<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1996
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)
<TABLE>
<S> <C> <C>
NORTH CAROLINA 6060 56-0939887
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
200 WEST SECOND STREET
WINSTON-SALEM, NORTH CAROLINA 27101
(910) 733-2000
(Address, including Zip Code, and telephone number, including
area code, of registrant's principal executive offices)
JERONE C. HERRING, ESQ.
200 WEST SECOND STREET, 3RD FLOOR
WINSTON-SALEM, NORTH CAROLINA 27101
(910) 733-2180
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
THE COMMISSION IS REQUESTED TO SEND COPIES OF
ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
DEBORAH H. HARTZOG, ESQ. J. NORFLEET PRUDEN III, ESQ.
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC KENNEDY COVINGTON LOBDELL & HICKMAN, L.L.P.
2100 FIRST UNION CAPITOL CENTER 100 NORTH TRYON STREET
150 FAYETTEVILLE STREET MALL SUITE 4200
RALEIGH, NORTH CAROLINA 27601 CHARLOTTE, NORTH CAROLINA 28202
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: [ ]
CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
<S> <C> <C> <C>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE REGISTERED AMOUNT TO BE REGISTERED OFFERING PRICE PER UNIT AGGREGATE OFFERING PRICE
<S> <C> <C> <C>
Common Stock,
par value $5.00
per share................. 6,467,888 (1) $163,445,709 (2)
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock,
par value $5.00
per share................. $17,500 (3)
</TABLE>
(1) Not applicable.
(2) Computed in accordance with Rule 457(f) based on the average of the high
($10 7/8) and low ($10 5/8) sales price of the common stock of Regional
Acceptance Corporation on July 12, 1996 as reported on The Nasdaq National
Market.
(3) Pursuant to Rule 457(b), the registration fee has been reduced by an amount
equal to the fee of $38,681 paid upon the filing with the Commission of the
preliminary proxy materials of Regional Acceptance Corporation on June 18,
1996.
<PAGE>
SOUTHERN NATIONAL CORPORATION
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION CAPTION IN PROSPECTUS
<C> <S> <C>
1 Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................. Facing Page; Cross Reference Sheet; Outside Front Cover Page
2 Inside Front and Outside Back Cover Pages of
Prospectus...................................... Available Information; Incorporation of Certain Documents by
Reference; Table of Contents
3 Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information........................... Summary; Special Meeting of Shareholders of RAC; The Merger
4 Terms of the Transaction........................ Summary; The Merger; Description of SNC Capital Stock; Comparison
of Shareholders' Rights
5 Pro Forma Financial Information................. Not Applicable
6 Material Contacts with the Company Being
Acquired........................................ The Merger -- Background of the Merger;
The Merger -- Reasons for the Merger
7 Additional Information Required for Reoffering
by Persons and Parties
Deemed to be Underwriters....................... Not Applicable
8 Interests of Named Experts and Counsel.......... The Merger -- Opinion of the Financial Advisor; Legal Matters
9 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... Not Applicable
10 Information with Respect to S-3 Registrants..... Not Applicable
11 Incorporation of Certain Information by
Reference....................................... Incorporation of Certain Documents 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-3 or S-2 Registrants..................... Not Applicable
15 Information with Respect to S-3 Companies....... Not Applicable
16 Information with Respect to S-2 or S-3
Companies....................................... Incorporation of Certain Documents by Reference
17 Information with Respect to Companies Other Than
S-3or S-2 Companies............................. Not Applicable
18 Information if Proxies, Consents or Authori-
zations Are to Be Solicited..................... Outside Front Cover Page; Incorporation of Certain Documents by
Reference; Summary; Special Meeting of Shareholders of RAC; The
Merger -- Interests of Certain Persons in the Merger; The
Merger -- Dissenters' Rights
19 Information if Proxies, Consents or Authori-
zations Are Not to Be Solicited or in an
Exchange Offer.................................. Not Applicable
</TABLE>
<PAGE>
PROXY STATEMENT
REGIONAL ACCEPTANCE CORPORATION
PROSPECTUS
SOUTHERN NATIONAL CORPORATION
COMMON STOCK
This Proxy Statement/Prospectus is being furnished to the holders of the
common stock of Regional Acceptance Corporation, a North Carolina corporation
("RAC"), in connection with the solicitation of proxies by the Board of
Directors of RAC for use at the special meeting of shareholders of RAC, or any
adjournment or postponement thereof (the "Special Meeting"), to be held on
August 23, 1996 at 10:00 a.m., local time, at the Ramada Inn, 203 S.W.
Greenville Boulevard, Greenville, North Carolina. At the Special Meeting, the
shareholders of RAC will be asked to consider and vote upon a proposal to
approve an Amended and Restated Agreement and Plan of Reorganization, dated as
of March 29, 1996 and amended and restated as of May 30, 1996 (the
"Reorganization Agreement"), between RAC and Southern National Corporation, a
North Carolina corporation ("SNC"), a copy of which and the related Plan of
Merger set forth therein (the "Plan of Merger") is attached hereto as Appendix
I. See "SPECIAL MEETING OF SHAREHOLDERS OF RAC."
The Reorganization Agreement and Plan of Merger provide for the merger of
SNC Acquisition Corp., a North Carolina corporation and wholly-owned subsidiary
of SNC ("SNC Acquisition"), with and into RAC (the "Merger"). As a result, RAC
will become a wholly-owned subsidiary of SNC, and the shareholders of RAC, other
than dissenting shareholders, will become shareholders of SNC in accordance with
the terms of the Reorganization Agreement and Plan of Merger. See "THE
MERGER -- Exchange Ratio."
This Proxy Statement/Prospectus also constitutes a prospectus of SNC with
respect to up to 6,600,000 shares of common stock, par value $5.00 per share, of
SNC (the "SNC Common Stock") to be issued to holders of the outstanding shares
of common stock, no par value, of RAC (the "RAC Common Stock") in accordance
with the Reorganization Agreement and Plan of Merger. The SNC Common Stock is
listed for trading on the New York Stock Exchange, Inc. (the "NYSE") under the
trading symbol "SNB." On July 19, 1996, the last sale price of SNC Common Stock
as reported on the NYSE Composite Transactions List was $ . The RAC
Common Stock is listed for trading on the Nasdaq National Market under the
trading symbol "REGA." On July 19, 1996 the last sale price of RAC Common Stock
as reported on the Nasdaq National Market was $ . On March 28, 1996,
the last trading day before SNC and RAC announced that they had entered into the
Reorganization Agreement, the last sale price of RAC Common Stock as reported on
the Nasdaq National Market was $9.75.
This Proxy Statement/Prospectus, the Notice of Special Meeting, and the
accompanying proxy cards are first being mailed to the shareholders of RAC on or
about July 23, 1996.
NEITHER THE MERGER NOR THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY
STATEMENT/PROSPECTUS HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is July 23, 1996.
<PAGE>
AVAILABLE INFORMATION
SNC and RAC are each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements, and other information filed with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the
following Regional Offices of the Commission: 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and at 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material can be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. The Commission maintains a World Wide
Web site on the Internet at http://www.sec.gov that contains reports, proxy and
information statements, and other information regarding registrants that file
electronically with the Commission, including SNC and RAC.
Shares of SNC Common Stock are listed on the NYSE, and proxy statements,
reports, and other information concerning SNC can also be inspected and copied
at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
SNC has filed a Registration Statement on Form S-4 (together with all
amendments, exhibits, and schedules thereto, the "Registration Statement") with
the Commission under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the shares of SNC Common Stock to be issued in the
Merger. This Proxy Statement/Prospectus does not include all of the information
set forth in the Registration Statement, as permitted by the rules and
regulations of the Commission. The Registration Statement, including any
amendments, schedules, and exhibits filed or incorporated by reference as a part
thereof, is available for inspection and copying as set forth above. Statements
contained in this Proxy Statement/Prospectus or in any document incorporated
herein by reference as to the contents of any contract or other document
referred to herein or therein are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document, and each such
statement shall be deemed qualified in its entirety by such reference.
The information contained herein with respect to SNC has been provided by
SNC, and the information contained herein with respect to RAC before the Merger
has been provided by RAC.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF
SECURITIES MADE HEREBY OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY SNC OR RAC.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES COVERED BY THIS PROXY
STATEMENT/PROSPECTUS OR A SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE, OR
TO OR FROM ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION
OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF SNC OR RAC SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by SNC with the Commission under
the Exchange Act are incorporated herein by reference:
(a) SNC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(b) SNC's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1996;
(c) SNC's Current Report on Form 8-K, dated April 15, 1996;
(d) SNC's Current Report on Form 8-K, dated May 3, 1996;
(e) SNC's Current Report on Form 8-K, dated July 12, 1996; and
(f) 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.
i
<PAGE>
The following documents previously filed by RAC with the Commission under
the Exchange Act are incorporated herein by reference:
(a) RAC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(b) RAC's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1996; and
(c) RAC's Current Report on Form 8-K, dated March 29, 1996.
In accordance with the rules and regulations of the Commission, copies of
such Form 10-K and Form 10-Q previously filed by RAC with the Commission
accompany this Proxy Statement/Prospectus.
All documents filed by SNC or RAC pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the Special Meeting shall be deemed to be incorporated by reference
into this Proxy Statement/Prospectus and to be a part hereof from the date of
the filing of such documents.
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 hereof to the extent that a statement contained herein (or in any
subsequently filed document that is or is deemed to be incorporated by reference
herein) modifies or supersedes such previous statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof except as
so modified or superseded.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE HEREIN) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST BY
ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF RAC COMMON STOCK, TO WHOM THIS
PROXY STATEMENT/PROSPECTUS HAS BEEN DELIVERED. REQUESTS FOR DOCUMENTS RELATING
TO SNC SHOULD BE DIRECTED TO INVESTOR RELATIONS, SOUTHERN NATIONAL CORPORATION,
223 WEST NASH STREET, WILSON, NORTH CAROLINA 27893 OR TELEPHONE: (919) 246-4219.
REQUESTS FOR DOCUMENTS RELATING TO RAC SHOULD BE DIRECTED TO SECRETARY, REGIONAL
ACCEPTANCE CORPORATION, 3004 SOUTH MEMORIAL DRIVE, GREENVILLE, NORTH CAROLINA
27834 OR TELEPHONE: (919) 756-2148. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY SUCH REQUEST SHOULD BE RECEIVED BY AUGUST 16, 1996.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AVAILABLE INFORMATION.................................................................................................. i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................................................ i
SUMMARY................................................................................................................ 1
Special Meeting of Shareholders of RAC............................................................................... 1
Parties to the Merger................................................................................................ 1
SNC............................................................................................................... 1
SNC Acquisition................................................................................................... 1
RAC............................................................................................................... 1
The Merger........................................................................................................... 2
General........................................................................................................... 2
Exchange Ratio.................................................................................................... 2
Effective Date and Time of the Merger............................................................................. 2
Recommendation of RAC Board; Reasons for the Merger............................................................... 2
Opinion of RAC's Financial Advisor................................................................................ 2
Conditions to the Merger.......................................................................................... 2
Termination of the Reorganization Agreement....................................................................... 3
Interests of Certain Persons in the Merger........................................................................ 3
Regulatory Considerations......................................................................................... 3
Dissenters' Rights................................................................................................ 3
Certain Federal Income Tax Consequences........................................................................... 3
Accounting Treatment.............................................................................................. 3
Option Agreement.................................................................................................. 3
Comparison of Shareholders' Rights................................................................................... 4
Comparative Market Prices and Dividends.............................................................................. 4
Selected Financial Data.............................................................................................. 5
SNC............................................................................................................... 5
RAC............................................................................................................... 6
Comparative Per Share Data........................................................................................... 7
SPECIAL MEETING OF SHAREHOLDERS OF RAC................................................................................. 8
General.............................................................................................................. 8
Record Date, Voting Rights, and Vote Required........................................................................ 8
Voting and Revocation of Proxies..................................................................................... 8
Solicitation of Proxies.............................................................................................. 9
Recommendation of RAC Board.......................................................................................... 9
THE MERGER............................................................................................................. 10
General.............................................................................................................. 10
Background of the Merger............................................................................................. 10
Reasons for the Merger............................................................................................... 11
Opinion of the Financial Advisor..................................................................................... 13
Exchange Ratio....................................................................................................... 17
Possible Adjustment or Renegotiation of the Exchange Ratio -- RAC.................................................... 17
Exchange of RAC Common Stock Certificates............................................................................ 18
The Reorganization Agreement......................................................................................... 18
Interests of Certain Persons in the Merger........................................................................... 20
Regulatory Considerations............................................................................................ 22
Dissenters' Rights................................................................................................... 23
Certain Federal Income Tax Consequences of the Merger................................................................ 24
Accounting Treatment................................................................................................. 25
The Option Agreement................................................................................................. 25
Effect on Employee Benefit Plans and Stock Options................................................................... 26
Restrictions on Resales by Affiliates................................................................................ 27
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
INFORMATION ABOUT SNC.................................................................................................. 28
General.............................................................................................................. 28
Subsidiaries......................................................................................................... 28
Acquisitions......................................................................................................... 28
Competition.......................................................................................................... 28
Market Area.......................................................................................................... 29
Lending Activities................................................................................................... 29
Leasing.............................................................................................................. 29
Capital.............................................................................................................. 29
INFORMATION ABOUT RAC.................................................................................................. 30
General.............................................................................................................. 30
Consumer Finance Industry............................................................................................ 30
RAC's Loan Products.................................................................................................. 31
Competition.......................................................................................................... 31
Relationships With Dealers........................................................................................... 31
Regulation........................................................................................................... 31
Recent Development................................................................................................... 32
OWNERSHIP OF RAC COMMON STOCK BY
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................................................. 32
DESCRIPTION OF SNC CAPITAL STOCK....................................................................................... 33
General.............................................................................................................. 33
Common Stock......................................................................................................... 33
Preferred Stock...................................................................................................... 33
Certain Provisions of the NCBCA, SNC Articles, and SNC Bylaws........................................................ 34
COMPARISON OF SHAREHOLDERS' RIGHTS..................................................................................... 34
Authorized Capital Stock............................................................................................. 34
Directors............................................................................................................ 35
Dividends and Other Distributions.................................................................................... 35
Notice of Shareholder Nominations and Shareholder Proposals.......................................................... 35
Exculpation and Indemnification...................................................................................... 36
Anti-takeover Statutes............................................................................................... 36
Amendments to Articles of Incorporation and Bylaws................................................................... 36
Liquidation Rights................................................................................................... 37
LEGAL MATTERS.......................................................................................................... 37
EXPERTS................................................................................................................ 37
SHAREHOLDER PROPOSALS.................................................................................................. 37
APPENDICES............................................................................................................. 38
Appendix I -- Amended and Restated Agreement and Plan of Reorganization
Appendix II -- Option Agreement
Appendix III -- Opinion of Salomon Brothers Inc
Appendix IV -- Chapter 55, Article 13 of NCBCA
</TABLE>
iv
<PAGE>
[This Page Left Intentionally Blank]
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS INTENDED ONLY TO HIGHLIGHT CERTAIN INFORMATION
CONTAINED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS. THIS SUMMARY IS NOT
INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION CONTAINED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS, THE
APPENDICES HERETO, AND THE DOCUMENTS INCORPORATED BY REFERENCE OR OTHERWISE
REFERRED TO HEREIN. SHAREHOLDERS ARE URGED TO REVIEW CAREFULLY THIS ENTIRE PROXY
STATEMENT/PROSPECTUS, INCLUDING THE APPENDICES HERETO.
SPECIAL MEETING OF SHAREHOLDERS OF RAC
The Special Meeting will be held on August 23, 1996 at 10:00 a.m., local
time, at the Ramada Inn, 203 S.W. Greenville Boulevard, Greenville, North
Carolina. At the Special Meeting, the shareholders of RAC will vote upon a
proposal to approve the Reorganization Agreement and the Plan of Merger set
forth therein attached hereto as Appendix I. On July 19, 1996, the record date
for the Special Meeting (the "Record Date"), there were approximately holders
of record of the shares of RAC Common Stock then outstanding and entitled to
vote at the Special Meeting.
The affirmative vote of the holders of a majority of the outstanding shares
of RAC Common Stock is required to approve the Reorganization Agreement and Plan
of Merger. As of the Record Date, directors and executive officers of RAC
beneficially owned 9,197,741 shares or 61.3% of the RAC Common Stock entitled to
vote at the Special Meeting. In the Reorganization Agreement, William R.
Stallings, Sr. and Dr. Ledyard B. Ross, who together own 8,695,739 shares of the
RAC Common Stock (57.9% of the shares entitled to vote at the Special Meeting),
agreed to vote those shares in favor of the Reorganization Agreement and Plan of
Merger unless the Board of Directors of RAC (the "RAC Board") withdraws,
modifies, or changes its recommendation that the shareholders of RAC vote in
favor thereof. See "SPECIAL MEETING OF SHAREHOLDERS OF RAC."
PARTIES TO THE MERGER
SNC
SNC is a multi-bank holding company headquartered in Winston-Salem, North
Carolina. SNC conducts its operations in North Carolina, South Carolina, and
Virginia primarily through its commercial banking subsidiaries and, to a lesser
extent, through its other subsidiaries. SNC's bank subsidiaries are Branch
Banking and Trust Company ("BB&T-NC"), which currently operates 312 banking
offices throughout North Carolina; Branch Banking and Trust Company of South
Carolina, which currently operates 99 banking offices throughout South Carolina;
and Commerce Bank, which currently operates 21 banking offices in the Hampton
Roads region of Virginia.
The mailing address and telephone number of SNC's principal executive
offices are 200 West Second Street, Winston-Salem, North Carolina 27101, (910)
733-2000. For additional information regarding SNC, see "INFORMATION ABOUT SNC."
SNC ACQUISITION
SNC Acquisition is a newly-formed North Carolina corporation that will not
conduct any significant activities other than those incident to its formation,
participation in the preparation of the Proxy Statement/Prospectus, and
completion of the Merger. SNC Acquisition is a wholly-owned subsidiary of SNC.
SNC Acquisition will be merged with and into RAC, and RAC will be the surviving
corporation in the Merger (the "Surviving Corporation"). The mailing address and
telephone number of SNC Acquisition's principal executive offices are 200 West
Second Street, Winston-Salem, North Carolina 27101, (910) 733-2000.
RAC
RAC is a consumer finance company engaged primarily in financing consumer
purchases of late model used automobiles and other used motor vehicles and in
making direct loans to consumers who typically have limited access to other
sources of consumer credit. RAC also offers insurance products to consumers in
connection with its loan transactions. RAC is based in Greenville, North
Carolina and currently has a total of 28 branch offices which are located in
North Carolina (23), South Carolina (3), Tennessee (1), and Virginia (1).
Operations at all of RAC's offices are integrated through a common management
information system and the same management structure, business strategy, and
lending procedures.
RAC is a North Carolina corporation founded in Greenville, North Carolina
in 1978. The mailing address and telephone number of RAC's principal executive
offices are 3004 South Memorial Drive, Greenville, North Carolina 27834, (919)
756-2148. For additional information regarding RAC, see "INFORMATION ABOUT RAC."
<PAGE>
THE MERGER
GENERAL
SNC Acquisition will be merged with and into RAC, and RAC will be the
surviving corporation in the Merger. Following the Merger, RAC will be a
wholly-owned subsidiary of SNC and each share of RAC Common Stock (other than
shares owned by any Dissenting Shareholders, as defined below) will be converted
into the right to receive shares of SNC Common Stock.
EXCHANGE RATIO
In the Merger, each outstanding share of RAC Common Stock (other than
shares held by Dissenting Shareholders) will be converted into .3929 shares of
SNC Common Stock if the Closing Value (as defined below) of SNC Common Stock is
not less than $26.00 and not greater than $30.00. If the Closing Value is less
than $26.00, the Exchange Ratio will be determined by dividing $10.21 by the
Closing Value. If the Closing Value is greater than $30.00, the Exchange Ratio
will be determined by dividing $11.79 by the Closing Value. If the Closing Value
is less than $24.00 or greater than $32.00, the Exchange Ratio will be subject
to renegotiation by SNC and RAC.
"Closing Value" means the average closing price per share, as reported on
the New York Stock Exchange (the "NYSE"), of the SNC Common Stock for the ten
NYSE trading days immediately preceding the fifth calendar day preceding the
date on which the shareholders of RAC approve the Merger. The Closing Value is
expected to be determined based on the ten business days ending on and including
August 16, 1996.
No fractional shares of SNC Common Stock will be issued in the Merger.
Holders of RAC Common Stock otherwise entitled to a fractional share will be
paid an amount in cash determined by multiplying that fraction by the Closing
Value. See "THE MERGER -- Exchange Ratio."
EFFECTIVE DATE AND TIME OF THE MERGER
The Merger will be effective on the date and at the time specified in the
Articles of Merger to be filed with the Secretary of State of the State of North
Carolina (the "Effective Date"). The filing of the Articles of Merger with the
Secretary of State of the State of North Carolina is anticipated to take place
on the first business day following the date on which the Plan of Merger shall
have been approved by the RAC shareholders or on such later date within ten days
thereafter as may be specified by SNC, or such later date as the parties may
otherwise agree. See "THE MERGER -- The Reorganization Agreement."
RECOMMENDATION OF RAC BOARD; REASONS FOR THE MERGER
The RAC Board has unanimously approved the Reorganization Agreement and
Plan of Merger and the transactions contemplated thereby. The RAC Board believes
that the Merger is in the best interests of RAC and its shareholders and
recommends that the shareholders of RAC vote "FOR" approval of the
Reorganization Agreement and Plan of Merger. For further discussion of the
factors considered by the RAC Board in reaching its conclusions, see "THE
MERGER -- Background of the Merger" and " -- Reasons for the Merger."
OPINION OF RAC'S FINANCIAL ADVISOR
RAC has retained Salomon Brothers Inc ("Salomon") to act as its financial
advisor in connection with the Merger, and Salomon has rendered its opinion to
the RAC Board that, as of the date of such opinion, the Exchange Ratio is fair
from a financial point of view to RAC's shareholders. The full text of the
Salomon opinion, updated to the date hereof, is set forth as Appendix III to
this Proxy Statement/Prospectus and should be read in its entirety with respect
to the assumptions made and other matters considered and limitations on the
review undertaken by Salomon in rendering such opinion. See "THE
MERGER -- Opinion of Financial Advisor."
CONDITIONS TO THE MERGER
The consummation of the Merger is subject to various conditions, including
the approval of the Reorganization Agreement and Plan of Merger by the
shareholders of RAC, receipt of necessary regulatory approvals, receipt of
opinions regarding tax consequences, receipt of assurances regarding accounting
treatment, and other customary conditions to closing. See "THE MERGER -- The
Reorganization Agreement."
2
<PAGE>
TERMINATION OF THE REORGANIZATION AGREEMENT
The Reorganization Agreement may be terminated by either SNC or RAC if the
Merger is not consummated on or before October 31, 1996 and the terminating
party is not in breach of any of its representations, warranties, or covenants
in the Reorganization Agreement. The parties also have certain rights of
termination if the Closing Value is less than $24.00 or greater than $32.00 and
a new Exchange Ratio cannot be negotiated and upon the occurrence of certain
other events. See "THE MERGER -- Exchange Ratio" and " -- The Reorganization
Agreement."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of RAC management, including one director, are entering
into employment agreements that provide for employment terms of three or more
years and severance payments and other benefits upon the occurrence of a merger
or other change of control of SNC or of RAC after the Merger. The Reorganization
Agreement obligates RAC, as the Surviving Corporation, to indemnify the
directors and officers of RAC and its subsidiaries from and after the Merger
against certain liabilities arising prior to the Merger. See "THE
MERGER -- Interests of Certain Persons in the Merger" and " -- Effect on Benefit
Plans and Options."
REGULATORY CONSIDERATIONS
The Merger must be approved by the Board of Governors of the Federal
Reserve System (the "Federal Reserve") under the Federal Reserve's Regulation Y
and Regulation K. Notice requesting approval of the Merger was submitted by SNC
to the Federal Reserve on June 7, 1996. See "THE MERGER -- Regulatory
Considerations."
DISSENTERS' RIGHTS
Under North Carolina law, holders of RAC Common Stock who do not vote in
favor of the Reorganization Agreement and Plan of Merger and who comply with
certain notice requirements and other procedures (the "Dissenting Shareholders")
will have the right to dissent and to be paid cash for the "fair value" of their
shares. Such "fair value" as finally determined under such procedures may be
more or less than the consideration to be received by other shareholders of RAC
under the terms of the Reorganization Agreement and Plan of Merger. The
procedures to be followed by the Dissenting Shareholders are described elsewhere
in this Proxy Statement/Prospectus, and the text of the applicable statutory
provisions is set forth in Appendix IV hereto. Failure to follow these
procedures precisely may result in the loss of dissenters' rights. Dissenting
Shareholders who receive cash for their shares of RAC Common Stock pursuant to
their dissenters' rights will recognize gain or loss for federal income tax
purposes. See "THE MERGER -- Dissenters' Rights" and Appendix IV hereto.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger has been structured to qualify as a nontaxable transaction under
the Internal Revenue Code of 1986, as amended (the "Code"). It is a condition to
the Merger that SNC and RAC receive an opinion from Womble Carlyle Sandridge &
Rice, PLLC, counsel to SNC, to the effect that no gain or loss will be
recognized in connection with the Merger by SNC Acquisition or the holders of
RAC Common Stock (other than with respect to cash received in lieu of fractional
shares or by Dissenting Shareholders) and that the holding period for, and basis
in, the shares of RAC Common Stock will be carried over to the shares of SNC
Common Stock. See "THE MERGER -- Certain Federal Income Tax Consequences of the
Merger."
ACCOUNTING TREATMENT
It is a condition to closing that the Merger will be accounted for as a
"pooling-of-interests" for accounting and financial reporting purposes. See "THE
MERGER -- Accounting Treatment."
OPTION AGREEMENT
As a condition to SNC entering into the Reorganization Agreement and to
increase the probability that the Merger will be consummated, SNC and RAC
entered into an Option Agreement, dated as of March 29, 1996 (the "Option
Agreement"), which granted SNC an option to purchase up to 2,986,399 shares of
RAC Common Stock (approximately 19.9% of the number of shares of RAC Common
Stock currently outstanding), subject to adjustment, at an exercise price of
$10.21 per share (the "Option"). A copy of the Option Agreement is attached to
this Proxy Statement/Prospectus as Appendix II. The exercise of the Option is
permitted only upon the occurrence of certain events which generally relate to
an acquisition of control of RAC, or the acquisition by a third party of a
significant interest in the equity or assets of RAC. The Option is not presently
exercisable. See "THE MERGER -- The Option Agreement."
3
<PAGE>
COMPARISON OF SHAREHOLDERS' RIGHTS
The rights of the shareholders of RAC currently are determined by the North
Carolina Business Corporation Act (the "NCBCA"), the Articles of Incorporation
of RAC, as they may be amended and restated from time to time (the "RAC
Articles"), and the Bylaws of RAC (the "RAC Bylaws"). At the Effective Date, the
shareholders of RAC will become shareholders of SNC. Their rights as
shareholders will then be determined by the NCBCA, the Amended and Restated
Articles of Incorporation of SNC, as they may be amended and restated from time
to time (the "SNC Articles"), and the Bylaws of SNC, as they may be amended and
restated from time to time (the "SNC Bylaws"). See "DESCRIPTION OF SNC CAPITAL
STOCK" and "COMPARISON OF SHAREHOLDERS' RIGHTS."
COMPARATIVE MARKET PRICES AND DIVIDENDS
SNC Common Stock is listed on the NYSE under the symbol "SNB." RAC Common
Stock is included in the Nasdaq National Market under the symbol "REGA." The
following table sets forth, for the periods indicated, the high and low sales
price of SNC Common Stock and RAC Common Stock on the NYSE Composite
Transactions List and the Nasdaq National Market, respectively, and cash
dividends paid per share. The prices have been rounded up to the nearest eighth
and do not include retail markups, markdowns, or commissions. Prices of RAC
Common Stock have been adjusted to give effect to stock splits in the form of
share dividends.
<TABLE>
<CAPTION>
SNC RAC
CASH CASH
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended
March 31, 1996................................................. $29.75 $25.88 $.23 $10.88 $ 7.75 -0-
Quarter Ended
March 31, 1995................................................. 22.38 18.88 .20 10.33 6.38 -0-
June 30, 1995.................................................. 24.13 19.88 .20 12.33 9.00 -0-
September 30, 1995............................................. 27.13 23.63 .23 13.25 10.75 -0-
December 31, 1995.............................................. 27.00 25.63 .23 12.00 8.00 -0-
For year 1995............................................... 27.13 18.88 .86 13.25 6.38 -0-
Quarter Ended
March 31, 1994................................................. 20.50 18.38 .17 7.87 5.87 -0-
June 30, 1994.................................................. 21.88 18.88 .17 9.07 6.27 -0-
September 30, 1994............................................. 21.88 20.00 .20 10.83 8.33 -0-
December 31, 1994.............................................. 21.13 17.13 .20 9.33 6.33 -0-
For year 1994............................................... 21.88 17.13 .74 10.83 5.87 -0-
</TABLE>
The following table sets forth the last reported sales price for shares of
SNC Common Stock and RAC Common Stock on March 28, 1996, the last trading day
preceding the public announcement of the proposed Merger, and July 19, 1996, on
the NYSE Composite Transactions List and the Nasdaq National Market,
respectively. The RAC Equivalent represents the last sales prices of a share of
SNC Common Stock on those dates multiplied by the Exchange Ratio of .3929.
<TABLE>
<CAPTION>
DATE SNC RAC RAC EQUIVALENT
<S> <C> <C> <C>
March 28, 1996..................................................... $27.63 $9.75 $10.85
July 19, 1996......................................................
</TABLE>
4
<PAGE>
SELECTED FINANCIAL DATA
SNC
The following selected historical financial information of SNC has been
derived from historical consolidated financial statements and should be read in
conjunction with such historical consolidated financial statements, and the
notes thereto, which are incorporated herein by reference.
SELECTED HISTORICAL FINANCIAL DATA -- SNC
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF/FOR THE
THREE MONTHS
ENDED MARCH 31 AS OF/FOR THE YEARS ENDED DECEMBER 31
1996 1995 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income.................... $ 383,782 $ 368,637 $ 1,548,176 $ 1,318,045 $ 1,199,708 $ 1,207,989
Interest expense................... 190,139 185,816 806,627 581,279 506,192 589,785
Net interest income................ 193,643 182,821 741,549 736,766 693,516 618,204
Net interest income after provision
for loan and lease losses........ 183,143 175,821 710,149 718,920 640,205 555,333
Noninterest income................. 67,667 36,977 226,350 226,047 220,318 185,873
Noninterest expense................ 146,946 229,351 672,303 583,336 663,244 510,158
Income (loss) before income
taxes............................ 103,864 (16,553) 264,196 361,631 197,279 231,048
Net income (loss).................. 69,610 (12,345) 178,133 236,872 85,828 146,726
EARNINGS (LOSS) PER COMMON SHARE
Net income (loss) primary.......... $ .67 $ (.13) $ 1.66 $ 2.26 $ .81 $ 1.53
Net income (loss) fully diluted.... .65 (.13) 1.64 2.21 .81 1.48
Cash dividends..................... .23 .20 .86 .74 .64 .50
Book value......................... 15.13 13.90 15.52 13.92 13.14 13.22
AVERAGE BALANCE SHEET DATA
Securities at carrying value....... $ 4,988,002 $ 5,331,071 $ 5,394,372 $ 5,340,070 $ 4,670,213 $ 3,998,587
Loans and leases*.................. 13,703,144 13,030,351 13,465,835 12,195,004 11,029,260 10,024,523
Other assets....................... 1,314,951 1,420,797 1,412,821 1,440,736 1,367,568 1,339,742
Total assets....................... 20,006,097 19,782,219 20,273,028 18,975,810 17,067,041 15,362,852
Deposits........................... 14,504,637 14,266,875 14,251,176 14,298,728 13,546,050 12,601,590
Other liabilities.................. 2,374,772 3,106,224 3,324,308 2,553,243 1,546,526 1,416,923
Long-term debt..................... 1,511,577 905,484 1,127,575 677,227 597,519 153,064
Common shareholders' equity........ 1,554,144 1,429,493 1,497,624 1,372,469 1,302,803 1,125,470
Preferred shareholders' equity..... 60,967 74,143 72,345 74,143 74,143 65,805
Total liabilities and shareholders'
equity........................... 20,006,097 19,782,219 20,273,028 18,975,810 17,067,041 15,362,852
PERIOD END BALANCES
Total assets....................... $20,174,126 $19,892,682 $20,492,929 $19,855,063 $18,858,370 $15,966,986
Deposits........................... 15,163,313 14,530,670 14,684,056 14,314,154 14,594,952 13,044,173
Long-term debt..................... 1,603,346 902,047 1,383,935 910,755 837,241 423,211
Shareholders' equity............... 1,563,081 1,494,716 1,674,003 1,496,477 1,398,726 1,266,898
SELECTED PERFORMANCE RATIOS
Rate of return on:
Average total assets............. 1.40% (.25)% .88% 1.25% .50% .96%
Average common shareholders'
equity......................... 17.86 (3.87) 11.56 16.88 6.19 12.63
Dividend payout.................... 34.33 NM** 51.81 32.74 79.01 32.68
Average equity to average assets... 8.07 7.60 7.74 7.62 8.07 7.75
<CAPTION>
1991
<S> <C>
SUMMARY OF OPERATIONS
Interest income.................... $ 1,243,470
Interest expense................... 743,322
Net interest income................ 500,148
Net interest income after provision
for loan and lease losses........ 424,304
Noninterest income................. 178,016
Noninterest expense................ 435,184
Income (loss) before income
taxes............................ 167,136
Net income (loss).................. 115,543
EARNINGS (LOSS) PER COMMON SHARE
Net income (loss) primary.......... $ 1.36
Net income (loss) fully diluted.... 1.33
Cash dividends..................... .46
Book value......................... 12.17
AVERAGE BALANCE SHEET DATA
Securities at carrying value....... $ 3,336,542
Loans and leases*.................. 9,087,120
Other assets....................... 1,252,057
Total assets....................... 13,675,719
Deposits........................... 11,398,365
Other liabilities.................. 1,206,790
Long-term debt..................... 142,359
Common shareholders' equity........ 928,205
Preferred shareholders' equity..... --
Total liabilities and shareholders'
equity........................... 13,675,719
PERIOD END BALANCES
Total assets....................... $14,436,338
Deposits........................... 12,166,090
Long-term debt..................... 417,050
Shareholders' equity............... 1,024,546
SELECTED PERFORMANCE RATIOS
Rate of return on:
Average total assets............. .84%
Average common shareholders'
equity......................... 12.45
Dividend payout.................... 33.82
Average equity to average assets... 6.79
</TABLE>
* Loans and leases are net of unearned income and the allowance for losses.
Amounts include loans held for sale.
** NM -- Not Meaningful.
5
<PAGE>
RAC
The following selected historical financial information of RAC has been
derived from historical consolidated financial statements and should be read in
conjunction with such historical consolidated financial statements, and the
notes thereto, which are incorporated herein by reference.
