<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 23, 1997
REGISTRATION NO. 333 -
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
BB&T CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NORTH CAROLINA 6060 56-0939887
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
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:
DOUGLAS A. MAYS WAYNE A. WHITHAM, JR.
WOMBLE CARLYLE SANDRIDGE & RICE, WILLIAMS, MULLEN, CHRISTIAN &
PLLC DOBBINS
3300 ONE FIRST UNION CENTER 1021 EAST CARY STREET
301 SOUTH COLLEGE STREET POST OFFICE BOX 1320
CHARLOTTE, NORTH CAROLINA 28202 RICHMOND, VIRGINIA 23218
----------------
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: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
----------------
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$5.00 per share(1).... 2,100,000 (2) $101,207,032(3) $1,448(4)
</TABLE>
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- -------------------------------------------------------------------------------
(1) Each share of the registrant's common stock includes one preferred share
purchase right.
(2) Not applicable.
(3) Computed in accordance with Rule 457(f) based on the average of the high
($24.125) and low ($24.125) sales price of the common stock of Virginia
First Financial Corporation on October 16, 1997 as reported on The Nasdaq
National Market.
(4) Pursuant to Rule 457(b), the registration fee has been reduced by an
amount equal to the fee of $29,221 paid upon the filing with the
Commission of the preliminary proxy materials of Virginia First Financial
Corporation on September 30, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
VIRGINIA FIRST FINANCIAL CORPORATION
FRANKLIN AND ADAMS STREETS, PETERSBURG, VIRGINIA 23803
OCTOBER 20, 1997
Dear Shareholders:
You are cordially invited to attend the annual meeting of shareholders (the
"Annual Meeting") of Virginia First Financial Corporation ("Virginia First"),
to be held at the Main Office of Virginia First Savings Bank, F.S.B., Corner
of Franklin and Adams Streets, Petersburg, Virginia on November 26, 1997 at
4:00 local time. At the Annual Meeting, you will be asked to consider and vote
on the Agreement and Plan of Reorganization, dated as of May 6, 1997 (the
"Reorganization Agreement"), by and among Virginia First, BB&T Corporation, a
North Carolina corporation ("BB&T"), and BB&T Financial Corporation of
Virginia, a Virginia corporation and wholly owned subsidiary of BB&T ("BB&T
Financial-VA"), and a related Plan of Merger (the "Plan of Merger"), pursuant
to which Virginia First will merge with and into BB&T Financial-VA (the
"Merger"), and each share of common stock of Virginia First ("Virginia First
Common Stock") will be converted into the right to receive shares of common
stock of BB&T ("BB&T Common Stock") and cash, as described below (the "Merger
Consideration"). It is a condition to the Merger that the exchange of BB&T
Common Stock solely for shares of Virginia First Common Stock will be tax free
to the shareholders of Virginia First for federal income tax purposes.
Shareholders of Virginia First will recognize their gain realized on the
exchange for federal income tax purposes, however, to the extent of the cash
received in the Merger.
The Merger Consideration to be received for each share of Virginia First
Common Stock issued and outstanding as of the effective time of the Merger
(the "Effective Time") will be determined, as set forth below, based on the
"Closing Value" of BB&T Common Stock. For purposes of determining the Merger
Consideration, "Closing Value" means the average closing price per share of
BB&T Common Stock on the New York Stock Exchange ("NYSE") Composite
Transactions List (as reported by The Wall Street Journal) for the ten trading
days immediately preceding the tenth calendar day preceding the Effective
Time. If the shareholders of Virginia First approve the Reorganization
Agreement and Plan of Merger at the Annual Meeting on November 26, 1997, it is
presently expected that the Effective Time will occur on or about December 1,
1997.
. If the Closing Value is $41.67 or more, the Merger Consideration will be
$25.00, of which $17.50 will be in BB&T Common Stock (determined with
reference to the Closing Value) and $7.50 will be in cash.
. If the Closing Value is less than $41.67 and is not less than $37.50,
the Merger Consideration will be 0.6 of the Closing Value (or between
$25.00 and $22.50), of which 70% will be in BB&T Common Stock and 30%
will be in cash.
. If the Closing Value is less than $37.50 and is not less than $33.75,
the Merger Consideration will be $22.50, of which $15.75 will be in BB&T
Common Stock (determined with reference to the Closing Value) and $6.75
will be in cash.
. If the Closing Value is less than $33.75 and is not less than $30.00,
the Merger Consideration will be $22.50, of which 0.467 of the Closing
Value will be in BB&T Common Stock (determined with reference to the
Closing Value) and the difference between such amount and $22.50 will be
in cash.
. If the Closing Value is less than $30.00, the Merger Consideration will
equal the sum of 0.467 of the Closing Value plus cash of $8.50, except
that at any time following determination of the Closing Value at below
$30.00 and before the Effective Time, the Virginia First Board of
Directors may elect to terminate the Reorganization Agreement and the
proposed Merger rather than to consummate the proposed Merger for the
Merger Consideration provided for by the Reorganization Agreement. The
Virginia First Board does not currently anticipate re-soliciting proxies
in the event the Closing Value is less than $30.00 and it determines to
proceed with the Merger.
<PAGE>
Assuming a Closing Value of $57.06, which was the closing per share market
price of BB&T Common Stock on October 20,1997, each share of Virginia First
Common Stock would be converted into the right to receive 0.3065 shares of
BB&T Common Stock and cash in the amount of $7.50. SHAREHOLDERS SHOULD
RECOGNIZE, HOWEVER, THAT THE FINAL DETERMINATION OF THE CLOSING VALUE WILL NOT
BE MADE UNTIL SHORTLY BEFORE THE EFFECTIVE TIME, AND THAT THE ACTUAL MERGER
CONSIDERATION MAY BE DIFFERENT FROM THE AMOUNT SET FORTH ABOVE. FLUCTUATIONS
IN THE VALUE OF BB&T COMMON STOCK MAY MATERIALLY AFFECT THE AMOUNT OF MERGER
CONSIDERATION SHAREHOLDERS OF VIRGINIA FIRST WILL BE ENTITLED TO RECEIVE.
MOREOVER, ANY CHANGES IN THE MARKET PRICE OF BB&T COMMON STOCK AFTER THE
PERIOD DURING WHICH THE CLOSING VALUE IS DETERMINED WILL NOT AFFECT THE NUMBER
OF SHARES OF BB&T COMMON STOCK THAT HOLDERS OF VIRGINIA FIRST COMMON STOCK
WILL RECEIVE, AND THE ACTUAL MARKET PRICE OF BB&T COMMON STOCK AT THE
EFFECTIVE TIME COULD BE MORE OR LESS THAN THE CLOSING VALUE USED TO DETERMINE
THE MERGER CONSIDERATION.
The number of shares (including fractional shares) of BB&T Common Stock to
be received by each Virginia First shareholder as Merger Consideration will be
rounded to the nearest whole share. The aggregate amount of cash to be
received as Merger Consideration will be correspondingly increased or
decreased to adjust for such rounding determined with reference to the Closing
Value.
In addition to considering the Reorganization Agreement and the Plan of
Merger at the Annual Meeting, you will be asked to consider and vote upon
proposals (a) to elect four directors of Virginia First for terms expiring at
the earlier of the effective time of the Merger, the date of either the 1998
annual meeting of Virginia First shareholders (in the case of one director) or
the 2000 annual meeting of Virginia First shareholders (in the case of three
directors) or such time as their respective successors are elected and
qualified and (b) to ratify the appointment of KPMG Peat Marwick LLP as
Virginia First's independent auditors for fiscal year 1998.
THE ENCLOSED NOTICE OF ANNUAL MEETING AND PROXY STATEMENT/PROSPECTUS CONTAIN
IMPORTANT INFORMATION CONCERNING THE ANNUAL MEETING AND THE PROPOSED MERGER,
INCLUDING DETAILS AS TO THE DETERMINATION OF THE MERGER CONSIDERATION. PLEASE
CAREFULLY READ THESE MATERIALS AND THOUGHTFULLY CONSIDER THE INFORMATION
CONTAINED IN THEM.
Whether or not you plan to attend the Annual Meeting, you are urged to
complete, sign, date, and promptly return the enclosed proxy card to assure
that your shares will be voted at the Annual Meeting. If you attend the Annual
Meeting, you may vote in person, whether or not you have previously submitted
a proxy.
THE BOARD OF DIRECTORS OF VIRGINIA FIRST APPROVED THE REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND BELIEVES THAT THE MERGER IS FAIR TO, AND IN
THE BEST INTERESTS OF, THE SHAREHOLDERS OF VIRGINIA FIRST. ACCORDINGLY, THE
BOARD OF DIRECTORS OF VIRGINIA FIRST RECOMMENDS THAT SHAREHOLDERS OF VIRGINIA
FIRST VOTE "FOR" APPROVAL OF THE REORGANIZATION AGREEMENT AND THE PLAN OF
MERGER. THE BOARD OF DIRECTORS OF VIRGINIA FIRST ALSO RECOMMENDS THAT
SHAREHOLDERS OF VIRGINIA FIRST VOTE "FOR" THE PROPOSED SLATE OF DIRECTORS AND
"FOR" RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS VIRGINIA
FIRST'S INDEPENDENT AUDITORS FOR FISCAL YEAR 1998.
Sincerely,
Charles A. Patton
Chief Executive Officer
<PAGE>
VIRGINIA FIRST FINANCIAL CORPORATION
FRANKLIN AND ADAMS STREETS, PETERSBURG, VIRGINIA 23803
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 26, 1997
----------------
To the Shareholders of Virginia First Financial Corporation:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders (the "Annual
Meeting") of Virginia First Financial Corporation, a Virginia corporation
("Virginia First"), will be held at the Main Office of Virginia First Savings
Bank, F.S.B., Corner of Franklin and Adams Streets, Petersburg, Virginia on
November 26, 1997 at 4:00 p.m. local time, for the following purposes:
1. Merger. To consider and vote upon a proposal to approve the Agreement
and Plan of Reorganization, dated as of May 6, 1997 (the "Reorganization
Agreement"), by and among Virginia First, BB&T Corporation, a North
Carolina corporation ("BB&T"), and BB&T Financial Corporation of Virginia,
a Virginia corporation and wholly owned subsidiary of BB&T ("BB&T
Financial-VA"), and a related Plan of Merger (the "Plan of Merger"),
pursuant to which each share of common stock of Virginia First will be
converted into the right to receive shares of common stock of BB&T and
cash, in amounts to be determined as described in the accompanying Proxy
Statement/Prospectus. A copy of the Reorganization Agreement and the Plan
of Merger set forth therein is attached to the accompanying Proxy
Statement/Prospectus as Appendix I.
2. Election of Directors. To consider and vote upon a proposal to elect
four directors of Virginia First for terms expiring at the earlier of the
effective time of the Merger or the date of either the 1998 annual meeting
of Virginia First shareholders (in the case of one director) or the 2000
annual meeting of Virginia First shareholders (in the case of three
directors).
3. Appointment of Auditors. To consider and vote upon a proposal to
ratify the appointment of KPMG Peat Marwick LLP as Virginia First's
independent auditors for fiscal year 1998.
4. Other Business. To transact such other business as may be properly
brought before the Annual Meeting or at any and all adjournments or
postponements thereof.
Shareholders of Virginia First of record at the close of business on October
15, 1997 are entitled to notice of and to vote at the Annual Meeting. You are
cordially invited to attend the Annual Meeting in person; however, whether or
not you plan to attend, we urge you to complete, date, and sign the
accompanying proxy card and to return it promptly in the enclosed postage
prepaid envelope.
By Order of the Board of Directors
Rebecca E. Truax
Secretary
Petersburg, Virginia
October 20, 1997
PLEASE COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY CARD PROMPTLY
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING. PLEASE DO NOT
SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
<PAGE>
PROXY STATEMENT
VIRGINIA FIRST FINANCIAL CORPORATION
----------------
PROSPECTUS
BB&T CORPORATION
COMMON STOCK
This Proxy Statement/Prospectus is being furnished to the holders of the
common stock of Virginia First Financial Corporation, a Virginia corporation
("Virginia First"), in connection with the solicitation of proxies by the
Board of Directors of Virginia First (the "Virginia First Board") for use at
the annual meeting of shareholders of Virginia First, or any adjournment or
postponement thereof (the "Annual Meeting"), to be held on November 26, 1997
at 4:00 p.m. local time, at the Main Office of Virginia First Savings Bank,
F.S.B., Corner of Franklin and Adams Streets, Petersburg, Virginia. At the
Annual Meeting, the shareholders of Virginia First will be asked to consider
and vote upon a proposal to approve an Agreement and Plan of Reorganization,
dated as of May 6, 1997 (the "Reorganization Agreement"), among Virginia
First, BB&T Corporation, a North Carolina corporation ("BB&T"), and BB&T
Financial Corporation of Virginia, a Virginia corporation and a wholly owned
subsidiary of BB&T ("BB&T Financial-VA"), a copy of which is attached hereto
as Appendix I, and the related Plan of Merger (the "Plan of Merger"), a copy
of which appears as Exhibit A to the form of Articles of Merger attached as
Annex A to the Reorganization Agreement. Shareholders of Virginia First will
also be asked to consider and vote upon proposals (a) to elect four directors
of Virginia First for terms expiring at the earlier of the Effective Time (as
defined herein), the date of either the 1998 annual meeting of Virginia First
shareholders (in the case of one director) or the 2000 annual meeting of
Virginia First shareholders (in the case of three directors) or such time as
their successors are elected and qualified and (b) to ratify the appointment
of KPMG Peat Marwick LLP as Virginia First's independent auditors for fiscal
year 1998. See "ANNUAL MEETING OF SHAREHOLDERS" and "ADDITIONAL MATTERS
RELATING TO THE ANNUAL MEETING."
The Reorganization Agreement and Plan of Merger provide for the merger of
Virginia First with and into BB&T Financial-VA (the "Merger"). At such time
(the "Effective Time"), and as a result of the Merger, Virginia First will
cease to exist and the shareholders of Virginia First will receive cash and
become shareholders of BB&T in accordance with the terms of the Reorganization
Agreement and the Plan of Merger. See "THE MERGER--Merger Consideration."
This Proxy Statement/Prospectus also constitutes a prospectus of BB&T with
respect to up to 2,100,000 shares of common stock, par value $5.00 per share,
of BB&T ("BB&T Common Stock"), to be issued to holders of the outstanding
shares of common stock, par value $1.00 per share, of Virginia First
("Virginia First Common Stock") in accordance with the Reorganization
Agreement and the Plan of Merger. BB&T Common Stock is listed for trading on
the New York Stock Exchange, Inc. (the "NYSE") under the trading symbol "BBK."
On October 20,1997, the last sale price of BB&T Common Stock as reported on
the NYSE Composite Transactions List was $57.06. Virginia First Common Stock
is listed for trading on the Nasdaq National Market under the trading symbol
"VFFC." On October 20,1997, the last sale price of Virginia First Common Stock
as reported on the Nasdaq National Market was $24.13. On May 5, 1997, the last
trading day before Virginia First announced that it had entered into the
Reorganization Agreement, the last reported sale price of Virginia First
Common Stock on the Nasdaq National Market was $13.75.
This Proxy Statement/Prospectus, the Notice of Annual Meeting, and the
accompanying proxy card are first being mailed to the shareholders of Virginia
First on or about October 24, 1997.
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 SHARES OF BB&T COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF
BB&T AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
The date of this Proxy Statement/Prospectus is October 20, 1997.
<PAGE>
AVAILABLE INFORMATION
BB&T and Virginia First are 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 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 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 BB&T and Virginia First.
Shares of BB&T Common Stock and Virginia First Common Stock are,
respectively, listed on the NYSE and traded on the Nasdaq National Market, and
proxy statements, reports and other information concerning BB&T and Virginia
First can also be inspected and copied at the offices of the NYSE, 20 Broad
Street, New York, New York 10005 and the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006, respectively.
BB&T 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 BB&T 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 BB&T has been provided by
BB&T, and the information contained herein with respect to Virginia First
before the Merger has been provided by Virginia First.
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 BB&T OR VIRGINIA FIRST. 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 BB&T OR
VIRGINIA FIRST 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 BB&T with the Commission under
the Exchange Act are incorporated herein by reference:
(a) BB&T's Annual Report on Form 10-K for the fiscal year ended December
31, 1996;
i
<PAGE>
(b) BB&T's Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1997 and June 30, 1997;
(c) BB&T's Current Reports on Form 8-K, dated April 11, 1997, May 23,
1997, June 11, 1997, July 11, 1997, July 14, 1997, August 15, 1997, August
15, 1997 and October 16, 1997;
(d) BB&T's Registration Statement on Form 8-A, dated January 10, 1997,
with respect to the adoption of its shareholder rights plan; and
(e) The description of BB&T Common Stock in BB&T's registration statement
filed under the Exchange Act with respect to BB&T Common Stock, including
all amendments and reports filed for the purpose of updating such
description.
The following documents previously filed by Virginia First with the
Commission under the Exchange Act are incorporated herein by reference:
(a) Virginia First's Annual Report on Form 10-K for the fiscal year ended
June 30, 1997;
(b) Virginia First's Registration Statement on Form 8-A, dated April 19,
1996, with respect to the adoption of its shareholder rights plan; and
(c) The description of Virginia First Common Stock in Virginia First's
registration statement filed under the Exchange Act with respect to
Virginia First Common Stock, including all amendments and reports filed for
the purpose of updating such description.
All documents filed by BB&T or Virginia First 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 Annual 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. In particular, reference is made
to BB&T's Current Report on Form 8-K dated August 15, 1997, which includes
supplemental consolidated financial statements and the related management's
discussion and analysis of financial condition and results of operations of
BB&T, giving effect to the acquisition of United Carolina Bancshares
Corporation consummated July 1, 1997 and accounted for as a pooling of
interests. See "INFORMATION ABOUT BB&T--UCB Acquisition."
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 VIRGINIA FIRST COMMON
STOCK, TO WHOM THIS PROXY STATEMENT/PROSPECTUS HAS BEEN DELIVERED. REQUESTS
FOR DOCUMENTS RELATING TO BB&T SHOULD BE DIRECTED TO INVESTOR RELATIONS, BB&T
CORPORATION, 223 WEST NASH STREET, WILSON, NORTH CAROLINA 27893 OR TELEPHONE:
(919) 246-4219. REQUESTS FOR DOCUMENTS RELATING TO VIRGINIA FIRST SHOULD BE
DIRECTED TO REBECCA E. TRUAX, SECRETARY, VIRGINIA FIRST FINANCIAL CORPORATION,
FRANKLIN AND ADAMS STREETS, PETERSBURG, VIRGINIA 23803 OR TELEPHONE: (804)
733-0333. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH
REQUEST SHOULD BE RECEIVED BY NOVEMBER 19, 1997.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION....................................................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. i
SUMMARY..................................................................... 1
Annual Meeting of Shareholders............................................ 1
Parties to the Merger..................................................... 1
The Merger................................................................ 3
Comparison of Shareholders' Rights........................................ 6
COMPARATIVE MARKET PRICES AND DIVIDENDS..................................... 7
SELECTED CONSOLIDATED FINANCIAL DATA........................................ 8
Selected Consolidated Financial Data--BB&T................................ 8
COMPARATIVE PER SHARE DATA.................................................. 11
ANNUAL MEETING OF SHAREHOLDERS.............................................. 12
General................................................................... 12
Record Date, Voting Rights, and Vote Required............................. 12
Voting and Revocation of Proxies.......................................... 13
Solicitation of Proxies................................................... 13
Recommendation of Virginia First Board.................................... 14
THE MERGER.................................................................. 14
General................................................................... 14
Background of the Merger.................................................. 14
Reasons for the Merger.................................................... 15
Opinion of Virginia First's Financial Advisor............................. 16
Merger Consideration...................................................... 21
Exchange of Virginia First Common Stock Certificates...................... 22
The Reorganization Agreement.............................................. 23
Interests of Certain Persons in the Merger................................ 27
Regulatory Considerations................................................. 29
Certain Federal Income Tax Consequences of the Merger..................... 31
Accounting Treatment...................................................... 32
The Option Agreement...................................................... 33
Effect on Employees, Employee Benefit Plans and Stock Options............. 35
Restrictions on Resales by Affiliates..................................... 35
INFORMATION ABOUT BB&T...................................................... 36
General................................................................... 36
Subsidiaries.............................................................. 36
UCB Merger................................................................ 37
Other Acquisitions........................................................ 37
Capital................................................................... 37
Deposit Insurance Assessments............................................. 38
INFORMATION ABOUT VIRGINIA FIRST............................................ 39
DESCRIPTION OF BB&T CAPITAL STOCK........................................... 39
General................................................................... 39
BB&T Common Stock......................................................... 39
BB&T Preferred Stock...................................................... 40
Shareholder Rights Plan................................................... 40
Certain Provisions of the NCBCA, BB&T Articles and BB&T Bylaws............ 42
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
COMPARISON OF SHAREHOLDERS' RIGHTS......................................... 43
Authorized Capital Stock................................................. 43
Directors................................................................ 44
Dividends and Other Distributions........................................ 44
Notice of Shareholder Nominations and Shareholder Proposals.............. 45
Exculpation and Indemnification.......................................... 45
Mergers, Share Exchanges and Sales of Assets............................. 46
Anti-takeover Statutes................................................... 46
Amendments to Articles of Incorporation and Bylaws....................... 48
Shareholders' Rights of Dissent and Appraisal............................ 48
Liquidation Rights....................................................... 50
LEGAL MATTERS.............................................................. 50
EXPERTS.................................................................... 50
ADDITIONAL MATTERS RELATING TO THE ANNUAL MEETING.......................... 51
Election of Directors; Security Ownership of Management and Certain Bene-
ficial Owners........................................................... 51
Remuneration............................................................. 55
Stock Performance Graph.................................................. 60
Ratification of Appointment of Auditors.................................. 61
Shareholder Proposals.................................................... 61
Annual Report and Financial Statements................................... 61
Other Matters............................................................ 61
Appendix I--Agreement and Plan of Reorganization and the Plan of Merger
Appendix II--Opinion of Sandler O'Neill & Partners, L.P.
</TABLE>
iv
<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.
ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting will be held on November 26, 1997 at 4:00 p.m. local time,
at the Main Office of Virginia First Savings Bank, F.S.B., Corner of Franklin
and Adams Streets, Petersburg, Virginia. At the Annual Meeting, the
shareholders of Virginia First will vote upon a proposal to approve the
Reorganization Agreement and the Plan of Merger attached hereto as Appendix I.
Shareholders of Virginia First will also be asked to consider and vote upon
proposals (a) to elect four directors of Virginia First for terms expiring at
the earlier of the effective time of the Merger (the "Effective Time"), the
date of either the 1998 annual meeting of Virginia First shareholders (in the
case of one director) or the 2000 annual meeting of Virginia First shareholders
(in the case of three directors) or such time as their respective successors
are elected and qualified and (b) to ratify the appointment of KPMG Peat
Marwick LLP as Virginia First's independent auditors for fiscal year 1998. On
October 15, 1997, the record date for the Annual Meeting (the "Record Date"),
there were approximately 937 holders of record of the 5,814,430 shares of
Virginia First Common Stock then outstanding and entitled to vote at the Annual
Meeting.
The affirmative vote of the holders of a majority of the outstanding shares
of Virginia First Common Stock is required to approve the Reorganization
Agreement and the Plan of Merger. As of the Record Date, directors and
executive officers of Virginia First and their affiliates beneficially owned
1,362,421 outstanding shares or 23.4% of the Virginia First Common Stock
entitled to vote at the Annual Meeting, all of which are expected to be voted
in favor of the Reorganization Agreement and the Plan of Merger. Charles A.
Patton and William A. Patton, the Chief Executive Officer and Chairman,
respectively, of Virginia First, who as of the Record Date beneficially owned
1,032,195 outstanding shares or 17.8% of the Virginia First Common Stock
entitled to vote at the Annual Meeting, have agreed in the Reorganization
Agreement not to transfer any of such shares and to vote all of such shares in
favor of the Reorganization Agreement and the Plan of Merger.
The election of each director nominee requires the affirmative vote of a
plurality of the shares of Virginia First Common Stock voted in the election of
directors; holders of Virginia First Common Stock do not have cumulative voting
rights in the election of directors. Ratification of the appointment of KPMG
Peat Marwick LLP as Virginia First's independent auditors for fiscal year 1998
requires the affirmative vote of a majority of the shares of Virginia First
Common Stock voted on such matter. See "THE ANNUAL MEETING" and "ADDITIONAL
MATTERS RELATING TO THE ANNUAL MEETING."
PARTIES TO THE MERGER
BB&T
BB&T is a multi-bank holding company headquartered in Winston-Salem, North
Carolina. BB&T 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. BB&T's bank subsidiaries are Branch
Banking and Trust Company ("BB&T-NC"), a North Carolina chartered bank that
currently operates 358 banking offices throughout North Carolina; Branch
Banking and Trust Company of South Carolina ("BB&T-SC"), a South Carolina
chartered bank that currently operates 98 banking offices throughout South
Carolina; Branch Banking and Trust Company of Virginia ("BB&T-VA"), a Virginia
chartered bank that currently operates 22 banking
1
<PAGE>
offices in the Hampton Roads region of Virginia; and Fidelity Federal Savings
Bank ("FFSB"), a federally chartered savings bank that operates seven banking
offices in the Richmond, Virginia area.
Effective July 1, 1997, United Carolina Bancshares Corporation, a bank
holding company headquartered in Whiteville, North Carolina ("UCB"), merged
with and into BB&T (the "UCB Merger"). Upon consummation of the UCB Merger,
each share of the common stock of UCB ("UCB Common Stock") issued and
outstanding at such time was converted into and exchanged for 1.135 shares of
BB&T Common Stock. Approximately 27.7 million shares of BB&T Common Stock were
issued in the UCB Merger. Through its two bank subsidiaries, United Carolina
Bank and United Carolina Bank of South Carolina, UCB operated 153 banking
offices in 89 communities in North Carolina and South Carolina. United Carolina
Bank and United Carolina Bank of South Carolina were merged into BB&T-NC and
BB&T-SC, respectively, on September 19, 1997. For additional information about
the UCB Merger, see "INFORMATION ABOUT BB&T--UCB Merger."
The mailing address and telephone number of BB&T's principal executive
offices are 200 West Second Street, Winston-Salem, North Carolina 27101, (910)
733-2000. Additional information with respect to BB&T and its subsidiaries is
included elsewhere in this Proxy Statement/Prospectus and in documents
incorporated by reference in this Proxy Statement/Prospectus. See "AVAILABLE
INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"INFORMATION ABOUT BB&T."
BB&T Financial-VA
BB&T Financial-VA is a Virginia corporation that serves as the holding
company of BB&T-VA. BB&T Financial-VA is a wholly owned subsidiary of BB&T. In
the Merger, Virginia First will be merged with and into BB&T Financial-VA, and
BB&T Financial-VA will be the surviving corporation. The mailing address and
telephone number of BB&T Financial-VA's principal executive offices are 5101
Cleveland Street, Virginia Beach, Virginia 23462, (804) 456-1007.
Virginia First
Virginia First was incorporated in Virginia in 1993 to serve as the holding
company for Virginia First Savings Bank, F.S.B. ("VFSB"). The stockholders of
VFSB approved the related plan of reorganization at their annual meeting on
November 10, 1993, and the reorganization was consummated on January 14, 1994
with VFSB becoming a wholly owned subsidiary of Virginia First. VFSB is a
federally chartered capital stock savings bank with principal offices in
Petersburg, Virginia. VFSB, incorporated in 1888, is one of the oldest
financial institutions in the Commonwealth of Virginia.
Virginia First's only direct subsidiary is VFSB, and Virginia First has no
material assets or liabilities except for the stock of VFSB. VFSB has three
active subsidiaries: one is engaged in real estate development, one is a title
insurance agency, and one is a company that originates residential mortgage
loans via the Internet.
Virginia First's principal business activities, which are conducted through
VFSB, are attracting checking and savings deposits from the general public
through its retail banking offices and originating, servicing, investing in and
selling loans secured by first mortgage liens on single-family dwellings,
including condominium units. All of the retail banking offices are located in
Virginia, while the mortgage loan organization offices are in Virginia and
Maryland. Virginia First also lends funds to retail banking customers by means
of home equity and installment loans, and originates residential construction
loans and loans secured by commercial property, multi-family dwellings and
manufactured housing units. Virginia First invests in certain U.S. Government
and agency obligations and other investments permitted by applicable laws and
regulations.
Virginia First operates twenty-four full service retail facilities throughout
southside, central and southwestern Virginia. In addition, Virginia First
operates twelve loan origination centers in southside, central
2
<PAGE>
and southwestern Virginia, in northern Virginia and southern Maryland under the
trade name Virginia First Mortgage.
THE MERGER
General
Virginia First will be merged with and into BB&T Financial-VA, and BB&T
Financial-VA will be the surviving corporation in the Merger. Each share of
Virginia First Common Stock will be converted into the right to receive shares
of BB&T Common Stock and cash (the "Merger Consideration"). Following the
Merger, BB&T Financial-VA will remain a wholly owned subsidiary of BB&T. It is
expected that, not later than March 31, 1998, VFSB will be merged into BB&T-VA,
with BB&T-VA as the surviving entity (the "VFSB Bank Merger").
Merger Consideration
The Merger Consideration to be received for each share of Virginia First
Common Stock issued and outstanding as of the Effective Time will be
determined, as set forth below, based on the "Closing Value" of BB&T Common
Stock. For purposes of determining the Merger Consideration, "Closing Value"
means the average closing price per share of BB&T Common Stock on the New York
Stock Exchange ("NYSE") Composite Transactions List (as reported by The Wall
Street Journal) for the ten trading days immediately preceding the tenth
calendar day preceding the Effective Time. If the shareholders of Virginia
First approve the Reorganization Agreement and Plan of Merger at the Annual
Meeting on November 26, 1997, it is presently expected that the Effective Time
will occur on or about December 1, 1997.
. If the Closing Value is $41.67 or more, the Merger Consideration will be
$25.00, of which $17.50 will be in BB&T Common Stock (determined with
reference to the Closing Value) and $7.50 will be in cash.
. If the Closing Value is less than $41.67 and is not less than $37.50,
the Merger Consideration will be 0.6 of the Closing Value (or between
$25.00 and $22.50), of which 70% will be in BB&T Common Stock and 30%
will be in cash.
. If the Closing Value is less than $37.50 and is not less than $33.75,
the Merger Consideration will be $22.50, of which $15.75 will be in BB&T
Common Stock (determined with reference to the Closing Value) and $6.75
will be in cash.
. If the Closing Value is less than $33.75 and is not less than $30.00,
the Merger Consideration will be $22.50, of which 0.467 of the Closing
Value will be in BB&T Common Stock (determined with reference to the
Closing Value) and the difference between such amount and $22.50 will be
in cash.
. If the Closing Value is less than $30.00, the Merger Consideration will
equal the sum of 0.467 of the Closing Value plus cash of $8.50, except
that at any time following determination of the Closing Value at below
$30.00 and before the Effective Time, the Virginia First Board may elect
to terminate the Reorganization Agreement and the proposed Merger rather
than to consummate the proposed Merger for the Merger Consideration
provided for by the Reorganization Agreement. The Virginia First Board
does not currently anticipate re-soliciting proxies in the event the
Closing Value is less than $30.00 and it determines to proceed with the
Merger.
Assuming a Closing Value of $57.06, which was the closing per share market
price of BB&T Common Stock on October 20,1997, each share of Virginia First
Common Stock would be converted into the right to receive 0.3065 shares of BB&T
Common Stock and cash in the amount of $7.50. SHAREHOLDERS SHOULD RECOGNIZE,
HOWEVER, THAT THE FINAL DETERMINATION OF THE CLOSING VALUE WILL NOT BE MADE
UNTIL SHORTLY BEFORE THE EFFECTIVE TIME, AND THAT THE ACTUAL MERGER
CONSIDERATION MAY BE DIFFERENT FROM THE AMOUNT SET FORTH
3
<PAGE>
ABOVE. FLUCTUATIONS IN THE VALUE OF BB&T COMMON STOCK MAY MATERIALLY AFFECT THE
AMOUNT OF MERGER CONSIDERATION SHAREHOLDERS OF VIRGINIA FIRST WILL BE ENTITLED
TO RECEIVE. MOREOVER, ANY CHANGES IN THE MARKET PRICE OF BB&T COMMON STOCK
AFTER THE PERIOD DURING WHICH THE CLOSING VALUE IS DETERMINED WILL NOT AFFECT
THE NUMBER OF SHARES OF BB&T COMMON STOCK THAT HOLDERS OF VIRGINIA FIRST COMMON
STOCK WILL RECEIVE, AND THE ACTUAL MARKET PRICE OF BB&T COMMON STOCK AT THE
EFFECTIVE TIME COULD BE MORE OR LESS THAN THE CLOSING VALUE USED TO DETERMINE
THE MERGER CONSIDERATION.
The number of shares (including fractional shares) of BB&T Common Stock to be
received by each Virginia First shareholder as Merger Consideration will be
rounded to the nearest whole share. The aggregate amount of cash to be received
as Merger Consideration will be correspondingly increased or decreased to
adjust for such rounding determined with reference to the Closing Value.
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 State Corporation Commission of the
Commonwealth of Virginia. Assuming the Reorganization Agreement and the Plan of
Merger are approved by Virginia First shareholders at the Annual Meeting, it is
currently anticipated that the Articles of Merger will be filed on or about
November 28, 1997 and the consummation of the Merger will occur on or about
December 1, 1997. See "THE MERGER--The Reorganization Agreement --Effective
Date and Time of the Merger."
Recommendation of Virginia First Board; Reasons for the Merger
The Virginia First Board has approved the Reorganization Agreement and Plan
of Merger and the transactions contemplated thereby. The Virginia First Board
believes that the Merger is in the best interests of Virginia First and its
shareholders and recommends that the shareholders of Virginia First vote "FOR"
approval of the Reorganization Agreement and Plan of Merger. For further
discussion of the factors considered by the Virginia First Board in reaching
its conclusions, see "THE MERGER--Background of the Merger" and "--Reasons for
the Merger."
Opinion of Virginia First's Financial Advisor
Virginia First has retained Sandler O'Neill & Partners, L.P. ("Sandler
O'Neill") to act as its financial advisor in connection with the Merger, and
Sandler O'Neill has rendered its opinion to the Virginia First Board that, as
of the date of such opinion, the Merger Consideration is fair to the
shareholders of Virginia First from a financial point of view. The full text of
the Sandler O'Neill opinion, updated to the date hereof, is set forth as
Appendix II 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 Sandler O'Neill in rendering such
opinion. See "THE MERGER--Opinion of Virginia First's Financial Advisor."
Conditions to the Merger
The consummation of the Merger is subject to various conditions, including
the approval of the Reorganization Agreement and the Plan of Merger by the
shareholders of Virginia First, receipt of necessary regulatory approvals,
receipt of a legal opinion regarding the tax consequences of the Merger and
other customary conditions to closing. See "THE MERGER--The Reorganization
Agreement--Conditions to the Merger."
Termination of the Reorganization Agreement
The Reorganization Agreement may be terminated by either BB&T or Virginia
First if the Merger is not consummated by March 31, 1998 for any reason other
than delay or nonperformance of the party seeking the
4
<PAGE>
termination. The parties also have certain rights of termination upon the
occurrence of certain other events. See "THE MERGER--The Reorganization
Agreement--Termination; Waiver; Amendment."
Interests of Certain Persons in the Merger
Charles A. Patton, chief executive officer of Virginia First, will enter into
an employment agreement with VFSB at the Effective Time providing for
employment for four years at a starting base salary of $250,000, a $75,000
bonus for employment through December 31, 1998, and severance payments and
other benefits. Mr. Patton will also receive a one-time payment of $525,000 on
the Closing Date in satisfaction of obligations to him under existing
employment agreements with Virginia First and VFSB. In addition, BB&T has
agreed that Mr. Patton and certain other directors of Virginia First will serve
on the boards of directors of certain subsidiaries of BB&T following the
Merger, and to maintain directors' and officers' liability insurance for the
current directors and officers of Virginia First for three years after the
Effective Time. See "THE MERGER--Interests of Certain Persons in the Merger."
Regulatory Considerations
The Merger must be approved by the Bureau of Financial Institutions of the
State Corporation Commission of the Commonwealth of Virginia (the "BFI") under
the Virginia Savings Institutions Act. BB&T also must provide notice of the
Merger to the Board of Governors of the Federal Reserve System (the "Federal
Reserve") under the Bank Holding Company Act and the Federal Reserve's
Regulation Y thereunder. The Federal Reserve approved the Merger on August 21,
1997 and the BFI approved the Merger on September 25, 1997. The VFSB Bank
Merger must be approved by the Federal Deposit Insurance Corporation (the
"FDIC") under the Bank Merger Act and by the BFI under the Virginia Savings
Institutions Act. VFSB must provide notice of the VFSB Bank Merger to the
Office of Thrift Supervision ("OTS") under its regulations. The required
applications relating to the VFSB Bank Merger will be submitted to the
appropriate regulatory authorities in the near future. See "THE MERGER--
Regulatory Considerations."
Shareholders' Rights of Dissent and Appraisal
Pursuant to the Virginia Stock Corporation Act (the "VSCA"), holders of
Virginia First Common Stock do not have dissenters' or appraisal rights in
connection with the Merger because as of the Record Date shares of Virginia
First Common Stock were listed on the Nasdaq National Market and because the
shares of BB&T Common Stock to be received in the Merger are listed on the
NYSE. See "COMPARISON OF SHAREHOLDERS' RIGHTS--Shareholders' Rights of Dissent
and Appraisal--Virginia First."
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"), to the extent that
Virginia First shareholders receive shares of BB&T Common Stock in exchange for
shares of Virginia First Common Stock. Virginia First shareholders will
recognize their gain realized in the exchange for federal income tax purposes,
however, to the extent of the cash received in the Merger. It is a condition to
the Merger that BB&T and Virginia First receive an opinion from Womble Carlyle
Sandridge & Rice, PLLC, counsel to BB&T, substantially to the effect that the
Merger will constitute one or more reorganizations under Section 368 of the
Code and that Virginia First shareholders will not recognize any gain or loss
to the extent that such shareholders exchange shares of Virginia First Common
Stock for shares of BB&T Common Stock. See "THE MERGER--Certain Federal Income
Tax Consequences of the Merger."
Accounting Treatment
It is anticipated that the Merger and other transactions contemplated in the
Reorganization Agreement will be accounted for as a "purchase" for accounting
and financial reporting purposes. See "THE MERGER--Accounting Treatment."
5
<PAGE>
Option Agreement
As a condition to BB&T entering into the Reorganization Agreement and to
increase the probability that the Merger will be consummated, BB&T and Virginia
First entered into an Option Agreement, dated as of May 6, 1997 (the "Option
Agreement"), pursuant to which BB&T was granted an option to purchase up to
1,155,127 shares of Virginia First Common Stock (approximately 19.9% of the
number of shares of Virginia First Common Stock currently outstanding), subject
to adjustment, at an exercise price of $17.50 per share (the "Option"). The
exercise of the Option is permitted only upon the occurrence of certain events
that generally relate to an acquisition of control of Virginia First, or the
public offer or announcement of such an acquisition of control, by a party
other than BB&T, or upon the acquisition by a third party of, or an offer or an
announcement of an intention by a third party to acquire, a significant
interest in the equity or assets of Virginia First. The Option is not presently
exercisable. See "THE MERGER--The Option Agreement."
COMPARISON OF SHAREHOLDERS' RIGHTS
The rights of the shareholders of Virginia First currently are determined by
the VSCA, the Articles of Incorporation of Virginia First (the "Virginia First
Articles") and the Bylaws of Virginia First (the "Virginia First Bylaws"). At
the Effective Time, the shareholders of Virginia First will become shareholders
of BB&T. Their rights as shareholders will then be determined by the North
Carolina Business Corporation Act (the "NCBCA"), the Articles of Incorporation
of BB&T (the "BB&T Articles") and the Bylaws of BB&T (the "BB&T Bylaws"). See
"DESCRIPTION OF BB&T CAPITAL STOCK" and "COMPARISON OF SHAREHOLDERS' RIGHTS."
6
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS
BB&T Common Stock is listed on the NYSE under the symbol "BBK." Virginia
First Common Stock is included in the Nasdaq National Market under the symbol
"VFFC." The following table sets forth, for the periods indicated, the high and
low sales price of BB&T Common Stock and Virginia First Common Stock on the
NYSE Composite Transactions List and the Nasdaq National Market, respectively,
and cash dividends paid per share. The prices do not include retail markups,
markdowns or commissions. Prices of Virginia First Common Stock have been
adjusted where appropriate to give effect to a two-for-one stock split in 1995.
<TABLE>
<CAPTION>
BB&T VIRGINIA FIRST
---------------------- ----------------------
CASH CASH
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended
March 31, 1997.................. $40.75 $35.25 $.27 $17.00 $12.25 $.025
June 30, 1997................... 47.13 35.75 .27 23.25 13.38 .025
September 30, 1997.............. 55.13 45.31 .31 24.50 22.50 .025
December 31, 1997 (through
October 20, 1997).............. 58.00 55.25 -- 24.25 24.00 --
Quarter Ended
March 31, 1996.................. 29.75 25.88 .23 12.25 10.63 .015
June 30, 1996................... 31.75 28.88 .23 14.25 10.75 .025
September 30, 1996.............. 33.88 28.63 .27 13.75 11.00 .025
December 31, 1996............... 36.75 33.38 .27 15.25 12.50 .025
For year 1996................... 36.75 25.88 1.00 15.25 10.63 .09
Quarter Ended
March 31, 1995.................. 22.38 18.88 .20 8.38 6.00 .025
June 30, 1995................... 24.13 19.88 .20 9.38 7.25 .025
September 30, 1995.............. 27.13 23.63 .23 11.38 8.38 .015
December 31, 1995............... 27.00 25.63 .23 11.88 9.88 .015
For year 1995................... 27.13 18.88 .86 11.88 6.00 .08
</TABLE>
The following table sets forth the last reported sales price for shares of
BB&T Common Stock and Virginia First Common Stock on May 5, 1997, the last
trading day before Virginia First announced that it had entered into the
Reorganization Agreement, and October 20, 1997, on the NYSE Composite
Transactions List and the Nasdaq National Market, respectively. The Virginia
First Equivalent Range represents the Merger Consideration that each share of
Virginia First Common Stock would represent assuming (a) a Closing Value of
$41.67 or more and (b) a Closing Value of $30.00. The Merger Consideration will
be determined based on the Closing Value. See "THE MERGER--Merger
Consideration."
