<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1998
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)
<TABLE>
<S> <C> <C>
NORTH CAROLINA 6060 56-0939887
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
200 WEST SECOND STREET
WINSTON-SALEM, NORTH CAROLINA 27101
(336) 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
(336) 733-2180
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
THE COMMISSION IS REQUESTED TO SEND COPIES OF
ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
DOUGLAS A. MAYS HUGH B. WELLONS
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC FLIPPIN, DENSMORE, MORSE, RUTHERFORD & JESSEE
3300 ONE FIRST UNION CENTER 10 SOUTH JEFFERSON STREET
CHARLOTTE, NORTH CAROLINA 28202-6025 ROANOKE, VIRGINIA 24006
</TABLE>
________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: [_]
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
<TABLE>
<CAPTION>
======================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER UNIT AGGREGATE OFFERING REGISTRATION FEE
PRICE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 16,845,644 (2) $637,065,117(3) $69,677.43(4)
par value $5.00 per share(1)
======================================================================================================================
</TABLE>
(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
($45.00) and low ($44.625) sales price of the common stock of MainStreet
Financial Corporation on December 3, 1998 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 $107,426.67 paid upon the filing with the Commission of
the preliminary proxy materials of MainStreet Financial Corporation (File
No. 0-8622) on October 30, 1998.
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 Section 8(a), may
determine.
================================================================================
<PAGE>
MAINSTREET FINANCIAL CORPORATION
200 EAST CHURCH STREET
MARTINSVILLE, VIRGINIA 24112
___________________________________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 15, 1999
___________________________________________________
TO THE SHAREHOLDERS OF MAINSTREET FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the
"Meeting") of MainStreet Financial Corporation, a Virginia corporation
("MainStreet"), will be held in the Frith Performance Hall of the Piedmont Arts
Association Building, located at 215 Starling Avenue, Martinsville, Virginia on
Friday, January 15, 1999 at 11:00 a.m. Eastern Time, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan of
Reorganization, dated as of August 26, 1998 (the "Merger Agreement"), among
MainStreet, 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"), and a related plan of
merger, pursuant to which MainStreet will merge with and into BB&T
Financial-VA and each share of common stock of MainStreet then outstanding
will be converted into the right to receive 1.18 shares of common stock of
BB&T, plus cash in lieu of any fractional share interest. A copy of the
Merger Agreement and the plan of merger set forth therein is attached to
the accompanying proxy statement/prospectus as Appendix I.
2. To transact such other business as may be properly brought before the
Meeting or at any and all adjournments or postponements thereof.
Shareholders of MainStreet of record at the close of business on December
11, 1998 are entitled to notice of and to vote at the Meeting. You are
cordially invited to attend the 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
Martinsville, Virginia Rebecca J. Jenkins
December 15, 1998 Secretary
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY WHETHER
OR NOT YOU PLAN TO BE PRESENT AT THE MEETING. FAILURE TO RETURN A PROPERLY
EXECUTED PROXY OR TO VOTE AT THE MEETING WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE MERGER AGREEMENT AND THE PLAN OF MERGER. PLEASE DO NOT SEND IN ANY
CERTIFICATES FOR YOUR SHARES AT THIS TIME.
<PAGE>
[MainStreet logo]
SPECIAL MEETING OF SHAREHOLDERS
MERGER PROPOSAL-YOUR
VOTE IS VERY IMPORTANT
The Board of Directors of MainStreet Financial Corporation has unanimously
approved a merger combining MainStreet and BB&T Corporation. IN THE MERGER,
MAINSTREET SHAREHOLDERS WILL RECEIVE 1.18 SHARES OF BB&T COMMON STOCK FOR EACH
SHARE OF MAINSTREET COMMON STOCK, AND GENERALLY WILL NOT RECOGNIZE FEDERAL
INCOME TAX GAIN OR LOSS FOR THE BB&T COMMON STOCK THEY RECEIVE. The merger will
join MainStreet's strengths as a community banking system covering southwestern,
central and northern Virginia, southern Maryland and metropolitan Washington
D.C. with BB&T's position as a leading bank throughout the Carolinas and
Virginia, enabling the combined company to offer MainStreet's customers a broad
range of financial products and services.
At the special meeting, you will consider and vote on the merger agreement. THE
MERGER CANNOT BE COMPLETED UNLESS HOLDERS OF TWO-THIRDS OF MAINSTREET COMMON
STOCK APPROVE IT. THE BOARD OF DIRECTORS BELIEVES THE MERGER IS IN THE BEST
INTERESTS OF MAINSTREET SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT. No vote of BB&T shareholders
is required to approve the merger agreement.
On December 11, 1998, the closing price of BB&T common stock was $____, making
the value of 1.18 shares of BB&T common stock (which is what MainStreet
shareholders will receive for each share of MainStreet common stock) equal to
$____. The closing price of MainStreet common stock on that date was $___. These
prices will, however, fluctuate between now and the merger. After the merger,
MainStreet shareholders will own about 5.4% of BB&T's common stock.
The date, time and place of the meeting are:
January 15, 1999, 11:00 a.m.
Frith Performance Hall
Piedmont Arts Association Building
215 Starling Avenue
Martinsville, Virginia
This proxy statement/prospectus provides you with detailed information about the
proposed merger. We encourage you to read this entire document carefully. You
can also obtain other information about MainStreet and BB&T from documents filed
with the Securities and Exchange Commission.
Whether or not you plan to attend the meeting, if you are a holder of MainStreet
common stock please take the time to vote by completing and mailing the enclosed
proxy card to us. IF YOU FAIL TO RETURN YOUR CARD OR VOTE IN PERSON, THE EFFECT
WILL BE A VOTE AGAINST APPROVAL OF THE MERGER AGREEMENT. YOUR VOTE IS VERY
IMPORTANT. You can revoke your proxy by writing to MainStreet's Secretary any
time before the meeting or by attending the meeting and voting in person.
ON BEHALF OF THE BOARD OF DIRECTORS OF MAINSTREET, WE URGE YOU TO VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Michael R. Brenan
Chairman, Chief Executive Officer and President
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
regulators have approved the BB&T common stock to be issued in the merger or
determined if this proxy statement/prospectus is accurate or adequate. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
This proxy statement/prospectus is dated December 15, 1998 and was first mailed
to shareholders of MainStreet on December 15, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SUMMARY............................................................................... 1
MEETING OF SHAREHOLDERS............................................................... 8
General.......................................................................... 8
Record Date, Voting Rights and Vote Required..................................... 8
Voting and Revocation of Proxies................................................. 8
Solicitation of Proxies.......................................................... 9
Recommendation of the MainStreet Board........................................... 9
THE MERGER............................................................................ 10
General.......................................................................... 10
Subsidiaries..................................................................... 10
Acquisitions..................................................................... 13
Capital.......................................................................... 23
Deposit Insurance Assessments.................................................... 25
The Merger Agreement............................................................. 26
Interests of Certain Persons in the Merger....................................... 32
Regulatory Considerations........................................................ 35
Material Federal Income Tax Consequences of the Merger........................... 37
Accounting Treatment............................................................. 38
The Option Agreement............................................................. 38
Effect on Employees, Employee Benefit Plans and Stock Options.................... 41
Restrictions on Resales by Affiliates............................................ 42
INFORMATION ABOUT BB&T................................................................ 43
General.......................................................................... 43
Subsidiaries..................................................................... 43
Acquisitions..................................................................... 44
Capital.......................................................................... 45
Deposit Insurance Assessments.................................................... 46
INFORMATION ABOUT MAINSTREET.......................................................... 46
DESCRIPTION OF BB&T CAPITAL STOCK..................................................... 47
General.......................................................................... 47
BB&T Common Stock................................................................ 47
BB&T Preferred Stock............................................................. 47
Shareholder Rights Plan.......................................................... 48
Certain Provisions of the NCBCA, BB&T Articles and BB&T Bylaws................... 50
COMPARISON OF SHAREHOLDERS' RIGHTS.................................................... 50
Special Meetings of Shareholders and Action by Shareholders without a Meeting.... 51
Directors........................................................................ 52
Dividends and Other Distributions................................................ 52
Exculpation and Indemnification.................................................. 54
Mergers, Share Exchanges and Sales of Assets..................................... 54
Anti-takeover Statutes........................................................... 55
Amendments to Articles of Incorporation and Bylaws............................... 56
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Shareholders' Rights of Dissent and Appraisal.................................... 56
Liquidation Rights............................................................... 58
SHAREHOLDER PROPOSALS................................................................. 59
OTHER BUSINESS........................................................................ 59
LEGAL MATTERS......................................................................... 59
EXPERTS............................................................................... 59
WHERE YOU CAN FIND MORE INFORMATION................................................... 60
</TABLE>
Appendix I - Agreement and Plan of Reorganization and Plan of Merger
Appendix II - Opinion of Sandler O'Neill & Partners, L.P.
Appendix III - Opinion of Scott & Stringfellow, Inc.
ii
<PAGE>
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire document and the documents to which we refer you. See "Where You Can Find
More Information" on page __.
EXCHANGE RATIO TO BE 1.18 SHARES OF BB&T COMMON STOCK FOR EACH MAINSTREET SHARE
(PAGE __)
If the merger is completed, you will receive 1.18 shares of BB&T common stock
for each share of MainStreet stock you own, plus cash instead of any fractional
share. On December 11, 1998, the closing price of BB&T common stock was $____,
making the value of 1.18 shares of BB&T common stock (which is what MainStreet
shareholders will receive for each share of MainStreet common stock) equal to
$____. Because the market price of BB&T stock fluctuates, you will not know when
you vote what the shares will be worth when issued in the merger. After the
merger, MainStreet shareholders will own about 5.4% of BB&T's common stock.
If the price of BB&T common stock is below $28.85 just before the merger and the
stock prices of certain other bank holding companies have not experienced
similar relative declines since the time that the companies agreed to merge,
MainStreet may terminate the merger agreement. If this were to happen, BB&T
could choose to proceed with the merger by increasing the consideration that you
would receive in the merger so that you would receive BB&T common stock valued,
shortly before the merger, at $34.04 for each share of MainStreet common stock.
NO FEDERAL INCOME TAX ON SHARES RECEIVED IN MERGER (PAGE __)
MainStreet shareholders generally will not recognize gain or loss for federal
income tax purposes for the shares of BB&T common stock they receive in the
merger. BB&T's attorneys have issued a legal opinion to this effect, which we
have included as an exhibit to the registration statement filed with the SEC for
the shares to be issued in the merger. MainStreet shareholders will be taxed on
cash received instead of any fractional share. TAX MATTERS ARE COMPLICATED, AND
TAX RESULTS MAY VARY AMONG SHAREHOLDERS. We urge you to contact your own tax
advisor to understand fully how the merger will affect you.
BB&T DIVIDEND POLICY FOLLOWING THE MERGER
BB&T currently pays quarterly dividends of $.175 per share of common stock. BB&T
expects that it will continue to pay at least this amount in quarterly
dividends, but may change that policy based on business conditions, BB&T's
financial condition and earnings or other factors.
MAINSTREET BOARD RECOMMENDS SHAREHOLDER APPROVAL (PAGE __)
The MainStreet Board believes that the merger is in the best interests of
MainStreet shareholders and unanimously recommends that the shareholders vote
"FOR" approval of the merger agreement. The MainStreet Board believes that, as a
result of the merger, MainStreet shareholders will have less financial risk and
will experience greater stock value appreciation than they would if MainStreet
remained independent.
EXCHANGE RATIO FAIR TO SHAREHOLDERS, ACCORDING TO TWO INVESTMENT BANKS (PAGE __)
Scott & Stringfellow, Inc. and Sandler O'Neill & Partners, L.P. have both given
an opinion to the MainStreet Board that, as of the date of this proxy
statement/prospectus, the exchange ratio in the merger is fair from a financial
point of view to MainStreet shareholders. The full text of these opinions are
attached as Appendices II and III to this proxy statement/prospectus. We
encourage you to read both opinions carefully. Sandler O'Neill was paid $300,000
for providing its opinion. If the merger is completed, Scott & Stringfellow will
be paid $3,000,000 in exchange for its advice and for providing its financial
opinion. You should be aware that BB&T is in the process of acquiring Scott &
Stringfellow.
MEETING TO BE HELD JANUARY 15, 1999 (PAGE __)
MainStreet will hold the special shareholders' meeting at 11:00 a.m. on Friday,
January 15, 1999 in the Frith Performance Hall of the Piedmont Arts Association
Building, 215 Starling Avenue, Martinsville, Virginia. At the meeting, you will
vote on the merger agreement and conduct any other business that properly
arises.
<PAGE>
THE COMPANIES (PAGE __)
BB&T CORPORATION
200 West Second Street
Winston-Salem, NC 27101
(336) 733-2000
BB&T Corporation is a multi-bank holding company with more than $[32.2] billion
in assets. It is the sixth largest bank holding company in the Southeast, and
through its banking subsidiaries operates [512] branch offices in the Carolinas,
Virginia, Maryland and Washington, D.C. BB&T ranks first in deposit market share
in North Carolina and third in South Carolina, maintains a significant market
presence in Richmond and in the Tidewater region of Virginia and recently
established a presence in Maryland and in Washington, D.C.
MAINSTREET FINANCIAL CORPORATION
200 East Church Street
Martinsville, VA 24112
(540) 666-6724
MainStreet Financial Corporation is the holding company for a system of 10
community banks with approximately $2.1 billion in assets and 49 branch offices
in southwestern, central and northern Virginia, southern Maryland and the
metropolitan Washington, D.C. area.
THE MERGER (PAGE __)
In the merger, MainStreet will merge into a Virginia subsidiary of BB&T, and
MainStreet's banking subsidiaries, through which it operates, will become wholly
owned indirect subsidiaries of BB&T. The merger requires the approval of the
holders of more than two-thirds of the MainStreet common stock. If we obtain
this approval, we currently expect to complete the merger in January 1999.
We have attached the merger agreement and the related plan of merger (Appendix
I) at the back of this proxy statement/prospectus. We encourage you to read the
merger agreement, as it is the legal document that governs the merger.
TWO-THIRDS MAINSTREET SHAREHOLDER VOTE REQUIRED (PAGE __)
Approval of the merger agreement requires the affirmative vote of the holders of
more than two-thirds of the outstanding shares of MainStreet common stock. Your
failure to vote will have the effect of a vote against approval of the merger
agreement. Certain directors and executive officers of MainStreet together own
about ____% of the shares entitled to be cast at the meeting, and we expect them
to vote their shares in favor of the merger.
Brokers who hold shares of MainStreet common stock as nominees will not have
authority to vote such shares with respect to the merger unless shareholders
provide voting instructions.
The merger does not require the approval of BB&T's shareholders.
RECORD DATE SET AT DECEMBER __, 1998; ONE VOTE PER SHARE OF MAINSTREET STOCK
(PAGE __)
If you owned shares of MainStreet common stock at the close of business on
December 11, 1998, the Record Date, you are entitled to vote on the merger
agreement and any other matters considered at the meeting.
On the Record Date, there were 14,169,964 shares of MainStreet common stock
outstanding. You will have one vote at the meeting for each share of MainStreet
common stock you own on the Record Date.
MONETARY BENEFITS TO MANAGEMENT IN THE MERGER (PAGE __)
When considering the recommendation of the MainStreet Board, you should be aware
that some MainStreet directors and officers have interests in the merger that
differ from the interests of other MainStreet shareholders. MainStreet president
and CEO Michael R. Brenan has been offered a 10-year employment agreement with
BB&T at an annual salary of $275,000, $10,000 more than his present annual
salary. In addition, Mr. Brenan has the opportunity to earn bonuses targeted at
between 50% and 100% of base salary. Six other members of management have been
offered 3-year employment agreements at their current salaries. These agreements
will provide severance payments and other benefits if there is a change in
control of BB&T. Stock options held by MainStreet executive officers that are
not yet vested will vest immediately upon completion of the merger. However,
except for options to acquire 2,746 shares of
2
<PAGE>
MainStreet common stock held by two executive officers, all of these options
will vest by January of 1999.
Also, two MainStreet directors will be put on the board of BB&T's Virginia bank
and will each earn annual fees of $1,000 plus $1,000 per meeting; two MainStreet
directors will be put on the board of BB&T's North Carolina bank and will each
earn annual fees of $5,000 plus $1,000 per meeting; and the other MainStreet
directors will be offered positions on a BB&T advisory board with annual fees
not less than what they are now receiving as MainStreet directors for at least
two years after the merger.
The MainStreet Board was aware of these and other interests and considered them
before approving and adopting the merger agreement.
CONDITIONS THAT MUST BE SATISFIED FOR THE MERGER TO OCCUR (PAGE __)
The following conditions must be met for us to complete the merger:
. approval of the merger agreement by MainStreet shareholders;
. the absence of legal restraints that prevent the completion of the merger;
. receipt of required regulatory approvals;
. receipt of a legal opinion concerning the tax consequences of the merger;
. the continuing accuracy of the parties' representations in the merger
agreement;
. the continuing effectiveness of the registration statement filed with the
SEC; and
. the ability to account for the merger as a pooling of interests.
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT (PAGE __)
We can agree at any time to terminate the merger agreement without completing
the merger. Either company can also terminate the merger agreement in the
following circumstances:
. the merger is not completed by April 30, 1999 and the company that wants to
terminate the merger agreement is not at that time in breach of it in a
material way;
. the conditions described above are not met; or
. the other company violates, in a material way, any of its representations,
warranties or obligations under the merger agreement.
Generally, the company seeking to terminate cannot itself be in violation of the
merger agreement so as to allow the other party to terminate.
We can agree to amend the merger agreement in any way, except that after the
shareholders' meeting we cannot decrease the consideration you will receive in
the merger. Either company can waive any of the requirements of the other
company in the merger agreement, except that neither company can waive any
required regulatory approval. Neither company intends to waive the tax opinion
condition. If a tax opinion is not available and the MainStreet board wishes to
proceed with the merger, MainStreet will resolicit its shareholders.
OPTION AGREEMENT (PAGE __)
MainStreet has granted to BB&T a stock option that allows BB&T to buy up to
1,650,000 shares of MainStreet's common stock. The exercise price of the option
is $28.00 per share. BB&T can exercise the option only if another party attempts
to acquire control of MainStreet. As of the date of this document, we do not
believe that has occurred. This stock option was required by BB&T as a condition
to its offer to acquire MainStreet, and was designed by BB&T to discourage other
companies from acquiring MainStreet.
REGULATORY APPROVALS REQUIRED (PAGE __)
We cannot complete the merger unless we obtain the approval of the Board of
Governors of the Federal Reserve System, the Virginia Bureau of Financial
Institutions and the Maryland Commissioner of Financial Regulation. On
November 3, 1998, BB&T filed the required applications seeking approval of the
merger.
Although we believe the regulatory approvals will be received in a timely
manner, we cannot be certain when or if we will obtain them.
BB&T TO USE POOLING-OF-INTERESTS ACCOUNTING TREATMENT (PAGE __)
BB&T will account for the merger as a pooling of interests. This means that
MainStreet and BB&T will be treated for accounting and financial reporting
3
<PAGE>
purposes as if they had always been combined. By accounting for the merger as a
pooling of interests, BB&T will avoid creating any goodwill relating to the
transaction and thus avoid charges to future earnings as a result of amortizing
the goodwill.
NO APPRAISAL RIGHTS (PAGE __)
Under Virginia law, you have no right to an appraisal of your shares in
connection with the merger.
SHARE PRICE INFORMATION (PAGE __)
MainStreet common stock is listed on the Nasdaq National Market, and BB&T common
stock is listed on the New 1998, the last full trading day York Stock Exchange.
On August 26, before public announcement of the proposed merger, MainStreet
common stock closed at $25.50 and BB&T common stock closed at $32.19. On ______
__, 1998, MainStreet stock closed at $____ and BB&T stock closed at $____.
LISTING OF BB&T STOCK
BB&T will list the shares of its common stock to be issued in the merger on the
New York Stock Exchange.
COMPARATIVE MARKET PRICES AND DIVIDENDS
BB&T common stock is listed on the NYSE under the symbol "BBK." MainStreet
common stock is included in the Nasdaq National Market under the symbol "MSBC."
The table below shows the high and low closing prices of BB&T common stock and
MainStreet common stock and cash dividends paid per share for the last three
years. For BB&T, prices reflect a 2-for-1 stock split on August 3, 1998, and for
MainStreet, prices reflect a 2-for-1 stock split on March 15, 1996. Shareholders
should note that the merger agreement restricts MainStreet's ability to pay
dividends. See page ______. MainStreet has restated its dividends to reflect the
acquisition of Regency Financial Shares, Incorporated in March 1998, which was
accounted for using the pooling-of-interests method of accounting.
<TABLE>
<CAPTION>
BB&T MAINSTREET
--------------------------- ----------------------------
HIGH LOW CASH HIGH LOW CASH
DIVIDEND DIVIDEND
------- ------- --------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended
March 31, 1998 $33.84 $29.03 $.155 $31.88 $ 26.75 $.15
June 30, 1998 34.06 32.03 .155 32.50 26.25 .15
September 30, 1998 36.03 28.00 .175 37.25 30.00 .15
December 31, 1998 .175
(through December ___)
Quarter Ended
March 31, 1997 20.38 17.63 .135 23.75 18.00 .13
June 30, 1997 23.56 17.88 .135 28.00 18.75 .13
September 30, 1997 27.56 22.66 .155 29.50 24.75 .16
December 31, 1997 32.50 25.97 .155 30.25 26.375 .15
For year 1997 32.50 17.63 .58 30.25 18.00 .57
Quarter Ended
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
BB&T MAINSTREET
--------------------------- ----------------------------
HIGH LOW CASH HIGH LOW CASH
DIVIDEND DIVIDEND
------- ------- --------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1996 14.88 12.94 .115 17.00 12.75 .10
June 30, 1996 15.88 14.44 .115 17.00 15.50 .10
September 30, 1996 16.94 14.31 .135 19.50 16.25 .12
December 31, 1996 18.38 16.69 .135 19.50 16.75 .15
For year 1996 18.38 12.94 .50 19.50 12.75 .47
</TABLE>
5
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
We are providing the following information to help you analyze the
financial aspects of the merger. We derived this information from audited
financial statements for 1993 through 1997 and unaudited financial statements
for the nine months ended September 30, 1998. This information is only a
summary, and you should read it in conjunction with our historical financial
statements (and related notes) contained in the annual and quarterly reports and
other documents that we have filed with the SEC. See "Where You Can Find More
Information" on page ___. You should not rely on the nine-month information as
being indicative of results expected for the entire year.
BB&T -- HISTORICAL FINANCIAL INFORMATION
(Dollars in thousands, except for per share amounts)
<TABLE>
<CAPTION>
As of/For the Nine Months Ended
-------------------------------
September 30, As of/For the Years Ended December 31,
------------------------------ ---------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------------- ------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 921,743 $ 864,534 $ 1,158,525 $ 1,060,194 $ 974,360 $ 940,026 $ 865,734
Net income 365,332 270,978 360,418 343,312 239,799 284,222 132,770
Diluted earnings per share 1.25 .93 1.23 1.17 0.80 0.96 0.47
Cash dividends paid per share .485 .425 .58 .50 .43 .37 .32
Book value per share 9.42 8.01 8.46 7.78 7.38 6.61 5.91
Total assets 33,875,788 29,205,372 31,290,247 27,625,225 26,135,308 24,758,727 23,274,795
Long-term debt 4,386,201 3,251,531 3,575,517 2,320,978 1,542,064 1,095,781 1,010,168
</TABLE>
MAINSTREET -- HISTORICAL FINANCIAL INFORMATION
(Dollars in thousands, except for per share amounts)
<TABLE>
<CAPTION>
As of/For the Nine Months Ended
-------------------------------
September 30, As of/For the Years Ended December 31,
------------------------------ ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------------- ------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 52,934 $ 44,664 $ 59,750 $ 56,461 $ 49,814 $ 45,429 $ 42,204
Net income 15,053 13,624 17,098 17,397 14,834 7,501 10,128
Diluted earnings per share 1.09 1.08 1.35 1.38 1.17 .63 .85
Cash dividends paid per share .45 .42 .57 .47 .34 .28 .24
Book value per share 12.43 10.58 10.72 9.66 8.77 7.12 7.47
Total assets 2,080,622 1,620,722 1,794,242 1,430,125 1,192,398 1,047,991 1,012,497
Long-term debt 658,250 406,050 579,238 299,149 121,655 41,469 36,127
</TABLE>
6
<PAGE>
COMPARATIVE PER SHARE DATA
We have summarized below the per share information for our companies on an
historical, pro forma combined and equivalent basis. You should read this
information in conjunction with our historical financial statements (and related
notes) contained in the annual and quarterly reports and other documents we have
filed with the SEC. See "Where You Can Find More Information" on page __. The
BB&T pro forma information gives effect to the merger accounted for as a pooling
of interests, assuming that 1.18 shares of BB&T common stock are issued for each
outstanding share of MainStreet common stock. MainStreet equivalent share
amounts are calculated by multiplying the pro forma basic and diluted earnings
per share, historical per share dividend and historical shareholders' equity by
the exchange ratio of 1.18 shares of BB&T common stock so that the per share
amounts equate to the respective values for one share of MainStreet common
stock. You should not rely on the pro forma information as being indicative of
the historical results that we would have had if we had been combined or the
future results that we will experience after the merger, nor should you rely on
the nine-month information as being indicative of results expected for the
entire year.
<TABLE>
<CAPTION>
As of/For the Nine As of/For the Year Ended
Months Ended December 31,
September 30, 1998 1997 1996 1995
------------------ ------ ------ ------
<S> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE
Basic
BB&T historical............................. $ 1.28 $ 1.25 $1.19 $0.82
MainStreet historical....................... 1.08 1.36 1.38 1.26
Pro forma combined.......................... 1.26 1.25 1.19 0.83
MainStreet pro forma equivalent............. 1.49 1.48 1.40 0.98
Diluted
BB&T historical............................. 1.25 1.23 1.17 0.80
MainStreet historical....................... 1.09 1.35 1.38 1.17
Pro forma combined.......................... 1.23 1.23 1.17 0.81
MainStreet pro forma equivalent............. 1.45 1.45 1.38 0.96
CASH DIVIDENDS DECLARED PER COMMON SHARE
BB&T historical.................................. .485 .580 .500 .430
MainStreet historical............................ .45 .57 .47 .34
Pro forma combined............................... .485 .580 .500 .430
MainStreet pro forma equivalent.................. .572 .684 .590 .507
SHAREHOLDERS' EQUITY PER COMMON SHARE
BB&T historical.................................. 9.42 8.46 7.78 7.63
MainStreet historical............................ 12.43 10.72 9.66 8.77
Pro forma combined............................... 9.48 8.49 7.80 7.62
MainStreet pro forma equivalent.................. 11.19 10.02 9.20 8.99
</TABLE>
7
<PAGE>
MEETING OF SHAREHOLDERS
GENERAL
We are providing this proxy statement/prospectus to the shareholders of
MainStreet as of the record date of December 11, 1998, along with a form of
proxy that the board of directors of MainStreet is soliciting for use at a
special meeting of shareholders of MainStreet to be held on Friday, January 15,
1999 at 11:00, Eastern Time, at located in the Frith Performance Hall of the
Piedmont Arts Association Building, located at 215 Starling Avenue,
Martinsville, Virginia. At the meeting, the shareholders of MainStreet will vote
upon a proposal to approve the merger agreement, which is dated as of August 26,
1998 and under which MainStreet would merge with and into BB&T Financial
Corporation of Virginia ("BB&T Financial-VA"), a wholly owned subsidiary of
BB&T. Proxies may be voted on such other matters as may properly come before the
meeting at the discretion of the proxy holders. The MainStreet board knows of no
such other matters except those incidental to the conduct of the meeting. The
merger agreement and the related plan of merger are attached as Appendix I.
We request holders of the common stock of MainStreet to complete, date and
sign the accompanying proxy and return it promptly to MainStreet in the enclosed
postage prepaid envelope.
RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED
Only the holders of MainStreet common stock on the record date are entitled
to receive notice of and to vote at the meeting. On the record date, there were
14,169,964 shares of MainStreet common stock outstanding, held by approximately
3,915 holders of record. Each such share of MainStreet common stock is entitled
to one vote on each matter submitted at the meeting.
Approval of the merger agreement and the plan of merger requires the
affirmative vote of the holders of more than two-thirds of the outstanding
shares of MainStreet common stock. FAILURE OF A HOLDER OF MAINSTREET COMMON
STOCK TO VOTE SUCH SHARES WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE
MERGER AGREEMENT AND THE PLAN OF MERGER.
Action on any other matters that shareholders consider at the meeting will
be approved if a quorum is present and the votes in favor of the matter
constitute a majority of the shares represented at the meeting and entitled to
vote. Presence in person or by proxy of a majority of the outstanding shares of
MainStreet common stock entitled to vote at the meeting will constitute a
quorum.
As of the record date, the directors and executive officers of MainStreet
and their affiliates beneficially owned a total of 247,559 shares, or 1.75%, of
the issued and outstanding shares of MainStreet common stock (exclusive of
shares that may be acquired pursuant to the exercise of stock options). As of
the record date, the directors and executive officers of BB&T and their
affiliates and BB&T and its subsidiaries beneficially owned a total of less than
1% of the outstanding shares of MainStreet common stock. Scott & Stringfellow
Financial, Inc., which is expected to merge into BB&T during first quarter of
1999, and its affiliates beneficially owned approximately ____ shares, or ___%,
of the issued and outstanding shares of MainStreet common stock as of the record
date.
VOTING AND REVOCATION OF PROXIES
The shares of MainStreet common stock represented by properly completed
proxies received at or before the time for the 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 merger agreement and
the plan of merger. Proxies marked "FOR" approval of the merger agreement and
the plan of merger and executed but unmarked proxies will be voted in the
discretion of the persons named therein as to any proposed adjournment of the
meeting. Proxies which are voted "AGAINST" approval of the merger agreement and
the plan of merger will not be voted in favor of any motion to adjourn the
meeting to solicit more votes in favor of the merger.
8
<PAGE>
Shares held in street name that have been designated by brokers on proxy
cards as not voted with respect to a proposal ("Broker Shares") will not be
counted as votes cast on the proposal. Shares with respect to which proxies have
been marked as abstentions also will not be counted as votes cast on the
proposal. 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.
The proposal to adopt the merger agreement and the plan of merger is a
"non-discretionary" item, meaning that brokerage firms may not vote shares in
their discretion on behalf of a client if the client has not furnished voting
instructions. Because the proposal to adopt the merger agreement and the plan of
merger must be approved by the holders of more than two-thirds of the
outstanding shares of MainStreet common stock, abstentions and Broker Shares
will have the same effect as a vote against the merger at the meeting.
If any other matters are properly presented at the meeting and voted upon,
the proxies solicited hereby will be voted on such matters at the discretion of
the proxy holders named therein. The MainStreet board is not aware of any other
business to be presented at the meeting other than matters incidental to the
conduct of the meeting.
A shareholder's attendance at the meeting will not automatically revoke his
or her proxy. A shareholder may, however, revoke a proxy any time before 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 MainStreet at
MainStreet's principal executive offices before the meeting, or by attending the
meeting and voting in person. A shareholder's proxy will not be revoked by his
or her death or incapacity unless, before the shares are voted, the Secretary of
MainStreet or other person authorized to tabulate the votes receives notice of
the death or incapacity.
BECAUSE APPROVAL OF THE MERGER AGREEMENT AND THE PLAN OF MERGER REQUIRES
THE AFFIRMATIVE VOTE OF THE HOLDERS OF MORE THAN TWO-THIRDS OF THE OUTSTANDING
SHARES OF MAINSTREET COMMON STOCK, ABSTENTIONS AND BROKER SHARES WILL HAVE THE
SAME EFFECT AS NEGATIVE VOTES. ACCORDINGLY, THE MAINSTREET BOARD URGES
MAINSTREET'S 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 MainStreet will each pay 50% of the cost of printing this proxy
statement/prospectus, and MainStreet will pay all other costs of soliciting
proxies. Directors, officers and other employees of MainStreet or its
subsidiaries may solicit proxies personally or by telephone or facsimile. None
of these people will receive any special compensation for solicitation
activities. MainStreet will arrange with brokerage firms and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of stock held of record by such persons, and MainStreet will
reimburse these record holders for their reasonable out-of-pocket expenses.
MainStreet intends to use the services of Morrow & Co., a professional proxy
solicitation firm, to help with soliciting proxies for the meeting, at an
estimated cost of $7,000 plus individual solicitation and out-of-pocket
expenses.
RECOMMENDATION OF THE MAINSTREET BOARD
The MainStreet board has unanimously adopted the merger agreement and the
plan of merger and believes that the proposed transaction is fair to and in the
best interests of MainStreet and its shareholders. The MainStreet board
unanimously recommends that MainStreet's shareholders vote "FOR" approval of the
merger agreement and the plan of merger. See "The Merger-Background of, and
Reasons for, the Merger."
SHAREHOLDERS SHOULD NOT SEND IN STOCK CERTIFICATES WITH THEIR PROXY CARDS.
See "The Merger-Exchange of MainStreet Common Stock Certificates."
9
<PAGE>
THE MERGER
The following information describes the material aspects of the merger.
This description does not purport to be complete and is qualified in its
entirety by reference to the appendices hereto, including the merger agreement
and the plan of merger, which are attached to this proxy statement/prospectus as
Appendix I and incorporated herein by reference. All shareholders are urged to
read the appendices in their entirety.
GENERAL
In the merger, MainStreet will be merged with and into BB&T Financial-VA,
and BB&T Financial-VA will be the surviving corporation. Shareholders of
MainStreet will receive shares of the common stock of BB&T in exchange for their
shares of MainStreet common stock. During 1999, BB&T intends to merge
MainStreet's various subsidiary banks into subsidiary banks of BB&T.
BACKGROUND OF, AND REASONS FOR, THE MERGER
Background of the Merger; MainStreet's Reasons for the Merger
In recent years, several interested parties, including BB&T, have contacted
MainStreet to explore the possibility of a merger or acquisition. The MainStreet
board elected not to pursue preliminary expressions of interests, believing it
to be in the best interests of MainStreet shareholders for MainStreet to focus
on independently building a franchise of semi-autonomous community banks
operating within a strong centralized support system provided by MainStreet.
