<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 1994
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SOUTHERN NATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
NORTH CAROLINA 6711 56-0939887
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
500 NORTH CHESTNUT STREET
LUMBERTON, NORTH CAROLINA 28358
(910) 671-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
DAVID L. CRAVEN
SOUTHERN NATIONAL CORPORATION
200 WEST SECOND STREET
WINSTON-SALEM, NORTH CAROLINA 28358
(910) 773-7390
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
DAVID M. CARTER L. STEVENSON PARKER
HUNTON & WILLIAMS ARNOLD & PORTER
951 EAST BYRD STREET 1200 NEW HAMPSHIRE AVENUE, N.W.
RICHMOND, VIRGINIA 23219-4074 WASHINGTON, D.C. 20036-6885
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER SHARE(2) PRICE(2) FEE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($5 par
value)................ 57,887,840 shs.(1) $20.47 $1,184,964,085 $408,690.90(3)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) This Registration Statement covers the maximum number of shares of common
stock of the Registrant that are expected to be issued in connection with
the transactions described herein.
(2) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(c) and (f)(1) based on the average high and low prices of BB&T
Financial Corporation common stock on the Nasdaq National Market System on
November 9, 1994.
(3) Of this amount, $215,631.19 was paid upon the initial filing of the
preliminary proxy statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SOUTHERN NATIONAL CORPORATION
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM OF FORM S-4 LOCATION IN PROSPECTUS
- ---------------- ----------------------
<S> <C>
1.Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus..... Facing Page; Cross Reference Sheet; Outside
Front Cover Page of Prospectus
2.Inside Front and Outside Back
Cover Pages of Prospectus.... Inside Front Cover Page of Prospectus;
Table of Contents; Available Information;
Incorporation of Certain Information by
Reference
3.Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information.................. Summary; Equivalent Share Data; Pro Forma
Condensed Financial Information
4.Terms of the Transaction....... Summary; The Merger; Comparative Rights of
Shareholders; Annex I; Annex II; Annex III;
Annex IV; Annex V
5.Pro Forma Financial
Information.................. Pro Forma Condensed Financial Information;
Incorporation of Certain Information by
Reference
6.Material Contracts with the
Company Being Acquired....... Summary; The Merger; Certain Related
Transactions
7.Additional Information Required
for Reoffering by Persons and
Parties Deemed to be
Underwriters................. Not Applicable
8.Interests of Named Experts and
Counsel...................... Not Applicable
9.Disclosure of Commission's
Position on Indemnification
for Securities Act
Liabilities.................. Not Applicable
10.Information with Respect to S-3
Registrants.................. Available Information; Incorporation of
Certain Information by Reference; Summary;
Business of SNC
11.Incorporation of Certain
Information by Reference..... Incorporation of Certain Information by
Reference
12.Information with Respect to S-2
or S-3 Registrants........... Not Applicable
13.Incorporation of Certain
Information by Reference..... Not Applicable
14.Information with Respect to
Registrants Other than S-2 or
S-3 Registrants.............. Not Applicable
15.Information with Respect to S-3
Companies.................... Available Information; Incorporation of
Certain Information by Reference; Summary;
Business of BB&T Financial
16.Information with Respect to S-2
or S-3 Companies............. Not Applicable
17.Information with Respect to
Companies Other than S-2 or
S-3 Companies................ Not Applicable
18.Information if Proxies,
Consents or Authorizations
are to be Solicited.......... Incorporations of Certain Information By
Reference; Summary; The Shareholder
Meetings; The Merger; Dissenters' Rights
19.Information if Proxies,
Consents or Authorizations
are not to be solicited, or
in an Exchange Offer......... Not Applicable
</TABLE>
<PAGE>
[SOUTHERN NATIONAL LETTERHEAD]
November 14, 1994
Dear Shareholders:
We cordially invite you to attend a special meeting of shareholders of
Southern National Corporation ("SNC") to be held at the Holiday Inn, 5201
Fayetteville Road, Lumberton, North Carolina, on December 15, 1994, at 10:00
a.m., Eastern Standard Time.
At this meeting, you will have an opportunity to consider and vote on the
merger of BB&T Financial Corporation ("BB&T Financial") with and into SNC in a
"merger-of-equals" transaction pursuant to the terms of the Amended and
Restated Agreement and Plan of Reorganization between SNC and BB&T Financial
and the related Amended and Restated Plan of Merger (collectively, the
"Agreement").
The Agreement generally provides for a tax-free exchange of BB&T Financial
common stock and options for shares of SNC common stock and options (with cash
in lieu of the issuance of fractional shares). The currently outstanding shares
of SNC common and preferred stock will remain outstanding. The terms of the
proposed merger, including the methods for valuing BB&T Financial common stock
and SNC common stock and determining the exchange ratio, are explained in
detail in the accompanying Joint Proxy Statement/Prospectus. We urge you to
read it carefully.
The Agreement also contemplates that as soon as practicable after the
proposed merger, Southern National Bank of North Carolina, SNC's North Carolina
bank subsidiary, will be merged with Branch Banking and Trust Company, BB&T
Financial's North Carolina bank subsidiary (with the surviving bank named
"Branch Banking and Trust Company"), and Southern National Bank of South
Carolina, SNC's South Carolina bank subsidiary, will be merged with Branch
Banking and Trust Company of South Carolina, BB&T Financial's lead South
Carolina bank subsidiary (with the surviving bank named "Branch Banking and
Trust Company of South Carolina").
The Board of Directors of SNC is unanimously of the opinion that the proposed
merger with BB&T Financial would be beneficial to SNC shareholders. The Board
has received written opinions from Lehman Brothers, Inc., and Wheat, First
Securities, Inc., as to the fairness of certain terms of the proposed merger to
SNC's shareholders from a financial point of view.
The affirmative vote of a majority of the shares entitled to vote is required
for approval of the proposed merger. Failure to vote will have the same effect
as a vote against the proposed merger. It is especially important that your
shares be voted FOR the proposal. If you cannot attend the Special Meeting in
person, please complete, date, sign and promptly return the proxy in the
envelope provided. You may revoke your proxy at any time before it is voted by
attending the Special Meeting and voting in person or by giving written notice
of revocation or submitting a signed proxy bearing a later date to SNC,
Attention: Corporate Secretary.
Sincerely,
L. GLENN ORR, JR.
Chairman of the Board,
Chief Executive Officer and
President
Southern National Corporation
P.O. Box 1489
Lumberton, N.C. 28358
<PAGE>
LOGO
November 14, 1994
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
BB&T Financial Corporation ("BB&T Financial") to be held at BB&T Financial's
headquarters at 223 West Nash Street, Wilson, North Carolina, on December 15,
1994, at 10:00 a.m., Eastern Standard Time (the "Special Meeting").
The purpose of the Special Meeting is to consider a proposal to approve an
Agreement and Plan of Reorganization and a related Plan of Merger
(collectively, the "Merger Agreements") pursuant to which BB&T Financial will
be merged (the "Merger") in a "merger of equals" with Southern National
Corporation ("SNC"), with the resulting corporation named "Southern National
Corporation". The Merger Agreements contemplate that as soon as practicable
after the Merger, Southern National Bank of North Carolina, SNC's North
Carolina bank subsidiary, will be merged with Branch Banking and Trust Company,
BB&T Financial's North Carolina bank subsidiary (with the resulting bank named
"Branch Banking and Trust Company"), and Southern National Bank of South
Carolina, SNC's South Carolina bank subsidiary, will be merged with Branch
Banking and Trust Company of South Carolina, BB&T Financial's lead South
Carolina bank subsidiary (with the resulting bank named "Branch Banking and
Trust Company of South Carolina").
Upon consummation of the Merger, you would receive 1.45 shares of common
stock of SNC for each share of common stock of BB&T Financial held by you, and
cash in lieu of any fractional share. Each option to purchase shares of BB&T
Financial common stock will be converted into an option to purchase a number of
shares of SNC common stock equal to the number of shares subject to the BB&T
Financial option multiplied by the exchange ratio of 1.45. Options issued
pursuant to BB&T Financial employee benefit plans and stock option plans will
vest and be immediately exercisable in full upon consummation of the Merger.
SNC common stock is traded on the New York Stock Exchange under the symbol
"SNB." BB&T Financial shareholders will not recognize gain or loss for federal
income tax purposes to the extent SNC common stock is received in the Merger in
exchange for BB&T Financial common stock, although the receipt of cash in lieu
of fractional shares will be taxable.
The last sale price of SNC common stock on November 8, 1994, on the New York
Stock Exchange was $20.625 per share. If this were the price per share of SNC
common stock on the date that the Merger is consummated, the 1.45 shares of SNC
common stock into which each share of BB&T Financial common stock would be
converted would have a market value of $29.91. However, to the extent the
actual market price of SNC common stock on the date the Merger is consummated
is higher or lower than $20.625 per share, the value of 1.45 shares SNC common
stock will be correspondingly higher or lower.
BB&T Financial and SNC are similar in size and your Board of Directors
believes that a merger-of-equals transaction is in the best interest of the
BB&T Financial shareholders. The Merger will result in a combined institution
with a greater market share and a wider range of products. The Merger will also
present substantial opportunities for savings through consolidation and
achievement of economies of scale.
The Board has unanimously approved the Merger Agreements and also recommends
that you vote FOR approval. The Board has received written opinions from Lehman
Brothers, Inc., and Merrill Lynch, Pierce, Fenner & Smith Incorporated as to
the fairness of certain terms of the Merger to BB&T Financial's shareholders
from a financial point of view. You are encouraged to read the accompanying
Joint Proxy Statement/Prospectus, which provides additional information
regarding SNC, BB&T Financial and the Merger.
Your vote is important, regardless of the number of shares you own. Approval
of the Merger requires an affirmative vote of a majority of the BB&T Financial
common stock entitled to be voted at the Special Meeting. Accordingly, on
behalf of your Board of Directors, I urge you to complete, date and sign the
<PAGE>
accompanying proxy and return it promptly in the enclosed postage-paid
envelope. This will not prevent you from attending the Special Meeting or
voting in person, but will assure that your vote is counted if you are unable
to attend the Special Meeting. You may revoke your proxy at any time by filing
a written notice of revocation with, or by delivering a duly executed proxy
bearing a later date to, the Secretary of BB&T Financial at BB&T Financial's
main office prior to the Special Meeting, or by attending the BB&T Financial
Special Meeting and voting in person.
On behalf of the Board of Directors, I thank you for your support and urge
you to vote FOR approval of the Merger Agreements.
Sincerely,
LOGO
John A. Allison IV
Chairman and Chief Executive Officer
2
<PAGE>
SOUTHERN NATIONAL CORPORATION
500 NORTH CHESTNUT STREET
LUMBERTON, NORTH CAROLINA 28358
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 15, 1994
----------------
TO THE SHAREHOLDERS OF SOUTHERN NATIONAL CORPORATION: NOTICE IS HEREBY GIVEN
that a special meeting of shareholders has been called by the Board of
Directors of Southern National Corporation ("SNC") and will be held at the
Holiday Inn, 5201 Fayetteville Road, Lumberton, North Carolina, on December 15,
at 10:00 a.m., Eastern Standard Time, for the purpose of considering and voting
upon the following matters:
1. Proposed Merger. To approve an Agreement and Plan of Reorganization
between SNC and BB&T Financial Corporation ("BB&T Financial"), dated as of
July 29, 1994, and amended and restated as of October 22, 1994, and a
related Plan of Merger, dated as of July 29, 1994, and amended and restated
as of October 22, 1994, pursuant to which: (i) BB&T Financial would merge
with and into SNC (the "Merger"); (ii) each outstanding share of BB&T
Financial common stock, $2.50 par value per share, would be converted into
the right to receive 1.45 shares of SNC common stock, $5.00 par value per
share ("SNC Common Stock"), with cash in lieu of the issuance of any
fractional share interest;(iii) each outstanding stock option granted by
BB&T Financial under one of its benefit plans, whether or not exercisable,
would be converted into and become a right with respect to SNC Common
Stock; (iv) the Amended and Restated Articles of Incorporation of SNC would
be amended to increase the number of authorized shares of SNC Common Stock
from 120,000,000 shares to 300,000,000 shares; and (v) the Board of
Directors of SNC would be increased from 23 to 24 members and 12 persons
designated by BB&T Financial would become members of the Board of Directors
of SNC (replacing 11 of the current members who would resign upon
consummation of the Merger and filling the one seat created by the increase
in the size of the SNC Board), all as described more fully in the
accompanying Joint Proxy Statement/Prospectus.
2. Other Business. To consider and vote upon such other matters as
properly may come before the meeting or any adjournments thereof.
Only those SNC shareholders of record at the close of business on October 21,
1994, will be entitled to notice of and to vote at the meeting and any
adjournments thereof. The approval of a majority of the outstanding shares of
SNC Common Stock entitled to vote is required for the approval of the Merger.
Any shareholder entitled to vote at the Special Meeting shall have the right
to dissent from the Merger and to receive payment of the fair value of his
shares upon compliance with Article 13 of the North Carolina Business
Corporation Act ("Article 13"). Article 13 requires, among other things, that a
shareholder wishing to perfect dissenters' rights: (i) give SNC written notice
of his intent to exercise dissenters' rights prior to the vote on the Merger;
(ii) not vote his shares of SNC Common Stock in favor of the Merger; and (iii)
upon receipt of notice from SNC that the Merger has been approved, make a
demand for payment of fair value for his shares and deposit such shares with
SNC. The full text of Article 13 is attached as Annex V to the accompanying
Joint Proxy Statement/Prospectus.
By Order of the Board of Directors,
DAVID L. CRAVEN
Secretary
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. PLEASE SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING. SHAREHOLDERS
ATTENDING THE MEETING MAY VOTE PERSONALLY ON ALL MATTERS THAT ARE CONSIDERED,
IN WHICH EVENT THE SIGNED PROXIES ARE REVOKED.
November 14, 1994
Lumberton, North Carolina
<PAGE>
NOTICE OF SPECIAL MEETING OF THE SHAREHOLDERS OF
BB&T FINANCIAL CORPORATION
TO BE HELD ON DECEMBER 15, 1994
AT 10:00 A.M.
----------------
To the Shareholders:
Notice is hereby given that a Special Meeting of the shareholders of BB&T
Financial Corporation ("BB&T Financial") will be held at the corporation's
headquarters at 223 West Nash Street, Wilson, North Carolina on December 15,
1994 at 10:00 A.M., Eastern Standard Time (the "Special Meeting"), for the
following purposes:
1. To consider and vote upon an Agreement and Plan of Reorganization
between BB&T Financial and Southern National Corporation ("SNC"), dated as
of July 29, 1994, and amended and restated as of October 22, 1994, and a
related Plan of Merger, dated as of July 29, 1994, and amended and restated
as of October 22, 1994, pursuant to which: (i) BB&T Financial will be
merged (the "Merger") with and into SNC; (ii) each outstanding share of
BB&T Financial common stock, $2.50 par value per share, would be converted
into the right to receive 1.45 shares of SNC common stock, $5.00 par value
per share ("SNC Common Stock"), with cash in lieu of the issuance of any
fractional share interest; (iii) each outstanding stock option granted by
BB&T Financial under one of its benefit plans, whether or not exercisable,
would be converted into and become a right with respect to SNC Common
Stock; (iv) SNC's Amended and Restated Articles of Incorporation would be
amended to increase the authorized number of shares of SNC Common Stock;
and (v) the Board of Directors of SNC would be increased from 23 to 24
members and 12 persons designated by BB&T Financial would become members of
the Board of Directors of SNC (replacing 11 of the current members who
would resign upon consummation of the Merger and filling the one seat
created by the increase in the size of the SNC Board), all as described
more fully in the accompanying Joint Proxy Statement/Prospectus.
2. To transact such other business as properly may come before the
Special Meeting or any adjournments thereof.
Any action may be taken on the foregoing proposal at the Special Meeting on
the date specified above, or on any date or dates to which, by original or
later adjournment, the Special Meeting may be adjourned. Shareholders of record
at the close of business on October 17, 1994, are the shareholders entitled to
vote at the Special Meeting and any adjournments thereof.
You are cordially invited to attend the Special Meeting in person. Whether or
not you plan to attend the Special Meeting, you are urged to complete, date,
sign and return the accompanying proxy card in the enclosed postage-paid
envelope as soon as possible. You may revoke your written proxy by delivering a
written instruction, or a duly executed proxy bearing a later date, to the
Secretary of BB&T Financial at any time prior to or at the Special Meeting or
by attending the Special Meeting and voting in person. However, returning a
proxy now will assure your vote is counted at the Special Meeting if you are
unable to attend.
Any shareholder entitled to vote at the Special Meeting shall have the right
to dissent from the Merger and to receive payment of the fair value of his or
her shares upon compliance with Article 13 of the North Carolina Business
Corporation Act, the full text of which is included as Annex V to the
accompanying Joint Proxy Statement/Prospectus, which is enclosed with this
Notice of Special Meeting. To exercise dissenters' rights, among other things,
a shareholder must (1) give BB&T Financial written notice of his or her intent
to exercise dissenters' rights prior to the vote on the Merger; (2) not vote
his or her shares of BB&T Financial Common Stock in favor of the Merger; and
(3) upon receipt of notice from BB&T Financial that the Merger has been
approved, make a demand for payment of the fair value of his or her shares and
deposit such shares as specified in the notice. For a summary of the
dissenters' rights of BB&T Financial shareholders, see "THE MERGER--DISSENTERS'
RIGHTS" in the accompanying Joint Proxy Statement/Prospectus.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Jerone C Herring
Jerone C. Herring
Secretary
<PAGE>
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING
POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED AT THE SPECIAL
MEETING. SHAREHOLDERS ATTENDING THE SPECIAL MEETING MAY VOTE PERSONALLY ON ALL
MATTERS THAT ARE CONSIDERED, IN WHICH EVENT THE SIGNED PROXIES ARE REVOKED.
Wilson, North Carolina
November 14, 1994
<PAGE>
JOINT PROXY STATEMENT
SOUTHERN NATIONAL CORPORATION BB&T FINANCIAL CORPORATION
Special Meeting Special Meeting
to be Held on December 15, 1994 to be Held on December 15, 1994
----------------- -----------------
---------------
PROSPECTUS
SOUTHERN NATIONAL CORPORATION
COMMON STOCK
---------------
This Joint Proxy Statement/Prospectus is being furnished to shareholders of
Southern National Corporation, a North Carolina-chartered bank holding company
("SNC"), and BB&T Financial Corporation, a North Carolina-chartered bank
holding company ("BB&T Financial"), in connection with the solicitation of
proxies by the Board of Directors of SNC (the "SNC Board") for use at the
Special Meeting of Shareholders of SNC (including any adjournments or
postponements thereof) (the "SNC Special Meeting") and by the Board of
Directors of BB&T Financial (the "BB&T Financial Board") for use at the
Special Meeting of Shareholders of BB&T Financial (including any adjournments
or postponements thereof) (the "BB&T Financial Special Meeting" and, together
with the SNC Special Meeting, the "Shareholder Meetings"), each to be held on
December 15, 1994, at the time and place set forth in the accompanying
notices.
The purpose of the Shareholder Meetings is to consider and vote upon an
Agreement and Plan of Reorganization, dated as of July 29, 1994, and amended
and restated as of October 22, 1994, between SNC and BB&T Financial (the
"Agreement"), and the related Plan of Merger, dated as of July 29, 1994, and
amended and restated as of October 22, 1994 (the "Plan of Merger"). The
Agreement and the Plan of Merger are attached to this Joint Proxy
Statement/Prospectus as Annex I and Annex II, respectively.
The Agreement and the Plan of Merger provide that (i) SNC and BB&T Financial
would engage in a "merger-of-equals" transaction (the "Merger"), in which BB&T
Financial would merge with and into SNC, and (ii) as soon as practicable
thereafter, SNC's principal subsidiary banks would merge with and into BB&T
Financial's subsidiary banks.
Upon consummation of the Merger, each share of common stock, $2.50 par value
per share, of BB&T Financial (the "BB&T Financial Common Stock") (other than
shares as to which dissenters' rights have been perfected) would be converted
into the right to receive 1.45 shares of common stock, par value $5 per share,
of SNC (the "SNC Common Stock"), with cash in lieu of the issuance of any
fractional share interest. The outstanding shares of SNC Common Stock and
6.75% Cumulative Convertible Preferred Stock, Series A, of SNC (the "SNC
Convertible Preferred Stock") would remain outstanding as stock of SNC. The
Agreement and the Plan of Merger also provide that each outstanding stock
option granted by BB&T Financial under one of its benefit plans, whether or
not exercisable, would be converted into and become a right with respect to
SNC Common Stock; that SNC's Amended and Restated Articles of Incorporation
(the "SNC Articles") would be amended to increase the authorized number of
shares of SNC Common Stock; and that twelve persons designated by BB&T
Financial would become members of the SNC Board (replacing 11 current members
of the SNC Board who would resign upon consummation of the Merger and filling
one seat created by increasing the size of the SNC Board from 23 to 24). The
surviving corporation after the Merger, SNC, is sometimes referred to herein
as the "Continuing Corporation".
Based on the closing price of SNC Common Stock on the New York Stock
Exchange (the "NYSE") of $20.625 per share on November 8, 1994, the total
market value of the Continuing Corporation would be approximately $2.1
billion. Based exclusively upon such closing price, the value of 1.45 shares
of SNC Common Stock on such date would be $29.91. That value may increase or
decrease depending upon the market price of SNC Common Stock at the time the
Merger is consummated. Based on the number of shares of SNC and BB&T Financial
outstanding on November 3, approximately 55% of the shares expected to be
outstanding after the Merger would be issued to BB&T Financial shareholders
(assuming conversion of the SNC Convertible Preferred Stock and consummation
of BB&T Financial's pending acquisition of Commerce Bank, Virginia Beach,
Virginia ("Commerce")). For a description of the Agreement and the Plan of
Merger, which are included in their entirety as Annex I and Annex II,
respectively, to this Joint Proxy Statement/Prospectus, see "THE MERGER."
This Joint Proxy Statement/Prospectus also constitutes a prospectus of SNC
in respect of the shares of SNC Common Stock to be issued to shareholders of
BB&T Financial in connection with the Merger. The outstanding shares of SNC
Common Stock are, and the shares offered hereby will be, listed on the NYSE
and traded under the symbol "SNB".
All information contained in this Joint Proxy Statement/Prospectus relating
to SNC and its subsidiaries has been supplied by SNC, and all information
relating to BB&T Financial and its subsidiaries has been supplied by BB&T
Financial. This Joint Proxy Statement/Prospectus and the accompanying proxy
cards are first being mailed to shareholders of SNC and BB&T Financial on or
about November 14, 1994.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SHARES OF SNC COMMON STOCK 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 (THE "FDIC") OR ANY OTHER
GOVERNMENTAL AGENCY.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED HEREIN IN CONNECTION WITH THE OFFER
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES,
NOR DOES IT CONSTITUTE AN OFFER TO OR SOLICITATION OF ANY PERSON IN ANY
JURISDICTION TO WHOM IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS AT ANY
TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
The date of this Joint Proxy Statement/Prospectus is November 14, 1994.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION...................................................... 1
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................... 1
SUMMARY.................................................................... 3
SELECTED FINANCIAL DATA.................................................... 17
THE SHAREHOLDER MEETINGS................................................... 21
SNC Special Meeting...................................................... 21
BB&T Financial Special Meeting........................................... 22
THE MERGER................................................................. 23
Background of and Reasons for the Merger................................. 23
Opinions of Financial Advisors........................................... 28
Determination of Exchange Ratio and Exchange for SNC Common Stock........ 40
Management and Operations After the Merger............................... 42
Effective Time of the Merger............................................. 43
Bank Mergers............................................................. 44
Headquarters............................................................. 44
Amendment to SNC Articles................................................ 44
Conditions to Consummation of the Merger................................. 44
Regulatory Approvals..................................................... 45
Conduct of Business Pending the Merger................................... 47
Waiver and Amendment; Termination........................................ 48
Interests of Certain Persons in the Merger............................... 48
Accounting Treatment..................................................... 53
Certain Federal Income Tax Consequences.................................. 54
Option Agreements........................................................ 54
Resales of SNC Common Stock.............................................. 56
DISSENTERS' RIGHTS......................................................... 56
PRO FORMA CONDENSED FINANCIAL INFORMATION.................................. 58
CAPITALIZATION............................................................. 66
BUSINESS OF SNC............................................................ 68
Southern National Bank of North Carolina................................. 68
Southern National Bank of South Carolina................................. 68
Other Subsidiaries--Non-Bank Subsidiaries................................ 68
Acquisition Strategy..................................................... 68
Thrift Acquisitions...................................................... 69
Deposit and Asset Acquisitions from the RTC.............................. 70
BUSINESS OF BB&T FINANCIAL................................................. 70
Branch Banking and Trust Company......................................... 70
South Carolina Banks..................................................... 71
BB&T Financial's Acquisition Program..................................... 71
COMPARATIVE RIGHTS OF SHAREHOLDERS......................................... 72
Capitalization........................................................... 72
Voting Rights............................................................ 72
Directors and Classes of Directors....................................... 74
Anti-Takeover Provisions................................................. 75
Preemptive Rights........................................................ 77
Assessment............................................................... 77
Conversion; Redemption; Sinking Fund..................................... 77
Liquidation Rights....................................................... 77
Dividends and Other Distributions........................................ 78
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Shareholder Meetings.................................................. 79
Indemnification....................................................... 80
Director Liability.................................................... 80
SUPERVISION AND REGULATION OF SNC AND BB&T FINANCIAL.................... 80
Bank Holding Companies................................................ 80
Capital Requirements.................................................. 81
Limits on Dividends and Other Payments................................ 82
Banks................................................................. 83
Other Safety and Soundness Regulations................................ 84
EXPERTS................................................................. 85
LEGAL OPINIONS.......................................................... 86
SHAREHOLDER PROPOSALS................................................... 86
OTHER MATTERS........................................................... 86
ANNEXES
Annex I--Agreement...................................................... I-1
Annex II--Plan of Merger................................................ II-1
Annex III-A--Opinion of Lehman Brothers................................. III-A-1
Annex III-B--Opinion of Wheat........................................... III-B-1
Annex III-C--Opinion of Merrill Lynch................................... III-C-1
Annex IV-A--BB&T Financial Option Agreement............................. IV-A-1
Annex IV-B--SNC Option Agreement........................................ IV-B-1
Annex V--Article 13 of NCBCA............................................ V-1
</TABLE>
<PAGE>
AVAILABLE INFORMATION
SNC and BB&T Financial are subject to the reporting and informational
requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and in
accordance therewith file reports, proxy statements and other information with
the SEC. Such reports, proxy statements and other information filed with the
SEC can be inspected and copied at the public reference facilities maintained
by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C., 20549, and
at the Regional Offices located at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60611-2511 and 7 World Trade Center (13th
Floor), New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. Such reports, proxy statements and other
information with respect to SNC may also be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005, and with respect to BB&T
Financial may be inspected at the office of the National Association of
Securities Dealers Stock Market, Reports Section, 1735 K Street, N.W.,
Washington, D.C. 20006. As permitted by the Rules and Regulations of the SEC,
this Joint Proxy Statement/Prospectus does not contain all the information set
forth in the Registration Statement on Form S-4, of which this Joint Proxy
Statement/Prospectus is a part, and exhibits thereto (together with the
amendments thereto, the "Registration Statement"), which have been filed by SNC
with the SEC under the Securities Act of 1933 (the "Securities Act") with
respect to SNC Common Stock and to which reference is hereby made for further
information.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN
DOCUMENTS RELATING TO SNC AND BB&T FINANCIAL THAT ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. DOCUMENTS RELATING TO SNC OR BB&T FINANCIAL (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS THAT ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE
IN SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROM SHERRY A.
KELLETT, EXECUTIVE VICE PRESIDENT AND CONTROLLER, SOUTHERN NATIONAL
CORPORATION, 200 WEST SECOND STREET, WINSTON-SALEM, NORTH CAROLINA 27101, (910)
773-7503, AND JERONE C. HERRING, SECRETARY, BB&T FINANCIAL CORPORATION, 223
WEST NASH STREET, WILSON, NORTH CAROLINA 27893, (919) 399-4291. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUESTS SHOULD BE MADE BY
DECEMBER 9, 1994.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents concerning SNC (File No. 1-10853) are incorporated by
reference herein: (i) SNC's Annual Report on Form 10-K for the year ended
December 31, 1993, the consolidated financial statements and certain other
information therein having been superseded by the consolidated financial
statements and certain other information for the year ended December 31, 1993,
that are included in SNC's Current Report on Form 8-K, dated September 26,
1994, to reflect SNC's acquisition of Regency Bancshares Inc. ("Regency"), The
First Savings Bank, FSB ("FSB"), and Home Federal Savings Bank ("Home");
(ii) SNC's Quarterly Reports on Form 10-Q for the periods ended March 31, 1994,
and June 30, 1994; (iii) the description of SNC Common Stock in SNC's
registration statement filed under the Exchange Act with respect to SNC Common
Stock, including all amendments and reports filed for the purpose of updating
such description; and (iv) SNC's Current Reports on Form 8-K dated January 28,
1994 (as amended on April 15, 1994, and June 6, 1994), August 8, 1994,
September 26, 1994, and November 14, 1994.
The following documents concerning BB&T Financial (File No. 0-7871)are
incorporated by reference herein: (i) BB&T Financial's Annual Report on Form
10-K for the year ended December 31, 1993, the consolidated financial
statements and certain other information therein having been superseded by the
consolidated financial statements and certain other information for the year
ended December 31, 1993, included in BB&T's Current Report on Form 8-K, dated
August 31, 1994 to reflect the acquisition of L.S.B.
<PAGE>
Bancshares, Inc. of South Carolina ("LSB"); (ii) BB&T Financial's Quarterly
Reports on Form 10-Q for the periods ended March 31, 1994, and June 30, 1994;
and (iii) BB&T Financial's Current Reports on Form 8-K dated January 10, 1994,
February 4, 1994, August 2, 1994, August 31, 1994 (including Amendment No. 1
thereto filed on August 31, 1994) and November 7, 1994.
All documents filed by SNC or BB&T Financial pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Joint
Proxy Statement/Prospectus and before the date of the Shareholder Meetings
shall be deemed to be incorporated by reference herein. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document that is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Joint Proxy Statement/Prospectus.
Also incorporated by reference herein are the Agreement and the Plan of
Merger, which are attached to this Joint Proxy Statement/Prospectus as Annex I
and Annex II, respectively.
2
<PAGE>
SUMMARY
The following summary is not intended to be a complete description of all
material facts regarding SNC, BB&T Financial and the matters to be considered
at the Shareholder Meetings and is qualified in all respects by the information
appearing elsewhere or incorporated by reference in this Joint Proxy
Statement/Prospectus, the Annexes hereto and the documents referred to herein.
PARTIES TO THE MERGER
SNC. SNC, a North Carolina corporation headquartered in Lumberton, North
Carolina, is a bank holding company registered under the Bank Holding Company
Act of 1956, as amended (the "BHCA"). As of June 30, 1994, SNC had total
consolidated assets of approximately $8.2 billion, total consolidated deposits
through its depository institution subsidiaries of approximately $6.2 billion
and consolidated shareholders' equity of approximately $593.9 million. SNC's
total consolidated net income for the six months ended June 30, 1994, was
approximately $52.9 million or $1.10 per share on a fully-diluted basis. See
"SELECTED FINANCIAL DATA" and "INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE." Based on total consolidated assets at June 30, 1994, SNC was the
fifth largest commercial banking entity based in the Carolinas. As of June 30,
1994, 68% of the deposits of SNC's bank subsidiaries were in North Carolina and
32% were in South Carolina.
SNC conducts its operations in North Carolina and South Carolina primarily
through its commercial bank subsidiaries and, to a lesser extent, through its
savings bank and other subsidiaries.
Southern National Bank of North Carolina ("SNBNC"), SNC's largest subsidiary,
was founded in 1897 and currently operates through 155 banking offices in 77
cities and towns throughout North Carolina. Southern National Leasing Corp., a
wholly-owned subsidiary of SNBNC, offers lease financing. Southern National
Investment Services, Inc., a new wholly-owned subsidiary of SNBNC, offers
customers investment alternatives, including discount brokerage services, fixed
rate and variable annuities, mutual funds and government and municipal bonds.
SNC entered the South Carolina banking market in 1986 with the formation of its
second banking subsidiary, Southern National Bank of South Carolina ("SNBSC").
SNBSC serves South Carolina through 78 banking offices in 39 cities and towns.
SNC operates a North Carolina state savings bank, SNB Savings Bank, Inc.,
S.S.B. ("SNB Savings"), which operates seven offices in six cities and towns.
As of June 30, 1994, SNBNC had total assets of approximately $5.5 billion and
deposit liabilities of approximately $4.0 billion; SNBSC had total assets of
approximately $2.6 billion and deposit liabilities of approximately $2.0
billion; and SNB Savings had total assets of approximately $250.1 million and
deposit liabilities of approximately $201.6 million. The deposits of SNBNC,
SNBSC and SNB Savings (collectively, the "SNC Bank Subsidiaries") are insured
by the FDIC.
SNC's principal executive offices are located at 500 North Chestnut Street,
Lumberton, North Carolina 28358, and the telephone number is (910) 671-2000.
For further information concerning SNC, see "BUSINESS OF SNC."
BB&T Financial. BB&T Financial, a North Carolina corporation headquartered in
Wilson, North Carolina, is a bank holding company registered under the BHCA. At
June 30, 1994, BB&T Financial had total consolidated assets of approximately
$9.9 billion, total deposits through its depository institution subsidiaries of
approximately $7.4 billion and consolidated shareholders' equity of
approximately $804.1 million. BB&T Financial's total consolidated net income
for the six months ended June 30, 1994, was approximately $55.4 million or
$1.52 per share on a fully-diluted basis. See "SELECTED FINANCIAL DATA" and
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE." Based on total
consolidated assets at June 30, 1994, BB&T Financial was the fourth largest
commercial banking entity based in the Carolinas. As of June 30, 1994, 86% of
the deposits of BB&T Financial's bank subsidiaries were in North Carolina and
14% were in South Carolina.
3
<PAGE>
BB&T Financial owns and operates four commercial bank subsidiaries: (i)
Branch Banking and Trust Company ("BB&T-NC"), a wholly-owned North Carolina-
chartered bank subsidiary, which was founded in 1872 and is the oldest bank in
North Carolina; and (ii) through BB&T Financial Corporation of South Carolina
("BB&T Financial-SC") (a wholly-owned subsidiary of BB&T Financial), Branch
Banking and Trust Company of South Carolina ("BB&T-SC"), a wholly-owned South
Carolina-chartered banking corporation headquartered in Greenville, South
Carolina; The Lexington State Bank ("Lexington"), a wholly-owned South
Carolina-chartered banking corporation headquartered in Lexington, South
Carolina; and The Community Bank of South Carolina ("Community"), a wholly-
owned South Carolina-chartered banking corporation headquartered in Varnville,
South Carolina. As of June 30, 1994, BB&T-NC had assets of approximately $8.3
billion and deposit liabilities of approximately $6.2 billion; BB&T-SC had
assets of approximately $510.6 million and deposit liabilities of approximately
$453.7 million; Lexington had assets of approximately $602.5 million and
deposit liabilities of approximately $491.4 million; and Community had assets
of approximately $117.2 million and deposit liabilities of approximately $99.1
million. Subsequent to June 30, 1994, three North Carolina-chartered savings
bank subsidiaries with total assets of approximately $395.7 million and deposit
liabilities of approximately $335.9 million were merged into BB&T-NC. The
deposits of BB&T-NC, BB&T-SC, Lexington and Community (collectively, the "BB&T
Bank Subsidiaries" and, together with the SNC Bank Subsidiaries, the "Bank
Subsidiaries") are insured by the FDIC.
BB&T Financial had pending as of the date of this Joint Proxy
Statement/Prospectus the acquisition of Commerce. As of June 30, 1994, Commerce
had assets of approximately $692.1 million, deposit liabilities of
approximately $636.3 million and shareholders' equity of approximately $46.6
million. See "PRO FORMA CONDENSED FINANCIAL INFORMATION."
The principal executive offices of BB&T Financial are located at 223 West
Nash Street, Wilson, North Carolina 27893, and the telephone number is (919)
399-4291. For further information concerning BB&T Financial, see "BUSINESS OF
BB&T FINANCIAL."
SHAREHOLDER MEETINGS
SNC. The SNC Special Meeting will be held on December 15, 1994, at 10:00
a.m., Eastern Standard Time, at the Holiday Inn, 5201 Fayetteville Road,
Lumberton, North Carolina. The purpose of the SNC Special Meeting is to
consider and vote upon a proposal to approve the Agreement and the Plan of
Merger.
BB&T Financial. The BB&T Financial Special Meeting will be held at 10:00
a.m., Eastern Standard Time on December 15, 1994, at BB&T Financial's
headquarters at 223 West Nash Street, Wilson, North Carolina. The purpose of
the BB&T Financial Special Meeting is to consider and vote upon a proposal to
approve the Agreement and the Plan of Merger. See "THE SHAREHOLDER MEETINGS."
VOTES REQUIRED; RECORD DATES
SNC. Only holders of SNC Common Stock of record at the close of business on
October 21, 1994 (the "SNC Record Date"), will be entitled to vote at the SNC
Special Meeting. Approval of the Agreement and the Plan of Merger requires the
affirmative vote of the holders of a majority of the shares of SNC Common Stock
outstanding and entitled to vote. As of the SNC Record Date, there were
43,488,593 shares of SNC Common Stock outstanding and entitled to vote.
The members of the SNC Board and executive officers of SNC and their
affiliates beneficially owned, as of the SNC Record Date, 1,413,550 shares or
approximately 3.2% of the outstanding shares of SNC Common Stock. The directors
and executive officers of BB&T Financial and their affiliates beneficially
owned, as of the SNC Record Date, a total of less than 1% of the outstanding
shares of SNC Common Stock. See "THE SHAREHOLDER MEETINGS--SNC Special
Meeting."
4
<PAGE>
BB&T Financial. Only holders of BB&T Financial Common Stock of record at the
close of business on October 17, 1994 (the "BB&T Financial Record Date"), will
be entitled to vote at the BB&T Financial Special Meeting. The affirmative vote
of the holders of a majority of the shares of BB&T Financial Common Stock
outstanding and entitled to vote is required to approve the Agreement and the
Plan of Merger. As of the BB&T Financial Record Date, there were 36,454,681
shares of BB&T Financial Common Stock outstanding and entitled to vote.
The members of the BB&T Financial Board and executive officers of BB&T
Financial and their affiliates beneficially owned, as of the BB&T Financial
Record Date, 642,667 shares or approximately 1.8% of the outstanding shares of
BB&T Financial Common Stock. The directors and executive officers of SNC and
their affiliates beneficially owned, as of the BB&T Financial Record Date, a
total of less than 1% of the outstanding shares of BB&T Financial Common Stock.
See "THE SHAREHOLDER MEETINGS--BB&T Financial Special Meeting."
RECOMMENDATIONS
Each of the SNC Board and BB&T Financial Board unanimously has approved the
Agreement and adopted the Plan of Merger and recommends that its respective
shareholders vote FOR approval of the Agreement and the Plan of Merger. See
"THE SHAREHOLDER MEETINGS" and "THE MERGER."
THE MERGER
The Agreement provides for a "merger of equals" between SNC and BB&T
Financial pursuant to which BB&T Financial would be merged with and into SNC.
At the Effective Time of the Merger (as hereinafter defined), each outstanding
share of BB&T Financial Common Stock (except shares as to which dissenters'
rights have been exercised) would be converted into the right to receive 1.45
shares of SNC Common Stock; and each outstanding option to purchase BB&T
Financial Common Stock (collectively, the "BB&T Financial Employee Options"),
whether or not exercisable, would be converted into and become a right with
respect to SNC Common Stock, adjusted to reflect the Exchange Ratio defined
below. See "THE MERGER--Determination of Exchange Ratio and Exchange for SNC
Common Stock."
REASONS FOR THE MERGER
SNC's Reasons for the Merger. The SNC Board concluded that a "merger of
equals" between SNC and BB&T Financial would be in the best interests of the
shareholders because it furthers the SNC Board's long-term business strategy to
enhance shareholder value by seeking actively mergers and acquisitions that
provide SNC with a competitive advantage by increasing earnings, broadening
product lines, expanding distribution and diversifying geographically, all
without sacrificing asset quality. The SNC Board also considered that the SNC
shareholders would incur a dilution in earnings per share, but an accretion in
book value per share as a result of the Merger. See "THE MERGER--Background of
and Reasons for the Merger--SNC's Reasons for the Merger."
BB&T Financial's Reasons for the Merger. Of particular significance to the
BB&T Financial Board in deciding to engage in a "merger of equals" with SNC
were the financial terms of the Merger, including the Exchange Ratio; the terms
of the Merger regarding the future management of the Continuing Corporation,
particularly the provision that John A. Allison IV, the current Chairman and
Chief Executive Officer of BB&T Financial, would be named Chairman and Chief
Executive Officer of the Continuing Corporation; the future prospects for the
Continuing Corporation, financial and otherwise; and other factors that the
BB&T Financial Board believed could have a favorable impact on financial
performance and long-term shareholder value. The BB&T Financial Board
considered a variety of other factors, including potential dilution in
BB&T Financial's book value per share, impact on management and employees and
certain non-recurring
5
<PAGE>
adjustments to be recorded in connection with the Merger. See "THE MERGER--
Background of and Reasons for the Merger--BB&T Financial's Reasons for the
Merger" and "SUMMARY--Equivalent Share Data," including Note 4 thereto.
OPINIONS OF FINANCIAL ADVISORS
SNC and BB&T Financial. The SNC and BB&T Financial Boards jointly retained
Lehman Brothers Inc. ("Lehman Brothers"), to assist in determining the Exchange
Ratio. After review of a variety of relevant factors, Lehman Brothers
recommended the Exchange Ratio and confirmed their view to the SNC and BB&T
Financial Boards on July 29, 1994 that the Exchange Ratio is fair, from a
financial point of view, to the holders of SNC Common Stock and BB&T Financial
Common Stock, which was re-confirmed in a written opinion dated as of the date
of this Joint Proxy Statement/Prospectus. The full text of the opinion, which
describes the procedures followed, assumptions made, limitations on the review
taken and other matters in connection with rendering such opinion, is set forth
in Annex III-A to this Joint Proxy Statement/Prospectus. SNC and BB&T Financial
have agreed to pay combined fees to Lehman Brothers of $2,000,000 as follows:
$100,000, which was paid upon delivery of Lehman Brother's July 29, 1994,
opinion; $100,000 payable upon mailing of this Joint Proxy
Statement/Prospectus; and $1,800,000 payable upon consummation of the Merger.
In addition, SNC and BB&T Financial have agreed to reimburse Lehman Brothers
for certain out-of-pocket expenses incurred in connection with their services
and to indemnify Lehman Brothers against certain liabilities. For additional
information regarding the opinion of Lehman Brothers, see "THE MERGER--Opinions
of Financial Advisors."
Lehman Brothers is a nationally recognized investment banking firm and is
continually 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 and valuations for
estate, corporate and other purposes. BB&T Financial and SNC selected Lehman
Brothers jointly as their financial advisor because of Lehman Brothers'
reputation and substantial experience in transactions such as the Merger.
SNC. SNC has received the opinion of Wheat, First Securities, Inc. ("Wheat"),
dated as of the date of this Joint Proxy Statement/Prospectus, that, as of such
date, the Exchange Ratio is fair, from a financial point of view, to the
holders of SNC Common Stock. In connection with this opinion, SNC has agreed to
pay fees to Wheat of $500,000 as follows: $300,000, which has been paid; and
$200,000 payable upon consummation of the Merger. In addition, SNC has agreed
to indemnify Wheat against certain liabilities. For additional information
concerning Wheat and its opinion, see "THE MERGER--Opinions of Financial
Advisors" and Wheat's opinion attached as Annex III-B to this Joint Proxy
Statement/Prospectus.
Wheat is a nationally recognized investment banking firm regularly engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
BB&T Financial. BB&T Financial received the opinion of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") at the meeting of the BB&T
Financial Board on July 29, 1994, and as of the date of this Joint Proxy
Statement/Prospectus, that the Exchange Ratio is fair to holders of BB&T
Financial Common Stock from a financial point of view.
Merrill Lynch is a nationally recognized investment banking firm and is
continually engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings
and secondary distributions of listed and unlisted securities, and valuations
for estate,
6
<PAGE>
corporate and other purposes. BB&T Financial selected Merrill Lynch to serve as
a financial advisor with respect to the Merger because of its reputation and
substantial experience in transactions such as the Merger.
In connection with providing its opinion, BB&T Financial has agreed to pay
Merrill Lynch fees of $500,000 as follows: $250,000, which has been paid; and
$250,000 payable upon consummation of the Merger. In addition, BB&T Financial
has agreed to reimburse Merrill Lynch for its reasonable and necessary out-of-
pocket expenses and to indemnify Merrill Lynch against certain liabilities. For
additional information concerning Merrill Lynch and its fairness opinion, see
"THE MERGER--Opinions of Financial Advisors" and Merrill Lynch's opinion, dated
as of the date of this Joint Proxy Statement/Prospectus, attached hereto as
Annex III-C.
DETERMINATION OF EXCHANGE RATIO AND EXCHANGE FOR SNC COMMON STOCK
At the Effective Time of the Merger (as defined herein), each outstanding
share of BB&T Financial Common Stock (except shares as to which dissenters'
rights have been exercised) would be converted into the right to receive 1.45
shares of SNC Common Stock (the "Exchange Ratio"), with cash in lieu of the
issuance of any fractional share interest. In the event of any reorganization,
reclassification, stock split, stock dividend or similar recapitalization with
respect to the SNC Common Stock or the BB&T Financial Common Stock, the
Exchange Ratio would be adjusted proportionately. Based on the 40,023,686
shares of BB&T Financial Common Stock outstanding on October 17, 1994 (assuming
shares to be issued upon consummation of BB&T Financial's acquisition of
Commerce), SNC would issue a total of 58,034,345 shares of SNC Common Stock in
the Merger. Each outstanding BB&T Financial Employee Option would be converted
into an option to purchase a number of shares of SNC Common Stock equal to the
number of shares of BB&T Financial Common Stock subject to the BB&T Financial
Employee Option multiplied by the Exchange Ratio at an exercise price equal to
the exercise price of the BB&T Financial Employee Option divided by the
Exchange Ratio. Based on BB&T Financial Employee Options covering 2,146,478
shares expected to be outstanding at the Effective Time of the Merger
(including such options to be awarded upon consummation of BB&T Financial's
acquisition of Commerce), SNC would issue options covering 3,112,393 shares of
SNC Common Stock in the Merger. Any unvested BB&T Financial Employee Options
will vest and be immediately exercisable at the Effective Time of the Merger.
Based on the closing price of SNC Common Stock on the NYSE on November 8, 1994,
of $20.625 per share, the total market value of the Continuing Corporation
would be approximately $2.1 billion.
Based on the number of shares of SNC Common Stock and BB&T Financial Common
Stock outstanding on November 3, 1994, approximately 55% of the shares expected
to be outstanding after the Effective Time of Merger would be issued to BB&T
Financial shareholders (assuming conversion of the SNC Convertible Preferred
Stock and consummation of BB&T Financial's pending acquisition of Commerce).
See "THE MERGER--Determination of Exchange Ratio and Exchange for SNC Common
Stock."
The Continuing Corporation Board will follow SNC's and BB&T Financial's
present policies by paying quarterly cash dividends on the common stock of the
Continuing Corporation when justified by the financial condition of the
Continuing Corporation and its subsidiaries. The declaration and amount of
future dividends will depend on circumstances existing at the time, including
the Continuing Corporation's earnings, financial condition and capital
requirements, as well as regulatory limitations and such other factors as the
Continuing Corporation Board may deem relevant. It is anticipated that the
Continuing Corporation's initial quarterly dividend will be $0.20 per share of
Continuing Corporation Common Stock (for an annual rate of $0.80 per share),
consistent with SNC's current annual dividend rate of $0.80 per share and BB&T
Financial's current annual dividend rate of $0.80 per share (giving effect to
the Exchange Ratio).
MANAGEMENT AND OPERATIONS AFTER THE MERGER; HEADQUARTERS OF CONTINUING
CORPORATION
Following the Merger, the Board of Directors of the Continuing Corporation
(the "Continuing Corporation Board") would consist of 24 persons, of which
twelve have been named by the current SNC Board and twelve have been named by
the current BB&T Financial Board.
7
<PAGE>
John A. Allison IV, the current Chairman of the Board and Chief Executive
Officer of BB&T Financial, would be Chairman of the Board and Chief Executive
Officer of the Continuing Corporation. L. Glenn Orr, Jr., the current Chairman
and Chief Executive Officer of SNC, would retire after the Merger, but would
remain a member of the Continuing Corporation Board and would be a consultant
to the Continuing Corporation.
The remaining executive officers of the Continuing Corporation would consist
of four current SNC executive officers and four other current BB&T Financial
executive officers. See "THE MERGER--Management and Operations After the
Merger."
The headquarters of the Continuing Corporation would be located in Winston-
Salem, North Carolina, the current administrative headquarters of SNBNC.
BANK MERGERS
As soon as practicable after the Effective Time of the Merger, SNBNC would be
merged with and into BB&T-NC (the "NC Bank Merger"), under the name "Branch
Banking and Trust Company"; and SNBSC would be merged with and into BB&T-SC
(the "SC Bank Merger" and, collectively with the NC Bank Merger, the "Bank
Mergers"), under the name "Branch Banking and Trust Company of South Carolina."
BB&T-NC and BB&T-SC sometimes are referred to herein as the "Continuing Banks"
with respect to the time period following the Bank Mergers. See "THE MERGER--
Bank Mergers."
EFFECTIVE TIME OF THE MERGER
The Merger will become effective at the date and time specified in the
Articles of Merger to be filed with the Secretary of State of North Carolina as
soon as practicable after satisfaction of all conditions to consummation of the
Merger (the "Effective Time of the Merger"). See "THE MERGER--Conditions to
Consummation of the Merger." The Merger is expected to be made effective during
the first half of 1995. BB&T Financial and SNC each has the right, acting
unilaterally, to terminate the Agreement should the Merger not be consummated
by the close of business on July 31, 1995; provided, however, that such date
will be extended to December 31, 1995, if the Merger has not been consummated
by July 31, 1995, because of failure to obtain necessary regulatory approvals.
See "THE MERGER--Waiver and Amendment; Termination."
CONDITIONS TO CONSUMMATION
Consummation of the Merger is contingent upon the following unwaivable
conditions: (i) the receipt of approvals of the Merger and the Bank Mergers by
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), the FDIC, the North Carolina State Banking Commission (the "NC
Commission"), the South Carolina State Board of Financial Institutions (the "SC
Board") and the Virginia State Corporation Commission Bureau of Financial
Institutions (the "Virginia Bureau"), as applicable; and (ii) the receipt by
SNC and BB&T Financial of the opinion of tax counsel or a tax advisor that the
Merger will qualify as a tax-free reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). The receipt by SNC and
BB&T Financial of opinions from Arthur Andersen LLP and KPMG Peat Marwick LLP,
respectively, that the Merger may be accounted for under the pooling-of-
interests accounting method in accordance with Accounting Principles Board
Opinion No. 16 is a condition to consummation of the Merger that may be waived
by SNC and BB&T Financial. The Merger is also subject to satisfaction or waiver
of other conditions. See "THE MERGER--Conditions to Consummation of the
Merger."
CONDUCT OF BUSINESS PENDING THE MERGER
Each of SNC and BB&T Financial has agreed in the Agreement to operate its
business in the ordinary course and to refrain from taking certain actions
relating to the operation of its business pending
8
<PAGE>
consummation of the Merger without the prior approval of the other party,
except as otherwise permitted by the Agreement. See "THE MERGER--Conduct of
Business Pending the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of SNC's management and BB&T Financial's management, as well
as certain members of the SNC Board and the BB&T Financial Board, have
interests in the Merger in addition to their interests as shareholders of SNC
and BB&T Financial, respectively. These include, among other things, provisions
in the Agreement relating to the management of SNC following the Merger,
indemnification, eligibility for certain SNC employee benefits and accelerated
vesting of BB&T Financial Employee Options and options with respect to SNC
Common Stock held by directors, officers and employees of BB&T Financial and
SNC, respectively. Also, in anticipation of the Merger, each of SNC and BB&T
Financial entered into employment agreements (collectively, the "Employment
Agreements") with each of its executive officers and certain other senior
officers, including in the case of BB&T Financial, Messrs. Allison, Henry G.
Williamson, Jr. and Kelly S. King, who are members of the BB&T Financial Board.
In addition, SNC has agreed to enter into a settlement and non-compete
agreement with L. Glenn Orr, Jr., Chairman of the Board, President and Chief
Executive Officer of SNC and a settlement, waiver and general release agreement
with Gary E. Carlton, Executive Vice President of SNC, who, together with
Luther C. Boliek, are the only members of the SNC Board who are also officers
of SNC. At or before Effective Time of the Merger, Mr. Boliek will resign from
the SNC Board and will retire pursuant to the terms of an existing employment
contract.
The following table sets forth certain benefits that Messrs. Orr and Carlton,
in the case of SNC, and Messrs. Allison, Williamson, King, and Robert L. Brady,
in the case of BB&T Financial, may receive as a result of the Merger. Mr. Brady
is an officer of BB&T-NC and a member of the BB&T Financial Board. The "Annual
Payment" column sets forth the approximate annual payment obligations to each
officer pursuant to Employment Agreements or other agreements, as the case may
be, as of the Effective Time of the Merger. The Option Value column sets forth
the aggregate value of the options held by such officer that will become
exercisable as a result of the Merger. Each Employment Agreement contains a
"change of control" (as defined therein) provision pursuant to which the
officer could receive, if terminated following a change of control, a lump sum
payment equal to 2.99 times the officer's highest annual cash compensation in
any of the preceding five years, subject to reduction to the extent any such
payment would constitute an "excess parachute payment" under Section 280G of
the Code. For additional information concerning the Employment Agreements,
including the amounts that could be paid following a change of control of the
Continuing Corporation, see "THE MERGER--Interest of Certain Persons in the
Merger--Employment Agreements."
<TABLE>
<CAPTION>
NAME ANNUAL PAYMENT OPTION VALUE
---- -------------- ------------
<S> <C> <C>
SNC
L. Glenn Orr, Jr. $1,655,000(1) $125,571(3)
Gary E. Carlton 312,000(1) 47,912(3)
BB&T FINANCIAL
John A. Allison IV 390,000(2) 185,969(3)(4)
Henry G. Williamson, Jr. 313,000(2) 129,766(3)(4)
Kelly S. King 229,350(2) 79,917(3)(4)
Robert L. Brady N/A 112,578(3)(4)
</TABLE>
- --------
(1) For additional information on the benefits to be received by Messrs. Orr
and Carlton, see "THE MERGER--Interests of Certain Persons in the Merger."
(2) Minimum annual base salary pursuant to an Employment Agreement. Base
salaries specified in the Employment Agreements were based on current base
salaries paid to the officers and were not increased in such Agreements.
See "THE MERGER--Interests of Certain Persons in the Merger--Employment
Agreements."
9
<PAGE>
(3) Calculated by multiplying (x) the number of shares of SNC Common Stock
subject to the option by (y) the difference between the closing price of a
share of SNC Common Stock on July 29, 1994, and the exercise price of such
option.
(4) Calculated assuming conversion of the BB&T Financial Employee Options
pursuant to the Merger to give effect to the 1.45 Exchange Ratio.
Payments will be made only if required pursuant to the terms of the related
agreements. Stock options that will become exercisable as a result of the
Merger vest pursuant to the terms of the related stock option plan and option
agreements. See "THE MERGER--Interests of Certain Persons in the Merger."
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
SNC and BB&T Financial have received the opinion of Hunton & Williams,
counsel to SNC, to the effect that the Merger will qualify as a tax-free
reorganization as defined in Section 368(a) of the Code, with the result that
BB&T Financial shareholders will not recognize gain or loss on the exchange of
BB&T Financial Common Stock for SNC Common Stock, except with respect to the
receipt of cash in lieu of fractional shares. A non-waivable condition to
consummation of the Merger is the receipt by each of SNC and BB&T Financial of
an opinion of Hunton & Williams as of the date of the Effective Time of the
Merger as to the qualification of the Merger as a tax-free reorganization and
certain other federal income tax consequences of the Merger. See "THE MERGER--
Conditions to Consummation of the Merger" and "--Certain Federal Income Tax
Consequences."
OPTION AGREEMENTS
Pursuant to a Stock Option Agreement, dated July 29, 1994 (the "BB&T
Financial Option Agreement"), BB&T Financial has granted to SNC an option to
acquire 7,217,932 shares of BB&T Common Stock (approximately 19.9% of the
outstanding BB&T Financial Common Stock as of June 30, 1994) at an exercise
price of $30.625 per share, subject to adjustment, as provided therein.
Pursuant to an additional Stock Option Agreement, dated July 29, 1994 (the "SNC
Option Agreement" and, together with the BB&T Financial Option Agreement, the
"Option Agreements"), SNC has granted to BB&T Financial an option to acquire
8,633,736 shares of SNC Common Stock (approximately 19.9% of the outstanding
SNC Common Stock as of June 30, 1994) at an exercise price of $20.625 per
share, subject to adjustment, as provided therein. Upon occurrence of certain
events specified in the Option Agreements that could jeopardize consummation of
the Merger, each of SNC or BB&T Financial may exercise its respective option by
providing written notice to the other party as required by the Option
Agreements. The Option Agreements are attached to this Joint Proxy
Statements/Prospectus as Annexes IV-A and IV-B. See "THE MERGER--Option
Agreements."
COMPARATIVE RIGHTS OF SHAREHOLDERS
At the Effective Time of the Merger, BB&T Financial shareholders
automatically would become shareholders of SNC as the Continuing Corporation,
and their rights as shareholders would be determined by the SNC Articles and
the bylaws of SNC (the "SNC Bylaws"). Holders of SNC Common Stock, like holders
of BB&T Financial Common Stock, are entitled to one vote per share and
presently are not entitled to cumulative voting rights in the election of
directors. The SNC Board, unlike the BB&T Financial Board, is divided into
three classes so that each director serves for a term ending on the date of the
third annual meeting following the annual meeting at which such director was
elected. The SNC shareholders may not call a special meeting of SNC
shareholders; the holders of not less than one-tenth of the outstanding capital
stock of BB&T Financial may call a special meeting of BB&T Financial
shareholders. The shareholder vote required for certain corporate actions
differs for SNC and BB&T Financial. SNC and BB&T Financial provide
substantially similar indemnification and liability limitations for directors
and executive officers. See "COMPARATIVE RIGHTS OF SHAREHOLDERS."
10
<PAGE>
RESALES OF SNC COMMON STOCK
Shares of SNC Common Stock received in the Merger will be freely transferable
by the holders thereof except for those shares held by those holders who may be
deemed to be "affiliates" (generally including directors, certain executive
officers and ten percent or more shareholders) of BB&T Financial or SNC under
applicable federal securities laws. See "THE MERGER--Resales of SNC Common
Stock."
DISSENTERS' RIGHTS
The holders of shares of SNC Common Stock and BB&T Financial Common Stock who
do not vote for approval of the Agreement and the Plan of Merger, and who
comply with the requirements of Chapter 13 of the North Carolina Business
Corporation Act (the "NCBCA"), will be entitled to appraisal of their SNC
Common Stock and BB&T Financial Common Stock, respectively. The holders of
shares of SNC Convertible Preferred Stock who comply with the requirements of
Article 13 of the NCBCA also will be entitled to appraisal of their SNC
Convertible Preferred Stock. The full text of Article 13 of the NCBCA is
attached as Annex V to this Joint Proxy Statement/Prospectus. See "DISSENTERS'
RIGHTS."
MARKET PRICES
The following table discloses the price per share of SNC Common Stock and
BB&T Financial Common Stock based on the last reported sale prices per share of
SNC Common Stock on the NYSE Composite Transactions List and of BB&T Financial
Common Stock on the Nasdaq National Market System on July 29, 1994, the last
business day prior to public announcement of the execution of the Agreement,
and on November 8, 1994.
PRICE PER SHARE
<TABLE>
<CAPTION>
HISTORICAL
--------------------- EQUIVALENT
SNC BB&T FINANCIAL PRO FORMA BB&T FINANCIAL (A)
------ -------------- ----------------------------
<S> <C> <C> <C>
July 29, 1994................ $21.13 $31.00 $30.64
November 8, 1994............. $20.63 $29.63 $29.91
</TABLE>
- --------
(a) Computed by multiplying the last sale price of SNC Common Stock by the
Exchange Ratio.
THE SHARES OF SNC COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS, OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
11
<PAGE>
EQUIVALENT SHARE DATA
(UNAUDITED)
The following summary presents selected comparative unaudited per share
information for SNC and BB&T Financial on an historical basis and SNC, BB&T
Financial and Commerce on a pro forma combined basis assuming the combinations
had been effective during the periods presented. Information is presented for
the pending acquisition of Commerce based on BB&T Financial management's
expectation that the proposed transaction will be consummated prior to
consummation of the Merger. The Merger and the acquisition of Commerce by BB&T
Financial are reflected under the pooling-of-interests method of accounting and
pro forma information is derived accordingly. BB&T Financial pro forma
equivalent amounts are presented with respect to pro forma information. Such
amounts allow comparison of historical information with respect to the value of
one share of BB&T Financial Common Stock to the corresponding information with
respect to the projected value of one share of BB&T Financial Common Stock as a
result of the Merger and are computed by multiplying the pro forma amounts by
the Exchange Ratio of 1.45 to 1.
For each of SNC and BB&T Financial, income statement information for each of
the years ended December 31, 1993, 1992 and 1991 and balance sheet information
as of December 31, 1993 and 1992, are based on, and should be read in
conjunction with, the consolidated audited financial statements of SNC and BB&T
Financial incorporated herein by reference. See "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE." The remaining financial information is based on the
respective historical consolidated unaudited financial statements of SNC and
BB&T Financial and the notes to such statements. All adjustments necessary to
present a fair statement of results of interim periods of SNC and BB&T
Financial (which adjustments were of a normal recurring nature), in the opinion
of the respective managements of SNC and BB&T Financial, have been included.
Results for SNC and BB&T Financial for the six months ended June 30, 1994, are
not necessarily indicative of results to be expected for their entire fiscal
years, nor are pro forma amounts necessarily indicative of results that will be
obtained on a combined basis.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------
1994 1993 1993 1992 1991
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net income per common share (2),(5)
Primary
SNC................................. $ 1.15 $ 1.08 $ .07 $ 1.34 $ 1.17
BB&T Financial..................... 1.52 1.47 2.95 2.53 2.30
SNC and BB&T Financial pro forma.... 1.09 1.04 1.15 1.56 1.39
BB&T Financial pro forma equiva-
lent.............................. 1.58 1.51 1.67 2.26 2.02
SNC, BB&T Financial and Commerce pro
forma.............................. 1.07 1.02 1.16 1.53 1.36
BB&T Financial pro forma equiva-
lent.............................. 1.55 1.48 1.68 2.22 1.97
Fully-diluted
SNC................................. $ 1.10 $ 1.03 $ .07 $ 1.31 $ 1.17
BB&T Financial..................... 1.52 1.43 2.91 2.43 2.21
SNC and BB&T Financial pro forma.... 1.07 1.01 1.14 1.51 1.36
BB&T Financial pro forma equiva-
lent.............................. 1.55 1.46 1.65 2.19 1.97
SNC, BB&T Financial and Commerce pro
forma.............................. 1.05 .98 1.15 1.48 1.33
BB&T Financial pro forma equiva-
lent.............................. 1.52 1.42 1.67 2.15 1.93
Cash dividends declared per common
share (1),(3)
SNC................................. $ .34 $ .30 $ .64 $ .50 $ .46
BB&T Financial..................... .54 .50 1.02 .91 .85
SNC and BB&T Financial pro forma.... .34 .30 .64 .50 .46
BB&T Financial pro forma equiva-
lent.............................. .49 .44 .93 .73 .67
SNC, BB&T Financial and Commerce pro
forma.............................. .34 .30 .64 .50 .46
BB&T Financial pro forma equiva-
lent.............................. .49 .44 .93 .73 .67
Shareholders' equity per common
share (end of period) (4)(6)
SNC................................ $11.98 $12.62 $11.42 $13.16 $12.15
BB&T Financial..................... 22.17 21.13 21.90 20.01 18.18
SNC and BB&T Financial pro forma.... 13.15 13.63 13.37 13.52 12.37
BB&T Financial pro forma equiva-
lent.............................. 19.07 19.76 19.39 19.60 17.94
SNC, BB&T Financial and Commerce pro
forma.............................. 12.94 13.38 13.13 13.22 12.17
BB&T Financial pro forma equiva-
lent.............................. 18.76 19.40 19.04 19.17 17.65
</TABLE>
12
<PAGE>
NOTES TO EQUIVALENT SHARE DATA
(UNAUDITED)
(1) Cash dividends per share do not reflect cash dividends paid during the
periods presented by banks that were acquired during 1993 and 1994 in
transactions accounted for as pooling-of-interests or the number of shares
issued in such transactions.
(2) Pro forma net income per share does not reflect the exercise of options to
acquire shares of BB&T Financial. Assumed exercise of these options does
not have a significant impact upon the pro forma net income per share. Pro
forma net income per share amounts give effect to the options through the
application of the treasury stock method.
(3) Pro forma dividends per share represent historical dividends per share paid
by SNC.
(4) Certain material, non-recurring adjustments of approximately $80 million
will be recorded in conjunction with the Merger. These adjustments include:
approximately $51 million for the settlement of obligations under existing
employment contracts, severance pay for involuntary terminations, early
retirement and related employee benefits; approximately $7 million
associated with branch closings and divestitures; approximately $7 million
for consolidation of bank operations and systems; and approximately $10
million of expenses related to effecting the Merger. The impact of these
adjustments has been reflected in the Pro Forma Condensed Statement of
Condition as of June 30, 1994 and in the related amounts in the
accompanying Equivalent Share Data.
(5) Net income and primary and fully-diluted net income per share for the six
months ended June 30, 1993, and the twelve months ended December 31, 1993,
do not include the cumulative effect of changes in accounting principles
resulting from the adoption by SNC, effective January 1, 1993, of Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes" ("SFAS 109"), SFAS No. 106, "Accounting for Postretirement Benefits
Other than Pensions" ("SFAS 106"), and SFAS No. 72, "Accounting for Certain
Acquisitions of Banking or Thrift Institutions" ("SFAS 72"). The impact of
adoption of SFAS 109, SFAS 106 and SFAS 72 on net income, primary net
income per share and fully-diluted net income per share of SNC was
$27,217,000, $0.65 and $0.60, respectively, for the six months ended June
30, 1993, and $27,217,000, $0.64 and $0.58, respectively for the twelve
months ended December 31, 1993.
(6) BB&T Financial elected to amortize the accumulated postretirement
obligation related to the adoption of SFAS 106 over a period of 21 years as
a component of the postretirement benefit cost. SNC elected to reflect the
adoption of SFAS 106 through the recording of a cumulative charge for this
change in accounting principle. The Condensed Pro Forma Financial
Information and related amounts in the accompanying Equivalent Share Data
reflect an adjustment to conform BB&T Financial's transition method to the
method elected by SNC. Net income and primary and fully-diluted net income
per share for the six months ended June 30, 1993, and the year ended
December 31, 1993, do not reflect this conforming adjustment. The impact of
this conforming adjustment, net of tax, on net income, for both the six
months ended June 30, 1993 and for the year ended December 31, 1993 is
$7,898,000. Additionally, the Pro Forma Condensed Statements of Operations
and related amounts in the accompanying Equivalent Share Data do not
reflect adjustments for amounts previously recorded by BB&T Financial as
amortization of the unrecorded transition obligation, which amounted to
$335,000 (net of tax of $224,000) for the year ended December 31, 1993, and
$168,000 (net of tax of $112,000) for each of the six month periods ended
June 30, 1994 and 1993.
13
<PAGE>
The following table presents the weighted average shares outstanding relevant
to the calculation of primary and fully-diluted net income per share as shown
in the preceding table.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------
1994 1993 1993 1992 1991
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Primary
SNC................... 43,635,581 41,899,448 42,331,126 40,777,780 38,079,355
BB&T Financial........ 36,552,211 34,684,487 35,619,953 32,704,634 29,760,298
SNC and BB&T Financial
pro forma............ 96,636,287 92,191,954 93,980,058 88,199,499 81,231,787
SNC, BB&T Financial
and Commerce pro
forma................ 101,938,371 97,350,228 99,179,961 92,765,498 84,851,662
Fully-diluted
SNC................... 48,188,556 46,467,659 46,889,289 44,993,809 38,111,573
BB&T Financial........ 36,552,211 35,843,287 36,188,410 34,741,310 31,755,821
SNC and BB&T Financial
pro forma............ 101,189,262 98,440,425 99,362,484 95,368,708 84,157,514
SNC, BB&T Financial
and Commerce pro
forma................ 106,994,685 104,103,929 105,063,833 100,432,370 88,275,050
</TABLE>
14
<PAGE>
RECENT FINANCIAL DATA OF SNC, BB&T FINANCIAL AND COMMERCE
For the nine months ended September 30, 1994, SNC reported net income of
$80.9 million, compared with $42.4 million for the first three quarters of
1993. Fully-diluted earnings per share were reported to be $1.68 for the nine
months, compared with $.91 for the first three quarters of 1993. SNC reported
total assets of $8.50 billion, total loans of $5.25 billion and total deposits
of $6.26 billion at September 30, 1994.
For the three months ended September 30, 1994, net income for BB&T Financial
was $32.2 million or $.88 per share (on a fully-diluted basis), compared with
$27.0 million or $.74 per share for the same period in fiscal 1993. For the
nine months ended September 30, 1994, net income for BB&T Financial increased
to $87.6 million, or $2.39 per share (on a fully-diluted basis) from $78.0
million or $2.17 per share for the same period in fiscal 1993. On September 30,
1994 and 1993, BB&T Financial had total assets of $10.19 billion and $9.03
billion, respectively. Total loans were $6.99 billion at September 30, 1994,
compared with $6.15 billion on September 30, 1993. Deposits at September 30,
1994 and 1993 were $7.50 billion and $6.88 billion, respectively.
For the nine months ended September 30, 1994, net income for Commerce was
$5.45 million or $1.85 per fully-diluted share, compared with $4.86 million or
$1.70 per fully-diluted share for the same period of 1993. As of September 30,
1994, Commerce had total assets of $699.6 million, total loans of $428.1
million and total deposits of $643.0 million.
The following tables set forth certain unaudited financial data for SNC, BB&T
Financial and Commerce respectively. In the opinion of the respective
managements of SNC, BB&T Financial and Commerce all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of the
financial position and results of operations of such unaudited periods have
been included. The financial position and results of operations for the periods
ended September 30, 1994 are not necessarily indicative of operations that may
be expected in future periods.