SELECTED HISTORICAL FINANCIAL DATA -- RAC
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF/FOR THE
THREE MONTHS
ENDED MARCH 31, AS OF/FOR THE YEARS ENDED DECEMBER 31,
1996 1995 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income............................................. $ 7,802 $ 6,306 $ 27,918 $ 21,094 $13,027 $10,205
Interest expense............................................ (1,959) (1,853) (7,315) (5,017) (2,918) (2,890)
Net interest income, before provision for loan losses....... 5,843 4,453 20,603 16,077 10,109 7,315
Provision for loan losses................................... (900) (640) (3,232) (2,335) (1,247) (713)
Net interest income......................................... 4,943 3,813 17,371 13,742 8,862 6,602
Other income................................................ 1,471 1,243 5,163 4,217 3,162 1,881
Operating expenses.......................................... (2,698) (1,880) (8,926) (6,459) (4,197) (3,491)
Income before income taxes.................................. 3,716 3,176 13,608 11,500 7,827 4,992
Income tax expense.......................................... (1,475) (1,266) (5,400) (4,530) (1,737) --
Income tax effect of change from Subchapter S corporation... -- -- -- -- 471 --
Net income.................................................. $ 2,241 $ 1,910 $ 8,208 $ 6,970 $ 6,561 $ 4,992
Net income per share (A).................................... $ .15 $ .13 $ .55 $ .46 $ .49
Weighted average outstanding shares (A)..................... 15,007 15,007 15,007 15,007 13,305
PRO FORMA NET INCOME (B)
Net income before income taxes.............................. $ 7,827 $ 4,992
Income tax expense.......................................... (3,042) (1,961)
Income tax effect of change from Subchapter S corporation... 471 --
Pro forma net income........................................ $ 5,256 $ 3,031
Pro forma net income per share.............................. $ .37 $ .24
Weighted average outstanding shares......................... 14,207 12,546
BALANCE SHEET DATA
Loans receivable............................................ $150,383 $121,623 $139,506 $116,389 $68,976 $49,677
Less allowance for loan losses.............................. (3,781) (2,541) (3,430) (2,368) (1,443) (1,056)
Non-refundable dealer holdbacks............................. (482) (46) (571) (624) -- --
Net loans receivable........................................ 146,120 119,036 135,505 113,397 67,533 48,621
Total assets................................................ 153,980 122,113 142,930 115,915 69,467 49,238
Total debt.................................................. 114,460 91,132 104,131 84,268 45,970 39,338
Stockholders' equity........................................ 39,520 30,981 37,279 29,071 22,064 8,979
OPERATING DATA
Net interest spread......................................... 14.4% 12.6% 14.0% 14.6% 15.3% 14.8%
Net interest margin......................................... 16.3% 15.0% 16.1% 16.8% 17.5% 16.3%
Return on average stockholders' equity (C).................. 23.2% 25.5% 24.7% 27.4% 25.1% --
Return on average assets (C)................................ 6.1% 6.4% 6.3% 7.2% 8.4% --
Allowance for loan losses and non-refundable dealer
holdbacks as a percentage of loans receivable............. 2.8% 2.1% 2.9% 2.6% 2.5% 2.3%
Net charge-offs as a percentage of average net loans
receivable (4.3% for March 31, 1996 and 2.3% for December
31, 1995 excluding losses charged to the non-refundable
dealer reserve)........................................... 1.5% 1.6% 1.7% 1.5% 1.5% 1.2%
Operating expenses as a percentage of average net loans
receivable................................................ 7.5% 6.3% 7.0% 6.7% 7.3% 7.8%
<CAPTION>
1991
<S> <C>
INCOME STATEMENT DATA
Interest income............................................. $ 8,521
Interest expense............................................ (3,078)
Net interest income, before provision for loan losses....... 5,443
Provision for loan losses................................... (1,078)
Net interest income......................................... 4,365
Other income................................................ 1,585
Operating expenses.......................................... (3,434)
Income before income taxes.................................. 2,516
Income tax expense.......................................... (47)
Income tax effect of change from Subchapter S corporation... --
Net income.................................................. $ 2,469
Net income per share (A)....................................
Weighted average outstanding shares (A).....................
PRO FORMA NET INCOME (B)
Net income before income taxes..............................
Income tax expense..........................................
Income tax effect of change from Subchapter S corporation...
Pro forma net income........................................
Pro forma net income per share..............................
Weighted average outstanding shares.........................
BALANCE SHEET DATA
Loans receivable............................................ $39,262
Less allowance for loan losses.............................. (892)
Non-refundable dealer holdbacks............................. --
Net loans receivable........................................ 38,370
Total assets................................................ 39,380
Total debt.................................................. 32,731
Stockholders' equity........................................ 5,711
OPERATING DATA
Net interest spread......................................... 13.2%
Net interest margin......................................... 14.8%
Return on average stockholders' equity (C).................. --
Return on average assets (C)................................ --
Allowance for loan losses and non-refundable dealer
holdbacks as a percentage of loans receivable............. 2.4%
Net charge-offs as a percentage of average net loans
receivable (4.3% for March 31, 1996 and 2.3% for December
31, 1995 excluding losses charged to the non-refundable
dealer reserve)........................................... 2.5%
Operating expenses as a percentage of average net loans
receivable................................................ 9.4%
</TABLE>
Notes to selected financial data
(A) Adjusted for 3:2 stock split paid July 10, 1995 and 5:4 stock split paid
July 18, 1994.
(B) RAC terminated its Subchapter S status on June 11, 1993. The pro forma net
income information reflects the application of corporate income taxes to
RAC's net income at an assumed combined federal and state tax rate of 39.3%
as if the termination of RAC's status as an S corporation had occurred on
January 1, 1992.
(C) 1993 returns are annualized for the period subsequent to the initial public
offering, June 15, 1993.
6
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth: (a) selected comparative per share data for
each of SNC and RAC on an historical basis (adjusted, in the case of RAC, for
stock splits); (b) selected unaudited pro forma comparative per share data
assuming the Merger had been effective during the periods presented for SNC and
RAC combined; and (c) RAC pro forma equivalent amounts, assuming the Exchange
Ratio is .3929 shares of SNC Common Stock for each share of RAC Common Stock.
The unaudited pro forma data has been prepared giving effect to the Merger as a
pooling of interests. For a description of the effect of pooling-of-interests
accounting on the Merger and the historical financial statements of SNC, see
"THE MERGER -- Accounting Treatment."
The comparative per share data presented are based on and derived from, and
should be read in conjunction with, the historical consolidated financial
statements and the related notes thereto of each of SNC and RAC incorporated by
reference herein. Results of each of SNC and RAC for the three months ended
March 31, 1996 and 1995 are not necessarily indicative of results expected for
the entire year, nor are pro forma amounts necessarily indicative of results of
operations or combined financial position that would have resulted had the
Merger been consummated at the beginning of the period indicated. All
adjustments, consisting of only normal adjustments, necessary for a fair
statement of results of interim periods have been included.
<TABLE>
<CAPTION>
AS OF/FOR THE
THREE MONTHS AS OF/FOR THE
ENDED YEARS ENDED
MARCH 31 DECEMBER 31
1996 1995 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Earnings (loss) per common share
SNC
Historical primary............................................................... $.67 $(.13) $1.66 $2.26 $.81
Historical fully diluted......................................................... .65 (.13) 1.64 2.21 .81
Pro forma combined primary....................................................... .66 (.11) 1.65 2.20 .84
Pro forma combined fully diluted................................................. .64 (.11) 1.62 2.15 .84
RAC
Historical....................................................................... $.15 $ .13 $ .55 $ .46 $.49
Pro forma equivalent (1) primary................................................. .26 (.04) .65 .86 .33
Pro forma equivalent (1) fully diluted........................................... .25 (.04) .64 .84 .33
Cash dividends declared per common share
SNC historical................................................................... $.23 $ .20 $ .86 $ .74 $.64
SNC pro forma combined (2)....................................................... .23 .20 .86 .74 .64
RAC historical................................................................... 0 0 0 0 0
RAC pro forma equivalent (1)..................................................... .09 .08 .34 .29 .25
</TABLE>
<TABLE>
<CAPTION>
AT AT
MARCH 31, 1996 DECEMBER 31, 1995
<S> <C> <C>
Shareholders' equity per common share
SNC historical.................................................. $15.13 $ 15.52
SNC pro forma combined.......................................... 14.67 15.02
RAC historical.................................................. 2.63 2.48
RAC pro forma equivalent (1).................................... 5.76 5.90
</TABLE>
(1) RAC pro forma equivalent amounts are calculated by multiplying the pro forma
combined amounts by the assumed Exchange Ratio of .3929 shares of SNC Common
Stock for each share of RAC Common Stock.
(2) Pro forma combined dividends per share represent historical dividends per
share paid by SNC.
7
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS OF RAC
GENERAL
This Proxy Statement/Prospectus is being furnished to the shareholders of
RAC as of the Record Date and is accompanied by a form of proxy which is
solicited by the RAC Board for use at the Special Meeting to be held on August
23, 1996 at 10:00 a.m., local time at the Ramada Inn, 203 S.W. Greenville
Boulevard, Greenville, North Carolina and any adjournment or postponement
thereof. At the Special Meeting, the shareholders of RAC will vote on a proposal
to approve the Reorganization Agreement and Plan of Merger attached hereto as
Appendix I. Proxies may be voted on such other matters as may properly come
before the Special Meeting, or any adjournment or postponement thereof, at the
discretion of the proxy holders named therein. The RAC Board knows of no such
other matters except matters incidental to the conduct of the Special Meeting.
Holders of RAC Common Stock are requested to complete, date, and sign the
accompanying proxy and return it promptly to RAC in the enclosed postage prepaid
envelope.
RECORD DATE, VOTING RIGHTS, AND VOTE REQUIRED
Only the holders of RAC Common Stock on the Record Date (July 19, 1996) are
entitled to receive notice of and to vote at the Special Meeting and at any
adjournments or postponements thereof. On the Record Date, there were shares
of RAC Common Stock outstanding which were held by approximately holders of
record. Each share of RAC Common Stock outstanding on the Record Date is
entitled to one vote as to each of the matters submitted at the Special Meeting.
APPROVAL OF THE REORGANIZATION AGREEMENT AND PLAN OF MERGER WILL REQUIRE
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF
RAC COMMON STOCK. FAILURE OF A HOLDER OF RAC COMMON STOCK TO VOTE SUCH SHARES IN
FAVOR OF THE REORGANIZATION AGREEMENT AND PLAN OF MERGER WILL HAVE THE SAME
EFFECT AS A VOTE "AGAINST" THE REORGANIZATION AGREEMENT AND PLAN OF MERGER.
As of the Record Date, the directors and executive officers of RAC
beneficially owned a total of 9,197,741 shares, or 61.3% of the issued and
outstanding shares of RAC Common Stock, all of which are expected to be voted in
favor of the Reorganization Agreement. In the Reorganization Agreement, William
R. Stallings, Sr. and Dr. Ledyard B. Ross, who together own 8,695,739 shares of
the RAC Common Stock (57.9% of the shares entitled to vote at the Special
Meeting), agreed to vote those shares in favor of the Reorganization Agreement
and Plan of Merger unless the RAC Board withdraws, modifies, or changes its
recommendation that the shareholders vote in favor thereof.
VOTING AND REVOCATION OF PROXIES
The shares of RAC Common Stock represented by properly completed proxies
received at or prior to the time for the 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
Reorganization Agreement and Plan of Merger. If any other matters are properly
presented at the Special Meeting and may be properly voted on, the proxies
solicited hereby will be voted on such matters at the discretion of the proxy
holders named therein. However, in such event, voting authority will only be
exercised to the extent permissible under the applicable federal securities
laws. The RAC Board is not aware of any other business to be presented at the
Special Meeting, other than matters incidental to the conduct of the Special
Meeting. This proxy is being solicited for the Special Meeting called to
consider the Reorganization Agreement and Plan of Merger and any adjournments or
postponements of the Special Meeting and will not be used for any other meeting
of the shareholders of RAC.
The Reorganization Agreement may be terminated by SNC or RAC, respectively,
if the Closing Value is less than $24.00 or more than $32.00. See "THE
MERGER -- Exchange Ratio" and " -- The Reorganization Agreement." Although the
Closing Value will be determinable prior to the time the shareholder vote is
taken on the Merger at the Special Meeting, any renegotiation of the Exchange
Ratio or election whether to terminate the Reorganization Agreement due to the
Closing Value being less than $24.00 or greater than $32.00 may occur after
proxies for the Special Meeting have been solicited and returned. See "THE
MERGER -- Possible Adjustment or Renegotiation of the Exchange Ratio -- RAC" for
a description of factors the RAC Board will consider in determining whether to
seek a renegotiated Exchange Ratio or seek termination of the Agreement if the
Closing Value is more than $32.00 and whether to accept a renegotiated Exchange
Ratio if pursued by SNC at a time the Closing Value is less than $24.00. By
granting proxies to approve the Reorganization Agreement and Plan of Merger, the
RAC shareholders would be permitting the RAC Board, in the exercise of its
fiduciary duties, to proceed with the
8
<PAGE>
Merger even if the adjusted Exchange Ratio were less than .3684 (in the event
the Closing Value is greater than $32.00) or the implied consideration per share
of RAC Common Stock, based upon the Closing Value of the SNC Common Stock, were
less than $10.21 (in the event the Closing Value is less than $24.00 and SNC
proposes to terminate the Reorganization Agreement unless the Exchange Ratio is
renegotiated).
The presence of a shareholder at the 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
RAC at RAC's principal executive offices prior to the Special Meeting, or by
attending the Special Meeting and voting in person. The 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 RAC or other person authorized to tabulate the votes.
BECAUSE APPROVAL OF THE REORGANIZATION AGREEMENT AND PLAN OF MERGER
REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF RAC
COMMON STOCK, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS
NEGATIVE VOTES. ACCORDINGLY, THE RAC BOARD URGES ITS SHAREHOLDERS TO COMPLETE,
DATE, AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PREPAID ENVELOPE.
SOLICITATION OF PROXIES
RAC will bear the cost of soliciting proxies. In addition to the use of the
mails, proxies may be solicited personally or by telephone or facsimile by
directors, officers, and other employees of RAC, 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 connection therewith by RAC. RAC will not utilize the
services of a proxy soliciting firm in connection with the solicitation of
proxies in connection with the Special Meeting.
No person is authorized to give any information or to make any
representation not contained or incorporated by reference in this Proxy
Statement/Prospectus and, if given or made, such information or representation
should not be relied upon as having been authorized by RAC, SNC, or any other
person. The delivery of this Proxy Statement/Prospectus will not, under any
circumstances, create any implication that there has been no change in the
affairs of RAC or SNC since the date of this Proxy Statement/Prospectus.
RECOMMENDATION OF RAC BOARD
The RAC Board has unanimously adopted the Reorganization Agreement and Plan
of Merger and believes that the proposed transaction is fair to and in the best
interests of RAC and its shareholders. The RAC Board unanimously recommends that
RAC's shareholders vote "FOR" approval of the Reorganization Agreement and Plan
of Merger.
In making its recommendation, the RAC Board has considered, among other
things, the opinion of Salomon that the Exchange Ratio is fair to RAC's
shareholders from a financial point of view. See "THE MERGER -- Background of
the Merger", " -- Reasons for the Merger" and " -- Opinion of Financial
Advisor."
SHAREHOLDERS SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
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THE MERGER
GENERAL
In the Merger, SNC Acquisition, a wholly-owned subsidiary of SNC, will be
merged with and into RAC, and RAC will be the surviving corporation in the
Merger and will become a wholly-owned subsidiary of SNC. Shareholders of RAC
will receive shares of SNC Common Stock and cash in lieu of fractional shares,
as described below, in exchange for their shares of RAC Common Stock.
THE FOLLOWING DESCRIPTION OF THE MERGER IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE COMPLETE TEXT OF THE REORGANIZATION AGREEMENT AND PLAN OF
MERGER INCLUDED THEREIN, A COPY OF WHICH IS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS APPENDIX I AND INCORPORATED HEREIN BY REFERENCE.
BACKGROUND OF THE MERGER
From time to time since mid-1993, representatives of RAC and
representatives of SNC (or, prior to the merger of BB&T-NC's parent into SNC,
BB&T-NC) have had informal contacts in which SNC's or BB&T-NC's interest in a
possible acquisition of RAC was discussed. Until 1995, however, these contacts
did not result in any substantive discussions regarding a proposed transaction.
Following the announcement in early 1995 of the proposed acquisition by a
bank holding company of another consumer finance company with a business similar
to RAC's, RAC's management believed that other bank holding companies or
financial institutions might be interested in similar transactions with finance
companies. RAC's management also believed that there might be a window of
opportunity to explore such transactions at values that would be particularly
favorable to RAC's shareholders. As a result, by a letter agreement dated April
17, 1995, authorized by the RAC Board, RAC engaged Salomon to render financial
advisory and investment banking services in connection with exploring and
evaluating possible sale or merger transactions.
Over the course of the next several weeks, Salomon identified and contacted
a number of bank holding companies, finance companies, and other financial
institutions, including SNC, to ascertain their level of interest in a
transaction with RAC. Three of the prospective purchasers contacted by Salomon,
including SNC, indicated a sufficient level of interest to meet with RAC to
discuss such a transaction. Representatives of SNC met with representatives of
RAC on June 21, 1995 as part of this process. Representatives of RAC also met
with the other two prospective purchasers during the summer of 1995. Discussions
with SNC and the other prospective purchasers continued through July 1995, but
were terminated without any specific proposals to RAC because preliminary
discussions of possible purchase price ranges indicated that the parties would
be unable to reach agreement. RAC formally terminated the Salomon engagement by
letter dated August 21, 1995.
Independent of the Salomon engagement, RAC was also contacted, through
another investment banking firm, by another prospective purchaser who met with
RAC's management in August and September 1995. No specific proposal was made to
RAC, however, as a result of these discussions. In November 1995,
representatives of RAC and Salomon met again with one of the prospective
purchasers with whom RAC had previously held discussions, but that meeting did
not result in further discussions or a specific proposal.
From time to time in the latter part of 1995, Burney S. Warren, III, a
Senior Vice President of BB&T-NC, expressed SNC's continued interest in a
transaction with RAC if the parties could agree to a mutually acceptable price.
In December 1995, RAC's management indicated to Mr. Warren that they would be
willing to have discussions with SNC after the end of the year.
Shortly after the beginning of 1996, Mr. Warren met with Robert D. Barry,
Vice President and Chief Financial Officer of RAC, to confirm SNC's continued
interest in a transaction with RAC and to discuss a possible range of values for
the shares of RAC Common Stock. Mr. Warren had a subsequent meeting with Mr.
Barry and Mr. Stallings, and in the following month the three of them met with
John A. Allison, IV, Chairman of the Board and Chief Executive Officer of SNC,
at SNC's principal offices in Winston-Salem, North Carolina. At that meeting,
SNC's valuation of RAC and internal investment criteria for acquisitions were
presented to Mr. Stallings and Mr. Barry. Discussions regarding the price,
structure, and other terms of a possible transaction continued over the next two
weeks. Shortly thereafter, Mr. Stallings advised SNC that an exchange ratio
based upon a value of $28.00 per share for SNC Common Stock against a value of
$11.00 per share for RAC Common Stock would be an acceptable basis for a
proposal by SNC, subject to further negotiation of the pricing structure and
other terms. SNC undertook to have its counsel prepare drafts of definitive
agreements, reflecting the parties' discussions and other proposed terms, and to
submit the draft agreements to RAC and its counsel for further discussion.
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On March 14, 1996, representatives of SNC and RAC and their respective
counsel met in Winston-Salem, North Carolina to review drafts of the
Reorganization Agreement and related documents previously submitted by SNC's
counsel and to discuss issues relating to price, structure, and other terms of
the Merger. Over the next two weeks, the parties continued to negotiate the
terms and conditions of the Merger and the related documentation.
On March 18, 1996, the RAC Board met by telephone conference to discuss
preliminarily the proposed transaction with SNC. The RAC Board authorized the
engagement of Salomon as RAC's financial advisor in connection with the proposed
transaction and for the preparation of an opinion as to the fairness of the
proposed Exchange Ratio from a financial point of view. The RAC Board also
scheduled a meeting for March 27, 1996 to consider and, if appropriate, act upon
the proposed transaction.
The RAC Board met on March 27, 1996. At the meeting, the RAC Board
discussed in detail the proposed Merger and the terms and conditions set forth
in the then current drafts of the Reorganization Agreement and Option Agreement
and received reports from counsel and from Salomon. At the meeting, Salomon
expressed its opinion relating to the fairness, from a financial point of view,
to RAC's shareholders of the Exchange Ratio in the Merger. See " -- Opinion of
the Financial Advisor." The RAC Board identified certain issues to be further
negotiated with SNC and deferred action on the proposed Merger pending
resolution of those issues.
The RAC Board again met, by telephone conference on the afternoon of March
28, 1996, and received a report by RAC's management and counsel on their further
negotiations with SNC of the terms of the Reorganization Agreement and Option
Agreement and the proposed changes to resolve the outstanding issues. The RAC
Board unanimously approved the Reorganization Agreement and Option Agreement in
the forms previously reviewed and with the proposed changes reviewed at the
meeting and authorized the execution and delivery of these agreements. On the
morning of March 29, 1996, the SNC Board unanimously approved the draft of the
Reorganization Agreement and the Option Agreement and delegated to senior
management the negotiation of remaining issues. On March 29, 1996, the
Reorganization Agreement and the Option Agreement were executed by SNC and RAC.
Subsequent to the execution of the Reorganization Agreement, SNC requested
indemnification from the current directors and executive officers of RAC for
losses arising from the activities of RAC prior to the Merger and relating to
certain contingencies. As of June 7, 1996, SNC and those individuals entered
into an Indemnification and Escrow Agreement (the "Indemnification Agreement")
pursuant to which a specified portion of the shares of SNC Common Stock to be
issued to such individuals in the Merger will be placed in escrow as the sole
means to satisfy these indemnification obligations. RAC is not a party to the
Indemnification Agreement, nor does RAC or any other shareholder of RAC have any
obligation under the Indemnification Agreement.
REASONS FOR THE MERGER
SNC
SNC became interested in the acquisition of RAC in order to gain entry into
the automobile loan financing market served by RAC, which includes primarily
consumers who do not have access to other sources of consumer credit because
they do not meet the objective credit standards imposed by many other lenders.
SNC sought a suitable acquisition by which to enter the market through an
established finance company with an existing portfolio, dealer network, and
operating procedures.
Management of SNC believes that the existing sales finance businesses of
RAC and SNC, respectively, will benefit from the combination. Management of SNC
believes that it will be able to refer many consumers, who do not otherwise meet
SNC's credit criteria, to RAC resulting in many cross-selling opportunities and
increasing SNC's overall consumer finance business. The acquisition of RAC also
will provide SNC with better access to a larger automobile dealer network. In
addition, the existing RAC automobile dealer network will have access to a
larger financial institution that offers a broader range of financing products
to better meet the needs of their customers.
RAC
In reaching its conclusion to approve the Merger at its March 27 and March
28, 1996 meetings, the RAC Board consulted with RAC senior management, as well
as with its financial and legal advisors, and considered various factors,
including the factors described below.
THE FINANCIAL TERMS OF THE MERGER. The RAC Board considered, among other
things, calculations based upon the proposed Exchange Ratio and the closing
sales price for the SNC Common Stock on the NYSE on March 26, 1996. Those
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calculations indicated transaction multiples of 19.8x and 4.40x, respectively,
of earnings and book value and a price to managed receivables percentage of
93.7%. These multiples and percentages compared favorably with the median
multiples and percentages for other transactions reviewed by Salomon for
purposes of its opinion as to the fairness from a financial point of view of the
Exchange Ratio (see " -- Opinion of Financial Advisor" below) and with median
multiples and percentages for current market prices of other companies in the
peer group of selected publicly traded automobile finance companies identified
by Salomon for purposes of its opinion. The RAC Board also considered the
implied RAC Common Stock value in the Merger as compared to recent market prices
for the RAC Common Stock and noted that the implied value as of March 26, 1996
($10.90 per share) represented a premium of 9.0%, 32.1%, 11.8%, and 32.5%,
respectively, over the closing sales prices for the RAC Common Stock on March
26, 1996, February 26, 1996, January 26, 1996, and December 26, 1995,
respectively, and a premium of 40.6% over the 52-week low for the RAC Common
Stock, although it also represented a 17.7% discount from the 52-week high. The
RAC Board also considered the provisions for adjustment of the Exchange Ratio,
which result in a minimum implied value of the RAC Common Stock of $10.21 and a
maximum implied value of $11.79 within an SNC Common Stock price range of $24.00
to $32.00 per share. If the Closing Value is in the range of $26.00 to $30.00,
the Exchange Ratio (.3929) will imply a correlative consideration per share of
RAC Common Stock ranging from $10.21 (based upon a Closing Value of $26.00) to
$11.79 (based upon a Closing Value of $30.00). If the Closing Value is less than
$26.00, the adjusted Exchange Ratio will be greater than .3929 but the implied
consideration per share of RAC Common Stock (based upon the Closing Value) will
remain $10.21; similarly, if the Closing Value is greater than $30.00, the
adjusted Exchange Ratio will be less than .3929 but the implied consideration
per share of RAC Common Stock (based upon the Closing Value) will remain $11.79.
Consequently, if the Closing Price is within the range of $24.00 to $32.00 (and
the Exchange Ratio is therefore not subject to renegotiation by reason of the
parties' termination rights), the implied consideration per share of RAC Common
Stock (based upon the Closing Value) will be no less than $10.21 and no greater
than $11.79.
THE EFFECT ON SHAREHOLDER VALUE OF COMBINING WITH SNC COMPARED TO REMAINING
INDEPENDENT. The RAC Board considered, among other things, the historical
financial and stock performance of RAC and SNC, a discounted cash flow analysis
under various assumptions as to RAC's future financial performance, the total
return to shareholders of RAC and SNC for recent periods, and the pro forma
financial impact of the Merger to the RAC shareholders. The RAC Board noted the
volatility of the RAC stock prices during the preceding twelve months and the
decline in the rates of loan growth, revenue growth, and earnings growth for RAC
from 1994 to 1995 compared to the growth from 1993 to 1994. Although the RAC
Board continued to express confidence in the continued long-term growth
prospects for RAC as an independent company, it also noted that since the
beginning of 1995 its financial performance and growth had been affected by
increased competition, and the consumer finance industry generally had been
affected by increased delinquency rates and declining valuations of consumer
finance company stocks. The RAC Board considered that an investment in SNC
Common Stock would likely have greater liquidity and less price volatility than
an investment in RAC Common Stock. The RAC Board also considered management's
high regard for SNC as an institution, based upon RAC's banking relationship
with BB&T-NC, other business and professional relationships of RAC management
with SNC and BB&T-NC, and the general reputation of SNC and BB&T-NC in RAC's
market area.
THE LIKELIHOOD OF THE AVAILABILITY OF OTHER STRATEGIC ALTERNATIVES. The RAC
Board also considered whether desirable strategic alternatives to maximize
shareholder value, other than the Merger or RAC's remaining independent, were
likely to be available to RAC. Based upon the contacts with prospective
purchasers made by RAC, through Salomon and otherwise, during 1995 and
management's assessment of the likelihood of attracting further interest by
those or other prospective purchasers, the RAC Board concluded that it could not
reasonably expect another prospective purchaser to propose a transaction with
RAC on terms more favorable than those proposed by SNC.
ADVICE OF FINANCIAL ADVISOR AND FAIRNESS OPINION. The RAC Board considered
the opinion of Salomon (including the assumptions and financial and other
information relied upon by Salomon in arriving at such opinion) that, as of
March 27, 1996, the Exchange Ratio was fair to the shareholders of RAC from a
financial point of view.
NONFINANCIAL TERMS OF THE MERGER. The RAC Board also considered all of the
other nonfinancial terms of the Reorganization Agreement, including the
structure of the transaction as a tax-free reorganization for federal income tax
purposes, whereby the RAC shareholders would not recognize gain or loss on their
receipt of the SNC Common Stock in the Merger in exchange for their RAC Common
Stock, and the requirement that RAC receive an opinion of counsel to that effect
as a closing condition; the continued right of the RAC Board to terminate the
Merger prior to the Effective Date if it were to determine that such action is
necessary in the exercise of the RAC Board's duties to the RAC shareholders; and
the likelihood that the conditions to consummation of the Merger, including
obtaining required regulatory approvals, would be met on a timely basis. The RAC
Board also considered the terms of the Option Agreement and its possible effect
of discouraging other offers to acquire RAC pending consummation of the Merger.
In this regard, the RAC Board was advised that SNC had
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insisted on the Option Agreement as a condition to its execution of the
Reorganization Agreement, but the RAC Board renegotiated certain provisions of
the Option Agreement to reduce the impact of the Option thereunder on RAC's
operations if the Option should become exercisable.
The foregoing discussion of the information and factors considered by the
RAC Board is not intended to be exhaustive, but it is believed to include all of
the material factors considered by the RAC Board. In reaching its determination
to approve the Merger and enter into the Reorganization Agreement and Option
Agreement, the RAC Board did not assign any relative or specific weights to the
foregoing factors, and individual directors may have given differing weights to
different factors. After deliberating with respect to the Merger and the
transactions contemplated thereby and considering, among other things, the
matters discussed above, the RAC Board unanimously approved the Reorganization
Agreement and the Option Agreement and the transactions contemplated thereby as
being in the best interests of the shareholders of RAC, and authorized the
execution, delivery, and performance of the Reorganization Agreement and the
Option Agreement.
At its subsequent meeting on July 15, 1996, the RAC Board reviewed a draft
of this Proxy Statement/Prospectus and a draft of the updated fairness opinion
of Salomon in substantially the form attached as Appendix III hereto, determined
that there were no subsequent events affecting its conclusions with respect to
the Merger, unanimously confirmed its approval of the Merger, and determined to
recommend the Reorganization Agreement and Plan of Merger to the shareholders of
RAC for approval at the Special Meeting.
FOR THE REASONS DESCRIBED ABOVE, THE RAC BOARD BELIEVES THE MERGER IS FAIR
TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF RAC AND, ACCORDINGLY,
UNANIMOUSLY RECOMMENDS THAT THE RAC SHAREHOLDERS VOTE "FOR" APPROVAL OF THE
REORGANIZATION AGREEMENT AND PLAN OF MERGER.
OPINION OF THE FINANCIAL ADVISOR
BACKGROUND
Salomon was engaged initially by RAC in a letter agreement dated April 17,
1995 to render financial advisory and investment banking services in connection
with exploring and evaluating a possible sale or merger transaction. In that
engagement, Salomon agreed, if requested by RAC, to render, in accordance with
customary practice, an opinion as to the fairness, from a financial point of
view, to the RAC shareholders of the consideration to be received in such a
transaction. That letter agreement was formally terminated by RAC by letter
dated August 21, 1995. RAC again engaged Salomon, by letter agreement dated
March 20, 1996, to advise and assist the RAC Board as financial advisor in
connection with its consideration of the proposed transaction with SNC and to
render such a fairness opinion, if requested, on the same basis as provided in
the April 17, 1995 letter agreement. The March 20, 1996 letter agreement
confirmed the indemnification undertaken by RAC in connection with the April 17,
1995 letter agreement and confirmed with modification the provisions of the
April 17, 1995 letter agreement relating to Salomon's compensation. The RAC
Board engaged Salomon as financial advisor and to render the fairness opinion
based upon its expertise in the valuation of businesses and securities in
mergers and acquisitions, its existing familiarity with RAC by reason of the
financial advisory and investment banking services it rendered to RAC in 1995,
and its willingness to accept such engagement upon terms satisfactory to RAC.
The RAC Board considered the fact that a portion of Salomon's compensation was
contingent upon consummation of the Merger, but was satisfied that this would
not impair Salomon's exercise of independent judgment in evaluating the fairness
of the proposed transaction from a financial point of view.
Salomon has delivered to the RAC Board its written opinion, dated March 27,
1996 (the "Salomon March Opinion"), that as of such date the Exchange Ratio was
fair, from a financial point of view, to the holders of RAC Common Stock.
Salomon has updated its written opinion as of the date of this Proxy
Statement/Prospectus (the "Salomon Update Opinion").
THE FULL TEXT OF THE SALOMON UPDATE OPINION IS ATTACHED AS APPENDIX III TO
THIS PROXY STATEMENT/PROSPECTUS. SHAREHOLDERS OF RAC ARE URGED TO READ THE
OPINION IN ITS ENTIRETY FOR A COMPLETE DESCRIPTION OF THE ASSUMPTIONS MADE,
MATTERS CONSIDERED, AND LIMITS OF THE REVIEW UNDERTAKEN. THE ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITS OF THE REVIEW UNDERTAKEN IN THE SALOMON
MARCH OPINION, ARE SUBSTANTIALLY THE SAME AS THOSE CONTAINED IN THE SALOMON
UPDATE OPINION ATTACHED HERETO AS APPENDIX III. THE SALOMON OPINIONS, WHICH WERE
DELIVERED FOR USE AND CONSIDERATION BY THE RAC BOARD, ARE DIRECTED ONLY TO THE
FAIRNESS OF THE EXCHANGE RATIO AND DO NOT ADDRESS RAC'S UNDERLYING BUSINESS
DECISION TO PARTICIPATE IN THE MERGER, OR THE FAIRNESS, FROM A FINANCIAL POINT
OF VIEW, OF ANY EXCHANGE RATIO THAT MAY BE AGREED UPON BY RAC AND SNC PURSUANT
TO THE PROVISION OF THE MERGER AGREEMENT THAT PROVIDES FOR RENEGOTIATION OF THE
EXCHANGE RATIO IN THE EVENT THAT THE CLOSING VALUE IS LESS THAN $24.00 OR
GREATER THAN
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$32.00, NOR DO THEY CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF RAC AS TO
HOW SUCH SHAREHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER.
In arriving at its opinions, Salomon reviewed, analyzed, and relied upon
material bearing upon the financial and operating condition and prospects of RAC
and SNC and material prepared in connection with the Merger, and considered such
financial and other factors as it deemed appropriate under the circumstances,
including, among other things, the following: (a) the Reorganization Agreement;
(b) the Annual Reports on Form 10-K of SNC and RAC for the year ended December
31, 1995, the Quarterly Reports on Form 10-Q of RAC and SNC for the quarter
ended March 31, 1996, and (in the case of the Salomon Update Opinion) the second
quarter earnings for SNC reported on Form 8-K of SNC dated July 12, 1996; (c)
certain other publicly available financial and other information concerning RAC
and SNC; (d) certain publicly available information concerning the trading of,
and the trading markets for, RAC Common Stock and SNC Common Stock; (e) certain
other internal information, including certain financial forecasts for RAC and
SNC prepared by the respective managements of such companies and certain pro
forma combined financial forecasts prepared by management of SNC and furnished
to Salomon for the purpose of its analysis; (f) the nature and terms of certain
transactions which Salomon believed to be reasonably comparable to the Merger or
otherwise relevant to its inquiry; and (g) certain publicly available
information regarding certain other companies that Salomon believed to be
comparable to RAC or SNC and the trading markets for certain of such other
companies' securities. Salomon also met with certain officers and
representatives of RAC and SNC to discuss the foregoing, as well as other
matters it believed relevant to its inquiry. Salomon 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 financial services industry generally.
Salomon did not consider the relative merits of the Merger as compared with
alternative strategies for RAC.
As set forth in its opinions, Salomon relied upon and assumed the accuracy
and completeness of the financial and other information provided to it or
publicly available and did not assume responsibility for independently verifying
the same. With respect to financial forecasts, Salomon assumed that such
forecasts were reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the respective managements of RAC and SNC.
Salomon did not make or obtain or assume any responsibility for making or
obtaining any evaluations or appraisals of the assets (including properties and
facilities) or liabilities of RAC or SNC. Salomon noted that, although it did
solicit third-party offers to acquire RAC approximately nine months prior to the
date of the Reorganization Agreement, it was not requested to, and did not,
solicit third-party offers to acquire all or any part of RAC immediately
preceding or in connection with the process resulting in the proposed Merger nor
did Salomon participate in discussions or negotiations with SNC with respect to
the proposed Merger. Salomon also noted that each opinion necessarily was based
upon conditions as they existed and could be evaluated as of the date thereof.
Salomon assumed that in the course of obtaining necessary regulatory approvals
for the Merger no restrictions would be imposed that would have a material
adverse effect on the contemplated benefits of the Merger to RAC following the
Merger and that the Merger will be accounted for as a pooling-of-interests. The
Salomon Update Opinion did not address the decision of the directors and
executive officers of the Company to enter into the Indemnification Agreement,
or give effect to any liabilities they may have incurred thereby.
In connection with the Salomon March Opinion, Salomon performed certain
financial analyses, which it discussed with the RAC Board on March 27, 1996. In
connection with the Salomon Update Opinion, Salomon performed procedures to
update certain of such analyses and reviewed the assumptions on which such
analyses were based and the factors considered in connection therewith. The
material portions of the analyses performed by Salomon in connection with the
rendering of the Salomon March Opinion are summarized below.
TRANSACTION SUMMARY
Based upon an assumed Exchange Ratio of .3929 and the closing market price
per share of SNC Common Stock on March 26, 1996, Salomon's analysis of the
Merger calculated the implied purchase price per share of RAC Common Stock and
the premium to the market value of RAC Common Stock on March 28, 1996 (the last
trading day prior to the public announcement of the Reorganization Agreement)
and February 26, 1996, January 26, 1996, and December 26, 1995 (one, two and
three months earlier). Salomon also calculated the premium or discount
represented by the implied purchase price to the 52-week high, low and average
market values of RAC Common Stock. This analysis showed that the Exchange Ratio
represented an implied purchase price of $10.90 per share of RAC Common Stock,
and a premium over RAC's closing market value on March 26, 1996, February 26,
1996, January 26, 1996, and December 26, 1995, of 9.0%, 32.1%, 11.8%, and 32.5%,
respectively. The analysis also showed that the implied purchase price
represented a premium or discount to the following select RAC Common Stock
closing values: 52-week high at $13.25, 52-week low at $7.75, and 52-week
average at $10.45 of (17.7%), 40.6% and 4.3%, respectively.