Michael Brenan, Chairman and Chief Executive Officer of MainStreet, and
Albert Prillaman, a member of both the MainStreet board and the board's
Executive Committee and the Chairman, Chief Executive Officer and President of
Stanley Furniture Company, Inc., visited with John A. Allison IV, Chairman and
Chief Executive Officer of BB&T, in December 1997 at Mr. Allison's request. Mr.
Allison again expressed BB&T's interest in exploring an affiliation. On January
7, 1998, a meeting of the executive committee was called during which the
committee discussed the strategy of independence versus affiliating with a
larger institution. The committee stated its agreement with the board's position
that MainStreet should remain independent, but expressed the view that
management and the board should revisit the issue if MainStreet failed to
perform satisfactorily.
In the MainStreet board's regular meetings on February 18, and June 17,
1998, the board authorized Mr. Brenan to maintain contacts and further develop
relationships with potential merger partners, including BB&T, as a means of
providing MainStreet with flexibility to pursue a business combination should
the board later determine that it would be in the best interest of the
shareholders for management to negotiate a sale of the institution.
During the first half of 1998, MainStreet management continued to develop a
strategy for moving forward independently. A part of this strategy was the
consolidation of MainStreet's subsidiary banks into regional units, and the use
of a single name ("MainStreet Bank") for all of the MainStreet banking
subsidiaries. MainStreet management began to consolidate its banks, consistent
with this plan, in the third quarter of 1998, with the first consolidated
MainStreet Bank commencing operations on August 1, 1998.
Early in 1998 Mr. Brenan engaged Furash & Company to provide the board of
directors and management assistance with the selection, design and
implementation of an optimal vision and organizational structure to position the
company to create long-term shareholder value. The board of directors firmly
believed that MainStreet had to "earn the right to be independent" by growing
earnings per share by 12-15% per annum. The challenge for management was to
develop a strategy and structure in conjunction with Furash that positioned
MainStreet to grow earnings and build long-term shareholder value. It became
clear during the summer of 1998 that traditional commercial banking strategies
were giving way under heavy pressure from emergent technologies, changing
customer preferences, and decreasing regulations to a new financial dynamic
centered around deposit intermediation businesses, capital markets, fee
businesses and other specialty lines of business.
10
<PAGE>
Management believed that MainStreet was at a strategic crossroads, with the
option of positioning itself as a community bank or expanding to become a super-
community bank. For MainStreet to be considered a community bank in the new
market structure, management believed MainStreet would have to offer a limited
product line delivered with highly tailored service at above market prices,
focus its earnings more on deposit intermediation, remain small but profitable,
and emphasize dividend yield over capital appreciation to investors. This would
require improved core earnings through charter consolidation and integration,
improved capital efficiency, enhanced sales culture and development of fee based
businesses. Management believed that to transform MainStreet into a super-
community bank, significant organizational change would be required, but that a
successful execution of the strategy could result in a diversified financial
services corporation able to compete effectively in the marketplace.
The uncertainty, effort and costs involved in either strategy caused Mr.
Brenan to conclude that it was better to pursue a merger partner that could give
MainStreet the necessary tools and components to be what it was trying to create
on its own, while at the same time giving the shareholders a premium value of
stock in a company that has already exhibited a successful operating strategy
and superior earnings performance. These analyses and conclusions, supported by
the Furash report, caused Mr. Brenan to pursue a merger with BB&T. Mr. Brenan
believed that BB&T shared MainStreet's respect for the individual employee,
commitment to customer service, and care for the communities which it serves.
In addition, Mr. Brenan believed that the proximity of the BB&T headquarters
would provide the best opportunity for the MainStreet headquarters employees to
secure employment with BB&T.
Mr. Brenan then spoke with his Executive Vice Presidents concerning his
conclusions, soliciting their views on the progress of MainStreet's plans to
consolidate operations. With his conclusions confirmed, Mr. Brenan on August
12, 1998 discussed with Mr. Allison the prospects for MainStreet's joining the
BB&T franchise. BB&T presented a letter to Mr. Brenan on August 13, 1998,
formally expressing an interest in acquiring MainStreet in a stock for stock
transaction at a fixed ratio of between 1.09 and 1.15 shares of BB&T common
stock for each share of MainStreet common stock. In addition, the BB&T letter
provided for senior executives of MainStreet to enter into employment agreements
in connection with the acquisition and other customary terms. Mr. Brenan called
a meeting of the Executive Committee of the MainStreet board for Monday, August
17, 1998. Mr. Brenan at that time also hired Scott & Stringfellow, Inc. to
advise MainStreet regarding the proposed transaction, and he asked the company's
outside counsel, Flippin, Densmore, Morse, Rutherford & Jessee, a Professional
Corporation, to analyze the legal issues involved. Scott & Stringfellow had
announced on August 10, 1998 that it had entered into an agreement to be
acquired by BB&T. Mr. Brenan nevertheless engaged Scott & Stringfellow based on
its longstanding relationship with and knowledge of MainStreet, its familiarity
with BB&T and his belief that Scott & Stringfellow could render independent
advice to MainStreet, notwithstanding that it had agreed to be acquired by BB&T.
The Executive Committee met on Monday, August 17 and reviewed the offer of
BB&T. Mr. Brenan described his recent conversations with BB&T and provided the
committee with a copy of the proposal letter from BB&T. (The committee is
composed of Messrs. Brenan (Chairman), Prillaman, W. Christopher Beeler, Jr.,
William L. Cooper, III, Ms. I. Patricia Henry and Larry E. Hutchens, of whom all
except Mr. Brenan are nonemployee directors of MainStreet.) The committee
reviewed the proposal letter, discussing the effect of the transaction on
shareholders, employees, and customers of MainStreet, and voted unanimously to
proceed with negotiations with BB&T. Scott & Stringfellow provided a financial
analysis of the offer, indicating on a preliminary basis that it was fair to
shareholders, from a financial point of view, but that management might be able
to improve the exchange ratio slightly. Specifically, Scott & Stringfellow
advised the committee that BB&T probably could afford to pay between 1.18 and
1.20 shares of BB&T common stock for each share of MainStreet common stock,
based on its analysis of dilution to current BB&T shareholders. Mr. Brenan and
Ms. Jenkins, Executive Vice President and Secretary of MainStreet, were
authorized by the committee to proceed with negotiations at a minimum
consideration in the range of 1.18 to 1.20 shares of BB&T common stock for each
share of MainStreet common stock outstanding. They also were authorized to
engage such accountants, lawyers, and financial advisors as they deemed
necessary and appropriate. The committee discussed the effect of the fact that
Scott & Stringfellow had agreed to be acquired by BB&T. Mr. Brenan explained the
basis for his engagement of Scott & Stringfellow, as described above. The
committee decided to obtain the opinion of an additional financial advisor and
after discussing possible choices it was decided that Mr. Brenan would approach
Sandler O'Neill
11
<PAGE>
& Partners, L.P., a firm that had worked with MainStreet in the past and was
well-known to the board, with regard to furnishing an additional fairness
opinion.
Following the August 17 meeting of the Executive Committee, Mr. Brenan
conducted additional negotiations with BB&T. As a result of these negotiations,
the parties agreed to an exchange ratio of 1.18 shares of BB&T common stock for
each outstanding share of MainStreet common stock. Mr. Brenan also received
confirmation that BB&T would provide employment agreements for six members of
MainStreet senior management, in addition to Mr. Brenan. Mr. Brenan and BB&T
also discussed issues relating to the retention of other MainStreet employees
and office locations.
Final negotiations and drafting of the merger agreement were completed on
August 24 and August 25, 1998. A regular meeting of the MainStreet board had
been scheduled for Wednesday, August 26, with discussion of strategic issues and
review of the final Furash report regarding the strategy of MainStreet to remain
independent the primary items on the agenda. All MainStreet directors were
present either in person or via telephone. Mr. Brenan explained to the board
the events that had taken place in the previous few weeks and reminded the board
of the strategic initiatives that the board had considered, including a
comparison of independence and the potential sale of the company. He advised
the board of his views concerning MainStreet's strategic plan to consolidate its
banks, the nature and magnitude of the operational changes needed for MainStreet
to remain independent, industry consolidation, and market conditions. He further
advised the board that he believed a combination with a larger institution would
be in the best interests of MainStreet's shareholders, customers and employees,
and he informed the board that he had engaged in discussions with BB&T which
culminated in a formal expression of interest. Mr. Brenan explained how the
discussions with BB&T had commenced, and he outlined the discussion held and
decisions made at the Executive Committee meeting on August 17. He informed the
MainStreet board that the committee had voted unanimously to proceed with
negotiations with BB&T, and he summarized the negotiations that resulted in the
proposed exchange ratio. He advised the board that a definitive agreement had
been negotiated, that outside counsel had been retained, and that Scott &
Stringfellow had been retained to provide financial advice and Sandler O'Neill
had been retained to opine on the fairness of the exchange ratio, from a
financial point of view, to the MainStreet shareholders.
Outside counsel explained the legal framework within which the MainStreet
board should act in considering the offer from BB&T and assessing the
information it would receive about the offer. The board heard a report from Mr.
Edward Furash, President of Furash, who explained a strategy for moving forward
as an independent organization, but also explained several risks associated with
that strategy. The board then heard reports from Scott & Stringfellow and from
Sandler O'Neill. Both financial advisors opined that the exchange ratio was
fair, from a financial point of view, to MainStreet shareholders.
During the course of that meeting, the MainStreet board excused Mr. Brenan
and members of management from the meeting and engaged in a further discussion
of the proposed transaction. The board discussed the offer by BB&T as it
related to both current price and to possible future value of the company as an
independent entity. The board discussed the risks Furash raised in a strategy
of independence and compared them to the risks raised by Scott & Stringfellow
and Sandler O'Neill related to "investing" in BB&T common stock. Among other
matters, the board discussed BB&T's recent performance and the strategic
consideration that BB&T was currently a regional institution in a market that
was consolidating nationally. The board considered the potential effect of the
proposed transaction on shareholders, management, employees, customers, and on
the communities in which the company and its affiliate banks are located, giving
no particular weight to any constituency. Specifically, the board, relying on
the opinions of its financial advisors, determined that the transaction was fair
to shareholders from a financial point of view. The board considered the effect
of the merger on management and employees and determined that, although some
employees might lose their jobs, have to relocate or determine that they did not
want to work for a large organization, most employees will have greater
opportunities under BB&T. The board considered BB&T's history of growing
through acquisition and promoting employees that it gained through that
acquisitive process. The board also determined that customers would be better
served by having greater accessibility to their bank across the state (and in
other states) because of BB&T's branch network, and that this would provide
MainStreet customers access to a wider variety of financial products offered by
BB&T. The board also took into account BB&T's commitment to make charitable
contributions totaling at least $1 million in the communities MainStreet serves
through its affiliate banks. The board consulted and
12
<PAGE>
relied on the written materials presented to them for purposes of assessing the
financial value of the offer, the effect of the transaction on other
constituencies, and the risks inherent with the offer. The board focused
particular attention on the opinion of Sandler O'Neill in discussing the
fairness of the consideration to be received by MainStreet shareholders. At the
conclusion of deliberations, management was asked to return to the meeting. Mr.
Brenan asked if there were additional questions or discussion, and then the
matter was put to a vote.
Based on its discussion and consideration of the factors discussed above,
the MainStreet board voted unanimously to approve the merger agreement, the
related plan of merger and the related stock option agreement as being in the
best interests of MainStreet, its shareholders, its employees, its customers,
and the communities in which it operates.
THE MAINSTREET BOARD RECOMMENDS THAT MAINSTREET SHAREHOLDERS VOTE FOR
---
APPROVAL OF THE MERGER AGREEMENT AND THE RELATED PLAN OF MERGER.
BB&T's Reasons for the Merger
One of BB&T's announced acquisition objectives is to build a statewide
franchise in Virginia with an emphasis on customer service, value and personal
attention. BB&T management believes that MainStreet is a well-run organization
that stresses customer service and loyalty and that its acquisition by BB&T,
which will give BB&T a substantial presence in southwestern and central Virginia
as well as expand its presence in the metropolitan Washington, D.C. area, is a
major step toward achieving this goal.
OPINIONS OF MAINSTREET'S FINANCIAL ADVISORS
The fairness opinions of MainStreet's two financial advisors, Sandler
O'Neill and Scott & Stringfellow, are described below. MainStreet would require
fairness opinions to be revised or updated if MainStreet's termination rights
under the merger agreement were triggered due to a decline in stock prices
generally and a substantial decline in BB&T's stock price. MainStreet has used,
directly or indirectly, both of these advisors in the past. The table below
shows compensation paid by MainStreet or by one of its acquired institutions to
these parties in the last three years. A majority of the payments made to Scott
& Stringfellow were in compensation for Scott & Stringfellow's representation of
banks that were acquired by MainStreet.
<TABLE>
<CAPTION>
1996 1997 1998
-------- ---------- ---------
<S> <C> <C> <C>
Scott & Stringfellow* $362,362 $ 13,000 $131,452
Sandler O'Neill** $ -- $1,000,000 $407,308
Total $362,362 $1,013,000 $538,760
======== ========== ========
</TABLE>
____________
*Payments to Scott & Stringfellow include $362,362 paid in 1996 and $88,311
paid in 1998 on behalf of three acquired institutions that used Scott &
Stringfellow as their financial advisor when acquired by MainStreet.
**Payments to Sandler O'Neill represent $300,000 paid in 1998 in connection
with the transaction with BB&T, with the remainder for services associated with
MainStreet's sale of trust preferred securities in 1997.
13
<PAGE>
Opinion of Sandler O'Neill
Pursuant to an engagement letter dated as of August 19, 1998, MainStreet
retained Sandler O'Neill as an independent financial advisor to render an
opinion as to the fairness, from a financial point of view, of the exchange
ratio to the holders of MainStreet common stock. Sandler O'Neill is a nationally
recognized investment banking firm whose principal business specialty is
financial institutions. In the ordinary course of its investment banking
business, Sandler O'Neill is regularly engaged in the valuation of such
businesses and their securities in connection with mergers and acquisitions and
other corporate transactions. Sandler O'Neil did not act as MainStreet's
financial advisor in connection with its consideration of the merger or in
connection with the negotiation of the merger agreement.
On August 26, 1998, Sandler O'Neill delivered to the MainStreet board its
oral and written opinion that, as of such date, the Exchange Ratio was fair to
the holders of shares of MainStreet common stock from a financial point of
view. Sandler O'Neill has also delivered to the MainStreet board a written
opinion dated the date of this proxy statement/prospectus (the "Sandler O'Neill
Fairness Opinion") which is substantially identical to the August 26, 1998
opinion. THE FULL TEXT OF THE SANDLER O'NEILL FAIRNESS OPINION, WHICH SETS
FORTH THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH SUCH
OPINION, IS ATTACHED AS APPENDIX II TO THIS PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION OF THE OPINION SET FORTH
HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX II. HOLDERS OF
SHARES OF MAINSTREET COMMON STOCK ARE URGED TO READ THE SANDLER O'NEILL FAIRNESS
OPINION IN ITS ENTIRETY IN CONNECTION WITH THEIR CONSIDERATION OF THE PROPOSED
MERGER.
THE SANDLER O'NEILL FAIRNESS OPINION WAS PROVIDED TO THE MAINSTREET BOARD
FOR ITS INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT
OF VIEW, OF THE EXCHANGE RATIO TO HOLDERS OF SHARES OF MAINSTREET COMMON STOCK.
IT DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION OF MAINSTREET TO ENGAGE IN
THE MERGER OR ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY HOLDER OF SHARES OF MAINSTREET COMMON STOCK AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE AT THE MEETING WITH RESPECT TO THE MERGER OR ANY OTHER
MATTER RELATED THERETO.
In connection with rendering its August 26, 1998 opinion, Sandler O'Neill
performed a variety of financial analyses. The following is a summary of the
material analyses performed by Sandler O'Neill, but does not purport to be a
complete description of all the analyses underlying Sandler O'Neill's opinion.
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 its 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
MainStreet, 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 on 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.
Summary of Proposal. Sandler O'Neill reviewed the financial terms of the
proposed transaction. Based on the closing price of BB&T common stock on August
25, 1998 of $32.94 and an exchange ratio of 1.18, Sandler calculated an implied
transaction value per share of MainStreet of $38.87. Based upon such implied
transaction value and MainStreet's June 30, 1998 financial information, Sandler
O'Neill calculated the price to tangible book value and price to last twelve
months' normalized earnings. This analysis yielded a price to tangible book
value multiple of 3.48x and a price to normalized last twelve months' earnings
multiple of 25.6x.
14
<PAGE>
Stock Trading History. Sandler O'Neill reviewed the history of the
reported trading prices and volume of MainStreet common stock and BB&T common
stock, and the relationship between the movements in the prices of MainStreet
common stock and BB&T common stock, respectively, to movements in certain stock
indices, including the Standard & Poor's 500 Index (the "S&P Index"), the NASDAQ
Bank Index (the "Bank Index") and selected composite groups of publicly traded
commercial banks (in the case of MainStreet) and larger publicly traded
commercial banks (in the case of BB&T). During the one-year period ended August
25, 1998, MainStreet common stock underperformed each of the indices to which it
was compared. During the three-year period ended August 25, 1998, MainStreet
common stock outperformed each of the indices to which it was compared. During
the one and three-year period ended August 25, 1998, BB&T common stock
outperformed each of the indices to which it was compared.
Comparable Company Analysis. 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
MainStreet and two groups of commercial banks. The first group consisted of
MainStreet and the following twelve publicly traded regional commercial banks
(the "Regional Group"): F&M National Corp., Hancock Holding Co., First United
Bancshares Inc., Carolina First Corp., WesBanco Inc., Republic Bancshares Inc.,
Triangle Bancorp Inc., Hamilton Bancorp Inc., Republic Banking Corp. of FL, City
Holding Co., Alabama National BanCorp. and Simmons First National Corp. Sandler
O'Neill also compared MainStreet to a group of twelve publicly traded commercial
banks which had a return on average equity (based on last twelve months'
earnings) of greater than 16.2% and a price to tangible book value of greater
than 244% (the "Highly Valued Group"). The Highly Valued Group included the
following institutions: Westamerica Bancorp, U.S. Trust Corp., Silicon Valley
Bancshares, TrustCo Bank Corp. of NY, Park National Corp., Republic Bancorp
Inc., Chittenden Corp., Southwest Bancorp. of Texas, Irwin Financial Corp.,
National Penn Bancshares Inc., Investors Financial Services and Santa Barbara
Bancorp. The analysis compared publicly available financial information for
MainStreet and the median data for each of the Regional Group and the Highly
Valued Group as of and for each of the years ended December 31, 1993 through
December 31, 1997 and as of and for the twelve months ended June 30, 1998.
Sandler O'Neill also used publicly available information to perform a
similar comparison of selected financial and market trading information for BB&T
and two different groups of commercial banks. The first group consisted of BB&T
and the following six publicly traded commercial banks (the "Peer Group"):
Wachovia Corp., SunTrust Banks, Inc., SouthTrust Corp., Regions Financial Corp.,
AmSouth Bancorp. and First American Corp. Sandler O'Neill also compared BB&T to
a group of twelve publicly traded commercial banks which had a return on average
equity (based on last twelve months' earnings) of greater than 15.7% and a price
to tangible book value of greater than 275% (the "Larger Highly Valued Group").
The Larger Highly Valued Group consisted of BB&T and Fleet Financial Group, PNC
Bank Corp., KeyCorp, BankBoston Corp., State Street Corp., Comerica Inc., Summit
Bancorp, Northern Trust Corp., Fifth Third Bancorp, Regions Financial Corp., M&T
Bank Corp. and AmSouth Bancorp. The analysis compared publicly available
financial information for BB&T and the median data for each of the Peer Group
and the Larger Highly Valued Group as of and for each of the years ended
December 31, 1993 through December 31, 1997 and as of and for the twelve months
ended June 30, 1998.
<TABLE>
<CAPTION>
Highly-Valued
MainStreet Regional Group Group
-------------------------------------------------------
<S> <C> <C> <C>
Total Assets $2,041,955 $2,041,955 $2,084,568
-------------------------------------------------------
Annual Growth Rate of Total Assets 42.66% 33.55% 15.85%
-------------------------------------------------------
Tangible Equity / Total Assets 7.33% 8.06% 6.88%
-------------------------------------------------------
Intangible Assets / Total Equity 6.55% 8.50% 4.25%
-------------------------------------------------------
Net Loans / Total Assets 48.36% 61.30% 55.64%
-------------------------------------------------------
Cash & Securities / Total Assets 47.86% 31.41% 37.18%
-------------------------------------------------------
Gross Loans / Total Deposits 86.02% 78.95% 70.57%
-------------------------------------------------------
Total Borrowings / Total Assets 31.71% 6.61% 8.99%
-------------------------------------------------------
Nonperforming Assets / Total Assets 0.26% 0.47% 0.41%
-------------------------------------------------------
Loans Loss Reserves / Nonperforming Loans 345.93% 261.93% 338.68%
-------------------------------------------------------
Loans Loss Reserves / Gross Loans 1.41% 1.41% 2.09%
-------------------------------------------------------
Net Interest Margin 3.77% 4.30% 4.87%
-------------------------------------------------------
Loan Loss Provision / Average Assets 0.24% 0.25% 0.24%
-------------------------------------------------------
Non-interest Income / Average Assets 0.82% 1.27% 1.27%
-------------------------------------------------------
Non-interest Expense / Average Assets 2.52% 3.43% 3.39%
-------------------------------------------------------
Efficiency Ratio 56.97% 59.93% 58.07%
-------------------------------------------------------
ROAA 1.09% 1.09% 1.45%
-------------------------------------------------------
ROAE 13.40% 11.99% 18.47%
-------------------------------------------------------
Price / Tangible Book Value per Share 228.29% 228.29% 331.18%
-------------------------------------------------------
Price / Earnings per Share 16.77 18.25 19.20
-------------------------------------------------------
Market Capitialization / Assets 16.73% 19.97% 25.20%
-------------------------------------------------------
Dividend Yield 2.15% 1.82% 1.67%
-------------------------------------------------------
Dividend Payout Ratio 40.14% 34.94% 30.30%
-------------------------------------------------------
</TABLE>
Analysis of Selected Merger Transactions. Sandler O'Neill reviewed 153
transactions announced from January 1, 1998 through August 25, 1998 involving
commercial banks nationwide as acquired institutions with transaction values
greater than $15 million ("Nationwide Transactions") and 53 transactions
announced from January 1, 1998 through August 25, 1998 involving commercial
banks in the Southeast Region (Alabama, Arkansas, Florida, Georgia, Mississippi,
North Carolina, South Carolina, Tennessee, Virginia and West Virginia) as
acquired institutions with transaction values greater than $15 million
("Regional Transactions"). Sandler O'Neill reviewed the ratios of transaction
value to last four quarters' earnings, transaction value to book value,
transaction value to tangible book value, tangible book premium to core
deposits, transaction value to total deposits and transaction value to total
assets and computed high, low, mean, and median ratios and premiums for the
respective groups of transactions. These multiples were applied to MainStreet's
financial information as of and for the twelve months ended June 30, 1998.
Based upon the
15
<PAGE>
median multiples for Nationwide Transactions, Sandler O'Neill derived an imputed
range of values per share of MainStreet common stock of $31.00 to $47.07. Based
upon the median multiples for Regional Transactions, Sandler O'Neill derived an
imputed range of values per share of MainStreet common stock of $32.34 to
$48.07.
No company involved in the transactions included in the above analysis is
identical to MainStreet and no transaction included in the above analysis is
identical to the merger. Accordingly, an analysis of the results of the
foregoing analysis is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of MainStreet and BB&T and the companies to which they are being
compared.
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 MainStreet through the year 2002 under various circumstances,
assuming the current dividend payout ratio and that MainStreet performed in
accordance with earnings forecasts prepared by Sandler O'Neill and certain
variations thereof. To approximate the terminal value of MainStreet common stock
at December 31, 2002, Sandler O'Neill applied price to earnings multiples
ranging from 14x to 32x and applied multiples of tangible book value ranging
from 200% to 380%. 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 different assumptions regarding required rates of return
of holders or prospective buyers of MainStreet common stock. This analysis
indicated an imputed range of values per share of MainStreet common stock of
between $21.58 and $55.91 when applying the price to earnings multiples, and an
imputed range of values per share of MainStreet common stock of between $21.99
and $47.92 when applying multiples of tangible book value. In connection with
its analysis, Sandler O'Neill used sensitivity analyses to consider the effects
changes in the underlying assumptions (including variations with respect to the
growth rate of assets, net interest spread, non-interest income, non-interest
expense and dividend payout ratio) would have on the resulting present value and
discussed these effects with the MainStreet board. Sandler O'Neill noted that
the discounted dividend stream and terminal value analysis is a widely used
valuation methodology, but the results of such methodology are highly dependent
upon the numerous assumptions that must be made, and the results thereof are not
necessarily indicative of actual values or actual future results.
Pro Forma Merger Analysis. Sandler O'Neill analyzed certain potential pro
forma effects of the merger through December 31, 2003, based upon an exchange
ratio of 1.18, MainStreet's and BB&T's current and projected income statements
and balance sheets, and assumptions regarding the economic environment,
accounting and tax treatment of the merger, charges associated with the merger,
operating efficiencies and other adjustments discussed with senior managements
of MainStreet and BB&T. This analysis indicated that the merger would be
accretive to BB&T's earnings per share and accretive to tangible book value per
share for all periods analyzed. This analysis also indicated that, from a
MainStreet shareholder's perspective, as compared to the projected stand-alone
performance of MainStreet, the merger would be accretive to MainStreet's
earnings per share and dilutive to tangible book value per share for all periods
analyzed. The actual results achieved by the combined company may vary from
projected results and the variations may be material.
In connection with rendering its August 26, 1998 opinion, Sandler O'Neill
reviewed, among other things:
. the merger agreement and exhibits thereto;
. the related option agreement;
. certain publicly available financial statements of MainStreet and
other historical financial information provided by MainStreet that
Sandler O'Neill deemed relevant;
. certain publicly available financial statements of BB&T and other
historical financial information provided by BB&T that Sandler O'Neill
deemed relevant;
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<PAGE>
. certain financial analyses and forecasts of MainStreet prepared by and
reviewed with management of MainStreet and the views of senior
management of MainStreet regarding MainStreet's past and current
business, operations, results thereof, financial condition and future
prospects;
. certain financial analyses and forecasts of BB&T prepared by and
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;
. the pro forma impact of the merger;
. the publicly reported historical price and trading activity for
MainStreet's and BB&T's common stock, including a comparison of
certain financial and stock market information for MainStreet and BB&T
with similar publicly available information for certain other
companies the securities of which are publicly traded;
. the financial terms of recent business combinations in the banking
industry, to the extent publicly available;
. the current market environment generally and the banking environment
in particular; and
. such other information, financial studies, analyses and investigations
and financial, economic and market criteria as Sandler O'Neill
considered relevant.
Sandler O'Neill was not asked to, and did not, solicit indications of interest
in a potential transaction from third parties.
In connection with rendering the Sandler O'Neill Fairness Opinion, Sandler
O'Neill confirmed the appropriateness of its reliance on the analyses used to
render its August 26, 1998 opinion by performing procedures to update certain of
such analyses and by reviewing the assumptions upon which such analyses were
based and the factors considered in connection therewith.
In performing its reviews and analyses, Sandler O'Neill assumed and relied
upon, without independent verification, the accuracy and completeness of all the
financial information, analyses and other information that was publicly
available or otherwise furnished to, reviewed by or discussed with it, and
Sandler O'Neill does not assume any responsibility or liability therefor.
Sandler O'Neill did not make an independent evaluation or appraisal of the
specific assets, the collateral securing assets or the liabilities (contingent
or otherwise) of MainStreet or BB&T or any of their respective subsidiaries, or
the collectibility of any such assets, nor was it furnished with any such
evaluations or appraisals. Sandler O'Neill is not an expert in the evaluation
of allowances for loan losses and it has not made an independent evaluation of
the adequacy of the allowance for loan losses of MainStreet or BB&T, nor has it
reviewed any individual credit files relating to MainStreet or BB&T. With
MainStreet's consent, Sandler O'Neill has assumed that the respective allowances
for loan losses for both MainStreet and BB&T are adequate to cover such losses
and will be adequate on a pro forma basis for the combined entity. In addition,
Sandler O'Neill has not conducted any physical inspection of the properties or
facilities of MainStreet or BB&T. With respect to all financial information and
projections reviewed with 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 respective managements of the
respective future financial performances of MainStreet and BB&T and that such
performances will be achieved. Sandler O'Neill expressed no opinion as to such
financial projections or the assumptions on which they were based.
Sandler O'Neill's opinion was necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
such opinion. Sandler O'Neill assumed, in all respects material to its
17
<PAGE>
analysis, that all of the representations and warranties contained in the merger
agreement and all related agreements are true and correct and that each party to
such agreements will perform all of the covenants required to be performed by
such party under such agreements. Sandler O'Neill also assumed, with
MainStreet's consent, that there has been no material change in MainStreet's or
BB&T's assets, financial condition, results of operations, business or prospects
since the date of the last publicly filed financial statements available to
them, that MainStreet and BB&T will remain as going concerns for all periods
relevant to its analyses, and that the merger will be accounted for as a pooling
of interests and will qualify as a tax-free reorganization for federal income
tax purposes. Sandler O'Neill further assumed that the termination provision
set forth in Section 7.1 (g) of the merger agreement would not be exercised and
that the terms and conditions precedent in the merger agreement are not waived
or modified.
Under its engagement letter, Sandler O'Neill has received a fee of $300,000
for rendering its fairness opinion. MainStreet 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 securities laws.
Sandler O'Neill has in the past provided certain other investment banking
services to MainStreet and has received compensation for such services. In the
ordinary course of its business, Sandler O'Neill may actively trade the debt and
equity securities of MainStreet and BB&T and their respective affiliates 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.
Opinion of Scott & Stringfellow
Pursuant to an engagement letter dated as of August 17, 1998, MainStreet
retained Scott & Stringfellow as a financial advisor in connection with
MainStreet's consideration of a possible business combination with BB&T. In
connection therewith, the MainStreet board requested Scott & Stringfellow to
render its opinion as to the fairness, from a financial point of view, of the
exchange ratio to the holders of MainStreet common stock. At the August 26,
1998 meeting at which MainStreet's board considered and approved the merger
agreement, Scott & Stringfellow delivered to MainStreet's board both its oral
and written opinion that as of such date, the exchange ratio was fair, from a
financial point of view, to the holders of shares of MainStreet common stock.
Scott & Stringfellow has reconfirmed its opinion dated as of August 26, 1998, by
delivering a written opinion to the MainStreet board, dated the date of this
proxy statement/prospectus, to the effect that, as of the date thereof, the
exchange ratio was fair to the holders of shares of MainStreet common stock from
a financial point of view. Scott & Stringfellow is a regional investment banking
firm and was selected by MainStreet based on the firm's reputation and
experience in investment banking, its extensive experience and knowledge of the
Virginia banking market, its recognized expertise in the valuation of commercial
banking businesses and because of its familiarity with, and prior work for
MainStreet. Scott & Stringfellow, through its investment banking business and
specifically through its Financial Institutions Group, specializes in commercial
banking institutions and is continually engaged in the valuation of such
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings and other corporate transactions.
BB&T entered into an agreement on August 10, 1998 to acquire Scott &
Stringfellow and its affiliated companies. BB&T did not impose any limitations
or otherwise provide any input or direction as to Scott & Stringfellow's
engagement by MainStreet or its opinion as to the fairness, from a financial
point of view, of the exchange ratio to the holders of MainStreet common stock.
The full text of Scott & Stringfellow's opinion, dated the date of this
proxy statement/prospectus, which sets forth the assumptions made, procedures
followed, matters considered and limits on the review undertaken, is attached as
Appendix III to this proxy statement/prospectus. The description of the Scott &
Stringfellow opinion set forth herein is qualified in its entirety by reference
to Appendix III. The Scott & Stringfellow opinion is provided for the
information of MainStreet shareholders because it was provided to the MainStreet
board in connection with its consideration of the merger. However, in
considering the Scott & Stringfellow fairness opinion, the MainStreet
shareholders should note
18
<PAGE>
the potential conflict of interest to which Scott & Stringfellow was subject in
providing such opinion as described above, which led MainStreet to engage a
second firm, Sandler O'Neill, to provide an independent opinion as to the
fairness of the exchange ratio. The Sandler O'Neill opinion is attached as
Appendix II to this proxy statement/prospectus.
In developing its opinion, Scott & Stringfellow reviewed and analyzed:
. the merger agreement;
. this proxy statement/prospectus;
. MainStreet's audited financial statements for the three years ended
December 31, 1997;
. MainStreet's unaudited financial statements for the nine months ended
September 30, 1998 and 1997, and other internal information relating
to MainStreet prepared by MainStreet's management;
. information regarding the trading market for MainStreet common stock
and BB&T common stock and the price ranges within which the respective
stocks have traded;
. the relationship of prices paid to relevant financial data such as net
worth, earnings, deposits and assets in certain bank and bank holding
company mergers and acquisitions in recent years;
. BB&T's annual reports to shareholders and its audited financial
statements for the three years ended December 31, 1997;
. BB&T's unaudited financial statements for the nine months ended
September 30, 1998 and 1997 and other internal information relating to
BB&T prepared by BB&T's management; and
. conducted such other studies, analysis and investigations particularly
of the banking industry, and considered such other information as it
deemed appropriate, the material portion of which is described below.
. Scott & Stringfellow also took into account its assessment of general
economic, market and financial conditions and its experience in other
transactions, as well as its experience in securities valuations and
knowledge of the commercial banking industry generally.
. Scott & Stringfellow also has discussed with members of MainStreet's
and BB&T's management past and current business operations, the
background of the merger, the reasons and basis for the merger,
results of regulatory examinations, and the business and future
prospects of MainStreet and BB&T individually and as a combined
entity, as well as other matters relevant to its inquiry.
Scott & Stringfellow relied without independent verification upon the
accuracy and completeness of all of the financial and other information reviewed
by it and discussed with it for purposes of its opinion. With respect to
financial forecasts reviewed by Scott & Stringfellow in rendering its opinion,
Scott & Stringfellow assumed that such financial forecasts were reasonably
prepared on the basis reflecting the best currently available estimates and
judgment of the managements of MainStreet and BB&T as to the future financial
performance of MainStreet and BB&T, respectively. Scott & Stringfellow did not
make an independent evaluation or appraisal of the assets or liabilities of
MainStreet and BB&T nor was it furnished with any such appraisal.