SNC
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ----------------------
1994 1993 1994 1993
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income................. $148,653 $ 136,232 $ 420,886 $ 407,529
Interest expense................ 66,811 58,354 181,363 177,971
--------- --------- ---------- ----------
Net interest income............. 81,842 77,878 239,523 229,558
Provision for loan losses....... 989 3,540 3,692 11,493
Noninterest income.............. 19,225 19,927 60,727 73,548
Noninterest expense............. 56,976 61,100 172,491 186,477
Income tax expense.............. 15,089 11,436 43,123 35,539
Less cumulative effect of
changes in accounting
principles, net of income
taxes.......................... -- -- -- 27,217
--------- --------- ---------- ----------
Net income.................. $ 28,013 $ 21,729 $ 80,944 $ 42,380
========= ========= ========== ==========
Securities gains (losses)
included in noninterest income. $ (48) $ 170 $ 906 $ 14,197
PER SHARE DATA
Net income:
Primary....................... $ .61 $ .49 $ 1.76 $ .92
Fully diluted................. .58 .47 1.68 .91
Cash dividends paid............. .20 .17 .54 .47
Book value...................... 12.30 14.77 12.30 12.98
Closing market price............ 20.75 20.50 20.75 20.50
SELECTED PERIOD END BALANCES
Assets.......................... $8,502,290 $7,861,218
Securities...................... 2,651,311 2,394,766
Loans........................... 5,247,797 4,939,957
Deposits........................ 6,262,346 6,137,469
Shareholders' equity............ 609,219 611,519
RATIOS
Performance Ratios (Annualized):
Return on average assets...... 1.34% 1.13% 1.32% .75%
Return on average equity...... 20.36 15.47 20.04 10.06
Net interest margin, taxable
equivalent................... 4.29 4.44 4.28 4.46
</TABLE>
15
<PAGE>
BB&T FINANCIAL
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -----------------------
1994 1993 1994 1993
--------- --------- ----------- ----------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income, taxable
equivalent..................... $175,544 $154,316 $ 503,392 $ 446,935
Interest expense................ 78,145 62,736 217,717 183,669
--------- --------- ----------- ----------
Net interest income............. 97,399 91,580 285,675 263,266
Provision for loan losses....... 750 4,363 5,250 14,769
Noninterest income.............. 33,527 30,671 97,399 86,073
Noninterest expense............. 80,169 77,683 243,945 219,931
Income tax expense.............. 17,800 13,183 46,293 36,678
--------- --------- ----------- ----------
Net income.................. $ 32,207 $ 27,022 $ 87,586 $ 77,961
========= ========= =========== ==========
Securities gains included in
noninterest income............. $ 995 $ 214 $ 2,120 $ 1,476
PER SHARE DATA
Net income:
Primary....................... $ .88 $ .74 $ 2.39 $ 2.21
Fully diluted................. .88 .74 2.39 2.17
Cash dividends paid............. .29 .25 .83 .75
Book value...................... 22.66 21.49 22.66 21.49
Closing market price............ 29.00 33.88 29.00 33.88
SELECTED PERIOD END BALANCES
Assets.......................... $10,187,834 $9,027,008
Securities...................... 2,413,176 2,247,520
Loans........................... 6,986,594 6,145,688
Deposits........................ 7,496,739 6,878,800
Shareholders' equity............ 827,551 772,111
RATIOS
Performance Ratios (Annualized):
Return on average assets...... 1.28% 1.20% 1.18% 1.23%
Return on average equity...... 15.71 14.05 14.59 14.39
Net interest margin, taxable
equivalent................... 4.29 4.53 4.28 4.65
</TABLE>
COMMERCE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ------------------
1994 1993 1994 1993
--------- --------- -------- --------
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income...................... $ 12,592 $ 11,957 $ 36,524 $ 35,359
Interest expense..................... 5,257 5,192 15,220 15,816
--------- --------- -------- --------
Net interest income.................. 7,335 6,765 21,304 19,543
Provision for loan losses............ 600 700 1,800 2,225
Noninterest income................... 2,064 3,893 6,826 8,256
Noninterest expense.................. 6,131 6,831 18,357 17,711
Income tax expense................... 821 1,415 2,524 3,003
--------- --------- -------- --------
Net income....................... $ 1,847 $ 1,712 $ 5,449 $ 4,860
========= ========= ======== ========
Securities gains (losses) included in
noninterest income.................. $ (28) $ 1,268 $ 41 $ 1,354
PER SHARE DATA
Net income:
Primary............................ $ .64 $ .62 $ 1.93 $ 1.77
Fully diluted...................... .62 .60 1.85 1.70
Cash dividends paid.................. .20 .14 .50 .36
Book value........................... 17.32 16.48 17.32 16.48
Closing market price................. 37.13 23.75 37.13 23.75
SELECTED PERIOD END BALANCES
Assets............................... $699,610 $681,896
Securities........................... 201,638 246,303
Loans................................ 428,114 372,870
Deposits............................. 643,005 629,692
Shareholders' equity................. 47,363 41,917
RATIOS
Performance Ratios (Annualized):
Return on average assets........... 1.06% 1.02% 1.06% 1.00%
Return on average equity........... 15.59 16.25 15.61 16.22
Net interest margin, taxable
equivalent........................ 4.54 4.36 4.48 4.36
</TABLE>
16
<PAGE>
SELECTED FINANCIAL DATA
(UNAUDITED)
The following table presents on an historical basis selected unaudited
financial data for SNC and BB&T Financial and unaudited pro forma amounts for
SNC, BB&T Financial and Commerce combined. Information is presented for the
pending acquisition of Commerce by BB&T Financial based on BB&T Financial
management's expectation that the proposed transaction will be consummated
prior to consummation of the Merger. The Merger and the acquisition of Commerce
by BB&T Financial are reflected under the pooling-of-interests method of
accounting and pro forma data is derived accordingly.
For each of SNC and BB&T Financial, income statement information for each of
the years ended December 31, 1993, 1992 and 1991, and balance sheet information
as of December 31, 1993 and 1992, are based on, and should be read in
conjunction with, the consolidated audited financial statements of SNC and BB&T
Financial incorporated herein by reference. For SNC, the consolidated audited
financial statements are included in SNC's Current Report on Form 8-K dated
September 26, 1994, and reflect restatement to give retroactive effect to SNC's
mergers in 1994 with FSB, Regency and Home, all of which were accounted for
under the pooling-of-interests method of accounting. For BB&T Financial, the
consolidated audited statements are included in BB&T Financial's Current Report
on Form 8-K dated August 31, 1994, and are restated to give retroactive effect
to BB&T Financial's merger in 1994 with LSB, which was accounted for under the
pooling-of-interests method of accounting. See "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE." The remaining financial information is based on the
respective historical consolidated unaudited financial statements of SNC and
BB&T Financial and the notes to such statements. All adjustments necessary to
present a fair statement of results of interim periods of SNC and BB&T
Financial (which adjustments were of a normal recurring nature), in the opinion
of the respective managements of SNC and BB&T Financial, have been included.
Results for SNC and BB&T Financial for the six months ended June 30, 1994, are
not necessarily indicative of results to be expected for their entire fiscal
years, nor are pro forma amounts necessarily indicative of results that will be
obtained on a combined basis.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- -------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Total interest and non-
interest income
SNC.................... $314,576 $324,918 $ 634,982 $ 650,186 $ 672,312 $ 667,803 $ 639,419
BB&T Financial......... 391,720 348,021 724,678 687,165 702,387 666,972 654,914
SNC and BB&T Financial
pro forma............. 706,296 672,939 1,359,660 1,337,351 1,374,699 1,334,775 1,294,333
SNC, BB&T Financial and
Commerce pro forma.... 734,990 700,704 1,417,562 1,390,500 1,421,485 1,373,534 1,325,838
Net interest income
SNC.................... $157,681 $151,680 $ 310,463 $ 279,646 $ 222,346 $ 198,139 $ 182,645
BB&T Financial......... 188,276 171,686 356,789 316,033 261,233 225,296 200,456
SNC and BB&T Financial
pro forma............. 345,957 323,366 667,252 595,679 483,579 423,435 383,101
SNC, BB&T Financial and
Commerce pro forma.... 359,926 336,144 693,516 618,204 500,148 436,783 394,758
Noninterest income
SNC.................... $ 42,343 $ 53,621 $ 87,672 $ 78,752 $ 81,368 $ 63,211 $ 59,610
BB&T Financial......... 63,872 55,402 119,527 95,549 90,888 68,404 61,319
SNC and BB&T Financial
pro forma............. 106,215 109,023 207,199 174,301 172,256 131,615 120,929
SNC, BB&T Financial and
Commerce pro forma.... 110,977 113,386 217,854 182,511 178,016 135,101 123,790
Noninterest expense
SNC.................... $116,356 $125,377 $ 336,059* $ 233,572 $ 204,601 $ 186,288 $ 170,128
BB&T Financial......... 163,776 142,248 301,574 254,133 214,999 189,761 177,757
SNC and BB&T Financial
pro forma............. 280,132 267,625 637,633 487,705 419,600 376,049 347,885
SNC, BB&T Financial and
Commerce pro forma.... 292,358 278,505 661,339 506,796 435,184 389,524 359,333
</TABLE>
- --------
* In late 1993, SNC entered into an agreement to sell $109 million of loan-
related assets. Noninterest expense for 1993 includes the loss on this bulk
asset sale of $49 million.
See Notes to Selected Financial Data.
17
<PAGE>
SELECTED FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Provision for loan and
lease losses
SNC.................... $ 2,703 $ 7,953 $ 31,438 $ 25,671 $ 30,602 $ 29,693 $ 17,019
BB&T Financial......... 4,500 10,406 19,048 32,975 42,317 21,718 14,620
SNC and BB&T Financial
pro forma............. 7,203 18,359 50,486 58,646 72,919 51,411 31,639
SNC, BB&T Financial and
Commerce pro forma.... 8,403 19,884 53,311 62,871 75,844 54,106 32,354
Net income (5)
SNC.................... $ 52,931 $ 47,868 $ 8,193 $ 59,163 $ 44,609 $ 30,869 $ 36,416
BB&T Financial......... 55,379 50,939 105,012 82,621 68,335 61,309 53,015
SNC and BB&T Financial
pro forma............. 108,310 98,807 113,205 141,784 112,944 92,178 89,431
SNC, BB&T Financial and
Commerce pro forma.... 111,912 101,955 119,756 146,726 115,543 92,725 91,118
Per share amounts:
(1),(4)
Net income (2),(5)
Primary $
SNC.................... $ 1.15 $ 1.08 $ .07 $ 1.34 $ 1.17 $ .82 .97
BB&T Financial......... 1.52 1.47 2.95 2.53 2.30 2.20 2.02
SNC and BB&T Financial
pro forma............. 1.09 1.04 1.15 1.56 1.39 1.18 1.18
SNC, BB&T Financial and
Commerce pro forma.... 1.07 1.02 1.16 1.53 1.36 1.14 1.15
Fully-diluted
SNC.................... $ 1.10 $ 1.03 $ .07 $ 1.31 $ 1.17 $ .82 $ .97
BB&T Financial......... 1.52 1.43 2.91 2.43 2.21 2.13 1.95
SNC and BB&T Financial
pro forma............. 1.07 1.01 1.14 1.51 1.36 1.17 1.17
SNC, BB&T Financial and
Commerce pro forma.... 1.05 .98 1.15 1.48 1.33 1.12 1.14
Cash dividends declared
SNC.................... $ .34 $ .30 $ .64 $ .50 $ .46 $ .42 $ .39
BB&T Financial......... .54 .50 1.02 .91 .85 .81 .74
SNC and BB&T Financial
pro forma............. .34 .30 .64 .50 .46 .42 .39
SNC, BB&T Financial and
Commerce pro forma.... .34 .30 .64 .50 .46 .42 .39
Book value (end of
period) (3)(6)
SNC.................... $ 11.98 $ 12.62 $ 11.42 $ 13.16 $ 12.15 $ 10.96 $ 10.34
BB&T Financial......... 22.17 21.13 21.90 20.01 18.18 16.55 15.43
SNC and BB&T Financial
pro forma............. 13.15 13.63 13.37 13.52 12.37 11.21 10.50
SNC, BB&T Financial and
Commerce pro forma.... 12.94 13.38 13.13 13.22 12.17 11.03 10.36
End of period balances:
Total assets (3)(6)
SNC.................... $ 8,236,362 $ 7,585,473 $ 8,274,470 $ 7,379,988 $ 6,567,309 $ 6,403,362 $ 6,147,689
BB&T Financial......... 9,878,471 8,886,534 9,867,398 7,931,660 7,390,370 6,204,047 6,203,893
SNC and BB&T Financial
pro forma............. 18,104,383 16,472,007 18,141,868 15,311,648 13,957,679 12,607,409 12,351,582
SNC, BB&T Financial and
Commerce pro forma.... 18,796,450 17,138,404 18,831,498 15,956,497 14,436,338 13,012,846 12,654,833
Deposits
SNC.................... $ 6,228,803 $ 6,042,046 $ 6,394,871 $ 6,040,928 $ 5,503,886 $ 5,148,605 $ 4,980,788
BB&T Financial......... 7,422,473 6,896,541 7,565,940 6,405,261 6,217,029 5,325,025 5,118,781
SNC and BB&T Financial
pro forma............. 13,651,276 12,938,587 13,960,811 12,446,189 11,720,915 10,473,630 10,099,569
SNC, BB&T Financial and
Commerce pro forma.... 14,287,668 13,554,773 14,594,952 13,044,173 12,166,090 10,847,996 10,377,636
Long-term debt
SNC.................... $ 216,686 $ 371,452 $ 479,677 $ 290,143 $ 293,250 $ 388,750 $ 309,059
BB&T Financial......... 396,252 105,947 350,736 127,442 118,129 104,740 115,421
SNC and BB&T Financial
pro forma............. 612,938 477,399 830,413 417,585 411,379 493,490 424,480
SNC, BB&T Financial and
Commerce pro forma.... 619,728 484,265 837,241 423,211 417,050 499,187 425,191
</TABLE>
See Notes to Selected Financial Data.
18
<PAGE>
SELECTED FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ ------------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------------ ----------- ------------ ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
End of period balances:
Common shareholders'
equity (3)(6)
SNC.................... $ 519,724 $ 521,599 $ 490,721 $ 501,312 $ 425,314 $ 370,273 $ 349,276
BB&T Financial......... 804,103 763,189 796,984 654,030 575,462 457,385 407,239
SNC and BB&T Financial
pro forma............. 1,262,493 1,277,078 1,280,183 1,155,342 1,000,776 827,658 756,515
SNC, BB&T Financial and
Commerce pro forma.... 1,309,086 1,317,400 1,323,772 1,192,755 1,024,546 848,763 777,064
Shares outstanding
SNC.................... 43,385,610 41,332,886 42,961,214 38,090,409 34,992,867 33,775,833 33,769,628
BB&T Financial......... 36,271,016 36,112,965 36,398,619 32,684,930 31,646,959 27,637,610 26,384,788
SNC and BB&T Financial
pro forma............. 95,978,583 93,696,150 95,739,212 85,483,558 80,880,958 73,850,368 72,027,571
SNC, BB&T Financial and
Commerce pro forma.... 101,134,964 98,490,949 100,823,294 90,235,616 84,182,934 76,972,580 75,002,188
</TABLE>
See Notes to Selected Financial Data.
19
<PAGE>
NOTES TO SELECTED FINANCIAL DATA
(UNAUDITED)
(1) Cash dividends do not reflect cash dividends paid during the periods
presented by banks that were acquired during 1989, 1990, 1993 and 1994 in
transactions accounted for as pooling-of-interests or the number of shares
issued in such transactions.
(2) Pro forma net income per share does not reflect the exercise of options to
acquire shares of BB&T Financial. Assumed exercise of these options does
not have a significant impact upon the pro forma net income per share. Pro
forma net income per share amounts give effect to the options through the
application of the treasury stock method.
(3) Certain material, non-recurring adjustments of approximately $80 million
will be recorded in conjunction with the Merger. These adjustments include:
approximately $51 million for the settlement of obligations under existing
employment contracts, severance pay for involuntary terminations, early
retirement and related employee benefits; approximately $7 million
associated with branch closings and divestitures; approximately $7 million
for consolidation of bank operations and systems; and approximately
$10 million of expenses related to effecting the Merger. The impact of
these adjustments has been reflected in the Pro Forma Condensed Statement
of Condition as of June 30, 1994, and in the related amounts in the
accompanying Selected Financial Data.
(4) Weighted average shares outstanding for calculations of primary and fully-
diluted net income per share for SNC in 1989 and 1990 do not reflect the
impact of stock options outstanding. This data is not readily available
because of acquisitions accounted for as pooling-of-interests in 1994,
1993, 1990 and 1989. The effect of stock options on weighted average shares
outstanding and on net income per share is not material.
(5) Net income and primary and fully-diluted net income per share for SNC for
the six months ended June 30, 1993, and the twelve months ended December
31, 1993, do not include the cumulative effect of changes in accounting
principles resulting from the adoption by SNC, effective January 1, 1993,
of Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes" ("SFAS 109"), SFAS No. 106, "Accounting for
Postretirement Benefits Other than Pensions" ("SFAS 106"), and SFAS No. 72,
"Accounting for Certain Acquisitions of Banking or Thrift Institutions"
("SFAS 72"). The impact of adoption of SFAS 109, SFAS 106 and SFAS 72 on
net income, primary net income per share and fully-diluted net income per
share of SNC was $27,217,000, $0.65 and $0.60, respectively, for the six
months ended June 30, 1993, and $27,217,000, $0.64 and $0.58, respectively
for the twelve months ended December 31, 1993.
(6) BB&T Financial elected to amortize the accumulated postretirement
obligation related to the adoption of SFAS 106 over a period of 21 years as
a component of the postretirement benefit cost. SNC elected to reflect the
adoption of SFAS 106 through the recording of a cumulative charge for this
change in accounting principle. The Condensed Pro Forma Financial
Information and related amounts in the accompanying Selected Financial Data
reflect an adjustment to conform BB&T Financial's transition method to the
method elected by SNC. Net income and primary and fully-diluted net income
per share for the six months ended June 30, 1993, and the year ended
December 31, 1993, do not reflect this conforming adjustment. The impact of
this conforming adjustment, net of tax, on net income, for both the six
months ended June 30, 1993 and for the year ended December 31, 1993 is
$7,898,000. Additionally, the Pro Forma Condensed Statements of Operations
and related amounts in the accompanying Selected Financial Data do not
reflect adjustments for amounts previously recorded by BB&T Financial as
amortization of the unrecorded transition obligation, which amounted to
$335,000 (net of tax of $224,000) for the year ended December 31, 1993, and
$168,000 (net of tax of $112,000), for each of the six month periods ended
June 30, 1994 and 1993.
20
<PAGE>
THE SHAREHOLDER MEETINGS
SNC SPECIAL MEETING
General. Each copy of this Joint Proxy Statement/Prospectus mailed to holders
of SNC Common Stock is accompanied by a form of proxy furnished in connection
with the solicitation of proxies by the SNC Board for use at the SNC Special
Meeting and any adjournment thereof. The SNC Special Meeting is scheduled to be
held on December 15, at 10:00 a.m., Eastern Standard Time, at the Holiday
Inn,5201 Fayetteville Road, Lumberton, North Carolina. Only holders of record
of SNC Common Stock on the SNC Record Date are entitled to receive notice of
and to vote at the SNC Special Meeting. At the SNC Special Meeting,
shareholders will consider and vote upon a proposal to approve the Agreement
and the Plan of Merger. See "THE MERGER."
HOLDERS OF SNC COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO SNC IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE. FAILURE TO RETURN YOUR PROPERLY EXECUTED PROXY OR TO VOTE AT THE
MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE AGREEMENT AND THE PLAN
OF MERGER.
Voting and Revocation of Proxies. Any holder of SNC Common Stock who has
executed and delivered a proxy may revoke it at any time before it is voted by
attending and voting in person at the SNC Special Meeting or by giving written
notice of revocation or submitting a signed proxy bearing a later date to SNC,
Attention: Corporate Secretary, provided such notice or proxy is actually
received by SNC prior to the vote of shareholders. A proxy will not be revoked
by the death or incapacity of the shareholder executing it unless, before the
shares are voted, notice of such death or supervening incapacity is filed with
the Corporate Secretary or other person authorized to tabulate the votes on
behalf of SNC. The shares of SNC Common Stock represented by properly executed
proxies received at or before the SNC Special Meeting and not subsequently
revoked will be voted as directed by the shareholders submitting such proxies.
If instructions are not given, proxies will be voted FOR approval of the
Agreement and the Plan of Merger. If any other matters are properly presented
for consideration at the SNC Special Meeting or any adjournments thereof, the
persons named in the SNC proxy enclosed herewith will have discretionary
authority to vote on such matters. If necessary, and unless the shares
represented by the proxy were voted against the applicable proposal therein,
the proxy holder also may vote in favor of a proposal to adjourn the SNC
Special Meeting to permit further solicitation of proxies in order to obtain
sufficient votes to approve any of the matters being considered at the SNC
Special Meeting. SNC is unaware of any matter to be presented at the SNC
Special Meeting other than the proposal described above.
Solicitation of Proxies. The cost of soliciting proxies from holders of SNC
Common Stock will be borne by SNC. Such solicitation will be made by mail but
also may be made by telephone or in person by the directors, officers or
employees of SNC (who will receive no additional compensation for doing so). In
addition, SNC will make arrangements with brokerage firms and other custodians,
nominees and fiduciaries to send proxy materials to their principals. SNC
expects to utilize the services of Morrow & Co., Inc., to solicit proxies, but
does not expect the fees to exceed $6,000 plus out-of-pocket expenses.
Vote Required. Because the number of shares of SNC Common Stock outstanding
immediately after the Effective Time of the Merger, plus the number of shares
of SNC Common Stock to be issued pursuant to the Merger, will exceed by more
than 20% the total number of shares of SNC Common Stock outstanding immediately
before the Effective Time of the Merger, Article 11 of the NCBCA requires the
affirmative vote of a majority of the outstanding shares of SNC Common Stock
entitled to vote at the SNC Special Meeting for approval of the Agreement and
the Plan of Merger. Abstentions and "broker non-votes" will have the same
effect as negative votes for purposes of determining whether the proposal has
received sufficient votes for approval.
As of the SNC Record Date, there were 43,488,593 shares of SNC Common Stock
outstanding and entitled to vote at the SNC Special Meeting, with each share
being entitled to one vote. As of the SNC Record Date, the members of the SNC
Board and the executive officers of SNC and their affiliates beneficially owned
a total of 1,413,550 shares (representing approximately 3.2% of the outstanding
shares of SNC Common
21
<PAGE>
Stock), all of which are expected to be voted in favor of the Agreement and the
Plan of Merger. Also, as of the SNC Record Date, one member of the BB&T
Financial Board had shared voting power with respect to 28,348 shares of SNC
Common Stock and one member of the BB&T Financial Board owned 1,512 shares of
SNC Common Stock, all of which are expected to be voted in favor of the
Agreement and the Plan of Merger.
Recommendation. For the reasons described herein, the SNC Board unanimously
has approved the Agreement and adopted the Plan of Merger. The SNC Board
believes the Merger is in the best interests of SNC and its shareholders and
unanimously recommends that the shareholders of SNC vote FOR approval of the
Agreement and the Plan of Merger. In making its recommendation, the SNC Board
considered, among other things, the opinions of Lehman Brothers and Wheat that
the Exchange Ratio is fair to SNC shareholders from a financial point of view.
See "THE MERGER--Background of and Reasons for the Merger" and "--Opinions of
Financial Advisors."
BB&T FINANCIAL SPECIAL MEETING
General. This Joint Proxy Statement/Prospectus is being furnished to the
holders of BB&T Financial Common Stock as of the BB&T Financial Record Date and
is accompanied by a form of proxy, which is solicited by the BB&T Financial
Board for use at the BB&T Financial Special Meeting to be held on December 15,
1994 and any adjournments thereof. At the BB&T Financial Special Meeting,
shareholders will vote on whether to approve the Agreement and the Plan of
Merger. Proxies may be voted on such other matters as may properly come before
the BB&T Financial Special Meeting, or any adjournments thereof, in the best
judgment of the proxy holders named therein. See "THE MERGER."
HOLDERS OF BB&T FINANCIAL COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO BB&T FINANCIAL IN THE
ENCLOSED, POSTAGE-PAID ENVELOPE. FAILURE TO RETURN YOUR PROPERLY EXECUTED PROXY
OR TO VOTE AT THE MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
AGREEMENT AND THE PLAN OF MERGER.
BB&T FINANCIAL SHAREHOLDERS SHOULD NOT FORWARD ANY CERTIFICATES WITH THEIR
PROXIES.
Voting and Revocation of Proxies. The shares of BB&T Financial Common Stock
represented by properly completed proxies received at or prior to the BB&T
Financial Special Meeting will be voted as directed by the shareholders, unless
revoked as described below. If no instructions are given, executed proxies will
be voted FOR approval of the Agreement and the Plan of Merger. If any other
matters are properly presented at the BB&T Financial Special Meeting and may be
properly voted on, the proxies solicited hereby will be voted on such matters
in accordance with the instructions of the Executive Committee of the BB&T
Financial Board. If necessary, except to the extent the shares represented by
the proxy are voted against the Merger, the proxy holders also may vote in
favor of a proposal to adjourn the BB&T Financial Special Meeting to permit
further solicitation of proxies in order to obtain sufficient votes to approve
any of the matters being considered at the BB&T Financial Special Meeting. The
management of BB&T Financial is not aware of any other business to be presented
at the BB&T Financial Special Meeting. This proxy is being solicited for the
BB&T Financial Special Meeting called to consider the Agreement and the Plan of
Merger and any adjournment(s) of the BB&T Financial Special Meeting and will
not be used for any other purpose.
The presence of a shareholder at the BB&T Financial Special Meeting will not
automatically revoke such shareholder's proxy. A shareholder may, however,
revoke a proxy at any time prior to its exercise by filing a written notice of
revocation with, or by delivering a duly executed proxy bearing a later date
to, the Secretary of BB&T Financial at BB&T Financial's main office address
prior to the BB&T Financial Special Meeting, or by attending the BB&T Financial
Special Meeting and voting in person. A proxy will not be revoked by the death
or incapacity of the shareholder executing it unless, before the shares are
voted, notice of such death or incapacity is filed with the Secretary of BB&T
Financial or other person authorized to tabulate votes.
22
<PAGE>
Solicitation of Proxies. BB&T Financial will bear the costs of soliciting
proxies. In addition to use of the mails, proxies may be solicited personally
or by telephone or facsimile by directors, officers and other employees of BB&T
Financial, who will not be specially compensated for such solicitation
activities. Arrangements also will be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of shares held of record by such persons,
and such persons will be reimbursed for their reasonable expenses incurred in
that effort by BB&T Financial. BB&T Financial expects to utilize the services
of Morrow & Co., Inc., in connection with the solicitation of proxies for the
BB&T Financial Special Meeting, and expects the fees relating to such services
not to exceed $6,000 plus out-of-pocket expenses.
Vote Required. Because BB&T Financial is not the surviving corporation in the
Merger, pursuant to the NCBCA and the rules of the National Association of
Securities Dealers, the affirmative vote of the holders of a majority of the
outstanding shares of BB&T Financial Common Stock entitled to vote at the BB&T
Financial Special Meeting is required in order to approve the Agreement and the
Plan of Merger. Abstentions and "broker non-votes" will have the same effect as
negative votes for purposes of determining whether the proposal has received
sufficient votes for approval.
As of the BB&T Financial Record Date, there were 36,454,681 shares of BB&T
Financial Common Stock outstanding and entitled to vote at the BB&T Financial
Special Meeting, with each share being entitled to one vote. As of the BB&T
Financial Record Date, the members of the BB&T Financial Board and the
executive officers of BB&T Financial and their affiliates beneficially owned a
total of 642,667 shares (representing approximately 1.8% of the outstanding
shares of BB&T Financial Common Stock), all of which are expected to be voted
in favor of the Agreement and the Plan of Merger. Also as of the BB&T Financial
Record Date, seven members of the SNC Board held or shared beneficial ownership
with respect to 57,409 shares of BB&T Financial Common Stock, all of which are
expected to be voted in favor of the Agreement and the Plan of Merger.
Recommendation. The BB&T Financial Board unanimously has approved the
Agreement and the Plan of Merger and believes that the Merger is fair to and in
the best interests of BB&T Financial and its shareholders. The BB&T Financial
Board unanimously recommends that the BB&T Financial shareholders vote FOR
approval of the Agreement and the Plan of Merger.
In making its recommendation, the BB&T Financial Board has considered, among
other things, the opinions of Lehman Brothers and Merrill Lynch that the
Exchange Ratio is fair to the BB&T Financial shareholders from a financial
point of view. See "THE MERGER--Background of and Reasons for the Merger" and
"--Opinions of Financial Advisors."
THE MERGER
The detailed terms of the Merger are contained in the Agreement and the Plan
of Merger, attached as Annex I and Annex II to this Joint Proxy
Statement/Prospectus, respectively. The following discussion describes the
material aspects of the Merger and all material terms of the Agreement and the
Plan of Merger. This description is qualified in its entirety by reference to
the Agreement and the Plan of Merger, which are incorporated by reference
herein and which BB&T Financial and SNC shareholders are urged to read
carefully.
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. SNC and BB&T Financial conduct their respective
banking and financial services operations in overlapping, but slightly
different, regions of the southeastern United States. Both companies have
expanded in recent years through extensive intra- and interstate acquisitions.
SNC is more strongly represented than BB&T Financial in southeastern North
Carolina and, since the acquisition of FSB, in South Carolina. BB&T Financial
is more strongly represented than SNC in northeastern North Carolina
23
<PAGE>
and, upon completion of the acquisition of Commerce, will have a significant
presence in the Tidewater region of Virginia.
Discussions regarding a possible "merger-of-equals" transaction between SNC
and BB&T Financial began in early July 1994. In a telephone conversation
regarding general business and regulatory issues involving both SNC and BB&T
Financial, L. Glenn Orr, Jr., Chairman of the Board, President and Chief
Executive Officer of SNC, suggested to John A. Allison IV, Chairman of the
Board and Chief Executive Officer of BB&T Financial, that the two should meet
to discuss the future of SNC and BB&T Financial. Messrs. Allison and Orr met in
Richmond, Virginia, on July 15, 1994, and discussed the issues raised by a
combination of SNC and BB&T Financial in a "merger of equals." Their interest
in exploring a "merger of equals" reflected a common view of the future course
of the banking industry and the cultural similarities and strong financial
positions of the two companies. They discussed the fact that each company had
been particularly impressed with the strength of the other's markets and
management, quality of earnings and assets, emphasis on risk management and
focus on community banking and customer service and the complementary nature of
the markets served by each institution and of the services each offered.
Messrs. Orr and Allison agreed to engage Lehman Brothers to serve as an
independent advisor to both parties in determining the appropriate exchange
ratio for a transaction from a financial point of view.
Lehman Brothers was engaged for this purpose on July 18, 1994. Messrs.
Allison and Orr met again on July 18, July 19, July 21 and July 22, 1994, at
Sunset Beach, North Carolina, for further discussions regarding the proposed
transaction. On July 24, 1994, Messrs. Allison and Orr, together with members
of senior management of, and the attorneys for, the respective companies, met
in Washington, D.C., for further discussions. Lehman Brothers also participated
in the meeting during the afternoon of July 24 to present orally that firm's
preliminary views on the Exchange Ratio. On July 25, 1994, SNC engaged Wheat,
and BB&T Financial engaged Merrill Lynch, to serve as their respective
investment bankers for the purpose of evaluating the fairness of the Exchange
Ratio from a financial point of view to the shareholders of SNC and BB&T,
respectively.
On July 29, 1994, the SNC Board met in Lumberton, North Carolina, and the
BB&T Financial Board met in Wilson, North Carolina, to approve the proposed
transaction. Messrs. Allison and Orr each had discussed the transaction with
their directors prior to July 29, 1994. Representatives of Lehman Brothers were
present at each meeting and described principles and procedures that led to the
Exchange Ratio, concluding that in the opinion of Lehman Brothers, the Exchange
Ratio was fair, from a financial point of view, to the shareholders of SNC and
BB&T Financial. See "--Opinions of Financial Advisors." Representatives of
Wheat and Merrill Lynch also concluded that the Exchange Ratio, in their
respective opinions, was fair from a financial point of view to the
shareholders of SNC and BB&T Financial, respectively. Each of the SNC Board and
the BB&T Financial Board unanimously approved the Agreement and adopted the
Plan of Merger.
SNC's Reasons for the Merger. The SNC Board has pursued a long-term business
strategy to enhance shareholder value by seeking actively mergers and
acquisitions that provide SNC with a competitive advantage by increasing
earnings, broadening product lines, expanding distribution and diversifying
geographically, all without sacrificing asset quality. This strategy has
resulted in a $5 billion increase in assets in the last four years. SNC's
competition for acquisitions is becoming significantly more intense, however,
due, among other reasons, to the presence in SNC's primary markets of super-
regional banks. This competition is expected to increase with the advent of
more extensive interstate banking. SNC has not engaged in serious discussions
concerning a merger in which SNC would be acquired by a larger institution. In
recent years, SNC management has considered various potential "merger-of-
equals" partners in North and South Carolina. Such considerations have not
resulted in substantive merger negotiations until the discussions leading to
the Merger. Of all potential partners in the Carolinas, BB&T Financial is, in
the view of the SNC Board, the largest, strongest and best known in the
investment community.
24
<PAGE>
The SNC Board has determined that the Merger is in the best interests of SNC
and its shareholders. In approving the Agreement and adopting the Plan of
Merger, the SNC Board considered a number of factors from a short-term and a
long-term perspective. In weighing the various considerations with respect to
the Merger, the primary goals of the SNC Board were to realize short-term
savings and to exploit long-term opportunities. Although the SNC Board assigned
no specific weight to any individual factor, the fairness of the Exchange Ratio
was the most critical factor. The material factors considered included the
following:
(i) a review, based in part on an oral presentation by SNC management, of
(a) the business, operations, earnings and financial condition, including
the capital levels and asset quality, of BB&T Financial on an historical,
prospective and pro forma basis; (b) product overlap between SNC and BB&T
Financial; (c) the compatibility of corporate goals, systems and
organizations and the respective contributions each party would make to a
combined entity; (d) the potential for enhanced shareholder value through
increased deposit market share in North Carolina, South Carolina and
Virginia; (e) the enhanced opportunities for acquisitions and growth that
the Merger would make possible as a result of the increased capitalization
of the combined entity; (f) the enhanced opportunities for cost savings and
synergies expected to result from the Merger; and (g) the competitive
advantage for larger financial institutions that are able to invest in more
sophisticated technology to serve the needs of their customers.
(ii) the terms of the Agreement, including the Exchange Ratio (the
Exchange Ratio of 1.45 shares of SNC Common Stock for each share of BB&T
Financial Common Stock was approved by the SNC Board, upon the advice of
Lehman Brothers and Wheat that this Ratio is fair, from a financial point
of view, to the shareholders of SNC. In deciding to approve and recommend
the terms of the Merger, the SNC Board considered the Exchange Ratio in
relation to (a) the respective market values, book values, earnings per
share and dividend rates of SNC Common Stock and BB&T Financial Common
Stock;(b) historical trading ranges and multiples for SNC Common Stock and
BB&T Financial Common Stock; and (c) expected trading ranges and multiples
for the two companies on a combined basis);
(iii) the financial advice rendered by Lehman Brothers and Wheat
regarding the terms of the Agreement and the Plan of Merger. In considering
such financial advice, the SNC Board reviewed the methodology and the
appropriateness of the assumptions used by Lehman and Wheat in their
analyses of the fairness of the Exchange Ratio. See "--Opinions of
Financial Advisors;"
(iv) the opportunity that the Merger would provide to strengthen and
deepen the management team by integrating the already strong management
teams of SNC and BB&T Financial and the agreement between the parties that
John A. Allison IV would serve as Chairman of the Board and Chief Executive
Officer of the Continuing Corporation and, that, although L. Glenn Orr,
Jr., would retire as an officer of SNC, Mr. Orr will continue as a director
and member of the Executive Committee of the Continuing Corporation and the
Continuing Banks and serve as a consultant to the Continuing Corporation;
(v) the expectation that the Merger would be tax-free for federal income
tax purposes to SNC and that the Merger would be accounted for under the
pooling-of-interests method of accounting and, therefore, would not give
rise to goodwill;
(vi) the current and prospective economic environment facing financial
institutions generally and SNC in particular; and
(vii) the terms of the Merger as a "merger of equals" resulting in a
surviving corporation with four executive officers from each of the parties
(in addition to Mr. Allison); equal Board and Board committee
representation of SNC and BB&T Financial, with each party designating 12
members of the Continuing Corporation Board; the relocation of the
headquarters of the Continuing Corporation to Winston-Salem, North Carolina
(the current administrative headquarters of SNBNC); and the name of the
Continuing Corporation as "Southern National Corporation" and the names of
the Continuing Banks as "Branch Banking and Trust Company" and "Branch
Banking and Trust Company of South Carolina."
The SNC Board also considered the potential dilution to 1994 earnings per
share of approximately 2% and accretion to book value per share of SNC Common
Stock at June 30, 1994, of approximately 9%,
25
<PAGE>
resulting from the Merger (see "--Opinions of Financial Advisors"), as well as
the loss of SNC's corporate independence.
The SNC Board believes that each institution currently is well-managed and
possesses management philosophies and a strategic focus that are compatible
with those of the other, that each institution would contribute complementary
business strengths resulting in a well-diversified combined institution and
that the strong capitalization of the combined entity would allow it to take
advantage of future acquisition opportunities that otherwise might not be
available to either institution individually. The SNC Board also believes that
the Merger would allow the combined institution to compete effectively in the
rapidly changing marketplace for banking and financial services and to take
advantage of opportunities for growth and diversification that might not be
available to either institution on its own.
Although no assurance can be given, SNC and BB&T Financial expect that
significant cost savings will be achieved by the Continuing Corporation at an
annual rate of approximately $63 million by the end of the third quarter of
1996 as a result of steps to be taken to integrate their operations and to
achieve efficiencies in certain markets where each has a presence. These
anticipated merger cost savings were determined based upon preliminary
estimates provided by both SNC and BB&T Financial. It is presently expected
that approximately 40% of the anticipated annualized savings will be achieved
in 1995. SNC and BB&T Financial also anticipate that they will incur one-time
expenses estimated to be approximately $80 million in the aggregate in
connection with the Merger. See "NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS." The actual savings to be achieved and expenses to be
incurred will depend on a variety of factors which cannot be predicted with
certainty, including the timing of the closing of the Merger and the Bank
Mergers, the pace and success of consolidation and the results of operations of
the Continuing Corporation. The estimates prepared by management of BB&T
Financial and SNC thus could be substantially different from actual results.
BB&T Financial's Reasons for the Merger. BB&T Financial has for years pursued
a strategy of increasing shareholder value through developing a significant
presence in the Carolinas and adjoining states with acquisitions of well-
managed and profitable financial institutions. During the 1980s, BB&T Financial
acquired five financial institutions in North Carolina and South Carolina. BB&T
Financial continued its strategy in 1990, when it became one of the first bank
holding companies to acquire savings institutions under authority provided by
Congress in 1989. Between 1990 and year-end 1993, BB&T Financial acquired 14
North Carolina savings institutions and several branches of a fifteenth
institution. In 1994, BB&T Financial completed the acquisition of two banks in
South Carolina (Lexington and Community) and entered into an agreement to
acquire another bank (Commerce) in Virginia.
In recent years, BB&T Financial has devoted considerable effort and
management resources to consolidating the operations of its banking activities
and to developing efficient and effective delivery systems for its various
financial service products. BB&T Financial has also carefully reviewed its
options to continue the expansion of its markets as the pace of bank mergers
and savings institution acquisitions has accelerated. As part of its analysis,
BB&T Financial identified and evaluated candidates for future acquisition.
Given the dilution in earnings per share likely to result if BB&T Financial
were to make significant acquisitions, it has from time to time considered
whether a "merger of equals" with an institution that shares a similar approach
to the fundamentals of banking would be most consistent with its goal of
maximizing long-term shareholder value through growth. Although prior to July
1994 no serious discussions were held with other potential partners for a
merger of equals, or an acquisition of BB&T Financial, from time to time
management of BB&T Financial discussed potential candidates for a merger of
equals with the BB&T Financial Board.
In voting for the Merger, the BB&T Financial Board concluded that the Merger
will result in a company with significant financial resources, increased market
share in a number of markets served by both companies, increased opportunities
for acquisitions, growth and diversification, and added flexibility in meeting
the increasing competition affecting the banking and financial services
industries. The Merger will result in a
26
<PAGE>
strongly capitalized bank holding company with approximately 441 branch banking
offices in the Carolinas and Virginia, and it is expected to result in more
favorable access to capital markets generally enjoyed by larger financial
organizations, greater economies of scale through coordination and
consolidation of certain operations, and a stronger economic position through a
greatly increased asset base. Further, the shareholders of the Continuing
Corporation will own securities with a broader trading market, representing
ownership of a larger company with subsidiaries emphasizing growth,
profitability and quality.
The BB&T Financial Board considered particularly significant the role of John
A. Allison IV as Chairman and Chief Executive Officer of the Continuing
Corporation. It also considered the terms of the Merger as a "merger of
equals," resulting in a surviving corporation with four executive officers (in
addition to Mr. Allison) from each of the parties; equal Continuing Corporation
Board and Continuing Corporation Board committee representation, with each
party designating 12 members of the Continuing Corporation Board; and the names
of the surviving banks as "Branch Banking and Trust Company" and "Branch
Banking and Trust Company of South Carolina."
The BB&T Financial Board also gave careful consideration and significant
weight to the presentations of Lehman Brothers and Merrill Lynch regarding the
determination of the Exchange Ratio and its fairness to the holders of BB&T
Financial Common Stock from a financial point of view. In considering such
presentations, the BB&T Financial Board reviewed the methodology and the
appropriateness of the assumptions used by Lehman and Merrill Lynch in their
analyses of the fairness of the Exchange Ratio. The BB&T Financial Board
received opinions from Lehman Brothers and Merrill Lynch as of the date of this
Joint Proxy Statement/Prospectus that the Exchange Ratio is fair to the holders
of BB&T Financial Common Stock from a financial point of view. See "--Opinions
of Financial Advisors."
The BB&T Financial Board also considered the opportunity that the Merger
would provide to strengthen and deepen the management team of the combined
entity by integrating the already strong management teams of SNC and BB&T
Financial. The BB&T Financial Board reviewed the provision of the agreement
between the parties that L. Glenn Orr, Jr., will retire as an officer of SNC
but will continue as a member of the Continuing Corporation Board. The BB&T
Financial Board also believed that the breadth of the combined operations will
offer greater opportunity for attracting, developing and retaining management
personnel.
The BB&T Financial Board noted that the Merger would be tax-free for federal
income tax purposes to BB&T Financial and its shareholders (other than with
respect to cash paid in lieu of fractional shares and dissenters' shares) and
that the Merger would be accounted for under the pooling-of-interests method of
accounting and, therefore, would not give rise to goodwill.
Although no assurance can be given, SNC and BB&T Financial expect that
significant cost savings will be achieved by the Continuing Corporation at an
annual rate of approximately $63 million by the end of the third quarter of
1996 as a result of steps to be taken to integrate their operations and to
achieve efficiencies in certain markets where each has a presence. These
anticipated merger cost savings were determined based upon preliminary
estimates provided by both SNC and BB&T Financial. SNC and BB&T Financial also
anticipate that they will incur one-time expenses estimated to be approximately
$80 million in the aggregate in connection with the Merger. See "NOTES TO PRO
FORMA CONDENSED COMBINED FINANCIAL STATEMENTS." The actual savings to be
achieved and expenses to be incurred will depend on a variety of factors which
cannot be predicted with certainty, including the timing of the closing of the
Merger and the Bank Mergers, the pace and success of consolidation and the
results of operations of the Continuing Corporation. The estimates prepared by
management of BB&T Financial and SNC thus could be substantially different from
actual results. It is presently expected that approximately 40% of the
anticipated annualized savings will be achieved in 1995.
The BB&T Financial Board also considered the potential dilution in BB&T
Financial's book value per share resulting from the Merger, as well as the
accretion in earnings per share (see "--Opinions of Financial Advisors"), the
potential impact on employees of a reduction in the BB&T Financial work force
and the
27
<PAGE>
relocation of its headquarters to Winston-Salem; the cost of severance
arrangements; the impact on BB&T Financial's future as an independent financial
institution; the risks associated with the impact of the Merger on BB&T
Financial's management and employee culture; and the demands on management
resources associated with engaging in a transaction of the magnitude of the
Merger.
The financial terms and the terms concerning management of the Continuing
Corporation dominated the BB&T Financial Board's consideration of the Merger.
The Board also considered carefully the prospects of the combined entity as
well as the other factors discussed above. The BB&T Financial Board as a group
focused most heavily on those factors that affected the potential impact of the
Merger on BB&T Financial's long-term financial prospects and shareholder value.
After considering these factors and certain related facts, the BB&T Financial
Board concluded that the Merger is in the best interests of BB&T Financial and
its shareholders. The BB&T Financial directors unanimously recommend that BB&T
Financial shareholders vote FOR the approval of the Agreement and the Plan of
Merger.
OPINIONS OF FINANCIAL ADVISORS
SNC and BB&T Financial. During the course of negotiating the transaction, SNC
and BB&T Financial jointly retained Lehman Brothers to assist in determining a
fair exchange ratio for the Merger.
Lehman Brothers delivered its opinion to the BB&T Financial Board and SNC
Board, as of July 29, 1994, that the Exchange Ratio to be offered in the Merger
is fair, from a financial point of view, to both BB&T Financial and its
shareholders and SNC and its shareholders.
The full text of an updated opinion of Lehman Brothers, dated the date of
this Joint Proxy Statement/Prospectus, which sets forth assumptions made,
matters considered and limits on the review undertaken by Lehman Brothers, is
attached hereto as Annex III-A to this Joint Proxy Statement/ Prospectus. This
opinion is substantially identical to the opinion delivered to the BB&T
Financial Board and SNC Board on July 29, 1994, and is incorporated herein by
reference. SNC and BB&T Financial shareholders are urged to read this opinion
in its entirety. The summary of the opinion of Lehman Brothers set forth in
this Joint Proxy Statement/Prospectus is qualified in its entirety by reference
to the full text of such opinion.
No limitations were imposed by BB&T Financial, SNC or their respective Boards
on the scope of Lehman Brothers' investigation or the procedures to be followed
by Lehman Brothers in rendering its opinion, except that as part of its
procedures Lehman Brothers was not requested to solicit any indications of
interest from any third party with respect to a purchase of all or a part of
either BB&T Financial's or SNC's business. In arriving at its opinion, Lehman
Brothers did not ascribe a specific range of value to BB&T Financial or SNC,
but made its determination as to the fairness of the Exchange Ratio on the
basis of the financial and comparative analyses described below. Lehman
Brothers' opinion is directed solely to the BB&T Financial Board and SNC Board
and does not constitute a recommendation to any shareholder of BB&T Financial
or SNC as to how such shareholder should vote with respect to the Merger at the
Shareholder Meetings. Lehman Brothers was not requested to opine as to, and its
opinion does not in any manner address, BB&T Financial's and SNC's underlying
business decision to proceed with or effect the Merger.
In connection with its opinion, Lehman Brothers reviewed and analyzed: (i)
the Agreement and the Plan of Merger; (ii) certain publicly available reports
filed with the SEC by BB&T Financial and SNC, including the Annual Report on
Form 10-K of each of BB&T Financial and SNC for the year ended December 31,
1993, and the Quarterly Reports on Form 10-Q of each of BB&T Financial and SNC
for the quarters ended March 31, 1994 and June 30, 1994; (iii) financial and
operating information furnished to Lehman Brothers by BB&T Financial and SNC
with respect to their respective businesses, operations, financial performance
and prospects; (iv) a trading history of the BB&T Financial Common Stock and
the SNC Common Stock from July 31, 1989, to the present and a comparison of
that trading history with those of other companies
28
<PAGE>
that Lehman Brothers deemed relevant; (v) a comparison of the historical
financial results and present financial condition of each of BB&T Financial and
SNC with those of other companies that Lehman Brothers deemed relevant; and
(vi) a comparison of the financial terms of the Merger with the financial terms
of certain other transactions that Lehman Brothers deemed relevant. In
addition, Lehman Brothers had discussions with the managements of BB&T
Financial and SNC concerning (i) their respective businesses, operations,
assets, financial conditions and prospects; (ii) the cost savings and other
potential benefits resulting from a combination of the businesses of BB&T
Financial and SNC; and (iii) the proposed future dividend policy of the
Continuing Corporation. Lehman Brothers also considered such financial and
other factors as it deemed appropriate under the circumstances and took into
account its assessment of general economic, market and financial conditions,
and its experience in similar transactions, as well as its experience in
securities valuation and its knowledge of the banking industry generally.
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 independent verification. Upon advice of BB&T Financial and SNC, Lehman
Brothers further assumed that the financial projections of BB&T Financial, SNC
and the Continuing Corporation have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
respective managements of BB&T Financial and SNC as to the future financial
performance of BB&T Financial, SNC and the Continuing Corporation, as the case
may be, and that BB&T Financial, SNC and the Continuing Corporation will
perform substantially in accordance with such projections. Upon advice of BB&T
Financial and SNC, Lehman Brothers also assumed that the aggregate allowances
for loan losses for BB&T Financial and SNC were adequate to cover such losses.
In arriving at its opinion, Lehman Brothers did not conduct a physical
inspection of the properties and facilities of BB&T Financial or SNC and did
not make nor obtain any evaluations or appraisals of the assets or liabilities
of BB&T Financial or SNC. In addition, BB&T Financial and SNC did not request
Lehman Brothers, as part of its procedures, to solicit, and Lehman Brothers did
not solicit, any indications of interest from any third party with respect to
the purchase of all or a part of either BB&T Financial's or SNC's business.
Upon advice of BB&T Financial and SNC and its legal and accounting advisors,
Lehman Brothers further assumed that the merger will (i) qualify for pooling-
of-interests accounting treatment and (ii) as a reorganization within the
meaning of Section 368(a) of the Code, and therefore as a tax-free
reorganization to the shareholders of BB&T Financial and SNC. Lehman Brothers'
opinion was necessarily based upon market, economic and other conditions as
they existed on and could be evaluated as of the date of its opinion.
In connection with rendering its opinion to the BB&T Financial Board and SNC
Board, Lehman Brothers performed a variety of financial and comparative
analyses, which are summarized below. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant methods
of financial 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 fairness 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 relevancy of each analysis and factor. Accordingly, Lehman Brothers
believes that its analyses must be considered as a whole and that a review of
selected portions of such analyses and the factors considered therein, without
considering all analyses and factors, could create a misleading or incomplete
view of the processes underlying its opinion. In its analyses, Lehman Brothers
made numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond
BB&T Financial's and SNC's control. Any estimates contained in Lehman Brothers'
analyses are not necessarily indicative of actual values or predictive of
future results or values that may be significantly more or less favorable than
such estimates. Estimates of values of companies do not purport to be
appraisals or necessarily reflect the prices at which companies or their
securities actually may be sold. None of the analyses performed by Lehman
Brothers was assigned a greater significance by Lehman Brothers than any other.
The projections used by Lehman Brothers in its analyses were prepared by the
managements of BB&T Financial and SNC. Neither BB&T Financial nor SNC publicly
discloses internal management projections of
29
<PAGE>
the type provided to Lehman Brothers in connection with the review of the
Merger and such projections were not prepared with a view towards public
dissemination. The projections were based on numerous variables and assumptions
that are inherently uncertain and beyond the control of BB&T Financial and SNC,
including, without limitation, factors related to general economic and
competitive conditions. Accordingly, actual results could vary significantly
from those set forth in such projections.
The following is a brief summary of analyses performed by Lehman Brothers in
connection with its opinion delivered to the BB&T Financial Board and SNC Board
on July 29, 1994:
(a) Relative Contribution Analysis. Lehman Brothers analyzed certain
historical balance sheet and income statement data for BB&T Financial and
SNC for 1988, 1989, 1990, 1991, 1992, 1993 and the six month period ended
June 30, 1994, and on a projected basis for 1994 and 1995, all adjusted for
pending acquisitions. The analysis showed that, among other things, at and
for the six month period ended June 30, 1994, BB&T Financial and SNC would
have contributed 56.1% and 43.9%, respectively, to total assets of the
Continuing Corporation, 58.5% and 41.5% to total stockholders' equity and
54.0% and 46.0% to net income available to common equity. The analysis
further showed that, based on the forecasts of the managements of BB&T
Financial and SNC, BB&T Financial and SNC would contribute 54.2% and 45.8%,
respectively, to 1994 estimated net income and 53.5% and 46.5%,
respectively, to 1995 estimated net income. Lehman Brothers also reviewed
and analyzed recent stock market trading market data for BB&T Financial and
SNC. This analysis showed that, using closing stock market prices for BB&T
Financial Common Stock and SNC Common Stock on July 28, 1994, BB&T
Financial and SNC would contribute 55.2% and 44.8%, respectively, to the
market capitalization of the Continuing Corporation. Using averages of
daily closing stock market prices for BB&T Financial Common Stock and SNC
Common Stock for selected periods ended July 22, 1994, the analysis further
showed that BB&T Financial's and SNC's contributions, respectively, to the
market capitalization of the Continuing Corporation would be 55.2% and
44.8%, based on a most recent five-day period, 55.5% and 44.5%, based on a
most recent one-month period, and 55.0% and 45.0% based on a most recent
three-month period. At the Exchange Ratio of 1.45 shares of SNC Common
Stock for each share of BB&T Financial Common Stock, the holders of BB&T
Financial Common Stock would own 55.1% of the common equity of the
Continuing Corporation and the holders of SNC Common Stock would own 44.9%
of the common equity of the Continuing Corporation, based on an assumed pro
forma 42,263,560 fully-diluted shares of BB&T Financial Common Stock and
49,955,560 fully-diluted shares of SNC Common Stock outstanding immediately
prior to consummation of the Merger, as provided by BB&T Financial and SNC.
(b) Stock Price Study and Exchange Ratio Profile. Lehman Brothers
reviewed the trading behavior of BB&T Financial Common Stock and SNC Common
Stock and analyzed the ratio of the closing prices of BB&T Financial Common
Stock to SNC Common Stock from July 16, 1993, through July 22, 1994. This
analysis showed that such ratio ranged from a high of 1.726 to a low of
1.386, with a most recent five-day average of 1.484, most recent month
daily average of 1.502 and most recent three- month daily average of 1.474.
(c) Comparative Historical Performance. Lehman Brothers analyzed certain
credit, operating and capital adequacy statistics for BB&T Financial and
SNC, comparing these statistics to the Continuing Corporation (on a pro
forma basis), all adjusted for pending acquisitions. This analysis showed
that, among other things, at and for the six month period ended June 30,
1994 (annualizing the data), the return on average assets for BB&T
Financial was 1.13%, for SNC was 1.31% and for the Continuing Corporation
(on a pro forma basis) was 1.21%; the return on average equity for BB&T
Financial was 14.11%, for SNC was 18.24% and for the Continuing Corporation
(on a pro forma basis) was 15.85%; the ratio of total equity to total
assets for BB&T Financial was 8.0%, for SNC was 7.2% and for the Continuing
Corporation (on a pro forma basis) was 7.7%; the ratio of non-performing
assets to total loans plus other real estate owned for BB&T Financial was
0.54%, for SNC was 0.70% and for the Continuing Corporation (on a pro forma
basis) was 0.61%; and the ratio of net chargeoffs to average loans for BB&T
Financial was 0.05%, for SNC was 0.10% and for the Continuing Corporation
(on a pro forma basis) was 0.08%.
30
<PAGE>
(d) Comparison with Selected Publicly Traded Companies. Lehman Brothers
compared certain credit, operating, stock market trading and other
statistics for BB&T Financial, SNC and the Continuing Corporation (on a pro
forma basis) relative to NationsBank Corporation, First Union Corporation,
Wachovia Corporation, First Citizens Bancshares Inc., Centura Banks, Inc.,
CCB Financial Corporation, United Carolina Bancshares, Crestar Financial
Corporation, Central Fidelity Banks, Inc., SunTrust Banks, Inc., Bank South
Corporation, First Tennessee National Corp., First American Corporation,
Barnett Banks, Inc., SouthTrust Corporation, AmSouth Corporation, Regions
Financial Corp. and Compass Bancshares, Inc. (including BB&T Financial and
SNC, the "Comparable Companies"). This analysis showed that, among other
things: (i) the ratio of the stock market price per share to latest twelve
months earnings per share for BB&T Financial was 10.0, for SNC was 10.1 and
for the median of the Comparable Companies was 10.6 (using stock market
trading data as of July 20, 1994, and financial data through March 31,
1994, adjusted in certain cases to reflect the results of certain publicly
announced and still pending acquisitions); (ii) the ratio of stock market
price to tangible book value for BB&T Financial was 1.44, for SNC was 1.82
and for the median of the Comparable Companies was 1.79; (iii) the
indicated annual dividend yield for BB&T Financial was 3.47%, for SNC was
3.83% and for the median of the Comparable Companies was 3.35%; (iv) return
on average assets for the latest twelve months for BB&T Financial was
1.19%, for SNC was 1.33% and for the median of the Comparable Companies was
1.20%; (v) the ratio of return on average equity for the latest twelve
months for BB&T Financial was 14.0%, for SNC was 16.2% and for the median
of the Comparable Companies was 15.8%; (vi) the ratio of total equity to
total assets for BB&T Financial was 8.0%, for SNC was 7.2% and for the
median of the Comparable Companies was 7.7%; and (vii) the ratio of non-
performing assets to total loans plus other real estate owned for BB&T
Financial was 0.94%, for SNC was 0.86% and for the median of the Comparable
Companies was 1.31%. However, because of the inherent differences between
the businesses, operations and prospects of BB&T Financial and SNC and the
Comparable Companies, such analysis also involved qualitative judgments
concerning the differences in financial and operating characteristics of
these companies that would affect the public trading values of each.
(e) Pro Forma Merger Analysis. Lehman Brothers analyzed the estimated
effect of the Merger on, among other things, projected earnings per share,
book value per share and dividends per share. Assuming consummation of the
Merger and using "First Call" (as hereinafter defined) estimates of
earnings per share for BB&T Financial and SNC for 1994 and 1995, without
including the impact of potential cost savings or revenue enhancements
resulting from the Merger, this analysis showed earnings per share
accretion of 2% to BB&T Financial for 1994 and 3% for 1995 and earnings per
share dilution of 2% to SNC for 1994 and 3% for 1995; book value per share
dilution to BB&T Financial of 6% and book value per share accretion to SNC
of 9% as of June 30, 1994; and little or no impact on dividends per share
for both BB&T Financial and SNC. "First Call" 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. In addition, Lehman Brothers analyzed capital adequacy, credit
quality and reserve coverage ratios for BB&T Financial, SNC and the
Continuing Corporation (on a pro forma basis).
(f) Comparable Merger of Equals Transactions Analysis. Lehman Brothers
analyzed 19 other bank merger transactions characterized as mergers of
equals in the United States from 1982 to March 1994. This analysis showed
that, among other things, the median relative contributions of the larger
company and the smaller company to the resulting combined entity were
approximately 56% and 43% for market value, 57% and 44% for total assets,
56% and 44% for net income and 55% and 45% for the allocation of common
shares (see subheading (a) above). In addition, for a subset of comparable
transactions consisting of the mergers between KeyCorp. and Society
Corporation, Chemical Banking Corporation and Manufacturers Hanover,
Comerica and Manufacturers National, Peoples Bancorporation ("Peoples") and
The Planters Corporation ("Planters"), Citizens and Southern Corporation
("Citizens & Southern") and Sovran Financial Corporation ("Sovran"), and
Hartford National Corporation and Shawmut Corporation, this analysis showed
a positive impact on the stock prices of the merging
31
<PAGE>
companies relative to the Lehman Brothers Bank Stock Index, ranging from 2%
one day after announcement of the transaction to 8% six months after
closing of the transaction (excluding the Citizens & Southern/Sovran and
Peoples/Planters transactions). The institutions included in the Lehman
Brothers Bank Stock Index are: BankAmerica Corporation; Barnett Banks,
Inc.; The Bank of New York Company, Inc.; Bank of Boston Corporation;
Boatmen's Bancshares, Inc.; Corestates Financial Corp; First Bank System,
Inc.; Fleet Financial Group, Inc.; First Union Corporation; First
Interstate Bancorp; Mellon Bank Corporation; NationsBank Corporation; NBD
Bancorp, Inc.; National City Corporation; Norwest Corporation; Banc One
Corporation; PNC Bank Corp.; SunTrust Banks, Inc.; USBancorp, Inc.;
Wachovia Corporation; and Wells Fargo & Company. However, because the
reasons for and the circumstances surrounding each of the transactions
analyzed were specific to each transaction and because of the inherent
differences between the businesses, operations and prospects of BB&T
Financial and SNC and the companies who were parties to such mergers, such
analysis also involved qualitative judgments concerning the differences in
characteristics of these transactions and the Merger that would affect the
values implied in each.
In connection with its opinion dated the date of this Joint Proxy
Statement/Prospectus, Lehman Brothers also confirmed the appropriateness of its
reliance on the analyses used to render its July 29, 1994, opinion by
performing procedures to update certain of such analyses and by reviewing the
assumptions on which such analyses were based and the factors considered in
connection therewith.
Lehman Brothers is a nationally recognized investment banking firm and is
continually 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 and valuations for
estate, corporate and other purposes. BB&T Financial and SNC selected Lehman
Brothers jointly as their financial advisor because of Lehman Brothers'
reputation and substantial experience in transactions such as the Merger and
because Lehman Brothers had no prior relationship with either party.
In the ordinary course of its business, Lehman Brothers actively trades in
the debt and equity securities of each of BB&T Financial and SNC for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities.
BB&T Financial, SNC and Lehman Brothers have entered into a letter agreement,
dated July 22, 1994 (the "Lehman Engagement Letter"), relating to the services
to be provided by Lehman Brothers in connection with the Merger. BB&T Financial
and SNC have agreed to pay Lehman Brothers a combined fee of $2,000,000 as
follows: (a) $100,000 (for a combined total of $200,000), $50,000 payable upon
delivery of the July 29, 1994, opinion and $50,000 payable upon mailing of this
Joint Proxy Statement/Prospectus; and (b) $900,000 (for a combined total of
$1,800,000) payable upon the consummation of the Merger. In the Lehman
Engagement Letter, BB&T Financial and SNC also have agreed to reimburse Lehman
Brothers for its reasonable out-of-pocket expenses and to indemnify Lehman
Brothers for certain liabilities, including liabilities under the federal
securities laws.
SNC. SNC retained Wheat to act as its financial advisor in connection with
the Merger and to render a written opinion to the SNC Board as to the fairness,
from a financial point of view, of the Exchange Ratio to the holders of SNC
Common Stock. Wheat is a nationally recognized investment banking firm
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. The SNC
Board selected Wheat to serve as its financial advisor in connection with the
Merger on the basis of Wheat's expertise.
An oral opinion to the SNC Board reflecting Wheat's opinion was delivered at
the meeting of the SNC Board on July 29, 1994, where the proposed Merger was
considered and certain officers of SNC were authorized to enter into the
Agreement and the Plan of Merger and a written opinion to the SNC Board
reflecting Wheat's opinion has been delivered and dated as of the date of this
Joint Proxy
32
<PAGE>
Statement/Prospectus, each of the oral and written opinions to the effect that,
as of such dates, the Exchange Ratio is fair, from a financial point of view,
to the holders of SNC Common Stock.
The full text of Wheat's opinion as of the date hereof, which sets forth
certain assumptions made, matters considered and limitations on review
undertaken is attached as Annex III-B to this Joint Proxy Statement/Prospectus,
is incorporated herein by reference and should be read in its entirety in
connection with this Joint Proxy Statement/Prospectus. The summary of Wheat's
opinion set forth below in this Joint Proxy Statement/Prospectus is qualified
in its entirety by reference to the opinion. Wheat's opinion is directed only
to the fairness, from a financial point of view, of the Exchange Ratio to the
holders of SNC Common Stock and does not constitute a recommendation to any
shareholder of SNC or BB&T Financial as to how such shareholder should vote
with respect to the Merger.
In arriving at its written opinion, Wheat reviewed certain publicly available
business and financial information relating to SNC and BB&T Financial and
certain other information provided to it, including, among other things, the
following: (i) SNC's Annual Reports to Shareholders, Annual Reports on Form 10-
K and related financial information for each of the three fiscal years ended
December 31, 1993, 1992 and 1991; (ii) SNC's Quarterly Reports on Form 10-Q and
related financial information for the three months ended March 31, 1994, and
for the six months ended June 30, 1994; (iii) BB&T Financial's Annual Reports
to Shareholders, Annual Reports on Form 10-K and related financial information
for each of the three fiscal years ended December 31, 1993, 1992 and 1991; (iv)
BB&T Financial's Quarterly Reports on Form 10-Q and related financial
information for the three months ended March 31, 1994, and for the six months
ended June 30, 1994; (v) certain publicly available information with respect to
historical market prices and trading activity for SNC Common Stock and BB&T
Financial Common Stock and for certain publicly traded financial institutions
that Wheat deemed relevant; (vi) certain publicly available information with
respect to banking companies and the financial terms of certain other "mergers
of equals" that Wheat deemed relevant; (vii) the Agreement and the Plan of
Merger; (viii) the Registration Statement, including this Joint Proxy
Statement/Prospectus; (ix) other financial information concerning the
businesses and operations of SNC and BB&T Financial, including certain audited
financial information and certain internal financial analyses and forecasts for
SNC and BB&T Financial prepared by the senior management of each entity, as
well as certain pro forma financial projections for the combined company
prepared by SNC and BB&T Financial; and (x) such financial studies, analyses,
inquiries and other matters as Wheat deemed necessary. In addition, Wheat met
with members of senior management of SNC and BB&T Financial to discuss the
business and prospects of each company.
In connection with its review, Wheat relied upon and assumed the accuracy and
completeness of all information provided to it or publicly available, including
representations and warranties of SNC and BB&T Financial included in the
Agreement, and Wheat has not assumed any responsibility for independent
verification of such information. Wheat relied upon the managements of SNC and
BB&T Financial as to the reasonableness and achievability of their financial
and operational forecasts and projections, and the assumptions and bases
therefor, provided to it and assumed that such forecasts and projections
reflect the best currently available estimates and judgments of such
managements and that such forecasts and projections will be realized in the
amounts and in the time periods currently estimated by such managements. Wheat
also assumed, without independent verification, that the aggregate allowances
for loan losses and other contingencies for SNC and BB&T Financial are adequate
to cover such losses. Wheat did not review any individual credit files of SNC
or BB&T Financial, nor did it make an independent evaluation or appraisal of
the assets or liabilities of SNC or BB&T Financial.
Additionally, Wheat considered certain financial and stock market data of SNC
and BB&T Financial, compared that data with similar data for other publicly-
held financial institutions and considered the financial terms of certain other
comparable transactions that recently have been announced or effected, as
further discussed below. Wheat also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria as it deemed relevant.
33
<PAGE>
In connection with rendering its opinion dated as of the date of this Joint
Proxy Statement/Prospectus, Wheat performed a variety of financial analyses.
The preparation of a fairness opinion involves various determinations as to the
most appropriate and relevant methods of financial analysis and the application
of those methods to the particular circumstances and, therefore, such an
opinion is not readily susceptible to partial analysis or summary description.
Moreover, the evaluation of the fairness, from a financial point of view, of
the Exchange Ratio to holders of SNC Common Stock was to some extent a
subjective one based on the experience and judgment of Wheat and not merely the
result of mathematical analysis of financial data. Accordingly, notwithstanding
the separate factors summarized below, Wheat believes that its analyses must be
considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. The
ranges of valuations resulting from any particular analysis described below
should not be taken to be Wheat's view of the actual value of SNC or BB&T
Financial.
In performing its analyses, Wheat made numerous assumptions with respect to
industry performance, business and economic conditions and other matters, many
of which are beyond the control of SNC or BB&T Financial. The analyses
performed by Wheat are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses. Additionally, analyses relating to the values of businesses do
not purport to be appraisals or to reflect the prices at which businesses
actually may be sold. In rendering its opinion, Wheat assumed that, in the
course of obtaining the necessary regulatory approvals for the Merger, no
conditions will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger, on a pro forma basis, to SNC.
Wheat's opinion is just one of many factors taken into consideration by the
SNC Board in determining to approve the Agreement and adopt the Plan of Merger.
Wheat's opinion does not address the relative merits of the Merger as compared
to any alternative business strategies that might exist for SNC, nor does it
address the effect of any other business combination in which SNC might engage.
The following is a summary of the analyses performed by Wheat in connection
with its opinion.
Analysis of Contribution and Ownership of the Merger. Wheat performed an
analysis of SNC's and BB&T Financial's respective contributions to the
Continuing Corporation of market capitalization, assets, shareholders' equity,
fully-diluted net income for the six months ended June 30, 1994, and fully-
diluted 1994 estimated earnings as provided by the management of both
companies. Data for SNC and BB&T Financial were pro forma for pending
transactions. SNC's pending transaction was assumed to be closed on June 30,
1994, for balance sheet calculations and December 31, 1994, for income
statement calculations. Based on the respective closing stock prices of SNC
Common Stock and BB&T Financial Common Stock as of July 28, 1994, and on
financial data as of June 30, 1994, the analysis yielded: (i) a percentage
contribution of market capitalization to the Continuing Corporation of 45.3%
for SNC; (ii) a percentage contribution of assets to the Continuing Corporation
of 43.9% for SNC; (iii) a percentage contribution of shareholders' equity to
the Continuing Corporation of 41.4% for SNC; (iv) a percentage contribution of
fully-diluted net income for the six months ended June 30, 1994, to the
Continuing Corporation of 47.2% for SNC; (v) a percentage contribution of
fully-diluted 1994 estimated earnings to the Continuing Corporation of 46.2%
for SNC; and (vi) a percentage contribution of fully-diluted 1995 estimated
earnings to the Continuing Corporation of 46.2%. Based on the Exchange Ratio,
SNC's shareholders will have 45.3% fully-diluted ownership in the Continuing
Corporation.
Analysis of Contribution and Ownership in Selected Mergers-of-Equals
Transactions. Wheat performed an analysis of selected "mergers-of-equals"
transactions. The percentage ownership of SNC's shareholders of the Continuing
Corporation relative to the percentage contribution of SNC to market
capitalization, assets, shareholders' equity and annualized fully- diluted net
income for the six months ended June 30, 1994, was compared to the percentage
ownership of shareholders of the other merged entities relative to the
percentage contribution of the respective merger partners to market
capitalization, assets, shareholders' equity, and the latest 12 months, net
income in selected transactions. Data for BB&T Financial and SNC were pro forma
for
34
<PAGE>
pending transactions. SNC's pending transaction was assumed to be closed on
June 30, 1994, for balance sheet calculations and December 31, 1994, for income
statement calculations. The selected transactions included the following
completed transactions: KeyCorp./Society Corporation, Comerica Incorporated/
Manufacturers National Corporation, Chemical Banking Corporation/Manufacturers
Hanover Corporation, The Planters Corporation/Peoples Bancorporation and Sovran
Financial Corporation/The Citizens and Southern Corporation.
Based on the respective closing stock prices of SNC Common Stock and BB&T
Financial Common Stock as of July 28, 1994, and on financial data as of June
30, 1994, the analysis yielded a range of ratios: (i) of percentage ownership
of the Continuing Corporation to percentage contribution of market
capitalization of .93 to 1.09 (compared to 1.01 for SNC); (ii) of percentage
ownership of the Continuing Corporation to percentage contribution of assets of
.91 to 1.11 (compared to 1.03 for SNC); (iii) of percentage ownership of the
Continuing Corporation to percentage contribution of shareholders' equity of
.95 to 1.06 (compared to 1.09 for SNC); and (iv) of percentage ownership of the
Continuing Corporation to percentage contribution for the latest 12 months net
income of .94 to 1.07 (compared to .96 for SNC for annualized fully- diluted
net income for the six months ended June 30, 1994).
Comparative Market Performance. Wheat analyzed the various exchange ratios
implied by the historical trading values of SNC Common Stock and BB&T Financial
Common Stock from January 4, 1993, to July 28, 1994, as determined by the ratio
of the closing prices of BB&T Financial Common Stock to the closing price of
SNC Common Stock during such period. For the period of January 4, 1993, to July
28, 1994, the analysis showed a range of ratios from 1.39 to 1.73 with an
average of 1.55; for the period of January 3, 1994, to July 28, 1994, the
analysis showed a range of ratios from 1.39 to 1.66 with an average of 1.52;
and for the period of June 29, 1994 to July 28, 1994, the analysis showed a
range of ratios from 1.44 to 1.56 with an average of 1.50, compared to the
Exchange Ratio of 1.45 for the Merger.
Comparison with Selected Companies. Wheat compared the financial performance
of SNC, BB&T Financial and the Continuing Corporation (assuming that the
transaction would be accounted for as a pooling-of-interests under Generally
Accepted Accounting Principles ("GAAP")) to that of a group of bank holding
companies in the southeast (the "Group"). Data for BB&T Financial were pro
forma for the pending acquisition of Commerce. The Group included Bank South
Corporation; Centura Banks, Inc.; CCB Financial Corporation; Crestar Financial
Corporation; Central Fidelity Banks, Inc.; First Citizens BancShares, Inc.;
First Virginia Banks, Inc.; Signet Banking Corporation; Synovus Financial
Corporation; and United Carolina Bancshares Corporation.
Based on financial data for the six months ended June 30, 1994, SNC and BB&T
Financial had (i) tangible equity to tangible assets of 7.07% and 7.66%,
respectively, compared to 7.40% for the Continuing Corporation and an average
of 7.55% for the Group; (ii) total regulatory capital to risk weighted assets
of 14.15% and 13.46%, respectively, compared to 13.74% for the Continuing
Corporation and an average of 13.52% for the Group; (iii) nonperforming assets
to loans and other real estate owned of .70% and .53%, respectively, compared
to .60% for the Continuing Corporation and an average of 1.07% for the Group;
(iv) reserves for loan losses to nonperforming loans of 211.14% and 458.38%,
respectively, compared to 311.56% for the Continuing Corporation and an average
of 281.86% for the Group; (v) returns on average assets before extraordinary
items of 1.31% and 1.13%, respectively, compared to 1.21% for the Continuing
Corporation and an average of 1.29% for the Group; and (vi) returns on average
equity before extraordinary items of 18.24% and 14.13%, respectively, compared
to 15.84% for the Continuing Corporation and an average of 15.60% for the
Group.
Earnings per Share/Book Value Analysis. Wheat compared the projected fully-
diluted earnings per share of SNC Common Stock to the projected fully-diluted
earnings per share of the Continuing Corporation on a pro forma basis,
including expense savings anticipated by the managements of both SNC and BB&T
Financial. For SNC's earnings projections, Wheat used earnings estimates
prepared by SNC's management for the two years ending December 31, 1994 and
1995. For BB&T Financial's earnings projections, Wheat
35
<PAGE>
used the earnings estimates prepared by BB&T Financial's management for the two
years ending December 31, 1994 and 1995. Wheat also assumed that the
transaction would be accounted for as a pooling-of-interests under GAAP. Data
for SNC and BB&T Financial were pro forma for pending transactions. SNC's
pending transaction was assumed to be closed on December 31, 1994, for income
statement calculations. Based on such analysis and assuming that 50% of the
projected pre-tax cost savings of $50 million is achieved in 1995, the proposed
transaction would be 2.7% dilutive to SNC's earnings per share in 1994 and
would be 3.4% accretive to SNC's earnings per share in 1995.
