<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 24, 1998
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
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)
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NORTH CAROLINA 6060 56-0939887
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(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:
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DOUGLAS A. MAYS R. GORDON SMITH
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC MCGUIRE, WOODS, BATTLE & BOOTHE LLP
3300 ONE FIRST UNION CENTER 901 EAST CARY STREET
CHARLOTTE, NORTH CAROLINA 28202-6025 RICHMOND, VIRGINIA 23219-4030
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
---------------
CALCULATION OF REGISTRATION FEE
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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 PRICE REGISTRATION FEE
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Common Stock, par value
$5.00 per share (1)........ 3,804,097 n/a $ 139,800,564.70(2) $ 15,564(3)
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(1) Each share of the registrant's common stock includes one preferred share
purchase right.
(2) Computed in accordance with Rule 457(f) based on the average of the high
($36.75) and low ($36.75) sales price of the common stock of Scott &
Stringfellow Financial, Inc. on November 19, 1998 as reported on The
Nasdaq National Market.
(3) Pursuant to Rule 457(b), the registration fee has been reduced by an amount
equal to the fee of $23,301 paid upon the filing with the Commission of
the preliminary proxy materials of Scott & Stringfellow Financial, Inc. on
September 29, 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.
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<PAGE>
SCOTT & STRINGFELLOW FINANCIAL, INC.
909 EAST MAIN STREET
RICHMOND, VIRGINIA 23219
DECEMBER , 1998
Dear Shareholders:
You are cordially invited to attend the annual meeting of shareholders (the
"Meeting") of Scott & Stringfellow Financial, Inc. ("Scott & Stringfellow") to
be held on Wednesday, January 13, 1999 at 4:30 p.m., Eastern Time, at the Omni
Hotel, located at 100 South 12th Street, Richmond, Virginia. At the Meeting, you
will be asked to consider and vote on proposals (i) to approve the Amended and
Restated Agreement and Plan of Reorganization dated as of September 16, 1998
(the "Merger Agreement") between Scott & Stringfellow and BB&T Corporation, a
North Carolina corporation ("BB&T"), and a related Plan of Merger (the "Plan of
Merger"). Pursuant to the Merger Agreement and the Plan of Merger, Scott
& Stringfellow will merge with and into BB&T (the "Merger"), and each share of
common stock of Scott & Stringfellow ("Scott & Stringfellow Common Stock")
outstanding immediately prior thereto will be converted into the right to
receive one share of common stock of BB&T ("BB&T Common Stock") as
set forth in the Merger Agreement and the Plan of Merger. BB&T will be
the surviving corporation in the Merger, and shareholders of Scott &
Stringfellow will become shareholders of BB&T.
Consummation of the Merger is subject to certain conditions, including
approval of the Merger Agreement and the Plan of Merger by the Scott &
Stringfellow shareholders, approval of the Merger by various regulatory agencies
and satisfaction or waiver of certain other contractual conditions. It is also a
condition to the Merger that the exchange of BB&T Common Stock solely for shares
of Scott & Stringfellow Common Stock will be a reorganization for federal income
tax purposes, with the result that holders of Scott & Stringfellow Common Stock
who receive BB&T Common Stock pursuant to the Merger generally will not
recognize gain or loss for such purposes.
In addition to considering the Merger Agreement and the Plan of Merger at
the Meeting, you will be asked (i) to elect four directors for terms expiring at
the earlier of the effective time of the Merger, the date of the 2001 annual
meeting of Scott & Stringfellow shareholders or such time as their respective
successors are elected and qualified, (ii) to ratify the selection by the Board
of Directors of KPMG Peat Marwick LLP as Scott & Stringfellow's independent
certified public accountants for the fiscal year ending June 25, 1999 if the
Merger is not consummated and (iii) to transact such other business as may be
properly brought before the Meeting or at any and all adjournments or
postponements thereof.
THE ENCLOSED NOTICE OF MEETING AND PROXY STATEMENT/PROSPECTUS CONTAIN
IMPORTANT INFORMATION CONCERNING THE MEETING AND THE PROPOSED MERGER, INCLUDING
DETAILS AS TO THE DETERMINATION OF THE CONSIDERATION TO BE RECEIVED IN THE
MERGER. PLEASE CAREFULLY READ THESE MATERIALS AND THOROUGHLY CONSIDER THE
INFORMATION CONTAINED IN THEM.
Whether or not you plan to attend the Meeting, you are urged to complete,
sign, date and promptly return the enclosed proxy card to assure that your
shares will be voted at the Meeting. If you attend the Meeting, you may vote in
person regardless of whether you have previously submitted a proxy. 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.
THE BOARD OF DIRECTORS OF SCOTT & STRINGFELLOW UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND THE PLAN OF MERGER AND BELIEVES THAT THE MERGER IS
FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF SCOTT &
STRINGFELLOW. ACCORDINGLY, THE BOARD OF DIRECTORS OF SCOTT & STRINGFELLOW
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF SCOTT & STRINGFELLOW VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT AND THE PLAN OF MERGER. THE BOARD OF
DIRECTORS OF SCOTT & STRINGFELLOW ALSO RECOMMENDS THAT SHAREHOLDERS OF SCOTT &
STRINGFELLOW VOTE "FOR" THE PROPOSED SLATE OF DIRECTORS AND "FOR" RATIFICATION
OF KPMG PEAT MARWICK LLP AS SCOTT & STRINGFELLOW'S INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE 25, 1999.
Sincerely,
S. BUFORD SCOTT
CHAIRMAN OF THE BOARD
JOHN SHERMAN, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
SCOTT & STRINGFELLOW FINANCIAL, INC.
909 EAST MAIN STREET
RICHMOND, VIRGINIA 23219
---------------------------------
NOTICE OF MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 13, 1999
---------------------------------
TO THE SHAREHOLDERS OF SCOTT & STRINGFELLOW FINANCIAL, INC.:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders (the
"Meeting") of Scott & Stringfellow Financial, Inc., a Virginia corporation
("Scott & Stringfellow"), will be held at the Omni Hotel, located at 100 South
12th Street, Richmond, Virginia, on Wednesday, January 13, 1999 at 4:30 p.m.,
Eastern Time, for the following purposes:
1. MERGER. To consider and vote upon a proposal to approve the Amended and
Restated Agreement and Plan of Reorganization dated as of September 16,
1998 (the "Merger Agreement") between Scott & Stringfellow and BB&T
Corporation, a North Carolina corporation ("BB&T"), and a related Amended
and Restated Plan of Merger (the "Plan of Merger"), pursuant to which
Scott & Stringfellow will merge with and into BB&T (the "Merger"), and
each share of common stock of Scott & Stringfellow outstanding immediately
prior thereto will be converted into the right to receive one share of
common stock of BB&T. A copy of the Merger Agreement and the Plan of
Merger set forth therein is attached to the accompanying Proxy
Statement/Prospectus as Appendix A.
2. ELECTION OF DIRECTORS. To elect four directors for terms expiring at the
earlier of the effective time of the Merger, the date of the 2001 annual
meeting of Scott & Stringfellow shareholders or such time as their
respective successors are elected and qualified.
3. RATIFICATION OF INDEPENDENT ACCOUNTANTS. To ratify the selection by the
Board of Directors of KPMG Peat Marwick LLP as Scott & Stringfellow's
independent certified public accountants for the fiscal year ending June
25, 1999 if the Merger is not consummated.
4. To transact such other business as may be properly brought before the
Meeting or at any and all adjournments or postponements thereof.
Shareholders of Scott & Stringfellow of record at the close of business on
December 2, 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
DAVID PLAGEMAN
SECRETARY
Richmond, Virginia
December , 1998
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>
[Scott & Stringfellow logo]
ANNUAL MEETING OF SHAREHOLDERS
MERGER PROPOSAL - YOUR
VOTE IS VERY IMPORTANT
The Board of Directors of Scott & Stringfellow Financial, Inc. has unanimously
approved a merger combining Scott & Stringfellow and BB&T Corporation. The
merger will join Scott & Stringfellow's strengths as a regional brokerage and
investment banking firm with BB&T's position as a leading commercial bank in
the Carolinas and Virginia to enable the combined company to offer its
customers a broad range of financial products and services.