In connection with rendering its August 26, 1998 opinion, Scott &
Stringfellow performed a variety of financial analyses. Scott & Stringfellow
evaluated the financial terms of the transaction using standard valuation
methods, including stock trading history, comparable acquisition analysis,
contribution analysis, pro forma merger analysis,
19
<PAGE>
dividend discount analysis, ability to pay analysis and comparable company
analysis, among others. The following is a summary of the material analyses
presented by Scott & Stringfellow to the MainStreet board of directors on August
26, 1998, in connection with its fairness opinion dated as of such date.
SUMMARY OF PROPOSAL. Scott & Stringfellow reviewed the terms of the
proposed transaction, including the exchange ratio and the implied aggregate
transaction value. Based on BB&T's closing stock price of $32.94 on August 25,
1998, Scott & Stringfellow calculated an implied transaction value per share of
MainStreet common stock of $38.87, and an implied total transaction value of
approximately $552 million. Scott & Stringfellow calculated the premium over the
closing price of MainStreet common stock on August 25, 1998, price to book,
price to tangible book, implied core deposit premium (defined as the transaction
value minus the tangible book value divided by core deposits) and price to
trailing twelve months' earnings multiple for MainStreet based on such implied
total transaction value. This analysis yielded a premium over the closing price
of MainStreet common stock on August 25, 1998 of 52.42%, a price to book value
multiple of 3.25x, a price to tangible book value multiple of 3.45x, an implied
core deposit premium of 37.64% and a price to trailing twelve months' earnings
multiple of 25.57x.
STOCK TRADING HISTORY. Scott & Stringfellow reviewed the history of the
reported trading prices and volume of the MainStreet common stock and the BB&T
common stock, and the relationship between the movements in the prices of the
MainStreet common stock and the BB&T common stock to each other and to movements
in certain stock indices, including the Standard & Poor's 500 Index, the
Standard & Poor's Bank Composite Index, the Nasdaq Composite Index, the Dow
Jones Industrials, the Russell 3000 and the Wilshire Small Capitalization Index.
COMPARABLE ACQUISITION ANALYSIS. Scott & Stringfellow reviewed 14
transactions announced from January 1, 1997 to August 25, 1998 involving
commercial banking institutions nationwide with assets between $1.0 and $5.0
billion ("Nationwide Transactions") and 11 transactions announced from January
1, 1996 to August 25, 1998 involving commercial banking institutions in the
Southeast and Mid-Atlantic (Alabama, Arkansas, Delaware, Florida, Georgia,
Maryland, Mississippi, New York, New Jersey, North Carolina, Pennsylvania, South
Carolina, Tennessee, Virginia, and West Virginia) with assets between $1.0 and
$10.0 billion ("Regional Transactions"). Scott & Stringfellow compared the
price to book value, price to tangible book value, price to last twelve months'
earnings, price to deposits, price to assets, and the implied core deposit
premium at the announcement date for such Nationwide Transactions and Regional
Transactions to the proposed merger at announcement.
<TABLE>
<CAPTION>
BB&T/ NATIONWIDE REGIONAL
MAINSTREET TRANSACTIONS TRANSACTIONS
<S> <C> <C> <C>
Deal Price/Book Value 3.25x 2.99x 2.94x
Deal Price/Tangible Book 3.45x 3.37x 3.05x
Deal Price/LTM Earnings 25.57x 23.72x 22.25x
Deal Price/Deposits 45.17% 36.25% 34.77%
Deal Price/Assets 26.08% 28.15% 27.70%
Tangible Book Premium/Core Deposits 37.64% 29.28% 26.81%
</TABLE>
CONTRIBUTION ANALYSIS. Scott & Stringfellow reviewed the relative
contributions to, among other things, last twelve months' core net income, last
twelve months' non-interest income, estimated 1998 net income, estimated 1999
net income, total equity and market capitalization to be made by MainStreet and
BB&T to the combined institution based on data at and for the twelve months
ended June 30, 1998. This analysis indicated the MainStreet's implied
contribution was 4.26% of last twelve months' core net income, 2.99% of last
twelve months' non-interest income, 4.45% of estimated 1998 net income, 4.59% of
estimated 1999 net income, 6.50% of total equity and 3.74% of market
20
<PAGE>
capitalization. Based upon the exchange ratio, holders of the MainStreet common
stock would own approximately 5.59% of the outstanding shares of the combined
institution.
PRO FORMA MERGER ANALYSIS. Based upon earnings forecasts of MainStreet and
BB&T, as well as the timing and amount of cost savings and revenue enhancements
expected to result from the merger, Scott & Stringfellow analyzed certain pro
forma effects of the merger. This analysis indicated that the transaction would
be accretive to earnings per share of BB&T in year one and each year thereafter,
once the projected cost savings and projected revenue enhancements are realized,
and that the merger would be accretive to BB&T's book value and tangible book
value per share. The actual results achieved by BB&T may vary from projected
results. The effect of the merger on MainStreet under the same assumptions,
compared to its projected stand-alone performance, would be accretive to
earnings per share and dividends per share.
DIVIDEND DISCOUNT ANALYSIS. Scott & Stringfellow performed a dividend
discount analysis to determine a range of present values per share of MainStreet
common stock assuming MainStreet continued to operate as a stand-alone entity.
This range was determined by adding (1) the present value of the estimated
future dividend stream that MainStreet could generate, and (2) the present value
of the "terminal value" of MainStreet common stock at the end of year 2003. To
determine a projected dividend stream, Scott & Stringfellow assumed a dividend
payout equal to 40% of MainStreet's projected net income. Scott & Stringfellow
used earnings estimates available from IBES for 1998. The net income projections
were grown using an earnings growth rate of 9% for years 1999 through 2003. The
"terminal value" of MainStreet common stock at the end of the period was
determined by applying a range of price-to-earnings multiples (16.0x to 18.0x)
to year 2003 projected earnings. The dividend stream and terminal values were
discounted to present value using discount rates of 11% to 13%, which Scott &
Stringfellow viewed as the appropriate discount rate range for a commercial bank
with MainStreet's risk characteristics. Based upon the above assumptions, the
stand-alone value of MainStreet common stock ranged from approximately $26 to
$31 per share.
ABILITY TO PAY ANALYSIS. Scott & Stringfellow performed an analysis
comparing the merger to hypothetical acquisitions of MainStreet by five banking
institutions other than BB&T for consideration equivalent in value to the value
of the consideration proposed in the merger and reviewed certain publicly
available information with respect to such hypothetical acquirors. The analyses
used IBES median earnings estimates for the hypothetical acquirors and assumed
cost savings ranging from 5% to 25% of MainStreet's annualized noninterest
expenses. Scott & Stringfellow analyzed the effect of such transactions on the
hypothetical acquirors' 1998 and 1999 earnings. Scott & Stringfellow also
estimated the price at which an acquisition of MainStreet by such hypothetical
acquirors would be neither accretive nor dilutive in 1999, indicating a price
per share of MainStreet common stock of between $25 and $39 per share.
ANALYSIS OF SELECTED COMPARABLE COMPANIES. Scott & Stringfellow analyzed
the performance and financial condition of BB&T relative to a group of
commercial banks consisting of AmSouth Bancorporation, CCB Financial
Corporation, Centura Banks, Inc., Colonial BancGroup, Inc., Compass Bancshares,
Inc., First Citizens BancShares, Inc., First Tennessee National Corporation,
First Virginia Banks, Inc., One Valley Bancorp, Inc., SouthTrust Corporation,
Synovus Financial Corp., Trustmark Corporation, Union Planters Corporation, and
Wachovia Corporation (the "Bank Peer Group"). The financial ratios shown in the
table below are as of September 30, 1998; the market price multiples are based
on market prices as of December 2, 1998.
<TABLE>
<CAPTION>
BB&T BANK PEER
CORPORATION GROUP AVERAGE
<S> <C> <C>
Last 12 Months Net Interest Margin 4.36% 4.34%
Last 12 Months Efficiency Ratio 50.36% 57.93%
Last 12 Months Return on Avg. Assets 1.45% 1.25%
Last 12 Months Return on Avg. Equity 18.70% 15.02%
</TABLE>
21
<PAGE>
<TABLE>
BB&T BANK PEER
CORPORATION GROUP AVERAGE
<S> <C> <C>
Tangible Equity/Assets 7.00% 7.51%
Equity/Assets 8.08% 8.49%
Risk Based Capital Ratio 14.82% 12.68%
Nonperforming Assets/Assets 0.34% 0.32%
Reserves/Nonperforming Assets 270.40% 318.33%
Market Price/Last 12 Months Earnings 23.25x 18.48x
Market Price/1998 Estimated Earnings 21.91x 17.47x
Market Price/1999 Estimated Earnings 19.75x 15.70x
Market Price/Book Value 4.05x 2.75x
Current Dividend Yield 1.84% 2.22%
</TABLE>
OTHER ANALYSES. Scott & Stringfellow also reviewed, among other things,
selective investment research reports on, and earnings estimates for, MainStreet
and BB&T and analyzed available information regarding the ownership of BB&T
common stock. In addition, Scott & Stringfellow prepared an overview of BB&T's
business, prepared a summary of the historical financial performance of BB&T,
summarized BB&T's financial goals and objectives, and, based on publicly
available information, analyzed BB&T's deposit market share and branch presence
in the states in which it operates.
In connection with its opinion dated as of the date of this proxy
statement/prospectus, Scott & Stringfellow performed procedures to update, as
necessary, certain of the analyses described above and reviewed the assumptions
on which such analyses described above were based and the factors considered in
connection therewith.
The summary set forth above includes all the material factors considered by
Scott & Stringfellow in developing its opinion. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of these methods to the
particular circumstances and, therefor, such an opinion is not readily
susceptible to summary description. Accordingly, notwithstanding the separate
factors discussed above, Scott & Stringfellow believes that its analyses must be
considered as a whole and that selecting portions of its analysis and of the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. As
a whole, these various analyses contributed to Scott & Stringfellow's opinion
that the exchange ratio is fair from a financial point of view to MainStreet's
shareholders.
Pursuant to an engagement letter dated August 17, 1998 between MainStreet
and Scott & Stringfellow, in exchange for its services, MainStreet has agreed to
pay Scott & Stringfellow a transaction fee of $3.0 million, which is payable and
contingent upon the consummation of the merger. In the past, Scott &
Stringfellow has provided investment banking services to MainStreet for which
services Scott & Stringfellow received customary fees. In the ordinary course of
its business, Scott & Stringfellow may actively trade the equity securities of
MainStreet for its own account or the account of its customers, and,
accordingly, may at any time hold a long or short position in such securities.
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EXCHANGE RATIO
At the effective time of the merger, MainStreet will be merged with and
into BB&T Financial-VA, and BB&T Financial-VA will be the surviving corporation
in the merger. In the merger, each share of MainStreet common stock outstanding
at the effective time will be converted into the right to receive BB&T common
stock at the exchange ratio of 1.18 shares of BB&T common stock for each share
of MainStreet common stock.
An upward adjustment to the exchange ratio could occur only if MainStreet
elected to terminate the merger agreement as described below, and if BB&T then
elected to avoid termination of the merger agreement by adjusting the exchange
ratio. Under no circumstances would the exchange ratio be less than 1.18 shares
of BB&T common stock for each share of MainStreet common stock.
MainStreet may elect to terminate the merger agreement and abandon the
merger if both of the following circumstances exist:
. the average closing price per share of BB&T common stock on the NYSE
on the five trading days before the Determination Date (defined below)
(the "Closing Value") is less than $28.85, and
. (a) the amount obtained by dividing the Closing Value by $32.19 (the
"BB&T Ratio") is less than (b) 90% of the amount obtained by dividing
the Index Price on the Determination Date by the Index Price (these
terms are defined below) on August 26, 1998 (the amount determined
pursuant to clause (b) the "Index Ratio").
MainStreet may refuse to complete the merger pursuant to this provision by
giving notice to BB&T during the five-day period following the Determination
Date. BB&T will thereafter have a five-day period in which it could elect to
increase the exchange ratio (rounded to the nearest thousandth) so that holders
of MainStreet common stock would receive the consideration that they would have
received had the Closing Value been $28.85, i.e., BB&T common stock having an
implied market value (based on the Closing Value) of approximately $34.04 per
share of MainStreet common stock. BB&T WOULD HAVE NO OBLIGATION TO ELECT TO
INCREASE THE EXCHANGE RATIO. Such an election would be made by giving notice to
MainStreet of the election and the revised exchange ratio, whereupon MainStreet
would be required to proceed with the merger with the adjusted exchange ratio in
accordance with all other terms of the merger agreement. MainStreet could
withdraw its notice of termination at any time during the ten-day period
following the Determination Date and elect to proceed with the merger at the
exchange ratio of 1.18 if BB&T were to determine not to adjust the exchange
ratio.
For purposes of the rights of termination and adjustment described above,
the following terms are defined as follows:
"Determination Date" means the tenth calendar day preceding the date
designated by BB&T as the closing date of the merger.
"Index Group" means 12 bank holding companies designated in the merger
agreement, the common stocks of all of which must be publicly traded and as
to which there may not have been, since August 26, 1998 and before the
Determination Date, any public announcement of a proposal for such company
to be acquired or for such company to acquire another company or companies
in transactions with a value exceeding 25% of the acquiror's market
capitalization. If any such company or companies are removed from the
Index Group, the weights (which have been determined based upon the number
of shares of outstanding common stock) will be redistributed
proportionately in determining the Index Price. If any company belonging
to the Index Group, or BB&T, declares or effects a stock dividend,
reclassification, recapitalization, split-up, combination, exchange of
shares or similar transaction between August 26, 1998 and the Determination
Date, the prices for the common stock of such company or BB&T will be
appropriately adjusted.
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"Index Price" on a given date means the weighted average (weighted in
accordance with the factors listed above and in the merger agreement) of
the closing sales prices of the companies composing the Index Group.
These conditions reflect the parties' agreement that MainStreet's
shareholders will assume certain risks of decline in the market value of BB&T
common stock. If the value of BB&T common stock were to decline so that the
Closing Value was below $28.85, but the Closing Value did not reflect a decline
in the price of BB&T common stock from $32.19 (the closing price of BB&T common
stock on August 26, 1998) (the "Starting Price") of more than 10% in comparison
to the stock prices of the group of comparable bank holding company stocks (the
Index Group referenced above) as measured from August 26, 1998 to the
Determination Date, then MainStreet's shareholders would continue to assume the
risk of decline in the value of BB&T common stock. MainStreet will have the
right to terminate the merger agreement only when both (a) the Closing Value is
less than $28.85 and (b) the decline from the value of the Starting Price to the
Closing Value exceeds by more than 10% the decline in value for the group of
comparable bank holding companies from August 26, 1998 to the Determination
Date.
If the MainStreet board elects to terminate the merger agreement because of
a decline in the price of BB&T common stock, BB&T may avoid termination by
increasing the exchange ratio. In deciding whether to increase the exchange
Ratio, the principal factors BB&T would consider include the projected effect of
the merger on BB&T's pro forma earnings and book value per share and whether
BB&T's assessment of MainStreet's earning potential as part of BB&T justifies
the issuance of a greater number of shares of BB&T common stock. If BB&T should
decline to adjust the exchange ratio, MainStreet may elect to withdraw its
election to terminate and to proceed with the merger without adjustment. In
making this determination, the principal factors the MainStreet board would
consider include whether the merger remains in the best interest of MainStreet
and its shareholders, despite the decline in the BB&T common stock price, and
whether the consideration to be received by MainStreet shareholders remains fair
from a financial point of view. Prior to making any decision to terminate the
merger agreement or to proceed with the merger without adjustment of the
exchange ratio, the MainStreet board would consult with its financial and other
advisors and would consider all financial and other information it deemed
relevant to its decision, including considerations relating to the necessity or
desirability of resoliciting MainStreet shareholders under the circumstances.
If MainStreet elected not to exercise its right to terminate the merger
agreement, the exchange ratio would remain 1.18 and the dollar value of the
consideration which the MainStreet shareholders would receive for each share of
MainStreet common stock would be the value of 1.18 shares of BB&T common stock
at the effective time. If the termination right were triggered and BB&T will
not increase the exchange ratio, the MainStreet board could determine to proceed
with the merger at the 1.18 exchange ratio. If MainStreet decided to proceed,
it would resolicit shareholders only if the MainStreet board believed that it
had a fiduciary duty or otherwise decided to do so.
The operation of the exchange ratio and the adjustment mechanism can be
illustrated by three scenarios. (For purposes of the numerical examples, the
Index Price, as of August 26, 1998, is deemed to be $100.)
. The first scenario is that the Closing Value of the BB&T common stock
is not less than $28.85. Under this scenario, the exchange ratio would
be 1.18 and there would be no potential adjustment to the exchange
ratio and no right on the part of MainStreet to terminate the merger
agreement due to a decline in the price of BB&T common stock. The
implied market value (based on the Closing Value) of the consideration
to be received by MainStreet shareholders would be not less than
$34.04.
. The second scenario is that the Closing Value is less than $28.85 but
the BB&T Ratio is equal to or above the Index Ratio. In this case,
the exchange ratio would be 1.18 and there would be no right on the
part of MainStreet to terminate the merger agreement due to the
decline in the value of BB&T common stock and therefore no potential
adjustment to the exchange ratio, even though the implied market value
of the consideration to be received by MainStreet shareholders would
have fallen from a pro forma $37.98 as of August 26, 1998 to less than
$34.04 per share. For example, if the Closing Value were $25.75 and
the Index Price were $85.00, the BB&T Ratio would be 0.8 ($25.75 /
$32.19)
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and the Index Ratio would be 0.765 (0.9 x ($85.00 / $100.00)). Based
upon the assumed $25.75 Closing Value, the consideration to be
received by MainStreet shareholders would have an implied market value
of $30.39 per share.
. The third scenario is that both the Closing Value is less than $28.85
and the BB&T Ratio is less than the Index Ratio. In this case,
MainStreet would have the right to terminate the merger agreement.
BB&T would have the right, but not the obligation, to reinstate the
merger agreement by increasing the exchange ratio (rounded to the
nearest thousandth) so that MainStreet shareholders would receive
shares of BB&T common stock having an implied market value (based upon
the Closing Value) equal to approximately $34.04 per share. For
example, if the Closing Value were $25.15 and the Index Price were
$90.00, the BB&T Ratio would be 0.78 ($25.15 / $32.19) and the Index
Ratio would be 0.81 (0.9 x ($90.00 / $100.00)). Based upon the
assumed $25.15 Closing Value, the consideration to be received by
MainStreet shareholders would have an implied market value of $29.68
per share. If the MainStreet board elected to terminate the merger
agreement, BB&T would have the right, but not the obligation, to
reinstate the merger agreement by increasing the exchange ratio within
five days to 1.353, which represents $34.04 divided by the Closing
Value, rounded to the nearest thousandth. Based upon the assumed
$25.15 Closing Value, the new exchange ratio would represent a value
to MainStreet shareholders of $34.03 per share.
MainStreet shareholders should be aware that the actual market value of a
share of BB&T common stock at the effective time and at the time certificates
for those shares are delivered following surrender and exchange of certificates
for shares of MainStreet common stock may be more or less than the Closing
Value. MainStreet shareholders are urged to obtain information on the market
value of BB&T common stock that is more recent than that provided in this proxy
statement/prospectus. See "Summary-Comparative Market Prices and Dividends."
No fractional shares of BB&T common stock will be issued in the merger.
Holders of MainStreet common stock otherwise entitled to a fractional share will
be paid an amount in cash determined by multiplying the fractional part of such
share of BB&T common stock by the closing price of BB&T common stock on the last
trading day before the effective time.
EXCHANGE OF MAINSTREET COMMON STOCK CERTIFICATES
At the effective time, by virtue of the merger and without any action on
the part of MainStreet or the holders of MainStreet common stock, each share of
MainStreet common stock issued and outstanding immediately before the effective
time will be converted into and will represent the right to receive, upon
surrender of the certificate representing such share of MainStreet common stock
as described below, whole shares of BB&T common stock and cash in lieu of any
fractional share interest. Promptly after the effective time, BB&T will deliver
or mail to each MainStreet shareholder a form of letter of transmittal and
instructions for use in effecting the surrender of the certificates that,
immediately before the effective time, represented any shares of MainStreet
common stock. Upon surrender of these certificates or other satisfactory
evidence of ownership, together with such letter of transmittal duly executed
and completed in accordance with its instructions and such other documents as
may be reasonably requested, BB&T will promptly transfer the merger
consideration to the persons entitled to receive it.
HOLDERS OF MAINSTREET COMMON STOCK SHOULD NOT SEND IN THEIR STOCK
CERTIFICATES UNTIL THEY RECEIVE TRANSMITTAL FORMS AND INSTRUCTIONS.
Until surrendered as described above, each outstanding certificate that
prior to the effective time represented one or more shares of MainStreet common
stock will be deemed upon the effective time for all purposes to represent only
the right to receive the merger consideration. No interest will be paid or
accrued on the merger consideration upon the surrender of the certificate or
certificates representing shares of MainStreet common stock. With respect to
any certificate for MainStreet common stock that has been lost or destroyed,
BB&T will pay the merger consideration
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attributable to such certificate upon receipt of a surety bond or other adequate
indemnity as required in accordance with BB&T's standard policy and evidence
reasonably satisfactory to BB&T of ownership of the shares in question. After
the effective time, no transfer of the shares of MainStreet common stock
outstanding immediately before the effective time will be made on the stock
transfer books of BB&T Financial-VA.
BB&T Financial-VA will pay any dividends or other distributions with a
record date before the effective time that have been declared or made by
MainStreet in respect of shares of MainStreet common stock in accordance with
the terms of the merger agreement and that remain unpaid at the effective time.
To the extent permitted by law, former shareholders of record of MainStreet will
be entitled to vote after the effective time at any meeting of BB&T shareholders
the number of whole shares of BB&T common stock into which their respective
shares of MainStreet common stock are converted, regardless of whether such
holders have exchanged their certificates representing MainStreet common stock
for certificates representing BB&T common stock. Whenever a dividend or other
distribution is declared by BB&T on the BB&T common stock, the record date for
which is at or after the effective time, the declaration will include dividends
or other distributions on all shares of BB&T common stock issuable pursuant to
the merger agreement, but after the effective time 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 MainStreet common stock until such holder surrenders
such certificate for exchange as described above. 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 of MainStreet common stock
represented by such certificate.
THE MERGER AGREEMENT
Effective Date and Time of the Merger
The merger agreement provides that the closing of the merger will take
place on the business day designated by BB&T that is within 30 days following
the satisfaction of the conditions to the completion of the merger, or such
later date as the parties may otherwise agree. The effective time will occur at
the time and date specified in the articles of merger to be filed with State
Corporation Commission of the Commonwealth of Virginia. It is currently
anticipated that the filing of the articles of merger will take place as soon as
practicable following the date on which the merger agreement and the plan of
merger is approved by the MainStreet shareholders and all other conditions to
the respective obligations of BB&T and MainStreet to complete the merger have
been satisfied. If the merger is approved at the meeting, it is currently
anticipated that the filing of the articles of merger and the effective time
will occur by January 31, 1999.
Conditions to the Merger
The obligations of BB&T and MainStreet to carry out the merger are subject
to satisfaction (or, if permissible, waiver) of the following conditions at or
before the effective time:
. all corporate action necessary to authorize the performance of the
merger agreement and the plan of merger must have been duly and
validly taken, including the approval by the shareholders of
MainStreet of the merger agreement and the plan of merger;
. BB&T's registration statement on Form S-4 relating to the merger
(including any post-effective amendments) must be effective under the
Securities Act of 1933, as amended, and BB&T must have received all
state securities authorizations or confirmations as to the
availability of exemptions, no proceedings may be pending or
threatened by the SEC or any state securities administration to
suspend the effectiveness of the Registration Statement and the BB&T
common stock to be issued in the merger must either have been
registered or be subject to exemption from registration under
applicable state securities laws;
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. the parties must have received all regulatory approvals required in
connection with the transactions in the merger agreement, all notice
periods and waiting periods required with respect to the approvals
must have passed and all approvals must be in effect;
. neither BB&T nor MainStreet nor any of their respective subsidiaries
may be subject to any order, decree or injunction of a court or agency
of competent jurisdiction that enjoins or prohibits completion of the
transactions in the merger agreement; and
. MainStreet and BB&T must have received an opinion of BB&T's legal
counsel, Womble Carlyle Sandridge & Rice, PLLC, in form and substance
satisfactory to MainStreet and BB&T, substantially to the effect that
the merger will constitute one or more reorganizations under Section
368 of the Internal Revenue Code of 1986, as amended, and that the
shareholders of MainStreet will not recognize any gain or loss to the
extent that they exchange shares of MainStreet common stock for shares
of BB&T common stock.
The obligations of MainStreet to carry out the transactions in the merger
agreement are also subject to the satisfaction of the following additional
conditions at or before the effective time, unless, where permissible, waived by
MainStreet:
. BB&T must have performed in all material respects all obligations and
complied in all material respects with all covenants required by the
merger agreement;
. all approvals of the transactions in the merger agreement from the
Federal Reserve and any other state or federal government agency,
department or body whose approval is required for the completion of
the merger must have been received and all waiting periods with
respect to such approvals must have expired;
. the shares of BB&T common stock to be issued in the merger must have
been approved for listing on the NYSE, subject to official notice of
issuance; and
. MainStreet must have received certain closing certificates and legal
opinions from BB&T and its counsel.
In addition, all representations and warranties of BB&T will be evaluated
as of the date of the merger 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 provided in the merger agreement or consented to in writing
by MainStreet. The representations and warranties of BB&T concerning
. its capitalization,
. its and its subsidiaries' organization and authority to conduct
business,
. its authorization and the binding nature of the merger agreement and
. the absence of any conflict between the transactions in the merger
agreement and BB&T's articles of incorporation or its bylaws
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 merger agreement such
that the aggregate effect of such inaccuracies has, or is reasonably likely to
have, a material adverse effect on BB&T.
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The obligations of BB&T to carry out the transactions in the merger
agreement are also subject to satisfaction of the following additional
conditions at or before the effective time, unless, where permissible, waived by
BB&T:
. no regulatory approval may have imposed any condition or requirement
that, in the reasonable opinion of the board of directors of BB&T,
would so materially adversely affect the business or economic benefits
to BB&T of the transactions in the merger agreement as to render their
completion inadvisable or unduly burdensome;
. MainStreet must have performed in all material respects all
obligations and complied in all material respects with all covenants
required by the merger agreement;
. BB&T must have received agreements from certain affiliates of
MainStreet concerning the shares of BB&T common stock to be received
by them;
. BB&T must have received letters from Arthur Andersen, LLP dated as of
the filing of the Registration Statement and as of the effective time
to the effect that the merger will qualify for pooling-of-interests
accounting treatment; and
. BB&T must have received certain closing certificates and legal
opinions from MainStreet and its counsel.
In addition, all representations and warranties of MainStreet will be
evaluated as of the date of the merger 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 provided in the merger agreement or consented to in
writing by BB&T. The representations and warranties of MainStreet concerning
. its capitalization,
. its and its subsidiaries' organization and authority to conduct
business,
. its ownership of its subsidiaries,
. its authorization and the binding nature of the merger agreement,
. the absence of conflict between the transactions in them merger
agreement and MainStreet's articles of incorporation or its bylaws,
. its forbearance from taking any actions that would negatively affect
the pooling-of-interest or tax-free elements of the merger or the
receipt of necessary regulatory approvals and
. actions taken to exempt the merger from any applicable 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 MainStreet set forth in the merger 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 MainStreet.
Conduct of MainStreet's and BB&T's Business Prior to the Effective Time of
the Merger
Except with the prior consent of BB&T, before the effective time MainStreet
may not, and must cause each of its subsidiaries not to:
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. carry on its business except in the ordinary course and in
substantially the same manner as previously conducted, or establish or
acquire any new subsidiary or engage in any new type of activity;
. declare or pay any distribution on its capital stock, other than
regularly scheduled quarterly dividends of $0.15 per share of
MainStreet common stock payable on record dates and in amounts
consistent with past practices (except that any dividend declared or
payable in the quarterly period during which the effective time occurs
may, unless otherwise agreed, be declared with a record date before
the effective time only if the normal record date for payment of the
corresponding quarterly dividend on BB&T common stock is before the
effective time);
. issue any shares of capital stock except under its stock option
plans, the option granted to BB&T in connection with the merger
agreement or its dividend reinvestment plan;
. issue or authorize any rights to acquire capital stock or effect any
recapitalization, reclassification, stock dividend, stock split or
similar change in capitalization;
. amend its articles of incorporation or bylaws, impose or permit the
imposition or existence of any lien, charge or encumbrance on any
share of stock held by it in any MainStreet subsidiary or release any
material right or cancel or compromise any debt or claim, in each case
other than in the ordinary course;
. merge with any other entity or permit any other entity to merge into
it, acquire control over any other entity or dispose of any assets or
acquire any assets, in each case other than in the ordinary course of
its business;
. fail to comply in any material respect with any legal requirements
applicable to it and to the conduct of its business;
. increase the compensation of any of its directors, officers or
employees (excluding increases resulting from the normal vesting of
restricted stock awards or the exercise of stock options), pay or
agree to pay any bonus or provide any new employee benefit or
incentive, except for increases or payments made in the ordinary
course under existing arrangements;
. enter into or substantially modify (except as may be required by law)
any employee benefit, incentive or welfare arrangement, or any related
trust agreement, relating to any of its directors, officers or other
employees (other than renewal of any of arrangement consistent with
past practice);
. solicit inquiries or proposals with respect to, furnish any
information relating to, or participate in any discussions concerning,
any other business combination with MainStreet or any MainStreet
subsidiary, 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 discussions are sought (except that this would
not apply to an unsolicited offer if MainStreet is advised by legal
counsel that the failure to furnish information or negotiate would
more likely than not constitute a breach of the fiduciary duties of
the MainStreet board to its shareholders);
. enter into (a) any material agreement or commitment not made in the
ordinary course, (b) any agreement, indenture or other instrument not
made in the ordinary course relating to the borrowing of money by
MainStreet or a MainStreet subsidiary or guarantee by MainStreet or a
MainStreet subsidiary of any obligation, (c) any agreement or
commitment relating to the employment or
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severance of a consultant or the employment, severance or retention in
office of any director, officer or employee (except for the election
of directors or the reappointment of officers in the normal course) or
(d) any contract, agreement or understanding with a labor union;
. change its lending, investment or asset liability management policies
in any material respect, except as required by applicable law and
except that after shareholder approval of the merger agreement and
receipt of necessary regulatory approvals, MainStreet will cooperate
with BB&T to adopt policies, practices and procedures consistent with
those used by BB&T (except that MainStreet will not be required to
implement any such changes until BB&T agrees that all conditions to
BB&T's obligation to complete the merger (other than delivery of
documents to be delivered at closing or otherwise to be dated as of
the effective time) have been satisfied or waived);
. change its methods of accounting in effect at December 31, 1997,
except as required by changes in accounting principles reasonably
concurred in by BB&T, or change any of its federal income tax
reporting methods from those used in the preparation of its 1997 tax
returns, except as required by changes in law;
. incur any commitments for capital expenditures or obligation to make
capital expenditures in excess of $100,000 for any single item, or
$1,000,000 in the aggregate, unless otherwise agreed by BB&T (which
agreement may not be unreasonably withheld);
. incur any new indebtedness other than deposits from customers,
advances from the Federal Home Loan Bank or Federal Reserve Bank and
reverse repurchase arrangements, in each case in the ordinary course;
. take any action that could reasonably be expected to (a) cause the
merger not to be accounted for as a pooling of interests or not to
constitute a tax-free reorganization as determined by BB&T, (b) result
in any inaccuracy of a representation or warranty that would permit
termination of the merger agreement or (c) cause any of the conditions
to the merger to fail to be satisfied;
. dispose of any material assets other than in the ordinary course; or
. agree to do any of the foregoing.
Except with the prior consent of MainStreet, before the effective time
neither BB&T nor any subsidiary of BB&T may take any action that would or might
be expected to
. cause the merger not to constitute a pooling of interests or a tax-
free reorganization;
. result in any inaccuracy of a representation or warranty that would
allow for termination of the merger agreement;
. cause any of the conditions precedent to the transactions in the
merger agreement to fail to be satisfied;
. exercise the option agreement executed concurrently with the merger
agreement other than in accordance with its terms or dispose of shares
of MainStreet common stock acquired under that agreement other than in
accordance with its terms; or
. fail to comply in any material respect with any laws, regulations,
ordinances or governmental actions applicable to it and to the conduct
of its business.
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Waiver; Amendment; Termination; Expenses
Except with respect to any required regulatory approval, BB&T or MainStreet
may at any time (whether before or after approval of the merger agreement and
the plan of merger by the MainStreet 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 merger 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 in the merger agreement or in
the plan of merger or (c) the performance by the other party of any of its
obligations set out therein. The parties may also mutually amend or supplement
the merger agreement in writing at any time. No such extension, waiver,
amendment or supplement after approval by the MainStreet shareholders of the
merger agreement and the plan of merger, however, may modify either the amount
or the form of the consideration to be provided to holders of MainStreet common
stock upon completion of the merger.
If any of the conditions to the obligation of either party to complete the
merger is not fulfilled, such party will consider the materiality of such
nonfulfillment. In the case of the nonfulfillment of a condition to
MainStreet's obligations, MainStreet will, if appropriate under the
circumstances, resolicit shareholder approval of the merger agreement and the
plan of merger and in connection therewith provide appropriate information
concerning such nonfulfillment.
The merger agreement may be terminated, and the merger may be abandoned:
. at any time before the effective time, by the mutual consent in
writing of BB&T and MainStreet;
. at any time before the effective time, by either party (a) in the
event of a material breach by the other party of any covenant or
agreement contained in the merger agreement or (b) in the event of an
inaccuracy of any representation or warranty of the other party
contained in the merger agreement that would provide the nonbreaching
party the ability to refuse to complete the merger under the
applicable standard set forth in the merger agreement (see "-
Conditions to the Merger"); and, in the case of (a) or (b), if such
breach or inaccuracy has not been cured by the earlier of 30 days
following notice of such breach to the party committing such breach or
inaccuracy or the effective time and the terminating party is not in
breach of the merger agreement;
. at any time before the effective time, by either party in writing, if
any of the conditions precedent to the obligations of the other party
to complete the transactions in the merger agreement cannot be
satisfied or fulfilled before the Closing Date, and the party giving
the notice is not in breach of any of its representations, warranties,
covenants or undertakings;
. at any time, by either party in writing, if any of the applications
for prior regulatory approval are denied, and the time period for
appeals and requests for reconsideration has run;
. at any time, by either party in writing, if the shareholders of
MainStreet do not approve the merger agreement and the plan of merger;
. at any time following April 30, 1999, by either party 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; or
. by MainStreet, pursuant to the provisions of the merger agreement
described above under "-Exchange Ratio."