Wheat also calculated the pro forma tangible book value, excluding merger-
related charges, for the Continuing Corporation as of June 30, 1994. Data for
SNC and BB&T Financial were pro forma for pending transactions. SNC's pending
transaction was assumed to be closed on June 30, 1994, for balance sheet
calculations. Based on the Exchange Ratio, the pro forma tangible book value
would equal $12.74 per share, a 11.6% increase over SNC's tangible book value
of $11.42 per share as of June 30, 1994.
Discounted Dividend Analysis. Using discounted dividend analysis, Wheat
estimated the present value of the future stream of dividends that SNC could
generate through 1998, under various circumstances, assuming SNC performed in
accordance with the earnings forecasts of SNC's management. Data for SNC were
pro forma for its pending transaction. Wheat then estimated the terminal value
for SNC Common Stock at the end of the period by applying multiples ranging
from 8.00 to 12.00 of SNC's projected 1998 earnings. The dividend stream and
terminal value were then discounted to a present value using different discount
rates (ranging from 8.00% to 14.00%) chosen to reflect different assumptions
regarding the required rates of return to holders or prospective buyers of SNC
Common Stock. This discounted dividend analysis indicated a reference range of
between $26.08 and $43.34 per share for SNC Common Stock.
Using similar assumptions, Wheat also estimated the present value of the
future streams of dividends that SNC and BB&T Financial could generate through
1998 as a combined entity, under various circumstances, including projected
expense savings. Data for SNC and BB&T Financial were pro forma for pending
transactions. SNC's pending transaction was assumed to be closed on June 30,
1994, for balance sheet calculations and December 31, 1994, for income
statement calculations. With the Exchange Ratio, this discounted dividend
analysis indicated a reference range of between $27.28 and $45.57 per share for
SNC Common Stock.
No company or transaction used as a comparison in the above analysis is
identical to SNC, BB&T Financial or the Merger. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading value of
the companies used for comparison in the above analysis.
In connection with its opinion as of the date hereof, Wheat confirmed the
appropriateness of its reliance on the analyses used to render its July 29,
1994, opinion by performing procedures to update certain of such analyses and
by reviewing the assumptions on which such analyses were based and the factors
considered in connection therewith.
Wheat's written opinion is dated as of the date of this Joint Proxy
Statement/Prospectus and is based solely upon the information available to it
and the economic, market and other circumstances as they existed as of such
date. Events occurring after that date could materially affect the assumptions
and conclusions contained in Wheat's opinion. Wheat will not undertake action
to reaffirm or revise its opinion or otherwise comment on any events occurring
after the date hereof.
Wheat acts as a market maker for BB&T Financial Common Stock and, in the
course of its normal trading activities, Wheat may from time to time effect
transactions and hold positions in the securities of SNC and BB&T Financial.
36
<PAGE>
Wheat will receive a fee of $200,000 upon the completion of the Merger. SNC
has also paid Wheat a fee of $50,000 upon the signing of an engagement letter
dated July 26, 1994, and a fee of $250,000 upon the signing of the Agreement.
The payment of these fees was not contingent upon Wheat rendering a favorable
opinion with respect to the Merger. SNC has further agreed to indemnify Wheat
against certain liabilities, including certain liabilities under federal
securities laws. In the past, Wheat and its affiliates have provided financial
advisory and/or financing services for SNC, as well as for BB&T Financial, and
have received customary fees for the rendering of these services.
BB&T Financial. BB&T Financial has retained Merrill Lynch to act as its
financial advisor in connection with rendering a fairness opinion with respect
to the Merger. Merrill Lynch has rendered its opinion that, based upon and
subject to the various considerations set forth therein, as of July 29, 1994,
and the date of this Joint Proxy Statement/Prospectus, the Exchange Ratio was
fair, from a financial point of view, to the holders of BB&T Financial Common
Stock.
Merrill Lynch delivered its oral opinion dated as of July 29, 1994, and its
written opinion dated as of the date of this Joint Proxy Statement/Prospectus,
in each case to the BB&T Financial Board, that the Exchange Ratio was fair,
from a financial point of view, to the holders of BB&T Financial Common Stock.
The full text of the opinion of Merrill Lynch, dated the date of this Joint
Proxy Statement/Prospectus, which sets forth assumptions made, matters
considered and limits on the review undertaken by Merrill Lynch, is attached
hereto as Annex III-C. BB&T Financial shareholders are urged to read this
opinion in its entirety. The summary set forth in this Joint Proxy
Statement/Prospectus of the opinions of Merrill Lynch is qualified in its
entirety by reference to the full text of such opinion.
In connection with its opinion dated the date of this Joint Proxy
Statement/Prospectus, Merrill Lynch reviewed, among other things: (i) BB&T
Financial's annual Reports on Form 10-K and related financial information for
the five fiscal years ended December 31, 1993, and BB&T Financial's Quarterly
Reports on Form 10-Q and related unaudited financial information for the
quarterly periods ended March 31, 1994 and June 30, 1994; (ii) SNC's Annual
Reports on Form 10-K and related financial information for the five fiscal
years ended December 31, 1993, and SNC's Quarterly Reports on Form 10-Q and
related unaudited financial information for the quarterly periods ended March
31, 1994 and June 30, 1994; (iii) certain information, including financial
forecasts, relating to the business, earnings, cash flow, assets and prospects
of BB&T Financial and SNC, furnished to Merrill Lynch by BB&T Financial and
SNC, which Merrill Lynch discussed with members of senior management of BB&T
Financial and SNC; (iv) historical market prices and trading activity for the
BB&T Financial Common Stock and SNC Common Stock and similar data for certain
publicly traded companies which Merrill Lynch deemed to be reasonably similar
to BB&T Financial and SNC, respectively; (v) the results of operations of BB&T
Financial and SNC and similar data for certain companies which Merrill Lynch
deemed to be reasonably similar to BB&T Financial and SNC, respectively; (vi)
the financial terms of the Merger contemplated by the Agreement and compared
such terms with the financial terms of certain other mergers and acquisitions
which Merrill Lynch deemed to be relevant; (vii) the pro forma effect of the
Merger on BB&T Financial's capitalization ratios and earnings, tangible book
value and book value per share; (viii) the Agreement; (ix) the Option
Agreements; and (x) such other matters as Merrill Lynch deemed necessary.
Merrill Lynch also met with certain officers and representatives of BB&T
Financial and SNC to discuss the foregoing as well as other matters. Merrill
Lynch also considered such financial and other factors as it deemed appropriate
under the circumstances and took into account its assessment of general
economic, market and financial conditions, and its experience in similar
transactions, as well as its experience in securities valuation and its
knowledge of the banking industry generally. Merrill Lynch's opinions are
necessarily based upon conditions as they existed and could be evaluated on the
respective dates thereof and the information made available to Merrill Lynch
through the respective dates thereof.
In preparing its opinions, Merrill Lynch relied on the accuracy and
completeness of all information supplied or otherwise made available to it by
BB&T Financial and SNC, and it did not assume responsibility
37
<PAGE>
for independently verifying such information or for undertaking an independent
appraisal of the assets or liabilities of BB&T Financial or SNC. With respect
to the financial forecasts furnished by BB&T Financial and SNC, Merrill Lynch
assumed that they were reasonably prepared and reflected the best currently
available estimates and judgment of BB&T Financial's or SNC's management as of
the expected future financial performance of BB&T Financial or SNC, as the case
may be. Merrill Lynch's opinions are directed to the BB&T Financial Board and
senior management of BB&T Financial and do not constitute a recommendation to
any shareholder as to how such shareholder should vote at the BB&T Financial
Special Meeting. Merrill Lynch did not address BB&T Financial's underlying
business decision to proceed with the Merger and did not make any
recommendation to the BB&T Financial Board with respect to approval of the
Merger.
In connection with rendering its opinion dated as of July 29, 1994 to the
BB&T Financial Board, Merrill Lynch performed a variety of financial analyses,
which are summarized below. Merrill Lynch believes that its analyses must be
considered as a whole and that selecting portions of such analyses and the
factors considered therein, without considering all factors and analyses, could
create an incomplete view of the analyses and the processes underlying Merrill
Lynch's opinions. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analysis or summary description. In its analyses, Merrill Lynch also took into
account its assessment of general economic, market, and financial conditions
and its experience in similar transactions, as well as its experience in
securities valuation and its knowledge of the banking industry generally. With
respect to the peer group analysis and selected merger transaction analysis
summarized below, no public company or transaction utilized as a comparison is
identical to BB&T Financial or SNC or the Merger, and such analyses necessarily
involve complex considerations and judgments concerning the differences in
financial and operating characteristics of the companies and transactions, and
other factors that could affect the companies concerned. Any estimates
contained in Merrill Lynch's analyses are not necessarily indicative of future
results or values, which may be significantly more or less favorable than such
estimates. Estimates of values of companies do not purport to be appraisals or
necessarily reflect the prices at which companies or their securities actually
may be sold. None of the analyses performed by Merrill Lynch was assigned a
greater significance by Merrill Lynch than any other.
The following is a brief summary of the analyses performed by Merrill Lynch
in connection with its opinion dated as of July 29, 1994:
Analysis of Selected Recent Merger of Equals Transactions. Merrill Lynch
analyzed selected mergers of equals in the United States during the years 1982
to 1993. The merger of equals transactions analyzed were: KeyCorp./Society,
Comerica Incorporated/Manufactures National Corporation, NCNB Corporation/
C&S/Sovran Corporation, Chemical Banking Corporation/Manufacturers Hanover
Corporation, Sovran Financial Corporation/The Citizens and Southern Corp., The
Planters Corporation/Peoples Bancorporation, Pennabancorp/Union National,
Shawmut/Hartford National, Fleet Financial Group, Inc./Norstar Bancorp Inc.,
Bank of New England Corporation/Connecticut Bank and Trust, Virginia
National/First & Merchants, and Pittsburgh National/Provident National.
This analysis, which was based on publicly available financial information
for the latest 12 months preceding the announcement of the transaction, showed
the pro forma split between the combining companies in the transactions
analyzed of ownership and director membership and the pro forma contributions
to the combined company's market value, total assets, deposits, book value and
last 12 months ("LTM") of reported net income prior to announcement of the
transaction. The analysis also showed the market premium/discount of the
consideration received by shareholders of the non- surviving entity in the
transactions to the market values of the common stock of such entity on the
trading day prior to announcement. Such premiums ranged from 20.12% to 0.44%,
and the one discount was (7.44%). Merrill Lynch also analyzed projected cost
savings data for five of such selected recent in-market merger of equals
transactions, which showed that in connection with such transactions the
combining companies announced projected first-year cost savings ranging from 4%
to 7% as a percentage of combined LTM non-interest expense, second- year cost
savings ranging from 7% to 13%, and third-year cost savings ranging from 9% to
16%.
38
<PAGE>
Contribution Analysis. Merrill Lynch analyzed certain historical balance
sheet, income statement and ratio data for BB&T Financial and SNC for 1991
through 1993 and for the first six months of 1994, as well as certain projected
net income data prepared by management of BB&T Financial for BB&T Financial and
SNC for 1995. Merrill Lynch also analyzed the ratio of the closing prices of
BB&T Financial Common Stock to SNC Common Stock over the period from December
31, 1993, through July 22, 1994. The analysis showed, among other things, that
for the six months ended June 30, 1994, and fiscal year ended 1993, BB&T
Financial would have contributed approximately 53.7% and 56.5%, respectively,
of pro forma combined net income to common shareholders (as originally
reported); for 1995, BB&T Financial was projected to contribute, based on BB&T
Financial's management projections, 54.0% of pro forma combined projected net
income; at December 31, 1993, and July 22, 1994, BB&T Financial would have
contributed 63.2% and 56.9%, respectively, of pro forma market capitalization;
and at December 31, 1993 and June 30, 1994, BB&T Financial would have
contributed 60.9% and 56.2%, respectively, of pro forma total assets. At the
Exchange Ratio of 1.45 shares of SNC Common Stock for each share of BB&T
Financial Common Stock, the holders of BB&T Financial Common Stock will own
54.8% of the Continuing Corporation.
Historical Stock Data Analysis. Merrill Lynch reviewed stock price and
trading volume data for BB&T Financial Common Stock and SNC Common Stock
compared to the Standard & Poor's 500 for the period from July 1989 through
July 1994 (see "SUMMARY"). Merrill Lynch also analyzed certain trading volume
data for each of BB&T Financial and SNC for such periods, showing the
percentages of volume which traded in indicated stock price ranges over the
indicated periods.
Peer Group Analysis. Merrill Lynch analyzed certain market, balance sheet,
asset quality and performance data for BB&T Financial and SNC, comparing these
statistics to comparable data for certain national institutions (the "National
Peer Group") and certain southeastern institutions (the "Regional Peer Group")
which were deemed relevant. This analysis showed, among other things, that, for
the LTM ended June 30, 1994, using market prices at July 27, 1994, the
price/book ratio for BB&T Financial was 1.37x, for SNC was 1.72x, for the
National Peer Group averaged 1.58x and, for the Regional Peer Group, averaged
1.66x; the price/tangible book ratio for BB&T Financial was 1.45x, for SNC was
1.76x, for the National Peer Group averaged 1.73x and, for the Regional Peer
Group, averaged 1.88x; and the price/earnings ratio for BB&T Financial was
9.74x, for SNC was 9.73x, for the National Peer Group averaged 11.35x and, for
the Regional Peer Group, averaged 10.41x. The National Peer Group consisted of
BayBanks, Inc., Commerce Bancshares, Inc., First Empire State Corporation,
Fourth Financial Corporation, First Security Corporation, Michigan National
Corporation, Marshall & Ilsley Corporation, Mercantile Bancorporation Inc., Old
Kent Financial Corporation, Star Banc Corporation and West One Bancorp. The
Regional Peer Group consisted of Bank South Corporation, Compass Bancshares,
Inc., Crestar Financial Corporation, Central Fidelity Banks, Inc., Regions
Financial Corp., First American Corporation, First Citizens BancShares Inc.,
First Tennessee National Corp., First Virginia Banks, Inc., Signet Banking
Corporation and Union Planters Corporation.
Pro Forma Analysis. Merrill Lynch analyzed certain historical balance sheet,
income statement and ratio data, as well as certain projected data prepared by
management of BB&T Financial and SNC, for BB&T Financial and SNC and for the
companies on a pro forma combined basis at and for the LTM ended June 30, 1994,
and projected for the years 1995 through 1999. The analysis showed, among other
things, that, including management's estimates of cost savings and other
synergies resulting from the Merger, the pro forma combined company's projected
1995 earnings per share would increase 3.09% over SNC's stand-alone projected
earnings per share for the same period. The analysis also showed that cost
savings and other synergies of 2.38% as a percentage of the pro forma combined
company's operating expenses would be required for the Merger to result in 0%
dilution to SNC's projected earnings per share for 1995, which compares to
management's actual estimates of cost savings and other synergies of
approximately 5.01% for the year 1995. This analysis further showed that the
Merger would result in an increase of 7.44% to SNC's stand-alone book value per
share and a decrease of 8.98% in BB&T Financial's stand-alone book value per
share, and indicated an annual dividend per share of BB&T Financial Common
Stock that would be
39
<PAGE>
approximately 7.4% higher than BB&T Financial's annualized stand-alone dividend
for the quarter ended June 30, 1994.
Discounted Cash Flow Analysis. Merrill Lynch performed a discounted cash flow
analysis using assumed growth rates for BB&T Financial, SNC and pro forma
combined company earnings per share of 9%, 10% and 9.5%, respectively, discount
rates ranging from 12.0% to 16.0%, terminal price to earnings multiples ranging
from 8x to 12x to apply to 1999 forecasted earnings, and projecting the maximum
per share dividend growth that would permit the maintenance of 6.50% tangible
common equity ratio. This analysis showed a range of present values per share
of BB&T Financial Common Stock from $28.91 to $44.56, a range of present values
per share of SNC Common Stock from $20.19 to $31.99 and, with respect to the
pro forma combined company, a range of present values that (based on the
Exchange Ratio of 1.45) would imply ranges of present values per share for
holders of BB&T Financial Common Stock (excluding potential synergies and cost
savings) of $30.60 to $47.03 and (including managements' estimates of cost
savings and other synergies resulting from the Merger) of $33.83 to $51.92.
This analysis did not purport to be indicative of actual values or expected
values of the shares of BB&T Financial Common Stock or SNC Common Stock before
or after the Merger. Merrill Lynch noted that the discounted cash flow analysis
was included because it is a widely used valuation methodology, but noted that
it relies on numerous assumptions, including earnings growth rates, dividend
payout rates, terminal values, and discount rates.
In connection with rendering its opinion dated as of the date of this Joint
Proxy Statement/Prospectus, Merrill Lynch performed procedures to update
certain of the foregoing analyses and reviewed the assumptions on which such
analyses were based, and the factors considered in connection therewith.
Merrill Lynch is a nationally recognized investment banking firm and is
continually engaged in the valuation of businesses and securities in connection
with the mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, and
valuations for estate, corporate and other purposes. BB&T Financial selected
Merrill Lynch as a financial advisor in connection with the Merger because of
its reputation and because Merrill Lynch has substantial experience in
transactions such as the Merger.
In addition to the financial advisory services referred to above, Merrill
Lynch has from time to time provided underwriting, financial advisory and/or
brokerage services to BB&T Financial and SNC, for all of which Merrill Lynch
has received customary compensation. In the ordinary course of business,
Merrill Lynch makes a market in BB&T Financial Common Stock and SNC Common
Stock and trades the debt and equity securities of BB&T Financial and SNC for
its own account and for the account of its customers and may at any time hold a
long or short position in such securities.
BB&T Financial and Merrill Lynch have entered into a letter agreement, dated
July 27, 1994, relating to the services to be provided by Merrill Lynch in
connection with the Merger. BB&T Financial has agreed to pay Merrill Lynch fees
as follows: (1) a cash fee of $250,000, which has been paid and (2) an
additional cash fee of $250,000, payable at the Effective Time of the Merger,
for a total fee of $500,000. In such letter, BB&T Financial also agreed to
reimburse Merrill Lynch for its reasonable and necessary out-of-pocket expenses
and to indemnify Merrill Lynch against certain liabilities, including
liabilities under the federal securities laws.
DETERMINATION OF EXCHANGE RATIO AND EXCHANGE FOR SNC COMMON STOCK
The Exchange Ratio was arrived at through arm's-length negotiations between
SNC and BB&T Financial, both as advised by Lehman Brothers. See "--Background
of and Reasons for the Merger." Each share of BB&T Financial Common Stock
issued and outstanding at the Effective Time of the Merger (other than shares
with respect to which dissenters' rights shall have been exercised pursuant to
Chapter 13 of the NCBCA) would cease to be outstanding and would be converted
into and exchanged for the right to receive 1.45 shares of SNC Common Stock.
See "DISSENTERS' RIGHTS."
Notwithstanding any other provision of the Agreement, each holder of shares
of BB&T Financial Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of SNC Common
Stock (after taking into account all certificates delivered by such holder)
40
<PAGE>
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of SNC Common Stock multiplied by the market
value of one share of SNC Common Stock at the Effective Time of the Merger. The
market value of one share of SNC Common Stock at the Effective Time of the
Merger will be the closing price of SNC Common Stock on the NYSE Composite
Transactions List (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source selected by SNC) on the last business
day preceding the Effective Time of the Merger.
At the Effective Time of the Merger, all rights with respect to a BB&T
Financial Employee Option granted by BB&T Financial under a BB&T Financial
employee benefit plan (each, a "BB&T Financial Stock Plan") that are
outstanding at the Effective Time of the Merger, whether or not exercisable,
will be converted into and become rights with respect to SNC Common Stock, and
SNC will assume each BB&T Financial Employee Option in accordance with the
terms of the relevant BB&T Financial Stock Plan and stock option agreement by
which such Option is evidenced. From and after the Effective Time of the
Merger, (i) each BB&T Financial Employee Option assumed by SNC may be exercised
solely for shares of SNC Common Stock, (ii) the number of shares of SNC Common
Stock subject to such BB&T Financial Employee Option will be equal to the
number of shares of BB&T Financial Common Stock subject to such BB&T Financial
Employee Option immediately prior to the Effective Time of the Merger
multiplied by the Exchange Ratio and (iii) the per share exercise price under
each such BB&T Financial Employee Option will be determined by dividing the per
share exercise price under each such BB&T Financial Employee Option by the
Exchange Ratio and rounding up to the nearest cent. Based on the Exchange
Ratio, BB&T Financial Employee Options (including those to be awarded upon BB&T
Financial's acquisition of Commerce) covering 2,146,478 shares of BB&T
Financial Common Stock would be converted at the Effective Time of the Merger
into options to acquire 3,112,393 shares of SNC Common Stock. Any unvested BB&T
Financial Employee Options will vest and be immediately exercisable at the
Effective Time of the Merger.
As promptly as practicable after the Effective Time of the Merger, SNC and
BB&T Financial will cause SNC's stock transfer agent to send to each holder of
record of BB&T Financial Common Stock at such time (other than shares as to
which dissenters' rights have been exercised), transmittal materials for use in
exchanging all of their certificates representing BB&T Financial Common Stock
for a certificate or certificates representing SNC 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 BB&T
Financial Common Stock certificates in exchange for certificates representing
SNC Common Stock.
BB&T FINANCIAL SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
Upon surrender following the Effective Time of the Merger of all of the
certificates for BB&T Financial Common Stock registered in the name of a holder
of BB&T Financial Common Stock (or indemnity satisfactory to SNC and the stock
transfer agent if any of such certificates are lost, stolen or destroyed),
together with a properly completed letter of transmittal, the stock transfer
agent will mail to such holder a certificate or certificates representing the
number of shares of SNC Common Stock to which such holder is entitled, together
with all undelivered dividends or distributions in respect of such shares and,
where applicable, a check for the amount representing any fractional share
interest (in each case, without interest).
After the Effective Time of the Merger, former holders of record of BB&T
Financial Common Stock will be entitled to vote the number of shares of SNC
Common Stock into which their shares of BB&T Financial Common Stock have been
converted, regardless of whether they have surrendered their BB&T Financial
Common Stock certificates. Dividends declared by SNC after the Effective Time
of the Merger will include dividends on all SNC Common Stock issued in the
Merger, but no dividend or other distribution payable to the holders of record
of SNC Common Stock at or as of any time after the Effective Time of the Merger
will be paid to the holder of any BB&T Financial Common Stock certificates
until such holder physically surrenders all such certificates as described
above. Promptly after such surrender, all undelivered
41
<PAGE>
dividends and other distributions 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 of the Merger, the
stock transfer books of BB&T Financial will be closed and there will be no
transfers on the transfer books of BB&T Financial of the shares of BB&T
Financial Common Stock that were outstanding immediately prior to the Effective
Time of the Merger.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
From and after the Effective Time of the Merger, the Continuing Corporation
Board will consist of 24 persons, of whom 12 have been named by the current SNC
Board and 12 have been named by the current BB&T Financial Board. As of the
Effective Time of the Merger, 11 members of the SNC Board will resign and the
SNC Board will adopt a resolution increasing the size of the SNC Board from 23
to 24 members. Immediately thereafter, the remaining members of the SNC Board
will elect the 12 BB&T designees to serve on the Continuing Corporation Board.
The Continuing Corporation Board, consistent with the classification of the
current SNC Board, will be divided into three classes. In accordance with North
Carolina law, all persons elected as directors by members of the Continuing
Corporation Board will serve until the 1995 Annual Meeting of Shareholders of
the Continuing Corporation (the "1995 Annual Meeting") (assuming that the
Effective Time of the Merger is before the 1995 Annual Meeting), at which time
they will be subject to reelection. The members of the Continuing Corporation
Board will be divided into classes as follows:
Directors to be elected at the 1995 Annual Meeting for three-year terms
expiring in 1998:
John A. Allison IV (2) Richard Janeway, M.D. (1)
W. R. Cuthbertson, Jr. (2) James H. Maynard (2)
Ronald E. Deal (1) Albert O. McCauley (1)
Tom D. Efird (2) L. Glenn Orr, Jr. (1)
Directors to be elected at the 1995 Annual Meeting for two-year terms
expiring in 1997:
Paul B. Barringer (2) L. Vincent Hackley (1)
A. J. Dooley, Sr. (2) A. Winniett Peters (2)
O. William Fenn, Jr. (2)
Directors to be elected at the 1995 Annual Meeting for one-year terms
expiring in 1996:
Joe L. Dudley, Sr. (2) Richard L. Player, Jr. (2)
Ernest F. Hardee (2)(3)
J. Ernest Lathem, M.D. (2)
Directors serving until 1996 Annual Meeting of Shareholders of the
Continuing Corporation:
Dickson McLean, Jr. (1) Nido R. Qubein (1)
C. Edward Pleasants, Jr. (1) A. Tab Williams, Jr. (1)
Directors serving until 1997 Annual Meeting of Shareholders of the
Continuing Corporation:
Paul S. Goldsmith (1)
Joseph A. McAleer, Jr. (1)
Charles E. Nichols (1)
- --------
(1) Designated by SNC.
(2) Designated by BB&T Financial.
(3) Currently a director of Commerce.
At annual meetings of shareholders of the Continuing Corporation in 1996 and
later years, each director elected will serve for a term ending on the date of
the third annual meeting following the annual meeting at which such director
was elected or until his or her successor is elected.
42
<PAGE>
SNC and BB&T Financial expect that each of the named persons will be
available to serve as a director of the Continuing Corporation. In the event
that any of such persons becomes unable to serve as a director, the party
designating such person will name an alternate.
It is anticipated that the members of the SNC Board and BB&T Financial Board
immediately prior to the Merger who do not serve as members of the Continuing
Corporation Board following the consummation of the Merger will serve on the
Board of Directors of BB&T-NC following the NC Bank Merger.
John A. Allison IV, Chairman of the BB&T Financial Board and Chief Executive
Officer of BB&T Financial, will be elected Chairman of the Continuing
Corporation Board and Chief Executive Officer of the Continuing Corporation. If
he is unavailable to serve as Chairman of the Continuing Corporation Board and
Chief Executive Officer of the Continuing Corporation, the SNC Board and the
BB&T Financial Board will select another person or persons to serve in such
capacities by mutual agreement. If, after reasonable efforts, they are unable
to do so, either party may terminate the Agreement. See "--Waiver and
Amendment; Termination."
From and after the Effective Time of the Merger, the following persons (in
addition to Mr. Allison) will serve as executive officers of the Continuing
Corporation in the following capacities:
<TABLE>
<CAPTION>
POSITION WITH
CONTINUING CORPORATION
PERSON FOLLOWING THE MERGER CURRENT POSITION
------ ---------------------- ----------------
<S> <C> <C>
Henry G. Williamson,
Jr..................... Chief Administrative Officer President and Chief Operating
Officer--BB&T Financial
John R. Spruill......... Chief Financial Officer Executive Vice President and Chief
Financial Officer--SNC
W. Kendall Chalk........ Executive Vice President Senior Executive Vice President--BB&T
Financial
Robert E. Greene........ Executive Vice President Executive Vice President--SNC
Kelly S. King........... Executive Vice President Senior Executive Vice President--BB&T
Financial
Morris D. Marley........ Executive Vice President Executive Vice President, Chief
Investment Officer and Treasurer--SNC
Scott E. Reed........... Executive Vice President Senior Executive Vice President, Chief
Financial Officer and Treasurer--BB&T
Financial
Michael W. Sperry....... Executive Vice President Executive Vice President and Chief
Credit Officer--SNC
</TABLE>
Subject to the fiduciary duties of the Continuing Corporation Board, L. Glenn
Orr, Jr., and John A. Allison IV will be elected to serve as members of the
Executive Committee of the Continuing Corporation Board as long as they are
members of such Board.
EFFECTIVE TIME OF THE MERGER
The Effective Time of the Merger will be the date and time specified in the
Articles of Merger that are to be filed with the Secretary of State of North
Carolina as soon as practicable following satisfaction of all the conditions to
consummation of the Merger set forth in the Agreement. See "--Conditions to
Consummation of the Merger." Assuming satisfaction of all conditions to
consummation of the Merger, the Merger is expected to become effective during
the first half of 1995. Either BB&T Financial or SNC may terminate the
Agreement if the Merger has not been consummated by July 31, 1995; provided,
however, that such date will be extended until December 31, 1995, if the cause
of the delay in consummating the Merger is the failure to receive any required
regulatory approval. See "--Waiver and Amendment; Termination" and "--
Regulatory Approvals."
43
<PAGE>
Until the Effective Time of the Merger, BB&T Financial shareholders will
retain their rights as shareholders of BB&T Financial to vote on matters
submitted to them.
BANK MERGERS
As soon as practicable after the Effective Time of the Merger, the Bank
Mergers will be consummated. Following the Bank Mergers, the principal officers
of the Continuing Banks will be as agreed upon by the parties. Following the
Effective Time of the Merger and before the consummation of the Bank Mergers,
Messrs. Allison and Orr each will serve on the Board of Directors of each of
BB&T-NC, SNBNC, BB&T-SC and SNBSC. Following consummation of the Bank Mergers,
Messrs. Allison and Orr each will serve on the Boards of Directors of each of
the Continuing Banks. Gary E. Carlton, currently an Executive Vice President of
SNC who will retire from such position after the Effective Time of the Merger,
will serve on the NC Continuing Bank Board until his 65th birthday.
HEADQUARTERS
After the Merger, the headquarters of the Continuing Corporation will be
located at 200 West Second Street, Winston-Salem, North Carolina, the current
administrative headquarters of SNBNC.
AMENDMENT TO SNC ARTICLES
Pursuant to the Plan of Merger, the SNC Articles will be amended to increase
the number of authorized shares of SNC Common Stock from 120,000,000 shares to
300,000,000 shares. The amendment would delete the first sentence of Article IV
of the SNC Articles and substitute the following:
"The Corporation shall have the authority to issue 300,000,000 shares of
Common Stock, par value $5 each, and 5,000,000 shares of Preferred Stock,
par value $5 each."
On October 21, 1994, 43,488,593 shares of SNC Common Stock were outstanding.
On such date, an aggregate of 5,498,164 shares of SNC Common Stock were
reserved for issuance pursuant to SNC's option and incentive plans including
3,112,393 shares for issuance to satisfy any obligations SNC will assume at the
Effective Time of the Merger with respect to BB&T Financial stock option and
employee benefits plans. An aggregate of 58,034,345 shares of SNC Common Stock
would be issued to the holders of BB&T Financial Common Stock pursuant to the
Merger.
The additional shares of SNC Common Stock would be available for issuance in
the Merger and for future issuance by the Continuing Corporation and would give
the Continuing Corporation flexibility in its corporate planning and in
responding to developments in the Continuing Corporation's business, including
possible financing and acquisition transactions, stock splits or dividends and
other general corporate purposes. SNC has no present plans to issue additional
shares of SNC Common Stock except as noted herein. The Continuing Corporation
could use the unissued shares of SNC Common Stock, as well as any unissued
shares of Preferred Stock, $5 par value, of SNC (the "SNC Preferred Stock"), in
a manner that could make a takeover attempt more difficult.
Authorized shares of SNC Common Stock may be issued by the Continuing
Corporation Board from time to time without further shareholder approval,
except in situations when shareholder approval is required by the NCBCA or the
rules of the NYSE. Shareholders of the Continuing Corporation would have no
preemptive right to acquire additional shares of SNC Common Stock. See
"COMPARATIVE RIGHTS OF SHAREHOLDERS."
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of SNC and BB&T Financial to effect the Merger are
subject to the satisfaction of certain conditions, including the following: (i)
receipt of the requisite approval of the holders of SNC
44
<PAGE>
Common Stock and BB&T Financial Common Stock solicited hereby; (ii) receipt of
the required regulatory approvals for the Merger and the Bank Mergers described
under "--Regulatory Approvals," without any conditions or requirements that
would, in the reasonable judgment of either the SNC Board or the BB&T Financial
Board, affect materially adversely the anticipated economic and business
benefits of the transactions contemplated by the Agreement so as to render
inadvisable the consummation of the Merger; (iii) no court or governmental or
regulatory authority having taken any action that prohibits the Merger; (iv)
the shares of SNC Common Stock to be issued in the Merger having been approved
for listing on the NYSE; (v) the receipt of opinions from Arthur Andersen LLP
and KPMG Peat Marwick LLP to the effect that the Merger will qualify for
pooling-of-interests accounting treatment; (vi) the receipt of a written tax
opinion from counsel or a tax advisor satisfactory to each of the parties
hereto substantially to the effect described under "--Certain Federal Income
Tax Consequences"; (vii) the Registration Statement having been declared
effective and all required state securities permits and confirmations as to
registration exemptions having been received; and (viii) receipt or waiver of
all required consents.
Consummation of the Merger also is subject to the satisfaction or waiver of
various other conditions specified in the Agreement, including, among others:
(i) the delivery by BB&T Financial and SNC, each to the other, of opinions of
their respective counsel and certificates executed by their respective chief
executive officers and chief financial officers as to compliance with the
Agreement; (ii) as of the Effective Time of the Merger, the accuracy of the
representations and warranties in all material respects (except for
representations and warranties specifically related to an earlier date) and the
compliance in all material respects with the obligations and covenants of each
party; (iii) the receipt by SNC and BB&T Financial of opinions of their
respective financial advisors to the effect that the Exchange Ratio is fair,
from a financial point of view, to the respective shareholders of SNC and BB&T
Financial; and (iv) dissenters' rights pursuant to Article 13 of the NCBCA not
having been exercised by the holders of either more than 10% in the aggregate
of the outstanding shares of SNC Common Stock and the SNC Convertible Preferred
Stock or more than 10% of the BB&T Financial Common Stock.
REGULATORY APPROVALS
The Merger cannot proceed in the absence of the requisite regulatory
approvals. See "--Conditions to Consummation of the Merger" and "--Waiver and
Amendment; Termination." To the extent that the following description describes
statutes and regulations, it is qualified in its entirety by reference to those
particular statutes and regulations. There can be no assurance that the
regulatory approvals described below will be obtained or that such approvals
will be obtained at a specific time. There also can be no assurance that any
such approvals will not contain a condition or requirement that causes such
approvals to fail to satisfy the conditions set forth in the Agreement and
described above under "--Conditions to Consummation of the Merger."
Applications for the approvals described below have been submitted.
SNC and BB&T Financial are not aware of any material governmental approvals
or actions that are required for consummation of the Merger or the Bank
Mergers, except as described below. Should any other approval or action be
required, it is contemplated presently that such approval or action would be
sought.
Merger. The Merger will require the prior approvals of (i) the Federal
Reserve Board pursuant to the BHCA, (ii) the SC Board pursuant to Section 34-
24-30 of the South Carolina Bank Holding Company Act (the "SC BHCA") and (iii)
assuming BB&T Financial completes its acquisition of Commerce prior to the
Effective Time of the Merger, the Virginia Bureau pursuant to Section 6.1-399
of the Code of Virginia.
Without the Federal Reserve Board's approval, the BHCA prohibits a bank
holding company, such as SNC, from merging with another bank holding company,
such as BB&T Financial, or acquiring direct or indirect ownership or control of
more than five percent (5%) of the voting shares of any bank, such as BB&T- NC,
BB&T-SC, Lexington, Community and Commerce. In considering an application for
approval of such an acquisition, the Federal Reserve Board reviews the
financial and managerial resources and future prospects of the bank holding
companies and the banks concerned and the convenience and needs of the
communities
45
<PAGE>
to be served. The Federal Reserve Board also is required to evaluate whether
the Merger would result in a monopoly, would be in furtherance of any
combination, conspiracy or attempt to monopolize the business of banking in any
part of the United States, otherwise would lessen substantially competition or
tend to create a monopoly or in any manner would be in restraint of trade,
unless it finds that the anticompetitive effects of the Merger are clearly
outweighed in the public interest by the probable effect of the Merger in
meeting the convenience and needs of the communities to be served. In addition,
the Federal Reserve Board must take into account the records of SNC and BB&T
Financial, the Bank Subsidiaries and Commerce in meeting the credit needs of
the communities, including low- and moderate-income neighborhoods, served by
such institutions. The BHCA requires that any bank holding company merger,
including the Merger, may not be consummated until the thirtieth day after
approval by the Federal Reserve Board, during which time the United States
Department of Justice ("DOJ") may challenge the transaction on antitrust
grounds; provided, however, that the Federal Reserve Board has the discretion,
upon request, to shorten the thirty day waiting period to 15 days in the event
the DOJ indicates to the Federal Reserve Board that it will not object to the
transaction on competitive grounds. SNC has submitted an application to the
Federal Reserve Board for approval to consummate the Merger, and that
application currently is pending.
The Merger also is subject to approval by the SC Board under Section 34-24-30
of the SC BHCA. Under Section 34-24-50 of the SC BHCA, the SC Board may approve
the Merger only after determining that the Merger would not create
anticompetitive or monopolistic effects on the South Carolina banking business.
The SC Board also must take into consideration the financial and managerial
resources and future prospects of the companies and banks involved as well as
the communities to be served. In making this determination, the SC Board will
wait until after the Federal Reserve Board approves the Merger and will deny
the application only if the SC Board finds that the Federal Reserve Board's
determination is not supported by evidence that is substantial when viewed in
light of the whole record considered by the Federal Reserve Board.
Assuming that BB&T Financial completes its acquisition of Commerce prior to
the Effective Time of the Merger, the Merger also is subject to approval by the
Virginia Bureau under Section 6.1-399 of the Code of Virginia, which permits an
out-of-state bank holding company, such as the Continuing Corporation, to
acquire, directly or indirectly, more than five percent (5%) of the voting
shares of a Virginia bank, such as Commerce, if the Virginia Bureau has
approved of the transaction. Approval of such an application is conditioned
upon, among other things, the Virginia Bureau's determination that the laws of
the state in which the out-of-state bank holding company is located, in this
case, North Carolina, would permit Virginia bank holding companies to acquire
banks and bank holding companies in that state. North Carolina law would permit
a Virginia bank holding company to acquire a bank or bank holding company
located in North Carolina, subject to certain conditions. The Virginia Bureau
also must determine whether: (i) the proposed acquisition would be detrimental
to the safety and soundness of the companies involved; (ii) the applicant and
its directors and officers are qualified by character, experience and financial
responsibility to control and operate a Virginia bank; (iii) the proposed
acquisition would be prejudicial to the interests of the depositors, creditors,
beneficiaries of fiduciary accounts or shareholders of the companies involved;
and (iv) the acquisition is in the public interest.
Bank Mergers. The Bank Mergers will require the prior approval of the FDIC
under the Bank Merger Act. In granting its approval under the Bank Merger Act,
the FDIC must consider the financial and managerial resources and future
prospects of the existing and proposed institutions and the convenience and
needs of the communities to be served. Further, the FDIC may not approve the
Bank Mergers if any would result in a monopoly, if any would 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, if the effect in any
section of the country may be substantially to lessen competition or to tend to
create a monopoly, or if any would be in any other manner in restraint of
trade, unless the FDIC finds that the anticompetitive effects of the Bank
Mergers are clearly outweighed in the public interest by the probable effect of
such Mergers in meeting the convenience and needs of the communities to be
served. In addition, the FDIC must take into account the record of performance
of the existing and proposed institutions under the Community Reinvestment Act
in meeting the credit needs of the entire community, including low-and
moderate-income neighborhoods, served by such institutions. Applicable
regulations also require publication of notice of the application for approval
46
<PAGE>
of the Bank Mergers and provide an opportunity for the public to comment on the
application in writing and to request a hearing.
In addition, the NC Bank Merger would require the prior approval of the NC
Commission pursuant to Sections 53-12 and 53-13 of the N.C. General Statutes,
and the SC Bank Merger would require prior approval of the SC Board pursuant to
Section 34-3-850 of the SC BHCA.
The Bank Merger Act requires that any bank mergers, including the Bank
Mergers, may not be consummated until the thirtieth day after approval by the
FDIC, during which time the DOJ may challenge the Bank Mergers on antitrust
grounds; provided, however, that the Federal Reserve Board has the discretion,
upon request, to shorten the thirty day waiting period to 15 days in the event
the DOJ indicates to the Federal Reserve Board that it will not object to the
transaction on competitive grounds.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of BB&T Financial and SNC generally has agreed, unless the prior written
consent of the other party is obtained, and except as otherwise contemplated by
the Agreement: (i) to operate its business only in the ordinary course; and
(ii) to preserve the properties, business and relationships of itself and its
subsidiaries with customers and employees.
In addition, each of SNC and BB&T Financial has agreed not to take certain
actions relating to the operation of its respective business pending
consummation of the Merger without the prior approval of the other party,
including, without limitation: (i) amending its Articles of Incorporation; (ii)
incurring any debt obligation or other obligation for borrowed money in excess
of amounts previously borrowed in the ordinary course of business consistent
with past practices; (iii) acquiring or exchanging any shares of its capital
stock; (iv) issuing any additional shares of capital stock, except pursuant to
the exercise of outstanding employee stock options, pursuant to an Option
Agreement or a dividend reinvestment plan and, in the case of BB&T Financial,
in connection with its pending acquisition of Commerce; (v) issuing, granting
or authorizing any rights other than the Option Agreements or grants of stock
options to employees in the ordinary course of business; (vi) effecting any
recapitalization, stock dividend, stock split or like change; (vii) (except as
previously disclosed to the other party) merging or consolidating with any
other entity; (viii) failing to comply in any material respect with law or
regulation applicable to it and material to the conduct of its business (except
where it is in good faith contesting the validity of the law or regulation);
(ix) selling or leasing all or any material portion of its assets; (x) making
an acquisition of all or any substantial part of the business or assets of
another entity; (xi) acquiring control over any other entity; (xii) increasing
the rate of compensation or benefits to its directors, officers or employees
(except as previously disclosed to the other party or as required by law),
paying any bonus (except as previously disclosed to the other party or in
accordance with any existing program or plan), entering into any employment or
severance agreements with its present or former directors, officers or
employees (except as previously disclosed to the other party); (xiii) adopting
any new employee benefit plan or program or materially changing any existing
plan or program (except for any change required by law); (xiv) changing any of
its material banking policies in any material respect (except as may be
required by applicable law); or (xv) changing its methods of accounting in
effect at December 31, 1993, in any material respect (except as required by
changes in GAAP) or changing any of its tax reporting methods.
SNC also has agreed: (i) not to declare or pay any dividend or other
distributions with respect to SNC Common Stock other than quarterly cash
dividends in an amount per share not in excess of $0.20, in a manner consistent
with past practice and in accordance with applicable law; and (ii) not to make
any changes in the dividend record and dividend payment dates; provided,
however, that if the Merger has not been consummated before July 31, 1995, SNC
may increase its regular quarterly cash dividends in a manner and amount
consistent with past increases. Similarly, BB&T Financial has agreed: (i) not
to declare or pay any dividend or other distribution with respect to BB&T
Financial Common Stock other than quarterly cash dividends in an amount per
share not in excess of $0.29, in a manner consistent with past practice and in
accordance with applicable law; and (ii) not to make any changes in the
dividend record and dividend payment dates; provided, however, that if the
Merger has not been consummated before July 31, 1995, BB&T
47
<PAGE>
Financial may increase its regular quarterly cash dividends in a manner and
amount consistent with past increases and, if SNC has increased the quarterly
cash dividends on the SNC Common Stock, BB&T Financial may increase its
dividends by such amount multiplied by the Exchange Ratio. SNC and BB&T
Financial have agreed to coordinate the declaration and payment of cash
dividends before the Effective Time of the Merger to ensure that an equivalent
number of dividends are declared during that time period.
Finally, SNC and BB&T Financial have agreed not to solicit or encourage
proposals with respect to all or a substantial portion of the assets of, or an
equity interest in, SNC or BB&T Financial, respectively, or their respective
subsidiaries; authorize or permit any director, officer, agent or affiliate to
engage in such activity; or fail to notify the other party immediately if any
such proposal is received.
WAIVER AND AMENDMENT; TERMINATION
Waiver and Amendment. At any time before the Effective Time of the Merger,
except with respect to any required shareholder or regulatory approval or
receipt of the tax opinions, either party may extend the time for performance
of any of the obligations of the other party or waive: (i) any inaccuracies in
the representations or warranties in the Agreement, the Plan of Merger or
related documents; (ii) compliance with any of the covenants, undertakings or
agreements of the other party, or satisfaction of any of the conditions
precedent to the party's obligations contained in the Agreement, the Plan of
Merger or related documents; or (iii) the performance by any party of its
obligations in connection with the Merger or the Bank Mergers; provided,
however, that following approval of the Agreement and the Plan of Merger by the
shareholders of BB&T Financial and/or SNC, the parties may not alter the
Exchange Ratio. Subject to the foregoing, the parties may amend the Agreement
or the Plan of Merger at any time by mutual agreement. If, at any time before
the Effective Time of the Merger, a material term of the Agreement or Plan of
Merger is amended, the SNC Board and the BB&T Financial Board will postpone or
reschedule the SNC Meeting and the BB&T Financial Meeting, respectively (or, if
necessary, call additional shareholder meetings), to vote on the Agreement and
Plan of Merger, as amended, and resolicit proxies for use at such meetings. For
these purposes, each of the following will be deemed to constitute an amendment
to a material term of the Agreement or the Plan of Merger: (i) a change in the
Exchange Ratio; (ii) a change in the accounting treatment of the Merger as a
pooling of interests; (iii) a change in the income tax treatment of the Merger
as a tax-free reorganization; or (iv) any other change that would materially
adversely affect the holders of SNC Common Stock or BB&T Financial Common
Stock.
Termination. The Agreement may be terminated prior to the Effective Time of
the Merger, either before or after approval by SNC and BB&T Financial
shareholders, under the circumstances specified therein, including: (i) by
mutual consent of the parties to the Agreement; (ii) by SNC or BB&T Financial,
in the event of a material breach by the other party of any representation,
warranty, covenant or agreement in the Agreement, the Plan of Merger or related
documents that is not cured within 30 days after the giving of written notice
to the party committing such breach; (iii) by SNC or BB&T Financial, in the
event the Merger is not consummated on or before July 31, 1995, provided,
however, that such date will be extended until December 31, 1995, if the reason
for non-consummation of the Merger is the failure to obtain any necessary
regulatory approval; (iv) by SNC or BB&T Financial, if the Merger is not
approved by the requisite vote of SNC and BB&T Financial shareholders; (v) by
SNC or BB&T Financial, after the final denial of any required regulatory
approval; (vi) by SNC or BB&T Financial, if any condition to the obligations of
such party to consummate the Merger is not satisfied on or before the closing
date of the Merger; or (vii) by SNC or BB&T Financial, if John A. Allison IV is
unavailable to serve as Chairman of the Continuing Corporation Board and Chief
Executive Officer of the Continuing Corporation at the time the Merger is to be
consummated and the BB&T Financial Board and the SNC Board are unable to agree
on a person or persons to serve in such capacities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of management of SNC and BB&T Financial and the SNC Board and
the BB&T Financial Board may be deemed to have interests in the Merger in
addition to their interests as shareholders
48
<PAGE>
of SNC and BB&T Financial generally. In each case, the SNC Board and BB&T
Financial Board either were aware of these interests or, with respect to
interests that arose subsequent to the execution of the Agreement, were aware
of their potential and considered them, among other matters, in approving the
Agreement and the transactions contemplated thereby.
Employment Agreements. In anticipation of the Merger, BB&T Financial and the
BB&T Bank Subsidiaries and SNC and the SNC Bank Subsidiaries have entered into
the Employment Agreements with 27 of their executive and other senior officers
(15 BB&T Financial officers and 12 SNC officers (collectively, the
"Officers")), including Messrs. Allison, Williamson and King, who are members
of the BB&T Financial Board.
In the case of BB&T Financial, the Employment Agreements represent the first
time that these Officers have entered into employment contracts with BB&T
Financial. Certain of the Officers of SNC who have entered into Employment
Agreements have existing employment contracts or executive "change of control"
agreements with SNC that have been superseded and replaced by the Employment
Agreements. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." The
Employment Agreements with the respective corporations currently are in effect
and will continue to be effective whether or not the Merger is consummated. If
the Merger is consummated, BB&T Financial's obligations under the Employment
Agreements with its Officers will become obligations of the Continuing
Corporation by operation of law.
The Employment Agreements provide for five-year terms that are extended
automatically each month (absent contrary notice by either party to the
Employment Agreement). As a result, five years remain on the term of each
Employment Agreement at any time unless either party elects not to extend the
term. The term of any Employment Agreement may not be extended beyond the month
in which the officer reaches age 65, however. The Employment Agreements provide
that the Officers are guaranteed minimum annual salaries equal to their current
annualized base salaries, and continued participation in specified incentive
compensation plans. During the term of the Employment Agreements, each Officer
will be entitled to receive, on the same basis as other officers, employee
pension and welfare benefits and group employee benefits such as sick leave,
vacation, group disability and health, life and accident insurance and similar
indirect compensation that BB&T Financial, SNC, the Continuing Corporation
and/or specified affiliates (collectively, the "Employer") may from time to
time extend to its officers.
The Employment Agreements also provide that under various circumstances an
Officer may continue to receive compensation and health insurance from the
Employer after the Officer's voluntary termination of employment or after being
terminated by the Employer other than for cause. At any time after the first
anniversary, and until the sixth anniversary of the Merger, the Officer
voluntarily may terminate his or her employment with the Continuing Corporation
and continue to receive 60% of the Officer's highest annual cash compensation
during any one of the five years preceding termination (such highest annual
cash compensation being referred to herein as the "Termination Compensation")
and health insurance provided by the Continuing Corporation until the sixth
anniversary of the Merger, subject to compliance with non- competition
provisions of the Employment Agreements, described below. In the event the
Officer's employment is terminated by Employer other than for "just cause" (as
defined in the Employment Agreements), the Officer will be entitled to receive
the Termination Compensation and health insurance for the remainder of the term
of the Employment Agreement, subject to compliance with the non-competition
provisions of the Employment Agreement. In addition, if an Officer is
terminated by the Employer other than for just cause, the Employer will use its
best efforts to accelerate vesting of any unvested benefits to which the
Officer may be entitled under any stock-based or other benefit plan or
arrangement to the extent permitted by the terms of such plan(s).
The Employment Agreements also provide that if there is a "Change of Control"
(as hereinafter defined) of an Employer or certain of its affiliates, the
Officer will be entitled to: (i) terminate his Employment Agreement voluntarily
for "good reason" (generally defined in the Employment Agreements to include a
reduction in the Officer's status, responsibilities and duties or salary
following the Change of Control); and
49
<PAGE>
(ii) receive, in a lump sum, an amount equal to 2.99 times the Termination
Compensation. In the event the Officer is terminated by an Employer for other
than just cause or the Officer terminates his employment for good reason after
a Change of Control, the Officer would also be entitled to accelerated vesting
of unvested benefits under employee stock and benefit plans to the extent
permitted by such plans. A "Change of Control" is deemed to have occurred under
the Employment Agreements if: (i) any person or group acquires 20% or more of
the voting securities of the Employer or specified affiliates; (ii) during any
two-year period persons who were directors of such corporation at the beginning
of the two-year period cease to constitute at least two-thirds of the
corporation's Board of Directors; (iii) the shareholders of such corporation
approve any merger or consolidation of such corporation with another company
that would result in less than 80% of the voting securities outstanding after
the merger or consolidation being held by persons who were shareholders of such
corporation immediately prior to the merger or consolidation; (iv) the
shareholders of such corporation approve a plan of complete liquidation or an
agreement for the sale of substantially all of such corporation's assets; or
(v) any other event the Board of Directors of such corporation determines
should constitute a Change of Control.
Any compensation an Officer may be entitled to receive under circumstances
described in the preceding two paragraphs may be subject to reduction in the
event and to the extent that any payment pursuant to the Employment Agreements
may be deemed an "excess parachute payment" within the meaning of Section 280G
of the Code. If the Continuing Corporation were to experience a change of
control prior to year end 1994 (assuming for this purpose that the Effective
Time of the Merger would have occurred prior to such time), the lump sum
payment to the officers could be as follows: Mr. Allison, $1,534,000; Mr.
Williamson, $1,232,000; and Mr. King, $903,000. These amounts would be subject
to reduction, however, to the extent that the aggregate amount of "parachute
payments" (as defined in the Code), which would include these lump sum
payments, exceeded the following approximate amounts: Mr. Allison, $1,414,000;
Mr. Williamson, $1,131,000; and Mr. King, $689,000. The actual amount of the
lump sum payment that would be paid to the officers under the change of control
provision in their Employment Agreements would depend on the facts and
circumstances at the time of the change of control, including the amount, if
any, of any other "parachute payments" to be received by the officers in
connection with the change of control.
The Employer also has the right under the Employment Agreements to terminate
the Officer's employment at any time for just cause. If the Employer terminates
an Officer's employment for just cause, such Officer will have no right to
receive compensation or other benefits under the Employment Agreement for any
period after such termination.
The Employment Agreements also provide that under certain circumstances upon
leaving the employment of the Employer, the Officer may not engage directly or
indirectly in the banking, financial services or any other business in which
Employer is engaged, in the states of North Carolina and South Carolina and in
any counties contiguous to any counties located in such states, nor may the
Officer solicit or assist in the solicitation of any depositors or customers of
the Employer or any of Employer's affiliates or induce any employees to
terminate their employment with the Employer or its affiliates. This non-
competition provision will be effective: (i) if the Officer voluntarily
terminates his employment prior to the first anniversary of the Merger, until
the later of the first anniversary of the Merger or the first anniversary of
the Officer's termination; (ii) if after the first anniversary of the Merger
the Officer voluntarily terminates his employment, for such period of time
during which the Officer elects to receive 60% of the Termination Compensation;
or (iii) if the Officer is terminated other than for just cause, until the
earlier of the first anniversary of the Officer's termination or the date as of
which the Officer elects to forego receiving the Termination Compensation.
The Employment Agreement of Mr. Allison provides that he will be Chairman of
the Board and Chief Executive Officer of the Continuing Corporation for the
term of such Employment Agreement.
Agreement with Mr. Orr. An Employment Contract exists between SNC and SNBNC
and L. Glenn Orr, Jr., dated July 16, 1981, as amended by an Amendment to
Employment Contract between SNC and SNBNC and Mr. Orr, dated June 15, 1989 (as
amended, the "Original Orr Agreement"). The term of the Original Orr Agreement
ends upon Mr. Orr attaining age 65, unless extended by mutual agreement between
SNBNC and Mr. Orr. In addition to stipulating his minimum annual salary, the
Original Orr Agreement provides
50
<PAGE>
that Mr. Orr is entitled to participate in all employee benefit plans
available to senior management of SNBNC, including, but not limited to, stock
purchase and deferred compensation plans and health and life insurance.
Finally, the Original Orr Agreement provides for certain severance benefits if
Mr. Orr, at his option, terminates the Agreement in the event that either SNC
or SNBNC is acquired by another company in a transaction in which SNC or
SNBNC, respectively, is not the surviving entity.
For services rendered during the fiscal year ended December 31, 1993, Mr.
Orr received a salary of $444,184; a bonus of $217,700; options to purchase
22,459 shares of SNC Common Stock; a Long Term Cash Incentive Plan payout of
$216,500 and other compensation, such as savings plan contributions, life
insurance premiums and deferred compensation accruals, of $74,822. Mr. Orr's
compensation has increased each year during the term of the Original Orr
Agreement.
In order to facilitate the transition from SNC and BB&T Financial as
separate entities to the Continuing Corporation as a single merged entity, Mr.
Orr has agreed to serve as Chairman Emeritus of the Continuing Corporation
until May 1, 1995, assuming the Effective Time of the Merger had occurred
prior thereto. Pursuant to a Settlement and Non-Compete Agreement between Mr.
Orr and the Continuing Corporation, effective as of the Effective Time of the
Merger (the "Orr Settlement Agreement"), Mr. Orr will resign as an employee
and officer of the Continuing Corporation and will be retained as a consultant
as of May 1, 1995 (assuming the Effective Time of the Merger has occurred
prior to such date). The Orr Settlement Agreement provides for SNC to pay
Mr. Orr an annual amount equal to the difference between $1,655,000 and the
SNC-provided portion of certain benefits payable to Mr. Orr under the
following plans of SNC: the retirement plan, the supplemental executive
retirement plan, the employee stock ownership plan, the employee stock
ownership plan excess plan, and the non-qualified deferred compensation plan.
The Orr Settlement Agreement also provides that Mr. Orr will agree (i) to
settle each of SNC's obligations to him pursuant to the Original Orr
Agreement, (ii) not to engage in competition with the Continuing Corporation
by (A) engaging directly or indirectly in the banking or financial services
business anywhere in North Carolina or South Carolina (or in any other state
in a county contiguous to North Carolina or South Carolina) or (B) soliciting
any depositors or customers of the Continuing Corporation or its subsidiaries
or inducing any employees of the Continuing Corporation or its subsidiaries to
terminate their employment with the Continuing Corporation, and (iii) to serve
as a consultant to the Continuing Corporation for a period of five years
following the Effective Time of the Merger.
The Continuing Corporation also will agree to continue to provide certain
miscellaneous benefits to Mr. Orr, including the continuation for life of
certain life and medical insurance policies, certain moving expenses, an
automobile and country club membership dues.
The payments provided for under the Orr Settlement Agreement will be paid to
Mr. Orr in equal monthly installments and will continue for the life of each
of Mr. Orr and his current wife, but in no event for a period of less than
fifteen years. To the extent that payments under the Orr Settlement Agreement
cause a "parachute payment," as defined in Code section 280G(b)(2), the
Continuing Corporation will indemnify Mr. Orr and hold him harmless against
all claims, expenses and excise taxes relating thereto. The Continuing
Corporation will establish a rabbi trust to help assure the payment of the
Continuing Corporation's obligations to Mr. Orr under the Orr Settlement
Agreement. Initially, the Continuing Corporation will place assets in the
rabbi trust representing partial funding of the Continuing Corporation's
obligations to Mr. Orr under the Orr Settlement Agreement. In the event of a
Change of Control (as defined the Orr Settlement Agreement) of the Continuing
Corporation, the Continuing Corporation will be obligated to contribute
additional assets to the rabbi trust to provide full funding, on a actuarial
basis, of the Continuing Corporation's obligations to Mr. Orr under the Orr
Settlement Agreement.
The Orr Settlement Agreement also provides that the Continuing Corporation
will use its best efforts, subject to fiduciary duties, to reelect Mr. Orr to
the Continuing Corporation Board until his seventieth birthday.
The SNC Board considered the general terms of the Orr Settlement Agreement
at the July 29, 1994, meeting at which it approved the Merger. At a meeting on
October 22, 1994, the SNC Board considered and approved the terms of the Orr
Settlement Agreement, based, among other things, on its judgment that a smooth
resolution of transition issues involving senior management is of particular
importance to the success
51
<PAGE>
of a merger of equals such as the Merger. Among other reasons, in approving the
Orr Settlement Agreement, the SNC Board took into account: (i) the terms of the
Original Orr Agreement, pursuant to which Mr. Orr is entitled to employment
with SNC until normal retirement age and the advice SNC has received from its
compensation consultants that the present value of the Original Orr Agreement
is comparable to or exceeds that of the Orr Settlement Agreement; (ii) the
significant value of the benefits that Mr. Orr to date has accrued under
various SNC benefit plans; (iii) the critical importance to the Continuing
Corporation that Mr. Orr not compete with it in North Carolina and South
Carolina; and (iv) Mr. Orr's expertise in the banking and financial services
business and his value to the Continuing Corporation as a consultant.
The BB&T Financial Board also considered the general terms of the Orr
Settlement Agreement at the July 29, 1994, meeting at which the BB&T Financial
Board approved the Merger.
Agreement with Mr. Carlton. Pursuant to an Employment Contract between SNC
and SNBNC and Gary E. Carlton, dated July 17, 1986, as amended by the Amendment
to Employment Contract between SNC and SNBNC and Gary E. Carlton, dated June
15, 1987, and as amended and restated by the Employment Contract between SNC
and SNBNC, dated January 1, 1994 (the "Original Carlton Agreement"), Mr.
Carlton is entitled to receive a minimum annual base salary, subject to
adjustments as approved annually by the SNC Board. The term of the Original
Carlton Agreement ends upon Mr. Carlton attaining age 65, unless extended by
mutual agreement between SNBNC and Mr. Carlton. Pursuant to the Original
Carlton Agreement, Mr. Carlton is entitled to participate in all employee
benefit plans available to senior management of SNBNC, including, but not
limited to, stock purchase and deferred compensation plans and health and life
insurance. Finally, the Original Carlton Agreement further provides that, in
the event of a merger or consolidation of SNC or SNBNC, the successor entity
shall agree and assume the obligations of SNC and SNBNC under the terms of the
Original Carlton Agreement. Should a potential successor not agree to assume
the obligations of SNC under the Original Carlton Agreement, then Mr. Carlton
shall be entitled to base salary plus annual increases in base salary which
shall be, at a minimum, the average percentage increase granted to officers of
equal rank of senior management of the surviving entity.
For services rendered during the fiscal year ended December 31, 1993, Mr.
Carlton received a salary of $211,900; a bonus of $74,200; options to purchase
8,571 shares of SNC Common Stock; a Long Term Cash Incentive Plan payout of
$73,000 and other compensation, such as savings plan contributions, life
insurance premiums and deferred compensation accruals, of $38,199.
Pursuant to a Settlement Agreement, Waiver, and General Release between Mr.
Carlton and the Continuing Corporation, dated as of the Effective Time of the
Merger (the "Carlton Settlement Agreement"), Mr. Carlton will resign as an
employee and officer of the Continuing Corporation as of August 1, 1995
(assuming the Effective Time of the Merger has occurred prior to such date).
Mr. Carlton, who is 54 years old, would serve on the Board of Directors of
BB&T-NC until his 65th birthday.
The Carlton Settlement Agreement provides that Mr. Carlton will agree (i) to
settle each of SNC's obligations to him pursuant to the Original Carlton
Agreement and (ii) maintain confidentiality with regard to certain proprietary
information of SNC and SNBNC in exchange for an annual payment of $312,000. The
amount of this payment will be reduced by any compensation earned by Mr.
Carlton as the result of employment by another employer after termination of
his employment with the Continuing Corporation. The payments provided for under
the Carlton Settlement Agreement will continue until Mr. Carlton attains age 65
or dies. Finally, the Continuing Corporation will provide a replacement
automobile and closing costs on the sale of his residence and will agree to
continue to provide certain miscellaneous benefits to Mr. Carlton, including
the continuation of certain life insurance policies and medical insurance.
At a meeting on October 22, 1994 the SNC Board considered and approved the
terms of the Carlton Settlement Agreement. Among other reasons, in approving
the Carlton Settlement Agreement, the SNC Board took into account: (i) the
terms of the Original Carlton Agreement, pursuant to which Mr. Carlton is
entitled to employment with SNC until normal retirement age; and (ii) the
significant value of the benefits that Mr. Carlton to date has accrued under
various SNC benefit plans.
Indemnification. Except as limited by applicable law, following the Effective
Time of the Merger in the case of the Continuing Corporation, and the
consummation of the Bank Mergers in the case of the
52
<PAGE>
Continuing Banks, the Continuing Corporation and the Continuing Banks will
maintain all indemnification rights with respect to matters arising before the
Effective Time of the Merger for former employees, agents, officers and
directors of BB&T Financial, and SNBNC and SNBSC, respectively, on no less
favorable terms than in effect on the date of the Agreement, for a period of
at least six years from the Effective Time of the Merger.
Post-Acquisition Compensation and Benefits. The Agreement states that the
intention of the parties is that, after the Effective Time of the Merger, each
director, officer and employee of the Continuing Corporation and its
subsidiaries would be entitled to participate in the Continuing Corporation's
compensation, benefit, welfare and related plans or arrangements under the
same terms and conditions available to a similarly situated person regardless
of such person's prior affiliation. The parties to the Agreement have agreed
to cooperate before the Effective Time of the Merger to develop such plans and
arrangements.
SNC currently pays non-employee SNC Board members an annual retainer of
$10,100 and an additional $600 for attendance at each regular meeting, $1,000
for attendance at each special meeting and $600 for attendance at each
committee meeting. BB&T Financial currently pays non-employee BB&T Financial
Board members an annual retainer of $11,000 and $625 for attendance at each
Board meeting and each committee meeting. In each case, directors who are also
employees receive no additional compensation. Following the Effective Time of
the Merger, the Continuing Corporation initially will compensate non-employee
Continuing Corporation Board members at the rates at which BB&T Financial
currently compensates its non-employee directors.
Director and Employee Options. Certain non-employee members of the SNC and
BB&T Financial Boards participate in the non-employee director stock option
plans of their respective companies. The executive officers of SNC and BB&T
Financial participate in employee benefit and incentive plans of their
respective companies under which plans they have received employee stock
options. Substantially all of the outstanding but unvested options to acquire
SNC Common Stock or BB&T Financial Common Stock that have been granted under
such plans (including options held by the members of the SNC Board and the
BB&T Financial Board and executive officers of SNC and BB&T Financial) will
vest automatically and be exercisable in connection with the Merger.
At the Effective Time of the Merger, all rights with respect to BB&T
Financial Employee Options granted under a BB&T Financial Stock Plan that are
outstanding at the Effective Time of the Merger, whether or not then
exercisable, will be converted into and become rights with respect to SNC
Common Stock, and SNC will assume each BB&T Financial Employee Option in
accordance with the terms of the relevant BB&T Financial Stock Plan and stock
option agreement by which it is evidenced. From and after the Effective Time
of the Merger: (i) each BB&T Financial Employee Option assumed by SNC may be
exercised solely for shares of SNC Common Stock; (ii) the number of shares of
SNC Common Stock subject to such BB&T Financial Employee Option will be equal
to the number of shares of BB&T Financial Common Stock subject to such BB&T
Financial Employee Option immediately prior to the Effective Time of the
Merger multiplied by the Exchange Ratio; and (iii) the per share exercise
price under each such BB&T Financial Employee Option will be adjusted by
dividing the per share exercise price under each such BB&T Financial Option by
the Exchange Ratio and rounding up to the nearest cent. Based on the Exchange
Ratio, BB&T Financial Employee Options (including such options to be awarded
upon the acquisition of Commerce) covering 2,146,478 shares of BB&T Financial
Common Stock would be converted at the Effective Time of the Merger into
options to acquire 3,112,393 shares of SNC Common Stock.
ACCOUNTING TREATMENT
Consummation of the Merger is conditioned upon the Merger being accounted
for as a pooling-of-interests and the receipt by SNC and BB&T Financial of
opinions from Arthur Andersen LLP and KPMG Peat Marwick LLP that the Merger
will qualify for such accounting treatment. See "--Conditions to Consummation
of the Merger." Under this accounting treatment, as of the Effective Time of
the Merger, the assets and liabilities of BB&T Financial would be added to
those of SNC at their recorded book values and the shareholders' equity
accounts of SNC and BB&T Financial would be combined on SNC's consolidated
balance sheet. On a pooling-of-interests accounting basis, income and other
financial statements of SNC issued after consummation of the Merger would be
restated retroactively to reflect the consolidated combined
53
<PAGE>
financial position and results of operations of SNC and BB&T Financial as if
the Merger had taken place prior to the periods covered by such financial
statements. See "SELECTED FINANCIAL DATA" and "PRO FORMA CONDENSED FINANCIAL
INFORMATION."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
SNC and BB&T Financial have received an opinion of Hunton & Williams, counsel
to SNC, to the effect that for federal income tax purposes: (i) the Merger and
the Bank Mergers each will constitute a reorganization within the meaning of
Section 368(a) of the Code; (ii) neither BB&T Financial nor SNC will recognize
any taxable gain or loss upon consummation of the Merger; (iii) none of SNC,
SNBNC, SNBSC, BB&T-NC, BB&T Financial-SC or BB&T-SC will recognize any taxable
gain or loss upon consummation of the Bank Mergers; and (iv) the Merger will
result in the tax consequences summarized below for BB&T Financial shareholders
who receive SNC Common Stock in exchange for BB&T Financial Common Stock
pursuant to the Merger. Such opinion has been filed as an exhibit to the
Registration Statement. Receipt of substantially the same opinion of Hunton &
Williams as of the date of the Effective Time of the Merger is a non-waivable
condition to consummation of the Merger. The opinion of Hunton & Williams is
based on, and the opinion to be given as of the date of the Effective Time of
the Merger will be based on, certain customary assumptions and representations
regarding, among other things, the lack of previous dealings between BB&T
Financial and SNC, the existing and future ownership of BB&T Financial stock
and SNC stock and the future business plans for SNC.
A BB&T Financial shareholder who receives solely SNC Common Stock in exchange
for his shares of BB&T Financial Common Stock will not recognize any gain or
loss on the exchange. If a shareholder receives SNC Common Stock and cash in
lieu of a fractional share of SNC Common Stock, the shareholder will recognize
taxable gain or loss solely with respect to such cash as if the fractional
share had been received and then redeemed for the cash. A shareholder will have
a tax basis in his shares of SNC Common Stock (including any fractional share
interest) received in the Merger equal to his tax basis in the shares of BB&T
Financial Common Stock exchanged therefor. A shareholder's holding period for
shares of SNC Common Stock (including any fractional share interest) received
in the Merger will include his holding period for the shares of BB&T Financial
Common Stock exchanged therefor if they are held as a capital asset at the
Effective Time of the Merger.
The preceding discussion summarizes for general information the material
federal income tax consequences of the Merger to BB&T Financial shareholders.
It does not discuss all potentially relevant federal income tax matters or
consequences to any foreign or other shareholders subject to special tax
treatment, nor does it discuss, and no opinion has been requested regarding,
any state or local tax consequences of the Merger. The tax consequences to any
particular shareholder may depend on the shareholder's circumstances. BB&T
Financial shareholders are urged to consult their own tax advisors with regard
to federal, state, and local tax consequences.
OPTION AGREEMENTS
As an inducement and a condition to enter into the Agreement, SNC and BB&T
Financial entered into the Option Agreements, which are attached as Annex IV-A
and Annex IV-B to this Joint Proxy Statement/Prospectus, respectively. The
following discussion describes the material terms of the Option Agreements.
This description is qualified in its entirety by reference to the Option
Agreements, which are incorporated by reference herein. Pursuant to the Option
Agreements, BB&T Financial granted SNC an option entitling it to purchase
7,217,932 shares of BB&T Financial Common Stock (representing approximately
19.9% of the outstanding shares of such stock as of June 30, 1994) at an
exercise price per share equal to $30.625, and SNC granted BB&T Financial an
option entitling it to purchase 8,633,736 shares of SNC Common Stock
(representing approximately 19.9% of the outstanding shares of such stock as of
June 30, 1994) at an exercise price per share equal to $20.625, each under the
circumstances described below. Both the number of shares subject to each option
and the purchase prices are subject to adjustment in certain circumstances.
This description of the Option Agreements does not purport to be complete and
is qualified in
54
<PAGE>
its entirety by reference to the Option Agreements, which are incorporated
herein by reference and attached hereto as Annexes IV-A and IV-B.
Subject to compliance with applicable law and regulation, SNC may exercise
its option or BB&T Financial may exercise its option, in whole or in part, at
any time or from time to time upon or after the occurrence of a Purchase Event
(as defined below). As used in each Option Agreement, "Purchase Event" means
any one of the following events:
(i) either party or the Bank Subsidiaries, without the prior written
consent of the other party, shall have entered into an agreement with any
person (other than a current affiliate) to: (a) merge or consolidate, or
enter into any similar transaction, except as contemplated in the Agreement
and the Plan of Merger; (b) purchase, lease or otherwise acquire all or
substantially all of the assets of either party or a specified Bank
Subsidiary; or (c) purchase or otherwise acquire (including by way of
merger, consolidation, share exchange or any similar transactions)
securities representing 10% or more of the voting power of BB&T Financial
or SNC, or any one of the Bank Subsidiaries;
(ii) any person (other than a current affiliate) shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 15% or
more of the outstanding shares of BB&T Financial Common Stock, on the one
hand, or SNC Common Stock, on the other hand, after the date of the Option
Agreements (the term "beneficial ownership" for purposes of the Option
Agreements having the meaning assigned thereto in Section 13(d) of the
Exchange Act and the regulations promulgated thereunder);
(iii) any person (other than a current affiliate) shall have made a bona
fide proposal to BB&T Financial or SNC by public announcement or written
communication that is or becomes the subject of public disclosure to
acquire BB&T Financial or SNC or any one of the Bank Subsidiaries, by
merger, consolidation, purchase of all or substantially all of its assets
or any other similar transaction, and following such bona fide proposal the
shareholders of BB&T Financial or SNC, respectively, vote not to approve
the Agreement and the Plan of Merger; or
(iv) BB&T Financial or SNC shall have willfully breached certain
specified covenants in the Option Agreements following a bona fide proposal
to acquire BB&T Financial or SNC or any one of the Bank Subsidiaries, by
merger, consolidation, purchase of all or substantially all of its assets
or any other similar transaction, which breach would entitle SNC or BB&T
Financial to terminate the Agreement and the Plan of Merger (without regard
to the cure periods provided for therein) and such breach shall not have
been timely cured.
If either party wishes to exercise an option and prior notification to or
approval of any federal or state regulatory agency is required in connection
with such exercise, such party will promptly file the required notice or
application for approval and will expeditiously process the same.