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HISTORICAL FINANCIAL DATA
Salomon analyzed the historical income statement and balance sheet data for
RAC for the period from 1993 through 1995. As part of this analysis, Salomon
examined the year-to-year growth rates in loans receivable, equity, revenues,
net income, and earnings per share.
RAC COMPARABLE COMPANY ANALYSIS
Salomon reviewed and compared the financial and market performance of a
selected peer group of publicly traded automobile finance companies (the
"Group") with that of RAC. Salomon selected such Group on the basis of various
factors, including business characteristics, size, and capitalization. The Group
included AmeriCredit Corp., CTL Credit, Inc., Eagle Finance Corp., First
Merchants Acceptance Corporation, General Acceptance Corporation, Mercury
Finance Company, MS Financial, Inc., National Auto Credit, Inc., and TFC
Enterprises, Inc. As part of this analysis, Salomon compared various financial
measures of the Group to those of RAC, including aggregate market value,
earnings per share, earnings per share compound annual growth rate,
price/earnings ratio, price/book ratio, and market value as a percentage of
managed receivables. This analysis showed that RAC was valued at price to latest
twelve month ("LTM") earnings, 1996 estimated earnings, 1997 estimated earnings
and book value multiples of 18.2x, 15.9x, 13.2x, and 4.03x, as compared to
median measures for the Group of 12.2x, 10.9x, 9.2x, and 1.66x. Salomon advised
the RAC Board that, of the companies in the Group, the companies that were the
most comparable to RAC and thus more meaningful for purposes of its analysis
were AmeriCredit, Eagle Finance, First Merchants Acceptance, and National Auto
Credit; the foregoing multiples and percentages for RAC also exceeded the median
corresponding multiples and percentages for these four companies. Based on its
analysis of these four most comparable companies, Salomon arrived at median
multiples for 1996 estimated earnings per share, 1997 estimated earnings per
share and price to book of 11.5x, 9.1x and 1.9x, respectively. Salomon also
analyzed certain operating and productivity statistics as well as the growth in
earnings and receivables under management for the Group and compared those
statistics to those of RAC at the end of or for the same period. This analysis
showed that RAC experienced compound annual growth rates in receivables under
management, net of allowances, and net income for the two-year period ended
December 31, 1995, of 41.6%, and 25.0%, respectively, as compared to the median
measures for the entire Group of 69.8% and 43.4%, respectively. This analysis
produced potential equity market values per share of RAC Common Stock ranging
from $4.66 to $7.27 per share.
COMPARABLE TRANSACTIONS ANALYSIS
Salomon also reviewed certain terms of twelve merger transactions involving
consumer finance companies. Salomon considered the value of each of these
transactions and the implied multiple of LTM earnings and of book value as well
as the premium (I.E., the excess of the indicated transaction value over book
value) as a percentage of managed receivables. The selected transactions
included (acquiror/acquiree): Bay View Capital Corporation/CTL Credit, Inc.;
Fidelity Acceptance Corp./Century Acceptance Corp.; KeyCorp/AutoFinance Group,
Inc.; First American Corporation/Tennessee Credit Corporation; Norwest
Financial, Inc./Island Finance (ITT Finance Corp. Division); Barnett Banks,
Inc./EquiCredit Corporation; Norwest Corporation/Community Credit Co.;
NationsBank Corporation/Chrysler First, Inc.; Associates Corporation of North
America/First Family Financial Services, Inc.; Avco Financial Services, Inc./USA
Financial Services, Inc.; Transamerica Finance Group, Inc./Nova Financial
Services, Inc. (First Interstate Bancorp); and Ford Motor Company/Associates
First Capital Corporation. Analysis of these selected transactions produced
median implied multiples based on LTM earnings and book value of 12.8x and
2.68x, respectively, and a median premium to managed receivables of 16.7%. These
median valuation measures compared with implied multiples of price to LTM
earnings and book value of 19.8x and 4.40x, respectively, and a premium to
managed receivables percentage of 93.7% for the Merger. This analysis produced
potential equity market values per share of RAC Common Stock ranging from $5.72
to $7.37 per share.
DISCOUNTED CASH FLOW ANALYSIS
Using a discounted cash flow analysis based on assumptions provided by RAC
management, Salomon estimated the present value of the future cash flows that
RAC could produce over a projected five-year period from 1996 through 2000 if
RAC were to perform on a stand-alone basis (i.e., without giving effect to any
operating or other efficiencies pursuant to the Merger). These estimates were
made using assumed rates of growth of loans, before loss reserve, ranging from
20.0% to 25.0% per year. Salomon derived certain potential equity market value
reference ranges for RAC Common Stock based upon the sum of the present value
(using discount rates ranging from 18.0% to 22.0%) of the future cash flows
based on the discounted value of the expected dividend stream and the discounted
value of RAC's final year's earnings multiplied by numbers representing
price-earnings multiples ranging from 12.0x to 15.0x. This analysis produced
potential equity market values per share of RAC Common Stock ranging from $8.25
to $14.28.
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ANALYSIS OF HISTORICAL STOCK PRICE PERFORMANCE
Salomon examined the annualized total rates of return for RAC Common Stock
and SNC Common Stock over a number of different holding periods. Salomon also
analyzed the recent price performance of both SNC Common Stock and RAC Common
Stock as compared to the S&P 500 Index and the Salomon Regional Bank Index (the
"Bank Index"). This analysis showed that, for the period from June 15, 1993 (the
date of RAC's initial public offering) to March 22, 1996, RAC Common Stock had
produced annualized dividend reinvested total returns of 31.5%, compared to
12.7% for SNC Common Stock,
11.6% for the Bank Index and 19.0% for the S&P 500 Index. For the two year
period ended March 22, 1996, the annualized dividend reinvested total return of
the RAC Common Stock was 19.0%, compared to 19.7% for SNC Common Stock (using
SNC on a stand-alone basis for periods prior to its merger with BB&T), 12.0% for
the Bank Index and 20.8% for the S&P 500 Index. For the one year period ended
March 22, 1996, the annualized dividend reinvested total return of the RAC
Common Stock was 11.1%, compared to 38.8% for SNC Common Stock, 31.1% for the
Bank Index and 34.2% for the S&P 500 Index.
SNC COMPARABLE COMPANY ANALYSIS
Salomon compared current market data and several credit and operating
statistics of SNC with those of a group of twenty-two bank holding companies
comprising the Bank Index, and as such being deemed comparable on the basis of
size and business lines. The measures compared included, among other factors,
price/earnings ratio, price/book ratio, dividend yield, return on assets, return
on equity, net interest margin, noninterest income as a percentage of revenue,
non-interest income as a percentage of assets, overhead ratio, equity to assets
ratio, Tier 1 capital ratio, and total risk based capital ratio. Salomon also
analyzed certain credit quality ratios of SNC's loan portfolio, such as the
ratio of nonperforming assets to total loans, the ratio of reserve for credit
losses to loans and the ratio of nonperforming assets to tangible common equity,
as compared to the Bank Index peer group. These analyses showed, among other
things, that SNC's market valuation measures of 10.1x 1996 estimated earnings,
1.79x book value, and a dividend yield of 3.32% were comparable with its Bank
Index peer group median multiples of 11.2x, 1.90x, and 3.17%, respectively. The
analysis further showed that SNC's return on average assets, return on average
common equity, and common equity to assets ratios of 1.26%, 16.2%, and 7.83%,
respectively, were comparable to the median measures for the Bank Index peer
group of 1.25%, 16.4% and 7.91%, respectively. The institutions included in the
Bank Index are AmSouth Bancorporation, Bancorp Hawaii, Inc., Barnett Banks,
Inc., Crestar Financial Corporation, First American Corporation, Fifth Third
Bancorp, First of America Bank Corporation, First Security Corporation, First
Tennessee National Corporation, Huntington Bancshares Incorporated, Marshall &
Ilsley Corporation, Mercantile Bancorporation, Inc., Northern Trust Corporation,
Old Kent Financial Corporation, Signet Banking Corporation, SouthTrust
Corporation, Star Banc Corporation, State Street Boston Corporation, Synovus
Financial Corp., U.S. Bancorp, Union Planters Corporation, and Wilmington Trust
Corporation.
PRO FORMA MERGER CONSEQUENCES ANALYSIS
Salomon analyzed certain pro forma effects on the combined company
resulting from the Merger for the projected five-year period from 1996 through
2000. This analysis was based upon certain assumptions prepared by the
management of SNC which reflected estimated cost savings and revenue
enhancements by combining the two companies. Salomon examined the pro forma
earnings, book value per share, return on assets, and return on common equity of
the pro forma combined equity. Salomon then estimated the present value (using
discount rates ranging from 12% to 16%) of the future cash flows per fully
diluted RAC share based on the discounted value of the expected dividend stream
and the discounted value of the final year's net earnings multiplied by numbers
representing terminal price earnings multiples ranging from 10.0x to 13.0x. This
pro forma analysis produced an overall range of potential values per RAC common
share of $9.90 to $14.55.
GENERAL
While the summary set forth above does not purport to be a complete
description of the analyses Salomon performed in connection with the rendering
of its opinions, it does address all of the material matters relevant to such
analyses. Salomon believes that its analyses and the summary set forth above
must be considered as a whole and that selecting portions of its analyses could
create an incomplete view of the process underlying the analyses it performed in
preparing its opinions and making its presentation to the RAC Board. In
performing its analyses, Salomon made numerous assumptions with respect to
industry performance, general business, economic, market and financial
conditions, and other matters, many of which are beyond the control of RAC and
SNC. Because any estimates contained in the analyses performed by Salomon are
inherently subject to uncertainty, none of the RAC Board, Salomon, or any other
person assumes responsibility for the accuracy of such estimates.
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Additionally, no company or transaction used in the comparable company or
comparable transaction analyses summarized above is identical to RAC, SNC, or
the Merger. Accordingly, any such analyses of the value of the Merger involve
complex considerations and judgments concerning differences in the potential
financial and operating characteristics of the comparable companies and other
factors in relation to the trading and transaction values of the comparable
companies and comparable transactions.
SALOMON GENERALLY
Salomon is an investment banking firm engaged, among other things, in the
valuation of businesses and securities in connection with mergers and
acquisitions and other purposes. Salomon has rendered its opinions as to the
fairness, from a financial point of view, of the Exchange Ratio and rendered
limited financial advice and assistance to the RAC Board regarding the Merger,
but did not participate in the discussions or negotiations with respect to the
Merger.
In the ordinary course of its business, Salomon actively trades the debt
and equity securities of RAC and SNC for its own account and for the accounts of
its customers, and it therefore may from time to time hold a long or short
position in such securities. Salomon provides investment banking and other
services to SNC from time to time, and RAC was advised that Salomon assisted SNC
with its share repurchase program during the first quarter of 1996. Salomon did
not advise SNC in any manner with respect to the Merger.
FEES PAID TO SALOMON
In connection with its engagement of Salomon pursuant to their letter
agreements dated April 17, 1995 and March 20, 1996, RAC has paid Salomon a fee
of $100,000 for its services and has agreed to pay Salomon an additional fee of
$900,000 payable and contingent upon the consummation of the Merger. RAC has
agreed to reimburse Salomon for all reasonable out-of-pocket expenses, including
reasonable fees and disbursements of counsel. RAC has also agreed to indemnify
and hold harmless Salomon against certain liabilities and expenses, including
certain liabilities arising under the federal securities laws, related to or
arising out of its engagement.
EXCHANGE RATIO
In the Merger, each outstanding share of RAC Common Stock (other than
shares held by Dissenting Shareholders) will be converted into .3929 shares of
SNC Common Stock (the "Exchange Ratio") if the Closing Value (as defined below)
of SNC Common Stock is not less than $26.00 and not greater than $30.00. If the
Closing Value is less than $26.00, the Exchange Ratio will be determined by
dividing $10.21 by the Closing Value. If the Closing Value is greater than
$30.00, the Exchange Ratio will be determined by dividing $11.79 by the Closing
Value. If the Closing Value is less than $24.00 or greater than $32.00, the
Exchange Ratio will be subject to renegotiation by SNC and RAC by reason of
provisions of the Reorganization Agreement permitting termination of the
Reorganization Agreement by SNC or RAC, respectively, if the Closing Value is
less than $24.00 or more than $32.00. Any changes in the market price of the SNC
Common Stock after the period for which the Closing Value is determined,
however, will not affect the Exchange Ratio, and the actual market price of the
SNC Common Stock at the time the Merger is consummated could be more or less
than the Closing Value used to determine the Exchange Ratio.
"Closing Value" means the average closing price per share, as reported on
the New York Stock Exchange (the "NYSE") of the SNC Common Stock for the ten
NYSE trading days immediately preceding the fifth calendar day preceding the
date on which the shareholders of RAC approve the Merger. If the Merger is
approved at the Special Meeting on August 23, 1996, then the period during which
the Closing Value will be determined will be the ten NYSE trading days ending on
August 16, 1996.
No fractional shares of SNC Common Stock will be issued in the Merger.
Holders of RAC Common Stock otherwise entitled to a fractional share will be
paid an amount in cash determined by multiplying that fraction by the Closing
Value.
POSSIBLE ADJUSTMENT OR RENEGOTIATION OF THE EXCHANGE RATIO -- RAC
The RAC Board has indicated that in determining whether to terminate the
Reorganization Agreement in the event the Closing Value is greater than $32.00
and the adjusted Exchange Ratio is therefore less than .3684 (or to offer a
renegotiated Exchange Ratio, greater than the adjusted Exchange Ratio, in lieu
of termination), and in determining whether to accept a renegotiated Exchange
Ratio in the event the Closing Value is less than $24.00 and SNC therefore has
the right to terminate the Reorganization Agreement, the RAC Board will take
into account, consistent with its fiduciary duties, all relevant facts and
circumstances existing at the time, including without limitation: (a) the
Exchange Ratio that SNC indicates it is prepared
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to accept and the implied consideration resulting from that Exchange Ratio; (b)
the factors thought to cause the Closing Value to be outside the $24.00 to
$32.00 range and whether such factors are anticipated to continue to affect the
market price for the SNC Common Stock; (c) market conditions in general and the
relative value of the SNC Common Stock in the market; and (d) the advice of
RAC's financial advisors and legal counsel. By granting proxies to approve the
Reorganization Agreement and Plan of Merger, the RAC shareholders would be
permitting the RAC Board, in the exercise of its fiduciary duties, to proceed
with Merger even if the adjusted Exchange Ratio were less than .3684 (in the
event the Closing Value is greater than $32.00) or the implied consideration per
share of RAC Common Stock (based upon the Closing Value of the SNC Common Stock)
were less than $10.21 (in the event the Closing Value is less than $24.00 and
SNC proposes to terminate the Reorganization Agreement unless the Exchange Ratio
is renegotiated). Notwithstanding the foregoing, if the implied consideration
per share of RAC Common Stock, based upon the Closing Value (determined with
respect to the date the Special Meeting is originally scheduled to be held) and
the renegotiated Exchange Ratio, would be less than $9.19 (that is, less than
90% of the implied consideration resulting from a $24.00 Closing Value), and the
RAC Board determines to proceed with the Merger on such basis, then the RAC
Board will adjourn the Special Meeting and resolicit proxies for the Special
Meeting so that the renegotiated Exchange Ratio is submitted to the RAC
shareholders for their approval.
EXCHANGE OF RAC COMMON STOCK CERTIFICATES
Promptly after the Effective Date, transmittal forms will be mailed to each
former shareholder of RAC. The transmittal form will include instructions to be
followed in exchanging the certificates formerly evidencing shares of RAC Common
Stock for certificates evidencing shares of SNC Common Stock and, if applicable,
cash in lieu of fractional shares. Upon surrender of certificates formerly
evidencing shares of RAC Common Stock in accordance with the transmittal forms
and instructions, each holder thereof will receive a certificate evidencing the
number of whole shares of SNC Common Stock to which that holder is entitled and
any cash payable in lieu of a fractional share.
THE SHAREHOLDERS OF RAC SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE TRANSMITTAL FORMS AND INSTRUCTIONS.
After the Effective Date, until so surrendered and exchanged, each
certificate that evidenced shares of RAC Common Stock immediately prior to the
Effective Date (other than certificates held by Dissenting Shareholders) will
represent only the right to receive the whole shares of SNC Common Stock and any
cash payment in lieu of a fractional share in the Merger. Holders of
certificates formerly evidencing RAC Common Stock will not be entitled to
receive any dividends or other distributions payable with respect to shares of
SNC Common Stock or to vote shares of SNC Common Stock until the unexchanged
certificates are surrendered. Any dividends and distributions on SNC Common
Stock from the Effective Date until surrender will be accumulated and paid,
together with any cash payment in lieu of fractional shares, without interest
upon surrender of certificates formerly evidencing the RAC Common Stock.
THE REORGANIZATION AGREEMENT
EFFECTIVE DATE AND TIME OF THE MERGER
The Merger will be effective at the time and on the date specified in the
Articles of Merger to be filed with the Secretary of State of the State of North
Carolina. The filing of the Articles of Merger with the Secretary of State of
the State of North Carolina will take place on the first business day following
the date on which the Plan of Merger shall have been approved by the RAC
shareholders, or such later date within ten days thereafter as may be specified
by SNC, or such later date as the parties may otherwise agree. If the Merger is
approved at the Special Meeting on August 23, 1996, it is currently anticipated
that the filing of the Articles of Merger and the consummation of the Merger
will occur on or about August 30, 1996 and that the Merger will be effective on
September 1, 1996.
CONDITIONS TO THE MERGER
The respective obligations of SNC and RAC to consummate the Merger are
subject to the satisfaction or, where permissible, the waiver of certain
conditions including, without limitation, the following: (a) the authorization
of the execution, delivery, and performance of the Reorganization Agreement and
the Option Agreement by all necessary SNC and RAC corporate action, including
approval of the Merger by the requisite vote of the shareholders of RAC; (b) the
registration under the Securities Act of the shares of SNC Common Stock to be
issued in connection with the Merger, the receipt of all permits,
authorizations, or confirmations under state securities laws necessary to carry
out the transactions contemplated by the Reorganization Agreement, and the
approval of the SNC Common Stock to be issued pursuant to the Merger for listing
on the
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NYSE; (c) the receipt of the approval of the Merger by the Federal Reserve; (d)
the absence of any order, decree, or injunction issued by a court or agency of
competent jurisdiction enjoining or preventing the consummation of the Merger;
and (e) the receipt of the opinion of Womble Carlyle Sandridge & Rice, PLLC,
counsel to SNC, substantially to the effect that the Merger will constitute a
reorganization under Section 368 of the Code and that the shareholders of RAC
will not recognize any gain or loss to the extent that such shareholders
exchange shares of RAC Common Stock for shares of SNC Common Stock, and that
their holding period for and basis in their shares of RAC Common Stock will be
carried over to such shares of SNC Common Stock.
The obligations of RAC to consummate the Merger are also subject to the
satisfaction or waiver of the following conditions: (a) the material accuracy of
the representations and warranties and the performance, in all material
respects, of all material obligations and covenants made by SNC in the
Reorganization Agreement; (b) the receipt of certain legal opinions and closing
certificates from SNC; and (c) the receipt of the opinion of Salomon, financial
advisor to RAC, in a form and substance reasonably satisfactory to the RAC Board
to the effect that the Exchange Ratio in the Merger is fair, from a financial
point of view, to the shareholders of RAC.
The obligations of SNC to consummate the Merger are also subject to the
satisfaction or waiver of the following conditions: (a) the material accuracy of
the representations and warranties and the performance, in all material
respects, of all material obligations and covenants made by RAC in the
Reorganization Agreement; (b) the receipt of certain legal opinions and closing
certificates from RAC; (c) no regulatory approval having imposed any condition
or requirement which, in the reasonable opinion of the Board of Directors of
SNC, would so materially adversely affect the business or economic benefits to
SNC of the Merger as to render the consummation of such transaction inadvisable
or unduly burdensome; (d) the receipt of written agreements from "affiliates,"
as defined in Rule 145 under the Securities Act, of RAC regarding certain
restrictions on resale of SNC Common Stock received in the Merger; (e) SNC shall
have determined that the Merger qualifies for "pooling-of-interests" accounting
treatment; and (f) the holders of not more than 4% of the issued and outstanding
shares of RAC Common Stock shall have given written notice to RAC of their
intent to demand payment for their shares pursuant to Article 13 of the NCBCA
and shall not have voted for the Merger.
CONDUCT OF RAC'S BUSINESS PRIOR TO THE EFFECTIVE DATE
Except as permitted, required, or specifically contemplated by the
Reorganization Agreement or with the prior written consent of SNC, RAC will not,
and will cause each of its subsidiaries not to: (a) carry on its business other
than in the usual and ordinary course in substantially the same manner as
theretofore conducted; (b) declare, make, or pay any dividend or other
distribution in respect of its capital stock; (c) issue any shares of its
capital stock other than pursuant to the exercise of outstanding stock options,
the acquisition of the Insurance Companies (as defined below), or the exercise
of SNC of its rights under the Option Agreement; (d) issue, grant, or authorize
any rights in respect of its capital stock (other than in connection with the
Option Agreement) or effect any recapitalization, reclassification, stock
dividend, stock split, or other capital change; (e) amend its articles of
incorporation or bylaws; (f) merge or acquire control over any other corporation
or dispose of any assets or acquire any assets, other than in the ordinary
course of its business and other than the acquisition by RAC of all of the
capital stock of Regional Fidelity Limited, Roanoke Fidelity Limited, and
Universal Fidelity, Limited, each a British Virgin Islands corporation (the
"Insurance Companies"); (g) fail to comply in any material respect with any
laws, regulations, ordinances, or governmental actions applicable to it and the
conduct of its business; (h) increase the rate of compensation of any of its
directors, officers or employees, 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 the ordinary course of business consistent with past
practices; (i) enter into or substantially modify (except as required by
applicable law or renewals consistent with past practices) any pension or other
employee benefit plan or arrangement; (j) solicit or encourage inquiries or
proposals with respect to, furnish any information relating to, or participate
in any negotiations or discussions concerning, any acquisition or purchase of
all or a substantial portion of the assets of, or a substantial equity interest
in, RAC or any business combination with RAC; (k) enter into any material
agreement, arrangement, or commitment other than in the ordinary course of
business or enter into any agreement relating to the employment or severance of
any present or former director, officer, or employee; (l) change its lending,
investment or asset/liability management policies in any material respect,
except as may be required by applicable law, regulation, or directive; (m)
change its methods of accounting in effect at December 31, 1995, or change any
of its methods of reporting income and deductions for federal income tax
purposes from those employed in the preparation of its federal income tax
returns for the year ended December 31, 1995, except as required by changes in
law; (n) incur any capital expenditures or obligations to make capital
expenditures in excess of $50,000.00 individually or $250,000.00 in the
aggregate; (o) incur any indebtedness other than in the ordinary course of
business; (p) knowingly and voluntarily take any action which would or might be
expected to (i) cause the Merger not to be accounted for as a
"pooling-of-interests" or not to
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constitute a reorganization under Section 368 of the Code, in either case as
determined by SNC, (ii) result in any representation or warranty made by RAC in
the Reorganization Agreement being untrue, or (iii) cause any of the conditions
precedent to the Merger to fail to be satisfied; (q) dispose of any assets other
than in the ordinary course of business; or (r) agree to do any of the
foregoing.
TERMINATION
The Reorganization Agreement may be terminated and the Merger abandoned at
any time prior to the Effective Date by the mutual written consent of SNC and
RAC. Either SNC or RAC may terminate the Reorganization Agreement at any time
prior to the Effective Date if: (a) there has been a materially adverse breach
by the other party of any of its representations, warranties, or covenants that
is not cured at the earlier of thirty days following written notice of the
breach or the Effective Date; (b) any approval required for the consummation of
the Merger is denied and the time period for appeals and requests for
reconsideration thereof has expired; or (c) the shareholders of RAC do not
approve the Merger at the Special Meeting. Either party may terminate the
Reorganization Agreement on the closing date, if any of the conditions precedent
to the obligations of the terminating party to consummate the Merger have not
been satisfied or fulfilled and the terminating party is not in breach of any of
its representations, warranties, or covenants, and either party may terminate
the Reorganization Agreement at any time after the close of business on October
31, 1996, if the Effective Date has not occurred and the terminating party is
not in breach of any of its representations, warranties, or covenants. If the
Closing Value of SNC Common Stock is less than $24.00 per share and SNC and RAC
have not mutually agreed to an adjusted Exchange Ratio, SNC may terminate the
Reorganization Agreement. If the Closing Value of SNC Common Stock is more than
$32.00 per share and SNC and RAC have not mutually agreed to an adjusted
Exchange Ratio, RAC may terminate the Reorganization Agreement. If, prior to the
approval by the shareholders of RAC, the RAC Board fails to make or withdraws
its recommendation to the shareholders of RAC that they approve the Merger after
determining in good faith after consultation with legal and financial advisors
that such action is necessary in order for the RAC Board to comply with their
duties as directors to the shareholders of RAC under applicable law, RAC may
terminate the Reorganization Agreement.
If the Reorganization Agreement is terminated by either SNC or RAC, the
Reorganization Agreement will become void. Thereafter, there will be no
liability on the part of SNC or RAC other than with respect to obligations
relating to the other party's confidential information, payment of their
respective costs and expenses incurred in connection with the transactions, and
any uncured breach of the covenant or agreement giving rise to the termination.
AMENDMENT AND WAIVER
SNC and RAC may amend the Reorganization Agreement by mutual written
agreement. At any time prior to the Effective Date and whether before or after
the Merger has been approved by the shareholders of RAC, either SNC or RAC may
extend the time of performance of any obligations of the other party, except
with respect to required regulatory approval, and may waive any inaccuracies in
the representations and warranties of the other party contained in the
Reorganization Agreement or in any document delivered pursuant thereto;
compliance or performance by the other party of any of its agreements,
covenants, or obligations contained in the Reorganization Agreement; or any
condition to such waiving party's obligations to consummate the transactions
contemplated by the Reorganization Agreement. After the approval of the Merger
by the shareholders of RAC at the Special Meeting, the Reorganization Agreement
may not be amended to reduce the number of shares of SNC Common Stock into which
each share of RAC Common Stock is converted or amend the payment terms for
fractional shares.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of RAC's management, including one director, have certain
interests in the Merger that are in addition to their interests as shareholders
of RAC generally.
BOARD OF DIRECTORS OF THE SURVIVING CORPORATION
It is anticipated that after the Effective Date, the Board of Directors of
RAC, as the Surviving Corporation, will be increased to seven members, three of
whom will be Mr. Stallings, Mr. Barry and Joseph P. LaCognata, Vice President
and Chief Operating Officer of RAC. The other four members of the Board of
Directors of the Surviving Corporation will be current employees of SNC or its
subsidiaries.
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INDEMNIFICATION OF DIRECTORS AND OFFICERS
From and after the Effective Date, the Surviving Corporation, to the
fullest extent permitted by applicable law, will indemnify all persons who at or
at any time prior to the Effective Date serve or have served as directors or
officers of RAC (the "Indemnified Persons") from and against any and all
liabilities and expenses incurred by them in any proceeding (including without
limitation a proceeding brought by or on behalf of RAC) arising out of their
status or activities at or prior to the Effective Date: (a) as directors or
officers of RAC; (b) as trustee or administrator of an employee benefit plan of
RAC or any of its subsidiaries; or (c) at the request of RAC, as directors or
officers of any of its subsidiaries. Notwithstanding the foregoing, no
Indemnified Person will be entitled to indemnity under the Reorganization
Agreement for liabilities or expenses incurred on account of activities that
were at the time taken known or believed by such Indemnified Person to be
clearly in conflict with the best interest of RAC or any of its subsidiaries.
The Surviving Corporation will also pay the reasonable costs and expenses
(including reasonable attorneys' fees) incurred by any Indemnified Person in
connection with the enforcement of such person's rights to indemnification
provided in the Reorganization Agreement, but only if the Indemnified Person is
finally determined to be entitled to the claimed indemnity in substantial part.
Except as otherwise provided in the Reorganization Agreement, the rights to
indemnification provided therein are in addition to and not in limitation of any
other rights to indemnification any Indemnified Person may have under applicable
law.
For purposes of ensuring reasonable security for the Surviving
Corporation's indemnification obligations to the Indemnified Persons, SNC has
guaranteed in the Reorganization Agreement that the Surviving Corporation's net
worth will at all times be at least equal to $40 million, reduced by any
indemnification claims described in the preceding paragraph previously paid or
determined to be payable, and SNC will pay any amounts due the Indemnified
Persons to the extent that, on the date such amount is required to be paid, such
amount exceeds the actual net worth of the Surviving Corporation and does not
exceed $40 million as so reduced.
EMPLOYMENT AGREEMENTS
In connection with the Merger, the Surviving Corporation will enter into a
five-year employment agreement with Mr. Stallings and three-year employment
agreements with each of Mr. Barry, Mr. LaCognata, and William E. Mayhew, Vice
President and Chief Administrative Officer of RAC (these executive officers of
RAC are referred to herein individually as a "RAC Executive" and collectively as
the "RAC Executives"). Mr. Stallings will serve as President and Chief Executive
Officer of the Surviving Corporation during the first two years of the term of
his employment agreement and as Chairman of the Board for the remaining three
years. Each of Mr. Barry, Mr. LaCognata, and Mr. Mayhew will serve the Surviving
Corporation in substantially the same capacities that they currently serve RAC.
The employment agreement for each of the RAC Executives provides that the
RAC Executive will receive a base salary at least equal to the base salary
currently received by that RAC Executive from RAC. Mr. Stallings's employment
agreement provides, however, that after two years, when his only office with the
Surviving Corporation is Chairman of the Board and his services are expected to
be rendered on less than a full-time basis, his base salary will be reduced to
$100,000 per annum. Each RAC Executive (but only during the first two years of
the term of Mr. Stallings's employment agreement) will be entitled to receive an
annual increase in his base salary at least equal to the average percentage
increases received by officers of BB&T-NC. Mr. Stallings, during the first two
years of the term of his employment agreement, and each of the other RAC
Executives will be entitled to participate in a bonus plan (the "Bonus Plan") to
be adopted by the Surviving Corporation which will be substantially similar to
SNC's Amended and Restated Short-Term Incentive Plan. Pursuant to the Bonus
Plan, the RAC Executives will be eligible for bonuses based upon the Surviving
Corporation's attainment of certain earnings and other financial goals. While
each RAC Executive's target bonus will be 25% of his actual salary payable
during the year, the bonus percentage could be as high as 50% of his actual
salary if the Surviving Corporation's performance goals are exceeded. During the
term of each RAC Executive's employment agreement, he will also be eligible to
participate in SNC's Amended and Restated 1995 Omnibus Stock Incentive Plan.
Each RAC Executive's employment agreement provides that, in the event his
employment with the Surviving Corporation is terminated other than as a result
of his death or disability or for cause, the RAC Executive will be entitled to
receive an annual salary for the remainder of what would otherwise have been the
term of such employment agreement equal to the highest amount of cash
compensation (including bonuses) received during any of the preceding five
calendar years (the "Termination Compensation") together with health insurance
and other benefits then provided by the Surviving Corporation.
In the event of a Change of Control (as hereinafter defined) of the
Surviving Corporation or SNC during the term of each RAC Executive's employment
agreement and the voluntary termination of his employment with the Surviving
Corporation for Good Reason (as hereinafter defined) at any time during the
twenty-four months following such Change of Control,
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he shall be entitled to receive a lump sum payment, in lieu of any other amounts
payable under his employment agreement, equal to the amount of his Termination
Compensation multiplied by 2.99. A "Change of Control" shall be deemed to have
occurred if: (a) any person or group of persons, other than SNC or its
affiliates (excluding certain employee benefit plans), is or becomes the
beneficial owner of securities of either SNC or the Surviving Corporation
representing 20% or more of the combined voting power of SNC's or Surviving
Corporation's then outstanding securities; (b) as a result of any tender offer,
exchange offer, proxy contest, merger, consolidation, or sale of assets,
individuals who at the beginning of any two-year period constitute the SNC
Board, plus new directors whose election is approved by 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 to constitute at least two-thirds of the
members of the SNC Board; (c) approval by the shareholders of SNC of certain
mergers or consolidations involving SNC which result in shareholders of SNC
having less than 60% of the voting power of the combined entity; (d) the
shareholders of SNC or the Surviving Corporation approve a plan of complete
liquidation of SNC or an agreement for the sale or disposition of all or
substantially all of SNC's or the Surviving Corporation's assets or such a
liquidation, sale or disposition is consummated; or (e) any other event which
the SNC Board determines to be a change of control. "Good Reason" is defined as:
(a) the assignment to the RAC Executive of duties inconsistent with those
assigned to him before the Change of Control; (b) a reduction in his base salary
or his exclusion from participating in the Surviving Corporation's benefits
plans in which he previously participated, in each case as in effect immediately
preceding the Change of Control, or a failure to increase his base salary by a
percentage equal to the average of that received by officers of BB&T; (c) an
involuntary relocation more than fifty miles from where the RAC Executive worked
prior to the Change of Control; or (d) a material breach by the Surviving
Corporation of the employment agreement.
In his employment agreement, each RAC Executive will covenant not to
compete in the consumer or sales finance business and agree not to solicit
customers or employees of either SNC or the Surviving Corporation under certain
circumstances.
The RAC Executives' employment agreements with the Surviving Corporation
supersede each of their existing employment agreements and change of control
arrangements with RAC.
INDEMNIFICATION AGREEMENT
Pursuant to the Indemnification Agreement, the current directors and
executive officers of RAC have agreed to indemnify and hold harmless SNC with
respect to losses arising from the activities of RAC prior to the Merger and
relating to certain contingencies. The Indemnification Agreement requires that
shares of SNC Common Stock to be issued to those individuals in the Merger with
an aggregate value of $4.0 million (based on the Closing Value) will be placed
in escrow for up to three years, subject to periodic release of shares, as the
sole means by which the indemnification obligations may be satisfied. RAC is not
a party to the Indemnification Agreement, nor does RAC or any other shareholder
of RAC have any obligation under the Indemnification Agreement.
REGULATORY CONSIDERATIONS
SNC anticipates that the regulatory approvals described herein will be
obtained in time to allow for consummation of the Merger in late August, 1996,
but there is no assurance that such regulatory approvals will be obtained so as
to permit consummation of the Merger or that such approvals will not be
conditioned upon matters that would cause the parties to abandon the Merger.
There likewise is no assurance that the United States Department of Justice or a
state Attorney General will not challenge the Merger, or if such a challenge is
made, as to the results thereof.
The Merger is subject to approval by the Federal Reserve under Section 4 of
the Bank Holding Company Act of 1956, as amended (the "BHCA"), and the Federal
Reserve's Regulation Y and Regulation K. Section 4 of the BHCA and Regulation Y
require that the Federal Reserve take into consideration whether the acquisition
of RAC can reasonably be expected to produce benefits, such as greater
convenience, increased competition, or gains in efficiency, that outweigh any
possible effects, such as undue concentration of resources, depressed or unfair
competition, conflicts of interest, or unsound banking practices. Consideration
of these factors includes an evaluation of the financial and managerial
resources of SNC, including its subsidiaries, and RAC, and the effect of the
proposed transaction on those resources. Approval under Regulation K, which
governs the foreign activities of bank holding companies, is necessary for SNC
to retain its indirect interest in the Insurance Companies following the
consummation of the Merger.
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DISSENTERS' RIGHTS
Under North Carolina law, holders of RAC Common Stock who do not vote in
favor of the Reorganization Agreement and who comply with certain notice
requirements and other procedures will have the right to dissent and to be paid
cash for the "fair value" of their shares. Such "fair value" as finally
determined under such procedures may be more or less than the consideration to
be received by other shareholders of RAC under the terms of the Reorganization
Agreement. Failure to follow such procedures precisely may result in loss of
dissenters' rights.
The following discussion is not a complete statement of the law pertaining
to dissenters' rights under the NCBCA and is qualified in its entirety by the
full text of Chapter 55, Article 13 of the NCBCA ("Article 13"), which is
reprinted in its entirety as Appendix IV to this Proxy Statement/Prospectus and
incorporated herein by reference.
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 RAC in writing of the name and
address of each person on whose behalf he asserts dissenters' rights. The rights
of a partial dissenter shall be determined as if the shares as to which he
dissents and his other shares were registered in the names of different
shareholders. A beneficial owner may assert dissenters' rights as to shares held
on his behalf only if he: (a) submits to RAC the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' right and (b) asserts dissenters' rights with respect to all
shares of which he is the beneficial owner.