<TABLE>
<CAPTION>
VIRGINIA FIRST EQUIVALENT
DATE BB&T VIRGINIA FIRST RANGE
---- ------- -------------- -------------------------
<S> <C> <C> <C>
May 5, 1997................ $40.625 $13.75 $25.00 to $22.50
October 20, 1997........... $ 57.06 $24.13 $25.00 to $22.50
</TABLE>
7
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected historical financial information has been derived from
historical consolidated financial statements of BB&T and Virginia First,
respectively, and should be read in conjunction with such historical
consolidated financial statements, and the notes thereto, which are
incorporated herein by reference. Results of BB&T for the six months ended June
30, 1997, are not necessarily indicative of results expected for the entire
year. All adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of results of interim periods have been
included.
SELECTED CONSOLIDATED FINANCIAL DATA--BB&T
The following table sets forth certain consolidated financial data of BB&T
for the five years ended December 31, 1996, and the six months ended June 30,
1997 and June 30, 1996. This consolidated financial data has been restated to
include the accounts of UCB and its subsidiaries, which merged into BB&T on
July 1, 1997 in a transaction accounted for as a pooling-of-interests. The
information is qualified in its entirety by the detailed information and
consolidated financial statements included in the documents incorporated herein
by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
AS OF/FOR THE SIX
MONTHS ENDED
JUNE 30, AS OF/FOR THE TWELVE MONTHS ENDED DECEMBER 31,
------------------- -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- -------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest income......... $1,033,939 $947,414 $1,934,570 $1,880,157 $1,586,515 $1,427,684 $1,436,751
Interest expense........ 490,546 454,039 926,870 948,839 678,571 590,709 686,922
---------- -------- ---------- ---------- ---------- ---------- ----------
Net interest income..... 543,393 493,375 1,007,700 931,318 907,944 836,975 749,829
Provision for loan and
lease losses........... 45,950 28,761 62,511 41,924 23,730 59,829 76,030
---------- -------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan and lease losses.. 497,443 464,614 945,189 889,394 884,214 777,146 673,799
Noninterest income...... 201,367 169,188 353,468 271,710 278,339 268,856 229,736
Noninterest expense..... 402,917 375,552 808,550 820,718 740,234 791,060 625,875
---------- -------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 295,893 258,250 490,107 340,386 422,319 254,942 277,660
Provision for income
taxes.................. 100,611 86,400 159,932 113,118 147,003 95,229 97,290
---------- -------- ---------- ---------- ---------- ---------- ----------
Income before cumulative
effect of changes in
accounting principles.. 195,282 171,850 330,175 227,268 275,316 159,713 180,370
Less: cumulative effect
of changes in
accounting principles,
net of income taxes.... -- -- -- -- -- (32,762) --
---------- -------- ---------- ---------- ---------- ---------- ----------
Net income.......... $ 195,282 $171,850 $ 330,175 $ 227,268 $ 275,316 $ 126,951 $ 180,370
========== ======== ========== ========== ========== ========== ==========
PER COMMON SHARE
Average shares
outstanding (000's)
Primary............... 139,081 137,257 138,152 137,129 135,332 130,419 123,271
Fully diluted......... 139,394 139,467 139,518 142,154 140,382 136,303 130,938
Primary earnings
Income before cumulative
effect................. $ 1.40 $ 1.25 $ 2.39 $ 1.62 $ 2.00 $ 1.18 $ 1.43
Less: cumulative effect. -- -- -- -- -- (0.25) --
---------- -------- ---------- ---------- ---------- ---------- ----------
Net income.......... $ 1.40 $ 1.25 $ 2.39 $ 1.62 $ 2.00 $ 0.93 $ 1.43
========== ======== ========== ========== ========== ========== ==========
Fully diluted
Income before cumulative
effect................. $ 1.40 $ 1.23 $ 2.37 $ 1.60 $ 1.96 $ 1.17 $ 1.38
Less: cumulative effect. -- -- -- -- -- (0.24) --
---------- -------- ---------- ---------- ---------- ---------- ----------
Net income.......... $ 1.40 $ 1.23 $ 2.37 $ 1.60 $ 1.96 $ 0.93 $ 1.38
========== ======== ========== ========== ========== ========== ==========
Cash dividends declared. $ 0.54 $ 0.46 $ 1.00 $ 0.86 $ 0.74 $ 0.64 $ 0.50
Shareholders' equity.... 15.64 14.21 15.13 14.32 12.79 12.06 11.95
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
AS OF/FOR THE SIX
MONTHS ENDED JUNE 30, AS OF/FOR THE TWELVE MONTHS ENDED DECEMBER 31,
------------------------ ---------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
AVERAGE BALANCE SHEETS
Securities at carrying
value.................. $ 6,248,353 $ 5,818,916 $ 6,137,748 $ 6,244,509 $ 6,050,612 $ 5,401,762 $ 4,733,403
Loans and leases*....... 18,469,521 17,052,975 16,958,876 16,286,928 14,711,409 13,155,522 11,978,837
Other assets............ 1,597,278 1,474,259 1,673,478 1,694,578 1,707,055 1,626,305 1,567,185
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets........ $26,315,152 $24,346,150 $24,770,102 $24,226,015 $22,469,076 $20,183,589 $18,279,425
=========== =========== =========== =========== =========== =========== ===========
Deposits................ $19,302,187 $18,229,530 $18,577,368 $17,691,264 $17,318,921 $16,260,492 $15,167,080
Other liabilities....... 2,610,833 2,507,871 2,346,374 3,507,910 2,724,841 1,687,474 1,535,422
Long-term debt.......... 2,285,012 1,648,477 1,861,380 1,130,460 679,654 598,753 154,113
Common shareholders'
equity................. 2,117,120 1,929,788 1,969,821 1,824,036 1,671,517 1,562,727 1,357,005
Preferred shareholders'
equity................. -- 30,484 15,159 72,345 74,143 74,143 65,805
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total liabilities and
shareholders' equity... $26,315,152 $24,346,150 $24,770,102 $24,226,015 $22,469,076 $20,183,589 $18,279,425
=========== =========== =========== =========== =========== =========== ===========
PERIOD END BALANCES
Total assets............ $27,472,081 $24,877,597 $25,707,646 $24,671,277 $23,497,824 $22,273,226 $18,979,348
Deposits................ 20,050,730 18,718,877 19,003,340 18,321,708 17,458,085 17,594,408 15,674,867
Long-term debt.......... 2,643,534 1,958,381 2,054,040 1,386,910 913,060 839,631 424,102
Shareholders' equity.... 2,117,747 1,942,738 2,071,567 2,025,112 1,803,888 1,686,134 1,510,774
SELECTED PERFORMANCE
RATIOS
Rate of return on:
Average total assets.... 1.50% 1.42% 1.33% 0.94% 1.23% 0.63% 0.99%
Average common
shareholders' equity... 18.60 17.84 16.73 12.18 16.16 7.79 12.95
Dividend payout......... 38.57 36.80 41.84 53.09 37.00 68.82 34.97
Average equity to
average assets......... 8.05 8.05 8.01 7.83 7.77 8.11 7.78
</TABLE>
- --------
* Loans and leases are net of unearned income and the allowance for losses.
Amounts include loans held for sale.
9
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA--VIRGINIA FIRST
<TABLE>
<CAPTION>
AS OF OR FOR THE YEARS ENDED JUNE 30,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest income.............. $ 66,131 $ 59,041 $ 53,525 $ 42,403 $ 40,307
Interest expense............. 35,611 32,322 27,631 21,187 21,850
-------- -------- -------- -------- --------
Net interest income.......... 30,520 26,719 25,894 21,216 18,457
Provision for loan losses.... 2,347 2,429 1,390 1,090 1,171
-------- -------- -------- -------- --------
Net interest income after
provision for loan losses... 28,173 24,290 24,504 20,126 17,286
Noninterest income........... 8,739 14,913 6,450 11,878 9,735
Noninterest expense.......... 28,924 20,029 18,412 21,342 18,640
-------- -------- -------- -------- --------
Income before income taxes... 7,988 19,174 12,542 10,662 8,381
Provision for income taxes... 2,876 7,032 4,992 3,681 3,127
-------- -------- -------- -------- --------
Income before cumulative
effect of changes in
accounting principles....... 5,112 12,142 7,550 6,981 5,254
Plus: cumulative effect of
changes in accounting
principles, net of income
taxes....................... -- -- -- -- 1,150
-------- -------- -------- -------- --------
Net income............... $ 5,112 $ 12,142 $ 7,550 $ 6,981 $ 6,404
======== ======== ======== ======== ========
SELECTED PERIOD END BALANCES:
Total assets................. $858,403 $746,867 $693,549 $583,580 $561,239
Earning assets............... 828,088 717,187 668,434 560,042 533,279
Securities................... 34,249 35,355 39,794 36,647 36,005
Loans(1)..................... 777,861 662,035 616,049 513,982 465,501
Deposits..................... 600,205 573,536 503,667 456,720 454,231
FHLB Advances................ 181,552 102,052 134,658 79,872 66,000
Shareholders' equity......... 66,492 60,996 48,772 41,079 34,512
SELECTED FINANCIAL RATIOS:
PROFITABILITY RATIOS:
Return on average assets... .64% 1.74% 1.19% 1.24% 1.00%
Return on average common
shareholders' equity...... 7.90 22.49 16.58 18.19 16.26
Net interest margin........ 4.02 3.97 4.21 3.99 3.66
Efficiency................. 58.6 48.1 56.7 64.5 66.1
CAPITAL RATIOS(2):
Equity to assets (period
end)...................... 7.75 8.17 7.03 7.04 6.15
Tangible capital ratio..... 7.35 7.87 6.69 6.58 5.60
Core capital ratio......... 7.36 7.90 6.74 6.99 6.09
Risk-based capital ratio... 11.44 12.33 10.57 11.03 10.67
LOAN QUALITY RATIOS:
Nonaccrual loans as a
percentage of total loans. 1.55 1.63 1.49 1.30 1.53
Nonperforming assets as a
percentage of:
Total assets............... 2.30 2.10 1.70 1.65 2.15
Loans plus foreclosed
property.................. 2.85 2.52 2.02 1.96 3.25
Net charge-offs as a
percentage of average
loans..................... .09 .21 .11 .02 .03
Allowance for loan losses
as a percentage of loans
held for investment....... 1.36 1.21 1.09 1.14 1.25
Ratio of allowance for loan
losses to:
Net charge-offs.......... 1,605.4 590.4 1,014.8 5,906.3 3,698.2
Nonaccrual loans......... 77.0 73.1 74.8 98.0 69.3
</TABLE>
- --------
(1) Loans are net of unearned income, premiums and discount points but gross of
the allowance for loan losses. Amounts include loans held for sale.
(2) OTS capital ratio definitions.
10
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth: (a) selected comparative per share data for
each of BB&T and Virginia First on an historical basis; (b) selected unaudited
pro forma comparative per share data assuming the Merger had been effective at
the beginning of the periods presented for BB&T and Virginia First combined;
and (c) Virginia First pro forma equivalent amounts. The pro forma combined
information has been calculated based on the prices of BB&T Common Stock as of
the periods presented, which resulted in stock exchange ratios of 0.3955 and
0.4345 for June 30, 1997, and December 31, 1996, respectively. Subsequent
increases in the price of BB&T Common Stock would result in a reduction of the
pro forma combined and pro forma equivalent balances reflected; based on the
closing price of BB&T Common Stock on October 20,1997 of $57.06, the Virginia
First pro forma equivalent cash dividends declared would be $0.17 at June 30,
1997 and $0.31 at December 31, 1996 and the Virginia First pro forma combined
shareholders' equity per common share would be $15.92 at June 30, 1997 and
$15.39 at December 31, 1997. The pro forma information presented does not
reflect the portion of the Merger Consideration to be paid in cash.
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 BB&T and Virginia First
incorporated by reference herein. Results of each of BB&T and Virginia First
for the six months ended June 30, 1997, 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 AS OF/FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
---------------- -----------------
<S> <C> <C>
EARNINGS PER COMMON SHARE
BB&T
Historical primary......................... $ 1.40 $ 2.39
Historical fully diluted................... 1.40 2.37
Pro forma combined primary................. 1.38 2.39
Pro forma combined fully diluted........... 1.38 2.37
Virginia First
Historical................................. 0.47 1.80
Pro forma equivalent primary............... 0.55 1.04
Pro forma equivalent fully diluted......... 0.55 1.03
CASH DIVIDENDS DECLARED
BB&T historical............................ 0.54 1.00
BB&T pro forma combined.................... 0.54 1.00
Virginia First historical.................. 0.05 0.09
Virginia First pro forma equivalent........ 0.21 0.43
SHAREHOLDERS' EQUITY PER COMMON SHARE
BB&T historical............................ 15.64 15.13
BB&T pro forma combined.................... 15.86 15.32
Virginia First historical.................. 11.44 10.99
Virginia First pro forma combined.......... 6.27 6.66
</TABLE>
11
<PAGE>
ANNUAL MEETING OF SHAREHOLDERS
GENERAL
This Proxy Statement/Prospectus is being furnished to the shareholders of
Virginia First as of the Record Date and is accompanied by a form of proxy
that is solicited by the Virginia First Board for use at the Annual Meeting to
be held on November 26, 1997 at 4:00 p.m. local time, at the main office of
VFSB, Corner of Franklin and Adams Streets, Petersburg, Virginia. At the
Annual Meeting, the shareholders of Virginia First will vote upon proposals
(a) to approve the Reorganization Agreement and the Plan of Merger attached
hereto as Appendix I, (b) to elect four directors of Virginia First for terms
expiring at the earlier of the effective time of the Merger, the date of
either the 1998 annual meeting of Virginia First shareholders (in the case of
one director) or the 2000 annual meeting of Virginia First shareholders (in
the case of three directors) or such time as their respective successors are
elected and qualified and (c) to ratify the appointment of KPMG Peat Marwick
LLP as Virginia First's independent auditors for fiscal year 1998. Proxies may
be voted on such other matters as may properly come before the Annual Meeting
at the discretion of the proxy holders named therein. The Virginia First Board
knows of no such other matters except matters incidental to the conduct of the
Annual Meeting.
Holders of Virginia First Common Stock are requested to complete, date, and
sign the accompanying proxy and return it promptly to Virginia First in the
enclosed postage prepaid envelope.
RECORD DATE, VOTING RIGHTS, AND VOTE REQUIRED
Only the holders of Virginia First Common Stock on the Record Date (October
15, 1997) are entitled to receive notice of and to vote at the Annual Meeting.
On the Record Date, there were 5,814,430 shares of Virginia First Common Stock
outstanding, which were held by approximately 937 holders of record. Each
share of Virginia First Common Stock outstanding on the Record Date is
entitled to one vote as to each of the matters submitted at the Annual
Meeting.
Approval of the Reorganization Agreement and the Plan of Merger requires the
affirmative vote of the holders of a majority of the outstanding shares of
Virginia First common stock. FAILURE OF A HOLDER OF VIRGINIA FIRST COMMON
STOCK TO VOTE SUCH SHARES WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE
REORGANIZATION AGREEMENT AND THE PLAN OF MERGER.
The Virginia First Board currently consists of nine persons. The Virginia
First Board is divided into three classes, with each class to be as nearly
equal in number as possible. There are three nominees for election as
directors who will serve for three-year terms expiring in 2000 and one nominee
for election as a director who will serve for a one-year term expiring in
1998. It is intended that the persons named in the accompanying form of proxy
will vote to elect the four nominees listed elsewhere in this Proxy
Statement/Prospectus as directors, unless authority so to vote is withheld.
Although management expects that each of the nominees will be available for
election, in the event a vacancy in the slate of nominees is occasioned by
unexpected occurrence, it is intended that shares of Virginia First Common
Stock represented by proxies will be voted for the election of a substitute
nominee selected by the proxyholders named in the accompanying form of proxy.
The election of each nominee requires the affirmative vote of a plurality of
the shares of Virginia First Common Stock voted in the election of directors.
Holders of Virginia First Common Stock do not have cumulative voting rights in
the election of directors. See "ADDITIONAL MATTERS RELATING TO THE ANNUAL
MEETING--Election of Directors."
Ratification of the appointment of KPMG Peat Marwick LLP as Virginia First's
independent auditors for fiscal year 1998 requires the affirmative vote of a
majority of the shares of Virginia First Common Stock voted on such matter.
As of the Record Date, the directors and executive officers of Virginia
First and their affiliates beneficially owned a total of 1,362,421 outstanding
shares, or 23.4% of the issued and outstanding shares of Virginia First Common
Stock, all of which are expected to be voted in favor of the Reorganization
Agreement and the Plan of
12
<PAGE>
Merger. Charles A. Patton and William A. Patton, the Chief Executive Officer
and Chairman, respectively, of Virginia First, who as of the Record Date
beneficially owned 1,032,195 outstanding shares or 17.8% of the Virginia First
Common Stock entitled to be voted at the Annual Meeting, have agreed in the
Reorganization Agreement not to transfer any of such shares and to vote all of
such shares in favor of the Reorganization Agreement and the Plan of Merger.
VOTING AND REVOCATION OF PROXIES
The shares of Virginia First Common Stock represented by properly completed
proxies received at or prior to the time for the Annual 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 the Plan of Merger, "FOR" the proposed slate of
directors and "FOR" ratification of the appointment of KPMG Peat Marwick LLP
as Virginia First's independent auditors for fiscal year 1998. In addition,
shares held in street name that have been designated by brokers on proxy cards
as not voted ("Broker Shares") will not be counted as votes cast. Shares with
respect to which proxies have been marked as abstentions will not be counted
as votes cast. Shares with respect to which proxies have been marked as
abstentions and Broker Shares, however, will be treated as shares present for
purposes of determining whether a quorum is present. If any other matters are
properly presented at the Annual 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
be exercised only to the extent permissible under the applicable federal
securities laws. The Virginia First Board is not aware of any other business
to be presented at the Annual Meeting, other than matters incidental to the
conduct of the Annual Meeting. This proxy is being solicited for the Annual
Meeting called to consider the Reorganization Agreement and the Plan of Merger
and the other matters described herein and will not be used for any other
meeting of the shareholders of Virginia First.
The presence of a shareholder at the Annual 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 Virginia First at Virginia First's principal executive offices prior to the
Annual Meeting, or by attending the Annual 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 Virginia First 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 VIRGINIA FIRST
COMMON STOCK, ABSTENTIONS AND BROKER SHARES WILL HAVE THE SAME EFFECT AS
NEGATIVE VOTES. ACCORDINGLY, THE VIRGINIA FIRST 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
BB&T and Virginia First will each bear 50% of the cost of printing this
Proxy Statement/Prospectus, and Virginia First will bear all other costs 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 Virginia First, who will not be specially compensated for
such solicitation activities. Virginia First presently intends to utilize the
services of Morrow & Co. in connection with the solicitation of proxies in
connection with the Annual Meeting, at an estimated cost of $4,500.
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 Virginia First, BB&T 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 Virginia First or BB&T since the date of this Proxy
Statement/Prospectus.
13
<PAGE>
RECOMMENDATION OF VIRGINIA FIRST BOARD
The Virginia First Board has adopted the Reorganization Agreement and the
Plan of Merger and believes that the proposed transaction is fair to and in
the best interests of Virginia First and its shareholders. The Virginia First
Board recommends that Virginia First's shareholders vote "FOR" approval of the
Reorganization Agreement and the Plan of Merger. The Virginia First Board also
recommends that Virginia First's shareholders vote "FOR" the proposed slate of
directors and "FOR" ratification of the appointment of KPMG Peat Marwick LLP
as Virginia First's independent auditors for fiscal year 1998. See "THE
MERGER--Background of the Merger," "--Reasons for the Merger," "ADDITIONAL
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING--Election of Directors" and "--
Appointment of Auditors."
SHAREHOLDERS SHOULD NOT SEND IN STOCK CERTIFICATES WITH THEIR PROXY CARDS.
See "THE MERGER--Exchange of Virginia First Common Stock Certificates."
THE MERGER
The following description of the Merger is qualified in its entirety by
reference to the complete text of the Reorganization Agreement and the Plan of
Merger included therein, a copy of which is attached to this Proxy
Statement/Prospectus as Appendix I and incorporated herein by reference.
GENERAL
In the Merger, Virginia First will be merged with and into BB&T Financial-
VA, a wholly owned subsidiary of BB&T, and BB&T Financial-VA will be the
surviving corporation in the Merger and will remain a wholly owned subsidiary
of BB&T. Shareholders of Virginia First will receive shares of BB&T Common
Stock and cash in exchange for their shares of Virginia First Common Stock as
described below. It is expected that, not later than the first quarter of
1998, the VFSB Bank Merger will be effected, with BB&T-VA as the surviving
entity. Thereafter, BB&T-VA will continue to operate as a Virginia chartered
commercial bank, with branches throughout eastern, central and southern
Virginia.
BACKGROUND OF THE MERGER
In late 1996 and early 1997 the senior officers of Virginia First evaluated
the means by which Virginia First could continue to grow and provide a
reasonable return on shareholders' equity. Among other alternatives, Virginia
First considered raising capital to support continued growth as well as
repurchasing shares of Virginia First Common Stock. Virginia First concluded
that while it could remain a profitable financial institution for the
foreseeable future, to sustain its rate of growth would involve significant
risks that could not be easily quantified.
In early March 1997 Charles A. Patton, the Chief Executive Officer of
Virginia First, concluded that it would be prudent to explore a possible
acquisition of Virginia First by a financial institution of a size sufficient
to compete effectively in the rapidly changing commercial banking environment.
On March 7, 1997, Mr. Patton met with representatives of Sandler O'Neill to
discuss the possible benefits of an acquisition. Sandler O'Neill identified
approximately ten potential acquirors, consisting of regional bank holding
companies headquartered in Virginia, North Carolina and West Virginia. On
March 9, 1997 the Executive Committee of the Virginia First Board met and
instructed Mr. Patton to proceed. On March 10, 1997 Virginia First engaged
Sandler O'Neill to contact potential acquirors, including BB&T.
On March 10, 1997 Burney S. Warren, III, an Executive Vice President of
BB&T-NC, was contacted by Tom Killian, a representative of Sandler O'Neill, on
behalf of Virginia First to inquire about BB&T's interest in pursuing a
proposed business combination. Messrs. Killian and Mr. Warren held a meeting
on March 17, 1997 at which the proposed business combination was discussed in
general terms and Virginia First supplied certain financial information to
BB&T. There was no discussion of pricing or other specific terms of a possible
acquisition at this meeting. General discussions between Messrs. Warren and
Killian continued through the next
14
<PAGE>
week, during which time members of BB&T management prepared and reviewed
various financial projections and valuations of Virginia First.
On March 26, 1997 a meeting was held at BB&T's principal offices in Winston-
Salem, North Carolina attended by Messrs. Patton, Killian and Warren, John A.
Allison, IV, Chairman of the Board and Chief Executive Officer of BB&T, and
other executive officers of BB&T. At that meeting, BB&T representatives
presented a valuation of Virginia First and made a proposal for an acquisition
of Virginia First by BB&T that included tentative pricing terms.
Representatives of the parties had further related conversations during the
next two weeks, during which time BB&T management members continued to revise
and review financial projections and valuations of Virginia First. On April
11, 1997, Mr. Warren presented Mr. Killian with a written acquisition proposal
including pricing terms.
Between March 10, 1997 and mid-April, Sandler O'Neill contacted certain
other bank holding companies in Virginia, North Carolina and West Virginia
concerning a possible acquisition of Virginia First. Several of such bank
holding companies indicated an interest in acquiring Virginia First. However,
it became evident that BB&T was likely to offer the highest potential price
and price protection in the event of a decline in the price of BB&T Common
Stock.
On April 15, 1997 the Executive Committee of the Virginia First Board met
again and was advised of the contacts that had been made by Sandler O'Neill
and of the level of interest exhibited by various potential acquirors. The
Executive Committee authorized the Chief Executive Officer to proceed to
attempt to negotiate an agreement with BB&T.
A second meeting at BB&T's Winston-Salem offices was held on April 30, 1997,
at which the parties and their respective legal counsel reviewed drafts of the
Reorganization Agreement and related transaction documents and negotiated the
final details of the written agreements. Messrs. Patton and Killian
represented Virginia First, while Mr. Warren, Jerone C. Herring, Executive
Vice President and General Counsel of BB&T, Scott E. Reed, Senior Executive
Vice President and the Chief Financial Officer of BB&T, and Theresa H.
Watkins, Manager of Mergers and Acquisitions for BB&T, represented BB&T.
On May 4, 1997 the Virginia First Board met and received reports from the
Chief Executive Officer, representatives of Sandler O'Neill and counsel for
Virginia First. The Chief Executive Officer reviewed the reasoning that had
led management to seek a potential acquiror. Representatives of Sandler
O'Neill reviewed the process from March 10, 1997 to the date of the meeting,
as well as the financial terms of the proposed transaction with BB&T. The
representatives of Sandler O'Neill advised the Virginia First Board that
Sandler O'Neill was prepared to deliver its opinion that the proposed
transaction was fair to the shareholders of Virginia First from a financial
point of view. Counsel to Virginia First reviewed the proposed Reorganization
Agreement with the Virginia First Board.
On May 6, 1997 the BB&T Board held a special meeting by telephone conference
call at which the Reorganization Agreement and the Plan of Merger were
approved. The Virginia First Board met again on the same day. The Chief
Executive Officer again reviewed with the Virginia First Board the rationale
for the acquisition. Representatives of Sandler O'Neill again reviewed the
financial terms of the transaction and delivered Sandler O'Neill's fairness
opinion. Eight members of the Virginia First Board were present and one
director was unable to attend. The eight members in attendance unanimously
approved the Reorganization Agreement and the Plan of Merger.
REASONS FOR THE MERGER
BB&T
One of BB&T's announced acquisition goals is to build a statewide franchise
in Virginia with an emphasis on customer service value and personal attention.
BB&T management believes that Virginia First is a quality
15
<PAGE>
institution, and that the Merger will give BB&T strategic entry into the
southern, central and southwestern parts of Virginia and create the
opportunity to build commercial business in these areas and to cross-sell to
the current customers of the Virginia First BB&T's expanded line of products
and services.
Virginia First
In the past several years, Virginia First has successfully grown its total
assets, total loans and operating income. However, by late 1996 and early 1997
it was becoming evident to Virginia First's management that it had reached a
size where it was larger than the typical community bank, yet considerably
smaller than the regional bank holding companies competing with it in
Virginia. Management concluded that Virginia First could not realize the
economies of scale necessary to compete with larger financial institutions
without very substantial growth, but that such growth and the necessary
efforts to diversify Virginia First's income stream would involve large
investments in assets, technology and personnel. The potential rewards from
such investments were considered to be uncertain. Virginia First concluded
that its relatively low stock price would make it difficult to grow through
acquisitions without diluting existing shareholders and that without acquiring
other financial institutions, Virginia First likely would not be able to
increase its deposits at a rate sufficient to fund the necessary growth in its
assets. As it concluded that continued growth involved significant risks and
uncertain rewards, Virginia First also considered the possibility that if it
were to wait several years or more to seek a merger with a larger institution,
the interest of larger regional bank holding companies in acquiring an
institution the size of Virginia First may be diminished. Of the several
potential acquirors that expressed an interest, Virginia First chose BB&T
primarily because it offered the highest potential price and price protection
in the event of a decline in the price of BB&T Common Stock.
OPINION OF VIRGINIA FIRST'S FINANCIAL ADVISOR
Pursuant to a letter agreement dated as of March 10, 1997 (the "Sandler
O'Neill Agreement"), Virginia First retained Sandler O'Neill as an independent
financial advisor in connection with certain possible business combinations
with third parties. Sandler O'Neill is a nationally recognized investment
banking firm whose principal business speciality is banks and savings
institutions and, in that connection, is regularly engaged in the valuation of
such businesses and their securities in connection with mergers and
acquisitions and other corporate transactions.
Pursuant to the terms of the Sandler O'Neill Agreement, Sandler O'Neill
acted as financial advisor to Virginia First in connection with the Merger. In
connection therewith, at the May 6, 1997 meeting at which the Virginia First
Board approved and adopted the Reorganization Agreement, Sandler O'Neill
delivered a written opinion (the "Fairness Opinion") to the Virginia First
Board that, as of May 6, 1997, the consideration to be received by the holders
of shares of Virginia First Common Stock pursuant to the Reorganization
Agreement was fair, from a financial point of view, to such shareholders. The
full text of the Fairness Opinion updated to the date of this Proxy
Statement/Prospectus, which sets forth the procedures followed, assumptions
made, matters considered and qualifications and limitations on the review
undertaken, is attached as Appendix II to this Proxy Statement/Prospectus and
is incorporated herein by reference. The description of such opinion set forth
herein is qualified in its entirety by reference to Appendix II. Holders of
Virginia First Common Stock are urged to read the Fairness Opinion in its
entirety in connection with their consideration of the proposed Merger.
THE FAIRNESS OPINION WAS PROVIDED TO THE VIRGINIA FIRST BOARD FOR ITS
INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF
VIEW TO THE HOLDERS OF VIRGINIA FIRST COMMON STOCK OF THE PROPOSED MERGER
CONSIDERATION. IT DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION OF
VIRGINIA FIRST TO ENGAGE IN THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY VIRGINIA FIRST SHAREHOLDER AS TO HOW SUCH SHAREHOLDER
SHOULD VOTE AT THE ANNUAL MEETING WITH RESPECT TO THE MERGER OR ANY OTHER
MATTER RELATED THERETO.
16
<PAGE>
In connection with rendering the Fairness Opinion, Sandler O'Neill preformed
a variety of financial analyses. The following is a summary of material
analyses performed by Sandler O'Neill and included in Sandler O'Neill's
presentation to the Virginia First Board on May 4 and May 6, 1997. Such
summary does not purport to be a complete description of Sandler O'Neill's
analyses or the presentation made by Sandler O'Neill to the Virginia First
Board. The preparation of a fairness opinion is a complex process involving
subjective judgments and is not necessarily susceptible to a partial analysis
or summary description. Sandler O'Neill believes that its analyses must be
considered as a whole and that selecting portions of such analyses and the
factors considered therein, without considering all factors and analyses,
could create an incomplete view of the analyses and processes underlying the
Fairness Opinion. In performing its analyses, Sandler O'Neill made numerous
assumptions with respect to industry performance, business and economic
conditions and various other matters, many of which cannot be predicted and
are beyond the control of Virginia First, BB&T and Sandler O'Neill. Any
estimates contained in Sandler O'Neill's analyses are not necessarily
indicative of future results or values, which may be significantly more or
less favorable than such estimates. Estimates of the values of companies do
not purport to be appraisals or necessarily reflect the prices at which
companies or their securities may actually be sold. Because such estimates are
inherently subject to uncertainty, neither Virginia First nor Sandler O'Neill
assumes responsibility for their accuracy.
Stock Trading History. Sandler O'Neill examined the history of the trading
prices and the volume of Virginia First Common Stock and BB&T Common Stock,
and the relationship between the movements in the prices of Virginia First
Common Stock and BB&T Common Stock, respectively, to movements in certain
stock indices, including the Standard & Poor's 500 Index, the NASDAQ Banking
Index and a composite group of publicly traded savings institutions (in the
case of Virginia First) and publicly traded commercial banks (in the case of
BB&T) in geographic proximity and of similar asset size.
Analysis of Selected Publicly Traded Companies. Sandler O'Neill used
publicly available information to compare selected financial and market
trading information, including balance sheet composition, asset quality
ratios, loan loss reserve levels, profitability, capital adequacy, dividends
and trading multiples for Virginia First and certain other institutions. The 8
publicly-traded regional savings institutions (the "MidAtlantic Group") to
which Sandler O'Neill compared Virginia First were: CENIT Bancorp Inc., FFVA
Financial Corp., First Citizens Financial Corp., HFNC Financial Corp., Life
Bancorp Inc., Maryland Federal Bancorp, Palfed, Inc., and Virginia Beach
Federal Financial. Sandler O'Neill also compared Virginia First to a group of
10 publicly-traded savings institutions which had a price to tangible book
value of greater than 150% (the "Highly-Valued Group"). The Highly-Valued
Group institutions were: Andover Bancorp., Inc., D&N Financial Corp., Dime
Financial Corp., First Essex Bancorp, Inc., Great Southern Bancorp, Inc., Home
Federal Bancorp, Magna Bancorp, Inc., North American Savings Bank, Security
First Corp. and WSFS Financial Corporation. The analysis compared publicly
available year-end financial information as of and for the fiscal years ending
December 31, 1992 through December 31, 1996. This data was compared to
Virginia First's financial information as of and for the fiscal years ended
June 30, 1992 through June 30, 1996, and for the six months ended December 31,
1996. The data described below with respect to the MidAtlantic Group and the
Highly-Valued Group consists of the median data for such groups based upon the
December 31, 1996 financial information.
The total assets of Virginia First were approximately $808 million, compared
to an average of approximately $707 million for the MidAtlantic Group and
approximately $889 million for the Highly-Valued Group, respectively. The
annual growth rate of assets for Virginia First was 12.3%, compared to a
growth rate of approximately 6.2% for the MidAtlantic Group and approximately
11.2% for the Highly-Valued Group. The total equity of Virginia First was
approximately $63 million, compared to approximately $63 million for the
MidAtlantic Group and approximately $68 million for the Highly-Valued Group.
The tangible equity to total assets ratio was 7.56% for Virginia First,
compared to approximately 7.79% for the MidAtlantic Group and approximately
7.97% for the Highly-Valued Group. The net loans to assets ratio for Virginia
First was approximately 89.0%, compared to approximately 73.7% for the
MidAtlantic Group and approximately 71.7% for the Highly-Valued Group. The
cash and securities to total assets ratio was approximately 7.6% for Virginia
First, compared to approximately 23.4% for the MidAtlantic Group and
approximately 25.0% for the Highly-
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Valued Group. Total deposits were approximately $580 million for Virginia
First, compared to approximately $539 million for the MidAtlantic Group and
approximately $627 million for the Highly-Valued Group. Virginia First had a
gross loans to total deposits ratio of approximately 125.6%, compared to
approximately 98.3% for the MidAtlantic Group and approximately 109.7% for the
Highly-Valued Group. The total borrowings to total assets ratio for Virginia
First was approximately 19.6%, compared to approximately 20.1% for the
MidAtlantic Group and approximately 21.8% for the Highly-Valued Group. The
ratio of non-performing loans to total assets for Virginia First was 1.19%,
compared to approximately 0.35% for the MidAtlantic Group and approximately
0.87% for the Highly-Valued Group. The ratio of non-performing assets to total
assets for Virginia First was 1.98%, compared to approximately 0.74% for the
MidAtlantic Group and approximately 0.97% for the Highly-Valued Group. The
ratio of loan loss reserves to gross loans for Virginia First was 1.18%,
compared to approximately 1.18% for the MidAtlantic Group and approximately
1.21% for the Highly-Valued Group. The net interest margin of Virginia First
was 4.00%, compared to approximately 3.22% for the MidAtlantic Group and
approximately 3.73% for the Highly-Valued Group. The ratio of non-interest
income to average assets for Virginia First was 2.10%, compared to
approximately 0.50% for the MidAtlantic Group and approximately 0.55% for the
Highly-Valued Group. The ratio of non-interest expense to average assets was
2.97% for Virginia First, compared to approximately 2.26% for the MidAtlantic
Group and approximately 2.32% for the Highly-Valued Group. The efficiency
ratio of Virginia First was 64.2%, compared to approximately 64.2% for the
MidAtlantic Group and approximately 53.5% for the Highly-Valued Group. The
overhead ratio of Virginia First was 58.1%, compared to approximately 58.1%
for the MidAtlantic Group and approximately 43.8% for the Highly-Valued Group.
The return on average assets for Virginia First was 1.10%, compared to
approximately 0.85% for the MidAtlantic Group and approximately 1.26% for the
Highly-Valued Group. The return on average equity for Virginia First was
13.85%, compared to approximately 9.42% for the MidAtlantic Group and
approximately 16.45% for the Highly-Valued Group. The price to tangible book
value for Virginia First was 139%, compared to approximately 132% for the
MidAtlantic Group and approximately 180% for the Highly-Valued Group. The
price to earnings per share multiple for Virginia First was 9.97x, compared to
approximately 13.6x for the MidAtlantic Group and approximately 11.8x for the
Highly-Valued Group.
Sandler O'Neill also used publicly available information to perform a
similar comparison of selected financial and market trading information for
BB&T and certain other institutions. The 9 publicly-traded commercial banks
(the "Peer Group") to which Sandler O'Neill compared BB&T were: AmSouth
Bancorp., Barnett Banks Inc., Crestar Financial Corporation, First Union
Corporation, NationsBank Corporation, Regions Financial Corp., SouthTrust
Corp., SunTrust Banks Inc. and Wachovia Corporation. The analysis compared
publicly available year-end financial information as of and for the years
ending December 31, 1992 through December 31, 1996, and for the three months
ended March 31, 1997. The following comparisons are based upon the March 31,
1997 financial information. The data described below with respect to the Peer
Group consists of the median data for such group.
The total assets of BB&T were approximately $22.1 billion, compared to $34.6
billion for the Peer Group. The annual growth rate of assets for BB&T was
approximately 8.5%, compared to a growth rate of approximately 6.6% for the
Peer Group. The total equity of BB&T was approximately $1.75 billion, compared
to approximately $2.37 billion for the Peer Group. The tangible equity to
total assets ratio was approximately 7.50% for BB&T, compared to approximately
5.78% for the Peer Group. The net loans to total assets ratio for BB&T was
approximately 67.5%, compared to approximately 67.6% for the Peer Group. Total
deposits were approximately $15.6 billion for BB&T, compared to approximately
$23.2 billion for the Peer Group. BB&T had a gross loans to total deposits
ratio of approximately 97.0%, compared to approximately 98.2% for the Peer
Group. The total borrowings to total assets ratio for BB&T was approximately
20.2%, compared to approximately 18.2% for the Peer Group. The total non-
performing loans to total assets ratio for BB&T was approximately 0.26%,
compared to approximately 0.43% for the Peer Group. The non-performing assets
to total assets ratio for BB&T was approximately 0.37%, compared to
approximately 0.51% for the Peer Group. The ratio of loan loss reserves to
gross loans for BB&T was approximately 1.29%, compared to approximately 1.46%
for the Peer Group. The net interest margin of BB&T was approximately 4.49%,
compared to approximately 4.27% for the Peer Group. The ratio of non-interest
income to average assets for BB&T was approximately
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1.48%, compared to approximately 1.68% for the Peer Group. The ratio of non-
interest expense to average assets was approximately 3.02% for BB&T, compared
to approximately 2.97% for the Peer Group. The efficiency ratio of BB&T was
approximately 52.1%, compared to approximately 54.7% for the Peer Group. The
overhead ratio of BB&T was approximately 35.3%, compared to approximately
38.8% for the Peer Group. The return on average assets for BB&T was
approximately 1.41%, compared to approximately 1.28% for the Peer Group. The
return on average equity for BB&T was approximately 17.49%, compared to
approximately 16.46% for the Peer Group. The price to tangible book value for
BB&T was approximately 249%, compared to approximately 296% for the Peer
Group. The price to earnings per share multiple for BB&T was approximately
14.3x, compared to approximately 14.4x for the Peer Group.
Analysis of Selected Merger Transactions. Sandler O'Neill reviewed 26
transactions announced from January 1, 1996 to May 3, 1997, involving public
savings institutions nationwide as targets with transaction values over $100
million ("Nationwide Large Transactions"), 11 transactions announced from
January 1, 1996 to May 3, 1997, involving regional (Maryland, Kentucky, North
Carolina, South Carolina, Tennessee, Virginia and West Virginia) public
savings institutions as targets with transaction values over $15 million
("Regional Transactions"), and 20 transactions announced from January 1, 1996
to May 3, 1997 involving high performing public savings institutions
nationwide, where the return on average equity ratio exceeded 12%, with
transaction values over $15 million ("High Performing Transactions"). Sandler
O'Neill reviewed the ratios of price to earnings, price to book value, price
to tangible book value, price to deposits, price to assets, and core deposit
premium paid in each such transaction and computed high, low, mean and median
ratios and premiums for the respective groups of transactions. Sandler O'Neill
also prepared a reconciliation of normalized latest twelve months earnings by
adding the after-tax BIF/SAIF charge to latest 12 months December 31, 1996 net
income and subtracting the after-tax gain on the sale of mortgage servicing.
Using this methodology, Sandler O'Neill calculated normalized net income to be
approximately $8.1 million. Based upon the median multiples for Nationwide
Large Transactions, Sandler O'Neill derived an imputed range of values per
share of Virginia First Common Stock of $18.44 to $23.06. Based upon the
median multiples for Regional Transactions, Sandler O'Neill derived an imputed
range of values per share of Virginia First Common Stock of $19.62 to $27.63.
Based upon the median multiples for High Performing Transactions, Sandler
O'Neill derived an imputed range of values per share of Virginia First Common
Stock of $17.14 to $19.66.
Discounted Dividend Stream and Terminal Value Analysis. Sandler O'Neill also
performed an analysis which estimated the future stream of after-tax dividend
flows of Virginia First through 2001 under various circumstances, assuming
Virginia First performed in accordance with information regarding potential
future performance provided by its management and certain variations thereof
(including variations with respect to the levels of assets, net interest
spread, non-interest income, non-interest expense and dividend payout ratio).
To approximate the terminal value of Virginia First Common Stock at the end of
the five-year period, Sandler O'Neill applied price to earning multiples
ranging from 11x to 20x and applied multiples of book value ranging from
150.0% to 240.0%. The dividend income streams and terminal values were then
discounted to present values using different discount rates (ranging from 9.0%
to 14.0%) chosen to reflect different assumptions regarding required rates of
return of holders or prospective buyers of Virginia First Common Stock. This
analysis, assuming the current dividend payout ratio, indicated an imputed
range of values per share of Virginia First Common Stock between $16.09 and
$35.74 when applying the price to earnings multiples, and an imputed range of
values per share of Virginia First Common Stock between $15.32 and $30.00 when
applying multiples of book value. In connection with its analysis, Sandler
O'Neill extensively used sensitivity analyses to estimate the effects changes
in the underlying assumptions could have on the resulting present value.