At the annual meeting, Scott & Stringfellow shareholders will consider and vote
on the merger agreement. Your Board of Directors has determined that the merger
is fair to Scott & Stringfellow shareholders and is in their best interests.
THE BOARD OF DIRECTORS THEREFORE UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE TO APPROVE THE MERGER AGREEMENT. No vote of the BB&T shareholders is
required to approve the merger agreement.
The affirmative vote of the holders of more than two-thirds of the outstanding
shares of Scott & Stringfellow common stock is required to approve the merger
agreement. THE MERGER CANNOT BE COMPLETED UNLESS HOLDERS OF SCOTT &
STRINGFELLOW COMMON STOCK APPROVE IT. Scott & Stringfellow shareholders will
also elect four directors and vote on the board's selection of KPMG Peat
Marwick LLP as Scott & Stringfellow's independent certified public accountants.
If the merger is completed, Scott & Stringfellow shareholders will receive one
share of BB&T common stock for each share of Scott & Stringfellow common stock.
On November 17, 1998, the closing price of BB&T common stock was $38.00 and the
closing price of Scott & Stringfellow common stock was $36.75. These prices
will, however, fluctuate between now and the merger.
The date, time and place of the Meeting are:
JANUARY 13, 1999
4:30 P.M.
OMNI HOTEL
100 SOUTH 12TH STREET
RICHMOND, VIRGINIA 23219
This Proxy Statement/Prospectus provides you with detailed information about
the proposed merger. You can also obtain other information about Scott &
Stringfellow and BB&T from documents filed with the Securities and Exchange
Commission. We encourage you to read this entire document carefully.
Whether or not you plan to attend the meeting, if you are a holder of Scott &
Stringfellow common stock please take the time to vote by completing and
mailing the enclosed proxy card to us. If you sign, date and mail your proxy
card without indicating how you wish to vote, your proxy will be counted as a
vote in favor of the approval and adoption of the merger agreement. 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 Scott & Stringfellow's Secretary any time before the
meeting or by attending the meeting and voting in person.
ON BEHALF OF THE BOARD OF DIRECTORS OF SCOTT & STRINGFELLOW, WE URGE YOU TO
VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
S. BUFORD SCOTT JOHN SHERMAN, JR. FREDERIC SCOTT BOCOCK
Chairman President and Chief Executive Officer Vice Chairman
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 , 1998 and was first mailed
to shareholders of Scott & Stringfellow on December , 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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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
Recommendations of the S&S Board .................................................. 9
THE MERGER ......................................................................... 10
General ........................................................................... 10
Background of the Merger .......................................................... 10
Reasons for the Merger ............................................................ 11
Opinion of Scott & Stringfellow's Financial Advisor ............................... 12
Exchange Ratio .................................................................... 16
Exchange of Scott & Stringfellow Common Stock Certificates ........................ 16
The Merger Agreement .............................................................. 16
Interests of Certain Persons in the Merger ........................................ 20
Regulatory Considerations ......................................................... 23
Certain Federal Income Tax Consequences of the Merger ............................. 24
Accounting Treatment .............................................................. 25
The Option Agreement .............................................................. 25
Effect on Employees, Employee Benefit Plans and Stock Options ..................... 27
Restrictions on Resales by Affiliates ............................................. 29
INFORMATION ABOUT BB&T ............................................................. 29
General ........................................................................... 29
Subsidiaries ...................................................................... 29
Acquisitions ...................................................................... 30
Capital ........................................................................... 31
Deposit Insurance Assessments ..................................................... 31
INFORMATION ABOUT SCOTT & STRINGFELLOW ............................................. 32
DESCRIPTION OF BB&T CAPITAL STOCK .................................................. 32
General ........................................................................... 32
BB&T Common Stock ................................................................. 32
BB&T Preferred Stock .............................................................. 32
Shareholder Rights Plan ........................................................... 33
Certain Provisions of the NCBCA, BB&T Articles and BB&T Bylaws .................... 35
COMPARISON OF SHAREHOLDERS' RIGHTS ................................................. 35
Authorized Capital Stock .......................................................... 35
Special Meetings of Shareholders and Action by Shareholders without a Meeting ..... 36
Directors ......................................................................... 36
Dividends and Other Distributions ................................................. 36
Notice of Shareholder Nominations and Shareholder Proposals ....................... 37
Exculpation and Indemnification ................................................... 37
Mergers, Share Exchanges and Sales of Assets ...................................... 37
Anti-takeover Statutes ............................................................ 38
Amendments to Articles of Incorporation and Bylaws ................................ 39
Shareholders' Rights of Dissent and Appraisal ..................................... 39
Liquidation Rights ................................................................ 40
ELECTION OF DIRECTORS .............................................................. 41
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i
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CERTAIN INFORMATION CONCERNING THE S&S BOARD AND ITS COMMITTEES .......................... 42
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS .............................. 43
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT ........................................ 43
EXECUTIVE COMPENSATION ................................................................... 44
STOCK PERFORMANCE GRAPH .................................................................. 44
CERTAIN TRANSACTIONS ..................................................................... 48
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ................................................. 48
SHAREHOLDER PROPOSALS .................................................................... 48
OTHER MATTERS THAT MAY COME BEFORE THE MEETING ........................................... 49
ANNUAL REPORTS ........................................................................... 49
LEGAL MATTERS ............................................................................ 49
EXPERTS .................................................................................. 49
WHERE YOU CAN FIND MORE INFORMATION ...................................................... 49
Appendix A -- Amended and Restated Agreement and Plan of Reorganization and Amended and
Restated Plan of Merger
Appendix B -- Opinion of Scott & Stringfellow, Inc.
</TABLE>
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 49. We have included page references in
parentheses to direct you to a more complete description of the topics
presented in this summary.
THE COMPANIES
BB&T CORPORATION (PAGE 29)
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 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.
SCOTT & STRINGFELLOW FINANCIAL, INC. (PAGE 32)
909 East Main Street
Richmond, VA 23219
(804) 643-1811
Scott & Stringfellow Financial, Inc., a Virginia corporation incorporated in
1984, is the holding company for a full-service securities firm founded in 1893
that operates 31 offices in Virginia, West Virginia and the Carolinas.
THE MEETING (PAGE 8)
We will hold our annual shareholders' meeting at 4:30 p.m. on Wednesday,
January 13, 1999 at the Omni Hotel, 100 South 12th Street, Richmond, Virginia.
At the meeting, you will vote on the merger agreement. You will also elect four
directors, vote on the Board's selection of KPMG Peat Marwick as Scott &
Stringfellow's independent auditors and conduct any other business that
properly arises.
THE MERGER (PAGE 10)
We have attached the merger agreement and the related plan of merger (Appendix
A) 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.
In the merger, Scott & Stringfellow will merge into BB&T, and Scott &
Stringfellow's subsidiaries, through which it operates, will become wholly
owned subsidiaries of BB&T. The merger requires the approval of the holders of
more than two-thirds of the Scott & Stringfellow common stock. If we obtain
this approval, we currently expect to complete the merger in January 1999.
WHAT SCOTT & STRINGFELLOW SHAREHOLDERS WILL RECEIVE IN THE MERGER (PAGE 16)
If the merger is completed, you will receive one share of BB&T common stock for
each share of Scott & Stringfellow stock you own. There are no fractional
shares of Scott & Stringfellow stock outstanding, and BB&T will not issue any
fractional shares of BB&T common stock in the merger. 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.
FEDERAL INCOME TAX CONSEQUENCES (PAGE 24)
In the merger, Scott & Stringfellow shareholders generally will not recognize
gain or loss for federal income tax purposes. 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.
REQUIRED VOTE (PAGE 8)
Approval of the merger agreement requires the affirmative vote of the holders
of more than two-thirds of the outstanding shares of Scott & Stringfellow
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
Scott & Stringfellow together own about % of the shares entitled to be
cast at the meeting, and have agreed to vote their shares in favor of the
merger.