A holder of shares of RAC Common Stock wishing to exercise dissenters'
rights must: (a) give to RAC and RAC must actually receive before the vote on
the Reorganization Agreement is taken, written notice of the holder's intent to
demand payment for his shares if the Merger is consummated and (b) must not vote
his shares in favor of the Merger. If the Reorganization Agreement is approved
by holders of the requisite number of outstanding shares of RAC Common Stock,
RAC will, no later than ten days following the consummation of the Merger, mail
a written dissenters' notice to all shareholders who gave the aforementioned
notice of intent to demand payment. Such dissenters' notice will: (a) state
where the payment demand must be sent and where and when certificates for
certificated shares must be deposited; (b) inform holders of uncertificated
shares to what extent transfer of the shares will be restricted after the
payment demand is received; (c) supply a form for demanding payment; (d) set a
date by which RAC must receive the payment demand, which date may not be fewer
than thirty nor more than sixty days after the date on which the dissenters'
notice is sent; and (e) be accompanied by a copy of Article 13. To exercise his
dissenters' rights, a shareholder sent a dissenters' notice must demand payment
and deposit his share certificates in accordance with the terms of the notice. A
shareholder failing to do so will not be entitled to payment for his shares
under Article 13. A shareholder who demands payment and deposits his share
certificates in accordance with the terms of the notice will retain all other
rights of a shareholder until consummation of the Merger. All notices, demands,
and other communications directed to RAC in connection with the appraisal
process should be sent to RAC at 3004 South Memorial Boulevard, Greenville,
North Carolina, 27834, Attention: Secretary.
Upon receipt of a payment demand by a shareholder made in compliance with
the above-described procedures, RAC will offer to pay such shareholder the
amount RAC estimates to be the value of his shares, plus interest accrued to the
date of payment. RAC will pay this amount to each dissenter who agrees in
writing to accept such payment in full satisfaction of his demand. Such offer of
payment will be accompanied by: (a) RAC's balance sheet as of the fiscal year
ended December 31, 1995, an income statement and a statement of cash flows for
that year and the latest available interim financial statements; (b) a statement
of RAC's estimate of the fair value of the shares; (c) an explanation of how the
interest was calculated; (d) a statement of the dissenter's right to demand
payment if he is dissatisfied with RAC's offer, if RAC fails to make payment
within thirty days of a dissenter's acceptance or if RAC, having failed to
consummate the Merger, fails to return deposited share certificates or release
the transfer restrictions imposed on uncertificated shares within sixty days
after the date set for demanding payment; and (e) a copy of Article 13.
If: (a) a dissenter believes that the amount offered by RAC is less than
the fair value of his shares, or that the interest due is incorrectly
calculated; (b) RAC fails to make payment to a dissenter who accepts RAC's offer
within thirty days after the acceptance; or (c) RAC, having failed to consummate
the Merger, fails to return deposited stock certificates to a dissenter or
release the transfer restrictions imposed on uncertificated shares within sixty
days after the date set for demanding payment, the dissenter may notify RAC 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 RAC's offer and demand
payment of the fair value of his shares and interest due. A dissenter will waive
his right to demand payment as described in this paragraph, and will be deemed
to have withdrawn his dissent and demand for payment, unless he notifies RAC of
his demand in writing within thirty days after RAC (x) offers payment for his
shares or (y) fails to take the actions described in clauses (b) and (c) of this
paragraph, as the case may be.
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If a demand for payment as described above remains unsettled, a shareholder
may commence a proceeding within sixty days after the date of his payment demand
and petition the court to determine the fair value of the shares and accrued
interest. If the dissenter does not commence a proceeding within the sixty day
period, the dissenter shall have an additional thirty days in which he may
either accept in writing the amount offered by RAC as described above or
withdraw his demand for payment and resume the status of a nondissenting
shareholder. A dissenter who takes no action during this thirty day period will
be deemed to have withdrawn his demand for payment.
Upon service on it of the petition filed with the court, RAC will pay to
the dissenter the amount offered by it as described above. The court may, in its
discretion, make all dissenters whose demands remain unsettled parties to the
proceeding. Each dissenter made a party to the proceeding by the court will be
entitled to judgment for the amount, if any, by which the court finds that the
fair value of his shares, plus interest, exceeds the amount paid by RAC upon
service of the petition filed with the court. The court may appoint one or more
appraisers to receive evidence and recommend decision on the question of fair
value. Parties to the proceeding are entitled to the same discovery rights as
parties in other civil proceedings. Since RAC is a "public corporation," no
party to the proceeding will have the right to trial by jury.
The court may assess the costs of a proceeding described above, including
the compensation and expenses of appointed appraisers, as it finds equitable.
With respect to the fees and expenses of counsel and experts for the parties to
the proceeding, the court may assess such costs against: (a) RAC and in favor of
any or all dissenters if it finds that RAC did not substantially comply with the
above described procedures or (b) either RAC or a dissenter or in favor of
either or any other party, if it finds that the party against whom such costs
are assessed acted arbitrarily, vexatiously, or not in good faith with respect
to the dissenters' rights provided under Article 13. In addition, if the court
finds that the services of counsel to any dissenter were of substantial benefit
to other dissenters and that the costs of such services should not be assessed
against RAC, the court may award to such counsel reasonable fees to be paid out
of the amounts to the dissenters who were benefitted.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary description of certain anticipated federal
income tax consequences of the Merger to RAC, the shareholders of RAC, and SNC.
This summary is not intended to be a complete description of all of the federal
income tax consequences of the Merger. The federal income tax laws are complex,
and a shareholder's individual circumstances may affect the tax consequences to
the shareholder. In addition, no information is provided with respect to the tax
consequences of the Merger to shareholders who are not citizens or residents of
the United States or with respect to the tax consequences under any applicable
state, local, foreign, and other tax laws. Consequently, each RAC shareholder is
urged to consult his or her own tax advisor regarding the tax consequences of
the Merger. No ruling has been or will be requested from the Internal Revenue
Service with respect to the tax effects of the Merger.
In the opinion of Womble Carlyle Sandridge & Rice, PLLC, counsel to SNC:
(a) the Merger will constitute a reorganization under Section 368 of the Code;
(b) no gain or loss will be recognized by SNC Acquisition or RAC by reason of
the Merger; (c) the shareholders of RAC will recognize no gain or loss for
federal income tax purposes to the extent SNC Common Stock is received in the
Merger in exchange for RAC Common Stock; (d) a shareholder of RAC who receives
cash in lieu of a fractional share of SNC Common Stock will recognize gain or
loss as if the shareholder received the fractional share and it was then
redeemed for cash; (e) the tax basis in the SNC Common Stock received by a
shareholder (including any fractional share interest deemed received) will be
the same as the tax basis in the RAC Common Stock surrendered in exchange
therefor; and (f) the holding period for SNC Common Stock received (including
any fractional share interest deemed received) in exchange for shares of RAC
Common Stock will include the period during which the shareholder held the
shares of RAC Common Stock surrendered in the exchange, provided that the RAC
Common Stock was held as a capital asset at the Effective Date.
If a shareholder holds RAC Common Stock as a capital asset at the Effective
Date, the shareholder's receipt of cash in lieu of a fractional share of SNC
Common Stock as a result of the Merger will give rise to capital gain or loss
measured by the difference, if any, between the amount of cash received for such
fractional share and the shareholder's basis in the fractional share.
The receipt of cash for shares of SNC Common Stock by a Dissenting
Shareholder pursuant to the exercise of dissenters' rights under the NCBCA will
be a taxable transaction. Any shareholder considering the exercise of such
rights should consult with a tax advisor about the tax consequences of doing so.
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The consummation of the Merger is conditioned upon the receipt by RAC and
SNC of an opinion of Womble, Carlyle Sandridge & Rice, PLLC, counsel to SNC,
dated as of the closing date in substantially the same form as the opinion
delivered to RAC and SNC prior to the date of this Proxy Statement/Prospectus
and described above.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a
pooling-of-interests. Under this accounting treatment, as of the Effective Date,
the assets and liabilities of RAC would be added to those of SNC at their
recorded book values and the shareholders' equity accounts of SNC and RAC would
be combined on SNC's consolidated balance sheet. On a pooling-of-interests
accounting basis, financial statements of SNC issued after consummation of the
Merger would be restated retroactively to reflect the consolidated combined
financial position and results of operations of SNC and RAC as if the Merger had
taken place prior to the periods covered by such financial statements.
THE OPTION AGREEMENT
GENERAL
Concurrently with the execution and delivery of the Reorganization
Agreement, and as a condition to SNC's entering into the Reorganization
Agreement, SNC and RAC entered into an Option Agreement pursuant to which RAC
granted SNC an option (the "Option") to purchase up to 2,986,399 shares of the
authorized and unissued shares of RAC Common Stock (or such other number of
shares as will represent not more than 19.9% of the then outstanding RAC Common
Stock) at a price of $10.21 per share.
THE FOLLOWING SUMMARY OF CERTAIN PROVISIONS OF THE OPTION AGREEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OPTION AGREEMENT, A COPY OF WHICH
IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS APPENDIX II AND INCORPORATED
HEREIN BY REFERENCE.
EXERCISE OF OPTION
SNC may exercise the Option, in whole or in part, only following the
occurrence of one of the following events (each a "Purchase Event"):
(a) RAC or any of its subsidiaries shall have authorized, recommended,
proposed, or publicly announced an intention to authorize, recommend, or
propose a transaction with a person (other than SNC or its affiliates) to,
or entered into an agreement with a person (other than SNC or its
affiliates) to, (i) effect a merger or consolidation with, or enter into
any similar business combination with, RAC or any of its subsidiaries, (ii)
sell, lease or otherwise dispose to such person assets of RAC aggregating
10% or more of the consolidated assets of RAC and its subsidiaries (other
than a sale of loan receivables in a financing transaction), or (iii)
issue, sell, or otherwise dispose to such person (including by way of
merger, consolidation, share exchange, or any similar transaction)
securities representing more than 10% of the voting power of RAC or any of
its subsidiaries;
(b) any person other than Mr. Stallings, Dr. Ross, their estates or
the beneficiaries of their estates after their respective deaths, or SNC or
any of its affiliates shall have acquired beneficial ownership of more than
10% of the outstanding shares of RAC Common Stock, or any person (other
than SNC or its affiliates) shall have merged, consolidated with or
consummated a similar transaction with RAC or any person (other than SNC or
its affiliates) shall have purchased, leased or otherwise acquired 10% of
more of the assets of RAC (other than a sale of loan receivables in a
financing transaction); or
(c) a bona fide proposal is made by any person (other than SNC or its
affiliates) by public announcement or written communication that is or
becomes the subject of public disclosure, or disclosure in an application
to any federal or state regulatory authority, to (i) acquire, merge, or
consolidate with, or enter into any similar transaction with RAC, (ii)
purchase, lease or otherwise acquire 10% or more of the assets of RAC
(other than a sale of loan receivables in a financing transaction), or
(iii) purchase or otherwise acquire (including by way of tender offer,
merger, consolidation, share exchange, tender, or exchange offer or any
similar transaction) securities representing more than 10% of the voting
power of RAC.
The right to purchase shares under the Option Agreement will expire and
terminate upon the earliest to occur of: (a) the Effective Date; (b) the
termination of the Reorganization Agreement other than following or in
connection with (i) a willful and material breach by RAC of any of its covenants
or agreements in the Reorganization Agreement or (ii) the failure of the
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shareholders of RAC to approve the Merger by the vote required under applicable
law; (c) twelve months after the first occurrence of a Purchase Event; or (d)
March 29, 1999.
ADJUSTMENT OF NUMBER OF SHARES
The number and type of securities subject to the Option and the purchase
price thereof will be adjusted for any change in the number of shares of
outstanding RAC Common Stock by reason of a stock dividend, stock split, merger,
recapitalization, combination, exchange of shares, or similar transaction, such
that SNC will receive (upon the exercise of the Option) the same number and type
of securities as if the Option had been exercised immediately prior to such
change. The number of shares of RAC Common Stock subject to the Option will also
be adjusted if RAC issues additional shares of RAC Common Stock, such that the
number of shares of Common Stock subject to the Option represents 19.9% of the
shares of RAC Common Stock then outstanding, without giving effect to shares
subject to or issued pursuant to the Option. In no event shall the shares
subject to the Option constitute more than 19.9% of the shares of RAC Common
Stock.
REGISTRATION RIGHTS
SNC has certain rights to require the registration of any shares of RAC
Common Stock purchased pursuant to the Option under the securities laws if
necessary for SNC to be able to sell such shares.
EFFECT OF OPTION AGREEMENT
The Option Agreement, which SNC required as a condition to SNC's entering
into the Reorganization Agreement with RAC, is intended to increase the
likelihood that the Merger will be consummated on the terms set forth in the
Reorganization Agreement. Consequently, certain aspects of the Option Agreement
may have the effect of discouraging persons who might now or prior to the
Effective Time be interested in acquiring all of or a significant interest in
RAC from considering or proposing such an acquisition, even if such persons were
prepared to offer higher consideration per share for the RAC Common Stock than
the consideration implicit in the Exchange Ratio.
EFFECT ON EMPLOYEE BENEFIT PLANS AND STOCK OPTIONS
The Surviving Corporation will maintain for its employees immediately
following the consummation of the Merger the group hospitalization, medical,
life, disability, and other benefit plans, programs, or arrangements that RAC
(the "RAC Plans") has in effect immediately prior to the Merger. All employees
of the Surviving Corporation will immediately be eligible to participate in the
RAC Plans subject to applicable waiting periods and other eligibility
requirements and limitations relating to pre-existing conditions. SNC will
endeavor to continue in effect the RAC Plans or other comparable employee
benefit plans or arrangements, subject to amendment or termination as the Board
of Directors of the Surviving Corporation may determine to be in the best
interest of the Surviving Corporation.
RAC's 1993 Stock Option Plan provides for the acceleration of vesting of
rights under all outstanding options to purchase shares of RAC Common Stock upon
the occurrence of a merger or other change of control. Pursuant to the
Reorganization Agreement and the terms of RAC's 1993 Stock Option Plan, each
outstanding option (other than the Option issued to SNC pursuant to the Option
Agreement) to purchase shares of RAC Common Stock (whether or not then
exercisable) that is unexercised immediately prior to the Effective Time (the
"Stock Options") will be converted automatically into an option to purchase
shares of SNC Common Stock (omitting any resulting fractional shares) in an
amount equal to the product of (a) the number of shares of RAC Common Stock
subject to the original option and (b) the Exchange Ratio, and at an exercise
price per share of SNC Common Stock equal to the quotient of (x) the exercise
price per share of RAC Common Stock under the original option divided by (y) the
Exchange Ratio (rounded up to the nearest cent). Any Stock Option that is an
"incentive stock option" will be adjusted as required by Section 424 of the Code
and the Regulations thereunder so that the Stock Option will continue as an
incentive stock option under Section 424(a) of the Code without a modification,
extension, or renewal thereof within the meaning of Section 424(h) of the Code.
SNC has agreed that it will either provide for registration of the shares
of SNC subject to the Stock Options or substitute options under the Southern
National Corporation 1995 Omnibus Stock Incentive Plan for all or part of the
Stock Options, providing rights to purchase the number of shares of SNC Common
Stock at the per share exercise price and on the other terms and conditions
described above for Stock Options assumed by SNC.
Options to purchase an aggregate of 201,500 shares of RAC Common Stock were
outstanding as of the Record Date. Any shares of RAC Common Stock issued
pursuant to the exercise of the Stock Options prior to the Effective Date will
be
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converted into shares of SNC Common Stock in accordance with the Exchange Ratio
in the same manner as other shares of RAC Common Stock.
RESTRICTIONS ON RESALES BY AFFILIATES
All shares of SNC Common Stock issuable in the Merger will be registered
under the Securities Act and will be freely transferable, except that any such
shares received by persons who are deemed to be "Affiliates" (as such term is
defined under the Securities Act) of RAC at the Effective Date may be resold by
them only in transactions registered under the Securities Act or permitted by
the resale provisions of Rule 145 under the Securities Act or as otherwise
permitted by the Securities Act. Persons who may be deemed Affiliates of RAC
generally include individuals or entities that directly, or indirectly through
one or more intermediaries, control, are controlled by, or are under common
control with RAC and may include certain executive officers and directors of
RAC.
The Reorganization Agreement requires RAC to cause each of its Affiliates
to deliver to SNC, at least thirty days prior to the Effective Date, a written
agreement to the effect that such person will not offer or otherwise dispose of
any shares of SNC Common Stock issued to that person in the Merger except in
compliance with the Securities Act and the rules and regulations promulgated
thereunder and prior to such time as SNC publishes financial statements
reflecting at least one month of combined operations with RAC as necessary under
the "pooling-of-interests" method of accounting.
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INFORMATION ABOUT SNC
GENERAL
SNC is a multi-bank holding company headquartered in Winston-Salem, North
Carolina. SNC conducts operations in North Carolina, South Carolina, and
Virginia primarily through its commercial banking subsidiaries and, to a lesser
extent, through its other subsidiaries. Substantially all of SNC's loans are to
businesses and individuals in the Carolinas. SNC has no material amount of
foreign loans and no loans that can be defined as highly-leveraged transactions.
The principal assets of SNC are all of the issued and outstanding shares of
common stock of Branch Banking and Trust Company, Winston-Salem, North Carolina,
BB&T Financial Corporation of South Carolina, Greenville, South Carolina, which
in turn owns all of the issued and outstanding shares of Branch Banking and
Trust Company of South Carolina, and BB&T Financial Corporation of Virginia,
which in turn owns all of the issued and outstanding shares of Commerce Bank.
SUBSIDIARIES
BB&T-NC, SNC's largest subsidiary, is the oldest bank in North Carolina and
currently operates through 312 banking offices throughout North Carolina.
BB&T-NC 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. BB&T Leasing Corp., a wholly-owned subsidiary of BB&T-NC, located
in Charlotte, North Carolina, offers lease financing to commercial businesses
and municipal governments. BB&T Investment Services, Inc., also a wholly-owned
subsidiary of BB&T-NC, located in Wilson, North Carolina, offers customers
investment alternatives, including discount brokerage services, fixed-rate and
variable-rate annuities, mutual funds, and government and municipal bonds. BB&T
Insurance Services, Inc., located in Raleigh, North Carolina, is also a
subsidiary of BB&T-NC and offers life and property and casualty insurance on an
agency basis. Additional subsidiaries of BB&T-NC include Goddard Technology
Corporation, which engages in the design and production of imaging and security
devices and programs, and Prime Rate Premium Finance Corporation, Inc., which
provides insurance premium financing and services to customers in Virginia and
the Carolinas.
Branch Banking and Trust Company of South Carolina ("BB&T-SC") serves South
Carolina through 99 banking offices. BB&T-SC 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, local governments,
trust customers and individuals. BB&T-SC's subsidiaries include BB&T Investment
Services of South Carolina, Inc., which is licensed as a general broker/dealer
of securities and is currently engaged in retailing of mutual funds, U.S.
Government securities, municipal securities, fixed and variable insurance
annuity products, and unit investment trusts.
Commerce Bank ("Commerce"), acquired on January 10, 1995 by BB&T Financial
Corporation ("BB&T") prior to the merger with SNC, operates 21 banking offices
in the Hampton Roads region of Virginia. Commerce offers a full range of
commercial and retail banking services and provides SNC with a strong initial
presence in Virginia.
ACQUISITIONS
SNC's profitability and market share have been enhanced through both
internal growth and acquisitions during recent years. Specifically, expansion
has been enhanced both by the acquisition of financial institutions (including
thrift institutions) and the purchase of deposits and assets from the Resolution
Trust Corporation in federally-assisted transactions.
During the three years ended December 31, 1995, SNC completed several
mergers and acquisitions of thrift institutions and financial services
companies. On February 28, 1995, SNC merged with BB&T, a multi-bank holding
company with approximately $11 billion in total assets. Each BB&T shareholder
received 1.45 shares of SNC Common Stock for each share of BB&T common stock
held. A total of 57.9 million shares of SNC Common Stock was issued in
conjunction with the merger.
COMPETITION
The banking industry is highly competitive and dramatic change continues to
occur. The banking subsidiaries of SNC compete actively with commercial banks,
savings and loan associations, securities dealers, mortgage bankers, finance
companies, and insurance companies. Competition for deposits continues to grow
as depositors move their funds to nontraditional financial institutions.
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MARKET AREA
SNC's primary market area consists of North Carolina, South Carolina, and
the Hampton Roads region of Virginia. These states continue to support one of
the most dynamic and fastest growing economies in the nation. The area's
employment base is diverse, consisting of manufacturing industries, service,
wholesale/retail, strong financial centers, and agricultural enterprises. Among
the primary area industries in which SNC has significant commercial lending
relationships are textiles, furniture, and health care. With modern
infrastructures and extensive educational systems, SNC's current market area is
adequate to support consistent growth in assets and deposits in the future. Even
so, management expects to continue to employ aggressive growth strategies,
including possible expansion into neighboring area states. The current market
area includes numerous small communities that SNC seeks to serve. Management
believes that maintaining a community bank approach as asset size and available
services grow will strengthen SNC's ability to successfully move into new states
and communities and successfully be the bank of choice for small to mid-sized
commercial customers in these areas.
LENDING ACTIVITIES
The primary goal of the SNC lending function is to help customers achieve
their financial goals and secure their financial futures. This purpose can best
be accomplished by building strong, profitable customer relationships over time,
with SNC becoming an important contributor to the prosperity and well-being of
its customers. SNC's philosophy of lending is to attempt to meet all legitimate
business and consumer credit needs within defined market segments where
standards of safety, profitability, and liquidity can be met.
SNC focuses lending efforts on small to intermediate commercial and
industrial loans, one-to-four family residential mortgage loans and other
consumer loans. Typically, fixed-rate mortgage loans are sold in the secondary
mortgage market and adjustable-rate mortgages are retained for the portfolio.
Loan growth typically follows economic cycles and has been strong during 1995,
primarily in the mortgage category. Management's lending strategy is to
establish market share in strategic cities and develop customer relationships by
providing quality products and services to the customer base. Once the
relationship is established, management focuses on small business lending and
retail banking through the branches to generate additional growth. During 1995,
management's lending focus changed from an emphasis on competitive pricing of
loans to an emphasis on marketing loan products from a quality perspective.
During the merger of SNC and BB&T, pricing strategies surrounding loans and
deposits were very competitive in order to protect current market positions and
retain customer relationships. However, market research performed during and
after the merger identified quality service as the primary concern of borrowers.
It is SNC's intention to conduct lending activities in the context of SNC's
community bank focus, with decentralized lending decisions made as close to the
customer as practicable.
LEASING
SNC provides leasing products and services in North Carolina and South
Carolina through BB&T Leasing Corp. ("Leasing"). Since Leasing is a separate
subsidiary, it is not restricted to North Carolina and South Carolina to obtain
business. Leasing provides three primary products: finance or capital leases,
true leases (as defined under the Internal Revenue Code), and other operating
leases. Leasing is primarily involved in commercial leasing. Leasing provides
products and services for small to medium-sized commercial customers primarily
in SNC's market area. Such products include vehicles, rolling stock, and
tangible personal property. Leasing also solicits business from municipal
customers and is seeking to augment the existing customer base with larger
commercial customers. For the twenty year history with SNC, the sales effort of
Leasing has been directed at fleet leasing. The mix of vehicle and equipment
leases has remained approximately 75% vehicle to 25% equipment.
CAPITAL
The minimum requirement for a bank holding company's ratio of capital to
risk-weighted assets (including certain off-balance-sheet activities, such as
standby letters of credit) is 8%. At least half of the total capital is to be
composed of common equity, retained earnings, and qualifying perpetual preferred
stock, less certain intangibles ("Tier 1 capital"). The remainder may consist of
subordinated debt, qualifying preferred stock, and a limited amount of the loan
loss allowance ("Tier 2 capital" and, together with Tier 1 capital, "total
capital"). At March 31, 1996, SNC's Tier 1 and total capital ratios were 12.1%
and 13.4%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
requirements for bank holding companies. These requirements provide for a
minimum leverage ratio of Tier 1 capital to adjusted average quarterly assets
("leverage
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ratio") equal to 3% for bank holding companies that meet certain specified
criteria, including that they have the highest regulatory rating. All other bank
holding companies will generally be required to maintain a leverage ratio of
from at least 4% to 5%. SNC's leverage ratio at March 31, 1996 was 7.6%. The
requirements also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without significant
reliance on intangible assets. Furthermore, the requirements indicate that the
Federal Reserve will continue to consider a "tangible Tier 1 leverage ratio"
(deducting all intangibles) in evaluating proposals for expansion or new
activity.
The Federal Deposit Insurance Corporation (the "FDIC") has also adopted
minimum risk-based and leverage ratio guidelines to which SNC's bank
subsidiaries are subject. Under federal banking laws, failure to meet the
minimum regulatory capital requirements could subject a banking institution to a
variety of enforcement remedies available to federal regulatory authorities,
including, in the most severe cases, the termination of deposit insurance by the
FDIC and placing the institution into conservatorship or receivership. The
capital ratios of each of SNC's bank subsidiaries exceeded all minimum
regulatory capital requirements as of March 31, 1996.
INFORMATION ABOUT RAC
GENERAL
RAC is a consumer finance company engaged primarily in financing consumer
purchases of late model used automobiles and other used motor vehicles and in
making direct loans to consumers who typically have limited access to other
sources of consumer credit. RAC also offers insurance products to consumers in
connection with its loan transactions.
RAC is based in Greenville, North Carolina and currently has 28 branch
offices which are located in North Carolina (23), South Carolina (3), Tennessee
(1), and Virginia (1). Operations at all of RAC's offices are integrated through
a common management information system and the same management structure,
business strategy, and lending procedures.
RAC opened 6 offices in 1995 and two offices through July 15, 1996. RAC
will consider opening additional offices as warranted by business conditions. At
this time, RAC anticipates opening an additional 3 to 7 offices through the end
of 1996. SNC will consider and determine whether to approve the establishment of
any new offices prior to the Effective Date. RAC estimates that it requires
approximately $30,000 in capital expenditures to open an office. Each office is
initially staffed with a manager and an assistant manager, who serves as
collection manager. Each office is linked to the home office computer by an
on-line, real-time computer system.
CONSUMER FINANCE INDUSTRY
The consumer finance industry is highly fragmented, and includes commercial
banks, thrift institutions, large consumer finance companies with nationwide
operations, credit card providers, credit unions, financing arms of
manufacturers and retailers of motor vehicles and other consumer products, small
loan companies, and other consumer lenders. The segment of the industry in which
RAC operates provides financing primarily to consumers who do not have access to
other sources of consumer credit because they do not meet the objective credit
standards imposed by many other lenders.
RAC generally charges interest to consumers at the maximum rates permitted
by law in North Carolina where interest rates are regulated. In the other three
states where RAC operates, RAC's charges are based on the local market, but do
not differ substantially from rates charged in North Carolina. By contrast,
banks, thrift institutions, credit card providers, large consumer finance
companies, and other traditional sources of consumer financing typically impose
more stringent, objective credit requirements and generally charge lower
interest rates based on the interest rate environment at the time the loan is
originated.
Management of RAC believes that consolidation in the financial services
industry and more stringent regulation of financial institutions in recent years
have led to the imposition of stricter credit standards and standardization of
credit criteria by traditional consumer financing sources. Management of RAC
believes that this trend toward stricter credit standards and standardization of
credit criteria has increased RAC's primary customer base of consumers who
typically are unable to meet the credit standards and criteria imposed by
traditional consumer financing sources. Management of RAC also believes that, by
establishing personal relationships with customers and permitting branch
managers to use subjective judgment and knowledge of local conditions in making
credit decisions, it is able to profitably make and collect loans to many
consumers.
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RAC'S LOAN PRODUCTS
Of RAC's loans receivable, net of unearned finance charges, at March 31,
1996, approximately $128.5 million (85%) were retail installment sales contracts
for vehicles and other consumer products ("sales finance loans") and
approximately $21.9 million (15%) were direct loans to consumers ("consumer
loans"). Substantially all of RAC's sales finance loans are originated in
connection with consumer purchases of used motor vehicles.
Sales finance loans are originated by the dealer at the time of sale to the
consumer. The consumer enters into a retail installment sale contract with the
dealer on a form supplied by RAC, which is then assigned by the dealer to RAC
with the dealer's security interest in the vehicle or other property being
purchased. RAC purchases retail installment sale contracts originated by the
dealer after conducting its own underwriting of the consumer's credit
application. The average sales finance loan, including unearned finance charges,
originated during the year ended December 31, 1995 was approximately $10,000 and
the average original term was thirty-nine months. RAC generally charges the
maximum annual percentage rates permitted by law on its sales finance loans,
which range in North Carolina from 18% to 29%, depending upon the model year of
the motor vehicle being financed (or the amount financed, in the case of
purchases of other consumer goods). The rates charged in the other three states
where RAC operates approximate the rates charged in North Carolina.
RAC's consumer loans are typically sought by consumers to meet various cash
needs as well as to refinance existing indebtedness, including retail
installment sale contracts and other loans granted by RAC. A significant amount
(by outstanding principal amount) of RAC's consumer loans at December 31, 1995
were collateralized by motor vehicles. Loans not secured by motor vehicles are
collateralized by other personal property or are unsecured. RAC typically does
not rely upon collateral other than motor vehicles as an ultimate source of
repayment. The maximum consumer loan RAC can originate in North Carolina is
$10,000 with a maximum term of sixty months. Such loans are repayable in
substantially equal monthly installments of principal and interest. The average
principal amount of consumer loans originated during the year ended December 31,
1995 was $2,400 and the average term originated during the year was twenty-four
months. RAC generally charges the maximum interest rates permitted by law for
its consumer loans, which range from 18% to 30% per annum in North Carolina,
depending upon the amount financed.
COMPETITION
RAC's business is limited to a particular segment of the consumer finance
industry with a customer base consisting of individuals who typically do not
have access to traditional sources of consumer credit. As a result, RAC usually
does not compete directly with banks, savings and loans, financing arms of
manufacturers of motor vehicles and other consumer products, and other
traditional consumer financing sources. In each locality where RAC operates,
however, there are one or more consumer finance companies that compete for the
consumer loans made by RAC.
RELATIONSHIPS WITH DEALERS
RAC has established relationships with motor vehicle dealers located in or
around the localities served by RAC who originate sales finance loans accepted
by RAC. Of the motor vehicle sales financed by RAC, RAC estimates that
approximately 85% are originated by manufacturer-franchised dealers and the
remaining 15% are originated by dealers specializing in used vehicles. RAC has
formal agreements with all its dealers. These agreements set forth general terms
upon which retail installment sale contracts will be assigned to and accepted by
RAC, but do not obligate the dealer to assign, or RAC to accept, any particular
contracts or volume of contracts. Retail installment sale contracts are usually
assigned to RAC without recourse to the dealer, although under some of the
dealer arrangements RAC has limited recourse to the dealer or to a refundable
deposit to recover losses upon the customer's default. Even in the case of
non-recourse assignments, the assigning dealer makes certain warranties as to
the validity of the contract and compliance with certain laws, and indemnifies
RAC for any claims, defenses, and set-offs against the dealer that may be
asserted against RAC because of the assignment. In 1995, no single dealer
accounted for more than 5% of RAC's sales finance loans.
REGULATION
RAC's business is subject to extensive supervision and regulation under
state and federal laws and regulations. RAC's business is primarily located in
North Carolina and is therefore subject to certain North Carolina laws and
regulations, including the North Carolina Retail Installment Sales Act and the
North Carolina Consumer Finance Act. RAC is also licensed as an "installment
paper dealer" in North Carolina. RAC is subject in all states in which it
operates to regulations governing insurance agents in connection with its sales
of credit and other insurance.
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RAC is also subject to extensive federal regulation, including the Truth In
Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act and
the regulations thereunder, and certain rules of the Federal Trade Commission.
These laws require RAC to provide certain disclosures to prospective borrowers,
prohibit misleading advertising, protect against discriminatory lending
practices, and proscribe unfair credit practices.
RECENT DEVELOPMENT
Since May 1995, $52 million of RAC's $130 million senior revolving line of
credit has been used as a liquidity backup line to assure repayment of amounts
outstanding under RAC's $50 million commercial paper facility (the "Commercial
Paper Facility"). For the month of June 1996, RAC failed to comply with a
covenant under the Commercial Paper Facility relating to the ratio of loans
charged off to cash collected during the month and consequently is ineligible
for continued use of the Commercial Paper Facility. RAC repaid a $13 million
tranche of commercial paper maturing July 16, 1996 by drawing on an existing $20
million unsecured line of credit obtained from BB&T-NC. RAC presently intends to
repay the remaining $35.3 million of outstanding commercial paper prior to July
31, 1996 with amounts drawn on its existing $130 million senior revolving line
of credit which will become available upon the simultaneous retirement of the
remaining outstanding commercial paper. The replacement of the Commercial Paper
Facility with a combination of amounts borrowed under the senior revolving line
of credit and the unsecured line of credit with BB&T-NC will increase RAC's
interest rate cost with respect to the $50 million previously outstanding
thereunder by approximately 140 basis points.
OWNERSHIP OF RAC COMMON STOCK BY
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of RAC Common Stock as of June 30, 1996 by: (a) each person
known by RAC to be the beneficial owner of more than 5% of the outstanding RAC
Common Stock; (b) each director of RAC; (c) certain executive officers of RAC;
and (d) all directors and executive officers of RAC as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND
NATURE OF
BENEFICIAL PERCENTAGE OF COMMON
NAME OF BENEFICIAL OWNER OWNERSHIP (1) STOCK OUTSTANDING
<S> <C> <C>
William R. Stallings, Sr. 5,650,921 (2) 37.6%
3004 South Memorial Drive
Greenville, NC 27834
Dr. Ledyard E. Ross 3,410,433 (3) 22.7%
217 Churchill Drive
Greenville, NC 27858
David E. Lee 937,465 (4) 6.2%
1212 Chestnut Drive
Smithfield, NC 27577
Ruane, Cunniff & Co., Inc. 843,240 (5) 5.6%
767 Fifth Avenue, Suite 4701
New York, NY 10153
Robert J. Abrahams 27,187 (6) (7)
N. Leo Daughtry 42,875 (8) (7)
Kirk W. Foley -- --
Robert D. Barry 58,018 (9) (7)
Joseph P. LaCognata 7,307 (10) (7)
Directors and executive officers as a group 9,197,741 (11) 61.3%
(8 persons)
</TABLE>
(1) Unless otherwise indicated, each shareholder has sole voting and sole
investment power with respect to all shares beneficially owned.
(2) Includes 54,119 shares held by Mr. Stallings's wife (as to which shares Mr.
Stallings disclaims beneficial ownership). Also includes 19,288 shares
subject to options which are presently exercisable or exercisable within 60
days. Excludes approximately 27,160 shares to be issued to Mr. Stallings in
connection with RAC's acquisition of the Insurance Companies prior to the
Effective Date.
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(3) Includes 292,209 shares held by Dr. Ross's wife (as to which shares Dr.
Ross disclaims beneficial ownership). Excludes approximately 24,270 shares
to be issued to Dr. Ross in connection with RAC's acquisition of the
Insurance Companies prior to the Effective Date.
(4) Includes 461,535 shares held by Mr. Lee's wife (as to which shares Mr. Lee
disclaims beneficial ownership). Excludes approximately 27,530 shares to be
issued to Mr. Lee in connection with RAC's acquisition of the Insurance
Companies prior to the Effective Date.
(5) The information concerning beneficial ownership is derived from Amendment
No. 1 to Schedule 13G filed February 7, 1996 with the Securities and
Exchange Commission. Ruane, Cunniff & Co., Inc. has sole voting power with
respect to 277,350 of such shares and has sole dispositive power with
respect to all of such shares.
(6) Includes 4,687 shares held by Mr. Abrahams's wife.
(7) Less than 1%.
(8) Includes 750 shares held by Mr. Daughtry's wife.
(9) Includes 31,807 shares subject to options which are presently exercisable
or exercisable within 60 days.
(10) Includes 5,357 shares subject to options which are presently exercisable or
exercisable within 60 days.
(11) Includes 56,452 shares subject to options which are presently exercisable
or exercisable within 60 days.
DESCRIPTION OF SNC CAPITAL STOCK
GENERAL
The authorized capital stock of SNC consists of 300,000,000 shares of SNC
Common Stock and 5,000,000 shares of SNC Preferred Stock, par value $5.00 per
share (the "SNC Preferred Stock"). As of July 19, 1996, there were shares
of SNC Common Stock issued and outstanding and no shares of SNC Preferred Stock
issued and outstanding. Based on the number of shares of RAC Common Stock
outstanding at the Record Date, if the Closing Value is between $26.00 and
$30.00, approximately shares of SNC Common Stock would be issued in the
Merger.