Each Option will expire and terminate, to the extent not previously
exercised, upon the earliest of:
(i) the Effective Date of the Merger (as defined in the Option
Agreement);
(ii) a termination of the Agreement in accordance with the provisions
thereof (other than a termination resulting from: (i) a willful breach by a
party of certain specified covenants; or (ii) following the occurrence of a
Purchase Event, failure of either party's shareholders to approve the
Agreement and the Plan of Merger by the vote required); and
(iii) 12 months after termination of the Agreement due to: (i) a willful
breach by a party of certain specified covenants; or (ii) following the
occurrence of a Purchase Event, failure of either party's shareholders to
approve the Agreement and the Plan of Merger by the vote required.
In the event of any change in BB&T Financial Common Stock or SNC Common Stock
by reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, exchanges of shares or the like, the type and number of shares
subject to the respective options and the purchase price per share, as the case
may be, will be adjusted appropriately. In the event that any additional shares
of BB&T Financial Common Stock or
55
<PAGE>
SNC Common Stock are issued or otherwise become outstanding after the date of
the Option Agreements (other than pursuant to the Option Agreements), the
number of shares of BB&T Financial or SNC Common Stock subject to each option
will be adjusted so that, after such issuance, it equals 19.9% of the number of
shares of BB&T Financial or SNC Common Stock then issued and outstanding.
Neither of the parties hereto may assign any of its rights or obligations
under the Option Agreements or the options created thereunder to any other
person, without the express written consent of the other party, except that in
the event a Purchase Event will have occurred and be continuing a party may
assign in whole or in part its rights and obligations thereunder; provided,
however, that, to the extent required by applicable regulatory authorities, the
party may not assign its rights under the option except in: (i) a widely
dispersed public distribution; (ii) a private placement in which no one party
acquires the right to purchase in excess of 2% of the voting shares of the
other party; (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely dispersed public
distribution on the party's behalf; or (iv) any other manner approved by
applicable regulatory authorities.
RESALES OF SNC COMMON STOCK
The shares of SNC Common Stock issuable to holders of BB&T Financial Common
Stock upon consummation of the Merger have been registered under the Securities
Act, and will be transferable freely and without restriction by those holders
of BB&T Financial Common Stock who receive such shares following consummation
of the Merger and who are not deemed to be "affiliates" (as defined under the
Securities Act, but generally including directors, certain executive officers
and ten percent or more shareholders) of BB&T Financial or SNC. BB&T Financial
has identified to SNC all persons whom it reasonably believes to be affiliates
of BB&T Financial for purposes of the Securities Act. BB&T Financial has agreed
in the Agreement to use its reasonable efforts to cause each such person to
deliver to SNC an agreement providing that such person will not transfer any
SNC Common Stock received by such person in connection with the Merger except
in compliance with the Securities Act and will not sell or otherwise transfer
such shares until consolidated financial results of the Continuing Corporation
(including BB&T Financial) and its subsidiaries reflecting at least 30 days of
post-Merger combined operations are published. This Joint Proxy
Statement/Prospectus does not cover any resales of SNC Common Stock received by
affiliates of BB&T Financial.
THE BB&T FINANCIAL BOARD AND THE SNC BOARD EACH UNANIMOUSLY RECOMMEND A VOTE
FOR THE AGREEMENT AND THE PLAN OF MERGER.
DISSENTERS' RIGHTS
Article 13 of the NCBCA gives any shareholder of BB&T Financial or SNC who
objects to the Agreement and the Plan of Merger and who complies with the
provisions of Article 13 of the NCBCA the right to receive a cash payment for
the "fair value," immediately before the Effective Time of the Merger, of his
BB&T Financial Common Stock, SNC Common Stock or SNC Convertible Preferred
Stock, respectively, subject only to the surrender by him of the certificates
representing his shares. Any such payment may be higher or lower than the value
of the per share consideration paid in the Merger.
To exercise the right to object to the Agreement and the Plan of Merger, a
shareholder of either BB&T Financial or SNC (each referred to in this section
as a "Merging Company") must follow the procedures contained in Article 13 of
the NCBCA. A shareholder of a Merging Company must give to that Merging
Company, prior to the vote taken at the relevant Shareholder Meeting, a written
notice of such shareholder's intent to demand payment for his shares of common
stock or preferred stock of the Merging Company (the "Merging Company Stock").
A holder of SNC Common Stock or BB&T Financial Common Stock who wishes to
object to the Agreement and the Plan of Merger must not vote any shares in
favor of the Agreement and the Plan of Merger. If the Agreement and the Plan of
Merger are approved at the relevant Shareholder
56
<PAGE>
Meeting, the Merging Company must provide written notice of such approval to
all objecting holders of SNC Common Stock or BB&T Financial Common Stock who
did not vote in favor of the Agreement and the Plan of Merger and to all
holders of the SNC Convertible Preferred Stock, as well as the time within
which objecting holders must make a demand for payment of the fair value of
their shares of Merging Company Stock. Not sooner than 30 nor later than 60
days after the mailing of such notice, each shareholder receiving the notice
must make demand upon the appropriate Merging Company for payment of the fair
value of his shares of Merging Company Stock and must deposit such shares with
the Merging Company. As of the Effective Time of the Merger, or upon receipt of
payment demand, the Merging Company shall offer to each objecting shareholder
who demands payment the amount the Merging Company estimates to be the fair
value of the shareholder's shares of Merging Company Stock, plus interest
accrued from the Effective Time of the Merger to the date of payment, and the
Merging Company will pay this amount to each objecting shareholder who agrees
in writing to accept it in full satisfaction of his demand. If the Merging
Company and the shareholder do not agree upon a value to be paid, the
shareholder, within 30 days after the Merging Company's offer of payment, must
notify the Merging Company in writing of his own estimate of the fair value of
his shares and the amount of interest due in order to preserve his rights under
Article 13 of the NCBCA. If a demand for payment remains unsettled after such
notification, the shareholder may commence an appraisal proceeding by filing an
action within 60 days after such notification. As soon as such petition is
served on the Merging Company, the Merging Company (or its successor pursuant
to the Merger) must pay to the shareholder the amount originally offered to the
objecting shareholder in the Merger.
After the Effective Time of the Merger, no current shareholder of BB&T
Financial will have any rights as a shareholder of BB&T Financial including,
without limitation, any right to vote or to receive dividends or liquidating
distributions, other than the right to receive SNC Common Stock in
consideration of the Merger.
NEITHER A VOTE AGAINST THE AGREEMENT AND THE PLAN OF MERGER NOR THE FAILURE
TO VOTE WILL CONSTITUTE A PROPER WRITTEN OBJECTION. If proper and timely
written objection to the Agreement and the Plan of Merger is given by a
shareholder, a failure to vote against the Agreement and the Plan of Merger
will not constitute a waiver of his right to dissent and demand the fair value
of his shares. A vote by a holder of SNC Common Stock or BB&T Financial Common
Stock to approve the Agreement and the Plan of Merger terminates the right to
object under Article 13 of the NCBCA with respect to such stock.
Any objections to the Agreement and the Plan of Merger or demands for payment
by BB&T Financial shareholders should be mailed to BB&T Financial Corporation,
223 West Nash Street, Wilson, North Carolina 27893, Attention: Jerone C.
Herring; and any objections to the Agreement and the Plan of Merger by SNC
shareholders should be mailed to SNC, P.O. Box 1255, Winston-Salem, North
Carolina 27102, Attention: David L. Craven. All proper objections or demands
must be received at the proper address on or prior to the date of the BB&T
Financial Special Meeting or the SNC Special Meeting, whichever may be
applicable.
Except as may be required by law or ordered by a court of proper
jurisdiction, neither BB&T Financial nor SNC will pay fees of counsel or other
expenses incurred by objecting shareholders.
Reference is made to Annex V attached hereto for the complete text of Article
13 of the NCBCA relating to dissenting shareholders' rights. Statements made in
this Joint Proxy Statement/Prospectus summarizing those sections are qualified
in their entirety by reference to Annex V. The provisions of the statutes are
technical and complex. It is suggested that any shareholder who desires to
avail himself of his right to object to the Agreement and the Plan of Merger
consult counsel. Failure to comply strictly with the provisions of the statute
may terminate a shareholder's right to object.
57
<PAGE>
PRO FORMA CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The following Pro Forma Condensed Financial Information and explanatory notes
are presented to show the impact of the Merger on SNC's and BB&T Financial's
historical financial position and results of operations. Information is
presented for the pending acquisition by BB&T Financial of Commerce based on
the expectation that the proposed transaction will be consummated prior to the
Effective Time of the Merger. The Merger and BB&T Financial's acquisition of
Commerce are reflected in the Pro Forma Condensed Financial Information under
the pooling-of-interests method of accounting.
The Pro Forma Condensed Statement of Condition presented assumes that the
Merger and BB&T Financial's acquisition of Commerce were consummated on June
30, 1994, and the Pro Forma Condensed Statements of Operations assume that the
Merger and BB&T Financial's acquisition of Commerce were consummated at the
beginning of each period presented.
The pro forma earnings are not necessarily indicative of the results of
operations had the Merger and BB&T Financial's acquisition of Commerce occurred
at the beginning of each period presented, nor are they necessarily indicative
of the results of future operations.
58
<PAGE>
PRO FORMA CONDENSED STATEMENT OF CONDITION
JUNE 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
SNC,
BB&T
SNC AND FINANCIAL
BB&T AND
FINANCIAL COMMERCE
BB&T ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
SNC FINANCIAL INCR(DCR) COMBINED COMMERCE INCR(DCR) COMBINED
---------- ---------- ----------- ----------- -------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Cash and due from
depository
institutions........... $ 266,117 $ 335,091 $ $ 601,208 $ 28,303 $ $ 629,511
Interest-bearing bank
balances.............. 12,760 31,447 44,207 12,613 56,820
Federal funds sold..... -- 31,260 31,260 -- 31,260
Securities available
for sale.............. 915,010 2,356,886 3,271,896 127,203 3,399,099
Loans held for sale.... 45,327 -- 45,327 -- 45,327
Investment securities.. 1,712,234 106,242 1,818,476 90,494 1,908,970
Loans and leases, net
of unearned income.... 5,098,647 6,692,768 11,791,415 408,433 12,199,848
Less: allowance for
losses................ (69,838) (96,524) (166,362) (7,188) (173,550)
---------- ---------- --------- ----------- -------- -------- -----------
Net loans and leases.. 5,028,809 6,596,244 11,625,053 401,245 12,026,298
Premises and equipment,
net................... 146,725 150,662 (10,450)(1) 286,937 19,229 306,166
Other assets........... 109,380 270,639 380,019 12,980 392,999
---------- ---------- --------- ----------- -------- -------- -----------
Total assets.......... $8,236,362 $9,878,471 $ (10,450) $18,104,383 $692,067 $ $18,796,450
========== ========== ========= =========== ======== ======== ===========
Liabilities and Share-
holders' Equity Depos-
its:
Demand................. $ 772,598 $ 842,974 $ $ 1,615,572 $101,268 $ $ 1,716,840
Savings................ 2,317,440 2,702,047 5,019,487 353,098 5,372,585
Time................... 3,138,765 3,877,452 7,016,217 182,026 7,198,243
---------- ---------- --------- ----------- -------- -------- -----------
Total deposits........ 6,228,803 7,422,473 13,651,276 636,392 14,287,668
Short-term borrowings.. 1,131,961 1,147,593 2,279,554 -- 2,279,554
Accounts payable and
accrued liabilities... 65,045 108,050 50,884(1),(4) 223,979 2,292 226,271
Long-term debt......... 216,686 396,252 612,938 6,790 619,728
---------- ---------- --------- ----------- -------- -------- -----------
Total liabilities..... 7,642,495 9,074,368 50,884 16,767,747 645,474 17,413,221
---------- ---------- --------- ----------- -------- -------- -----------
Shareholders' equity
Preferred stock ($5
par, 5,000,000 shares
authorized, 770,000
issued and
outstanding).......... 3,850 3,850 -- 3,850
Common stock ($5 par,
120,000,000 shares
authorized 43,385,610
issued and outstanding
95,978,583 shares and
101,134,964 shares pro
forma issued and
outstanding
respectively)......... 216,928 90,678 172,287 (2) 479,893 6,813 18,969 (2) 505,675
Paid-in capital........ 153,205 278,775 (172,287)(2) 259,693 29,787 (18,969)(2) 270,511
Retained earnings...... 233,269 456,282 (61,334)(1),(4) 628,217 10,587 638,804
Net unrealized
depreciation on
securities............ (13,385) (21,632) (35,017) (594) (35,611)
---------- ---------- --------- ----------- -------- -------- -----------
Total shareholders'
equity............... 593,867 804,103 (61,334) 1,336,636 46,593 1,383,229
---------- ---------- --------- ----------- -------- -------- -----------
Total liabilities and
shareholders' equity. $8,236,362 $9,878,471 $ (10,450) $18,104,383 $692,067 $ $18,796,450
========== ========== ========= =========== ======== ======== ===========
</TABLE>
See Notes to Pro Forma Consolidated Financial Information.
59
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
SNC,
SNC AND BB&T FINANCIAL
BB&T FINANCIAL AND COMMERCE
BB&T PRO FORMA PRO FORMA
SNC FINANCIAL COMBINED (5) COMBINED (5)
---------- ---------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on
loans and leases........ $ 198,181 $ 262,116 $ 460,297 $ 477,001
Interest and dividends on
securities.............. 73,444 64,358 137,802 144,687
Interest on temporary in-
vestments............... 608 1,374 1,982 2,325
---------- ---------- ----------- -----------
Total interest income.. 272,233 327,848 600,081 624,013
---------- ---------- ----------- -----------
Interest Expense
Interest on deposits..... 89,696 109,167 198,863 208,465
Interest on short-term
borrowings.............. 15,575 20,660 36,235 36,265
Interest on long-term
debt.................... 9,281 9,745 19,026 19,357
---------- ---------- ----------- -----------
Total interest expense. 114,552 139,572 254,124 264,087
---------- ---------- ----------- -----------
Net Interest Income
Net interest income...... 157,681 188,276 345,957 359,926
Provision for loan and
lease losses............ 2,703 4,500 7,203 8,403
---------- ---------- ----------- -----------
Net interest income after
provision for loan and
lease losses............ 154,978 183,776 338,754 351,523
---------- ---------- ----------- -----------
Noninterest Income
Service charges on de-
posit accounts.......... 17,805 22,166 39,971 41,931
Nondeposit fees and com-
missions................ 14,735 22,364 37,099 38,893
Securities gains, net.... 954 1,125 2,079 2,148
Other noninterest income. 8,849 18,217 27,066 28,005
---------- ---------- ----------- -----------
Total noninterest in-
come.................. 42,343 63,872 106,215 110,977
---------- ---------- ----------- -----------
Noninterest Expense
Personnel expense........ 61,193 81,780 142,973 148,666
Occupancy and equipment
expense................. 17,755 25,353 43,108 45,340
Federal deposit insurance
expense................. 7,465 8,432 15,897 15,897
Other noninterest ex-
pense................... 29,943 48,211 78,154 82,455
---------- ---------- ----------- -----------
Total noninterest ex-
pense................. 116,356 163,776 280,132 292,358
---------- ---------- ----------- -----------
Earnings
Income before income tax-
es...................... 80,965 83,872 164,837 170,142
Provision for income tax-
es...................... 28,034 28,493 56,527 58,230
---------- ---------- ----------- -----------
Net Income (4)........... 52,931 55,379 108,310 111,912
Preferred dividend re-
quirements.............. 2,598 -- 2,598 2,598
---------- ---------- ----------- -----------
Net income applicable to
common shares........... $ 50,333 $ 55,379 $ 105,712 $ 109,314
========== ========== =========== ===========
Per Common Share Data
Net income per share:
Primary................ $ 1.15 $ 1.52 $ 1.09 $ 1.07
========== ========== =========== ===========
Fully-diluted.......... $ 1.10 $ 1.52 $ 1.07 $ 1.05
========== ========== =========== ===========
Weighted average shares
outstanding:
Primary................ 43,635,581 36,552,211 96,636,287 101,938,371
========== ========== =========== ===========
Fully-diluted.......... 48,188,556 36,552,211 101,189,262 106,994,685
========== ========== =========== ===========
</TABLE>
See Notes to Pro Forma Condensed Financial Information.
60
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
SNC,
SNC AND BB&T FINANCIAL
BB&T FINANCIAL AND COMMERCE
BB&T PRO FORMA PRO FORMA
SNC FINANCIAL COMBINED (5) COMBINED (5)
---------- ---------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on
loans and leases........ $ 200,581 $ 230,686 $ 431,267 $ 446,269
Interest and dividends on
securities.............. 69,186 61,216 130,402 138,479
Interest on temporary
investments............. 1,530 717 2,247 2,570
---------- ---------- ---------- -----------
Total interest income.. 271,297 292,619 563,916 587,318
---------- ---------- ---------- -----------
Interest Expense
Interest on deposits..... 100,491 107,185 207,676 217,987
Interest on short-term
borrowings.............. 7,465 9,758 17,223 17,232
Interest on long-term
debt.................... 11,661 3,990 15,651 15,955
---------- ---------- ---------- -----------
Total interest expense. 119,617 120,933 240,550 251,174
---------- ---------- ---------- -----------
Net Interest Income
Net interest income...... 151,680 171,686 323,366 336,144
Provision for loan and
lease losses............ 7,953 10,406 18,359 19,884
---------- ---------- ---------- -----------
Net interest income after
provision for loan and
lease losses............ 143,727 161,280 305,007 316,260
---------- ---------- ---------- -----------
Noninterest Income
Service charges on
deposit accounts........ 17,905 18,842 36,747 38,342
Nondeposit fees and
commissions............. 15,478 18,410 33,888 35,973
Securities gains, net.... 14,027 1,262 15,289 15,375
Other noninterest income. 6,211 16,888 23,099 23,696
---------- ---------- ---------- -----------
Total noninterest
income................ 53,621 55,402 109,023 113,386
---------- ---------- ---------- -----------
Noninterest Expense
Personnel expense........ 61,588 70,254 131,842 137,053
Occupancy and equipment
expense................. 18,509 22,888 41,397 43,382
Federal deposit insurance
expense................. 6,661 7,507 14,168 14,168
Other noninterest
expense................. 38,619 41,599 80,218 83,902
---------- ---------- ---------- -----------
Total noninterest
expense............... 125,377 142,248 267,625 278,505
---------- ---------- ---------- -----------
Earnings
Income before income
taxes................... 71,971 74,434 146,405 151,141
Provision for income
taxes................... 24,103 23,495 47,598 49,186
---------- ---------- ---------- -----------
Net income (3),(4)......... 47,868 50,939 98,807 101,955
Preferred dividend
requirements............ 2,598 -- 2,598 2,598
---------- ---------- ---------- -----------
Net income applicable to
common shares............. $ 45,270 $ 50,939 $ 96,209 $ 99,357
========== ========== ========== ===========
Per Common Share Data (3)
Net income per share:
Primary................ $ 1.08 $ 1.47 $ 1.04 $ 1.02
========== ========== ========== ===========
Fully-diluted.......... $ 1.03 $ 1.43 $ 1.01 $ .98
========== ========== ========== ===========
Weighted average shares
outstanding:
Primary................ 41,899,448 34,684,487 92,191,954 97,350,228
========== ========== ========== ===========
Fully-diluted.......... 46,467,659 35,843,287 98,440,425 104,103,929
========== ========== ========== ===========
</TABLE>
See Notes to Pro Forma Condensed Financial Information.
61
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
SNC,
SNC AND BB&T FINANCIAL
BB&T FINANCIAL AND COMMERCE
BB&T PRO FORMA PRO FORMA
SNC FINANCIAL COMBINED (5) COMBINED (5)
----------- ----------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on
loans and leases...... $ 405,121 $ 479,212 $ 884,333 $ 915,194
Interest and dividends
on securities......... 139,768 124,271 264,039 279,728
Interest on temporary
investments........... 2,421 1,668 4,089 4,786
----------- ----------- ----------- ------------
Total interest
income.............. 547,310 605,151 1,152,461 1,199,708
----------- ----------- ----------- ------------
Interest Expense
Interest on deposits... 195,204 212,668 407,872 428,194
Interest on short-term
borrowings............ 18,525 24,733 43,258 43,284
Interest on long-term
debt.................. 23,118 10,961 34,079 34,714
----------- ----------- ----------- ------------
Total interest
expense............. 236,847 248,362 485,209 506,192
----------- ----------- ----------- ------------
Net Interest Income
Net interest income.... 310,463 356,789 667,252 693,516
Provision for loan and
lease losses.......... 31,438 19,048 50,486 53,311
----------- ----------- ----------- ------------
Net interest income
after provision for
loan and lease
losses.............. 279,025 337,741 616,766 640,205
----------- ----------- ----------- ------------
Noninterest Income
Service charges on
deposit accounts...... 36,838 40,764 77,602 81,030
Nondeposit fees and
commissions........... 24,507 39,895 64,402 68,837
Securities gains, net.. 13,714 1,720 15,434 16,841
Other noninterest
income................ 12,613 37,148 49,761 51,146
----------- ----------- ----------- ------------
Total noninterest
income.............. 87,672 119,527 207,199 217,854
----------- ----------- ----------- ------------
Noninterest Expense
Personnel expense...... 131,681 147,644 279,325 290,046
Occupancy and equipment
expense............... 38,153 49,344 87,497 91,631
Federal deposit
insurance expense..... 14,074 15,327 29,401 30,730
Loss on bulk sale of
assets................ 49,147 -- 49,147 49,147
Other noninterest
expense............... 103,004 89,259 192,263 199,785
----------- ----------- ----------- ------------
Total noninterest
expense............. 336,059 301,574 637,633 661,339
----------- ----------- ----------- ------------
Earnings
Income before income
taxes................. 30,638 155,694 186,332 196,720
Provision for income
taxes................. 22,445 50,682 73,127 76,964
----------- ----------- ----------- ------------
Net income (3),(4)....... 8,193 105,012 113,205 119,756
Preferred dividend
requirements.......... 5,196 -- 5,196 5,196
----------- ----------- ----------- ------------
Net income applicable to
common shares........... $ 2,997 $ 105,012 $ 108,009 $ 114,560
----------- ----------- ----------- ------------
Per Common Share Data (3)
Net income per share:
Primary.............. $ .07 $ 2.95 $ 1.15 $ 1.16
=========== =========== =========== ============
Fully-diluted........ $ .07 $ 2.91 $ 1.14 $ 1.15
=========== =========== =========== ============
Weighted average shares
outstanding:
Primary.............. 42,331,126 35,619,953 93,980,058 99,179,961
=========== =========== =========== ============
Fully-diluted........ 46,889,289 36,188,410 99,362,484 105,063,833
=========== =========== =========== ============
</TABLE>
See Notes to Pro Forma Condensed Financial Information.
62
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1992
(UNAUDITED)
<TABLE>
<CAPTION>
SNC,
SNC AND BB&T FINANCIAL
BB&T FINANCIAL AND COMMERCE
BB&T PRO FORMA PRO FORMA
SNC FINANCIAL COMBINED (5) COMBINED (5)
---------- ---------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on
loans and leases........ $ 428,923 $ 454,061 $ 882,984 $ 913,159
Interest and dividends on
securities.............. 137,025 135,529 272,554 286,243
Interest on temporary in-
vestments............... 5,486 2,026 7,512 8,587
---------- ---------- ---------- -----------
Total interest income.. 571,434 591,616 1,163,050 1,207,989
---------- ---------- ---------- -----------
Interest Expense
Interest on deposits..... 251,172 249,876 501,048 522,893
Interest on short-term
borrowings.............. 14,964 16,996 31,960 31,979
Interest on long-term
debt.................... 25,652 8,711 34,363 34,913
---------- ---------- ---------- -----------
Total interest expense. 291,788 275,583 567,371 589,785
---------- ---------- ---------- -----------
Net Interest Income
Net interest income...... 279,646 316,033 595,679 618,204
Provision for loan and
lease losses............ 25,671 32,975 58,646 62,871
---------- ---------- ---------- -----------
Net interest income af-
ter provision for loan
and lease losses...... 253,975 283,058 537,033 555,333
---------- ---------- ---------- -----------
Noninterest Income
Service charges on de-
posit accounts.......... 36,455 33,606 70,061 73,067
Nondeposit fees and com-
missions................ 20,454 31,395 51,849 54,874
Securities gains, net.... 1,972 6,268 8,240 9,338
Other noninterest income. 19,871 24,280 44,151 45,232
---------- ---------- ---------- -----------
Total noninterest in-
come.................. 78,752 95,549 174,301 182,511
---------- ---------- ---------- -----------
Noninterest Expense
Personnel expense........ 114,258 123,814 238,072 246,998
Occupancy and equipment
expense................. 33,184 40,210 73,394 77,124
Federal deposit insurance
expense................. 12,826 13,456 26,282 27,384
Other noninterest ex-
pense................... 73,304 76,653 149,957 155,290
---------- ---------- ---------- -----------
Total noninterest ex-
pense................. 233,572 254,133 487,705 506,796
---------- ---------- ---------- -----------
Earnings
Income before income tax-
es...................... 99,155 124,474 223,629 231,048
Provision for income tax-
es...................... 39,992 41,853 81,845 84,322
---------- ---------- ---------- -----------
Net income................. 59,163 82,621 141,784 146,726
Preferred dividend re-
quirements.............. 4,605 -- 4,605 4,605
---------- ---------- ---------- -----------
Net income applicable to
common shares............. $ 54,558 $ 82,621 $ 137,179 $ 142,121
========== ========== ========== ===========
Per Common Share Data
Net income per share:
Primary................ $ 1.34 $ 2.53 $ 1.56 $ 1.53
========== ========== ========== ===========
Fully-diluted.......... $ 1.31 $ 2.43 $ 1.51 $ 1.48
========== ========== ========== ===========
Weighted average shares
outstanding:
Primary................ 40,777,780 32,704,634 88,199,499 92,765,498
========== ========== ========== ===========
Fully-diluted.......... 44,993,809 34,741,310 95,368,708 100,432,370
========== ========== ========== ===========
</TABLE>
See Notes to Pro Forma Condensed Financial Information.
63
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1991
(UNAUDITED)
<TABLE>
<CAPTION>
SNC,
SNC AND BB&T FINANCIAL
BB&T FINANCIAL AND COMMERCE
BB&T PRO FORMA PRO FORMA
SNC FINANCIAL COMBINED (5) COMBINED (5)
---------- ---------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on
loans and leases........ $ 456,154 $ 467,671 $ 923,825 $ 955,550
Interest and dividends on
securities.............. 124,221 136,888 261,109 269,384
Interest on temporary in-
vestments............... 10,569 6,939 17,508 18,535
---------- ---------- ---------- ----------
Total interest income.. 590,944 611,498 1,202,442 1,243,469
---------- ---------- ---------- ----------
Interest Expense
Interest on deposits..... 315,460 323,126 638,586 662,382
Interest on short-term
borrowings.............. 20,078 18,023 38,101 38,195
Interest on long-term
debt.................... 33,060 9,116 42,176 42,744
---------- ---------- ---------- ----------
Total interest expense. 368,598 350,265 718,863 743,321
---------- ---------- ---------- ----------
Net Interest Income
Net interest income...... 222,346 261,233 483,579 500,148
Provision for loan and
lease losses............ 30,602 42,317 72,919 75,844
---------- ---------- ---------- ----------
Net interest income af-
ter provision for loan
and lease losses...... 191,744 218,916 410,660 424,304
---------- ---------- ---------- ----------
Noninterest Income
Service charges on de-
posit accounts.......... 34,387 30,413 64,800 67,141
Nondeposit fees and com-
missions................ 19,023 27,189 46,212 48,138
Securities gains, net.... 4,331 10,949 15,280 16,180
Other noninterest income. 23,627 22,337 45,964 46,557
---------- ---------- ---------- ----------
Total noninterest in-
come.................. 81,368 90,888 172,256 178,016
---------- ---------- ---------- ----------
Noninterest Expense
Personnel expense........ 99,163 106,502 205,665 213,068
Occupancy and equipment
expense................. 30,783 35,718 66,501 69,830
Federal deposit insurance
expense................. 10,869 11,584 22,453 23,240
Other noninterest ex-
pense................... 63,786 61,195 124,981 129,046
---------- ---------- ---------- ----------
Total noninterest ex-
pense................. 204,601 214,999 419,600 435,184
---------- ---------- ---------- ----------
Earnings
Income before income tax-
es...................... 68,511 94,805 163,316 167,136
Provision for income tax-
es...................... 23,902 26,470 50,372 51,593
---------- ---------- ---------- ----------
Net income................. 44,609 68,335 112,944 115,543
Preferred dividend re-
quirements.............. -- -- -- --
---------- ---------- ---------- ----------
Net income applicable to
common shares............. $ 44,609 $ 68,335 $ 112,944 $ 115,543
========== ========== ========== ==========
Per Common Share Data
Net income per share:
Primary................ $ 1.17 $ 2.30 $ 1.39 $ 1.36
========== ========== ========== ==========
Fully-diluted.......... $ 1.17 $ 2.21 $ 1.36 $ 1.33
========== ========== ========== ==========
Weighted average shares
outstanding:
Primary................ 38,079,355 29,760,298 81,231,787 84,851,662
========== ========== ========== ==========
Fully-diluted.......... 38,111,573 31,755,821 84,157,514 88,275,050
========== ========== ========== ==========
</TABLE>
See Notes to Pro Forma Condensed Financial Information
64
<PAGE>
NOTES TO PRO FORMA CONDENSED FINANCIAL INFORMATION
(1) Certain material, non-recurring adjustments of approximately $80 million
will be recorded in conjunction with the Merger. These adjustments include:
approximately $51 million for the settlement of obligations under existing
employment contracts, severance pay for involuntary terminations, early
retirement and related employee benefits; approximately $7 million
associated with branch closings and divestitures; approximately $7 million
for consolidation of bank operations and systems; and approximately $10
million of expenses related to effecting the Merger. The impact of these
adjustments has been reflected in the Pro Forma Condensed Statement of
Condition as of June 30, 1994.
(2) Based on exchange ratios of 1.45 for conversion of BB&T Financial Common
Stock into SNC Common Stock, and 1.305 for conversion of Commerce stock
into BB&T Financial Common Stock. At June 30, 1994, BB&T Financial and
Commerce had 36,271,016 and 2,725,162 shares outstanding, respectively.
(3) Net income and primary and fully-diluted net income per share for the six
months ended June 30, 1993, and the year ended December 31, 1993, do not
include the cumulative effect of changes in accounting principles resulting
from the adoption by SNC effective January 1, 1993 of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes" ("SFAS 109"), SFAS No. 106, "Accounting for Postretirement Benefits
Other than Pensions" ("SFAS 106"), and SFAS No. 72, "Accounting for Certain
Acquisitions of Banking or Thrift Institutions ("SFAS 72"). The impact of
adoption of SFAS 109, SFAS 106 and SFAS 72 on net income, primary net
income per share and fully-diluted net income per share was $27,217,000,
$0.65 and $0.60, respectively for the six months ended June 30, 1993, and
$27,217,000, $0.64 and $0.58, respectively for the year ended December 31,
1993.
(4) BB&T Financial elected to amortize the accumulated postretirement
obligation related to the adoption of SFAS 106 over a period of 21 years as
a component of the postretirement benefit cost. SNC elected to reflect the
adoption of SFAS 106 through the recording of a cumulative charge for this
change in accounting principle. The Condensed Proforma Financial
Information reflect an adjustment to conform BB&T Financial's transition
method to the method elected by SNC. Net income and primary and fully-
diluted net income per share for the six months ended June 30, 1993, and
the year ended December 31, 1993, do not reflect this conforming
adjustment. The impact of this conforming adjustment, net of tax, on net
income, for both the six months ended June 30, 1993 and for the year ended
December 31, 1993 is $7,898,000. Additionally, the accompanying Pro Forma
Condensed Statements of Operations do not reflect adjustments for amounts
previously recorded by BB&T Financial as amortization of the unrecorded
transition obligation, which amounted to $335,000 (net of tax of $224,000)
for the year ended December 31, 1993, and $168,000 (net of tax of
$112,000), for each of the six month periods ended June 30, 1994 and 1993.
(5) No pro forma adjustments are reflected in the Pro Forma Condensed
Statements of Operations.
65
<PAGE>
CAPITALIZATION
(UNAUDITED)
The following table sets forth: (i) the unaudited historical capitalization
of SNC as of June 30, 1994; (ii) the unaudited historical capitalization of
BB&T Financial as of June 30, 1994; and (iii) the unaudited pro forma
capitalization of SNC and BB&T Financial, and Commerce assuming the
transactions had been consummated on June 30, 1994. For additional information,
reference is made to the historical consolidated financial statements and notes
thereto of SNC and BB&T Financial incorporated by reference herein.
<TABLE>
<CAPTION>
JUNE 30, 1994
----------------------------------------------------------
SNC AND SNC,
BB&T BB&T FINANCIAL
FINANCIAL AND COMMERCE
BB&T PRO FORMA PRO FORMA
SNC FINANCIAL COMBINED COMMERCE COMBINED
-------- ---------- ---------- -------- --------------
<S> <C> <C> <C> <C> <C>
Long-term debt and
capital lease
obligations:
SNC:
9.28%, $20 million
senior capital notes,
dated 1986, due in
annual installments of
amounts ranging from
$3,000,000 to
$4,000,000 through
1996.................. $ 10,000 $ $ 10,000 $ $ 10,000
$5 million Industrial
Revenue Bond, dated
1984, secured by
premises with a net
book value of
$6,244,000 at June 30,
1994, due in quarterly
installments of
$83,340 through second
quarter, 1999, and one
final installment of
$82,940 in 1999.
Interest rate is
variable--5.815% at
June 30, 1994......... 1,750 1,750 1,750
Capitalized leases,
varying maturities to
2028 with rates from
8.11% to 15.42%. This
represents the
unamortized balances
due on leases of
various facilities.
(1)................... 4,550 4,550 4,550
Advances from Federal
Home Loan Bank of
Atlanta, with varying
maturities to 2006
with rates from 3.73%
to 8.52% (1).......... 199,938 199,938 199,938
Other mortgage
indebtedness (1)...... 448 448 448
BB&T Financial:
Advances from Federal
Home Loan Bank of
Atlanta, with
maturities of up to
eight years and fixed
interest rates varying
from 5.37% to 8.95%... 59,357 59,357 59,357
Medium-term bank notes. 336,895 336,895 336,895
Commerce:
10% convertible
subordinated capital
notes due 2002........ 4,995 4,995
Obligations under
capital lease......... 1,795 1,795
-------- ---------- ---------- ------- ----------
Total long-term debt and
capital lease
obligations............ $216,686 $ 396,252 $ 612,938 $ 6,790 $ 619,728
======== ========== ========== ======= ==========
Shareholders' equity:
SNC:
Preferred stock, $5
par, 5,000,000 shares
authorized, 770,000
shares issued and
outstanding........... $ 3,850 $ $ 3,850 $ $ 3,850
Common stock, $5 par,
120,000,000 shares
authorized, 43,385,610
issued and
outstanding,
95,978,583 shares and
101,134,964 shares pro
forma issued and
outstanding,
respectively (2)...... 216,928 479,893 505,675
Paid-in capital........ 153,205 259,693 270,511
Retained earnings...... 233,269 628,217 638,804 (3)
Net unrealized
depreciation of
securities............ (13,385) (35,017) (35,611)
BB&T Financial:
Common stock, $2.50 par
value, 100,000,000
shares authorized;
36,271,016 issued and
outstanding........... 90,678
Paid-in capital........ 278,775
Retained earnings...... 456,282
Net unrealized loss on
securities available
for sale.............. (21,632)
Commerce:
Common stock, $2.50 par
value, 10,000,000
shares authorized;
2,725,162 shares
issued and outstanding
in 1994............... 6,813
Capital surplus........ 29,787
Retained earnings...... 10,587
Net unrealized loss on
securities available
for sale.............. (594)
-------- ---------- ---------- ------- ----------
Total shareholders'
equity............... 593,867 804,103 1,336,636 46,593 1,383,229
-------- ---------- ---------- ------- ----------
Total long-term debt,
capital lease
obligations, and
shareholders' equity... $810,553 $1,200,355 $1,949,574 $53,383 $2,002,957
======== ========== ========== ======= ==========
</TABLE>
66
<PAGE>
NOTES TO CAPITALIZATION
(UNAUDITED)
(1) These obligations are direct obligations of subsidiaries of SNC and, as
such, constitute claims against such subsidiaries prior to SNC's equity
interest therein.
(2) Based on assumed exchange ratios of 1.45 to 1 for the Merger and 1.305 to 1
for BB&T Financial's acquisition of Commerce.
(3) Certain material, non-recurring adjustments of approximately $80 million
will be recorded in conjunction with the Merger. These adjustments include:
approximately $51 million for the settlement of obligations under existing
employment contracts, severance pay for involuntary terminations, early
retirement and related employee benefits; approximately $7 million
associated with branch closings and divestitures; approximately $7 million
for consolidation of bank operations and systems; and approximately $10
million of expenses related to effecting the Merger. The impact of these
adjustments has been reflected in the Pro Forma Condensed Statement of
Condition as of June 30, 1994.
67
<PAGE>
BUSINESS OF SNC
SNC, a multi-bank holding company, conducts its operations in North Carolina
and South Carolina primarily through its commercial bank subsidiaries and, to a
lesser extent, through its savings bank and other subsidiaries. As of June 30,
1994, SNC had total consolidated assets of approximately $8.2 billion, total
consolidated deposits through its depository institution subsidiaries of
approximately $6.2 billion and consolidated shareholders' equity of
approximately $593.9 million. SNC's total consolidated net income for the six
months ended June 30, 1994, was approximately $52.9 million or $1.10 per share
on a fully-diluted basis. Based on total consolidated assets at June 30, 1994,
SNC was the fifth largest commercial banking entity based in the Carolinas. As
of June 30, 1994, 68% of SNC's deposits were in North Carolina and 32% in South
Carolina.
SNC operates a savings bank in North Carolina--SNB Savings. SNB Savings is
engaged primarily in the origination of mortgage loans on residential real
estate and, to a lesser degree, other consumer and commercial loans.
Substantially all of the loans of SNC's Bank Subsidiaries are to businesses and
individuals in the Carolinas. SNC's Bank Subsidiaries have no foreign loans and
no loans that are characterized as highly-leveraged transactions by bank
regulators.
SOUTHERN NATIONAL BANK OF NORTH CAROLINA
SNBNC, SNC's largest subsidiary, was founded in 1897 and currently operates
through 155 banking offices in 77 cities and towns throughout North Carolina.
SNBNC focuses on providing a wide range of banking services in its local market
for retail and commercial customers, including small and mid-size businesses,
public agencies and local governments, trust customers and individuals.
Southern National Leasing Corp., a wholly-owned subsidiary of SNBNC, offers
lease financing. Southern National Investment Services, Inc., another wholly-
owned subsidiary of SNBNC, offers customers investment alternatives, including
discount brokerage services, fixed rate and variable annuities, mutual funds
and government and municipal bonds. As of June 30, 1994, SNBNC had total
consolidated assets of approximately $5.5 billion and consolidated
shareholder's equity of approximately $372.6 million.
SOUTHERN NATIONAL BANK OF SOUTH CAROLINA
SNC entered the South Carolina banking market in 1986 with the formation of
its second banking subsidiary, SNBSC. SNBSC serves South Carolina through 78
banking offices in 39 cities and towns. SNBSC focuses on providing a wide range
of banking services in its local market for retail and commercial customers,
including small and mid-size businesses, public agencies and local governments,
trust customers and individuals. As of June 30, 1994, SNBSC had total
consolidated assets of approximately $2.6 billion and consolidated
shareholder's equity of approximately $185.1 million.
OTHER SUBSIDIARIES--NON-BANK SUBSIDIARIES
SNC has two other active subsidiaries. Unified Investors Life Insurance
Company is a reinsurer and underwriter of certain credit life and accident and
health insurance policies written by a non-affiliated insurance company in
connection with certain loans made by the banking and savings bank
subsidiaries. Southern International Corp. provides advice to customers of
SNC's subsidiaries who conduct international business. SNB Savings' subsidiary,
Southern National Insurance Services, Inc., is engaged in selling property,
casualty and life insurance.
ACQUISITION STRATEGY
SNC seeks to enhance profitability and build market share through both
internal growth and acquisitions. SNC has determined that the acquisition of
sound financial institutions (including thrift institutions) and engaging in
federally-assisted transactions, including the purchase of deposits and assets
68
<PAGE>
from the Resolution Trust Corporation ("RTC"), represent attractive
opportunities. In particular, SNC seeks to identify acquisitions that increase
market share in existing markets or provide entrance into new markets in the
Carolinas and that create opportunities for growth and operating synergies. Any
future acquisitions or related series of acquisitions may be of a size
comparable to or larger than the acquisitions described below.
THRIFT ACQUISITIONS
On March 20, 1992, SNC acquired Workmen's Bancorp, Inc. ("Workmen's"), a
Delaware-chartered savings and loan holding company headquartered in Mount
Airy, North Carolina, with total consolidated assets of $262.6 million
(including loans of $192.5 million) and total consolidated deposits of $219.2
million as of the date of the acquisition. In the transaction, SNC issued to
Workmen's shareholders approximately 2.6 million shares of, and options to
purchase shares of, SNC Common Stock. At the same time, SNBNC acquired all of
the assets and assumed all of the liabilities of Workmen's thrift subsidiary,
Workmen's Federal Savings Bank ("Workmen's Federal"). Prior to the acquisition,
Workmen's Federal operated five branches with a market consisting principally
of consumers and small to medium-sized businesses in the counties of Surry,
Forsyth, Stokes and Allegheny in North Carolina and the counties of Grayson,
Patrick and Carroll in Virginia. SNBNC has continued to operate all of these
branches.
On January 29, 1993, SNC acquired FedFirst Bancshares, Inc. ("FedFirst"), a
Delaware-chartered savings and loan holding company headquartered in Winston-
Salem, North Carolina, with total consolidated assets of $396 million
(including consolidated loans of $173 million) and total consolidated deposits
of $339 million. In the transaction, SNC issued to FedFirst shareholders
approximately 5.2 million shares of, and options to purchase shares of, SNC
Common Stock. At the same time, SNBNC acquired all of the assets and assumed
all of the liabilities of FedFirst's thrift subsidiary, First Federal Savings
Bank ("First Federal"). Prior to the acquisition, First Federal operated nine
branches with a market consisting principally of consumers and small to medium-
sized businesses in the counties of Forsyth and Davie in North Carolina. SNBNC
has continued to operate all but two of these branches.
On October 7, 1993, SNC acquired East Coast Savings Bank, S.S.B. ("East
Coast"), headquartered in Goldsboro, North Carolina, through the conversion of
East Coast to the stock form of ownership (effected through an offering of SNC
Common Stock) and the simultaneous merger of East Coast into SNBNC. At June 30,
1993, East Coast had total consolidated assets of $268 million and total
consolidated deposit liabilities of $206 million. SNC issued 1,414,945 shares
of SNC Common Stock in the merger/conversion of this North Carolina-chartered
mutual savings bank. East Coast's principal business consisted of soliciting
deposit accounts from the general public, making mortgage loans to finance the
acquisition and construction of residential dwellings and making consumer and
commercial loans.
On January 28, 1994, SNBSC acquired FSB, a federally-chartered stock savings
bank, headquartered in Greenville, South Carolina, with total consolidated
assets of $2.0 billion and total consolidated deposits of $1.6 billion as of
December 31, 1993. In the transaction, SNC issued to FSB shareholders
approximately 8.1 million shares of SNC Common Stock. Prior to the acquisition,
FSB operated in South Carolina through 45 retail offices, 12 limited service
offices in grocery stores and nine mortgage origination offices. FSB also
operated, through a subsidiary, loan origination offices in Atlanta, Georgia;
Charlotte, Raleigh and Greensboro, North Carolina; and Midlothian, Virginia.
SNBSC has continued to operate all of the banking offices.
On January 31, 1994, SNC acquired Regency, a North Carolina corporation
headquartered in Hickory, North Carolina, with consolidated assets of $262.9
million and total consolidated deposits of $210.2 million as of year-end 1993.
In the merger of Regency with and into SNC, SNC issued to Regency shareholders
approximately 2.4 million shares of SNC Common Stock. As a result of this
transaction, SNBNC is building a new main office in Lexington, North Carolina.
69
<PAGE>
On February 24, 1994, SNC acquired Home, a federally-chartered stock savings
bank headquartered in Statesville, North Carolina, with total consolidated
assets of $98.1 million and total consolidated deposits of $89.7 million as of
December 31, 1993. In the merger of Home with and into SNBNC, SNC issued to
Home shareholders 824,601 shares of SNC Common Stock.
DEPOSIT AND ASSET ACQUISITIONS FROM THE RTC
Acquisitions of thrift deposits from the RTC in the early 1990's expanded
SNC's market share in central and western North Carolina. In 1992, SNC acquired
approximately $50 million in deposits and approximately $50 million in assets
from the RTC related to First Security Federal Savings Bank of Pinehurst, a
financially sound thrift placed under government control after its parent
company was declared insolvent.
In 1991, SNC acquired from the RTC $228 million in deposits and $59 million
of home equity lines of credit related to Southeastern Federal Savings Bank,
Charlotte, North Carolina ("Southeastern") and Preferred Savings Bank, F.S.B.,
High Point, North Carolina ("Preferred"). The deposits acquired from
Southeastern and Preferred were based in 12 cities and towns in central and
western North Carolina, including Charlotte, Winston-Salem, Greensboro,
Hickory, Burlington, Newton and Boone. SNC had existing banking offices in all
of these localities except Burlington and Newton. SNC retained two branches in
these cities and all other deposits have been assumed by existing branches of
SNC's Bank Subsidiaries or SNB Savings. All of the home equity lines of credit
were secured by mortgages on North Carolina homes.
For additional information about SNC's business, see "AVAILABLE INFORMATION"
and "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
BUSINESS OF BB&T FINANCIAL
BB&T Financial is a bank holding company, the principal assets of which are
all of the outstanding shares of common stock of BB&T-NC and BB&T Financial-SC
(which in turn owns all of the outstanding shares of capital stock of BB&T-SC,
Lexington and Community). BB&T Financial also includes among its assets
interest-bearing bank balances with and loans to BB&T-NC. BB&T Financial's
principal sources of revenue are interest, dividends and management fees
received from its subsidiaries. There are limitations on the subsidiaries'
ability to supply funds to BB&T Financial. See "SUPERVISION AND REGULATION OF
SNC AND BB&T FINANCIAL--Limits on Dividends and Other Payments." As of June 30,
1994, BB&T Financial had consolidated assets of approximately $9.9 billion,
total insured deposits through its subsidiaries of approximately $7.4 billion
and total consolidated shareholder's equity of approximately $804.1 million.
BB&T Financial's total consolidated income for the six months ended June 30,
1994 was $55.4 million or $1.52 per share on a fully-diluted basis.
BRANCH BANKING AND TRUST COMPANY
BB&T-NC is a North Carolina-chartered commercial bank. As of June 30, 1994,
BB&T-NC operated 224 offices in 121 cities and towns in North Carolina and had
4,015 employees. BB&T-NC provides a wide range of commercial, consumer banking,
trust and investment services primarily through its branch network. BB&T-NC
also operates an insurance department and a travel department and is a broker-
dealer in government and municipal securities. At June 30, 1994, BB&T-NC had
total assets of approximately $8.3 billion, consolidated deposit liabilities of
approximately $6.2 billion and consolidated shareholder's equity of
approximately $655.5 million.
Since June 30, 1994, three savings institution subsidiaries with assets of
approximately $395.7 million as of June 30, 1994 have been merged into BB&T-NC.
These subsidiaries had deposit liabilities of approximately $335.7 million and
consolidated shareholders' equity of approximately $38.6 million as of June 30,
1994.
70
<PAGE>
SOUTH CAROLINA BANKS
BB&T-SC is a South Carolina-chartered commercial bank. As of June 30, 1994,
BB&T-SC operated 19 offices in five counties in South Carolina and had
approximately 182 employees. BB&T-SC provides a full range of commercial
banking, consumer banking, trust and investment services through its branch
network. As of June 30, 1994, BB&T-SC had total assets of approximately $510.6
million, deposit liabilities of approximately $453.7 million and shareholder's
equity of approximately $44.2 million.
Lexington and Community are also South Carolina chartered commercial banks.
As of June 30, 1994, these banks operated 25 offices in 16 cities and towns in
South Carolina, had 425 employees and had total assets of approximately $719.7
million, deposit liabilities of approximately $590.5 million and shareholder's
equity of approximately $64.8 million. Both banks provide a full range of
commercial banking, trust and investment services through their respective
branch networks. Lexington and Community also offer discount brokerage services
both directly and through a subsidiary.
BB&T-SC, Lexington and Community are expected to be merged in 1995 with the
resulting bank named "Branch Banking and Trust Company of South Carolina."
BB&T FINANCIAL'S ACQUISITION PROGRAM
BB&T Financial primarily has focused its business strategy on meeting the
banking needs of the retail and small and middle market commercial customer
through an extensive bank branch network. To complement this strategy, since
1990, BB&T Financial has expanded its customer base through the acquisition of
14 North Carolina-based savings institutions (which were in both mutual and
stock form) with aggregate assets of approximately $3.1 billion and branches of
a fifteenth savings institution. In connection with its savings institutions
acquisitions, BB&T Financial has acquired a total of 92 branch offices and has
issued approximately 10 million shares of BB&T Financial Common Stock. Also,
through the acquisition of LSB, BB&T Financial has acquired two South Carolina-
based commercial banks (Lexington and Community) with aggregate assets of
approximately $719.7 million and aggregate deposit liabilities of approximately
$590.5 million as of June 30, 1994. All the acquired savings institutions have
been merged into BB&T-NC, and Lexington and Community are expected to be merged
in 1995 with BB&T-SC.
BB&T Financial has also begun to explore opportunities to expand its banking
business outside the Carolinas, and in that regard BB&T Financial has pending
as of the date of this Joint Proxy Statement/Prospectus the acquisition of
Commerce. Commerce offers a full range of commercial banking services through
its branch network in the southeastern part of Virginia. As of June 30, 1994,
Commerce had assets of approximately $692.1 million, deposit liabilities of
approximately $636.3 million and shareholder's equity of approximately $46.6
million. It is expected that, subject to shareholder and regulatory approval,
this acquisition will be completed by early 1995.
In the last three years, BB&T Financial also has acquired the assets and
liabilities of 11 insurance agencies with operations in several cities
throughout North Carolina. The agencies write commercial and personal insurance
policies as agents on behalf of various insurance underwriters. All insurance
operations are conducted through a department of BB&T-NC in the communities
where the acquired agencies operated.
BB&T Financial continues to evaluate possible acquisitions of savings
institutions, commercial banks, insurance agencies and other companies in the
Carolinas and Virginia and may after the date of this Joint Proxy
Statement/Prospectus enter into agreements to acquire one or more such
institutions. Certain acquisitions prior to the Merger would require the
agreement of SNC. See "THE MERGER--Conduct of Business Pending the Merger."
Additional information about BB&T Financial's completed and pending
acquisitions is included in the BB&T Financial documents incorporated by
reference in this Joint Proxy Statement/Prospectus. See "INCORPORATION OF
CERTAIN INFORMATION BY REFERENCE." See also "PRO FORMA CONDENSED FINANCIAL
STATEMENTS."
71
<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS
At the Effective Time of the Merger, BB&T Financial shareholders
automatically would become shareholders of SNC as the Continuing Corporation,
and their rights as shareholders would be determined by the SNC Articles and
the SNC Bylaws. The following is a summary of the material differences in the
rights of shareholders of SNC and BB&T Financial.
CAPITALIZATION
SNC. SNC is authorized to issue 120,000,000 shares of SNC Common Stock, $5
par value, of which 43,488,593 shares were issued and outstanding as of the SNC
Record Date. If the SNC Articles are amended pursuant to the Plan of Merger,
SNC will be authorized to issue 300,000,000 shares of SNC Common Stock. SNC
also is authorized to issue 5,000,000 shares of SNC Preferred Stock, of which
770,000 shares of SNC Convertible Preferred Stock have been issued.
The SNC Convertible Preferred Stock was issued in connection with an offering
of 3,080,000 Depositary Shares, each representing one-quarter interest in a
share of SNC Convertible Preferred Stock. Each owner of a Depositary Share is
entitled, in proportion to the one-quarter interest in a share of SNC
Convertible Preferred Stock represented by such Depositary Share, to all the
rights and preferences of the SNC Convertible Preferred Stock represented
thereby (including dividend, voting, redemption, conversion and liquidation
rights). The SNC Convertible Preferred Stock is convertible at any time into
such number of whole shares of SNC Common Stock as is equal to the aggregate
stated value of shares surrendered for conversion divided by $16.93 per share
of SNC Common Stock, subject to adjustment (under formulae set forth in the SNC
Articles) in certain events (currently the conversion ratio is 1.4767).
Under the SNC Articles, the SNC Board, or a duly authorized committee
thereof, has the power, without further action by the SNC shareholders, to
provide for the issuance of SNC Preferred Stock in one or more series and to
fix the voting powers, designations, preferences and relative, participating,
optional or special rights, and qualifications, limitations or restrictions
thereof, by adopting a resolution or resolutions creating and designating such
series. The rights of the holders of SNC Common Stock are subject to the rights
and preferences of the holders of the SNC Convertible Preferred Stock and would
be subject to any rights and preferences of any other SNC Preferred Stock or
series thereof that the SNC Board may issue. See "--Anti-Takeover Provisions."
Under North Carolina law, any outstanding shares of capital stock of SNC
reacquired by SNC would be considered authorized but unissued shares.
BB&T Financial. BB&T Financial's authorized capital stock consists of two
classes, represented by 100,000,000 shares of BB&T Financial Common Stock,
$2.50 par value, of which 36,454,681 shares were issued and outstanding and
6,194,409 shares were reserved for issuance as of the BB&T Financial Record
Date and 4,000,000 shares of nonvoting preferred stock, $2.50 par value, no
shares of which are issued or outstanding. BB&T Financial's Amended Articles of
Incorporation authorize the BB&T Financial Board, without shareholder approval,
to fix the preferences, limitations and relative rights of the preferred stock
and to establish series of such preferred stock and determine the variations
between each series. If any shares of preferred stock are issued, the rights of
holders of BB&T Financial Common Stock would be subject to the rights and
preferences conferred to holders of such preferred stock.
VOTING RIGHTS
SNC. Each holder of SNC Common Stock is entitled to one vote per share and to
the same and identical voting rights as other holders of SNC Common Stock.
Holders of SNC Common Stock do not have cumulative voting rights in the
election of directors so long as SNC has shares of any class of securities
entitled to be voted at a meeting that are held of record by more than 2,000
shareholders or listed on a national securities exchange, unless the SNC
Articles are amended to provide otherwise. Directors are elected
72
<PAGE>
by a plurality of the votes cast, and at each election for directors every
shareholder entitled to vote at such election has the right to vote, in person
or by proxy, the number of shares outstanding of record in his name for as many
persons as there are directors to be elected.
Shares of SNC Common Stock owned by any of its subsidiaries in a non-
fiduciary capacity are not eligible to vote on any matter. Shares of SNC Common
Stock held by SNC or any of its subsidiaries either as a sole- or co-fiduciary
may be voted in the election of directors and in all other matters by the
registered owners, unless otherwise limited by the terms of the individual
trust agreements.
In general, unless the SNC Articles are amended to provide otherwise or a
bylaw is adopted by the shareholders, action on a matter is approved if the
votes cast favoring the action exceed the votes cast opposing the action.
However, generally (i) the affirmative vote of a majority of the shares
entitled to be cast of each voting group entitled to vote separately is
required to approve a merger or share exchange; (ii) the affirmative vote of a
majority of the shares of each voting group entitled to vote thereon is
required to amend the SNC Articles, if the amendment would give rise to
dissenters' rights; and (iii) the affirmative vote of a majority of the shares
of capital stock of SNC entitled to be cast may be required to approve the
dissolution of SNC or to approve the sale of all or substantially all the
property of SNC other than in the regular course of business. With respect to
sales of assets in the regular course of business, the SNC Board may approve
the sale of all or substantially all the property of SNC without shareholder
approval.
Holders of SNC Common Stock and SNC Convertible Preferred Stock have
dissenters' rights of appraisal with respect to their shares as provided by
statute in connection with certain types of merger or share exchange
transactions. Dissenters' rights are also available with respect to certain
sales of all or substantially all the property of SNC and amendments to the SNC
Articles that materially and adversely affect certain enumerated rights of the
dissenters' shares.
The SNC Board, without shareholder approval, may issue shares of SNC
Preferred Stock with voting and conversion rights that could adversely affect
the voting power of the holders of SNC Common Stock.
Holders of SNC Convertible Preferred Stock do not have any voting rights
except as set forth below or as otherwise from time to time expressly required
by law. Whenever dividends on any shares of SNC Convertible Preferred Stock are
in arrears for six full quarterly periods, whether or not consecutive, the
holders of such shares of SNC Convertible Preferred Stock (voting separately as
a class with all other series of cumulative preferred stock upon which like
voting rights have been conferred and are exercisable) would be entitled to
vote for the election of two additional directors (on the terms set forth
below) of SNC at the next annual meeting of shareholders and at each subsequent
meeting until all dividends accumulated on such shares of SNC Convertible
Preferred Stock have been fully paid or set aside for payment. In such case,
the entire SNC Board will be increased by two directors. Each director so
elected will continue to serve for the full term for which he has been elected,
notwithstanding that, prior to the end of such term, such default ceases to
exist.
So long as any shares of SNC Convertible Preferred Stock remain outstanding,
SNC may not, without the affirmative vote of the holders, given in person or by
proxy at a meeting, of at least two-thirds of the shares of SNC Convertible
Preferred Stock outstanding at the time (voting separately as one class):
(i) authorize, create or issue, or increase the authorized or issued amount of,
any class or series of stock ranking prior to the SNC Convertible Preferred
Stock with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up; (ii) authorize, create or issue, or
increase the authorized or issued amount of, any class or series of stock
(including any class or series of preferred stock) which ranks on a parity with
the SNC Convertible Preferred Stock as to dividends and upon liquidation,
dissolution or winding up ("Parity Stock") unless the SNC Articles or other
provisions of the charter creating or authorizing such class or series provide
that if in any case the stated dividends or amounts payable upon liquidation,
dissolution or winding up are not paid in full on the SNC Convertible Preferred
Stock and all outstanding shares of Parity Stock, the shares of all Parity
Stock will share ratably in the payment of dividends, including
73
<PAGE>
accumulations (if any), in accordance with the sums which would be payable on
all Parity Stock if all dividends in respect of all shares of Parity Stock were
paid in full, and on any distribution of assets upon liquidation, dissolution
or winding up ratably in accordance with the sums which would be payable in
respect of all shares of Parity Stock if all sums payable were discharged in
full; or (iii) amend, alter or repeal the provisions of the SNC Articles,
whether by merger, consolidation or otherwise, so as to materially and
adversely affect any right, preference, privilege or voting power of such
shares of SNC Convertible Preferred Stock or the holders thereof; provided,
however, that any increase in the amount of the authorized preferred stock or
any outstanding series of preferred stock or any other capital stock of SNC, or
the creation and issuance of other series of preferred stock including SNC
Convertible Preferred Stock, or of any other capital stock of SNC, in each case
junior to the SNC Convertible Preferred Stock with respect to the payment of
dividends and the distribution of assets upon liquidation, dissolution or
winding up will not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
BB&T Financial. The holders of BB&T Financial Common Stock have one vote for
each share held on any matter presented for consideration by the shareholders.
The holders of BB&T Financial Common Stock are not entitled to cumulative
voting in the election of directors.
DIRECTORS AND CLASSES OF DIRECTORS
SNC. The SNC Bylaws provide for a Board of Directors having not less than
three nor more than twenty-five members as determined from time to time by vote
of a majority of the members of the SNC Board or by resolution of the
shareholders of SNC. As long as the shareholders of SNC do not have cumulative
voting rights with respect to the election of directors, the SNC Board may
increase or decrease the number of directors not more than 30% in any twelve-
month period. Vacancies, whether arising from an increase in the number of
directors or from the failure by shareholders to elect the full authorized
number of directors, may be filled by the shareholders or by the SNC Board (by
the affirmative vote of a majority of the remaining directors if less than a
quorum of the directors remains). Pursuant to the SNC Bylaws, however, less
than a majority of the full SNC Board may not increase the number of directors
to a number that: (i) exceeds by more than two the number of directors last
fixed by shareholders where such number was fifteen or less; or (ii) exceeds by
more than four the number of directors last fixed by shareholders where such
number was sixteen or more. Currently, membership on the SNC Board is fixed at
23. See "THE MERGER--Management and Operations after the Merger."
Pursuant to the SNC Articles, members of the SNC Board may be removed only
for cause. In addition, the directors may be removed only by the vote of a
majority of the outstanding shares of SNC Common Stock entitled to vote in the
election of directors.
The SNC Board is divided into three classes so that each director serves for
a term ending on the date of the third annual meeting following the annual
meeting at which such director was elected. In the event of any increase in the
authorized number of directors, the newly created directorships resulting from
such increase would be apportioned among the three classes of directors so as
to maintain such classes as nearly equal as possible. Because of the
classification of directors, unless the shareholders act under North Carolina
law to remove directors from office, two annual meetings generally would be
required to elect a majority of the SNC Board, and three rather than one would
be required to replace the entire SNC Board. Amendment of the provisions of the
SNC Articles providing for the structure of the SNC Board and providing for the
removal of directors and the selection of a director to fill a vacancy on the
SNC Board requires the affirmative vote of not less than two-thirds of the
total number of issued and outstanding shares of SNC Common Stock entitled to
vote thereon.
BB&T Financial. All of BB&T Financial's directors are elected each year.
Under BB&T Financial's Amended Articles of Incorporation, approval by the vote
of at least two-thirds of the outstanding shares of BB&T Financial Common Stock
entitled to vote is required for the removal of any director or the entire BB&T
Financial Board. Under North Carolina law, a director may be removed by
shareholder vote only if the number of votes cast to remove him exceeds the
number of votes cast not to remove him.
74
<PAGE>
ANTI-TAKEOVER PROVISIONS
Certain provisions of North Carolina law, the SNC Bylaws and the SNC
Articles, as well as the Bylaws and Amended Articles of Incorporation of BB&T
Financial, and certain other arrangements, some of which are described below,
may discourage an attempt to acquire control of SNC or BB&T Financial,
respectively, that a majority of either corporation's shareholders determined
was in their best interests. These provisions also may render the removal of
one or all directors more difficult or deter or delay corporate changes of
control that the SNC Board or BB&T Financial Board, respectively, did not
approve.
SNC
Classified Board of Directors. The provisions of the SNC Bylaws and the SNC
Articles providing for classification of the Board of Directors into three
separate classes and removal of directors only for cause may have certain anti-
takeover effects. See "--Directors and Classes of Directors."
Authorized Preferred Stock. The rights of holders of SNC Common Stock will be
subject to, and may be adversely affected by, the rights of holders of any SNC
Preferred Stock that may be issued in the future. Any such issuance may
adversely affect the interests of holders of SNC Common Stock by limiting the
control that such holders may exert by exercise of their voting rights, by
subordinating their rights in liquidation to the rights of the holders of such
SNC Preferred Stock, and otherwise. In addition, the issuance of SNC Preferred
Stock, in some circumstances, may deter or discourage takeover attempts and
other changes in control of SNC, including takeovers and changes in control
that some holders of SNC Common Stock may deem to be in their best interests
and in the best interests of SNC, by making it more difficult for a person who
has gained a substantial equity interest in SNC to obtain control or to
exercise control effectively. SNC has no current plans or agreements with
respect to the issuance of any shares of SNC Preferred Stock, other than the
issuance of SNC Convertible Preferred Stock.
Notice Provisions. The SNC Bylaws provide that a shareholder wishing to
nominate a person as a candidate for election to the SNC Board must submit such
nomination in writing to the Secretary of SNC not later than 60 days before one
year after the date of the immediately preceding Annual Meeting of
Shareholders, together with biographical information about the candidate, the
shareholder's name and shareholdings, in order for such candidate to be
considered at the next Annual Meeting. Similarly, a shareholder must notify the
Secretary of SNC in writing not later than 60 days before one year after the
date of the immediately preceding Annual Meeting of the shareholder's intention
to make a proposal for consideration at the next Annual Meeting. As to each
proposal, the notice must contain (i) a brief description of the proposal, (ii)
the name and shareholdings of the shareholder and (iii) any material interest
of the shareholder in such proposal.
Shareholder Meetings. Shareholders of SNC may not request that a special
meeting of shareholders be called. See "--Shareholder Meetings."
BB&T Financial
Authorized Preferred Stock. BB&T Financial's Amended Articles of
Incorporation authorize 4,000,000 shares of nonvoting preferred stock. The BB&T
Financial Board may, subject to applicable law and the rules of the National
Association of Securities Dealers, authorize the issuance of preferred stock at
such times, for such purposes and for such consideration as it may deem
advisable without further shareholder approval. The issuance of preferred stock
under certain circumstances may have the effect of discouraging an attempt by a
third party to acquire control of BB&T Financial by, for example, authorizing
the issuance of a series of preferred stock with rights and preferences
designed to impede the proposed transaction. A series of preferred stock also
could be used for a shareholder rights plan, which may be adopted without
shareholder approval. Such a plan, if adopted, could deter attempts by third
parties to acquire a significant number of shares of BB&T Financial Common
Stock without the prior approval of the BB&T Financial Board.
75
<PAGE>
Supermajority Voting Provisions. BB&T Financial's Amended Articles of
Incorporation require the affirmative vote of two-thirds of the outstanding
shares entitled to vote to approve a merger, consolidation or other business
combination, unless (as is the case with the Merger) the transaction is
approved, prior to consummation, by two-thirds of the members of the BB&T
Financial Board. This provision could tend to make the acquisition of BB&T
Financial more difficult to accomplish without the cooperation or favorable
recommendation of the BB&T Financial Board.
Amendments to Articles of Incorporation and Bylaws. BB&T Financial's Amended
Articles of Incorporation require approval by holders of at least two-thirds of
the outstanding shares entitled to vote in order to amend certain provisions of
BB&T Financial's Amended Articles of Incorporation. Those provisions require
holders of at least two-thirds of its outstanding shares to approve (i) the
removal of a director or the entire BB&T Financial Board, (ii) a merger,
consolidation or other business combination not approved by two-thirds of the
BB&T Financial Board and (iii) an amendment or repeal of the By-laws. Any other
amendment of the Amended Articles of Incorporation requires the affirmative
vote of the holders of a majority of the shares entitled to vote on such
amendment. BB&T Financial's by-laws may be amended by either the vote of a
majority of the BB&T Financial Board or by the affirmative vote of the holders
of at least two-thirds of the outstanding BB&T Financial Common Stock entitled
to vote.
Employee Stock Plans. BB&T Financial established employee stock ownership
plans for the benefit of the employees of seven savings institutions upon their
acquisitions by BB&T Financial. These plans, which held 255,906 shares of BB&T
Financial Common Stock as of June 30, 1994, are subparts of BB&T Financial's
Savings and Thrift Plan, which held an additional 1,639,839 shares of BB&T
Financial Common Stock as of June 30, 1994. Under plan terms, participants in
BB&T Financial's Savings and Thrift Plan have the right to direct the trustee
as to the voting of the shares held in their accounts on all matters, including
the election of directors. Under these plans, including each employee stock
ownership plan, the trustee is required, subject to applicable law, to vote the
shares as to which participant directions are not received and as to shares not
allocated to participant accounts in the same proportion as the allocated
shares as to which directions are received. Plan terms also would require the
trustee of each plan to follow participant instructions as to the tendering of
any shares held in participant accounts in the event of a tender offer. Shares
allocated to participant accounts as to which instructions are not received and
unallocated shares are, again subject to applicable law, tendered pursuant to
the same procedures as to which shares would be voted. As a result of these so-
called "pass-through" provisions, any third-party attempt to acquire control of
BB&T Financial by means of a proxy contest or tender offer may require the
support of the plan participants. The BB&T Financial employee stock plans
established thus may tend to discourage such attempts to the extent that
participants oppose third-party attempts to acquire control and shareholder
approval or support is required for such attempts.
North Carolina Legislation
The North Carolina Control Share Acquisition Act (the "Control Share
Acquisition Act") applies to both BB&T Financial and SNC and the North Carolina
Shareholder Protection Act (the "Shareholder Protection Act") applies to BB&T
Financial. (The SNC Bylaws provide that SNC is not subject to the Shareholder
Protection Act.) These Acts are designed to protect shareholders against
certain changes in control and to provide shareholders with the opportunity to
vote on whether to afford voting rights to certain shareholders.
The Shareholder Protection Act is a "fair price" statute that requires the
affirmative vote of 95% of the voting shares of a corporation for the adoption
of a business combination (including a merger) with another entity if the other
entity beneficially owns more than 20% of the voting shares of the corporation.
This vote is not required if the shareholders of the corporation receive a
specified minimum price for their shares as part of the business combination
and the shareholders receive a proxy statement for the purpose of soliciting
their approval for the business combination. The proxy statement must contain
the opinion of those directors
76
<PAGE>
not elected by the other entity as to the advisability of the business
combination and may include an opinion from an outside investment firm as to
the fairness of the transaction.
The Control Share Acquisition Act is triggered upon the acquisition by a
person of shares of voting stock of a North Carolina corporation that, when
added to all other shares beneficially owned by the person, would result in
that person holding one-fifth, one-third or a majority of the voting power in
the election of directors. Under the Control Share Acquisition Act, the shares
acquired that result in the crossing of any of these thresholds ("control
shares") have no voting rights until such rights are conferred by the
affirmative vote of the holders of a majority of all outstanding voting shares,
excluding those shares held by any person involved or proposing to be involved
in the acquisition of control shares, any officer of the corporation and any
employee of such corporation who is also a director of such corporation. If
voting rights are conferred on control shares, all shareholders of such
corporation have the right to require that their shares be redeemed at the
highest price paid per share by the acquiror for any control shares.
The aggregate effect of these provisions may be to delay or prevent attempts
by other corporations or groups to acquire control of a North Carolina
corporation without negotiation with its Board of Directors.
The Shareholder Protection Act and the Control Share Acquisition Act will not
apply to the Merger.
PREEMPTIVE RIGHTS
Neither the shareholders of SNC nor the shareholders of BB&T Financial have
preemptive rights. Thus, if additional shares of SNC Common Stock, SNC
Preferred Stock or BB&T Financial Common Stock were issued, holders of such
stock, to the extent they did not participate in such additional issuance of
shares, would own proportionately smaller interests in a larger amount of
outstanding shares of capital stock.
ASSESSMENT
All outstanding shares of SNC Common Stock are, and those to be issued
pursuant to the Agreement and the Plan of Merger will be, fully paid and
nonassessable. All outstanding shares of SNC Convertible Preferred Stock are
fully paid and nonassessable.
The shares of BB&T Financial Common Stock presently outstanding are fully
paid and nonassessable.
CONVERSION; REDEMPTION; SINKING FUND
Neither SNC Common Stock nor BB&T Financial Common Stock is convertible,
redeemable or entitled to any sinking fund.
LIQUIDATION RIGHTS
SNC. In the event of the liquidation, dissolution or winding-up of the
affairs of SNC, holders of outstanding shares of SNC Common Stock are entitled
to share, in proportion to their respective interests, in SNC's assets and
funds remaining after payment, or provision for payment, of all debts and other
liabilities of SNC. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of SNC, the holders of shares of the SNC Convertible
Preferred Stock will be entitled to receive out of the assets of SNC available
for distribution to shareholders, before any distribution is made to holders of
SNC Common Stock, liquidating distributions in the amount of $100 per share of
the SNC Convertible Preferred Stock (equivalent to $25 per Depositary Share),
plus accrued but unpaid dividends to, but excluding, the date of final
distribution, but the holders of the shares of the SNC Convertible Preferred
Stock will not be entitled to receive the liquidation price of such shares
until the liquidation preference of any other shares of SNC's capital stock
ranking senior to the SNC Convertible Preferred Stock with respect to rights
upon liquidation, dissolution or winding up shall have been paid (or a sum set
aside therefor sufficient to provide for payment) in full. No such senior
capital stock of SNC is outstanding, and the holders of the SNC Convertible
Preferred
77
<PAGE>
Stock have certain voting rights with respect to the issuance of any such
senior capital stock. See "--Voting Rights." If upon any voluntary or
involuntary liquidation, dissolution or winding up of SNC, the assets of SNC
shall be insufficient to make such full payments to holders of the SNC
Convertible Preferred Stock and any other SNC Preferred Stock ranking with
respect to rights upon liquidation, dissolution or winding up on a parity with
the SNC Convertible Preferred Stock, then such assets shall be distributed pro
rata among holders of the SNC Convertible Preferred Stock or any other such SNC
Preferred Stock. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of the SNC Convertible
Preferred Stock will not be entitled to any further participation in any
distribution of assets by SNC. Neither a consolidation or merger of SNC with or
into another corporation nor a merger of another corporation with or into SNC
nor a sale, lease or conveyance of all or any part of SNC's property or
business shall be considered a liquidation, dissolution, or winding up of SNC.