Brokers who hold shares of Scott & Stringfellow 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 AND VOTING RIGHTS (PAGE 8)
If you owned shares of Scott & Stringfellow common stock at the close of
business on December 2, 1998, the Record Date, you are entitled to vote on the
merger agreement and other matters at the meeting.
On the Record Date, there were shares of Scott & Stringfellow common stock
outstanding. You will have
<PAGE>
one vote at the meeting for each share of Scott & Stringfellow common stock you
own on the Record Date.
RECOMMENDATION TO SCOTT & STRINGFELLOW SHAREHOLDERS (PAGE 9)
The Scott & Stringfellow Board of Directors believes that the merger is in the
best interests of Scott & Stringfellow shareholders and unanimously recommends
that the shareholders vote "FOR" approval of the merger agreement. The Scott &
Stringfellow Board of Directors believes the merger will create a company able
to offer a broader range of financial services and products to its customers
and will benefit shareholders by helping the combined company increase market
share and remain competitive in its industry, which is rapidly consolidating.
OPINION OF SCOTT & STRINGFELLOW'S FINANCIAL ADVISOR (PAGE 12)
Scott & Stringfellow's brokerage subsidiary has acted as Scott & Stringfellow's
financial advisor in connection with the merger and has given its opinion to
the Scott & Stringfellow Board of Directors that, as of the date of the
opinion, the consideration to be received by the Scott & Stringfellow
shareholders in the merger is fair from a financial point of view. The full
text of the opinion is attached as Appendix B to this Proxy
Statement/Prospectus. You are encouraged to read the entire opinion.
INTERESTS OF MANAGEMENT IN THE MERGER (PAGE 20)
When considering the recommendation of the Scott & Stringfellow Board of
Directors, you should be aware that certain Scott & Stringfellow directors and
officers may have interests in the merger that differ from the interests of
Scott & Stringfellow shareholders generally.
Scott & Stringfellow President and CEO John Sherman, Jr. and three other
members of management will have employment agreements with BB&T for up to five
years. These agreements will provide severance payments and other benefits if
there is a change in control of BB&T. In addition, some of the directors of
Scott & Stringfellow will be directors of BB&T's brokerage subsidiary. Also,
BB&T will create a "retention pool" of $15 million worth of BB&T common stock
that will be distributed to Scott & Stringfellow management and employees over
the next three and one-half years.
The Board of Directors of Scott & Stringfellow was aware of these and other
interests and considered them before approving and adopting the merger
agreement.
CONDITIONS TO THE MERGER (PAGE 17)
Certain conditions, including the following, must be met for us to complete the
merger:
(1) approval of the merger agreement by Scott & Stringfellow shareholders;
(2) the absence of legal restraints that prevent the completion of the
merger;
(3) receipt of required regulatory approvals; and
(4) receipt of a legal opinion concerning the tax consequences of the merger.
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT (PAGE 19)
We can agree at any time to terminate the merger agreement without completing
the merger. Either company can also terminate the merger agreement in certain
other circumstances, including the following:
(1) the merger is not completed by March 31, 1999 and the company that wants
to terminate the merger agreement is not at that time in breach of it
in a material way;
(2) the required regulatory approvals are not obtained;
(3) Scott & Stringfellow shareholders do not approve and adopt the merger
agreement at the shareholders' meeting; or
(4) 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 generally agree to amend the merger agreement but, after the
shareholders' meeting, we cannot decrease the consideration that you will
receive in the merger. Either party can generally waive any of the requirements
of the merger agreement, except that neither party can waive any required
regulatory approval.
OPTION AGREEMENT (PAGE 25)
In connection with the merger agreement, Scott & Stringfellow granted to BB&T a
stock option that allows BB&T to buy up to 19.9% of Scott & Stringfellow's
common stock. The exercise price of the option is $26.75 per share. BB&T can
exercise the option only if specific events take place. These events generally
relate to a competing transaction involving a proposed acquisition of Scott &
Stringfellow. As of the date of this document, we do not believe any event of
that kind has occurred. The option could have the effect of discouraging other
companies that might want to combine with or acquire Scott & Stringfellow.
REGULATORY CONSIDERATIONS (PAGE 23)
We cannot complete the merger without the approval of the Board of Governors of
the Federal Reserve System. We received such approval from the Federal Bank of
Richmond under delegated authority on November 16, 1998.
2
<PAGE>
In addition, other regulators must approve or receive notice of the merger. We
have made or shortly will make all of the required filings with these
regulatory authorities.
While we believe that all required regulatory approvals will be received in a
timely manner, we cannot be certain when or if we will obtain them.
ACCOUNTING TREATMENT (PAGE 25)
BB&T will account for the merger as a purchase. This means generally that BB&T
will record the assets and liabilities of Scott & Stringfellow at their fair
market values at the time of the merger. BB&T will record any excess of the
consideration that it pays in the merger over such fair market values as
goodwill.
NO APPRAISAL RIGHTS (PAGE 38)
Under Virginia law, you have no right to an appraisal of your shares in
connection with the merger.
COMPARATIVE PER COMMON SHARE MARKET PRICE INFORMATION (PAGE 7)
Scott & Stringfellow common stock is listed on the Nasdaq National Market, and
BB&T common stock is listed on the New York Stock Exchange. On August 7, 1998,
the last full trading day before public announcement of the proposed merger,
Scott & Stringfellow common stock closed at $28.75 and BB&T common stock closed
at $34.44. On November 17, 1998, Scott & Stringfellow common stock closed at
$38.00 and BB&T common stock closed at $36.75.
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.
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 New York Stock Exchange ("NYSE") under
the symbol "BBK." Scott & Stringfellow common stock is included in the Nasdaq
National Market under the symbol "SCOT." The following table sets forth, for
the periods indicated, the high and low closing sales price of BB&T and Scott &
Stringfellow common stock on the NYSE Composite Transactions List and the
Nasdaq National Market, respectively, and cash dividends paid per share. The
prices do not include retail markups, markdowns or commissions and, in the case
of BB&T, reflect a 2-for-1 stock split effective August 3, 1998.
<TABLE>
<CAPTION>
BB&T SCOTT & STRINGFELLOW
---------------------------------------- ---------------------------------------------
CASH CASH
HIGH LOW DIVIDEND HIGH LOW DIVIDEND(1)
------------ ------------ ---------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended
March 31, 1998 $ 33.84 $ 29.03 $ .155 $ 26.25 $ 20.25 $ .09
June 30, 1998 34.06 32.03 .155 26.00 22.25 .10
September 30, 1998 36.03 28.00 .175 33.38 23.63 .30 (2)
December 31, 1998 39.43 27.31 .175 38.88 24.13 --
(through November 17, 1998)
Quarter Ended
March 31, 1997 20.38 17.63 .135 17.33 12.83 .08
June 30, 1997 23.56 17.88 .135 20.00 13.50 .09
September 30, 1997 27.56 22.66 .155 26.25 17.75 .09
December 31, 1997 32.50 25.97 .155 29.75 25.25 .09
For year 1997 32.50 17.63 .58 29.75 12.83 .35
Quarter Ended
March 31, 1996 14.88 12.94 .115 9.83 9.00 .07
June 30, 1996 15.88 14.44 .115 12.33 9.17 .08
September 30, 1996 16.94 14.31 .135 12.33 11.33 .08
December 31, 1996 18.38 16.69 .135 12.83 11.67 .08
For year 1996 18.38 12.94 .50 12.83 9.00 .31
</TABLE>
(1) The merger agreement restricts Scott & Stringfellow's ability to pay
dividends on its common stock. See "THE MERGER -- The Merger Agreement" on
page 16.
(2) Includes a special cash dividend of $.20 per share declared on September
22, 1998 and paid on October 15, 1998.