COMMON STOCK
Each share of SNC Common Stock is entitled to one vote on all matters
submitted to a vote at any meeting of shareholders. Holders of SNC Common Stock
are entitled to receive dividends when, as, and if declared by the Board of
Directors of SNC (the "SNC Board") out of funds legally available therefor and,
upon liquidation, to receive pro rata all assets, if any, of SNC available for
distribution after the payment of necessary expenses and all prior claims.
Holders of SNC Common Stock have no preemptive rights to subscribe for any
additional securities of any class that SNC may issue, nor any conversion,
redemption or sinking fund rights. Holders of SNC Common Stock have no right to
cumulate votes in the election of directors. The rights and privileges of
holders of SNC Common Stock are subject to any preferences provided for by
resolution of the SNC Board for any series of SNC Preferred Stock that SNC may
issue in the future.
The transfer agent and registrar for SNC Common Stock is BB&T-NC. The
shares of SNC Common Stock to be issued in the Merger have been approved for
listing, subject to official notice of issuance, on the NYSE.
PREFERRED STOCK
Under the SNC Articles, SNC may issue shares of SNC Preferred Stock in one
or more series as may be determined by the SNC Board or a duly authorized
committee. The SNC Board or committee may also establish, from time to time, the
number of shares to be included in each series and may fix the designation,
powers, preferences and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof, and may increase or
decrease the number of shares of any series without any further vote or action
by the shareholders. Any SNC Preferred Stock issued may rank senior to the SNC
Common Stock with respect to the payment of dividends or amounts upon
liquidation, dissolution or winding up of SNC, or both. In addition, any shares
of SNC Preferred Stock may have class or series voting rights. Under certain
circumstances, the issuance of SNC Preferred Stock or the existence of the
unissued SNC Preferred Stock may tend to discourage or render more difficult a
merger or other change in control of SNC.
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CERTAIN PROVISIONS OF THE NCBCA, SNC ARTICLES, AND SNC BYLAWS
Certain provisions of the NCBCA, the SNC Articles, and the SNC Bylaws deal
with matters of corporate governance and the rights of shareholders. Certain of
these provisions, as well as the ability of the SNC Board to issue shares of SNC
Preferred Stock and to set the voting rights, preferences, and other terms
thereof, may be deemed to have an anti-takeover effect and may delay or prevent
takeover attempts not first approved by the SNC Board. These provisions also
could delay or deter the removal of incumbent directors or the assumption of
control by shareholders. SNC believes that these provisions are appropriate to
protect the interests of SNC and all of its shareholders. The following
describes the principal provisions of the NCBCA applicable to SNC, the SNC
Articles and SNC Bylaws that may be deemed to have anti-takeover effects.
CONTROL SHARE ACT
The Control Share Acquisition Act of the NCBCA may make an unsolicited
attempt to gain control of SNC more difficult by restricting the right of
certain shareholders to vote newly acquired large blocks of stock. For a
description of this statute, see "COMPARISON OF SHAREHOLDERS'
RIGHTS -- Anti-takeover Statutes."
PROVISIONS REGARDING SNC BOARD
The provisions of the SNC Articles and the SNC Bylaws with respect to the
classification of the SNC Board and the removal of directors only for cause
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from acquiring, control of SNC. For a
description of such provisions, see "COMPARISON OF SHAREHOLDERS'
RIGHTS -- Directors."
MEETING OF SHAREHOLDERS; SHAREHOLDERS' NOMINATIONS AND PROPOSALS
Under the SNC Bylaws, meetings of the shareholders may be called by the
Chief Executive Officer or the SNC Board. Shareholders of SNC may not request
that a special meeting of shareholders be called. This provision could have the
effect of delaying until the next annual shareholders' meeting shareholder
actions which are favored by the holders of a majority of the outstanding voting
securities of SNC.
Certain procedures governing the submission of nominations for directors
and other proposals by stockholders may have some deterrent on shareholder
actions designed to result in change of control in SNC. See "COMPARISON OF
SHAREHOLDERS' RIGHTS -- Notice of Shareholder Nominations and Shareholder
Proposals."
COMPARISON OF SHAREHOLDERS' RIGHTS
At the Effective Date, holders of RAC Common Stock will become shareholders
of SNC. The following is a summary of material differences between the rights of
holders of SNC Common Stock and RAC Common Stock. Since SNC and RAC are both
organized under the laws of North Carolina, any differences arise from differing
provisions of their respective articles of incorporation and bylaws.
The following summary does not purport to be a complete statement of the
provisions affecting, and differences between, the rights of holders of SNC
Common Stock and RAC Common Stock. The identification of specific provisions or
differences is not meant to indicate that other equally or more significant
differences do not exist. This summary is qualified in its entirety by reference
to the governing corporate instruments of SNC and RAC, to which the shareholders
of RAC are referred.
AUTHORIZED CAPITAL STOCK
SNC
SNC's authorized capital stock consists of 300,000,000 shares of SNC Common
Stock and 5,000,000 shares of SNC Preferred Stock. The SNC Articles authorize
the SNC Board to issue shares of SNC Preferred Stock in one or more series and
to fix the designation, powers, preferences, and rights of the shares of SNC
Preferred Stock in each such series. As of the Record Date, shares of SNC
Common Stock and no shares of SNC Preferred Stock were outstanding.
RAC
RAC's authorized capital stock consists of 110,000,000 shares, divided into
the following classes: 100,000,000 shares of RAC Common Stock and 10,000,000
shares of preferred stock ("RAC Preferred Stock"). The RAC Articles authorize
the RAC Board, to the fullest extent permitted by applicable law, to determine
the preferences, limitations, and relative rights of
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the RAC Preferred Stock or to create one or more series of RAC Preferred Stock
and determine the preferences, limitations, and relative rights of each such
series, as the RAC Board may from time to time determine. As of the Record Date,
shares of RAC Common Stock and no shares of RAC Preferred Stock were
outstanding.
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. Currently, the SNC Board consists of twenty-four directors.
The SNC Board is divided into three classes with each director serving
staggered three-year terms. Under the SNC Articles and the SNC Bylaws, SNC
directors may be removed only for cause and only by the vote of a majority of
the outstanding shares of SNC Common Stock entitled to vote in the election of
directors.
RAC
The RAC Bylaws provide for a board having not less than two nor more than
seven members, as shall be determined from time to time by resolution of the
shareholders or RAC Board. Currently, the RAC Board consists of five directors.
All of RAC's directors are elected each year. Under RAC's Bylaws, a
director may be removed, with or without cause by shareholder vote if the number
of votes cast to remove him exceeds the number of votes cast not to remove him.
The entire RAC Board may be removed, with or without cause, by vote of
shareholders holding a majority of the votes entitled to be cast at any election
of directors.
DIVIDENDS AND OTHER DISTRIBUTIONS
SNC
SNC is not subject to regulatory restrictions on payments of dividends. The
ability of SNC to pay distributions to the holders of SNC Common Stock will
depend, however, to a large extent upon the amount of dividends its bank
subsidiaries, which are subject to the restrictions imposed by regulatory
authorities, pay to SNC.
RAC
RAC's revolving credit facility with its principal lender places certain
restrictions on RAC's payment of dividends. Under the most restrictive
provision, at June 30, 1996, approximately $3.0 million was available for the
payment of dividends on RAC's capital stock. The subsidiaries of RAC are not
subject to regulatory restrictions on the payment of dividends.
NOTICE OF SHAREHOLDER NOMINATIONS AND SHAREHOLDER PROPOSALS
SNC
The SNC Bylaws establish advance notice procedures for shareholder
proposals and the nomination, other than by or at the direction of the SNC Board
or a committee thereof, of candidates for election as directors. 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 sixty 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.
Nominations not made in accordance with the foregoing provisions may be ruled
out of order by the presiding officer or the chairman of the meeting.
Similarly, a shareholder must notify the Secretary of SNC in writing not
later than sixty days before one year after the date of the immediately
preceding Annual Meeting of Shareholders of the shareholder's intention to make
a proposal for consideration at the next Annual Meeting. The notice must
contain: (a) a brief description of the proposal; (b) the name and shareholdings
of the shareholder submitting the proposal; and (c) any material interest of the
shareholder in such proposal.
RAC
The RAC Articles and the RAC Bylaws provide no limitations or procedures
relating to nominations for directors or shareholder proposals.
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EXCULPATION AND INDEMNIFICATION
SNC
The SNC Articles provide that, to the fullest extent permitted by
applicable law, no director of SNC will have any personal liability for monetary
damage for breach of a duty as a director. The SNC Bylaws require SNC to
indemnify its directors and officers against liabilities arising out of such
person's status as such, excluding any liability relating to activities that
were at the time taken known or believed by such person to be clearly in
conflict with the best interests of SNC.
Certain rules of the FDIC prohibit SNC from indemnifying a director of SNC
for certain costs incurred with regard to an administrative or enforcement
action commenced by any federal banking agency which results in a final order or
settlement pursuant to which the director is assessed a civil monetary penalty,
removed from office, prohibited from participating in the affairs of an insured
depository institution or required to cease and desist from or take an
affirmative action described in Section 8(b) of the Federal Deposit Insurance
Act.
RAC
The RAC Articles provide that, to the fullest extent permitted by
applicable law, no director of RAC will have any personal liability arising out
of any action whether by or in the right of RAC or otherwise for monetary
damages for breach of a duty as a director of RAC. The RAC Bylaws require RAC to
indemnify its directors, but not its officers who are not directors, to the
fullest extent permitted by law against liabilities arising out of such person's
status as such. Under the NCBCA, RAC may by action of the RAC Board indemnify
its officers to the same extent.
ANTI-TAKEOVER STATUTES
SNC
The North Carolina Control Share Acquisition Act (the "Control Share Act")
applies to SNC. The Control Share Act is 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 Control Share 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 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.
In accordance with the provisions of such statute, SNC has elected not to
be governed by the North Carolina Shareholder Protection Act.
RAC
In accordance with the provisions of such statutes, RAC has elected to be
governed by neither the Control Share Act nor the North Carolina Shareholder
Protection Act.
AMENDMENTS TO ARTICLES OF INCORPORATION AND BYLAWS
SNC
The SNC Bylaws prohibit the SNC Board from amending or repealing the
corporation's bylaws: (a) requiring more than a majority of the voting shares
for a quorum at a regular meeting of the shareholders or more than a majority of
the votes cast to constitute action by the shareholders, unless higher
percentages are required by law; (b) increasing or decreasing the number of
directors; or (c) altering or repealing any bylaws adopted or amended by the
shareholders.
The SNC Articles and Bylaws also require the affirmative vote of two-thirds
of the outstanding shares of SNC Common Stock to approve an amendment to any
provision of the SNC Articles or Bylaws amending, altering or repealing the
portions of the Articles or Bylaws relating to classification and staggered
terms of the board, removal of directors, the requirement for a supermajority
vote on such provisions, limitations or amendments of the bylaws.
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RAC
Under the NCBCA, an amendment to the RAC Articles generally requires the
recommendation of the RAC Board and the approval of either a majority of all
shares entitled to vote thereon or a majority of the votes cast thereon,
depending upon the nature of the amendment. In accordance with the NCBCA, the
RAC Board may condition its submission of a proposed amendment on any basis. The
RAC Board may, in accordance with the NCBCA, amend or repeal the RAC Bylaws
except that a bylaw adopted, amended or repealed by the shareholders of RAC may
generally be readopted, amended or repealed only by the shareholders.
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.
Because SNC is a bank holding company, its rights, the rights of its
creditors and of its shareholders, including the holders of the shares of any
SNC Preferred Stock that may be issued, 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 bank acquired by SNC for the benefit of eligible account holders in
connection with conversion of such savings associations to stock form.
RAC
The rights of holders of RAC Common Stock upon liquidation are virtually
identical to those of SNC, except that those rights are not subjected to the
rights of creditors of the subsidiaries of RAC by virtue of bank holding company
status.
LEGAL MATTERS
The validity of SNC Common Stock to be issued in connection with the Merger
and certain of the tax consequences of the Merger will be passed upon at the
Effective Date, as a condition to the Merger, by Womble Carlyle Sandridge &
Rice, PLLC, Raleigh, North Carolina, as counsel to SNC. As of July 18, 1996
attorneys of Womble Carlyle Sandridge & Rice, PLLC owned an aggregate of
19,444 shares of SNC Common Stock.
EXPERTS
The consolidated financial statements and schedule of SNC included in SNC's
Annual Report on Form 10-K for the year ended December 31, 1995, incorporated by
reference in this Proxy Statement/Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said reports.
The consolidated financial statements of RAC incorporated by reference in
this Proxy Statement/Prospectus have been audited by Coopers & Lybrand L.L.P.,
independent accountants, to the extent indicated in their report thereon also
incorporated by reference. Such consolidated financial statements have been
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
SHAREHOLDER PROPOSALS
RAC had originally scheduled its 1996 Annual Meeting of Shareholders for
May 1996 but postponed that Annual Meeting when the Reorganization Agreement was
entered into on March 29, 1996. Based upon the date of RAC's 1995 Annual Meeting
of Shareholders, shareholder proposals for the 1996 Annual Meeting were required
to have been submitted by November 30, 1995; no shareholder proposals were
received by such date. In the event the Reorganization Agreement is terminated
or the Merger is not otherwise consummated, RAC will promptly reschedule its
1996 Annual Meeting of Shareholders and, in a timely manner, inform its
shareholders of the date on which such Annual Meeting will be held and the date
by which proposals of shareholders must be received for inclusion in RAC's proxy
statement and form of proxy relating to such Annual Meeting.
37
<PAGE>
APPENDICES
Appendix I -- Amended and Restated Agreement and Plan
of Reorganization
Appendix II -- Option Agreement
Appendix III -- Opinion of Salomon Brothers Inc
Appendix IV -- Chapter 55, Article 13 of NCBCA
38
<PAGE>
APPENDIX I
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
REGIONAL ACCEPTANCE CORPORATION
AND
SOUTHERN NATIONAL CORPORATION
<PAGE>
<TABLE>
<C> <C> <S> <C>
ARTICLE I
DEFINITIONS............................................................................................. I-1
ARTICLE II
THE MERGER.............................................................................................. I-3
2.1 Merger........................................................................................... I-3
2.2 Filing; Plan of Merger........................................................................... I-3
2.3 Effective Date................................................................................... I-3
2.4 Closing.......................................................................................... I-3
2.5 Effect of Merger................................................................................. I-3
2.6 Further Assurances............................................................................... I-4
2.7 Merger Consideration............................................................................. I-4
2.8 Conversion of Shares; Payment of Merger Consideration............................................ I-4
2.9 Dissenting Shares................................................................................ I-5
2.10 Conversion of Stock Options...................................................................... I-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF REGIONAL ACCEPTANCE................................................... I-6
3.1 Capital Structure................................................................................ I-6
3.2 Organization, Standing and Authority............................................................. I-6
3.3 Ownership of Subsidiaries........................................................................ I-6
3.4 Organization, Standing and Authority of the Subsidiaries......................................... I-7
3.5 Authorized and Effective Agreement............................................................... I-7
3.6 Securities Documents and Reports................................................................. I-7
3.7 Financial Statements: Minute Books............................................................... I-7
3.8 Material Adverse Change.......................................................................... I-8
3.9 Absence of Undisclosed Liabilities............................................................... I-8
3.10 Properties....................................................................................... I-8
3.11 Environmental Matters............................................................................ I-8
3.12 Allowance for Loan Losses........................................................................ I-9
3.13 Tax Matters...................................................................................... I-9
3.14 Employee Benefit Plans........................................................................... I-9
3.15 Certain Contracts................................................................................ I-10
3.16 Legal Proceedings; Regulatory Approvals.......................................................... I-10
3.17 Compliance with Laws............................................................................. I-10
3.18 Brokers and Finders.............................................................................. I-11
3.19 Insurance........................................................................................ I-11
3.20 Loans............................................................................................ I-11
3.21 Related Party Transactions....................................................................... I-11
3.22 Vote Required.................................................................................... I-11
3.23 Certain Information.............................................................................. I-11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SNC................................................................... I-12
4.1 Capital Structure of SNC......................................................................... I-12
4.2 Organization, Standing and Authority of SNC...................................................... I-12
4.3 Authorized and Effective Agreement............................................................... I-12
4.4 Organization, Standing and Authority of SNC Subsidiaries and SNC Acquisition..................... I-12
4.5 Securities Documents............................................................................. I-13
4.6 Financial Statements............................................................................. I-13
4.7 Material Adverse Change.......................................................................... I-13
4.8 Legal Proceedings; Regulatory Approvals.......................................................... I-13
4.9 Absence of Undisclosed Liabilities............................................................... I-13
4.10 Allowance for Loan Losses........................................................................ I-13
4.11 Tax Matters...................................................................................... I-13
4.12 Compliance with Laws............................................................................. I-14
4.13 Certain Information.............................................................................. I-14
</TABLE>
i
<PAGE>
<TABLE>
<C> <C> <S> <C>
ARTICLE V
COVENANTS............................................................................................... I-14
5.1 Stockholders' Meeting............................................................................ I-14
5.2 Proxy Statement; Registration Statement; NYSE Listing............................................ I-14
5.3 Plan of Merger; Reservation of Shares............................................................ I-15
5.4 Additional Acts.................................................................................. I-15
5.5 Best Efforts..................................................................................... I-15
5.6 Certain Accounting Matters....................................................................... I-15
5.7 Access to Information............................................................................ I-16
5.8 Press Releases................................................................................... I-16
5.9 Forbearances of Regional Acceptance.............................................................. I-16
5.10 Employment Agreements............................................................................ I-17
5.11 Resales by Affiliates............................................................................ I-18
5.12 Employee Benefit Plans........................................................................... I-18
5.13 Forbearances of SNC.............................................................................. I-18
5.14 Financial Opinion................................................................................ I-18
5.15 Stockholder Vote................................................................................. I-18
5.16 Indemnification.................................................................................. I-19
ARTICLE VI
CONDITIONS PRECEDENT.................................................................................... I-19
6.1 Conditions Precedent -- SNC and Regional Acceptance.............................................. I-19
6.2 Conditions Precedent -- Regional Acceptance...................................................... I-20
6.3 Conditions Precedent -- SNC...................................................................... I-20
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT....................................................................... I-21
7.1 Termination...................................................................................... I-21
7.2 Effect of Termination............................................................................ I-22
7.3 Survival of Representations, Warranties and Covenants............................................ I-22
7.4 Waiver........................................................................................... I-22
7.5 Amendment or Supplement.......................................................................... I-23
ARTICLE VIII
MISCELLANEOUS........................................................................................... I-23
8.1 Expenses......................................................................................... I-23
8.2 Entire Agreement................................................................................. I-23
8.3 No Assignment.................................................................................... I-23
8.4 Notices.......................................................................................... I-23
8.5 Captions......................................................................................... I-24
8.6 Counterparts..................................................................................... I-24
8.7 Governing Law.................................................................................... I-24
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION ("Reorganization
Agreement" or "Agreement") between REGIONAL ACCEPTANCE CORPORATION ("Regional
Acceptance"), a North Carolina corporation having its principal office at
Greenville, North Carolina, and SOUTHERN NATIONAL CORPORATION ("SNC"), a North
Carolina corporation having its principal office at Winston-Salem, North
Carolina which restates in one document the Agreement and Plan of Reorganization
between Regional Acceptance and SNC, dated as of March 29, 1996, as amended by a
First Amendment to Agreement and Plan of Reorganization, dated as of May 30,
1996 and as further amended hereby.
R E C I T A L S:
The parties desire that SNC Acquisition Corp. ("SNC Acquisition"), a
wholly-owned subsidiary of SNC, shall be merged with and into Regional
Acceptance (said transaction being hereinafter referred to as the "Merger")
pursuant to a plan of merger in the form set forth in Articles of Merger
attached hereto as Annex A ("Plan of Merger"), and the parties desire to provide
for certain undertakings, conditions, representations, warranties and covenants
in connection with the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
"Closing Date" shall mean the date specified pursuant to Section 2.4 as the
date on which the parties hereto shall close the transactions contemplated
herein.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Effective Date" shall mean the time and date specified in Section 2.3 as
the effective time and date of the Merger.
"Environmental Claim" means any written notice 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 upon, or resulting from
the presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" means all applicable federal, state and local laws,
regulations and guidelines, 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.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System.
"Financial Statements" shall mean (a) with respect to SNC, (i) the
consolidated balance sheet (including related notes and schedules, if any) of
SNC as of December 31, 1995 and the related consolidated statements of income,
changes in Stockholders' equity and cash flows (including related notes and
schedules, if any) for the year ended December 31, 1995 as filed by SNC in
Securities Documents and (ii) the consolidated balance sheets of SNC (including
related notes and schedules, if any) and related statements of income, changes
in Stockholders' equity and cash flows (including related notes and schedules,
if any) included in Securities Documents filed by SNC with respect to periods
ended subsequent to December 31, 1995, and (b) with respect to Regional
Acceptance, (i) the consolidated balance sheets (including related notes and
schedules, if any) of Regional Acceptance as of December 31, 1995, 1994 and
1993, and the related consolidated statements of income, changes in
Stockholders' equity and cash flows (including related notes and schedules, if
any) for each of the three years ended December 31, 1995, 1994 and 1993 as filed
by Regional Acceptance in Securities Documents and (ii) the consolidated balance
sheets of Regional Acceptance (including related notes and schedules, if any)
and related statements of income,
I-1
<PAGE>
changes in Stockholders' equity and cash flows (including related notes and
schedules, if any) included in Securities Documents filed by Regional Acceptance
with respect to periods ended subsequent to December 31, 1995.
"Material Adverse Effect" shall mean a material adverse effect on the
financial condition, results of operations, business or prospects of Regional
Acceptance and its Subsidiaries, taken as a whole.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, asbestos containing materials, lead based paint,
petroleum and petroleum products and any other materials regulated under
Environmental Laws.
"NCBCA" shall mean the North Carolina Business Corporation Act, as amended.
"NCCFA" shall mean the North Carolina Consumer Finance Act, as amended.
"NCRISA" shall mean the North Carolina Retail Installment Sales Act, as
amended.
"Option Agreement" shall mean the Option Agreement dated as of even date
herewith between Regional Acceptance and SNC, which shall be executed
immediately following execution of this Reorganization Agreement.
"Previously Disclosed" shall mean disclosed in (i) a Securities Document
delivered by one party to the other on or prior to the execution of this
Reorganization Agreement or (ii) a letter from one party to the other party
delivered and dated not later the date hereof specifically referring to this
Agreement; provided, that after May 31, 1996, if SNC has not terminated this
Agreement pursuant to Section 7.1(g), "Previously Disclosed" shall also include
any information disclosed in (A) a Securities Document delivered by Regional
Acceptance to SNC at least five days prior to such date or (B) a letter from
Regional Acceptance to SNC delivered and dated not later than five days prior to
such date specifically referring to this Agreement.
"Proxy Statement/Prospectus" shall mean the proxy statement and prospectus,
together with any supplements thereto sent to Stockholders of Regional
Acceptance to solicit their votes in connection with this Agreement and the Plan
of Merger.
"Regional Acceptance Common Stock" shall mean shares of common stock, no
par value, of Regional Acceptance.
"Regional Acceptance Stockholders" shall mean the holders of the Regional
Acceptance Common Stock.
"Registration Statement" shall mean the registration statement with respect
to the SNC Common Stock to be issued in the Merger as declared effective by the
Commission under the Securities Act.
"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 or other ownership interests, and stock appreciation
rights, performance units and similar stock-based rights whether or not they
obligate the issuer thereof to issue stock or other securities or to pay cash.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, proxy statements,
registration statements and all similar documents filed, or required to be
filed, pursuant to the Securities Laws.
"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,
"SNC Common Stock" shall mean the shares of common stock, par value $5.00
per share, of SNC.
"SNC Subsidiaries" shall mean Branch Banking and Trust Company, Branch
Banking and Trust Company of South Carolina, and Commerce Bank, each of which is
a wholly-owned subsidiary of SNC.
"Stock Option Plan" shall mean Regional Acceptance's 1993 Stock Option
Plan.
"Stock Options" shall mean (i) options granted under the Stock Option Plan
and unexercised on the date hereof, to acquire in the aggregate 203,215 shares
of Regional Acceptance Common Stock; and (ii) options granted to Robert D. Barry
pursuant to his employment agreement dated March 1, 1993, and unexercised on the
date hereof, to acquire 21,093 shares of Regional Acceptance Stock.
"Subsidiaries" shall mean Regional Acceptance Investment Corporation of
Nevada, a Nevada corporation; Greenville Funding Corporation 1994-1, a Nevada
corporation; Greenville Car Mart, Inc., a North Carolina corporation; REGA
Insurance Services, Inc., a North Carolina corporation; and the Insurance
Companies referred to in Section 5.9(f) following their
I-2
<PAGE>
acquisition by Regional Acceptance. Each of such corporations is (or, with
respect to each of the Insurance Companies, will be on or before the Closing
Date), a wholly-owned subsidiary of Regional Acceptance.
"TILA" shall mean the Truth in Lending Act, as amended.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II
THE MERGER
2.1 MERGER
SNC Acquisition and Regional Acceptance are constituent corporations to the
Merger as contemplated by the NCBCA. On the Effective Date:
a. SNC Acquisition shall be merged with and into Regional Acceptance in
accordance with the applicable provisions of the NCBCA, with Regional Acceptance
remaining as the surviving corporate entity (hereinafter sometimes referred to
as the "Surviving Corporation");
b. The separate existence of SNC Acquisition shall cease and the Merger
shall in all respects have the effect provided for in Section 2.5.
c. The Articles of Incorporation of Regional Acceptance shall continue in
effect as the Articles of Incorporation of the Surviving Corporation at the
Effective Date.
d. The Bylaws of Regional Acceptance as presently constituted shall become
the Bylaws of the Surviving Corporation at the Effective Date.
2.2 FILING; PLAN OF MERGER
The Merger shall not become effective unless this Agreement is duly
approved by holders of a majority of the outstanding shares of common stock of
each of SNC Acquisition and Regional Acceptance. Upon fulfillment or waiver of
the conditions specified in Article VI and provided that this Agreement has not
been terminated pursuant to Article VII, on the Closing Date (as defined in
Section 2.4) the Constituent Corporations will cause Articles of Merger in
substantially the form of Annex A (the "Articles of Merger") to be executed and
filed with the Secretary of State of North Carolina. The Plan of Merger, which
is a part of the Articles of Merger, is incorporated herein by reference, and
adoption of this Agreement by the Boards of Directors of the Constituent
Corporations and approval by the Stockholders of the Constituent Corporations
shall constitute adoption and approval of the Plan of Merger.
2.3. EFFECTIVE DATE
The Merger shall be effective at the day and hour specified in the Articles
of Merger filed with the Secretary of State of North Carolina (herein sometimes
referred to as the "Effective Date"), which shall be no later than 12:01 a.m. on
the first business day following the date on which the Articles of Merger are
filed with the Secretary of State of the State of North Carolina.
2.4 CLOSING
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the executive offices of SNC, BB&T Financial
Center, 200 West Second Street, Winston-Salem, North Carolina, at 11:00 a.m. on
the first business day following the date on which the Plan of Merger shall have
been approved by the Regional Acceptance Stockholders, or such later date within
10 days thereafter as may be specified by SNC, or such later date as the parties
may otherwise agree (the "Closing Date"). The parties agree to use their best
efforts to cause all conditions of the Closing to be met prior to or as soon as
practicable following such Stockholder approval.
2.5 EFFECT OF MERGER
From and after the Effective Date, the separate existence of SNC
Acquisition shall cease, and the Surviving Corporation shall thereupon and
thereafter, to the extent consistent with its Articles of Incorporation, possess
all the rights, privileges, immunities, and franchises, of a public as well as
of a private nature, of each of the Constituent Corporations; and all property,
real, personal and mixed, and all debts due on whatever account, and all other
choses in action, and all and every other interest of or belonging to or due to
each of the Constituent Corporations shall be taken and deemed to be transferred
to and
I-3
<PAGE>
vested in the Surviving Corporation without further act or deed; and the title
to any real estate or any interest therein vested in either of the Constituent
Corporations shall not revert or be in any way impaired by reason of the Merger.
The Surviving Corporation shall thenceforth be responsible and liable for all
the liabilities, obligations and penalties of each of the Constituent
Corporations; and any claim existing or action or proceeding, civil or criminal,
pending by or against either of the Constituent Corporations may be prosecuted
as if the Merger had not taken place, or the Surviving Corporation may be
substituted in its place; and any judgment rendered against either of the
Constituent Corporations may be enforced against the Surviving Corporation.
Neither the rights of creditors nor any liens upon the property of either of the
Constituent Corporations shall be impaired by reason of the Merger.
2.6 FURTHER ASSURANCES
If, at any time after the Effective Date, the Surviving Corporation shall
consider or be advised that any further deeds, assignments or assurances in law
or any other actions are necessary, desirable or proper to vest, perfect or
confirm of record or otherwise, in the Surviving Corporation, the title to any
property or rights of the Constituent Corporations acquired or to be acquired by
reason of, or as a result of, the Merger, the Constituent Corporations agree
that such Constituent Corporations and their proper officers and directors shall
and will execute and deliver all such proper deeds, assignments and assurances
in law and do all things necessary, desirable or proper to vest, perfect or
confirm title to such property or rights in the Surviving Corporation and
otherwise to carry out the purpose of this Agreement, and that the proper
officers and directors of the Surviving Corporation are fully authorized and
directed in the name of the Constituent Corporations or otherwise to take any
and all such actions.
2.7 MERGER CONSIDERATION
As used herein, the term "Merger Consideration" shall mean whole shares of
SNC Common Stock to be exchanged for shares of Regional Acceptance Common Stock
issued and outstanding as of the Effective Date, and cash to be payable in
exchange for any fractional shares of SNC Common Stock which would otherwise be
exchanged for shares of Regional Acceptance Common Stock of any particular
holder. The number of shares of SNC Common Stock to be issued in exchange for
each issued and outstanding share of Regional Acceptance Common Stock shall be
in the ratio (the "Exchange Ratio") of .3929 shares of SNC Common Stock for each
share of Regional Acceptance Common Stock issued and outstanding, if the closing
value per share of the SNC Common Stock ("Closing Value") is not less than
$26.00 and not more than $30.00. If the Closing Value is less than $26.00, the
Exchange Ratio shall be determined by dividing the Closing Value into $10.21. If
the Closing Value is more than $30.00, the Exchange Ratio shall be determined by
dividing the Closing Value into $11.79. In the event that the Closing Value
shall be less than $24.00 or more than $32.00, the Exchange Ratio shall be
subject to renegotiation. For this purpose, the Closing Value shall mean the
average closing price per share, as reported on the New York Stock Exchange, of
SNC's Common Stock for the ten business days (determined by excluding days on
which the New York Stock Exchange is closed) immediately preceding the fifth
calendar day preceding the date on which the Regional Acceptance Stockholders
approve the Merger (the fifth day will be determined by counting the day next
preceding the date on which the Regional Acceptance Stockholders approve the
Merger as the first day). The amount payable for any fractional share of SNC
Common Stock shall be determined by multiplying the fractional part of such
share by the Closing Value.
2.8 CONVERSION OF SHARES; PAYMENT OF MERGER CONSIDERATION
a. At the Effective Date, by virtue of the Merger and without any action on
the part of Regional Acceptance or the holders of record of Regional Acceptance
Common Stock (the "Regional Acceptance Stockholders"), each share of Regional
Acceptance Common Stock issued and outstanding immediately prior to the
Effective Date shall be converted into and shall represent the right to receive,
upon surrender of the certificate representing such share of Regional Acceptance
Common Stock (as provided in paragraph (d) below), the Merger Consideration
attributable thereto. The Merger Consideration shall be payable only to the
Regional Acceptance Stockholders.
b. Each share of the common stock of SNC Acquisition issued and outstanding
immediately prior to the Effective Date shall be converted into one share of
Regional Acceptance Common Stock.
c. Until surrendered, each outstanding certificate which prior to the
Effective Date represented one or more shares of Regional Acceptance Common
Stock shall be deemed upon the Effective Date for all purposes to represent only
the right to receive the Merger Consideration as described in Section 2.7. No
dividend or other distribution payable following the Closing with respect to
shares of SNC Common Stock to be received as Merger Consideration shall be paid,
and there shall be no right to vote such shares of SNC Common Stock, until the
Regional Acceptance Stockholder has tendered the certificate or certificates
representing shares of Regional Acceptance Common Stock (as provided in
paragraph (d) immediately following) to be exchanged for such Merger
Consideration; provided, that such tender when made shall relate back to the
Effective Date
I-4
<PAGE>
for purposes of any rights to receive dividends and other distributions with
respect to SNC Common Stock distributable to holders of record after the
Effective Date. No interest will be paid or accrued on the Merger Consideration
upon the surrender of the certificate or certificates representing shares of
Regional Acceptance Common Stock, or on dividends or other distributions
deferred as described in the immediately preceding sentence. With respect to any
certificate for Regional Acceptance Common Stock that has been lost or
destroyed, the Surviving Corporation shall pay the Merger Consideration
attributable to such certificate upon receipt of evidence and indemnity
reasonably satisfactory to it of ownership of the shares represented thereby.
After the Effective Date, no transfer of the shares of Regional Acceptance
Common Stock outstanding immediately prior to the Effective Date shall be made
on the stock transfer books of the Surviving Corporation.
d. Promptly after the Effective Date, Regional Acceptance shall cause to be
delivered or mailed to each Regional Acceptance Stockholder a form of letter of
transmittal and instructions for use in effecting the surrender of the
certificates which, immediately prior to the Effective Date, represented any
shares of Regional Acceptance Common Stock, in exchange for the Merger
Consideration. Upon surrender of such certificates, together with such letter of
transmittal duly executed and completed in accordance with the instructions
thereto, and such other documents as may be reasonably requested, SNC shall
promptly cause the transfer to the persons entitled thereto of the Merger
Consideration.
2.9 DISSENTING SHARES
Any Regional Acceptance Stockholder who shall have lawfully dissented from
the Merger in accordance with the NCBCA and who has properly exercised such
Stockholder's rights to demand payment of the value of the Stockholder's shares
(the "Dissenting Shares") as provided in the NCBCA (the "Dissenting
Stockholder") shall thereafter have only such rights as are provided a
dissenting Stockholder in accordance with the NCBCA and shall have no rights
under Sections 2.7 and 2.8; provided, however, that if a Dissenting Stockholder
shall withdraw (in accordance with the NCBCA) the demand for such appraisal or
shall become ineligible for such appraisal, then such Dissenting Stockholder's
Dissenting Shares automatically shall cease to be Dissenting Shares and shall be
converted into and represent only the right to receive from the Surviving
Corporation the Merger Consideration provided for in Section 2.7, without
interest thereon, upon surrender of the certificate or certificates representing
the Dissenting Shares.