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If the merger agreement is terminated pursuant to any of the provisions
described above, both the merger agreement and the plan of merger will become
void and have no effect, except that (a) provisions in the merger agreement
relating to confidentiality and expenses will survive any such termination and
(b) a termination for an uncured breach of a covenant or agreement or inaccuracy
in a representation or warranty will not relieve the breaching party from
liability for that breach or inaccuracy.
Each party to the merger agreement will pay all expenses incurred by it in
connection with the merger agreement and the merger, except that printing
expenses and Commission registration fees incurred in connection with the
Registration Statement will be paid 50% by BB&T and 50% by MainStreet.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of MainStreet's management, including all of its directors,
have certain interests in the merger that are in addition to their interests as
shareholders of MainStreet generally. The MainStreet board was aware of these
factors and considered them, among other matters, in approving the merger
agreement.
Employment Agreements
In connection with the merger, it is anticipated that a BB&T subsidiary (in
each case, the "Employer") will enter into a ten-year employment agreement with
Mr. Brenan and a three-year employment agreement with each of Rebecca J.
Jenkins, Darryl J. Landreneau, Mark J. Wenick, R. Bruce Valley, Merlin A. Henkel
and George Kapusta (with Mr. Brenan, the "Executives"). The employment
agreements will provide for the employment of Mr. Brenan as Executive Vice
President of Branch Banking and Trust Company ("BB&T-NC"), which is BB&T's North
Carolina banking subsidiary, Mr. Valley as a Regional President and each of the
remaining Executives as a Senior Vice President of the Employer in question.
Mr. Brenan's employment agreement provides for a base annual salary of
$275,000, with an annual increase at least equal to the average percentage
increase provided to similarly situated officers of BB&T-NC. Each of the other
employment agreements provides that the Executive in question will receive a
base salary at least equal to that previously received from MainStreet, with the
potential for an annual increase based on the Employer's performance and the
Executive's performance.
Mr. Brenan's agreement provides that he will participate in BB&T's Short
Term Incentive Plan and be eligible to receive a bonus under the plan calculated
at a target level of 50% of his base salary, with a maximum bonus not to exceed
100% of base salary. The targets for achieving bonuses each year will be
determined in good faith by BB&T. Mr. Brenan also will be granted options under
the BB&T's 1995 Omnibus Stock Incentive Plan each year having a value
(determined by BB&T in the same manner as for other executives receiving options
under the plan) of at least 42% of his base salary in effect at the time of the
grant and in no event less than the value, as a percentage of base salary, of
options granted to similarly situated officers of BB&T. Each of the other
Executives will be entitled to participate in any bonus or incentive plan,
whether it provides for awards in cash or securities, made available to
similarly situated officers, or such other similar plans for which the Executive
may become eligible and designated a participant. Each Executive also will
receive, on the same basis as other officers of the Employer, employee pension
and welfare benefits and group employee benefits such as sick leave, vacation,
group disability and health, dental, life and accident insurance and similar
indirect compensation that may be extended to similarly situated officers.
Each Executive's employment agreement provides that, if the Employer
terminates the Executive's employment other than because of disability or for
cause, the Executive will, if he or she complies with certain noncompetition
provisions, be entitled to receive an annual salary equal to the highest amount
of cash compensation (including bonuses) received during any of the preceding
three calendar years ("Termination Compensation") for the remainder of what
would otherwise have been the term of the agreement. In addition, each
Executive would continue to receive health insurance coverage and other group
employee benefits from the Employer on the same terms as were in effect before
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the termination, either under the Employer's plans or comparable coverage,
during the time payments of Termination Compensation are made.
Each of the employment agreements provides that the Executive may
voluntarily terminate employment for "Good Reason" (defined below) until twelve
months after a "Change of Control" (defined below) of the Employer or BB&T and
(a) be entitled to receive in a lump sum (1) any compensation due but not yet
paid through the date of termination and (2) in lieu of any further salary
payments from the date of termination to the end of the term of the agreement,
an amount equal to the Termination Compensation times 2.99, and (b) continue to
receive health insurance coverage and other group employee benefits for a period
of three years following termination of employment by the Executive on the same
terms as were in effect either (A) at the date of termination or (B) at the date
of the Change of Control, if such plans and programs in effect before the Change
of Control were, considered together as a whole, materially more generous to the
officers of the Employer than such plans and programs at the date of
termination.
"Good Reason" means any of the following events occurring without the
Executive's consent:
. the assignment to the Executive of duties inconsistent with the
position and status of the Executive's title;
. a reduction in the Executive's pay grade or base salary as then in
effect, or the exclusion of the Executive from participation in
benefit plans in which he or she previously participated;
. an involuntary relocation of the Executive more than 35 miles from the
location where the Executive worked immediately before a Change in
Control, or the breach by the Employer of any material provision of
the employment agreement; or
. any purported termination of the employment of the Executive by the
Employer not effected in accordance with the employment agreement.
A "Change of Control" would be deemed to occur if
. any person or group of persons (as defined in the Securities Exchange
Act of 1934, as amended) together with its affiliates, excluding
employee benefit plans of the Employer or BB&T, is or becomes the
beneficial owner of securities of the Employer or BB&T representing
20% or more of the combined voting power of the Employer's or BB&T's
then outstanding securities;
. as a result of a tender offer or exchange offer for the purchase of
securities of the Employer or BB&T (other than an offer by BB&T for
its own securities), or as a result of a proxy contest, merger,
consolidation or sale of assets, or as a result of any combination of
the foregoing, individuals who at the beginning of any two-year period
constitute the BB&T board, plus new directors whose election or
nomination for election by BB&T's shareholders is approved by a vote
of at least two-thirds of the directors still in office who were
directors at the beginning of the two-year period, cease for any
reason during the two-year period to constitute at least two-thirds of
the members of the BB&T board;
. the shareholders of BB&T approve a merger or consolidation of BB&T
with any other corporation or entity, regardless of which entity is
the survivor, other than a merger or consolidation that would result
in the voting securities of BB&T outstanding immediately beforehand
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 40%
of the combined voting power of the voting securities of BB&T or the
other surviving entity outstanding immediately after the merger or
consolidation;
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. the shareholders of BB&T approve a plan of complete liquidation or
winding-up of BB&T or an agreement for the sale or disposition by BB&T
of all or substantially all of BB&T's assets; or
. any other event occurs that the BB&T board determines should
constitute a Change of Control.
If any of the payments to be made under the employment agreements would
constitute a "parachute payment," as defined in Section 280G of the Code, the
payments would be reduced by the smallest amount necessary so that no portion of
such payments would be a "parachute payment." A "parachute payment" generally
is a payment which is contingent on a change in the control of the corporation
and the present value of which equals or exceed three times the "base amount,"
which is generally defined as the Executive's annualized includable compensation
for the "base period," which is generally the most recent five taxable years of
the Executive ending before the date of the change in control. Sections 280G and
4999 of the Code generally provide that if "parachute payments" are paid to an
individual, everything above the base amount will be subject to a 20% excise tax
payable by the individual (in addition to the payment of regular income taxes on
the payments), as well as be nondeductible by the employer for federal income
tax purposes.
The Executives' employment agreements will supersede any of their existing
employment agreements and change of control arrangements with MainStreet or its
subsidiaries.
Management Severance Benefits
Management will receive some benefits as a result of this merger. All
executive officers and all MainStreet bank presidents have stock options that
vest over time. All of these options will vest automatically on completion of
the merger. This will benefit only two executive officers, however. Options
for 1,379 shares held by Mr. Valley and options for 1,367 shares held by
Mr. Wenick are not due to vest until 1999 or until 2000. All other stock
options held by Mr. Valley, Mr. Wenick and other executive officers of
MainStreet will vest in January of 1999 according to the normal vesting
schedule, whether or not this merger is completed. The options held by
MainStreet bank presidents are scheduled to vest over time, with the last
options vesting in January 2000, and the merger also will accelerate the vesting
of those options
Sixteen officers of MainStreet have severance agreements that provide for
compensation if their employment terminates within a certain period after
consummation of an acquisition. As mentioned earlier, seven of these officers
have offers of employment from BB&T, and others may be retained by BB&T.
However, if these officers terminate their employment after the acquisition (or
if they are terminated) and the circumstances described in the severance
agreements are met, the officers will receive the following severance payments:
Mr. Brenan, $1,285,000; Ms. Jenkins, $583,000; Mr. Adams, $885,000; Mr.
Landreneau, $411,000; Mr. Bagby, $138,000; Mr. Campbell, $108,000; Mr. Clark,
$106,000; Mr. Clement, $102,000; Mr. Heaton, $94,000; Ms. Mitchell, $83,000; Mr.
Valley, $214,000; Mr. Turner, $70,000; Mr. Wenick, $140,000; Mr. Kapusta
$150,000; Mr. Henkel, $130,000; and Mr. Thomas, $110,000.
MainStreet Board of Directors
In connection with the merger, BB&T will offer each member of the
MainStreet board a seat on either the Advisory Board for the southwest Virginia
area or the Advisory Board for the community in which the member resides. For
two years after the effective time, those members will receive, as compensation
for service on the Advisory Board, member's fees (annual retainer and attendance
fees) equal in amount each year to the annual retainer and schedule of
attendance fees for directors of MainStreet in effect on July 1, 1998. These
Advisory Board members will thereafter receive fees in accordance with BB&T's
standard schedule of Advisory Board service fees. For two years after the
effective time, no such member may be prohibited from serving because he or she
has reached the maximum age for Advisory Board service (currently age 70). In
addition to the foregoing, two members of the MainStreet board will be appointed
to the board of directors of BB&T-NC and two members will be appointed to the
board of directors of Branch Banking and Trust Company of Virginia ("BB&T-VA"),
which is BB&T's Virginia banking subsidiary, subject in each case to the
member's eligibility and willingness to serve. Members of the BB&T-NC board
receive an annual retainer
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of $5,000 plus $1,000 for each meeting attended, and members of the BB&T-VA
board receive an annual retainer of $1,000 plus $1,000 for each meeting
attended.
Indemnification of Directors and Officers
The merger agreement provides that BB&T or one of its subsidiaries will
maintain for three years after the effective time directors' and officers'
liability insurance covering directors and officers of MainStreet for acts or
omissions before the effective time. This insurance will provide at least the
same coverage and amounts as contained in MainStreet's policy on the date of the
merger agreement, unless the annual premium on the policy would exceed 150% of
the annual premium payments on MainStreet's policy, in which case BB&T would
maintain the most advantageous policies of directors' and officers' liability
insurance obtainable for a premium equal to this amount. BB&T has also agreed to
indemnify all individuals who are or have been officers, directors or employees
of MainStreet or any MainStreet subsidiary before the effective time from any
acts or omissions in these capacities before the effective time to the fullest
extent that such indemnification is provided under MainStreet's articles or
bylaws or by contract and is permitted under Virginia law.
REGULATORY CONSIDERATIONS
Bank holding companies (such as BB&T and MainStreet) and their depository
institution subsidiaries 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 oversight and the laws and regulations
under which it is carried out can be found in the Annual Report on Form 10-K of
each of BB&T and MainStreet incorporated by reference herein. See "Where You
Can Find More Information" on page ___. Those discussions 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 subsidiary bank mergers 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 Board of Governors of the Federal
Reserve System under Section 3 of the Bank Holding Company Act of 1956. In
considering the approval of a transaction such as the merger, this act requires
the Federal Reserve to review the financial and managerial resources and future
prospects of the bank holding companies and the banks concerned and the
convenience and needs of the communities to be served. The Federal Reserve is
also required to evaluate whether the merger would result in a monopoly or would
be in furtherance of any combination or conspiracy or attempt to monopolize the
business of banking in any part of the United States or otherwise would
substantially lessen competition or tend to create a monopoly or which in any
manner would be in restraint of trade, unless it finds the anti-competitive
effects of the proposed transaction are clearly outweighed in the public
interest by the probable effect of the transaction in meeting the convenience
and needs of the communities to be served.
Where a transaction, such as the merger, is the acquisition by a bank
holding company of a bank located in a state other than the home state of the
bank holding company (in this case North Carolina), the BHC Act authorizes the
Federal Reserve to approve the transaction without regard to whether such
transaction is prohibited under the laws of any state, provided the bank holding
company is adequately capitalized and adequately managed and certain other
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limitations are not exceeded. BB&T is considered well-capitalized and well-
managed under the Federal Reserve's Regulation Y, and the transaction does not
exceed the other limitations.
The merger also is subject to approval by the Virginia Bureau of Financial
Institutions under Section 6.1-399 of the Code of Virginia, which permits an
out-of-state bank holding company with a Virginia bank subsidiary, such as BB&T,
to acquire a Virginia bank holding company, such as MainStreet, if the Virginia
Bureau approves the transaction. In its review of the merger, the Virginia
Bureau is required to consider, among other things, whether all of the bank
subsidiaries of MainStreet have been in existence and continuously operating for
more than two years.
The merger also is subject to approval by the Maryland Commissioner of
Financial Regulation under Section 5-903 of the Maryland Financial Institutions
Code, which permits a bank holding company, such as BB&T or BB&T Financial-VA,
to directly or indirectly acquire a Maryland bank, such as MainStreet subsidiary
Commerce Bank, if the Maryland Commissioner approves the transaction. In its
review of the merger, the Maryland Commissioner is required to consider, among
other things, whether the merger would be detrimental to the safety and
soundness of Commerce Bank and whether the merger would result in an undue
concentration of resources or a substantial reduction in competition in
Maryland.
The Subsidiary Bank Mergers
Although not required by the terms of the merger agreement or the plan of
merger, BB&T expects to effect the subsidiary bank mergers during 1999. The
Subsidiary Bank Mergers are each subject to approval of the Federal Deposit
Insurance Corporation 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 any subsidiary 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 subsidiary 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 subsidiary 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 of 1977 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 subsidiary bank mergers and an
opportunity for the public to comment on the application in writing and to
request a hearing.
The Virginia Bureau must approve the merger of MainStreet's Virginia state-
chartered and national bank subsidiaries into BB&T-VA under Sections 6.1-43 and
6.1-44 of the Code of Virginia, which authorize the merger of Virginia chartered
banks, or a Virginia chartered bank and a national bank located in Virginia,
where a Virginia chartered bank is the resulting bank.
The Maryland Commissioner must approve the merger of Commerce Bank into
BB&T-NC under Sections 3-701 and 3-703 of the Maryland Financial Institutions
Code. In its review of the merger, the Maryland Commissioner is required to
consider whether the agreement of merger is fair and whether its provides an
adequate capital structure and whether the merger is against the public
interest.
The North Carolina Commissioner of Banks must also approve the merger of
Commerce Bank into BB&T-NC, under Section 53-12 of the North Carolina General
Statutes. In its review of the merger, the N.C. Commissioner is required to
consider whether the interests of the depositors, creditors and shareholders of
each bank are protected, whether the merger is in the public interest and
whether the merger is for legitimate purposes.
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All of the required applications and notices for the merger have been
submitted to the appropriate regulatory agencies, and BB&T and MainStreet
anticipate that the regulatory approvals described herein will be obtained in
time to allow completion of the merger by January 15, 1999. However, there can
be no assurance that such regulatory approvals will be obtained or that such
approvals will not be conditioned upon matters that would cause BB&T to abandon
the merger in the manner permitted by the merger agreement. There likewise is
no assurance that the U.S. Department of Justice or a state attorney general
will not challenge the merger or any of the subsidiary bank mergers, or, if such
a challenge is made, as to the results thereof.
BB&T and MainStreet are not aware of any other governmental approvals or
actions that are required for completion of the merger or the subsidiary bank
mergers, except as described above. Should any other approval or action be
required, it is currently expected 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 completion of the merger or would not be conditioned
in a manner that would cause BB&T to abandon the merger in the manner permitted
by the merger agreement.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary description of the material anticipated federal
income tax consequences of the merger generally applicable to the shareholders
of MainStreet and to BB&T and MainStreet. 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 Internal Revenue Code (to the extent
that tax affects the tax consequences of the merger); persons who acquired
MainStreet 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 MainStreet 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 IRS with respect to the tax effects of the merger.
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
Internal Revenue Code; (b) no gain or loss will be recognized by BB&T or
MainStreet by reason of the merger; (c) the shareholders of MainStreet 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 MainStreet common stock;
(d) a shareholder of MainStreet who receives cash in lieu of a fractional share
of BB&T common stock will recognize gain or loss as if the shareholder received
the fractional share and it was then redeemed for cash in an amount equal to the
amount paid by BB&T in respect of such fractional share; (e) 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 MainStreet
common stock surrendered in exchange therefor; and (f) the holding period for
BB&T common stock received (including any fractional share interest deemed
received) in exchange for shares of MainStreet common stock will include the
period during which the shareholder held the shares of MainStreet common stock
surrendered in the exchange, provided that the MainStreet common stock was held
as a capital asset at the effective time.
The completion of the merger is conditioned upon the receipt by BB&T and
MainStreet of the legal 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. Neither party intends to waive this condition. If the tax
opinion were not available and the MainStreet board wished to proceed with the
merger, MainStreet would resolicit its shareholders.
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ACCOUNTING TREATMENT
It is anticipated that the merger will be accounted for as a pooling-of-
interests transaction under generally accepted accounting principles. Under
such accounting method, holders of MainStreet common stock will be deemed to
have combined their existing voting common stock interest with that of holders
of BB&T common stock by exchanging their shares for shares of BB&T common stock.
Accordingly, the book value of the assets, liabilities and shareholders' equity
of MainStreet, as reported on its consolidated balance sheet, will be carried
over to the consolidated balance sheet of BB&T, and no goodwill will be created.
BB&T will be able to include in its consolidated income the consolidated income
of MainStreet for the entire fiscal year in which the merger occurs; however,
certain expenses incurred to effect the merger must be treated by BB&T as
current charges against income rather than adjustments to its balance sheet.
The unaudited pro forma financial information contained in this proxy
statement/prospectus has been prepared using the pooling-of-interests method of
accounting. If the merger does not qualify for pooling-of-interests accounting
treatment, BB&T may, in its discretion, terminate the transaction.
THE OPTION AGREEMENT
General
As a condition to BB&T entering into the merger agreement, MainStreet (as
issuer) entered into an agreement with BB&T (as grantee), pursuant to which
MainStreet granted an option to BB&T to purchase from MainStreet up to 1,650,000
shares of MainStreet common stock (subject to adjustment in certain
circumstances) at a price of $28.00 per share (subject to adjustment under
certain circumstances). The purchase of any shares of MainStreet common stock
pursuant to the option is subject to compliance with applicable law, including
the receipt of necessary approvals under the BHC Act, and to BB&T's compliance
with its covenants in the merger agreement.
The option agreement is intended to increase the likelihood that the merger
will be completed in accordance with the terms set forth in the merger
agreement. Consequently, certain aspects of the option agreement may have the
effect of discouraging persons who, before the effective time, might be
interested in acquiring all of or a significant interest in MainStreet from
considering or proposing such an acquisition, even if they were prepared to
offer to pay consideration to shareholders of MainStreet with a higher current
market price than the BB&T common stock to be received for MainStreet common
stock pursuant to the merger agreement.
The option agreement is filed as an exhibit to the registration statement,
and the following discussion is qualified in its entirety by reference to the
option agreement. See "Where You Can Find More Information" on page ___.
Exercisability
If BB&T is not in material breach of the option agreement or its covenants
and agreements contained in the merger 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 prior to its termination, as described below, following the
happening of either of the following events (each a "Purchase Event"):
. without BB&T's prior consent, MainStreet authorizes, recommends,
publicly proposes (or publicly announces an intention to authorize,
recommend or propose) or enters into an agreement with any third party
to effect any of the following (each an "Acquisition Transaction"):
(a) a merger, consolidation or similar transaction involving
MainStreet or any of its significant subsidiaries, (b) the sale,
lease, exchange or other disposition of 15% or more of the
consolidated assets or deposits of MainStreet and its subsidiaries or
(c) the issuance, sale or other disposition of securities representing
15% or more of the voting power of MainStreet or any of its
significant subsidiaries; or
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. any third party or group of third parties acquires or has the right
to acquire beneficial ownership of securities representing 15% or more
of the outstanding shares of MainStreet common stock.
The obligation of MainStreet to issue shares of MainStreet common stock upon
exercise of the option will be deferred (but will not terminate) (a) until the
receipt of all required governmental or regulatory approvals or consents, or
until the expiration or termination of any waiting period required by law, or
(b) so long as any injunction or other order, decree or ruling issued by any
federal or state court of competent jurisdiction is in effect that prohibits the
sale or delivery of the shares.
Termination
The option will terminate upon the earliest to occur of the following
events: (a) the effective time; (b) the termination of the merger agreement
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event (as
defined below) (other than a termination by BB&T based on either a material
breach by MainStreet of a covenant or agreement in the merger agreement or an
inaccuracy in MainStreet's representations or warranties in the merger 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 merger
agreement (other than a Default Termination) following the occurrence of a
Purchase Event or a Preliminary Purchase Event; or (e) 12 months after a
termination of the merger agreement based on the failure of the shareholders of
MainStreet to approve the merger agreement and the plan of merger.
A "Preliminary Purchase Event" is defined as either of the following:
. 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 MainStreet common stock or the filing of a registration
statement with respect to such an offer, or
. the failure of the shareholders of MainStreet to approve the merger
agreement, the failure of the meeting to have been held, the
cancellation of the meeting prior to the termination of the merger
agreement or the MainStreet board having withdrawn or modified in any
manner adverse to BB&T its recommendations with respect to the merger
agreement, in any case after a third party: (a) proposes to engage in
an Acquisition Transaction, (b) 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 10% or more of the
outstanding shares of MainStreet common stock or (c) 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 MainStreet, no Purchase Event or Preliminary
Purchase Event has occurred as of the date of this proxy statement/prospectus.
Adjustments
The option agreement provides for certain adjustments in the option in the
event of any change in MainStreet 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
MainStreet common stock before termination of the option.
Repurchase Rights
At the request of the holder of the option any time during the 12 months
after the first occurrence of a Repurchase Event (as defined below), MainStreet
must, if the option has not terminated, and subject to any required regulatory
approval, repurchase from the holder (a) the option and (b) all shares of
MainStreet common stock purchased
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by the holder pursuant to the option with respect to which the holder then has
beneficial ownership. The repurchase will be at an aggregate price equal to the
sum of:
. the aggregate purchase price paid by the holder for any shares of
MainStreet common stock acquired pursuant to the option with respect
to which the holder then has beneficial ownership, plus
. the excess, if any, of (a) the Applicable Price (as defined in the
option agreement) for each share of MainStreet common stock over the
purchase price, multiplied by (b) the number of shares of MainStreet
common stock with respect to which the option has not been exercised,
plus
. the excess, if any, of (a) the Applicable Price over the purchase
price paid (or, in the case of shares of MainStreet common stock
covered by the option with respect to which the option has been
exercised but the closing date for the purchase has not occurred,
payable) by the holder for each share of MainStreet common stock with
respect to which the option has been exercised and with respect to
which the holder then has beneficial ownership, multiplied by (b) the
number of such shares.
A "Repurchase Event" occurs if: (a) any third party acquires actual
ownership or control of, or any "group" (as such term is defined under the
Exchange Act) is formed that has acquired actual ownership or control of, 50% or
more of the then outstanding shares of MainStreet common stock, or (b) any of
the merger or other business combination transactions described in subsections
(a) through (d) in the paragraph below describing substitute options is
completed.
Substitute Options
If, before the termination of the option agreement, MainStreet enters into
an agreement:
. to consolidate with or merge into any third party and will not be the
continuing or surviving corporation of the consolidation or merger;
. to permit any third party to merge into MainStreet with MainStreet as
the continuing or surviving corporation, but, in connection therewith,
the then outstanding shares of MainStreet common stock are changed
into or exchanged for stock or other securities of MainStreet or any
other person or cash or any other property, or the outstanding shares
of MainStreet common stock after the merger represent less than 50% of
the outstanding shares and share equivalents of the merged company;
. to permit any third party to acquire all of the outstanding shares of
MainStreet common stock pursuant to a statutory share exchange; or
. to sell or otherwise transfer all or substantially all of its assets
or deposits to any third party,
then the agreement must provide that the option will be converted or exchanged
for an 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 MainStreet's assets or (y) any
person controlling the 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.
Registration Rights
The option agreement grants to BB&T and any permitted transferee of the
option certain rights to require MainStreet to prepare and file a registration
statement under the Securities Act if registration is necessary in order to
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permit the sale or other disposition of any or all shares of MainStreet 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
Employees
Each employee of MainStreet or a MainStreet subsidiary at the effective
time who becomes an employee of BB&T or a BB&T subsidiary immediately following
the effective time will be eligible to participate in the group hospitalization,
medical, dental, life, disability and other welfare benefit plans and programs
available to similarly situated employees of the BB&T employer, subject to the
terms of such plans and programs. Service with MainStreet will be deemed to be
service with the BB&T employer for the purpose of determining eligibility to
participate in and periods applicable to such welfare plans and programs.
Any employee of MainStreet or a MainStreet subsidiary who becomes an
employee of BB&T or a BB&T subsidiary and who is terminated after the effective
time (excluding any employee who has an existing employment or special
termination agreement) will be entitled to severance pay in accordance with the
general severance policy maintained by BB&T if and to the extent such employee
is entitled to severance pay under the policy. An employee's service with
MainStreet or a MainStreet subsidiary will be treated as service with BB&T for
purposes of determining the amount of severance pay, if any, under BB&T's
severance policy.
BB&T has agreed to honor all employment agreements, severance agreements
and deferred compensation agreements that MainStreet and its subsidiaries have
with their current and former employees and directors and which have been
disclosed to BB&T, except to the extent any such agreements are superseded or
terminated at or after the effective time.
401(k) Plan
BB&T shall cause the 401(k) plan of MainStreet to be merged with the 401(k)
plan maintained by BB&T and its subsidiaries, and the account balances of former
employees of MainStreet or its subsidiaries who are participants in the
MainStreet plan will be transferred to the accounts of such employees under the
BB&T 401(k) plan. Following the merger and transfer, these accounts will 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 administering the 401(k) plan, service with MainStreet and its subsidiaries
will be deemed to be service with BB&T or its subsidiaries for eligibility and
vesting purposes, but not for purposes of benefit accrual.
Defined Benefit Pension Plans
As soon as practicable after the effective time, BB&T will terminate
MainStreet's defined benefit pension plans pursuant to a standard termination in
accordance with Section 4041 of the Employee Retirement Income Security Act of
1974, as amended, and provide for full vesting of the accrued benefits of all
participants in the MainStreet pension plans and the distribution of its assets
to the participants. Actions relating to termination of the MainStreet pension
plans will be conditioned upon receiving a favorable determination letter from
the IRS, which BB&T will seek as soon as practicable after the effective time.
Each employee of MainStreet or a MainStreet subsidiary at the effective time who
becomes an employee of BB&T or a BB&T subsidiary immediately following the
effective time will be given credit under BB&T's defined benefit pension plan
for service with MainStreet and its subsidiaries for eligibility and vesting
purposes, but not for purposes of benefit accrual.
Stock Options
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At the effective time, each stock option granted under the Piedmont Bank
Group Incorporated 1990 Stock Option Plan or the MainStreet Bankgroup
Incorporated 1997 Stock Incentive Plan then outstanding, whether or not
exercisable, will be converted into rights with respect to BB&T common stock.
Unless it elects to substitute options as described below, BB&T will assume each
of these stock options in accordance with the terms of the applicable stock
option plan, except that (a) BB&T and its Compensation Committee will be
substituted for MainStreet and the committee of the MainStreet board
administering the stock option plans, (b) each stock option may be exercised
solely for shares of BB&T common stock, (c) the number of shares of BB&T common
stock subject to each stock option will be the number of whole shares (omitting
any fractional share) determined by multiplying the number of shares of
MainStreet common stock subject to the stock option by the exchange ratio and
(d) the per share exercise price for each stock option will be adjusted by
dividing the per share exercise price for the stock option by the exchange ratio
and rounding up to the nearest cent.
As an alternative to assuming the stock options, BB&T may choose to
substitute as of the effective time options under the BB&T Corporation 1995
Omnibus Stock Incentive Plan for all or a part of the stock options, subject to
the conditions that the requirements of (c) and (d) in the preceding paragraph
will apply, the substitution may not constitute a modification, extension or
renewal of any stock options that are incentive stock options and the
substituted options will continue in effect on the same terms and conditions as
provided in the stock options and the stock option plan granting each stock
option.
Each Stock Option that is an incentive stock option will be adjusted as
required by Section 424 of the Internal Revenue Code to continue as an incentive
stock option and not to constitute a modification, extension or renewal within
the meaning of Section 424(h) of the Code.
BB&T has reserved and will continue to reserve adequate shares of BB&T
common stock for the exercise of any converted or substitute options. As soon
as practicable after the effective time, if it has not already done so, and to
the extent MainStreet has a registration statement in effect or an obligation to
file a registration statement, BB&T will file a registration statement under the
Securities Act with respect to the shares of BB&T common stock subject to
converted or substitute options and will use its reasonable efforts to maintain
the effectiveness of such registration statement (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
converted or substitute options remain outstanding.
BB&T will deliver to each participant in the stock option plans who
receives converted or substitute options an appropriate notice setting forth the
participant's rights in this regard.
Based on stock options outstanding as of the date of execution of the
merger agreement and subsequent exercises, options to purchase an aggregate of
up to approximately 88,876 shares of MainStreet common stock may be outstanding
at the effective time. Any shares of MainStreet common stock issued pursuant to
the exercise of stock options under the stock option plans before the effective
time will be converted into shares of BB&T common stock and cash in lieu of any
fractional share interest in the same manner as other outstanding shares of
MainStreet 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 MainStreet at the effective time may be
resold by them (a) 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 and (b) following the satisfaction of
the requirements of the Commission's Accounting Series Release Nos. 130 and 135
relating to publication of financial results of the post-merger combined
operations of BB&T and MainStreet. Those who may be deemed affiliates of
MainStreet generally include individuals or entities that directly, or
indirectly through one or more intermediaries, control, are controlled by or are
under common
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control with MainStreet and include directors and certain executive officers of
MainStreet. The restrictions on resales by an affiliate extend also to certain
related parties of the affiliate, including spouse, relatives and spouse's
relatives who in each case have the same home as the affiliate.
The merger agreement requires MainStreet to cause each of its affiliates to
deliver to BB&T a written agreement to the effect generally 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 (a) the Securities Act and
the rules and regulations promulgated thereunder and (b) the requirements of the
accounting releases described above.
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, Virginia,
Maryland and the District of Columbia 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, Virginia, Maryland and the District of Columbia. BB&T's commercial
bank subsidiaries are BB&T-NC, Branch Banking and Trust Company of South
Carolina ("BB&T-SC"), BB&T-VA, Franklin National Bank of Washington D.C. ("FNB")
and BB&T Bankcard Corporation. 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; BB&T Financial-VA, which in
turn owns all of the issued and outstanding shares of BB&T-VA; FNB; and MFB.
SUBSIDIARIES
BB&T-NC, BB&T's largest subsidiary, is the oldest bank in North Carolina
and currently operates through 350 banking offices throughout North Carolina and
28 offices in the metropolitan Washington D.C. area. 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 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 92 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 offers a full range of commercial and retail banking services
through 63 banking offices in the Hampton Roads and Richmond areas and the
southern, central and southwestern regions of Virginia.
FNB, the banking subsidiary of Franklin Bancorporation, Inc. ("Franklin"),
of Washington, D.C., was acquired on July 1, 1998 and operates nine banking
offices in the metropolitan Washington D.C. 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.
Craigie Incorporated ("Craigie") is a registered broker-dealer with offices
in Richmond, Virginia and Charlotte, North Carolina that specializes in the
origination, trading and distribution of fixed income securities and equity
products in both the public and private capital markets. Phillips Factors
Corporation buys and manages account receivables primarily in the furniture,
textiles and home furnishings-related industries. W.E. Stanley & Company, Inc.
is primarily engaged in actuarial and employee group, health and welfare benefit
plan consulting, plan administration, and the design, communication and
administration of all types of corporate retirement plans. Sheffield Financial
Corp. ("Sheffield") specializes in loans to small commercial lawn care
businesses across the country.
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 October 1, 1997, BB&T completed the acquisition of the investment
banking firm Craigie. 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.
On December 1, 1997, BB&T completed the acquisition of Virginia First
Financial Corporation, which was a Virginia corporation that served as the
holding company for Virginia First Savings Bank, F.S.B. ("VFSB"), in a
transaction accounted for as a purchase. Effective April 17, 1998, VFSB, which
operated 23 banking offices in the south, central and southwestern areas of
Virginia, was merged into BB&T-VA.
On March 1, 1998, BB&T completed the acquisition of Life Bancorp, Inc.,
which was a Virginia corporation that served as the holding company for Life
Savings Bank, F.S.B. ("LSB"), in a transaction accounted for as a pooling of
interests. Effective August 14, 1998, LSB was merged into BB&T-VA.
On June 18, 1998, BB&T completed the acquisition of Dealers Credit Inc.
("DCI"), a commercial finance company based in Menomonee Falls, Wisconsin that
specializes in extending secured, installment loan credit and direct financing
lease credit to commercial, agricultural, municipal and consumer end-users of
turf care equipment, outdoor power equipment, agricultural equipment and related
products. DCI was merged into Refloat, Inc., the holding company for Sheffield,
and its assets were transferred to Sheffield immediately thereafter.
On June 30, 1998, BB&T completed the acquisition of W.E. Stanley & Company,
Inc. and two of its sister companies (collectively, "W.E. Stanley"). W.E.
Stanley operates as a wholly owned subsidiary of BB&T-NC under the name W.E.
Stanley & Company, Inc.
On July 1, 1998, BB&T completed the acquisition of Franklin in a
transaction accounted for as a pooling-of-interests. BB&T intends to convert
the systems of FNB into BB&T-NC during the first quarter of 1999.
Also on July 1, 1998, BB&T established BB&T Bankcard Corporation, a special
purpose credit card bank headquartered in Columbus, Georgia.