Because SNC is a bank and savings bank holding company, its rights, the
rights of its creditors and of its shareholders, including the holders of the
shares of the SNC Convertible Preferred Stock, to participate in the assets of
any subsidiary upon the latter's liquidation or recapitalization may be subject
to the prior claims of the subsidiary's creditors except to the extent that SNC
may itself be a creditor with recognized claims against the subsidiary and any
interests in the liquidation accounts established by savings associations or
savings banks acquired by SNC for the benefit of eligible account holders in
connection with conversion of such savings associations to stock form. The SNC
Board, without shareholder approval, may issue SNC Preferred Stock with
liquidation rights that may affect the amount of assets and funds remaining for
payment to holders of SNC Common Stock upon a liquidation of SNC.
BB&T Financial. In the event of liquidation, dissolution or winding up of
BB&T Financial, whether voluntary or involuntary, the holders of BB&T Financial
Common Stock would be entitled to share ratably in any of its net assets or
funds which are available for distribution to its shareholders after the
satisfaction of its liabilities or after adequate provision is made therefor,
subject to the rights of the holders of any preferred stock outstanding at the
time.
DIVIDENDS AND OTHER DISTRIBUTIONS
SNC. Unless the SNC Articles are amended to provide otherwise, SNC may issue
to the holders of shares of SNC Common Stock share dividends in SNC Common
Stock. If certain requirements are met, share dividends in shares of another
class or series may be issued to holders of SNC Common Stock. Additionally, the
holders of shares of SNC Common Stock will be entitled to receive such other
distributions as the SNC Board may declare; provided, however, no distributions
may be made if, after giving effect thereto: (i) SNC would not be able to pay
its debts as they become due in the ordinary course of business; or (ii) SNC's
total assets would be less than the sum of SNC's total liabilities plus the
amount that would be needed, if SNC were to be dissolved at the time of
distribution, to satisfy claims of holders of SNC Convertible Preferred Stock
and such shareholders which have preferential rights superior to the rights of
holders of SNC Common Stock.
Holders of shares of the SNC Convertible Preferred Stock are entitled to
receive, when and as declared by the SNC Board, out of assets of SNC legally
available for payment, an annual cash dividend of 6.75% per annum (equivalent
to $1.6875 per Depositary Share). Dividends on the SNC Convertible Preferred
Stock are cumulative from the date of issue and payable quarterly on February
15, May 15, August 15, and November 15 of each year commencing May 15, 1992, at
such annual rate. Dividends payable on the SNC Convertible Preferred Stock for
any period less than a full dividend period are computed on the basis of a 360-
day year consisting of twelve 30-day months. Each such dividend are payable to
holders of record as they appear on the stock register of SNC on such record
dates, not more than 60 days nor less than 10 days preceding the payment dates,
as fixed by the SNC Board. In the event that full cumulative dividends on the
SNC Convertible Preferred Stock have not been paid when due, SNC may not: (i)
declare or pay any dividends or make other distributions (other than: (A)
dividends payable in shares of SNC Common Stock
78
<PAGE>
or other capital stock of SNC ranking junior to the SNC Convertible Preferred
Stock with respect to the payment of dividends and upon liquidation,
dissolution or winding up; or (B) options, warrants or rights to subscribe for
or purchase such shares) on the SNC Common Stock or on any other capital stock
of SNC ranking junior to the SNC Convertible Preferred Stock with respect to
the payment of dividends; or (ii) purchase, redeem or otherwise acquire any
shares of SNC Convertible Preferred Stock (other than with funds previously
deposited in trust for the redemption of shares of SNC Convertible Preferred
Stock pursuant to any sinking fund) or any other shares of capital stock of SNC
ranking on a parity with or junior to the SNC Convertible Preferred Stock
(except by conversion into or exchange for capital stock of SNC ranking junior
to the SNC Convertible Preferred Stock as to payment of dividends and upon
liquidation, dissolution or winding up). In the event dividends on any shares
of SNC Convertible Preferred Stock are in arrears for six full quarterly
periods, whether or not consecutive, the holders of the SNC Convertible
Preferred Stock would be entitled to certain voting rights. See "--Voting
Rights." SNC is not in arrears on any dividends payable to the holders of the
SNC Convertible Preferred Stock.
Debt instruments to which SNC is subject contain provisions restricting its
payment of dividends. Under the most restrictive of these provisions, at June
30, 1994, approximately $222.4 million was available for the payment of
dividends on SNC's capital stock.
While SNC is not subject to the restrictions on dividends applicable to
national banks, the ability of SNC to pay distributions to the holders of SNC
Common Stock will depend to a large extent upon the amount of dividends SNBNC
and SNBSC, which are subject to the restrictions imposed by the National Bank
Act, and SNB Savings, which is subject to the restrictions imposed by the
regulations of the Administrator, pay to SNC. See "SUPERVISION AND REGULATION
OF SNC AND BB&T FINANCIAL--Limits on Dividends and Other Payments."
There can be no assurance as to the payment of dividends on shares of SNC
Common Stock in the future because such payment will depend upon the earnings
and financial condition of SNC and its Bank Subsidiaries, as well as other
related factors.
BB&T Financial. The holders of BB&T Financial Common Stock are entitled to
share ratably in dividends when and as declared by the BB&T Financial Board out
of funds legally available therefor. One of the principal sources of income to
BB&T Financial is dividends from its subsidiaries, which are subject to
regulatory restrictions. See "SUPERVISION AND REGULATION OF SNC AND BB&T
FINANCIAL--Limits on Dividends and Other Payments." BB&T Financial's Amended
Articles of Incorporation permit the BB&T Financial Board to issue nonvoting
preferred stock with terms set by the BB&T Financial Board, which terms may
include the right to receive dividends ahead of the holders of BB&T Financial
Common Stock. No shares of such preferred stock are presently outstanding.
SHAREHOLDER MEETINGS
SNC. Under the SNC Bylaws, special meetings of SNC shareholders may be called
by the Chief Executive Officer, President, Secretary or the SNC Board.
BB&T Financial. Under BB&T Financial's Bylaws, special meetings of the
shareholders may be called at any time by the Chairman of the Board, the
President or a majority of the BB&T Financial Board and shall be called by the
Chairman of the Board, the President or the Secretary upon the written request
of the holders of not less than one-tenth of all of the outstanding capital
stock of BB&T Financial entitled to vote at the meetings. Under BB&T
Financial's Bylaws, any action required or permitted to be taken at a meeting
of shareholders may be taken without a meeting if written consents setting
forth the action so taken are signed by all shareholders entitled to vote with
respect to such action.
79
<PAGE>
INDEMNIFICATION
Sections 55-8-50 through 55-8-58 of the NCBCA contain specific provisions
relating to indemnification of directors and officers of North Carolina
corporations. In general, the statute provides that: (i) a corporation must
indemnify a director or officer who is wholly successful in his defense of a
proceeding to which he is a party because of his status as such, unless limited
by the articles of incorporation; and (ii) a corporation may indemnify a
director or officer if he is not wholly successful in such defense, if it is
determined as provided in the statute that the director or officer meets a
certain standard of conduct, provided that when a director or officer is liable
to the corporation, the corporation may not indemnify him. The statute also
permits a director or officer of a corporation who is a party to a proceeding
to apply to the courts for indemnification, unless the articles of
incorporation provide otherwise, and the court may order indemnification under
certain circumstances set forth in the statute. The statute further provides
that a corporation may in its articles of incorporation or bylaws or by
contract or resolution provide indemnification in addition to that provided by
the statute, subject to certain conditions set forth in the statute.
The SNC Bylaws and BB&T Financial's Bylaws provide for the indemnification of
directors and executive officers against liabilities arising out of such
person's status as such, excluding any liability relating to activities that
were at the time known or believed by such person to be clearly in conflict
with the best interests of SNC or BB&T Financial, respectively.
DIRECTOR LIABILITY
The NCBCA provides that in suits brought by shareholders or by the
corporation, the liability of a director is limited by statute except in cases
of (i) acts or omissions that the director knew or believed were clearly in
conflict with the best interests of the corporation, (ii) unlawful
distributions or (iii) any transaction providing the director an improper
personal benefit. The statutory limit on liability can be, and in the case of
SNC and BB&T Financial has been, reduced by the shareholders to zero.
SUPERVISION AND REGULATION OF SNC AND BB&T FINANCIAL
Bank holding companies and banks are extensively regulated entities. The
following description briefly discusses certain provisions of federal and state
laws and certain regulations and proposed regulations applicable to SNC, BB&T
Financial and the Bank Subsidiaries and the potential impact of such provisions
on SNC, BB&T Financial, the Bank Subsidiaries, the Continuing Corporation and
the Continuing Banks. To the extent that the following information describes
statutory or regulatory provisions (or such provisions in proposed form), it is
qualified in its entirety by reference to the particular statutory and
regulatory provisions.
BANK HOLDING COMPANIES
As bank holding companies registered under the BHCA, SNC and BB&T Financial
are subject to regulation by the Federal Reserve Board. The Federal Reserve
Board has jurisdiction under the BHCA to approve any bank or nonbank
acquisition, merger or consolidation proposed by a bank holding company. The
BHCA generally limits the activities of a bank holding company and its
subsidiaries to that of banking, managing or controlling banks, or any other
activity which is so closely related to banking or to managing or controlling
banks as to be a proper incident thereto.
The BHCA currently prohibits the Federal Reserve Board from approving an
application from a bank holding company to acquire shares of a bank located
outside the state in which the operations of the holding company's banking
subsidiaries are principally conducted, unless such an acquisition is
specifically authorized by statute of the state in which the bank whose shares
are to be acquired is located. However, under recently enacted federal
legislation, the restriction on interstate acquisitions will be abolished
effective September 1995, and thereafter, bank holding companies from any state
will be able to acquire banks and bank holding companies located in any other
state, subject to certain conditions, including nationwide and state imposed
80
<PAGE>
concentration limits. Banks also will be able to branch across state lines by
acquisition, merger or de novo, effective June 1, 1997 (unless state law would
permit such interstate branching at an earlier date), provided certain
conditions are met, including that applicable state law must expressly permit
such interstate branching.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by federal law and
regulatory policy that are designed to reduce potential loss exposure to the
depositors of such depository institutions and to the FDIC insurance fund in
the event the depository institution becomes in danger of default or is in
default. For example, under a policy of the Federal Reserve Board with respect
to bank holding company operations, a bank holding company is required to serve
as a source of financial strength to its subsidiary depository institutions and
to commit resources to support such institutions in circumstances where it
might not do so absent such policy. In addition, the "cross-guarantee"
provisions of federal law require insured depository institutions under common
control to reimburse the FDIC for any loss suffered or reasonably anticipated
by either the Savings Association Insurance Fund ("SAIF") or the Bank Insurance
Fund ("BIF") as a result of the default of a commonly controlled insured
depository institution or for any assistance provided by the FDIC to a commonly
controlled insured depository institution in danger of default. The FDIC may
decline to enforce the cross-guarantee provisions if it determines that a
waiver is in the best interest of the SAIF or the BIF or both. The FDIC's claim
for damages is superior to claims of stockholders of the insured depository
institution or its holding company but is subordinate to claims of depositors,
secured creditors and holders of subordinated debt (other than affiliates) of
the commonly controlled insured depository institutions.
The FDIA also provides that amounts received from the liquidation or other
resolution of any insured depository institution by any receiver must be
distributed (after payment of secured claims) to pay the deposit liabilities of
the institution prior to payment of any other general or unsecured senior
liability, subordinated liability, general creditor or stockholder. This
provision would give depositors a preference over general and subordinated
creditors and stockholders in the event a receiver is appointed to distribute
the assets of any of the Bank Subsidiaries.
SNC and BB&T Financial are registered under the bank holding company laws of
North Carolina and South Carolina. Accordingly, SNC and its subsidiaries and
BB&T Financial and its subsidiaries are subject to regulation and supervision
by the NC Commissioner and the South Carolina Board.
CAPITAL REQUIREMENTS
The Federal Reserve Board, the Office of the Comptroller of Currency (the
"OCC") and the FDIC have issued substantially similar risk-based and leverage
capital guidelines applicable to United States banking organizations. In
addition, those regulatory agencies may from time to time require that a
banking organization maintain capital above the minimum levels whether because
of its financial condition or actual or anticipated growth. Under the risk-
based capital requirements of these federal bank regulatory agencies, SNC, BB&T
Financial and each of the Bank Subsidiaries are required to maintain a minimum
ratio of total capital to risk-weighted assets of at least 8%. At least half of
the total capital is required to be "Tier 1 capital", which consists
principally of common and certain qualifying preferred shareholders' equity,
less certain intangibles and other adjustments. The remainder ("Tier 2
capital") consists of a limited amount of subordinated and other qualifying
debt (including certain hybrid capital instruments) and a limited amount of the
general loan loss allowance. The Tier 1 and total capital to risk-weighted
asset ratios of SNC and BB&T Financial as of June 30, 1994 were 12.87% and
14.15%, and 11.93% and 13.18% respectively, exceeding the minimums required.
In addition, each of the federal regulatory agencies has established a
minimum leverage capital ratio (Tier 1 capital to average tangible assets).
These guidelines provide for a minimum leverage capital ratio of 3% for banks
and bank holding companies that meet certain specified criteria, including that
they have the highest regulatory examination rating and are not contemplating
significant growth or expansion. All other
81
<PAGE>
institutions are expected to maintain a leverage ratio of at least 100 to 200
basis points above the minimum. The leverage ratios of SNC and BB&T Financial
as of June 30, 1994, were 7.17% and 7.74%, respectively, which are above the
minimum requirements. The guidelines also provide that banking organizations
experiencing internal growth or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum supervisory
levels, without significant reliance on intangible assets.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
requires each federal banking agency, to revise its risk-based capital
standards to ensure that those standards take adequate account of interest rate
risk, concentration of credit risk and the risks of nontraditional activities,
as well as reflect the actual performance and expected risk of loss on multi-
family mortgages. The Federal Reserve Board, the FDIC and the OCC have issued a
joint advance notice of proposed rulemaking, and have issued a revised
proposal, soliciting comments on a proposed framework for implementing the
interest rate risk component of the risk-based capital guidelines. Under the
proposal, an institution's assets, liabilities, and off-balance sheet positions
would be weighed by risk factors that approximate the instruments' price
sensitivity to a 100 basis point change in interest rates. Institutions with
interest rate risk exposure in excess of a threshold level would be required to
hold additional capital proportional to that risk. The Federal Reserve Board,
the FDIC, the OCC and the Office of Thrift Supervision also issued a joint
notice of proposed rulemaking soliciting comments on a proposed revision to the
risk-based capital guidelines to take account of concentration of credit risk
and the risk of non-traditional activities. The proposal would amend each
agency's risk-based capital standards by explicitly identifying concentration
of credit risk and the risk arising from non-traditional activities, as well as
an institution's ability to manage those risks, as important factors to be
taken into account by the agency in assessing an institution's overall capital
adequacy. The proposal was adopted without modification as a final rule by the
Federal Reserve Board on August 3, 1994, and by the FDIC on August 9, 1994. The
OCC has not yet acted on the proposal. Publication of a final interagency rule
is subject to the completion of each agency's approval process. The final rule
will not become effective until 30 days after publication. SNC and BB&T
Financial do not expect the final rule to have a material impact on their
capital requirements.
CAPITAL RATIOS
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL COMBINED COMBINED WITH
------------------------- WITH SNC SNC, BB&T
REGULATORY BB&T AND BB&T FINANCIAL AND
MINIMUM SNC FINANCIAL COMMERCE FINANCIAL (3),(4) COMMERCE (4)
---------- ----- --------- -------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Risk-based capital (1)
Tier 1................ 4.00% 12.87% 11.93% 10.32% 11.77% 11.71%
Total................. 8.00 14.15 13.18 12.71 13.03 13.02
Leverage (2)............ 3.00 7.17 7.74 6.61 7.14 7.12
Common shareholders'
equity to total assets. N/A 6.31 8.14 6.73 6.97 6.97
Total shareholders' eq-
uity to total assets... N/A 7.21 8.14 6.73 7.38 7.36
</TABLE>
- --------
(1) The pro forma risk-based capital ratios have been computed using pro forma
combined historical data for SNC, BB&T Financial and Commerce at June 30,
1994.
(2) Leverage ratio is defined as Tier 1 capital as a percentage of quarterly
average adjusted assets.
(3) Calculated in accordance with the Federal Reserve Board's capital rules,
with adjustment for net unrealized depreciation on securities available for
sale.
(4) Certain non-recurring charges will be recorded in connection with the
Merger and have been reflected in the pro forma ratios.
LIMITS ON DIVIDENDS AND OTHER PAYMENTS
SNC and BB&T Financial are each legal entities separate and distinct from
their respective subsidiary institutions. Most of the revenues of SNC and BB&T
Financial result from dividends paid to SNC and BB&T Financial by their
respective Bank Subsidiaries. There are various legal limitations applicable to
the payment
82
<PAGE>
of dividends to SNC and BB&T Financial as well as the payment of dividends by
SNC and BB&T Financial to their respective shareholders.
Under federal law, the Bank Subsidiaries may not, subject to certain limited
exceptions, make loans or extensions of credit to, or investments in the
securities of, SNC or BB&T Financial, as the case may be, or take securities of
SNC or BB&T Financial, as the case may be, as collateral for loans to any
borrower. The Bank Subsidiaries are also subject to collateral security
requirements for any loans or extensions of credit permitted by such
exceptions.
The SNC Bank Subsidiaries are subject to various statutory restrictions on
their ability to pay dividends to SNC. Under OCC regulations, at June 30, 1994,
SNBNC could have paid additional dividends to SNC of $49.7 million without
obtaining prior approval of the OCC. SNBSC would be required to obtain such
approval to pay additional dividends to SNC at such date. Under regulations of
the Administrator, SNB Savings could have paid additional dividends to SNC of
$343,000. The payment of dividends by SNC and the SNC Subsidiaries may also be
limited by other factors, such as requirements to maintain adequate capital
above regulatory guidelines.
Under North Carolina law, North Carolina-chartered banks, such as BB&T-NC,
are subject to legal limitations on the amount of dividends they are permitted
to pay. Prior approval of the NC Commissioner is required if the total of all
dividends declared by BB&T-NC in any calendar year exceeds its net profits (as
defined by statute) for that year combined with its retained net profits (as
defined by statute) for the preceding two calendar years, less any required
transfers to surplus. South Carolina-chartered banks, such as BB&T-SC,
Lexington and Community, are required by regulation to obtain the prior written
approval of the SC Board to pay any cash dividend.
Under the FDIA, insured depository institutions, such as the Bank
Subsidiaries, are prohibited from making capital distributions, including the
payment of dividends, if, after making such distribution, the institution would
become "undercapitalized" (as such term is used in the statute). Based on the
Bank Subsidiaries' current financial condition, neither SNC nor BB&T Financial
expects that this provision will have any impact on its ability to obtain
dividends from its Bank Subsidiaries.
BANKS
The SNC Bank Subsidiaries are supervised and regularly examined by the OCC
and the BB&T Bank Subsidiaries are supervised and regularly examined by the
FDIC, the NC Commissioner and the SC Board. SNB Savings is supervised and
regularly examined by the FDIC and the Administrator. The various laws and
regulations administered by the regulatory agencies affect corporate practices,
such as payment of dividends, incurring debt and acquisition of financial
institutions and other companies, and affect business practices, such as
payment of interest on deposits, the charging of interest on loans, types of
business conducted and location of offices.
The Bank Subsidiaries also are subject to the requirements of the CRA. The
CRA imposes on financial institutions an affirmative and ongoing obligation to
meet the credit needs of their local communities, including low- and moderate-
income neighborhoods, consistent with the safe and sound operation of those
institutions. Each financial institution's efforts in meeting community credit
needs currently are evaluated as part of the examination process pursuant to
twelve assessment factors. These factors also are considered in evaluating
mergers, acquisitions and applications to open a branch or facility.
As a result of a Presidential initiative, each of the four federal banking
agencies published a notice of proposed rulemaking in December 1993, and as a
result of extensive public comment, published a revised notice in October 1994
to amend the CRA regulations. Both the original and revised proposal would
replace the current CRA assessment system with a new evaluation system that
would rate institutions based on their
83
<PAGE>
actual performance (rather than efforts) in meeting community credit needs.
Under the revised proposal, each institution would be evaluated based on the
degree to which it is providing loans (the lending test), branches and other
services (the service test) and investments (the investment test) to low- and
moderate-income areas in the communities it serves, based on the communities'
demographics, characteristics and needs, the institution's capacity, product
offerings and business strategy, and the performance of the institution and
similarly situated institutions. Each depository institution would have to
report to its federal supervisory agency and make available to the public data
on the geographic distribution of its loan applications, denials, originations
and purchases. Institutions would continue to receive one of four composite
ratings: Outstanding, Satisfactory, Needs to Improve or Substantial
Noncompliance. For the lending, services and investment tests, however, the
Satisfactory category would be divided into High Satisfactory and Low
Satisfactory. An institution that received a composite rating of Substantial
Noncompliance could be subject to enforcement action. SNC and BB&T Financial
each are studying the proposal and determining whether the regulations, if
enacted in their revised proposed form, would require changes to the CRA action
plans of the Bank Subsidiaries.
As institutions with deposits insured by the BIF, SNBNC, SNBSC, BB&T, BB&T-
SC, Lexington and Community also are subject to insurance assessments imposed
by the FDIC. The FDIC has implemented a risk-based assessment schedule,
imposing assessments ranging from 0.23% to 0.31% of an institution's average
assessment base. The actual assessment to be paid by each BIF member is based
on the institution's assessment risk classification, which is determined based
on whether the institution is considered "well capitalized," "adequately
capitalized" or "undercapitalized," as such terms have been defined in
applicable federal regulations, and whether such institution is considered by
its supervisory agency to be financially sound or to have supervisory concerns.
Based on the current financial condition and capital levels of the Bank
Subsidiaries (all being "well-capitalized"), SNC and BB&T Financial,
respectively, do not expect that the current BIF risk-based assessment schedule
will have a material adverse effect on the earnings of the Bank Subsidiaries.
Because a portion of the Bank Subsidiaries deposits are treated as being
insured by the SAIF, however, SNC's and BB&T Financial's future deposit
insurance premium expenses may be affected by changes in the SAIF assessment
rate. Under current law, the SAIF assessment is determined pursuant to the same
risk-based assessment system that applies to BIF-insured institutions. In
addition, current federal law provides that the SAIF assessment rate may not be
less than 0.18% from January 1, 1994 through December 31, 1997. After December
31, 1997, the SAIF assessment rate must be a rate determined by the FDIC to be
appropriate to increase the SAIF's reserve ratio to 1.25% of insured deposits
or such higher percentage as the FDIC determines to be appropriate, but the
assessment rate may not be less than 0.15%. As of June 30, 1994, 49.0% of the
consolidated deposits of SNC and 39.6% of the consolidated deposits of BB&T
Financial were SAIF-insured and subject to the SAIF assessment rate.
OTHER SAFETY AND SOUNDNESS REGULATIONS
The federal banking agencies have broad powers under current federal law to
take prompt corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the institutions
in question are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized," as such terms are defined under uniform regulations defining
such capital levels issued by each of the federal banking agencies.
In addition, FDIC regulations require that management report on its
institution's responsibility for preparing financial statements, and
establishing and maintaining an internal control structure and procedures for
financial reporting and compliance with designated laws and regulations
concerning safety and soundness; and that independent auditors attest to and
report separately on assertions in management's reports concerning compliance
with such laws and regulations, using FDIC-approved audit procedures.
The FDIA also requires each of the federal banking agencies to develop
regulations addressing certain safety and soundness standards for insured
depository institutions and depository institution holding
84
<PAGE>
companies, including operational and managerial standards, asset quality,
earnings and stock valuation standards, as well as compensation standards (but
not dollar levels of compensation). Each of the federal banking agencies have
issued a joint notice of proposed rulemaking, which requested comment on the
implementation of these standards. The proposed rule sets forth general
operational and managerial standards in the areas of internal controls,
information systems and internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth and compensation, fees and
benefits. The proposal contemplates that each federal agency would determine
compliance with these standards through the examination process, and if
necessary to correct weaknesses, require an institution to file a written
safety and soundness compliance plan. SNC and BB&T Financial have not yet
determined the effect that the proposed rule would have on their respective
operations and the operations of their depository institution subsidiaries if
it is enacted substantially as proposed.
EXPERTS
The consolidated financial statements and exhibit of SNC and its subsidiaries
as of December 31, 1993 and 1992, and for each of the years in the three-year
period ended December 31, 1993, included in SNC's Current Report on Form 8-K,
dated September 26, 1994, and incorporated by reference in this Joint Proxy
Statement/Prospectus, to the extent and for the periods indicated in their
reports, have been audited by Arthur Andersen LLP and KPMG Peat Marwick LLP,
independent public accountants, and are incorporated herein by reference upon
the authority of said firms as experts in giving said reports.
The consolidated financial statements of BB&T Financial and its subsidiaries
included in BB&T Financial's Annual Report on Form 10-K for the year ended
December 31, 1993, incorporated herein by reference have been incorporated by
reference in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. Such financial
statements have been restated in BB&T Financial's Current Report on Form 8-K
dated August 31, 1994.
The consolidated financial statements of BB&T Financial and its subsidiaries
which are incorporated herein by reference from BB&T Financial's Current Report
on Form 8-K dated August 31, 1994, which restates the consolidated financial
statements that are incorporated by reference from BB&T Financial's Annual
Report on Form 10-K for the year ended December 31, 1993, to reflect the
acquisition of LSB by BB&T Financial during 1994, have been incorporated by
reference herein in reliance upon the reports of KPMG Peat Marwick LLP and
Donald G. Jones and Company, P.A., independent certified public accountants,
incorporated by reference herein, and upon the authority of said firms as
experts in accounting and auditing.
The financial statements of Commerce as of December 31, 1993, and for the
one-year period ended December 31, 1993, included in SNC's Current Report on
Form 8-K dated November 14, 1994, and incorporated by reference in this Joint
Proxy Statement/Prospectus have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated by reference. Such financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The financial statements of Commerce as of December 31, 1992, and for each of
the two years in the period ended December 31, 1992, included in SNC's Current
Report on Form 8-K dated November 14, 1994, and incorporated by reference in
this Joint Proxy Statement/Prospectus have been included herein in reliance on
the report of Coopers & Lybrand, independent accountants, and are incorporated
herein by reference upon the authority of that firm as experts in auditing and
accounting.
The financial statements of FSB and subsidiaries as of June 30, 1993, and
1992, and for each of the years in the three-year period ended June 30, 1993,
included in SNC's Current Report on Form 8-K Amendment
85
<PAGE>
No. 1, dated April 15, 1994, have been incorporated by reference in this Joint
Proxy Statement/Prospectus, in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference herein
upon the authority of said firm as experts in accounting and auditing.
LEGAL OPINIONS
The legality of the SNC Common Stock to be issued in the Merger will be
passed on for SNC by Hunton & Williams, Richmond, Virginia.
Hunton & Williams, counsel for SNC, will deliver opinions to SNC and BB&T
Financial, respectively, concerning certain federal income tax consequences of
the Merger. See "THE MERGER--Certain Federal Income Tax Consequences."
SHAREHOLDER PROPOSALS
Any proposals by SNC shareholders to be presented at SNC's 1995 Annual
Meeting of Shareholders must be received by SNC no later than November 17,
1994, in order to be included in SNC's proxy materials relating to the meeting.
Any proposals by BB&T Financial shareholders to be presented at BB&T
Financial's 1995 Annual Meeting of Shareholders, assuming that the Merger is
not yet consummated, must have been received by BB&T Financial no later than
November 14, 1994, in order to be included in BB&T Financial's proxy materials
relating to the meeting. If the Merger has been effected, any proposals by
Continuing Corporation shareholders to be presented at the Continuing
Corporation's 1995 Annual Meeting of Shareholders must be received by SNC
(which would be the Continuing Corporation) no later than November 17, 1994, in
order to be included in the Continuing Corporation's proxy materials relating
to the meeting. Any such proposals shall conform to the requirements of the
proxy rules adopted under the Exchange Act.
OTHER MATTERS
The SNC Board does not intend to bring any matter before the SNC Special
Meeting other than as specifically set forth in the Notice of Special Meeting
of Shareholders, nor does it know of any matter to be brought before the SNC
Special Meeting by others. If, however, any other matters properly come before
the Special Meeting, it is the intention of the proxyholders to vote such proxy
in accordance with the decision of a majority of the SNC Board.
The BB&T Financial Board does not intend to bring any matter before the BB&T
Financial Special Meeting other than as specifically set forth in the Notice of
Special Meeting of Shareholders, nor does it know of any matter to be brought
before the BB&T Financial Special Meeting by others. If, however, any other
matters properly come before the BB&T Financial Special Meeting, it is the
intention of the proxyholders to vote such proxy in accordance with the
decision of a majority of the BB&T Financial Board.
86
<PAGE>
ANNEXES
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Annex I--Agreement...................................................... I-1
Annex II--Plan of Merger................................................ II-1
Annex III-A--Opinion of Lehman Brothers................................. III-A-1
Annex III-B--Opinion of Wheat........................................... III-B-1
Annex III-C--Opinion of Merrill Lynch................................... III-C-1
Annex IV-A--BB&T Financial Option Agreement............................. IV-A-1
Annex IV-B--SNC Option Agreement........................................ IV-B-1
Annex V--Article 13 of NCBCA............................................ V-1
</TABLE>
87
<PAGE>
ANNEX I
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
BB&T FINANCIAL CORPORATION
AND
SOUTHERN NATIONAL CORPORATION
OCTOBER 22, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 1. DEFINITIONS................................................... I-2
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SNC......................... I-4
2.1. Capital Structure of SNC...................................... I-4
2.2. Organization, Standing and Authority of SNC................... I-4
Ownership of the SNC Subsidiaries; Capital Structure of the
2.3. SNC Subsidiaries.............................................. I-5
Organization, Standing and Authority of the SNC Subsidiaries
2.4. .............................................................. I-5
2.5. Authorized and Effective Agreement............................ I-5
2.6. SEC Documents; Regulatory Filings............................. I-6
2.7. Financial Statements; Books and Records; Minute Books......... I-6
2.8. Material Adverse Change....................................... I-6
2.9. Absence of Undisclosed Liabilities............................ I-6
2.10. Properties.................................................... I-6
2.11. Loans......................................................... I-7
2.12. Allowance for Loan Losses..................................... I-7
2.13. Tax Matters................................................... I-7
2.14. Employee Benefit Plans........................................ I-8
2.15. Certain Contracts............................................. I-9
2.16. Other Real Estate Owned....................................... I-9
2.17. Legal Proceedings............................................. I-10
2.18. Compliance with Laws.......................................... I-10
2.19. Brokers and Finders........................................... I-10
2.20. Insurance..................................................... I-11
2.21. Repurchase Agreements......................................... I-11
2.22. Deposit Insurance; Federal Reserve Membership................. I-11
2.23. Administration of Trust Accounts.............................. I-11
2.24. Environmental Matters......................................... I-11
2.25. Certain Information........................................... I-13
2.26. Information in Applications................................... I-13
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BB&T........................ I-13
3.1. Capital Structure of BB&T..................................... I-13
3.2. Organization, Standing and Authority of BB&T.................. I-13
Ownership of the BB&T Subsidiaries; Capital Structure of the
3.3. BB&T Subsidiaries............................................. I-14
Organization, Standing and Authority of the BB&T
3.4. Subsidiaries.................................................. I-14
3.5. Authorized and Effective Agreement............................ I-14
3.6. SEC Documents; Regulatory Filings............................. I-15
3.7. Financial Statements; Books and Records; Minute Books......... I-15
3.8. Material Adverse Change....................................... I-15
3.9. Absence of Undisclosed Liabilities............................ I-15
3.10. Properties.................................................... I-16
3.11. Loans......................................................... I-16
3.12. Allowance for Loan Losses..................................... I-16
3.13. Tax Matters................................................... I-16
3.14. Employee Benefit Plans........................................ I-17
3.15. Certain Contracts............................................. I-18
3.16. Other Real Estate Owned....................................... I-19
3.17. Legal Proceedings............................................. I-19
3.18. Compliance with Laws.......................................... I-19
3.19. Brokers and Finders........................................... I-20
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
3.20. Insurance..................................................... I-20
3.21. Repurchase Agreements......................................... I-20
3.22. Deposit Insurance............................................. I-20
3.23. Administration of Trust Accounts.............................. I-20
3.24. Environmental Matters......................................... I-21
3.25. Certain Information........................................... I-22
3.26. Information in Applications................................... I-22
ARTICLE 4. COVENANTS..................................................... I-22
4.1. Shareholders' Meetings........................................ I-22
4.2. Proxy Statement; Registration Statement....................... I-22
4.3. Applications.................................................. I-23
4.4. Best Efforts.................................................. I-23
4.5. Investigation and Confidentiality............................. I-23
4.6. Press Releases................................................ I-24
4.7. Covenants of SNC.............................................. I-24
4.8. Covenants of BB&T............................................. I-25
4.9. Headquarters.................................................. I-27
4.10. Dividends Prior to the Effective Date......................... I-27
4.11. Closing; Certificate of Merger................................ I-27
4.12. Affiliates.................................................... I-27
4.13. Board of Directors............................................ I-28
4.14. Management; Employees; Employee Benefits...................... I-29
4.15. Indemnifications.............................................. I-30
ARTICLE 5. CONDITIONS PRECEDENT.......................................... I-30
5.1. Conditions Precedent--Mutual.................................. I-30
5.2. Conditions Precedent--BB&T.................................... I-31
5.3. Conditions Precedent--SNC..................................... I-32
ARTICLE 6. TERMINATION, WAIVER AND AMENDMENT............................. I-32
6.1. Termination................................................... I-32
6.2. Effect of Termination......................................... I-33
6.3. Survival of Representations, Warranties and Covenants......... I-34
6.4. Waiver........................................................ I-34
6.5. Amendment or Supplement....................................... I-34
ARTICLE 7. MISCELLANEOUS................................................. I-34
7.1. Expenses...................................................... I-34
7.2. Entire Agreement.............................................. I-35
7.3. No Assignment................................................. I-35
7.4. Notices....................................................... I-35
7.5. Captions...................................................... I-36
7.6. Counterparts.................................................. I-36
7.7. Governing Law................................................. I-36
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION ("Reorganization Agreement" or
"Agreement") dated as of July 29, 1994, and amended and restated as of October
22, 1994, among BB&T FINANCIAL CORPORATION ("BB&T"), a North Carolina
corporation having its principal executive offices at 223 West Nash Street,
Wilson, North Carolina 27893 and SOUTHERN NATIONAL CORPORATION ("SNC"), a
North Carolina corporation having its principal executive offices at 500 North
Chestnut Street, Lumberton, North Carolina 28358.
WITNESSETH
WHEREAS, the parties hereto desire to combine their respective businesses;
and
WHEREAS, in furtherance of the combination of their respective businesses,
the parties hereto desire that BB&T shall be merged ("Merger") with and into
SNC, under the name "Southern National Corporation" (SNC as it will exist from
and after the Effective Date being referred to herein as the "Continuing
Corporation"), and that all of the issued and outstanding shares of common
stock of BB&T (other than shares held by dissenting shareholders and
fractional share interests) shall be converted into and exchanged for shares
of common stock of the Continuing Corporation and all outstanding options to
acquire common stock of BB&T shall be converted into options to acquire common
stock of SNC and all of the issued and outstanding shares of capital stock of
SNC shall continue to be issued and outstanding shares of capital stock of the
Continuing Corporation, all pursuant to a Plan of Merger substantially in the
form attached hereto as Annex A ("Plan of Merger"); and
WHEREAS, in furtherance of the combination of their respective businesses,
the parties hereto contemplate that, as soon as practicable after the Merger,
Southern National Bank of North Carolina ("SNBNC"), a wholly owned subsidiary
of SNC, shall be merged ("North Carolina Bank Merger") with and into Branch
Banking and Trust Company ("BB&T-NC"), a wholly owned subsidiary of BB&T,
under the name "Branch Banking and Trust Company" (BB&T-NC as it will exist
from and after the consummation of the North Carolina Bank Merger being
referred to herein as the "NC Continuing Bank"); and
WHEREAS, in furtherance of the combination of their respective businesses,
the parties hereto contemplate that as soon as practicable after the Merger,
Southern National Bank of South Carolina ("SNBSC"), a wholly owned subsidiary
of SNC, shall be merged ("South Carolina Bank Merger") with and into Branch
Banking and Trust Company of South Carolina ("BB&T-SC"), an indirect wholly
owned subsidiary of BB&T, under the name "Branch Banking and Trust Company of
South Carolina" (BB&T-SC as it will exist from and after the consummation of
the South Carolina Bank Merger being referred to herein as the "SC Continuing
Bank"); and
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, the parties to the Reorganization Agreement have decided to amend
and restate the Reorganization Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties hereto do hereby agree as follows:
I-1
<PAGE>
ARTICLE 1.
Definitions
1.1. "Bank Holding Company Act" shall mean the Bank Holding Company Act of
1956, as amended.
1.2. "Bank Merger Agreements" shall have the meaning set forth in Section 4.6
hereof.
1.3. "Bank Mergers" shall mean the North Carolina Bank Merger and the South
Carolina Bank Merger.
1.4. "BB&T Common Stock" shall have the meaning set forth in Section 3.1.
1.5. "BB&T DRP" shall mean BB&T's Dividend Reinvestment and Shareholders
Savings Service.
1.6. "BB&T ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, that together with BB&T or any BB&T Subsidiary would be deemed a
"single employer" within the meaning of Section 4001(b) of ERISA.
1.7. "BB&T Financial Statements" shall mean (i) the consolidated balance
sheets of BB&T as of December 31, 1993 and 1992 and the related consolidated
statements of income, cash flows and changes in shareholders' equity (including
related notes, if any) for each of the three years ended December 31, 1993,
1992 and 1991 as filed by BB&T in SEC Documents and (ii) the consolidated
balance sheets of BB&T and related consolidated statements of income, cash
flows and changes in shareholders' equity (including related notes, if any) as
filed by BB&T in SEC Documents with respect to periods ended subsequent to
December 31, 1993.
1.8. "BB&T Option Agreement" shall mean the Stock Option Agreement dated as
of the date hereof between BB&T and SNC with regard to BB&T Common Stock which
shall be executed immediately after execution of this Reorganization Agreement.
1.9. "BB&T Preferred Stock" shall have the meaning set forth in Section 3.1.
1.10. "BB&T Subsidiary" shall have the meaning set forth in Section 3.3.
1.11. "Closing Date" shall mean the date specified pursuant to Section 4.11
hereof as the date on which the parties hereto shall close the transactions
contemplated herein.
1.12. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.13. "Commission" shall mean the Securities and Exchange Commission.
1.14. "Communication" shall have the meaning set forth in Section 2.24(e)(i).
1.15. "Continuing Corporation Common Stock" shall mean SNC Common Stock from
and after the Effective Date.
1.16. "Effective Date" shall mean the date specified pursuant to Section 4.11
hereof as the effective date of the Merger.
1.17. "Environmental Claim" shall have the meaning set forth in Section
2.24(e)(ii).
1.18. "Environmental Laws" shall have the meaning set forth in Section
2.24(e)(iii).
1.19. "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
1.20. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
I-2
<PAGE>
1.21. "FDIA" shall mean the Federal Deposit Insurance Act, as amended.
1.22. "FDIC" shall mean the Federal Deposit Insurance Corporation.
1.23. "Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
1.24. "FRB Richmond" shall mean the Federal Reserve Bank of Richmond.
1.25. "Materials of Environmental Concern" shall have the meaning set forth
in Section 2.24(e)(iv).
1.26. "OREO" shall mean real and personal property assets acquired as a
result of foreclosure, deeded in lieu of foreclosure or any other method in
satisfaction of indebtedness.
1.27. "PBGC" shall mean the Pension Benefit Guaranty Corporation.
1.28. "Previously Disclosed" shall mean disclosed in (i) an SEC Document
delivered by one party to the other on or prior to the execution of this
Reorganization Agreement or (ii) a letter from the party delivered and dated
not later than August 15, 1994 making such disclosure specifically referring to
this Agreement and delivered to the other party, provided that such letter (x)
is not materially inconsistent with a letter delivered to the other party and
dated on or prior to the date of this Agreement ("Initial Letter") and (y) does
not by its contents demonstrate that the Initial Letter contained a material
omission or misstatement. Any matter included, whether aggregated or not, in
SNC Financial Statements or BB&T Financial Statements, as the case may be,
shall be deemed to be Previously Disclosed.
1.29. "Proxy Statement" shall mean the joint proxy statement/prospectus (or
similar documents) together with any supplements thereto sent to the
shareholders of BB&T and/or SNC to solicit their votes in connection with this
Agreement and the Plan of Merger.
1.30. "Registration Statement" shall mean the registration statement with
respect to the Continuing Corporation Common Stock to be issued in connection
with the Merger as declared effective by the Commission under the Securities
Act.
1.31. "Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock.
1.32. "SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by a party hereto pursuant to the Securities
Laws.
1.33. "Securities Act" shall mean the Securities Act of 1933, as amended.
1.34. "Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of
1940, as amended; the Trust Indenture Act of 1939, as amended; and the rules
and regulations of the Commission promulgated thereunder.
1.35. "SNC Common Stock" shall have the meaning set forth in Section 2.1.
1.36. "SNC DRP" shall mean SNC's Dividend Reinvestment Plan.
1.37. "SNC ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, that together with SNC or any SNC Subsidiary would be deemed a
"single employer" within the meaning of Section 4001(b) of ERISA.
1.38. "SNC Financial Statements" shall mean (i) the consolidated balance
sheets of SNC as of December 31, 1993 and 1992 and the related consolidated
statements of income, cash flows and changes in shareholders' equity (including
related notes, if any) for each of the three years ended December 31, 1993,
1992 and 1991
I-3
<PAGE>
as filed by SNC in SEC Documents and (ii) the consolidated balance sheets of
SNC and related consolidated statements of income, cash flows and changes in
shareholders' equity (including related notes, if any) as filed by SNC in SEC
Documents with respect to periods ended subsequent to December 31, 1993.
1.39. "SNC Option Agreement" shall mean the Stock Option Agreement dated as
of even date herewith between SNC and BB&T with regard to SNC Common Stock,
which shall be executed immediately after execution of this Reorganization
Agreement.
1.40. "SNC Preferred Stock" shall have the meaning set forth in Section 2.1.
1.41. "SNC Series A Preferred Stock" shall have the meaning set forth in
Section 2.1.
1.42. "SNC Subsidiary" shall have the meaning set forth in Section 2.3.
1.43. "State Boards" shall mean the North Carolina State Banking Commission,
the Savings Institutions Division of the North Carolina Department of Commerce,
the Bureau of Financial Institutions of the Virginia Corporation Commission and
the South Carolina State Board of Financial Institutions.
Other terms used herein are defined in the preamble and the recitals to this
Reorganization Agreement.
ARTICLE 2.
Representations and Warranties of SNC
SNC hereby represents and warrants to BB&T as follows:
2.1. CAPITAL STRUCTURE OF SNC
The authorized capital stock of SNC consists of (i) 120,000,000 shares of
common stock, par value $5.00 per share ("SNC Common Stock"), of which
43,385,610 shares were issued and outstanding and no shares were held in
treasury as of June 30, 1994; and (ii) 5,000,000 shares of preferred stock,
$5.00 par value ("SNC Preferred Stock"), of which 770,000 shares were
designated as 6 3/4% Cumulative Convertible Preferred Stock, Series A ("SNC
Series A Preferred Stock") and were issued and outstanding as of June 30, 1994.
All outstanding shares of SNC Common Stock have been duly authorized and
validly issued, and are fully paid and nonassessable. There are no Rights
authorized, issued or outstanding with respect to the capital stock of SNC and
no written or oral plans, understandings, commitments or contracts to which SNC
or, to SNC's knowledge, any of its affiliates is subject with respect to the
issuance, voting or sale of issued or unissued shares of SNC's capital stock,
except as Previously Disclosed. None of the shares of SNC's capital stock has
been issued in violation of the preemptive rights of any person. The shares of
Continuing Corporation Common Stock to be issued in connection with the Merger
have been duly authorized and, when issued in accordance with the terms of this
Agreement and the Plan of Merger, will be validly issued, fully paid and
nonassessable.
2.2. ORGANIZATION, STANDING AND AUTHORITY OF SNC
SNC is a duly organized corporation, validly existing and in good standing
under the laws of the State of North Carolina. SNC (i) has full corporate power
and authority to carry on its business as now conducted and (ii) is duly
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification and where failure to so qualify would have
a material adverse effect on the financial condition, results of operations or
business of SNC on a consolidated basis. SNC has all federal, state, local and
foreign governmental authorizations and licenses necessary for it to own and
lease its properties and assets and to carry on its business as it is now being
conducted. SNC has delivered to BB&T a true, complete and correct copy of its
Articles of
I-4
<PAGE>
Incorporation and of its Bylaws, each as in effect on the date of this
Agreement. SNC is registered as a bank holding company under the Bank Holding
Company Act.
2.3. OWNERSHIP OF THE SNC SUBSIDIARIES; CAPITAL STRUCTURE OF THE SNC
SUBSIDIARIES
SNC does not own, directly or indirectly, 5% or more of the outstanding
capital stock or other voting securities of any corporation, bank or other
organization actively engaged in business except as Previously Disclosed
(collectively the "SNC Subsidiaries" and each individually an "SNC
Subsidiary"). The outstanding shares of capital stock of each SNC Subsidiary
have been duly authorized and are validly issued, and are fully paid and
(subject to 12 U.S.C. (S)55) nonassessable and all such shares are directly or
indirectly owned by SNC free and clear of all liens, claims and encumbrances.
No Rights are authorized, issued or outstanding with respect to the capital
stock of any SNC Subsidiary and there are no agreements, understandings or
commitments relating to the right of SNC to vote or to dispose of said shares.
None of the shares of capital stock of any SNC Subsidiary has been issued in
violation of the preemptive rights of any person.
2.4. ORGANIZATION, STANDING AND AUTHORITY OF THE SNC SUBSIDIARIES
Each SNC Subsidiary is a duly organized corporation, national banking
association, savings institution or savings bank, validly existing and in good
standing under applicable laws. Each SNC Subsidiary (i) has full corporate
power and authority to own, lease and operate its properties and to carry on
its business as now conducted except where the absence of such power or
authority would not have a material adverse effect on the financial condition,
results of operations or business of SNC on a consolidated basis, and (ii) is
duly qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification and where failure to so qualify would have
a material adverse effect on the financial condition, results of operations or
business of SNC on a consolidated basis. Each SNC Subsidiary has all federal,
state, local and foreign governmental authorizations and licenses necessary for
it to own or lease its properties and assets and to carry on its business as it
is now being conducted, except where failure to obtain such authorization or
license would not have a material adverse effect on the business of such SNC
Subsidiary.
2.5. AUTHORIZED AND EFFECTIVE AGREEMENT
(a) SNC has all requisite corporate power and authority to enter into, adopt
and perform all of its obligations under this Reorganization Agreement, the
Plan of Merger and the SNC Option Agreement. The execution, adoption and
delivery of this Reorganization Agreement, the Plan of Merger and the SNC
Option Agreement and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action in respect thereof on the part of SNC, except that the affirmative vote
of the shareholders of SNC is required to adopt the Plan of Merger, pursuant to
the North Carolina Business Corporation Act, as amended, and SNC's Articles of
Incorporation and Bylaws.
(b) This Reorganization Agreement, the SNC Option Agreement and the Plan of
Merger constitute legal, valid and binding obligations of SNC enforceable
against it in accordance with their respective terms, subject as to
enforceability, to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(c) Except as Previously Disclosed, neither the execution, adoption and
delivery of this Reorganization Agreement, the Plan of Merger or the SNC Option
Agreement nor consummation of the transactions contemplated hereby or thereby,
nor compliance by SNC with any of the provisions hereof or thereof shall (i)
conflict with or result in a breach of any provision of the Articles of
Incorporation, Articles of Association or Bylaws of SNC or any SNC Subsidiary,
(ii) constitute or result in a breach of any term, condition or provision of,
or constitute a default under, or give rise to any right of termination,
cancellation or acceleration
I-5
<PAGE>
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of SNC or any SNC Subsidiary pursuant to, any note,
bond, mortgage, indenture, license, agreement or other instrument or
obligation, or (iii) subject to the receipt of all required regulatory
approvals, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to SNC or any SNC Subsidiary.
(d) Except for consents and approvals of or filings with the Federal Reserve
Board, the FDIC, the Commission and the State Boards and any appropriate state
securities authorities, no consents or approvals of or filings or registrations
with any public body or authority are necessary, and no consents or filings or
registrations with any public body or authority are necessary and no consents
or approval of any third parties are necessary, in connection with the
execution and delivery of this Agreement by SNC or the consummation by SNC of
the transactions contemplated hereby or by the Plan of Merger.
2.6. SEC DOCUMENTS; REGULATORY FILINGS
SNC has filed all SEC Documents required by the Securities Laws and such SEC
Documents complied in all material respects with the Securities Laws. Each of
SNC, SNBNC and SNBSC has filed all reports required by statute or regulation to
be filed with any federal or state bank or savings association or savings
institution regulatory agency, and such reports were prepared in accordance
with the applicable statutes, regulations and instructions in all material
respects.
2.7. FINANCIAL STATEMENTS; BOOKS ANDRECORDS; MINUTE BOOKS
The SNC Financial Statements fairly present the consolidated financial
position of SNC as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity and cash flows of SNC for the
periods then ended in conformity with generally accepted accounting principles
applicable to financial institutions applied on a consistent basis except as
disclosed therein. The books and records of SNC and each SNC Subsidiary fairly
reflect the transactions to which it is a party or by which its properties are
subject or bound. Such books and records have been properly kept and maintained
and are in compliance in all material respects with all applicable legal and
accounting requirements. The minute books of SNC and each SNC Subsidiary
contain accurate records of all corporate actions of their respective
shareholders and Boards of Directors (including committees of their Boards of
Directors).
2.8. MATERIAL ADVERSE CHANGE
Except as Previously Disclosed, SNC has not, on a consolidated basis,
suffered any material adverse change in its business, financial condition or
results of operations since December 31, 1993.
2.9. ABSENCE OF UNDISCLOSED LIABILITIES
Neither SNC nor any SNC Subsidiary has any liability (contingent or
otherwise) that is material to SNC on a consolidated basis, or that, when
combined with all similar liabilities, would be material to SNC on a
consolidated basis, except as disclosed in the SNC Financial Statements and
except for liabilities incurred in the ordinary course of business consistent
with past practice since the date of the most recent SNC Financial Statements.
2.10. PROPERTIES
SNC and the SNC Subsidiaries have good title free and clear of all liens,
encumbrances, charges, defaults or equitable interests to all of the properties
and assets, real and personal, reflected on the SNC Financial Statements as of
December 31, 1993 or acquired after such date, except (i) liens for current
taxes not yet due and payable, (ii) pledges to secure deposits and other liens
incurred in the ordinary course of business,(iii) such imperfections of title,
easements and encumbrances, if any, as are not material in character, amount or
extent and (iv) dispositions and encumbrances for adequate consideration in the
ordinary course of business. Each SNC Subsidiary as lessee has the right under
valid and subsisting leases of properties used by
I-6
<PAGE>
it in the conduct of its respective business to occupy and use all such
properties as presently occupied and used by it. Each of the real properties
used by each SNC Subsidiary has been maintained in all material respects in
good condition and is suitable for its current use. Each of such properties
conforms in all material respects to currently applicable ordinances,
regulations and zoning requirements and, if required, is occupied pursuant to a
certificate of occupancy authorizing its current use. Since December 31, 1993,
none of such properties which are material to the operation of any SNC
Subsidiary has been damaged by fire, storm or other identifiable event or other
act of God, except to the extent that any property owned or leased by any SNC
Subsidiary if so damaged is insured to the extent necessary to satisfactorily
repair the damaged premises.
2.11. LOANS
(a) Except as Previously Disclosed, to SNC's best knowledge each loan
reflected as an asset in the SNC Financial Statements (i) is evidenced by
notes, agreements or other evidences of indebtedness which are true, genuine
and what they purport to be, (ii) to the extent secured, has been secured by
valid liens and security interests which have been perfected, and (iii) is the
legal, valid and binding obligation of the obligor named therein, enforceable
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles. All loans and extensions of
credit which are subject to Regulation O of the Federal Reserve Board which
have been made by SNBNC and SNBSC comply therewith.
(b) The classification on the books and records of SNC and each SNC
Subsidiary that is a banking institution of loans and/or non-performing assets
as nonaccrual, troubled debt restructuring, OREO or other similar
classification, complies in all material respects with generally accepted
accounting principles and applicable regulatory accounting principles.
2.12. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected on the SNC Financial Statements as of
December 31, 1993 and any SNC Financial Statements, as of their respective
dates, is adequate in all material respects under the requirements of generally
accepted accounting principles and regulatory accounting principles to provide
for reasonably anticipated losses on outstanding loans.
2.13. TAX MATTERS
(a) SNC and each SNC Subsidiary, and each of their respective predecessors,
have timely filed federal income tax returns for each year through December 31,
1992 and have timely filed, or caused to be filed, all other federal and state
tax returns (including, without limitation, estimated tax returns, withholding
tax returns and FICA and FUTA returns) required to have been filed with respect
to SNC or such SNC Subsidiary. SNC has made available to BB&T true and complete
copies of its federal and state income tax returns for the past five years, and
true and complete copies of all correspondence from governmental authorities,
and responses of SNC or any SNC Subsidiary thereto, relating to such federal
and state income tax returns or any other federal, state or other tax filings
within the past five years. All taxes due in respect of the periods covered by
such tax returns have been paid or adequate reserves have been established for
the payment of such taxes and, as of the Closing Date, all taxes due in respect
of any subsequent periods ending on or prior to the Closing Date will have been
paid or adequate reserves will have been established for the payment thereof.
Except as Previously Disclosed, no audit examination or deficiency or refund
litigation with respect to such returns is pending. SNC has been audited by the
IRS through the tax year ended December 31, 1986. Neither SNC nor any SNC
Subsidiary will have as of the Closing Date any material liability for any such
taxes in excess of the amounts so paid or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) tax returns
filed by SNC and each SNC Subsidiary are complete and accurate in all material
respects. Neither SNC nor any SNC Subsidiary is delinquent in the payment of
any tax, assessment or governmental charge, and, except as Previously
I-7
<PAGE>
Disclosed, none of them has requested any extension of time within which to
file any tax returns in respect of any fiscal year or portion thereof which
have not since been filed. No deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed (tentatively or
otherwise) against SNC or any SNC Subsidiary which have not been settled and
paid. Except as Previously Disclosed, there are currently no agreements in
effect with respect to SNC or any SNC Subsidiary to extend the period of
limitations for the assessment or collection of any tax.
(c) SNC and each SNC Subsidiary have timely filed all material information
returns required under Sections 6041-6050N of the Code and any comparable state
laws, and have timely complied in all material respects with the requirements
of Section 3406 of the Code and the regulations thereunder and any comparable
state laws and regulations. Neither SNC nor any SNC Subsidiary has made or
entered into, or holds any asset subject to, a consent filed pursuant to
Section 341(f) of the Code and the regulations thereunder or a "safe harbor
lease" subject to former Section 168(f)(8) of the Code and the regulations
thereunder.
2.14. EMPLOYEE BENEFIT PLANS
(a) SNC has Previously Disclosed true and complete copies of all pension or
profit-sharing plans, any deferred compensation, consulting, bonus or group
insurance contract or any other incentive, stock option, welfare or employee
benefit plan or agreement maintained for the benefit of any employees or former
employees of SNC, any SNC Subsidiary or any SNC ERISA Affiliate (collectively,
the "SNC Plans") together with (i) the most recent actuarial and financial
reports, if any, prepared with respect to each such SNC Plan, (ii) the most
recent annual report, if any, filed with any government agency with respect to
each such SNC Plan, and (iii) all rulings and determination letters and any
open requests for rulings or letters that pertain to any SNC Plan. Except as
Previously Disclosed, no SNC Plan provides health, medical, death or survivor
benefits to any former employee or beneficiary thereof (other than coverage
mandated by applicable law or death or retirement benefits under an employee
pension benefit plan, as defined in Section 3(2) of ERISA).
(b) No liability under Title IV of ERISA has been incurred by SNC, any SNC
Subsidiary or any SNC ERISA Affiliate since the effective date of ERISA that
has not been satisfied in full, and no condition exists that presents a
material risk to SNC, any SNC Subsidiary or any SNC ERISA Affiliate of
incurring a liability under such Title, other than liability for premiums due
the PBGC, which payments have been or will be made when due.
(c) None of the SNC Plans is a "multiemployer plan," as such term is defined
in Section 3(37) of ERISA.
(d) A favorable determination letter has been issued by the Internal Revenue
Service with respect to each SNC Plan that is intended to be a qualified plan
to the effect that such plan is qualified under Section 401 of the Code and tax
exempt under Section 501 of the Code and each such letter has been Previously
Disclosed. No such letter has been revoked or threatened to be revoked and
neither SNC nor any SNC Subsidiary knows of any ground on which such revocation
may be based. Neither SNC nor any SNC Subsidiary has a material liability under
any SNC Plan that is not reflected on the SNC Financial Statements.
(e) Except as Previously Disclosed, each of the SNC Plans has been operated
and administered in all material respects in accordance with applicable laws,
including but not limited to ERISA and the Code.
(f) No prohibited transaction (which shall mean any transaction prohibited by
Section 406 of ERISA and not exempt under Section 408 of ERISA) has occurred
with respect to any SNC Plan (i) which would result in the imposition, directly
or indirectly, of a material excise tax under Section 4975 of the Code or(ii)
the correction of which would have a material adverse effect on the financial
condition, results of operations or business of SNC on a consolidated basis.
(g) Each of the SNC Plans that is intended to satisfy the requirements of
Section 125 or Section 501(c)(9) of the Code satisfies such requirements.
I-8
<PAGE>
(h) With respect to each SNC Plan that is subject to Title IV of ERISA, the
present value of accrued benefits under such plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such plan's actuary with respect to such plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such plan
allocable to such accrued benefits and nothing has occurred since such most
recent valuation date with respect to each such plan that adversely affects the
funded status of such plan. No reportable event under Section 4043(b) of ERISA
has occurred with respect to any SNC Plan (other than a reportable event for
which the requirement of notice to the PBGC has been waived by regulation).
(i) There are no actions, suits or claims pending, or to the best knowledge
of SNC, threatened or anticipated (other than routine claims for benefits) by,
on behalf of or against any of the SNC Plans or any trusts related thereto or
against SNC or any SNC Subsidiary with respect to the SNC Plans or any trusts
related thereto.
(j) Except as Previously Disclosed, the consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee of SNC or any SNC Subsidiary to severance pay, employment compensation
or any other payment, benefit or award or (ii) accelerate the time of payment
or vesting, or increase the amount of any benefit, award or compensation due
any such employee.
2.15. CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither SNC nor any SNC Subsidiary is a
party to, or is bound by, (i) any material agreement, arrangement or commitment
whether or not made in the ordinary course of business, (ii) any agreement,
indenture or other instrument relating to the borrowing of money by SNC or any
SNC Subsidiary or the guarantee by SNC or any SNC Subsidiary of any such
obligation, (iii) any agreement, arrangement or commitment relating to the
employment of a consultant or the employment, election, retention in office or
severance of any present or former director or officer, (iv) any agreement to
make loans or for the provision, purchase or sale of goods, services or
property between SNC or any SNC Subsidiary and any director or officer of SNC
or any SNC Subsidiary, or any member of the immediate family or affiliate of
any of the foregoing, or (v) any agreement between SNC or any SNC Subsidiary
and any 5% or more shareholder of SNC, in each case other than transactions
entered into in the ordinary course of the banking business of SNBNC or SNBSC
consistent with past practice.
(b) Neither SNC nor any SNC Subsidiary, nor to the knowledge of SNC, the
other party thereto, is in default under any material agreement, commitment,
arrangement, lease, insurance policy or other instrument whether entered into
in the ordinary course of business or otherwise and whether written or oral,
and there has not occurred any event that, with the lapse of time or giving of
notice or both, would constitute such a default, other than defaults of loan
agreements by borrowers from SNBNC or SNBSC in the ordinary course of its
banking business.
(c) Since December 31, 1993, neither SNC nor any SNC Subsidiary has incurred
or paid any obligation or liability that would be material to SNC, except
obligations incurred or paid in connection with transactions in the ordinary
course of business of any SNC Subsidiary consistent with its past practice and
except as Previously Disclosed. Except as Previously Disclosed, from December
31, 1993 to the date hereof, neither SNC nor any SNC Subsidiary has taken any
action that, if taken after the date hereof, would breach any of the covenants
contained in Section 4.7(b) hereof.
2.16. OTHER REAL ESTATE OWNED
(a) Except for liens, security interests, claims, charges, or such other
encumbrances as have been appropriately reserved for in the SNC Financial
Statements or are not material, title to the OREO is good and marketable, and
there are no adverse claims or encumbrances on the OREO.
I-9
<PAGE>
(b) All title, hazard and other insurance claims and mortgage guaranty claims
with respect to the OREO have been timely filed and neither SNC nor any SNC
Subsidiary has received any notice of denial of any such claim.
(c) SNC and each SNC Subsidiary are in possession of all of the OREO or, if
any of the OREO remains occupied by the mortgagor, eviction or summary
proceedings have been commenced or rental arrangements providing for market
rental rates have been agreed upon and SNC and/or each SNC Subsidiary are
diligently pursuing such eviction or summary proceedings or such rental
arrangements.
(d) Except as Previously Disclosed, no legal proceeding or quasi-legal
proceeding is pending or, to the knowledge of SNC and each SNC Subsidiary,
threatened concerning any OREO or any servicing activity or omission to provide
a servicing activity with respect to any of the OREO.
2.17. LEGAL PROCEEDINGS
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the
knowledge of SNC, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against SNC or any SNC Subsidiary or against any asset,
interest or right of SNC or any SNC Subsidiary that would, if determined
adversely to SNC or an SNC Subsidiary, have a material adverse effect on SNC.
To the knowledge of SNC, there are no actual or threatened actions, suits or
proceedings which present a claim to restrain or prohibit the transactions
contemplated herein, the Plan of Merger or the BB&T Option Agreement or to
impose upon BB&T, SNC or any of their respective subsidiaries any material cost
or obligation in connection therewith. Except as Previously Disclosed there are
no actions, suits, claims, governmental investigations or proceedings
instituted, pending or, to the knowledge of SNC, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against any present or former
director or officer of SNC that would be reasonably likely to give rise to a
claim for indemnification by such present or former director or officer that
would, if determined adversely to SNC or an SNC Subsidiary, have a material
adverse effect on SNC, and, to the knowledge of SNC, there is no reasonable
basis for any such action, suit or proceeding.
2.18. COMPLIANCE WITH LAWS
SNC and the SNC Subsidiaries are in compliance in all material respects with
all statutes and regulations applicable to the conduct of their business, and
neither SNC nor any SNC Subsidiary has received notification from any agency or
department of federal, state or local government (i) asserting a material
violation of any such statute or regulation, (ii) threatening to revoke any
license, franchise, permit or government authorization or (iii) restricting or
in any way limiting its operations. Neither SNC nor any SNC Subsidiary is
subject to any regulatory or supervisory cease and desist order, agreement,
directive, memorandum of understanding or commitment, and neither of them has
received any communication requesting that they enter into any of the
foregoing. Without limiting the generality of the foregoing, each of SNBNC and
SNBSC has timely filed all currency transaction reports required to be filed
and taken all other actions required under the Currency and Foreign
Transactions Reporting Act, codified at 31 U.S.C. (S)5301 et seq., and its
implementing regulations.
2.19. BROKERS AND FINDERS
Neither SNC nor any SNC Subsidiary, nor any of their respective officers,
directors or employees, has employed any broker, finder or financial advisor or
incurred any liability for any fees or commissions in connection with the
transactions contemplated herein, the Bank Merger Agreement or the Plan of
Merger, except for Lehman Brothers and Wheat, First Securities, Inc.
I-10
<PAGE>
2.20. INSURANCE
SNC and each SNC Subsidiary currently maintains insurance in amounts
reasonably necessary for their operations and, to the best knowledge of SNC,
similar in scope and coverage to that maintained by other entities similarly
situated. Neither SNC nor any SNC Subsidiary has received any notice of a
premium increase or cancellation with respect to any of its insurance policies
or bonds, and within the last three years, neither SNC nor any SNC Subsidiary
has been refused any insurance coverage sought or applied for, and SNC has no
reason to believe that existing insurance coverage cannot be renewed as and
when the same shall expire, upon terms and conditions as favorable as those
presently in effect, other than possible increases in premiums or
unavailability in coverage that have not resulted from any extraordinary loss
experience of SNC or any SNC Subsidiary.
2.21. REPURCHASE AGREEMENTS
With respect to all agreements pursuant to which SNC or any SNC Subsidiary
has purchased securities subject to an agreement to resell, if any, SNC or such
SNC Subsidiary, as the case may be, has a valid, perfected first lien or
security interest in the government securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
2.22. DEPOSIT INSURANCE; FEDERAL RESERVE MEMBERSHIP
The deposits of SNBNC and SNBSC are insured by the FDIC in accordance with
the FDIA, and SNBNC and SNBSC have paid all assessments and filed all reports
required by the FDIA. SNBNC and SNBSC are members of the Federal Reserve System
and have subscribed and paid (or will have done so by the Closing Date) for the
requisite number of shares of capital stock of the FRB Richmond.
2.23. ADMINISTRATION OF TRUST ACCOUNTS
SNBNC and SNBSC have properly administered, in all respects material and
which could reasonably be expected to be material to the business, operations
or financial condition of SNC, SNBNC and SNBSC, taken as a whole, all accounts
for which they act as fiduciaries, including but not limited to accounts for
which they serve as trustees, agents, custodians, personal representatives,
guardians, conservators or investment advisors, in accordance with the terms of
the governing documents and applicable state and federal law and regulation and
common law. Neither SNC, SNBNC or SNBSC, nor any director, officer or employee
of SNC, SNBNC or SNBSC has committed any breach of trust with respect to any
such fiduciary account which is material to or could reasonably be expected to
be material to the business, operations or financial condition of SNC, and
SNBNC and SNBSC, taken as a whole, and the accountings for each such fiduciary
account are true and correct in all material respects and accurately reflect
the assets of such fiduciary account in all material respects.
2.24. ENVIRONMENTAL MATTERS
(a) Except as Previously Disclosed, to the best of SNC's knowledge, neither
SNC nor any SNC Subsidiary owns or leases any properties affected by toxic
waste, radon gas or other hazardous conditions or constructed in part with the
use of asbestos. Each of SNC and the SNC Subsidiaries is in substantial
compliance with all Environmental Laws applicable to real or personal
properties in which it has a direct fee ownership or, with respect to a direct
interest as lessee, applicable to the leasehold premises or, to the best
knowledge of SNC and the SNC Subsidiaries, the premises on which the leasehold
is situated. Neither SNC nor any SNC Subsidiary has received any Communication
alleging that SNC or such SNC Subsidiary is not in such compliance and, to the
best knowledge of SNC and the SNC Subsidiaries, there are no present
circumstances (including Environmental Laws that have been adopted but are not
yet effective) that would prevent or interfere with the continuation of such
compliance.
I-11
<PAGE>
(b)(i) There are no legal, administrative, arbitral or other proceedings, or
Environmental Claims or other claims, causes of action or governmental
investigations of any nature, seeking to impose, or that could result in the
imposition, on SNC and the SNC Subsidiaries of any liability arising under any
Environmental Laws pending or, to the best knowledge of SNC and the SNC
Subsidiaries, threatened against (A) SNC or any SNC Subsidiary, (B) any person
or entity whose liability for any Environmental Claim SNC or any SNC Subsidiary
has or may have retained or assumed either contractually or by operation of
law, or (C) any real or personal property which SNC or any SNC Subsidiary owns
or leases, or has been or is judged to have managed or to have supervised or
participated in the management of, which liability might have a material
adverse effect on the business, financial condition or results of operations of
SNC. SNC and the SNC Subsidiaries are not subject to any agreement, order,
judgment, decree or memorandum by or with any court, governmental authority,
regulatory agency or third party imposing any such liability.
(ii) To the best knowledge of SNC and the SNC Subsidiaries, there are no
legal, administrative, arbitral or other proceedings, or Environmental Claims
or other claims, causes of action or governmental investigations of any nature,
seeking to impose, or that could result in the imposition, on SNC or any SNC
Subsidiary of any liability arising under any Environmental Laws pending or
threatened against any real or personal property in which SNC or any SNC
Subsidiary holds a security interest in connection with a loan or a loan
participation which liability might have a material adverse effect on the
business, financial condition or results of operations of SNC. SNC and the SNC
Subsidiaries are not subject to any agreement, order, judgment, decree or
memorandum by or with any court, governmental authority, regulatory agency or
third party imposing any such liability.
(c) With respect to all real and personal property owned or leased by SNC or
any SNC Subsidiary, other than OREO, SNC will have made available to BB&T
before or by September 1, 1994 copies of any environmental audits, analyses and
surveys that have been prepared relating to such properties. With respect to
all OREO held by SNC or any SNC Subsidiary and all real or personal property
which SNC or any SNC Subsidiary has been or is judged to have managed or to
have supervised or participated in the management of, SNC has made available to
BB&T the information relating to such OREO available to SNC. SNC and the SNC
Subsidiaries are in compliance in all material respects with all
recommendations contained in any environmental audits, analyses and surveys
relating to any of the properties, real or personal, described in this
subsection (c).
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge or disposal of any Materials of Environmental Concern, that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
liability arising under any Environmental Laws currently in effect or adopted
but not yet effective against SNC or any SNC Subsidiary or against any person
or entity whose liability for any Environmental Claim SNC or any SNC Subsidiary
has or may have retained or assumed either contractually or by operation of
law.
(e) For the purpose of this Agreement, the following terms shall have the
following meanings:
(i) "Communication" means a communication which is of a substantive nature
and which is made (A) in writing to SNC or any SNC Subsidiary on the one hand
or to BB&T or any BB&T Subsidiary on the other hand, or (B) orally to a senior
officer of SNC or any SNC Subsidiary or of BB&T or any BB&T Subsidiary, whether
from a governmental authority or a third party.
(ii) "Environmental Claim" means any Communication from any governmental
authority or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from the
presence, or release into the environment, of any Material of Environmental
Concern.
I-12
<PAGE>
(iii) "Environmental Laws" means all applicable federal, state and local laws
and regulations, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, that relate to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata).
This definition includes, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
(iv) "Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
2.25. CERTAIN INFORMATION
When the Registration Statement or any post-effective amendment thereto shall
become effective, and at all times subsequent to such effectiveness up to and
including the time of the later of the SNC and BB&T shareholders' meetings to
vote upon the Merger, such Registration Statement and all amendments or
supplements thereto, with respect to all information set forth therein
furnished by SNC relating to SNC and the SNC Subsidiaries, (i) shall comply in
all material respects with the applicable provisions of the Securities Laws,
and (ii) shall 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 contained therein not misleading.
2.26. INFORMATION IN APPLICATIONS
All information concerning SNC and the SNC Subsidiaries, and their respective
officers, directors and shareholders, included (or submitted for inclusion) in
the applications described in Section 4.3 hereof shall be true, correct and
complete in all material respects.
ARTICLE 3.
Representations and Warranties of BB&T
BB&T hereby represents and warrants to SNC as follows:
3.1. CAPITAL STRUCTURE OF BB&T
The authorized capital stock of BB&T consists of (i) 100,000,000 shares of
common stock, par value $2.50 per share ("BB&T Common Stock"), of which as of
June 30, 1994, 36,271,016 shares were issued and outstanding and none were held
in treasury; and (ii) 4,000,000 shares of nonvoting preferred stock, no par
value ("BB&T Preferred Stock"), none of which have been issued or are
outstanding. All outstanding shares of BB&T Common Stock have been duly
authorized and are validly issued, and are fully paid and nonassessable. There
are no Rights authorized, issued or outstanding with respect to the capital
stock of BB&T and no written or oral plans, understandings, commitments or
contracts to which BB&T or any of its affiliates is subject with respect to the
issuance, voting or sale of issued or unissued shares of BB&T's capital stock,
except for the BB&T DRP and as Previously Disclosed. None of the shares of
BB&T's capital stock has been issued in violation of the preemptive rights of
any person.
3.2. ORGANIZATION, STANDING AND AUTHORITY OF BB&T
BB&T is a duly organized corporation, validly existing and in good standing
under the laws of the State of North Carolina. BB&T (i) has full corporate
power and authority to carry on its business as now conducted and (ii) is duly
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification and where failure
I-13
<PAGE>
to so qualify would have a material adverse effect on the financial condition,
results of operations or business of BB&T on a consolidated basis. BB&T has all
federal, state, local and foreign governmental authorizations and licenses
necessary for it to own and lease its properties and assets and to carry on its
business as it is now being conducted. BB&T has delivered to SNC a true,
complete and correct copy of its Articles of Incorporation and of its Bylaws,
each as in effect on the date of this Agreement. BB&T is registered as a bank
holding company under the Bank Holding Company Act.