2.10 CONVERSION OF STOCK OPTIONS
a. At the Effective Date, each Stock Option then outstanding, whether or
not then exercisable, shall be converted into and become rights with respect to
SNC Common Stock, and SNC shall assume each Stock Option, in accordance with the
terms of the Stock Option Plan and stock option agreement, or other agreement,
by which it is evidenced, except that from and after the Effective Date (i) SNC
and its Compensation Committee shall be substituted for Regional Acceptance and
the Committee of Regional Acceptance's Board of Directors administering the
Stock Option Plan, (ii) each Stock Option assumed by SNC may be exercised solely
for shares of SNC Common Stock, (iii) the number of shares of SNC Common Stock
subject to such Stock Option shall be the number of whole shares of SNC
(omitting any fractional share) determined by multiplying the number of shares
of Regional Acceptance Common Stock subject to such Stock Option immediately
prior to the Effective Date by the Exchange Ratio, and (iv) the per share
exercise price under each such Stock Option shall be adjusted by dividing the
per share exercise price under each such Stock Option by the Exchange Ratio and
rounding up to the nearest cent. In addition, notwithstanding the provisions of
clauses (iii) and (iv) of the first sentence of this Section 2.10(a), each Stock
Option which is an "incentive stock option" shall be adjusted as required by
Section 424 of the Code, and the Regulations promulgated thereunder, so as to
continue as an incentive stock option under Section 424(a) of the Code, and so
as not to constitute a modification, extension, or renewal of the option, within
the meaning of Section 424(h) of the Code. SNC and Regional Acceptance agree to
take all necessary steps to effectuate the foregoing provisions of this Section
2.10.
b. As soon as practicable after the Effective Date, SNC shall deliver to
the participants in the Stock Option Plan an appropriate notice setting forth
such participant's rights pursuant thereto and the grants pursuant to such Stock
Option Plan shall continue in effect on the same terms and conditions (subject
to the adjustments required by Section 2.10(a) after giving effect to the
Merger), and SNC shall comply with the terms of the Stock Option Plan to ensure,
to the extent required by and subject to the provisions of such Stock Option
Plan, that Stock Options which qualified as incentive stock options prior to the
Effective Date continue to qualify as incentive stock options after the
Effective Date. At or prior to the Effective Date, SNC shall take all corporate
action necessary to reserve for issuance sufficient shares of SNC Common Stock
for delivery upon exercise of Stock Options assumed by it in accordance with
this Section 2.10. As soon as practicable after the Effective Date, SNC shall
file a registration statement on Form S-3 or Form S-8 (or any successor or other
appropriate form), as determined by SNC, with respect to the shares of SNC
Common Stock subject to such options and shall use its reasonable efforts to
maintain the effectiveness of such registration statement (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such options remain outstanding. With respect to any individuals who
subsequent to the
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Merger will be subject to the reporting requirements under Section 16(a) of the
Exchange Act, where applicable, SNC shall administer the Stock Option Plan
assumed pursuant to this Section 2.10 in a manner that complies with Rule 16b-3
promulgated under the Exchange Act to the extent the Stock Option Plan complied
with such rule prior to the Merger. Regional Acceptance hereby represents that
the Stock Option Plan in its current form complies with Rule 16b-3.
c. It is understood that the Merger will constitute a "Change of Control"
for purposes of the Stock Options, and that consequently the right to exercise
all Stock Options will vest in the holders thereof at the Effective Date to the
extent required by the documents pursuant to which the Stock Options were
granted.
d. The obligations in this Section 2.10 of SNC to file a registration
statement and to maintain its effectiveness shall inure to the benefit of those
persons holding Stock Options on the Effective Date, and after the Effective
Date shall be enforceable directly by them.
e. Notwithstanding the foregoing provisions of this Section 2.10, SNC may
at its election substitute as of the Effective Date options under the Southern
National Corporation 1995 Omnibus Stock Incentive Plan (the "SNC Option Plan")
for all or a part of the Stock Options, subject to the following conditions: (i)
the requirements of Section 2.10(a) (iii) and (iv) shall be met; (ii) such
substitution shall not constitute a modification, extension or renewal of any of
the Stock Options which are incentive stock options; (iii) the substituted
options shall continue in effect on the same terms and conditions as the Stock
Option Plan or other document granting the Stock Options; and (iv) the
provisions of Section 2.10(c) shall be applicable with respect to such
substituted options. As soon as practicable following the Effective Date, SNC
shall deliver to the participants receiving substitute options under the SNC
Option Plan an appropriate notice setting forth such participant's rights
pursuant thereto. If SNC exercises its election under this Section 2.10(e), it
shall register shares of SNC Common Stock subject to the SNC Option Plan with
the Commission by the filing of Form S-8, and SNC will use its reasonable
efforts to maintain the effectiveness of such registration statement for so long
as any such substituted options remain outstanding. SNC has reserved under the
SNC Option Plan adequate shares of SNC Common Stock for delivery upon exercise
of any such substituted options. SNC hereby represents that the SNC Option Plan
in its current form complies with Rule 16b-3 promulgated under the Exchange Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF REGIONAL ACCEPTANCE
Regional Acceptance represents and warrants to SNC and SNC Acquisition as
follows:
3.1 CAPITAL STRUCTURE
The authorized capital stock of Regional Acceptance consists of 100,000,000
shares of Regional Acceptance Common Stock, and 10,000,000 shares of preferred
stock. As of the date hereof, there were 15,007,031 shares of Regional
Acceptance Common Stock issued and outstanding, and no other shares of capital
stock, common or preferred, issued and outstanding. All outstanding shares of
Regional Acceptance Common Stock have been duly issued and are validly
outstanding, fully paid and nonassessable. No other classes of capital stock of
Regional Acceptance are authorized. No shares of capital stock have been
reserved for any purpose, except for (i) shares of Regional Acceptance Common
Stock issuable in connection with Regional Acceptance's Stock Option Plan and
the other Stock Options, (ii) shares of Regional Acceptance Common Stock
issuable in connection with the Option Agreement, and (iii) the shares of
Regional Acceptance Common Stock to be issued in connection with the acquisition
of the Insurance Companies referred to in Section 5.9. Except as set forth
herein, there are no Rights authorized, issued or outstanding with respect to
the capital stock of Regional Acceptance. Stockholders of Regional Acceptance do
not have preemptive rights.
3.2 ORGANIZATION, STANDING AND AUTHORITY
Regional Acceptance is a corporation duly organized, validly existing and
in good standing under the laws of the State of North Carolina with full
corporate power and authority to carry on its business as now conducted, and is
qualified to do business in Virginia, South Carolina, Tennessee and in every
other state of the United States or foreign jurisdiction where its ownership or
leasing of property or the conduct of its business requires qualification to do
business and where the failure to qualify would subject it to any material
penalty or loss of rights.
3.3 OWNERSHIP OF SUBSIDIARIES
Except as Previously Disclosed, Regional Acceptance does not own, directly
or indirectly, any outstanding capital stock or other voting securities or
ownership interests of any corporation, partnership, joint venture, or other
organization, except
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for the Subsidiaries. The outstanding shares of capital stock of the
Subsidiaries are validly issued and outstanding, fully paid and nonassessable,
and all such shares are directly or indirectly owned by Regional Acceptance free
and clear of all liens, claims and encumbrances or preemptive rights of any
person. No Rights are authorized, issued or outstanding with respect to the
capital stock of any Subsidiary, and there are no agreements, understandings or
commitments relating to the right of Regional Acceptance to vote or to dispose
of said shares. None of the shares of capital stock of any Subsidiary have been
issued in violation of the preemptive rights of any person.
3.4 ORGANIZATION, STANDING AND AUTHORITY OF THE SUBSIDIARIES
Each Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation. Each
Subsidiary: (i) has full corporate power and authority to carry on its business
as now conducted; (ii) is duly qualified to do business in every state of the
United States and foreign jurisdiction where its ownership or leasing of
property or the conduct of its business requires such qualification and where
the failure to qualify would subject it to any material penalty or loss of
rights; and (iii) is engaged only in business activities that are ancillary to
the business of Regional Acceptance.
3.5 AUTHORIZED AND EFFECTIVE AGREEMENT
a. Regional Acceptance has all requisite corporate power and authority to
enter into and (subject to receipt of all necessary governmental approvals and
the receipt of approval of Stockholders of Regional Acceptance of the Plan of
Merger) to perform all of its obligations under this Reorganization Agreement,
the Plan of Merger and the Option Agreement. The execution and delivery of this
Reorganization Agreement, the Plan of Merger and the Option Agreement and
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary corporate action in respect thereof,
except, in the case of this Agreement and the Plan of Merger, the approval of
Regional Acceptance Stockholders pursuant to and to the extent required by
applicable law. This Agreement, the Plan of Merger and the Option Agreement
constitute legal, valid and binding obligations of Regional Acceptance, and each
of which is enforceable against Regional Acceptance in accordance with its
terms, in each such case subject to (i) bankruptcy, fraudulent transfer,
insolvency, moratorium, reorganization, conservatorship, receivership, or other
similar laws from time to time in effect relating to or affecting the
enforcement of rights of creditors and general principles of equity, and except
that the availability of equitable remedies or injunctive relief is within the
discretion of the appropriate court.
b. Neither the execution and delivery of this Agreement, the Plan of Merger
and the Option Agreement, nor consummation of the transactions contemplated
hereby or thereby, nor compliance by Regional Acceptance 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 by-laws of Regional Acceptance
or any Subsidiary, (ii) except as Previously Disclosed, 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 material property or asset of Regional Acceptance or any Subsidiary pursuant
to, any note, bond, mortgage, indenture, license, agreement or other instrument
or obligation, or (iii) subject to receipt of all required governmental
approvals, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Regional Acceptance or any Subsidiary.
3.6 SECURITIES DOCUMENTS AND REPORTS
Regional Acceptance has made available to SNC a true and complete copy of
each Securities Document (other than Forms SR) filed by Regional Acceptance with
the Commission since June 30, 1993, which are all the Securities Documents
(other than Forms SR) that Regional Acceptance was required to file following
such date. As of their respective dates of filing with the Commission, the
Securities Documents complied in all material respects with the Securities Laws
as then in effect and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
3.7 FINANCIAL STATEMENTS: MINUTE BOOKS
The Financial Statements of Regional Acceptance fairly present or will
fairly present, as the case may be, the consolidated financial position of
Regional Acceptance and the Subsidiaries as of the dates indicated and the
consolidated results of operations, changes in Stockholders' equity and
statements of cash flows for the periods then ended (subject, in the case of
unaudited interim statements, to normal year-end audit adjustments that are not
material in amount or effect) in conformity with generally accepted accounting
principles applied on a consistent basis. The minute books of Regional
Acceptance and the Subsidiaries contain legally sufficient records of all
meetings and other corporate actions of its Stockholders and Board of Directors
(including committees of its Board of Directors).
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3.8 MATERIAL ADVERSE CHANGE
Except as Previously Disclosed, since December 31, 1995, Regional
Acceptance and the Subsidiaries have not entered into any transactions with
affiliates (within the meaning of Rule 145 promulgated by the Commission) nor
has there been any change, or any event involving a prospective change, in the
business, financial condition or results of operations of Regional Acceptance or
any of the Subsidiaries which has had, or is reasonably likely to have, a
Material Adverse Effect.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES
Neither Regional Acceptance nor any Subsidiary has any liability
(contingent or otherwise) that is material to Regional Acceptance and its
Subsidiaries on a consolidated basis, except as has been Previously Disclosed
and except for liabilities made or incurred in the ordinary course of its
business consistent with past practices since the date of Regional Acceptance's
most recent Financial Statements.
3.10 PROPERTIES
a. Regional Acceptance and the Subsidiaries have good and marketable title,
free and clear of all liens, encumbrances, charges, defaults or equitable
interests, to all of the properties and assets having an initial cost to
Regional Acceptance or a Subsidiary of $10,000 or more, real and personal,
reflected as being owned by them on the consolidated balance sheet included in
the Financial Statements of Regional Acceptance as of December 31, 1995 or
acquired after such date, except (i) liens for current taxes not yet due and
payable, (ii) such liens, charges, defaults, equitable interests, imperfections
of title, easements and encumbrances, if any, which have been Previously
Disclosed, or (iii) dispositions and encumbrances for adequate consideration in
the ordinary course of business.
b. All leases pursuant to which Regional Acceptance or any Subsidiary, as
lessee, leases real or personal property, and which require the payment
thereunder of $10,000 or more in any year, are valid and enforceable in
accordance with their respective terms, in each such case subject to (i)
bankruptcy, fraudulent transfer, insolvency, moratorium, reorganization,
conservatorship, receivership, or other similar laws from time to time in effect
relating to or affecting the enforcement of creditors' rights, and, (ii) general
principles of equity, and except that the availability of equitable remedies or
injunctive relief is within the discretion of the appropriate court.
3.11 ENVIRONMENTAL MATTERS
a. Regional Acceptance and the Subsidiaries are and at all times in the
past have been in substantial compliance with all Environmental Laws in all
material respects. Neither Regional Acceptance nor any Subsidiary has received
any communication alleging that Regional Acceptance or any Subsidiary is not in
such compliance, and there are no present circumstances that would prevent or
interfere with the continuation of such compliance.
b. Regional Acceptance has not received notice of any pending, and there
are no pending or threatened, legal, administrative, arbitral or other
proceedings, asserting Environmental Claims or other claims, causes of action or
governmental investigations of any nature, seeking to impose, or that could
result in the imposition of, any material liability arising under any
Environmental Laws upon (i) Regional Acceptance or any Subsidiary, (ii) any
person or entity whose liability for any Environmental Claim Regional Acceptance
or any Subsidiary has or may have retained or assumed, either contractually or
by operation of law, (iii) any real or personal property owned or leased by
Regional Acceptance or any Subsidiary, or any real or personal property which
Regional Acceptance or any Subsidiary has or is judged to have managed or
supervised or participated in the management of, or (iv) any real or personal
property in which Regional Acceptance or any Subsidiary holds a security
interest securing a loan recorded on the books of Regional Acceptance or the
Subsidiary. Neither Regional Acceptance nor any Subsidiary is 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
Regional Acceptance or any Subsidiary, or all real and personal property which
Regional Acceptance or any Subsidiary has or is judged to have managed or
supervised or participated in the management of, Regional Acceptance has
provided SNC with access to copies of any environmental audits, analyses and
surveys that have been prepared for or provided to Regional Acceptance relating
to such properties (a list of all of which has been Previously Disclosed).
Regional Acceptance and the Subsidiaries are and have at all times in the past
been complying in all material respects with all recommendations contained in
any such environmental audits, analyses and surveys.
d. There are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably be expected to form the
basis of any Environmental Claim or other claim or action or governmental
investigation that could
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result in the imposition of any material liability arising under any
Environmental Laws against Regional Acceptance or any Subsidiary or against any
person or entity whose liability for any Environmental Claim Regional Acceptance
or any Subsidiary has or may have retained or assumed, either contractually or
by operation of law.
3.12 ALLOWANCE FOR LOAN LOSSES
The allowances for loan losses reflected on the consolidated balance sheets
included in the Financial Statements of Regional Acceptance are adequate in all
material respects as of their respective dates under the requirements of
generally accepted accounting principles.
3.13 TAX MATTERS
a. Except as Previously Disclosed, Regional Acceptance and the
Subsidiaries, and each of their predecessors, have timely filed (or requests for
extensions have been timely filed and any such extensions have been granted and
have not expired) all federal, state and local (and, if applicable, foreign) tax
returns required by applicable law to be filed by them (including, without
limitation, estimated tax returns, income tax returns, information returns, and
withholding and employment tax returns) and have paid, or where payment is not
required to have been made, have set up an adequate reserve or accrual for the
payment of, all taxes required to be paid in respect of the periods covered by
such returns and, as of the Effective Date, will have paid, or where payment is
not required to have been made, will have set up an adequate reserve or accrual
for the payment of, all taxes for any subsequent periods ending on or prior to
the Effective Date. Neither Regional Acceptance nor any Subsidiary will have 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 Regional Acceptance and the Subsidiaries are complete and accurate in
all material respects. Neither Regional Acceptance nor any Subsidiary is
delinquent in the payment of any material tax, assessment or governmental
charge. No deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or otherwise) against Regional
Acceptance or any Subsidiary which have not been settled and paid. There are
currently no agreements in effect with respect to Regional Acceptance or any
Subsidiary to extend the period of limitations for the assessment or collection
of any tax. Except as Previously Disclosed, no audit examination or deficiency
or refund litigation with respect to such returns is pending.
3.14 EMPLOYEE BENEFIT PLANS
a. Regional Acceptance has Previously Disclosed true and complete copies of
all stock option and employee stock purchase plans, pension, profit-sharing
plans or stock bonus plans qualified under Section 401 of the Code ("Qualified
Plans"), deferred compensation, bonus or group insurance contracts, and any
other incentive, welfare or employee benefit plans or agreements maintained for
the benefit of employees or former employees of Regional Acceptance or any
Subsidiary, together with (i) the most recent actuarial and financial reports
prepared with respect to any Qualified Plans or other plans for which such
reports exist, (ii) the most recent annual reports filed with any government
agency, and (iii) all rulings and determination letters and any open requests
for rulings or letters that pertain to any Qualified Plan.
b. Neither Regional Acceptance nor any Subsidiary (or any Qualified Plan
maintained by any of them) has incurred any liability to the Pension Benefit
Guaranty Corporation or the Internal Revenue Service with respect to any such
Qualified Plan, except liabilities to the Pension Benefit Guaranty Corporation
pursuant to Section 4007 of ERISA, all of which have been fully paid. No
reportable event under Section 4043(b) of ERISA has occurred with respect to any
Qualified Plan.
c. Neither Regional Acceptance nor any Subsidiary participates in, or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from, a multiemployer plan (as such term is defined in ERISA).
d. A determination letter has been issued by the Internal Revenue Service
with respect to each "employee pension plan" (as defined in Section 3(2) of
ERISA) of Regional Acceptance or any Subsidiary which 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. No such letter has been
revoked or threatened to be revoked, and there is no ground on which such
revocation may be based.
e. Neither Regional Acceptance nor any Subsidiary has any material
liability under any plan described in this Section 3.14 that is not reflected on
the consolidated balance sheet included in the Financial Statements of Regional
Acceptance as of December 31, 1995 or otherwise Previously Disclosed.
f. No prohibited transaction (which shall mean any transaction prohibited
by Section 406 of ERISA and not exempt under Section 408 of ERISA or Section
4975 of the Code, whether by statutory, class or individual exemption) has
occurred
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with respect to any employee benefit plan maintained by Regional Acceptance or
any Subsidiary which would result in the imposition, directly or indirectly, of
any excise tax under Section 4975 of the Code.
3.15 CERTAIN CONTRACTS
a. Except as Previously Disclosed, neither Regional Acceptance nor any
Subsidiary is a party to, is bound or affected by, or receives benefits under
(i) any material agreement, arrangement or commitment, whether or not made in
the ordinary course of business (other than loans or loan commitments made in
the ordinary course of the consumer finance business), or any agreement
restricting its business activities, including without limitation agreements or
memoranda of understanding with regulatory authorities, (ii) any agreement,
indenture or other instrument relating to the borrowing of money by Regional
Acceptance or any Subsidiary or the guarantee by Regional Acceptance or any
Subsidiary of any such obligation, which cannot be terminated within less than
30 days after the Closing Date by Regional Acceptance or the Subsidiaries
(without payment of any penalty or cost), (iii) any agreement, arrangement or
commitment relating to the employment of a consultant or the employment,
election or retention in office of any present or former director or officer,
which cannot be terminated within less than 30 days after the Closing Date by
Regional Acceptance or the Subsidiaries (without payment of any penalty or
cost), or that provides benefits which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Regional
Acceptance of the nature contemplated by this Agreement or the Option Agreement,
(iv) any contract, agreement or understanding with a labor union, in each case
whether written or oral, or (v) any agreement or plan, including any stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated (other than with respect to the Stock
Options as provided in Section 2.10(c)), by the occurrence of any of the
transactions contemplated by this Agreement or the Option Agreement or the value
of any of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement or the Option Agreement.
b. Neither Regional Acceptance nor any Subsidiary is in default, which
default would have a Material Adverse Effect or would adversely affect the
transactions contemplated herein, under any 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.
3.16 LEGAL PROCEEDINGS; REGULATORY APPROVALS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of Regional
Acceptance, threatened against Regional Acceptance or any Subsidiary or against
any asset, interest, or right of Regional Acceptance or any Subsidiary, or
against any officer, director or employee of any of them that in any such case,
if decided adversely, might reasonably be expected to have a Material Adverse
Effect. Except as Previously Disclosed, there are no actions, suits or
proceedings instituted, pending or, to the best knowledge of Regional
Acceptance, threatened against any present or former director or officer of
Regional Acceptance or any Subsidiary that might give rise to a claim for
indemnification. There are no actual or threatened actions, suits or proceedings
which present a claim to restrain or prohibit the transactions contemplated
herein, in the Plan of Merger or the Option Agreement. To the best knowledge of
Regional Acceptance, no fact or condition relating to Regional Acceptance or any
Subsidiary exists that would prevent Regional Acceptance or SNC from obtaining
all of the federal and state regulatory approvals contemplated herein. No
regulatory approvals required in order to consummate the transactions herein are
expected by Regional Acceptance to impose any condition or requirement which
would materially adversely affect the business or economic benefits to SNC of
the transactions contemplated herein.
3.17 COMPLIANCE WITH LAWS
Each of Regional Acceptance and each Subsidiary is in compliance in all
material respects with all statutes and regulations (including, but not limited
to, the TILA, NCRISA, NCCFA and regulations promulgated thereunder, and other
consumer finance laws) applicable and material to the conduct of its business,
and neither Regional Acceptance nor any Subsidiary has received notification
that has not elapsed, been withdrawn or abandoned by any agency or department of
federal, state or local government (i) asserting a violation or possible
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, which in any such case might reasonably be
expected to have a Material Adverse Effect. Neither Regional Acceptance nor any
Subsidiary is subject to any regulatory or supervisory cease and desist order,
agreement, directive, memorandum of understanding or commitment, and none of
them has received any communication requesting that it enter into any of the
foregoing.
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3.18 BROKERS AND FINDERS
Neither Regional Acceptance nor any 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, in the Plan of Merger or in the Option
Agreement, except for fees to accountants and lawyers and an obligation to
Salomon Brothers Inc. which has been Previously Disclosed for investment banking
services.
3.19 INSURANCE
Regional Acceptance and each Subsidiary currently maintains insurance in
the amounts and for the coverages Previously Disclosed, and the types and
amounts of such coverages are consistent with industry standards. Neither
Regional Acceptance nor any Subsidiary has received any notice of a premium
increase or cancellation or a failure to renew with respect to any insurance
policy or bond, and within the last three years, neither Regional Acceptance nor
any Subsidiary has been refused any insurance coverage sought or applied for.
Neither Regional Acceptance nor any Subsidiary has any 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 of coverage that do not result
from any extraordinary loss experience on the part of Regional Acceptance or any
Subsidiary.
3.20 LOANS
With respect to the loans on the books and records of Regional Acceptance,
in all material respects: (i) such loans are valid loans; (ii) the principal
balances thereof as shown on the books and records of Regional Acceptance are
true and correct as of the last date shown thereon; (iii) all purported
signatures on and executions of any document in connection with such loans are
reasonably believed by Regional Acceptance to be genuine; (iv) all related
documentation has been signed or executed by all necessary parties; (v) Regional
Acceptance has custody of all documents or microfilm records thereof related to
such loans (as such documents relate to the matters described in clauses
(i)-(iv) and (vi)-(vii) hereof); (vi) to the extent secured, such loans have
been secured by valid liens and security interests which have been perfected
except in those cases where, in the ordinary course of its business, Regional
Acceptance does not take action to perfect such liens or security interests; and
(vii) such loans are the legal, valid and binding obligations of the obligors
named therein, 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 on the books and records of Regional
Acceptance have been originated and administered in accordance with the terms of
the underlying notes related thereto. Neither the terms of such loans, nor any
of the loan documentation, nor the manner in which such loans have been
administered and serviced, violates any federal, state or local law, rule,
regulation or ordinance applicable thereto, including without limitation, the
TILA, Regulation Z of the Federal Reserve Board, the NCRISA, the NCCFA, the
Equal Credit Opportunity Act, as amended, and state laws, rules and regulations
relating to consumer protection, installment sales and usury.
3.21 RELATED PARTY TRANSACTIONS
Regional Acceptance has Previously Disclosed all leases, investments,
loans, including loan guarantees, and material transactions of other types to
which Regional Acceptance or any Subsidiary is a party with any director,
executive, officer or 5% Stockholder of Regional Acceptance or any person,
corporation, or enterprise controlling, controlled by or under common control
with any of the foregoing. All such leases, investments, loans and material
transactions are on terms no less favorable to Regional Acceptance than could be
obtained from unrelated parties. To the extent any such leases, investments,
loans or material transactions are between Regional Acceptance and either of
William R. Stallings, Sr. or Dr. Ledyard E. Ross, or any entity controlled by
either or both of them, each agrees to negotiate any renewals or extensions of
such leases, investments, loans or transactions in good faith; and SNC agrees to
cause the Surviving Corporation likewise to negotiate such renewals or
extensions in good faith.
3.22 VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding shares
of Regional Acceptance Common Stock is the only vote of the holders of any class
or series of Regional Acceptance capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
3.23 CERTAIN INFORMATION
When the Proxy Statement/Prospectus is mailed, and at the time of the
meeting of Stockholders of Regional Acceptance to vote upon the Plan of Merger,
the Proxy Statement/Prospectus and all amendments or supplements thereto, with
respect to
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all information set forth therein furnished by Regional Acceptance, (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, in light of the circumstances in which they were
made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SNC
SNC represents and warrants to Regional Acceptance as follows:
4.1 CAPITAL STRUCTURE OF SNC
The authorized capital stock of SNC consists of (i) 5,000,000 shares of
preferred stock, par value $5.00 per share, none of which shares shall be issued
and outstanding after March 29, 1996, and (ii) 300,000,000 shares of SNC Common
Stock, of which 99,107,181 shares were issued and outstanding on March 4, 1996.
All outstanding shares of SNC Common Stock have been duly issued and are validly
outstanding, fully paid and nonassessable. The shares of SNC Common Stock
reserved as provided in Section 5.3b are free of any Rights and have not been
reserved for any other purpose, and such shares are available for issuance as
provided pursuant to the Plan of Merger. Stockholders of SNC do not have
preemptive rights.
4.2 ORGANIZATION, STANDING AND AUTHORITY OF SNC
SNC is a corporation duly organized, validly existing and in good standing
under the laws of the state of North Carolina, with full corporate power and
authority to carry on its business as now conducted, and 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 operation, or business of SNC on a
consolidated basis. SNC is registered as a bank holding company under the Bank
Holding Company Act.
4.3 AUTHORIZED AND EFFECTIVE AGREEMENT
a. SNC has all requisite corporate power and authority to enter into and
perform all of its obligations under this Agreement and the Option Agreement.
The execution and delivery of this Agreement and the Option Agreement and
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. This Agreement and the Option Agreement constitute legal, valid
and binding obligations of SNC, in each such case enforceable against it in
accordance with their respective terms subject to (i) bankruptcy, insolvency,
moratorium, reorganization, conservatorship, receivership or other similar laws
in effect from time to time relating to or affecting the enforcement of the
rights of creditors of FDIC-insured institutions or the enforcement of
creditors' rights generally, (ii) laws relating to the safety and soundness of
depository institutions and their holding companies, and (iii) general
principles of equity, and except that the availability of remedies or injunctive
relief is within the discretion of the appropriate court.
b. Neither the execution and delivery of this Agreement nor the Option
Agreement, nor consummation of the transactions contemplated hereby or thereby,
nor 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 or
by-laws of SNC or SNC Acquisition, (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 SNC pursuant to any note, bond, mortgage, indenture, license, agreement
or other instrument or obligation, which would have a material adverse effect on
the business, operations or financial condition of SNC and the SNC Subsidiaries
taken as a whole, or (iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to SNC or SNC Acquisition.
4.4 ORGANIZATION, STANDING AND AUTHORITY OF SNC SUBSIDIARIES AND SNC
ACQUISITION
a. Each SNC Subsidiary is a duly organized corporation, validly existing
and in good standing under applicable laws. Each SNC Subsidiary (i) has full
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,
business or prospects of SNC on a consolidated basis. The SNC Subsidiaries
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include all of the "significant subsidiaries" of SNC as defined in Rule 1-02 of
Regulation S-X promulgated by the Commission.
b. SNC Acquisition is a corporation duly organized and validly existing in
good standing under the laws of the State of North Carolina, with full corporate
power and authority to participate in the Merger as contemplated hereby and to
consummate the transactions contemplated hereby to be consummated by it. The
authorized capital stock of SNC Acquisition consists of a single class of common
stock, and all of the outstanding shares of such common stock are and will at
all times through the Effective Date be owned and controlled by SNC. SNC
Acquisition has been organized solely for the purpose of effecting the Merger
and has and will have no material assets, liabilities or operations.
4.5 SECURITIES DOCUMENTS
SNC has timely filed all Securities Documents required by the Securities
Laws since December 31, 1992, and such Securities Documents complied in all
material respects with the Securities Laws as in effect at the times of such
filings and at the respective times of such filings, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
4.6 FINANCIAL STATEMENTS
The Financial Statements of SNC fairly present or will fairly present, as
the case may be, the consolidated financial position of SNC and the SNC
Subsidiaries as of the dates indicated and the consolidated results of
operations, changes in Stockholders' equity and changes in cash flows for the
periods then ended in conformity with generally accepted accounting principles
applicable to financial institutions, applied on a consistent basis except as
set forth in the notes thereto.
4.7 MATERIAL ADVERSE CHANGE
SNC has not, on a consolidated basis, suffered any material adverse change
in its business, financial condition, results of operations or prospects since
December 31, 1995.
4.8 LEGAL PROCEEDINGS; REGULATORY APPROVALS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of SNC, threatened
against SNC or any SNC Subsidiary or SNC Acquisition or against any asset,
interest or right of SNC or any SNC Subsidiary or SNC Acquisition, or against
any officer, director or employee of any of them that, if decided adversely,
might reasonably be expected to have a material adverse effect on the financial
condition, results of operations, business or prospects of SNC on a consolidated
basis. To the best 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 or in the Plan of Merger. No fact or condition
relating to SNC or any SNC Subsidiary or SNC Acquisition known to SNC exists
that would prevent SNC from obtaining all of the federal and state regulatory
approvals contemplated herein. No regulatory approvals required in order to
consummate the transaction herein are expected by SNC to impose any condition or
requirement which would materially adversely affect the business or economic
benefits to SNC of the transactions contemplated herein.
4.9 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 Financial Statements of SNC and
except for liabilities made in the ordinary course of its business since the
date of SNC's most recent Financial Statements.
4.10 ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected on the consolidated balance sheets
included in the Financial Statements of SNC is or will be in the opinion of
SNC's management adequate in all material respects as of their respective dates
under the requirements of generally accepted accounting principles applicable to
banks and bank holding companies to provide for reasonably anticipated losses on
outstanding loans net of recoveries.
4.11 TAX MATTERS
a. SNC and each of its predecessors, has timely filed all federal, state
and local (and, if applicable, foreign) tax returns required by applicable law
to be filed by it (including, without limitation, estimated tax returns, income
tax returns, information returns, and withholding and employment tax returns)
and have paid, or have set up an adequate reserve or accrual for
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the payment of, all taxes required to be paid as shown on such returns and, as
of the Effective Date, will have paid, or where payment is not required to have
been made, will have set up an adequate reserve or accrual for the payment of,
all taxes for any subsequent periods ending on or prior to the Effective Date.
SNC will not to SNC's knowledge have 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 are complete and accurate in all material respects. SNC is not
delinquent in the payment of any tax, assessment or governmental charge, and has
not failed to file any tax return which is currently past due. No deficiencies
for any tax, assessment or governmental charge have been proposed, asserted or
assessed (tentatively or otherwise) against SNC which have not been settled and
paid. There currently are no agreements in effect with respect to SNC to extend
the period of limitations for the assessment or collection of any tax.
4.12 COMPLIANCE WITH LAWS
Each of SNC and the SNC Subsidiaries is in material compliance with all
statutes and regulations applicable and material to the conduct of its business
(except for any violations not material to the business, operations or financial
condition of SNC and the SNC Subsidiaries taken as a whole), and neither SNC nor
any SNC Subsidiary has received notification that has not elapsed, been
withdrawn or abandoned from any agency or department of federal, state or local
government (i) asserting a violation of any such statute or regulation, and
which violations would be likely to have a material adverse effect on the
business, operations or financial condition of SNC and the SNC Subsidiaries
taken as a whole, (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 or memorandum of understanding, and none of
them has received any communication requesting that they enter into either of
the foregoing.
4.13 CERTAIN INFORMATION
When the Proxy Statement/Prospectus is mailed, and at all times subsequent
to such mailing up to and including the time of the meeting of Stockholders of
Regional Acceptance to vote on the Merger, the Proxy Statement/Prospectus and
all amendments or supplements thereto, with respect to all information set forth
therein furnished by SNC relating to SNC, the SNC Subsidiaries or SNC
Acquisition, including pro forma information insofar as it relates to SNC and
entities other than Regional Acceptance and the 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, in light of the circumstances in which they were
made, not misleading.
ARTICLE V
COVENANTS
5.1 STOCKHOLDERS' MEETING
Regional Acceptance shall submit this Reorganization Agreement and the Plan
of Merger to its Stockholders for approval at a special meeting to be held as
soon as practicable, and the Board of Directors of Regional Acceptance shall
recommend that the Stockholders vote for such approval; provided, however, that
the Board of Directors of Regional Acceptance may fail to make such
recommendation, or may withdraw, modify or change any such recommendation, if
and only if the Board of Directors has determined in good faith, after
consultation with its legal and financial advisors, that the making of such
recommendation, or the failure to withdraw or modify such recommendation, would
constitute a breach of the duties of the directors in their capacity as such to
the Regional Acceptance Stockholders under applicable law.
5.2 PROXY STATEMENT; REGISTRATION STATEMENT; NYSE LISTING
SNC and Regional Acceptance shall cooperate in the timely preparation and
filing with the Commission of the Registration Statement. Regional Acceptance
will furnish to SNC the information required to be included in the Registration
Statement with respect to its business and affairs before it is filed with the
Commission and again before any amendments are filed, and shall have the right
to review and consult with SNC on the form of, and any characterizations of such
information included in, the Registration Statement prior to the filing with the
Commission. SNC shall use its best efforts to cause such Registration Statement
to be declared effective under the Securities Act. Such Registration Statement,
at the time it becomes effective and on the Effective Date, shall in all
material respects conform to the requirements of the Securities Act and the
applicable rules and regulations of the Commission. SNC shall take all actions
required to register or obtain exemptions from
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such registration for the SNC Common Stock to be issued in connection with the
transactions contemplated by this Agreement and the Plan of Merger under
applicable state "Blue Sky" securities laws, as appropriate, and to cause such
SNC Common Stock to be listed on the New York Stock Exchange. The Registration
Statement shall include the form of Proxy Statement for the meeting of Regional
Acceptance's Stockholders to be held for the purpose of voting upon approval of
this Reorganization Agreement and the Plan of Merger (as it is so submitted to
the Regional Acceptance Stockholders, and including any amendments and
supplements thereto so submitted, the "Proxy Statement"). Regional Acceptance
shall use its best efforts to cause the Proxy Statement to be cleared for
mailing to its stockholders by the Commission, and the Proxy Statement shall, on
the date of mailing and on the Effective Date, conform in all material respects
to the requirements of the Securities Laws and the applicable rules and
regulations of the Commission thereunder. Regional Acceptance shall cause the
Proxy Statement to be mailed to its Stockholders.
5.3 PLAN OF MERGER; RESERVATION OF SHARES
a. On the Effective Date, and subject to compliance with or waiver of the
conditions in Article VI, the Merger shall be effected in accordance with the
Plan of Merger attached hereto as Annex A. In this connection, SNC undertakes
and agrees (i) to adopt and to cause SNC Acquisition to adopt the Plan of
Merger; (ii) to vote the shares of SNC Acquisition common stock for approval of
the Plan of Merger; (iii) to issue, deliver or pay or cause to be delivered or
paid when due the number of shares of SNC Common Stock to be distributed
pursuant to Section 2.7 and any cash required to be paid for fractional shares;
and (iv) to cause SNC Acquisition to take all actions on its part necessary or
appropriate for the consummation of the transactions contemplated hereby.
b. SNC has reserved for issuance such number of shares of SNC Common Stock
as shall be necessary to pay the consideration to be distributed to Regional
Acceptance's stockholders as contemplated in Section 2.8. If at any time the
aggregate number of shares of SNC Common Stock available for issuance hereunder
shall not be sufficient to effect the Merger, SNC shall take all appropriate
action as may be required to increase the amount of the authorized SNC Common
Stock.
5.4 ADDITIONAL ACTS
a. Regional Acceptance agrees to approve, execute and deliver any amendment
to this Agreement and the Plan of Merger and any additional plans and agreements
reasonably requested by SNC to modify the structure of, or to substitute parties
to, the transactions contemplated hereby, provided that such modifications do
not adversely affect the economic benefits of such transactions to Regional
Acceptance and the Regional Acceptance Stockholders or otherwise abrogate the
covenants and other agreements contained in this Agreement.
b. As promptly as practicable after the date hereof, SNC and Regional
Acceptance shall submit notice or applications for prior approval of the
transactions contemplated herein to the Federal Reserve Board and any other
federal or state government agency, department or body to which notice is
required or from which approval is required for consummation of the Merger and
the other transactions contemplated hereby. Regional Acceptance and SNC each
represent and warrant to the other that all information concerning it and its
directors, officers and Stockholders and concerning its subsidiaries included
(or submitted for inclusion) in any such application shall be true, correct and
complete in all material respects as of the date presented.