In addition, Sandler O'Neill analyzed the discounted after-tax cash flows of
BB&T through 2001 under various circumstances, assuming (i) BB&T's future
performance met analysts' projections and (ii) that BB&T closed all pending
transactions. To approximate the terminal value of BB&T Common Stock at the
end of the five-year period, Sandler O'Neill applied price to earnings
multiples ranging from 11x to 20x and applied multiples of book value ranging
from 150% to 285%. The dividend income streams and terminal values were then
discounted to present values using different discount rates (ranging from 9%
to 14%) chosen to reflect
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different assumptions regarding required rates of return of prospective buyers
of BB&T Common Stock. This analysis, assuming the current dividend payout
ratio, indicated an imputed range of values per share of BB&T Common Stock
between $29.53 and $61.65 when applying the price to earnings multiples
(ranging from 11x to 20x), and an imputed range of values per share of BB&T
Common Stock between $24.88 and $53.13 when applying multiples of book value
(ranging from 150% to 285%). In connection with its analysis, Sandler O'Neill
used sensitivity analyses to estimate the effects changes in the underlying
assumptions could have on the resulting present value.
In addition, Sandler O'Neill performed an analysis which estimated the
future stream of after-tax dividend flows of BB&T on a pro forma basis,
assuming consummation of the Merger (the "Combined Company") through 2002
under various circumstances, assuming (i) the operations of the Combined
Company attributable to Virginia First performed in accordance with the
earnings forecasts of Virginia First's management and certain variations
thereof, as described above; (ii) the operations of the Combined Company
attributable to BB&T performed in accordance with certain publicly available
earnings forecasts prepared by financial analysts and certain variations
thereof (including variations with respect to the growth rate of assets, net
interest spread, non-interest income, non-interest expense and dividend payout
ratio); and (iii) the Combined Company realized cost savings equal to 20% of
Virginia First's projected non-interest expense. To approximate the terminal
value of the Combined Company's common stock at the end of the five-year
period, Sandler O'Neill applied current market price to earnings multiples for
BB&T. Over the range of relevant purchase prices the transaction was found to
be slightly accretive to both earnings per share and net present value.
Varying the assumptions did not have a material effect on pro forma results.
In connection with its analysis, Sandler O'Neill extensively used sensitivity
analyses to illustrate the effects changes in the underlying assumptions would
have on the resulting present value, and discussed these changes with the
Virginia First Board.
In connection with rendering the Fairness Opinion, Sandler O'Neill confirmed
the appropriateness of its reliance on the analysis used to render its May 6,
1997 opinion by performing procedures to update certain of such analyses and
by reviewing the assumptions on which such analyses were based and the factors
considered in connection therewith. Sandler O'Neill also reviewed, among other
things: (i) the Reorganization Agreement and exhibits thereto; (ii) the Option
Agreement; (iii) the audited consolidated financial statements and
management's discussion and analysis of the financial condition and results of
operations of Virginia First for the years ended June 30, 1996 and 1997; (iv)
the audited consolidated financial statements and management's discussion and
analysis of the financial condition and results of operations of BB&T for the
year ended December 31, 1996; (v) the unaudited consolidated financial
statements and management's discussion and analysis of the financial condition
and results of operations for the interim periods ending March 31 and
September 30, 1997 for Virginia First; (vi) the unaudited consolidated
financial statements and management's discussion and analysis of the financial
condition and results of operations for the interim periods ending March 31
and June 30, 1997 for BB&T; (vii) preliminary financial information prepared
by the senior management of Virginia First concerning Virginia First's
financial condition and results of operations for the three months ended
September 30, 1997; (viii) preliminary financial information prepared by the
senior management of BB&T concerning BB&T's financial condition and results of
operations for the nine months ended September 30, 1997; (ix) certain
financial analyses and forecasts of Virginia First prepared by and/or reviewed
with management of Virginia First and the views of senior management of
Virginia First regarding Virginia First's past and current business
operations, results thereof, financial condition and future prospects; (x)
certain financial analyses and forecasts of BB&T prepared by and/or reviewed
with management of BB&T and the views of senior management of BB&T regarding
BB&T's past and current business operations, results thereof, financial
condition and future prospects; (xi) the historical reported price and trading
activity for Virginia First's and BB&T's common stock, including a comparison
of certain financial and stock market information for Virginia First and BB&T
with similar information for certain other companies the securities of which
are publicly traded; (xii) the pro forma impact of the Merger on BB&T; (xiii)
the financial terms of recent business combinations in the savings institution
and banking industries; (xiv) the current market environment generally and the
banking environment in particular; and (xv) such other information, financial
studies, analyses and investigations and financial, economic and market
criteria as Sandler O'Neill considered relevant.
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In performing its review, Sandler O'Neill assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information reviewed by and discussed with
Sandler O'Neill, and Sandler O'Neill did not make an independent evaluation or
appraisal of the specific assets, the collateral securing assets or the
liabilities of BB&T or Virginia First or any of their subsidiaries, or the
collectibility of any such assets (relying, where relevant, on the analyses and
estimates of BB&T and Virginia First). With respect to the information
regarding future financial performance provided by each company's management,
Sandler O'Neill assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
managements of the respective future financial performances of BB&T and
Virginia First and that such performances will be achieved. Sandler O'Neill
also assumed the following: (i) that there has been no material change in
BB&T's or Virginia First's assets, financial condition, results of operations,
business or prospects since the date of the last financial statements noted
above; (ii) that BB&T will remain as a going concern for all periods relevant
to Sandler O'Neill's analyses; and (iii) that the terms and conditions
precedent in the Reorganization Agreement are not waived or modified.
Under the Sandler O'Neill Agreement, the Company has agreed to pay Sandler
O'Neill a transaction fee in connection with the Merger, a substantial portion
of which is contingent upon the consummation of the Merger. Under the terms of
the Sandler O'Neill Agreement, the Company has agreed to pay Sandler O'Neill a
transaction fee as follows: (i) if the Merger Consideration is less than or
equal to $22.00, an amount equal to 1% of the aggregate transaction value (as
defined in the Sandler O'Neill Agreement), plus (ii) if the Merger
Consideration is greater than $22.00, an amount equal to 2% of the amount by
which the aggregate transaction value exceeds the base value aggregate
transaction value (as defined in the Sandler O'Neill Agreement), $348,000 of
which was paid upon execution of the Merger Agreement and the balance to be
paid if the Merger is consummated. Virginia First has also paid Sandler O'Neill
a fee of $125,000 for rendering the Fairness Opinion which will be credited to
the transaction fee payable when the Merger is consummated. Virginia First has
also agreed to reimburse Sandler O'Neill for its reasonable out-of-pocket
expenses incurred in connection with its engagement and to indemnify Sandler
O'Neill and its affiliates and their respective partners, directors, officers,
employees, agents, and controlling persons against certain expenses and
liabilities, including liabilities under the securities laws.
In the ordinary course of its business, Sandler O'Neill may actively trade
the equity securities of Virginia First and BB&T for its own account and for
the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
MERGER CONSIDERATION
The Merger Consideration to be received for each share of Virginia First
Common Stock issued and outstanding as of the Effective Time will be
determined, as set forth below, based on the "Closing Value" of BB&T Common
Stock. For purposes of determining the Merger Consideration, "Closing Value"
means the average closing price per share of BB&T Common Stock on the NYSE
("NYSE") Composite Transactions List (as reported by The Wall Street Journal)
for the ten trading days immediately preceding the tenth calendar day preceding
the Effective Time. If the shareholders of Virginia First approve the
Reorganization Agreement and Plan of Merger at the Annual Meeting on November
26, 1997, it is presently expected that the Effective Time will occur on or
about December 1, 1997.
. If the Closing Value is $41.67 or more, the Merger Consideration will be
$25.00, of which $17.50 will be in BB&T Common Stock (determined with
reference to the Closing Value) and $7.50 will be in cash.
. If the Closing Value is less than $41.67 and is not less than $37.50,
the Merger Consideration will be 0.6 of the Closing Value (or between
$25.00 and $22.50), of which 70% will be in BB&T Common Stock and 30%
will be in cash.
. If the Closing Value is less than $37.50 and is not less than $33.75,
the Merger Consideration will be $22.50, of which $15.75 will be in BB&T
Common Stock (determined with reference to the Closing Value) and $6.75
will be in cash.
. If the Closing Value is less than $33.75 and is not less than $30.00,
the Merger Consideration will be $22.50, of which 0.467 of the Closing
Value will be in BB&T Common Stock (determined with reference to the
Closing Value) and the difference between such amount and $22.50 will be
in cash.
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. If the Closing Value is less than $30.00, the Merger Consideration will
equal the sum of 0.467 of the Closing Value plus cash of $8.50, except
that at any time following determination of the Closing Value at below
$30.00 and before the Effective Time, the Virginia First Board may elect
to terminate the Reorganization Agreement and the proposed Merger rather
than to consummate the proposed Merger for the Merger Consideration
provided for by the Reorganization Agreement. The Virginia First Board
does not currently anticipate re-soliciting proxies in the event the
Closing Value is less than $30.00 and it determines to proceed with the
Merger.
Assuming a Closing Value of $57.06, which was the closing per share market
price of BB&T Common Stock on October 20,1997, each share of Virginia First
Common Stock would be converted into the right to receive 0.3065 shares of
BB&T Common Stock and cash in the amount of $7.50. SHAREHOLDERS SHOULD
RECOGNIZE, HOWEVER, THAT THE FINAL DETERMINATION OF THE CLOSING VALUE WILL NOT
BE MADE UNTIL SHORTLY BEFORE THE EFFECTIVE TIME, AND THAT THE ACTUAL MERGER
CONSIDERATION MAY BE DIFFERENT FROM THE AMOUNT SET FORTH ABOVE. FLUCTUATIONS
IN THE VALUE OF BB&T COMMON STOCK MAY MATERIALLY AFFECT THE AMOUNT OF MERGER
CONSIDERATION SHAREHOLDERS OF VIRGINIA FIRST WILL BE ENTITLED TO RECEIVE.
MOREOVER, ANY CHANGES IN THE MARKET PRICE OF BB&T COMMON STOCK AFTER THE
PERIOD DURING WHICH THE CLOSING VALUE IS DETERMINED WILL NOT AFFECT THE NUMBER
OF SHARES OF BB&T COMMON STOCK THAT HOLDERS OF VIRGINIA FIRST COMMON STOCK
WILL RECEIVE, AND THE ACTUAL MARKET PRICE OF BB&T COMMON STOCK AT THE
EFFECTIVE TIME COULD BE MORE OR LESS THAN THE CLOSING VALUE USED TO DETERMINE
THE MERGER CONSIDERATION.
The aggregate number of shares (including fractional shares) of BB&T Common
Stock to be received by each Virginia First shareholder as Merger
Consideration will be rounded to the nearest whole share. The aggregate amount
of cash to be received as Merger Consideration will be correspondingly
increased or decreased to adjust for such rounding determined with reference
to the Closing Value.
EXCHANGE OF VIRGINIA FIRST COMMON STOCK CERTIFICATES
Promptly after the Effective Time, BB&T will deliver or mail to each
Virginia First shareholder a form of letter of transmittal and instructions
for use in effecting the surrender of the certificates that, immediately prior
to the Effective Time, represented any shares of Virginia First Common Stock
in exchange for the Merger Consideration. Upon surrender of such certificates,
together with the letter of transmittal duly executed and completed in
accordance with applicable instructions, and such other documents as may be
reasonably requested, BB&T will promptly transfer the Merger Consideration to
the persons entitled thereto.
BB&T Financial-VA will pay any dividends or other distributions with a
record date prior to the Effective Time that have been declared or made by
Virginia First in respect of shares of Virginia First Common Stock in
accordance with the terms of the Reorganization Agreement and that remain
unpaid at the Effective Time. To the extent permitted by law, former
shareholders of record of Virginia First will be entitled after the Effective
Time to vote at any meeting of BB&T shareholders the number of whole shares of
BB&T Common Stock into which their respective shares of Virginia First Common
Stock are converted, regardless of whether such holders have exchanged their
certificates representing Virginia First Common Stock for certificates
representing BB&T Common Stock. Whenever a dividend or other distribution is
declared by BB&T on BB&T Common Stock for which the record date is at or after
the Effective Time, the declaration shall include dividends or other
distributions on all shares of BB&T Common Stock issuable pursuant to the
Reorganization Agreement. However, no dividend or other distribution payable
to the holders of record of BB&T Common Stock as of any time subsequent to the
Effective Time will be delivered to the holder of any certificate representing
shares of Virginia First Common Stock until such holder surrenders such
certificate for exchange as provided in the Reorganization Agreement. Upon
surrender of such certificate, both the BB&T Common Stock certificate and any
undelivered dividends and cash payments payable hereunder (without interest)
will be delivered and paid with respect to each share represented by such
certificate.
HOLDERS OF VIRGINIA FIRST COMMON STOCK SHOULD NOT SEND IN THEIR STOCK
CERTIFICATES UNTIL THEY RECEIVE TRANSMITTAL FORMS AND INSTRUCTIONS.
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After the Effective Time, until so surrendered and exchanged, each
certificate that evidenced shares of Virginia First Common Stock immediately
prior to the Effective Time will represent only the right to receive the
Merger Consideration. No interest will be paid or accrued on the Merger
Consideration.
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 State Corporation Commission of the
Commonwealth of Virginia. The filing of the Articles of Merger will take place
following approval of the Plan of Merger by the Virginia First shareholders
and satisfaction of all other conditions to the consummation of the Merger set
forth in the Reorganization Agreement. If the Merger is approved at the Annual
Meeting on November 26, 1997, it is currently anticipated that the Articles of
Merger will be filed on or about November 28, 1997 and the consummation of the
Merger will occur on or about December 1, 1997.
Conditions to the Merger
The respective obligations of BB&T and Virginia First to carry out the
transactions contemplated by the Reorganization Agreement are subject to
satisfaction or, where permissible, waiver of the following conditions at or
prior to the Effective Time: (a) all corporate action necessary to authorize
the execution, delivery and performance of the Reorganization Agreement and
the Plan of Merger, and consummation of the transactions contemplated thereby,
must have been duly and validly taken, including without limitation the
approval of the shareholders of Virginia First of the Reorganization Agreement
and the Plan of Merger; (b) the Registration Statement (including any post-
effective amendments) must be effective under the Securities Act, BB&T must
have received all necessary state securities or "Blue Sky" permits or other
authorizations, no proceedings may be pending or threatened by the Commission
or any state "Blue Sky" securities administration to suspend the effectiveness
of the Registration Statement and the BB&T Common Stock to be issued as
contemplated in the Plan of Merger must either have been registered or be
subject to exemption from registration under applicable state securities laws;
(c) the parties must have received all regulatory approvals required in
connection with the transactions contemplated by the Reorganization Agreement,
all notice periods and waiting periods required after the granting of any such
approvals must have passed and all such approvals must be in effect; (d) none
of BB&T, any of BB&T's subsidiaries, Virginia First or any of Virginia First's
subsidiaries may be subject to any order, decree or injunction of a court or
agency of competent jurisdiction that enjoins or prohibits consummation of the
transactions contemplated by the Reorganization Agreement; and (e) Virginia
First and BB&T must have received an opinion of BB&T's legal counsel, in form
and substance satisfactory to Virginia First and BB&T, substantially to the
effect that the Merger will constitute one or more reorganizations under
Section 368 of the Code and that the shareholders of Virginia First will not
recognize any gain or loss to the extent that such shareholders exchange
shares of Virginia First Common Stock for shares of BB&T Common Stock.
The obligations of Virginia First to carry out the transactions contemplated
by the Reorganization Agreement are also subject to the satisfaction of the
following additional conditions at or prior to the Effective Time, unless,
where permissible, waived by Virginia First: (a) BB&T must have performed in
all material respects all obligations and complied in all material respects
with all covenants required by the Reorganization Agreement; (b) all approvals
of the transactions contemplated in the Reorganization Agreement from the
Federal Reserve and any other state or federal government agency, department
or body, the approval of which is required for the consummation of the Merger,
must have been received and all waiting periods with respect to such approvals
must have expired; (c) the shares of BB&T Common Stock issuable pursuant to
the Merger must have been approved for listing on the NYSE, subject to
official notice of issuance; (d) Virginia First must not have reasonably
determined in good faith that there has been a material adverse change in the
condition, operations or prospects of BB&T since December 31, 1996; and (e)
Virginia First must have received customary closing certificates and legal
opinions from BB&T and its counsel.
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In addition, all representations and warranties of BB&T will be evaluated as
of the date of the Reorganization Agreement and as of the Effective Time as
though made on and as of the Effective Time (or on the date designated, in the
case of any representation and warranty that specifically relates to an
earlier date), except as otherwise contemplated by the Reorganization
Agreement or consented to in writing by Virginia First. The representations
and warranties of BB&T concerning (a) its capitalization, (b) its and its
subsidiaries' organization and authority to conduct business, (c) the binding
nature of the Reorganization Agreement and (d) its and its subsidiaries'
compliance with laws must be true and correct (except for inaccuracies that
are de minimis in amount). Moreover, there must not exist inaccuracies in any
of the representations and warranties of BB&T set forth in the Reorganization
Agreement such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a material adverse effect on BB&T. (For purposes of
this provision only, those representations and warranties that are qualified
by references to "material" or "material adverse effect" are deemed not to
include such qualifications.)
The obligations of BB&T to carry out the transactions contemplated by the
Reorganization Agreement are also subject to satisfaction of the following
additional conditions at or prior to the Effective Time, unless, where
permissible, waived by BB&T: (a) no regulatory approval may have imposed any
condition or requirement that, in the reasonable opinion of the BB&T Board,
would so materially adversely affect the business or economic benefits to BB&T
of the transactions contemplated by the Reorganization Agreement as to render
consummation of such transactions inadvisable or unduly burdensome; (b)
Virginia First must have performed in all material respects all obligations
and complied in all material respects with all covenants required by the
Reorganization Agreement; (c) BB&T must have received the written agreements
from certain affiliates of Virginia First concerning the shares of BB&T Common
Stock to be received by them; and (d) BB&T must have received customary
closing certificates and legal opinions from Virginia First and its counsel.
In addition, all representations and warranties of Virginia First will be
evaluated as of the date of the Reorganization Agreement and as of the
Effective Time as though made on and as of the Effective Time (or on the date
designated, in the case of any representation and warranty that specifically
relates to an earlier date), except as otherwise contemplated by the
Reorganization Agreement or consented to in writing by BB&T. The
representations and warranties of Virginia First concerning (a) its
capitalization, (b) its and its subsidiaries' organization and authority to
conduct business, (c) its ownership of its subsidiaries, (d) the binding
nature of the Reorganization Agreement, (e) the lack of conflicts between the
transactions contemplated by the Reorganization Agreement and the Virginia
First Articles and the Virginia First Bylaws, (f) its forbearance from taking
any actions that would negatively affect the tax-free elements of the Merger
or the receipt of necessary regulatory approvals and (g) the exemption of the
Merger from Virginia anti-takeover laws must be true and correct (except for
inaccuracies that are de minimis in amount). Moreover, there must not exist
inaccuracies in any of the representations and warranties of Virginia First
set forth in the Reorganization Agreement such that the effect of such
inaccuracies individually or in the aggregate has, or is reasonably likely to
have, a material adverse effect on Virginia First and Virginia First's
subsidiaries taken as a whole. (For purposes of this provision only, those
representations and warranties that are qualified by references to "material"
or "material adverse effect" are deemed not to include such qualifications.)
Conduct of Virginia First's and BB&T's Business Prior to the Effective Date
of the Merger
Except with the prior written consent of BB&T, prior to the Effective Time
Virginia First may not, and must cause each of its subsidiaries 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 engage in any new activity;
(b) declare, set aside, make or pay any dividend or other distribution in
respect of its capital stock, other than regularly scheduled quarterly
dividends of $.025 per share of Virginia First Common Stock payable on
record dates and in amounts consistent with past practices, and other than
redemption of the rights provided for under its shareholder rights plan for
a price of $.01 per such right, except that any dividend declared or
payable on the shares of Virginia First Common Stock for the quarterly
period during
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which the Effective Time occurs will, unless otherwise agreed upon in
writing by BB&T and Virginia First, be declared with a record date prior to
the Effective Time only if the normal record date for payment of the
corresponding quarterly dividend to holders of BB&T Common Stock is before
the Effective Time;
(c) issue any shares of its capital stock, except pursuant to Virginia
First's stock option plans, the Option Agreement or Virginia First's
dividend reinvestment plan;
(d) issue, grant or authorize any rights or options to acquire capital
stock 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 of its subsidiaries, 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 entity or permit any other entity to merge into
it, or consolidate with any other entity; acquire control over any other
entity; or liquidate, sell or otherwise dispose of any assets or acquire
any assets, other than in the ordinary course of its business consistent
with past practices;
(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;
(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 with respect to officers and employees in the ordinary
course of business consistent with past practices;
(i) enter into or substantially modify (except as may be required by
applicable law or regulation) 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 (except that this does not prevent renewal 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, Virginia
First or any subsidiary or any business combination with Virginia First or
any subsidiary other than as contemplated by the Reorganization Agreement;
or authorize any officer, director, agent or affiliate of Virginia First or
any subsidiary to do any of the above; or fail to notify BB&T immediately
if any such inquiries or proposals are received, any such information is
requested or required, or any such negotiations or discussions are sought
to be initiated (except that this does not apply to furnishing information,
negotiations or discussions following an unsolicited offer if, as a result
of such officer, Virginia First is advised in writing by legal counsel that
the failure so to furnish information or negotiate would constitute a
breach of the fiduciary duties of the Virginia First Board to its
shareholders);
(k) enter into (i) any material agreement, arrangement or commitment not
made in the ordinary course of business, (ii) any agreement, indenture or
other instrument not made in the ordinary course of business relating to
the borrowing of money by Virginia First or a subsidiary or guarantee by
Virginia First or a 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 (except that this does
not apply to the election of directors by shareholders in the normal course
other than to the extent otherwise provided in an agreement, arrangement or
commitment previously disclosed to BB&T); or (iv) any contract, agreement
or understanding with a labor union;
(l) change its lending, investment or asset liability management policies
in any material respect, except as may be required by applicable law,
regulation, or directives, and except that after approval of the
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Reorganization Agreement and the Plan of Merger by its shareholders
Virginia First will cooperate in good faith with BB&T to adopt policies,
practices and procedures consistent with those utilized by BB&T, effective
on or before the Closing Date;
(m) change its methods of accounting in effect at June 30, 1996, except
as required by changes in generally accepted accounting principles
concurred in by BB&T's independent certified public accountants, which
concurrence may not be unreasonably withheld, 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 June 30, 1996, except as required by changes in law or
regulation;
(n) incur any commitments for capital expenditures or obligation to make
capital expenditures in excess of $50,000, for any one expenditure, or
$150,000, in the aggregate;
(o) incur any indebtedness other than deposits from customers, advances
from the Federal Home Loan Bank and reverse repurchase arrangements in the
ordinary course of business;
(p) take any action that would or could reasonably be expected to (i)
cause the Merger hereby not to constitute a reorganization under Section
368 of the Code as determined by BB&T, (ii) result in any inaccuracy of a
representation or warranty herein that would allow for a termination of the
Reorganization Agreement, or (iii) cause any of the conditions precedent to
the transactions contemplated by the Reorganization Agreement to fail to be
satisfied;
(q) dispose of any material assets other than in the ordinary course of
business; or
(r) agree to do any of the foregoing.
Except with the prior written consent of Virginia First, which consent may
not be arbitrarily or unreasonably withheld, prior to the Effective Time BB&T
may not, and must cause each of its subsidiaries not to, take any action that
would or might be expected to (a) cause the Merger not to constitute a
reorganization under Section 368 of the Code; (b) result in any inaccuracy of
a representation or warranty in the Reorganization Agreement that would allow
for termination of the Reorganization Agreement; (c) cause any of the
conditions precedent to the transactions contemplated by the Reorganization
Agreement to fail to be satisfied; (d) exercise the Option Agreement other
than in accordance with its terms, or dispose of the shares of Virginia First
Common Stock issuable upon exercise of the option rights conferred thereby
other than as permitted or contemplated therein; or (e) 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.
Termination; Waiver; Amendment
The Reorganization Agreement may be terminated: (a) at any time prior to the
Effective Time, by the mutual consent in writing of the parties; (b) at any
time prior to the Effective Time, by either party (i) in the event of a
material breach by the other party of any covenant or agreement contained in
the Reorganization Agreement, or (ii) in the event of an inaccuracy of any
representation or warranty of the other party contained in the Reorganization
Agreement, which inaccuracy would provide the nonbreaching party the ability
to refuse to consummate the Merger under the applicable standard set forth in
the Reorganization Agreement (see "--Conditions to the Merger"), and, in the
case of (i) or (ii), if such breach or inaccuracy 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 Time; (c) at any time prior to the
Effective Time, by either party, if any of the conditions precedent to the
obligations of the other party to consummate the transactions contemplated in
the Reorganization Agreement cannot be satisfied or fulfilled prior to the
Closing Date, and the party giving the notice is not in breach of any of its
representations, warranties, covenants or undertakings; (d) at any time, by
either party, if any of the applications for prior regulatory approval are
denied, and the time period for appeals and requests for reconsideration has
run; (e) at any time, by either party, if the Virginia First shareholders do
not approve the Reorganization Agreement and the Plan of Merger; (f) at any
time following March 31, 1998, by either party, if the Effective Time has not
occurred, and the party giving the notice is not in breach of any of its
representations, warranties, covenants or undertakings; or (h) at any time
prior to the Effective Time by Virginia First if the Closing Value is less
than $30.00.
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If the Reorganization Agreement and the Plan of Merger are terminated, both
will become void and have no effect, except that (i) provisions relating to
confidentiality and expenses will survive any such termination and (ii) a
termination as described in clause (b) of the immediately preceding paragraph
will not relieve the breaching party from liability for an uncured breach of
the covenant, agreement, understanding, representation or warranty giving rise
to such termination. The Option Agreement is governed by its own terms.
All representations, warranties and covenants in the Reorganization
Agreement and the Plan of Merger will expire at the Effective Time, other than
covenants that by their terms are to be performed after the Effective Time,
except that no such representations, warranties or covenants will be deemed to
be terminated so as to deprive BB&T or Virginia First (or any director,
officer or controlling person thereof) of any defense at law or in equity that
otherwise would be available against the claims of any person, including,
without limitation, any shareholder or former shareholder of either BB&T or
Virginia First.
Except with respect to any required regulatory approval, either party, by
written instrument signed by an executive officer of such party, may at any
time (whether before or after approval of the Reorganization Agreement and the
Plan of Merger by Virginia First shareholders) extend the time for the
performance of any of the obligations or other acts of the other party and may
waive (a) any inaccuracies of the other party in the representations or
warranties contained in the Reorganization Agreement, the Plan of Merger or
any document delivered pursuant thereto, (b) 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 therein, or (c)
the performance by the other party of any of its obligations set out herein or
therein, except that no such extension or waiver, nor any amendment of or
supplement to the Reorganization Agreement, executed after approval by
Virginia First shareholders of the Reorganization Agreement and the Plan of
Merger may reduce either the number of shares of BB&T Common Stock into which
each share of Virginia First Common Stock will be converted in the Merger or
the payment terms for fractional interests. Subject to this limitation, the
Reorganization Agreement and the Plan of Merger may be amended or supplemented
at any time in writing by mutual agreement of BB&T and Virginia First.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Virginia First's management have certain interests in the
Merger that are in addition to their interests as shareholders of Virginia
First generally.
Employment Agreement
At the Effective Time, BB&T and VFSB will enter into a four-year employment
agreement with Charles Patton that provides for the employment of Mr. Patton
as Senior Vice President of VFSB (or, following the anticipated VFSB Bank
Merger, of BB&T-VA). The employment agreement provides for an annual base
salary of $250,000 during the first two years of employment. Thereafter, he
will be entitled to at least such amount subject to annual review and increase
at the discretion of VFSB. In addition, Mr. Patton will be entitled to receive
a bonus of $75,000 for continued employment under the agreement through
December 31, 1998 (or the earlier date that Mr. Patton's employment with VFSB
terminates, if such date is at least one year following the Effective Time),
and will thereafter participate in bonus and incentive plans as are then
generally in effect for BB&T officers of similar grade. Also, VFSB will pay
the amount of $16,000 to Mr. Patton during each year of employment under the
agreement to enable Mr. Patton to pay premiums on a life insurance policy
previously conveyed to him by VFSB. While employed pursuant to the agreement,
Mr. Patton will be entitled to receive, on the same basis as other officers of
VFSB, employee pension and welfare benefits such as sick leave, vacation,
group disability and health, life, and accident insurance that VFSB may from
time to time extend to its officers. Mr. Patton will not receive any credit
for benefit accrual purposes under any pension plan for service prior to the
Effective Time.
BB&T has agreed that, while employed under the agreement, Mr. Patton will
serve on the board of directors of BB&T-NC, BB&T-VA and Craigie Incorporated,
and will serve as chairman of the board of directors of
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VFSB subsidiary American Finance & Investment, Inc. All of these corporations
are currently controlled by BB&T or expected to be controlled by BB&T at the
Effective Time. While employed under the agreement, Mr. Patton will not
receive any fees for services on such boards of directors; however, upon
termination of such employment Mr. Patton will receive a payment of $350.00
for each BB&T-VA board meeting thereafter attended and payments of $5,000 per
year for service thereafter on the BB&T-NC board plus $1,000 for each BB&T-NC
board or committee meeting attended. Continuation of service on the boards as
described above is conditional upon Mr. Patton's carrying out his duties in
accordance with his fiduciary obligations, and upon his compliance with the
terms of the employment agreement.
VFSB will have the right to terminate Mr. Patton's employment under the
agreement at any time for "Just Cause," which includes personal dishonesty,
gross incompetence, willful misconduct, breach of a fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, conviction of a felony or
of a misdemeanor involving moral turpitude, unethical business practices in
connection with VFSB's or BB&T's business, misappropriation of VFSB or BB&T's
assets (determined on a reasonable basis) or those of their affiliates, or
material breach of any other provision of the employment agreement, provided
that Mr. Patton has received written notice from VFSB of such material breach
and such breach remains uncured 30 days after the delivery of such notice. If
employment under the agreement is terminated for Just Cause, the agreement
will end at such time and Mr. Patton will have no right to receive
compensation or other benefits under the agreement during the period following
the termination. In addition, Mr. Patton would be subject to certain
noncompetition provisions for the following two years.
VFSB may also terminate Mr. Patton's employment other than for Just Cause,
as described above, at any time upon written notice. In this event, Mr. Patton
would receive an annual amount equal to the sum of his rate of annual base
salary in effect immediately preceding such termination plus the $16,000
amount payable annually for insurance premiums ("Termination Compensation") in
each year for the remainder of what would otherwise have been the term of the
employment agreement (pro rated for any partial year), so long as Mr. Patton
complies with certain noncompetition provisions. In addition, assuming such
compliance, Mr. Patton would (i) receive a cash payment on the date of
termination equal to the amount of the cash bonus, if any, paid to him with
respect to the calendar year preceding the year in which his termination of
employment occurred multiplied by a fraction, the numerator of which is the
number of days in the calendar year in which his employment terminated that
elapsed before such termination, and the denominator of which is 365 (the
"Bonus Amount"), and (ii) continue to participate in retirement and welfare
benefit plans for which officers of VFSB generally are eligible, on the same
terms as applicable to such officers, or receive benefits of comparable value,
for all periods during which he received Termination Compensation.
If Mr. Patton voluntarily terminates employment with VFSB at any time after
the first anniversary of the date of the agreement, he would be entitled to
receive Termination Compensation and other present or future employee benefits
as described above for the periods described above, and would receive the
Bonus Amount, so long as he complied with the noncompetition provisions. If
Mr. Patton were to die during the term of the agreement, VFSB would pay his
personal representative, for one year thereafter, a monthly amount equal to
one-twelfth of the annual rate of base salary in effect on the date of death.
If any payments made by VFSB to Mr. Patton upon termination of employment as
described above were to be deemed to be excess parachute payments within the
meaning of Section 280G of the Code and subject to the excise tax under
Section 4999 of the Code, VFSB would pay to Mr. Patton an additional sum (a
"Gross-Up Payment") in an amount such that after payment by Mr. Patton of all
taxes imposed with respect to such Gross-Up Payment (including any income
taxes, FICA taxes and excise taxes and any interest and penalties) he would
retain an amount equal to the excise tax (including any interest and penalties
thereon) that would have been avoided if the payments in question had not been
treated as parachute payments.
If, by reason of physical or mental disability during his employment under
the agreement, Mr. Patton were unable to carry out the essential functions of
his employment hereunder for six consecutive months, his services
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could be terminated by the VFSB Board of Directors upon one month's notice.
If, prior to the expiration of the one-month period after the giving of such
notice, Mr. Patton were to recover from such disability and return to full-
time duties, then his employment would continue as if it had been
uninterrupted. During the first six months of the period of disability, Mr.
Patton would continue to earn all compensation (including bonuses) to which he
would have been entitled as if he had not been disabled, inclusive of any
compensation received pursuant to any applicable disability insurance plan of
VFSB or BB&T. Thereafter, he would receive compensation to which he is
entitled under any applicable disability insurance plan, except that if the
termination on account of disability occurred on or after the first
anniversary of the date of the employment agreement, Mr. Patton would be
treated as if he voluntarily terminated his employment and would be entitled
to receive the payments provided for under such circumstances, as described
above, subject to offset each month for any payments received under any
applicable disability insurance plan of VFSB or BB&T.
Settlement Payment
The Reorganization Agreement provides that at the closing of the
transactions contemplated therein, and prior to the Effective Time, Virginia
First will pay to Mr. Patton a lump sum amount of $525,000. This payment will
be in full satisfaction of any obligations to Mr. Patton pursuant to
employment agreements entered into between Mr. Patton and each of Virginia
First and VFSB on January 1, 1996.
Protection of Virginia First Officers and Directors
Under the terms of the Reorganization Agreement, BB&T or a subsidiary will
purchase and keep in force for a period of three years after the Effective
Time directors' and officers' liability insurance providing coverage to
directors and officers of Virginia First for acts or omissions occurring prior
to the Effective Time. Such insurance will provide at least the same coverage
and amounts as contained in Virginia First's policy in effect on the date of
the Reorganization Agreement, except that in no event will the annual premium
on such policy exceed 150% of the annual premium payments on Virginia First's
policy in effect as of the date of the Reorganization Agreement (the "Maximum
Amount"). If the amount of the premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, BB&T will use its reasonable
efforts to maintain the most advantageous policies of directors' and officers'
liability insurance obtainable for a premium equal to the Maximum Amount. BB&T
has further agreed to indemnify all individuals who are or have been officers
and directors of Virginia First prior to the Effective Time from any acts or
omissions in such capacities prior to the Effective Time, to the extent
indemnification is provided pursuant to the Virginia First Articles and is
permitted under the VSCA.
Service on BB&T-VA Board of Directors
The Reorganization Agreement provides that William A. Patton, Chairman of
the Virginia First Board, and at least four other members of the Virginia
First Board other than Charles A. Patton will be elected to the board of
directors of BB&T-VA as soon as practicable following the Effective Time. The
maximum age requirement presently in effect for membership on such board will
be waived by BB&T for two years following the Effective Time with respect to
Mr. William Patton. Mr. Charles Patton will be elected to the board of BB&T-VA
pursuant to the terms of his employment agreement. See "--Employment
Agreement."
REGULATORY CONSIDERATIONS
Bank holding companies (such as BB&T and BB&T Financial-VA), savings and
loan holding companies (such as Virginia First) and their respective
depository institution subsidiaries (including BB&T-VA and VFSB, respectively)
are highly regulated institutions, with numerous federal and state laws and
regulations governing their activities. Among these laws and regulations are
requirements of prior approval by applicable government regulatory authorities
in connection with acquisition and merger transactions such as the Merger, as
summarized below. In addition, these institutions are subject to ongoing
supervision, regulation, and periodic examination by various federal and state
financial institution regulatory agencies. Detailed discussions of such
ongoing regulatory
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oversight and the laws and regulations under which it is carried out can be
found in the Annual Reports on Forms 10-K of each of BB&T and Virginia First
incorporated by reference herein. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Those summaries are
qualified in their entirety by the actual language of the laws and
regulations, which are subject to change based on possible future legislation
and action by regulatory agencies.
The Merger and the VFSB Bank Merger are subject to certain regulatory
approvals, as set forth below. To the extent that the following information
describes statutes and regulations, it is qualified in its entirety by
reference to those particular statutes and regulations.
The Merger
The Merger is subject to approval by the BFI under Section 6.1-194.97 of the
Code of Virginia, which permits an out-of-state holding company, such as BB&T,
to acquire directly or indirectly more than twenty five percent (25%) of the
voting shares of a Virginia savings institution holding company, such as
Virginia First, or a savings institution located in Virginia, such as VFSB, if
the BFI approves the transaction. Approval of such an application is
conditioned upon, among other things, the BFI's determination that the laws of
the state in which the out-of-state holding company is located, in this case
North Carolina, would permit Virginia savings institution holding companies to
acquire savings institutions and savings institution holding companies in that
state. North Carolina law would permit a Virginia savings and loan holding
company to acquire a savings institution and savings and loan holding company
located in North Carolina, subject to certain conditions. The BFI also must
determine whether: (a) the proposed acquisition would be detrimental to the
safety and soundness of the companies involved; (b) the applicant, its
directors and officers, and any proposed new directors and officers are
qualified by character, experience and financial responsibility to control and
operate a Virginia savings institution; (c) the proposed acquisition would be
prejudicial to the interests of the depositors, creditors, beneficiaries of
fiduciary accounts or shareholders of the companies involved; and (d) the
acquisition is in the public interest.
BB&T also is required to provide notice of the Merger to the Federal Reserve
under the Bank Holding Company Act and the Federal Reserve's Regulation Y.
Under the Bank Holding Company Act, a bank holding company, such as BB&T, may
not acquire direct or indirect ownership or control of a company engaged in
nonbanking activities unless the company is engaged in an activity that the
Federal Reserve has determined to be so closely related to banking, or
managing or controlling banks, as to be a proper incident thereto. The Federal
Reserve has determined by regulation that owning a savings institution is
closely related to banking. However, the Federal Reserve is required by the
Bank Holding Company Act to review the Merger to determine whether it
reasonably can be expected to produce benefits to the public (such as greater
convenience, increased competition or gains in efficiency) that outweigh
possible adverse effects (such as undue concentration of resources, decreased
or unfair competition, conflicts of interest or unsound banking practices).
This consideration includes an evaluation by the Federal Reserve of the
financial and managerial resources of BB&T and its subsidiaries, and Virginia
First and its subsidiaries, and the effect of the proposed transaction on
those resources, as well as whether the Merger would result in a monopoly or
otherwise would substantially lessen competition. Recently enacted legislation
requires the Federal Reserve to forward a copy of the notice required to be
filed by BB&T to the OTS for its review and comment. However, because such
legislation exempts bank holding companies that acquire savings institutions
from the provisions of the federal law relating to savings and loan holding
companies, BB&T is not required to file a separate application with the OTS
for approval of the Merger.
The VFSB Bank Merger
Although not required by the terms of the Reorganization Agreement or the
Plan of Merger, BB&T expects to effect the VFSB Bank Merger not later than
March 31, 1998. The VFSB Bank Merger is subject to approval of the FDIC under
the Bank Merger Act. In granting its approval under the Bank Merger Act, the
FDIC must consider the financial and managerial resources and future prospects
of the existing and proposed institutions and the convenience and needs of the
communities to be served. Further, the FDIC may not approve the VFSB
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Bank Merger if it would result in a monopoly, if it would be in furtherance of
any combination or conspiracy to monopolize or to attempt to monopolize the
business of banking in any part of the United States, if the effect of the
VFSB Bank Merger in any section of the country may be substantially to lessen
competition or to tend to create a monopoly or if it would be in any other
manner in restraint of trade, unless the FDIC finds that the anticompetitive
effects of the VFSB Bank Merger are clearly outweighed in the public interest
by the probable effect of such merger in meeting the convenience and needs of
the communities to be served. In addition, the FDIC must take into account the
record of performance of the existing and proposed institution under the
Community Reinvestment Act in meeting the credit needs of the entire
community, including low- and moderate-income neighborhoods, served by such
institution. Applicable regulations also require publication of notice of the
application for approval of the VFSB Bank Merger and an opportunity for the
public to comment on the application in writing and to request a hearing.
The BFI must approve the VFSB Bank Merger under Section 6.1-194.40 of the
Virginia Code, which authorizes the merger between a federal savings bank and
a Virginia chartered bank, when, among other things, the BFI determines that
all applicable laws governing such mergers are complied with and the public
interest will be served. In addition, notice of the VFSB Bank Merger must be
provided to the OTS under its regulations.
The Bank Merger Act requires that any bank merger, including the VFSB Bank
Merger, may not be consummated before the thirtieth day after approval by the
FDIC, during which time the U.S. Department of Justice (the "DOJ") may
challenge the VFSB Bank Merger on antitrust grounds. If the FDIC has not
received any adverse comments from the DOJ concerning the competitive effects
of the proposed transaction, this time period may be shortened to no less than
fifteen days after the date of approval.
All of the required applications and notices for the Merger have been
submitted to the appropriate regulatory agencies. The Federal Reserve approved
the Merger on August 21, 1997 and the BFI approved the Merger on September 25,
1997. However, there can be no assurance that the DOJ or a state Attorney
General will not challenge the Merger or the VFSB Bank Merger, or, if such a
challenge is made, as to the results thereof. The applications and required
notices for the VFSB Bank Merger will be submitted in the near future.
BB&T and Virginia First are not aware of any other governmental approvals or
actions that are required for consummation of the Merger or the VFSB Bank
Merger, except as described above. Should any other approval or action be
required, it is contemplated presently that such approval or action would be
sought. There can be no assurance that any such approval or action, if needed,
could be obtained, would not delay consummation of the Merger or would not be
conditioned in a manner that would cause BB&T to abandon the Merger.
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 the shareholders of Virginia First and to
Virginia First and BB&T. This summary is not intended to be a complete
description of all of the federal income tax consequences of the Merger. No
information is provided with respect to the tax consequences of the Merger
under any other tax laws, including applicable state, local and foreign tax
laws. In addition, the following discussion may not be applicable with respect
to certain specific categories of shareholders, including but not limited to
persons who are corporations, trusts, dealers in securities, financial
institutions, insurance companies, or tax exempt organizations; persons who
are not United States citizens or resident aliens or domestic entities
(partnerships or trusts); persons who are subject to alternative minimum tax
(to the extent that tax affects the tax consequences of the Merger) or are
subject to the "golden parachute" provisions of the Code (to the extent that
tax affects the tax consequences of the Merger); persons who acquired Virginia
First Common Stock pursuant to employee stock options or otherwise as
compensation if such shares are subject to any restriction related to
employment; persons who do not hold their shares as capital assets; or persons
who hold their shares as part of a "straddle" or "conversion transaction." The
federal income tax laws are complex, and a shareholder's individual
circumstances may affect the tax consequences to the shareholder.
Consequently, each Virginia First 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.