3
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected historical financial information has been derived
from historical consolidated financial statements of BB&T and Scott &
Stringfellow, respectively, and should be read in conjunction with such
historical consolidated financial statements, and the notes thereto, which are
incorporated herein by reference. Results of BB&T for the nine months ended
September 30, 1998 and results of Scott & Stringfellow for the three months
ended September 25, 1998, are not necessarily indicative of results expected
for the entire year. All adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of results of interim periods have
been included. On June 23, 1998, BB&T declared a 2-for-1 stock split which was
effected by the issuance of a 100% stock dividend on August 3, 1998.
BB&T
The following table sets forth certain consolidated financial data of BB&T
for the five years ended December 31, 1997, and the nine months ended September
30, 1998 and September 30, 1997. This consolidated financial data has been
restated to include the accounts of Life Bancorp, Inc. and Franklin
Bancorporation, Inc., both of which were acquired by BB&T during 1998 in
transactions accounted for as poolings of interests. The information is
qualified in its entirety by the detailed information and consolidated
financial statements included in the documents incorporated herein by
reference. See "WHERE YOU CAN FIND MORE INFORMATION" on page 49.
4
<PAGE>
BB&T CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
As of/For the nine months ended
September 30,
1998 1997
---------------- ----------------
<S> <C> <C>
Summary of Operations
Interest income $ 1,839,750 $ 1,679,617
Interest expense 918,007 815,083
------------ ------------
Net interest income 921,743 864,534
Provision for loan and lease losses 64,310 68,015
------------ ------------
Net interest income after provision for loan
and lease losses 857,433 796,519
Noninterest income 388,970 346,695
Noninterest expense 711,722 725,178
------------ ------------
Income before income taxes 534,681 418,036
Provision for income taxes 169,349 147,058
------------ ------------
Income before cumulative effect of changes
in accounting principles 365,332 270,978
Less: cumulative effect of changes in
accounting principles, net of income taxes -- --
------------ ------------
Net income $ 365,332 $ 270,978
============ ============
Per Common Share
Average shares outstanding (000's):
Basic 286,410 288,115
Diluted 292,506 292,933
Basic earnings:
Income before cumulative effect $ 1.28 $ .94
Less: cumulative effect -- --
------------ ------------
Net income $ 1.28 $ .94
============ ============
Diluted earnings:
Income before cumulative effect $ 1.25 $ .93
Less: cumulative effect -- --
------------ ------------
Net income $ 1.25 $ .93
============ ============
Cash dividends declared $ .485 $ .425
Shareholders' equity 9.42 8.01
Average Balance Sheets
Securities, at carrying value $ 7,671,197 $ 7,252,352
Loans and leases * 21,633,427 19,307,822
Other assets 2,476,546 1,957,401
------------ ------------
Total assets $ 31,781,170 $ 28,517,575
============ =============
Deposits $ 21,203,039 $ 20,386,807
Long-term debt 3,858,294 2,727,802
Other liabilities 4,250,368 3,102,186
Common shareholders' equity 2,469,469 2,300,780
Preferred shareholders' equity -- --
------------- -------------
Total liabilities and shareholders' equity $ 31,781,170 $ 28,517,575
============= =============
Period End Balances
Total assets $ 33,875,788 $ 29,205,372
Deposits 22,097,655 20,429,760
Long-term debt 4,386,201 3,251,531
Shareholders' equity 2,738,472 2,280,803
Selected Performance Ratios
Rate of return on:
Average total assets 1.54% 1.27%
Average common shareholders' equity 19.78 15.75
Dividend payout 37.89 45.21
Average equity to average assets 7.77 8.07
<CAPTION>
As of/For the years ended
December 31,
1997 1996 1995 1994
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Summary of Operations
Interest income $ 2,265,488 $ 2,059,043 $ 1,979,646 $ 1,659,184
Interest expense 1,106,963 998,849 1,005,286 719,158
------------ ------------ ------------ ------------
Net interest income 1,158,525 1,060,194 974,360 940,026
Provision for loan and lease losses 98,010 62,273 42,559 25,526
------------ ------------ ------------ ------------
Net interest income after provision for loan
and lease losses 1,060,515 997,921 931,801 914,500
Noninterest income 458,348 341,259 256,740 270,989
Noninterest expense 968,746 827,362 828,174 750,201
------------ ------------ ------------ ------------
Income before income taxes 550,117 511,818 360,367 435,288
Provision for income taxes 189,699 168,506 120,568 151,066
------------ ------------ ------------ ------------
Income before cumulative effect of changes
in accounting principles 360,418 343,312 239,799 284,222
Less: cumulative effect of changes in
accounting principles, net of income taxes -- -- -- --
------------ ------------ ------------ ------------
Net income $ 360,418 $ 343,312 $ 239,799 $ 284,222
============ ============ ============ ============
Per Common Share
Average shares outstanding (000's):
Basic 287,481 287,535 287,925 283,875
Diluted 292,470 293,757 300,156 296,329
Basic earnings:
Income before cumulative effect $ 1.25 $ 1.19 $ .82 $ .98
Less: cumulative effect -- -- -- --
------------ ------------ ------------ ------------
Net income $ 1.25 $ 1.19 $ .82 $ .98
============ ============ ============ ============
Diluted earnings:
Income before cumulative effect $ 1.23 $ 1.17 $ .80 $ .96
Less: cumulative effect -- -- -- --
------------ ------------ ------------ ------------
Net income $ 1.23 $ 1.17 $ .80 $ .96
============ ============ ============ ============
Cash dividends declared $ .58 $ .50 $ .43 $ .37
Shareholders' equity 8.46 7.78 7.38 6.61
Average Balance Sheets
Securities, at carrying value $ 7,299,444 $ 6,939,363 $ 6,910,879 $ 6,570,085
Loans and leases * 19,554,842 17,730,243 16,883,199 15,194,910
Other assets 2,021,800 1,799,550 1,779,629 1,808,633
------------ ------------ ------------ -------------
Total assets $ 28,876,086 $ 26,469,156 $ 25,573,707 $ 23,573,628
============ ============ ============ =============
Deposits $ 20,403,684 $ 19,594,913 $ 18,524,803 $ 18,086,694
Long-term debt 2,925,628 2,027,683 1,303,992 870,697
Other liabilities 3,240,171 2,680,914 3,670,664 2,782,404
Common shareholders' equity 2,306,603 2,150,487 2,001,903 1,759,690
Preferred shareholders' equity -- 15,159 72,345 74,143
------------ ------------ ------------ -------------
Total liabilities and shareholders' equity $ 28,876,086 $ 26,469,156 $ 25,573,707 $ 23,573,628
============ ============ ============ =============
Period End Balances
Total assets $ 31,290,247 $ 27,625,225 $ 26,135,308 $ 24,758,727
Deposits 21,375,975 20,099,089 19,231,282 18,258,880
Long-term debt 3,534,203 2,320,978 1,542,064 1,095,781
Shareholders' equity 2,439,110 2,254,398 2,212,438 1,972,144
Selected Performance Ratios
Rate of return on:
Average total assets 1.25% 1.30% .94% 1.21%
Average common shareholders' equity 15.63 15.94 11.72 15.86
Dividend payout 46.40 42.02 52.44 37.76
Average equity to average assets 7.99 8.18 8.11 7.78
<CAPTION>
As of/For the
years ended
December 31,
1993
----------------
<S> <C>
Summary of Operations
Interest income $ 1,492,719
Interest expense 626,985
------------
Net interest income 865,734
Provision for loan and lease losses 61,625
------------
Net interest income after provision for loan
and lease losses 804,109
Noninterest income 268,470
Noninterest expense 810,018
------------
Income before income taxes 262,561
Provision for income taxes 97,162
------------
Income before cumulative effect of changes
in accounting principles 165,399
Less: cumulative effect of changes in
accounting principles, net of income taxes (32,629)
------------
Net income $ 132,770
============
Per Common Share
Average shares outstanding (000's):
Basic 272,931
Diluted 286,605
Basic earnings:
Income before cumulative effect $ .59
Less: cumulative effect ( .12)
------------
Net income .47
============
Diluted earnings:
Income before cumulative effect $ .58
Less: cumulative effect ( .11)
------------
Net income $ .47
============
Cash dividends declared $ .32
Shareholders' equity 5.91
Average Balance Sheets
Securities, at carrying value $ 5,768,100
Loans and leases * 13,651,601
Other assets 1,724,686
------------
Total assets $ 21,144,387
============
Deposits $ 16,948,370
Long-term debt 733,047
Other liabilities 1,766,415
Common shareholders' equity 1,622,412
Preferred shareholders' equity 74,143
------------
Total liabilities and shareholders' equity $ 21,144,387
============
Period End Balances
Total assets $ 23,274,795
Deposits 18,290,673
Long-term debt 1,010,168
Shareholders' equity 1,753,129
Selected Performance Ratios
Rate of return on:
Average total assets .63%
Average common shareholders' equity 7.86
Dividend payout 68.02
Average equity to average assets 8.02
</TABLE>
* Loans and leases are net of unearned income and the allowance for losses.