3.3. OWNERSHIP OF THE BB&T SUBSIDIARIES; CAPITAL STRUCTURE OF THE BB&T
SUBSIDIARIES
BB&T does not own, directly or indirectly, 5% or more of the outstanding
capital stock or other voting securities of any corporation, bank or other
organization actively engaged in business except as Previously Disclosed
(collectively the "BB&T Subsidiaries" and each individually a "BB&T
Subsidiary"). The outstanding shares of capital stock of each BB&T Subsidiary
have been duly authorized and are validly issued, and are fully paid and
nonassessable and all such shares are directly or indirectly owned by BB&T free
and clear of all liens, claims and encumbrances. No Rights are authorized,
issued or outstanding with respect to the capital stock of any BB&T Subsidiary
and there are no agreements, understandings or commitments relating to the
right of BB&T to vote or to dispose of said shares. None of the shares of
capital stock of any BB&T Subsidiary has been issued in violation of the
preemptive rights of any person.
3.4. ORGANIZATION, STANDING AND AUTHORITY OF THE BB&T SUBSIDIARIES
Each BB&T Subsidiary is a duly organized corporation or North Carolina
chartered or South Carolina chartered commercial bank or a North Carolina
chartered savings bank, validly existing and in good standing under applicable
laws. Each BB&T Subsidiary (i) has full corporate power and authority to own,
lease and operate its properties and to carry on its business as now conducted
except where the absence of such power or authority would not have a material
adverse effect on the financial condition, results of operations or business of
BB&T on a consolidated basis, and (ii) is duly qualified to do business in the
states of the United States and foreign jurisdictions where its ownership or
leasing of property or the conduct of its business requires such qualification
and where failure to so qualify would have a material adverse effect on the
financial condition, results of operations or business of BB&T on a
consolidated basis. Each BB&T Subsidiary has all federal, state, local and
foreign governmental authorizations and licenses necessary for it to own or
lease its properties and assets and to carry on its business as it is now being
conducted, except where failure to obtain such authorization or license would
not have a material adverse effect on the business of such BB&T Subsidiary.
3.5. AUTHORIZED AND EFFECTIVE AGREEMENT
(a) BB&T has all requisite corporate power and authority to enter into, adopt
and perform all of its obligations under this Reorganization Agreement, the
Plan of Merger and the BB&T Option Agreement. The execution, adoption and
delivery of this Reorganization Agreement, the Plan of Merger and the BB&T
Option Agreement and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action in respect thereof on the part of BB&T, except that the affirmative vote
of the holders of all outstanding shares of BB&T Common Stock entitled to vote
thereon is required to adopt the Plan of Merger, unless two-thirds of the
entire board of directors of BB&T recommends to the shareholders of BB&T a vote
in favor of the Merger, in which case the affirmative vote of the holders of a
majority of all outstanding shares of BB&T Common Stock entitled to vote
thereon is required to adopt the Plan of Merger, pursuant to the North Carolina
Business Corporation Act, as amended, and BB&T's Articles of Incorporation and
Bylaws.
(b) This Reorganization Agreement, the BB&T Option Agreement and the Plan of
Merger constitute legal, valid and binding obligations of BB&T enforceable
against it in accordance with their respective terms,
I-14
<PAGE>
subject as to enforceability, to bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(c) Neither the execution, adoption and delivery of this Reorganization
Agreement, the Plan of Merger or the BB&T Option Agreement, nor consummation of
the transactions contemplated hereby or thereby, nor compliance by BB&T with
any of the provisions hereof or thereof shall (i) conflict with or result in a
breach of any provision of the Articles of Incorporation or Bylaws of BB&T or
any BB&T Subsidiary, (ii) constitute or result in a breach of any term,
condition or provision of, or constitute a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, or result
in the creation of any lien, charge or encumbrance upon any property or asset
of BB&T or any BB&T Subsidiary pursuant to, any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation, or (iii)
subject to the receipt of all required regulatory approvals, violate any order,
writ, injunction, decree, statute, rule or regulation applicable to BB&T or any
BB&T Subsidiary.
(d) Except for consents and approvals of or filings with the Federal Reserve
Board, the FDIC, the Commission and the State Boards and any appropriate state
securities authorities, no consents or approvals of or filings or registrations
with any public body or authority are necessary, and no consents or filings or
registrations with any public body or authority are necessary and no consents
or approval of any third parties are necessary, in connection with the
execution and delivery of this Agreement by BB&T or the consummation by BB&T of
the transactions contemplated hereby or by the Plan of Merger.
3.6. SEC DOCUMENTS; REGULATORY FILINGS
BB&T has filed all SEC Documents required by the Securities Laws and such SEC
Documents complied in all material respects with the Securities Laws. Each of
BB&T, BB&T-NC and BB&T-SC has filed all reports required by statute or
regulation to be filed with any federal or state bank or savings association or
savings institution regulatory agency, and such reports were prepared in
accordance with the applicable statutes, regulations and instructions in all
material respects.
3.7. FINANCIAL STATEMENTS; BOOKS AND RECORDS; MINUTE BOOKS
The BB&T Financial Statements fairly present the consolidated financial
position of BB&T as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity and cash flows of BB&T for the
periods then ended in conformity with generally accepted accounting principles
applicable to financial institutions applied on a consistent basis except as
disclosed therein. The books and records of BB&T and each BB&T Subsidiary
fairly reflect the transactions to which it is a party or by which its
properties are subject or bound. Such books and records have been properly kept
and maintained and are in compliance in all material respects with all
applicable legal and accounting requirements. The minute books of BB&T and each
BB&T Subsidiary contain accurate records of all corporate actions of their
respective shareholders and Boards of Directors (including committees of their
Boards of Directors).
3.8. MATERIAL ADVERSE CHANGE
BB&T has not, on a consolidated basis, suffered any material adverse change
in its business, financial condition or results of operations since December
31, 1993.
3.9. ABSENCE OF UNDISCLOSED LIABILITIES
Neither BB&T nor any BB&T Subsidiary has any liability (contingent or
otherwise) that is material to BB&T on a consolidated basis, or that, when
combined with all similar liabilities, would be material to BB&T on a
consolidated basis, except as disclosed in the BB&T Financial Statements and
except for liabilities incurred in the ordinary course of business consistent
with past practice since the date of the most recent BB&T Financial Statements.
I-15
<PAGE>
3.10. PROPERTIES
BB&T and the BB&T Subsidiaries have good title free and clear of all liens,
encumbrances, charges, defaults or equitable interests to all of the properties
and assets, real and personal, reflected on the BB&T Financial Statements as of
December 31, 1993 or acquired after such date, except (i) liens for current
taxes not yet due and payable, (ii) pledges to secure deposits and other liens
incurred in the ordinary course of business, (iii) such imperfections of title,
easements and encumbrances, if any, as are not material in character, amount or
extent and (iv) dispositions and encumbrances for adequate consideration in the
ordinary course of business. Each BB&T Subsidiary as lessee has the right under
valid and subsisting leases of properties used by it in the conduct of its
respective business to occupy and use all such properties as presently occupied
and used by it. Each of the real properties used by any BB&T Subsidiary has
been maintained in all material respects in good condition and is suitable for
its current use by it. Each of such properties conforms in all material
respects to currently applicable ordinances, regulations and zoning
requirements and, if required, is occupied pursuant to a certificate of
occupancy authorizing its current use. Since December 31, 1993, none of such
properties which are material to the operation of any BB&T Subsidiary has been
damaged by fire, storm or other identifiable event or other act of God, except
to the extent that any property owned or leased by any BB&T Subsidiary if so
damaged is insured to the extent necessary to satisfactorily repair the damaged
premises.
3.11. LOANS
(a) Except as Previously Disclosed, to BB&T's best knowledge each loan
reflected as an asset in the BB&T Financial Statements (i) is evidenced by
notes, agreements or other evidences of indebtedness which are true, genuine
and what they purport to be, (ii) to the extent secured, has been secured by
valid liens and security interests which have been perfected, and (iii) is the
legal, valid and binding obligation of the obligor named therein, enforceable
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles. All loans and extensions of
credit which are subject to Regulation O of the Federal Reserve Board which
have been made by BB&T-NC and BB&T-SC comply therewith.
(b) The classification on the books and records of BB&T and each BB&T
Subsidiary that is a banking institution of loans and/or non-performing assets
as nonaccrual, troubled debt restructuring, OREO or other similar
classification, complies in all material respects with generally accepted
accounting principles and applicable regulatory accounting policy.
3.12. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected on the BB&T Financial Statements as
of December 31, 1993 and any BB&T Financial Statements, as of their respective
dates, is adequate in all material respects under the requirements of generally
accepted and regulatory accounting principles to provide for reasonably
anticipated losses on outstanding loans.
3.13. TAX MATTERS
(a) BB&T and each BB&T Subsidiary, and each of their respective predecessors,
have timely filed federal income tax returns for each year through December 31,
1992 and have timely filed, or caused to be filed, all other federal and state
tax returns (including, without limitation, estimated tax returns, withholding
tax returns and FICA and FUTA returns) required to have been filed with respect
to BB&T or such BB&T Subsidiary. BB&T has made available to SNC true and
complete copies of its federal and state income tax returns for the past five
years, and true and complete copies of all correspondence from governmental
authorities, and responses of BB&T or any BB&T Subsidiary thereto, relating to
such federal and state income tax returns or any other federal, state or other
tax filings within the past five years. All taxes due in respect of the periods
covered by such tax returns have been paid or adequate reserves have been
established for the payment of such taxes and, as of the Closing Date, all
taxes due in respect of any subsequent periods ending
I-16
<PAGE>
on or prior to the Closing Date will have been paid or adequate reserves will
have been established for the payment thereof. No audit examination or
deficiency or refund litigation with respect to such returns is pending. BB&T
has been audited by the IRS through the tax year ended December 31, 1992.
Neither BB&T nor any BB&T Subsidiary will have as of the Closing Date any
material liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) tax returns
filed by BB&T and each BB&T Subsidiary are complete and accurate in all
material respects. Neither BB&T nor any BB&T Subsidiary is delinquent in the
payment of any tax, assessment or governmental charge, and, except as
Previously Disclosed, none of them has requested any extension of time within
which to file any tax returns in respect of any fiscal year or portion thereof
which have not since been filed. No deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed (tentatively or
otherwise) against BB&T or any BB&T Subsidiary which have not been settled and
paid. There are currently no agreements in effect with respect to BB&T or any
BB&T Subsidiary to extend the period of limitations for the assessment or
collection of any tax.
(c) BB&T and each BB&T Subsidiary have timely filed all material information
returns required under Sections 6041-6050N of the Code and any comparable state
laws, and have timely complied in all material respects with the requirements
of Section 3406 of the Code and the regulations thereunder and any comparable
state and local laws and regulations. Neither BB&T nor any BB&T Subsidiary has
made or entered into, or holds any asset subject to, a consent filed pursuant
to Section 341(f) of the Code and the regulations thereunder or a "safe harbor
lease" subject to former Section 168(f)(8) of the Code and the regulations
thereunder.
3.14. EMPLOYEE BENEFIT PLANS
(a) BB&T has Previously Disclosed true and complete copies of all pension or
profit-sharing plans, any deferred compensation, consulting, bonus or group
insurance contract or any other incentive, stock option, welfare or employee
benefit plan or agreement maintained for the benefit of any employees or former
employees of BB&T, any BB&T Subsidiary or any BB&T ERISA Affiliate
(collectively, the "BB&T Plans") together with (i) the most recent actuarial
and financial reports, if any, prepared with respect to each such BB&T Plan,
(ii) the most recent annual report, if any, filed with any government agency
with respect to each such BB&T Plan, and (iii) all rulings and determination
letters and any open requests for rulings or letters that pertain to any BB&T
Plan. Except as Previously Disclosed, no BB&T Plan provides health, medical,
death or survivor benefits to any former employee or beneficiary thereof (other
than coverage mandated by applicable law or death or retirement benefits under
an employee pension benefit plan, as defined in Section 3(2) of ERISA).
(b) No liability under Title IV of ERISA has been incurred by BB&T, any BB&T
Subsidiary or any BB&T ERISA Affiliate since the effective date of ERISA that
has not been satisfied in full, and no condition exists that presents a
material risk to BB&T, any BB&T Subsidiary or any BB&T ERISA Affiliate of
incurring a liability under such Title, other than liability for premiums due
the PBGC, which payments have been or will be made when due.
(c) None of the BB&T Plans is a "multiemployer plan," as such term is defined
in Section 3(37) of ERISA.
(d) A favorable determination letter has been issued by the Internal Revenue
Service with respect to each BB&T Plan that is intended to be a qualified plan
to the effect that such plan is qualified under Section 401 of the Code and tax
exempt under Section 501 of the Code and each such letter has been Previously
Disclosed. No such letter has been revoked or threatened to be revoked and
neither BB&T nor any BB&T Subsidiary knows of any ground on which such
revocation may be based. Except as Previously Disclosed,
I-17
<PAGE>
neither BB&T nor any BB&T Subsidiary has a material liability under any BB&T
Plan that is not reflected on the BB&T Financial Statements.
(e) Each of the BB&T Plans has been operated and administered in all material
respects in accordance with applicable laws, including but not limited to ERISA
and the Code.
(f) No prohibited transaction (which shall mean any transaction prohibited by
Section 406 of ERISA and not exempt under Section 408 of ERISA) has occurred
with respect to any BB&T Plan (i) which would result in the imposition,
directly or indirectly, of a material excise tax under Section 4975 of the Code
or (ii) the correction of which would have a material adverse effect on the
financial condition, results of operations or business of BB&T on a
consolidated basis.
(g) Each of the BB&T Plans that is intended to satisfy the requirements of
Section 125 or Section 501(c)(9) of the Code satisfies such requirements.
(h) With respect to each BB&T Plan that is subject to Title IV of ERISA, the
present value of accrued benefits under such plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such plan's actuary with respect to such plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such plan
allocable to such accrued benefits and nothing has occurred since such most
recent valuation date with respect to each such plan that adversely affects the
funded status of such plan. No reportable event under Section 4043(b) of ERISA
has occurred with respect to any BB&T Plan (other than a reportable event for
which the requirement of notice to the PBGC has been waived by regulation).
(i) There are no actions, suits or claims pending, or to the best knowledge
of SNC, threatened or anticipated (other than routine claims for benefits) by,
on behalf of or against any of the BB&T Plans or any trusts related thereto or
against BB&T or any BB&T Subsidiary with respect to the BB&T Plans or any
trusts related thereto.
(j) Except as Previously Disclosed, the consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee of BB&T or any BB&T Subsidiary to severance pay, employment
compensation or any other payment, benefit or award or (ii) accelerate the time
of payment or vesting, or increase the amount of any benefit, award or
compensation due any such employee.
3.15. CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither BB&T nor any BB&T Subsidiary is a
party to, or is bound by, (i) any material agreement, arrangement or commitment
whether or not made in the ordinary course of business, (ii) any agreement,
indenture or other instrument relating to the borrowing of money by BB&T or any
BB&T Subsidiary or the guarantee by BB&T or any BB&T Subsidiary of any such
obligation, (iii) any agreement, arrangement or commitment relating to the
employment of a consultant or the employment, election, retention in office or
severance of any present or former director or officer, (iv) any agreement to
make loans or for the provision, purchase or sale of goods, services or
property between BB&T or any BB&T Subsidiary and any director or officer of
BB&T or any BB&T Subsidiary, or any member of the immediate family or affiliate
of any of the foregoing, or (v) any agreement between BB&T or any BB&T
Subsidiary and any 5% or more shareholder of BB&T, in each case other than
transactions entered into in the ordinary course of the banking business of
BB&T-NC or BB&T-SC consistent with past practice.
(b) Neither BB&T nor any BB&T Subsidiary, nor to the knowledge of BB&T, the
other party thereto, is in default under any material agreement, commitment,
arrangement, lease, insurance policy or other instrument whether entered into
in the ordinary course of business or otherwise and whether written or oral,
and there has not occurred any event that, with the lapse of time or giving of
notice or both, would constitute
I-18
<PAGE>
such a default, other than defaults of loan agreements by borrowers from BB&T-
NC or BB&T-SC in the ordinary course of its banking business.
(c) Since December 31, 1993, neither BB&T nor any BB&T Subsidiary has
incurred or paid any obligation or liability that would be material to BB&T,
except obligations incurred or paid in connection with transactions in the
ordinary course of business of the BB&T Subsidiaries consistent with its past
practice and except as Previously Disclosed. Except as Previously Disclosed,
from December 31, 1993 to the date hereof, neither BB&T nor any BB&T Subsidiary
has taken any action that, if taken after the date hereof, would breach any of
the covenants contained in Section 4.8(b) hereof.
3.16. OTHER REAL ESTATE OWNED
(a) Except for liens, security interests, claims, charges, or such other
encumbrances as have been appropriately reserved for in the BB&T Financial
Statements or are not material, title to the OREO is good and marketable, and
there are no adverse claims or encumbrances on the OREO.
(b) All title, hazard and other insurance claims and mortgage guaranty claims
with respect to the OREO have been timely filed and neither BB&T nor any BB&T
Subsidiary has received any notice of denial of any such claim.
(c) BB&T and each BB&T Subsidiary are in possession of all of the OREO or, if
any of the OREO remains occupied by the mortgagor, eviction or summary
proceedings have been commenced or rental arrangements providing for market
rental rates have been agreed upon and BB&T and/or each BB&T Subsidiary are
diligently pursuing such eviction or summary proceedings or such rental
arrangements.
(d) No legal proceeding or quasi-legal proceeding is pending or, to the
knowledge of BB&T and each BB&T Subsidiary, threatened concerning any OREO or
any servicing activity or omission to provide a servicing activity with respect
to any of the OREO.
3.17. LEGAL PROCEEDINGS
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the
knowledge of BB&T, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against BB&T or any BB&T Subsidiary or against any
asset, interest or right of BB&T or any BB&T Subsidiary that would, if
determined adversely to BB&T or a BB&T Subsidiary, have a material adverse
effect on BB&T. To the knowledge of BB&T, there are no actual or threatened
actions, suits or proceedings which present a claim to restrain or prohibit the
transactions contemplated herein, the Plan of Merger or the SNC Option
Agreement or to impose upon SNC, BB&T or any of their respective subsidiaries
any material cost or obligation in connection therewith. Except as Previously
Disclosed there are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the knowledge of BB&T, threatened (or
unasserted but considered probable of assertion and which if asserted would
have at least a reasonable probability of an unfavorable outcome) against any
present or former director or officer of BB&T that would be reasonably likely
to give rise to a claim for indemnification by such present or former director
or officer that would, if determined adversely to BB&T or a BB&T Subsidiary,
have a material adverse effect on BB&T, and, to the knowledge of BB&T, there is
no reasonable basis for any such action, suit or proceeding.
3.18. COMPLIANCE WITH LAWS
Except as Previously Disclosed, BB&T and the BB&T Subsidiaries are in
compliance in all material respects with all statutes and regulations
applicable to the conduct of their business, and except as Previously
I-19
<PAGE>
Disclosed, neither BB&T nor any BB&T Subsidiary has received notification from
any agency or department of federal, state or local government (i) asserting a
material violation of any such statute or regulation, (ii) threatening to
revoke any license, franchise, permit or government authorization or (iii)
restricting or in any way limiting its operations. Except as Previously
Disclosed, neither BB&T nor any BB&T Subsidiary is subject to any regulatory or
supervisory cease and desist order, agreement, directive, memorandum of
understanding or commitment, and neither of them has received any communication
requesting that they enter into any of the foregoing. Without limiting the
generality of the foregoing, each of BB&T-NC and BB&T-SC has timely filed all
currency transaction reports required to be filed and taken all other actions
required under the Currency and Foreign Transactions Reporting Act, codified at
31 U.S.C. (S)5301 et seq., and its implementing regulations.
3.19. BROKERS AND FINDERS
Neither BB&T nor any BB&T Subsidiary, nor any of their respective officers,
directors or employees, has employed any broker, finder or financial advisor or
incurred any liability for any fees or commissions in connection with the
transactions contemplated herein, the Bank Merger Agreement or the Plan of
Merger, except for Lehman Brothers and Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch").
3.20. INSURANCE
BB&T and each BB&T Subsidiary currently maintain insurance in amounts
reasonably necessary for their operations and, to the best knowledge of BB&T,
similar in scope and coverage to that maintained by other entities similarly
situated. Neither BB&T nor any BB&T Subsidiary has received any notice of a
premium increase or cancellation with respect to any of its insurance policies
or bonds, and within the last three years, neither BB&T nor any BB&T Subsidiary
has been refused any insurance coverage sought or applied for, and BB&T has no
reason to believe that existing insurance coverage cannot be renewed as and
when the same shall expire, upon terms and conditions as favorable as those
presently in effect, other than possible increases in premiums or
unavailability in coverage that have not resulted from any extraordinary loss
experience of BB&T or any BB&T Subsidiary.
3.21. REPURCHASE AGREEMENTS
With respect to all agreements pursuant to which BB&T or any BB&T Subsidiary
has purchased securities subject to an agreement to resell, if any, BB&T or
such BB&T Subsidiary, as the case may be, has a valid, perfected first lien or
security interest in the government securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
3.22. DEPOSIT INSURANCE
The deposits of BB&T-NC and BB&T-SC are insured by the FDIC in accordance
with the FDIA, and BB&T-NC and BB&T-SC have paid all assessments and filed all
reports required by the FDIA.
3.23. ADMINISTRATION OF TRUST ACCOUNTS
BB&T-NC and BB&T-SC have properly administered, in all respects material and
which could reasonably be expected to be material to the business, operations
or financial condition of BB&T, BB&T-NC and BB&T-SC, taken as a whole, all
accounts for which they act as fiduciaries, including but not limited to
accounts for which they serve as trustees, agents, custodians, personal
representatives, guardians, conservators or investment advisors, in accordance
with the terms of the governing documents and applicable state and federal law
and regulation and common law. Neither BB&T, BB&T-NC or BB&T-SC, nor any
director, officer or employee of BB&T, BB&T-NC or BB&T-SC has committed any
breach of trust with
I-20
<PAGE>
respect to any such fiduciary account which is material to or could reasonably
be expected to be material to the business, operations or financial condition
of BB&T, BB&T-NC and BB&T-SC, taken as a whole, and the accountings for each
such fiduciary account are true and correct in all material respects and
accurately reflect the assets of such fiduciary account in all material
respects.
3.24. ENVIRONMENTAL MATTERS
(a) Except as Previously Disclosed, to the best of BB&T's knowledge, neither
BB&T nor any BB&T Subsidiary owns or leases any properties affected by toxic
waste, radon gas or other hazardous conditions or constructed in part with the
use of asbestos. Each of BB&T and the BB&T Subsidiaries is in substantial
compliance with all Environmental Laws applicable to real or personal
properties in which it has a direct fee ownership or, with respect to a direct
interest as lessee, applicable to the leasehold premises or, to the best
knowledge of BB&T and the BB&T Subsidiaries, the premises on which the
leasehold is situated. Neither BB&T nor any BB&T Subsidiary has received any
Communication alleging that BB&T or such BB&T Subsidiary is not in such
compliance and, to the best knowledge of BB&T and the BB&T Subsidiaries, there
are no present circumstances (including Environmental Laws that have been
adopted but are not yet effective) that would prevent or interfere with the
continuation of such compliance.
(b)(i) There are no legal, administrative, arbitral or other proceedings, or
Environmental Claims or other claims, causes of action or governmental
investigations of any nature, seeking to impose, or that could result in the
imposition, on BB&T and the BB&T Subsidiaries of any liability arising under
any Environmental Laws pending or, to the best knowledge of BB&T and the BB&T
Subsidiaries, threatened against (A) BB&T or any BB&T Subsidiary, (B) any
person or entity whose liability for any Environmental Claim BB&T or any BB&T
Subsidiary has or may have retained or assumed either contractually or by
operation of law, or (C) any real or personal property which BB&T or any BB&T
Subsidiary owns or leases, or has been or is judged to have managed or to have
supervised or participated in the management of, which liability might have a
material adverse effect on the business, financial condition or results of
operations of BB&T. BB&T and the BB&T Subsidiaries are not subject to any
agreement, order, judgment, decree or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any such
liability.
(ii) To the best knowledge of BB&T and the BB&T Subsidiaries, there are no
legal, administrative, arbitral or other proceedings, or Environmental Claims
or other claims, causes of action or governmental investigations of any nature,
seeking to impose, or that could result in the imposition, on BB&T or any BB&T
Subsidiary of any liability arising under any Environmental Laws pending or
threatened against any real or personal property in which BB&T or any BB&T
Subsidiary holds a security interest in connection with a loan or a loan
participation which liability might have a material adverse effect on the
business, financial condition or results of operations of BB&T. BB&T and the
BB&T Subsidiaries are not subject to any agreement, order, judgment, decree or
memorandum by or with any court, governmental authority, regulatory agency or
third party imposing any such liability.
(c) With respect to all real and personal property owned or leased by BB&T or
any BB&T Subsidiary, other than OREO, BB&T will have made available to SNC
before or by September 1, 1994 copies of any environmental audits, analyses and
surveys that have been prepared relating to such properties. With respect to
all OREO held by BB&T or any BB&T Subsidiary and all real or personal property
which BB&T or any BB&T Subsidiary has been or is judged to have managed or to
have supervised or participated in the management of, BB&T has made available
to SNC the information relating to such OREO available to BB&T. BB&T and the
BB&T Subsidiaries are in compliance in all material respects with all
recommendations contained in any environmental audits, analyses and surveys
relating to any of the properties, real or personal, described in this
subsection (c).
I-21
<PAGE>
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge or disposal of any Materials of Environmental Concern, that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
liability arising under any Environmental Laws currently in effect or adopted
but not yet effective against BB&T or any BB&T Subsidiary or against any person
or entity whose liability for any Environmental Claim BB&T or any BB&T
Subsidiary has or may have retained or assumed either contractually or by
operation of law.
3.25. CERTAIN INFORMATION
When the Registration Statement or any post-effective amendment thereto shall
become effective, and at all times subsequent to such effectiveness up to and
including the time of the later of the SNC and BB&T shareholders' meetings to
vote upon the Merger, such Registration Statement and all amendments or
supplements thereto, with respect to all information set forth therein
furnished by BB&T relating to BB&T and the BB&T Subsidiaries, (i) shall comply
in all material respects with the applicable provisions of the Securities Laws,
and (ii) shall 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 contained therein not misleading.
3.26. INFORMATION IN APPLICATIONS
All information concerning BB&T and the BB&T Subsidiaries, and their
respective officers, directors and shareholders, included (or submitted for
inclusion) in the applications described in Section 4.3 hereof shall be true,
correct and complete in all material respects.
ARTICLE 4.
Covenants
4.1. SHAREHOLDERS' MEETINGS
BB&T and SNC shall submit this Reorganization Agreement and the Plan of
Merger to their respective shareholders for approval at an annual or a special
meeting to be held as soon as practicable. Except to the extent legally
required for the discharge by the boards of directors of their fiduciary duties
as determined by such boards of directors after consultation with such board's
counsel, the boards of directors of SNC and BB&T shall recommend at the
respective shareholders' meetings that the shareholders vote in favor of and
approve the Merger and adopt the Plan of Merger.
4.2. PROXY STATEMENT; REGISTRATION STATEMENT
As promptly as practicable after the date hereof, BB&T and SNC shall
cooperate in the preparation of the Proxy Statement to be mailed to the
shareholders of BB&T and SNC in connection with the Merger and to be filed by
SNC as part of the Registration Statement. SNC will advise BB&T, promptly after
it receives notice thereof, of the time when the Registration Statement or any
post-effective amendment thereto has become effective or any supplement or
amendment has been filed, of the issuance of any stop order, of the suspension
of qualification of the Continuing Corporation Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or the
initiation or threat of any proceeding for any such purpose, or of any request
by the SEC for the amendment or supplement of the Registration Statement or for
additional information. The Continuing Corporation after the Effective Date
shall file a post-effective amendment to the Registration Statement either with
respect to the sale of the shares of Continuing Corporation Common Stock
provided for in the Plan of Merger to the holders of stock options issued by
BB&T or for the resale of such shares by such optionees, as the Continuing
Corporation and such optionees may agree. SNC shall take all actions necessary
to register or qualify the shares of Continuing Corporation
I-22
<PAGE>
Common Stock to be issued in the Merger and pursuant to such options pursuant
to all applicable state "blue sky" or securities laws and shall maintain such
registrations or qualifications in effect for all purposes hereof.
4.3. APPLICATIONS
As promptly as practicable after the date hereof, (i) SNC shall submit any
requisite applications for prior approval of the transactions contemplated
herein and in the Plan of Merger to the Federal Reserve Board pursuant to
Section 3 of the Bank Holding Company Act, (ii) each of the parties shall
submit any requisite applications for prior approval of the transactions
contemplated herein and the Plan of Merger to the FDIC and the State Boards,
and (iii) each of the parties hereto shall, and they shall cause their
respective subsidiaries to, submit any applications, notices or other filings
to any other state or federal government agency, department or body the
approval of which is required for consummation of the Merger and the Bank
Mergers. Prior to the making of any such filings with any regulatory authority
or any third persons, BB&T and SNC shall submit to each other the materials to
be filed, mailed or released. Any such materials must be acceptable to both
BB&T and SNC prior to the filings with any regulatory authorities or any third
persons, except to the extent that BB&T or SNC is legally required to proceed
prior to obtaining the acceptance of the other.
4.4. BEST EFFORTS
BB&T, BB&T-NC, BB&T-SC, SNC, SNBNC and SNBSC each shall use its best efforts
in good faith to (i) furnish such information as may be necessary or desirable
in connection with the preparation of the documents referred to in Sections 4.2
and 4.3 above, and (ii) take or cause to be taken all action necessary or
desirable on its part so as to permit consummation of the Merger and the Bank
Mergers at the earliest possible date, including, without limitation, (1)
obtaining the consent or approval of each individual, partnership, corporation,
association or other business or professional entity whose consent or approval
is necessary or desirable for consummation of the transactions contemplated
hereby, and (2) requesting the delivery of appropriate opinions, consents and
letters from its counsel and independent auditors. No party hereto shall take,
or cause or to the best of its ability permit to be taken, any action that
would adversely affect the qualification of the Merger for pooling of interests
accounting treatment; provided that nothing herein contained shall preclude
BB&T from exercising its rights under the SNC Option Agreement or SNC from
exercising its rights under the BB&T Option Agreement.
4.5. INVESTIGATION AND CONFIDENTIALITY
(a) BB&T and SNC each will keep the other advised of all material
developments relevant to its business and to consummation of the transactions
contemplated herein. BB&T and SNC each may make or cause to be made such
investigation of the financial and legal condition of the other as such party
reasonably deems necessary or advisable in connection with the transactions
contemplated herein and in the Plan of Merger, provided, however, that such
investigation shall be reasonably related to such transactions and shall not
interfere unnecessarily with normal operations. BB&T and SNC agree to furnish
the other and the other's advisors with such financial data and other
information with respect to its business and properties as such other party
shall from time to time reasonably request. No investigation pursuant to this
Section 4.5 shall affect or be deemed to modify any representation or warranty
made by, or the conditions to the obligations to consummate the Merger and the
Bank Mergers of, any party hereto.
(b) Each party hereto shall, and shall cause its directors, officers,
attorneys and advisors to, maintain the confidentiality of all information
obtained in such investigation which is not otherwise publicly disclosed by the
other parties, said undertaking with respect to confidentiality to survive any
termination of this Agreement pursuant to Section 6.1 hereof. In the event of
termination of this Agreement each party shall return to the furnishing party
or destroy and certify the destruction of all information previously furnished
by the other party in connection with the transactions contemplated by this
Agreement.
I-23
<PAGE>
(c) SNC shall give prompt notice to BB&T, and BB&T shall give prompt notice
to SNC, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Closing Date and (ii) any material
failure of SNC or BB&T, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, and each party shall use all reasonable efforts to remedy such
failure.
4.6. PRESS RELEASES
The parties hereto shall agree with each other as to the form and substance
of any press release related to this Reorganization Agreement, the Plan of
Merger and the agreements which shall be acceptable in form to BB&T and SNC to
effect the North Carolina Bank Merger and the South Carolina Bank Merger
(collectively, the "Bank Merger Agreements") or the transactions contemplated
hereby or thereby, and shall consult each other as to the form and substance of
other public disclosures related thereto, provided, however, that nothing
contained herein shall prohibit any party, following notification to the other
parties, from making any disclosure which its counsel deems necessary.
4.7. COVENANTS OF SNC
(a) Prior to the Closing Date, and except as otherwise provided for by this
Reorganization Agreement or consented to or approved by BB&T, SNC shall use its
best efforts to preserve the properties, business and relationships of SNC and
the SNC Subsidiaries with customers, employees and other persons.
(b) Except with the prior written consent of BB&T, between the date hereof
and the Effective Date, SNC and each SNC Subsidiary that is a banking
institution shall not:
(1) carry on its business other than in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
(2) in the case of SNC only (a) declare, set aside, make or pay any
dividend or other distribution in respect of SNC Common Stock other than
quarterly cash dividends in an amount per share in excess of $0.20, in a
manner consistent with past practice and in accordance with applicable law,
regulation and contractual and regulatory commitments and in respect of SNC
Series A Preferred Stock as required by SNC's Articles of Incorporation or
(b) make any changes in its dividend record or dividend payment dates;
provided, however, that if the Closing Date shall not have occurred prior
to July 31, 1995, SNC may increase its regular quarterly cash dividends in
a manner and amount consistent with past increases in such dividends;
(3) except as Previously Disclosed, issue any shares of its capital stock
or permit any treasury shares to become outstanding other than pursuant to
the SNC Option Agreement, the SNC DRP or Rights outstanding at the date
hereof, or incur any additional debt obligation or other obligation for
borrowed money in amounts materially in excess of amounts previously
borrowed in the ordinary course of business of SNC and SNC Subsidiaries
consistent with past practice;
(4) issue, grant or authorize any Rights other than pursuant to the SNC
Option Agreement or grants of stock options to its employees in the
ordinary course of business or effect any recapitalization,
reclassification, stock dividend (other than pursuant to the SNC DRP),
stock split or like change in capitalization or redeem, repurchase or
otherwise acquire any shares of its capital stock;
(5) except as Previously Disclosed or as contemplated herein, amend its
Articles of Incorporation, Articles of Association or Bylaws except as
contemplated herein; impose, or suffer the imposition, on any share of
stock held by SNC in any SNC Subsidiary of any lien, charge or encumbrance,
or permit any such lien, charge or encumbrance to exist, except as existing
on the date hereof;
(6) except as Previously Disclosed, merge or consolidate with any other
entity; sell or lease all or any material portion of its assets or
business; except as Previously Disclosed, make any acquisition of all
I-24
<PAGE>
or any substantial portion of the business or assets of any other person,
firm, association, corporation or business organization other than in
connection with the collection of any loan or credit arrangement between it
and any other person; enter into or consummate a purchase and assumption
transaction with respect to deposits and liabilities; revoke or surrender
its certificate of authority to maintain, or apply for the relocation of,
any existing branch office or apply for a certificate of authority to
establish a new branch office other than in the ordinary course of
business;
(7) fail to comply in any material respect with any laws, regulations,
ordinances or governmental actions applicable to it and material to the
conduct of its business except where it is in good faith contesting the
validity of any of the foregoing;
(8) liquidate or sell or dispose of any material assets or acquire any
material assets; make any capital expenditures outside the ordinary course
of business; or, except as Previously Disclosed, establish new branches or
other similar facilities or modify any leases or other contracts relating
thereto outside the ordinary course of business;
(9) except as Previously Disclosed or as contemplated by this Agreement,
increase the rate of compensation of, pay or agree to pay any bonus to, or
provide any other employee benefit or incentive to, any of its directors,
officers or employees except in a manner consistent with past practice,
provided, however, that such payments may not increase severance amounts
payable under employment or severance agreements; provided, however, all
amounts covered under SNC's Long-Term and Short-Term Incentive Plans as of
the end of the month prior to the month in which the Closing Date occurs,
at the sole option of SNC, may vest and be paid out immediately; except as
Previously Disclosed or as contemplated by this Agreement, enter into,
modify or extend or permit to be renewed any employment or severance
contracts with any of its present or former directors, officers or
employees; or enter into or modify (except as may be required by applicable
law, for any modification that is not material or to effect normal,
corrective or previously contemplated actions with respect to such plans)
any pension, retirement, stock option, stock purchase, stock appreciation
right, savings, profit sharing, deferred compensation, consulting, bonus,
group insurance or other employee benefit, incentive or welfare contract,
plan or arrangement, or any trust agreement related thereto, in respect of
any of its directors, officers or other employees;
(10) change its lending, investment, asset/liability management or other
material banking policies in any material respect except as may be required
by applicable law;
(11) change its methods of accounting in effect at December 31, 1993, in
any material respect except as required by changes in generally accepted
accounting principles concurred in by its independent certified public
accountants, or change any of its methods of reporting income and
deductions for federal income tax purposes in any material respect from
those employed in the preparation of its federal income tax returns for the
year ended December 31, 1993, except as required by law;
(12) solicit or encourage inquiries or proposals with respect to any
acquisition or purchase of all or a substantial portion of the assets of,
or a substantial equity interest in, SNC, SNBNC or SNBSC or any business
combination with SNC, SNBNC or SNBSC other than as contemplated by this
Reorganization Agreement; or authorize or permit any officer, director,
agent or affiliate of it to do any of the above; or fail to notify BB&T
immediately if any such inquiries or proposals are received by SNC, SNBNC
or SNBSC; or
(13) agree to do any of the foregoing.
4.8. COVENANTS OF BB&T
(a) Prior to the Closing Date, and except as otherwise provided for by this
Reorganization Agreement or consented to or approved by SNC, BB&T shall use its
best efforts to preserve the properties, business and relationships of BB&T and
the BB&T Subsidiaries with customers, employees and other persons.
I-25
<PAGE>
(b) Except with the prior written consent of SNC, between the date hereof and
the Effective Date, BB&T and each BB&T Subsidiary that is a banking institution
shall not:
(1) carry on its business other than in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
(2) in the case of BB&T only (a) declare, set aside, make or pay any
dividend or other distribution in respect of its capital stock other than
its regular quarterly cash dividends in an amount per share in excess of
$0.29, in a manner consistent with past practice and in accordance with
applicable law, regulation and contractual and regulatory commitments or
(b) make any changes in its dividend record or dividend payment dates;
provided, however, that if the Closing Date shall not have occurred prior
to July 31, 1995, BB&T may increase its regular quarterly cash dividends in
a manner and amount consistent with past increases in such dividends,
except that, if SNC increases its dividend after July 31, 1995, BB&T may
increase its dividend(s) by an amount equal to the increase in the SNC
dividend multiplied by 1.45;
(3) except as Previously Disclosed, issue any shares of its capital stock
or permit any treasury shares to become outstanding other than pursuant to
the BB&T Option Agreement, the BB&T DRP or Rights outstanding at the date
hereof, or incur any additional debt obligation or other obligation for
borrowed money in amounts materially in excess of amounts previously
borrowed in the ordinary course of business of BB&T and the BB&T
Subsidiaries consistent with past practice;
(4) issue, grant or authorize any Rights other than pursuant to the BB&T
Option Agreement, the BB&T DRP or grants of stock options to its employees
in the ordinary course of business or effect any recapitalization,
reclassification, stock dividend, stock split or like change in
capitalization, or redeem, repurchase or otherwise acquire any shares of
its capital stock;
(5) amend its Articles of Incorporation or Bylaws; impose, or suffer the
imposition, on any share of stock held by BB&T in any BB&T Subsidiary of
any lien, charge or encumbrance, or permit any such lien, charge or
encumbrance to exist, except as existing on the date hereof;
(6) except as Previously Disclosed, merge or consolidate with any other
entity; sell or lease all or any material portion of its assets or
business; except as Previously Disclosed, make any acquisition of all or
any substantial portion of the business or assets of any other person,
firm, association, corporation or business organization other than in
connection with the collection of any loan or credit arrangement between it
and any other person; enter into or consummate a purchase and assumption
transaction with respect to deposits and liabilities; revoke or surrender
its certificate of authority to maintain, or apply for the relocation of,
any existing branch office or apply for a certificate of authority to
establish a new branch office other than in the ordinary course of
business;
(7) except as Previously Disclosed, fail to comply in any material
respect with any laws, regulations, ordinances or governmental actions
applicable to it and material to the conduct of its business except where
it is in good faith contesting the validity of any of the foregoing;
(8) liquidate or sell or dispose of any material assets or, except as
Previously Disclosed, acquire any material assets; make any capital
expenditures outside the ordinary course of business; or establish new
branches or other similar facilities or modify any leases or other
contracts relating thereto outside the ordinary course of business;
(9) except as contemplated by this Agreement, increase the rate of
compensation of, pay or agree to pay any bonus to, or provide any other
employee benefit or incentive to, any of its directors, officers or
employees except in a manner consistent with past practice, provided,
however, that such payments may not increase severance amounts payable
under employment or severance agreements; except as Previously Disclosed or
as contemplated by this Agreement, enter into, modify or extend, or permit
to be renewed, any employment or severance contracts with any of its
present or former directors, officers or employees; or, enter into or
modify (except as may be required by applicable law, for any modification
I-26
<PAGE>
that is not material or to effect normal, corrective or previously
contemplated actions with respect to such plans) any pension, retirement,
stock option, stock purchase, stock appreciation right, savings, profit
sharing, deferred compensation, consulting, bonus, group insurance or other
employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement related thereto, in respect of any of its directors,
officers or other employees;
(10) change its lending, investment, asset/liability management or other
material banking policies in any material respect except as may be required
by applicable law;
(11) change its methods of accounting in effect at December 31, 1993, in
any material respect except as required by changes in generally accepted
accounting principles concurred in by its independent certified public
accountants, or change any of its methods of reporting income and
deductions for federal income tax purposes in any material respect from
those employed in the preparation of its federal income tax returns for the
year ended December 31, 1993, except as required by law;
(12) solicit or encourage inquiries or proposals with respect to any
acquisition or purchase of all or a substantial portion of the assets of,
or a substantial equity interest in, BB&T, BB&T-NC or BB&T-SC or any
business combination with BB&T, BB&T-NC or BB&T-SC other than as
contemplated by this Reorganization Agreement; or authorize or permit any
officer, director, agent or affiliate of it to do any of the above; or fail
to notify SNC immediately if any such inquiries or proposals are received
by BB&T, BB&T-NC or BB&T-SC; or
(13) agree to do any of the foregoing.
4.9. HEADQUARTERS
At the Effective Date, the headquarters of the Continuing Corporation and of
the NC Continuing Bank shall be located at 200 West Second Street, Winston-
Salem, North Carolina.
4.10. DIVIDENDS PRIOR TO THE EFFECTIVE DATE
BB&T and SNC shall coordinate with one another as to the declaration and
payment of cash dividends on the shares of BB&T Common Stock and SNC Common
Stock to be declared prior to the Effective Date to ensure that an equivalent
number of such dividends are declared by BB&T and SNC prior to the Effective
Date.
4.11. CLOSING; CERTIFICATE OF MERGER
The transactions contemplated by this Reorganization Agreement and the Plan
of Merger shall be consummated simultaneously at a closing to be held at such
location as the parties shall agree on the first business day following
satisfaction of the conditions to consummation of the Merger set forth in
Article 5 hereof or such later date within 45 days thereafter as may be agreed
upon by the parties hereto ("Closing Date"). In connection with such Closing,
BB&T and SNC shall execute a certificate of merger and shall cause such
certificate to be delivered to the Secretary of State of the State of North
Carolina. The Merger shall be effective at the time and on the date ("Effective
Date") specified in such certificate of merger. The North Carolina Bank Merger
and the South Carolina Bank Merger are intended to be accomplished as soon as
practicable after the Merger. After the North Carolina Bank Merger, the NC
Continuing Bank shall operate under the name of "Branch Banking and Trust
Company" and after the South Carolina Bank Merger the SC Continuing Bank shall
operate under the name of "Branch Banking and Trust Company of South Carolina"
and utilize all trademarks, service marks and other registered and non-
registered rights, words, symbols and devices related to such names.
4.12. AFFILIATES
BB&T and SNC shall cooperate and use their best efforts to identify those
persons who may be deemed to be "affiliates" of BB&T or SNC within the meaning
of Rule 144 or 145 promulgated by the Commission
I-27
<PAGE>
under the Securities Act, as appropriate, or by whom the transfer of Continuing
Corporation Common Stock following consummation of the Merger may adversely
affect the accounting for the Merger as a pooling of interests. SNC and BB&T
shall use their best efforts to cause each person so identified to deliver to
BB&T or SNC, no later than 30 days prior to the Effective Date, a written
agreement providing that such person will not dispose of any SNC Common Stock,
BB&T Common Stock or Continuing Corporation Common Stock except in compliance
with the Securities Act, the rules and regulations promulgated thereunder and
the Commission's rules relating to pooling of interests accounting treatment.
Shares of Continuing Corporation Common Stock issued to such affiliates in
exchange for BB&T Common Stock shall not be transferable until such time as
financial results covering at least 30 days of combined operations of SNC and
BB&T have been published within the meaning of Section 201.01 of the
Commission's Codification of Financial Reporting Policies, regardless of
whether each such affiliate has provided the written agreement referred to in
this section.
4.13. BOARD OF DIRECTORS
(a) From and after the Effective Date and until the first meeting of
shareholders of the Continuing Corporation called to elect directors following
the Merger (the "First Shareholders' Meeting"), the Board of Directors of the
Continuing Corporation shall consist of 24 persons, of which 12 shall be
persons named by the Board of Directors of BB&T ("BB&T Nominees") and 12 shall
be persons named by the Board of Directors of SNC ("SNC Nominees") (in each
case as identified by each party by letter to the other dated as of the date of
this Amended and Restated Agreement). If prior to the Effective Date (i) any of
the BB&T Nominees or the SNC Nominees becomes unable or unwilling to serve as a
director of the Continuing Corporation, or (ii) either BB&T or SNC determines
to replace a BB&T Nominee or an SNC Nominee, the party that designated such
individual may name a replacement to become a director of the Continuing
Corporation after the Effective Date.
(b) John A. Allison IV shall be elected Chairman of the Board of the
Continuing Corporation. If for any reason John A. Allison IV is unavailable to
serve in that capacity at the Effective Date, the Chairman of the Board of the
Continuing Corporation shall be selected by mutual agreement of the Boards of
Directors of BB&T and SNC. If the Boards of Directors of BB&T and SNC are
unable to agree upon a Chairman of the Board after reasonable effort to do so,
then either party may upon written notice to the other terminate this
Agreement.
(c) The members of the Nominating Committee of the Continuing Corporation
Board shall nominate for reelection, at the First Shareholders' Meeting, as
directors to serve on the Continuing Corporation Board of Directors the BB&T
Nominees and such of the SNC Nominees as may be required to be reelected at
such meeting (or their designated replacements pursuant to Section 4.13(a)).
The terms of those directors of the Continuing Corporation to be elected at the
First Shareholders' Meeting whose terms of office expire at the First
Shareholders' Meeting shall be allocated as designated by BB&T and SNC,
provided that the terms of the same number of SNC Nominees and BB&T Nominees
(including those SNC Nominees, if any, whose terms do not expire at the First
Shareholders' Meeting) will expire in each applicable year. If after the
Effective Date and prior to the First Shareholders' Meeting, any of the BB&T
Nominees or the SNC Nominees becomes unable or unwilling or is otherwise
ineligible to serve as a director of the Continuing Corporation, the remaining
BB&T Nominees or SNC Nominees, as the case may be, may name a replacement to be
nominated by the Nominating Committee for election at the First Shareholders'
Meeting.
(d) The Board of Directors of the NC Continuing Bank following the North
Carolina Bank Merger shall be comprised of current BB&T and SNC directors who
do not serve as directors of the Continuing Corporation and such other persons
as may be determined at the time the North Carolina Bank Merger is effected.
I-28
<PAGE>
(e) Subject to the fiduciary duties of the Continuing Corporation directors,
L. Glenn Orr, Jr. andJohn A. Allison will be elected as members of the
Executive Committee of the Continuing Corporation's Board of Directors for as
long as they are directors of the Continuing Corporation.
(f) As soon as practicable after the Effective Date, each Committee of the
Board of Directors of the Continuing Corporation shall be reconstituted so as
to consist of an equal number of BB&T Nominees and SNC Nominees.
(g) At the Effective Date and until consummation of the North Carolina Bank
Merger, John A. Allison IV and L. Glenn Orr, Jr. shall each serve on the Boards
of Directors of BB&T-NC and SNBNC and, after the consummation of the North
Carolina Bank Merger, on the Board of Directors of NC Continuing Bank. At the
Effective Date and until consummation of the South Carolina Bank Merger, John
A. Allison IV and L. Glenn Orr, Jr. shall each serve on the Boards of Directors
of BB&T-SC and SNBSC and, after the consummation of the South Carolina Bank
Merger, on the Board of Directors of SC Continuing Bank.
4.14. MANAGEMENT; EMPLOYEES; EMPLOYEE BENEFITS
(a) From and after the Effective Date, the Chief Executive Officer of the
Continuing Corporation shall be John A. Allison IV. If for any reason John A.
Allison IV is unavailable to serve in that capacity at the Effective Date, the
Chief Executive Officer of the Continuing Corporation shall be selected by
mutual agreement of the Boards of Directors of BB&T and SNC. If the Boards of
Directors of BB&T and SNC are unable to agree upon a Chief Executive Officer
after reasonable efforts to do so, then either party may terminate this
Agreement. From and after the Effective Date, Henry G. Williamson, Jr. shall be
the Chief Administrative Officer, John R. Spruill shall be the Chief Financial
Officer, and each of W. Kendall Chalk, Robert E. Greene, Kelly S. King, Morris
D. Marley, Scott E. Reed and Michael W. Sperry shall be Executive Vice
Presidents of the Continuing Corporation. The principal officers of the NC
Continuing Bank and the SC Continuing Bank from and after the consummation of
the North Carolina Bank Merger and the South Carolina Bank Merger,
respectively, shall be as provided in the Bank Merger Agreements. No officer of
BB&T-NC, SNBNC, BB&T-SC or SNBSC shall have his or her title or position
altered automatically as a result of the Bank Mergers; provided, however, that
nothing in this Section 4.14(a) shall affect the rights of the NC Continuing
Bank and the SC Continuing Bank to alter such titles and positions of such
officers following the Bank Mergers.
(b) It is the intention of the parties hereto that after the Effective Date,
all directors, officers and employees of the Continuing Corporation and its
subsidiaries will be entitled to participate in compensation, benefit, welfare
and related plans, programs or arrangements made available to similarly
situated directors, officers and employees under the same terms and conditions,
notwithstanding such individuals' prior affiliation with BB&T or SNC. The
parties agree to work together prior to the Effective Date to develop and
design such plans, programs and arrangements, and to prepare for the
implementation of such plans, programs and arrangements following the Effective
Date. It is also anticipated that any such plans, programs or arrangements to
be effective after the Effective Date shall provide that, for purposes of
determining eligibility for and vesting of such employee benefits only (and not
for pension benefit or other accrual purposes), service with SNC or an SNC
Subsidiary, on the one hand, or BB&T or a BB&T Subsidiary, on the other hand,
prior to the Effective Date shall be treated as service with an "employer" to
the same extent as if such persons had been employees of BB&T or a BB&T
Subsidiary or of SNC or an SNC Subsidiary, as appropriate.
(c) After the Effective Date, as provided in the Plan of Merger, the
obligations under any stock option plans of BB&T shall be assumed by SNC, and
no further options shall be granted under such plan, and all
I-29
<PAGE>
officers and employees of the Continuing Corporation shall be eligible to
participate in SNC's stock option plans notwithstanding such individuals' prior
affiliation with BB&T or SNC.
4.15. INDEMNIFICATION
Except as may be limited by applicable law, from and after the Effective
Date, and after the effective date of the Bank Mergers, as applicable, the
Continuing Corporation and the NC Continuing Bank and the SC Continuing Bank
shall maintain all rights of indemnification existing in favor of the former
employees, agents, officers and directors of BB&T, SNBNC and SNBSC,
respectively, on terms no less favorable than those provided in the Articles of
Incorporation and Bylaws of BB&T, SNBNC and SNBSC, as applicable, or otherwise
in effect on the date of this Agreement for a period of not less than six years
from the Effective Date with respect to matters occurring prior to the
Effective Date.
ARTICLE 5.
Conditions Precedent
5.1. CONDITIONS PRECEDENT--MUTUAL
The respective obligations of BB&T and SNC to effect the Merger shall be
subject to satisfaction or waiver of the following conditions at or prior to
the Closing Date:
(a) All corporate action necessary to authorize the execution, delivery and
performance of this Reorganization Agreement, the Plan of Merger, the Bank
Merger Agreements and consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken, and all required shareholder
approvals shall have been duly received;
(b) The parties hereto shall have received all regulatory approvals required
or mutually deemed necessary in connection with the transactions contemplated
by this Reorganization Agreement, the Plan of Merger, and the Bank Merger
Agreements, and all notice periods and waiting periods required after the
granting of any such approvals shall have passed and all conditions contained
in any such approval required to have been satisfied prior to consummation of
such transactions shall have been satisfied, provided, however, that no such
approval shall have imposed any condition or requirement which, in the
reasonable opinion of the Board of Directors of either BB&T or SNC so
materially and adversely affects the anticipated economic and business benefits
to such party of the transactions contemplated by this Agreement as to render
consummation of such transactions inadvisable;
(c) The parties hereto shall have received from counsel or a tax advisor,
which counsel or tax advisor shall be satisfactory to each of SNC and BB&T (and
SNC and BB&T each may elect to use separate counsel or tax advisor(s)), an
opinion satisfactory in form and substance to BB&T and SNC, to the effect that
the Merger when consummated in accordance with the terms hereof and the Plan of
Merger, and the Bank Mergers when consummated in accordance with the terms of
the Bank Merger Agreements, will constitute reorganizations within the meaning
of Section 368(a) of the Code, that no gain or loss will be recognized by BB&T
or SNC on consummation of the Merger, that no gain or loss will be recognized
by BB&T-NC, BB&T-SC, SNBNC and SNBSC on consummation of the Bank Mergers, and
that the exchange of BB&T Common Stock for SNC Common Stock will not give rise
to recognition of gain or loss for federal income tax purposes to the
shareholders of BB&T, except with respect to the receipt of cash in lieu of a
fractional share of SNC Common Stock, and the Bank Mergers will not give rise
to recognition of gain or loss for federal income tax purposes to SNC;
(d) The Registration Statement (including any post-effective amendment
thereto) shall be effective under the Securities Act, and no proceeding shall
be pending or to the knowledge of SNC threatened by the Commission to suspend
the effectiveness of such Registration Statement, and SNC shall have received
all
I-30
<PAGE>
state securities or "Blue Sky" permits or other authorizations, or
confirmations as to the availability of an exemption from registration
requirements as may be necessary, and no proceedings shall be pending or to the
knowledge of SNC threatened by any state "Blue Sky" securities administrator to
suspend the effectiveness of such Registration Statement;
(e) Except as Previously Disclosed, to the extent that any lease, license,
loan, financing agreement or other contract or agreement to which any party
hereto of any of its subsidiaries, as the case may be, is a party requires the
consent of or waiver from the other party thereto as a result of the
transactions contemplated by this Agreement, such consent or waiver shall have
been obtained, unless the failure to obtain such consent or waiver would not
have a material adverse effect on the consolidated financial condition of such
party from that reflected in the December 31, 1993 financial statements
included in the SNC Financial Statements as to SNC and the SNC Subsidiaries and
the BB&T Financial Statements as to BB&T and the BB&T Subsidiaries, following
consummation of the Merger and the Bank Mergers; and
(f) None of the parties hereto or to the Bank Merger Agreements shall be
subject to any order, decree or injunction of a court or agency of competent
jurisdiction, which enjoins or prohibits the consummation of the transactions
contemplated by this Reorganization Agreement, the Plan of Merger and the Bank
Merger Agreements and there shall be no action or proceeding by or before any
such court or agency that, in the judgment of SNC or BB&T, with the advice of
its respective counsel, shall present a bona fide claim to restrain, prohibit
or invalidate the transactions contemplated hereby;
(g) Dissenters' rights pursuant to Section 55-13-02 of the North Carolina
Business Corporation Act with respect to the Merger shall not have been
exercised by the holders of more than 10% of either (i) the outstanding SNC
Common Stock and SNC Series A Preferred Stock in the aggregate or (ii) the BB&T
Common Stock. For purposes of calculating the aggregate amount of SNC Common
Stock and SNC Series A Preferred Stock for which dissenters' rights have been
exercised, the SNC Series A Preferred Stock will be counted assuming that all
shares of the SNC Series A Preferred Stock had been converted into SNC Common
Stock in accordance with SNC's Articles of Incorporation on the date that SNC's
shareholders vote on the Merger.
5.2. CONDITIONS PRECEDENT--BB&T
The obligations of BB&T to effect the Merger and of BB&T-NC and BB&T-SC to
effect the Bank Mergers shall be subject to satisfaction of the following
additional conditions at or prior to the Closing Date unless waived by BB&T
pursuant to Section 6.4 hereof:
(a) The representations and warranties of SNC set forth in Article 2
hereof shall be true and correct in all material respects as of the date of
this Reorganization Agreement and as of the Closing Date as though made on
and as of the Closing Date (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated by this Reorganization Agreement or
consented to in writing by BB&T;
(b) SNC, SNBNC and SNBSC shall have in all material respects performed
all obligations and complied with all covenants required by this
Reorganization Agreement, the Plan of Merger and the Bank Merger
Agreements;
(c) SNC shall have delivered to BB&T a certificate, dated the Closing
Date and signed by its President and Chief Executive Officer and by its
Chief Financial Officer to the effect that the conditions set forth in this
section have been satisfied;
(d) BB&T shall have received an opinion of counsel to SNC, which counsel
shall be reasonably satisfactory to BB&T, dated the Closing Date, as to
such matters as BB&T may reasonably request with respect to the
transactions contemplated hereby, by the Plan of Merger, the Bank Merger
Agreements and the SNC Option Agreement;
(e) BB&T shall have received an opinion from KPMG Peat Marwick LLP that
the Merger shall qualify for the pooling-of-interests method of accounting;
I-31
<PAGE>
(f) Neither SNC, SNBNC nor SNBSC shall have experienced or suffered any
material adverse change in its business, operations, assets or condition
(financial or other) since the date hereof;
(g) BB&T shall have received the opinion of Lehman Brothers and Merrill
Lynch as of or immediately prior to the effective date of the Registration
Statement, to the effect that certain terms of the Merger are fair from a
financial point of view to the BB&T shareholders; and
(h) Current BB&T officers as Previously Disclosed shall have executed
employment agreements substantially in the form provided in Exhibit 5.2(h)
to this Agreement
5.3. CONDITIONS PRECEDENT--SNC
The obligations of SNC to effect the Merger and of SNBNC and of SNBSC to
effect the Bank Mergers shall be subject to satisfaction of the following
additional conditions at or prior to the Closing Date unless waived by SNC
pursuant to Section 6.4 hereof:
(a) The representations and warranties of BB&T set forth in Article 3
hereof shall be true and correct in all material respects as of the date of
this Reorganization Agreement and as of the Closing Date as though made on
and as of the Closing Date (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated by this Reorganization Agreement or
consented to in writing by SNC;
(b) BB&T, BB&T-NC and BB&T-SC shall have in all material respects
performed all obligations and complied with all covenants required by this
Reorganization Agreement, the Plan of Merger and the Bank Merger
Agreements;
(c) BB&T shall have delivered to SNC a certificate, dated the Closing
Date and signed by its Chairman and Chief Executive Officer and by its
Chief Financial Officer to the effect that the conditions set forth in this
section have been satisfied;
(d) SNC shall have received an opinion of counsel to BB&T, which counsel
shall be reasonably satisfactory to SNC, dated the Closing Date, as to such
matters as SNC may reasonably request with respect to the transactions
contemplated hereby and by the Plan of Merger, the Bank Merger Agreements
and the BB&T Option Agreement;
(e) SNC shall have received an opinion from Arthur Andersen & Co. LLP
that the Merger shall qualify for the pooling-of-interests method of
accounting;
(f) Neither BB&T, BB&T-NC nor BB&T-SC shall have experienced or suffered
any material adverse change in its business, operations, assets or
condition (financial or other) since the date hereof;
(g) SNC shall have received the opinion of Lehman Brothers and Wheat,
First Securities, Inc. as of or immediately prior to the effective date of
the Registration Statement, to the effect that certain terms of the Merger
are fair from a financial point of view to the SNC shareholders;
(h) Current SNC officers as Previously Disclosed shall have terminated
any and all employment, severance or similar agreements with SNC or any SNC
Subsidiary and shall have executed employment agreements substantially in
the form provided in Exhibit 5.2(h) to this Agreement; and
(i) L. Glenn Orr, Jr. shall have entered into an agreement with the terms
provided for in Exhibit 5.3(i) to this Agreement.
ARTICLE 6.
Termination, Waiver and Amendment
6.1. TERMINATION
This Reorganization Agreement, the Plan of Merger and the Bank Merger
Agreements may be terminated, either before or after approval by the
shareholders of BB&T or SNC:
I-32
<PAGE>
(a) At any time on or prior to the Effective Date, by the mutual consent
in writing of the parties hereto;
(b) At any time on or prior to the Closing Date, by BB&T in writing, if
SNC has, or by SNC in writing, if BB&T has, in any material respect,
breached (i) any covenant or agreement contained herein, in the Plan of
Merger or in the Bank Merger Agreements or (ii) any representation or
warranty contained herein, and in either case if such breach has not been
cured by the earlier of 30 days after the date on which written notice of
such breach is given to the party committing such breach or the Closing
Date;
(c) On the Closing Date, by any party hereto in writing, if any of the
conditions precedent set forth in Article 5 hereof with respect to such
party have not been satisfied or fulfilled;
(d) At any time, by any party hereto in writing, if the applications for
prior approval referred to in Section 4.3 hereof have been denied, and the
time period for appeals and requests for reconsideration has run;
(e) At any time, by any party hereto in writing, if the shareholders of
SNC or BB&T do not approve the transactions contemplated herein at the
special meetings duly called for that purpose;
(f) By any party hereto in writing, if the Closing Date has not occurred
by the close of business on July 31, 1995; provided, however, such date
shall be extended until December 31, 1995, if the reason for failure of the
Closing to have occurred by July 31, 1995 is that any regulatory approval
contemplated by Section 4.3 has not been received;
(g) At any time prior to September 22, 1994 by BB&T in writing, if BB&T
determines in its sole good faith judgment that the financial condition,
business or prospects of SNC, SNBNC or SNBSC are materially adversely
different from what was reasonably expected by BB&T after the performance
of its due diligence prior to the execution of this Agreement; provided
that BB&T shall inform SNC upon such termination as to the reasons for
BB&T's determination; and, provided further, that this Section 6.1(g) shall
not limit in any way the due diligence investigation of SNC, SNBNC and
SNBSC which BB&T may perform or otherwise affect any other rights which
BB&T has after the date hereof and after September 22, 1994, under the
terms of this Agreement;
(h) At any time prior to September 22, 1994, by SNC in writing, if SNC
determines in its sole good faith judgment that the financial condition,
business or prospects of BB&T, BB&T-NC or BB&T-SC are materially adversely
different from what was reasonably expected by SNC after the performance of
its due diligence prior to the execution of this Agreement; provided that
SNC shall inform BB&T upon such termination as to the reasons for SNC's
determination; and, provided further, that this Section 6.1(h) shall not
limit in any way the due diligence investigation of BB&T, BB&T-NC and BB&T-
SC which SNC may perform or otherwise affect any other rights which SNC has
after the date hereof and after September 22, 1994, under the terms of this
Agreement; or
(i) By either BB&T or SNC if, in the event John A. Allison IV is
unavailable to serve as Chairman of the Board of Directors and Chief
Executive Officer of the Continuing Corporation at such time as the parties
are otherwise prepared to consummate the Merger, and the BB&T Board of
Directors and the SNC Board of Directors are unable, after reasonable
efforts, to mutually agree upon a person to serve as Continuing Corporation
Chairman and a person to serve as Continuing Corporation Chief Executive
Officer.
6.2. EFFECT OF TERMINATION
In the event this Reorganization Agreement and the Plan of Merger are
terminated pursuant to Section 6.1 hereof, this Agreement, the Plan of Merger
and the Bank Merger Agreements shall become void and have no effect, except
that (i) the provisions relating to confidentiality and expenses set forth in
Sections 4.5 and 7.1 hereof, respectively, shall survive any such termination
and (ii) a termination pursuant to Section 6.1(b)(i) shall not relieve the
breaching party from liability for an uncured willful breach of such covenant
or agreement giving rise to such termination.
I-33
<PAGE>
6.3. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Reorganization
Agreement, the Plan of Merger and the Bank Merger Agreements or in any
instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Date and from and after the
Effective Date, none of the parties hereto shall have any liability to the
other on account of any breach or failure of any of these representations,
warranties or covenants, other than covenants that by their terms are to
survive or be performed after the Effective Date, provided that no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive BB&T or SNC (or any director, officer or
controlling person thereof) of any defense in law or equity which otherwise
would be available against the claims of any person, including, without
limitation, any shareholder or former shareholder of either BB&T or SNC, the
aforesaid representations, warranties and covenants being material inducements
to the consummation by BB&T, SNC, BB&T-NC, SNBNC, BB&T-SC and SNBSC of the
transactions contemplated herein and in the Bank Merger Agreements.
6.4. WAIVER
Except with respect to any required shareholder or regulatory approval, BB&T
and SNC respectively, by written instrument signed by an executive officer of
such party, may at any time (whether before or after approval of this
Reorganization Agreement and the Plan of Merger by the shareholders of BB&T and
SNC) extend the time for the performance of any of the obligations or other
acts of BB&T, BB&T-NC or BB&T-SC, on the one hand, or SNC, SNBNC or SNBSC, on
the other hand, and may waive (i) any inaccuracies of such parties in the
representations or warranties contained in this Agreement, the Plan of Merger,
the Bank Merger Agreements or any document delivered pursuant hereto or
thereto, (ii) compliance with any of the covenants, undertakings or agreements
of such parties, or satisfaction of any of the conditions precedent to its
obligations, contained herein, in the Plan of Merger or in the Bank Merger
Agreements or (iii) the performance by such parties of any of its obligations
set out herein or therein; provided, however, that no such waiver executed
after approval of this Reorganization Agreement and the Plan of Merger by the
shareholders of BB&T and/or SNC shall alter the number of shares of SNC Common
Stock into which each share of BB&T Common Stock shall be converted pursuant to
the Merger.
6.5. AMENDMENT OR SUPPLEMENT
This Reorganization Agreement, the Plan of Merger and the Bank Merger
Agreements may be amended or supplemented at any time by mutual agreement of
the parties hereto, in the case of this Reorganization Agreement, or thereto,
in the case of the Plan of Merger and the Bank Merger Agreements, respectively.
Any such amendment or supplement must be in writing and approved by their
respective boards of directors and/or officers authorized thereby and shall be
subject to the proviso in Section 6.4 hereof.
ARTICLE 7.
Miscellaneous
7.1. EXPENSES
(a) Except as provided in Section 7.1(b) below, each party hereto shall bear
and pay all costs and expenses incurred by it in connection with the
transactions contemplated in this Reorganization Agreement, including fees and
expenses of its own financial consultants, accountants and counsel, except that
BB&T and SNC each shall bear and pay 50% of the fees of Lehman Brothers and 50%
of all printing costs.
(b) Notwithstanding the provisions of Section 7(a) hereof, if for any reason
this Reorganization Agreement is terminated by any party before the closing of
the transactions contemplated hereby is concluded, each of SNC and BB&T shall
bear and pay one-half of the reasonable and actual out of pocket
I-34
<PAGE>
costs and expenses incurred by the parties in connection with this Agreement,
including the fees and expenses of consultants, printers and persons involved
in the transactions contemplated by this Reorganization Agreement, the
preparation of the Registration Statement and Proxy Statement, the solicitation
of proxies and the registration under the Securities Act of the Continuing
Corporation Common Stock, (except that the fees and expenses for paying
employees and of investment bankers, accountants, and counsel shall not be
subject to this Section 7.1(b)), provided that if this Reorganization
Agreement, the Plan of Merger and the Bank Merger Agreements are terminated by
SNC or BB&T pursuant to Section 6.1(b) hereof, in either case because of a
willful breach by the other of any representation, warranty, covenant,
undertaking or restriction as set forth in Section 6.1(b), and provided further
that the terminating party shall not have been in breach of any representation
and warranty (in any material respect), covenant, undertaking or restriction
contained herein, in the Plan of Merger or in the Bank Merger Agreements, then
the breaching party shall bear and pay all such costs and expenses. Final
settlement with respect to the payment of such fees and expenses by the parties
shall be made within thirty days of the termination of this Reorganization
Agreement, the Plan of Merger and the Bank Merger Agreements.
7.2. ENTIRE AGREEMENT
This Reorganization Agreement, the Plan of Merger, the BB&T Option Agreement,
the SNC Option Agreement and the Bank Merger Agreements contain the entire
agreement between the parties with respect to the transactions contemplated
hereunder and thereunder and supersede all prior arrangements or understandings
with respect thereto, written or oral, other than documents referred to herein
or therein. The terms and conditions of this Reorganization Agreement and the
Plan of Merger shall inure to the benefit of and be binding upon the parties
hereto and thereto and their respective successors. Nothing in this
Reorganization Agreement or the Plan of Merger, expressed or implied, is
intended to confer upon any party, other than the parties hereto and thereto,
and their respective successors, any rights, remedies, obligations or
liabilities.
7.3. NO ASSIGNMENT
No party hereto may assign any of its rights or obligations under this
Reorganization Agreement to any other person.
7.4. NOTICES
All notices or other communications which are required or permitted hereunder
shall be in writing and sufficient if delivered personally or sent by facsimile
transmission or overnight express or by registered or certified mail, postage
prepaid, addressed as follows:
If to BB&T:
BB&T Financial Corporation
223 West Nash Street
Wilson, North Carolina 27893
Attention: John A. Allison IV
Facsimile No.: (919) 399-4895
With a required copy to:
Arnold & Porter
1200 New Hampshire Ave., N.W.
Washington, D.C. 20036
Attention: L. Stevenson Parker
Facsimile No.: (202) 872-6720
I-35
<PAGE>
If to SNC:
Southern National Corporation
200 West Second Street
Winston-Salem, North Carolina 27101
Attention: L. Glenn Orr, Jr.
Facsimile No.: (910) 773-7203
With a required copy to:
Hunton & Williams
951 E. Byrd Street
Richmond, Virginia 23219
Attention: David M. Carter
Facsimile No.: (804) 788-8218
7.5. CAPTIONS
The captions contained in this Reorganization Agreement are for reference
purposes only and are not part of this Reorganization Agreement.
7.6. COUNTERPARTS
This Reorganization Agreement may be executed in any number of counterparts,
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
7.7. GOVERNING LAW
This Reorganization Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina applicable to
agreements made and entirely to be performed within such jurisdiction, without
regard to the conflict of laws principles thereof, except to the extent federal
law may be applicable.
I-36
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have caused this Reorganization Agreement to be executed in counterparts by
their duly authorized officers and their corporate seal to be hereunto affixed
and attested by their officers thereunto duly authorized, all as of the day and
year first above written.
Attest:
BB&T Financial Corporation
_____________________________________ By __________________________________
Secretary John A. Allison IV
Chairman of the Board and
Chief Executive Officer
(SEAL)
Attest:
Southern National Corporation
_____________________________________ By __________________________________
Secretary L. Glenn Orr, Jr.
Chairman, President and
Chief Executive Officer
I-37
<PAGE>
ANNEX II
PLAN OF MERGER OF
SOUTHERN NATIONAL CORPORATION WITH AND INTO
BB&T FINANCIAL CORPORATION
PLAN OF MERGER ("Plan of Merger") dated as of July 29, 1994, and as amended
and restated as of October 22, 1994, by and between SOUTHERN NATIONAL
CORPORATION ("SNC"), a North Carolina corporation having its registered office
at 500 North Chestnut Street, Lumberton, North Carolina 28358, and BB&T
FINANCIAL CORPORATION ("BB&T"), a North Carolina corporation having its
registered office at 223 West Nash Street, Wilson, North Carolina 27893.
W I T N E S S E T H
WHEREAS, the respective Boards of Directors of SNC and BB&T deem the merger
of BB&T with and into SNC, under and pursuant to the terms and conditions
herein set forth or referred to, desirable and in the best interests of the
respective corporations and their respective shareholders, and the respective
Boards of Directors of SNC and BB&T have adopted resolutions approving this
Plan of Merger and an Agreement and Plan of Reorganization dated as of even
date herewith ("Reorganization Agreement");
WHEREAS, the Board of Directors of SNC has directed that this Plan of Merger
be submitted to the shareholders of SNC; and
WHEREAS, the Board of Directors of BB&T has directed that this Plan of Merger
be submitted to the shareholders of BB&T;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
herein contained, the parties hereto do hereby agree that the Plan of Merger
shall be as follows:
ARTICLE I.
Merger
Subject to the terms and conditions of this Plan of Merger and the
Reorganization Agreement, on the Effective Date (as hereinafter defined), BB&T
shall be merged with and into SNC, pursuant to the provisions of, and with the
effect provided in, Section 55-11-06 of the North Carolina Business Corporation
Act (said transaction being hereinafter referred to as the "Merger"). On the
Effective Date, the separate existence of BB&T shall cease and SNC, as the
surviving entity, shall continue unaffected and unimpaired by the Merger and
shall operate under the name "Southern National Corporation." (SNC as existing
on and after the Effective Date being hereinafter sometimes referred to as the
"Surviving Corporation.")
ARTICLE II.