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In the opinion of Womble Carlyle Sandridge & Rice, PLLC, counsel to BB&T:
(a) the Merger will constitute a reorganization under Section 368 of the Code;
(b) no gain or loss will be recognized by BB&T Financial-VA or Virginia First
by reason of the Merger; (c) the shareholders of Virginia First will recognize
no gain or loss for federal income tax purposes to the extent BB&T Common
Stock is received in the Merger in exchange for Virginia First Common Stock;
(d) the gain, if any, realized by Virginia First shareholders who receive BB&T
Common Stock (including a fractional share) and cash in exchange for their
Virginia First Common Stock will be recognized by each such shareholder, but
in an amount not in excess of the amount of cash received (not including cash
in lieu of a fractional share), and if the exchange has the effect of the
distribution of a dividend (determined with the application of Section 318(a)
of the Code), then the amount of the gain recognized that is not in excess of
each such shareholder's taxable share of the undistributed earnings and
profits shall be treated as a dividend (the determination of whether the
exchange has the effect of a distribution of a dividend will be made on a
shareholder-by-shareholder basis in accordance with the principles set forth
by the Supreme Court in its 1989 decision in the case of Commissioner v.
Clark; it is unlikely that shareholders will be required to treat the cash as
a dividend, but shareholders should consult their tax advisors as to the
correct treatment, based on their individual circumstances); (e) no loss shall
be recognized by a Virginia First shareholder on the exchange; (f) the tax
basis in the BB&T Common Stock received by a shareholder (including any
fractional share interest deemed received) will be the same as the tax basis
in the Virginia First Common Stock surrendered in exchange therefor, less the
cash (other than cash in lieu of a fractional share) received, plus the gain
(other than gain on the deemed disposition of a fractional share) or dividend
recognized; (g) the holding period for BB&T Common Stock received in exchange
for shares of Virginia First Common Stock will include the period during which
the shareholder held the shares of Virginia First Common Stock surrendered in
the exchange, provided that the Virginia First Common Stock was held as a
capital asset at the Effective Time; and (h) a fractional share will be
treated as if it had been issued and then redeemed by BB&T, with the cash
treated as received in exchange for the fractional share, subject to the
provisions and limitations of Section 302 of the Code.
The consummation of the Merger is conditioned upon the receipt by Virginia
First and BB&T of an opinion of Womble, Carlyle Sandridge & Rice, PLLC,
counsel to BB&T, dated as of the Closing Date to the effect of items (a) and
(c) as described above.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for under the purchase
method of accounting, wherein BB&T will record the acquired identifiable
assets and liabilities assumed at the fair market value at the time of
consummation of the Merger. Any excess of the cost of Virginia First and the
sum of the fair values of tangible and identifiable intangible assets less
liabilities assumed will be recorded as goodwill. Any goodwill recorded is
expected to be amortized over of the period of expected benefit. BB&T's
reported income shall include the operations of Virginia First after
acquisition, based on the cost of the transaction. Financial statements of
BB&T issued after consummation of the Merger would reflect the impact of
Virginia First. Financial statements of BB&T issued after consummation of the
Merger would not be restated retroactively to reflect Virginia First's
historical financial position or results of operations. The unaudited proforma
financial information contained in this Proxy Statement/Prospectus has been
prepared using the purchase method of accounting.
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THE OPTION AGREEMENT
General
As a condition to BB&T entering into the Reorganization Agreement, Virginia
First (as issuer) entered into the Option Agreement with BB&T (as grantee),
pursuant to which Virginia First granted the Option to BB&T to purchase from
Virginia First up to 1,155,127 shares of Virginia First Common Stock (subject
to adjustment in certain circumstances, but in no event to exceed 19.9% of the
shares of Virginia First Common Stock outstanding upon any exercise of such
option) at a price of $17.50 per share (subject to adjustment under certain
circumstances, as described below) (the "Purchase Price"). The purchase of any
shares of Virginia First Common Stock pursuant to the Option is subject to
compliance with applicable law, including the receipt of necessary approvals
under the Bank Holding Company Act. See "--Regulatory Considerations."
The Option Agreement is intended to increase the likelihood that the Merger
will be consummated in accordance with 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 Virginia First from considering or proposing such an acquisition,
even if such persons were prepared to offer to pay consideration to
shareholders of Virginia First with a higher current market price than the
shares of BB&T Common Stock to be received for each share of Virginia First
Common Stock pursuant to the Reorganization Agreement.
The Option Agreement is filed as an exhibit to the Registration Statement,
and reference is made thereto for the complete terms of the Option Agreement
and the Option. The foregoing discussion is qualified in its entirety by
reference to the Option Agreement. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Exercisability
If BB&T is not in material breach of the Option Agreement or its covenants
and agreements contained in the Reorganization Agreement and if no injunction
or other court order against delivery of the shares covered by the Option is
in effect, BB&T may generally exercise the Option, in whole or in part, at any
time and from time to time, following the happening of any of the following
events (each a "Purchase Event"):
(a) without BB&T's prior written consent, Virginia First taking certain
actions (each an "Acquisition Transaction"), including authorizing,
recommending, publicly proposing (or publicly announcing an intention to
authorize, recommend or propose) or entering into an agreement with any
third party to effect (i) a merger, consolidation or similar transaction
involving Virginia First or any of its significant subsidiaries, (ii) the
sale, lease, exchange or other disposition of 15% or more of the
consolidated assets or deposits of Virginia First and its subsidiaries or
(iii) the issuance, sale or other disposition of securities representing
15% or more of the voting power of Virginia First or any of its significant
subsidiaries;
(b) any third party or group of third parties (except the parties
identified in (c) below) acquiring or having the right to acquire
beneficial ownership of securities representing 15% or more of the voting
power of Virginia First or any of its subsidiaries; or
(c) any of William A. Patton, Charles A. Patton, Jr., J. Dale Patton,
Patton Associates Limited Partnership or any associate or affiliate, or any
group of which any of the foregoing is a member, acquiring or having the
right to acquire beneficial ownership of 30% or more of the then-
outstanding shares of Virginia First Common Stock.
Termination
The Option will terminate upon the earliest to occur of the following
events: (a) the Effective Time; (b) the termination of the Reorganization
Agreement prior to the occurrence of a Purchase Event or Preliminary Purchase
Event (as defined below) (other than a termination by BB&T based on either a
willful material breach by Virginia First of a covenant or agreement in the
Reorganization Agreement or a willful inaccuracy in Virginia
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First's representations or warranties in the Reorganization Agreement of a
nature entitling BB&T to terminate (a "Default Termination"); (c) 12 months
after a Default Termination; (d) 12 months after termination of the
Reorganization Agreement (other than a Default Termination) following the
occurrence of a Purchase Event or a Preliminary Purchase Event; or (e) six
months after a termination of the Reorganization Agreement based on the
failure of the shareholders of Virginia First to approve the Reorganization
Agreement and the Plan of Merger.
A "Preliminary Purchase Event" is defined as either of the following:
(a) the commencement by any third party of a tender or exchange offer
such that it would thereafter own 15% or more of the outstanding shares of
Virginia First Common Stock or the filing of a registration statement with
respect to such an offer, or
(b) the failure of the shareholders of Virginia First to approve the
Reorganization Agreement, the failure of the Virginia First Meeting to have
been held, the cancellation of such meeting prior to the termination of the
Reorganization Agreement or the Virginia First Board having withdrawn or
modified in any manner adverse to BB&T its recommendations with respect to
the Reorganization Agreement, in any case after a third party: (i) proposes
to engage in an Acquisition Transaction, (ii) commences a tender offer or
files a registration statement under the Securities Act with respect to an
exchange offer such that it would thereafter own 15% or more of the
outstanding shares of Virginia First Common Stock or (iii) files an
application or notice under federal or state statutes relating to the
regulation of financial institutions or their holding companies to engage
in an Acquisition Transaction.
To the knowledge of BB&T and Virginia First, no Purchase Event or
Preliminary Purchase Event has occurred as of the date of this Joint Proxy
Statement/Prospectus.
Adjustments
The Option Agreement provides for certain adjustments in the Option in the
event of any change in Virginia First Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction or in the event of the issuance of any
additional shares of Virginia First Common Stock before termination of the
Option.
Substitute Options
If, prior to the termination of the Option Agreement, Virginia First enters
into an agreement:
(a) to consolidate with or merge into any third party and will not be the
continuing or surviving corporation of such consolidation or merger;
(b) to permit any third party to merge into Virginia First with Virginia
First as the continuing or surviving corporation, but, in connection
therewith, the then outstanding shares of Virginia First Common Stock are
changed into or exchanged for stock or other securities of Virginia First
or any other person or cash or any other property, or the outstanding
shares of Virginia First Common Stock after such merger represent less than
50% of the outstanding shares and share equivalents of the merged company;
(c) to permit any third party to acquire all of the outstanding shares of
Virginia First Common Stock pursuant to a statutory share exchange; or
(d) to sell or otherwise transfer all or substantially all of its assets
or deposits to any third party,
then such agreement must provide that the Option will be converted or
exchanged for an option (a "Substitute Option") to purchase shares of common
stock of, at the holder's option, either (x) the continuing or surviving
corporation of a merger or consolidation or the transferee of all or
substantially all of Virginia First assets or (y) any person controlling such
continuing or surviving corporation or transferee. The number of shares
subject to the Substitute Option and the exercise price per share will be
determined in accordance with a formula in the Option Agreement. To the extent
possible, the Substitute Option will contain terms and conditions that are the
same as those in the Option Agreement.
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Registration Rights
The Option Agreement grants to BB&T and any permitted transferee of the
Option certain rights to require Virginia First to prepare and file a
registration statement under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all
shares of Virginia First Common Stock or other securities that have been
acquired by or are issuable upon exercise of the Option.
EFFECT ON EMPLOYEES, EMPLOYEE BENEFIT PLANS AND STOCK OPTIONS
Each employee of Virginia First or its subsidiaries at the time of the
Merger will become, immediately following the Merger, an employee of BB&T
Financial-VA or of one of its subsidiaries. It is expected that BB&T will
cause Virginia First's 401(k) plan to be merged with the 401(k) plan
maintained by BB&T and its subsidiaries, and the account balances of former
employees of Virginia First or its subsidiaries who are participants in the
Virginia First plan will be transferred to the accounts of such employees
under the BB&T 401(k) plan. Following this merger and transfer, these accounts
would be governed and controlled by the terms of the BB&T 401(k) plan as in
effect from time to time (and subject to BB&T's right to terminate such plan).
For purposes of participating in this plan, service to Virginia First and its
subsidiaries by each such employee will be deemed to be service with BB&T-VA
for participation and vesting purposes only.
At the Effective Time, each option to purchase shares of Virginia First
Common Stock granted under Virginia First's 1984 Incentive Stock Option Plan,
1986 Stock Compensation Program or 1992 Incentive Plan and then outstanding
(and which by its terms does not lapse on or before the Effective Time) (a
"Stock Option"), whether or not then exercisable, will be converted into and
become an option under the BB&T 1995 Omnibus Stock Incentive Plan (the "BB&T
Option Plan"), and will be governed by the terms and conditions of the BB&T
Option Plan. No holder of a Stock Option will be entitled to receive any
payment from BB&T of any tax liability incurred by such holder resulting from
exercise following the Effective Time of all or a part of the Stock Option. In
making such conversion, (i) the number of shares of BB&T Common Stock subject
to each such Stock Option will be the number of whole shares of BB&T (omitting
any fractional share) determined by multiplying the number of shares of
Virginia First Common Stock subject to such Stock Option immediately prior to
the Effective Time by the Option Exchange Ratio (defined below), and (ii) the
per share exercise price under each such Stock Option will be adjusted by
dividing the per share exercise price under each such Stock Option by the
Option Exchange Ratio and rounding up to the nearest cent. In addition, each
such Stock Option that is an "incentive stock option" will 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. The
"Option Exchange Ratio" means the percentage determined by dividing the value
of the Merger Consideration at the Effective Time by the Closing Value.
Options to purchase an aggregate of 307,980 shares of Virginia First Common
Stock are expected to be outstanding at the Effective Time, of which options
to purchase 25,000 shares of Virginia First Common Stock will lapse at the
Effective Time. Any shares of Virginia First Common Stock issued pursuant to
the exercise of options under the plan prior to the Effective Time will be
converted into shares of BB&T Common Stock and cash in the same manner as
other outstanding shares of Virginia First Common Stock.
RESTRICTIONS ON RESALES BY AFFILIATES
All shares of BB&T 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 terms
are defined under the Securities Act) of Virginia First at the Effective Time
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. Those who may be deemed
Affiliates of Virginia First generally include individuals or entities that
directly, or indirectly through one or more intermediaries, control, are
controlled by or are under common control with Virginia First and include
certain executive officers and directors of Virginia First. The restrictions
on resales by an Affiliate extend also to certain
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related parties of the Affiliate, including spouse, relatives and spouse's
relatives who in each case have the same home as the Affiliate.
The Reorganization Agreement requires Virginia First to cause each of its
Affiliates to deliver to BB&T a written agreement to the effect that such
person will not offer or otherwise dispose of any shares of BB&T Common Stock
issued to that person in the Merger except in compliance with applicable
securities laws.
INFORMATION ABOUT BB&T
GENERAL
BB&T is a multi-bank holding company headquartered in Winston-Salem, North
Carolina. BB&T 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 BB&T's
loans are to businesses and individuals in the Carolinas and Virginia. BB&T
has no material amount of foreign loans and no loans that can be defined as
highly leveraged transactions. BB&T's bank subsidiaries are BB&T-NC, a North
Carolina chartered bank; BB&T-SC, a South Carolina chartered bank; BB&T-VA, a
Virginia chartered bank; and FFSB, a federally chartered savings bank. The
principal assets of BB&T are all of the issued and outstanding shares of
common stock of BB&T-NC, BB&T Financial Corporation of South Carolina,
Greenville, South Carolina, which in turn owns all of the issued and
outstanding shares of BB&T-SC, and BB&T Financial Corporation of Virginia
("BB&T Financial-VA"), Virginia Beach, Virginia, which in turn owns all of the
issued and outstanding shares of BB&T-VA and FFSB.
SUBSIDIARIES
BB&T-NC, BB&T's largest subsidiary, is the oldest bank in North Carolina and
currently operates through 358 banking offices throughout North Carolina.
BB&T-NC provides 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 Corporation, 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 Charlotte, 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, property and casualty and title
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.
BB&T-SC serves South Carolina through 98 banking offices. BB&T-SC provides 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.
BB&T-VA, formerly Commerce Bank, was acquired on January 10, 1995 by BB&T
Financial Corporation ("BB&T Financial") prior to the merger of BB&T Financial
with and into BB&T, which was then named Southern National Corporation. BB&T-
VA offers a full range of commercial and retail banking services through 22
banking offices in the Hampton Roads region of Virginia.
FFSB was acquired on March 1, 1997, upon the merger of its parent company,
Fidelity Financial Bankshares Corporation ("FFBC"), with and into BB&T
Financial-VA. FFSB operates seven branch offices offering commercial and
retail banking services in the Richmond, Virginia area.
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Regional Acceptance Corporation ("RAC"), of Greenville, North Carolina, was
acquired on September 1, 1996. RAC, which has 28 branch offices in North
Carolina, South Carolina, Tennessee and Virginia, specializes in indirect
financing for consumer purchases of mid-model and late-model used automobiles.
Phillips Factors Corporation, which buys and manages account receivables
primarily in the furniture, textiles and home furnishings-related industries,
and Sheffield Financial Corp., which specializes in loans to small commercial
lawn care businesses across the country, are other subsidiaries of BB&T.
UCB MERGER
Effective July 1, 1997, UCB merged with and into BB&T. Each share of UCB
Common Stock issued and outstanding at the effective time of the UCB Merger
was converted into and exchanged for 1.135 shares of BB&T Common Stock (the
"UCB Exchange Ratio"). In addition, at the effective time, all rights with
respect to UCB Common Stock outstanding at the effective time pursuant to
stock options granted by UCB under the existing stock plans of UCB were
converted into and became rights with respect to BB&T Common Stock on a basis
reflecting the UCB Exchange Ratio. Approximately 27.7 million shares of BB&T
Common Stock were issued in the UCB Merger. The UCB Merger constituted a tax-
free transaction under the Code, and has been accounted for as a pooling of
interests. Through its two bank subsidiaries, United Carolina Bank and United
Carolina Bank of South Carolina, UCB operated 153 banking offices in 89
communities in North Carolina and South Carolina. Effective September 19,
1997, United Carolina Bank and United Carolina Bank of South Carolina were
merged into BB&T-NC and BB&T-SC, respectively.
OTHER ACQUISITIONS
BB&T's profitability and market share have been enhanced through both
internal growth and acquisitions during recent years. Specifically, BB&T has
expanded by both the acquisition of financial institutions (including thrift
institutions) and the purchase of deposits and assets from the Resolution
Trust Corporation in federally assisted transactions.
On March 1, 1997, BB&T completed the acquisition of FFBC, which was a
Virginia corporation that served as the holding company for FFSB, in a
transaction accounted for as a purchase. BB&T intends to effect the merger of
FFSB, which is currently a wholly owned subsidiary of BB&T Financial-VA, with
and into BB&T-VA not later than the first quarter of 1998.
On October 1, 1997, BB&T completed the acquisition of the investment banking
firm Craigie Incorporated ("Craigie"), of Richmond, Virginia. With offices in
Richmond and Charlotte, North Carolina, Craigie specializes in the
origination, trading and distribution of fixed-income securities and equity
products in both the public and private capital markets. Craigie's public
finance department provides investment banking services, financial advisory
services and municipal bond financing to a variety of regional tax-exempt
issuers. The firm's corporate finance department specializes in raising
capital for corporate clients and has an active mergers and acquisitions
practice. Established in 1929, Craigie continues to operate as a subsidiary of
BB&T.
BB&T expects to continue to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions. Such acquisitions may entail the
payment by BB&T of consideration in excess of the book value of the underlying
net assets acquired, may result in the issuance of additional shares of BB&T
capital stock or the incurring of an additional indebtedness by BB&T, and
could have a dilutive effect on the per share earnings or book value of BB&T
Common Stock. Moreover, such acquisitions sometimes result in significant
front-end charges against earnings, although cost savings, especially incident
to in-market acquisitions, also are frequently anticipated.
CAPITAL
The Federal Reserve has established a 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) of 8%. At
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least half of the total capital is required to be composed of common equity,
retained earnings, and qualifying perpetual preferred stock, less certain
intangibles ("Tier 1 capital"). The remainder may consist of certain
subordinated debt, certain hybrid capital instruments and other qualifying
preferred stock, and a limited amount of the loan loss allowance ("Tier 2
capital" and, together with Tier 1 capital, "total capital"). At June 30,
1997, BB&T's Tier 1 and total capital ratios were 10.5% and 14.9%,
respectively. Effective January 1, 1997, with mandatory compliance as of
January 1, 1998, the Federal Reserve also is requiring certain bank holding
companies that engage in trading activities to adjust their risk-based capital
to take into consideration market risk that may result from movements in
market prices of covered trading positions in trading accounts, or from
foreign exchange or commodity positions, whether or not in trading accounts,
including changes in interest rates, equity prices, foreign exchange rates or
commodity prices. Any capital required to be maintained pursuant to these
provisions may consist of new "Tier 3 capital" consisting of certain short
term subordinated debt. In addition, the Federal Reserve has issued a policy
statement, pursuant to which a bank holding company that is determined to have
weaknesses in its risk management processes or a high level of interest rate
risk exposure may be required, among other things, to hold additional capital.
The Federal Reserve also 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
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 100 to 200 basis points above the stated minimum. BB&T's
leverage ratio at June 30, 1997 was 7.3%. Bank holding companies experiencing
internal growth or making acquisitions are 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 FDIC has adopted minimum risk-based and leverage ratio regulations to
which BB&T's bank subsidiaries are subject that are substantially similar to
those requirements established by the Federal Reserve described above. 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 BB&T's bank subsidiaries exceeded all minimum regulatory capital
requirements as of June 30, 1997.
DEPOSIT INSURANCE ASSESSMENTS
The deposits of each of BB&T's bank subsidiaries are insured by the FDIC up
to the limits set forth under applicable law. A majority of the deposits of
the banks are subject to the deposit insurance assessments of the Bank
Insurance Fund ("BIF") of the FDIC. However, approximately 40% of the deposits
of BB&T-NC and BB&T-SC (related to the banks' acquisition of various savings
associations) are subject to assessments imposed by the Savings Association
Insurance Fund ("SAIF") of the FDIC.
Pursuant to budget reconciliation legislation enacted in 1996, the FDIC
imposed a special assessment on SAIF-assessable deposits of 65.7 basis points
per $100 of SAIF-assessable deposits in order to increase the SAIF's net worth
to 1.25 percent of SAIF-insured deposits as of October 1, 1996. This special
assessment was applied by the FDIC to the amount of SAIF-assessable deposits
held by institutions as of March 31, 1995. Certain institutions that engaged
in thrift acquisitions, including BB&T-NC, received a 20 percent discount on
the assessment. As a result, the pre-tax impact of the special assessment on
BB&T was approximately $34 million, and was recorded as an expense as of
September 30, 1996.
The FDIC also lowered the assessment rates for SAIF-insured deposits,
effective January 1, 1997, to the same levels as the assessment rates
currently applicable to BIF-insured deposits. Thus, for the semi-annual period
beginning January 1, 1997, the effective rate of assessments imposed on all
FDIC deposits for deposit insurance
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ranges from 0 to 27 basis points per $100 of insured deposits, depending on
the institution's capital position and other supervisory factors, with a
statutory minimum of $2,000. However, because the 1996 legislation requires
that both SAIF-insured and BIF-insured deposits pay a pro rata portion of the
interest due on the obligations issued by the Financing Corporation, the FDIC
is assessing BIF-insured deposits an additional 1.30 basis points per $100 of
deposits, and SAIF-insured deposits an additional 6.3 basis points per $100 of
deposits, in each case on an annualized basis, to cover those obligations.
INFORMATION ABOUT VIRGINIA FIRST
Virginia First was incorporated in Virginia in 1993 to serve as the holding
company for Virginia First Savings Bank, F.S.B. ("VFSB"). The stockholders of
VFSB approved the related plan of reorganization at their annual meeting on
November 10, 1993, and the reorganization was consummated on January 14, 1994
with VFSB becoming a wholly owned subsidiary of Virginia First. VFSB is a
federally chartered capital stock savings bank with principal offices in
Petersburg, Virginia. VFSB, incorporated in 1888, is one of the oldest
financial institutions in the Commonwealth of Virginia.
Virginia First's only direct subsidiary is VFSB, and Virginia First has no
material assets or liabilities except for the stock of VFSB. VFSB has three
active subsidiaries: one is engaged in real estate development, one is a title
insurance agency, and one is a company that originates residential mortgage
loans via the Internet.
Virginia First's principal business activities, which are conducted through
VFSB, are attracting checking and savings deposits from the general public
through its retail banking offices and originating, servicing, investing in
and selling loans secured by first mortgage liens on single-family dwellings,
including condominium units. All of the retail banking offices are located in
Virginia, while the mortgage loan organization offices are in Virginia and
Maryland. Virginia First also lends funds to retail banking customers by means
of home equity and installment loans, and originates residential construction
loans and loans secured by commercial property, multi-family dwellings and
manufactured housing units. Virginia First invests in certain U.S. Government
and agency obligations and other investments permitted by applicable laws and
regulations.
Virginia First operates twenty-four full service retail facilities
throughout southside, central and southwestern Virginia. In addition, Virginia
First operates twelve loan origination centers in southside, central and
southwestern Virginia, in northern Virginia and southern Maryland under the
trade name Virginia First Mortgage.
DESCRIPTION OF BB&T CAPITAL STOCK
GENERAL
The authorized capital stock of BB&T consists of 300,000,000 shares of BB&T
Common Stock and 5,000,000 shares of preferred stock, par value $5.00 per
share (the "BB&T Preferred Stock"). As of June 30, 1997, there were
135,418,510 shares of BB&T Common Stock issued and outstanding (as restated to
reflect the issuance of shares in the UCB Merger). There were no shares of
BB&T Preferred Stock issued and outstanding as of such date, although
2,000,000 shares of BB&T Preferred Stock have been designated as Junior
Participating Preferred Stock (the "BB&T Junior Preferred Stock") and are
reserved for issuance in connection with BB&T's shareholder rights plan. See
"--Shareholder Rights Plan." Based on the number of shares of Virginia First
Common Stock outstanding at the Record Date, if the Closing Value is $57.06,
it is estimated that approximately 1,783,200 shares of BB&T Common Stock would
be issued in the Merger.
BB&T COMMON STOCK
Each share of BB&T Common Stock is entitled to one vote on all matters
submitted to a vote at any meeting of shareholders. Holders of BB&T Common
Stock are entitled to receive dividends when, as, and if declared by the Board
of Directors of BB&T (the "BB&T Board") out of funds legally available
therefor and, upon
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liquidation, to receive pro rata all assets, if any, of BB&T available for
distribution after the payment of necessary expenses and all prior claims.
Holders of BB&T Common Stock have no preemptive rights to subscribe for any
additional securities of any class that BB&T may issue, nor any conversion,
redemption or sinking fund rights. Holders of BB&T Common Stock have no right
to cumulate votes in the election of directors. The rights and privileges of
holders of BB&T Common Stock are subject to any preferences provided for by
resolution of the BB&T Board for any series of BB&T Preferred Stock that BB&T
may issue in the future. The terms of the BB&T Junior Preferred Stock reserved
for issuance in connection with BB&T's shareholders rights plan provide that
holders of such shares shall have rights and privileges that are substantially
identical to those of holders of BB&T Common Stock.
The transfer agent and registrar for BB&T Common Stock is BB&T-NC. The
Company intends to apply for the listing on the NYSE, subject to official
notice of issuance, of the shares of BB&T Common Stock to be issued in the
Merger.
BB&T PREFERRED STOCK
Under the BB&T Articles, BB&T may issue shares of BB&T Preferred Stock in
one or more series as may be determined by the BB&T Board or a duly authorized
committee. The BB&T 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 BB&T Preferred Stock issued may rank senior to
the BB&T Common Stock with respect to the payment of dividends or amounts upon
liquidation, dissolution or winding up of BB&T, or both. In addition, any
shares of BB&T Preferred Stock may have class or series voting rights. Under
certain circumstances, the issuance of BB&T Preferred Stock or the existence
of the unissued BB&T Preferred Stock may tend to discourage or render more
difficult a merger or other change in control of BB&T. See "--Shareholder
Rights Plan."
SHAREHOLDER RIGHTS PLAN
BB&T has adopted a shareholder rights plan pursuant to which holders of
shares of BB&T Common Stock also hold rights to purchase securities or other
property that may be exercised upon the occurrence of certain "triggering
events." Shareholder rights plans such as BB&T's plan are intended to
encourage potential hostile acquirors of a "target" corporation to negotiate
with the board of directors of the target corporation in order to avoid
occurrence of the "triggering events" specified in such plans. Shareholder
rights plans are intended to give the directors of a target corporation the
opportunity to assess the fairness and appropriateness of a proposed
transaction in order to determine whether or not it is in the best interests
of the corporation and its shareholders. Notwithstanding these purposes and
intentions of shareholder rights plans, such plans, including that of BB&T,
could have the effect of discouraging a business combination that shareholders
believe to be in their best interests. The provisions of BB&T's shareholder
rights plan are discussed below.
On December 17, 1996, the BB&T Board declared a dividend distribution of one
right (a "Right," and collectively the "Rights") for each outstanding share of
BB&T Common Stock to shareholders of record at the close of business on
January 17, 1997. One Right will also be distributed for each share of BB&T
Common Stock issued between January 17, 1997 and the occurrence of a
"Distribution Date" (described in the next paragraph). Each Right entitles the
registered holder to purchase from BB&T a unit consisting of one-hundredth of
a share (a "Unit") of BB&T Junior Preferred Stock at a Purchase Price of
$145.00 per Unit, subject to adjustment, or, under certain circumstances,
other securities or property. The description and terms of the Rights are set
forth in the Rights Agreement, dated as of December 17, 1996, between BB&T and
BB&T-NC in the capacity of Rights Agent (the "Rights Agreement").
Initially, the Rights will be attached to all BB&T Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. A "Distribution Date" will occur, and the
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Rights will separate from shares of BB&T Common Stock, upon the earliest of
(a) 10 business days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of the
outstanding shares of BB&T Common Stock (the "Stock Acquisition Date"), (b) 10
business days following the commencement of a tender offer or exchange offer
that would if consummated result in a person or group beneficially owning 20%
or more of such outstanding shares of BB&T Common Stock or (c) 10 business
days after the BB&T Board declares any Person to be an "Adverse Person," as
described in the following paragraph.
The BB&T Board will declare a person to be an Adverse Person upon its
determinations (a) that such person, alone or together with its affiliates and
associates, has or will become the beneficial owner of 10% or more of the
outstanding shares of BB&T Common Stock (provided that any such determination
will not be effective until such person has in fact become the beneficial
owner of 10% or more of the outstanding shares of BB&T Common Stock) and (b)
following consultation with such persons as the BB&T Board deems appropriate,
that (i) such beneficial ownership by such person is intended to cause, is
reasonably likely to cause or will cause BB&T to repurchase the BB&T Common
Stock beneficially owned by such person or to cause pressure on BB&T to take
action or enter into a transaction or series of transactions intended to
provide such person with short-term financial gain under circumstances where
the BB&T Board determines that the best long-term interests of BB&T and its
shareholders would not be served by taking such action or entering into such
transactions or series of transactions at that time or (ii) such beneficial
ownership is causing or is reasonably likely to cause a material adverse
impact (including, but not limited to, impairment of relationships with
customers or impairment of BB&T's ability to maintain its competitive
position) on the business or prospects of BB&T or (iii) such beneficial
ownership otherwise is determined to be not in the best interests of BB&T and
its shareholders, employees, customers and communities in which BB&T and its
subsidiaries do business.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on December 31, 2006, subject to extension by the
BB&T Board, or unless earlier redeemed by BB&T as described below.
As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of BB&T Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except for certain issuances in
connection with outstanding options and convertible securities and as
otherwise determined by the BB&T Board, only shares of BB&T Common Stock
issued prior to the Distribution Date will be issued with Rights.
In the event that the BB&T Board determines that a person is an Adverse
Person or, at any time following the Distribution Date, a person becomes the
beneficial owner of 25% or more of the then-outstanding shares of BB&T Common
Stock, each holder of a Right will thereafter have the right to receive at the
time specified in the Rights Agreement, (a) upon exercise and payment of the
exercise price, BB&T Common Stock (or, in certain circumstances, cash,
property or other securities of BB&T) having a value equal to two times the
exercise price of the Right or (b) at the discretion of the BB&T Board, upon
exercise and without payment of the exercise price, BB&T Common Stock (or, in
certain circumstances, cash, property or other securities of BB&T) having a
value equal to the difference between the exercise price of the Right and the
value of the consideration that would be payable under clause (a).
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person or Adverse Person will be null and void. Rights will not
become exercisable following the occurrence of either of the events set forth
above, however, until such time as the Rights are no longer redeemable by BB&T
as set forth below.
For example, at an exercise price of $145.00 per Right, each Right not owned
by an Acquiring Person or an Adverse Person (or by certain related parties)
following an event set forth in the preceding paragraph would entitle its
holder to purchase $290.00 worth of BB&T Common Stock (or other consideration,
as noted above) for $145.00. Assuming that the BB&T Common Stock had a per
share value of $72.50 at such time, the holder of each valid Right would be
entitled to purchase four shares of BB&T Common Stock for $145.00.
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Alternatively, at the discretion of the BB&T Board, each Right following an
event set forth in the preceding paragraph, without payment of the exercise
price, would entitle its holder to BB&T Common Stock (or other consideration,
as noted above) worth $145.00.
In the event that, at any time following the Stock Acquisition Date, (a)
BB&T is acquired in a merger, statutory share exchange or other business
combination transaction in which BB&T is not the surviving corporation or (b)
50% or more of BB&T's assets or earning power is sold or transferred, each
holder of a Right (except Rights that previously have been voided as set forth
above) will thereafter have the right to receive, upon exercise, common stock
of the acquiring company having a value equal to two times the exercise price
of the Right. The Purchase Price payable, and the number of Units of BB&T
Junior Preferred Stock or other securities or property issuable, upon exercise
of the Rights are subject to adjustment from time to time to prevent dilution
in the event of certain events.
In general, BB&T may redeem the Rights in whole, but not in part, at a price
of $0.01 per Right at any time until 10 business days following the earlier of
the Stock Acquisition Date or the effective date of any declaration by the
BB&T Board that any person is an Adverse Person. After the redemption period
has expired, BB&T's right of redemption may be reinstated if an Acquiring
Person or Adverse Person reduces his beneficial ownership to less than 10% of
the outstanding shares of BB&T Common Stock in a transaction or series of
transactions not involving BB&T and if there are no other Acquiring Persons or
Adverse Persons.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of BB&T, including, without limitation, the right to vote or
to receive dividends. While the distribution of the Rights will not be taxable
to shareholders or to BB&T, shareholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for stock (or other consideration) of BB&T or for common stock of
the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
BB&T Board prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the BB&T Board in order
to cure any ambiguity, to make changes that do not adversely affect the
interests of holders of Rights (excluding the interests of any Acquiring
Person or Adverse Person) or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust the time
period governing redemption may be made when the Rights are not redeemable.
The Rights Agreement is filed as an exhibit to a Registration Statement on
Form 8-A dated January 10, 1997 that has been filed by BB&T with the
Commission. Such registration statement and the Rights Agreement are
incorporated by reference in this Proxy Statement/Prospectus, and reference is
made thereto for the complete terms of the Rights Agreement and the Rights.
The foregoing discussion is qualified in its entirety by reference to the
Rights Agreement. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
CERTAIN PROVISIONS OF THE NCBCA, BB&T ARTICLES AND BB&T BYLAWS
Certain provisions of the NCBCA, the BB&T Articles and the BB&T Bylaws deal
with matters of corporate governance and the rights of shareholders. Certain
of these provisions, as well as the ability of the BB&T Board to issue shares
of BB&T 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 BB&T Board. These
provisions also could delay or deter the removal of incumbent directors or the
assumption of control by shareholders. BB&T believes that these provisions are
appropriate to protect the interests of BB&T and all of its shareholders. The
following describes the principal provisions of the NCBCA applicable to BB&T,
the BB&T Articles and BB&T Bylaws that may be deemed to have anti-takeover
effects.
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Control Share Act
The Control Share Acquisition Act of the NCBCA may make an unsolicited
attempt to gain control of BB&T 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 the BB&T Board
The provisions of the BB&T Articles and the BB&T Bylaws with respect to the
classification of the BB&T 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 BB&T. For
a description of such provisions, see "COMPARISON OF SHAREHOLDERS' RIGHTS--
Directors."
Meeting of Shareholders; Shareholders' Nominations and Proposals
Under the BB&T Bylaws, meetings of the shareholders may be called by the
Chief Executive Officer or the BB&T Board. Shareholders of BB&T 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 that are favored by the holders of a majority of the
outstanding voting securities of BB&T.
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 BB&T. See "COMPARISON OF
SHAREHOLDERS' RIGHTS--Notice of Shareholder Nominations and Shareholder
Proposals."
COMPARISON OF SHAREHOLDERS' RIGHTS
At the Effective Date, holders of Virginia First Common Stock (other than
dissenting shareholders) will become shareholders of BB&T. The following is a
summary of material differences between the rights of holders of BB&T Common
Stock and holders of Virginia First Common Stock. Since BB&T is organized
under the laws of the State of North Carolina and Virginia First is organized
under the laws of the Commonwealth of Virginia, differences in the rights of
holders of BB&T Common Stock and those of holders of Virginia First Common
Stock arise from differing provisions of the NCBCA and the VSCA in addition to
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 BB&T
Common Stock and holders of Virginia First 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 NCBCA and VSCA and the governing corporate
instruments of BB&T and Virginia First, to which the shareholders of Virginia
First are referred.
AUTHORIZED CAPITAL STOCK
BB&T
BB&T's authorized capital stock consists of 300,000,000 shares of BB&T
Common Stock and 5,000,000 shares of BB&T Preferred Stock. The BB&T Articles
authorize the BB&T Board to issue shares of BB&T Preferred Stock in one or
more series and to fix the designation, powers, preferences, and rights of the
shares of BB&T Preferred Stock in each such series. As of June 30, 1997,
135,418,510 shares of BB&T Common Stock were outstanding (as restated to
reflect the issuance of shares in the UCB Merger). No shares of BB&T Preferred
Stock were issued and outstanding as of such date, although 2,000,000 shares
of BB&T Preferred Stock have
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been designated as BB&T Junior Preferred Stock and are reserved for issuance
in connection with BB&T's shareholder rights plan. See "DESCRIPTION OF BB&T
CAPITAL STOCK--Shareholder Rights Plan."
Virginia First
Virginia First's authorized capital stock consists of 20,000,000 shares of
Virginia First Common Stock and 5,000,000 shares of preferred stock par value
$1.00 per share ("Virginia First Preferred Stock"). As of the Record Date,
5,814,430 shares of Virginia First Common Stock and no shares of Virginia
First Preferred Stock were outstanding, although 200,000 shares of Virginia
First Preferred Stock have been designated as Series A Junior Participating
Preferred Stock and are reserved for issuance in connection with Virginia
First's shareholder rights plan.
DIRECTORS
BB&T
The BB&T Articles and the BB&T Bylaws provide for a board of directors
having not less than three nor more than 30 members as determined from time to
time by vote of a majority of the members of the BB&T Board or by resolution
of the shareholders of BB&T. Currently, the BB&T Board consists of twenty-nine
directors. The BB&T Board is divided into three classes, with directors
serving staggered three-year terms. Under the BB&T Articles and the BB&T
Bylaws, BB&T directors may be removed only for cause and only by the vote of a
majority of the outstanding shares entitled to vote in the election of
directors. Holders of BB&T Common Stock do not have cumulative voting rights
in the election of directors.
Virginia First
The Virginia First Articles and the Virginia First Bylaws provide for a
board of directors having not less than five nor more than 15 members as
determined from time to time by or pursuant to the Virginia First Bylaws.
Currently, the Virginia First Board consists of nine directors. The Virginia
First Board is divided into three classes, with directors serving staggered
three-year terms. Holders of Virginia First Common Stock do not have
cumulative voting rights in the election of directors.
DIVIDENDS AND OTHER DISTRIBUTIONS
BB&T
The NCBCA prohibits a North Carolina corporation from making any
distributions to shareholders, including the payment of cash dividends, that
would render it insolvent or unable to meet its obligations as they become due
in the ordinary course of business. BB&T is not subject to other express
regulatory restrictions on payments of dividends and other distributions. The
ability of BB&T to pay distributions to the holders of BB&T Common Stock will
depend, however, to a large extent upon the amount of dividends its bank
subsidiaries, which are subject to restrictions imposed by regulatory
authorities, pay to BB&T. In addition, the Federal Reserve could oppose a
distribution by BB&T if it determined that such a distribution would harm
BB&T's ability to support its bank subsidiaries. There can be no assurances
that dividends will be paid in the future. The declaration, payment and amount
of any such future dividends would depend on business conditions, operating
results, capital, reserve requirements and the consideration of other relevant
factors by the BB&T Board.
Virginia First
The VSCA prohibits a Virginia corporation from making any distributions to
shareholders, including the payment of cash dividends, that would render it
insolvent or unable to meet its obligations as they become due in the usual
course of business. Virginia First is not subject to other express regulatory
restrictions on payments of dividends and other distributions. The ability of
Virginia First to pay distributions to the holders of Virginia First Common
Stock will depend, however, upon the amount of dividends its savings bank
subsidiary, which is subject to the restrictions imposed by regulatory
authorities, pays to Virginia First.
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NOTICE OF SHAREHOLDER NOMINATIONS AND SHAREHOLDER PROPOSALS
BB&T
The BB&T Bylaws establish advance notice procedures for shareholder
proposals and the nomination, other than by or at the direction of the BB&T
Board or a committee thereof, of candidates for election as directors. The
BB&T Bylaws provide that a shareholder wishing to nominate a person as a
candidate for election to the BB&T Board must submit such nomination in
writing to the Secretary of BB&T not later than 60 days before one year after
the date of the immediately preceding Annual Meeting of Shareholders, together
with biographical information about the candidate and 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 BB&T in writing not
later than 60 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.
Virginia First
The Virginia First Bylaws establish advance notice procedures for
shareholder proposals and the nomination, other than by or at the direction of
the Virginia First Board, of candidates for election as directors. The
Virginia First Bylaws provide that a shareholder wishing to nominate a person
as a candidate for election to the Virginia First Board must submit such
nomination in writing to the Secretary of Virginia First not less than 60 nor
more than 90 days before the date of the scheduled annual meeting, unless less
than 70 days' notice or prior public disclosure of the annual meeting is
given, in which case such notice must be received not later than the close of
business on the tenth following, together with biographical information about
the candidate, the shareholder's name and shareholdings, and information about
any other shareholder who, to the knowledge of the shareholder, supports the
nomination. Nominations not made in accordance with the foregoing provisions
may be ruled out of order by the chairman of the meeting.
Similarly, a shareholder must notify the Secretary of Virginia First in
writing not less than 60 nor more than 90 days before the date of the
scheduled annual meeting, unless less than 70 days' notice or prior public
disclosure of the annual meeting is given, in which case such notice must be
received not later than the close of business on the tenth following the
earlier of (a) the day on which such notice was sent or (b) the day on which
such public disclosure occurred. The notice must contain: (a) a brief
description of the proposal, (b) the name and address of the shareholder
submitting the proposal, (c) the class and number of shares of Virginia First
capital stock owned by the shareholder beneficially or of record and the
number of shares so owned by any person who, to the knowledge of the
shareholder, supports such proposal and (d) any material interest of the
shareholder in the proposal.
EXCULPATION AND INDEMNIFICATION
BB&T
The NCBCA requires that a director of a North Carolina corporation discharge
the duties as a director (a) in good faith, (b) with the care an ordinarily
prudent person in a like position would exercise under similar circumstances
and (c) in a manner the director reasonably believes to be in the best
interests of the corporation. The NCBCA expressly provides that a director
facing a change of control situation shall not be subject to any different
duties or a higher standard of care. The BB&T Articles provide that, to the
fullest extent permitted by applicable law, no director of BB&T will have any
personal liability for monetary damage for breach of a duty as a director. The
BB&T Bylaws require BB&T 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 BB&T.