BB&T completed the acquisition of Maryland Federal Bancorp, Inc., a unitary
savings and loan holding company and the sole shareholder of Maryland Federal
Bank ("MFB"), on September 30, 1998 and effected the merger
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of MFB, which has 28 branch offices in the metropolitan Washington D.C. area,
into BB&T-NC in November 1998. The transaction was accounted for as a purchase.
MFB primarily engages in the business of attracting deposits from the general
public and investing such deposits primarily in permanent loans secured by first
liens on one-to-four family residential properties and, to a lesser extent,
commercial real estate located in MFSL's market area and in consumer loans.
On August 10, 1998, BB&T announced an agreement to acquire Scott &
Stringfellow Financial, Inc. ("Scott & Stringfellow Financial") in a stock
transaction valued at $131 million, based on BB&T's closing price of $34.44 on
August 7, 1998. The exchange ratio will be one share of BB&T common stock for
each share of Scott & Stringfellow Financial common stock. Scott & Stringfellow
Financial, established in 1893, has 31 offices in the Carolinas, Virginia and
West Virginia. It specializes in full-service retail brokerage, institutional
equity and debt underwriting, investment advisory services, corporate finance,
equity trading, equity research and a wide range of other investment-related
financial services, and manages more than $10 billion in total assets for
clients. Scott & Stringfellow Financial is the parent company of Scott &
Stringfellow, which advised MainStreet in connection with the merger. See "The
Merger-opinions of MainStreet's Financial Advisors-Opinion of Scott &
Stringfellow." The acquisition, which will be accounted for as a purchase, is
subject to the approval of regulators and Scott & Stringfellow Financial
shareholders and is expected to be completed during the first quarter of 1999.
BB&T expects to continue to take advantage of the consolidation of the
financial services industry by 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
least half of a bank holding company's 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
September 30, 1998, BB&T's Tier 1 and total capital ratios were 10.0% and 14.8%,
respectively. Effective January 1, 1997, with mandatory compliance as of
January 1, 1998, the Federal Reserve also requires 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.
BB&T meets such criteria and its leverage ratio requirement is 3%. All other
bank holding companies generally are 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 September 30, 1998 was 7.1%. Bank holding companies experiencing
internal growth or making acquisitions are expected to maintain strong capital
positions substantially above the
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minimum supervisory levels without significant reliance on intangible assets.
Furthermore, these capital 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 September 30, 1998.
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 and a portion of the deposits of BB&T-VA (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. 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 $38 million, and was recorded as an
expense as of September 30, 1996.
The FDIC has since 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. For the semi-annual period beginning June
30, 1998, the effective rate of assessments imposed on all FDIC deposits for
deposit insurance ranges from 0 to 27 basis points per $100 of insured deposits,
depending on the institution's capital position and other supervisory factors.
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 currently assessing BIF-insured
deposits an additional 1.22 basis points per $100 of deposits, and SAIF-insured
deposits an additional 6.10 basis points per $100 of deposits, in each case on
an annualized basis, to cover those obligations.
INFORMATION ABOUT MAINSTREET
MainStreet is a multi-bank holding company headquartered in Martinsville,
Virginia, with total assets of $2.1 billion and total shareholders' equity of
$175.6 million at September 30, 1998. Organized in 1977, MainStreet through its
ten affiliate banks (the "MainStreet Banks"), and MainStreet Trust Company,
National Association, a nationally chartered bank with powers limited to
fiduciary activities and related business (the "Trust Company"), engages in a
general banking business and, provides a broad spectrum of full-service banking
and trust services to consumers, businesses, institutions and governments,
including accepting demand, savings and time deposits; making commercial,
personal, installment, mortgage and construction loans; issuing letters of
credit; and providing discount brokerage, trust services, bank-card services,
mortgage banking and investment services. MainStreet offers banking services in
several communities in Virginia, and also in southern Maryland and Washington,
D.C.
In November 1997, MainStreet created a Delaware statutory business trust
subsidiary ("MainStreet Capital Trust I") which issued approximately $50 million
of trust preferred securities. MainStreet Capital Trust I then, in turn, used
the proceeds from the sale of the trust securities to acquire Junior
Subordinated Debentures of MainStreet which
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have the same rate, payment of dividends and maturity. These debentures are
included in MainStreet's capital calculation for bank regulatory purposes only.
DESCRIPTION OF BB&T CAPITAL STOCK
GENERAL
The authorized capital stock of BB&T consists of 500,000,000 shares of BB&T
common stock and 5,000,000 shares of preferred stock, par value $5.00 per share.
As of December 11, 1998, there were __________ shares of BB&T common stock
issued and outstanding. 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 Series B 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 MainStreet common stock outstanding at the record date, it is
estimated that approximately _____________ 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 BB&T
board out of funds legally available therefor and, upon 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 will
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. BB&T
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 paid 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"
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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 (as defined in the Rights Agreement) will be distributed. A
"Distribution Date" will occur, and the 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 completed 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 (1)
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 (2) 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 before the
Distribution Date will be issued with Rights.
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If 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 $36.25 at such time, the holder of each valid Right
would be entitled to purchase eight shares of BB&T common stock for $145.00.
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.
If, 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 if certain events occur.
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 or her 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 if 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 before 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.
This registration statement and the Rights Agreement are
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incorporated by reference in this proxy statement/prospectus, and reference is
made to them 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 "Where You Can Find More Information."
CERTAIN PROVISIONS OF THE NCBCA, BB&T ARTICLES AND BB&T BYLAWS
Certain provisions of the North Carolina Business Corporation Act (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.
Control Share Acquisition 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 BB&T articles and the BB&T bylaws classify the BB&T board and permit
the removal of directors only for cause. This could make it more difficult for
a third party to acquire, or discourage 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 only by
the Chief Executive Officer, President, Secretary or the BB&T board.
Shareholders of BB&T may not request that a special meeting of shareholders be
called. This provision could delay 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 shareholders may have some deterrent effect 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 time, holders of MainStreet common stock 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 MainStreet
common stock. Since BB&T is organized under the laws of the State of North
Carolina and MainStreet 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 MainStreet common stock arise from differing provisions of the NCBCA
and the Virginia Stock Corporation Act (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 MainStreet common stock. The identification of
specific provisions or differences is not meant to indicate that other equally
or more significant differences do not
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exist. This summary is qualified in its entirety by reference to the NCBCA and
the VSCA and the governing corporate instruments of BB&T and MainStreet, to
which the shareholders of MainStreet are referred.
AUTHORIZED CAPITAL STOCK
BB&T
BB&T's authorized capital stock consists of 500,000,000 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 December 11, 1998, there were
_________ shares of BB&T common stock outstanding. 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 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."
MainStreet
MainStreet's authorized capital stock consists of 20,000,000 shares of
MainStreet common stock and 1,000,000 shares of preferred stock. The MainStreet
articles authorize the MainStreet board to issue shares of MainStreet preferred
stock in one or more series and to fix the designation, powers, preferences, and
rights of the shares of MainStreet preferred stock in each such series. As of
December 11, 1998, there were 14,169,964 shares of MainStreet common stock
outstanding. No shares of MainStreet preferred stock were issued and
outstanding as of such date, although 100,000 shares of MainStreet preferred
stock have been designated as Series A Participating Cumulative Preferred Stock
and are reserved for issuance in connection with MainStreet's shareholder rights
plan.
SPECIAL MEETINGS OF SHAREHOLDERS AND ACTION BY SHAREHOLDERS WITHOUT A MEETING
BB&T
Special meetings of the shareholders of BB&T may be called at any time by
BB&T's Chief Executive Officer, President or Secretary or by the BB&T board.
Under the NCBCA, shareholders of a North Carolina corporation may take action
without a meeting by one or more written consents signed by all shareholders
entitled to vote on the matter in question, provided that any required notice is
given to any shareholders not entitled to vote on such matter.
MainStreet
Under the VSCA, a special meeting of shareholders may be called by the
board of directors or by any other person authorized to do so in the certificate
of incorporation or the bylaws. The MainStreet bylaws provide that a special
meeting of shareholders may be called by the Chairman, the Vice-Chairman, the
President or a majority of the directors.
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 21 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
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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.
MainStreet
Under the VSCA, the number of directors of a corporation may be fixed in
the articles of incorporation or bylaws of a corporation. The MainStreet
Bylaws provide that the MainStreet board shall consist of 11 persons. All of
the MainStreet directors are elected each year. Any vacancy occurring on the
MainStreet board, including a vacancy resulting from an increase in the number
of directors, may be filled by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the MainStreet board.
However, the VSCA provides that, when the bylaws fix the number of directors,
the board may increase or decrease that number only by 30% or less without
shareholder action. No decrease in the number of directors constituting the
MainStreet board shall shorten the term of any incumbent director. Subject to
the rights of the holders of any preferred stock then outstanding, any director
may be removed by the affirmative vote of the holders of at least two-thirds of
outstanding voting shares. MainStreet shareholders do not have cumulative
voting 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.
MainStreet
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. MainStreet is not subject to other express regulatory
restrictions on payments of dividends and other distributions. The ability of
MainStreet to pay distributions to the holders of MainStreet common stock may
depend, however, upon the amount of dividends its bank subsidiaries pay to
MainStreet. MainStreet's bank subsidiaries, like BB&T's, are subject to
regulatory restrictions on the payment of dividends.
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.
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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.
MainStreet
The MainStreet bylaws provide that any nomination for director made by a
shareholder must be made in writing to the Secretary of MainStreet not less than
90 days prior to the meeting of shareholders at which directors are to be
elected. Any such shareholder's notice shall include (a) the name and address
of the shareholder and of each person to be nominated, (b) a representation that
the shareholder is a holder of record of stock of MainStreet entitled to vote
and intends to appear in person or by proxy at the meeting to nominate each
person specified, (c) a description of all arrangements or understandings
between the shareholder and each nominee and any other person (naming such
person) pursuant to which the nomination is made by the shareholder, (d) such
other information regarding each nominee as would be required to be included in
a proxy statement filed pursuant to the proxy rules of the Commission had the
nominee been nominated by the MainStreet board, and (e) the consent of each
nominee to serve as a director if so elected. There is no residency requirement
for the directors and no requirement that directors of MainStreet own any
capital stock of MainStreet.
Only business that is properly brought before the meeting may be presented
to and acted upon by the shareholders. To be properly brought before the
meeting, business must be brought (a) by or at the direction of the MainStreet
board or (b) by a shareholder who has given written notice of business he
expects to bring before the meeting to the Secretary of MainStreet by December 1
of the year preceding the meeting. A shareholder's notice to the Secretary
shall set forth as to each matter the shareholder proposes to bring before the
meeting (a) a brief description of the business to be brought before the meeting
and the reasons for conducting such business at the meeting, (b) the name and
address, as they appear on MainStreet's books, of the shareholder proposing such
business, (c) the class and number of shares of MainStreet's stock beneficially
owned by the shareholder, and (d) any material interest of the shareholder in
such business.
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.
MainStreet
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.
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MERGERS, SHARE EXCHANGES AND SALES OF ASSETS
BB&T
The NCBCA generally requires that any merger, share exchange or sale of all
or 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. Approval of a merger
by the shareholders of the surviving corporation is not required in certain
instances, however, including (as in the case of the merger) a merger in which
the number of voting shares outstanding immediately after the merger, plus the
number of voting shares issuable as a result of the merger, does not exceed by
more than 20% the number of voting shares outstanding immediately before the
merger. BB&T is also subject to certain statutory anti-takeover provisions.
See "-Anti-takeover Statutes."
MainStreet
The VSCA generally requires that any merger, share exchange or sale of all
or substantially all of the assets of a corporation not in the ordinary course
of business be approved by more than 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 VSCA does permit such an amendment or transaction to
be approved by as few as a majority of the votes cast, if the articles of
incorporation so state. Approval of a merger or a share exchange by the
shareholders of the surviving corporation is not required in certain instances
by either the VSCA or the rules of the National Association of Securities
Dealers, which governs the market on which MainStreet common stock trades, when
the number of voting shares outstanding immediately after the transaction, plus
the number of voting shares issuable as a result of the transaction, do not
exceed by more than 20% the number of voting shares outstanding immediately
before the transaction. MainStreet is also subject to certain statutory anti-
takeover provisions. See "--Anti-takeover Statues."
ANTI-TAKEOVER STATUTES
BB&T
The North Carolina Control Share Acquisition Act applies to BB&T. This 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 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 act, the shares acquired that result in the crossing of
any of these thresholds ("Control Shares") have no voting rights until such
rights are conferred by the affirmative vote of the holders of a majority of all
outstanding voting shares, excluding those shares held by any person involved or
proposing to be involved in the acquisition of Control Shares, any officer of
the corporation and any employee of such corporation who is also a director of
such corporation. If voting rights are conferred on Control Shares, all
shareholders of such corporation have the right to require that their shares be
redeemed at the highest price paid per share by the acquiror for any Control
Shares.
In accordance with the provisions of such statute, BB&T has elected not to
be governed by the North Carolina Shareholder Protection Act, which requires
that certain business combinations with existing shareholders either be approved
by a supermajority of the other shareholders or meet certain "fair price"
requirements.
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MainStreet
The VSCA contains provisions governing "Affiliated Transactions." These
provisions, with several exceptions discussed below, require approval of
specified material acquisition transactions between a Virginia corporation and
any holder of more than 10% of any class of its outstanding voting shares (an
"Interested Shareholder") by the holders of more than two-thirds of the
remaining voting shares. Affiliated Transactions subject to this approval
requirement include mergers, share exchanges, dispositions of corporate assets
with an aggregate fair market value in excess of 5% of the corporation's net
worth, any dissolution of the corporation proposed by or on behalf of an
Interested Shareholder, or any reclassification of securities, including a
reverse stock split, recapitalization or merger of the corporation with its
subsidiaries which increases the percentage of voting shares owned beneficially
by an Interested Shareholder by more than 5%.
For three years following the time that an Interested Shareholder becomes
an owner of 10% of the outstanding voting shares, a Virginia corporation cannot
engage in an Affiliated Transaction with such Interested Shareholder without the
approval of two-thirds of the voting shares other than those shares beneficially
owned by the Interested Shareholder and the approval of a majority of the
"Disinterested Directors," as defined in the statute. At the expiration of the
three year period, the VSCA requires approval of Affiliated Transactions by two-
thirds of the voting shares other than those beneficially owned by the
Interested Shareholder.
After the three-year period has expired, the requirement for a two-thirds
vote by holders of shares other than those held by an Interested Shareholder
does not apply if (1) the transaction is approved by majority vote of the
Disinterested Directors, or (2) the transaction satisfies the fair-price
provisions of the statute. In general, the fair price provisions require that in
a two-step acquisition, the Interested Shareholder must pay the shareholders in
the second step a price that is equal to the higher of (1) the fair market value
of the shares at the time of the second step or (2) the highest price paid by
the Interested Shareholder to acquire its shares in the first step.
In addition, the VSCA provides that, by affirmative vote of a majority of
the voting shares other than shares owned by an Interested Shareholder, a
corporation can provide in its articles of incorporation or bylaws that the
Affiliated Transactions provisions shall not apply to the corporation.
The VSCA also regulates "Control Share Acquisitions," as defined therein,
and provides that shares acquired in a transaction that would cause the
acquiring person's voting strength to meet or exceed any of three thresholds
(20%, 33 1/3% or 50%) have no voting rights unless granted by a majority vote of
shares not owned by the acquiring person or any officer or employee-director of
the Virginia corporation. This provision empowers an acquiring person to
require the Virginia corporation to hold a special meeting of shareholders to
consider the matter within 50 days of its request. A Virginia corporation can
provide in its articles of incorporation or bylaws that the Control Share
Acquisition provisions do not apply to such corporation.
Since the merger was approved by more than a majority of MainStreet's
disinterested directors, the Affiliated Transactions statute will not apply in
this case. Similarly, if the MainStreet shareholders approve the merger, the
Control Share Acquisition statute also will not apply to this transaction.
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 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 more than 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 BB&T board, removal
of directors or any
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requirement for a supermajority vote on such an amendment. The NCBCA provides
that a North Carolina corporation's bylaws may be amended by its shareholders,
and the BB&T articles authorize the BB&T board to amend the BB&T bylaws.
MainStreet
The VSCA generally requires that any amendment to a Virginia corporation's
articles of incorporation be approved by more than 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 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,
(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.
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 or her shares in
the event of any of the following corporate transactions:
. completion of a plan of merger to which the corporation is a party,
unless (a) the corporation is a parent merging with a subsidiary
pursuant to a particular NCBCA provision for such transactions; (b)
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 (c) the shares in question are then redeemable by the
corporation at a price not greater than the cash to be received for
such shares;
. completion 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;
. completion 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;
. an amendment to the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(a) alters or abolishes a preferential right of the shares; (b)
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; (c) alters or abolishes a preemptive right
of the holder of the shares to acquire shares or other securities; (d)
excludes or limits the right of shares to vote on any matter; (e)
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 (f) changes the corporation into a nonprofit corporation or
cooperative organization; or
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. any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws or a resolution of the
board of directors provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their shares.
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 (1) cash, (2)
shares in another corporation that are either listed on a national securities
exchange or held by more than 2,000 record shareholders or (3) 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 or her shares must follow specific procedural
requirements as set forth in the NCBCA in order to maintain such right and
obtain such payment.
MainStreet
Under the VSCA, a shareholder of a Virginia corporation is entitled to
dissent from, and to receive payment of the "fair value" of his or her shares in
the event of, any of the following corporation transactions:
. completion of a merger to which the corporation is a party, provided
that either (a) 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 (b) the corporation is a
subsidiary being merged with its parent pursuant to a particular VSCA
provision for such transactions;
. completion of a plan of share exchange in which the corporation is the
party whose shares will be acquired, provided that the shareholder is
entitled to vote on the plan;
. completion 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 (a) a transaction pursuant to court order nor
(b) 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
. 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
MainStreet) 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
. the articles of incorporation of the corporation issuing such shares
provided otherwise (MainStreet's Articles do not provide otherwise);
. in the case of a merger or share exchange (unlike the merger), the
holders of such shares are required to accept anything other than (a)
cash, (b) shares in another corporation that are either listed on a
national securities exchange or held by more than 2,000 record
shareholders or (c) a combination of cash and such shares; or
57
<PAGE>
. 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 object to a transaction and receive
payment of the "fair value" of his or her shares must follow specific procedural
requirements as set forth in the VSCA in order to maintain such right and obtain
such payment.
Holders of MainStreet common stock do not have appraisal rights in
connection with the merger because, as of the record date, shares of MainStreet
common stock were listed on the Nasdaq National Market and the shares of BB&T
common stock are held of record by at least 2,000 record shareholders.
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 (a) the subsidiary's creditors, except to the extent that
BB&T may itself be a creditor with recognized claims against the subsidiary, and
(b) 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 from
mutual to stock form.
MainStreet
In the event of the liquidation, dissolution or winding up of the affairs
of MainStreet, holders of the outstanding shares of MainStreet common stock are
entitled to share, in proportion to their respective interests, MainStreet's
assets and funds remaining after payment, or the provision for payment, of all
liabilities of MainStreet.
SHAREHOLDER PROPOSALS
Any proposal which a shareholder wishes to have presented at the next
annual meeting of shareholders, which will not be held if the merger is
completed, and included in MainStreet's proxy materials must be received at the
main office of MainStreet, 200 East Church Street, Martinsville, Virginia 24112,
no later than November 21, 1999. If such proposal is in compliance with all of
the requirements of Rule 14a-8 of the Exchange Act, it will be included in
MainStreet's proxy statement and set forth on the form of proxy issued for the
next annual meeting of shareholders, if applicable. Shareholders wishing to
present proposals at such meeting (but not include them in MainStreet's proxy
materials) must also give notice of such proposals to MainStreet no later than
November 21, 1999. It is urged that any proposals be sent by certified mail,
return receipt requested.
OTHER BUSINESS
The MainStreet board is not aware of any business to come before the
meeting other than those matters described in this proxy statement/prospectus.
However, if any other matters should properly come before the meeting, it is
intended that the proxies solicited hereby will be voted with respect to those
other matters in accordance with the judgment of the persons voting the proxies.
58
<PAGE>
LEGAL MATTERS
The validity of the shares of BB&T common stock 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 19,000 shares of BB&T common stock.
EXPERTS
The consolidated financial statements of BB&T Corporation and its
subsidiaries which are incorporated by reference in this proxy
statement/prospectus from BB&T's Current Report on Form 8-K dated September 18,
1998, which restates the consolidated financial statements that are incorporated
by reference from BB&T's Annual Report on Form 10-K for the year ended December
31, 1997, to reflect the acquisitions by BB&T of Life Bancorp, Inc. on March 1,
1998 and Franklin Bancorporation, Inc. on July 1, 1998, 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 MainStreet Financial Corporation
and its subsidiaries which are incorporated by reference in this proxy
statement/prospectus from MainStreet's Current Report on Form 8-K dated October
23, 1998, which restates the consolidated financial statements that are
incorporated by reference from MainStreet's Annual Report on Form 10-K for the
year ended December 31, 1997, to reflect the acquisition by MainStreet of
Regency Financial Shares, Incorporated on March 10, 1998, have been audited by
PricewaterhouseCoopers 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 accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
BB&T and MainStreet file annual, quarterly and special reports, proxy
statements and other information with the Commission. You may read and copy any
reports, statements or certain other information that the companies file with
the Commission at the Commission's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the Commission at 1-800-
SEC-0330 for further information on the public reference rooms. These Commission
filings are also available to the public from commercial document retrieval
services and at the Internet world wide web site maintained by the Commission at
"http://www.sec.gov." Reports, proxy statements and other information should
also be available for inspection at the offices of the NYSE, for BB&T, and
Nasdaq, for MainStreet.
BB&T has filed the Registration Statement to register with the Commission
the BB&T common stock to be issued to MainStreet shareholders in the merger.
This proxy statement/prospectus is a part of that Registration Statement and
constitutes a prospectus of BB&T. As allowed by Commission rules, this proxy
statement/prospectus does not contain all the information you can find in BB&T's
Registration Statement or the exhibits to the Registration Statement.
The Commission allows MainStreet and BB&T to "incorporate by reference"
information into this proxy statement/prospectus, which means that the companies
can disclose important information to you by referring you to another document
filed separately with the Commission. The information incorporated by reference
is considered part of this proxy statement/prospectus, except for any
information superseded by information contained directly in this proxy
statement/prospectus or in later filed documents incorporated by reference in
this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that MainStreet and BB&T have previously filed with the Commission.
These documents contain important information about MainStreet and BB&T and
their businesses.
59
<PAGE>
<TABLE>
BB&T COMMISSION FILINGS (FILE NO. 1-10853)
<S> <C>
Annual Report on Form 10-K For the fiscal year ended December 31, 1997
Quarterly Reports on Form 10-Q For the fiscal quarters ended March 31, June 30 and
September 30, 1998
Current Reports on Form 8-K Filed January 15, 1998, February 26, 1998, February
27, 1998, April 13, 1998, May 13, 1998, June 23,
1998, July 7, 1998, July 13, 1998, August 10, 1998,
August 11, 1998, August 27, 1998, September 18,
1998 and October 14, 1998
Registration Statement on Form 8-A (concerning Filed January 10, 1997
BB&T's shareholder rights plan)
MAINSTREET COMMISSION FILINGS (FILE NO. 0-8622)
Annual Report on Form 10-K For the fiscal year ended December 31, 1997
Quarterly Reports on Form 10-Q For the fiscal quarters ended March 31, June 30
and
September 30, 1998
Current Reports on Form 8-K Filed March 5, 1998, March 13, 1998, March 13,
1998, June 4, 1998, July 21, 1998, October 1, 1998
and October 23, 1998
The description of MainStreet common stock in Filed May 27, 1998 and amended June 11, 1998
MainStreet's Registration Statement on Form S-4
under the caption "Description of MSBC Capital
Stock"
</TABLE>
MainStreet and BB&T also incorporate by reference additional documents that
may be filed with the Commission between the date of this proxy
statement/prospectus and the completion of the merger or the termination of the
merger agreement. These include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
BB&T has supplied all information contained or incorporated by reference in
this proxy statement/prospectus relating to BB&T, and MainStreet has supplied
all such information relating to MainStreet before the merger.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the companies,
the Commission or the Commission's Internet web site as described above.
Documents incorporated by reference are available from the companies without
charge, excluding all exhibits except those that the companies have specifically
incorporated by reference in this proxy statement/prospectus. Shareholders may
obtain documents incorporated by reference in this proxy statement/prospectus by
requesting them in writing or by telephone from the appropriate company at the
following addresses:
60
<PAGE>
Shareholder Reporting Rebecca J. Jenkins
BB&T Corporation Corporate Secretary
Post Office Box 1290 MainStreet Financial Corporation
Winston-Salem, North Carolina 27104 200 East Church Street
(336) 733-3021 Martinsville, VA 24112
(540) 666-3272
If you would like to request documents from us, please do so by January 8, 1999
to receive them before the meeting.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. BB&T and MainStreet have not
authorized anyone to provide you with information that is different from what is
contained in this proxy statement/prospectus. This proxy statement/prospectus
is dated December 15, 1998. You should not assume that the information
contained in this proxy statement/prospectus is accurate as of any date other
than that date. Neither the mailing of this proxy statement/prospectus to
shareholders nor the issuance of BB&T common stock in the merger creates any
implication to the contrary.
61
<PAGE>
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
MAINSTREET FINANCIAL CORPORATION,
BB&T CORPORATION
AND
BB&T FINANCIAL CORPORATION OF VIRGINIA
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS........................................................... 1
ARTICLE II
THE MERGER............................................................ 5
2.1 Merger........................................................... 5
------
2.2 Filing; Plan of Merger........................................... 5
----------------------
2.3. Effective Time................................................... 6
--------------
2.4 Closing.......................................................... 6
-------
2.5 Effect of Merger................................................. 6
----------------
2.6 Further Assurances............................................... 6
------------------
2.7 Merger Consideration............................................. 6
--------------------
2.8 Conversion of Shares; Payment of Merger Consideration............ 7
------------------------------------------------------
2.9 Conversion of Stock Options...................................... 8
---------------------------
2.10 Assumption of Indenture Obligations.............................. 8
-----------------------------------
2.11 Merger of Subsidiary............................................. 9
--------------------
2.12 Anti-Dilution.................................................... 9
-------------
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MAINSTREET.......................... 9
3.1 Capital Structure................................................ 9
-----------------
3.2 Organization, Standing and Authority............................. 10
------------------------------------
3.3 Ownership of Subsidiaries........................................ 10
-------------------------
3.4 Organization, Standing and Authority of the Subsidiaries......... 10
--------------------------------------------------------
3.5 Authorized and Effective Agreement............................... 10
----------------------------------
3.6 Securities Filings; Financial Statements; Statements True........ 11
---------------------------------------------------------
3.7 Minute Books..................................................... 11
------------
3.8 Adverse Change................................................... 11
--------------
3.9 Absence of Undisclosed Liabilities............................... 12
----------------------------------
3.10 Properties....................................................... 12
----------
3.11 Environmental Matters............................................ 12
---------------------
3.13 Tax Matters...................................................... 13
-----------
3.14 Employees; Compensation; Benefit Plans........................... 13
--------------------------------------
3.15 Certain Contracts................................................ 16
-----------------
3.16 Legal Proceedings; Regulatory Approvals.......................... 17
---------------------------------------
3.17 Compliance with Laws; Filings.................................... 17
-----------------------------
3.18 Brokers and Finders.............................................. 17
-------------------
3.19 Repurchase Agreements; Derivatives............................... 17
----------------------------------
3.20 Deposit Accounts................................................. 18
----------------
3.21 Related Party Transactions....................................... 18
--------------------------
3.22 Certain Information.............................................. 18
-------------------
3.23 Tax and Regulatory Matters....................................... 18
--------------------------
3.24 State Takeover Laws.............................................. 18
-------------------
3.25 Labor Relations.................................................. 19
---------------
3.26 Fairness Opinion................................................. 19
----------------
</TABLE>
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BB&T................................................................. 19
4.1 Capital Structure of BB&T.......................................... 19
-------------------------
4.2 Organization, Standing and Authority of BB&T....................... 19
--------------------------------------------
4.3 Authorized and Effective Agreement................................. 19
----------------------------------
4.4 Organization, Standing and Authority of BB&T Subsidiaries.......... 20
---------------------------------------------------------
4.5 Securities Documents; Statements True.............................. 20
-------------------------------------
4.6 Financial Statements............................................... 20
--------------------
4.7 Certain Information................................................ 20
-------------------
4.8 Tax and Regulatory Matters......................................... 21
--------------------------
4.9 Share Ownership.................................................... 21
---------------
ARTICLE V
COVENANTS............................................................... 22
5.1 MainStreet Shareholder Meeting..................................... 22
------------------------------
5.2 Registration Statement; Proxy Statement/Prospectus................. 22
--------------------------------------------------
5.3 Plan of Merger; Reservation of Shares.............................. 22
-------------------------------------
5.4 Additional Acts.................................................... 22
---------------
5.5 Best Efforts....................................................... 23
------------
5.6 Certain Accounting Matters......................................... 23
--------------------------
5.7 Access to Information.............................................. 23
---------------------
5.8 Press Releases..................................................... 24
--------------
5.9 Forbearances of MainStreet......................................... 24
--------------------------
5.10 Employment Agreements.............................................. 26
---------------------
5.11 Affiliates......................................................... 26
----------
5.12 Section 401(k) Plan; Employee Benefits............................. 26
--------------------------------------
5.13 Directors and Officers Protection.................................. 27
---------------------------------
5.14 Forbearances of BB&T............................................... 27
--------------------
5.15 Assumption of Agreement by Acquiror of BB&T........................ 28
-------------------------------------------
5.16 Reports............................................................ 28
-------
5.17 Exchange Listing................................................... 28
----------------
5.18 MainStreet Board of Directors...................................... 28
-----------------------------
5.19 Charitable Contribution............................................ 29
-----------------------
ARTICLE VI
CONDITIONS PRECEDENT.................................................... 29
6.1 Conditions Precedent - BB&T and MainStreet......................... 29
------------------------------------------
6.2 Conditions Precedent - MainStreet.................................. 29
---------------------------------
6.3 Conditions Precedent - BB&T........................................ 30
---------------------------
ARTICLE VII
TERMINATION, DEFAULT, WAIVER AND AMENDMENT.............................. 31
7.1 Termination........................................................ 31
-----------
7.2 Effect of Termination.............................................. 33
---------------------
7.3 Termination of Representations, Warranties and Covenants........... 33
--------------------------------------------------------
7.4 Waiver............................................................. 33
------
7.5 Amendment or Supplement............................................ 34
-----------------------
ARTICLE VIII
MISCELLANEOUS........................................................... 34
<PAGE>
8.1 Expenses........................................................... 34
--------
8.2 Entire Agreement................................................... 34
----------------
8.3 No Assignment...................................................... 34
-------------
8.4 Notices............................................................ 34
-------
8.6 Captions........................................................... 35
--------
8.7 Counterparts....................................................... 35
------------
8.8 Governing Law...................................................... 35
-------------
ANNEXES
- -------
Annex A Articles of Merger
Annex B (not included) Employment Agreement with Michael R.Brenan
Annex C (not included) Employment Agreements with Rebecca J.
Jenkins, Darryl J. Lamdreneau, Mark J.
Wenick, R. Bruce Valley, Merlin A. Henkel
and George Kapusta
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of
August 26, 1998, is among MAINSTREET FINANCIAL CORPORATION ("MainStreet"), a
Virginia corporation having its principal office at Martinsville, Virginia, BB&T
CORPORATION ("BB&T"), a North Carolina corporation having its principal office
at Winston-Salem, North Carolina, and BB&T FINANCIAL CORPORATION OF VIRGINIA
("BB&T FINANCIAL"), a Virginia corporation having its principal office at
Virginia Beach, Virginia and a wholly owned subsidiary of BB&T;
R E C I T A L S:
- - - - - - - -
The parties desire that MainStreet 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
attached as Annex A hereto, and the parties desire to provide for certain
undertakings, conditions, representations, warranties and covenants in
connection with the transactions contemplated hereby. As a condition and
inducement to BB&T's willingness to enter into the Agreement, MainStreet is
concurrently granting to BB&T an option to acquire, under certain circumstances,
up to 2,800,000 shares of the common stock, par value $5.00 per share, of
MainStreet (the "BB&T Option Agreement").
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:
"Advisors" shall mean Sandler O'Neill & Partners, L.P. and Scott &
Stringfellow, Inc.
"Affiliate" shall mean, with respect to any Person, any Person, who
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with such Person and, without limiting
the generality of the foregoing, includes any executive officer or director of
such Person and any Affiliate of such executive officer or director.
"Articles of Merger" shall mean the Articles of Merger required to be
filed with the Virginia State Corporation Commission, as provided in Section
13.1-720 of the VSCA,
"Bank Holding Company Act" shall mean the Federal Bank Holding Company
Act of 1956, as amended.
"BB&T Common Stock" shall mean the shares of voting common stock, par
value $5.00 per share, of BB&T, with rights attached issued pursuant to Rights
Agreement dated December 17, 1996 between BB&T and Branch Banking and Trust
Company, as Rights Agent, relating to BB&T's Series B Junior Participating
Preferred Stock, $5.00 par value per share.
"BB&T Option Agreement" shall mean the Stock Option Agreement dated as
of even date herewith, as amended from time to time, under which BB&T has an
option to purchase shares of MainStreet Common Stock, which shall be executed
concurrently with execution of this Agreement.
<PAGE>
"BB&T Subsidiaries" shall mean all bank Subsidiaries of BB&T at the
Effective Time.
"Business Day" shall mean all days other than Saturdays, Sundays and
Federal Reserve holidays.
"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 MainStreet Disclosure
Memorandum, referencing the Section number herein pursuant to which such
disclosure is being made.
"Environmental Claim" shall mean 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 Hazardous Substances.
"Environmental Laws" shall mean 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. ("CERCLA"), 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 Hazardous
Substances, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of any Hazardous
Substances.