Amounts include loans held for sale.
5
<PAGE>
SCOTT & STRINGFELLOW
The following table sets forth certain consolidated financial data of
Scott & Stringfellow for the five years ended June 26, 1998 and the three
months ended September 25, 1998 and September 26, 1997. The information is
qualified in its entirety by the detailed information and consolidated
financial statements included in the documents incorporated herein by
reference. See "WHERE YOU CAN FIND MORE INFORMATION" on page 49.
SCOTT & STRINGFELLOW FINANCIAL, INC.
SELECTED CONSOLIDATED DATA
(Dollars and share amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
As of/For the three months
ended
September 25, September 26,
1998 1997
--------------- ---------------
<S> <C> <C>
Results of operations
Total Revenue $23,829 $ 25,444
Income before taxes 1,436 2,574
Net Income 807 1,625
Per Share Data
Earnings per share -- basic $ 0.24 $ 0.51
Earnings per share -- diluted 0.23 0.48
Cash dividends per share 0.30(1) 0.09
Book value per share 10.23 9.64
Average shares outstanding 3,335 3,170
Average shares and dilutive potential
shares outstanding 3,561 3,364
Financial Condition
Total assets $168,494 $ 143,386
Total liabilities 132,881 112,694
Total stockholders' equity 35,613 30,692
Other Financial Data
Profit Margin:
Pre-tax 6.0% 10.1%
After-tax 3.4% 6.4%
Annualized Return on average equity
Pre-tax 16.4% 34.4%
After-tax 9.2% 21.7%
Other Company Data
Total employees 630 569
Investment brokers 263 238
Branch offices 31 30
<CAPTION>
As of/For the years ended
June 26, June 27, June 28, June 30, June 24,
1998 1997 1996 1995 1994
-------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Results of operations
Total Revenue $ 105,364 $ 80,907 $ 73,165 $ 54,119 $ 52,108
Income before taxes 9,120 5,453 6,568 3,288 4,665
Net Income 5,782 3,458 4,176 2,101 2,958
Per Share Data
Earnings per share -- basic $ 1.81 $ 1.12 $ 1.30 $ 0.67 $ 0.94
Earnings per share -- diluted 1.67 1.09 1.28 0.66 0.93
Cash dividends per share 0.37 0.33 0.28 0.27 0.23
Book value per share 10.46 9.20 8.47 7.98 7.61
Average shares outstanding 3,200 3,079 3,224 3,147 3,158
Average shares and dilutive potential
shares outstanding 3,465 3,160 3,256 3,163 3,173
Financial Condition
Total assets $ 167,993 $ 129,584 $ 114,249 $ 93,266 $ 80,702
Total liabilities 133,707 100,676 88,558 68,028 56,680
Total stockholders' equity 34,286 29,178 25,690 25,238 24,022
Other Financial Data
Profit Margin:
Pre-tax 8.7% 6.7% 9.0% 6.1% 9.0%
After-tax 5.5% 4.3% 5.7% 3.9% 5.7%
Annualized Return on average equity
Pre-tax 28.6% 19.7% 24.1% 13.3% 20.2%
After-tax 18.1% 12.5% 15.3% 8.5% 12.8%
Other Company Data
Total employees 616 566 520 479 458
Investment brokers 260 237 223 214 205
Branch offices 31 29 28 26 25
</TABLE>
- ---------
1 Includes a special cash dividend of $0.20 per share declared on September 22,
1998 and paid October 15, 1998.
6
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain per share, pro forma combined per
share and pro forma equivalent per share information with respect to BB&T and
Scott & Stringfellow common stock at the dates and for the periods indicated,
giving effect to the Merger using the purchase method of accounting. The
information is presented assuming that the Merger was consummated as of the
beginning of the periods shown. In order to conform to the per share data
relating to BB&T common stock, the per share data relating to Scott &
Stringfellow common stock has been prepared by utilizing financial information
at the calendar dates and periods indicated rather than the fiscal dates and
periods utilized by Scott & Stringfellow for financial reporting purposes. The
comparative per share data presented should be read in conjunction with the
historical consolidated financial statements and the related notes of each of
BB&T and Scott & Stringfellow. See "WHERE YOU CAN FIND MORE INFORMATION" on
page 49. Results of BB&T and Scott & Stringfellow for the nine months ended
September 30, 1998 are not necessarily indicative of results expected for the
entire year, nor are pro forma amounts necessarily indicative of results of
operations or combined financial position that would have resulted had the
Merger been consummated at the beginning of the periods indicated. All
adjustments, consisting of only normal adjustments, necessary for a fair
statement of results of interim periods have been included.
<TABLE>
<CAPTION>
As of/For the Nine As of/For the
Months Ended Year Ended
September 30, December 31,
1998 1997
-------------------- --------------
<S> <C> <C>
EARNINGS PER COMMON SHARE
Basic
BB&T historical ................................... 1.28 1.25
Scott & Stringfellow historical ................... 1.00 1.59
Pro forma combined ................................ 1.26 1.25
Scott & Stringfellow pro forma equivalent ......... 1.26 1.25
Diluted
BB&T historical ................................... 1.25 1.23
Scott & Stringfellow historical ................... 0.93 1.51
Pro forma combined ................................ 1.23 1.23
Scott & Stringfellow pro forma equivalent ......... 1.23 1.23
CASH DIVIDENDS DECLARED PER COMMON SHARE
BB&T historical ................................... 0.485 0.58
Scott & Stringfellow historical ................... 0.490(1) 0.35
Pro forma combined ................................ 0.485 0.58
Scott & Stringfellow pro forma equivalent ......... 0.485 0.58
SHAREHOLDERS' EQUITY PER COMMON SHARE
BB&T historical ................................... 9.42 8.46
Scott & Stringfellow historical ................... 10.23 10.14
Pro forma combined ................................ 9.43 8.48
Scott & Stringfellow pro forma equivalent ......... 9.43 8.48
</TABLE>
(1) Includes a special cash dividend of $.20 per share declared on September
22, 1998 and paid on October 15, 1998.
7
<PAGE>
MEETING OF SHAREHOLDERS
GENERAL
This Proxy Statement/Prospectus is being furnished to the shareholders of
Scott & Stringfellow as of December 2, 1998 (the "Record Date") and is
accompanied by a form of proxy that is solicited by the Board of Directors of
Scott & Stringfellow (the "S&S Board") for use at the annual meeting of
shareholders of Scott & Stringfellow (the "Meeting") to be held on Wednesday,
January 13, 1999 at 4:30 p.m., Eastern Time, at the Omni Hotel, located at 100
South 12th Street, Richmond, Virginia. At the Meeting, the shareholders of
Scott & Stringfellow will vote upon proposals (i) to approve the Amended and
Restated Agreement and Plan of Reorganization dated as of September 16, 1998
(the "Merger Agreement"), which Merger Agreement amends and supersedes the
Agreement and Plan of Reorganization (the "Original Merger Agreement") dated as
of August 10, 1998 (the "Original Merger Agreement Date"), and the Amended and
Restated Plan of Merger (the "Plan of Merger") pursuant to which Scott &
Stringfellow would merge with and into BB&T (the "Merger"), (ii) to elect four
directors for terms expiring at the earlier of the effective time of the Merger
(the "Effective Time"), the date of the 2001 annual meeting of Scott &
Stringfellow shareholders or such time as their respective successors are
elected and qualified and (iii) to ratify the selection of KPMG Peat Marwick
LLP as Scott & Stringfellow's independent certified public accountants for the
fiscal year ending June 25, 1999 if the Merger is not consummated. Proxies may
be voted on such other matters as may properly come before the Meeting at the
discretion of the proxy holders named therein. The S&S Board knows of no such
other matters except matters incidental to the conduct of the Meeting and those
matters described under "OTHER MATTERS THAT MAY COME BEFORE THE MEETING." The
Merger Agreement and the Plan of Merger are attached hereto as Appendix A.