5.5 BEST EFFORTS
SNC and Regional Acceptance shall each use its best efforts in good faith,
and Regional Acceptance shall cause each Subsidiary to use its best efforts in
good faith, to (i) furnish such information as may be required in connection
with and otherwise cooperate in the preparation and filing of the documents
referred to in Sections 5.2 and 5.4 or elsewhere herein, and (ii) take or cause
to be taken all action necessary or desirable on its part to fulfill the
conditions in Article VI and to consummate the transactions herein contemplated
at the earliest possible date. Neither SNC nor Regional Acceptance shall take,
or cause, or to the best of its ability permit to be taken, any action that
would substantially delay or impair the prospects of completing the Merger
pursuant to this Agreement and the Plan of Merger, provided that nothing herein
contained shall preclude SNC from exercising its rights under the Option
Agreement.
5.6 CERTAIN ACCOUNTING MATTERS
Regional Acceptance shall cooperate with SNC concerning accounting and
financial matters necessary or appropriate to facilitate the Merger (taking into
account SNC's policies, practices and procedures), including without limitation
issues arising in connection with record keeping, loan classification, valuation
adjustments, levels of loan loss reserves and other accounting practices.
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5.7 ACCESS TO INFORMATION
Regional Acceptance will keep SNC advised of all material developments
relevant to its business and the business of the Subsidiaries and to
consummation of the Merger, and SNC will advise Regional Acceptance of any
public disclosures by SNC of material adverse changes in its financial condition
or operations. Upon reasonable notice, Regional Acceptance and the Subsidiaries
shall afford to representatives of SNC access, during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, shall make available
to representatives of SNC all information concerning its business as SNC may
reasonably request. No investigation pursuant to this Section 5.7 shall affect
or be deemed to modify any representation or warranty made by, or the conditions
to the obligations hereunder of either party hereto. Each party hereto shall,
and shall cause each of its directors, officers, attorneys and advisors to,
maintain the confidentiality of all information obtained hereunder which is not
otherwise publicly disclosed by the other party, said undertaking with respect
to confidentiality to survive any termination of this Agreement pursuant to
Section 7.1. In the event of the termination of this Agreement, each party shall
return to the furnishing party all confidential information previously furnished
in connection with the transactions contemplated herein.
5.8 PRESS RELEASES
SNC and Regional Acceptance shall agree with each other as to the form and
substance of any press release related to this Agreement and the Plan of Merger
or the transactions contemplated hereby and thereby, and consult with each other
as to the form and substance of other public disclosures related thereto,
provided, that nothing contained herein shall prohibit either party, following
notification to the other party, from making any disclosure which it reasonably
believes to be required by law.
5.9 FORBEARANCES OF REGIONAL ACCEPTANCE
Except with the prior written consent of SNC, between the date hereof and
the Effective Date (or earlier termination of this Agreement) Regional
Acceptance shall not, and shall cause each Subsidiary not to:
(a) carry on its business other than in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted,
or establish or acquire any new subsidiary or cause or permit any
Subsidiary to engage in any new activity or expand any existing activities;
(b) declare, set aside, make or pay any dividend or other distribution
in respect of its capital stock, other than regularly scheduled cash
dividends payable on record dates and in amounts consistent with past
practices;
(c) issue any shares of its capital stock (except pursuant to the
exercise of Stock Options heretofore granted, pursuant to the acquisition
of the Insurance Companies described in Section 5.9(f), or pursuant to
exercise by SNC of its rights under the Option Agreement);
(d) issue, grant or authorize any Rights (except as provided in the
Option Agreement) or effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization;
(e) amend its articles of incorporation or bylaws; impose or permit
imposition of any lien, charge or encumbrance on any share of stock held by
it in any Subsidiary, or permit any such lien, charge or encumbrance to
exist; or waive or release any material right or cancel or compromise any
debt or claim other than in the ordinary course of business;
(f) merge with any other corporation or bank or permit any other
corporation, savings institution or bank to merge into it or consolidate
with any other corporation, savings institution or bank; acquire control
over any other firm, bank, corporation, savings institution or
organization; or liquidate, sell or otherwise dispose of any assets or
acquire any assets, other than in the ordinary course of its business;
provided that notwithstanding the foregoing, SNC hereby consents to the
acquisition by Regional Acceptance of all of the capital stock of Regional
Fidelity Ltd., Roanoke Fidelity Ltd., and Universal Fidelity Ltd., each a
British Virgin Islands corporation (collectively, the "Insurance
Companies") in exchange for that number of newly issued shares of Regional
Acceptance Common Stock with respect to each Insurance Company determined
by dividing (A) into (B), where (A) is $11 and (B) is the sum determined by
multiplying 95% times the amount of cash held by each such Insurance
Company at the time of the exchange (fractional shares of Regional
Acceptance Common Stock shall not be issued and the value of any such
fractional shares shall be payable in cash);
(g) fail to comply in any material respect with any laws, regulations,
ordinances or governmental actions applicable to it and to the conduct of
its business;
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(h) increase the rate of compensation of any of its directors,
officers or employees, or 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 the ordinary course of business consistent with past
practices;
(i) enter into or substantially modify (except as may be required by
applicable law) 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;
provided, that this subparagraph shall not prevent renewals of any of the
foregoing consistent with past practice;
(j) solicit or encourage inquiries or proposals with respect to,
furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition or purchase of all or a substantial
portion of the assets of, or a substantial equity interest in, Regional
Acceptance or any business combination with Regional Acceptance other than
as contemplated by this Agreement (except where the Board of Directors of
Regional Acceptance determines in good faith, after consultation with its
legal and financial advisors, that the failure to furnish such information
or participate in such negotiations or discussions would constitute a
breach of the duties of the directors, in their capacities as such, to the
Regional Acceptance Stockholders under applicable law); or authorize 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, any such information is required from, or any such negotiations or
discussions are sought to be initiated with, Regional Acceptance;
(k) enter into (i) any material agreement, arrangement or commitment
not made in the ordinary course of business, including, without limitation,
agreements or memoranda of understanding with regulatory authorities, (ii)
any agreement, indenture or other instrument not made in the ordinary
course of business relating to the borrowing of money by Regional
Acceptance or any Subsidiary or guarantee by Regional Acceptance or any
Subsidiary of any obligation, (iii) any agreement, arrangement or
commitment relating to the employment or severance of a consultant or the
employment, severance, election or retention in office of any present or
former director, officer or employee (this clause shall not apply to the
election of directors by Stockholders and the election of officers by
directors in the normal course, terminable at will except to the extent
otherwise provided in an agreement, arrangement or commitment Previously
Disclosed); or (iv) any contract, agreement or understanding with a labor
union;
(1) change its lending, investment or asset/liability management
policies in any material respect, except as may be required by applicable
law, regulation, or directive, and except that after approval of the Plan
of Merger by its Stockholders Regional Acceptance shall cooperate in good
faith with SNC in adopting consistent policies, practices and procedures;
(m) change its methods of accounting in effect at December 31, 1995,
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 from those employed in the preparation of its federal income tax
returns for the year ended December 31, 1995, except as required by changes
in law or regulation;
(n) incur any capital expenditures or obligation to make capital
expenditures in excess of $50,000 for any one expenditure or $250,000 in
the aggregate;
(o) incur any indebtedness other than in the ordinary course of
business, or indebtedness for money borrowed pursuant to existing credit
facilities as needed in the ordinary course of business;
(p) knowingly and voluntarily take any action which would or might be
expected to (i) cause the business combination contemplated hereby not to
be accounted for as a pooling of interests or not to constitute a
reorganization under Section 368 of the Code, in either case as determined
by SNC, (ii) result in any representation or warranty herein to be untrue,
or (iii) cause any of the conditions precedent to the transactions
contemplated by this Agreement to fail to be satisfied;
(q) dispose of any assets other than in the ordinary course of
business; or
(r) agree to do any of the foregoing.
5.10 EMPLOYMENT AGREEMENTS
SNC shall enter into employment agreements with those Regional Acceptance
employees and on the terms as have been Previously Disclosed.
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5.11 RESALES BY AFFILIATES
Regional Acceptance shall identify those persons whom it expects will be
deemed to be "affiliates" of Regional Acceptance at the Effective Date within
the meaning of Rule 145 promulgated by the Commission under the Securities Act.
Regional Acceptance shall cause each person so identified to deliver to SNC at
least 30 days prior to the Effective Date a written agreement providing that
such person will not dispose of SNC Common Stock received in the Merger (a)
except in compliance with the Securities Act and the rules and regulations
promulgated thereunder, and (b) prior to such time as SNC shall have published
Financial Statements reflecting at least one month of combined operations with
Regional Acceptance as necessary for pooling of interests accounting treatment.
SNC hereby agrees, for the benefit of such affiliates, that for at least three
years after the Effective Date, it will continue to meet the current public
information requirement of paragraph (c) of Rule 144 under the Securities Act.
5.12 EMPLOYEE BENEFIT PLANS
The Surviving Corporation as defined in the Plan of Merger shall maintain
for its employees immediately following the Merger the group hospitalization,
medical, life, disability and other benefit plans, programs or arrangements of
Regional Acceptance as in effect immediately preceding the Merger (the "Regional
Acceptance Plans"), and all such employees shall immediately participate therein
subject to complying with any waiting period or other eligibility requirements
and limitations relating to pre-existing conditions. SNC agrees to endeavor to
continue in effect for employees of the Surviving Corporation the Regional
Acceptance Plans or other benefit plans, programs or arrangements similar or
comparable thereto, subject to the right to amend or terminate any such plans,
programs or arrangements if the Board of Directors of the Surviving Corporation
shall deem any such action to be in the best interest of the business of the
Surviving Corporation.
5.13 FORBEARANCES OF SNC
Except with the prior written consent of Regional Acceptance, which consent
shall not be arbitrarily or unreasonably withheld, between the date hereof and
the Effective Date (or earlier termination of this Agreement) SNC shall not:
a. exercise the Option Agreement other than in accordance with its terms,
or dispose of the shares of Regional Acceptance Common Stock issuable upon
exercise of the Option rights conferred thereby, other than as permitted or
contemplated by the terms thereof; or
b. declare or effect any share dividend, stock split or other change in its
outstanding capital stock, or any extraordinary or special dividend or
distribution with respect to its capital stock (including without limitation
distribution of any Rights), unless either (i) such action will not affect the
operation of Section 2.7 with respect to the Closing Value, Exchange Ratio or
Merger Consideration in any manner that is adverse to the Regional Acceptance
Stockholders (including without limitation any effect thereon from the time the
Closing Value is determined through the Effective Date), or (ii) SNC agrees to
appropriate modifications of Section 2.7 (and any related provision of this
Agreement) reasonably acceptable to Regional Acceptance that equitably adjusts
the operation of Section 2.7 (and related provisions) to take into account the
effect of such action.
c. knowingly and voluntarily take any action (other than exercise of its
rights under the Option Agreement) that would or might be expected to (i) cause
the business combination contemplated hereby not be be accounted for as a
pooling of interests or not to constitute a reorganization under Section 368 of
the Code, in either case as determined by Regional Acceptance, (ii) result in
any representation or warranty herein to be untrue, or (iii) cause any of the
conditions precedent to the transactions contemplated by this Agreement to fail
to be satisfied.
5.14 FINANCIAL OPINION
Regional Acceptance shall use its best efforts to obtain, on or before the
mailing of the Proxy Statement to Regional Acceptance Stockholders, an opinion
of its financial advisors, Salomon Brothers, Inc., as to whether the Merger
Consideration is fair, from a financial point of view, to such Stockholders.
5.15 STOCKHOLDER VOTE
At the special meeting of Regional Acceptance Stockholders described in
Section 5.1, and unless the Board of Directors of Regional Acceptance shall
have, as permitted in Section 5.1, failed to recommend (or shall have withdrawn,
modified or changed any such recommendation) voting in favor of this
Reorganization Agreement and the Plan of Merger, each of William R. Stallings,
Sr. and Dr. Ledyard E. Ross severally agrees to vote at such meeting or any
adjournment or continuation thereof all shares of Regional Acceptance Common
Stock owned by him in favor of this Reorganization Agreement and the Plan of
Merger. From and after the date hereof, unless the Board of Directors of
Regional Acceptance shall have, as permitted in Section 5.1, failed to recommend
(or shall have withdrawn, modified or changed any such recommendation) voting in
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favor of this Reorganization Agreement and the Plan of Merger, each of William
R. Stallings, Sr. and Dr. Ledyard E. Ross severally agrees not to transfer from
and after the date hereof to any person any shares of Regional Acceptance Common
Stock owned by him on the date hereof without the prior consent of SNC.
5.16 INDEMNIFICATION
(a) From and after the Effective Date, Regional Acceptance, to the fullest
extent permitted by applicable law, shall indemnify all persons who at or at any
time prior to the Effective Date serve or have served as directors or officers
of Regional Acceptance (the "Indemnified Persons"), from and against any and all
liabilities and expenses incurred by them in any proceeding (including without
limitation a proceeding brought by or on behalf of Regional Acceptance) arising
out of their status or activities at or prior to the Effective Date (i) as such
directors or officers, or (ii) as trustee or administrator of an employee
benefit plan of Regional Acceptance or any Subsidiary, or (iii) at the request
of Regional Acceptance, as directors or officers of any Subsidiary; provided,
that no Indemnified Person shall be entitled to indemnity hereunder for
liabilities or expenses incurred on account of activities that were at the time
taken known or believed by such Indemnified Person to be clearly in conflict
with the best interests of Regional Acceptance or any Subsidiary. Regional
Acceptance further agrees that it will pay the reasonable costs and expenses
(including reasonable attorneys' fees) incurred by any Indemnified Person in
connection with the enforcement of such person's rights to indemnification
provided herein, but only if the Indemnified Person is finally determined to be
entitled to the claimed indemnity in substantial part. Except as otherwise
provided herein, the rights to indemnification provided herein are in addition
to and not in limitation of any other rights to indemnification any Indemnified
Person may have under applicable law.
(b) For the purpose of ensuring reasonable security for Regional
Acceptance's obligations in Section 5.16(a), SNC hereby guarantees that Regional
Acceptance's net worth shall at all times be at least equal to $40 million,
reduced by any claims under Section 5.16(a) previously paid or determined to be
payable, and SNC shall pay any amount due under Section 5.16(a) to the extent
that, on the date such amount is required to be paid, such amount exceeds the
actual net worth of Regional Acceptance and does not exceed $40 million as so
reduced.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT -- SNC AND REGIONAL ACCEPTANCE
The respective obligations of SNC and Regional Acceptance to effect the
transactions contemplated by this Agreement shall be subject to satisfaction or
waiver of the following conditions at or prior to the Effective Date:
a. All corporate action necessary to authorize the execution, delivery
and performance of this Reorganization Agreement and the Option Agreement
and consummation of the transactions contemplated hereby and thereby shall
have been duly and validly taken, including without limitation the approval
by the Regional Acceptance Stockholders of the Merger;
b. The Registration Statement (including any post-effective amendments
thereto) shall be effective under the Securities Act, and SNC shall have
received all 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 the Commission or
any state "Blue Sky" securities administration to suspend the effectiveness
of such Registration Statement; and the SNC Common Stock to be issued as
contemplated in the Plan of Merger shall have either been registered or be
subject to exemption from registration under applicable state securities
laws, and shall have been approved for listing on the New York Stock
Exchange;
c. The parties shall have received all regulatory approvals required
in connection with the transactions contemplated by this Reorganization
Agreement, all notice periods and waiting periods required after the
granting of any such approvals shall have passed, and all such approvals
shall be in effect;
d. None of SNC, any SNC subsidiary, Regional Acceptance or any
Subsidiary shall be subject to any order, decree or injunction of a court
or agency of competent jurisdiction which enjoins or prohibits consummation
of the transactions contemplated by this Reorganization Agreement; and
e. Regional Acceptance and SNC shall have received an opinion of SNC's
legal counsel or tax advisor, in form and substance satisfactory to
Regional Acceptance and SNC, substantially to the effect that the Merger
will constitute one or
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more reorganizations under Section 368 of the Code and that the
Stockholders of Regional Acceptance will not recognize any gain or loss to
the extent that such Stockholders exchange shares of Regional Acceptance
Common Stock for shares of SNC Common Stock, and that their holding period
for and basis in their shares of Regional Acceptance Common Stock will be
carried over to such shares of SNC Common Stock.
6.2 CONDITIONS PRECEDENT -- REGIONAL ACCEPTANCE
The obligations of Regional Acceptance to effect the transactions
contemplated by this Agreement shall be subject to satisfaction of the following
additional conditions at or prior to the Effective Date, unless waived by
Regional Acceptance pursuant to Section 7.4:
a. The representations and warranties of SNC set forth in Article IV
shall be true and correct in all material respects as of the date of this
Agreement and as of the Effective Date as though made on and as of the
Effective 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 Regional Acceptance;
b. SNC shall have in all material respects performed all material
obligations and complied with all material covenants required by this
Agreement;
c. SNC shall have delivered to Regional Acceptance a certificate,
dated the Effective Date and signed by its Chairman or President or an
Executive Vice President, to the effect that the conditions set forth in
Sections 6.1(a), 6.1(b), 6.1(c), 6.2(a) and 6.2(b), to the extent
applicable to SNC, have been satisfied and that there are no actions,
suits, claims, governmental investigations or procedures instituted,
pending or, to the best of such officer's knowledge, threatened that
reasonably may be expected to have a material adverse effect on SNC or that
present a claim to restrain or prohibit the transactions contemplated
herein or in the Plan of Merger;
d. Regional Acceptance shall have received opinions of counsel to SNC
in form and content generally provided in similar transactions and
reasonably acceptable to Regional Acceptance;
e. The Board of Directors of Regional Acceptance shall have received,
not later than, and dated or updated to a time on or about, the time the
Proxy Statement is mailed to the Regional Acceptance Stockholders, the
written opinion of its financial advisors, Salomon Brothers Inc. in form
and substance reasonably satisfactory to the Board of Directors of Regional
Acceptance, to the effect that the Merger Consideration is fair, from a
financial point of view, to the Regional Acceptance Stockholders; and on or
prior to the Effective Date such opinion shall not have been withdrawn or
modified because such financial advisor is then unable to determine that
the Merger Consideration is fair from a financial point of view.
6.3 CONDITIONS PRECEDENT -- SNC
The obligations of SNC to effect the transactions contemplated by this
Agreement shall be subject to satisfaction of the following additional
conditions at or prior to the Effective Date, unless waived by SNC pursuant to
Section 7.4:
a. The representations and warranties of Regional Acceptance set forth
in Article III shall be, true and correct in all material respects as of
the date of this Agreement and as of the Effective Date as though made on
and as of the Effective 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 Agreement or consented to in
writing by SNC;
b. No regulatory approval shall have imposed any condition or
requirement which, in the reasonable opinion of the Board of Directors of
SNC, would so materially adversely affect the business or economic benefits
to SNC of the transactions contemplated by this Agreement as to render
consummation of such transactions inadvisable or unduly burdensome;
c. Regional Acceptance shall have in all material respects performed
all material obligations and complied with all material covenants required
by this Agreement;
d. Regional Acceptance shall have delivered to SNC a certificate,
dated the Effective Date and signed by its Chairman or President, to the
effect that the conditions set forth in Sections 6.1(a), 6.1(c), 6.3(a) and
6.3(c), to the extent applicable to Regional Acceptance, have been
satisfied and that there are no actions, suits, claims, governmental
investigations or procedures instituted, pending or, to the best of such
officer's knowledge, threatened that reasonably may be expected to have a
Material Adverse Effect on Regional Acceptance or that present a claim to
restrain or prohibit the transactions contemplated herein or in the Plan of
Merger;
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e. SNC shall have received opinions of counsel to Regional Acceptance
in form and content generally provided in similar transactions and
reasonably acceptable to SNC;
f. SNC shall have received the written agreements from affiliates as
specified in Section 5.11;
g. SNC shall have determined that the transactions contemplated herein
qualify for accounting treatment as a pooling of interests; and
h. The holders of no more than 4% of the Regional Acceptance Common
Stock shall have given written notice of their intent to demand payment for
their shares and shall not have voted for the Merger, pursuant to Article
13 of the NCBCA.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 TERMINATION
This Agreement may be terminated and the Merger abandoned:
a. at any time prior to the Effective Date, by the mutual consent in
writing of the parties hereto;
b. at any time prior to the Effective Date, by SNC in writing if
Regional Acceptance has, or by Regional Acceptance in writing if SNC has,
breached (i) any covenant or undertaking contained herein, in the Plan of
Merger, in the Option Agreement, or (ii) any representation or warranty
contained herein, and, in each such case, if such breach is materially
adverse and has not been cured by the earlier of 30 days following written
notice of such breach to the party committing such breach or the Effective
Date;
c. on the Closing Date, by either party hereto in writing, if any of
the conditions precedent to the obligations of such party to consummate the
transactions contemplated hereby have not been satisfied or fulfilled, and
the party giving the notice is not in breach of any of its representations,
warranties, covenants or undertakings herein;
d. at any time prior to the Effective Date, by either party hereto in
writing, if any of the applications for prior approval referred to in
Section 5.4(b) are denied, and the time period for appeals and requests for
reconsideration has run;
e. at any time prior to the Effective Date, by either party hereto in
writing, if the Regional Acceptance Stockholders, when their vote is taken
thereon, do not approve the Merger contemplated herein;
f. at any time following October 31, 1996, by either party hereto in
writing, if the Effective Date has not occurred by the close of business on
such date, and the party giving the notice is not in breach of any of its
representations, warranties, covenants or undertakings herein;
g. at any time prior to May 31, 1996 by SNC in writing if SNC
determines in good faith, after the performance of its due diligence, that
the financial condition, business or prospects of Regional Acceptance are
materially adversely different from what was reasonably expected by SNC;
provided that SNC shall inform Regional Acceptance prior to such
termination as to the reasons for SNC's determination; and, provided
further, that this Section 7.1(g) shall not limit in any way the due
diligence investigation of Regional Acceptance which SNC may perform or
otherwise affect any other rights which SNC has after the date hereof under
the terms of this Agreement;
h. on the Closing Date, by SNC in writing if the Closing Value of SNC
Common Stock as determined pursuant to Section 2.7 shall be less than
$24.00 per share and the parties have not been able to renegotiate a
mutually agreeable Exchange Ratio;
i. on the Effective Date, by Regional Acceptance in writing if the
Closing Value of SNC Common Stock as determined pursuant to Section 2.7
shall be more than $32.00 per share and the parties have not been able to
renegotiate a mutually agreeable Exchange Ratio;
j. prior to the approval of the Merger by the Regional Acceptance
Stockholders, by Regional Acceptance in writing, if its Board of Directors
fails to make or withdraws or modifies its recommendation to the Regional
Acceptance Stockholders that they approve the Merger, but only if the Board
of Directors of Regional Acceptance determines in good
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faith, after consultation with its legal and financial advisors, that such
action is necessary in order for the Board of Directors to comply with
their duties as directors to the Regional Acceptance Stockholders under
applicable law; and
k. at any time prior to 5:00 P.M. local time in Greenville, North
Carolina, on June 7, 1996, or at such later time and date as may be
mutually agreed, by SNC in writing if SNC has not received, or determines
in good faith that it will not be able to receive, indemnification
agreements from all of the directors and officers of Regional Acceptance
pursuant to which the Regional Acceptance directors and officers agree (i)
to indemnify SNC for all losses and expenses up to an aggregate of
$4,000,000 (reducing at the end of two years to the greater of $2,000,000
or the amount of any pending claims up to $4,000,000) relating to breaches
of representations, warranties, covenants and obligations of Regional
Acceptance under this Agreement and for third party claims relating to
operations of Regional Acceptance prior to the Closing Date and (ii) to
deposit in escrow, to secure such indemnification arrangements, shares of
SNC Common Stock to be issued by SNC to the directors and officers of
Regional Acceptance in the Merger with an initial aggregate value of
$4,000,000 based upon the Closing Value per share and to maintain in escrow
shares of SNC Common Stock and/or cash with an aggregate value at all times
equal to $4,000,000, reducing at the end of two years to an aggregate value
equal to the greater of $2,000,000 or the amount of any pending claims up
to $4,000,000, in each case based on the then current market value of SNC
Common Stock; with such indemnity obligations and escrow to terminate
(except with respect to any claims then pending) on the fourth anniversary
of the Closing Date; and all on terms and conditions mutually satisfactory
to SNC and the directors and officers of Regional Acceptance. The
provisions of this Section 7.1(k) shall not limit in any way the due
diligence investigation of Regional Acceptance which SNC may perform or
otherwise affect any other rights which SNC has after the date of the
Reorganization Agreement.
7.2 EFFECT OF TERMINATION
In the event this Agreement or the Plan of Merger is terminated pursuant to
Section 7.1, both this Agreement and the Plan of Merger shall become void and
have no effect, except that (i) the provisions hereof relating to
confidentiality and expenses set forth in Sections 5.7 and 8.1, respectively,
shall survive any such termination and (ii) a termination pursuant to Section
7.1(b) shall not relieve the breaching party from liability for an uncured
breach of the covenant or agreement giving rise to such termination.
7.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Agreement or the Plan
of Merger or in any instrument delivered pursuant hereto or thereto shall expire
on, and be terminated and extinguished at, the Effective Date, other than
covenants that by their terms are to 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 SNC or Regional Acceptance (or
any director, officer or controlling person thereof) of any defense at law or in
equity which otherwise would be available against the claims of any person,
including, without limitation, any stockholder or former stockholder of either
SNC or Regional Acceptance, or so as to extinguish the obligation of SNC to
cause the Merger Consideration to be made available to the Regional Acceptance
Stockholders as provided herein (which obligation, after the Effective Date, may
be enforced directly by the Regional Acceptance Stockholders), the aforesaid
representations, warranties and covenants being material inducements to
consummation by SNC and Regional Acceptance of the transactions contemplated
herein.
7.4 WAIVER
Except with respect to any required regulatory approval, each party hereto,
by written instrument signed by an executive officer of such party, may at any
time (whether before or after approval of the Agreement and the Plan of Merger
by the Stockholders of Regional Acceptance) extend the time for the performance
of any of the obligations or other acts of the other party hereto and may waive
(i) any inaccuracies of the other party in the representations or warranties
contained in this Agreement, the Plan of Merger or any document delivered
pursuant hereto or thereto, (ii) compliance with any of the covenants,
undertakings or agreements of the other party, or satisfaction of any of the
conditions precedent to its obligations, contained herein or in the Plan of
Merger, or (iii) the performance by the other party of any of its obligations
set out herein or therein; provided that no such extension or waiver, or
amendment or supplement pursuant to Section 7.5, executed after approval by the
Stockholders of Regional Acceptance of this Agreement and the Plan of Merger
shall reduce either the number of shares of SNC Common Stock into which each
share of Regional Acceptance common Stock shall be converted in the Merger or
the payment terms for fractional interests.
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<PAGE>
7.5 AMENDMENT OR SUPPLEMENT
This Agreement and the Plan of Merger may be amended or supplemented at any
time in writing by mutual agreement of SNC and Regional Acceptance, subject to
the proviso in Section 7.4.
ARTICLE VIII
MISCELLANEOUS
8.1 EXPENSES
Each party hereto shall bear and pay all costs and expenses incurred by it
in connection with the transactions contemplated by this Reorganization
Agreement, including fees and expenses of its own financial consultants,
accountants and counsel.
8.2 ENTIRE AGREEMENT
This Agreement and the Option Agreement 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 Agreement and the Option Agreement shall inure
to the benefit of and be binding upon the parties hereto and thereto and their
respective successors. Nothing in this Agreement or the Option Agreement is
intended to confer upon any party, other than the parties hereto and thereto,
and their respective successors, any rights, remedies, obligations or
liabilities, except for rights conferred upon holders of Stock Options in
Section 2.10, affiliates of Regional Acceptance in Section 5.11, persons
indemnified pursuant to Section 5.16, and persons receiving the Merger
Consideration pursuant to Section 7.3.
8.3 NO ASSIGNMENT
Neither of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person, except upon the prior written consent
of the other party.
8.4 NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
nationally recognized overnight express or by facsimile transmission, addressed
or directed as follows:
If to Regional Acceptance:
Regional Acceptance Corporation
3004 South Memorial Drive
Greenville, North Carolina 27834
Attention: Robert D. Barry
Fax No.: 919-355-3827
With a required copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
Attn: J. Norfleet Pruden, III
Suite 4200, 100 North Tryon Street
Charlotte, North Carolina 28202-4006
Fax No.: 704-331-7598
If to SNC:
Southern National Corporation
200 West Second Street
Winston-Salem, North Carolina 27101
Attention: Scott E. Reed
Fax No.: 910-770-1659
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<PAGE>
With a required copy to:
Womble Carlyle Sandridge & Rice
Post Office Drawer 84
Winston-Salem, North Carolina 27102
Attention: William A. Davis, II
Fax No.: 910-733-8364
Any party may by notice change the address to which notice or other
communications to it are to be delivered or mailed.
8.5 CAPTIONS
The captions contained in this Agreement are for reference only and are not
part of this Agreement.
8.6 COUNTERPARTS
This 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.
8.7 GOVERNING LAW
This 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, except to the extent federal law may
be applicable.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed in counterparts by their duly
authorized officers, all as of the day and year first above written.
SOUTHERN NATIONAL CORPORATION
By /s/ John A. Allison IV
Title: Chairman and Chief Executive
Officer
REGIONAL ACCEPTANCE CORPORATION
By /s/ William R. Stallings, Sr.
Title: President and Chief Executive
Officer
Each of William R. Stallings, Sr. and Dr. Ledyard E. Ross, by his signature
below, hereby personally consents to and agrees to be bound by his undertakings
in Sections 3.21 and 5.15 of the foregoing Agreement and Plan of Reorganization.
This the 29th day of March, 1996.
/s/ William R. Stallings, Sr.
William R. Stallings, Sr.
/s/ Dr. Ledyard E. Ross
Dr. Ledyard E. Ross
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<PAGE>
ANNEX A
ARTICLES OF MERGER
OF
SNC ACQUISITION CORP.
INTO
REGIONAL ACCEPTANCE CORPORATION
Pursuant to the provisions of Section 55-11-05 of the General Statutes of
North Carolina, Regional Acceptance Corporation (the "Surviving Corporation")
hereby submits these Articles of Merger for the purpose of merging SNC
Acquisition Corp. (the "Merging Corporation") into the Surviving Corporation
(the "Merger"):
I.
The following Plan of Merger was duly approved in the manner prescribed by
law by each of the corporations participating in the merger on the
day of , 1996:
1. The name of the corporation proposing to merge is SNC
Acquisition Corp. (the "Merging Corporation"), a North Carolina
corporation which is a wholly-owned subsidiary of Southern National
Corporation ("SNC"); and the name of the corporation into which the
Merging Corporation proposes to merge is Regional Acceptance
Corporation, a North Carolina corporation (the "Surviving
Corporation"). The Merging Corporation and Surviving Corporation are
hereinafter referred to collectively as the "Constituent
Corporations."
2. The name of the Surviving Corporation shall be Regional
Acceptance Corporation.
3. Until the effective time of the Merger (the "Effective Time"),
each of the Constituent Corporations shall continue to conduct its
business without material change and shall not make any distribution
or other disposition of assets, capital or surplus, except in the
ordinary course of business.
4. As of the Effective Time, the Merging Corporation's
liabilities and assets of every nature shall become those of the
Surviving Corporation by operation of law.
5. Each share of common stock of the Merging Corporation issued
and outstanding immediately preceding the Effective Time shall, as of
the Effective Time, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and exchanged for
one share of common stock of the Surviving Corporation. Each share of
common stock of the Surviving Corporation issued and outstanding
immediately preceding the Effective Time shall, as of the Effective
Time, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into and exchanged for * shares of
common stock of SNC plus cash in lieu of any fractional shares in an
amount equal to such fraction multiplied by $ * per share.
6. After the Effective Time, each holder of shares of the common
stock of the Surviving Corporation issued and outstanding immediately
preceding the Effective Time shall surrender the certificate or
certificates representing such shares to SNC, and shall promptly upon
surrender receive in exchange therefor (i) a certificate or
certificates for the shares of common stock of SNC provided for in
paragraph 5 of this Plan of Merger to the maximum extent that the
exchange can be made in whole shares of SNC, and (ii) cash to the
extent of any fractional share. The certificate or certificates so
surrendered shall be duly endorsed as SNC may require. SNC shall not
be obligated to deliver the certificate or certificates to which any
former holder of common stock of the Surviving Corporation is entitled
as a result of the Merger until such holder surrenders the certificate
or certificates representing the shares of the common stock of the
Surviving Corporation for exchange as provided in this paragraph 6 or
in default thereof, an appropriate Affidavit of Loss and Indemnity
Agreement or bond or both as may be required in each case by SNC.
After the Effective Time, each outstanding certificate representing
shares of common stock of the Surviving Corporation immediately
preceding to the Effective Time shall be deemed for all corporate
purposes (other than the payment of dividends and other distributions
to which the former shareholders of the Surviving Corporation may be
* To be completed to reflect the applicable amounts determined pursuant to
Section 2.7 of the Amended and Restated Agreement and Plan of Merger to which
this Annex A is attached.
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<PAGE>
entitled) to evidence only the right of the holder thereof to
surrender such certificate and receive the requisite number of shares
of common stock of SNC in exchange therefor as provided in this Plan
of Merger.
7. The Articles of Incorporation of the Surviving Corporation, as
presently constituted, shall continue as the Articles of Incorporation
of the Surviving Corporation, without change.
II.
With respect to the Surviving Corporation, Shareholder approval was
required for the Merger, and the Plan of Merger was approved by the shareholders
as required by Chapter 55 of the North Carolina General Statutes.
With respect to the Merging Corporation, Shareholder approval was required
for the Merger, and the Plan of Merger was approved by the shareholders as
required by Chapter 55 of the North Carolina General Statutes.
III.
The Merger shall become effective at 12:01 A.M. on September 1, 1996.
This the day of , 1996.
REGIONAL ACCEPTANCE CORPORATION
By:
Title:
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APPENDIX II
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN RESTRICTIONS CONTAINED HEREIN.
OPTION AGREEMENT
This OPTION AGREEMENT, dated as of the 29th day of March, 1996, between
SOUTHERN NATIONAL CORPORATION ("SNC"), a North Carolina corporation, and
REGIONAL ACCEPTANCE CORPORATION ("Regional Acceptance"), a North Carolina
corporation;
R E C I T A L S:
The Boards of Directors of SNC and Regional Acceptance have approved an
Agreement and Plan of Reorganization (the "Reorganization Agreement"), dated as
of March 29, 1996, between SNC and Regional Acceptance, providing for the merger
of SNC Acquisition Corp., a subsidiary of SNC, with and into Regional Acceptance
(the "Merger"), which Reorganization Agreement has been executed by the parties
concurrently with this Agreement. As a condition to SNC's execution of the
Reorganization Agreement, and in consideration thereof, Regional Acceptance has
agreed to grant to SNC the option set forth herein.
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. DEFINITIONS. Capitalized terms defined in the Reorganization Agreement
and used herein shall have the same meanings as in the Reorganization Agreement.
2. GRANT OF OPTION. Regional Acceptance hereby grants to SNC an option (the
"Option") to purchase up to 2,986,399 shares of authorized but unissued shares
of Regional Acceptance Common Stock at a price of $10.21 per share (the
"Exercise Price") payable in cash as provided in Section 4; provided, however,
that such number of shares shall be reduced if and to the extent necessary so
that the number of shares for which this Option is exercisable shall not exceed
19.9% of the issued and outstanding Regional Acceptance Common Stock, as of the
date hereof. The number of shares of Regional Acceptance Common Stock that may
be received upon the exercise of the Option is subject to adjustment as set
forth herein.
3. EXERCISE OF OPTION.
(a) Subject to compliance with applicable law and regulations, SNC may
exercise the Option, in whole or in part, at any time or from time to time
following the occurrence of a Purchase Event (as defined below) and prior to the
occurrence of a Termination Event (as defined below).
(b) (i) As used herein, "Purchase Event" shall mean when:
(A) Regional Acceptance or any of the Subsidiaries shall have
authorized, recommended, proposed or publicly announced an intention to
authorize, recommend or propose a transaction with a person (other than SNC
or its affiliates) to, or entered into an agreement with a person (other
than SNC or its affiliates) to: (a) effect a merger or consolidation with,
or enter into any similar business combination with, Regional Acceptance or
any of the Subsidiaries, (b) sell, lease or otherwise dispose of the assets
of Regional Acceptance to such person aggregating 10% or more of the
consolidated assets of Regional Acceptance and the Subsidiaries (other than
a sale of loan receivables in a financing transaction), or (c) issue, sell
or otherwise dispose of to such person (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing more than 10 percent of the voting power of Regional
Acceptance or any of the Subsidiaries; or
(B) any person other than William R. Stallings, Sr., Dr. Ledyard E.