"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 BB&T, (i) the
consolidated balance sheet (including related notes and schedules, if any) of
BB&T as of December 31, 1997, 1996, and 1995, 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,
1997, 1996, and 1995, as filed by BB&T in Securities Documents and (ii) the
consolidated balance sheets of BB&T (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 BB&T with respect to periods ended subsequent to
December 31, 1997, and (b) with respect to MainStreet, (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of MainStreet as of December 31, 1997, December 31, 1996 and December 31,
1995, and the related consolidated statements of income and retained earnings,
and cash flows (including related notes and schedules, if any) for each of the
three years ended December 31, 1997, December 31, 1996 and December 31, 1995 as
filed by MainStreet in Securities Documents and (ii) the consolidated statements
of financial condition of MainStreet (including related notes and schedules, if
any) and the related consolidated statements of income and retained earnings,
and cash flows
2
<PAGE>
(including related notes and schedules, if any) included in Securities Documents
filed by MainStreet with respect to periods ended subsequent to December 31,
1997.
"GAAP" shall mean generally accepted accounting principles applicable
to financial institutions and their holding companies, as in effect at the
relevant date.
"Hazardous Substances" shall mean any substance or material (i)
identified in CERCLA; (ii) determined to be toxic, a pollutant or a contaminant
under any applicable federal, state or local statutes, law, ordinance, rule or
regulation, including but not limited to petroleum products; (iii) asbestos;
(iv) radon; (v) poly-chlorinated biphiphenyls and (vi) such other materials,
substances or waste which are otherwise dangerous, hazardous, harmful to human
health or the environment.
"IRS" shall mean the Internal Revenue Service.
"MainStreet Common Stock" shall mean the shares of voting common
stock, par value $5.00 per share, of MainStreet, with MainStreet Rights
attached.
"MainStreet Disclosure Memorandum" shall mean the written information
in one or more documents, each of which is entitled "MainStreet Disclosure
Memorandum" and dated on or before the date of this Agreement and delivered not
later than September 1, 1998 by MainStreet to BB&T, 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.
"MainStreet Rights" shall mean rights issued by MainStreet pursuant to
the MainStreet Rights Agreement.
"MainStreet Rights Agreement" shall mean the Rights Agreement, dated
January 18, 1990, between MainStreet and Crestar Bank, as Rights Agent, relating
to 100,000 shares of MainStreet's Series A Participating Cumulative Preferred
Stock, par value $5.00 per share.
"MainStreet Subsidiaries" shall mean The Bank of Northern Virginia,
MainStreet Bank (Central Virginia), Bank of Carroll, Bank of Ferrum, Commerce
Bank, The First Bank of Stuart, First Community Bank of Saltville, The First
National Bank of Clifton Forge, MainStreet Capital Trust I, MainStreet Trust
Company, N.A., Piedmont Trust Bank, Tysons National Bank, Tysons Financial
Corporation, any and all other Subsidiaries of MainStreet as of the date hereof
and any corporation, bank, savings association, or other organization acquired
as a Subsidiary of MainStreet after the date hereof and held as a Subsidiary by
MainStreet at the Effective Time.
"Material Adverse Effect" on BB&T or MainStreet 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 BB&T and the
BB&T Subsidiaries taken as a whole, or MainStreet and the MainStreet
Subsidiaries taken as a whole, or (ii) materially impairs the ability of BB&T or
MainStreet 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 BB&T or MainStreet taken with the prior written 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 or relating to any
litigation arising as a result of the Merger.
"NYSE" shall mean the New York Stock Exchange, Inc.
3
<PAGE>
"Proxy Statement/Prospectus" shall mean the proxy statement and
prospectus, together with any supplements thereto, to be sent to shareholders of
MainStreet to solicit their votes in connection with a proposal to approve this
Agreement and the Plan of Merger.
"Registration Statement" shall mean the registration statement of BB&T
as declared effective by the Commission under the Securities Act, including any
post-effective amendments or supplements thereto as filed with the Commission
under the Securities Act, with respect to the BB&T Common Stock to be issued in
connection with the transactions contemplated by this Agreement.
"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
"BB&T Common Stock" and "MainStreet 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.
"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.
"Stock Option" shall mean, collectively, any option granted under the
Stock Option Plans, outstanding and unexercised on the date hereof to acquire
shares of MainStreet Common Stock, aggregating 138,177 shares.
"Stock Option Plans" shall mean the Piedmont Bankshares, Inc. 1990
Stock Option Plan and the MainStreet Bankgroup, Inc. 1997 Stock Incentive Plan.
"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 equity
securities of another, equity securities owned or controlled in a fiduciary
capacity shall be deemed owned and controlled by the beneficial owner).
"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:
Agreement Introduction
BB&T Introduction
BB&T Financial Introduction
BB&T Option Agreement Recitals
BB&T Option Plan Section 2.9(a)
BB&T Ratio Section 7.1(h)
Closing Section 2.4
4
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Closing Date Section 2.4
Closing Value Section 7.1(h)
Constituent Corporations Section 2.1
Determination Date Section 7.1(h)
Effective Time Section 2.3
Employer Entity Section 5.12(c)
Exchange Ratio Section 2.7(a)
Index Group Section 7.1(h)
Index Price Section 7.1(h)
MainStreet Introduction
MainStreet Preferred Stock Section 3.1
Merger Recitals
Merger Consideration Section 2.7
PBGC Section 3.14(b)(iv)
Plan Section 3.14(b)(i)
Plan of Merger Recitals
Starting Date Section 7.1(h)
Surviving Corporation Section 2.1(a)
ARTICLE II
THE MERGER
2.1 Merger
------
BB&T Financial and MainStreet are constituent corporations (the
"Constituent Corporations") to the Merger as contemplated by the VSCA. At the
Effective Time:
(a) MainStreet 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 MainStreet 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 MainStreet 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.
5
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2.3. Effective Time
--------------
The Merger shall be effective at the day and hour specified in the Articles
of Merger as filed as provided in Section 2.2 (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 10:00 a.m. on the date designated by
BB&T which is within thirty days following the satisfaction of the conditions to
Closing set forth in Article VI (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing), 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 separate existence of MainStreet
shall cease, and the Surviving Corporation shall thereupon and thereafter, to
the extent consistent with its Articles of Incorporation, possess all of the
rights, privileges, immunities and franchises, of a public as well as a private
nature, of each of the Constituent Corporations; and all property, real,
personal and mixed, and all debts due on whatever account, and all other choses
in action, and each and every other interest of or belonging to or due to each
of the Constituent Corporations shall be taken and deemed to be transferred to
and vested in the Surviving Corporation without further act or deed; and the
title to any real estate or any interest therein vested in either of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the Merger. The Surviving Corporation shall thenceforth be responsible for all
the liabilities, obligations and penalties of each of the Constituent
Corporations; and any claim, existing action or proceeding, civil or criminal,
pending by or against either of the Constituent Corporations may be prosecuted
as if the Merger had not taken place, or the Surviving Corporation may be
substituted in its place; and any judgment rendered against either of the
Constituent Corporations may be enforced against the Surviving Corporation.
Neither the rights of creditors nor any liens upon the property of either of the
Constituent Corporations shall be impaired by reason of the Merger.
2.6 Further Assurances
------------------
If, at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any further deeds, assignments or assurances in law
or any other actions are necessary, reasonably desirable or proper to vest,
perfect or confirm of record or otherwise, in the Surviving Corporation, the
title to any property or rights of the Constituent Corporations acquired or to
be acquired by reason of, or as a result of, the Merger, the Constituent
Corporations agree that such Constituent Corporations and their proper officers
and directors shall and will execute and deliver all such proper deeds,
assignments and assurances in law and do all things necessary, reasonably
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 number of
shares of BB&T Common Stock (to the nearest one-hundredth of a share) to be
exchanged for each share of MainStreet Common Stock issued and outstanding as of
the Effective Time and cash (without interest) to be payable in exchange for any
fractional share of BB&T Common Stock which would otherwise be distributable to
a MainStreet shareholder as provided in Section 2.8(d), determined as follows:
6
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(a) The number of shares of BB&T Common Stock to be issued in exchange for
each issued and outstanding share of MainStreet Common Stock shall be in the
ratio of 1.18 shares of BB&T Common Stock for each share of MainStreet Common
Stock (the "Exchange Ratio").
(b) The amount of cash payable with respect to any fractional share of BB&T
Common Stock shall be determined by multiplying the fractional part of such
share by the closing price per share on the NYSE Composite Transactions List (as
reported by The Wall Street Journal - Eastern Edition) for the last trading day
preceding the Effective Time. No person will be entitled to dividends, voting
rights or any other rights as a BB&T shareholder with respect to any fractional
share.
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 MainStreet or the holders of record of MainStreet Common Stock,
each share of MainStreet 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 MainStreet
Common Stock (as provided in subsection (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.
(c) Until surrendered, each outstanding certificate which prior to the
Effective Time represented one or more shares of MainStreet Common Stock shall
be deemed upon the Effective Time for all purposes to represent only the right
to receive the Merger Consideration. No interest will be paid or accrued on the
Merger Consideration upon the surrender of the certificate or certificates
representing shares of MainStreet Common Stock. With respect to any certificate
for MainStreet Common Stock that has been lost or destroyed, BB&T shall pay the
Merger Consideration attributable to such certificate upon receipt of a surety
bond or other adequate indemnity as required in accordance with BB&T's standard
policy, and evidence reasonably satisfactory to BB&T of ownership of the shares
represented thereby. After the Effective Time, no transfer of the shares of
MainStreet 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, BB&T shall cause to be delivered or
mailed to each MainStreet 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 MainStreet
Common Stock. Upon surrender of such certificates or other evidence of
ownership meeting the requirements of Section 2.8(c), 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, BB&T 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 MainStreet in respect of shares of MainStreet Common Stock
in accordance with the terms of this Agreement and which remain unpaid at the
Effective Time, subject to compliance by MainStreet with Section 5.9(b). To the
extent permitted by law, former shareholders of record of MainStreet shall be
entitled to vote after the Effective Time at any meeting of BB&T shareholders
the number of whole shares of BB&T Common Stock into which their respective
shares of MainStreet Common Stock are converted, regardless of whether such
holders have exchanged their certificates representing MainStreet Common Stock
for certificates representing BB&T Common Stock in accordance with the
provisions of this Agreement. Whenever a dividend or other distribution is
declared by BB&T on the BB&T 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 BB&T Common Stock issuable pursuant to this
Agreement, but 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
shall be delivered to the holder of any certificate representing MainStreet
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Common Stock until such holder surrenders such certificate for exchange as
provided in this Section 2.8. Upon surrender of such certificate, both the BB&T
Common Stock certificate and any undelivered dividends and cash payments payable
hereunder (without interest) shall be delivered and paid with respect to the
shares of MainStreet Common Stock represented by such certificate.
2.9 Conversion of Stock Options
---------------------------
(a) 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 rights with respect to BB&T
Common Stock, and BB&T shall assume each Stock Option in accordance with the
terms of the applicable Stock Option Plan, except that from and after the
Effective Time (i) BB&T and its Compensation Committee shall be substituted for
MainStreet and the Committee of MainStreet's Board of Directors administering
the Stock Option Plans, (ii) each Stock Option assumed by BB&T may be exercised
solely for shares of BB&T Common Stock, (iii) the number of shares of BB&T
Common Stock subject to each such Stock Option shall be the number of whole
shares of BB&T (omitting any fractional share) determined by multiplying the
number of shares of MainStreet Common Stock subject to such Stock Option
immediately prior to the Effective Time by the Exchange Ratio, and (iv) the per
share exercise price under each such Stock Option shall be adjusted by dividing
the per share exercise price under each such Stock Option by the Exchange Ratio
and rounding up to the nearest cent. Notwithstanding the foregoing, BB&T may at
its election substitute as of the Effective Time options under the BB&T
Corporation 1995 Omnibus Stock Incentive Plan (the "BB&T Option Plan") for all
or a part of the Stock Options, subject to the following conditions: (A) the
requirements of (iii) and (iv) above shall be met; (B) such substitution shall
not constitute a modification, extension or renewal of any of the Stock Options
which are incentive stock options; and (C) the substituted options shall
continue in effect on the same terms and conditions as provided in the Stock
Options and the Stock Option Plan granting each Stock Option. Each grant of a
converted or substitute option to any individual who subsequent to the Merger
will be a director or officer of BB&T as construed under Rule 16b-3 shall, as a
condition to such conversion or substitution, be approved in accordance with the
provisions of Rule 16b-3. Each Stock Option which is an incentive stock option
shall be adjusted as required by Section 424 of the Code, and the Regulations
promulgated thereunder, so as to continue as an incentive stock option under
Section 424(a) of the Code, and so as not to constitute a modification,
extension, or renewal of the option within the meaning of Section 424(h) of the
Code. BB&T and MainStreet agree to take all necessary steps to effectuate the
foregoing provisions of this Section 2.9. BB&T has reserved and shall continue
to reserve adequate shares of BB&T Common Stock for delivery upon exercise of
any converted or substitute options. As soon as practicable after the Effective
Time, if it has not already done so, and to the extent MainStreet shall have a
registration statement in effect or an obligation to file a registration
statement, BB&T shall file a registration statement on Form S-3 or Form S-8, as
the case may be (or any successor or other appropriate forms), with respect to
the shares of BB&T Common Stock subject to converted or substitute options and
shall use its reasonable efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such converted or substitute
options remain outstanding. With respect to those individuals, if any, who
subsequent to the Merger may be subject to the reporting requirements under
Section 16(a) of the Exchange Act, BB&T shall administer the Stock Option Plans
assumed pursuant to this Section 2.9 (or the BB&T Option Plan, if applicable) in
a manner that complies with Rule 16b-3 promulgated under the Exchange Act to the
extent necessary to preserve for such individuals the benefits of Rule 16b-3 to
the extent such benefits were available to them prior to the Effective Time.
MainStreet hereby represents that each of the Stock Option Plans in its current
form complies with Rule 16b-3 to the extent, if any, required as of the date
hereof.
(b) As soon as practicable following the Effective Time, BB&T shall deliver
to each participant in the Stock Option Plans receiving converted or substitute
options an appropriate notice setting forth such participant's rights pursuant
thereto.
2.10 Assumption of Indenture Obligations
-----------------------------------
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BB&T and BB&T Financial acknowledge the Junior Subordinated Deferrable
Interest Debentures in the principal amount of up to $51,547,000 issued to
MainStreet Capital Trust I by MainStreet on November 19, 1997 and governed by
the Indenture dated as of such date between MainStreet and the Bank of New York,
as Debenture Trustee, and BB&T Financial agrees to assume all obligations of
MainStreet under such outstanding Debentures and such Indenture at the Effective
Time. Without limiting the generality of the foregoing, BB&T Financial agrees
that it shall comply with the provisions of Article X of such Indenture and
shall execute and deliver at the Effective Time the supplemental indenture
provided for therein.
2.11 Merger of Subsidiary
--------------------
In the event that BB&T shall request, MainStreet shall take such actions,
and shall cause the MainStreet 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 MainStreet Subsidiaries with and into, in each case, one of the BB&T
Subsidiaries. In the event any such actions shall be taken and the Merger shall
not be consummated for reasons other than due to a breach of this Agreement by
MainStreet, BB&T shall reimburse MainStreet for all legal and regulatory costs
incurred by MainStreet with respect to such actions.
2.12 Anti-Dilution
-------------
In the event BB&T changes the number of shares of BB&T 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 Exchange
Ratio shall be proportionately adjusted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MAINSTREET
Except as Disclosed, MainStreet represents and warrants to BB&T as follows
(no representation or warranty herein of MainStreet shall be deemed to be
inaccurate unless the inaccuracy would permit BB&T 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 MainStreet consists of 20,000,000 shares of
MainStreet Common Stock, par value $5.00 per share, and 1,000,000 shares of
preferred stock, par value $5.00 per share ("MainStreet Preferred Stock"). As of
the date hereof, the total number of shares of MainStreet Common Stock issued
and outstanding and subject to options granted under the Stock Option Plans was
14,232,170 of which approximately 14,093,993 shares of such Common Stock are
issued and outstanding and approximately 138,177 are subject to such options.
No shares of the MainStreet Preferred Stock are issued and outstanding. No
other classes of capital stock of MainStreet, common or preferred, are
authorized, issued or outstanding. All outstanding shares of MainStreet 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 MainStreet Common Stock reserved in connection with the
Stock Option Plans, (ii) shares of Series A MainStreet Preferred Stock reserved
for issuance pursuant to the MainStreet Rights Agreement, and (iii) 1,650,000
shares of MainStreet Common Stock reserved in connection with the BB&T Option
Agreement. Except as set forth in this Section 3.1, there are no Rights
authorized, issued or outstanding with respect to the capital stock of
MainStreet. Holders of MainStreet Common Stock do not have preemptive rights.
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3.2 Organization, Standing and Authority
------------------------------------
MainStreet 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 and to own, lease
and operate its assets. MainStreet has not failed to qualify to do business in
any other state of the United States or foreign jurisdiction where such failure
would have a Material Adverse Effect.
3.3 Ownership of Subsidiaries
-------------------------
Section 3.3 of the MainStreet Disclosure Memorandum lists all of the
MainStreet Subsidiaries and, with respect to each, its jurisdiction of
organization, jurisdictions in which it is qualified or otherwise licensed to
conduct business, the percentage ownership interest so owned by MainStreet and
its business activities. The outstanding shares of capital stock or other
equity interests of the MainStreet Subsidiaries are validly issued and
outstanding, fully paid and nonassessable, and all such shares are directly or
indirectly owned by MainStreet 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 MainStreet Subsidiaries, and there are no agreements,
understandings or commitments relating to the right of MainStreet to own, to
vote or to dispose of said interests. Section 3.3 of the MainStreet Disclosure
Memorandum also discloses all ownership interests of any corporation,
partnership, joint venture, or other organization (other than the MainStreet
Subsidiaries) owned directly or indirectly by MainStreet.
3.4 Organization, Standing and Authority of the Subsidiaries
--------------------------------------------------------
Each MainStreet Subsidiary which is a depository institution is a United
States or State-chartered banking association with deposits insured by the FDIC.
Each of the MainStreet Subsidiaries is validly existing and in good standing
under the laws of its jurisdiction of organization. Each of the MainStreet
Subsidiaries has full power and authority to carry on its business as now
conducted, and is duly qualified to do business in each jurisdiction Disclosed
with respect to it. No MainStreet Subsidiary is required to be qualified to do
business in any other jurisdiction of the United States or foreign jurisdiction,
or is engaged in any type of activities that have not been Disclosed.
3.5 Authorized and Effective Agreement
----------------------------------
(a) MainStreet 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 MainStreet shareholders of this Agreement and the
Plan of Merger) to perform all of its obligations under this Agreement, the
Articles of Merger, the Certificate of Merger and the BB&T Option Agreement.
The execution and delivery of this Agreement, the Articles of Merger and the
BB&T Option Agreement, and consummation of the transactions contemplated hereby
and thereby, have been duly and validly authorized by all necessary corporate
action, except, in the case of this Agreement and the Plan of Merger, the
approval of the MainStreet shareholders pursuant to and to the extent required
by applicable law. This Agreement, the Plan of Merger and the BB&T Option
Agreement constitute legal, valid and binding obligations of MainStreet, and
each is enforceable against MainStreet 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 the
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, the Certificate of Merger or the BB&T Option Agreement, nor consummation
of the transactions contemplated hereby or thereby, nor compliance by MainStreet
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
MainStreet or any MainStreet 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
10
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of MainStreet or any MainStreet 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 MainStreet or any MainStreet Subsidiary.
(c) Other than consents or approvals required from, or notices to,
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
MainStreet of the Merger and the other transactions contemplated in this
Agreement.
(d) Effective prior to execution of this Agreement, MainStreet has taken
all action necessary to amend the MainStreet Rights Agreement so that execution
of this Agreement and the BB&T 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 BB&T Option Agreement, shall not result in the grant of any
MainStreet Rights to any person under the MainStreet Rights Agreement or enable
or require any of the MainStreet Rights thereunder to be exercised, distributed
or triggered.
3.6 Securities Filings; Financial Statements; Statements True
---------------------------------------------------------
(a) MainStreet has timely filed all Securities Documents required by the
Securities Laws since December 31, 1994. MainStreet has Disclosed or made
available to BB&T a true and complete copy of each Securities Document filed by
MainStreet with the Commission after December 31, 1994 and prior to the date
hereof, which are all of the Securities Documents that MainStreet 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 MainStreet fairly present or will fairly
present, as the case may be, the consolidated financial position of MainStreet
and the MainStreet Subsidiaries as of the dates indicated and the consolidated
statements of income and retained earnings, changes in shareholders' equity and
statements of cash flows for the periods then ended (subject, in the case of
unaudited interim statements, to the absence of notes and to normal year-end
audit adjustments that are not material in amount or effect) in conformity with
GAAP applied on a consistent basis.
(c) No statement, certificate, instrument or other writing furnished or to
be furnished hereunder by MainStreet or any MainStreet Subsidiary to BB&T
contains or will contain any untrue statement of a 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 MainStreet and each of the MainStreet 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 December 31, 1997, MainStreet and the MainStreet Subsidiaries have
not incurred any liability except as disclosed in the most recent MainStreet
Financial Statements, or entered into any transactions with Affiliates, in each
case other than in the ordinary course of business consistent with past
practices, nor has there been any adverse change or any event involving a
prospective adverse change in the business, financial condition, results of
operations or business prospects of MainStreet and any of the MainStreet
Subsidiaries.
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3.9 Absence of Undisclosed Liabilities
----------------------------------
All liabilities (including contingent liabilities) of MainStreet and the
MainStreet Subsidiaries are disclosed in the most recent Financial Statements of
MainStreet or were incurred in the ordinary course of its business since the
date of MainStreet's most recent Financial Statements.
3.10 Properties
----------
(a) MainStreet and the MainStreet 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
MainStreet as of December 31, 1997 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 MainStreet or any MainStreet
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) MainStreet and the MainStreet Subsidiaries are and at all times have
been in compliance with all Environmental Laws. Neither MainStreet nor any
MainStreet Subsidiary has received any communication alleging that MainStreet or
the MainStreet Subsidiary is not in such compliance, and there are no present
circumstances that would prevent or interfere with the continuation of such
compliance.
(b) There are no pending Environmental Claims, neither MainStreet nor any
MainStreet Subsidiary has received notice of any pending Environmental Claims,
and 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)
MainStreet or any MainStreet Subsidiary, (ii) any person or entity whose
liability for any Environmental Claim MainStreet or any MainStreet 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 MainStreet or any
MainStreet Subsidiary, or any real or personal property which MainStreet or any
MainStreet 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 MainStreet or any MainStreet Subsidiary holds a security interest securing
a loan recorded on the books of MainStreet or any MainStreet Subsidiary.
Neither MainStreet nor any MainStreet 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 liability under any
Environmental Laws.
(c) MainStreet and the MainStreet Subsidiaries are in compliance with all
recommendations contained in any environmental audits, analyses and surveys
received by MainStreet relating to all real and personal property owned or
leased by MainStreet or any MainStreet Subsidiary and all real and personal
property of which MainStreet or any MainStreet 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 MainStreet or any MainStreet Subsidiary or against any person or
entity whose liability for any Environmental Claim MainStreet or any MainStreet
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) In the aggregate, the loans on the books of MainStreet and the
MainStreet Subsidiaries are valid and properly documented, and were made in the
ordinary course of business. The terms, documentation, administration, and
servicing of those loans do not contain systemic violations of federal, state or
local laws, rules, regulations or ordinances applicable thereto.
(b) The allowances for loan losses reflected on the consolidated balance
sheets included in the Financial Statements of MainStreet are adequate as of
their respective dates under the requirements of GAAP and applicable regulatory
requirements and guidelines.
3.13 Tax Matters
-----------
(a) MainStreet and the MainStreet Subsidiaries and each of their
predecessors have timely filed (or requests for extensions have been timely
filed and any such extensions either are pending or 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 MainStreet nor any MainStreet Subsidiary has or
will have any liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established. MainStreet and the MainStreet Subsidiaries
have paid, or where payment is not required to have been made have set up an
adequate reserve or accrual for payment of, all taxes required to be paid or
accrued for the preceding or current fiscal year for which a return is not yet
due.
(b) All federal, state and local (and, if applicable, foreign) tax returns
filed by MainStreet and the MainStreet Subsidiaries are complete and accurate.
Neither MainStreet nor any MainStreet 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 MainStreet or any MainStreet Subsidiary which
have not been settled and paid. There are currently no agreements in effect
with respect to MainStreet or any MainStreet 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) Neither MainStreet nor any of the MainStreet Subsidiaries is a party to
any tax allocation or sharing agreement or 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 MainStreet or a MainStreet subsidiary) or has any
liability for taxes of any person (other than MainStreet and the MainStreet
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.
(d) Each of MainStreet and the MainStreet 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.
(e) Neither MainStreet nor any of the MainStreet 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.
3.14 Employees; Compensation; Benefit Plans
--------------------------------------
13
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(a) Compensation. MainStreet has 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 MainStreet and of each MainStreet Subsidiary
and each other person (in each case other than as an employee) to whom
MainStreet or any MainStreet 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) MainStreet has Disclosed an accurate and complete list of all
Plans, as defined below, contributed to, maintained or sponsored by
MainStreet or any MainStreet Subsidiary, to which MainStreet or any
MainStreet 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 MainStreet or any MainStreet
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, (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. With respect to any
terminated Plans which were tax-qualified, approvals of the terminations by
the IRS (and, if applicable, the PBGC) were sought and obtained.
(ii) Neither MainStreet nor any MainStreet 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) None of the Plans obligates MainStreet or any MainStreet
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
14
<PAGE>
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 threatened the termination of
any Plan. None of the assets of MainStreet or any MainStreet Subsidiary is
the subject of any lien arising under Section 302(f) of ERISA or Section
412(n) of the Code, neither MainStreet nor any MainStreet 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 MainStreet or any
MainStreet Subsidiary to any tax under Sections 4971, 4972, 4976, 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 IRS 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 MainStreet or any MainStreet Subsidiary is a member or was a member
during such five-year period.
(vii) As of the close of the last plan year preceding the date
hereof, the fair market value of the assets of each Plan that is a tax
qualified defined benefit plan equaled or exceeded the then 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 MainStreet nor, to the best knowledge of
MainStreet, any MainStreet Subsidiary, any trustee, administrator or other
fiduciary of any Plan, or any agent of any of the foregoing has engaged in
any transaction or acted or failed to act in a manner that could subject
MainStreet or any MainStreet 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.
15
<PAGE>
(x) MainStreet and each MainStreet Subsidiary has been and is
presently in compliance with all of the requirements of Section 4980B of
the Code.
(xi) Neither MainStreet nor any MainStreet Subsidiary has a liability
as of December 31, 1997 under any Plan that, to the extent disclosure is
required under GAAP, is not reflected on the consolidated balance sheet
included in the Financial Statements of MainStreet as of December 31, 1997
or otherwise Disclosed.
(xii) Neither the consideration nor implementation of the
transactions contemplated under this Agreement will increase (A)
MainStreet's or any MainStreet 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, accelerated
allocation of previously unallocated Plan assets or by the conversion of
all stock options in accordance with Section 2.9 hereof.
(xiii) With respect to each Plan, MainStreet has Disclosed or made
available to BB&T, 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 IRS (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.
(xiv) Each of the Plans as applied to MainStreet and any MainStreet
Subsidiary may be amended or terminated at any time by action of
MainStreet's Board of Directors, committee of the board of Directors or
duly authorized officer, in each case subject to the terms of the Plan and
compliance with applicable laws and regulations (and limited, in the case
of multiemployer plans, to termination of the participation of MainStreet
or a MainStreet Subsidiary thereunder).
3.15 Certain Contracts
-----------------
(a) Neither MainStreet nor any MainStreet 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
MainStreet or any MainStreet Subsidiary or the guarantee by MainStreet or any
MainStreet Subsidiary of any such obligation, which cannot be terminated within
less than 30 days after the Closing Date by MainStreet or any MainStreet
Subsidiary (without payment of any penalty or cost, except with respect to
Federal Home Loan Bank or Federal Reserve 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 MainStreet or
any MainStreet Subsidiary (without payment of any penalty or cost), or that
provides benefits which are contingent, or the application of which is
materially altered, upon the occurrence of a transaction involving MainStreet of
the nature contemplated by this Agreement or the BB&T 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 BB&T Option Agreement or the value of any of the
benefits
16
<PAGE>
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement or the BB&T Option Agreement. Each matter Disclosed pursuant
to this Section 3.15(a) is in full force and effect as of the date hereof.
(b) Neither MainStreet nor any MainStreet 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 MainStreet,
threatened against MainStreet or any MainStreet Subsidiary or against any asset,
interest, plan or right of MainStreet or any MainStreet Subsidiary, or, to the
best knowledge of MainStreet, against any officer, director or employee of any
of them in their capacity as such. There are no actions, suits or proceedings
instituted, pending or, to the best knowledge of MainStreet, threatened against
any present or former director or officer of MainStreet or any MainStreet
Subsidiary that would reasonably be expected to give rise to a claim against
MainStreet or any MainStreet Subsidiary for indemnification. There are no actual
or, to the best knowledge of MainStreet, threatened actions, suits or
proceedings which present a claim to restrain or prohibit the transactions
contemplated herein or in the BB&T Option Agreement. To the best knowledge of
MainStreet, no fact or condition relating to MainStreet or any MainStreet
Subsidiary exists (including without limitation noncompliance with the CRA) that
would prevent MainStreet or BB&T from obtaining all of the federal and state
regulatory approvals contemplated herein.
3.17 Compliance with Laws; Filings
-----------------------------
Each of MainStreet and each MainStreet Subsidiary is in compliance with all
statutes and regulations (including, but not limited to, the CRA 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 MainStreet nor any MainStreet 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 MainStreet nor any
MainStreet 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. Since December 31, 1994, MainStreet and each of the
MainStreet 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,
the Commission, the FDIC and the Federal Reserve Board. Each such report,
registration, notice and statement, and each amendment thereto, complied with
applicable legal requirements.
3.18 Brokers and Finders
-------------------
Neither MainStreet nor any MainStreet 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 BB&T Option Agreement, except for obligations to the Advisors, the nature
and extent of which have been Disclosed, for investment banking services, and
except for fees to accountants and lawyers.
3.19 Repurchase Agreements; Derivatives
----------------------------------
(a) With respect to all agreements currently outstanding pursuant to which
MainStreet or any MainStreet Subsidiary has purchased securities subject to an
agreement to resell, MainStreet or the MainStreet Subsidiary has a valid,
perfected first lien or security interest in the securities or other collateral
securing such agreement, and the value
17
<PAGE>
of such collateral equals or exceeds the amount of the debt secured thereby.
With respect to all agreements currently outstanding pursuant to which
MainStreet or any MainStreet Subsidiary has sold securities subject to an
agreement to repurchase, neither MainStreet nor the MainStreet Subsidiary has
pledged collateral materially in excess of the amount of the debt secured
thereby. Neither MainStreet nor any MainStreet Subsidiary has pledged
collateral materially in excess of the amount required under any interest rate
swap or other similar agreement currently outstanding.
(b) Neither MainStreet nor any MainStreet 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 MainStreet Subsidiaries that are depository
institutions are insured by the FDIC to the maximum extent permitted by federal
law, and the MainStreet Subsidiaries have paid all premiums and assessments and
filed all reports required to have been paid or filed under all rules and
regulations applicable to the FDIC.
3.21 Related Party Transactions
--------------------------
MainStreet has Disclosed all existing transactions, investments and loans,
including loan guarantees existing as of the date hereof, to which MainStreet or
any MainStreet Subsidiary is a party with any director, executive officer or 5%
shareholder of MainStreet 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 MainStreet
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 MainStreet to vote on the Plan of Merger, the Proxy
Statement/Prospectus and all amendments or supplements thereto, with respect to
all information set forth therein provided by MainStreet, (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 MainStreet nor any MainStreet Subsidiary has taken or agreed to
take any action which would or could reasonably be expected to (i) cause the
Merger not to be accounted for as a pooling of interests or 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
-------------------
MainStreet and each MainStreet 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.
18
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3.25 Labor Relations
---------------
Neither MainStreet nor any MainStreet 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 MainStreet or any MainStreet Subsidiary party to any
collective bargaining agreement. There is no strike or other labor dispute
involving MainStreet or any MainStreet Subsidiary, pending or threatened, or to
the best knowledge of MainStreet, is there any activity involving any employees
of MainStreet or any MainStreet Subsidiary seeking to certify a collective
bargaining unit or engaging in any other organization activity.
3.26 Fairness Opinion
----------------
MainStreet has received from the Advisors opinions that, as of the date
hereof, the Merger Exchange Ratio is fair to the shareholders of MainStreet from
a financial point of view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BB&T
BB&T represents and warrants to MainStreet as follows (no representation or
warranty herein of BB&T shall be deemed to be inaccurate unless the inaccuracy
would permit MainStreet to refuse to consummate the Merger under the applicable
standard set forth in Section 6.2(a)):
4.1 Capital Structure of BB&T
-------------------------
The authorized capital stock of BB&T 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)
500,000,000 shares of BB&T Common Stock, of which 284,377,132 shares were issued
and outstanding on August 7, 1998. All outstanding shares of BB&T Common Stock
have been duly authorized and are validly issued, fully paid and nonassessable.
The shares of BB&T 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
BB&T Common Stock do not have preemptive rights.
4.2 Organization, Standing and Authority of BB&T
--------------------------------------------
BB&T 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. BB&T is registered as a bank holding
company under the Bank Holding Company Act.
4.3 Authorized and Effective Agreement
----------------------------------
(a) Each of BB&T and BB&T Financial 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 each of BB&T and BB&T Financial. This
Agreement and the Plan of Merger attached hereto constitute legal, valid and
binding obligations of BB&T and BB&T Financial, and each is enforceable against
BB&T and BB&T Financial in accordance with its terms,
19
<PAGE>
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 (whether applied in a court of law or in 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 or the Articles of
Merger, nor consummation of the transactions contemplated hereby, nor compliance
by BB&T or BB&T Financial with any of the provisions hereof or thereof shall (i)
conflict with or result in a breach of any provision of the Articles of
Incorporation or bylaws of BB&T or any BB&T Subsidiary, (ii) constitute or
result in a breach of any term, condition or provision of, or constitute a
default under, or give rise to any right of termination, cancellation or
acceleration with respect to, or result in the creation of any lien, charge or
encumbrance upon any property or asset of BB&T or any BB&T Subsidiary pursuant
to, any note, bond, mortgage, indenture, license, agreement or other instrument
or obligation, or (iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to BB&T or any BB&T Subsidiary.
(c) Other than consents or approvals required from, or notices to,
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
BB&T and BB&T Financial of the Merger and the other transactions contemplated in
this Agreement.