Holders of the common stock of Scott & Stringfellow ("Scott & Stringfellow
Common Stock") are requested to complete, date and sign the accompanying proxy
and return it promptly to Scott & Stringfellow in the enclosed postage prepaid
envelope.
RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED
Only the holders of Scott & Stringfellow Common Stock on the Record Date
(December 2, 1998) are entitled to receive notice of and to vote at the
Meeting. On the Record Date, there were shares of Scott & Stringfellow Common
Stock outstanding, which were held by approximately holders of record. Each
share of Scott & Stringfellow Common Stock outstanding on the Record Date is
entitled to one vote as to each of the matters 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 Scott & Stringfellow Common Stock. FAILURE OF A HOLDER OF SCOTT &
STRINGFELLOW COMMON STOCK TO VOTE SUCH SHARES WILL HAVE THE SAME EFFECT AS A
VOTE "AGAINST" THE MERGER AGREEMENT AND THE PLAN OF MERGER.
Except as described in the immediately preceding paragraph and except for
the election of directors, action on matters submitted to a vote of the
shareholders at the Meeting will be approved if a quorum is present and the
votes cast in favor of the matter constitute a majority of the shares
represented at the Meeting and entitled to vote. With respect to the election
of directors, the four nominees receiving the greatest number of votes cast for
the election of directors will be deemed elected even though not receiving a
majority, assuming a quorum is present at the Meeting. Presence in person or by
proxy of a majority of the outstanding shares of Scott & Stringfellow Common
Stock entitled to vote at the meeting will constitute a quorum.
As of the Record Date, the directors and executive officers of Scott &
Stringfellow and their affiliates beneficially owned a total of shares, or
%, of the issued and outstanding shares of Scott & Stringfellow Common Stock
(exclusive of shares that may be acquired pursuant to the exercise of stock
options). Each of Frederic S. Bocock, Sidney Buford Scott, John J. Muldowney,
David Plageman, William F. Calliott, John Sherman, Jr. and R. Bruce Campbell,
directors or executive officers of Scott & Stringfellow, has agreed in the
Merger Agreement to vote all shares of Scott & Stringfellow Common Stock owned
by him in favor of the Merger Agreement and the Plan of Merger and not to
transfer any of such shares except pursuant to the Merger Agreement or with
BB&T's consent. As of the Record Date, neither the directors and executive
officers of BB&T and their affiliates nor BB&T and its subsidiaries
beneficially owned any shares of Scott & Stringfellow Common Stock.
VOTING AND REVOCATION OF PROXIES
The shares of Scott & Stringfellow 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
8
<PAGE>
given, executed proxies will be voted "FOR" approval of the Merger Agreement
and the Plan of Merger, "FOR" the election of the nominees for director
specified herein and "FOR" the ratification of KPMG Peat Marwick LLP as Scott &
Stringfellow's independent certified public accountants for the fiscal year
ended June 25, 1999 if the Merger is not consummated. 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.
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
considered a "non-discretionary" item whereby brokerage firms may not vote in
their discretion on behalf of their clients if such clients have not furnished
voting instructions. Because the proposal to adopt the Merger Agreement and the
Plan of Merger is required to be approved by the holders of more than
two-thirds of the outstanding shares of Scott & Stringfellow 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 may be
properly voted on, the proxies solicited hereby will be voted on such matters
at the discretion of the proxy holders named therein. The S&S Board is not
aware of any other business to be presented at the Meeting, other than matters
incidental to the conduct of the Meeting and those matters described under
"OTHER MATTERS THAT MAY COME BEFORE THE MEETING."
The presence of a shareholder at the Meeting will not automatically revoke
such shareholder's proxy. A shareholder may, however, revoke a proxy at 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
Scott & Stringfellow at Scott & Stringfellow's principal executive offices
before the Meeting, or by attending the Meeting and voting in person. The proxy
will not be revoked by the death or incapacity of the shareholder executing it
unless, before the shares are voted, notice of such death or incapacity is
filed with the Secretary of Scott & Stringfellow or other person authorized to
tabulate the votes.
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 SCOTT & STRINGFELLOW COMMON STOCK, ABSTENTIONS AND BROKER SHARES WILL
HAVE THE SAME EFFECT AS NEGATIVE VOTES. ACCORDINGLY, THE S&S BOARD URGES SCOTT
& STRINGFELLOW'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 Scott & Stringfellow will each bear 50% of the cost of printing
this Proxy Statement/Prospectus, and Scott & Stringfellow will bear all other
costs of soliciting proxies. In addition to the use of the mails, proxies may
be solicited personally or by telephone or facsimile by directors, officers,
and other employees of Scott & Stringfellow or its subsidiaries, who will not
be specially compensated for such solicitation activities. Arrangements also
will be made 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 Scott & Stringfellow will
reimburse such custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses in connection therewith. Scott & Stringfellow presently
intends to utilize the services of ChaseMellon Shareholder Services, LLC, a
professional proxy solicitation firm, in connection with the solicitation of
proxies for the Meeting, at an estimated cost of $5,000 plus out-of-pocket
expenses.
RECOMMENDATIONS OF THE S&S BOARD
The S&S 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 Scott & Stringfellow and its shareholders. The S&S Board
unanimously recommends that Scott & Stringfellow's shareholders vote "FOR"
approval of the Merger Agreement and the Plan
9
<PAGE>
of Merger. The S&S Board also recommends that Scott & Stringfellow's
shareholders vote "FOR" the election of the nominees for director specified
herein and "FOR" the ratification of KPMG Peat Marwick LLP as Scott &
Stringfellow's independent certified public accountants for the fiscal year
ended June 25, 1999 if the Merger is not consummated. See "THE MERGER --
Background of the Merger," " -- Reasons for the Merger."
SHAREHOLDERS SHOULD NOT SEND IN STOCK CERTIFICATES WITH THEIR PROXY CARDS.
See "THE MERGER -- Exchange of Scott & Stringfellow Common Stock Certificates."
THE MERGER
(PROPOSAL ONE)
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 MERGER AGREEMENT AND THE PLAN OF MERGER AND THE
FAIRNESS OPINION OF SCOTT & STRINGFELLOW, INC., WHICH ARE ATTACHED TO THIS
PROXY STATEMENT/PROSPECTUS AS APPENDIX A AND APPENDIX B, RESPECTIVELY, AND
INCORPORATED HEREIN BY REFERENCE. ALL SHAREHOLDERS ARE URGED TO READ EACH
APPENDIX IN ITS ENTIRETY.
GENERAL
In the Merger, Scott & Stringfellow will be merged with and into BB&T, and
BB&T will be the surviving corporation. Shareholders of Scott & Stringfellow
will receive shares of the common stock of BB&T ("BB&T Common Stock") in
exchange for their shares of Scott & Stringfellow Common Stock. It is expected
that Scott & Stringfellow, Inc. ("S&S Brokerage") will and, in BB&T's sole
discretion, Scott & Stringfellow Realty, Inc. ("S&S Realty") may, be merged
into Craigie Incorporated ("Craigie") (the "Subsidiary Merger") after the
Effective Time. The name of the surviving corporation of the Subsidiary Merger
will be Scott & Stringfellow, Inc. ("New S&S"). Thereafter, New S&S will
continue to operate as a full-service securities firm with branches throughout
North Carolina, South Carolina, Virginia and West Virginia. Scott &
Stringfellow Capital Management, Inc. ("S&S Capital Management") is not
expected to be merged into Craigie or any other subsidiary of BB&T. S&S
Brokerage, S&S Realty and S&S Capital Management are referred to collectively
herein as the "S&S Subsidiaries."