Ross their estates or the beneficiaries of their estates after their
respective deaths, SNC or any of its Affiliates shall have acquired
beneficial ownership of more than 10 percent of the outstanding shares of
Regional Acceptance Common Stock; or any person shall have merged,
consolidated with or consummated a similar transaction with Regional
Acceptance or any person shall have purchased, leased or otherwise acquired
10% of more of Regional Acceptance's assets (other than a sale of loan
receivables in a financing transaction); or
(C) a bona fide proposal is made by any person (other than SNC or its
affiliates) by public announcement or written communication that is or
becomes the subject of public disclosure, or disclosure in an application
to any federal or state regulatory authority, to (a) acquire, merge or
consolidate with, or enter into any similar transaction with Regional
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Acceptance, (b) purchase, lease or otherwise acquire 10% or more of the
assets of Regional Acceptance (other than a sale of loan receivables in a
financing transaction), or (c) purchase or otherwise acquire (including by
way of tender offer, merger, consolidation, share exchange, tender or
exchange offer or any similar transaction) securities representing more
than 10 percent of the voting power of Regional Acceptance;
(ii) A "Specified Covenant" shall mean any of Regional Acceptance's
covenants or agreements provided in the Reorganization Agreement.
(iii) The term "person" shall have the meaning specified in Section
3(a)(9), and "beneficial ownership" shall have the meaning specified under
Section 13(d)(3), of the Exchange Act.
(c) Regional Acceptance shall notify SNC promptly in writing of the
occurrence of any transaction, offer or event giving rise to a Purchase Event.
(d) In the event SNC wishes to exercise the Option, it shall send to
Regional Acceptance a written notice (an "Exercise Notice," the date of which
being herein referred to as the "Notice Date") specifying (i) the total number
of shares SNC will purchase pursuant to such exercise, and (ii) a place and date
not earlier than three business days nor later than 20 business days from the
Notice Date for the closing of such purchase with respect to such exercise (the
"Option Closing Date"); provided that if the closing of the purchase and sale
pursuant to the Option cannot be consummated by reason of any applicable
judgment, decree, order, law or regulation, the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which
such restriction on consummation has expired or been terminated; and provided
further, without limiting the foregoing, if prior notification to or approval of
any federal or state regulatory agency is required in connection with such
purchase, SNC, and Regional Acceptance if required by applicable law, 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 the last
required notification period has expired or been terminated or such approvals
have been obtained and any requisite waiting periods shall have passed.
(e) The Option shall expire and terminate, to the extent not previously
exercised, upon the earliest of (a "Termination Event"):
(i) the Effective Time of the Merger;
(ii) the termination of the Reorganization Agreement, other than a
termination based upon, following or in connection with either (A) a
willful and material breach by Regional Acceptance of a Specified Covenant
(as defined above) or (B) the failure of Regional Acceptance to obtain
shareholder approval of the transactions contemplated by the Reorganization
Agreement by the vote required under applicable law; or
(iii) 12 months after the first occurrence of a Purchase Event; or
(iv) 36 months after the date hereof.
(f) Notwithstanding the termination of the Option, SNC shall be entitled to
purchase any shares with respect to which it has exercised the Option in
accordance with the terms hereof prior to the termination of the Option. The
termination of the Option shall not affect any rights hereunder which by their
terms extend beyond the date of such termination.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Option Closing Date, SNC shall pay to Regional Acceptance the
aggregate purchase price for the shares being purchased on that Option Closing
Date in immediately available funds by a wire transfer to a financial
institution designated by Regional Acceptance.
(b) At each closing relating to an exercise of the Option, simultaneously
with the delivery of cash by SNC as provided in subsection (a) with respect to
the Option, Regional Acceptance shall deliver to SNC a certificate or
certificates representing the number of shares purchased by SNC, and SNC shall
deliver to Regional Acceptance 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 and providing such undertakings and
representations as necessary for the issuance and sale of such shares to be
exempt from registration under applicable securities laws.
5. REPRESENTATIONS. Regional Acceptance hereby represents and warrants to,
and covenants with, SNC as follows:
(a) Regional Acceptance has all requisite corporate power and authority to
enter into this Option Agreement and, subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this
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Option Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Regional Acceptance. This Option Agreement has been duly executed and delivered
by Regional Acceptance and constitutes a valid and binding obligation of
Regional Acceptance, enforceable in accordance with its terms.
(b) Regional Acceptance has taken all necessary corporate action to
authorize and reserve for issuance the full number of shares of Regional
Acceptance Common Stock issuable upon exercise of the Option, and shall continue
to reserve such shares until the Option is exercised or until this Agreement is
terminated as provided herein.
(c) 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 and shall be delivered free and clear of
all liens, claims, charges and encumbrances of any kind or nature whatsoever,
including any preemptive rights of any shareholder of Regional Acceptance, but
subject to restrictions on transfer imposed by applicable securities laws.
(d) The execution and delivery of this Option Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with or
result in any violation of any provision of the Articles of Incorporation or
By-laws of Regional Acceptance or any Subsidiary of Regional Acceptance or,
subject to obtaining any approvals or consents contemplated hereby, result in
any violation of any loan or credit agreement, note, mortgage, indenture, lease,
benefit plan or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Regional Acceptance or any Subsidiary of Regional
Acceptance or their respective properties or assets which violation would,
individually or in the aggregate, have a Material Adverse Effect.
(e) The Board of Directors of Regional Acceptance having approved this
Agreement and the consummation of the transactions contemplated hereby, the
provisions of the Shareholder Protection Act and the Control Share Acquisition
Act do not and will not apply to this Option Agreement or the purchase of shares
of Regional Acceptance Common Stock pursuant to this Option Agreement.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. In the event of any
change in the outstanding Regional Acceptance Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, exchanges of
shares or the like, the number of shares subject to the Option and its purchase
price per share shall be adjusted appropriately so that the Option will entitle
the holder thereof to acquire at the Exercise Price all of the shares or other
securities, property, or rights to which ownership of the underlying shares of
Regional Acceptance Common Stock would have entitled the holder had they been
outstanding immediately prior to such change. In the event that any shares of
Regional Acceptance Common Stock are issued after the date of this Agreement
other than in a transaction described in the first sentence of this Section 6 or
pursuant to the exercise of the Option, the number of shares subject to the
Option shall be adjusted so that, immediately after such issuance, the number of
such shares (together with the number of shares previously issued under the
Option) equals 19.9 percent (subject to reduction as provided in Section 2
hereof) of the number of the then-outstanding shares of Regional Acceptance
Common Stock. Nothing contained in this Section 6 shall be deemed to authorize
Regional Acceptance to breach any provision of the Reorganization Agreement or
the Plan of Merger.
7. REGISTRATION RIGHTS. Regional Acceptance shall, if requested by SNC at
any time and from time to time within three years of the first exercise of the
Option, as expeditiously as possible, prepare and file up to two registration
statements under the Securities Act if such registration is necessary in order
to permit the sale or other disposition of any or all shares or securities that
have been acquired by or are issuable to SNC upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by SNC,
including a "shelf" registration statement under Rule 415 under the Securities
Act or any successor provision. Regional Acceptance shall use its best efforts
to qualify such shares or other securities under any applicable state securities
laws, to cause each such registration statement to become effective, to obtain
all consents or waivers of other parties which are required therefor, and to
keep such registration statement effective for such period not in excess of 360
days from the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. The obligations
of Regional Acceptance hereunder to file a registration statement and to
maintain its effectiveness may be suspended for one or more periods of time not
exceeding 60 days in the aggregate if the Board of Directors of Regional
Acceptance shall have determined that the filing of such registration statement
or the maintenance of its effectiveness would require disclosure of nonpublic
information that would materially and adversely affect Regional Acceptance. Any
registration statement prepared and filed under this Section 8, and any sale
covered thereby, shall be at Regional Acceptance's expense except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of SNC's counsel related thereto. SNC shall provide all
information reasonably requested by Regional Acceptance for inclusion in any
registration statement to be filed hereunder. If during the time periods
referred to in
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the first sentence of this Section 8 Regional Acceptance effects a registration
under the Securities Act of Regional Acceptance Common Stock for its own account
or for any other stockholders of Regional Acceptance (other than on Form S-4 or
Form S-8, or any successor form), it shall allow SNC the right to participate in
such registration, and such participation shall not affect the obligation of
Regional Acceptance to effect two registration statements for SNC under this
Section 8; provided that, if the managing underwriters of such offering advise
Regional Acceptance in writing that in their opinion the number of shares of
Regional Acceptance Common Stock requested to be included in such registration
exceeds the number which can be sold in such offering, Regional Acceptance shall
include the shares requested to be included therein by SNC only to the maximum
extent such managing underwriter determines to be feasible. In connection with
any registration pursuant to this Section 8, Regional Acceptance and SNC shall
provide each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification and contribution in
connection with such registration.
9. LISTING. If Regional Acceptance Common Stock or any other securities to
be acquired upon exercise of the Option are then listed on the NASDAQ National
Market System, Regional Acceptance, upon the request of SNC, will promptly file
an application to list the shares of Regional Acceptance Common Stock or other
securities to be acquired upon exercise of the Option on the NASDAQ National
Market System and will use its best efforts to obtain approval of such listing
as soon as practicable.
10. DIVISION OF OPTION. This Option Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of SNC, upon
presentation and surrender of this Option Agreement at the principal office of
Regional Acceptance for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase in the aggregate the same
number of shares of Regional Acceptance Common Stock purchasable hereunder. The
terms "Agreement" and "Option" as used herein include any other Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Regional Acceptance of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Regional Acceptance will execute and deliver a new
Agreement of like tenor and date. Any such new Agreement executed and delivered
shall constitute an additional contractual obligation on the part of Regional
Acceptance, whether or not the Agreement so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
11. 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, 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 Regional Acceptance Common Stock provided in Section 2
hereof (as adjusted pursuant to Section 6 hereof), it is the express intention
of Regional Acceptance to allow the holder to acquire such lesser number of
shares as may be permissible, without any amendment or modification hereof.
12. 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
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 Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors. Nothing in this 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 Agreement, except as expressly
provided herein.
(c) ASSIGNMENT. Neither of the parties hereto may assign any of its rights
or obligations under this Agreement to any other person, without the express
written consent of the other party, except that SNC may assign in whole or in
part the Option and other benefits and obligations hereunder without limitation
to any of its wholly owned subsidiaries and SNC may assign in whole or in part
the Option and other benefits and obligations hereunder without limitation if a
Purchase Event has occurred and SNC shall have delivered to Regional Acceptance
a copy of a letter from the staff of the Commission, or an opinion of counsel,
in form and substance reasonably satisfactory to Regional Acceptance, to the
effect that such Assignment will not violate the requirements of the Securities
Act; provided that prior to any such assignment, SNC shall give written notice
of the proposed assignment to Regional Acceptance, and within 24 hours of
receipt of such notice of a bona fide
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proposed assignment, Regional Acceptance may purchase the Option at a price and
on other terms at least as favorable to SNC as that set forth in the notice of
assignment.
(d) NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent nationally recognized overnight express or by facsimile transmission,
addressed or directed as follows:
If to Regional Acceptance:
Regional Acceptance Corp.
3004 South Memorial Drive
Greenville, North Carolina 27834
Attention: Robert D. Barry
919-355-3827
With a required copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
Attn: J. Norfleet Pruden, III
Suite 4200, 100 North Tryon Street
Charlotte, North Carolina 28202-4006
Fax No.: 704-331-7598
If to SNC:
Southern National Corporation
200 West Second Street
Winston-Salem, North Carolina 27893
Attention: Scott E. Reed
Fax No.: 910-770-1659
With a required copy to:
Womble Carlyle Sandridge & Rice
Post Office Drawer 84
Winston-Salem, North Carolina 27102
Attention: William A. Davis, II
Fax No.: 910-733-8364
Any party may by notice change the address to which notice or other
communications to it are to be delivered or mailed.
(e) COUNTERPARTS. This 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 Agreement by Regional
Acceptance and that this Agreement may be enforced by SNC through injunctive or
other equitable relief.
(g) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without regard to
principles of conflicts of laws thereof.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first written above.
SOUTHERN NATIONAL CORPORATION
By: /s/ John A. Allison IV
Title: Chairman and Chief Executive
Officer
REGIONAL ACCEPTANCE CORPORATION
By: /s/ William R. Stallings, Sr.
Title: President and Chief Executive
Officer
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<PAGE>
APPENDIX III
July , 1996
Board of Directors
Regional Acceptance Corporation
3004 South Memorial Drive
Greenville, NC 27834
Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the holders of common stock, no par value
("Company Common Stock"), of Regional Acceptance Corporation (the "Company") of
the consideration to be received by such holders in connection with the proposed
merger (the "Merger") of the Company with a wholly owned subsidiary of Southern
National Corporation ("SNC") pursuant to an Agreement and Plan of Reorganization
(the "Merger Agreement"), between the Company and SNC. Upon the effectiveness of
the Merger, each issued and outstanding share of Company Common Stock (other
than shares owned by stockholders who properly exercise dissenters' rights) will
be converted into and represent the right to receive .3929 (the "Exchange
Ratio") of a share of the common stock of SNC, par value $5.00 per share ("SNC
Common Stock") (the "Merger Consideration"); PROVIDED, HOWEVER, that if the
average closing price per share of SNC Common Stock for the ten business days
immediately preceding the fifth calendar day preceding the date on which the
stockholders of the Company vote to approve the Merger (the "Closing Value") is
(i) less than $26.00 and greater than or equal to $24.00, the Exchange Ratio
will be equal to $10.21 divided by the Closing Value, (ii) greater than $30.00
and less than or equal to $32.00, the Exchange Ratio will be equal to $11.79
divided by the Closing Value or (iii) less than $24.00 or greater than $32.00,
the Exchange Ratio will be subject to renegotiation.
In connection with rendering our opinion, we have reviewed and analyzed,
among other things, the following: (i) the Merger Agreement; (ii) certain
publicly available information concerning the Company and SNC, including the
Annual Reports on Form 10-K of the Company for each of the years in the three
year period ended December 31, 1995, and of SNC for each of the years in the
three year period ended December 31, 1995, the Quarterly Reports on Form 10-Q of
the Company and SNC for the quarter ended March 31, 1996, and the second quarter
earnings for SNC reported on Form 8-K of SNC dated July 12, 1996; (iii) certain
financial forecasts concerning the business and operations of the Company and
SNC that were prepared by management of the Company and SNC, respectively, and
(iv) certain publicly available information with respect to certain other
companies that we believe to be comparable in certain respects to the Company
and SNC and the trading markets for such other companies' securities. We have
also met with certain officers and employees of the Company and SNC to discuss
the foregoing, including the past and current business operations, financial
condition and prospects of the Company and SNC, as well as other matters we
believe relevant to our inquiry. We have also considered such other information,
financial studies, analyses, investigations and financial, economic and market
criteria that we deemed relevant.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided us or publicly available and have neither attempted
independently to verify nor assumed responsibility for verifying any of such
information. With respect to the financial projections of the Company and SNC,
we have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the Company's or SNC's, as
the case may be, management as to the future financial performance of the
Company or SNC, as the case may be, and we express no opinion with respect to
such forecasts or the assumptions on which they are based. We have not made or
obtained or assumed any responsibility for making or obtaining any independent
evaluations or appraisals of any of the assets (including properties and
facilities) or liabilities of the Company or SNC.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances, including, among others, the following: (i)
the historical and current financial position and results of operations of the
Company and SNC; (ii) the historical and current market for the equity
securities of the Company, SNC and certain other companies that we believe to be
comparable in certain respects to the Company or SNC; (iii) the nature and terms
of certain other acquisition transactions that we believe to be relevant; and
(iv) the current and historical relationships between the trading levels of the
Company Common Stock and SNC Common
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Stock. We have also taken into account our assessment of general economic,
market and financial conditions and our knowledge of the consumer finance
industry, as well as our experience in connection with similar transactions and
securities valuation generally. Our opinion necessarily is based upon conditions
as they exist and can be evaluated on the date hereof, and we asssume no
responsibility to update or revise our opinion based upon circumstance or events
occurring after the date hereof. Our opinion as expressed below does not imply
any conclusion as to the likely trading range for SNC Common Stock following the
consummation of the Merger, which may vary depending upon, among other factors,
changes in interest rates, dividend rates, market conditions, general economic
conditions and other factors that generally influence the price of securities.
Our opinion does not address the Company's underlying business decision to
effect the Merger. Our opinion is directed only to the fairness, from a
financial point of view, of the Merger Consideration and does not constitute a
recommendation concerning how holders of Company Common Stock should vote with
respect to the Merger Agreement. Although Salomon did solicit third-party offers
to acquire the Company approximately nine months prior to the date hereof and
had subsequent discussions with certain of the potential acquirors, Salomon was
not requested to, and did not, solicit third-party offers to acquire all or any
part of the Company immediately preceding or in connection with the process
resulting in the proposed Merger nor did Salomon participate in the discussions
or negotiations with respect to the proposed Merger. Our opinion does not
address the fairness, from a financial point of view, of any Exchange Ratio that
may be agreed upon by the Company and SNC pursuant to the provision of the
Merger Agreement that provides for renegotiation of the Exchange Ratio in the
event that the Closing Value is less than $24.00 or greater than $32.00. Our
opinion also does not address the decision of the directors and executive
officers of the Company to enter into an indemnification agreement with SNC or
give effect to any liabilities they may have incurred thereby.
In rendering our opinion we have assumed that in the course of obtaining
the necessary regulatory approvals for the Merger no restrictions will be
imposed that would have a material adverse affect on the contemplated benefits
of the Merger to the Company following the Merger. We understand that the Merger
will qualify as a tax-free reorganization under the Internal Revenue Code and
that, for accounting purposes, the Merger will be accounted for as a pooling of
interests.
As you are aware, we will receive a fee from the Company for delivery of
this fairness opinion, the payment of which is contingent upon consummation of
the Merger. In addition, in the ordinary course of our business, we may actively
trade the securities of the Company and SNC for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration to be received by the holders of the
Company Common Stock is fair to such holders from a financial point of view.
Very truly yours,
SALOMON BROTHERS INC
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APPENDIX IV
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES.
(SECTION MARK)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 or 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.
(SECTION MARK)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) or (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 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;
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(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.
(SECTION MARK) 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenter's 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.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.
(SECTION MARK) 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.
(SECTION MARK) 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.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
(SECTION MARK) 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;
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(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.
(SECTION MARK) 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 cancelled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this Article.
(SECTION MARK) 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 cancelled or modified by the taking of the proposed corporate action.
(SECTION MARK) 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;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
(SECTION MARK) 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.
(SECTION MARK) 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;
IV-3
<PAGE>
(2) The corporation fails to make payment 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.
PART 3. JUDICIAL APPRAISAL OF SHARES.
(SECTION MARK) 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.
(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 a 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.
(SECTION MARK) 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 benefited.
IV-4
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporation
Act contain specific provisions relating to indemnification of directors and
officers of North Carolina corporations. In general, such sections provide 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 by statute that the director or officer
meets a certain standard of conduct, provided when a director or officer is
liable to the corporation or is adjudged liable on the basis that personal
benefit was improperly received by him, the corporation may not indemnify him. A
director or officer of a corporation who is a party to a proceeding may also
apply to a court for indemnification, and the court may order indemnification
under certain circumstances set forth in statute. A corporation may, in its
articles of incorporation or bylaws or by contract or resolution of the board of
directors, provide indemnification in addition to that provided by statute,
subject to certain conditions.
SNC's bylaws provide for the indemnification of any director or officer of
SNC against liabilities and litigation expenses arising our of his status as
such, excluding: (i) any liabilities or litigation expenses relating to
activities which were at the time taken known or believed by such person to be
clearly in conflict with the best interest of SNC and (ii) that portion of any
liabilities or litigation expenses with respect to which such person is entitled
to receive payment under any insurance policy.
SNC's articles of incorporation provide for the elimination of the personal
liability of each director of SNC to the fullest extent permitted by law.
SNC maintains directors and officers liability insurance which, in general,
insures: (i) SNC's directors and officers against loss by reason of any of their
wrongful acts and (ii) SNC against loss arising from claims against the
directors and officers by reason of their wrongful acts, all subject to the
terms and conditions contained in the policy.
Certain rules of the Federal Deposit Insurance Corporation limit the
ability of certain depository institutions, their subsidiaries and their
affiliated depository institution holding companies to indemnify affiliated
parties, including institution directors. In general, subject to the ability to
purchase directors and officers liability insurance and to advance professional
expenses under certain circumstances, the rules prohibit such institutions from
indemnifying a director for certain costs incurred with regard to an
administrative or enforcement action commenced by any federal banking agency
which results in a final order or settlement pursuant to which the director is
assessed a civil money penalty, removed from office, prohibited from
participating in the affairs of an insured depository institution or required to
cease and desist from or take an affirmative action described in Section 8(b) of
the Federal Deposit Insurance Act (12 U.S.C. (section mark) 1818(b)).
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The folllowing documents are filed as exhibits to this registration
statement on Form S-4:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
2 Amended and Restated Agreement and Plan of Reorganization, dated as of May 30, 1996, between Regional Acceptance
Corporation and Southern National Corporation
5 Opinion of Womble Carlyle Sandridge & Rice, PLLC
8 Opinion of Womble Carlyle Sandridge & Rice, PLLC
23(a) Consent of Womble Carlyle Sandridge & Rice, PLLC (Included in Exhibits 5 and 8)
23(b) Consent of Arthur Andersen LLP
23(c) Consent of Coopers & Lybrand L.L.P.
23(d) Consent of Salomon Brothers Inc
24 Power of Attorney (On signature page)
99 Form of Regional Acceptance Corporation Proxy Card
</TABLE>
(b) Financial statement schedules: Not applicable.
ITEM 22. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
II-1
<PAGE>
(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.
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.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned registrant hereby undertakes as follows: That prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
D. The registrant undertakes that every prospectus (i) that is filed
pursuant to Paragraph (C) 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 (Sec. 230.415 of this chapter),
will be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
E. 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.
F. 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.
G. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Winston-Salem, State of North Carolina, on June
25, 1996.
SOUTHERN NATIONAL CORPORATION
By: JERONE C. HERRING
Name: Jerone C. Herring
Title: Executive Vice President and
Secretary
POWER OF ATTORNEY
Each of the undersigned, being a director and/or officer of Southern
National Corporation (the "Company"), hereby nominates, constitutes, and
appoints John A. Allison, Scott E. Reed, and Jerone C. Herring, or any one of
them severally, to be his or her true and lawful attorney-in-fact and to sign in
his or her name and on his or her behalf in any and all capacities stated below,
and to file with the Securities and Exchange Commission ( the "Commission"), any
and all amendments, including post-effective amendments, to this Registration
Statement, making such changes in the Registration Statement as such
attorney-in-fact deems appropriate, and generally to do all such things on his
or her behalf in any and all capacities stated below to enable the Company to
comply with the provisions of the Securities act of 1933, as amended, and all
requirements of the Commission.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-4 has been signed by the following persons
in the capacities indicated on June 25, 1996.
JOHN A. ALLISON IV
Name: John A. Allison IV
Title: Chairman of the Board and
Chief Executive Officer
(principal executive officer)
SHERRY A. KELLET
Name: Sherry A. Kellet
Title: Executive Vice President
and Controller (principal
accounting officer)
W.R. CUTHBERTSON, JR.
Name: W.R. Cuthbertson, Jr.
Title: Director
A.J. DOOLEY, SR.
Name: A.J. Dooley, Sr.
Title: Director
Name: Tom D. Efird
Title: Director
SCOTT E. REED
Name: Scott E. Reed
Title: Senior Executive Vice President
and Chief Financial Officer
(principal financial officer)
PAUL B. BARRINGER
Name: Paul B. Barringer
Title: Director
RONALD E. DEAL
Name: Ronald E. Deal
Title: Director
JOE L. DUDLEY, SR.
Name: Joe L. Dudley, Sr.
Title: Director
O. WILLIAM FENN, JR.
Name: O. William Fenn, Jr.
Title: Director
II-3
<PAGE>
PAUL S. GOLDSMITH
Name: Paul S. Goldsmith
Title: Director
ERNEST F. HARDEE
Name: Ernest F. Hardee
Title: Director
J. ERNEST LATHEM, M.D.
Name: J. Ernest Lathem, M.D.
Title: Director
JOSEPH A. MCALEER
Name: Joseph A. McAleer
Title: Director
DICKSON MCLEAN, JR.
Name: Dickson McLean, Jr.
Title: Director
L. GLENN ORR, JR.
Name: L. Glenn Orr, Jr.
Title: Director
RICHARD L. PLAYER, JR.
Name: Richard L. Player, Jr.
Title: Director
NIDO R. QUBEIN
Name: Nido R. Qubein
Title: Director
Name: L. Vincent Hackley
Title: Director
RICHARD JANEWAY, M.D.
Name: Richard Janeway, M.D.
Title: Director
Name: James H. Maynard
Title: Director
ALBERT O. MCCAULEY
Name: Albert O. McCauley
Title: Director
CHARLES E. NICHOLS
Name: Charles E. Nichols
Title: Director
O. WINNIETT PETERS
Name: O. Winniett Peters
Title: Director
C. EDWARD PLEASANTS, JR.
Name: C. Edward Pleasants, Jr.
Title: Director
A. TAB WILLIAMS, JR.
Name: A. Tab Williams, Jr.
Title: Director
II-4
Amended and Restated Agreement and Plan of Reorganization
[Included as Appendix I to the Proxy Statement/Prospectus included in
this Registration Statement]
<PAGE>
EXHIBIT 5
[Letterhead of Womble Carlyle Sandridge & Rice appears here]
July 18, 1996
Southern National Corporation
200 West Second Street
Winston-Salem, North Carolina 27012
Re: Registration Statement of Form S-4 with respect to Shares Issued
pursuant to the Amended and Restated Reorganization Agreement by and
between Southern National Corporation and Regional Acceptance
Corporation
Ladies and Gentlemen:
We have acted as counsel to Southern National Corporation (the "Company")
in connection with the registration by the Company of 6,600,000 shares of its
Common Stock, par value, $5.00 per share (the "Common Stock"), issuable pursuant
to the Amended and Restated Agreement and Plan of Reorganization, dated as of
March 29, 1996 and amended and restated as of May 30, 1996 (the "Reorganization
Agreement", by and between the Company and Regional Acceptance Corporation, a
North Carolina corporation ("RAC"), as set forth on the registration statement
on Form S-4 (the "Registration Statement") that is being filed on the date
hereof by the Company with the Securities and Exchange Commission pursuant to
the Securities act of 1933, as amended. This opinion is Exhibit 5 to the
Registration Statement. All capitalized terms not otherwise defined herein shall
have the meaning given to them in the Registration Statement.
In connection with the foregoing, we have examined such records, documents,
and proceedings as we have deemed relevant as a basis for the opinion expressed
herein, and we have relied upon an officer's certificate as to certain factual
matters.
Based on the foregoing, we are of the opinion that when (1) the
Registration Statement shall have been declared effective by order of the
Securities and Exchange Commission and (2) the shares of Common Stock have been
issued in accordance with the Reorganization Agreement and upon the terms and
conditions set forth in the Registration Statement, then the shares of Common
Stock will be legally issued, fully paid, and non-assessable.
We hereby consent to be named in the Registration Statement and in the
Proxy Statement/Prospectus as attorneys who passed upon the legality of the
shares of Common Stock and to the filing of a copy of this opinion as Exhibit 5
to the Registration Statement.
Sincerely,
WOMBLE CARYLYLE SANDRIDGE & RICE
A PROFESSIONAL LIMITED LIABILITY
COMPANY
Deborah H. Hartzog
<PAGE>
EXHIBIT 8
[Letterhead of Womble Carlyle Sandridge & Rice appears here]
July 18, 1996
Regional Acceptance Corporation
3004 South Memorial Drive
Greenville, NC 27834
Southern National Corporation
150 South Stratford Road
Winston-Salem, North Carolina 27104-4291
Re: Certain Federal Income Tax Consequences of Merger Provided for in the
Amended and Restated Agreement and Plan of Reorganization by and among
Regional Acceptance Corporation and Southern National Corporation
Dated as of May 30, 1996 (the "Agreement"); capitalized terms herein
have the meaning attributed to them in the Agreement
Gentlemen:
We have acted as counsel to Southern National Corporation ("SNC") and to
SNC Acquisition Corp., a North Carolina corporation formed as a wholly-owned,
transitory subsidiary of SNC for the purpose of effecting the Merger ("SNC
Acquisition"), in connection with a proposed transaction (the "Merger") in which
Regional Acceptance will become a wholly-owned subsidiary of SNC, and the
shareholders of Regional Acceptance (except for any dissenting Regional
Acceptance shareholders) will become shareholders of SNC.
Regional Acceptance will become a subsidiary of SNC through the Merger of
SNC Acquisition into Regional Acceptance pursuant to North Carolina law. In the
Merger, each outstanding share of Regional Acceptance Common Stock is to be
converted into a predetermined number of shares of SNC Common Stock, plus cash
in lieu of fractional shares. Regional Acceptance shareholders are entitled to
dissenters' rights with respect to the Merger. Each outstanding share of SNC
Acquisition stock will be converted into one share of Regional Acceptance Common
Stock in the Merger. Regional Acceptance Common Stock is the only class of
Regional Acceptance stock outstanding.
You have requested our opinion concerning certain federal income tax
consequences relating to the Merger. In giving this opinion, we have reviewed
the Agreement, the Registration Statement on Form S-4 filed by SNC under the
Securities Act of 1933 relating to the shares of SNC Common Stock to be issued
in the Merger (the "S-4"), and such other documents as we have considered
necessary. In addition, we have been provided with certificates dated July 17,
1996 (the "Tax Certificates") in which officers of Regional Acceptance and
officers of SNC make certain representations on behalf of Regional Acceptance
and SNC regarding the Merger. We assume those representations to be not only
statements of the signers' best information, but also currently true statements
of fact and statements of fact that will be true at the Effective Date, and we
rely thereon in rendering this opinion. We also assume that the Merger will be
consummated in accordance with the Agreement.
On the basis of the foregoing, we are of the opinion that (under existing
law) for federal income tax purposes:
a. The Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code.
b. No gain or loss will be recognized by SNC Acquisition or Regional
Acceptance by reason of the Merger.
c. No gain or loss will be recognized by the shareholders of Regional
Acceptance upon the exchange of Regional Acceptance Common Stock solely for
shares of SNC Common Stock in the Merger.
d. A shareholder who receives cash in lieu of a fractional share of
SNC Common Stock will recognize gain or loss as if the fractional share has
been received and then redeemed for cash.
e. The aggregate tax basis of the shares of SNC Common Stock received
(including any fractional share interest deemed received) by shareholders
who exchange all of their shares of Regional Acceptance Common Stock solely
for shares of SNC Common Stock in the Merger will be the same as the
aggregate tax basis of the shares of Regional Acceptance Common Stock
surrendered in exchange therefor.
<PAGE>
f. The holding period of the shares of SNC Common Stock received in
the Merger (including any fractional share interest deemed received) will
include the period during which the shares of Regional Acceptance Common
Stock surrendered in exchange therefor were held, provided such shares of
Regional Acceptance Common Stock were held as capital assets at the
Effective Date.
This opinion is limited to the effect of the income tax laws of the United
States of America and we express no opinion as to the laws of any jurisdiction
other than the United States of America. We express no opinion as to the United
States tax treatment of Regional Acceptance shareholders who are not United
States citizens or residents for federal tax purposes. Further, our opinion is
limited to the specific conclusions set forth above, and no other opinions are
expressed or implied. The shares of Regional Acceptance Common Stock and the
shareholders referred to herein do not include any stock rights, warrants or
options to acquire Regional Acceptance Common Stock or holders thereof. With
respect to the shares of Regional Acceptance Common Stock issued in the
acquisitions of the Insurance Companies as described in Section 5.9(f) of the
Agreement and holders to the extent thereof, the foregoing opinions assume that
such shares are not issued pursuant to the plan of reorganization between SNC
and Regional Acceptance for federal tax purposes, but rather are issued in
independent transactions, and that the shareholders of those Insurance Companies
become Regional Acceptance shareholders for all federal tax purposes.
The references to Code Sections and other authority above are not intended
to be complete citations of all relevant authority. Changes to the Code,
regulations, the rulings thereunder, or changes by the courts in the
interpretation of the authorities relied upon, may be applied retroactively and
may affect the opinion expressed herein.
The foregoing opinion is furnished to you solely in connection with the
above-described transaction and may not be relied on by any other person or
entity other than the addresses of this letter and the shareholders of Regional
Acceptance or used for any other purpose. Unless the prior written consent of
our firm is obtained, this opinion is not to be quoted or otherwise referred to
in any report, proxy statement, or registration statement, except as otherwise
required by law.
We consent to the use of this opinion as an exhibit to the S-4 and to the
reference to this firm under the captions "Summary -- The Merger -- Certain
Federal Income Tax Consequences" and "The Merger -- Certain Federal Income Tax
Consequences of the Merger" therein. In giving this consent, we do not admit
that we are within the category of person whose consent is required by section 7
of the Securities Act of 1933 or the rule and regulations promulgated thereunder
by the Securities and Exchange Commission.
Sincerely,
Jasper L. Cummings, Jr.
<PAGE>
EXHIBIT 23(B)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this S-4 registration statement of our reports dated January 18,
1996 (except with respect to the matter discussed in Note J to the consolidated
financial statements, as to which the date is February 28, 1996), included in
Southern National Corporation's Form 10-K for the year ended December 31, 1995,
and to all references to our firm included in this registration statement.
(Signature of Arthur Andersen
appears here)
Charlotte, North Carolina,
July 18, 1996.
<PAGE>
EXHIBIT 23(C)
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 February 1,
1996, on our audits of the consolidated financial statements of Regional
Acceptance Corporation as of December 31, 1995 and 1994, and for the years ended
December 31, 1995, 1994 and 1993, which report is included in Regional
Acceptance Corporation's Form 10-K for the fiscal year ended December 31, 1995.
We also consent to the reference to our firm under the caption "Experts."
(Signature of Coopers & Lybrand appears here)
Raleigh, North Carolina
July 18, 1996
<PAGE>
EXHIBIT 23(D)
CONSENT OF SALOMON BROTHERS INC
We hereby consent to the use of our name and the description of our opinion
letter, dated the date of the Proxy Statement/Prospectus referred to below,
under the caption "Opinion of the Financial Advisor" in, and to the inclusion of
such opinion letter as Appendix III to, the Proxy Statement/Prospectus of
Regional Acceptance Corporation, which Proxy Statement/Prospectus is part of the
Registration Statement on Form S-4 of Southern National Corporation. By giving
such consent we do not thereby admit that we are experts with respect to any
part of such Registration Statement within the meaning of the term "expert" as
used in, or that we come within the category of persons whose consent is
required under, the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
(Signature of Salomon Brothers Inc
appears here)
New York, New York
July 16, 1996
<PAGE>
EXHIBIT 99
REGIONAL ACCEPTANCE CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD AUGUST 23, 1996
The undersigned hereby appoints William R. Stallings, Sr. and Robert D.
Barry, and each or either of them, proxies, with full power of substitution,
with the powers the undersigned would possess if personally present, to vote, as
designated below, all shares of the Common Stock of the undersigned in Regional
Acceptance Corporation, a North Carolina corporation ("RAC"), at the Special
Meeting of Shareholders to be held on August 23, 1996, commencing at 10:00 a.m.,
local time, at the Ramada Inn, 203 S.W. Greenville Boulevard, Greenville, North
Carolina or at any adjournments or postponements thereof.
THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL SET FORTH BELOW UNLESS OTHERWISE
SPECIFIED. THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" SUCH PROPOSAL.
A proposal to approve the Amended and Restated Agreement and Plan of
Reorganization, dated as of March 29, 1996 and amended and restated as of
May 30, 1996, by and between RAC and Southern National Corporation, a North
Carolina corporation ("SNC"), and a related Plan of Merger, pursuant to
which SNC Acquisition Corp., a wholly-owned subsidiary of SNC, will merge
with and into RAC and each share of common stock of RAC, other than shares
held by dissenting shareholders, will be converted into the right to receive
.3929 shares of the common stock of SNC, subject to adjustment or
renegotiation in certain circumstances.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued and to be signed on reverse)
<PAGE>
(continued from other side)
In their discretion, the proxies are authorized to vote upon such other
matters incidental to the Special Meeting and such other business as may be
properly brought before the Special Meeting.
Receipt of the Notice of Special Meeting and accompanying Proxy
Statement/Prospectus is hereby acknowledged.
Please date, sign exactly as printed below, and return promptly in the
enclosed postage-paid envelope.
Dated: , 1996
(When signing as attorney, executor,
administrator, trustee, guardian,
etc., give title as such. If a joint
account, each joint owner should sign
personally.)