Articles of Incorporation and Bylaws
Upon the Effective Date, the Articles of Incorporation and the Bylaws of the
Surviving Corporation shall be the Articles of Incorporation and Bylaws of SNC;
except that Article IV of SNC's Articles of Incorporation shall be amended by
deleting the first sentence of such Article and substituting the following:
"The Corporation shall have the authority to issue 300,000,000 shares
of Common Stock, par value $5 each, and 5,000,000 shares of Preferred
Stock, par value $5 each."
II-1
<PAGE>
ARTICLE III.
Board of Directors and Officers
1. From and after the Effective Date and until the first meeting of
shareholders of the Surviving Corporation called to elect directors following
the Merger (the "First Shareholders' Meeting"), the Board of Directors of the
Surviving Corporation shall consist of 24 persons, of which 12 shall be persons
named by the Board of Directors of BB&T ("BB&T Nominees") and 12 shall be
persons named by the Board of Directors of SNC ("SNC Nominees") (in each case
as identified by each party by letter to the other dated October 22, 1994). If
prior to the Effective Date (i) any of the BB&T Nominees or the SNC Nominees
becomes unable or unwilling to serve as a director of the Surviving
Corporation, or (ii) either BB&T or SNC determines to replace a BB&T Nominee or
an SNC Nominee, the party that designated such individual may name a
replacement to become a director of the Surviving Corporation after the
Effective Date. The members of the Nominating Committee of the Surviving
Corporation Board shall nominate for reelection, at the First Shareholders'
Meeting, as directors to serve on the Surviving Corporation Board of Directors
the BB&T Nominees and such of the SNC Nominees as may be required to be
reelected at such meeting (or their designated replacements pursuant to Section
4.13(a)). The terms of those directors of the Surviving Corporation to be
elected whose terms of office expire at the First Shareholders' Meeting shall
be allocated as designated by BB&T and SNC, provided that the terms of the same
number of SNC Nominees and BB&T Nominees (including those SNC Nominees, if any
whose terms do not expire at the First Shareholders' Meeting) will expire in
each applicable year. If after the Effective Date and prior to the First
Shareholders' Meeting, any of the BB&T Nominees or the SNC Nominees becomes
unable or unwilling or is otherwise ineligible to serve as a director of the
Surviving Corporation, the remaining BB&T Nominees or SNC Nominees, as the case
may be, may name a replacement to be nominated by the Nominating Committee for
election at the First Shareholders' Meeting. It is intended by the parties
hereto that following the Effective Date John A. Allison IV shall serve as
Chairman of the Board of the Surviving Corporation. If for any reason John A.
Allison IV is unavailable to serve as Chairman of the Board of the Surviving
Corporation at the Effective Date, the Chairman of the Board of the Surviving
Corporation shall be selected by mutual agreement of the Boards of Directors of
BB&T and SNC.
2. From and after the Effective Date, the Chief Executive Officer of the
Surviving Corporation shall be John A. Allison IV, to serve until his successor
is duly elected and qualified. If for any reason John A. Allison IV is
unavailable to serve as Chief Executive Officer of the Surviving Corporation at
the Effective Date, the Board of Directors of BB&T and SNC shall mutually agree
upon the person to serve as the Chief Executive Officer of the Surviving
Corporation. From and after the Effective Date, Henry G. Williamson, Jr. shall
be the Chief Administrative Officer, John R. Spruill shall be the Chief
Financial Officer, and each of W. Kendall Chalk, Robert E. Greene, Kelly S.
King, Morris D. Marley, Scott E. Reed and Michael W. Sperry shall be Executive
Vice Presidents of the Surviving Corporation. All other officers of the
Surviving Corporation shall be elected by the Board of Directors of the
Surviving Corporation.
ARTICLE IV.
Capital
1. The designation and number of outstanding shares of capital stock of BB&T
as of June 30, 1994 was as follows: (a) 36,271,016 shares of common stock, par
value $2.50 per share ("BB&T Common Stock"); and (b) no shares of Preferred
Stock. Each share of BB&T Common Stock is entitled to vote with respect to the
Merger. Such number of outstanding shares of BB&T Common Stock may be changed
prior to the Effective Date as a result of the exercise of stock options or
other rights, the sale of such shares by BB&T pursuant to its Dividend
Reinvestment Plan, the issuance of shares pursuant to its pending acquisition
of Commerce Bank, upon the repurchase by BB&T of such shares, or as otherwise
may be permitted pursuant to the Reorganization Agreement.
II-2
<PAGE>
2. The designation and number of outstanding shares of capital stock of SNC
as of June 30, 1994 was as follows: (a) 43,385,610 shares of common stock, par
value $5.00 per share ("SNC Common Stock" until the "Effective Date" and
"Surviving Corporation Common Stock" from and after the Effective Date) and(b)
770,000 shares of 6 3/4% Cumulative Convertible Preferred Stock, Series A,
$5.00 par value ("SNC Series A Preferred Stock"). Shares of capital stock of
SNC shall be entitled to vote with respect to the Merger as required by North
Carolina law. Such number of outstanding shares of SNC Common Stock and SNC
Series A Stock may be changed prior to the Effective Date as a result of the
exercise of stock options, the sale of such shares by SNC pursuant to its
Dividend Reinvestment Plan, the conversion of shares of SNC Series A Preferred
Stock, or other rights or upon the repurchase by SNC of shares of SNC Common
Stock. The number of outstanding shares of SNC Series A Preferred Stock may be
changed prior to the Effective Date as a result of the conversion of such
shares into shares of SNC Common Stock or upon the repurchase by SNC of such
shares.
3. The shares of capital stock of SNC issued and outstanding immediately
prior to the Effective Date shall, on the Effective Date, continue to be issued
and outstanding capital stock of the Surviving Corporation.
ARTICLE V.
Conversion and Exchange of SNC
Shares; Fractional Share Interests
1. On the Effective Date, each share of BB&T Common Stock outstanding
immediately prior to the Effective Date (except as provided in Paragraphs 3, 5,
and 7 of this Article) shall by virtue of the Merger be converted into 1.45
shares of Surviving Corporation Common Stock and shall no longer be shares of
common stock of BB&T.
2. On the Effective Date, all shares of BB&T Common Stock authorized but
unissued shall be canceled and no cash, stock or other property shall be
delivered in exchange therefor.
3. On and after the Effective Date, each holder of a certificate or
certificates theretofore representing outstanding shares of BB&T Common Stock
(any such certificate being hereinafter referred to as a "BB&T Certificate")
may surrender the same to the Surviving Corporation or its agent for
cancellation and each such holder shall be entitled upon such surrender to
receive in exchange therefor certificate(s) representing the number of whole
shares of Surviving Corporation Common Stock to which such holder is entitled
as provided herein and a check in an amount (subject to applicable withholding
taxes) equal to the amount of cash in lieu of a fractional share, without
interest, to which such holder is entitled as provided in Paragraph 7 of this
Article. Until so surrendered, each BB&T Certificate shall be deemed for all
purposes to evidence ownership of the number of whole shares of Surviving
Corporation Common Stock into which the shares represented by such Certificates
have been changed or converted as aforesaid. BB&T Certificates surrendered for
exchange by any person who is an "affiliate" of BB&T for purposes of Rule
145(c) under the Securities Act of 1933, as amended, shall not be exchanged for
certificates representing shares of Surviving Corporation Common Stock until
the Surviving Corporation has received the written agreement of such person
contemplated by Section 4.12 of the Reorganization Agreement. If any
certificate for shares of Surviving Corporation Common Stock is to be issued in
a name other than that in which a BB&T Certificate surrendered for exchange is
issued, the BB&T Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and the person requesting such exchange
shall affix any requisite stock transfer tax stamps to the BB&T Certificate
surrendered or provide funds for their purchase or establish to the
satisfaction of the Surviving Corporation or its agent that such taxes are not
payable.
4. Upon the Effective Date, the stock transfer books of BB&T shall be closed
and no transfer of BB&T Common Stock shall thereafter be made or recognized.
Any other provision of this Plan of Merger
II-3
<PAGE>
notwithstanding, neither the Surviving Corporation or its agent nor any party
to the Merger shall be liable to a holder of BB&T Common Stock for any amount
paid or property delivered in good faith to a public official pursuant to any
applicable abandoned property, escheat or similar law.
5. No conversion under Paragraph 1 of this Article V shall be made in respect
of any share of BB&T Common Stock as to which a BB&T shareholder has elected to
exercise dissenters' rights pursuant to Section 55-13-02 of the North Carolina
Business Corporation Act, as amended, if any, until such time as such
shareholder shall have effectively lost dissenters' rights.
6. In the event that during the period commencing on the date hereof and
ending on the Effective Date, the outstanding shares of SNC Common Stock shall
have been increased, decreased or changed into or exchanged for a different
number or kind of shares or securities by reorganization, recapitalization,
reclassification, stock dividend (other than pursuant to the Dividend
Reinvestment Plan), stock split or other like changes in BB&T's capitalization,
all without SNC's receiving consideration therefor, then an appropriate and
proportionate adjustment shall be made in the number and kind of shares of
Surviving Corporation Common Stock to be thereafter delivered to BB&T
shareholders pursuant to this Plan of Merger.
7. Notwithstanding any other provision hereof, each holder of shares of BB&T
Common Stock who would otherwise have been entitled to receive a fraction of a
share of Surviving Corporation Common Stock (after taking into account all BB&T
Certificates delivered by such holder) shall receive, in lieu thereof, upon
presentation of such BB&T Certificates, cash in an amount (subject to
applicable withholding taxes) equal to such fractional part of a share of
Surviving Corporation Common Stock multiplied by the market value of such
Surviving Corporation Common Stock. The market value of one share of Surviving
Corporation Common Stock on the Effective Date shall be the closing price of
SNC Common Stock as reported on the New York Stock Exchange Composite
Transactions Listing (as reported in the Wall Street Journal, or if not
reported thereby, any other authoritative source selected by the Surviving
Corporation) on the last business day preceding such date (or, if no such price
is reported on such date, on the next preceding business day when such price is
reported). No such holder shall be entitled to dividends, voting rights or any
other shareholder right in respect of any fractional share.
8. On the Effective Date, options to purchase shares of BB&T Common Stock
issued pursuant to BB&T's stock option plans shall be converted, without any
action on the part of the holders thereof, into options to acquire, upon
payment of the adjusted exercise price (which shall equal the exercise price
per share for the options immediately prior to the Merger, divided by 1.45),
the number of shares of SNC Common Stock the option holder would have received
pursuant to the Merger if he or she had exercised his or her options
immediately prior thereto. The conversion provided for any option in this
Paragraph 8 that is an "incentive stock option" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended ("Code") shall in all
events comply with the requirements of Section 424(a) of the Code, including
the requirement that such converted options shall not give to the holder
thereof any benefits additional to those which such holder had prior to such
conversion under the option as originally granted.
ARTICLE VI.
Effective Date of the Merger
Articles of Merger evidencing the transactions contemplated herein shall be
delivered to the North Carolina Secretary of State for filing as provided in
the Reorganization Agreement. The Merger shall be effective at the time and on
the date specified in such Articles of Merger (such date and time being herein
referred to as the "Effective Date").
II-4
<PAGE>
ARTICLE VII.
Further Assurances
If at any time the Surviving Corporation shall consider or be advised that
any further assignments, conveyances or assurances are necessary or desirable
to vest, perfect or confirm in the Surviving Corporation title to any property
or rights of BB&T, or otherwise carry out the provisions hereof, the proper
officers and directors of BB&T, as of the Effective Date, and thereafter the
officers of the Surviving Corporation acting on behalf of BB&T, shall execute
and deliver any and all proper assignments, conveyances and assurances, and do
all things necessary or desirable to vest, perfect or confirm title to such
property or rights in the Surviving Corporation and otherwise carry out the
provisions hereof.
ARTICLE VIII.
Conditions Precedent
The obligations of BB&T and SNC to effect the Merger as herein provided shall
be subject to satisfaction, unless duly waived, of the conditions set forth in
the Reorganization Agreement.
ARTICLE IX.
Termination
Anything contained in this Plan of Merger to the contrary notwithstanding,
and notwithstanding adoption hereof by the shareholders of SNC and BB&T, this
Plan of Merger may be terminated and the Merger abandoned as provided in the
Reorganization Agreement. If the Reorganization Agreement is terminated, then
this Plan of Merger shall terminate.
ARTICLE X.
Miscellaneous
1. This Plan of Merger may be amended or supplemented at any time prior to
its Effective Date by mutual agreement of BB&T and SNC. Any such amendment or
supplement must be in writing and approved by their respective Boards of
Directors and/or by officers authorized thereby and shall be subject to the
proviso in Section 6.4 of the Reorganization Agreement.
2. Any notice or other communication required or permitted under this Plan of
Merger shall be given, and shall be effective, in accordance with the
provisions of the Reorganization Agreement.
3. The headings of the several Articles herein are inserted for convenience
of reference only and are not intended to be a part of or to affect the meaning
or interpretation of this Plan of Merger.
4. This Plan of Merger shall be governed by and construed in accordance with
the laws of the State of North Carolina applicable to agreements made and
entirely to be performed in such jurisdiction, except to the extent Federal law
may be applicable.
II-5
<PAGE>
[LEHMAN BROTHERS LETTERHEAD]
ANNEX III-A
November 14, 1994
To the respective Boards of Directors:
BB&T Financial Corporation
223 West Nash Street
Wilson, NC 27893
Southern National Corporation
500 North Chestnut Street
Lumberton, NC 28358
Members of the Boards:
We understand that BB&T Financial Corporation ("BB&T") and Southern National
Corporation ("Southern National") (each a "Party" and collectively the
"Parties") have entered into a definitive merger agreement pursuant to which
the Parties will merge (the surviving corporation of such merger being referred
to herein as the "Combined Company") and each share of common stock of BB&T
will be converted into the right to receive 1.45 shares of common stock of
Southern National (the "Exchange Ratio") (the "Proposed Transaction"). The
terms and conditions of the Proposed Transaction are set forth in more detail
in the Agreement and Plan of Reorganization dated July 29, 1994 between the
Parties (the "Agreement").
We have been requested by each of the Parties to render our opinion with
respect to the fairness, from a financial point of view, to each Party and its
stockholders of the Exchange Ratio to be offered in the Proposed Transaction.
We have not been requested to opine as to, and our opinion does not in any
manner address, either Party's underlying business decision to proceed with or
effect the Proposed Transaction. This letter is in confirmation of our opinion
to you dated July 29, 1994.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement, (2)
the Joint Proxy Statement filed with the Securities and Exchange Commission
with respect to the Proposed Transaction, (3) the Annual Report on Form 10-K of
each Party for the year ended December 31, 1993, the Quarterly Reports on Form
10-Q of each Party for the quarters ended March 31, 1994, and June 30, 1994,
and such other publicly available information concerning each Party which we
believe to be relevant to our inquiry, (4) financial and operating information
furnished to us by each Party with respect to its business, operations,
financial performance and prospects, (5) a trading history of each Party's
common stock from July 31, 1989, to the present and a comparison of that
trading history with those of other companies which we deemed relevant, (6) a
comparison of the historical financial results and present financial condition
of each Party with those of other companies which we deemed relevant, and (7) a
comparison of the financial terms of the Proposed Transaction with the
financial terms of certain other transactions which we deemed relevant. In
addition, we have had discussions with the managements of both Parties
concerning (i) their respective businesses, operations, assets, financial
conditions and prospects, (ii) the cost savings and other potential benefits
resulting from a combination of the businesses of BB&T and Southern National
and (iii) the proposed future dividend policy of the Combined Company, and we
undertook such other studies, analyses and investigations as we deemed
appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification and have further relied upon the assurances of the
respective managements of each Party that they are not aware of any facts that
would make such information inaccurate or misleading. With respect to the
financial projections of each Party and the Combined Company, upon advice of
each Party we have assumed that such projections have been reasonably prepared
on a basis reflecting the best currently available estimates and judgments of
the management of
III-A-1
<PAGE>
such Party as to the future financial performance of such Party and the
Combined Company and that such Party and the Combined Company will perform
substantially in accordance with such projections. In arriving at our opinion,
we have not conducted a physical inspection of the properties and facilities of
the Parties and have not made nor obtained any evaluations or appraisals of the
assets or liabilities of the Parties. In addition, you have not authorized us
to solicit, and we have not solicited, any indications of interest from any
third party with respect to the purchase of all or a part of either Party's
business. Upon advice of each Party and its legal and accounting advisors, we
have assumed that the merger will (i) qualify for pooling-of-interests
accounting treatment and (ii) as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended, and therefore as a
tax-free reorganization to the stockholders of each Party. Our opinion is
necessarily 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 offered
in the Proposed Transaction is fair to both BB&T and its stockholders and
Southern National and its stockholders.
We have acted as financial advisor to both of the Parties in connection with
the Proposed Transaction and will receive a fee for our services from each
Party which is contingent upon the consummation of the Proposed Transaction. In
addition, each Party has agreed to indemnify us for certain liabilities which
may arise out of the rendering of this opinion. In the ordinary course of our
business, we actively trade in the debt and equity securities of each of the
Parties 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 solely for the use and benefit of the respective Boards of
Directors of BB&T and Southern National. This opinion is not intended to be and
does not constitute a recommendation to any stockholder of either Party as to
how such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
III-A-2
<PAGE>
[WHEAT, FIRST SECURITIES, INC. LETTERHEAD]
ANNEX III-B
November 14, 1994
Board of Directors
Southern National Corporation
200 West Second Street
Winston-Salem, North Carolina 27101
Members of the Board:
Southern National Corporation ("Southern National") and BB&T Financial
Corporation ("BB&T") have entered into an Agreement and Plan of Reorganization
and a related Plan of Merger dated as of July 29, 1994 (the "Agreements"),
pursuant to which Southern National will combine with BB&T by means of the
merger of BB&T with and into Southern National. The combination of Southern
National and BB&T is referred to herein as the "Merger" and the exchange ratio
of 1.45 shares of the $5.00 par value common stock of Southern National
("Southern National Common Stock") for each share of the $2.50 par value common
stock of BB&T ("BB&T Common Stock") is referred to herein as the "Exchange
Ratio".
Wheat, First Securities, Inc. ("Wheat, First") as part of its investment
banking business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes. In the ordinary course of our business as a broker-dealer,
we may, from time to time, have a long or short position in, and buy or sell,
debt or equity securities of Southern National or BB&T for our own account or
for the accounts of our customers. Wheat, First will also receive a fee from
Southern National for rendering this opinion. In the past, Wheat, First and its
affiliates have provided financial advisory and/or financing services for
Southern National, as well as BB&T, and have received customary fees for the
rendering of these services.
You have asked us whether, in our opinion, the Exchange Ratio is fair, from a
financial point of view, to the holders of Southern National Common Stock.
In arriving at the opinion set forth below, we have conducted discussions
with members of senior management of Southern National and BB&T concerning
their businesses and prospects and have reviewed certain publicly available
business and financial information and certain other information prepared or
provided to us in connection with the proposed Merger, including, among other
things, the following:
(1) Southern National's Annual Reports to Stockholders, Annual Reports on
Form !0-K and related financial information for the three fiscal years
ended December 31, 1993;
(2) Southern National's Quarterly Reports on Form 10-Q and related financial
information for the three months ended March 31, 1994 and for the six
months ended June 30, 1994;
(3) BB&T's Annual Reports to Stockholders, Annual Reports on Form 10-K and
related financial information for the three fiscal years ended December
31, 1993;
(4) BB&T's Quarterly Reports on Form 10-Q and related financial information
for the three months ended March 31, 1994 and for the six months ended
June 30, 1994;
(5) Certain publicly available information with respect to historical market
prices and trading activity for Southern National Common Stock and BB&T
Common Stock and for certain publicly traded financial institutions
which Wheat, First deemed relevant;
(6) Certain publicly available information with respect to banking companies
and the financial terms of certain other mergers of equals which Wheat,
First deemed relevant;
III-B-1
<PAGE>
(7) The Agreements;
(8) The Registration Statement on Form S-4 filed by Southern National with
the Securities and Exchange Commission with respect to the
reorganization, including the Joint Proxy Statement/Prospectus;
(9) Other financial information concerning the businesses and operations of
Southern National and BB&T, including certain audited financial
information and certain internal financial analyses and forecasts for
Southern National and BB&T prepared by the senior management of each
entity, as well as certain pro forma financial projections for the
combined company prepared by Southern National and BB&T; and
(10) Such financial studies, analyses, inquires and other matters as we
deemed necessary.
In preparing our opinion, we have relied on and assumed the accuracy and
completeness of all information provided to us or publicly available, including
the representations and warranties of Southern National and BB&T included in
the Agreements, and we have not assumed any responsibility for independent
verification of such information or undertaken an independent appraisal of the
assets or liabilities of Southern National or BB&T. We have relied upon the
management of Southern National and BB&T as to the reasonableness and
achievability of their financial and operational forecasts and projections, and
the assumptions and bases therefor, provided to us, and we have assumed that
such forecasts and projections reflect the best currently available estimates
and judgments of such management and that such forecasts and projections will
be realized in the amounts and in the time periods currently estimated by such
management. We also assumed, without independent verification, that the
aggregate allowances for loan losses and other contingencies for Southern
National and BB&T are adequate to cover such losses. Moreover, Wheat, First did
not review any individual credit files of Southern National or BB&T, nor did it
make an independent evaluation or appraisal of the assets or liabilities of
Southern National or BB&T. We also assumed that, in the course of obtaining the
necessary regulatory approvals for the Merger, no conditions will be imposed
that will have a material adverse effect on the contemplated benefits of the
Merger, on a pro forma basis, to Southern National. Our opinion is necessarily
based upon market, economic and other conditions as they exist and can be
evaluated on the date hereof and the information made available to us through
the date hereof. Wheat, First's opinion is directed only to the fairness, from
a financial point of view, of the Exchange Ratio to the shareholders of
Southern National Common Stock and does not constitute a recommendation to any
shareholder of Southern National or BB&T as to how such shareholder should vote
with respect to the Merger. Wheat, First's opinion does not address the
relative merits of the Merger as compared to any alternative business
strategies that might exist for Southern National, nor does it address the
effect of any other business combination in which Southern National might
engage.
It is understood that this opinion may be included in its entirety in the
Joint Proxy Statement/Prospectus. This opinion may not, however, be summarized,
excerpted from or otherwise publicly referred to without our prior written
consent.
On the basis of and subject to the foregoing, we are of the opinion that as
of the date hereof the Exchange Ratio is fair, from a financial point of view,
to the holders of Southern National Common Stock.
Very truly yours,
WHEAT, FIRST SECURITIES, INC.
III-B-2
<PAGE>
[MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED LETTERHEAD]
ANNEX III-C
November 14, 1994
Board of Directors
BB&T Financial Corporation
223 West Nash Street
Wilson, North Carolina 27893
Members of the Board:
BB&T Financial Corporation (the "Company") and Southern National Corporation
(the "Subject Company") have entered into an agreement (the "Agreement")
pursuant to which the Company will be merged with and into the Subject Company
in a transaction (the "Merger"). Pursuant to the Merger each share of the
Company's common stock, par value $2.50 per share (the "Shares"), will be
converted into the right to receive 1.45 shares (the "Common Exchange Ratio")
of the common stock, par value $5.00 per share of the Subject Company (the
"Company Shares"). The Merger is expected to be considered by the shareholders
of the Company and Subject Company at special shareholders' meetings and
consummated as soon as practicable after the receipt of all required regulatory
approvals. In connection with the Merger, the parties have entered into
agreements (the "Option Agreements") pursuant to which the Company and Subject
Company have granted to each other an option to acquire approximately 19.9% of
each other's total common shares outstanding (determined as set forth in the
Option Agreements) at prices of $30.625 and $20.625, respectively.
You have asked us whether, in our opinion, the proposed Common Exchange Ratio
is fair to the holders of the Shares (other than the Subject Company and its
affiliates) from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports on Form 10-K and related
financial information for the five fiscal years ended December 31,
1993 and the Company's Quarterly Reports on Form 10-Q and the related
unaudited financial information for the quarterly periods ending March
31, 1994 and June 30, 1994;
(2) Reviewed the Subject Company's Annual Reports on Form 10-K and related
financial information for the five fiscal years ended December 31,
1993 and the Subject Company's Quarterly Reports on Form 10-Q and the
related unaudited financial information for the quarterly periods
ending March 31, 1994 and June 30, 1994;
(3) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company and the Subject Company, furnished to us by the Company and
the Subject Company;
(4) Conducted discussions with members of senior management of the Company
and the Subject Company concerning their respective businesses and
prospects;
(5) Reviewed the historical market prices and trading activity for the
Shares and the Company Shares and compared them with that of certain
publicly traded companies which we deemed to be reasonably similar to
the Company and the Subject Company, respectively;
(6) Compared the results of operations of the Company and the Subject
Company with that of certain companies which we deemed to be
reasonably similar to the Company and the Subject Company,
respectively;
(7) Compared the proposed financial terms of the Merger contemplated by
the Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant;
III-C-1
<PAGE>
(8) Considered the pro forma effect of the Merger on the Company's
capitalization ratios and earnings, tangible book value and book value
per share;
(9) Reviewed the Agreement;
(10) Reviewed the Option Agreements; and
(11) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary to the rendering of this opinion.
In preparing our opinion, we have relied on the accuracy and completeness of
all information supplied or otherwise made available to us by the Company and
the Subject Company, and we have not assumed any responsibility for
independently verifying such information or undertaking an independent
appraisal of the assets or liabilities of the Company or the Subject Company.
With respect to the financial forecasts furnished by the Company and the
Subject Company, we have assumed that they have been reasonably prepared and
reflect the best currently available estimates and judgment of the Company's or
the Subject Company's management as to the expected future financial
performance of the Company or the Subject Company, as the case may be.
We have been retained by the Board of Directors of the Company as an
independent contractor to act as financial advisor to the Company with respect
to the Merger and will receive a fee for our services. We have, in the past,
provided financial advisory and financing services to the Company and Subject
Company and have received customary fees for the rendering of such services. In
addition, in the ordinary course of our securities business, we may actively
trade debt and/or equity securities of the Company and Subject Company and
their respective affiliates for our own account and the accounts of our
customers, and we therefore may from time to time hold a long or short position
in such securities. Our opinion is directed to the Board of Directors and
senior management of the Company and does not constitute a recommendation to
any shareholder of the Company as to how such shareholder should vote at any
shareholder meeting of the Company held in connection with the Merger. We
understand that this Opinion will be included in its entirety in the Joint
Proxy Statement/Prospectus.
On the basis of, and subject to the foregoing, we are of the opinion that the
proposed Common Exchange Ratio is fair to the holders of the Shares (other than
the Subject Company and its affiliates) from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
III-C-2
<PAGE>
ANNEX IV-A
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Option Agreement") dated as of July 29, 1994,
between BB&T FINANCIAL CORPORATION ("BB&T"), a North Carolina corporation
registered as a bank holding company under the Bank Holding Company Act of
1956, as amended ("Bank Holding Company Act"), and SOUTHERN NATIONAL
CORPORATION ("SNC"), a North Carolina corporation registered as a bank holding
company under the Bank Holding Company Act.
WITNESSETH
WHEREAS, the Boards of Directors of the parties hereto have approved an
Agreement and Plan of Reorganization ("Reorganization Agreement") and have
adopted a related Plan of Merger dated as of the date hereof (together
referred to herein as the "Merger Agreements"), providing for certain
transactions pursuant to which BB&T would be merged with and into SNC; and
WHEREAS, as a condition to and as consideration for SNC's entry into the
Merger Agreements and to induce such entry, BB&T has agreed to grant to SNC
the option set forth herein to purchase authorized but unissued shares of BB&T
Common Stock;
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. DEFINITIONS.
Capitalized terms defined in the Merger Agreements and used herein shall
have the same meanings as in the Merger Agreements.
2. GRANT OF OPTION.
Subject to the terms and conditions set forth herein, BB&T hereby grants to
SNC an option ("Option") to purchase up to 7,217,932 shares of BB&T Common
Stock, at a price of $30.625 per share payable in cash as provided in Section
4 hereof; provided, however, that in the event BB&T issues or agrees to issue
any shares of BB&T Common Stock (other than as permitted under the Merger
Agreements) at a price less than $30.625 per share (as adjusted pursuant to
Section 6 hereof), the exercise price shall be equal to such lesser price.
Notwithstanding anything else in this Agreement to the contrary, the number of
shares of BB&T Common Stock subject to the Option shall be reduced to such
lesser number, if any, as may from time-to-time be necessary, but only for so
long as may be necessary, to cause SNC not to be subject to the provisions of
Section 55-9-01 et seq. of, or deemed to own "control shares" of BB&T within
the meaning of Section 55-9A-01 of, the North Business Corporation Act, as
amended.
3. EXERCISE OF OPTION.
(a) Unless SNC shall have breached in any material respect any material
covenant or representation contained in the Reorganization Agreement and such
breach has not been cured, SNC may exercise the Option, in whole or part, at
any time or from time to time if a Purchase Event (as defined below) shall
have occurred and be continuing; provided that to the extent the Option shall
not have been exercised, it shall terminate and be of no further force and
effect (i) on the Effective Date of the Merger or (ii) upon termination of the
Merger Agreements in accordance with the provisions thereof (other than a
termination resulting from a willful breach by BB&T of any Specified Covenant
or, following the occurrence of a Purchase Event, failure
IV-A-1
<PAGE>
of BB&T's shareholders to approve the Merger Agreements by the vote required
under applicable law or under BB&T's Certificate of Incorporation), or (iii) 12
months after termination of the Merger Agreements due to a willful breach by
BB&T of any Specified Covenant or, following the occurrence of a Purchase
Event, failure of BB&T's shareholders to approve the Merger Agreements by the
vote required under applicable law or under BB&T's Certificate of
Incorporation; and provided further that any such exercise shall be subject to
compliance with applicable provisions of law.
(b) As used herein, a "Purchase Event" shall mean any of the following events
or transactions occurring after the date hereof:
(i) BB&T, Branch Banking and Trust Company ("BB&T-NC") or Branch Banking
and Trust Company of South Carolina ("BB&T-SC"), without having received
SNC's prior written consent, shall have entered into an agreement with any
person (other than BB&T, BB&T-NC or BB&T-SC, to (x) merge or consolidate,
or enter into any similar transaction, with BB&T, BB&T-NC or BB&T-SC,
except as contemplated in the Reorganization Agreement (including
Previously Disclosed transactions), (y) purchase, lease or otherwise
acquire all or substantially all of the assets of BB&T, BB&T-NC or BB&T-SC
or (z) purchase or otherwise acquire (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 10% or more of the voting power of BB&T, BB&T-NC or BB&T-SC;
(ii) any person (other than BB&T, or BB&T-NC or BB&T-SC in a fiduciary
capacity, or SNC, or Southern National Bank of North Carolina or Southern
National Bank of South Carolina in a fiduciary capacity) shall have
acquired beneficial ownership or the right to acquire beneficial ownership
of 15% or more of the outstanding shares of BB&T Common Stock after the
date hereof (the term "beneficial ownership" for purposes of this Option
Agreement having the meaning assigned thereto in Section 13(d) of the
Exchange Act and the regulations promulgated thereunder);
(iii) any person (other than BB&T, BB&T-NC or BB&T-SC) shall have made a
bona fide proposal to BB&T by public announcement or written communication
that is or becomes the subject of public disclosure to acquire BB&T, BB&T-
NC or BB&T-SC by merger, consolidation, purchase of all or substantially
all of its assets or any other similar transaction, and following such bona
fide proposal the shareholders of BB&T vote not to adopt the Plan of
Merger; or
(iv) BB&T shall have willfully breached any Specified Covenant following
a bona fide proposal to BB&T-NC, BB&T-SC or BB&T to acquire BB&T, BB&T-NC
or BB&T-SC by merger, consolidation, purchase of all or substantially all
of its assets or any other similar transaction, which breach would entitle
SNC to terminate the Merger Agreements (without regard to the cure periods
provided for therein) and such breach shall not have been cured prior to
the Notice Date (as defined below).
If more than one of the transactions giving rise to a Purchase Event under
this Section 3(b) is undertaken or effected, then all such transactions shall
give rise only to one Purchase Event, which Purchase Event shall be deemed
continuing for all purposes hereunder until all such transactions are
abandoned. As used in this Option Agreement, "person" shall have the meanings
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(c) In the event SNC wishes to exercise the Option, it shall send to BB&T a
written notice (the date of which being herein referred to as "Notice Date")
specifying (i) the total number of shares it will purchase pursuant to such
exercise, and (ii) a place and date not earlier than three business days nor
later than 60 business days from the Notice Date for the closing of such
purchase ("Closing Date"); provided that if prior notification to or approval
of any federal or state regulatory agency is required in connection with such
purchase, SNC shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date
on which any required notification period has expired or been terminated or
such approval has been obtained and any requisite waiting period shall have
passed.
IV-A-2
<PAGE>
(d) As used herein, "Specified Covenant" means any covenant contained in
Sections 4.1, 4.4 or 4.11, or subsections (2), (3), (4), (5), (6), (12) and,
to the extent applicable to the foregoing subsections, (14) of Section 4.8(b)
of the Reorganization Agreement.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) At the closing referred to in Section 3 hereof, SNC shall pay to BB&T
the aggregate purchase price for the shares of BB&T Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a
wire transfer to a bank account designated by BB&T.
(b) At such closing, simultaneously with the delivery of funds as provided
in subsection (a), BB&T shall deliver to SNC a certificate or certificates
representing the number of shares of BB&T Common Stock purchased by SNC, and
SNC shall deliver to BB&T a letter agreeing that SNC will not offer to sell or
otherwise dispose of such shares in violation of applicable law or the
provisions of this Option Agreement.
(c) Certificates for BB&T Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend which shall read substantially as
follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
BB&T Financial Corporation and to resale restrictions arising under the
Securities Act of 1933, as amended, a copy of which agreement is on file at
the principal office of BB&T Financial Corporation. A copy of such
agreement will be provided to the holder hereof without charge upon receipt
by BB&T Financial Corporation of a written request."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if SNC shall have
delivered to BB&T a copy of a letter from the staff of the Commission, or an
opinion of counsel, in form and substance satisfactory to BB&T, to the effect
that such legend is not required for purposes of the Securities Act.
5. REPRESENTATIONS.
BB&T hereby represents, warrants and covenants to SNC as follows:
(a) BB&T shall at all times maintain sufficient authorized but unissued
shares of BB&T Common Stock so that the Option may be exercised without
authorization of additional shares of BB&T Common Stock.
(b) The shares to be issued upon due exercise, in whole or in part, of
the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
In the event of any change in BB&T Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, exchanges of
shares or the like, the type and number of shares subject to the Option, and
the purchase price per share, as the case may be, shall be adjusted
appropriately. In the event that any additional shares of BB&T Common Stock
are issued or otherwise become outstanding after the date of this Option
Agreement (other than pursuant to this Option Agreement), the number of shares
of BB&T Common Stock subject to the Option shall be adjusted so that, after
such issuance, it equals 19.9% of the number of shares of BB&T Common Stock
then issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this Section 6 shall be
deemed to authorize BB&T to breach any provision of the Merger Agreements.
IV-A-3
<PAGE>
7. REGISTRATION RIGHTS.
BB&T shall, if requested by SNC, as expeditiously as possible file a
registration statement on a form of general use under the Securities Act if
necessary in order to permit the sale or other disposition of the shares of
BB&T Common Stock that have been acquired upon exercise of the Option in
accordance with the intended method of sale or other disposition requested by
SNC. SNC shall provide all information reasonably requested by BB&T for
inclusion in any registration statement to be filed hereunder. BB&T will use
its best efforts to cause such registration statement first to become effective
and then to remain effective for such period not in excess of 270 days from the
day such registration statement first becomes effective as may be reasonably
necessary to effect such sales or other dispositions. The first registration
effected under this Section 7 shall be at BB&T's expense except for
underwriting commissions and the fees and disbursements of SNC's counsel
attributable to the registration of such BB&T Common Stock. A second
registration may be requested hereunder at SNC's expense. In no event shall
BB&T be required to effect more than two registrations hereunder. The filing of
any registration statement hereunder may be delayed for such period of time as
may reasonably be required to facilitate any public distribution by BB&T of
BB&T Common Stock. If requested by SNC, in connection with any such
registration, BB&T will become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements. Upon receiving any
request from SNC or assignee thereof under this Section 7, BB&T agrees to send
a copy thereof to SNC and to any assignee thereof known to BB&T, in each case
by promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies.
8. SEVERABILITY.
If any term, provision, covenant or restriction contained in this Option
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Option
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Option will not permit the holder to acquire the
full number of shares of BB&T Common Stock provided in Section 2 hereof (as
adjusted pursuant to Section 6 hereof), it is the express intention of BB&T to
allow the holder to acquire or to require BB&T to repurchase such lesser number
of shares as may be permissible, without any amendment or modification hereof.
9. MISCELLANEOUS.
(a) Expenses. Except as otherwise provided herein, each of the parties hereto
shall bear and pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
(b) Entire Agreement. Except as otherwise expressly provided herein, this
Option Agreement contains the entire agreement between the parties with respect
to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Nothing in this Option Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by
reason of this Option Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Purchase Event shall have occurred and be continuing SNC
may assign in whole or in part its rights and obligations hereunder; provided,
however, that to the extent required by applicable regulatory authorities, SNC
may not assign its rights under the Option except in (i) a widely dispersed
public distribution, (ii) a private placement in which no one party acquires
the right
IV-A-4
<PAGE>
to purchase in excess of 2% of the voting shares of BB&T, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on SNC's behalf, or (iv) any
other manner approved by applicable regulatory authorities.
(d) Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered in the
manner and to the addresses provided for in or pursuant to Section 7.4 of the
Reorganization Agreement.
(e) Counterparts. This Option Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and construed
in accordance with the laws of the State of North Carolina applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
BB&T FINANCIAL CORPORATION
By: _________________________________
Name:
Title:
SOUTHERN NATIONAL CORPORATION
By: _________________________________
Name:
Title:
IV-A-5
<PAGE>
ANNEX IV-B
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Option Agreement") dated as of July 29, 1994,
between SOUTHERN NATIONAL CORPORATION ("SNC"), a North Carolina corporation
registered as a bank holding company under the Bank Holding Company Act of
1956, as amended ("Bank Holding Company Act"), and BB&T FINANCIAL CORPORATION
("BB&T"), a North Carolina corporation registered as a bank holding company
under the Bank Holding Company Act.
W I T N E S S E T H
WHEREAS, the Boards of Directors of the parties hereto have approved an
Agreement and Plan of Reorganization ("Reorganization Agreement") and have
adopted a related Plan of Merger dated as of the date hereof (together referred
to herein as the "Merger Agreements"), providing for certain transactions
pursuant to which BB&T would be merged with and into SNC; and
WHEREAS, as a condition to and as consideration for BB&T's entry into the
Merger Agreements and to induce such entry, SNC has agreed to grant to BB&T the
option set forth herein to purchase authorized but unissued shares of SNC
Common Stock;
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. DEFINITIONS.
Capitalized terms defined in the Merger Agreements and used herein shall have
the same meanings as in the Merger Agreements.
2. GRANT OF OPTION.
Subject to the terms and conditions set forth herein, SNC hereby grants to
BB&T an option ("Option") to purchase up to 8,633,736 shares of SNC Common
Stock, at a price of $20.625 per share payable in cash as provided in Section 4
hereof; provided, however, that in the event SNC issues or agrees to issue any
shares of SNC Common Stock (other than as permitted under the Merger
Agreements) at a price less than $20.625 per share (as adjusted pursuant to
Section 6 hereof), the exercise price shall be equal to such lesser price.
Notwithstanding anything else in this Agreement to the contrary, the number of
shares of SNC Common Stock subject to the Option shall be reduced to such
lesser number, if any, as may from time-to-time be necessary, but only for so
long as may be necessary, to cause BB&T not to be subject to the provisions of
Section 55-9-01 et seq. of, or deemed to own "control shares" of SNC within the
meaning of Section 55-9A-01 of, the North Business Corporation Act, as amended.
3. EXERCISE OF OPTION.
(a) Unless BB&T shall have breached in any material respect any material
covenant or representation contained in the Reorganization Agreement and such
breach has not been cured, BB&T may exercise the Option, in whole or part, at
any time or from time to time if a Purchase Event (as defined below) shall have
occurred and be continuing; provided that to the extent the Option shall not
have been exercised, it shall terminate and be of no further force and effect
(i) on the Effective Date of the Merger or (ii) upon termination of the Merger
Agreements in accordance with the provisions thereof (other than a termination
resulting from a willful breach by SNC of any Specified Covenant or, following
the occurrence of a Purchase Event, failure of SNC's shareholders to approve
the Merger Agreements by the vote required under applicable law), or(iii) 12
months after termination of the Merger Agreements due to a willful breach by
SNC of any Specified
IV-B-1
<PAGE>
Covenant or, following the occurrence of a Purchase Event, failure of SNC's
shareholders to approve the Merger Agreements by the vote required under
applicable law; and provided further that any such exercise shall be subject to
compliance with applicable provisions of law.
(b) As used herein, a "Purchase Event" shall mean any of the following events
or transactions occurring after the date hereof:
(i) SNC, Southern National Bank of North Carolina ("SNBNC") or Southern
National Bank of South Carolina ("SNBSC"), without having received BB&T's
prior written consent, shall have entered into an agreement with any person
(other than SNC, SNBNC or SNBSC) to (x) merge or consolidate, or enter into
any similar transaction, with SNC, SNBNC or SNBSC, except as contemplated in
the Reorganization Agreement (including Previously Disclosed transactions),
(y) purchase, lease or otherwise acquire all or substantially all of the
assets of SNC, SNBNC or SNBSC or (z) purchase or otherwise acquire
(including by way of merger, consolidation, share exchange or any similar
transaction) securities representing 10% or more of the voting power of SNC,
SNBNC or SNBSC;
(ii) any person (other than BB&T, or Bank Banking and Trust Company or
Branch Banking and Trust Company of South Carolina in a fiduciary capacity,
or SNC, or SNBNC or SNBSC in a fiduciary capacity) shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 15% or
more of the outstanding shares of the common stock of SNC, SNBNC or SNBSC
after the date hereof (the term "beneficial ownership" for purposes of this
Option Agreement having the meaning assigned thereto in Section 13(d) of the
Exchange Act and the regulations promulgated thereunder);
(iii) any person (other than SNC, SNBNC or SNBSC) shall have made a bona
fide proposal to SNC, SNBNC or SNBSC by public announcement or written
communication that is or becomes the subject of public disclosure to acquire
SNC, SNBNC or SNBSC by merger, consolidation, purchase of all or
substantially all of its assets or any other similar transaction, and
following such bona fide proposal the shareholders of SNC vote not to adopt
the Plan of Merger; or
(iv) SNC shall have willfully breached any Specified Covenant following a
bona fide proposal to SNC, SNBNC or SNBSC to acquire SNC, SNBNC or SNBSC by
merger, consolidation, purchase of all or substantially all of its assets or
any other similar transaction, which breach would entitle BB&T to terminate
the Merger Agreements (without regard to the cure periods provided for
therein) and such breach shall not have been cured prior to the Notice Date
(as defined below).
If more than one of the transactions giving rise to a Purchase Event under
this Section 3(b) is undertaken or effected, then all such transactions shall
give rise only to one Purchase Event, which Purchase Event shall be deemed
continuing for all purposes hereunder until all such transactions are
abandoned. As used in this Option Agreement, "person" shall have the meanings
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(c) In the event BB&T wishes to exercise the Option, it shall send to SNC a
written notice (the date of which being herein referred to as "Notice Date")
specifying (i) the total number of shares it will purchase pursuant to such
exercise, and (ii) a place and date not earlier than three business days nor
later than 60 business days from the Notice Date for the closing of such
purchase ("Closing Date"); provided that if prior notification to or approval
of any federal or state regulatory agency is required in connection with such
purchase, BB&T shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date
on which any required notification period has expired or been terminated or
such approval has been obtained and any requisite waiting period shall have
passed.
(d) As used herein, "Specified Covenant" means any covenant contained in
Sections 4.1, 4.4 or 4.11, or subsections (2), (3), (4), (5), (6), (12) and, to
the extent applicable to the foregoing subsections, (14) of Section 4.7(b) of
the Reorganization Agreement.
IV-B-2
<PAGE>
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) At the closing referred to in Section 3 hereof, BB&T shall pay to SNC the
aggregate purchase price for the shares of SNC Common Stock purchased pursuant
to the exercise of the Option in immediately available funds by a wire transfer
to a bank account designated by SNC.
(b) At such closing, simultaneously with the delivery of funds as provided in
subsection (a) SNC shall deliver to BB&T a certificate or certificates
representing the number of shares of SNC Common Stock purchased by BB&T, and
BB&T shall deliver to SNC a letter agreeing that BB&T will not offer to sell or
otherwise dispose of such shares in violation of applicable law or the
provisions of this Option Agreement.
(c) Certificates for SNC Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend which shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
Southern National Corporation and to resale restrictions arising under
Securities Act of 1933, as amended, a copy of which agreement is on file at
the principal office of Southern National Corporation. A copy of such
agreement will be provided to the holder hereof without charge upon receipt
by Southern National Corporation of a written request."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if BB&T shall have
delivered to SNC a copy of a letter from the staff of the Commission, or an
opinion of counsel, in form and substance satisfactory to SNC, to the effect
that such legend is not required for purposes of the Securities Act.
5. REPRESENTATIONS.
SNC hereby represents, warrants and covenants to BB&T as follows:
(a) SNC shall at all times maintain sufficient authorized but unissued
shares of SNC Common Stock so that the Option may be exercised without
authorization of additional shares of SNC Common Stock.
(b) The shares to be issued upon due exercise, in whole or in part, of
the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
In the event of any change in SNC Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, exchanges of shares or the
like, the type and number of shares subject to the Option, and the purchase
price per share, as the case may be, shall be adjusted appropriately. In the
event that any additional shares of SNC Common Stock are issued or otherwise
become outstanding after the date of this Option Agreement (other than pursuant
to this Option Agreement), the number of shares of SNC Common Stock subject to
the Option shall be adjusted so that, after such issuance, it equals 19.9% of
the number of shares of SNC Common Stock then issued and outstanding without
giving effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 6 shall be deemed to authorize SNC to breach any
provision of the Merger Agreements.
7. REGISTRATION RIGHTS.
SNC shall, if requested by BB&T, as expeditiously as possible file a
registration statement on a form of general use under the Securities Act if
necessary in order to permit the sale or other disposition of the shares of SNC
Common Stock that have been acquired upon exercise of the Option in accordance
with the intended method of sale or other disposition requested by BB&T. BB&T
shall provide all information reasonably requested by SNC for inclusion in any
registration statement to be filed hereunder. SNC will use its best efforts to
cause such registration statement first to become effective and then to remain
effective for such
IV-B-3
<PAGE>
period not in excess of 270 days from the day such registration statement first
becomes effective as may be reasonably necessary to effect such sales or other
dispositions. The first registration effected under this Section 7 shall be at
SNC's expense except for underwriting commissions and the fees and
disbursements of BB&T's counsel attributable to the registration of such SNC
Common Stock. A second registration may be requested hereunder at BB&T's
expense. In no event shall SNC be required to effect more than two
registrations hereunder. The filing of any registration statement hereunder may
be delayed for such period of time as may reasonably be required to facilitate
any public distribution by SNC of SNC Common Stock. If requested by BB&T, in
connection with any such registration, SNC will become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements. Upon receiving any request from BB&T or assignee thereof under this
Section 7, SNC agrees to send a copy thereof to BB&T and to any assignee
thereof known to SNC, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies.
8. SEVERABILITY.
If any term, provision, covenant or restriction contained in this Option
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Option
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Option will not permit the holder to acquire the
full number of shares of SNC Common Stock provided in Section 2 hereof (as
adjusted pursuant to Section 6 hereof), it is the express intention of SNC to
allow the holder to acquire or to require SNC to repurchase such lesser number
of shares as may be permissible, without any amendment or modification hereof.
9. MISCELLANEOUS.
(a) Expenses. Except as otherwise provided herein, each of the parties hereto
shall bear and pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
(b) Entire Agreement. Except as otherwise expressly provided herein, this
Option Agreement contains the entire agreement between the parties with respect
to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Nothing in this Option Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by
reason of this Option Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Purchase Event shall have occurred and be continuing BB&T
may assign in whole or in part its rights and obligations hereunder; provided,
however, that to the extent required by applicable regulatory authorities, BB&T
may not assign its rights under the Option except in(i) a widely dispersed
public distribution, (ii) a private placement in which no one party acquires
the right to purchase in excess of 2% of the voting shares of SNC, (iii) an
assignment to a single party (e.g., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on BB&T's behalf,
or (iv) any other manner approved by applicable regulatory authorities.
(d) Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered in the
manner and to the addresses provided for in or pursuant to Section 7.4 of the
Reorganization Agreement.
IV-B-4
<PAGE>
(e) Counterparts. This Option Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and construed
in accordance with the laws of the State of North Carolina applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
SOUTHERN NATIONAL CORPORATION
By:__________________________________
Name:
Title:
BB&T FINANCIAL CORPORATION
By:__________________________________
Name:
Title:
IV-B-5
<PAGE>
ANNEX V
ARTICLE 13.
Dissenters' Rights
Part 1. Right to Dissent and Obtain Payment for Shares.
(S)55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger of share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and
in the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be
inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances, giving due consideration to the rate currently
paid by the corporation on its principal bank loans, if any, but not less
than the rate provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
(S)55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares
in the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other than
a parent corporation in a merger under G.S. 55-11-04) is a party unless (i)
approval by the shareholders of that corporation is not required under G.S.
55-11-03(g) and (ii) such shares are then redeemable by the corporation at
a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than as permitted by G.S. 55-12-01,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale pursuant to a plan by which all or substantially all of the
net proceeds of the sale will be distributed in cash to the shareholders
within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it (i)
alters or abolishes a preferential right of the shares;(ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the
V-1
<PAGE>
holder of the shares to acquire shares or other securities; (iv) excludes
or limits the right of the shares to vote on any matter, or to cumulate
votes; (v) reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under G.S. 55-6-04; or (vi) changes the corporation into a
nonprofit corporation or cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares under
this Article may not challenge the corporate action creating his entitlement,
including without limitation a merger solely or partly in exchange for cash or
other property, unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
(S)55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the beneficial
shareholder.
(S)55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
Part 2. Procedure for Exercise of Dissenters' Rights
(S)55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S. 55-
13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters'
rights under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S. 55-
13-02 unless he voted for such corporate action.
(S)55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S. 55-
13-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
V-2
<PAGE>
(b) A shareholder who does not satisfy the requirements of subsection (a) is
not entitled to payment for his shares under this Article.
(S)55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S. 55-
13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than 30 nor more than 60 days after the date
the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
(S)55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this Article.
(S)55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
(S)55-13-25. OFFER OF PAYMENT.
(a) As soon as the proposed corporate action is taken, or upon receipt of a
payment demand, the corporation shall offer to pay each dissenter who complied
with G.S. 55-13-23 the amount the corporation estimates to be the fair value of
his shares, plus interest accrued to the date of payment, and shall pay this
amount to each dissenter who agrees in writing to accept it in full
satisfaction of his demand.
(b) The offer of payment must be accompanied by:
(1) The corporation's most recent available balance sheet as of the end
of a fiscal year ending not more than 16 months before the date of offer of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
V-3
<PAGE>
(4) A statement of the dissenter's right to demand payment under G.S. 55-
13-28; and
(5) A copy of this Article.
(S)55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand
procedure.
(S)55-13-27. RESERVED FOR FUTURE PURPOSES.
(S)55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S OFFER OR
FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate or reject the corporation's offer under G.S. 55-13-25 and demand
payment of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payments to a dissenter who accepts the
corporation's offer under G.S. 55-13-25 within 30 days after the
dissenter's acceptance; or
(3) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section unless
he notifies the corporation of his demand in writing (i) under subdivision
(a)(1) within 30 days after the corporation offered payment for his shares or
(ii) under subdivisions (a)(2) and (a)(3) within 30 days after the corporation
has failed to perform timely. A dissenter who fails to notify the corporation
of his demand under subsection (a) within such 30-day period shall be deemed
to have withdrawn his dissent and demand for payment.
(S)55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
Part 3. Judicial Appraisal of Shares.
(S)55-13-30. COURT ACTION.
(a) If a demand for payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the date of his
payment demand under G.S. 55-13-28 and petition the court to determine the
fair value of the shares and accrued interest. Upon service upon it of the
petition filed with the court, the corporation shall pay to the dissenter the
amount offered by the corporation under G.S. 55-13-25.
(a1) If the dissenter does not commence the proceeding within the 60-day
period, the dissenter shall have an additional 30 days to either (i) accept in
writing the amount offered by the corporation under G.S. 55-13-25, upon which
the corporation shall pay such amount to the dissenter in full satisfaction of
his demand, or(ii) withdraw his demand for payment and resume the status of a
nondissenting shareholder. A dissenter who takes no action within such 30-day
period shall be deemed to have withdrawn his dissent and demand for payment.
(b) Reserved for future codification purposes.
V-4
<PAGE>
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The parties are entitled to the
same discovery rights as parties in other civil proceedings. However, in a
proceeding by a dissenter in a public corporation, there is no right to a trial
by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment for
the amount, if any, by which the court finds the fair value of his shares, plus
interest, exceeds the amount paid by the corporation.
(S)55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30 shall
determine all costs of the proceeding, including the reasonable compensation
and expenses of appraisers appointed by the court, and shall assess the costs
as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either or
any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
(c) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court
may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefitted.
V-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The SNC Bylaws provide that SNC shall indemnify to the fullest extent
permitted by law any person who (i) is, or has served as, an officer or
director of SNC (ii) is, or has served as, at the request of the Company, an
officer or director of any enterprise in which SNC has a significant financial
interest (each, an "Affiliate") or (iii) is, or has served as, a trustee or
administrator under any employee benefit plan sponsored by SNC or any
Affiliate.
North Carolina law permits a corporation to indemnify any director or officer
of the corporation against expenses (including attorneys' fees), judgments,
penalties, fines and amounts paid in settlement incurred in connection with any
actual or threatened action, suit or proceeding brought because such person is
or was a director or officer of the corporation; provided, however, that a
corporation may not indemnify or agree to indemnify a director or officer
against liability or expenses he may incur on account of his activities which
were at the time taken known or believed by him to be clearly in conflict with
the best interests of the corporation.
SNC has in force and effect a policy effective during the period insuring the
directors and officers of SNC against losses which they or any of them shall
become legally obligated to pay for reason of any actual or alleged error or
misstatement or misleading statement or act or omission or neglect or breach of
duty by the directors and officers in the discharge of their duties,
individually or collectively, or any matter claimed against them solely by
reason of their being directors or officers, such insurance coverage being
limited to an aggregate sum of $10,000,000 each policy year, and such coverage
being further limited by the specific terms and provisions of the insurance
policy.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
2(a) Agreement and Plan of Reorganization, dated as of July 29, 1994,
and amended and restated as of October 22, 1994, between SNC and
BB&T Financial (attached to the Joint Proxy Statement/Prospectus
as Annex I)
2(b) Plan of Merger, dated as of July 29, 1994, and amended and
restated as of October 22, 1994, between SNC and BB&T Financial
(attached to the Joint Proxy Statement/Prospectus as Annex II)
3(a) Amended and Restated Articles of Incorporation of SNC (filed as
Exhibit 4(a) to SNC's Registration Statement on Form S-3 filed on
June 9, 1993 (Registration Statement No. 33-64176) and
incorporated herein by reference)
3(b) Bylaws of SNC (filed as Exhibit 3.2 to SNC's Registration
Statement on Form S-4 filed on June 20, 1989 (Registration
Statement No. 33-20586) and incorporated herein by reference))
4(a) BB&T Financial Option Agreement (attached to the Joint Proxy
Statement/Prospectus as Annex IV-A)
4(b) SNC Option Agreement (attached to the Joint Proxy
Statement/Prospectus as Annex IV-B)
5 Opinion of Hunton & Williams regarding the legality of the
securities to be registered hereby
8 Opinion of Hunton & Williams regarding certain federal income tax
consequences of the Merger
10(a) Form of Employment Agreement
10(b) Agreement with L. Glenn Orr, Jr.
10(c) Agreement with Gary E. Carlton
23(a) Consent of Arthur Andersen LLP
II-1
<PAGE>
23(b) Consent of KPMG Peat Marwick LLP
23(c) Consent of KPMG Peat Marwick LLP
23(d) Consent of Donald G. Jones and Company, P.A.
23(e) Consent of Ernst & Young LLP
23(f) Consent of Coopers & Lybrand L.L.P.
23(g) Consent of Hunton & Williams (included as part of Exhibits 5 and
8 hereto)
23(h) Consent of Lehman Brothers Inc.
23(i) Consent of Wheat, First Securities, Inc.
23(j) Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
24 Powers of Attorney (included on signature page)
99(a) Form of SNC proxy
99(b) Form of BB&T Financial proxy
ITEM 22 UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes as follows:
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 of 1933;
(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; 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.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and
the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
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.
4. That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange
Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
5. That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this
registration statement, by any person or party who is deemed
II-2
<PAGE>
to be an underwriter within the meaning of Rule 145(c), the
Registrant 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.
6. That every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements
of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as part of
an amendment to the registration statement and will not be used until
such amendment is effective, and that, for the purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
7. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(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 the
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF LUMBERTON, STATE OF NORTH CAROLINA, ON NOVEMBER 14,
1994.
Southern National Corporation
(Registrant)
/s/ L. Glenn Orr, Jr.
By: _________________________________
L. Glenn Orr, Jr.
Chairman, President and Chief
Executive Officer
II-4
<PAGE>
POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED
ON SEPTEMBER 15, 1994. EACH OF THE DIRECTORS AND/OR OFFICERS OF SOUTHERN
NATIONAL CORPORATION WHOSE SIGNATURE APPEARS BELOW HEREBY APPOINTS DAVID L.
CRAVEN, JOHN R. SPRUILL AND DAVID M. CARTER, AND EACH OF THEM SEVERALLY, AS HIS
ATTORNEY-IN-FACT TO SIGN IN HIS NAME AND BEHALF, IN ANY AND ALL CAPACITIES
STATED BELOW AND TO FILE WITH THE COMMISSION, ANY AND ALL AMENDMENTS, INCLUDING
POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT, MAKING SUCH CHANGES
IN THE REGISTRATION STATEMENT AS APPROPRIATE, AND GENERALLY TO DO ALL SUCH
THINGS IN THEIR BEHALF IN THEIR CAPACITIES AS OFFICERS AND DIRECTORS TO ENABLE
SOUTHERN NATIONAL CORPORATION TO COMPLY WITH THE PROVISIONS OF THE SECURITIES
ACT OF 1933, AND ALL REQUIREMENTS OF THE SECURITIES AND EXCHANGE COMMISSION.
SIGNATURE TITLE
/s/ L. Glenn Orr, Jr. Chairman, President, Chief
- ------------------------------------- Executive Officer and
L. GLENN ORR, JR. Director (Principal Executive
Officer)
/s/ John R. Spruill Executive Vice President and
- ------------------------------------- Chief Financial Officer
JOHN R. SPRUILL (Principal Financial Officer)
/s/ Gary E. Carlton Executive Vice President and
- ------------------------------------- Director
GARY E. CARLTON
/s/ Sherry A. Kellet Executive Vice President and
- ------------------------------------- Controller (Principal
SHERRY A. KELLET Accounting Officer)
/s/ William F. Black Director
- -------------------------------------
WILLIAM F. BLACK
/s/ Luther C. Boliek Director
- -------------------------------------
LUTHER C. BOLIEK
/s/ Ronald E. Deal Director
- -------------------------------------
RONALD E. DEAL
/s/ William N. Geiger, Jr. Director
- -------------------------------------
WILLIAM N. GEIGER, JR.
/s/ Paul S. Goldsmith Director
- -------------------------------------
PAUL S. GOLDSMITH
/s/ Lloyd Vincent Hackley Director
- -------------------------------------
LLOYD VINCENT HACKLEY
/s/ James A. Hardison, Jr. Director
- -------------------------------------
JAMES A. HARDISON, JR.
II-5
<PAGE>
SIGNATURE TITLE
/s/ Donald C. Hiscott Director
- -------------------------------------
DONALD C. HISCOTT
/s/ Charles A. Hostetler Director
- -------------------------------------
CHARLES A. HOSTETLER
/s/ Richard Janeway, M.D. Director
- -------------------------------------
RICHARD JANEWAY, M.D.
/s/ Joseph A. McAloer Director
- -------------------------------------
JOSEPH A. MCALOER
/s/ Albert O. McCauley Director
- -------------------------------------
ALBERT O. MCCAULEY
/s/ Dickson McLean, Jr. Director
- -------------------------------------
DICKSON MCLEAN, JR.
/s/ Charles E. Nichols Director
- -------------------------------------
CHARLES E. NICHOLS
/s/ C. Edward Pleasants Director
- -------------------------------------
C. EDWARD PLEASANTS
/s/ Nido R. Qubein Director
- -------------------------------------
NIDO R. QUBEIN
/s/ Ted R. Reynolds Director
- -------------------------------------
TED R. REYNOLDS
/s/ A. Bruce Williams Director
- -------------------------------------
A. BRUCE WILLIAMS
/s/ A. Tab Williams, Jr. Director
- -------------------------------------
A. TAB WILLIAMS, JR.
/s/ Edward M. Williams Director
- -------------------------------------
EDWARD M. WILLIAMS
/s/ T. H. Yancey Director
- -------------------------------------
T. H. YANCEY
/s/ Robert H. Yeargin Director
- -------------------------------------
ROBERT H. YEARGIN
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBITS NUMBERED PAGES
-------- --------------
<C> <S> <C>
2(a) Agreement and Plan of Reorganization, dated as of
July 29, 1994, and amended and restated as of
October 22, 1994, between SNC and BB&T Financial
(attached to the Joint Proxy Statement/Prospectus as
Annex I)
2(b) Plan of Merger, dated as of July 29, 1994, and
amended and restated as of October 22, 1994, between
SNC and BB&T Financial (attached to the Joint Proxy
Statement/Prospectus as Annex II)
3(a) Amended and Restated Articles of Incorporation of
SNC (filed as Exhibit 4(a) to SNC's Registration
Statement in Form S-3 filed on June 9, 1993
(Registration Statement No. 33-64176) and
incorporated herein by reference)
3(b) Bylaws of SNC (filed as Exhibit 3.2 to SNC's
Registration Statement in Form S-4 filed in June 20,
1989 (Registration Statement No. 33-29586) and
incorporated herein by reference)
4(a) BB&T Financial Option Agreement (attached to the
Joint Proxy Statement/Prospectus as Annex IV-A)
4(b) SNC Option Agreement (attached to the Joint Proxy
Statement/Prospectus as Annex IV-B)
5 Opinion of Hunton & Williams regarding the legality
of the securities to be registered hereby
8 Opinion of Hunton & Williams regarding certain
federal income tax consequences of the Merger
10(a) Form of Employment Agreement
10(b) Agreement with L. Glenn Orr, Jr.
10(c) Agreement with Gary E. Carlton
23(a) Consent of Arthur Andersen LLP
23(b) Consent of KPMG Peat Marwick
23(c) Consent of KPMG Peat Marwick
23(d) Consent of Donald G. Jones and Company, P.A.
23(e) Consent of Ernst & Young LLP
23(f) Consent of Coopers & Lybrand
23(g) Consent of Hunton & Williams (included as part of
Exhibits 5 and 8 hereto)
23(h) Consent of Lehman Brothers Inc.
23(i) Consent of Wheat, First Securities, Inc.
23(j) Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
24 Powers of Attorney (included on signature page)
99(a) Form of SNC proxy
99(b) Form of BB&T Financial proxy
</TABLE>
<PAGE>
EXHIBIT 5
November 7, 1994
Board of Directors
Southern National Corporation
500 North Chestnut Street
Lumberton, North Carolina 28358
SOUTHERN NATIONAL CORPORATION
REGISTRATION STATEMENT ON FORM S-4
Gentlemen:
We are acting as counsel for Southern National Corporation (the "Company") in
connection with its Registration Statement on Form S-4, and any amendments
thereto, as filed with the Securities and Exchange Commission (the
"Registration Statement"), with respect to shares of Common Stock (the
"Shares") to be issued pursuant to a merger with BB&T Financial Corporation.
In rendering this opinion, we have relied upon, among other things, our
examination of such records of the Company and certificates of its officers and
of public officials as we have deemed necessary.
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated and validly existing
under the laws of the state of North Carolina.
2. The Shares are legally issued, fully paid and nonassessable.
We consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement and to the references to
us in the Prospectus included therein.
Very truly yours,
/s/ Hunton & Williams
<PAGE>
EXHIBIT 8
November 7, 1994
Southern National Corporation
200 West Second Street
Winston-Salem, North Carolina 27101
BB&T Financial Corporation
223 West Nash Street
Wilson, North Carolina 27893
MERGER OF BB&T FINANCIAL CORPORATION
INTO SOUTHERN NATIONAL CORPORATION
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Gentlemen:
We have acted as counsel to Southern National Corporation ("SNC") in
connection with the proposed merger of BB&T Financial Corporation ("BB&T") into
SNC (the "Holding Company Merger"). In the Holding Company Merger, each
outstanding share of BB&T common stock (except shares held by dissenting
shareholders) is to be converted into 1.45 shares of SNC common stock. Any BB&T
shareholder who becomes entitled to a fractional share of SNC common stock as a
result of the Holding Company Merger will receive cash from SNC in lieu of the
fractional share. Any shareholder exercising dissenter's rights will have the
right to receive cash for his shares of BB&T common stock. BB&T has no stock
outstanding other than common stock.
Shortly after the Holding Company Merger, (a) Southern National Bank of North
Carolina ("SNBNC"), a wholly-owned, first-tier subsidiary of SNC, is to merge
(the "NC Bank Merger") into Branch Banking and Trust Company ("BB&T-NC"), a
wholly-owned first-tier subsidiary of BB&T that will become a wholly-owned,
first-tier subsidiary of SNC as a result of the Holding Company Merger, and (b)
Southern National Bank of South Carolina ("SNBSC"), a wholly-owned, first-tier
subsidiary of SNC, is to merge (the "SC Bank Merger") into Branch Banking and
Trust Company of South Carolina ("BB&T-SC"), a wholly-owned, second-tier
subsidiary of BB&T that will become a wholly-owned, second-tier subsidiary of
SNC as a result of the Holding Company Merger (collectively the "Bank Mergers"
and individually a "Bank Merger"). All the stock of BB&T-SC is owned by BB&T
Financial Corporation of South Carolina ("BB&T Financial-SC"), a wholly-owned,
first-tier subsidiary of BB&T that will become a wholly-owned, first-tier
subsidiary of SNC as a result of the Holding Company Merger. BB&T-NC, BB&T-SC,
and BB&T Financial-SC will not issue any stock to SNC in the Bank Mergers.
You have requested our opinion concerning certain federal income tax
consequences of the Holding Company Merger and the Bank Mergers. In giving this
opinion we have reviewed the Agreement and Plan of Reorganization dated July
29, 1994, and amended and restated as of October 22, 1994, between BB&T and
SNC; the Plan of Merger relating to the Holding Company Merger; the Agreements
of Merger relating to the Bank Mergers; the Form S-4 Registration Statement
under the Securities Act of 1933 relating to the Holding Company Merger (the
"S-4"); and such other documents as we have considered necessary. In addition,
we have assumed the following:
1. The fair market value of the SNC common stock (including any fractional
share interest) received by a BB&T shareholder in exchange for BB&T common
stock will be approximately equal to the fair market value of the BB&T common
stock surrendered in the exchange.
2. None of the compensation received by any shareholder-employee of BB&T will
be separate consideration for, or allocable to, any shares of BB&T common
stock; none of the shares of BB&T common
<PAGE>
stock received by any shareholder-employee in the Holding Company Merger will
be separate consideration for, or allocable to, any employment agreement; and
the compensation paid to any shareholder-employee will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
3. The payment of cash in lieu of fractional shares of SNC common stock is
solely for the purpose of avoiding the expense and inconvenience to SNC of
issuing fractional shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in the Holding
Company Merger to BB&T shareholders in lieu of fractional shares of SNC common
stock will not exceed one percent of the total consideration that will be
issued in the Holding Company Merger to the BB&T shareholders in exchange for
their BB&T common stock.
4. No share of BB&T common stock has been or will be redeemed in anticipation
of the Holding Company Merger, and BB&T has not made and will not make any
extraordinary distribution with respect to its stock in anticipation of the
Holding Company Merger.
5. SNC has no plan or intention to reacquire any of its stock issued in the
Holding Company Merger or to make any extraordinary distribution with respect
to such stock.
6. There is no plan or intention by BB&T shareholders to sell, exchange, or
otherwise dispose of a number of shares of SNC common stock received in the
Holding Company Merger that would reduce the BB&T shareholders' ownership of
SNC common stock to a number of shares having a fair market value, as of the
effective date of the Holding Company Merger, of less than 50 percent of the
fair market value of all of the formerly outstanding BB&T common stock as of
the same date. For this purpose, shares of BB&T common stock surrendered by
dissenters or exchanged for cash in lieu of fractional shares of SNC common
stock are treated as outstanding BB&T common stock on the effective date of the
Holding Company Merger. Moreover, shares of BB&T common stock and shares of SNC
common stock held by BB&T shareholders and otherwise sold, redeemed, or
disposed of before or after the Holding Company Merger are considered in making
the above determination.
7. Following the Holding Company Merger, SNC will continue the historic
business of BB&T or use a significant portion of BB&T's historic business
assets in a business.
8. The liabilities of BB&T that will be assumed by SNC and the liabilities,
if any, to which the transferred assets of BB&T are subject were incurred by
BB&T in the ordinary course of business.
9. There is no intercorporate indebtedness existing between BB&T and SNC that
was issued or acquired or will be settled at a discount.
10. Neither SNC nor any subsidiary of SNC (a) has transferred or will
transfer cash or other property to BB&T or any subsidiary of BB&T for less than
fair market value consideration in anticipation of the Holding Company Merger
or the Bank Mergers or (b) has made or will make any loan to BB&T or any
subsidiary of BB&T in anticipation of the Holding Company Merger or the Bank
Mergers.
11. On the effective date of the Holding Company Merger, the fair market
value of the assets of BB&T transferred to SNC will exceed the sum of BB&T's
liabilities assumed by SNC plus the amount of liabilities, if any, to which the
transferred assets are subject.
12. SNC has no plan or intention to sell or otherwise dispose of any of the
assets of BB&T acquired in the Holding Company Merger.
13. SNC, SNBNC, SNBSC, BB&T, BB&T-NC, BB&T Financial-SC, BB&T-SC, and the
shareholders of BB&T will pay their respective expenses, if any, incurred in
connection with the Holding Company Merger
2
<PAGE>
and the Bank Mergers, except that SNC nd BB&T each will pay one half of the
fees of Lehman Brothers and one half of all printing costs.
14. For each of SNC, SNBNC, SNBSC, BB&T, BB&T-NC, BB&T Financial-SC, and
BB&T-SC, not more than 25 percent of the fair market value of its adjusted
total assets consists of stock and securities of any one issuer, and not more
than 50 percent of the fair market value of its adjusted total assets consists
of stock and securities of five or fewer issuers. For purposes of the preceding
sentence, (a) a corporation's adjusted total assets exclude cash, cash items
(including accounts receivable and cash equivalents), and United States
government securities, (b) a corporation's adjusted total assets exclude stock
and securities issued by any subsidiary at least 50 percent of the voting power
or 50 percent of the total fair market value of the stock of which is owned by
the corporation, but the corporation s treated as owning directly a ratable
share (based on the percentage of the fair market value of the subsidiary's
stock owned by the corporation) of the assets owned by any subsidiary, and (c)
all corporations that are members of the same "controlled group" within the
meaning of section 1563(a) of the Internal Revenue Code (the "Code") are
treated as a single issuer.
15. At all times during the five-year period ending on the effective date of
the Holding Company Merger, the fair market value of all of BB&T's United
States real property interests was and will have been less than 50 percent of
the total fair market value of (a) its United States real property interests,
(b) its interests in real property located outside the United States, and (c)
its other assets used and held for use in a trade or business. For purposes of
the preceding sentence, (x) United States real property interests include all
interests (other than an interest solely as a creditor) in real property and
associated personal property (such as movable walls and furnishings) located in
the United States or the Virgin Islands and interests in any corporation)
owning any United States real property interest, (y) BB&T is treated as owning
its proportionate share (based on the relative fair market value of its
ownership interest to all ownership interests) of the assets owned by any
controlled corporation or any partnership, trust, or estate in which BB&T is a
partner or beneficiary, and (z) any such entity in turn is treated as owning
its proportionate share of the assets owned by any controlled corporation or
any partnership, trust, or estate in which the entity is a partner or
beneficiary. As used in the paragraph, "controlled corporation" means any
corporation at least 50 percent of the fair market value of the stock of which
is owned by BB&T, in the case of a first-tier subsidiary of BB&T, or by a
controlled corporation, in the case of a lower-tier subsidiary.
16. Any shares of SNC common stock received in exchange for shares of BB&T
common stock that (a) were acquired in connection with the performance of
services, including stock acquired through the exercise of an option or warrant
acquired in connection with the performance of services, and (b) are subject to
a substantial risk of forfeiture within the meaning of section 83(c) of the
Code will be subject to substantially the same risk of forfeiture after the
Holding Company Merger.