BACKGROUND OF THE MERGER
Scott & Stringfellow's strategy historically has been to remain an
independent financial services firm. However, the S&S Board has closely
followed recent regulatory and competitive changes in the securities industry.
In December 1996, the Federal Reserve Board announced that, effective
March 6, 1997, it would raise from 10% to 25% the cap on revenues that
commercial banks may derive from an approved subsidiary engaged in securities
activities. This led to a series of acquisitions of securities firms by
commercial banks in 1997, including BB&T's acquisition of Craigie, Bankers
Trust New York Corporation's acquisition of Alex Brown Incorporated, Swiss Bank
Corporation's acquisition of Dillon Read & Co., BankAmerica Corporation's
acquisition of Robertson Stephens & Company, NationsBank Corporation's
acquisition of Montgomery Securities and First Union Corporation's acquisition
of Wheat First Butcher Singer, Inc. Commercial bank acquisitions of securities
firms continued in 1998 with U.S. Bancorp acquiring Piper Jaffray Companies
Inc., First Chicago NBD Corporation acquiring Roney & Co., and KeyCorp
announcing the acquisition of McDonald & Co.
In the fall of 1997, shortly after the First Union/Wheat First merger was
announced, the S&S Board began to reexamine the strategic alternatives for
Scott & Stringfellow and to consider whether affiliation with a commercial bank
would be advantageous. The S&S Board authorized management to engage in
preliminary discussions with one financial institution. However, following
these discussions, the S&S Board reaffirmed its strategy of independence.
On May 21, 1998, representatives of Scott & Stringfellow visited
Winston-Salem and met with representatives of BB&T to present Scott &
Stringfellow's investment banking and capital markets capabilities. Following
this meeting, John Sherman, Jr., the President and Chief Executive Officer of
Scott & Stringfellow, contacted John A. Allison IV, the Chairman and Chief
Executive Officer of BB&T, and on June 8 they met to discuss whether a
strategic affiliation would be in the best interests of both parties. Messrs.
Sherman and Allison agreed that the cultures of their organizations were
compatible and that an affiliation could be beneficial.
Representatives of Scott & Stringfellow and BB&T met on June 2, July 2,
July 16 and July 21, 1998, to discuss the outline of a transaction in which
Scott & Stringfellow would merge with BB&T and the shareholders of Scott &
Stringfellow
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would receive BB&T Common Stock in a tax-free reorganization. On July 22, 1998,
the parties agreed that the exchange ratio in the Merger (the "Exchange Ratio")
would be one share of BB&T stock for each share of Scott & Stringfellow Common
Stock.
The S&S Board met on July 27, 1998. At this meeting, management presented
the outline of a proposal for Scott & Stringfellow to merge with and into BB&T.
As part of the transaction, Scott & Stringfellow's broker-dealer subsidiary,
S&S Brokerage, would merge with Craigie, the wholly owned broker-dealer
subsidiary of BB&T. Representatives of the S&S Brokerage Corporate Finance
Department presented a preliminary report that analyzed the proposed
transaction and tentatively concluded that, from a financial point of view, the
transaction was fair to the shareholders of Scott & Stringfellow. After a
thorough discussion of the proposed transaction, the S&S Board authorized
management to continue the discussions with BB&T and to negotiate a definitive
merger agreement.
On July 29, Scott & Stringfellow and BB&T executed a confidentiality
agreement and each firm began conducting due diligence activities with respect
to the other.
During the period from July 27 through August 7, the parties negotiated
the terms of the merger agreement, employment agreements with Messrs. Sherman,
DeLaney, Mintz and Johnston and an option agreement.
On August 10, 1998, the S&S Board met to consider the definitive proposal
for the Merger with BB&T. Following presentations from management and from its
legal and financial advisers, the S&S Board voted unanimously to approve the
Original Merger Agreement and an option agreement (the "Option Agreement") and
to recommend approval of the Merger to the shareholders of Scott &
Stringfellow. Immediately following the Board meeting, the parties executed the
Merger Agreement (in its pre-amended form) and the Option Agreement.
The Original Merger Agreement contemplated that the Merger would be
accounted for as a pooling of interests. Scott & Stringfellow and BB&T
subsequently determined that certain facts and circumstances precluded the use
of pooling-of-interests accounting in the Merger. Accordingly, on September 16,
1998, the parties amended and restated the Merger Agreement to provide that the
Merger would be accounted for as a purchase and to make certain other desired
changes.
REASONS FOR THE MERGER
BB&T
BB&T believes that the Merger with Scott & Stringfellow will significantly
expand its existing investment banking and brokerage operations throughout the
Southeast and accommodate its clients' desire for more sophisticated financial
products, including corporate finance, equity underwriting, distribution,
advisory services and research.
SCOTT & STRINGFELLOW
Scott & Stringfellow believes that the Merger will successfully combine
Scott & Stringfellow's retail brokerage network and its investment banking and
investment advisory businesses with BB&T's large base of middle market and
private banking clients, enabling Scott & Stringfellow to offer a wider array
of services to its existing customers and to expand its customer base through
BB&T's network of customers. In reaching its conclusion to approve the Merger
Agreement and the transactions contemplated thereby, the S&S Board, in
consultation with Scott & Stringfellow management and financial and legal
advisors, considered a variety of factors, including the following principal
factors:
SHAREHOLDER CONSIDERATION. The S&S Board carefully considered the amount
and quality of the consideration to be received by S&S shareholders in the
Merger and the opinion of S&S Brokerage that the transaction was fair from a
financial point of view to the shareholders of Scott & Stringfellow. BB&T has
produced strong operating results relative to its peers, with its return on
equity ranking in the upper quartile of the industry in 1997. The S&S Board
also took into account that shares of BB&T Common Stock are widely traded on
the NYSE and constitute a more liquid security than shares of Scott &
Stringfellow Common Stock. In addition, the current BB&T dividend is about 75%
higher than the current Scott & Stringfellow dividend.
THE COMPLEMENTARY NATURE OF BB&T'S AND SCOTT & STRINGFELLOW'S BUSINESSES.
The S&S Board believes that the businesses of commercial banking and investment
banking are complementary and that customers are increasingly demanding
one-stop shopping for financial services. The S&S Board further believes that
the Merger will enable Scott & Stringfellow to provide additional services to
its present customers, such as trust services and estate planning, and to
expand significantly its customer base by providing investment banking,
investment advisory, brokerage and other services to BB&T's existing commercial
banking customers. The additional services that Scott & Stringfellow provides
should help BB&T expand its customer base by satisfying its customers' desires
for a wider range of financial services. The geographic footprints of BB&T
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and Scott & Stringfellow substantially overlap and the Merger provides Scott &
Stringfellow with excellent opportunities to continue its expansion into North
and South Carolina. The S&S Board also believes that the managerial style and
culture of BB&T is compatible with the entrepreneurial managerial style and
culture of Scott & Stringfellow.
ACCESS TO GREATER RESOURCES. Scott & Stringfellow will require significant
amounts of capital in order to provide its customers with the sophisticated
services, information systems and customer statements that they desire. The S&S
Board believes that a combination with BB&T will provide Scott & Stringfellow
with access to superior information technology systems and greater capital
resources than it would have as an independent firm.
PRESERVATION OF SCOTT & STRINGFELLOW AS AN ENTITY. After the Merger, Scott
& Stringfellow will continue to operate as a separate subsidiary of BB&T under
the name of Scott & Stringfellow, Inc. Its headquarters will remain in
Richmond, Virginia and will become the investment banking headquarters for
BB&T. Scott & Stringfellow's existing management will remain in place after the
Merger and will have significant autonomy. John Sherman, Steven C. DeLaney,
Charles E. Mintz and Mike D. Johnston will continue in their present positions
and it is expected that most Scott & Stringfellow employees will remain in
their present jobs.