4.4 Organization, Standing and Authority of BB&T Subsidiaries
---------------------------------------------------------
Each of the BB&T Subsidiaries and BB&T Financial is duly organized, validly
existing and in good standing under applicable laws. BB&T owns, directly or
indirectly, all of the issued and outstanding shares of capital stock of each of
the BB&T Subsidiaries and BB&T Financial. Each of the BB&T Subsidiaries and
BB&T Financial (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; Statements True
-------------------------------------
BB&T has timely filed all Securities Documents required by the Securities
Laws since December 31, 1994. 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. No statement, certificate, instrument or other writing furnished or
to be furnished hereunder by BB&T or any other BB&T Subsidiary to MainStreet
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.
4.6 Financial Statements
--------------------
The Financial Statements of BB&T fairly present or will fairly present, as
the case may be, the consolidated financial position of BB&T and the BB&T
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 the
absence of any notes and to normal year-end audit adjustments that are not
material in amount or effect) in conformity with GAAP consistently applied.
4.7 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
MainStreet to vote on the Merger, the Proxy Statement/Prospectus and all
amendments or supplements thereto, with respect to all information set forth
therein relating to BB&T, (i) shall comply
20
<PAGE>
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.
4.8 Tax and Regulatory Matters
--------------------------
Neither BB&T nor any BB&T Subsidiary has taken. agreed to take or will take
any action which would or could reasonably be expected to (i) cause the Merger
not to be accounted for as a pooling of interests or 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).
4.9 Share Ownership
---------------
As of the date of this Agreement, BB&T does not own (except in a fiduciary
capacity) any shares of MainStreet Common Stock. BB&T has entered into an
agreement to acquire Scott & Stringfellow Financial, Inc., which BB&T
understands maintains a position in shares of MainStreet.
4.10 Legal Proceedings; Regulatory Approvals
---------------------------------------
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of BB&T, threatened
against BB&T or any BB&T Subsidiary or against any assets, interest, or right of
BB&T or any BB&T Subsidiary, or against any officer, director or employee of any
of them that in any 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 BB&T, threatened
against any present or former director of officers of BB&T or any BB&T
Subsidiary that would reasonably be expected to give rise to a claim against
BB&T or any BB&T Subsidiary for indemnification. There are no actual or, to the
best knowledge of BB&T, threatened actions, suits or proceedings which present a
claim to restrain or prohibit the transactions contemplated herein, in the Plan
of Merger or the BB&T Option Agreement. To the best knowledge of BB&T, no fact
or condition relating to BB&T or any BB&T Subsidiary exists (including without
limitation noncompliance with the CRA) that would prevent BB&T or MainStreet
from obtaining all of the federal and state regulatory approvals contemplated
herein.
4.11 Material Adverse Change
-----------------------
Since December 31, 1997, BB&T and the BB&T Subsidiaries have not incurred
any material liability except as disclosed on the most recent BB&T Financial
Statements, or entered into any transactions with Affiliates, in each case other
than in the ordinary course of business consistent with past practices, nor has
there been any adverse change or any event involving a prospective change in the
business, financial condition or results of operations of BB&T Subsidiaries
4.12 Compliance with Laws
--------------------
Each of BB&T and the BB&T Subsidiaries is in compliance with all statutes
and regulations (including, but not limited to, the CRA and regulations
promulgated thereunder and other consumer banking laws) applicable and material
to the conduct of its business, and neither BB&T nor any of the BB&T
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 BB&T nor any of the BB&T Subsidiaries is subject to any
regulatory or supervisory cease and desist order, agreement, directive or
memorandum or understanding, and none of them has received any communication
requesting that they enter into any of the foregoing.
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ARTICLE V
COVENANTS
5.1 MainStreet Shareholder Meeting
------------------------------
MainStreet 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 MainStreet
agrees that it shall, at the time the Proxy Statement/Prospectus is mailed to
the shareholders of MainStreet, recommend that MainStreet's shareholders vote
for such approval; provided, that the Board of Directors of MainStreet may
withdraw or refuse to make such recommendation only if the Board of Directors
shall determine in good faith that such recommendation should not be made in
light of its fiduciary duty to MainStreet shareholders following consideration
of (i) written advice of legal counsel to the effect that making such
recommendation or failing to withdraw or modify such recommendation would more
likely than not constitute a breach of the fiduciary duties of such Board to
MainStreet or its shareholders; and (ii) either (A) the withdrawal by either
Financial Advisor in writing of its opinion referred to in Section 3.26 or (B)
the delivery to the MainStreet Board of Directors of written advice from either
Financial Advisor that the Merger Consideration is either not fair or is
inadequate to the shareholders of MainStreet from a financial point of view.
5.2 Registration Statement; Proxy Statement/Prospectus
--------------------------------------------------
As promptly as practicable after the date hereof, BB&T shall prepare
and file the Registration Statement with the Commission. MainStreet will furnish
to BB&T 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 BB&T on the form of, and any characterizations of such
information included in, the Registration Statement prior to the filing with the
Commission. 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. The Registration Statement shall include the form of Proxy
Statement/Prospectus. BB&T and MainStreet shall use their reasonable best
efforts to cause the Proxy Statement/Prospectus to be approved by the Commission
for mailing to the MainStreet 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 Commission thereunder. MainStreet 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, BB&T undertakes and agrees (i) to cause
BB&T Financial to adopt the Plan of Merger; (ii) to vote the shares of BB&T
Financial common stock for approval of the Plan of Merger; (iii) to pay or cause
to be paid when due the Merger Consideration; and (iv) to reserve for issuance
such number of shares of BB&T Common Stock as shall be necessary to pay the
portion of the Consideration to be distributed in the form of BB&T Common Stock,
and not to take any action that would cause the aggregate number of shares of
BB&T Common Stock available for issuance hereunder not to be sufficient to
effect the Merger.
5.4 Additional Acts
---------------
(a) MainStreet agrees to take such actions reasonably requested by BB&T as
may be reasonably necessary to modify the structure of, or to substitute parties
to (so long as such substitute is BB&T or a BB&T 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, including without limitation the covenant not to take
22
<PAGE>
any action that would substantially delay or impair the prospects of completing
the Merger pursuant to this Agreement and the Plan of Merger.
(b) As promptly as practicable after the date hereof, BB&T and MainStreet
shall submit notice or applications for prior approval of the transactions
contemplated herein to the Federal Reserve Board 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. MainStreet and BB&T each represents and
warrants to the other that all information included (or submitted for inclusion)
concerning it, its respective Subsidiaries, and any of its respective directors,
officers and shareholders, shall be true, correct and complete in all material
respects as of the date presented.
(c) BB&T agrees that its Board of Directors or authorized Board committee
shall approve prior to the Effective Time each grant of a converted option (as
described in Section 2.9(a)) to any individual who, subsequent to consummation
of the Merger, will be a director or officer of BB&T under Rule 16b-3 of the
Exchange Act.
5.5 Best Efforts
------------
Each of BB&T and MainStreet shall use, and shall cause each of their
respective Subsidiaries to use, its reasonable 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 reasonably desirable on its part to fulfill the conditions in
Article VI and to consummate the transactions herein contemplated at the
earliest practicable date. Neither BB&T nor MainStreet 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
--------------------------
MainStreet shall cooperate with BB&T concerning accounting and financial
matters necessary or appropriate to facilitate the Merger (taking into account
BB&T'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;
provided, that any action taken pursuant to this Section 5.6 shall not be deemed
to constitute or result in the breach of any representation or warranty of
MainStreet contained in this Agreement; and provided further, that MainStreet
shall not be required to implement any changes in accounting or financial
matters unless and until BB&T agrees in writing that all conditions to BB&T's
obligation to consummate the Merger set forth in Sections 6.1 and 6.3 (other
than the delivery of certificates, opinions and other instruments and documents
to be delivered at the Closing or otherwise to be dated at the Effective Time,
the delivery of which shall continue to be conditions to BB&T's obligation to
consummate the Merger) have been satisfied or waived.
5.7 Access to Information
---------------------
MainStreet and BB&T 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,
MainStreet shall afford to representatives of BB&T access, during normal
business hours during the period prior to the Effective Time, to all of the
properties, books, contracts, commitments and records of MainStreet and the
MainStreet Subsidiaries and, during such period, shall make available all
information concerning their businesses as may be reasonably requested. BB&T
shall make available to representatives of MainStreet information consistent
with information provided by BB&T in the past to other corporations similarly
situated. 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 undertakings with
23
<PAGE>
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
--------------
BB&T and MainStreet 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 MainStreet
--------------------------
Except with the prior written consent of BB&T, between the date hereof and
the Effective Time, MainStreet shall not, and shall cause each of the MainStreet
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 type of 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 $0.15 per share of MainStreet Common Stock payable on record dates
and in amounts consistent with past practices; provided that any dividend
declared or payable on the shares of MainStreet Common Stock for the quarterly
period during which the Effective Time occurs shall, unless otherwise agreed
upon in writing by BB&T and MainStreet, 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 (including treasury shares),
except pursuant to the Stock Option Plans or the BB&T Option Agreement, and
except pursuant to its 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 MainStreet 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, in each case 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 (excluding increases in compensation resulting from the vesting in the
normal course of restricted stock awards outstanding as of the date of this
Agreement, if any, or the exercise of compensatory stock options outstanding as
of the date of this Agreement), or pay or agree to pay any bonus to, or provide
any new employee benefit or incentive to, any of its directors, officers
24
<PAGE>
or employees, except for increases or payments made in the ordinary course of
business consistent with past practice pursuant to plans or arrangements in
effect on the date hereof;
(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, however, 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, MainStreet or any MainStreet
Subsidiary or any business combination with MainStreet or any MainStreet
Subsidiary other than as contemplated by this Agreement; or authorize any
officer, director, agent or affiliate of MainStreet or any MainStreet 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; provided, that this
subsection (j) shall not apply to furnishing information, negotiations or
discussions following an unsolicited offer if, as a result of such offer,
MainStreet is advised in writing by legal counsel that the failure to so furnish
information or negotiate would more likely than not constitute a breach of the
fiduciary duties of MainStreet'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 MainStreet or a MainStreet Subsidiary or guarantee by
MainStreet or a MainStreet 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 or the reappointment of officers in
the normal course), 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 Agreement and
the Plan of Merger by its shareholders and after receipt of the requisite
regulatory approvals for the transactions contemplated by this Agreement and the
Plan of Merger, MainStreet shall 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; provided, that MainStreet shall not be
required to implement any changes in such policies, practices and procedures
unless and until BB&T agrees in writing that all conditions to BB&T's obligation
to consummate the Merger set forth herein (other than the delivery of
certificates, opinions and other instruments and documents to be delivered at
the Closing or otherwise to be dated at the Effective Time, the delivery of
which shall continue to be conditions to obligations to consummate the Merger)
have been satisfied or waived.
(m) change its methods of accounting in effect at December 31, 1997,
except as required by changes in GAAP concurred in by BB&T, 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 December 31,
1997, 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 $100,000 for any single item, or
$1,000,000 in the aggregate, unless otherwise agreed by BB&T in writing, which
agreement may not be unreasonably withheld;
(o) incur any new indebtedness other than deposits from customers, advances
from the Federal Home Loan Bank or Federal Reserve Bank and reverse repurchase
arrangements, all in the ordinary course of business;
25
<PAGE>
(p) take any action which would or could reasonably be expected to (i)
cause the Merger not to be accounted for as a pooling of interests or 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 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 Agreements
---------------------
BB&T (or its specified banking subsidiary) agrees to enter into an
employment agreement with Michael R. Brenan substantially in the form of Annex B
hereto, and employment agreements with Rebecca J. Jenkins, Darryl J.
Lamdreneau, Mark J. Wenick, R. Bruce Valley, Merlin A. Henkel and George Kapusta
substantially in the form of Annex C hereto.
5.11 Affiliates
----------
MainStreet shall use its best efforts to cause all persons who are
Affiliates of MainStreet to deliver to BB&T promptly following this Agreement a
written agreement providing that such person will not dispose of BB&T Common
Stock received in the Merger except in compliance with the Securities Act and
the rules and regulations promulgated thereunder and except as consistent with
qualifying the transactions contemplated hereby for pooling of interests
accounting treatment, and in any event shall use its best efforts to cause such
affiliates to deliver to BB&T such written agreement prior to the Closing Date.
5.12 Section 401(k) Plan; Employee Benefits
--------------------------------------
(a) BB&T shall cause the 401(k) plan of MainStreet to be merged with
the 401(k) plan maintained by BB&T and the BB&T Subsidiaries, and the account
balances of former employees of MainStreet or the MainStreet Subsidiaries who
are participants in the MainStreet plan shall be transferred to the accounts of
such employees under the BB&T 401(k) plan. Following such merger and transfer,
such accounts shall 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 administering the 401(k) plan, service with
MainStreet and the MainStreet Subsidiaries shall be deemed to be service with
BB&T or the BB&T Subsidiaries for eligibility and vesting purposes, but not for
purposes of benefit accrual.
(b) As soon as practicable following the Effective Time, BB&T shall take
any and all action necessary to terminate MainStreet's defined benefit pension
plans (the "MainStreet Pension Plan") pursuant to a standard termination in
accordance with Section 4041 of ERISA and to provide for full vesting of the
accrued benefits of all participants in the MainStreet Pension Plan and the
distribution of the assets thereof to the participants. The actions relating to
termination of the MainStreet Pension Plan shall be conditioned upon receiving a
favorable determination letter from the IRS with regard to the termination of
the MainStreet Pension Plan. BB&T will use its reasonable best efforts to seek
the issuance of such letter as soon as practicable following the Effective
Time. Each employee of MainStreet or a MainStreet Subsidiary at the Effective
Time who becomes an employee immediately following the Effective Time of BB&T or
a BB&T Subsidiary ("Employer Entity") shall be given credit under BB&T's defined
benefit pension plan for service with MainStreet and the MainStreet Subsidiaries
for eligibility and vesting purposes, but not for purposes of benefit accrual.
(c) Each employee of MainStreet or of a MainStreet Subsidiary at the
Effective Time who becomes an employee immediately following the Effective Time
of BB&T or a BB&T Subsidiary ("Employer Entity") shall be
26
<PAGE>
eligible to participate in the group hospitalization, medical, dental, life,
disability and other welfare benefit plans and programs available to similarly
situated employees of the Employer Entity, subject to the terms of such plans
and programs; provided, that service with MainStreet shall be deemed to be
service with the Employer Entity for the purpose of determining eligibility to
participate in and periods applicable to such welfare plans and programs.
(d) Each employee of MainStreet or a MainStreet Subsidiary who becomes
an employee of BB&T or a BB&T Subsidiary and is terminated by BB&T or a BB&T
Subsidiary subsequent to the Effective Time, excluding any employee who has an
existing employment or special termination agreement which is Disclosed, shall
be entitled to severance pay in accordance with the general severance policy
maintained by BB&T, if and to the extent that such employee is entitled to
severance pay under such policy. Such employee's service with MainStreet or a
MainStreet Subsidiary shall be treated as service with BB&T for purposes of
determining the amount of severance pay, if any, under BB&T's severance policy.
(e) BB&T shall honor all employment agreements, severance agreements
and deferred compensation agreements that MainStreet and the MainStreet
Subsidiaries have with their current and former employees and directors and
which have been Disclosed to BB&T pursuant to this Agreement, except to the
extent any such agreements shall be superseded or terminated at the Closing or
following the Closing Date.
5.13 Directors and Officers Protection
---------------------------------
BB&T or a BB&T 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 MainStreet for acts or
omissions occurring prior to the Effective Time. Such insurance shall provide at
least the same coverage and amounts as contained in MainStreet'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 MainStreet'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, BB&T 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. BB&T further agrees to indemnify all
individuals who are or have been officers, directors or employees of MainStreet
or any MainStreet Subsidiary prior to the Effective Time from any acts or
omissions in such capacities prior to the Effective Time, to the fullest extent
that such indemnification is provided pursuant to the Articles of Incorporation,
bylaws and contracts of MainStreet on the date hereof and is permitted under the
VSCA. If BB&T or the BB&T Subsidiary maintaining the insurance provided for in
this Section 5.13 or any successors or assigns shall consolidate with or merge
into any other entity and shall not be the continuing or surviving entity of the
consolidation or merger, or shall transfer all or substantially all of its
assets to any entity, proper provision shall be made so that the successor or
assign of BB&T or the BB&T Subsidiary shall assume the obligations in this
Section 5.13. This Section 5.13 is intended for the benefit of and shall be
enforceable by each indemnified officer and director and their respective heirs
and representatives.
5.14 Forbearances of BB&T
--------------------
Except with the prior written consent of MainStreet, which consent shall
not be arbitrarily or unreasonably withheld, between the date hereof and the
Effective Time, neither BB&T nor any BB&T Subsidiary shall take any action which
would or might be expected to (i) cause the business combination contemplated
hereby not to be accounted for as a pooling of interests or not to constitute a
reorganization under Section 368 of the Code; (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 BB&T
Option Agreement other than in accordance with its terms, or dispose of the
shares of MainStreet Common Stock issuable upon exercise of the option rights
conferred thereby other than as permitted 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.
27
<PAGE>
5.15 Assumption of Agreement by Acquiror of BB&T
-------------------------------------------
It shall be a condition precedent to BB&T entering into any agreement
whereby BB&T shall (i) consolidate or merge into any other entity and shall not
be the continuing or surviving person of such consolidation or merger, or (ii)
transfers all or substantially all of its assets to any entity, that proper
provision shall be made so that the successor and assigns of BB&T shall
specifically agree to assume BB&T's obligations under this Agreement.
5.16 Reports
-------
Each of MainStreet and BB&T shall file (and shall cause the MainStreet
Subsidiaries and the BB&T 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 BB&T or MainStreet, 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 GAAP (subject in the case of interim
financial statements to the absence of notes and 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.
5.17 Exchange Listing
----------------
BB&T shall use its reasonable best efforts to list, prior to the Effective
Time, on the NYSE, subject to official notice of issuance, the shares of BB&T
Common Stock to be issued to the holders of MainStreet Common Stock pursuant to
the Merger, and BB&T shall give all notices and make all filings with the NYSE
required in connection with the transactions contemplated herein.
5.18 MainStreet Board of Directors
-----------------------------
As of the Effective Time, BB&T shall offer to each of the members of the
Board of Directors of MainStreet a seat on either the Advisory Board for the
southwest Virginia area or the Advisory Board in the community in which such
member resides. For two years following the Effective Time, the Advisory Board
members appointed pursuant to this Section 5.17 and who continue to serve shall
receive, as compensation for service on the Advisory Board, Advisory Board
member's fees (annual retainer and attendance fees) equal in amount each year
(prorated for any partial year) to the annual retainer and schedule of
attendance fees for directors of MainStreet in effect on July 1, 1998. Following
such two-year period, Advisory Board Members, if they continue to serve in such
capacity, shall receive fees in accordance with BB&T's standard schedule of fees
for service thereon as in effect from time to time. For two years after the
Effective Time, no such Advisory Board member shall be prohibited from serving
thereon because he or she shall have attained the maximum age for service
thereon (currently age 70). In addition to the foregoing, as soon as practicable
following the Effective Time, BB&T shall cause two members of the Board of
Directors of MainStreet designated by such Board to be appointed to the Board of
Directors of Branch Banking and Trust Company and two additional members of the
Board of Directors of MainStreet designated by such Board to be appointed to the
Board of Directors of Branch Banking and Trust Company of Virginia, subject in
each case to such member's eligibility and willingness to serve. MainStreet
shall use its best efforts to cause each member of the MainStreet Board of
Directors to enter into an agreement with BB&T on or before the Closing Date
providing that such member will not engage in activities competitive to BB&T for
two years following the Effective Time.
28
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5.19 Charitable Contribution
-----------------------
As soon as practicable after the Effective Time, BB&T shall make available
the amount of $1 million for the purpose of making charitable and community
development contributions within the geographic area served on the date hereof
by MainStreet and the MainStreet Subsidiaries. Such sum shall be distributed
consistent with such purposes by a group of five individuals, three of whom
shall be designated by BB&T and two of whom shall be designated by the Board of
Directors of MainStreet as it exists prior to the Effective Time.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - BB&T and MainStreet
------------------------------------------
The respective obligations of BB&T and MainStreet 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 by the shareholders of
MainStreet and of BB&T Financial of the Agreement and the Plan of Merger;
(b) The Registration Statement (including any post-effective amendments
thereto) shall be effective under the Securities Act, and BB&T 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 BB&T threatened by the Commission or any state "Blue Sky"
securities administration to suspend the effectiveness of such Registration
Statement and the BB&T 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 and the Plan of
Merger, all notice periods and waiting periods with respect to such approvals
shall have passed and all such approvals shall be in effect;
(d) None of BB&T, any of the BB&T Subsidiaries, MainStreet or any of the
MainStreet 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) MainStreet and BB&T shall have received an opinion of BB&T's legal
counsel, in form and substance satisfactory to MainStreet 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
MainStreet will not recognize any gain or loss to the extent that such
shareholders exchange shares of MainStreet Common Stock for shares of BB&T
Common Stock.
6.2 Conditions Precedent - MainStreet
---------------------------------
The obligations of MainStreet 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 MainStreet
pursuant to Section 7.4:
29
<PAGE>
(a) All representations and warranties of BB&T 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 MainStreet. The
representations and warranties of BB&T set forth in Sections 4.1, 4.2, 4.3(a),
4.3(b)(i) and 4.4 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 BB&T set forth in this Agreement (including the
representations and warranties set forth in Sections 4.1, 4.2, 4.3(a), 4.3(b)(i)
and 4.4) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on BB&T.
(b) BB&T shall have performed in all material respects all obligations and
complied in all material respects with all covenants required by this Agreement.
(c) BB&T shall have delivered to MainStreet 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), 6.1(d), 6.2(a) and 6.2(b) hereof, to the extent applicable to
BB&T, 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 BB&T or that present a claim to restrain or prohibit
the transactions contemplated herein or in the Plan of Merger.
(d) MainStreet shall have received opinions of counsel to BB&T in the form
reasonably acceptable to MainStreet'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 BB&T Common Stock issuable pursuant to the Merger shall
have been approved for listing on the NYSE, subject to official notice of
issuance.
6.3 Conditions Precedent - BB&T
---------------------------
The obligations of BB&T 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 BB&T pursuant to
Section 7.4:
(a) All representations and warranties of MainStreet 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
BB&T. The representations and warranties of MainStreet set forth in Sections
3.1, 3.2 (except the last sentence thereof), 3.3, 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 MainStreet 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 MainStreet and the MainStreet Subsidiaries taken as a
whole.
(b) No regulatory approval shall have imposed any condition or requirement
which, in the reasonable opinion of the Board of Directors of BB&T, would so
materially adversely affect the business or economic benefits to BB&T of the
transactions contemplated by this Agreement as to render consummation of such
transactions unduly burdensome.
30
<PAGE>
(c) MainStreet shall have performed in all material respects all
obligations and complied in all material respects with all covenants required by
this Agreement.
(d) MainStreet shall have delivered to BB&T 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) hereof, to
the extent applicable to MainStreet, 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 MainStreet or that present
a claim to restrain or prohibit the transactions contemplated herein or in the
Plan of Merger.
(e) BB&T shall have received opinions of counsel to MainStreet in the form
reasonably acceptable to BB&T's legal counsel.
(f) BB&T shall have received the written agreements from Affiliates as
specified in Section 5.11 hereof to the extent necessary, in the reasonable
judgment of BB&T, to ensure that the Merger will be accounted for as a pooling
of interests under GAAP and to promote compliance with Rule 145 promulgated by
the Commission.
(g) BB&T shall have received letters, dated as of the date of filing of the
Registration Statement with the Commission and as of the Effective Time,
addressed to BB&T, in form and substance reasonably satisfactory to BB&T, from
Arthur Andersen, LLP to the effect that the Merger will qualify for pooling of
interests accounting treatment.
ARTICLE VII
TERMINATION, DEFAULT, 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)
hereof in the case of MainStreet and Section 6.3(a) hereof in the case of BB&T;
and, in the case of (i) or (ii), if such breach or inaccuracy has not been cured
by the earlier of thirty days following written notice of such breach to the
party committing such breach or the Effective Time and the party terminating the
Agreement is not in breach of any of its representations, warranties, covenants
or undertakings herein.
(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 hereof 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
MainStreet do not approve the Agreement and the Plan of Merger.
31
<PAGE>
(f) At any time following April 30, 1999 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 September 30, 1998 by BB&T in
writing, if BB&T determines in its sole good faith judgment, through review of
information Disclosed by MainStreet, or otherwise, that the financial condition,
results of operations, business or business prospects of MainStreet and of the
MainStreet Subsidiaries, taken as a whole, are materially adversely different
from BB&T's reasonable expectations with respect thereto on the date of
execution of this Agreement; provided that BB&T shall inform MainStreet upon
such termination as to the reasons for BB&T's determination. The fact that
MainStreet has Disclosed information shall not prevent BB&T from terminating
this Agreement pursuant to this Section 7.1(g) on account of such information.
(h) By MainStreet at any time during the five-day period commencing after
the Determination Date if both of the following conditions are satisfied:
(1) the Closing Value shall be less than $28.85; and
(2) (i) the quotient obtained by dividing the Closing Value by
$32.1875 (such number being referred to herein as the "BB&T Ratio") shall
be less than (ii) 90% of the quotient obtained by dividing the Index Price
on the Determination Date by the Index Price on the Starting Date;
subject, however, to the following three sentences. If MainStreet determines
not to consummate the Merger pursuant to this Section 7.1(h), it shall give
prompt written notice of its election to terminate to BB&T, which notice may be
withdrawn at any time prior to the lapse of the ten-day period commencing on the
Determination Date. During the five-day period commencing with its receipt of
such notice, BB&T shall have the option to elect to increase the Exchange Ratio
(rounded to the nearest thousandth) to a number such that the value (based on
the Closing Value) of the amount of BB&T Common Stock to be received in the
merger in exchange for each share of MainStreet Common Stock shall equal the
value (based on the Closing Value) that would have been received if the Closing
Value were $28.85. The election contemplated by the preceding sentence shall be
made by giving notice to MainStreet of such election and the revised Exchange
Ratio, whereupon no termination shall have occurred pursuant to this Section
7.1(h), and this Agreement shall remain in effect in accordance with its terms
(except as the Exchange Ratio shall have been so modified), and any references
in this Agreement to "Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this Section 7.1(h). If the Closing Date
shall occur during the five-day period such option is in effect, the Closing
Date shall be extended until the fifth Business Day following the close of such
five-day period.
For purposes of this Section 7.1(h), the following terms shall have the
meanings indicated:
"Closing Value" shall mean the average closing price per share of BB&T
Common Stock on the NYSE Composite Transactions List (as reported by The Wall
Street Journal - Eastern Edition) on the five trading days (determined by
excluding days on which the NYSE is closed) immediately preceding the
Determination Date.
"Determination Date" shall mean the tenth calendar day preceding the date
designated by BB&T as the Closing Date.
"Index Group" shall mean the 12 bank holding companies listed below, the
common stocks of all of which shall be publicly traded and as to which there
shall not have been, since the Starting Date and before the Determination Date,
any public announcement of a proposal for such company to be acquired or for
such company to acquire another company or companies in transactions with a
value exceeding 25% of the acquiror's market capitalization. In the event that
any such company or companies are removed from the Index Group, the weights
(which have been determined based upon the number of shares of outstanding
common stock) shall be redistributed proportionately for purposes of determining
the Index Price. The 12 bank holding companies and the weights attributed to
them are as follows:
32
<PAGE>
Bank Holding Companies % Weighting
---------------------- ------------
AmSouth Bancorporation 6.37%
Comerica Incorporated 8.24%
Fifth Third Bancorp 14.20%
Huntington Bancshares Inc. 11.22%
Mercantile Bancorporation, Inc. 7.07%
Northern Trust Corporation 5.90%
Regions Financial Corporation 7.95%
SouthTrust Corporation 8.73%
Marshall & Illsley Corp 5.62%
Union Planters Corp 4.51%
Summit Bancorp 9.22%
Wachovia Corporation 10.96%
Total 100.00%
=======
"Index Price" on a given date shall mean the weighted average (weighted in
accordance with the "% Weighting" listed above) of the closing sales prices of
the companies composing the Index Group (determined as provided with respect to
the Closing Value).
"Starting Date" shall mean the date of this Agreement.
If any company belonging to the Index Group or BB&T declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares, or similar transaction between the Starting Date and the
Determination Date, the prices for the common stock of such company or BB&T
shall be appropriately adjusted for the purposes of applying this Section
7.1(h).
7.2 Effect of Termination
---------------------
In the event this Agreement and the Plan of Merger is terminated pursuant
to Section 7.1 hereof, 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 a breach of the
covenant, agreement, representation or warranty giving rise to such termination.
The BB&T Option Agreement shall be governed by its own terms.
7.3 Termination 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
(including Sections 5.12, 5.13 and 5.17).
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 MainStreet 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
33
<PAGE>
of its obligations set out herein or therein; provided that no such extension or
waiver, or amendment or supplement pursuant to this Section 7.4, executed after
approval by the MainStreet shareholders of this Agreement and the Plan of
Merger, shall reduce either the Exchange Ratio 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 BB&T and MainStreet, 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 filing fees and printing costs incurred in
connection with the Registration Statement and the Proxy Statement/Prospectus
shall be borne 50% by BB&T and 50% by MainStreet.
8.2 Entire Agreement
----------------
This Agreement, including the documents and other writings referenced
herein or delivered pursuant hereto, contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and thereunder
and supersedes all arrangements or understandings with respect thereto, written
or oral, entered into on or before the date hereof. The terms and conditions of
this Agreement and the BB&T 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 BB&T Option 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, except for the rights of directors and officers of MainStreet to
enforce rights in Sections 5.13 and 5.17.
8.3 No Assignment
-------------
None 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 each 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 MainStreet:
Rebecca J. Jenkins
200 East Church Street
Martinsville, Virginia 24112
Telephone: 540-666-3272
Fax: 540-666-3675
34
<PAGE>
With a required copy to:
Hugh B. Wellons
Flippin, Densmore, Morse, Rutherford & Jessee
300 First Campbell Square
Roanoke, Virginia 24006
Telephone: 540-510-3000
Fax: 540-510-3050
If to BB&T or BB&T Financial:
Scott E. Reed
150 South Stratford Road
4th Floor
Winston-Salem, North Carolina 27104
Telephone: 336-733-3088
Fax: 336-733-2296
With a required copy to:
William A. Davis, II
Womble Carlyle Sandridge & Rice, PLLC
200 West Second Street
Winston-Salem, North Carolina 27102
Telephone: 336-721-3624
Fax: 336-733-8364
Any party may by notice change the address to which notice or other
communications to it are to be delivered.
8.5 Specific Performance
--------------------
MainStreet acknowledges that the MainStreet Common Stock and the MainStreet
business and assets are unique, and that if MainStreet fails to consummate the
transactions contemplated by this Agreement such failure will cause irreparable
harm to BB&T for which there will be no adequate remedy at law, BB&T shall be
entitled, in addition to its other remedies at law, to specific performance of
this Agreement if MainStreet shall, without cause, refuse to consummate the
transactions contemplated by this Agreement.
8.6 Captions
--------
The captions contained in this Agreement are for reference only and are not
part of this Agreement.
8.7 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.
8.8 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.
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed in counterparts by their duly
authorized officers, all as of the day and year first above written.
BB&T CORPORATION
By _______________________________________________
Name:________________________________________
Title:_______________________________________
BB&T FINANCIAL CORPORATION OF VIRGINIA
By _______________________________________________
Name:________________________________________
Title:_______________________________________
MAINSTREET FINANCIAL CORPORATION
By _______________________________________________
Name:________________________________________
Title:_______________________________________
36
<PAGE>
ANNEX A
-------
ARTICLES OF MERGER
OF
MAINSTREET 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 (the "Act"), hereby execute the following Articles of
Merger.
ONE
The merger of MainStreet Financial Corporation, a Virginia corporation
("MainStreet"), with and into BB&T Financial Corporation of Virginia, a Virginia
corporation ("BB&T Financial"), shall be in accordance with the Plan of Merger
attached hereto as Exhibit A and incorporated herein by reference (the "Plan of
Merger").
TWO
The Plan of Merger was submitted to the shareholders of each of BB&T
Financial and MainStreet by its Board of Directors in accordance with the
provisions of Section 13.1-718 of the Act:
A. The Plan of Merger was approved by the Board of Directors of
MainStreet on August 26, 1998 and recommended and submitted to the shareholders
of common stock of MainStreet, the only class of capital stock outstanding, at a
special meeting of shareholders called and held in accordance with the Act, on
_____________, 1998. As of the record date of that meeting, _________ shares of
MainStreet common stock were outstanding and entitled to vote. At that meeting,
_______ undisputed shares were voted in favor of the Plan of Merger, _______
shares abstained, and _______ shares were voted against the Plan of Merger.
This represented approval by ___% of the total MainStreet common stock issued
and outstanding, sufficient for approval by MainStreet shareholders.
B. Pursuant to Section 13.1-657 of the Act, the Plan of Merger was
adopted by unanimous consent of the shareholders of BB&T Financial.
THREE
The effective time and date of the Plan of Merger shall be ______ local
time on _______ __, 19__, or as soon thereafter as practicable.
<PAGE>
The undersigned, in behalf of each of BB&T Financial and MainStreet,
declares that the facts herein stated are true as of __________________, 19__.
BB&T FINANCIAL CORPORATION OF VIRGINIA
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
MAINSTREET FINANCIAL CORPORATION
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
<PAGE>
EXHIBIT A
---------
PLAN OF MERGER
OF
MAINSTREET FINANCIAL CORPORATION
WITH AND INTO
BB&T FINANCIAL CORPORATION OF VIRGINIA
Section 1. Corporations Proposing to Merge and Surviving Corporation.
---------------------------------------------------------
MainStreet Financial Corporation, a Virginia corporation ("MainStreet") shall be
merged (the "Merger") with and into BB&T Financial Corporation of Virginia, a
Virginia corporation ("BB&T Financial"), 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 ___, 1998, (the "Agreement"), by and among
MainStreet, BB&T Financial and BB&T Corporation, a North Carolina corporation
and parent corporation of BB&T Financial ("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 shall continue as the surviving corporation (the "Surviving
Corporation") in the Merger and the separate corporate existence of MainStreet
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 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, par value $5.00 per
share, of MainStreet ("MainStreet 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, par value $5.00 per share, of BB&T ("BB&T Common
Stock") as described in Section 5.