17. No outstanding BB&T common stock acquired in connection with the
performance of services was or will have been acquired within six months before
the effective date of the Holding Company Merger by any person subject to
section 16(b) of the Securities Exchange Act of 1934 other than pursuant to an
option granted more than six months before the effective date of the Holding
Company Merger.
18. Neither BB&T, SNBNC, nor SNBSC has filed, or holds any asset subject to,
a consent pursuant to section 341(f) of the Code and regulations thereunder.
19. Neither BB&T, SNBNC, nor SNBSC is a party to, or holds any asset subject
to, a "safe harbor lease" under former section 168(f)(8) of the Code and
regulations thereunder.
20. No share of SNBNC stock or of SNBSC stock has been or will be redeemed in
anticipation of the Bank Mergers, and neither SNBNC nor SNBSC has made or will
make any extraordinary distribution with respect to its stock in anticipation
of the Bank Mergers.
21. Neither BB&T-NC, BB&T-SC, nor BB&T Financial-SC has any plan or intention
to reacquire any of its outstanding stock or to make any extraordinary
distribution with respect to such stock.
3
<PAGE>
22. Following each of the Bank Mergers, BB&T-NC and BB&T-SC will continue the
historic business of SNBNC or of SNBSC, as appropriate, or will use a
significant portion of the historic business assets of SNBNC or of SNBSC, as
appropriate, in a business.
23. The liabilities of SNBNC or of SNBSC that will be assumed by BB&T-NC or
BB&T-SC, as appropriate, and the liabilities, if any, to which the transferred
assets of SNBNC or of SNBSC are subject were incurred by SNBNC or SNBSC, as
appropriate, in the ordinary course of business.
24. There is no intercorporate indebtedness existing between SNBNC and BB&T-
NC, or between SNBSC and BB&T-SC or BB&T Financial-SC, that was issued or
acquired or will be settled at a discount.
25. With respect to each Bank Merger, on the Bank Merger's effective date,
the adjusted federal income tax basis and the fair market value of the assets
of SNBNC or of SNBSC that are transferred to BB&T-NC or BB&T-SC, as
appropriate, each will exceed the sum of the liabilities of SNBNC or of SNBSC
that are assumed by BB&T-NC or BB&T-SC, as appropriate, plus the amount of
liabilities, if any, to which the transferred assets are subject.
26. BB&T-SC will acquire at least 90 percent of the fair market value of the
net assets and at least 70 percent of the fair market value of the gross assets
held by SNBSC immediately before the SC Bank Merger. For this purpose, amounts
paid by SNBSC for its expenses related to the SC Bank Merger and any
redemptions and distributions (except for regular, normal dividends) made by
SNBSC in connection with the SC Bank Merger will be included as assets of SNBSC
held immediately before the SC Bank Merger.
27. BB&T-SC has outstanding only one class of stock, and BB&T Financial-SC
owns all the outstanding shares of such shares of such class. Following the
Bank Merger, BB&T-SC will not issue additional shares of its stock that would
result in BB&T Financial-SC's owning less than 80 percent of the total combined
voting power of all classes of BB&T-SC's voting stock or less than 80 percent
of each class of BB&T-SC's nonvoting stock.
28. There is no plan or intention to liquidate BB&T-SC, to merge BB&T-SC into
another corporation, to sell or otherwise dispose of any stock of BB&T-SC, or
(except for dispositions made in the ordinary course of business) to sell or
otherwise dispose of any of the assets of SNBSC acquired in the Bank Merger.
29. There is no plan or intention to liquidate BB&T-NC, to merge BB&T-NC into
another corporation, to sell or otherwise dispose of any stock of BB&T-NC, or
(except for dispositions made in the ordinary course of business) to sell or
otherwise dispose of any of the assets of SNBNC acquired in the Bank Merger.
30. SNC has no plan or intention to sell or otherwise dispose of any stock of
BB&T Financial-SC, except that SNC might cause BB&T Financial-SC to merge into
SNC.
On the basis of the foregoing, and assuming that (a) with respect to any
nonresident alien or foreign entity that is or has been a more-than-five-
percent shareholder of BB&T, BB&T will comply with applicable statement and
notification requirements of Treasury Regulation (S) 1.897-2(g) & (h), and (b)
the Holding Company Merger and the Bank Mergers will be consummated in
accordance with the Plan of Merger relating to the Holding Company Merger and
the Agreements of Merger relating to the Bank Mergers, respectively, we are of
the opinion that (under existing law) for federal income tax purposes:
1. The Holding Company Merger will be a reorganization within the meaning of
section 368(a)(1)(A) of the Code.
2. BB&T will not reorganize gain or loss in the Holding Company Merger (a) on
the transfer or its assets to SNC in exchange for SNC common stock and the
assumption of BB&T's liabilities or (b) on the constructive distribution of SNC
common stock to BB&T shareholders.
4
<PAGE>
3. SNC will not recognize gain or loss in the Holding Company Merger on the
acquisition of BB&T's assets in exchange for SNC common stock and the
assumption of BB&T's liabilities.
4. A BB&T shareholder will not recognize gain or loss on the exchange of his
shares of BB&T common stock for shares of SNC common stock (including any
fractional share interest) in the Holding Company Merger.
5. The basis of shares of SNC common stock (including any fractional share
interest) received by a BB&T shareholder in the Holding Company Merger will be
the same as the basis of the shares of BB&T common stock exchanged therefor.
6. The holding period for the shares of SNC common stock (including any
fractional share interest) received by a BB&T shareholder in the Holding
Company Merger will include the holding period for the shares of BB&T common
stock exchanged therefor, if such shares of BB&T common stock are held as a
capital asset on the effective date of the Holding Company Merger.
7. Cash received by a BB&T shareholder in lieu of a fractional share of SNC
common stock will be treated as having been received as full payment in
exchange for such fractional share pursuant to section 302(a) of the Code.
8. Each of the Bank Mergers will be a reorganization within the meaning of
section 368(a)(1)(A) of the Code.
9. SNBNC will not recognize gain or loss in the NC Bank Merger (a) on the
transfer of its assets to BB&T-NC in exchange for the assumption of liabilities
and in constructive exchange for BB&T-NC stock or (b) on the constructive
distribution of BB&T-NC stock to SNC.
10. BB&T-NC will not recognize gain or loss in the NC Bank Merger on the
acquisition of the assets of SNBNC in exchange for the assumption of
liabilities and in constructive exchange for BB&T-NC stock.
11. SNC will not recognize gain or loss on the constructive exchange of SNBNC
stock for BB&T-NC stock in the NC Bank Merger.
12. The basis of the shares of BB&T-NC stock held by SNC will be increased by
the basis of the shares of SNBNC stock outstanding immediately before the NC
Bank Merger.
13. SNBSC will not recognize gain or loss in the SC Bank Merger (a) on the
transfer of its assets to BB&T-SC in exchange for the assumption of liabilities
and in constructive exchange for either BB&T-SC stock or BB&T Financial-SC
stock or (b) on the constructive distribution of either BB&T-SC stock or BB&T
Financial-SC stock to SNC.
14. BB&T-SC will not recognize gain or loss in the SC Bank Merger on the
acquisition of the assets of SNBSC in exchange for the assumption of
liabilities and in constructive exchange for either BB&T-SC stock or BB&T
Financial-SC stock.
15. BB&T Financial-SC will not recognize gain or loss (a) on the acquisition
by BB&T-SC of SNBSC's assets in exchange for the assumption of SNBSC's
liabilities and in constructive exchange for either BB&T Financial-SC stock or
BB&T-SC stock or (b) on the constructive contribution, if any, of BB&T-SC stock
by SNC to BB&T Financial-SC.
16. SNC will not recognize gain or loss (a) on the constructive exchange of
SNBSC stock for either BB&T-SC stock or BB&T Financial-SC stock in the SC Bank
Merger or (b) on the constructive contribution, if any, of BB&T-SC stock to
BB&T Financial-SC.
5
<PAGE>
17. The basis of the shares of BB&T Financial-SC stock held by SNC will be
increased by the basis of the shares of SNBSC stock outstanding immediately
before the SC Bank Merger.
We are also of the opinion that the material federal income tax consequences
of the Holding Company Merger are fairly summarized in the S-4 under the
headings "Summary--Federal Income Tax Consequences of the Merger" and "The
Merger--Certain Federal Income Tax Consequences." We consent to the use of this
opinion as an exhibit to the S-4 and to the reference to this firm under such
headings. In giving this consent, we do not admit that we are within the
category of persons whose consent is required by section 7 of the Securities
Act of 1933 or the rules and regulations promulgated thereunder by the
Securities and Exchange Commission.
Very truly yours,
/s/ Hunton & Williams
6
<PAGE>
EXHIBIT 10(A)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made as of the 1st day of August,
1994, by and among SOUTHERN NATIONAL CORPORATION, a North Carolina corporation
("SNC"), SOUTHERN NATIONAL BANK OF NORTH CAROLINA, a national banking
association ("Employer"), and NAME ("Employee").
WITNESSETH THAT:
WHEREAS, Employee has heretofore been employed, and currently is rendering
services to Employer, as Bank Title and SNC as SNC Title;
WHEREAS, Employer and SNC consider the continued availability of Employee's
services to be important to the management and conduct of Employer's and SNC's
businesses and desire to secure for themselves the continued availability of
Employee's services; and
WHEREAS, Employee is willing to make his services available to Employer and
SNC on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Employment. Employee is employed as Bank Title of Employer and SNC Title
of SNC through the effective date of the merger of SNC with BB&T Financial
Corporation (the "Merger"), as contemplated by the Agreement and Plan of
Reorganization dated July 29, 1994 (the "Reorganization Agreement"). If and
when the Merger occurs, Employee will become [ of SNC and] of BB&T
Branch Banking and Trust Company [of South Carolina.] Employee shall have such
duties and responsibilities as are commensurate with such positions. Employee
hereby accepts and agrees to such employment, subject to the general
supervision and pursuant to the orders, advice, and direction of Employer, SNC
and their Boards of Directors. Employee shall perform such duties as are
customarily performed by one holding such positions in other same or similar
businesses or enterprises as that engaged in by Employer and SNC, and shall
also additionally render such other services and duties as may be reasonably
assigned to him from time to time by Employer of SNC, consistent with his
positions.
2. Term of Employment. The term of this Agreement shall commence from and
after the date hereof, and shall terminate on the day next preceding the fifth
anniversary of the date hereof unless extended as provided herein. On each
monthly anniversary date starting the first month after the date hereof, this
Agreement will be automatically extended for an additional month; provided,
however, that on any one month anniversary date either Employer or Employee may
serve notice to the other party to fix the term to a definite five year period
from the date of such notice and no further automatic extensions will occur.
Notwithstanding the foregoing, this Agreement will not be extended beyond the
first day of the month coincident with or next following the date on which
Employee attains age sixty-five (65). The term of this Agreement as may be
extended pursuant to this Section 2, or, as may be shortened in accordance with
Section 5 or 6 hereof, is hereinafter referred to as the "Term."
3. Compensation.
a. For all services rendered by Employee to Employer and SNC under this
Agreement, Employer or SNC shall pay to Employee, for the one-year period
beginning on the date hereof, a minimum annual salary at a rate not less than
$Amount, payable in accordance with the payroll practices of Employer or SNC
applicable to all officers.
b. Employee shall continue to participate in such incentive plans of Employer
and SNC as he is currently participating or for which he may become eligible
and designated a participant, as such plans may be modified from time to time.
<PAGE>
c. After the first year following the date hereof, any salary increase
payable to Employee shall be determined in accordance with Employer's or SNC's
annual salary plan, and be based on Employer's and/or SNC's performance and the
performance of Employee.
d. Except as otherwise specifically provided herein, for so long as Employee
is employed by Employer or SNC, Employee also shall be entitled to receive, on
the same basis as other officers of Employer or SNC, employee pension and
welfare benefits and group employee benefits such as sick leave, vacation,
group disability and health, life, and accident insurance and similar indirect
compensation which Employer or SNC may from time to time extend to its
officers.
e. If during the Term of the Agreement the Employee becomes eligible for
retirement under Employer's or SNC's retirement plans and he retires, Employee
may elect to continue receiving the heath insurance coverage provided to
Employee prior to retirement at a comparable rate available to other retired
employees.
4. Covenants of the Employee.
a. Subject to the limitations provided in Sections 4(b) and 4(d) (whichever
may be applicable), upon termination of Employee's employment prior to the
expiration of the Term, Employee will not directly or indirectly, either as a
principal, agent, employee, employer, stockholder, co-partner or in any other
individual or representative capacity whatsoever, engage in the banking and
financial services business, which includes consumer, savings, commercial
banking and the insurance and trust businesses, or the savings and loan or
mortgage banking business, or any other business in which the Employer, SNC or
their Affiliates are engaged, anywhere in the states of North Carolina and
South Carolina and in any county outside of North Carolina and South Carolina
contiguous to North Carolina or South Carolina, nor will the Employee solicit,
or assist any other person in so soliciting, any depositors or customers of
Employer, SNC or their Affiliates or induce any then or former employee of
Employer, SNC, or their Affiliates to terminate their employment with Employer,
SNC, or their Affiliates. The term "Affiliate" as used in this Agreement means
a Person that directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, another Person.
The term "Person" as used in this Agreement means any person, partnership,
corporation, group or other entity.
b. If Employee voluntarily terminates his employment with Employer, SNC and
their Affiliates at any time prior to the first anniversary of the effective
date of the Merger, Employee will be subject to the provisions of Section 4(a)
until the later of the first anniversary of the Merger or the first anniversary
of the Employee's termination. If Employee voluntarily terminates employment
with Employer, SNC or their Affiliates at any time after the first anniversary
of the Merger, Employee will be subject to the provisions of Section 4(a) for
any period of time during which Employee elects to receive compensation
pursuant to Section 6(e).
c. If Employee's employment is terminated by Employer, SNC or their
Affiliates for Just Cause (as defined in Section 6(b) herein), Employee will
not be subject to the provisions of Section 4(a).
d. If Employee's employment is terminated by Employer, SNC or their
Affiliates for reasons other than Just Cause (as defined in Section 6(b)
herein) at any time, Employee will be subject to the provisions of Section 4(a)
until the earlier of: (i) the first anniversary of Employee's termination or
(ii) the date as of which Employee elects to forego any further compensation
pursuant to the last sentence of Section 6(c).
e. Notwithstanding any other provision of this Agreement to the contrary, if
Employee voluntarily terminates his employment with Employer, SNC or their
Affiliates in accordance with Section 6(d), Employee will not be subject to
Section 4(a).
f. During the Term of Employee's employment hereunder and thereafter, and
except as required by any court, supervisory authority or administrative agency
or as may be otherwise required by applicable law, Employee shall not, without
the written consent of the Boards of Directors of Employer and SNC or a person
authorized thereby, disclose to any person, other than an employee of Employer,
SNC or an Affiliate thereof
2
<PAGE>
or a person to whom disclosure is reasonably necessary or appropriate in
connection with the performance by Employee of his duties as an employee of
Employer, SNC or an Affiliate, any confidential information obtained by him
while in the employ of Employer or SNC, unless such information has become a
matter of public knowledge at the time of such disclosure.
g. The covenants contained in this Section 4 shall be construed and
interpreted in any judicial proceeding to permit their enforcement to the
maximum extent permitted by law. Employee agrees that the restraints imposed
herein are necessary for the reasonable and proper protection of Employer, SNC
and their Affiliates and that each and every one of the restraints is
reasonable in respect to such matter, length of time and the area. Employee
further acknowledges that damages at law would not be a measurable or adequate
remedy for breach of the covenants contained in this Section 4 and,
accordingly, Employee agrees to submit to the equitable jurisdiction of any
court of competent jurisdiction in connection with any action to enjoin
Employee from violating any such covenants.
5. Disability. If, by reason of physical or mental disability during the term
hereof, Employee is unable to carry out the essential functions of his
employment hereunder for twelve (12) consecutive months, his services hereunder
may be terminated by action of the Board of Directors of Employer or SNC
determining so to do upon one month's notice to be given to Employee at any
time after the period of twelve (12) continuous months of disability and while
such disability continues. If, prior to the expiration of the one month period
after the giving of such notice, Employee shall recover from such disability
and return to the full-time active discharge of his duties, then such notice
shall be of no further force and effect and Employee's employment shall
continue as if the same had been uninterrupted. If Employee shall not so
recover from his disability and return to his duties, then his services shall
terminate at the expiration date of such one month's notice with the same force
and effect as if that date had been the date of termination originally provided
for hereunder. During the first twelve (12) months of the period of Employee's
disability, Employee shall continue to earn all compensation (including bonuses
and incentive compensation) to which Employee would have been entitled as if he
had not been disabled, such compensation to be paid at the time, in the
amounts, and in the manner provided in Section 3(a), inclusive of any
compensation received pursuant to any applicable disability insurance plan of
Employer or SNC. Thereafter, Employee shall receive compensation to which he is
entitled under any applicable disability insurance plan. In the event a dispute
arises between Employee and Employer or SNC concerning Employee's physical or
mental ability to continue or return to the performance of his duties as
aforesaid, Employee shall submit to examination by a competent physician
mutually agreeable to the parties, and his opinion as to Employee's capability
to so perform will be final and binding. Upon termination of Employee's
services by reason of disability, the Term shall end.
6. Termination.
a. If Employee shall die during the Term, this Agreement and the employment
relationship hereunder will automatically terminate on the date of death, which
date shall be the last date of the Term.
b. Employer or SNC shall have the right to terminate Employee's employment
under this Agreement at any time for Just Cause, which termination shall be
effective immediately. Termination for "Just Cause" shall include termination
for Employee's personal dishonesty, gross incompetence, willful misconduct,
breach of a fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or a final cease-and-desist order,
conviction of a felony or of a misdemeanor involving moral turpitude, unethical
business practices in connection with Employer's or SNC's business,
misappropriation of Employer's or SNC's assets (determined on a reasonable
basis) or those of their Affiliates, or material breach of any other provision
of this Agreement, provided that Employee has received written notice from
Employer or SNC of such material breach and such breach remains uncured thirty
days after the delivery of such notice. In the event Employee's employment
under this Agreement is terminated for Just Cause, Employee shall have no right
to receive compensation or other benefits under this Agreement for any period
after such termination.
3
<PAGE>
c. Employer or SNC may terminate Employee's employment other than for "Just
Cause," as described in Subparagraph (b) above, at any time upon written notice
to Employee, which termination shall be effective immediately. In the event
Employer or SNC terminates Employee pursuant to this Subparagraph (c), (i)
Employee will receive the highest amount of the annual cash compensation
(including cash bonuses and other cash-based benefits, including for these
purposes amounts earned or payable whether or not deferred) received during any
of the preceding five calendar years ("Termination Compensation") in each year
until the end of the Term, so long as Employee complies with Section 4(a) of
the Agreement until the first anniversary of Employee's termination and (ii)
Employer and SNC shall use their best efforts to accelerate vesting of any
unvested benefits of the Employee under any employee stock-based or other
benefit plan or arrangement to the extent permitted by the terms of such plan.
Such amounts shall be payable at the times such amounts would have been paid in
accordance with Section 3(a). In addition, Employee shall continue to receive
health insurance coverage from Employer or SNC on the same terms as were in
effect prior to Employee's termination, either under Employer's or SNC's plans
or comparable coverage, for all periods Employee receives Termination
Compensation. Notwithstanding anything in this Agreement to the contrary, if
Employee breaches Section 4(a) of this Agreement prior to the first anniversary
of Employee's termination pursuant to this Section 6(c), Employee will not be
entitled to receive any further compensation or benefits pursuant to this
Section 6(c).
d. In the event of a Change of Control of Employer or SNC at any time after
the date hereof, Employee may voluntarily terminate employment with Employer or
SNC up until 24 months after the Change of Control for "Good Reason" and be
entitled to receive in a lump sum (i) any compensation due but not yet paid
through the date of termination and (ii) in lieu of any further salary payments
from the date of termination to the end of the Term, an amount equal to the
Termination Compensation times 2.99.
"Good Reason" shall mean the occurrence of any of the following events
without Employee's express written consent:
(a) the assignment to Employee of duties inconsistent with the position
and status of the offices and positions of Employer and/or SNC held
immediately prior to the Change of Control;
(b) a reduction by Employer or SNC in Employee's pay grade or base salary
as then in effect or the exclusion of Employee from participation in
Employer's or SNC's benefit plans in which he previously participated as in
effect at the date hereof or as the same may be increased from time to time
during the term of this Agreement or Employer's or SNC's failure to
increase (within 12 months of Employee's last increase in base salary)
Employee's base salary in an amount which at least equals, on a percentage
basis, the average percentage increase in base salary for all executives
entitled to participate in Employer's or SNC's executive incentive plans
for which Employee was eligible during the preceding 12 months;
(c) an involuntary relocation of Employee more than 100 miles from the
location where Employee worked immediately prior to the Change in Control
or the breach by Employer or SNC of any other material provision of this
Agreement; or
(d) any purported termination of the employment of Employee by Employer
or SNC which is not effected in accordance with this Agreement.
A "Change of Control" shall be deemed to have occurred if (i) any person or
group of persons (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934 together with its affiliates, excluding employee benefit
plans of Employer or SNC, is or becomes, directly or indirectly, the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934) of securities of Employer or SNC representing 20% or more
of the combined voting power of Employer's or SNC's then outstanding
securities; or (ii) during the term of this Agreement as a result of a tender
offer or exchange offer for the purchase of securities of Employer or SNC
(other than such an offer by SNC for its own securities), or as a result of a
proxy contest, merger, consolidation or sale of assets, or as a result of any
combination of the foregoing, individuals who at the beginning of any two-year
period during the term of this Agreement constitute SNC's Board of Directors,
plus new directors whose election or nomination for election by SNC's
4
<PAGE>
shareholders is approved by a vote of at least two-thirds of the directors
still in office who were directors at the beginning of such two-year period,
cease for any reason during such two-year period to constitute at least two-
thirds of the members of such Board of Directors; or (iii) the shareholders of
SNC approve a merger or consolidation of SNC with any other corporation or
entity regardless of which entity is the survivor, other than a merger or
consolidation which would result in the voting securities of SNC outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or being converted into voting securities of the surviving entity)
at least 80% of the combined voting power of the voting securities of SNC or
such surviving entity outstanding immediately after such merger or
consolidation; or (iv) the shareholders of SNC approve a plan of complete
liquidation or winding-up of SNC or an agreement for the sale or disposition by
SNC of all or substantially all of SNC's assets; or (v) any event which SNC's
Board of Directors determines should constitute a Change of Control.
Notwithstanding the foregoing, the transactions contemplated by the
Reorganization Agreement, shall not be considered a Change in Control.
e. Notwithstanding any other provision of this Agreement to the contrary, in
the event that Employee voluntary terminates employment with Employer or SNC at
any time after the first anniversary of the Merger and before the sixth
anniversary of the Merger (other than pursuant to Section 6(d)), Employee will
be entitled to receive annually 60% of Employee's Termination Compensation
until the sixth anniversary of the Merger, so long as Employee complies with
Section 4(a) of this Agreement. Such Termination Compensation shall be payable
at the times such amounts would have been paid in accordance with Section 3(a).
In addition, Employee shall continue to receive health insurance coverage from
Employer or SNC on the same terms as were in effect prior to Employee's
termination, either under the Employee's or SNC's plans or comparable coverage,
for all periods Employee receives Termination Compensation pursuant to this
Section 6(a), so long as Employee complies with Section 4(a) of the Agreement.
f. In receiving any payments pursuant to this Section 6, Employee shall not
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to Employee hereunder and such amounts shall
not be reduced or terminated whether or not Employee obtains other employment.
g. Notwithstanding anything in this Agreement to the contrary, if any of the
payments provided for under this Agreement (the "Agreement Payments"), together
with any other payments that Employee has the right to receive (such other
payments together with the Agreement Payments are referred to as the "Total
Payments"), would constitute an "excess parachute payment," as defined in
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code") (an "Excess Parachute Payment"), the Agreement Payments shall be
reduced by the smallest amount necessary so that no portion of such Total
Payments would constitute Excess Parachute Payments. In the event Employer or
SNC shall make an Agreement Payment to Employee that would constitute an Excess
Parachute Payment, Employee shall return such payment to Employee or SNC
(together with interest at the rate set forth in Section 1274(b)(2)(B) of the
Code). To the extent the application of this Section 6(g) is triggered, the
provisions of Section 4(a) shall not apply.
7. Other Employment. Employee shall devote all of his business time,
attention, knowledge and skills solely to the business and interest of
Employer, SNC and their Affiliates, and Employer, SNC and their Affiliates
shall be entitled to all of the benefits, profits and other emoluments arising
from or incident to all work, services and advice of Employee, and Employee
shall not, during the Term hereof, become interested directly or indirectly, in
any manner, as partner, officer, director, stockholder, advisor, employee or in
any other capacity in any other business similar to Employer's or SNC's
business; provided, however, that nothing herein contained shall be deemed to
prevent or limit the right of Employee to invest in a business similar to
Employer's or SNC's business if such investment is limited to less than one
percent of the capital stock or other securities of any corporation or similar
organization whose stock or securities are publicly owned or are regularly
traded on any public exchange.
8. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina without regard to conflicts of law
principles thereof.
5
<PAGE>
b. This Agreement [(and the attached Addendum)] constitutes the entire
Agreement between Employee, Employer and SNC, with respect to the subject
matter hereof, and supersedes all prior agreements with respect thereto.
Without limiting the foregoing, Employee agrees that this Agreement satisfies
any rights he may have had under any prior agreement or understanding with
Employer and SNC with respect to his employment by Employer and SNC.
c. This Agreement may be executed in one or more counterparts, all of which,
taken together, shall constitute one and the same instrument.
d. Any notice or other communication required or permitted under this
Agreement shall be effective only if it is in writing and delivered in person
or by reliable overnight courier service or deposited in the mails, postage
prepaid, return receipt requested, addressed as follows:
To Employer:
Southern National Corporation
200 West Second Street
Winston-Salem, NC 27101
(910) 773-7203
Attention: David L. Craven, Esq.
To Employee:
Address
Notices given in person or by overnight courier service shall be deemed given
when delivered to the address required by this Section 8(d), and notices given
by mail shall be deemed given three days after deposit in the mails. Any party
hereto may designate by written notice to the other party in accordance
herewith any other address to which notices addressed to him shall be sent.
e. The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity
or enforceability of the other provisions hereof. It is understood and agreed
that no failure or delay be Employer, SNC or Employee in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
f. In the event any dispute shall arise between Employee, Employer and SNC as
to the terms or interpretations of this Agreement, whether instituted by formal
legal proceedings or otherwise, including any action taken by Employee to
enforce the terms of this Agreement or in defending against any action taken by
Employee, Employer or SNC shall reimburse Employee for all reasonable costs and
expenses, including reasonable attorneys' fees, arising from such dispute,
proceeding or action, if Employee shall prevail in any action initiated by
Employee or shall have acted reasonably and in good faith in defending against
any action initiated by Employer. Such reimbursement shall be paid within 10
days of Employee furnishing to Employer written evidence, which may be in the
form, among other things, of a canceled check or receipt, of any costs or
expenses incurred by Employee. Any such request for reimbursement by Employee
shall be made no more frequently than at 60 day intervals.
g. To the extent permitted by applicable law, all obligations of Employer or
SNC hereunder shall be joint and several.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
Southern National Corporation
By: _________________________________
Name: L. Glenn Orr, Jr.
Title: Chairman, President and
Chief Executive Officer
Southern National Bank of North
Carolina
By: _________________________________
Name: L. Glenn Orr, Jr.
Title: Chairman and Chief
Executive Officer
Employee:
_____________________________________
Name:
7
<PAGE>
EXHIBIT 10(B)
SETTLEMENT AND NON-COMPETE AGREEMENT
THIS AGREEMENT made and entered into this day of , 1994, by and between
SOUTHERN NATIONAL CORPORATION, together with its affiliates, hereinafter
collectively referred to as "SNC", and L. GLENN ORR, JR., hereinafter referred
to as "Orr" (the "Agreement") provides as follows:
W I T N E S S E T H:
WHEREAS, SNC and Southern National Bank of North Carolina entered into an
employment contract with Orr dated July 16, 1981, which was subsequently
amended on June 15, 1989 (the "Employment Contract") solely to reflect Mr.
Orr's then current compensation; and
WHEREAS, based on advice of counsel, SNC and Orr understand and believe the
Employment Contract is fully enforceable under North Carolina law; and
WHEREAS, SNC has entered into an Agreement and Plan of Reorganization between
BB&T Financial Corporation, together with its affiliates (collectively,
"BB&T"), dated July 29, 1994, whereby BB&T will be merged into SNC in a merger
of equals (the "Merger"); and
WHEREAS, Orr is ready, willing, able and has all of the qualifications
necessary to perform all of the obligations set forth in the Employment
Contract and to serve as Chairman and Chief Executive Officer of SNC following
the Merger, and has offered to do so; and
WHEREAS, SNC and Orr agree that it is in the best interests of SNC, BB&T,
their shareholders and Orr, for SNC to enter into this Agreement in full
settlement of its obligations under the Employment Contract, and for Orr's
employment with SNC to be terminated; and
WHEREAS, SNC and Orr also agree that it is in the best interests of SNC,
BB&T, their shareholders and Orr, for Orr to continue in the employment of SNC
through the effective date of the Merger (the "Merger Effective Date"), and in
any event through May 1, 1995 to assist with the Merger transaction issues; and
WHEREAS, the amounts Orr will receive under this Agreement are intended to be
and constitute liquidated damages for the settlement of SNC's obligations under
his Employment Contract and the payments that would have been made thereunder
or in accordance therewith, compensation for certain consulting services to be
provided by Orr over the next five (5) years, and consideration for the non-
competition agreement contained herein, all as specified in this Agreement; and
WHEREAS, SNC and Orr are entering into this Agreement with full awareness of
the geographic breadth and the length of the non-compete agreement and
acknowledge that such agreement reflects exactly what the parties intend, and
both parties have negotiated this Agreement at arms length, hold equal
bargaining positions, and are each relying on the advice of experienced legal
counsel in regard thereto; and
WHEREAS, SNC and Orr acknowledge that Orr has extensive banking experience
and possesses proprietary information about SNC's and its affiliates operations
in North Carolina and South Carolina and has the ability to substantially
injure SNC, and for this reason SNC is willing to pay Orr substantial
compensation for his future and ongoing agreement not to compete with SNC; and
WHEREAS, because of Orr's financial resources, his extensive business
experience, and his ability to engage in the banking industry in 48 other
states, this Agreement, including its non-competition provision, does not
unduly curtail Orr's ability to support himself and his family; and
WHEREAS, Orr shall be entitled to receive the amounts payable under this
Agreement as liquidated damages for the settlement of the Employment Contract,
and as compensation for the services (both
<PAGE>
consulting and non-compete/including the agreement not to compete) Orr will
provide SNC in the future; and
WHEREAS, this Agreement is subject to the consummation of the Merger and the
Employment Contract shall continue in effect through the Merger Effective Date
and, if later, through May 1, 1995;
NOW, THEREFORE, for and in consideration of the mutual promises and
agreements hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, SNC and Orr covenant
and agree as follows:
ARTICLE I
Applicability of Agreement
This Agreement shall become effective on the Merger Effective Date. From and
after the Merger Effective Date, Orr will continue in SNC's employ as Chairman
Emeritus, to assist with Merger transition issues, until May 1, 1995, if the
Merger Effective Date is before May 1, 1995, and shall be compensated pursuant
to the Employment Contract for such period.
ARTICLE II
Compensation
2.01. Annual Compensation. SNC shall pay Orr One Million Six Hundred and
Fifty-Five Thousand Dollars ($1,655,000.00) per year, as adjusted in accordance
with section 2.02, and without regard to Article III hereof, commencing May 1,
1995. One-twelfth of such amount shall be paid monthly in accordance with the
normal payroll practices of SNC, to Orr for his life, or to his current wife
for her life if she is still married to Orr and living at the time of his
death, but in no event for a period of less than fifteen (15) years from the
date of Orr's termination. To the extent that payments under this section 2.01
(and any other payments required to be taken into account) cause a "parachute
payment," as defined in section 280G(b)(2) of the Internal Revenue Code of
1986, as amended (the "Code"), SNC does hereby indemnify Orr and hold him
harmless against all claims, losses, damages, penalties, expenses, and excise
taxes relating thereto. To effect this indemnification, SNC shall pay Orr an
additional amount that is sufficient to pay any excise tax imposed by Code
section 4999 on the payments and benefits to which Orr is entitled without the
additional amount plus any penalties or interest imposed by the Internal
Revenue Service in regard to such amounts, plus another additional amount
sufficient to pay all the excise and income taxes on the additional amounts.
The determination of any additional amount that must be paid under this section
at any time shall be made in good faith by the independent auditors then
employed by SNC.
2.02. Other Payments. The payments due Orr under section 2.01 shall be
reduced by the SNC-provided portion of his benefits payable under the following
plans, as indicated with respect to each:
(a) Southern National Retirement Plan. The actuarial equivalent of Orr's
accrued benefit under the Southern National Retirement Plan, as of May 1,
1995, based upon the actuarial assumptions and factors employed in
conjunction with the Plan and assuming that the benefit were paid in the
form of a fifteen year certain, joint and 100% survivor annuity.
(b) Southern National Supplemental Executive Retirement Plan. The
actuarial equivalent of Orr's accrued benefit under the Southern National
Supplemental Executive Retirement Plan, as of May 1, 1995, based upon the
actuarial assumptions and factors employed in conjunction with the Southern
National Retirement Plan and assuming that the benefit were paid in the
form of a fifteen year certain, joint and 100% survivor annuity.
(c) Southern National Employee Stock Ownership Plan. The actuarial
equivalent of the value of Orr's Company Account and Company PAYSOP
accounts under the Southern National Employee
2
<PAGE>
Stock Ownership Plan, as of May 1, 1995, based upon the actuarial
assumptions and factors employed in conjunction with the Southern National
Retirement Plan and assuming that the benefit were paid in the form of a
fifteen year certain, joint and 100% survivor annuity.
(d) Southern National ESOP Excess Plan. The actuarial equivalent of the
value of Orr's Company Account under the Southern National ESOP Excess
Plan, as of May 1, 1995, based upon the actuarial assumptions and factors
employed in conjunction with the Southern National Retirement Plan and
assuming that the benefit were paid in the form of a fifteen year certain,
joint and 100% survivor annuity.
(e) Southern National Nonqualified Deferred Compensation Plan. The
actuarial equivalent of the value of Orr's Company-provided accrued benefit
under the Southern National Nonqualified Deferred Compensation Plan as of
May 1, 1995, and the actuarial equivalent of the portion of the value of
Orr's account or accrued benefit under such Plan attributable to Orr's
contributions and earnings credits exceeding 9% per annum thereon, based
upon the actuarial assumptions and factors employed in conjunction with the
Southern National Retirement Plan and assuming that the benefit were paid
in the form of a fifteen year certain, joint and 100% survivor annuity.
ARTICLE III
Benefits
3.01 Life Insurance SNC shall provide for Orr's lifetime a minimum of Two
Million Dollars ($2,000,000) of face amount life insurance on Orr's life,
including Orr's split-dollar and term life insurance policies, as follows:
(a) Split-Dollar Life Insurance. SNC shall continue to pay its portion of
the premiums on the existing split-dollar insurance policies on Orr's life
through the policy years indicated therein as called for under Orr's
agreements entered into in conjunction with the SNC Senior Officers
Insurance Program. Orr or his designee shall continue to own the policies
subject to SNC's interest therein. Orr agrees to execute the agreements
attached as Exhibits I and II relating to the policies at the time he
executes this Agreement.
(b) Term Life Insurance. SNC shall continue to maintain Orr's existing
term life insurance policies totalling Five-Hundred Forty-Five Thousand
Dollars ($545,000.00) or provide replacement coverage. SNC shall pay the
premium payments for such policies for Orr's lifetime.
Orr or his designee shall have the right to designate the beneficiary of
the life insurance policies referred to in sections 2.01(a) and (b).
3.02. Medical Insurance. SNC shall provide hospital and major medical health
insurance to Orr and to Orr's spouse for life. Such medical coverage shall be
provided in one of the following ways: (i) under the medical plan covering
senior executives of SNC; (ii) through a contract arrangement providing
comparable coverage to the SNC medical plan in existence at the relevant time;
or (iii) by reimbursing Orr and/or his wife for coverage comparable to the then
SNC medical plan.
3.03. Moving Expenses. If it has not already done so, following the Merger
Effective Date to facilitate Orr's move to Winston-Salem, North Carolina, SNC
shall purchase Orr's personal residence located in Lumberton, North Carolina,
in accordance with SNC's relocation allowance policy, at a purchase price equal
to the appraised value of such residence. In addition, SNC shall pay all
expenses Orr incurs as a result of his move to Winston-Salem, North Carolina in
accordance with SNC's relocation allowance policy.
3.04. Automobile. If it has not already done so, following the Merger
Effective Date SNC shall purchase Orr an automobile of his reasonable choice.
SNC will transfer the title of such automobile to Orr on termination of his
employment.
3
<PAGE>
3.05. Social Dues. SNC shall pay Orr's membership dues at the Forsyth Country
Club for life.
3.06. Establishment of Trust. SNC shall establish a "rabbi trust," reasonably
acceptable to Orr, (the "Trust") to help assure payment of the amount set forth
in Article II. Further, prior to the consummation of the Merger, SNC shall
deposit in the Trust an amount not less than Nine Million Dollars
($9,000,000.00). A portion of such reserve (based on the cash value of such
policies) may include insurance policies on Orr's life owned and maintained by
SNC and as to which it is the beneficiary, or SNC's interest in the cash values
of the insurance policies referred to in section 3.01(a). Earnings and
principal from the Trust shall not be used to pay any amounts due under section
2.01 until the obligations due thereunder are fully funded. SNC shall not be
permitted to remove any principal or interest from the Trust unless and only to
the extent that, the actuarial value of all payments due in accordance with
this Agreement is less than the amount in the Trust or, with Orr's consent, in
the event SNC breaches its obligations to pay the amounts due under section
2.01, which it shall not willingly do. Such determinations shall be made on the
basis of reasonable actuarial assumptions. The interest assumption shall not
exceed the interest assumption employed by SNC (or any successor) in
conjunction with the actuarial valuation of its defined benefit plan covering
executive officers for the most recent plan year.
Further, prior to the effective date of any "Change of Control," as defined
below (or as soon as practicable thereafter if SNC had no prior notice of such
Change of Control), SNC shall transfer or cause to be transferred to the rabbi
trust to be created hereunder an amount of cash sufficient, when added to the
existing value of the assets already in the rabbi trust, to fully fund all
remaining obligations due hereunder based on reasonable actuarial assumptions
and the interest assumption specified above.
For this purpose, a "Change of Control" shall be deemed to have occurred if
(i) any person or group of persons (as defined in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934) together with its Affiliates, excluding
employee benefit plans of SNC, is or becomes, directly or indirectly, the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934) of securities of SNC representing 20% or more of the
combined voting power of SNC's then outstanding securities; or (ii) during the
term of this Agreement as a result of a tender offer or exchange offer for the
purchase of securities of SNC (other than such an offer by SNC for its own
securities), or as a result of a proxy contest, merger, consolidation or sale
of assets, or as a result of any combination of the foregoing, individuals who
at the beginning of any two-year period during the term of this Agreement
constitute SNC's Board of Directors, plus new directors whose election or
nomination for election by SNC's shareholders is approved by a vote of at least
two-thirds of the directors still in office who were directors at the beginning
of such two-year period, cease during such two-year period to constitute at
least two-thirds of the members of such Board of Directors; or (iii) the
shareholders of SNC approve a merger or consolidation of SNC with any other
corporation or entity regardless of which entity is the survivor, other than a
merger or consolidation which would result in the voting securities of SNC
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or being converted into voting securities of the
surviving entity) at least 80% of the combined voting power of the voting
securities of the surviving entity outstanding immediately after such merger or
consolidation; or (iv) the shareholders of SNC approve a plan of complete
liquidation or winding-up of SNC or an agreement for the sale or disposition by
SNC of all or substantially all of SNC's assets; or (v) any event which SNC's
Board of Directors determines should constitute a Change of Control. The term
"Affiliate" as used in this Agreement means a Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, another Person. The term "Person" as used in
this Agreement means any person, partnership, corporation, group or other
entity. Notwithstanding the foregoing, the Merger shall not be considered a
Change of Control.
SNC will provide Orr an annual accounting and report of the assets and funded
status of the rabbi trust and the obligations due him hereunder as of the end
of each calendar year following the Merger Effective Date no later than March
31 of the following year.
4
<PAGE>
3.07. Death Benefits. If Orr dies after the Merger Effective Date, before
receiving the benefits described in Articles II and III, amounts payable
pursuant to such Articles shall be paid to Orr's current spouse (or to a trust
for her benefit), if she is married to Orr at the time of his death and
survives, or if she does not so survive to Orr's beneficiary. Orr shall provide
a written beneficiary designation to be attached to this Agreement as Exhibit
II. If there is no designated beneficiary or, if such designated beneficiary
does not survive, any remaining amounts will be paid to Orr's estate.
ARTICLE IV
Consulting Services
4.01. Term. Orr agrees to make himself available as a consultant to SNC after
the Merger Effective Date upon the request of the Chairman and Chief Executive
Officer of SNC or his designee for a period of up to five (5) years.
4.02. Scope of Consulting Services. Orr agrees to provide advice and
consultation to SNC with respect to issues relating to the Merger, management
strategy or by calling on customers, not to exceed three days per month. Orr
shall at all times positively promote the business of SNC in all of Orr's
business dealings.
4.03. Relationship between Parties. To the extent Orr performs services as a
consultant to SNC, Orr shall be engaged by SNC in this capacity only for the
purposes and to the extent set forth in this Agreement, and Orr's relation to
SNC shall be that of an independent contractor. The parties agree that Orr will
control the manner, methods and details of performance of his consulting
services. Orr shall not be considered as having any employee status or as being
entitled to participate in any plans, arrangements, or distributions by SNC
pertaining to or in connection with any pension, stock, bonus, profit-sharing
or other benefit plan for employees of SNC as a result of or pertaining to such
services.
4.04. Compensation. If called upon to provide services under this Article IV,
Orr shall be reimbursed for his reasonable out of pocket expenses incurred in
rendering such services. Although Orr shall not receive any additional
compensation hereunder with respect to the rendition of such services, Orr and
SNC agree that the per diem value of such services is $1,500.
ARTICLE V
Non-Competition and Confidentiality
5.01. Upon termination of Orr's employment pursuant to this Agreement, Orr
shall not directly or indirectly, either as a principal, agent, employee,
employer, stockholder, co-partner or in any other individual or representative
capacity whatsoever, engage in the banking and financial services business,
which includes consumer, savings, commercial banking and the insurance and
trust businesses, or the savings and loan or mortgage banking business, or any
other business in which SNC are engaged at this time, anywhere in the states of
North Carolina and South Carolina and in any county outside of North Carolina
and South Carolina contiguous to North Carolina or South Carolina, nor shall
Orr knowingly solicit, or assist any other person in so soliciting, any
depositors or customers of SNC or induce any then or former employee of SNC to
terminate his or her employment with SNC. However, nothing contained herein
shall be deemed to prevent or limit Orr's right to invest in a business similar
to SNC's business if such investment is limited to less than one percent of the
capital stock or other securities of any corporation or similar organization
whose stock or securities are publicly owned or are regularly traded on any
public exchange. This Article V shall apply for a period of fifteen (15) years
from May 1, 1995.
5.02. Payments due Orr under section 2.01 shall be discontinued in the event
Orr breaches the provisions of section 5.01; provided that Orr has received
written notice from SNC of such breach and such
5
<PAGE>
breach remains uncured thirty days after the delivery of such notice. If there
is a disagreement between the parties as to whether Orr has breached this
Article V, then after the above thirty-day period, if such breach remains
uncured in SNC's opinion, SNC may suspend payments to Orr and instead make such
payments to an escrow account to be established for this purpose. The parties
agree in such event that the dispute shall be settled by binding arbitration in
accordance with the rules then obtaining of the American Arbitration
Association and, if necessary, judgment upon the award may be entered in any
court having jurisdiction thereof. The place of hearing of the arbitration
shall be in North Carolina at a place mutually agreed upon between the parties.
Upon the award being made by the arbitrator, the escrow agent shall delivery
all amounts in the account to the proper recipient as determined by the
arbitrator.
5.03. Orr acknowledges that during his employment with SNC he has learned a
substantial amount of information which is proprietary and confidential to SNC.
Such proprietary and confidential information includes, but is not limited to
SNC's business, marketing, customer development, strategic, planning, and
expansion plans. Orr acknowledges that SNC would be damaged if such proprietary
and confidential information were made available to SNC's competitors. Orr
agrees that except as required by law, he shall not knowingly at any time
divulge to any person, agency, institution, company or other entity any
information which he knows or has reason to believe is proprietary or
confidential to SNC. Orr agrees that his duties and obligations under this
section shall continue for as long as such information remains proprietary or
confidential to SNC.
ARTICLE VI
Amendment or Termination
SNC may, with the prior written consent of Orr, modify, alter, amend or
terminate this Agreement, in whole or in part at any time. An amendment may be
made retroactively if it is necessary to make this Agreement conform to
applicable law or agreeable to the parties. No amendment or modification of
this Agreement or any covenant, condition or limitation shall be valid unless
in writing and duly executed by the parties to this Agreement.
ARTICLE VII
Continued Board and Executive Committee Service
SNC will use its best efforts, subject to the fiduciary duties of the members
of the Nominating Committee and the other members of its Board of Directors, to
nominate Orr for reelection to SNC's Board of Directors and to reelect him to
its Executive Committee, in each case so that he will serve on the Board and
Executive Committee until his 70th birthday. SNC will also use its best efforts
to elect and reelect Orr to the boards of directors of its subsidiary banks in
North Carolina and South Carolina (four banks prior to the anticipated bank
mergers and two thereafter) so that Orr will serve on such boards until his
70th birthday, subject to fiduciary duties of SNC and the members of the
respective bank boards of directors and nominating committees. Orr will receive
the normal compensation of an outside director with respect to these services.
ARTICLE VIII
Mergers and Consolidations
8.01. Continuance of Agreement. SNC shall require any successor (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of its business to expressly assume and perform all of SNC's
obligations under this Agreement, in a written agreement form satisfactory to
Orr.
8.02. Assumption of Agreement. Unless the parties to this Agreement otherwise
mutually agree in writing, SNC shall not merge or consolidate with any other
corporation, bank, association, or other entity until such successor entity
expressly agrees to and assumes the obligations of SNC set forth in this
Agreement.
6
<PAGE>
ARTICLE IX
General Provisions
9.01. Construction. Headings and subheadings used in this Agreement have been
inserted for convenience of reference only and must be ignored in any
construction of the provisions. If a provision of this Agreement is illegal or
invalid, that illegality or invalidity does not effect other provisions in this
Agreement. Any term with an initial capital not expected by capitalization
rules is a defined term in this Agreement. This Agreement must be construed
according to the applicable provisions of the Code in a manner that assures
that the Agreement provides the benefits and tax consequences intended for Orr.
9.02. Governing Law. This Agreement shall be construed, enforced, and
administered in accordance with the laws of the State of North Carolina (other
than its choice of law rules), except to the extent that those laws are
superseded by the laws of the United States of America.
9.03. Mitigation. Orr Shall not be required to mitigate the amounts of any
payments provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any such payment be reduced by any
compensation earned by Orr as the result of employment by another employer
after termination of Orr's employment by SNC.
9.04. Contents and Audits. Orr agrees that for tax purposes he shall report
the payments made to him hereunder in a manner that is consistent with the tax
treatment of such payments by SNC. Orr shall promptly notify SNC in writing
upon receipt of notice of any pending or threatened audit or assessment with
respect to Orr which may relate to the treatment of payments hereunder. SNC
shall not have the right at its option and expense to exclusively control and
have responsibility for the conduct of any audit, examination, proceeding or
litigation (a "Contest') with respect to Orr and the treatment of payments
hereunder. SNC agrees to notify Orr of any proposed settlement. The indemnity
provided for by section 2.01 hereof shall not apply with respect to any claims,
losses, damages, penalties, expenses and excise taxes relating to the
settlement of any action by Orr that is effected without SNC's express written
consent, which shall not be unreasonably withheld.
9.05. Withholding. All payments provided for hereunder shall be paid net of
all applicable withholding required under federal, state or local law and any
additional withholding to which Orr has agreed.
9.06. Indemnification. SNC must pay any reasonable legal fees and expenses
incurred by Orr, his current wife, if she survives Orr, or his beneficiary in
seeking in good faith to obtain or enforce any right or benefit provided under
this Agreement, whether Orr is successful or not. Payments made under this
section 9.06 shall be paid by SNC to Orr, upon notice from Orr, at the time Orr
incurs such legal fees or expenses.
9.07. Notice. For purposes of this Agreement, notices and all other
communications must be in writing and are effective when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to Orr or his personal representative at his last known address. All
notices to SNC must be directed to the attention of the Chairman of the Board.
Such other addresses may be used as either party may have furnished to the
other in writing. Notices of change in address are effective only upon receipt.
9.08. Entire Agreement. This Agreement sets forth all of the promises,
covenants, agreements, conditions and understandings between the parties to
this Agreement with respect to the subject matter hereof, and supersedes all
prior and contemporaneous agreements, understandings, inducement or conditions,
express or implied, oral or written, with respect thereto, except as contained
herein.
7
<PAGE>
IN WITNESS WHEREOF, SNC, by its duly authorized officer and Orr have hereunto
set their hands as of the day and year first written above.
Southern National Corporation
By: _________________________________
_____________________________________
_____________________________________
L. Glenn Orr, Jr.
* * * * *
On behalf of BB&T Financial Corporation, I hereby acknowledge that I have
reviewed the above agreement and confirm and acknowledge that it is consistent
with the terms of the letter agreement between BB&T Financial Corporation,
Southern National Corporation and L. Glenn Orr, Jr., dated July 29, 1994.
BB&T Financial Corporation
By: _________________________________
John A. Allison, IV
Chairman of the Board and Chief
Executive Officer
8
<PAGE>
EXHIBIT 10(C)
SETTLEMENT AGREEMENT, WAIVER, AND GENERAL RELEASE
THIS SETTLEMENT AGREEMENT, WAIVER, AND GENERAL RELEASE (the "Agreement"),
made and entered into this 19th day of September, 1994, effective as of and
subject to the merger of BB&T Financial Corporation ("BB&T Financial") and
Southern National Corporation ("SNC") (the "Merger"), sets forth the complete
terms under which the employment of GARY E. CARLTON ("Carlton") with SNC and
SOUTHERN NATIONAL BANK OF NORTH CAROLINA, a national banking association
("SNBNC"), under the Employment Agreement between Carlton, SNC and SNBNC, dated
January 1, 1994 (the "Employment Contract"), is being settled and terminated in
conjunction with and subject to the Merger.
W I T N E S S E T H:
WHEREAS, Carlton currently serves as Executive Vice President of SNC and as
President of SNBNC; and
WHEREAS, Carlton entered into the Employment Contract; and
WHEREAS, subject to the Merger, Carlton, SNC and SNBNC desire to conclude
Carlton's employment with SNC and SNBNC amicably and on mutually satisfactory
terms, and to terminate the Employment Contract for liquidated damages. These
terms are intended to recognize Carlton's service to SNC and SNBNC, to provide
Carlton compensation not in excess of what he reasonably could have expected to
receive under the Employment Contract if he had continued in the employ of SNC
and SNBNC to age 65; and
WHEREAS, each reference in this Agreement to Carlton includes Gary E. Carlton
and any of his agents, attorneys, personal representatives, executors,
administrators, heirs, beneficiaries, successors, and assigns; and
WHEREAS, each reference in this Agreement to SNC refers to Southern National
Corporation and any of its present or former divisions, subsidiaries,
Affiliates, officers, directors, representatives, employees, servants, agents,
attorneys, representatives, predecessors, successors, and assigns; and
WHEREAS, each reference in this Agreement to SNBNC refers to Southern
National Bank of North Carolina and any of its present or former divisions,
subsidiaries, Affiliates, officers, directors, representatives, employees,
servants, agents, attorneys, representatives, predecessors, successors, and
assigns; and
WHEREAS, each reference in this Agreement to an "Affiliate" of SNC or SNBNC
includes all businesses or corporations directly or indirectly controlled by
SNC or SNBNC through sole membership, stock ownership or otherwise.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. Conclusion of Employment. Carlton, SNC and SNBNC agree that Carlton's
employment as an officer of SNC and SNBNC and any other position he currently
holds with SNC, SNBNC or any Affiliate will end effective August 1, 1995 (the
"Termination Date"). To the effective date of the Merger, Carlton shall
continue to serve in the positions he holds as of the date of this Agreement.
From the effective date of the Merger through August 1, 1995, Carlton shall
continue to serve as Executive Vice President of SNC and Senior Vice President
of Branch Banking and Trust Company ("BB&T"). Carlton specifically waives and
renounces any claim for employment with SNC, SNBNC or any Affiliate at any time
after the Termination Date.
2. Term. Subject to the consummation of the Merger on or before the
Termination Date, the term of this Agreement shall be for the period of time
beginning on the Termination Date, and continuing and existing until Carlton
reaches age sixty-five (65).
<PAGE>
3. Compensation. Prior to the Termination Date, Carlton shall continue to
receive compensation at his current level. Effective from and after the
Termination Date, SNC and SNBNC jointly and severally agree to pay Carlton an
amount equal to Three-Hundred Twelve Thousand Dollars ($312,000.00) per year
until he attains age 65 or dies. Such amounts shall be payable in equal monthly
installments, in accordance with the normal payroll practices of SNC and SNBNC
or its successor.
4. Board of Directors. Following the consummation of the Merger, subject to
its fiduciary duties to its stockholders and so long as it is appropriate, SNC
will elect Carlton to the Board of Directors of BB&T, until the earlier of (i)
his 65th birthday or (ii) until the BB&T Board goes out of existence. Effective
as of the Termination Date, Carlton shall receive the normal compensation of an
outside director with respect to these services.
5. Incentive Payments. Carlton shall be entitled to a distribution of any
amount he has earned under the 1994 Southern National Corporation Short-Term
Incentive Plan and the 1992-1994 Long-term Incentive Plan at the normal
distribution dates for such plans in early 1995. In addition, Carlton shall be
entitled to receive pro rata distributions of any amounts he has earned based
on his service during calendar year 1994 under the 1993-1995 and the 1994-1996
Long-Term Incentive Plans at the same time and on the same basis as other
participants in such plans receive any such distributions.
6. Employee Benefits.
a. Retirement Benefits. Carlton shall receive all retirement benefits he is
entitled to under the Southern National Retirement Plan (the "Retirement
Plan"). In addition, Carlton shall receive credit for purposes of years of
service and compensation (as set forth in section 3) under the Southern
National Supplemental Executive Retirement Plan (the "SERP"), from his
Termination Date to age 65 as if he had continued in the employment of SNC and
SNBNC during such period, and his benefit under the SERP as of any given date
shall be determined on the basis of his imputed service and compensation to
such date. All payments made under the SERP pursuant to this section 6(a) shall
be made in the form of a seventy-five percent (75%) joint and survivor annuity.
Benefits payable under the Retirement Plan shall be distributed in accordance
with the terms thereof. In determining Carlton's SERP benefit the offset
attributable to his accrued benefit under the Retirement Plan shall be the
benefit payable (or that would have been payable) under the Retirement Plan as
of the date Carlton elects to commence receiving his SERP benefit. Based on the
provisions of section 3 (and subject to any adjustments required under section
11), an estimate of Carlton's pension and SERP benefit are set forth in Exhibit
I. Such estimates assume that Carlton survives to age 65 and commences his
benefit on that date. Should Carlton elect to commence receiving his SERP
benefit before age 65, the amount then payable under section 3 shall be reduced
by such benefit. Except for the imputation of compensation and service and the
provisions of section 11, the provisions of the SERP shall apply in all cases
in determining Carlton's SERP benefit.
b. Health Insurance. SNBNC agrees to provide Carlton health insurance
coverage on the same terms and conditions as other retired officers and
employees of SNBNC receive. In the event that Carlton is employed by another
employer on or after the Termination Date, and the employer provides health
coverage to Carlton, SNBNC shall, as authorized by law, cease to provide health
insurance to Carlton.
c. Stock Options. Carlton shall be entitled to exercise any outstanding stock
options he has received under the Southern National Corporation Non-Qualified
Stock Option Plan or the Southern National Corporation Incentive Stock Option
Plan, in accordance with the terms of such plans and his outstanding Stock
Option Agreements. Every effort will be made to have SNC's Compensation
Committee treat Carlton's termination pursuant to this Agreement as a
"voluntary retirement" for purposes of the stock option plans.
d. Insurance. So long as Carlton continues to pay his portion of the
premiums, SNBNC shall continue to pay its portion of the premiums on the
following split-dollar insurance policies on Carlton's life through the
indicated dates:
2
<PAGE>
Northwestern Mutual Life Insurance Company
Policy Number: 12268865
Initial Face Amount: $514,947
Premium Date: Through the premium due on July 1, 2006
General American Life Insurance Company
Policy Number: 51003514
October 1, 1992 Face Amount: $324,096
Premium Date: Through the premium due on October 1, 2004
Carlton or his designee shall then become the owner of such life insurance
policies, less SNBNC's interest therein. Carlton further agrees to execute the
attached amendment to his Executive Life Agreement attached hereto as Exhibit
II.
7. Residence. Carlton shall have his personal residence located in Winston-
Salem, North Carolina appraised by an appraiser on SNBNC's approved list of
residential appraisers. SNC and SNBNC jointly and severally agree to pay
Carlton an amount equal to six percent (6%) of the appraised value of such
residence or its actual sales price, if less, to compensate Carlton for any
loss he incurs as a result of paying applicable real estate commissions on the
sale of his residence.
8. Automobile. Carlton shall trade in his existing automobile provided by SNC
and SNBNC. SNC and SNBNC jointly and severally agree to replace Carlton's
existing automobile with a new automobile of the same model, which SNC and
SNBNC shall pay for in full. The title to such automobile shall be transferred
to Carlton on his Termination Date.
9. Waiver, Release and Covenant Not to Sue.
a. By signing this Agreement, Carlton forever waives, releases and covenants
not to sue SNC or SNBNC with respect to any and all claims against SNC or SNBNC
of any kind or nature whatsoever arising from any events which have occurred up
to the date Carlton executes this Agreement and through the Termination Date,
including all claims arising from or relating in any way to Carlton's
employment with SNC or SNBNC or the conclusion of that employment, whether such
claims are now known or are later discovered.
b. Carlton does not waive any rights or claims that may arise after his
Termination Date.
c. This Agreement is not and shall not be deemed an admission by SNC or SNBNC
of a violation of any statute or law or wrongdoing of any kind, nor is it an
admission or finding that any claim Carlton might raise against SNC or SNBNC,
including any claim in connection with his employment with SNC or SNBNC or the
conclusion of that employment, is or would be in any way valid or meritorious.
Carlton, SNC and SNBNC specifically acknowledge that they are entering into
this Agreement solely for the purpose of concluding Carlton's employment with
SNC and SNBNC amicably.
10. Covenant to Maintain Confidentiality.
a. Carlton acknowledges that during his employment with SNC and SNBNC before
the Termination Date, he has learned a substantial amount of information which
is proprietary and confidential to SNC and SNBNC. Such proprietary and
confidential information includes, but is not limited to SNC's and SNBNC's
business, marketing, customer development, strategic planning, and expansion
plans. Carlton acknowledges that SNC and SNBNC would be damaged if such
proprietary and confidential information were made available to SNC's or
SNBNC's competitors.
b. Carlton agrees that except as required by law, he shall not at any time
divulge to any person, agency, institution, company or other entity any
information which he knows or has reason to believe is proprietary or
confidential to SNC or SNBNC.
3
<PAGE>
c. Carlton agrees that his duties and obligations under this section 10 shall
continue for as long as such information remains proprietary or confidential to
SNC or SNBNC.
d. Carlton acknowledges and agrees that any breach of this section 10 would
constitute a material breach of this Agreement.
11. Mitigation.
a. Carlton agrees that the amount of any payment provided for in section 3
shall be reduced by any compensation earned by Carlton as the result of
employment by another employer after the Termination Date. Carlton further
agrees that any amount he is entitled to receive under the SERP pursuant to
section 6(a) of this Agreement shall be reduced at the time of commencement of
payment by the "actuarial equivalent" (as defined under the SERP) of any
benefits accrued by Carlton after the Termination Date under any "employee
pension benefit plan" (as defined in section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended) maintained by another employer.
b. Carlton shall have an affirmative obligation to notify the Chief Financial
Officer of SNC if Carlton at any time accepts employment with another employer,
and/or begins to accrue benefits under an employee pension benefit plan
maintained by another employer, within 30 days of such event. Carlton shall
further have an affirmative obligation to notify SNC's Director of Human
Resources at the time he becomes eligible for health insurance coverage
provided by another employer.
12. Confidentiality. Carlton agrees that he shall not reveal or allow anyone
else to reveal the terms of this Agreement to any person, agency, institution,
company, or other entity unless SNC and SNBNC agree in writing that he may do
so. Carlton may, however, make such disclosures as are required by law,
including disclosures to taxing agencies, and Carlton may disclose the terms of
this Agreement to his wife, attorney, accountant or tax advisor, provided that
Carlton shall inform his wife, attorney, accountant or tax advisor that the
terms are strictly confidential and are not to be revealed to anyone else
except as required by law. Carlton further agrees that he shall not disparage,
denigrate, or otherwise speak negatively about the Merger, BB&T Financial,
BB&T, SNC, SNBNC or their management, directors or employees, to any person,
agency, institution, company, or other entity. Carlton acknowledges and agrees
that any breach of this section 12 would constitute a material breach of this
Agreement.
13. Construction of Agreement.
a. Carlton, SNC and SNBNC agree that this Agreement contains all the promises
and covenants made by them with respect to its subject matter.
b. This Agreement shall be governed by and interpreted in accordance with the
laws of the State of North Carolina. Any dispute arising between the parties
related to or involving this Agreement shall be litigated in a court having
jurisdiction in the State of North Carolina.
c. If any provision or clause of this Agreement or any application thereof to
any party or circumstance is held invalid, such invalidity shall not affect
other provisions or applications to any party or of the Agreement that can be
given effect without the invalid provision or application, and to this end the
provisions of the Agreement are declared to be severable.
d. Carlton acknowledges and agrees that SNC and SNBNC are not undertaking to
advise him with respect to the tax consequences of this Agreement and that he
is solely responsible for determining those consequences.
e. Carlton acknowledges that he has read this Agreement and that he
understands its terms. Carlton is satisfied with the terms of this Agreement
and agrees that the terms are binding upon him.
4
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed the day and year first above written.
Southern National Corporation
By: _________________________________
L. Glenn Orr, Jr.
Chairman, President and Chief
Executive Officer
Southern National Bank of North
Carolina
By: _________________________________
L. Glenn Orr, Jr.
Chairman and Chief Executive
Officer
_____________________________________
Gary E. Carlton
5
<PAGE>
EXHIBIT 23(A)
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 February 28, 1994,
included in Southern National Corporation's Current Report on Form 8-K dated
September 26, 1994, and to all references to our firm included in this
registration statement.
Arthur Andersen LLP
Charlotte, North Carolina,
November 14, 1994.
<PAGE>
EXHIBIT 23(B)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
BB&T Financial Corporation
We consent to the use of our report dated January 19, 1994, except as to note
2 which is as of June 30, 1994, included in BB&T Financial Corporation's
Current Report on Form 8-K dated August 31, 1994, which restates portions of
the Company's Annual Report on Form 10-K for the year ended December 31, 1993
to give effect to the acquisition of L.S.B. Bancshares, Inc. of South Carolina
("LSB") in 1994 which has been accounted for under the pooling-of-interests
method, incorporated by reference in the Form S-4 Registration Statement and to
the reference to our firm under the heading "Experts" in the related Joint
Proxy Statement/Prospectus for the merger with Southern National Corporation.
We also consent to the use of our report dated January 19, 1994 included in
BB&T Financial Corporation's Annual Report on Form 10-K for the year ended
December 31, 1993, incorporated by reference in the Form S-4 Registration
Statement. Such financial statements were restated subsequent to the Company's
Annual Report on Form 10-K in the Company's Current Report on Form 8-K dated
August 31, 1994 to give effect to the LSB acquisition occurring in 1994 and
accounted for under the pooling-of-interests method.
KPMG Peat Marwick LLP
Raleigh, North Carolina
November 14, 1994
<PAGE>
EXHIBIT 23(C)
INDEPENDENT AUDITORS CONSENT
The Board of Directors
Southern National Corporation
We consent to the incorporation by reference in the registration statement on
Form S-4 of Southern National Corporation of our report dated August 14, 1992,
with respect to the consolidated statements of financial condition of The First
Savings Bank, FSB and subsidiaries as of June 30, 1992 and 1991, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the two-year period ended June 30, 1992 which
report appears in the Form 8-K of Southern National Corporation dated September
26, 1994 and the Form 8-K of BB&T Financial Corporation dated November 7, 1994;
and our report date August 6, 1993, with respect to the consolidated statements
of financial condition of The First Savings Bank, FSB and subsidiaries as of
June 30, 1993 and 1992, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended June 30, 1993 which report appears in the Form 8-K Amendment No. 1
of Southern National Corporation dated April 15, 1994; and to the reference to
our firm under the heading "Experts" in the registration statement.
KPMG Peat Marwick LLP
Greenville, South Carolina
November 9, 1994
<PAGE>
EXHIBIT 23(D)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report included herein and incorporated herein
by reference, and to the reference to our firm under the heading "Experts" in
the Proxy Statement/Prospectus.
Donald G. Jones and Company, P.A.
Columbia, South Carolina
November 14, 1994
<PAGE>
EXHIBIT 23(E)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption of "Experts" in the
Registration Statement (Form S-4) and related Joint Proxy Statement/Prospectus
of Southern National Corporation for the registration of 57,887,840 shares of
its common stock and to the incorporation by reference therein of our report
dated January 21, 1994, with respect to the 1993 financial statements and
schedule of Commerce Bank included in its Annual Report (Form F-2) for the year
ended December 31, 1993, filed with the Securities and Exchange Commission as
Exhibit 99.3 to the Current Report on Form 8-K of Southern National Corporation
dated November 14, 1994.
Ernst & Young LLP
Richmond, Virginia
November 14, 1994
<PAGE>
EXHIBIT 23(F)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Southern National Corporation on Form S-4 of our report dated January 15, 1993,
on our audits of the financial statements of Commerce Bank as of December 31,
1992 and 1991 and for each of the three years in the period ended December 31,
1992, which report has been filed in the Current Report on Form 8-K of Southern
National Corporation dated November 14, 1994. We also consent to the reference
to our firm under the caption "Experts" appearing in this Form S-4.
Coopers & Lybrand L.L.P.
Norfolk, Virginia
November 14, 1994
<PAGE>
EXHIBIT 23(H)
CONSENT OF LEHMAN BROTHERS
We hereby consent to the inclusion in the Proxy Statement/Prospectus forming
part of this Registration Statement on Form S-4 of our opinion dated on or
about November 14, 1994 to the Boards of Directors of BB&T Financial
Corporation and Southern National Corporation attached as Appendix B to such
Proxy Statement/Prospectus and the references to such opinion therein. In
giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
and the rules and regulations issued thereunder, and we do not thereby admit
that we are experts with respect to any part of the Registration Statement
within the meaning of the term "expert" as used in the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
Lehman Brothers
By __________________________________
Managing Director
New York, New York
November 14, 1994
<PAGE>
EXHIBIT 23(I)
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the use in this registration statement on Form S-4 of
our letter to the Board of Directors of Southern National Corporation included
as Annex III-B to the Joint Proxy Statement/Prospectus that is a part of this
Registration Statement, and to the references to such letter and to our firm
in such Joint Proxy Statement/Prospectus. In giving such consent we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission thereunder.
Wheat, First Securities, Inc.
Richmond, Virginia
November 14, 1994
<PAGE>
EXHIBIT 23(J)
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the use in this registration statement on Form S-4 of
our letter to the Board of Directors of BB&T Financial Corporation included as
Annex III-C to the Proxy Statement/Prospectus that is a part of this
Registration Statement, and to the references to such letter and to our firm in
such Proxy Statement/Prospectus. In giving such consent we do not thereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933 or the rules and regulations of the
Securities and Exchange Commission thereunder.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
New York, New York
November 14, 1994
<PAGE>
PROXY
SOUTHERN NATIONAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING
OF SHAREHOLDERS TO BE HELD DECEMBER 15, 1994
KNOW ALL MEN BY THESE PRESENTS, That the undersigned shareholder of Southern
National Corporation (the "Corporation"), a North Carolina corporation, hereby
constitutes and appoints E. Michael Sessoms and Laura P. Richardson, and each
of them, attorneys and proxies, with full power of substitution, for and on
behalf of the undersigned to act and vote, as indicated below, according to the
number of shares of the Corporation's common stock held of record by the
undersigned on October 21, 1994, and as fully as the undersigned would be
entitled to act and vote if personally present, at the Special Meeting of
Shareholders to be held at the Holiday Inn, 5201 Fayetteville Road, Lumberton,
North Carolina on December 15, 1994, at 10:00 a.m. and at any adjournment or
adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF PROPERLY EXECUTED AND NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSAL AND IN THE DISCRETION
OF THE PROXY HOLDERS AS TO ANY OTHER MATTERS.
PROPOSAL TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN THE
CORPORATION AND BB&T FINANCIAL CORPORATION AND A RELATED PLAN OF MERGER
[_] FOR[_] AGAINST[_] ABSTAIN
In their discretion, the proxies are authorized to act and vote upon any
other business which may properly be brought before the meeting or any
adjournment thereof.
<PAGE>
The undersigned hereby ratifies and confirms all that said attorneys and
proxies or any of them lawfully do or cause to be done by virtue hereof. A
majority of said attorneys and proxies who shall be present and acting as such
at the Special Meeting of Shareholders or any adjournment thereof, or if only
one such attorney and proxy be present and acting, then that one, shall have
and may exercise all the powers hereby conferred.
The undersigned hereby acknowledges receipt of the Notice of Special Meeting
of Shareholders, dated November 14, 1994, and the Joint Proxy
Statement/Prospectus.
DATED THIS DAY OF , 1994. _________________________________(SEAL)
_________________________________(SEAL)
NOTE: PLEASE SIGN EXACTLY AS NAME
APPEARS ON STOCK CERTIFICATE. WHEN
SHARES ARE HELD BY JOINT TENANTS, BOTH
SHOULD SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES AND OTHER
FIDUCIARIES, AND PERSONS SIGNING ON
BEHALF OF CORPORATIONS OR
PARTNERSHIPS, SHOULD SO INDICATE WHEN
SIGNING.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY. THANK YOU.
<PAGE>
LOGO
PROXY PROXY
BB&T FINANCIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF BB&T FINANCIAL
CORPORATION
The undersigned hereby appoints JOHN A. ALLISON IV and RUSSELL A. THOMPSON,
JR., and either of them, attorneys and proxies, with power of substitution, to
vote the shares of BB&T Financial Corporation's ("BB&T") common stock of the
undersigned at the Special Meeting of the Shareholders of BB&T to be held at
the Corporation's headquarters at 223 West Nash Street, Wilson, North Carolina,
27893 on Thursday, December 15, 1994, at 10:00 a.m., and at any adjournments
thereof, upon the following matters:
1. Proposal 1--To consider and vote upon an Agreement and Plan of
Reorganization between BB&T and Southern National Corporation ("SNC"), dated
as of July 29, 1994, and amended and restated as of October 22, 1994, and a
related Plan of Merger, dated as of July 29, 1994, and amended and restated
as of October 22, 1994, pursuant to which, among other things: (i) BB&T will
be merged (the "Merger") with and into SNC; (ii) each outstanding share of
BB&T common stock, $2.50 par value per share, would be converted into the
right to receive 1.45 shares of SNC common stock, $5.00 par value per share
("SNC Common Stock"), with cash in lieu of the issuance of any fractional
share interest; and (iii) each outstanding stock option granted by BB&T
under one of its benefit plans, whether or not exercisable, would be
converted into and become a right with respect to SNC Common Stock, all as
described more fully in the accompanying Joint Proxy Statement/Prospectus.
PLEASE MARK VOTES:
[_] FOR [_] AGAINST [_] ABSTAIN
2. Proposal 2--In their discretion, to vote upon such other business as may
properly come before the meeting or any adjournments thereof.
<PAGE>
LOGO
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR APPROVAL OF PROPOSAL 1 AND IN THE DISCRETION OF THE PROXY HOLDERS AS
TO ANY OTHER MATTERS. AT THE PRESENT TIME, THE PROXY HOLDERS KNOW OF NO OTHER
MATTERS TO BE PRESENTED AT THE SPECIAL MEETING.
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
PLEASE SIGN EXACTLY AS NAME
APPEARS AT LEFT.
WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL CORPORATE NAME
BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE
SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
-----------------------------------
Signature
-----------------------------------
Signature if held jointly
Dated _______________________, 1994
IF YOU ATTEND THE SPECIAL MEETING,
YOU MAY WITHDRAW YOUR PROXY AND
VOTE IN PERSON.