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Virginia First
The VSCA requires that a director of a Virginia corporation discharge the
duties as a director in accordance with the director's good faith business
judgment of the best interests of the corporation. The VSCA permits Virginia
corporations to provide indemnification for directors, officers and agents and
also permits Virginia corporations to eliminate personal liability for
directors and officers for certain actions. The Virginia First articles
provide that, to the fullest extent permitted by applicable law, no director
of Virginia First will have any personal liability for monetary damage in
excess of $1.00 for breach of a duty as a director.
MERGERS, SHARE EXCHANGES AND SALES OF ASSETS
BB&T
The NCBCA generally requires that any merger, share exchange or sale of
substantially all the assets of a corporation not in the ordinary course of
business be approved by the affirmative vote of the majority of the issued and
outstanding shares of each voting group entitled to vote. BB&T is also subject
to certain statutory anti-takeover provisions. See "--Anti-takeover Statutes."
Virginia First
The VSCA generally requires that any merger, share exchange or sale of
substantially all of the assets of a corporation not in the ordinary course of
business be approved by at least two thirds of the votes entitled to be cast
by each voting group entitled to vote, unless the articles of incorporation
provide for a greater or lesser vote (but in no event less than a majority of
votes cast by each such voting group at a meeting at which a quorum of the
voting group exists). The Virginia First articles provide that any such
transaction will be approved if (a) a majority of the votes entitled to be
cast by each voting group entitled to vote are cast in favor of the
transaction and (b) unless the transaction has been approved by at least two
thirds of the "Continuing Directors" (defined as any director (i) who was an
initial director of Virginia First when it was incorporated in 1993, (ii) who
has been elected to the Virginia First Board at an annual meeting more than
one time or (iii) who was elected to fill a vacancy on the Virginia First
Board and who received the affirmative vote of a majority of the Continuing
Directors serving at such time and who was subsequently elected to the
Virginia First Board at least one annual meeting), at least 75% of the votes
cast by holders of Virginia First Common Stock are cast in favor of the
transaction. The Virginia First Bylaws provide that the Virginia First Board
may not submit to the shareholders any plan of merger or share exchange or any
proposed disposition of substantially all of the assets of Virginia First not
in the ordinary course of business unless such submission is approved by at
least two thirds of the entire Virginia First Board. The Reorganization
Agreement was approved by all members of the Virginia First Board except one,
who was absent from the meeting at which the approval was given.
ANTI-TAKEOVER STATUTES
BB&T
The North Carolina Control Share Acquisition Act (the "Control Share Act")
applies to BB&T. The Control Share Act is designed to protect shareholders of
publicly owned North Carolina corporations based within the state 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 covered 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
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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, BB&T has elected not to
be governed by the North Carolina Shareholder Protection Act.
Virginia First
The VSCA restricts transactions between a corporation and its affiliates and
potential acquirors. The summary below is necessarily general and is not
intended to be a complete description of all the features and consequences of
those provisions, and is qualified in its entirety by reference to the
statutory provisions contained in the VSCA.
The VSCA contains provisions governing "Affiliated Transactions," which
include certain mergers and share exchanges, certain material dispositions of
corporate assets not in the ordinary course of business, any dissolution of a
corporation proposed by or on behalf of an Interested Shareholder (as defined
below), and reclassifications, including reverse stock splits,
recapitalizations or mergers of a corporation with its subsidiaries, or
distributions or other transactions which have the effect of increasing the
percentage of voting shares beneficially owned by an Interested Shareholder by
more than 5%. For purposes of the VSCA, an Interested Shareholder is defined
as any beneficial owner of more than 10% of any class of the voting securities
of a Virginia corporation.
Subject to certain exceptions discussed below, the provisions governing
Affiliated Transactions require that, for three years following the date upon
which any shareholder becomes an Interested Shareholder, any Affiliated
Transaction must be approved by the affirmative vote of holders of two-thirds
of the outstanding shares of the corporation entitled to vote, other than the
shares beneficially owned by the Interested Shareholder, and by a majority
(but not less than two) of the Disinterested Directors (as defined below). A
Disinterested Director is defined in the VSCA as a member of a corporation's
board of directors who (i) was a member before the later of January 1, 1988 or
the date on which an Interested Shareholder became an Interested Shareholder
and (ii) was recommended for election by, or was elected to fill a vacancy and
received the affirmative vote of, a majority of the Disinterested Directors
then on the corporation's board of directors. At the expiration of the three
year period after a shareholder becomes an Interested Shareholder, these
provisions require approval of the Affiliated Transaction by the affirmative
vote of the holders of two-thirds of the outstanding shares of the corporation
entitled to vote, other than those beneficially owned by the Interested
Shareholder.
The principal exceptions to the special voting requirement apply to
Affiliated Transactions occurring after the three-year period has expired and
require either that the transaction be approved by a majority of the
corporation's Disinterested Directors or that the transaction satisfy certain
fair price requirements of the statute. In general, the fair price
requirements provide that the shareholders must receive the higher of: the
highest per share price for their shares as was paid by the Interested
Shareholder for his or its shares, or the fair market value of the shares. The
fair price requirements also require that, during the three years preceding
the announcement of the proposed Affiliated Transaction, all required
dividends have been paid and no special financial accommodations have been
accorded the interested Shareholder, unless approved by a majority of the
Disinterested Directors.
None of the foregoing limitations and special voting requirements applies to
a transaction with an Interested Shareholder who has been an Interested
Shareholder continuously since the effective date of the statute (January 26,
1988) or who became an Interested Shareholder by gift or inheritance from such
a person or whose acquisition of shares making such person an Interested
Shareholder was approved by a majority of the Disinterested Directors of the
corporation.
In accordance with the provisions of such statute, Virginia First has
elected not to be governed by the Virginia Control Share Acquisitions Statute.
47
<PAGE>
AMENDMENTS TO ARTICLES OF INCORPORATION AND BYLAWS
BB&T
The NCBCA provides generally that a North Carolina corporation's articles of
incorporation may be amended if the amendment is affirmatively approved by a
majority of the votes cast within each voting group entitled to vote. The BB&T
Articles and BB&T Bylaws also require the affirmative vote of two thirds of
the outstanding shares entitled to vote to approve an amendment to the BB&T
Articles or BB&T Bylaws amending, altering or repealing the portions of such
articles or bylaws relating to classification and staggered terms of the
board, removal of directors or any requirement for a supermajority vote on
such an amendment. The BB&T Articles authorize the BB&T Board to amend the
BB&T Bylaws.
Virginia First
The VSCA generally requires that any amendment to a Virginia corporation's
articles of incorporation be approved by at least two-thirds of the votes
entitled to be cast by each voting group entitled to vote on such amendment,
unless the articles of incorporation provide for a greater or lesser vote (but
in no event less than a majority of all of the votes cast by each such voting
group at a meeting at which a quorum of the voting group exists). The Virginia
First Articles provide that an amendment will be approved if (a) a majority of
the votes entitled to be cast by each voting group entitled to vote are cast
in favor of the amendment and (b) unless the transaction has been approved by
at least two thirds of the Continuing Directors, at least 75% of the votes
cast by holders of Virginia First Common Stock are cast in favor of the
amendment.
The VSCA provides generally that a Virginia corporation's board of directors
may amend or repeal the corporation's bylaws except to the extent that (a)
such power is reserved to the shareholders by the articles of incorporation or
by law, (b) the shareholders in adopting or amending a particular bylaw
provided expressly that the board of directors could not amend or repeal such
bylaw and (c) the corporation's shareholders may amend or repeal the bylaws
even though the bylaws may be amended or repealed by the board of directors.
The Virginia First Articles provide that the provisions of the Virginia First
Bylaws relating to the ability of shareholders to call a special meeting,
advance notice requirements for shareholder proposals and director nominations
and the requirement that a supermajority of the Virginia First Board approve
the submission to shareholders of proposals for certain business combinations
may not be amended or repealed unless (a) a majority of the votes entitled to
be cast by each voting group entitled to vote are cast in favor of the action
and (b) at least 75% of the votes cast by holders of Virginia First Common
Stock are cast in favor of the action. Otherwise, the Virginia First Board may
adopt, amend and repeal the Virginia First Bylaws except to the extent a bylaw
adopted by the shareholders provides to the contrary.
SHAREHOLDERS' RIGHTS OF DISSENT AND APPRAISAL
BB&T
Under the NCBCA, a shareholder of a North Carolina corporation is entitled
to dissent from, and obtain payment of the "full value" of his shares in the
event of, any of the following corporate transactions: (a) consummation of a
plan of merger to which the corporation is a party, unless (i) the corporation
is a parent merging with a subsidiary pursuant to a particular NCBCA provision
for such transactions; (ii) the merger is subject to an NCBCA provision that
exempts from the shareholder approval requirement certain mergers that do not
result in a substantial change to the corporation or the rights of its
shareholders; or (iii) the shares in question are then redeemable by the
corporation at a price not greater than the cash to be received for such
shares; (b) 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; (c) consummation of a sale or
exchange of all or substantially all of the property of the corporation other
than in the regular course of business, 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 are to be distributed in
cash to shareholders within one year; (d) an amendment to the articles of
48
<PAGE>
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 shares to vote on any matter; (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; or (vi) changes the corporation
into a nonprofit corporation or cooperative organization; or (e) any
corporation 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.
With respect to corporations that have a class or series of shares either
listed on a national securities exchange or held by more than 2,000 record
shareholders, dissenters' rights are not available to the holders of these
shares by reason of a merger, share exchange or sale or exchange of property
unless (a) the articles of incorporation of the corporation that issued the
shares provide otherwise or (b) in the case of a merger or share exchange, the
holders of the shares are required to accept anything other than (i) cash,
(ii) shares in another corporation that are either listed on a national
securities exchange or held by more than 2,000 record shareholders or (iii) a
combination of cash and such shares.
A shareholder who has the right to dissent from a transaction and receive
payment of the "fair value" of his shares must follow specific procedural
requirements as set forth in the NCBCA in order to maintain such right and
obtain such payment.
Virginia First
Under the VSCA, a shareholder of a Virginia corporation is entitled to
dissent from, and to receive payment of the "fair value" of his shares in the
event of, any of the following corporation transactions: (a) consummation of a
merger to which the corporation is a party, provided that either (i)
shareholder approval is required for the merger pursuant to the VSCA or the
corporation's articles of incorporation and the shareholder is entitled to
vote or (ii) the corporation is a subsidiary being merged with its parent
pursuant to a particular VSCA provision for such transactions; (b)
consummation of a plan of share exchange to which the corporation is a party
as the party whose shares will be acquired, provided that the shareholder is
entitled to vote on the plan; (c) consummation of the sale or exchange of all
or substantially all the property of the corporation, if the shareholder is
entitled to vote on the transaction or the transaction is in furtherance of a
dissolution on which the shareholder is entitled to vote, and provided that
the transaction is neither (i) a transaction pursuant to court order nor (ii)
a transaction for cash pursuant to a plan by which all or substantially all of
the net proceeds will be distributed to shareholders within one year; or (d)
any corporate action taken pursuant to a shareholder vote, to the extent that
the articles of incorporation, the bylaws, or a resolution of the board of
directors provides that voting and nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
With respect to corporations that have a class or series of shares either
listed on a national securities exchange or the Nasdaq market (such as
Virginia First) or held by more than 2,000 record shareholders, dissenters'
rights are not available to the holders of such shares by reason of a merger,
share exchange or sale or exchange of property unless (a) the articles of
incorporation of the corporation issuing such shares provided otherwise; (b)
in the case of a merger or share exchange (unlike the Merger), the holders of
such shares are required to accept anything other than (i) cash, (ii) shares
in another corporation that are either listed on a national securities
exchange or held by more than 2,000 record shareholders or (iii) a combination
of cash and such shares; or (c) the transaction is with a shareholder who owns
more than 10 percent of a class of shares and has not been approved by a
majority of the directors unaffiliated with such shareholder.
A shareholder who has the right to dissent from a transaction and receive
payment of the "fair value" of his shares must follow specific procedural
requirements as set forth in the VSCA in order to maintain such right and
obtain such payment.
49
<PAGE>
LIQUIDATION RIGHTS
BB&T
In the event of the liquidation, dissolution or winding-up of the affairs of
BB&T, holders of outstanding shares of BB&T Common Stock are entitled to share,
in proportion to their respective interests, in BB&T's assets and funds
remaining after payment, or provision for payment, of all debts and other
liabilities of BB&T.
Because BB&T is a bank holding company, its rights, the rights of its
creditors and of its shareholders, including the holders of the shares of any
BB&T 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 BB&T
may itself be a creditor with recognized claims against the subsidiary and any
interests in the liquidation accounts established by savings associations or
savings banks acquired by BB&T for the benefit of eligible account holders in
connection with conversion of such savings associations to stock form.
Virginia First
The rights of holders of Virginia First Common Stock upon liquidation are
virtually identical to those of holders of BB&T Common Stock.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon by Womble
Carlyle Sandridge & Rice, PLLC, Charlotte, North Carolina, as counsel to BB&T.
As of the date of this Proxy Statement/Prospectus, certain members of Womble
Carlyle Sandridge & Rice, PLLC owned an aggregate of approximately 22,000
shares of BB&T Common Stock.
EXPERTS
The consolidated financial statements of BB&T Corporation and its
subsidiaries which are incorporated herein by reference from BB&T Corporation's
Current Report on Form 8-K dated August 15, 1997, which restates the
consolidated financial statements that are incorporated by reference from BB&T
Corporation's Annual Report on Form 10-K for the year ended December 31, 1996
to reflect the acquisition of United Carolina Bancshares Corporation by BB&T
Corporation during 1997, and 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 Virginia First incorporated by
reference from Virginia First's Annual Report (Form 10-K) for the year ended
June 30, 1997, have been audited by KPMG Peat Marwick LLP, independent
auditors, as set forth in their report thereon incorporated by reference
therein and incorporated herein by reference in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
50
<PAGE>
ADDITIONAL MATTERS RELATING TO THE ANNUAL MEETING
ELECTION OF DIRECTORS; SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS
Election of Directors; The Nominees
The Virginia First Articles provide that the Virginia First Board
(hereinafter referred to as the "Board") shall be divided into three classes
as nearly equal in number as possible. The members of each class are to be
elected for a term of three years and until their successors are elected and
qualified. One class of directors is elected each year. At the Annual Meeting
the directors whose terms expire will be reclassified so that each class of
director has three members. The following table sets forth the names of the
current directors and the years in which their terms of office will expire if
the Merger is for any reason not consummated:
<TABLE>
<CAPTION>
1997(1) 1998 1999
------- ---- ----
<S> <C> <C>
Frasier W. Brickhouse Preston H. Cottrell Charles A. Patton
William A. Patton William L. Eure, Jr. Benjamin S. Gill
Francis R. Payne, Jr. George R. Mercer
John H. VanLandingham, Jr.
</TABLE>
- --------
(1) These four directors are the nominees for election at the Annual Meeting.
Messrs. Brickhouse, Patton and VanLandingham are nominees for a three-
year term expiring in 2000 or until their successors are elected and
qualified. Dr. Payne is a nominee for a one year term expiring in 1998.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE NOMINEES BE ELECTED AS DIRECTORS.
The Board of Directors
Unless authority is withheld in the proxy, each proxy executed and returned
by a shareholder will be voted for the election of the nominees listed above.
Proxies distributed in conjunction herewith may not be voted for persons other
than the nominees named thereon. If any person named as nominee should be
unable or unwilling to stand for election at the time of the Annual Meeting,
the proxy holders will nominate and vote for a replacement nominee or nominees
recommended by the Board. At this time, the Board knows no reason why any of
the nominees listed above may not be able to serve as a director if elected.
The proxy also confers discretionary authority upon the persons named therein,
or their substitutes, with respect to any other matter that may properly come
before the meeting.
In the election of directors, those receiving the greatest number of votes
will be elected even if they do not receive a majority. Abstentions and broker
non-votes will not be considered a vote for, or a vote against, a director.
There is set forth hereafter as to each of the nominees, and the remaining
directors who will continue to serve, certain information including age,
principal occupation and, as of September 1, 1997, information respecting
beneficial ownership of Virginia First Common Stock. The date shown for first
election as a director in the information below represents the year in which
the nominee or continuing director was first elected to the Board of Virginia
First or previously to the Board of VFSB (hereinafter referred to as the
"Savings Bank"). Unless otherwise indicated, the business experience and
principal occupations shown for each nominee or continuing director has
extended five or more years.
WILLIAM A. PATTON, 71, has been a director since 1956. Mr. Patton is
Chairman of the Board of Virginia First and the Savings Bank.
FRANCIS R. PAYNE, JR., 77, has been a director since 1964. Dr. Payne is a
retired physician associated with Petersburg Obstetrics and Gynecology
Associates, Ltd., Petersburg, Virginia.
51
<PAGE>
JOHN H. VANLANDINGHAM, 74, has been a director since 1956. Mr. VanLandingham
is Chairman of the Board of Builders Supply Co. of Petersburg, Inc.,
Petersburg, Virginia.
FRASIER W. BRICKHOUSE, 60, has been a director since 1983. Mr. Brickhouse is
Assistant Dean, School of Business, Virginia State University, Petersburg,
Virginia.
WILLIAM L. EURE, JR., 67, has been a director since 1971. Mr. Eure is
Chairman of Eure Communications, Inc., Charlottesville, Virginia.
BENJAMIN S. GILL, 63, has been a director since 1971. Mr. Gill is the owner
of Benny's BBQ, Richmond, Virginia.
GEORGE R. MERCER, 87, has been a director since 1952. Mr. Mercer is Chairman
of Mercer Rug Cleaning and Carpet Sales and George Marshall Corp., a real
estate holding corporation, Richmond, Virginia.
CHARLES A. PATTON, 41, has been a director since 1986. Mr. Patton is
President and Chief Executive Officer of Virginia First and the Savings Bank.
PRESTON H. COTTRELL, 48, has been a director since 1992. Mr. Cottrell is
President and Chief Executive Officer of Cottrell Communications, a private
provider of telecommunications services, Richmond, Virginia.
William A. Patton, Chairman of the Board of Virginia First and the Savings
Bank, is the father of Charles A. Patton, President and Chief Executive
Officer and a director of Virginia First and the Savings Bank. There are no
other family relationships among the officers or directors of Virginia First.
Security Ownership of Management
The following table sets forth information as of September 1, 1997 regarding
the number of shares of Virginia First Common Stock beneficially owned by all
directors and nominees, by each of the executive officers named in the
"Summary Compensation Table" herein and by all directors and executive
officers in the group. Unless otherwise noted, beneficial ownership includes
shares, if any, held in the name of the spouse, minor children or other
relatives of the nominee living in such person's home, as well as shares, if
any, held in the name of another person under an arrangement whereby the
director or executive officer can vest title in himself at once or at some
future time.
<TABLE>
<CAPTION>
COMMON STOCK
NAME BENEFICIALLY OWNED PERCENT OF CLASS
---- ------------------ ----------------
<S> <C> <C>
DIRECTORS
William A. Patton........................ 1,083,108(1) 18.47%
Francis R. Payne, Jr. ................... 83,676 1.44%
John H. VanLandingham, Jr. .............. 20,806 *
Frasier W. Brickhouse.................... 26,251 *
William L. Eure, Jr...................... 68,562 1.18%
Benjamin S. Gill......................... 10,668 *
George R. Mercer......................... 43,860 *
Charles A. Patton........................ 1,266,208(1) 21.20%
Preston H. Cottrell...................... 39,220 *
NAMED EXECUTIVES
David L. Huntington...................... 20,239 *
Gary L. Martin........................... 12,224 *
Steven A. Whitley........................ 15,707 *
All present executive officers and direc-
tors as a group (13 persons).............. 1,607,421(2) 26.54%
</TABLE>
- --------
* Indicated holdings amount to less than 1% of the issued and outstanding
Virginia First Common Stock.
52
<PAGE>
(1) William A. Patton, Charles A. Patton, J. Dale Patton and Patton
Associates Limited Partnership are parties to a Voting Agreement under
which they share voting power over 1,034,108 issued and outstanding
shares of Virginia First Common Stock, including 449,094 shares held by
William A. Patton, 283,101 shares held by Charles A. Patton, 1,913 shares
held by J. Dale Patton and 300,000 shares held by Patton Associates
Limited Partnership. The Voting Agreement also will apply to 50,000
shares and 160,000 shares of Virginia First Common Stock that William A.
Patton and Charles A. Patton, respectively, have the right to acquire
under presently exercisable stock options, if and when such options are
exercised. The Voting Agreement does not affect the parties' power to
dispose of shares with respect to which any has or shares the power of
disposition and does not cover any shares held in a fiduciary capacity or
with respect to which a party shares voting power with a person who is
not a party to the Voting Agreement. Charles A. Patton beneficially owns
73,100 shares of Virginia First Common Stock that are not subject to the
Voting Agreement. J. Dale Patton beneficially owns 9,203 shares of
Virginia First Common Stock that are not subject to the Voting Agreement.
Not included are 16,000 shares held by the wife of Charles A. Patton, as
to which he disclaims beneficial ownership.
(2) Includes beneficial ownership of shares issuable upon the exercise of
stock options exercisable within 60 days of September 1, 1997 by: William
A. Patton, 50,000 shares; Charles A. Patton, 160,000 shares; Steven A.
Whitley, 10,000 shares; Gary L. Martin, 10,000 shares; David L.
Huntington, 15,000 shares; and 245,000 shares by all directors and
executive officers as a group.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information about those persons
believed by management to be beneficial owners of more than 5% of the shares
of Virginia First Common Stock outstanding on September 1, 1997. Persons and
groups owning in excess of 5% of Virginia First Common Stock are required to
file certain reports regarding ownership with Virginia First and the
Commission under the Exchange Act. Other than those persons listed below,
Virginia First is not aware of any person or group that owned more than 5% of
Virginia First Common Stock at September 1, 1997.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
-------------- ------------------------------------ -------------------- ----------
<S> <C> <C> <C>
Common Stock............ William A. Patton, Charles A. 1,243,108 21.56%
Patton, J. Dale Patton and
Patton Associates Limited
Partnership (1)
c/o William A. Patton,
P. O. Box 2009
Petersburg, VA 23804
Heartland Advisors, Inc. 405,300 6.97%
790 North Milwaukee Street
Milwaukee, Wisconsin
</TABLE>
- --------
(1) William A. Patton, Charles A. Patton, J. Dale Patton and Patton
Associates Limited Partnership are parties to a Voting Agreement under
which they share voting power over 1,034,108 issued and outstanding
shares of Virginia First Common Stock, including 449,094 shares held by
William A. Patton, 283,101 shares held by Charles A. Patton, 1,913 shares
held by J. Dale Patton and 300,000 shares held by Patton Associates
Limited Partnership. The Voting Agreement also will apply to 50,000
shares and 160,000 shares of Virginia First Common Stock that William A.
Patton and Charles A. Patton, respectively, have the right to acquire
under presently exercisable stock options, if and when such options are
exercised. The Voting Agreement does not affect the parties' power to
dispose of shares with respect to which any has or shares the power of
disposition and does not cover any shares held in a fiduciary capacity or
with respect to which a party shares voting power with a person who is
not a party to the Voting Agreement. Charles A. Patton beneficially owns
73,100 shares of Virginia First Common Stock that are not subject to the
Voting Agreement. J. Dale Patton beneficially owns 9,203 shares of
Virginia First Common Stock that are not subject to the Voting Agreement.
53
<PAGE>
The Board of Directors and Its Committees
Meetings of the Board are held regularly, and there is also an
organizational meeting following the conclusion of the Annual Meeting of
Shareholders. The Board held 11 meetings in the year ended June 30, 1997. All
directors of Virginia First also are directors of the Savings Bank. The Board
of the Savings Bank held 13 meetings in the year ended June 30, 1997. With the
exception of Dr. Payne, for the year ended June 30, 1997, none of Virginia
First's nine directors attended fewer than 75% of the aggregate of the total
number of meetings of both Boards and the total number of meetings held by
committees on which the respective director served.
The Board has a Nominating Committee, an Audit Committee, a Stock Option
Committee, a Compensation Committee and an Executive Committee.
For fiscal 1997 the Nominating Committee consisted of Messrs. Eure, Gill and
Mercer. The duties of this committee are to advise the Board with respect to
the nomination of directors. It recommends candidates to the Board as nominees
for election at the Annual Meeting. Directors are selected on the basis of
recognized achievements and their ability to bring skill and experience to the
deliberations of the Board. The Nominating Committee met once in the year
ended June 30, 1997, and recommended the nominees named herein. The Virginia
First Bylaws provide, however, that shareholders entitled to vote for the
election of directors may name nominees for election to the Board.
Under the Virginia First Bylaws, notice of a proposed nomination meeting
certain specified requirements must be received by Virginia First not less
than 60 nor more than 90 days prior to any meeting of shareholders called for
the election of directors, provided in each case that if fewer than 70 days'
notice of the meeting is given to shareholders, such written notice shall be
received not later than the close of the tenth day following the day on which
notice of the meeting was mailed to shareholders.
The Virginia First Bylaws require that the shareholder's notice set forth as
to each nominee (i) the name, age, business address and residence address of
such nominee, (ii) the principal occupation or employment of such nominee,
(iii) the class and number of shares of Virginia First which are beneficially
owned by such nominee, and (iv) any other information relating to such nominee
that is required under federal securities laws to be disclosed in
solicitations of proxies for the election of directors, or is otherwise
required (including, without limitation, such nominee's written consent to
being named in a proxy statement as nominee and to serving as a director if
elected). The Virginia First Bylaws further require that the shareholder's
notice set forth as to the shareholder giving the notice (i) the name and
address of such shareholder and (ii) the class and amount of such
shareholder's beneficial ownership of Virginia First capital stock. If the
information supplied by the shareholder is deficient in any material aspect or
if the foregoing procedure is not followed, the chairman of the Annual Meeting
may determine that such shareholder's nomination should not be brought before
the Annual Meeting and that such nominee shall not be eligible for election as
a director of Virginia First.
The Audit Committee consists of Mr. William L Eure, Jr., as Chairman,
Messrs. Brickhouse and VanLandingham and Dr. Payne. The Audit Committee is
responsible for the selection and recommendation of the independent accounting
firm for the annual audit and to establish, and assure the adherence to, a
system of internal controls. It reviews and accepts the reports of Virginia
First's independent auditors and federal examiners. The Audit Committee met 6
times during the year ended June 30, 1997.
The Executive Committee, which acts for the Board when the Board is not in
session, with certain exceptions as delineated by the Virginia First Bylaws,
is composed of Mr. William A. Patton, Chairman, Messrs. Charles A. Patton,
Eure, Gill and Dr. Payne. The Executive Committee met 7 times during the year
ended June 30, 1997. The Executive Committee also functions as the
Compensation Committee.
Executive Officers Who Are Not Directors
GARY L. MARTIN (Age 44), a Senior Vice President, joined the Savings Bank in
1991 when it acquired Southern Atlantic Mortgage from Home Savings Bank of
Norfolk and serves as the chief operating officer of Virginia First Mortgage.
Before September 1991 he operated Southern Atlantic Mortgage for Home Savings
Bank.
54
<PAGE>
WILLIAM J. VOGT (Age 45) is a Senior Vice President and Chief Financial
Officer of Virginia First and the Savings Bank. Prior to joining Virginia
First in November, 1996, he was chief operating officer of American Home
Funding, Inc., a residential mortgage banker.
STEVEN A. WHITLEY (Age 50) is Executive Vice-President and Chief Operating
Officer of the Savings Bank. Before January 1997, Mr. Whitley was a Senior
Vice President of the Savings Bank in charge of retail banking operations.
Prior to joining Virginia First in November 1991, he held a similar position
with Coreast Federal Savings Bank from 1989 to 1991.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires Virginia First's directors and
executive officers, and any persons who own more than 10% of Virginia First
Common Stock, to file with the Commission reports of ownership and changes in
ownership of Virginia First Common Stock. Officers and directors are required
by Commission regulation to furnish Virginia First with copies of all Section
16(a) forms that they file. Based solely on review of the copies of such
reports furnished to Virginia First or written representation that no other
reports were required, Virginia First believes that, during fiscal year 1997,
all filing requirements applicable to its officers and directors were complied
with.
REMUNERATION
Compensation Committee Interlocks and Insider Participation
The Executive Committee of the Board of Virginia First, of which William A.
Patton and Charles A. Patton are members, also serves as the Compensation
Committee by making recommendations to the Board with respect to employee
benefits, compensation changes and policy. William A. Patton and Charles A.
Patton abstain from voting on their own compensation. None of the remaining
members of the Executive Committee (Mr. Eure, Mr. Gill and Dr. Payne) is an
employee of Virginia First or any of its subsidiaries, nor does any executive
officer of Virginia First serve as a director or member of the compensation
committee of any entity of which Mr. Eure, Mr. Gill or Dr. Payne is an
executive officer.
Compensation Committee Report on Compensation
Recommendations on compensation of Virginia First's executive officers are
made by the Executive Committee of the Board. Subject to Board approval, the
Committee establishes and controls compensation for the Company's senior
management through review and approval of salaries, incentive programs and
executive benefits.
The three primary components of executive compensation are base salary,
bonuses and stock option grants. The Compensation Committee recommends to the
Board the salaries and bonuses of the executive officers and stock option or
restricted stock grants. All components of executive compensation are reviewed
for competitiveness in relation to a group of companies in the financial
services and mortgage banking industries.
Base Salary. Base salaries for senior management of Virginia First and the
Savings Bank, which the Committee believes are consistent with industry
standards, are based on peer group data, individual performance,
responsibilities, tenure and internal comparability. In general, base salary
levels are set at the minimum levels believed by the Committee to be
sufficient to attract and retain qualified executives when considered with
other components of the Company's compensation structure.
Base salaries for the year ended June 30, 1997 reported in this Proxy
Statement/Prospectus were determined by the Committee in August, 1996. In the
year ended June 30, 1997, Charles A. Patton's salary was not directly related
to any specific measure of corporate performance.
Incentive Compensation. The Incentive Compensation Plan (the "Plan")
effective as of July 1, 1993 offers the potential for additional compensation
to eligible senior officers based upon Virginia First's financial
55
<PAGE>
performance. Specific levels of incentive compensation, based on Virginia
First's return on average assets or beginning equity have been established,
above which participating officers receive incentive compensation. In the
event qualifying earnings are less than the minimum threshold, no incentive
compensation is paid. Earnings above the minimum threshold will provide an
incentive payment to participating officers on a graduated scale. The earnings
ranges necessary to produce a financial incentive are modified for the
subsequent fiscal year to an amount reflective of Virginia First's equity as
of the end of the current fiscal year or average assets for the subsequent
fiscal year.
The Plan provides for any incentive payment to be divided equally into two
parts. Generally, the first part is a cash payment to participating officers
as the product of a fraction, the numerator of which is the individual
officer's salary and the denominator of which is the sum of the salaries of
all participants. However, the allocation percentages can be modified by the
Compensation Committee.
The second part is allocated by the Board's Compensation Committee. The Plan
provides that earned incentives are to be allocated on the basis of individual
achievement. Such allocation can be made in the form of cash, stock
(restricted or unrestricted) or any other method reasonably determined by the
Compensation Committee.
For the fiscal year ended June 30, 1997, the Compensation Committee approved
payment of the second part in cash, taking into consideration the evaluation
of each participant's performance together with the degree to which the
officer, in the opinion of the Committee, contributed to the overall success
of Virginia First. The participants were also evaluated on the basis of their
leadership, dedication, community involvement and commitment to the long term
success of Virginia First.
Stock Options. In contrast to salaries and bonuses, the value to each
executive officer of stock option grants is tied directly to stock price
performance. The Stock Option Committee, consisting of Messrs. Eure and Gill
and Dr. Payne, recommends stock option grants under the shareholder-approved
option plans. All options have been granted with an exercise price equal to
the market price at the date of grant. If there is no appreciation in the
market price of Virginia First Common Stock, the options are valueless. In the
year ended June 30, 1997, Virginia First granted 100,000 stock options to its
executive officers.
Annual Compensation Review. During the fourth quarter of each year, the
Chief Executive Officer submits an annual salary plan for senior executives
(other than the Chief Executive Officer) to the Committee, and the Committee
reviews that plan, makes any modifications it deems appropriate, and
recommends the plan to the Board. The salary plan is developed based on
industry peer groups, surveys, and performance judgments as to the past and
expected further contributions of the individual senior executives. The
Committee reviews and recommends the base salary of the Chief Executive
Officer based upon similar competitive compensation data and the Committee's
assessment of his past performance and its expectation as to his future
contributions in leading Virginia First.
Other Compensation Plans. At various times Virginia First has adopted
certain broad-based employee benefit plans in which executive officers are
permitted to participate on the same terms as non-executive employees who meet
applicable eligibility criteria, subject to any legal limitations on the
amounts that may be contributed to or the benefits that may be payable under
the plans.
Submitted by the Compensation Committee of the Board of Directors
William A. Patton, Chairman
William L. Eure, Jr.
Benjamin S. Gill
Charles A. Patton
Dr. Francis R. Payne, Jr.
56
<PAGE>
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ended June 30, 1997, 1996
and 1995, the cash compensation paid by Virginia First, as well as certain
other compensation paid or accrued for those years, to each of the named
Executive Officers in all capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------- ------------------------
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND COMPEN- STOCK AWARDS UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) SATION ($) ($) (B) OPTIONS (#) ($) (C)
------------------ ---- ---------- --------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles A. Patton....... 1997 225,000 90,000 (a) -0- 60,000 21,047
President and CEO 1996 204,634 50,000 (a) 61,250 -0- 20,785
1995 194,250 33,331 (a) 49,252 -0- 20,759
Gary L. Martin.......... 1997 120,000 206,957 (a) -0- -0- 5,153
Chief Operating Officer 1996 120,000 166,908 (a) -0- -0- 5,817
Virginia First Mortgage 1995 183,075 -0- (a) -0- -0- 3,323
Steven A. Whitley ...... 1997 115,763 47,000 (a) -0- 25,000 4,332
Executive Vice Presi- 1996 110,250 30,000 (a) 24,500 -0- 3,973
dent and 1995 105,000 17,951 (a) 14,768 -0- 3,583
Chief Operating Officer
Virginia First Savings
Bank
David L. Huntington..... 1997 100,709 40,000 (a) -0- 15,000 3,940
Senior Vice President 1996 95,917 22,500 (a) 18,375 -0- 2,800
1995 91,350 15,668 (a) 11,814 -0- 2,598
</TABLE>
- --------
(a) The value of perquisites and other personal benefits did not exceed the
lesser of $50,000 or ten percent of total annual salary and bonus.
(b) The Board of Directors accelerated the vesting of all unvested shares of
restricted stock on April 15, 1997, resulting in immediate vesting of
9,012 shares for Mr. Patton, 3,440 shares for Mr. Whitley and 2,748
shares for Mr. Huntington. The market value of Virginia First Common
Stock on April 15, 1997 was $13.75 per share.
(c) For Charles A. Patton, "All Other Compensation" includes amounts paid in
consideration of the termination of a supplemental retirement income
agreement ($16,000 in 1997, 1996 and 1995) and matching contributions by
Virginia First to its 401(k) Plan ($5,047 in 1997, $4,785 in 1996 and
$4,759 in 1995). For Messrs. Martin, Huntington and Whitley, "All Other
Compensation" includes matching contributions by Virginia First to its
401(k) Plan.
57
<PAGE>
Options Grants in Last Fiscal Year
The following table sets forth for the year ended June 30, 1997, the grants
of stock options to the named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (A)
------------------------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OR OPTION TERM
OPTIONS FISCAL YEAR BASE PRICE EXPIRATION -----------------------
NAME GRANTED (#) (%) (B) ($/SHARE) DATE 5% ($) 10% ($)
---- ----------- ------------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Patton....... 60,000 48% 13.00 2/14/07 491,400 1,240,200
Steven A. Whitley....... 25,000 20% 13.00 2/14/07 204,750 516,750
David L. Huntington..... 15,000 12% 13.00 2/14/07 122,850 310,050
OPTION GRANTS IN LAST FISCAL YEAR
</TABLE>
- --------
(a) Stock options were awarded at the fair market value of the shares of
Virginia First Common Stock at the date of award. Mr. Patton's stock
option is immediately exercisable. Mr. Whitley's stock option is
immediately exercisable as to 10,000 shares and becomes exercisable for
an additional 7,500 shares on each of September 17, 1998 and 1999 and,
upon a change of control, will lapse to the extent it is not then
exercisable. Mr. Huntington's stock option is immediately exercisable as
to 10,000 shares and becomes exercisable for an additional 5,000 shares
on September 17, 1998 and, upon a change of control, will lapse to the
extent it is not then exercisable.
(b) Options to purchase 100,000 shares of Virginia First Common Stock were
granted to executive officers during the year ended June 30, 1997.
Option Exercises and Holdings
Except as set forth in the following table, none of the named Executive
Officers exercised options or stock appreciation rights during the fiscal year
ended June 30, 1997. The following table sets forth information with respect
to exercised and unexercised options held by such officers as of the end of
the fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES JUNE 30, 1997(#) JUNE 30, 1997($) (A)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Patton....... -0- -0- 160,000 -0- 2,120,000 -0-
Gary L. Martin.......... -0- -0- 10,000 -0- 155,000 -0-
Steven A. Whitley....... 10,000 92,500 10,000 15,000 95,000 142,500
David L. Huntington..... -0- -0- 15,000 5,000 172,500 47,500
</TABLE>
- --------
(a) The value of unexercised in-the-money options at fiscal year end was
calculated by determining the difference between the fair market value of
Virginia First Common Stock underlying the options on June 30, 1997
($22.50 per share), which was the last sales price of Virginia First
Common Stock on such date as reported on The Nasdaq National Market, and
the exercise price of the options.
58
<PAGE>
Directors' Fees
Directors, including directors who are officers of Virginia First, received
fees of $1,000 for each meeting of the Board attended and $500 for each
meeting of the Executive Committee attended during fiscal 1997, and $400 for
each meeting of the Audit Committee attended during fiscal 1997.
Employment Agreements
Virginia First and Charles A. Patton are parties to an employment agreement
that provides for Mr. Patton to serve as President of Virginia First. The
agreement is for a five year period ending December 31, 2000 and provides for
a base salary of $204,000. If Mr. Patton's employment is terminated for
reasons other than cause or resignation without good reason, he will be
entitled to receive his base salary and certain benefits for the remainder of
the term of the agreement. If his employment is terminated subsequent to a
change in control of Virginia First (as defined in the employment agreement),
Mr. Patton will be entitled to additional benefits equal to 1.5 times the
compensation paid to him for the twelve months prior to the date of
termination. If termination of employment due to a change in control had
occurred in fiscal 1997, Charles A. Patton would be entitled to severance
payments amounting to approximately $472,500 and his salary and fringe
benefits for the remaining term of his employment agreement.
Gary L. Martin was first employed by Virginia First in connection with its
acquisition of Southern Atlantic Mortgage. Under Mr. Martin's employment
arrangement, he receives a salary of $120,000 per year and a bonus, based on
residential mortgage loan production of Virginia First Mortgage. The bonus
paid under Mr. Martin's employment arrangement in the fiscal year ended June
30, 1997 was $206,957. There are no severance provisions or provisions for
payments in connection with a change in control of Virginia First.
The Savings Bank and Steven A. Whitley are parties to an employment
agreement that provides for Mr. Whitley to serve as Executive Vice-President
and Chief Operating Officer of the Savings Bank. The agreement is for a two
year period ending December 31, 1998 and provides for a base salary of
$115,758. If Mr. Whitley's employment is terminated for reasons other than
cause or resignation without good reason, he will be entitled to receive the
lesser of his base salary or $100,000 for the remainder of the term of the
agreement. There are no severance provisions or provisions for payments in
connection with a change in control of Virginia First.
Indebtedness of Management
No loans to directors or officers involve more than the normal risks of
collectibility or present other unfavorable features. None of the loans was
non-accrual, past-due, restricted or potential problem loans, as of August 31,
1997. All such loans were originated on substantially the same terms,
including interest rates, as those prevailing at the time for comparable
transactions with other persons.
59
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return on Virginia First
Common Stock with the cumulative total return of the NASDAQ Stock Market--U.S.
Index and the NASDAQ Bank Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG VIRGINIA FIRST FINANCIAL CORPORATION,
THE NASDAQ STOCK MARKET--US INDEX AND THE NASDAQ BANK INDEX
[LINE GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------
Legend
<TABLE>
<CAPTION>
Index Description 6/30/92 6/30/93 6/30/94 6/30/95 6/30/96 6/30/97
- ----------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
VIRGINIA FIRST 100 237.5 352.7 443.8 701.8 1,156.7
NASDAQ STOCK 100 121.2 119.2 149.8 188.1 202.1
MARKET INDEX
NASDAQ BANK 100 137.1 171.0 191.9 242.5 364.6
STOCK INDEX
</TABLE>
*$100 INVESTED ON 6/30/92 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
- --------------------------------------------------------------------------------
60
<PAGE>
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board has appointed KPMG Peat Marwick LLP, independent certified public
accountants, to perform the audit of Virginia First's financial statements for
the year ending June 30, 1998, and further directed that the selection of the
auditors be submitted for ratification by the shareholders at the Annual
Meeting. KPMG Peat Marwick LLP has acted as Virginia First's, and its
predecessor's, independent accountants since 1961.
Representatives from KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting, will have the opportunity to make a statement, if they so
desire, and are expected to be available to respond to appropriate questions
from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS FOR FISCAL 1998.
SHAREHOLDER PROPOSALS
Any proposal which a shareholder wishes to have presented at the next annual
meeting of shareholders, to be held in October 1998, must be received no later
than June 25, 1998. If such proposal complies with all of the requirements of
Rule 14a-8 of the Exchange Act, it will be included in the Proxy Statement and
set forth in the form of proxy issued for the next Annual Meeting of
Shareholders. It is urged that any such proposals be sent by certified mail,
return receipt requested.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of Virginia First's Annual Report to Shareholders for the year ended
June 30, 1997 accompanies this Proxy Statement/Prospectus. Additional copies
may be obtained by written request to the Secretary of Virginia First at the
address indicated below. Such Annual Report is not part of the proxy
solicitation materials.
OTHER MATTERS
The Board of Directors of Virginia First is not aware of any other matters
that may come before the Annual Meeting. However, the proxies may be voted
with discretionary authority with respect to any other matters that may
properly come before the Annual Meeting.