(b) At the Effective Time, 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.
Section 5. Merger Consideration. The number of shares of BB&T Common
--------------------
Stock (to the nearest one-hundredth of a share) to be exchanged for each share
of MainStreet Common Stock issued and outstanding as of the Effective Time and
cash (without interest) to be payable in exchange for any fractional share of
BB&T Common Stock which would otherwise be distributable to a MainStreet
shareholder shall be determined as follows:
(a) The number of shares of BB&T Common Stock to be issued in exchange for
each issued and outstanding share of MainStreet Common Stock shall be in the
ratio of 1.18 shares of BB&T Common Stock for each share of MainStreet Common
Stock (the "Exchange Ratio").
(b) The amount of cash payable with respect to any fractional share of BB&T
Common Stock shall be determined by multiplying the fractional part of such
share by the closing price per share on the NYSE Composite Transactions List (as
reported by The Wall Street Journal - Eastern Edition) for the last trading day
preceding the Effective Time. No person will be entitled to dividends, voting
rights or any other rights as a BB&T shareholder in respect of any fractional
share.
<PAGE>
Section 6. Conversion of Stock Options. At the Effective Time, each
---------------------------
option to acquire shares of MainStreet Common Stock ("Stock Option") granted
under the Piedmont Bankshares, Inc. 1990 Stock Option Plan and the MainStreet
Bankgroup, Inc. 1997 Stock Incentive Plan (the "Stock Option Plans") 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
rights with respect to BB&T Common Stock, and BB&T shall assume each such Stock
Option in accordance with the terms of the applicable Stock Option Plan, except
that from and after the Effective Time (i) BB&T and its Compensation Committee
shall be substituted for MainStreet and the Committee of MainStreet's Board of
Directors administering the Stock Option Plans, (ii) each Stock Option assumed
by BB&T may be exercised solely for shares of BB&T Common Stock, (iii) the
number of shares of BB&T Common Stock subject to each such Stock Option shall be
the number of whole shares of BB&T (omitting any fractional share) determined by
multiplying the number of shares of MainStreet Common Stock subject to such
Stock Option immediately prior to the Effective Time by the Exchange Ratio, and
(iv) the per share exercise price under each such Stock Option shall be adjusted
by dividing the per share exercise price under each such Stock Option by the
Exchange Ratio and rounding up to the nearest cent. Notwithstanding the
foregoing, BB&T may at its election substitute as of the Effective Time options
under the BB&T Corporation 1995 Omnibus Stock Incentive Plan (the "BB&T Option
Plan") for all or a part of the Stock Options, subject to the following
conditions: (A) the requirements of (iii) and (iv) above shall be met; (B) such
substitution shall not constitute a modification, extension or renewal of any of
the Stock Options which are incentive stock options; and (C) the substituted
options shall continue in effect on the same terms and conditions as provided in
the Stock Options and the Stock Option Plan granting each Stock Option. Each
grant of a converted or substitute option to any individual who subsequent to
the Merger will be a director or officer of BB&T as construed under Rule 16b-3
shall, as a condition to such conversion or substitution, be approved in
accordance with the provisions of Rule 16b-3. Each Stock Option which is an
incentive stock option shall be adjusted as required by Section 424 of the
Internal Revenue Code of 1986, as amended (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. With respect to those individuals, if any, who subsequent to the Merger
may be subject to the reporting requirements under Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), BB&T shall
administer the Stock Option Plans assumed pursuant to the Agreement (or the BB&T
Option Plan, if applicable) in a manner that complies with Rule 16b-3
promulgated under the Exchange Act to the extent necessary to preserve for such
individuals the benefits of Rule 16b-3 to the extent such benefits were
available to them prior to the Effective Time.
Section 7. 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 MainStreet Common Stock in the
Merger, and no right to receive cash in lieu thereof shall entitle the holder
thereof to any voting or other rights of a holder of shares or fractional share
interests of the Surviving Corporation. In lieu of such fractional shares, any
holder of shares who would otherwise be entitled to fractional shares of BB&T
Common Stock will, upon receipt by the Surviving Corporation of the letter of
transmittal and other documents described in Section 2.8(d) of the Agreement, be
paid the cash value of each such fraction, computed in accordance with the ratio
set forth in Section 5 above.
Section 8. 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 Boards of Directors of MainStreet and BB&T Financial; and (ii) no such
amendment made subsequent to the submission of this Plan of Merger to the
shareholders of MainStreet shall have any of the effects prohibited in Section
13.1-718.I of the VSCA without the approval of the shareholders affected
thereby.
<PAGE>
APPENDIX II
[Letterhead of Sandler O'Neill & Partners, L.P.]
December ___, 1998
Board of Directors
MainStreet Financial Corporation
200 East Church Street
P.O. Box 4831
Martinsville, VA 24115-4831
Ladies and Gentlemen:
MainStreet Financial Corporation ("MainStreet"), BB&T Financial Corporation
of Virginia ("BB&T Financial") and BB&T Corporation ("BB&T") have entered into
an Agreement and Plan of Reorganization, dated as of August 26, 1998 (the
"Agreement"), pursuant to which MainStreet will be merged with and into BB&T
Financial (the "Merger"). Upon consummation of the Merger, each share of
MainStreet common stock, par value $5.00 per share (together with the rights
attached thereto issued pursuant to the Rights Agreement dated January 18, 1990
between Piedmont Bankgroup Incorporated and Crestar Bank, as Rights Agent, the
"MainStreet Stock"), issued and outstanding immediately prior to the Merger will
be converted into the right to receive 1.18 shares (the "Exchange Ratio") of
BB&T common stock, par value $5.00 per share (together with the rights attached
thereto issued pursuant to the Rights Agreement dated December 17,1996 between
BB&T and Branch Banking and Trust Company, as Rights Agent, the "BB&T Stock"),
subject to adjustment as described in 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 Exchange
Ratio to the holders of MainStreet Stock.
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 August 26, 1998, by and between MainStreet and BB&T; (iii) certain
publicly available financial statements of MainStreet and other historical
financial information provided by MainStreet that we deemed relevant; (iv)
certain publicly available financial statements of BB&T and other historical
financial information provided by BB&T that we deemed relevant; (v) certain
financial analyses and forecasts of MainStreet prepared by and reviewed with
management of MainStreet and the views of senior management of MainStreet
regarding MainStreet's past and current business operations, results thereof,
financial condition and future prospects; (vi) certain financial analyses and
forecasts of BB&T prepared by and 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; (vii) the
pro forma impact of the Merger; (viii) the publicly reported historical price
and trading activity for MainStreet's and BB&T's common stock, including a
comparison of certain financial and stock market information for MainStreet and
BB&T with similar publicly available information for certain other companies the
securities of which are publicly traded; (ix) the financial terms of recent
business combinations in the banking industry, to the extent publicly available;
(x) the current market environment generally and the banking environment in
particular; and (xi) such other information, financial studies, analyses and
investigations and financial, economic and market criteria as we considered
relevant. Other than in connection with rendering this opinion, we did not act
as MainStreet's financial advisor in connection with its consideration of the
Merger or in connection with the negotiation of the Agreement, and we have not
been asked to, and did not, solicit indications of interest in a potential
transaction from other third parties.
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 that was publicly available or
otherwise furnished to, reviewed by or discussed with us, and we do not assume
any responsibility or liability for the accuracy or completeness thereof. We
did not make an independent evaluation or appraisal of the specific assets, the
<PAGE>
Board of Directors
MainStreet Financial Corporation
December ____, 1998
Page 2
collateral securing assets or the liabilities (contingent or otherwise) of
MainStreet or BB&T or any of their subsidiaries, or the collectibility of any
such assets, nor have we been furnished with any such evaluations or appraisals.
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 MainStreet and BB&T and that such
performances will be achieved, and we express no opinion as to such financial
projections or the assumptions on which they are based. We have also assumed
that there has been no material change in MainStreet's or BB&T's assets,
financial condition, results of operations, business or prospects since the date
of the most recent financial statements made available to us. We have assumed
in all respects material to our analysis that MainStreet and BB&T will remain as
going concerns for all periods relevant to our analyses, that all of the
representations and warranties contained in the Agreement and all related
agreements are true and correct, that each party to such agreements will perform
all of the covenants required to be performed by such party under such
agreements and that the Merger will be accounted for as a pooling of interests.
We have further assumed that the termination provision set forth in Section
7.1(g) of the Agreement will not be exercised and that the terms and conditions
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 financial, 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
this opinion. We have not undertaken to update, revise or reaffirm this opinion
or otherwise comment upon events occurring after the date hereof. We are
expressing no opinion herein as to what the value of BB&T common stock will be
when issued to MainStreet's shareholders pursuant to the Agreement or the prices
at which MainStreet's or BB&T's common stock will trade at any time.
We have been retained by you to render this opinion and will receive a fee
for our services. In the past, we have also provided certain other investment
banking services for MainStreet and have received compensation for such
services.
In the ordinary course of our business, we may actively trade the equity
securities of MainStreet 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 MainStreet in
connection with its consideration of the Merger and does not constitute a
recommendation to any stockholder of MainStreet as to how such stockholder
should vote at any 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; provided, however, that we hereby consent to the
inclusion of this opinion as an appendix to MainStreet's and BB&T's Proxy
Statement/Prospectus dated the date hereof and to the references to this opinion
therein.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the Exchange Ratio is fair, from a financial point of view, to the
holders of MainStreet Stock.
Very truly yours,
SANDLER O'NEILL & PARTNERS, L.P.
<PAGE>
APPENDIX III
[Letterhead of Scott & Stringfellow, Inc.]
December __, 1998
Board of Directors
MainStreet Financial Corporation
One Ellsworth Street
Martinsville, Virginia 24115
Dear Madame and Gentlemen:
MainStreet Financial Corporation ("MainStreet") and BB&T Corporation
("BB&T") have entered into an Agreement and Plan of Merger, dated as of August
26, 1998 (the "Merger Agreement"), pursuant to which MainStreet will be merged
with and into BB&T (the "Merger"). You have requested our opinion as to the
fairness to the holders of the outstanding shares of Common Stock, par value
$5.00 per share, of MainStreet (the "MainStreet Common Stock") of the exchange
ratio of 1.18 shares of Common Stock, par value $5.00 per share, of BB&T to be
received for each share of MainStreet Common Stock (the "Exchange Ratio")
pursuant to the terms of the Merger Agreement.
Scott & Stringfellow, as a customary part of its investment banking
business, is engaged in the valuation of financial institutions and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements, and valuations for estate, corporate and
other purposes. We have acted as financial advisor to the Board of Directors of
MainStreet in connection with the transaction described above. We are familiar
with MainStreet, having acted as its financial advisor in the past and have
provided certain investment banking services from time to time.
In developing our opinion, we have, among other things, reviewed and
analyzed: (1) the Merger Agreement; (2) MainStreet's financial statements for
the four years ended December 31, 1997; (2) MainStreet's unaudited financial
statements for the six months ended June 30, 1998 and other internal information
relating to MainStreet prepared by MainStreet's management; (3) information
regarding the trading market for the common stocks of MainStreet and BB&T and
the price ranges within which the respective stocks have traded; (4) the
relationship of prices paid to relevant financial data such as net worth,
earnings, assets and deposits in certain bank and bank holding company mergers
and acquisitions in recent years; (5) BB&T's annual reports to shareholders and
its financial statements for the four fiscal years ended December 31, 1997; (6)
BB&T's unaudited financial statements for the six months ended June 30, 1998 and
certain other internal information relating to BB&T prepared by BB&T's
management. We have discussed with members of management of MainStreet and BB&T
the background of the Merger, the reasons and basis for the Merger and the
business and future prospects of MainStreet and BB&T individually and as a
combined entity. Finally, we have conducted such other studies, analyses and
investigations, particularly of the banking industry, and considered such other
information as we have deemed appropriate.
In conducting our review and arriving at our opinion, we have relied upon
and assumed the accuracy and completeness of the information furnished to us by
or on behalf of MainStreet and BB&T. We have not attempted independently to
verify such information, nor have we made any independent appraisal of the
assets of MainStreet or BB&T. With respect to the information relating to the
prospects of MainStreet and BB&T, we have assumed that such information reflects
the best currently available judgments and estimates of the managements of
MainStreet and BB&T as to the likely future financial performances of their
respective companies and of the combined entity. We have taken into account our
assessment of general economic, financial market and industry conditions as they
exist and can be evaluated as of the date hereof, as well as our experience in
business valuation in general. We have also assumed that, in the course of
obtaining regulatory and third party consents for the Merger and the
transactions contemplated by the Merger Agreement, no restriction will be
imposed that will have a material adverse effect on the future results of
<PAGE>
operations or financial condition of MainStreet or BB&T. Furthermore, we are
expressing no opinion as to the price which BB&T's Common Stock will trade at in
any future time.
Our advisory services and opinion expressed herein were prepared for the
use of the Board of Directors of MainStreet and do not constitute a
recommendation to the MainStreet shareholders as to how they should vote at the
stockholders' meeting in connection with the Merger. We hereby consent, however,
to the inclusion of this opinion as an exhibit to any proxy or registration
statement distributed in connection with the Merger.
On the basis of our analyses and review and in reliance on the accuracy and
completeness of the information furnished to us and subject to the conditions
and assumptions noted above, it is our opinion that, as of the date hereof, the
Exchange Ratio is fair from a financial point of view to the shareholders of
MainStreet Common Stock.
Very truly yours,
SCOTT & STRINGFELLOW, INC.
By: _________________________
Gary S. Penrose
Managing Director
Financial Institutions Group
<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, except that when a director or officer is
liable to the corporation or is adjudged liable on the basis that personal
benefit was improperly received by him, the corporation may not indemnify him. A
director or officer of a corporation who is a party to a proceeding may also
apply to a court for indemnification, and the court may order indemnification
under certain circumstances set forth in statute. A corporation may, in its
articles of incorporation or bylaws or by contract or resolution of the board of
directors, provide indemnification in addition to that provided by statute,
subject to certain conditions.
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)).
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 Agreement and Plan of Reorganization dated as of August 26, 1998 between BB&T
Corporation and MainStreet Financial Corporation (included as Appendix I to the Proxy
Statement/Prospectus)
5 Form of Opinion of Womble Carlyle Sandridge & Rice, PLLC
8 Form of Tax 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 PricewaterhouseCoopers LLP
23(d) Form of Consent of Sandler O'Neill & Partners, L.P.
23(e) Form of Consent of Scott & Stringfellow, Inc.
24 Power of Attorney
99(a) Form of MainStreet Financial Corporation Proxy Card
99(b) Option Agreement, dated August 26, 1998, between BB&T Corporation and MainStreet
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.
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.
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 December 9, 1998.
BB&T CORPORATION
By: /s/ Scott E. Reed
-----------------------------------------
Name: Scott E. Reed
Title: Senior Executive Vice President and
Chief Financial Officer
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 December 9, 1998.
<TABLE>
<S> <C>
/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/ Alfred E. Cleveland* /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/ Paul S. Goldsmith*
- ---------------------------------------------- ---------------------------------------
Name: Tom D. Efird Name: Paul S. Goldsmith
Title: Director Title: Director
/s/ L. Vincent Hackley* /s/ Jane P. Helm*
- ---------------------------------------------- ---------------------------------------
Name: L. Vincent Hackley Name: Jane P. Helm
Title: Director Title: Director
</TABLE>
<PAGE>
<TABLE>
<S> <C>
/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* /s/ Joseph A. McAleer, Jr.*
- ---------------------------------------------- ---------------------------------------
Name: James H. Maynard Name: Joseph A. McAleer, Jr.
Title: Director Title: Director
/s Albert O. McCauley* /s/ Richard L. Player, Jr.*
- ---------------------------------------------- ---------------------------------------
Name: Albert O. McCauley 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/ E. Rhone Sasser* /s/ Jack E. Shaw*
- ---------------------------------------------- ---------------------------------------
Name: E. Rhone Sasser Name: Jack E. Shaw
Title: Director Title: Director
/s/ Harold B. Wells*
- ----------------------------------------------
Name: Harold B. Wells
Title: Director
</TABLE>
*By: /s/ Scott E. Reed
-----------------------------------------
Scott E. Reed
Attorney-in-Fact
<PAGE>
EXHIBIT 5
[Letterhead of Womble Carlyle Sandridge & Rice, PLLC]
December __, 1998
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 by and among BB&T Corporation ("BB&T"), MainStreet Financial
Corporation and BB&T Financial Corporation of Virginia dated as of August
26, 1998 (the "Merger Agreement")
Ladies and Gentlemen:
We have acted as counsel to BB&T in connection with the registration of
________ shares of its Common Stock, par value $5.00 per share (the "Common
Stock"), issuable pursuant to the Merger 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 the shares of
Common Stock have been issued upon the terms and conditions set forth in the
Merger Agreement, the shares of Common Stock will be validly 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
<PAGE>
EXHIBIT 8
[Letterhead of Womble Carlyle Sandridge & Rice, PLLC]
December __, 1998
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 August 26, 1998 (the "Reorganization
Agreement"), by and among MainStreet Financial Corporation, a Virginia
corporation ("MainStreet"), 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
_______ 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, MainStreet will merge into BB&T Financial-VA pursuant to
Virginia law, and each outstanding share of MainStreet Common Stock (the only
class outstanding) is to be converted into a number of shares of BB&T Common
Stock determined under a formula in the Reorganization Agreement. Also, cash
will be paid in lieu of issuance of fractional shares. MainStreet shareholders
are not entitled by state law to dissent from the Merger.
In giving this opinion we have reviewed and we have relied upon the
representations and warranties contained in, or the facts described in, the
Reorganization Agreement, the Registration Statement, and certificates dated
December __, 1998 in which officers of MainStreet and officers of BB&T make
certain representations on behalf of MainStreet 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 assumed that the statements in the Tax
Certificates are true, correct and complete as of the date of this opinion and
as of the Effective Time, 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)
MainStreet'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 MainStreet 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
MainStreet 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 MainStreet or BB&T Financial-VA
by reason of the Merger.
(3) No gain or loss will be recognized by the shareholders of MainStreet
upon the receipt of BB&T Common Stock solely in exchange for their
shares of MainStreet Common Stock.
<PAGE>
(4) A shareholder of MainStreet 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 tax basis in the BB&T Common Stock received by a MainStreet
shareholder (including any fractional share interest deemed received)
will be the same as the tax basis in the MainStreet Common Stock
surrendered in exchange therefor.
(6) The holding period for BB&T Common Stock received in exchange for
shares of MainStreet Common Stock will include the period during which
the shareholder held the shares of MainStreet Common Stock surrendered
in the exchange, provided that the MainStreet 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 MainStreet Common Stock do not
apply to any stock rights, warrants or options to acquire MainStreet Common
Stock. The opinions stated as to MainStreet shareholders are general in nature
and do not necessarily apply to any particular MainStreet 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 (partnerships 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
MainStreet 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 judgment, 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.
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:___________________________
_______________
<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 September 18,
1998, included in BB&T Corporation's Form 8-K dated September 18, 1998, and to
all references to our firm included in this registration statement. Our report
dated January 14, 1998, 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 two business combinations accounted for as poolings-
of-interests.
/s/ ARTHUR ANDERSEN LLP
Charlotte, North Carolina
December 9, 1998
<PAGE>
EXHIBIT 23(C)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-4 of BB&T Corporation of our report, dated January 16, 1998, on our
audits of the consolidated financial statements of MainStreet Financial
Corporation as of December 31, 1997 and 1996 and for each of the three years in
the period ended December 31, 1997, included in the 1997 Annual Report on Form
10-K filed by MainStreet Financial Corporation, and our report, dated October
22, 1998, on our audit of the supplemental consolidated financial statements of
MainStreet Financial Corporation, as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997, included in the Form
8-K, dated October 23, 1998, filed by MainStreet Financial Corporation. We also
consent to the reference to our firm under the caption "Experts."
/s/ PRICEWATERHOUSECOOPERS LLP
Greensboro, North Carolina
December 9, 1998
<PAGE>
EXHIBIT 23(D)
FORM OF CONSENT OF SANDLER O'NEILL & PARTNERS, L.P.
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of MainStreet Financial Corporation (the "Company") as an Appendix to
the Proxy Statement/Prospectus relating to the proposed merger of the Company
with and into BB&T Corporation contained in the Registration Statement on Form
S-4 as filed with the Securities and Exchange Commission on the date hereof, 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 "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 Act or the
Regulations.
/s/ SANDLER O'NEILL & PARTNERS, L.P.
December __, 1998
<PAGE>
EXHIBIT 23(E)
FORM OF CONSENT OF SCOTT & STRINGFELLOW, INC.
We consent to the use, quotation and summarization in the Registration
Statement on Form S-4 of our fairness opinion dated December __, rendered to the
Board of Directors of MainStreet Financial Corporation in connection with its
merger with BB&T Corporation and the use of our name, and the statements with
respect to us, appearing in the Registration Statement.
/s/ SCOTT & STRINGFELLOW, INC.
December __, 1998
<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 MainStreet 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 August 25, 1998.
/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/ Alfred E. Cleveland /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/ Paul S. Goldsmith
- ------------------------------------- ---------------------------------------
Name: Tom D. Efird Name: Paul S. Goldsmith
Title: Director Title: Director
/s/ L. Vincent Hackley /s/ Jane P. Helm
- ------------------------------------- ---------------------------------------
Name: L. Vincent Hackley 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
<PAGE>
/s/ James H. Maynard /s/ Joseph A. McAleer, Jr.
- ------------------------------------- ---------------------------------------
Name: James H. Maynard Name: Joseph A. McAleer, Jr.
Title: Director Title: Director
/s/ Albert O. McCauley /s/ Richard L. Player, Jr.
- ------------------------------------- ---------------------------------------
Name: Albert O. McCauley 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/ E. Rhone Sasser /s/ Jack E. Shaw
- ------------------------------------- ---------------------------------------
Name: E. Rhone Sasser Name: Jack E. Shaw
Title: Director Title: Director
/s/ Harold B. Wells
- -------------------------------------
Name: Harold B. Wells
Title: Director
<PAGE>
EXHIBIT 99(A)
REVOCABLE PROXY
MAINSTREET FINANCIAL CORPORATION
SPECIAL MEETING OF SHAREHOLDERS
JANUARY 15, 1999
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints James E. Adams and Michael R. Blevins, and
each of them, with full power of substitution in each, proxies to vote all the
shares of Common Stock of MainStreet Financial Corporation ("MainStreet") which
the undersigned is entitled to vote, at the Special Meeting of Shareholders of
MainStreet to be held on Friday, January 15, 1999, at 11:00 a.m., and at any and
all adjournments thereof.
1. To approve an Agreement and Plan of Reorganization, dated as of August
26, 1998 (the "Merger Agreement"), by and among MainStreet, 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, and a related Plan
of Merger (the "Plan of Merger"), pursuant to which each share of common stock
of MainStreet will be converted into the right to receive shares of common stock
of BB&T and cash in lieu of any fractional share, in amounts to be determined as
described in the accompanying Proxy Statement/Prospectus. A copy of the Merger
Agreement and the Plan of Merger set forth therein is attached to the Proxy
Statement/Prospectus as Appendix I.
[_] For [_] Against [_] Abstain
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING. [_]
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder(s). If no direction is made, this proxy
will be voted FOR Item 1.
Please sign exactly as your name appears hereon. Joint owners should each
sign. When signing as Executor, Administrator, Attorney, Trustee or Guardian,
please give full title as such. If a corporation, please sign in full corporate
name by President, or other authorized officer, giving full title. If a
partnership, please sign in partnership name by an authorized person, giving
full title.
Please be sure to sign and date this proxy in the box below.
____________________
Date
________________________________
Shareholder sign above
________________________________
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
MAINSTREET FINANCIAL CORPORATION
C/O REGISTRAR AND TRANSFER COMPANY, 10 COMMERCE DRIVE, CRANFORD, NJ 07016
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
<PAGE>
EXHIBIT 99(B)
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as of
August 26, 1998 by and between MAINSTREET FINANCIAL CORPORATION, a Virginia
corporation ("Issuer"), and BB&T CORPORATION, a North Carolina corporation
("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement and Plan
of Reorganization, dated this date (the "Reorganization Agreement"), providing
for, among other things, the merger of Issuer with and into BB&T Financial
Corporation of Virginia, a wholly owned subsidiary of Grantee, with the result
that Issuer will become a wholly owned subsidiary of Grantee;
WHEREAS, as a condition and inducement to Grantee's execution of the
Reorganization Agreement, Grantee has required that Issuer agree, and Issuer has
agreed, to grant to Grantee the Option (as defined in Section 2);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Reorganization
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 Reorganization 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 1,650,000 shares (as adjusted as set forth herein, the "Option Shares,"
which term shall refer to the Option Shares before and after any transfer of
such Option Shares), of the common stock of Issuer, par value $5.00 per share
("Issuer Common Stock"), at a purchase price per Option Share (subject to
adjustment as set forth herein, the "Purchase Price") equal to $28.00.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as defined below), as applicable,
shall not be in material breach of its agreements or covenants contained in this
Agreement or the Reorganization 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 (as defined in
Section 3(b)); 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 Reorganization Agreement in
accordance with the terms thereof prior to the occurrence of a Purchase Event or
a Preliminary Purchase Event (as defined in Section 3(c)) (other than a
termination of the Reorganization 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 Reorganization 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, 12 months
after termination of the Reorganization Agreement pursuant to Section 7.1(e)
thereof; 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").
Subject to compliance with Section 12(h) hereof, the term "Holder" shall mean
the holder or holders of the Option from time to time, including initially
Grantee. The rights set forth in Section 8 hereof shall terminate when the right
to exercise the Option terminates (other than as a result of a complete exercise
of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following events
subsequent to the date of this Agreement:
<PAGE>
(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 Transaction (as defined below). 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 or between Issuer's
Subsidiaries and 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 (including by way of merger,
consolidation, share exchange or any similar transaction) of securities
representing 15% or more of the voting power of Issuer or any of its
Subsidiaries; or
(ii) any person (other than Grantee or any Subsidiary of Grantee) 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.
(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
Reorganization Agreement at the meeting of such shareholders held for the
purpose of voting on the Reorganization Agreement, such meeting shall not
have been held or shall have been canceled prior to termination of the
Reorganization 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 Reorganization 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 Owners' 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.
(d) Notwithstanding the foregoing, the obligation of Issuer to issue Option
Shares upon exercise of the Option shall be deferred (but shall not terminate):
(i) until the receipt of all required governmental or regulatory approvals or
consents necessary for Issuer to issue the Option Shares or Holder to exercise
the Option, or until the expiration or termination of any waiting period
required by law, or (ii) so long as any injunction or other order, decree or
ruling issued by any federal or state court of competent jurisdiction is in
effect which prohibits the sale or delivery of the Option Shares.
(e) 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
<PAGE>
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 at Holder's expense, 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 referenced in Section 12(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)
hereof, (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 preemptive 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 evidencing Holder's agreement not to offer, 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 AUGUST 26, 1998. 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 Commission, 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 its obtaining 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 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 hereof upon exercise of the
Option. The shares of Issuer Common Stock to be issued upon due exercise of the
Option, including all additional shares of Issuer Common Stock or other
securities which may be issuable
<PAGE>
pursuant to Section 7 hereof, 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 its obtaining 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) Grantee represents that it is acquiring the Option for Grantee's own
account and not with a view to, or for sale in connection with, any distribution
of the Option or the Option Shares. Grantee represents that it is aware that
neither the Option nor the Option Shares is the subject of a registration
statement filed with and declared effective by the Commission pursuant to
Section 5 of the Securities Act, but instead each is being offered in reliance
upon the exemption from the registration requirement provided by Section 4(2)
thereof and the representations and warranties made by Grantee in connection
therewith. Grantee represents that neither the Option nor the Option Shares will
be transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Laws, and that with respect to any
transfer or other disposition proposed to be made in reliance upon an exemption
from registration, such transfer or other disposition shall not be made unless
Issuer first receives an opinion of counsel in form and substance reasonably
acceptable to it regarding the availability of such exemption.
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, when added to the
number of shares of Issuer Common Stock previously issued pursuant hereto,
equals 11.7% 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 (prior to
termination of the Option pursuant to Section 3(a) hereof): (i) to consolidate
with or merge into any person, other than Grantee or one of its Subsidiaries (or
any entity that acquires control of Grantee or any subsidiary of such entity),
and Issuer (or such other entity) 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 its 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, deemed granted by either (x) the Acquiring Corporation (as defined in
Section 7(e)(i)), (y) any person that controls the Acquiring
<PAGE>
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 identical to those of 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 agreement shall
be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
the Substitute Common Stock (as defined in Section 7(e)(ii)) as is equal to the
Assigned Value (as defined in Section 7(e)(iii)) multiplied by the number of
shares of the Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as defined in Section 7(e)(iv)). 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, or the transferee of all or
substantially all 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 National
Market System 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 period immediately preceding
effectiveness of 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 the effectiveness of 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.
<PAGE>
(f) In no event pursuant to any of the foregoing sections 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).
(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, 10 and 11 hereof 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. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a) hereof, at the request of
Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder the Option and all shares of Issuer Common Stock
purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired by Holder pursuant to the Option with respect to
which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined in
Section 8(c)) for each share of Issuer Common Stock over (y) the Purchase
Price (subject to adjustment pursuant to Section 7), multiplied by the number
of shares of Issuer Common Stock with respect to which the Option has not
been exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case of
Option Shares with respect to which the Option has been exercised but the
Closing Date has not occurred, payable) by Holder for each share of Issuer
Common Stock with respect to which the Option has been exercised and with
respect to which Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within ten business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and Holder shall
warrant that it has sole record and beneficial ownership of such shares and that
the same are then free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or the consent or approval of any governmental or regulatory
agency or authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that
<PAGE>
Issuer deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval), in which case the
ten business day period of time that would otherwise run pursuant to the
preceding sentence for the payment of the portion of the Section 8 Repurchase
Consideration shall run instead from the date on which, as the case may be, any
required notification period has expired or been terminated or such approval has
been obtained and, in either event, any requisite waiting period shall have
passed. If any governmental or regulatory agency or authority disapproves of any
part of Issuer's proposed repurchase pursuant to this Section 8, Issuer shall
promptly give notice of such fact to Holder. If any governmental or regulatory
agency or authority prohibits the repurchase in part but not in whole, then
Holder shall have the right (i) to revoke the repurchase request or (ii) to the
extent permitted by such agency or authority, determine whether the repurchase
should apply to the Option and/or Option Shares and to what extent to each, and
Holder shall thereupon have the right to exercise the Option as to the number of
Option Shares for which the Option was exercisable at the Request Date less the
sum of the number of shares covered by the Option in respect of which payment
has been made pursuant to Section 8(a)(ii) and the number of shares covered by
the portion of the Option (if any) that has been repurchased. Holder shall
notify Issuer of its determination under the preceding sentence within five
business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this Section 8 shall terminate on the date of termination of this Option
pursuant to Section 3(a) hereof.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i) hereof, (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Sections 7(b)(i), 7(b)(ii), 7(b)(iii) or 7(b)(iv) hereof, or (iii)
the highest closing sales price per share of Issuer Common Stock quoted on the
Nasdaq National Market (or if Issuer Common Stock is not quoted on the Nasdaq
National Market, the highest bid price per share as quoted on the principal
trading market or securities exchange on which such shares are traded as
reported by a recognized source chosen by Holder) during the 60 business days
preceding the Request Date; provided, however, that in the event of a sale of
less than all of Issuer's assets, the Applicable Price 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 an independent nationally recognized
investment banking firm selected by Holder and reasonably acceptable to Issuer
(which determination shall be conclusive for all purposes of this Agreement),
divided by the number of shares of the Issuer Common Stock outstanding at the
time of such sale. If the consideration to be offered, paid or received pursuant
to either of the foregoing clauses (i) or (ii) shall be other than in cash, the
value of such consideration shall be determined in good faith by an independent
nationally recognized investment banking firm selected by Holder and reasonably
acceptable to Issuer, which determination shall be conclusive for all purposes
of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person (other
than Grantee or any Subsidiary of Grantee) shall have acquired actual ownership
or control, or any "group" (as such term is defined under the Exchange Act)
shall have been formed which shall have acquired actual ownership or control, of
50% or more of the then-outstanding shares of Issuer Common Stock, or (ii) any
consolidation, merger, share exchange or asset transfer described in Section
7(b)(i), 7(b)(ii), 7(b)(iii) or 7(b)(iv) shall be consummated.
9. REGISTRATION RIGHTS.
(a) For a period of 24 months following exercise of the Option, Issuer
shall, subject to the conditions of subsection (c) below, if requested by any
Holder, including Grantee and any permitted transferee of the Option Shares
("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 the Selling 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.
<PAGE>
(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
subsection (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 subsection (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 subsection (a) above for a
period not exceeding 90 days in the event that 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
subsection (a) above:
(i) prior to the occurrence of a Purchase Event;
(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 subsection (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 Option 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 Selling Holders whose Option Shares are being registered,
printing expenses, reasonable 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 subsection (a)
or (b) above (including the related offerings and sales by Selling Holders) and
all other qualifications,
<PAGE>
notifications or exemptions pursuant to subsection (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 subsection (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 or omission or alleged omission 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 or omission or alleged omission 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 subsection (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 subsection (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
subsection (e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party 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 subsection (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.
<PAGE>
In connection with any registration pursuant to subsection (a) or (b)
above, Issuer and each Selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this subsection (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 the Selling Holders 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 the Selling Holders 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.
10. 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.
11. 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 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.
12. MISCELLANEOUS.
(A) EXPENSES. Except as otherwise provided, herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
(B) 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 Reorganization 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 12(h) hereof) 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
<PAGE>
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 hereof (as adjusted pursuant to Section 7
hereof), 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 Reorganization
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; TRANSFER. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned or
transferred 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 subsidiary of Grantee and
Grantee may assign or transfer its rights hereunder in whole or in part after
the occurrence of a Purchase Event. In the case of any permitted assignment or
transfer of the Option, Issuer shall do all things necessary to facilitate the
same, and the Holder to whom the Option is assigned or transferred shall make
the representations contained in Section 6 hereof (with Holder substituted for
Grantee) and shall agree in writing to the terms and conditions hereof. 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.
MAINSTREET FINANCIAL CORPORATION BB&T CORPORATION
By: ____________________________ By: ____________________________
Name: ____________________ Name: ____________________
Title: ____________________ Title: ____________________