61
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
VIRGINIA FIRST FINANCIAL CORPORATION
BB&T FINANCIAL CORPORATION OF VIRGINIA
AND
SOUTHERN NATIONAL CORPORATION
DATED AS OF MAY 6, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINITIONS............................................................. A-1
ARTICLE II
THE MERGER.............................................................. A-5
2.1 Merger........................................................... A-5
2.2 Filing; Plan of Merger............................................ A-5
2.3 Effective Time.................................................... A-5
2.4 Closing........................................................... A-5
2.5 Effect of Merger.................................................. A-5
2.6 Further Assurances................................................ A-5
2.7 Merger Consideration.............................................. A-6
2.8 Conversion of Shares; Payment of Merger Consideration............. A-6
2.9 Conversion of Stock Options....................................... A-7
2.10Merger of Subsidiary.............................................. A-8
2.11Anti-Dilution..................................................... A-8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VIRGINIA FIRST........................ A-8
3.1 Capital Structure................................................. A-8
3.2 Organization, Standing and Authority.............................. A-8
3.3 Ownership of Subsidiaries......................................... A-9
3.4 Organization, Standing and Authority of the Subsidiaries.......... A-9
3.5 Authorized and Effective Agreement................................ A-9
3.6 Securities Filings; Statements True............................... A-10
3.7 Minute Books...................................................... A-10
3.8 Adverse Change.................................................... A-10
3.9 Absence of Undisclosed Liabilities................................ A-11
3.10Properties........................................................ A-11
3.11Environmental Matters............................................. A-11
3.12Loans; Allowance for Loan Losses.................................. A-12
3.13Tax Matters....................................................... A-12
3.14Employees; Compensation; Benefit Plans............................ A-13
3.15Certain Contracts................................................. A-15
3.16Legal Proceedings; Regulatory Approvals........................... A-15
3.17Compliance with Laws; Filings..................................... A-16
3.18Brokers and Finders............................................... A-16
3.19Repurchase Agreements; Derivatives................................ A-16
3.20Deposit Accounts.................................................. A-16
3.21Related Party Transactions........................................ A-17
3.22Certain Information............................................... A-17
3.23Tax and Regulatory Matters........................................ A-17
3.24State Takeover Laws............................................... A-17
3.25Labor Relations .................................................. A-17
3.26Fairness Opinion.................................................. A-17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SNC................................... A-17
4.1 Capital Structure of SNC.......................................... A-18
4.2 Organization, Standing and Authority of SNC....................... A-18
4.3 Authorized and Effective Agreement................................ A-18
4.4 Organization, Standing and Authority of SNC Subsidiaries.......... A-18
4.5 Securities Documents.............................................. A-18
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.6 Financial Statements............................................... A-19
4.7 Adverse Change..................................................... A-19
4.8 Legal Proceedings; Regulatory Approvals............................ A-19
4.9 Absence of Undisclosed Liabilities................................. A-19
4.10Compliance with Laws............................................... A-19
4.11Certain Information................................................ A-19
4.12Accounting, Tax and Regulatory Matters............................. A-20
4.13Share Ownership.................................................... A-20
ARTICLE V
COVENANTS................................................................ A-20
5.1 Virginia First Shareholder Meeting................................. A-20
5.2 Registration Statement; Proxy Statement/Prospectus................. A-20
5.3 Plan of Merger; Reservation of Shares.............................. A-21
5.4 Additional Acts.................................................... A-21
5.5 Best Efforts....................................................... A-21
5.6 Certain Accounting Matters......................................... A-21
5.7 Access to Information.............................................. A-22
5.8 Press Releases..................................................... A-22
5.9 Forbearances of Virginia First..................................... A-22
5.10Employment Agreement............................................... A-24
5.11Affiliates......................................................... A-24
5.12Section 401(k) Plan................................................ A-24
5.13Directors and Officers Protection.................................. A-24
5.14Forbearances of SNC................................................ A-24
5.15Reports............................................................ A-25
5.16Exchange Listing................................................... A-25
5.17Board of Directors of Virginia Banking Subsidiary.................. A-25
5.18Employee Benefits; Special Payment................................. A-25
5.19Assumption of Agreement by Acquiror................................ A-26
ARTICLE VI
CONDITIONS PRECEDENT..................................................... A-26
6.1 Conditions Precedent--SNC and Virginia First....................... A-26
6.2 Conditions Precedent--Virginia First............................... A-26
6.3 Conditions Precedent--SNC.......................................... A-27
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT........................................ A-28
7.1 Termination........................................................ A-28
7.2 Effect of Termination.............................................. A-29
7.3 Survival of Representations, Warranties and Covenants.............. A-29
7.4 Waiver............................................................. A-29
7.5 Amendment or Supplement............................................ A-29
ARTICLE VIII
MISCELLANEOUS............................................................ A-29
8.1 Expenses........................................................... A-29
8.2 Entire Agreement................................................... A-29
8.3 No Assignment...................................................... A-30
8.4 Notices............................................................ A-30
8.5 Captions........................................................... A-31
8.6 Counterparts....................................................... A-31
8.7 Governing Law...................................................... A-31
</TABLE>
2
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("Agreement"), dated as of May 6,
1997, among VIRGINIA FIRST FINANCIAL CORPORATION ("Virginia First"), a
Virginia corporation having its principal office at Petersburg, Virginia, BB&T
FINANCIAL CORPORATION OF VIRGINIA, a Virginia corporation having its principal
office at Virginia Beach, Virginia ("BB&T Financial"), and SOUTHERN NATIONAL
CORPORATION, the name of which is to be changed to BB&T Corporation ("SNC"), a
North Carolina corporation having its principal office at Winston-Salem, North
Carolina;
R E C I T A L S:
The parties desire that Virginia First shall be merged with and into BB&T
Financial (said transaction being hereinafter referred to as the "Merger")
pursuant to a plan of merger (the "Plan of Merger") substantially in the form
set forth in Articles of Merger attached as Annex A hereto ("Articles 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
1.1 Definitions
When used herein, the capitalized terms set forth below shall have the
following meanings:
"Bank Holding Company Act" shall mean the federal Bank Holding Company Act
of 1956, as amended.
"Business Day" shall mean all days other than Saturdays, Sundays and Federal
Reserve holidays.
"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.
"CRA" shall mean the Community Reinvestment Act of 1977, as amended.
"Disclosed" shall mean disclosed in the Virginia First Disclosure
Memorandum, referencing the Section number herein pursuant to which such
disclosure is being made.
"Effective Time" shall mean the time specified in Section 2.3 as the
Effective Time of the Merger.
"Environmental Claim" means any notice from any governmental authority or
third party alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup or remediation costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based upon, or resulting from
a violation of the Environmental Laws or the presence or release into the
environment of any Materials of Environmental Concern.
A-1
<PAGE>
"Environmental Laws" means all applicable federal, state and local laws and
regulations, as amended, relating to pollution or protection of human health
or the environment (including ambient air, surface water, ground water, land
surface, or subsurface strata) and which are administered, interpreted, or
enforced by the United States Environmental Protection Agency and state and
local agencies with jurisdiction over and including common law in respect of,
pollution or protection of the environment, including the Comprehensive
Environmental Response Compensation and Liability Act, as amended, 42 U.S.C.
9601 et seq., the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq., and other laws and regulations relating to emissions,
discharges, releases, or threatened releases of any Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of any Materials of
Environmental Concern.
"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 sheets (including related notes and schedules, if any) of
SNC as of December 31, 1996, 1995, and 1994, and the related consolidated
statements of income, shareholders' equity and cash flows (including related
notes and schedules, if any) for each of the three years ended December 31,
1996, 1995, and 1994, as filed by SNC in Securities Documents and (ii) the
consolidated balance sheets of SNC (including related notes and schedules, if
any) and the related consolidated statements of income, shareholders' 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, 1996, and (b) with respect to Virginia First, (i) the
consolidated balance sheets (including related notes and schedules, if any) of
Virginia First as of June 30, 1996, 1995, and 1994, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows (including related notes and schedules, if any) for each of the three
years ended June 30, 1996, 1995, and 1994 as filed by Virginia First in
Securities Documents and (ii) the consolidated balance sheets of Virginia
First (including related notes and schedules, if any) and the related
consolidated statements of income, changes in shareholders' equity and cash
flows (including related notes and schedules, if any) included in Securities
Documents filed by Virginia First with respect to periods ended subsequent to
June 30, 1996.
"FIRREA" shall mean the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended.
"Material Adverse Effect" on SNC or Virginia First shall mean an event,
change, or occurrence which, individually or together with any other event,
change or occurrence, (i) has a material adverse effect on the financial
condition, results of operations, business or business prospects of SNC and
the SNC Subsidiaries, taken as a whole, or Virginia First and the Virginia
First Subsidiaries, taken as a whole, or (ii) materially impairs the ability
of SNC or Virginia First to perform its obligations under this Agreement or to
consummate the Merger and the other transactions contemplated by this
Agreement; provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) actions and omissions of SNC or Virginia First taken
with the prior informed consent of the other in contemplation of the
transactions contemplated hereby, and (b) the direct effects of compliance
with this Agreement on the operating performance of the parties, including
expenses incurred by the parties in consummating the transactions contemplated
by this Agreement.
"Materials of Environmental Concern" means pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other materials
regulated under Environmental Laws.
A-2
<PAGE>
"NCBCA" shall mean the North Carolina Business Corporation Act, as amended.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OTS" shall mean the Office of Thrift Supervision.
"Proxy Statement/Prospectus" shall mean the proxy statement and prospectus,
together with any supplements thereto, sent to shareholders of Virginia First
to solicit their votes in connection with this Agreement and the Plan of
Merger.
"Registration Statement" shall mean the registration statement of SNC 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 (other than rights
pursuant to the Rights Agreements described under the definitions of "SNC
Common Stock" and "Virginia First Common Stock"), 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.
"SAIF" shall mean the Savings Association Insurance Fund.
"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, including but not limited to periodic
and other reports filed pursuant to Section 13 of the Exchange Act.
"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, with rights attached issued pursuant to Rights Agreement
dated December 17, 1996 between SNC and Branch Banking and Trust Company,
Rights Agent.
"SNC Option Agreement" shall mean the Option Agreement dated as of even date
herewith under which SNC has an option to purchase shares of Virginia First,
as amended from time to time, which shall be executed immediately following
execution of this Agreement.
"SNC Subsidiaries" shall mean all Subsidiaries of SNC at the Effective Time
which are banks or savings associations.
"State Board" shall mean the Virginia State Corporation Commission, Bureau
of Financial Institutions.
"Stock Option" shall mean, collectively, any option granted under the Stock
Option Plan and unexercised on the date hereof to acquire shares of Virginia
First Common Stock, aggregating 282,980 shares.
"Stock Option Plan" shall mean, collectively or singularly, Virginia First's
1984 Incentive Stock Option Plan, 1986 Stock Compensation Program, and 1992
Incentive Plan, as amended.
"Subsidiaries" shall mean all those corporations, associations, or other
business entities of which the entity in question either owns or controls 50%
or more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the outstanding
equity securities is owned directly or indirectly by its parent (in
determining whether one entity owns or controls 50% or more of the outstanding
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equity securities of another, equity securities owned or controlled in a
fiduciary capacity shall be deemed owned and controlled by the beneficial
owner).
"TILA" shall mean the Truth in Lending Act, as amended.
"Virginia First Common Stock" shall mean the shares of common stock, par
value $1.00 per share, of Virginia First, with rights attached pursuant to the
Rights Agreement dated April 19, 1996 between Virginia First and First Union
National Bank of North Carolina, Rights Agent.
"Virginia First Disclosure Memorandum" shall mean the written information in
one or more documents, each of which is entitled "Virginia First Disclosure
Memorandum" and dated on or before the date of this Agreement and delivered
not later than twenty days after the execution of this Agreement by Virginia
First to SNC, and describing in reasonable detail the matters contained
therein. Each disclosure made therein shall be in existence on the date of
this Agreement and shall specifically reference each Section of this Agreement
under which such disclosure is made. Information disclosed with respect to one
Section shall not be deemed to be disclosed for purposes of any other Section
not specifically referenced.
"Virginia First Subsidiaries" shall mean the Subsidiaries of Virginia First,
which shall include any corporation, bank, savings association, or other
organization acquired as a Subsidiary of Virginia First in the future and held
as a Subsidiary by Virginia First at the Effective Time.
"VSCA" shall mean the Virginia Stock Corporation Act, as amended.
1.2 Terms Defined Elsewhere
The capitalized terms set forth below are defined in the following sections:
<TABLE>
<S> <C>
Agreement Introduction
Articles of Merger Recitals
BB&T Financial Introduction
Closing Section 2.4
Closing Date Section 2.4
Closing Value Section 2.7
Constituent Corporations Section 2.1
Dissenting Shareholder Section 2.9
Dissenting Shares Section 2.9
Effective Time Section 2.3
Exchange Ratio Section 2.10
Indemnified Party Section 5.13
Merger Recitals
Merger Consideration Section 2.7
PBGC Section 3.14(b)(iv)
Plan Section 3.14(b)(i)
Plan of Merger Recitals
SNC Introduction
SNC Option Plan Section 2.10(c)
SNC-Virginia Recitals
Surviving Corporation Section 2.1(a)
Virginia First Introduction
</TABLE>
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ARTICLE II
THE MERGER
2.1 Merger
BB&T Financial and Virginia First are constituent corporations (the
"Constituent Corporations") to the Merger as contemplated by the VSCA. At the
Effective Time:
(a) Virginia First shall be merged with and into BB&T Financial in
accordance with the applicable provisions of the VSCA, with BB&T Financial
being the surviving corporate entity (hereinafter sometimes referred to as
the "Surviving Corporation").
(b) The separate existence of Virginia First shall cease and the Merger
shall in all respects have the effect provided in Section 2.5.
(c) The Articles of Incorporation of BB&T Financial at the Effective Time
shall become the Articles of Incorporation of the Surviving Corporation.
(d) The Bylaws of BB&T Financial at the Effective Time shall become the
Bylaws of the Surviving Corporation.
2.2 Filing; Plan of Merger
The Merger shall not become effective unless this Agreement and the Plan of
Merger are duly approved by shareholders holding the requisite number of
shares of each of Virginia First and BB&T Financial. Upon fulfillment or
waiver of the conditions specified in Article VI and provided that this
Agreement has not been terminated pursuant to Article VII, the Constituent
Corporations will cause the Articles of Merger to be executed and filed with
the Virginia State Corporation Commission, as provided in Section 13.1-720 of
the VSCA. The Plan 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 shareholders of the Constituent Corporations shall
constitute adoption and approval of the Plan of Merger.
2.3. Effective Time
The Merger shall be effective at the day and hour specified in the Articles
of Merger filed with the Virginia State Corporation Commission (herein
sometimes referred to as the "Effective Time").
2.4 Closing
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Womble Carlyle Sandridge & Rice,
PLLC, Winston-Salem, North Carolina, at 11:00 a.m. on the Business Day
designated by SNC which is within thirty days following the satisfaction of
the conditions to Closing set forth in Article VI, or such later date as the
parties may otherwise agree (the "Closing Date").
2.5 Effect of Merger
From and after the Effective Time, the Merger shall have the effect
described in Section 13.1-721 of the VSCA.
2.6 Further Assurances
If, at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any further deeds, assignments or assurances in
law or any other 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
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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 the portion of a
whole share of SNC Common Stock and cash to be exchanged for each share of
Virginia First Common Stock issued and outstanding as of the Effective Time,
determined as follows:
(a) If the Closing Value (as defined below) is less than $41.67 and is
not less than $37.50, the Merger Consideration shall equal in value .6 of
the Closing Value, of which 70% shall be distributable in the form of SNC
Common Stock and 30% shall be distributable in cash.
(b) If the Closing Value is $41.67 or more, the Merger Consideration
shall equal in value $25.00, of which $17.50 in value shall be in the form
of SNC Common Stock (determined with reference to the Closing Value), and
$7.50 in value shall be in cash.
(c) If the Closing Value is less than $37.50 and is not less than $33.75,
the Merger Consideration shall equal in value $22.50, of which $15.75 in
value shall be in the form of SNC Common Stock (determined with reference
to the Closing Value), and $6.75 in value shall be in cash.
(d) If the Closing Value is less than $33.75 and is not less than $30.00,
the Merger Consideration shall equal in value $22.50, of which an amount
equal to .467 of the Closing Value shall be distributable in the form of
SNC Common Stock (determined with reference to the Closing Value) and the
difference between such amount and $22.50 shall be in cash.
(e) If the Closing Value shall be less than $30.00, the Merger
Consideration shall equal in value the sum of .467 of the Closing Value
plus cash of $8.50; provided that at any time following determination of
the Closing Value at below $30.00 and prior to the Effective Time, the
Board of Directors of Virginia First may elect to terminate this Agreement
and the proposed Merger rather than to consummate the proposed Merger for
the Merger Consideration provided in this Section 2.7(e).
(f) With regard to each Virginia First shareholder, the aggregate shares
(including fractional shares) of SNC Common Stock to be received as Merger
Consideration shall be determined, and the number of such shares shall be
rounded to the nearest whole share. The aggregate amount of cash shall be
correspondingly increased or decreased to adjust for such rounding
determined with reference to the Closing Value.
(g) For purposes of this Section 2.7, the "Closing Value" of SNC Common
Stock shall mean the average closing price per share on the NYSE Composite
Transactions List (as reported by The Wall Street Journal) for the 10
trading days (determined by excluding days on which the NYSE is closed)
immediately preceding the 10th calendar day preceding the Effective Time
(the 10th day to be determined by counting the day preceding the Effective
Time as the first day).
2.8 Conversion of Shares; Payment of Merger Consideration
(a) At the Effective Time, by virtue of the Merger and without any action on
the part of Virginia First or the holders of record of Virginia First Common
Stock, each share of Virginia First Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into and shall
represent the right to receive, upon surrender of the certificate representing
such share of Virginia First Common Stock (as provided in paragraph (d)
below), the Merger Consideration.
(b) Each share of the common stock of BB&T Financial issued and outstanding
immediately prior to the Effective Time shall continue to be issued and
outstanding.
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(c) Until surrendered, each outstanding certificate which prior to the
Effective Time represented one or more shares of Virginia First Common Stock
shall be deemed upon the Effective Time for all purposes to represent only the
right to receive the Merger Consideration as described in this Section 2.8. No
interest will be paid or accrued on the Merger Consideration upon the
surrender of the certificate or certificates representing shares of Virginia
First Common Stock. With respect to any certificate for Virginia First Common
Stock that has been lost or destroyed, the Surviving Corporation shall pay the
Merger Consideration attributable to such certificate upon receipt of a surety
bond or other adequate indemnity as required in accordance with SNC's standard
policy, and evidence reasonably satisfactory to SNC of ownership of the shares
represented thereby. After the Effective Time, no transfer of the shares of
Virginia First Common Stock outstanding immediately prior to the Effective
Time shall be made on the stock transfer books of the Surviving Corporation.
(d) Promptly after the Effective Time, SNC shall cause to be delivered or
mailed to each Virginia First shareholder a form of letter of transmittal and
instructions for use in effecting the surrender of the certificates which,
immediately prior to the Effective Time, represented any shares of Virginia
First 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.
(e) The Surviving Corporation shall pay any dividends or other distributions
with a record date prior to the Effective Time which have been declared or
made by Virginia First in respect of shares of Virginia First Common Stock in
accordance with the terms of this Agreement and which remain unpaid at the
Effective Time. To the extent permitted by law, former shareholders of record
of Virginia First shall be entitled to vote after the Effective Time at any
meeting of SNC shareholders the number of whole shares of SNC Common Stock
into which their respective shares of Virginia First Common Stock are
converted, regardless of whether such holders have exchanged their
certificates representing Virginia First Common Stock for certificates
representing SNC Common Stock in accordance with the provisions of this
Agreement. Whenever a dividend or other distribution is declared by SNC on the
SNC Common Stock, the record date for which is at or after the Effective Time,
the declaration shall include dividends or other distributions on all shares
of SNC Common Stock issuable pursuant to this Agreement, but after the
Effective Time no dividend or other distribution payable to the holders of
record of SNC Common Stock as of any time subsequent to the Effective Time
shall be delivered to the holder of any certificate until such holder
surrenders such certificate for exchange as provided in this Section 2.8. Upon
surrender of such certificate, both the SNC Common Stock certificate and any
undelivered dividends and cash payments payable hereunder (without interest)
shall be delivered and paid with respect to each share represented by such
certificate.
2.9 Conversion of Stock Options
At the Effective Time, each Stock Option then outstanding (and which by its
terms does not lapse on or before the Effective Time), whether or not then
exercisable, shall be converted into and become an option under the SNC 1995
Omnibus Stock Incentive Plan (the "SNC Option Plan"), and shall be governed by
the terms and conditions of the SNC Option Plan. Specifically, without
limiting the foregoing, no holder of a Stock Option shall be entitled to
receive any payment from SNC of any tax liability incurred by such holder
resulting from exercise following the Effective Time of all or a part of the
Stock Option. In making such conversion, (i) the number of shares of SNC
Common Stock subject to each such Stock Option shall be the number of whole
shares of SNC (omitting any fractional share) determined by multiplying the
number of shares of Virginia First Common Stock subject to such Stock Option
immediately prior to the Effective Time by the Option Exchange Ratio (defined
below), and (ii) 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 Option Exchange Ratio and rounding up to the nearest cent.
In addition, each such 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
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renewal of the option, within the meaning of Section 424(h) of the Code. As
used in this Agreement, the Option Exchange Ratio shall mean the percentage
determined by dividing the value of the Merger Consideration at the Effective
Time by the Closing Value. SNC and Virginia First agree to take all necessary
steps to effectuate the foregoing provisions of this Section 2.9. Each grant
of a converted option to any individual who subsequent to the Merger will be a
director or officer of SNC as construed under Rule 16b-3 shall, as a condition
to such conversion, be specifically approved in accordance with the provisions
of Rule 16b-3. As soon as practicable following the Effective Time, SNC shall
deliver to the participants receiving converted options under the SNC Option
Plan an appropriate notice setting forth such participant's rights pursuant
thereto. SNC has reserved under the SNC Option Plan adequate shares of SNC
Common Stock for delivery upon exercise of any such converted options. SNC
hereby represents that the SNC Option Plan in its current form complies with
Rule 16b-3, as in effect on the date hereof, promulgated under the Exchange
Act.
2.10 Merger of Subsidiary
In the event that SNC shall request, Virginia First shall cooperate in
taking such actions, and shall cooperate in causing the Virginia First
Subsidiaries to take such actions, as may be required in order to effect, at
the Effective Time, the merger of one or more of the Virginia First
Subsidiaries with and into, in each case, one of the SNC Subsidiaries.
2.11 Anti-Dilution
In the event SNC changes the number of shares of SNC Common Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend or other similar recapitalization, and the record date thereof (in
the case of a stock dividend) or the effective date thereof (in the case of a
stock split or similar recapitalization for which a record date is not
established) shall be prior to the Effective Time, the Merger Consideration
and the Option Exchange Ratio shall be proportionately adjusted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VIRGINIA FIRST
Except as otherwise Disclosed, Virginia First represents and warrants to SNC
as follows (no representation or warranty herein of Virginia First shall be
deemed to be inaccurate unless the inaccuracy would permit SNC to refuse to
consummate the Merger under the applicable standard set forth in Section
6.3(a)):
3.1 Capital Structure
The authorized capital stock of Virginia First consists of 20,000,000 shares
of Virginia First Common Stock, and 5,000,000 shares of preferred stock, par
value $1.00 per share. No other classes of capital stock of Virginia First are
authorized. As of the date hereof, 5,804,661 shares of Virginia First Common
Stock are issued and outstanding, and no other shares of capital stock of
Virginia First, common or preferred, are issued and outstanding. All
outstanding shares of Virginia First Common Stock have been duly authorized
and are validly issued, fully paid and nonassessable. No shares of capital
stock have been reserved for any purpose, except for (i) shares of Virginia
First Common Stock reserved in connection with the Stock Option Plan and the
Dividend Reinvestment Plan, and (ii) 1,155,127 shares of Virginia First Common
Stock in connection with the SNC Option Agreement. Virginia First has granted
options to acquire 307,980 shares of Virginia First Common Stock under the
Stock Option Plan (of which 25,000 shall lapse at the Effective Time). Except
as set forth herein, there are no Rights authorized, issued or outstanding
with respect to the capital stock of Virginia First. Holders of Virginia First
Common Stock do not have preemptive rights.
3.2 Organization, Standing and Authority
Virginia First is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia with full corporate
power and authority to carry on its business as now conducted
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and to own, lease and operate its assets. Virginia First is not required to be
qualified to do business in any other state of the United States or foreign
jurisdiction.
3.3 Ownership of Subsidiaries
Section 3.3 of the Virginia First Disclosure Memorandum lists all of the
Virginia First Subsidiaries and, with respect to each, its jurisdiction of
organization, jurisdictions in which it is qualified or otherwise licensed to
conduct business, the number of shares or ownership interests owned by
Virginia First (directly or indirectly), and the percentage ownership interest
so owned by Virginia First. The outstanding shares of capital stock or other
equity interests of the Virginia First Subsidiaries are validly issued and
outstanding, fully paid and nonassessable, and all such shares are directly or
indirectly owned by Virginia First 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 or other equity
interests of the Virginia First Subsidiaries, and there are no agreements,
understandings or commitments relating to the right of Virginia First to own,
to vote or to dispose of said interests. None of the shares of capital stock
or other equity interests of the Virginia First Subsidiaries has been issued
in violation of the preemptive rights of any person. Section 3.3 of the
Virginia First Disclosure Memorandum also lists all shares of capital stock or
other securities or ownership interests of any corporation, partnership, joint
venture, or other organization owned by Virginia First, directly or indirectly
(except for securities owned in a fiduciary capacity).
3.4 Organization, Standing and Authority of the Subsidiaries
Each Virginia First Subsidiary which is a depository institution is a
federally chartered capital stock savings bank and its deposits are insured by
SAIF. Each of the Virginia First Subsidiaries is validly existing and in good
standing under the laws of its state of organization. Each of the Virginia
First Subsidiaries has full power and authority to carry on its business as
now conducted, and is duly qualified to do business in its state of
organization. No Virginia First Subsidiary is required to be qualified to do
business in any other state of the United States or foreign jurisdiction other
than such Virginia First Subsidiary's state of organization, or is engaged in
any activities that have not been Disclosed.
3.5 Authorized and Effective Agreement
(a) Virginia First 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 the Virginia First shareholders of this Agreement and
the Plan of Merger) to perform all of its obligations under this Agreement,
the Articles of Merger and the SNC Option Agreement. The execution and
delivery of this Agreement, the Articles of Merger and the SNC 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 Virginia First shareholders pursuant to and to the
extent required by applicable law. This Agreement, the Plan of Merger and the
SNC Option Agreement constitute legal, valid and binding obligations of
Virginia First, and each is enforceable against Virginia First 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 of FDIC insured institutions
or the enforcement of creditors' rights generally; 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.
(b) Neither the execution and delivery of this Agreement, the Articles of
Merger or the SNC Option Agreement, nor consummation of the transactions
contemplated hereby or thereby, nor compliance by Virginia First 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
Virginia First or any Virginia First Subsidiary, (ii) constitute or result in
a breach of any term, condition or provision of, or constitute a default
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or
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encumbrance upon any property or asset of Virginia First or any Virginia First
Subsidiary pursuant to, any note, bond, mortgage, indenture, license, permit,
contract, 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 Virginia First
or any Virginia First Subsidiary.
(c) Other than consents required from regulatory authorities as provided in
Section 5.4(b), no notice to, filing with, or consent of, any public body or
authority is necessary for the consummation by Virginia First of the Merger
and the other transactions contemplated in this Agreement.
(d) Effective prior to execution of this Agreement, Virginia First has taken
all action necessary to redeem the rights pursuant to the Rights Agreement
described under the definition of "Virginia First Common Stock," or to amend
or terminate such Rights Agreement, so that execution of this Agreement and
the SNC Option Agreement and consummation of the transactions contemplated
herein and therein, including without limitation consummation of the Merger
pursuant to this Agreement or acquisition of shares pursuant to the SNC Option
Agreement, shall not result in the grant of any rights to any person under the
Rights Agreement or enable or require any of the rights thereunder to be
exercised, distributed or triggered.
3.6 Securities Filings; Statements True
(a) Virginia First has timely filed all Securities Documents required by the
Securities Laws since December 31, 1994. Virginia First shall Disclose to SNC
a true and complete copy of each Securities Document filed by Virginia First
with the Commission after December 31, 1994 and prior to the date hereof,
which are all of the Securities Documents that Virginia First was required to
file during such period. As of their respective dates of filing, such
Securities Documents complied 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.
(b) The Financial Statements of Virginia First fairly present or will fairly
present, as the case may be, the consolidated financial position of Virginia
First and the Virginia First Subsidiaries as of the dates indicated and the
consolidated results of operations, changes in shareholders' 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 applicable to financial institutions applied on a
consistent basis.
(c) No statement, certificate, instrument or other writing furnished or to
be furnished hereunder by Virginia First or any Virginia First Subsidiary to
SNC contains or will contain any untrue statement of material fact or will
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
3.7 Minute Books
The minute books of Virginia First and each of the Virginia First
Subsidiaries contain or will contain at Closing accurate records of all
meetings and other corporate actions of its shareholders and Board of
Directors (including committees of its Board of Directors).
3.8 Adverse Change
Since June 30, 1996, Virginia First and the Virginia First Subsidiaries have
not incurred any liability except as disclosed in the most recent Virginia
First Financial Statements, or entered into any transactions with affiliates,
other than in the ordinary course of business consistent with past practices,
nor has there been any change or any event involving a prospective change in
the business, financial condition or results of operations of Virginia First
or any of the Virginia First Subsidiaries.
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3.9 Absence of Undisclosed Liabilities
All liabilities (including contingent liabilities) of Virginia First and the
Virginia First Subsidiaries are disclosed in the most recent Financial
Statements of Virginia First or incurred in the ordinary course of its
business since the date of Virginia First's most recent Financial Statements.
3.10 Properties
(a) Virginia First and the Virginia First 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, real and
personal, reflected on the consolidated balance sheet included in the
Financial Statements of Virginia First as of June 30, 1996 or acquired after
such date, except (i) liens for current taxes not yet due and payable, (ii)
pledges to secure deposits and other liens incurred in the ordinary course of
banking business, (iii) such imperfections of title, easements and
encumbrances, if any, as are not material in character, amount or extent, or
(iv) dispositions and encumbrances for adequate consideration in the ordinary
course of business.
(b) All leases and licenses pursuant to which Virginia First or any Virginia
First Subsidiary, as lessee or licensee, leases or licenses rights to real or
personal property, are valid and enforceable in accordance with their
respective terms.
3.11 Environmental Matters
(a) Virginia First and the Virginia First Subsidiaries are in compliance
with all Environmental Laws. Neither Virginia First nor any Virginia First
Subsidiary has received any communication alleging that Virginia First or the
Virginia First Subsidiary is not in such compliance, and there are no present
circumstances that would prevent or interfere with the continuation of such
compliance.
(b) Neither Virginia First nor any Virginia First Subsidiary has received
notice of any pending, there are no pending, and to the best knowledge of
Virginia First there are no conditions or facts existing which might
reasonably be expected to result in, 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 liability arising under any Environmental
Laws upon (i) Virginia First or any Virginia First Subsidiary, (ii) any person
or entity whose liability for any Environmental Claim Virginia First or any
Virginia First 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 Virginia First or any Virginia First Subsidiary, or any
real or personal property which Virginia First or any Virginia First
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 Virginia
First or any Virginia First Subsidiary holds a security interest securing a
loan recorded on the books of Virginia First or any Virginia First Subsidiary.
Neither Virginia First nor any Virginia First 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) Virginia First and the Virginia First Subsidiaries are in compliance
with all recommendations contained in any environmental audits, analyses and
surveys relating to all real and personal property owned or leased by Virginia
First or any Virginia First Subsidiary and all real and personal property
which Virginia First or any Virginia First Subsidiary has or is judged to have
managed or supervised or participated in the management of.
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim, or other claim or action or governmental investigation
that could result in the imposition of any liability arising under any
Environmental Laws, against Virginia First or any Virginia First Subsidiary or
against any person or entity whose liability for any Environmental Claim
Virginia First or any Virginia First Subsidiary has or may have retained or
assumed, either contractually or by operation of law.
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3.12 Loans; Allowance for Loan Losses
(a) All of the loans on the books of Virginia First and the Virginia First
Subsidiaries are valid and properly documented, and were made in the ordinary
course of business. 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,
Regulations O and Z of the Federal Reserve Board, the CRA, the Equal Credit
Opportunity Act, as amended, and state laws, rules and regulations relating to
consumer protection, installment sales and usury.
(b) The allowances for loan losses reflected on the consolidated balance
sheets included in the Financial Statements of Virginia First are in the
opinion of Virginia First's management adequate as of their respective dates,
under the requirements of generally accepted accounting principles and
applicable regulatory requirements and guidelines as they apply to banks and
bank holding companies, to provide for losses on outstanding loans (including
accrued interest receivables) net of recoveries.
3.13 Tax Matters
(a) Virginia First and the Virginia First 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 Time, 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 Time. Neither Virginia First nor any Virginia First Subsidiary
will have any liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established.
(b) Except as Disclosed, all federal, state and local (and, if applicable,
foreign) tax returns filed by Virginia First and the Virginia First
Subsidiaries are complete and accurate. Neither Virginia First nor any
Virginia First Subsidiary is delinquent in the payment of any tax, assessment
or governmental charge. No deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed (tentatively or
otherwise) against Virginia First or any Virginia First Subsidiary which have
not been settled and paid. There are currently no agreements in effect with
respect to Virginia First or any Virginia First Subsidiary to extend the
period of limitations for the assessment or collection of any tax. No audit
examination or deficiency or refund litigation with respect to such returns is
pending.
(c) Deferred Taxes have been provided for in accordance with generally
accepted accounting principles consistently applied.
(d) Neither Virginia First nor any of the Virginia First Subsidiaries is a
party to any tax allocation or sharing agreement and none has been a member of
an affiliated group filing a consolidated federal income tax return (other
than a group the common parent of which was Virginia First) or has any
liability for taxes of any person (other than Virginia First and the Virginia
First Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law) as a transferee or successor or by
contract or otherwise.
(e) Each of Virginia First and the Virginia First Subsidiaries is in
compliance with, and its records contain all information and documents
(including properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and tax withholding requirements under
federal, state, and local tax laws, and such records identify with specificity
all accounts subject to backup withholding under Section 3406 of the Code.
(f) None of Virginia First or the Virginia First Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any contract
that could obligate it to make any payments that would be disallowed as a
deduction under Section 280G or 162(m) of the Code.
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3.14 Employees; Compensation; Benefit Plans
(a) Compensation. Virginia First shall have Disclosed a complete and correct
list of the name, age, position, rate of compensation and any incentive
compensation arrangements, bonuses or commissions or fringe or other benefits,
whether payable in cash or in kind, of each director, shareholder, independent
contractor, consultant and agent of Virginia First and of each Virginia First
Subsidiary and each other person (other than an employee as such) to whom
Virginia First or any Virginia First Subsidiary pays or provides, or has an
obligation, agreement (written or unwritten), policy or practice of paying or
providing, retirement, health, welfare or other benefits of any kind or
description whatsoever.
(b) Employee Benefit Plans.
(i) Virginia First shall have Disclosed an accurate and complete list of
all Plans, as defined below, contributed to, maintained or sponsored by
Virginia First or any Virginia First Subsidiary, to which Virginia First or
any Virginia First Subsidiary is obligated to contribute or has any
liability or potential liability, whether direct or indirect, including all
Plans contributed to, maintained or sponsored by each member of the
controlled group of corporations, within the meaning of Sections 414(b),
414(c), 414(m) and 414(o) of the Code, of which Virginia First or any
Virginia First Subsidiary is a member. For purposes of this Agreement, the
term "Plan" shall mean a plan, arrangement, agreement or program described
in the foregoing provisions of this Section 3.14(b)(i) and which is: (A) a
profit-sharing, deferred compensation, bonus, stock option, stock purchase,
pension, retainer, consulting, retirement, severance, welfare or incentive
plan, agreement or arrangement, whether or not funded and whether or not
terminated, (B) an employment agreement, (C) a personnel policy or fringe
benefit plan, policy, program or arrangement providing for benefits or
perquisites to current or former employees, officers, directors or agents,
whether or not funded, and whether or not terminated, including without
limitation benefits relating to automobiles, clubs, vacation, child care,
parenting, sabbatical, sick leave, severance, medical, dental,
hospitalization, life insurance and other types of insurance, or (D) any
other employee benefit plan as defined in Section 3(3) of ERISA, whether or
not funded and whether or not terminated.
(ii) Except as Disclosed, neither Virginia First nor any Virginia First
Subsidiary contributes to, has an obligation to contribute to or otherwise
has any liability or potential liability with respect to (A) any
multiemployer plan as defined in Section 3(37) of ERISA, (B) any plan of
the type described in Sections 4063 and 4064 of ERISA or in section 413 of
the Code (and regulations promulgated thereunder), or (C) any plan which
provides health, life insurance, accident or other "welfare-type" benefits
to current or future retirees or former employees or directors, their
spouses or dependents, other than in accordance with Section 4980B of the
Code or applicable state continuation coverage law.
(iii) Except as Disclosed, none of the Plans obligates Virginia First or
any Virginia First Subsidiary to pay separation, severance, termination or
similar-type benefits solely as a result of any transaction contemplated by
this Agreement or solely as a result of a "change in control," as such term
is used in Section 280G of the Code (and regulations promulgated
thereunder).
(iv) Each Plan has been maintained, funded and administered in compliance
in all respects with its own terms and in compliance in all respects with
all applicable laws and regulations, including but not limited to ERISA and
the Code. No actions, suits, claims, complaints, charges, proceedings,
hearings, examinations, investigations, audits or demands with respect to
the Plans (other than routine claims for benefits) are pending or
threatened, and there are no facts which could give rise to or be expected
to give rise to any actions, suits, claims, complaints, charges,
proceedings, hearings, examinations, investigations, audits or demands. No
Plan that is subject to the funding requirements of Section 412 of the Code
or Section 302 of ERISA has incurred any "accumulated funding deficiency"
as such term is defined in such Sections of ERISA and the Code, whether or
not waived, and each Plan has always fully met the funding standards
required under Title I of ERISA and Section 412 of the Code. No liability
to the Pension Benefit Guaranty Corporation ("PBGC") (except for routine
payment of premiums) has been or is expected to be incurred with respect to
any Plan that is subject to Title IV of ERISA, no reportable event (as such
term is defined in Section 4043 of ERISA) has occurred with respect to any
such Plan, and the PBGC has not commenced or
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threatened the termination of any Plan. None of the assets of Virginia
First or any Virginia First Subsidiary is the subject of any lien arising
under Section 302(f) of ERISA or Section 412(n) of the Code, neither
Virginia First nor any Virginia First Subsidiary has been required to post
any security pursuant to Section 307 of ERISA or Section 401(a)(29) of the
Code, and there are no facts which could be expected to give rise to such
lien or such posting of security. No event has occurred and no condition
exists that would subject Virginia First or any Virginia First Subsidiary
to any tax under Sections 4971, 4972, 4977 or 4979 of the Code or to a fine
or penalty under Section 502(c) of ERISA.
(v) Each Plan that is intended to be qualified under Section 401(a) of
the Code, and each trust (if any) forming a part thereof, has received a
favorable determination letter from the Internal Revenue Service as to the
qualification under the Code of such Plan and the tax exempt status of such
related trust, and nothing has occurred since the date of such
determination letter that could adversely affect the qualification of such
Plan or the tax exempt status of such related trust.
(vi) No underfunded "defined benefit plan" (as such term is defined in
Section 3(35) of ERISA) has been, during the five years preceding the
Closing Date, transferred out of the controlled group of corporations
(within the meaning of Sections 414(b), (c), (m) and (o) of the Code) of
which Virginia First or any Virginia First Subsidiary is a member or was a
member during such five-year period.
(vii) As of the Closing Date, the fair market value of the assets of each
Plan that is a tax qualified defined benefit plan equals or exceeds the
present value of all vested and non-vested liabilities thereunder
determined in accordance with reasonable actuarial methods, factors and
assumptions applicable to a defined benefit plan on an ongoing basis. With
respect to each Plan that is subject to the funding requirements of Section
412 of the Code and Section 302 of ERISA, all required contributions for
all periods ending prior to or as of the Closing Date (including periods
from the first day of the then-current plan year to the Closing Date and
including all quarterly contributions required in accordance with Section
412(m) of the Code) shall have been made. With respect to each other Plan,
all required payments, premiums, contributions, reimbursements or accruals
for all periods ending prior to or as of the Closing Date shall have been
made. No tax qualified Plan has any unfunded liabilities.
(viii) 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 with respect to any Plan which would
result in the imposition, directly or indirectly, of any excise tax,
penalty or other liability under Section 4975 of the Code or Section 409 or
502(i) of ERISA. Neither Virginia First, nor to the best knowledge of
Virginia First any Virginia First Subsidiary, nor any trustee,
administrator or other fiduciary of any Plan, nor to the best knowledge of
Virginia First any agent of any of the foregoing has engaged in any
transaction or acted or failed to act in a manner which could subject
Virginia First or any Virginia First Subsidiary to any liability for breach
of fiduciary duty under ERISA or any other applicable law.
(ix) With respect to each Plan, all reports and information required to
be filed with any government agency or distributed to Plan participants and
their beneficiaries have been duly and timely filed or distributed.
(x) Virginia First and each Virginia First Subsidiary has been and is
presently in compliance with all of the requirements of Section 4980B of
the Code.
(xi) Neither Virginia First nor any Virginia First Subsidiary has a
liability as of June 30, 1996, under any Plan that, to the extent
disclosure is required under generally accepted accounting principles, is
not reflected on the consolidated balance sheet included in the Financial
Statements of Virginia First as of June 30, 1996 or otherwise Disclosed.
(xii) Neither the consideration nor implementation of the transactions
contemplated under this Agreement will increase (A) Virginia First's or any
Virginia First Subsidiary's obligation to make contributions or any other
payments to fund benefits accrued under the Plans as of the date of this
Agreement or (B) the benefits accrued or payable with respect to any
participant under the Plans (except to the extent benefits may be deemed
increased by accelerated vesting).
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(xiii) With respect to each Plan, Virginia First has Disclosed or made
available true, complete and correct copies of (A) all documents pursuant
to which the Plans are maintained, funded and administered, including
summary plan descriptions, (B) the three most recent annual reports (Form
5500 series) filed with the Internal Revenue Service (with attachments),
(C) the three most recent actuarial reports, if any, (D) the three most
recent financial statements, (E) all governmental filings for the last
three years, including without limitation, excise tax returns and
reportable events filings, and (F) all governmental rulings,
determinations, and opinions (and pending requests for governmental
rulings, determinations, and opinions) during the past three years.
3.15 Certain Contracts
(a) Except as Disclosed, neither Virginia First nor any Virginia First
Subsidiary is a party to, is bound or affected by, or receives benefits under
(i) any agreement, arrangement or commitment, written or oral, the default of
which would have a Material Adverse Effect, whether or not made in the
ordinary course of business (other than loans or loan commitments made or
certificates or deposits received in the ordinary course of the banking
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, written or
oral, relating to the borrowing of money by Virginia First or any Virginia
First Subsidiary or the guarantee by Virginia First or any Virginia First
Subsidiary of any such obligation, which cannot be terminated within less than
30 days after the Closing Date by Virginia First or any Virginia First
Subsidiary (without payment of any penalty or cost, except with respect to
Federal Home Loan Bank advances), (iii) any agreement, arrangement or
commitment, written or oral, relating to the employment of a consultant,
independent contractor or agent, 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 Virginia First
or any Virginia First Subsidiary (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 Virginia
First of the nature contemplated by this Agreement or the SNC Option
Agreement, or (iv) any agreement or plan, written or oral, 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, by the occurrence of any of the
transactions contemplated by this Agreement or the SNC 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 SNC Option
Agreement. Each matter Disclosed pursuant to this Section 3.15(a) is in full
force and effect.
(b) Neither Virginia First nor any Virginia First Subsidiary is in default
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 Virginia First
threatened against Virginia First or any Virginia First Subsidiary or against
any asset, interest, plan or right of Virginia First or any Virginia First
Subsidiary, or against any officer, director or employee of any of them. There
are no actions, suits or proceedings instituted, pending or, to the best
knowledge of Virginia First threatened against any present or former director
or officer of Virginia First or any Virginia First Subsidiary that would
reasonably be expected to give rise to a claim against Virginia First or any
Virginia First Subsidiary for indemnification. There are no actual or, to the
best knowledge of Virginia First threatened actions, suits or proceedings
which present a claim to restrain or prohibit the transactions contemplated
herein or in the SNC Option Agreement. To the best knowledge of Virginia
First, no fact or condition relating to Virginia First or any Virginia First
Subsidiary exists (including without limitation noncompliance with the CRA)
that would prevent Virginia First or SNC from obtaining all of the federal and
state regulatory approvals contemplated herein.
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3.17 Compliance with Laws; Filings
Each of Virginia First and each Virginia First Subsidiary is in compliance
with all statutes and regulations (including, but not limited to, the CRA,
TILA and regulations promulgated thereunder, and other consumer banking laws),
and has obtained and maintained all permits, licenses and registrations
applicable to the conduct of its business, and neither Virginia First nor any
Virginia First Subsidiary has received notification that has not lapsed, 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 permit, license, registration,
or other government authorization, or (iii) restricting or in any way limiting
its operations. Neither Virginia First nor any Virginia First 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.
Virginia First and each of the Virginia First Subsidiaries has filed all
reports, registrations, notices and statements, and any amendments thereto,
that it was required to file with federal and state regulatory authorities,
including without limitation the OTS, FDIC, Federal Reserve Board and State
Board. Each such report, registration, notice and statement, and each
amendment thereto, has complied with applicable legal requirements and none
has contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.18 Brokers and Finders
Neither Virginia First nor any Virginia First 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 SNC Option Agreement, except for fees to accountants and lawyers and an
obligation, the amount and nature of which is Disclosed, to Sandler O'Neill &
Partners, L.P. for investment banking services.
3.19 Repurchase Agreements; Derivatives
(a) With respect to all agreements currently outstanding pursuant to which
Virginia First or any Virginia First Subsidiary has purchased securities
subject to an agreement to resell, Virginia First or the Virginia First
Subsidiary has a valid, perfected first lien or security interest in the
securities or other collateral securing such agreement, and the value of such
collateral equals or exceeds the amount of the debt secured thereby. With
respect to all agreements currently outstanding pursuant to which Virginia
First or any Virginia First Subsidiary has sold securities subject to an
agreement to repurchase, neither Virginia First nor the Virginia First
Subsidiary has pledged collateral materially in excess of the amount of the
debt secured thereby. Neither Virginia First nor any Virginia First Subsidiary
has pledged collateral materially in excess of the amount required under any
interest rate swap or other similar agreement currently outstanding.
(b) Neither Virginia First nor any Virginia First Subsidiary is a party to
or has agreed to enter into an exchange-traded or over-the-counter swap,
forward, future, option, cap, floor, or collar financial contract, or any
other interest rate or foreign currency protection contract not included on
its balance sheets in the Financial Statements, which is a financial
derivative contract (including various combinations thereof), except for
options and forwards entered into in the ordinary course of its mortgage
lending business consistent with past practice and current policy.
3.20 Deposit Accounts
The deposit accounts of the Virginia First Subsidiaries that are insured
depository institutions are insured by the SAIF to the maximum extent
permitted by federal law, and the Virginia First Subsidiaries have paid all
premiums and assessments and filed all reports required to have been paid or
filed under the SAIF.
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3.21 Related Party Transactions
Virginia First has Disclosed all transactions, investments and loans,
including loan guarantees, to which Virginia First or any Virginia First
Subsidiary is a party with any director, executive officer or 5% shareholder
of Virginia First or any person, corporation, or enterprise controlling,
controlled by or under common control with any of the foregoing. All such
transactions, investments and loans are on terms no less favorable to Virginia
First than could be obtained from unrelated parties.
3.22 Certain Information
When the Proxy Statement/Prospectus is mailed, and at the time of the
meeting of shareholders of Virginia First to vote upon the Plan of Merger, the
Proxy Statement/Prospectus and all amendments or supplements thereto, with
respect to all information set forth therein provided by Virginia First, (i)
shall comply 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.
3.23 Tax and Regulatory Matters
Neither Virginia First nor any Virginia First Subsidiary has taken or agreed
to take any action which would or could reasonably be expected to (i) cause
the Merger not to constitute a reorganization under Section 368 of the Code,
or (ii) materially impede or delay receipt of any consents of regulatory
authorities referred to in Section 5.4(b) or result in failure of the
condition in Section 6.3(b).
3.24 State Takeover Laws
Virginia First and each Virginia First Subsidiary have taken all necessary
action to exempt the transactions contemplated by this Agreement from any
applicable moratorium, fair price, business combination, control share or
other anti-takeover laws, including without limitation the provisions of
Section 13.1-728 of the VSCA.
3.25 Labor Relations
Neither Virginia First nor any Virginia First Subsidiary is the subject of
any claim or allegation that it has committed an unfair labor practice (within
the meaning of the National Labor Relations Act or comparable state law) or
seeking to compel it to bargain with any labor organization as to wages or
conditions of employment, nor is Virginia First or any Virginia First
Subsidiary party to any collective bargaining agreement. There is no strike or
other labor dispute involving Virginia First or any Virginia First Subsidiary,
pending or threatened, or to the best knowledge of Virginia First, is there
any activity involving any employees of Virginia First or any Virginia First
Subsidiary seeking to certify a collective bargaining unit or engaging in any
other organization activity.
3.26 Fairness Opinion
Virginia First has received from Sandler, O'Neill & Partners, L.P. an
opinion that, as of the date hereof, the Merger Consideration is fair to the
shareholders of Virginia First from a financial point of view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SNC
SNC represents and warrants to Virginia First as follows (no representation
or warranty herein of SNC shall be deemed to be inaccurate unless the
inaccuracy would permit Virginia First to refuse to consummate the Merger
under the applicable standard set forth in Section 6.2(a)):
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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, of which 2,000,000 shares have
been designated as Series B Junior Participating Preferred Stock and the
remainder are undesignated, and none of which shares are issued and
outstanding, and (ii) 300,000,000 shares of SNC Common Stock, of which
109,452,428 shares were issued and outstanding on March 31, 1997. All
outstanding shares of SNC Common Stock have been duly authorized and are
validly issued, fully paid and nonassessable. The shares of SNC Common Stock
reserved as provided in Section 5.3 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. Holders of SNC Common Stock do not
have preemptive rights. SNC has registered 27,947,958 shares for issuance
pursuant to its acquisition of United Carolina Bancshares Corporation.
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 to own, lease and
operate its assets, and is duly qualified to do business in the states of the
United States where its ownership or leasing of property or the conduct of its
business requires such qualification. 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
(subject to receipt of all necessary government approvals) perform all of its
obligations under this Agreement. The execution and delivery of this Agreement
and consummation of the transactions contemplated hereby, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of SNC. This Agreement and the Plan of Merger attached hereto constitute
legal, valid and binding obligations of SNC, and each is enforceable against
SNC in accordance with its terms, in each case 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; and (ii) 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 consummation
of the transactions contemplated hereby, nor compliance by SNC with any of the
provisions hereof or thereof shall (i) conflict with or result in a breach of
any provision of the articles of incorporation or bylaws of SNC or any SNC
Subsidiary, (ii) constitute or result in a breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of SNC
or any SNC Subsidiary pursuant to any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation, or (iii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to SNC
or any SNC Subsidiary.
4.4 Organization, Standing and Authority of SNC Subsidiaries
Each of the SNC Subsidiaries is duly organized, validly existing and in good
standing under applicable laws. Each of the SNC Subsidiaries (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.
4.5 Securities Documents
SNC has timely filed all Securities Documents required by the Securities
Laws since December 31, 1993. As of their respective dates of filing, such
Securities Documents complied 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
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stated therein or necessary to make the statements therein, in light of the
circumstances under 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 shareholders' equity and changes in cash flows for the
periods then ended (subject, in the case of unaudited interim statements, to
normal year-end audit adjustments in conformity with generally accepted
accounting principles applicable to financial institutions applied on a
consistent basis).
4.7 Adverse Change
Since December 31, 1996, SNC and the SNC Subsidiaries have not incurred any
liability except as disclosed on the most recent SNC Financial Statements, or
entered into any transactions with affiliates other than in the ordinary
course of business consistent with past practices, nor has there been any
change or any event involving a prospective change in the business, financial
condition or results of operations of SNC and the SNC Subsidiaries.
4.8 Legal Proceedings; Regulatory Approvals
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or threatened against SNC or any SNC
Subsidiary or against any asset, interest, or right of SNC or any SNC
Subsidiary, or against any officer, director or employee of any of them that
in such case, if decided adversely, would reasonably be expected to have a
Material Adverse Effect. There are no actions, suits or proceedings
instituted, pending or, to the best knowledge of SNC, threatened against any
present or former director or officer of SNC or any SNC Subsidiary for
indemnification. There are no actual or, to the best knowledge of SNC,
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 SNC, no fact or condition relating
to SNC or any SNC Subsidiary exists (including without limitation
noncompliance with the CRA) that would prevent Virginia First or SNC from
obtaining all of the federal and state regulatory approvals contemplated
herein.
4.9 Absence of Undisclosed Liabilities
All liabilities of SNC and the SNC Subsidiaries are disclosed in the most
recent Financial Statements of SNC or incurred in the ordinary course of
business since the date of SNC's most recent Financial Statements.
4.10 Compliance with Laws
Each of SNC and the SNC Subsidiaries is in compliance with all statutes and
regulations (including, but not limited to, the CRA, TILA and regulations
promulgated thereunder and other consumer banking laws) applicable to the
conduct of its business, and neither SNC nor any of the SNC Subsidiaries has
received any notification that has not lapsed, been withdrawn or abandoned
from 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.
Neither SNC nor any of the SNC Subsidiaries is subject to any regulatory or
supervisory cease and desist order, agreement, directive or memorandum of
understanding, and none of them has received any communication requesting that
they enter into any of the foregoing.
4.11 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 shareholders of
SNC to vote on the Merger, the Proxy Statement/Prospectus
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and all amendments or supplements thereto, with respect to all information set
forth therein relating to SNC, (i) shall comply 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.
4.12 Accounting, Tax and Regulatory Matters
Neither SNC nor the SNC Subsidiaries have taken or agreed to take any action
which would or could reasonably be expected to (i) cause the business
combination contemplated hereby not to constitute a reorganization under
Section 368 of the Code, or (ii) materially impede or delay receipt of any
consents of regulatory authorities referred to in Section 5.4(b) or result in
failure of the condition in Section 6.3(b).
4.13 Share Ownership
As of the date of this Agreement, SNC does not own (except in a fiduciary
capacity) any shares of Virginia First Common Stock.
ARTICLE V
COVENANTS
5.1 Virginia First Shareholder Meeting
Virginia First shall submit this Agreement and the Plan of Merger to its
shareholders for approval at a meeting to be held as soon as practicable, and
by approving execution of this Agreement the Board of Directors of Virginia
First agrees that it shall, at the time the Proxy Statement/Prospectus is
mailed to the shareholders of Virginia First, recommend that Virginia First's
shareholders vote for such approval; provided, that the Board of Directors of
Virginia First may withdraw or refuse to make such recommendation only if the
Board of Directors shall determine in good faith that such recommendation
would violate its fiduciary duty to Virginia First's shareholders following
(i) the consideration of written advice of legal counsel that making such
recommendation or the failure to withdraw or modify such recommendation would
constitute a breach of the fiduciary duties of such Board to shareholders of
Virginia First, and (ii) the withdrawal by Sandler O'Neill & Partners, L.P. in
writing of its opinion referred to in Section 3.26 or the delivery to the
Virginia First Board of Directors of written advice from Sandler O'Neill &
Partners, L.P. that the Merger Consideration is not fair or is inadequate to
the shareholders of Virginia First from a financial point of view. Each of
William A. Patton and Charles A. Patton severally agrees to vote all shares of
Virginia First Common Stock over which he has sole or shared voting rights,
through nominal or beneficial ownership or by contract or otherwise (including
without limitation shares held by Patton Associates Limited Partnership, but
excluding shares held in a fiduciary capacity), in favor of the Plan of
Merger, and each further severally agrees not to transfer or agree to transfer
(except as provided herein), from and after the date hereof, to any person any
shares of Virginia First Common Stock over which he has sole or shared rights
of transfer.
5.2 Registration Statement; Proxy Statement/Prospectus
As promptly as practicable after the date hereof, SNC shall prepare and file
the Registration Statement with the Commission. Virginia First 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 reasonable 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
Time, 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
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from 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. The
Registration Statement shall include the form of Proxy Statement/Prospectus.
SNC and Virginia First shall use their best efforts to cause the Proxy
Statement/Prospectus to be approved by the SEC for mailing to the Virginia
First and SNC shareholders, and such Proxy Statement/Prospectus shall, on the
date of mailing, conform in all material respects to the requirements of the
Securities Laws and the applicable rules and regulations of the SEC
thereunder. Virginia First shall cause the Proxy Statement/Prospectus to be
mailed to shareholders in accordance with all applicable notice requirements
under the Securities Laws and the VSCA.
5.3 Plan of Merger; Reservation of Shares
At the Effective Time, the Merger shall be effected in accordance with the
Plan of Merger. In this connection, SNC undertakes and agrees to pay or cause
to be paid when due the Merger Consideration to be distributed pursuant to
Section 2.7. SNC has reserved for issuance such number of shares of SNC Common
Stock as shall be necessary to pay the portion of the Consideration to be
distributed in the form of SNC Common Stock. 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) Virginia First agrees to take such actions as may be reasonably
necessary to modify the structure of, or to substitute parties to (so long as
such substitute is SNC or a SNC Subsidiary) the transactions contemplated
hereby, provided that such modifications do not change the Merger
Consideration or abrogate the covenants and other agreements contained in this
Agreement.
(b) As promptly as practicable after the date hereof, SNC and Virginia First
shall submit notice or applications for prior approval of the transactions
contemplated herein to the Federal Reserve Board, the OTS, and any other
federal, state or local 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. Virginia First and SNC each
represents and warrants to the other that all information included (or
submitted for inclusion) concerning it, their respective Subsidiaries, and any
of their respective directors, officers and shareholders, shall be true,
correct and complete in all material respects as of the date presented.
5.5 Best Efforts
SNC and Virginia First shall use, and shall cause each of their respective
Subsidiaries 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 practicable
date. Without limiting the foregoing, SNC agrees to vote its shares of BB&T
Financial in favor of the Plan of Merger following fulfillment of the
conditions in Sections 6.1 and 6.3. Neither SNC nor Virginia First 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.
5.6 Certain Accounting Matters
Virginia First 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
Virginia First and SNC will each keep the other advised of all material
developments relevant to its business and the businesses of its Subsidiaries,
and to consummation of the Merger, and each shall provide to the other, upon
request, reasonable details of any such development. Upon reasonable notice,
Virginia First shall afford to representatives of SNC access, during normal
business hours during the period prior to the Effective Time, to all of the
properties, books, contracts, commitments and records of Virginia First and
the Virginia First Subsidiaries and, during such period, shall make available
all information concerning their business as may be reasonably requested. 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 other party upon request all confidential information
previously furnished in connection with the transactions contemplated by this
Agreement.
5.8 Press Releases
SNC and Virginia First 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 in
the opinion of its counsel is required by law.
5.9 Forbearances of Virginia First
Except with the prior written consent of SNC, between the date hereof and
the Effective Time, Virginia First shall not, and shall cause each of the
Virginia First Subsidiaries 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 engage in any new activity;
(b) declare, set aside, make or pay any dividend or other distribution in
respect of its capital stock, other than regularly scheduled quarterly
dividends of $.025 per share of Virginia First Common Stock payable on
record dates and in amounts consistent with past practices, and other than
redemption of Rights for a price of $.01 per Right under the Rights
Agreement described in the definition of "Virginia First Common Stock";
provided that any dividend declared or payable on the shares of Virginia
First Common Stock for the quarterly period during which the Effective Time
occurs shall, unless otherwise agreed upon in writing by SNC and Virginia
First, be declared with a record date prior to the Effective Time only if
the normal record date for payment of the corresponding quarterly dividend
to holders of SNC Common Stock is before the Effective Time;
(c) issue any shares of its capital stock, except pursuant to the Stock
Option Plan, the SNC Option Agreement, and the Virginia First Dividend
Reinvestment Plan;
(d) issue, grant or authorize any Rights 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 Virginia First 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 entity or permit any other entity to merge into
it, or consolidate with any other entity; acquire control over any other
entity; or liquidate, sell or otherwise dispose of any assets or acquire
any assets, other than in the ordinary course of its business consistent
with past practices;
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(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;
(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 with respect to officers and employees in the ordinary
course of business consistent with past practices (it being understood that
officers' salaries are generally reviewed as of July 1 of each year and
compensation of other employees is generally reviewed on each anniversary
of the date of hire);
(i) enter into or substantially modify (except as may be required by
applicable law or regulation) 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 renewal 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, Virginia
First or any Virginia First Subsidiary or any business combination with
Virginia First or any Virginia First Subsidiary other than as contemplated
by this Agreement; or authorize any officer, director, agent or affiliate
of Virginia First or any Virginia First Subsidiary to do any of the above;
or fail to notify SNC immediately if any such inquiries or proposals are
received, any such information is requested or required, or any such
negotiations or discussions are sought to be initiated; provided, that this
paragraph (j) shall not apply to furnishing information, negotiations or
discussions following an unsolicited offer if, as a result of such officer,
Virginia First is advised in writing by legal counsel that the failure so
to furnish information or negotiate would constitute a breach of the
fiduciary duties of Virginia First's Board of Directors to its
shareholders;
(k) enter into (i) any material agreement, arrangement or commitment not
made in the ordinary course of business, (ii) any agreement, indenture or
other instrument not made in the ordinary course of business relating to
the borrowing of money by Virginia First or a Virginia First Subsidiary or
guarantee by Virginia First or a Virginia First 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
shareholders in the normal course 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 directives, and except that after approval of the Agreement
and the Plan of Merger by its shareholders Virginia First shall cooperate
in good faith with SNC to adopt policies, practices and procedures
consistent with those utilized by SNC, effective on or before the Closing
Date;
(m) change its methods of accounting in effect at June 30, 1996, except
as required by changes in generally accepted accounting principles
concurred in by SNC's independent certified public accountants, which
concurrence shall not be unreasonably withheld, 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 June 30, 1996, except as required by changes in law or
regulation;
(n) incur any commitments for capital expenditures or obligation to make
capital expenditures in excess of $50,000, for any one expenditure, or
$150,000, in the aggregate;
(o) incur any indebtedness other than deposits from customers, advances
from the Federal Home Loan Bank and reverse repurchase arrangements in the
ordinary course of business;
(p) take any action which would or could reasonably be expected to (i)
cause the business combination contemplated hereby not to constitute a
reorganization under Section 368 of the Code as determined by
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SNC, (ii) result in any inaccuracy of a representation or warranty herein
which would allow for a termination of this Agreement, or (iii) cause any
of the conditions precedent to the transactions contemplated by this
Agreement to fail to be satisfied;
(q) dispose of any material assets other than in the ordinary course of
business; or
(r) agree to do any of the foregoing.
5.10 Employment Agreement
SNC (or its specified banking subsidiary) and Charles A. Patton shall enter
into an employment agreement (the "Employment Agreement") substantially in the
form of Annex B hereto.
5.11 Affiliates
Virginia First shall cause all persons who are affiliates of Virginia First
to deliver to SNC promptly following this Agreement a written agreement
providing that such person will not dispose of SNC Common Stock received in
the Merger except in compliance with the Securities Act and the rules and
regulations promulgated thereunder, and in any event shall cause such
affiliates to deliver to SNC such written agreement prior to the Effective
Time.
5.12 Section 401(k) Plan
SNC shall cause the 401(k) plan of Virginia First to be merged with the
401(k) plan maintained by SNC and the SNC Subsidiaries, and the account
balances of former employees of Virginia First or the Virginia First
Subsidiaries who are participants in the Virginia First plan shall be
transferred to the accounts of such employees under the SNC 401(k) plan.
Following such merger and transfer, such accounts shall be governed and
controlled by the terms of the SNC 401(k) plan as in effect from time to time
(and subject to SNC's right to terminate such plan). For purposes of
administering the 401(k) plan, service with Virginia First and the Virginia
First Subsidiaries by each such employee shall be deemed to be service with
SNC or the SNC Subsidiaries for participation and vesting purposes only.
5.13 Directors and Officers Protection
SNC or a SNC Subsidiary shall purchase and keep in force for a period of
three years after the Effective Time directors' and officers' liability
insurance providing coverage to directors and officers of Virginia First for
acts or omissions occurring prior to the Effective Time. Such insurance shall
provide at least the same coverage and amounts as contained in Virginia
First's policy on the date hereof; provided, that in no event shall the annual
premium on such policy exceed 150% of the annual premium payments on Virginia
First's policy in effect as of the date hereof (the "Maximum Amount"). If the
amount of the premiums necessary to maintain or procure such insurance
coverage exceeds the Maximum Amount, SNC shall use its reasonable efforts to
maintain the most advantageous policies of directors' and officers' liability
insurance obtainable for a premium equal to the Maximum Amount.
Notwithstanding the foregoing, SNC further agrees to indemnify all individuals
who are or have been officers and directors of Virginia First prior to the
Effective Time from any acts or omissions in such capacities prior to the
Effective Time, to the extent indemnification is provided pursuant to the
Articles of Incorporation of Virginia First on the date hereof and is
permitted under the VSCA.
5.14 Forbearances of SNC
Except with the prior written consent of Virginia First, which consent shall
not be arbitrarily or unreasonably withheld, between the date hereof and the
Effective Time, neither SNC nor any SNC Subsidiary shall take any action which
would or might be expected to (i) cause the business combination contemplated
hereby not to constitute a reorganization under Section 368 of the Code; (ii)
result in any inaccuracy of a representation or warranty herein which would
allow for termination of this Agreement; (iii) cause any of the conditions
precedent to the transactions contemplated by this agreement to fail to be
satisfied; (iv) exercise the
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Option Agreement other than in accordance with its terms, or dispose of the
shares of Virginia First Common Stock issuable upon exercise of the option
rights conferred thereby other than as permitted or contemplated by the terms
thereof; or (v) 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.
5.15 Reports
Each of Virginia First and SNC shall file (and shall cause the Virginia
First Subsidiaries and the SNC Subsidiaries, respectively, to file), between
the date of this Agreement and the Effective Time, all reports required to be
filed by it with the Commission and any other regulatory authorities having
jurisdiction over such party, and shall deliver to SNC or Virginia First, as
the case may be, copies of all such reports promptly after the same are filed.
If financial statements are contained in any such reports filed with the
Commission, such financial statements will fairly present the consolidated
financial position of the entity filing such statements as of the dates
indicated and the consolidated results of operations, changes in shareholders'
equity, and cash flows for the periods then ended in accordance with generally
accepted accounting procedures (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with the Commission will comply
in all material respects with the Securities Laws and will not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Any
financial statements contained in any other reports to a regulatory authority
other than the Commission shall be prepared in accordance with requirements
applicable to such reports.
5.16 Exchange Listing
SNC shall use its reasonable efforts to list, prior to the Effective Time,
on the NYSE, subject to official notice of issuance, the shares of SNC Common
Stock to be issued to the holders of Virginia First Common Stock pursuant to
the Merger, and SNC shall give all notices and make all filings with the NYSE
required in connection with the transactions contemplated herein.
5.17 Board of Directors of Virginia Banking Subsidiary
The Chairman of the Board of Directors of Virginia First and at least four
other members of the Board of Directors of Virginia First other than Charles
A. Patton shall be elected to the Board of Directors of SNC's Virginia banking
subsidiary as soon as practicable following the Effective Time. The maximum
age requirement presently in effect for membership on such Board shall be
waived by SNC for two years following the Effective Time with respect to the
Chairman of the Board of Directors of Virginia First.
5.18 Employee Benefits; Special Payment
(a) Each employee of Virginia First at the Effective Time who becomes an
employee immediately following the Effective Time of SNC or a SNC Subsidiary
shall be eligible to participate in group hospitalization, medical, life,
disability, retirement and other benefit plans and programs comparable to
those provided to then employees of SNC, without the imposition of any waiting
period or limitation on preexisting conditions. For purposes of participating
in all plans and benefits of SNC, each such employee of Virginia First who
becomes employed immediately following the Effective Time by SNC or a SNC
Subsidiary shall receive credit for service to Virginia First for
participation and vesting purposes only.
(b) At the Closing, and prior to the Effective Time, Virginia First shall
pay to Charles A. Patton a lump sum amount of $525,000, which payment shall be
in full satisfaction of any obligation to Employee pursuant to Section 10 of
the Employment Agreement entered into by Charles A. Patton and each of
Virginia First and Virginia First Savings Bank, F.S.B, each dated January 1,
1996.
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5.19 Assumption of Agreement by Acquiror
It shall be a condition precedent to SNC entering into any agreement whereby
SNC shall (i) consolidate with or merge into any other entity and shall not be
the continuing surviving person of such consolidation or merger, or (ii)
transfer all or substantially all of its assets to any entity, that proper
provision shall be made so that the successor and assigns of SNC shall
specifically agree to assume SNC's obligations under this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent--SNC and Virginia First
The respective obligations of SNC and Virginia First 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 Time:
(a) All corporate action necessary to authorize the execution, delivery
and performance of this Agreement and the Plan of Merger, and consummation
of the transactions contemplated hereby and thereby, shall have been duly
and validly taken, including without limitation the approval of the
shareholders of Virginia First of the Agreement and the Plan of Merger set
forth in Section 2.2;
(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;
(c) The parties shall have received all regulatory approvals required in
connection with the transactions contemplated by this 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 of the SNC Subsidiaries, Virginia First or any of
the Virginia First Subsidiaries 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 Agreement;
and
(e) Virginia First and SNC shall have received an opinion of SNC's legal
counsel, in form and substance satisfactory to Virginia First and SNC,
substantially to the effect that the Merger will constitute one or more
reorganizations under Section 368 of the Code and that the shareholders of
Virginia First will not recognize any gain or loss to the extent that such
shareholders exchange shares of Virginia First Common Stock for shares of
SNC Common Stock.
6.2 Conditions Precedent--Virginia First
The obligations of Virginia First to effect the transactions contemplated by
this Agreement shall be subject to the satisfaction of the following
additional conditions at or prior to the Effective Time, unless waived by
Virginia First pursuant to Section 7.4:
(a) All representations and warranties of SNC shall be evaluated as of
the date of this Agreement and as of the Effective Time as though made on
and as of the Effective Time (or on the date designated 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 Virginia First. The representations and warranties of SNC set
forth in Sections 4.1, 4.2, 4.3, 4.4 and 4.10 shall be true and correct
(except for inaccuracies which are de minimis in amount). There shall not
exist inaccuracies in the representations and warranties of SNC set forth
in this Agreement (including the representations and warranties set forth
in
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Sections 4.1, 4.2, 4.3, 4.4 and 4.10) such that the aggregate effect of
such inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on SNC; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(b) SNC shall have performed in all material respects all obligations and
complied in all material respects with all covenants required by this
Agreement.
(c) SNC shall have delivered to Virginia First a certificate, dated the
Closing 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) Virginia First shall have received opinions of counsel to SNC in the
form reasonably acceptable to Virginia First's legal counsel.
(e) All approvals of the transactions contemplated herein from the
Federal Reserve Board and any other state or federal government agency,
department or body, the approval of which is required for the consummation
of the Merger, shall have been received and all waiting periods with
respect to such approvals shall have expired.
(f) The shares of SNC Common Stock issuable pursuant to the Merger shall
have been approved for listing on the NYSE, subject to official notice of
issuance.
(g) Virginia First shall not have reasonably determined in good faith
that there has been a material adverse change in the condition, operations
or prospects of SNC since December 31, 1996.
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 Time, unless waived by SNC pursuant to
Section 7.4:
(a) All representations and warranties of Virginia First shall be
evaluated as of the date of this Agreement and as of the Effective Time as
though made on and as of the Effective Time (or on the date designated 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. The representations and warranties of
Virginia First set forth in Sections 3.1, 3.2 (except the last sentence
thereof), 3.3 (except the last sentence thereof), 3.4 (except the last
sentence thereof), 3.5(a), 3.5(b)(i), 3.23 and 3.24 shall be true and
correct (except for inaccuracies which are de minimis in amount). There
shall not exist inaccuracies in the representations and warranties of
Virginia First set forth in this Agreement (including the representations
and warranties set forth in the Sections designated in the preceding
sentence) such that the effect of such inaccuracies individually or in the
aggregate has, or is reasonably likely to have, a Material Adverse Effect
on Virginia First and the Virginia First Subsidiaries taken as a whole;
provided that, for purposes of this sentence only, those representations
and warranties which are qualified by references to "material" or "Material
Adverse Effect" shall be deemed not to include such qualifications.
(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) Virginia First shall have performed in all material respects all
obligations and complied in all material respects with all covenants
required by this Agreement.
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(d) Virginia First shall have delivered to SNC a certificate, dated the
Closing 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 Virginia First, 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
Virginia First or that present a claim to restrain or prohibit the
transactions contemplated herein or in the Plan of Merger.
(e) SNC shall have received opinions of counsel to Virginia First in the
form reasonably acceptable to SNC's legal counsel.
(f) SNC shall have received the written agreements from affiliates as
specified in Section 5.11.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) At any time prior to the Effective Time, by the mutual consent in
writing of the parties hereto.
(b) At any time prior to the Effective Time, by either party (i) in the
event of a material breach by the other party of any covenant or agreement
contained in this Agreement, or (ii) in the event of an inaccuracy of any
representation or warranty of the other party contained in this Agreement,
which inaccuracy would provide the nonbreaching party the ability to refuse
to consummate the Merger under the applicable standard set forth in Section
6.2(a) in the case of Virginia First and Section 6.3(a) in the case of SNC;
and, in the case of (i) or (ii), if such breach or inaccuracy 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 Time.
(c) At any time prior to the Effective Time, by either party hereto in
writing, if any of the conditions precedent to the obligations of the other
party to consummate the transactions contemplated hereby cannot be
satisfied or fulfilled prior to the Closing Date, and the party giving the
notice is not in breach of any of its representations, warranties,
covenants or undertakings herein.
(d) At any time, by either party hereto in writing, if any of the
applications for prior approval referred to in Section 5.4 are denied, and
the time period for appeals and requests for reconsideration has run.
(e) At any time, by either party hereto in writing, if the shareholders
of Virginia First do not approve the Agreement and the Plan of Merger.
(f) At any time following March 31, 1998, by either party hereto in
writing, if the Effective Time 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 11:59 p.m. on July 31, 1997 by SNC in writing,
if SNC determines in its sole good faith judgment, through review of
information Disclosed by Virginia First, the performance of its due
diligence or otherwise, that the financial condition, results of
operations, business or business prospects of Virginia First and of the
Virginia First Subsidiaries, taken as a whole, are materially adversely
different from SNC's reasonable expectations with respect thereto on the
date of execution of this Agreement; provided that SNC shall inform
Virginia First upon 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 Virginia First and the
Virginia First Subsidiaries which SNC may perform or otherwise affect any
other rights which SNC has after the date hereof under the terms of this
Agreement. Specifically, without limitation, the fact that Virginia First
has Disclosed information shall not prevent SNC from terminating this
Agreement pursuant to this Section 7.1(g) on account of such information.
(h) At any time prior to the Effective Time by Virginia First as provided
in Section 2.7(e) if the Closing Value shall be less than $30.00.
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<PAGE>
7.2 Effect of Termination
In the event this Agreement and 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, agreement, understanding, representation or warranty
giving rise to such termination. The SNC Option Agreement shall be governed by
its own terms.
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 Time, other
than covenants that by their terms are to be performed after the Effective
Time, provided that no such representations, warranties or covenants shall be
deemed to be terminated or extinguished so as to deprive SNC or Virginia First
(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 shareholder or former shareholder
of either SNC or Virginia First, the aforesaid representations, warranties and
covenants being material inducements to consummation by SNC and Virginia First
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 Virginia First shareholders) 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 Virginia First shareholders of this Agreement and the Plan of Merger shall
reduce either the number of shares of SNC Common Stock into which each share
of Virginia First Common Stock shall be converted in the Merger or the payment
terms for fractional interests.
7.5 Amendment or Supplement
This Agreement or the Plan of Merger may be amended or supplemented at any
time in writing by mutual agreement of SNC and Virginia First, subject to the
proviso to 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 Agreement, including
fees and expenses of its own financial consultants, accountants and counsel;
provided, however, that the printing costs incurred in connection with the
Registration Statement and the Proxy Statement/Prospectus shall be borne 50%
by SNC and 50% by Virginia First.
8.2 Entire Agreement
This Agreement and the SNC Option Agreement contain the entire agreement
between the parties with respect to the transactions contemplated hereunder
and thereunder and supersede all arrangements or
A-29
<PAGE>
understandings with respect thereto, written or oral, entered into on or
before the date hereof, other than documents referred to herein or therein.
The terms and conditions of this Agreement and the SNC 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 SNC Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto and thereto, and their respective successors, any rights,
remedies, obligations or liabilities.
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 courier or by facsimile
transmission, addressed or directed as follows:
If to Virginia First:
Charles A. Patton
Virginia First Financial Corporation
Franklin and Adams Street
Petersburg, Virginia 23803
Telephone:
Fax:
With a required copy to:
Wayne A. Whitham, Jr., Esq.
Williams Mullen Christian & Dobbins
1021 East Cary Street, 16th Floor
Richmond, Virginia 23219
Telephone: 804-783-6473
Fax: 804-783-6507
If to SNC:
Scott E. Reed
150 South Stratford Road
4th Floor
Winston-Salem, North Carolina 27104
Telephone: 910-733-3088
Fax: 910-733-2296
With a required copy to:
William A. Davis, II
Womble Carlyle Sandridge & Rice, PLLC
200 West Second Street
Winston-Salem, North Carolina 27102
Telephone: 910-721-3624
Fax: 910-733-8364
Any party may by notice change the address to which notice or other
communications to it are to be delivered.
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<PAGE>
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 Amended and Restated 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
----------------------------------
Title:
---------------------------
BB&T FINANCIAL CORPORATION OF
VIRGINIA
By
----------------------------------
Title:
---------------------------
VIRGINIA FIRST FINANCIAL CORPORATION
By
----------------------------------
Title:
---------------------------
The undersigned, by their signatures below, hereby agree to be bound by and
to comply with the provisions of Section 5.1 of the foregoing Agreement and
Plan of Reorganization as applicable to him. Further, Charles A. Patton agrees
to enter into and execute the Employment Agreement described in Section 5.10
and agrees to the provisions of Section 5.18(b).
-------------------------------------
WILLIAM A. PATTON
-------------------------------------
CHARLES A. PATTON
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<PAGE>
ANNEX A
ARTICLES OF MERGER
OF
VIRGINIA FIRST FINANCIAL CORPORATION
WITH AND INTO
BB&T FINANCIAL CORPORATION OF VIRGINIA
The undersigned corporations, pursuant to Section 13.1-720 of the Virginia
Stock Corporation Act, hereby execute the following articles of merger.
ONE
The merger of Virginia First Financial Corporation, a Virginia corporation
("Virginia First"), with and into BB&T Financial Corporation of Virginia, a
Virginia corporation ("BB&T Financial-Virginia"), shall be in accordance with
the Plan of Merger attached hereto as Exhibit A (the "Plan of Merger").
TWO
The Plan of Merger was submitted to the shareholders of each of Virginia
First and BB&T Financial- Virginia by its Board of Directors in accordance
with the provisions of Section 13.1-718 of the Virginia Stock Corporation Act:
A. The number of outstanding shares of common stock, par value $1.00 per
share, of Virginia First (the only voting group entitled to vote on the Plan
of Merger) entitled to be cast and number of undisputed votes cast for the
Plan of Merger were:
OUTSTANDING SHARES UNDISPUTED VOTES CAST FOR THE PLAN
------------------ ----------------------------------
------------------------- ----------------------------------
The number of undisputed votes cast for the Plan of Merger was sufficient
for approval of the Plan of Merger.
B. The Plan of Merger was adopted by unanimous consent of the shareholders
of BB&T Financial-Virginia.
THREE
The articles of merger shall become effective at .m. on , 199 .
The undersigned, [Title] of each of Virginia First and BB&T Financial-
Virginia declares that the facts herein stated are true as of , 199 .
Virginia First Financial Corporation
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
BB&T Financial Corporation of
Virginia
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
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<PAGE>
EXHIBIT A
PLAN OF MERGER
OF
VIRGINIA FIRST FINANCIAL CORPORATION
WITH AND INTO
BB&T FINANCIAL CORPORATION OF VIRGINIA
Section 1. Corporations Proposing to Merge and Surviving
Corporation. Virginia First Financial Corporation, a Virginia corporation
("Virginia First"), shall be merged (the "Merger") with and into BB&T
Financial Corporation of Virginia, a Virginia corporation ("BB&T Financial-
Virginia"), pursuant to the terms and conditions of this Plan of Merger (the
"Plan of Merger") and of the Agreement and Plan of Reorganization, dated as of
August , 1996 (the "Agreement"), by and between Virginia First and BB&T
Corporation, a North Carolina corporation and parent corporation of BB&T
Financial-Virginia ("BB&T"). The effective time for the Merger (the "Effective
Time") shall be set forth in the Articles of Merger to be filed with the Clerk
of the State Corporation Commission of Virginia. BB&T Financial-Virginia shall
continue as the surviving corporation (the "Surviving Corporation") in the
Merger and the separate corporate existence of Virginia First shall cease.
Section 2. Effects of the Merger. The Merger shall have the effects set
forth in Section 13.1-721 of the Virginia Stock Corporation Act (the "VSCA").
Section 3. Articles of Incorporation and Bylaws. The Articles of
Incorporation and the Bylaws of BB&T Financial-Virginia as in effect
immediately prior to the Effective Time shall remain in effect as the Articles
of Incorporation and Bylaws of the Surviving Corporation following the
Effective Time until changed in accordance with their terms and the VSCA.
Section 4. Conversion of Shares.
(a) At the Effective Time, each share of common stock, $1.00 par value per
share, of Virginia First ("Virginia First Common Stock") outstanding
immediately prior to the Effective Time, shall by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
become the right to receive shares of common stock, $5.00 par value per
share, of BB&T ("BB&T Common Stock"), plus cash in the amount of $ .
(b) At the Effective Time, each share of the common stock of BB&T Financial-
Virginia issued and outstanding immediately prior to the Effective Time shall
continue to be issued and outstanding.
Section 5. No Right to Dissent. Pursuant to Section 13.1-730C of the VSCA,
holders of Virginia First Common Stock shall have no right to dissent from the
Merger.
Section 6. No Fractional Shares. Notwithstanding any other term or provision
hereof, no fraction of a share of BB&T Common Stock, and no certificates or
scrip therefor or other evidence of ownership thereof, will be issued in
connection with the conversion of Virginia First Common Stock in the Merger.
At the Effective Time, the aggregate shares of BB&T Common Stock (including
fractional shares) to be received in the Merger by each holder of shares of
Virginia First Common Stock shall be determined, and the number of such shares
of BB&T Common Stock shall be rounded to the nearest whole share. The amount
of cash to be received by each such holder shall be increased or decreased to
adjust for such rounding based on a value per share for BB&T Common Stock of
$ .
Section 7. Amendment. At any time before the Effective Time, this Plan of
Merger may be amended, provided that: (i) any such amendment is approved by
the Board of Directors of Virginia First; and (ii) no such amendment made
subsequent to the submission of this Plan of Merger to the shareholders of
Virginia First shall have any of the effects specified in Section 13.1-718.I
of the VSCA without the approval of the shareholders affected thereby.
A-33
<PAGE>
APPENDIX B
OPINION OF
SANDLER O'NEILL & PARTNERS, L.P.
<PAGE>
Sandler O'Neill & Partners, L.P.
Investment Banking Group
Two World Trade Center, 104th floor
New York, New York 10048
October 20, 1997
Board of Directors
Virginia First Financial Corporation
Franklin and Adams Streets
Petersburg, VA 23805
Gentlemen:
Virginia First Financial Corporation ("VFFC"), BB&T Financial Corporation of
Virginia ("BB&T Financial") and Southern National Corporation, which
subsequently changed its name to BB&T Corporation ("BB&T"), have entered into
an Agreement and Plan of Reorganization, dated as of May 6, 1997 (the
"Agreement"), pursuant to which VFFC will be merged with and into BB&T
Financial (the "Merger"). Upon consummation of the Merger, each outstanding
share of VFFC common stock, par value $1.00 per share (together with the
rights attached pursuant to the VFFC Rights Agreement dated April 19, 1996, as
amended on May 4, 1997, the "VFFC Shares"), will be converted into the right
to receive a combination of BB&T common stock, par value $5.00 per share
(together with the rights attached pursuant to the BB&T Rights Agreement dated
December 17, 1996, the "BB&T Stock") and cash (the "Merger Consideration"), as
follows: (a) if the Closing Value of BB&T Stock (as defined in the Agreement)
is less than $41.67 and is not less than $37.50, the Merger Consideration
shall equal in value 0.6 of the Closing Value, of which 70% shall be BB&T
Stock and 30% shall be cash, or (b) if the Closing Value is $41.67 or more,
the Merger Consideration shall equal in value $25.00, of which $17.50 shall be
BB&T Stock and $7.50 shall be cash, or (c) if the Closing Value is less than
$37.50 and is not less than $33.75, the Merger Consideration shall equal in
value $22.50, of which $15.75 shall be BB&T Stock and $6.75 shall be cash, or
(d) if the Closing Value is less than $33.75 and is not less than $30.00, the
Merger Consideration shall equal in value $22.50, of which 0.467 of the
Closing Value shall be BB&T Stock and the difference between such amount and
$22.50 shall be cash, or (e) if the Closing Value is less than $30.00, the
Merger Consideration shall equal in value the sum of 0.467 of the Closing
Value plus $8.50; provided, however, that if the Closing Value is below $30.00
the Board of Directors of VFFC may terminate the Agreement. The terms and
conditions of the Merger are more fully set forth in the Agreement. You have
requested our opinion as to the fairness, from a financial point of view, of
the Merger Consideration to be received by the holders of the VFFC Shares.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other
corporate transactions. In connection with this opinion, we have reviewed,
among other things: (i) the Agreement and exhibits thereto; (ii) the Stock
Option Agreement, dated as of May 6, 1997, by and between VFFC and BB&T; (iii)
VFFC's audited consolidated financial statements and management's discussion
and analysis of the financial condition and results of operations for the
years ended June 30, 1996 and 1997; (iv) BB&T's audited consolidated financial
statements and management's discussion and analysis of the financial condition
and results of operations for the year ended December 31, 1996; (v) the
unaudited consolidated financial statements and management's discussion and
analysis of the financial condition and results of operations for the interim
Period ending March 31, 1997 for VFFC; (vi) the unaudited consolidated
financial statements and management's discussion and analysis of the financial
condition and results of operations for the interim periods ending March 31
and June 30, 1997 for BB&T; (vii) preliminary financial information prepared
by the senior management of VFFC concerning VFFC's financial condition and
results of operations for the three months ended September 30, 1997; (viii)
preliminary financial information prepared by the senior management of BB&T
concerning BB&T's financial condition and results of operations for the nine
months ended September 30, 1997; (ix) certain financial analyses and forecasts
of VFFC prepared by and/or reviewed with management of VFFC and the views
B-1
<PAGE>
of senior management of VFFC regarding VFFC's past and current business
operations, results thereof, financial condition and future prospects; (x)
certain financial analyses and forecasts of BB&T prepared by and/or reviewed
with management of BB&T and the views of senior management of BB&T regarding
BB&T's past and current business operations, results thereof, financial
condition and future prospects; (xi) the historical reported price and trading
activity for VFFC's and BB&T's common stock, including a comparison of certain
financial and stock market information for VFFC and BB&T with similar
information for certain other companies the securities of which are publicly
traded; (xii) the pro forma impact of the Merger on BB&T; (xiii) the financial
terms of recent business combinations in the savings institution and banking
industries; (xiv) the current market environment generally and the banking
environment in particular, and (xv) such other information, financial studies,
analyses and investigations and financial, economic and market criteria as we
considered relevant.
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information reviewed by and discussed with us,
and we did not make an independent evaluation or appraisal of the specific
assets, the collateral securing assets or the liabilities of VFFC or BB&T or
any of their subsidiaries, or the collectibility of any such assets (relying,
where relevant, on the analyses and estimates of VFFC and BB&T). With respect
to the financial projections reviewed with management, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of the
respective future financial performances of VFFC and BB&T and that such
performances will be achieved. We have also assumed that there has been no
material change in VFFC's or BB&T's assets, financial condition, results of
operations, business or prospects since the date of the last financial
statements noted above. We have assumed that VFFC and BB&T will remain as
going concerns for all periods relevant to our analyses. We have further
assumed that the terms and conditions precedent of the Agreement in effect on
the date hereof will not be modified or waived by the parties thereto.
Our opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of, the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion. We have not undertaken to reaffirm or revise
this opinion or otherwise comment upon events occurring after the date hereof.
We have acted as VFFC's financial advisor in connection with the Merger and
will receive a fee for our services, a significant portion of which is
contingent upon consummation of the Merger. We will also receive a fee for
rendering this opinion. We have also provided general financial advisory
services for VFFC in the past and have received fees for such services.
In the ordinary course of our business, we may actively trade the equity
securities of VFFC and BB&T for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
Our opinion is directed to the Board of Directors of VFFC and does not
constitute a recommendation to any stockholder of VFFC as to how such
stockholder should vote at the special meeting of stockholders called to
consider and vote upon the Merger. Our opinion is not to be quoted or referred
to, in whole or in part, in a registration statement, prospectus, proxy
statement or in any other document, nor shall this opinion be used for any
other purposes, without Sandler O'Neill's prior written consent.
Based upon and subject to the foregoing, it is our opinion that the Merger
Consideration to be received by the holders of the VFFC Shares is fair, from a
financial point of view, to the holders of such shares.
Very truly yours,
Sandler O'Neill & Partners, L.P.
B-2
<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 the 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.
The registrant's bylaws provide for the indemnification of any director or
officer of the registrant against liabilities and litigation expenses arising
out of his status as such, excluding: (i) any liabilities or litigation expenses
relating to activities that were at the time taken known or believed by such
person to be clearly in conflict with the best interest of the registrant 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.
The registrant's articles of incorporation provide for the elimination of
the personal liability of each director of the registrant to the fullest extent
permitted by law.
The registrant maintains directors and officers liability insurance that,
in general, insures: (i) the registrant's directors and officers against loss by
reason of any of their wrongful acts and (ii) the registrant 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
that 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. (S) 1818(b)).
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following 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 6, 1997, among
BB&T Corporation, BB&T Financial Corporation of Virginia and Virginia First Financial
Corporation (included as Appendix I to the Proxy Statement/Prospectus)
3(a) Articles of Incorporation of BB&T Corporation, as amended (incorporated herein by reference
to Exhibit No. 3(a) to the registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 and Exhibit No. 3(b) to the registrant's registration statement on Form S-3
filed May 23, 1997 (Registration No. 333-27755))
3(b) Bylaws of BB&T Corporation, as amended (incorporated herein by reference to Exhibit No. 3.2
to the registrant's registration statement on Form S-4 filed June 29, 1989 (Registration No. 33-
29586) and Exhibit No. 3(c) to the registrant's registration statement on Form S-4 filed May 6,
1997 (Registration No. 333-26545))
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 KPMG Peat Marwick LLP
23(d) Consent of Sandler O'Neill & Partners, L.P.
24 Power of Attorney
99(a) Form of Virginia First Financial Corporation Proxy Card
99(b) Option Agreement, dated May 6, 1997, between BB&T Corporation and Virginia First Financial
Corporation
</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:
(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.
II-2
<PAGE>
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 Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, 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 Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant 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 October 23, 1997.
BB&T CORPORATION
By: /s/ Jerone C. Herring
--------------------------------------
Name: Jerone C. Herring
Title: Executive Vice President and Secretary
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 October 23, 1997.
/s/ John A. Allison IV* /s/ Scott E. Reed*
- --------------------------------- --------------------------------------
Name: John A. Allison IV Name: Scott E. Reed
Title: Chairman of the Board and Title: Senior Executive Vice President
Chief Executive Officer and Chief Financial Officer
(principal executive officer) (principal financial officer)
/s/ Sherry A. Kellett* /s/ Paul B. Barringer*
- --------------------------------- --------------------------------------
Name: Sherry A. Kellett Name: Paul B. Barringer
Title: Executive Vice President Title: Director
and Controller
(principal accounting officer)
/s/ W. R. Cuthbertson, Jr.*
- --------------------------------- --------------------------------------
Name: Alfred E. Cleveland Name: W. R. Cuthbertson, Jr.
Title: Director Title: Director
/s/ Ronald E. Deal* /s/ A. J. Dooley, Sr.*
- --------------------------------- --------------------------------------
Name: Ronald E. Deal Name: A. J. Dooley, Sr.
Title: Director Title: Director
/s/ Joe L. Dudley, Sr.* /s/ Tom D. Efird*
- --------------------------------- --------------------------------------
Name: Joe L. Dudley, Sr. Name: Tom D. Efird
Title: Director Title: Director
/s/ O. William Fenn, Jr.* /s/ Paul S. Goldsmith*
- --------------------------------- --------------------------------------
Name: O. William Fenn, Jr. Name: Paul S. Goldsmith
Title: Director Title: Director
II-4
<PAGE>
/s/ L. Vincent Hackley* /s/ Ernest F. Hardee*
- --------------------------------- --------------------------------------
Name: L. Vincent Hackley Name: Ernest F. Hardee
Title: Director Title: Director
/s/ Jane P. Helm* /s/ Richard Janeway, M.D.*
- --------------------------------- --------------------------------------
Name: Jane P. Helm Name: Richard Janeway, M.D.
Title: Director Title: Director
/s/ J. Ernest Lathem, M.D.* /s/ James H. Maynard*
- --------------------------------- --------------------------------------
Name: J. Ernest Lathem, M.D. Name: James H. Maynard
Title: Director Title: Director
/s/ Albert O. McCauley*
- --------------------------------- --------------------------------------
Name: Joseph A. McAleer, Jr. Name: Albert O. McCauley
Title: Director Title: Director
/s/ Dickson McLean, Jr.* /s/ Charles E. Nichols*
- --------------------------------- --------------------------------------
Name: Dickson McLean, Jr. Name: Charles E. Nichols
Title: Director Title: Director
/s/ L. Glenn Orr, Jr.* /s/ A. Winniett Peters*
- --------------------------------- --------------------------------------
Name: L. Glenn Orr, Jr. Name: A. Winniett Peters
Title: Director Title: Director
/s/ Richard L. Player, Jr.* /s/ C. Edward Pleasants, Jr.*
- --------------------------------- --------------------------------------
Name: Richard L. Player, Jr. Name: C. Edward Pleasants, Jr.
Title: Director Title: Director
/s/ Nido R. Qubein*
- --------------------------------- --------------------------------------
Name: Nido R. Qubein Name: E. Rhone Sasser
Title: Director Title: Director
- --------------------------------- --------------------------------------
Name: Jack E. Shaw Name: Harold B. Wells
Title: Director Title: Director
/s/ A. Tab Williams, Jr.*
- ---------------------------------
Name: A. Tab Williams, Jr.
Title: Director
*By: /s/ Jerone C. Herring
-----------------------------
Jerone C. Herring
Attorney-in-Fact
II-5
<PAGE>
EXHIBIT 5
October 23, 1997
BB&T Corporation
200 West Second Street
Winston-Salem, North Carolina 27102
Re: Registration Statement on Form S-4 (the "Registration Statement") with
respect to shares to be issued pursuant to the Agreement and Plan of
Reorganization by and among BB&T Corporation ("BB&T"), BB&T Financial
Corporation of Virginia and Virginia First Financial Corporation dated as
of May 6, 1997 (the "Reorganization Agreement")
Ladies and Gentlemen:
We have acted as counsel to BB&T in connection with the registration of
2,100,000 shares of its Common Stock, par value $5.00 per share (the "Common
Stock"), issuable pursuant to the Reorganization Agreement, as set forth in the
Registration Statement that is being filed on the date hereof by BB&T with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Act of 1933, as amended (the "Securities Act"). This opinion is provided
pursuant to the requirements of Item 21(a) of Form S-4 and Item 601(b)(5) of
Regulation S-K.
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
Commission and (2) the shares of Common Stock have been issued upon the terms
and conditions set forth in the Reorganization Agreement and in accordance with
the Registration Statement, then the shares of Common Stock will be legally
issued, fully paid, and nonassessable.
We hereby consent to be named in the Registration Statement under the
heading "LEGAL MATTERS" as attorneys who passed upon the validity of the shares
of Common Stock and to the filing of a copy of this opinion as Exhibit 5 to the
Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required by Section 7 of the
Securities Act or other rules and regulations of the Commission thereunder.
Very truly yours,
WOMBLE CARLYLE SANDRIDGE & RICE,
A Professional Limited Liability Company
By: Garza Baldwin, III
----------------------------------
Garza Baldwin, III
<PAGE>
EXHIBIT 8
October 23, 1997
BB&T Corporation
200 West Second Street
Winston-Salem, North Carolina 27101
Re: Registration Statement on Form S-4 (the "Registration
Statement") with respect to shares to be issued pursuant to the
Agreement and Plan of Reorganization, dated as of May 6, 1997
(the "Reorganization Agreement"), by and among Virginia First
Financial Corporation, a Virginia corporation ("Virginia
First"), BB&T Corporation, a North Carolina corporation
("BB&T"), and BB&T Financial Corporation of Virginia, a Virginia
corporation and wholly owned subsidiary of BB&T ("BB&T
Financial-VA")
Ladies and Gentlemen:
We have acted as counsel to BB&T in connection with the registration of
2,100,000 shares of its Common Stock, par value $5.00 per share (the "BB&T
Common Stock"), issuable pursuant to the Reorganization Agreement, as set forth
in the Registration Statement that is being filed on the date hereof by BB&T
with the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Act of 1933, as amended (the "Securities Act"). This opinion is
provided pursuant to the requirements of Item 21(a) of Form S-4 and Item
601(b)(8) of Regulation S-K. All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Reorganization Agreement.
In the Merger, Virginia First will merge into BB&T Financial-VA pursuant
to Virginia law, and each outstanding share of Virginia First Common Stock (the
only class outstanding) is to be converted into a number of shares of BB&T
Common Stock and an amount of cash determined under a formula in the
Reorganization Agreement. Also, cash will be paid in lieu of issuance of
fractional shares. Virginia First shareholders are not entitled by state law to
dissent from the Merger.
In giving this opinion we have reviewed, and with your permission we
have relied upon the representations and warranties contained in or the facts
described in, the Reorganization Agreement, the Registration Statement, and
certificates dated October 22, 1997 in which officers of Virginia First and
officers of BB&T make certain representations on behalf of Virginia First and
BB&T regarding the Merger (the "Tax Certificates"). We also have reviewed such
other documents as we have considered necessary and appropriate for the purposes
of this opinion.
In giving this opinion we have with your permission assumed that the
statements in the Tax Certificates are correct as of the date of this opinion,
and any representation or statement made "to the best of knowledge" or similarly
qualified is correct without such qualification. As to all matters in which a
person or entity has represented that such person or entity either is not a
party to, or does not have, or is not aware of, any plan or intention,
understanding or agreement, we have assumed that there is in fact no such plan,
intention, understanding or agreement. We also assume that (a) the Merger will
be consummated in accordance with the Reorganization Agreement, (b) Virginia
First's only outstanding stock (as that term is used in Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code")) is the Virginia First
Common Stock, and (c) the Rights attached to the shares of BB&T Common Stock
issued in the Merger will not be exchanged by BB&T for any part of the value of
the Virginia First Common Stock, and such Rights will have no ascertainable fair
market value at the Effective Time.
Based on the foregoing, and subject to the limitations herein, we are of
the opinion that under existing law, upon consummation of the Merger in
accordance with the Reorganization Agreement, for federal income tax purposes:
(1) The Merger will constitute a "reorganization" within the
meaning of Section 368 of the Code.
(2) No gain or loss will be recognized by Virginia First or
BB&T Financial-VA by reason of the Merger.
<PAGE>
(3) No gain or loss will be recognized by the shareholders of
Virginia First upon the receipt of BB&T Common Stock
(including any fractional share interest to which they may
be entitled) solely in exchange for their shares of
Virginia First Common Stock.
(4) A shareholder of Virginia First who receives cash in lieu
of a fractional share of BB&T Common Stock will recognize
gain or loss as if the fractional share has been received
and then redeemed for cash equal to the amount paid by
BB&T in respect of such fractional share, subject to the
provisions and limitations of Section 302 of the Code.
(5) The gain, if any, realized by Virginia First shareholders
who receive BB&T Common Stock (including a fractional
share) and cash in exchange for their Virginia First
Common Stock will be recognized by each such shareholder,
but in an amount not in excess of the amount of cash
received (not including cash in lieu of a fractional
share), and if the exchange has the effect of the
distribution of a dividend (determined with the
application of Section 318(a) of the Code), then the
amount of the gain recognized that is not in excess of
each such shareholder's taxable share of the undistributed
earnings and profits shall be treated as a dividend (the
determination of whether the exchange has the effect of a
distribution of a dividend will be made on a shareholder-
by-shareholder basis in accordance with the principles set
forth by the Supreme Court in its 1989 decision in the
case of Commissioner v. Clark; it is unlikely that
shareholders will be required to treat the cash as a
dividend, but shareholders should consult their tax
advisors as to the correct treatment, based on their
individual circumstances).
(6) No loss shall be recognized by a Virginia First
shareholder on the exchange.
(7) The tax basis in the BB&T Common Stock received by a
shareholder (including any fractional share interest
deemed received) will be the same as the tax basis in the
Virginia First Common Stock surrendered in exchange
therefor, less the cash (other than cash in lieu of a
fractional share) received, plus the gain (other than
gain on the deemed disposition of a fractional share) or
dividend recognized.
(8) The holding period for BB&T Common Stock received in
exchange for shares of Virginia First Common Stock will
include the period during which the shareholder held the
shares of Virginia First Common Stock surrendered in the
exchange, provided that the Virginia First Common Stock
was held as a capital asset at the Effective Time.
We express no opinion as to the laws of any jurisdiction other than the
United States of America. Further, our opinion is limited to the specific
conclusions set forth above, and no other opinions are expressed or implied. The
opinions stated with respect to shares of Virginia First Common Stock do not
apply to any stock rights, warrants or options to acquire Virginia First Common
Stock. The opinions stated as to Virginia First shareholders are general in
nature and do not necessarily apply to any particular Virginia First
shareholder, and, for example, may not apply to shareholders who are
corporations, trusts, dealers in securities, financial institutions, insurance
companies or tax exempt organizations; or to persons who are not United States
citizens or resident aliens or domestic entities (partnership or trusts), are
subject to the alternative minimum tax (to the extent that tax affects the tax
consequences), or are subject to the "golden parachute" provisions of the Code
(to the extent that tax affects the tax consequences); or to shareholders who
acquired Virginia First Common Stock pursuant to employee stock options or
otherwise as compensation if such shares are subject to any restriction related
to employment, who do not hold their shares as capital assets, or who hold their
shares as part of a "straddle" or "conversion transaction."
This opinion represents our best legal judgement, but it has no binding
effect or official status of any kind. Changes to the Code or in regulations or
rulings thereunder, or changes by the courts in the interpretation of the
authorities relied upon, may be applied retroactively and may affect the
opinions expressed herein. Any material defect in any assumption or
representation on which we have relied would adversely affect our opinion.
<PAGE>
We furnish this opinion to you solely to support the discussion set forth
under the headings "SUMMARY--The Merger--Certain Federal Income Tax
Consequences," "THE MERGER--The Reorganization Agreement--Conditions to the
Merger," "THE MERGER--Certain Federal Income Tax Consequences of the Merger" and
"LEGAL MATTERS" in the Registration Statement, and we do not consent to its use
for any other purpose. We hereby consent to be named in the Registration
Statement under the foregoing headings and to the filing of a copy of this
opinion as Exhibit 8 to the Registration Statement. In giving this consent, we
do not admit that we are within the category of persons whose consent is
required by Section 7 of the Securities Act or the rules and regulations of the
Commission thereunder.
Very truly yours,
WOMBLE CARLYLE SANDRIDGE & RICE
A Professional Limited Liability Company
By: /s/ Jasper L. Cummings, Jr.
------------------------------------
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 registration statement of our report dated July 1, 1997,
included in BB&T Corporation's Form 8-K dated August 15, 1997, and to all
references to our firm included in this registration statement. Our report
dated January 14, 1997, included in BB&T Corporation's financial statements
previously filed on Form 10-K and incorporated by reference in this registration
statement is no longer appropriate since restated financial statements have been
presented giving effect to a business combination accounted for as a pooling-of-
interests.
/s/ Arthur Andersen LLP
------------------------------------
Charlotte, North Carolina
October 22, 1997.
<PAGE>
EXHIBIT 23(C)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Virginia First Financial Corporation:
We consent to the use of our report dated August 14, 1997, relating to the
consolidated statements of financial condition of Virginia First Financial
Corporation and subsidiaries as of June 30, 1997 and 1996, and the related
consolidated statements of earnings, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended June 30, 1997, which
report is incorporated by reference in the Registration Statement on Form S-4 of
BB&T Corporation, and to the reference to our firm under the heading "Experts"
in the Proxy Statement/Prospectus.
/s/ KPMG Peat Marwick LLP
------------------------------------
Richmond, Virginia
October 21, 1997
<PAGE>
EXHIBIT 23(d)
Sandler O'Neill
CONSENT OF SANDLER O'NEILL & PARTNERS, L.P.
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of Virginia First Financial Corporation (the "Company") as Appendix B
to the Proxy Statement/Prospectus relating to the proposed merger of the Company
with and into BB&T Financial Corporation of Virginia contained in the
Registration Statement on Form S-4, dated October __, 1997, and to the
references to our firm and such opinion in such Proxy Statement/Prospectus. In
giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended (the "Securities Act"), or the rules and regulations of the
Securities and Exchange Commission thereunder (the "Regulations"), nor do we
admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "experts" as used in the Securities Act
or the Regulations.
Sandler O'Neill & Partners, L.P.
October 23, 1997
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
Each of the undersigned, being a director and/or officer of BB&T
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"), a Registration
Statement on Form S-4 (the "Registration Statement") relating to the issuance of
shares of the Company's common stock, $5.00 par value per share, in connection
with the acquisition by the Company of Virginia First Financial Corporation, a
Virginia corporation, and to file any and all amendments, including post-
effective amendments, to the 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.
This Power of Attorney has been signed by the following persons in the
capacities indicated on June 24, 1997.
/s/ John A. Allison IV /s/ Scott E. Reed
- --------------------------------- --------------------------------------
Name: John A. Allison IV Name: Scott E. Reed
Title: Chairman of the Board and Title: Senior Executive Vice President
Chief Executive Officer and Chief Financial Officer
(principal executive officer) (principal financial officer)
/s/ Sherry A. Kellett /s/ Paul B. Barringer
- --------------------------------- --------------------------------------
Name: Sherry A. Kellett Name: Paul B. Barringer
Title: Executive Vice President Title: Director
and Controller
(principal accounting officer)
/s/ W. R. Cuthbertson, Jr. /s/ Ronald E. Deal
- --------------------------------- --------------------------------------
Name: W. R. Cuthbertson, Jr. Name: Ronald E. Deal
Title: Director Title: Director
/s/ A. J. Dooley, Sr. /s/ Joe L. Dudley, Sr.
- --------------------------------- --------------------------------------
Name: A. J. Dooley, Sr. Name: Joe L. Dudley, Sr.
Title: Director Title: Director
/s/ Tom D. Efird /s/ O. William Fenn, Jr.
- --------------------------------- --------------------------------------
Name: Tom D. Efird Name: O. William Fenn, Jr.
Title: Director Title: Director
/s/ Paul S. Goldsmith /s/ L. Vincent Hackley
- --------------------------------- --------------------------------------
Name: Paul S. Goldsmith Name: L. Vincent Hackley
Title: Director Title: Director
<PAGE>
/s/ Ernest F. Hardee /s/ Jane P. Helm
- --------------------------------- --------------------------------------
Name: Ernest F. Hardee Name: Jane P. Helm
Title: Director Title: Director
/s/ Richard Janeway, M.D. /s/ J. Ernest Lathem, M.D.
- --------------------------------- --------------------------------------
Name: Richard Janeway, M.D. Name: J. Ernest Lathem, M.D.
Title: Director Title: Director
/s/ James H. Maynard
- --------------------------------- --------------------------------------
Name: James H. Maynard Name: Joseph A. McAleer, Jr.
Title: Director Title: Director
/s/ Albert O. McCauley /s/ Dickson McLean, Jr.
- --------------------------------- --------------------------------------
Name: Albert O. McCauley Name: Dickson McLean, Jr.
Title: Director Title: Director
/s/ Charles E. Nichols /s/ L. Glenn Orr, Jr.
- --------------------------------- --------------------------------------
Name: Charles E. Nichols Name: L. Glenn Orr, Jr.
Title: Director Title: Director
/s/ A. Winniett Peters /s/ Richard L. Player, Jr.
- --------------------------------- --------------------------------------
Name: A. Winniett Peters Name: Richard L. Player, Jr.
Title: Director Title: Director
/s/ C. Edward Pleasants, Jr. /s/ Nido R. Qubein
- --------------------------------- --------------------------------------
Name: C. Edward Pleasants, Jr. Name: Nido R. Qubein
Title: Director Title: Director
/s/ A. Tab Williams, Jr.
- ---------------------------------
Name: A. Tab Williams, Jr.
Title: Director
<PAGE>
EXHIBIT 99(a)
VIRGINIA FIRST FINANCIAL CORPORATION
Franklin & Adams Streets
Petersburg, Virginia 23803
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
Proxy Solicited by the Board of Directors
The undersigned hereby constitutes Preston H. Cottrell, William L. Eure, Jr. and
Benjamin S. Gill or any of them, attorneys and proxies, with power of
substitution in each, to act for the undersigned with respect to all shares of
Common Stock of Virginia First Financial Corporation ("Virginia First") held of
record by the undersigned on October 15, 1997, at the Annual Meeting of
Shareholders to be held at the Main Office of Virginia First at the Corner of
Franklin & Adams Streets, Petersburg, Virginia on November 26, 1997, at 4:00
p.m., or any adjournment thereof, for the following purposes:
1. To approve an Agreement and Plan of Reorganization, dated as of May 6,
1997 (the "Reorganization Agreement"), by and among Virginia First, BB&T
Corporation, a North Carolina corporation ("BB&T"), and BB&T Financial
Corporation of Virginia, a Virginia corporation and wholly owned subsidiary of
BB&T ("BB&T Financial-VA"), and a related Plan of Merger (the "Plan of Merger"),
pursuant to which each share of common stock of Virginia First will be converted
into the right to receive shares of common stock of BB&T and cash, in amounts to
be determined as described in the accompanying Proxy Statement/Prospectus. A
copy of the Reorganization Agreement and the Plan of Merger set forth therein is
attached to the Proxy Statement/Prospectus as Appendix I.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To elect as directors the four nominees listed below.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
(except as marked to the contrary) vote for all nominees
INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below)
Frasier W. Brickhouse
William A. Patton
Francis R. Payne, Jr.
John H. VanLandingham, Jr.
3. To ratify the appointment by the Board of Directors of the firm of
KPMG Peat Marwick LLP as Virginia First's independent auditors for the fiscal
year 1998; and
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To vote on such other business as may property come before the
meeting.
This proxy when properly executed will be voted in the manner directed by
the undersigned shareholder. If no direction is made, this proxy will be voted
for 1, 2 and 3.
Please sign name exactly as it appears on
the stock certificate. Only one of several
joint owners need sign. Fiduciaries should
give full title.
--------------------- ----------
Signature Date
--------------------- ----------
Signature Date
I plan ____, do not plan ___, to attend the
1997 Annual Meeting.
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY PROMPTLY
<PAGE>
EXHIBIT 99(b)
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of May 6, 1997, by and between VIRGINIA FIRST FINANCIAL CORPORATION, a Virginia
corporation ("Issuer"), and SOUTHERN NATIONAL CORPORATION, a North Carolina
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement and
Plan of Reorganization, dated this date (the "Merger Agreement"), providing for,
among other things, the merger of Issuer with and into BB&T Financial
Corporation of Virginia ("BB&T Financial-Virginia"), a wholly owned Subsidiary
of Grantee, with BB&T Financial-Virginia as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement, Grantee has required that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 1,155,127 shares, as adjusted as set forth herein (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares), of common stock of Issuer, $1.00 par value per share
("Issuer Common Stock"), at a purchase price per Option Share (subject to
adjustment as set forth herein, the "Purchase Price") equal to $17.50.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, Holder may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of a Purchase Event;
provided that the Option shall terminate and be of no further force and effect
upon the earliest to occur of (A) the Effective Time, (B) subject to clause (E)
below, termination of the Merger Agreement in accordance with the terms thereof
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event
(other than a termination of the Merger Agreement by Grantee pursuant to Section
7.1(b) thereof (a "Default Termination")), (C) 12 months after a Default
Termination, (D) 12 months after any termination of the Merger Agreement (other
than a Default Termination) following the occurrence of a Purchase Event or a
Preliminary Purchase Event, and (E) subject to clause (D) above, six months
after termination of the Merger Agreement pursuant to Section 7.1(e) thereof
(but only in the event the shareholders of Issuer do not approve the Agreement
and Plan of Merger); provided further, that any purchase of shares upon exercise
of the Option shall be subject to compliance with applicable law, including,
without limitation, the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). The term "Holder" shall mean the holder or holders of the Option from
time to time, including initially Grantee.
(b) As used herein, a "Purchase Event" means any of the following
events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any Subsidiary of Grantee) to effect
an Acquisition
<PAGE>
Transaction (as defined below). As used herein, the term Subsidiary when used
with respect to Issuer shall have the meaning given that term in the Merger
Agreement. As used herein, the term "Acquisition Transaction" shall mean (A) a
merger, consolidation or similar transaction involving Issuer or any of its
Subsidiaries (other than transactions solely between Issuer's Subsidiaries and
other subsidiaries of Issuer), (B) the disposition, by sale, lease, exchange or
otherwise, of assets of Issuer or any of its Subsidiaries representing in either
case 15% or more of the consolidated assets of Issuer and its Subsidiaries
(other than a sale of loan receivables in a financing transaction in the normal
course of business consistent with past practices), or (C) the issuance, sale or
other disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities representing 15% or more of the voting
power of Issuer or any of its Subsidiaries;
(ii) any person (other than Grantee, any Subsidiary of Grantee
or any member of the Patton Group (as defined below)) shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act) of or the right to acquire beneficial ownership of,
or any "group" (as such term is defined under the Exchange Act), other than
a group of which Grantee or any of the Subsidiaries of Grantee is a member,
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 15% or more of the then-outstanding shares of
Issuer Common Stock; or
(iii) any member of the Patton Group (as defined below) shall
have acquired beneficial ownership (as such term is defined in Rule 13d-3
promulgated under the Exchange Act) of or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under the Exchange
Act) of which any member of the Patton Group is a member, other than a
group of which Grantee or any Subsidiary of Grantee is a member, shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 30% or more of the then-outstanding shares of Issuer Common
Stock. For the purpose of this Agreement, the "Patton Group" means William
A. Patton, Charles A. Patton, Jr., J. Dale Patton, Patton Associates
Limited Partnership and any associate or affiliate of such person or
entity. As used in this Agreement, the terms "associate" and "affiliate"
shall have the meanings specified in Rule 12b-2 promulgated under the
Exchange Act.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any Subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2 under
the Exchange Act), or shall have filed a registration statement under the
Securities Act with respect to, a tender offer or exchange offer to
purchase any shares of Issuer Common Stock such that, upon consummation of
such offer, such person would own or control 15% or more of the then-
outstanding shares of Issuer Common Stock (such an offer being referred to
herein as a "Tender Offer" or an "Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have approved
the Merger Agreement at the meeting of such shareholders held for the
purpose of voting on the Merger Agreement, such meeting shall not have been
held or shall have been canceled prior to termination of the Merger
Agreement, or Issuer's Board of Directors shall have withdrawn or modified
in a manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Merger Agreement, in each case after any
person (other than Grantee or any Subsidiary of Grantee) shall have (A)
made, or disclosed an intention to make, a proposal to engage in an
Acquisition Transaction, (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an Exchange
Offer, or (C) filed an application (or given a notice), whether in draft or
final form, under any federal or state statute or regulation (including an
application or notice filed under the BHC Act, the Bank Merger Act, the
Home Owner's Loan Act or the Change in Bank Control Act of 1978) seeking
the Consent to an Acquisition Transaction from any federal or state
governmental or regulatory authority or agency.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
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(d) In the event Holder wishes to exercise the Option, it shall send
to Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior Consent
of any governmental or regulatory agency or authority is required in connection
with such purchase, Issuer shall cooperate with Holder in the filing of the
required notice or application for such Consent and the obtaining of such
Consent, and the Closing shall occur not earlier than three business days nor
later than 15 business days following receipt of such Consents (and expiration
of any mandatory waiting periods).
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in Section 11(f)
hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no pre-emptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF MAY 6, 1997.
A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Issuer.
This Agreement has been duly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue, and, at all times from the date
hereof until the obligation to deliver Issuer Common Stock upon the exercise of
the Option terminates, will have reserved for issuance, upon exercise of the
Option, the number of shares of Issuer Common Stock necessary for Holder to
exercise the Option, and Issuer will take all necessary corporate action to
authorize and reserve for issuance all additional shares of Issuer Common Stock
or other securities which may be issued pursuant to Section 7 upon exercise of
the Option. The shares of Issuer Common Stock to be issued upon due
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exercise of the Option, including all additional shares of Issuer Common Stock
or other securities which may be issuable pursuant to Section 7, upon issuance
pursuant hereto, shall be duly and 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 Issuer.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Laws.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option and the Purchase Price therefor shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 19.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter into an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Grantee or one of
its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company; (iii) to permit any person, other than
Grantee or one of the Subsidiaries, to acquire all of the outstanding shares of
Issuer Common Stock pursuant to a statutory share exchange; or (iv) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Grantee, of either (x) the
Acquiring Corporation (as defined below), (y) any person that controls the
Acquiring Corporation, or (z) in the case of a merger described in clause (ii),
the Issuer (in each case, such person being referred to as the "Substitute
Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Grantee. The Substitute Option Issuer shall also
enter into an agreement with the then-holder or holders of the Substitute Option
in substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
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(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of
the Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), Issuer in a merger in which Issuer is the continuing or
surviving person, the corporation that shall acquire all of the outstanding
shares of Issuer Common Stock pursuant to a statutory share exchange, the
transferee of all or any substantial part of the Issuer's assets (or the
assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the highest of (x) the price
per share of the Issuer Common Stock at which a Tender Offer or Exchange
Offer therefor has been made by any person (other than Grantee), (y) the
price per share of the Issuer Common Stock to be paid by any person (other
than the Grantee) pursuant to an agreement with Issuer, and (z) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
Stock Market within the six-month period immediately preceding the
agreement; provided, that in the event of a sale of less than all of
Issuer's assets, the Assigned Value shall be the sum of the price paid in
such sale for such assets and the current market value of the remaining
assets of Issuer as determined by a nationally recognized investment
banking firm selected by Grantee (or by a majority in interest of the
Grantees if there shall be more than one Grantee (a "Grantee Majority")),
divided by the number of shares of the Issuer Common Stock outstanding at
the time of such sale. In the event that an exchange offer is made for the
Issuer Common Stock or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for the
Issuer Common Stock shall be determined by a nationally recognized
investment banking firm mutually selected by Grantee and Issuer (or if
applicable, Acquiring Corporation). (If there shall be more than one
Grantee, any such selection shall be made by a Grantee Majority.)
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately preceding
the consolidation, merger, share exchange or sale in question, but in no
event higher than the closing price of the shares of the Substitute Common
Stock on the day preceding such consolidation, merger, share exchange or
sale; provided that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common stock
issued by Issuer, the person merging into Issuer or by any company which
controls or is controlled by such merger person, as Grantee may elect.
(f) In no event pursuant to any of the foregoing paragraphs shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute Option Issuer shall make a cash payment
to Grantee equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f).
This difference in value shall be determined by a nationally recognized
investment banking firm selected by Grantee (or a Grantee Majority).
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(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9 and 10 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock" shall
be deemed to be references to "Substitute Option Issuer," "Substitute Option,"
"Substitute Purchase Price" and "Substitute Common Stock," respectively.
8. REGISTRATION RIGHTS.
(a) Following termination of the Merger Agreement, Issuer shall,
subject to the conditions of subparagraph (c) below, if requested by any Holder,
including Grantee and any permitted transferee ("Selling Holder"), as
expeditiously as possible prepare and file a registration statement under the
Securities Laws if necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Selling Holder upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
Holder in such request, including, without limitation, a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision,
and Issuer shall use its best efforts to qualify such shares or other securities
for sale under any applicable state securities laws.
(b) If Issuer at any time after the exercise of the Option proposes
to register any shares of Issuer Common Stock under the Securities Laws in
connection with an underwritten public offering of such Issuer Common Stock,
Issuer will promptly give written notice to Holder of its intention to do so
and, upon the written request of Holder given within 30 days after receipt of
any such notice (which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten public offering by
Selling Holder), Issuer will cause all such shares, the holders of which shall
have requested participation in such registration, to be so registered and
included in such underwritten public offering; provided, that Issuer may elect
to cause any such shares not to be so registered (i) if the underwriters in good
faith object for a valid business reason, or (ii) in the case of a registration
solely to implement a dividend reinvestment or similar plan, an employee benefit
plan or a registration filed on Form S-4 or any successor form, or a
registration filed on a form which does not permit registration of resales;
provided, further, that such election pursuant to clause (i) may be made only
one time. If some but not all the shares of Issuer Common Stock, with respect
to which Issuer shall have received requests for registration pursuant to this
subparagraph (b), shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Selling Holders and any
other person (other than Issuer or any person exercising demand registration
rights in connection with such registration) who or which is permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each Selling Holder bears to the total number of shares
requested to be registered by all persons then desiring to have Issuer Common
Stock registered for sale.
(c) Issuer shall use all reasonable efforts to cause each
registration statement referred to in subparagraph (a) above to become effective
and to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective, provided, that
Issuer may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days provided Issuer shall
in good faith determine that any such registration would adversely affect an
offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Laws
pursuant to subparagraph (a) above:
(i) prior to the earliest of (A) termination of the Merger
Agreement pursuant to Section 7.1 thereof, (B) failure to obtain the
requisite shareholder approval of the holders of Issuer Common Stock
pursuant to Section 5.1 of the Merger Agreement, and (C) a Purchase Event
or a Preliminary Purchase Event;
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(ii) on more than two occasions;
(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a registration
referred to in subparagraph (b) above pursuant to which the Selling Holders
concerned were afforded the opportunity to register such shares under the
Securities Laws and such shares were registered as requested; and
(v) unless a request therefor is made to Issuer by Selling
Holders holding at least 25% or more of the aggregate number of Options
Shares then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Issuer shall use
all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided, that Issuer shall not
be required to consent to general jurisdiction or qualify to do business in any
state where it is not otherwise required to so consent to such jurisdiction or
to so qualify to do business.
(d) Except where applicable state law prohibits such payments, Issuer
will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of counsel), accounting expenses, legal expenses, including reasonable fees and
expenses of one counsel to the Holders whose Option Shares are being registered,
printing expenses, expenses of underwriters, excluding discounts and commissions
but including liability insurance if Issuer so desires or the underwriters so
require, and the reasonable fees and expenses of any necessary special experts)
in connection with each registration pursuant to subparagraph (a) or (b) above
(including the related offerings and sales by Selling Holders) and all other
qualifications, notifications or exemptions pursuant to subparagraph (a) or (b)
above. Underwriting discounts and commissions relating to Option Shares and any
other expenses incurred by such Selling Holders in connection with any such
registration shall be borne by such Selling Holders.
(e) In connection with any registration under subparagraph (a) or (b)
above Issuer hereby indemnifies the Selling Holders, and each underwriter
thereof, including each person, if any, who controls such holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in any registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such expenses, losses,
claims, damages or liabilities of such indemnified party are caused by any
untrue statement or alleged untrue statement that was included by Issuer in any
such registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon and in
conformity with, information furnished in writing to Issuer by such indemnified
party expressly for use therein, and Issuer and each officer, director and
controlling person of Issuer shall be indemnified by such Selling Holder, or by
such underwriter, as the case may be, for all such expenses, losses, claims,
damages and liabilities caused by any untrue, or alleged untrue, statement, that
was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information furnished in
writing to Issuer by such holder or such underwriter, as the case may be,
expressly for such use.
Promptly upon receipt by a party indemnified under this subparagraph
(e) of notice of the commencement of any action against such indemnified party
in respect of which indemnity or reimbursement may be sought against any
indemnifying party under this subparagraph (e), such indemnified party shall
notify the indemnifying party in writing of the commencement of such action, but
the failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
subparagraph (e). In case notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party
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shall be entitled to participate in and, to the extent it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the indemnifying party agrees
to pay them, (ii) the indemnifying party fails to assume the defense of such
action with counsel satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this subparagraph (e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, all Selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, all Selling Holders and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; provided, that in no case shall any Selling Holder be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to subparagraph (a) or
(b) above, Issuer and each Selling Holder (other than Grantee) shall enter into
an agreement containing the indemnification provisions of this subparagraph (e).
(f) Issuer shall comply with all reporting requirements and will do
all such other things as may be necessary to permit the expeditious sale at any
time of any Option Shares by Holder in accordance with and to the extent
permitted by any rule or regulation promulgated by the Commission from time to
time, including, without limitation, Rules 144 and 144A. Issuer shall at its
expense provide Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Laws, or required pursuant to any state securities laws or the
rules of any stock exchange.
(g) Issuer will pay all stamp taxes in connection with the issuance
and the sale of the Option Shares and in connection with the exercise of the
Option, and will save Holder harmless, without limitation as to time, against
any and all liabilities, with respect to all such taxes.
9. QUOTATION; LISTING. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the Nasdaq National Market or any other securities
exchange or any automated quotations system maintained by a self-regulatory
organization, Issuer will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of Issuer Common Stock
or other securities to be acquired upon exercise of the Option on the Nasdaq
National Market or any other securities exchange or any automated quotations
system maintained by a self-regulatory organization and will use its best
efforts to obtain approval, if required, of such quotation or listing as soon as
practicable.
10. DIVISION OF OPTION. This Agreement (and the Option granted hereby)
is exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the
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aggregate the same number of shares of Issuer 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 Issuer 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, Issuer 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 Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
11. 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) WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY; SEVERABILITY. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 11(h)) any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
governmental or regulatory agency or authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this 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 does not permit Holder to acquire,
or does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in Sections 3 and 8 (as adjusted pursuant to Section
7), it is the express intention of Issuer to allow Holder to acquire or to
require Issuer to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of North Carolina without
regard to any applicable conflicts of law rules, except to the extent that the
federal laws of the United States shall govern.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Merger Agreement (or
at such other address for a party as shall be specified by like notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned
9
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subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Purchase Event. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option
by Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the day and year first written above.
VIRGINIA FIRST FINANCIAL CORPORATION
By:-------------------------------
Name:------------------------
Title:-----------------------
SOUTHERN NATIONAL CORPORATION
By:-------------------------
Name:------------------
Title:-----------------
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