SCOTT & STRINGFELLOW'S FUTURE AS AN INDEPENDENT FIRM. The S&S Board
carefully considered the advantages and disadvantages of remaining independent.
It observed the rapid entry of commercial banks into the securities business
and the trend of mergers between banks and securities firms. The S&S Board
concluded that larger, better capitalized firms that combine the commercial
banking and securities businesses have a competitive advantage over smaller
local and regional firms that operate only a securities business.
OPINION OF SCOTT & STRINGFELLOW'S FINANCIAL ADVISOR
Scott & Stringfellow retained S&S Brokerage to act as its financial
advisor in connection with the Merger and to render an opinion to the S&S Board
as to the fairness, from a financial point of view, to the holders of Scott &
Stringfellow Common Stock of the Exchange Ratio. S&S Brokerage is a regional
investment banking firm that is regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. The S&S Board selected S&S Brokerage to serve as
its financial advisor in connection with the Merger on the basis of such firm's
expertise.
S&S Brokerage is a wholly owned subsidiary of Scott & Stringfellow, and
certain members of management of S&S Brokerage are also members of management
of Scott & Stringfellow and also may have interests that are in addition to,
and may be different from, the interests of Scott & Stringfellow shareholders.
The S&S Board relied on S&S Brokerage's experience in providing advice in
connection with mergers and acquisitions and related transactions.
Representatives of S&S Brokerage attended the meeting of the S&S Board on
July 27, 1998, at which the proposed Merger was first discussed, and the
meeting of the S&S Board on August 10, 1998, at which the Original Merger
Agreement and the Plan of Merger were considered, approved and adopted. At the
August 10 meeting, S&S Brokerage issued an oral opinion that, as of such date,
the Exchange Ratio was fair, from a financial point of view, to the holders of
Scott & Stringfellow Common Stock. S&S Brokerage subsequently issued a written
opinion dated as of August 10, 1998, that the Exchange Ratio was fair, from a
financial point of view, to the holders of Scott & Stringfellow Common Stock.
S&S Brokerage subsequently delivered to the S&S Board a written opinion, dated
as of the date of this Proxy Statement/Prospectus, confirming its opinion of
August 10, 1998.
The full text of S&S Brokerage's written opinion, dated as of the date of
this Proxy Statement/Prospectus, which sets forth certain assumptions made,
matters considered and limitations on review undertaken, is attached as
Appendix B to this Proxy Statement/Prospectus, is incorporated herein by
reference and should be read in its entirety in connection with this Proxy
Statement/Prospectus. The summary of the opinion of S&S Brokerage set forth in
this Proxy Statement/Prospectus is qualified in its entirety by reference to
the opinion. S&S Brokerage's opinion is directed only to the fairness, from a
financial point of view, of the Exchange Ratio to the holders of Scott &
Stringfellow Common Stock. S&S Brokerage's opinion was provided to the S&S
Board to assist it in connection with its consideration of the Merger and does
not constitute a recommendation to any shareholder of Scott & Stringfellow as
to how such shareholder should vote on the Merger Agreement and the Plan of
Merger.
In arriving at its opinion, S&S Brokerage reviewed certain publicly
available business and financial information relating to Scott & Stringfellow
and BB&T and certain other information provided to it, including the following:
(i) the Merger Agreement; (ii) certain internal information provided by the
management of Scott & Stringfellow; (iii) Scott & Stringfellow's
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financial statements for the four fiscal years ended June 30, 1997 and
internally prepared, unaudited financial statements for the period ended June
30, 1998; (iv) BB&T's Annual Reports to Shareholders, Annual Reports on Form
10-K and related financial information for the four fiscal years ended December
31, 1997; (v) BB&T's unaudited financial information for the quarters and six
months ended June 30, 1997 and 1998; (vi) certain publicly available
information with respect to historical market prices and trading activities for
Scott & Stringfellow and BB&T Common Stock and for certain publicly traded
financial institutions which S&S Brokerage deemed relevant; (vii) certain
publicly available information with respect to banking and brokerage companies
and the financial terms of certain other mergers and acquisitions which S&S
Brokerage deemed relevant; and (viii) such financial studies, analyses,
inquiries and other matters, particularly of the banking and investment banking
and brokerage industry as S&S Brokerage deemed appropriate. In addition, S&S
Brokerage discussed the background of the Merger, the reasons for the Merger
and the business and future prospects of Scott & Stringfellow and BB&T
individually and as a combined entity with members of management of Scott &
Stringfellow and BB&T.
In connection with its review, S&S Brokerage relied upon and assumed the
accuracy and completeness of all of the foregoing information, including
publicly available information and information provided to it by Scott &
Stringfellow and BB&T's management, and S&S Brokerage has not assumed any
responsibility for independent verification of such information. With respect
to the information relating to the prospects of Scott & Stringfellow and BB&T,
S&S Brokerage assumed that such information reflected the best currently
available judgments and estimates of Scott & Stringfellow and BB&T as to the
likely future performance of the respective companies and of the combined
entity. S&S Brokerage also assumed, without independent investigation, that the
aggregate reserves for loan losses, litigation and other contingencies for
Scott & Stringfellow and BB&T are adequate to cover such losses. S&S Brokerage
did not make an independent evaluation or appraisal of the assets or
liabilities of Scott & Stringfellow or BB&T.
In connection with rendering its opinion, S&S Brokerage performed a
variety of financial analyses. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances, and therefore, such an opinion is not readily susceptible to
partial analysis or summary description. Moreover, the evaluation of the
fairness, from a financial point of view, of the Exchange Ratio to holders of
Scott & Stringfellow Common Stock was to some extent a subjective one based on
the experience and judgment of S&S Brokerage and not merely the result of
mathematical analysis of financial data. Accordingly, notwithstanding the
separate factors summarized below, S&S Brokerage believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
of the factors considered by it, without considering all analyses and factors,
could create an incomplete view of the evaluation process underlying its
opinion. The ranges of valuations resulting from any particular analysis
described below should not be taken to be S&S Brokerage's view of the actual
value of Scott & Stringfellow or BB&T.
In performing its analyses, S&S Brokerage made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of Scott & Stringfellow or BB&T.
The analyses performed by S&S Brokerage are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than suggested by such analyses. Additionally, analyses relating to
the values of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold. In rendering its opinion, S&S
Brokerage assumed that, in the course of obtaining the necessary regulatory
approvals for the Merger, no restriction will be imposed that will have a
material adverse effect on the future results of operations or financial
condition of Scott & Stringfellow or BB&T.
S&S Brokerage's opinion is just one of the many factors taken into
consideration by the S&S Board in determining to approve the Merger Agreement
and the Plan of Merger. S&S Brokerage's opinion does not address the relative
merits of the Merger as compared to any alternative business strategies that
might exist for Scott & Stringfellow, nor does it address the effect of any
other business combination in which Scott & Stringfellow might engage.
The following is a summary of the analyses performed by S&S Brokerage in
connection with its opinion delivered to the S&S Board on August 10, 1998:
COMPARISON OF SELECTED COMPANIES. S&S Brokerage compared the financial
performance and market trading information of BB&T to that of a group of
certain bank holding companies (the "Group"). This Group included: AmSouth
Corporation; CCB Financial Corporation; Centura Banks, Inc.; Colonial BancGroup
Inc.; Compass Bancshares, Inc.; Crestar Financial Corporation; First Citizens
BancShares, Inc.; First Tennessee National Corporation; First Virginia Banks,
Inc.; One Valley Bancorp, Inc.; SouthTrust Corporation; SunTrust Banks, Inc.;
Synovus Financial Corporation; Trustmark Corporation; Union Planters
Corporation; and Wachovia Corporation.
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Based on financial data as of and for the twelve month period ended June
30, 1998, BB&T had: (i) tangible equity to assets of 6.96% compared to an
average of 7.82%, a low of 5.30%, and a high of 10.36% for the Group; (ii) a
total risk based capital ratio of 16.00% compared to an average of 13.32%, a
low of 11.21%, and a high of 20.71% for the Group; (iii) nonperforming assets
to total assets of 0.36% compared to an average of 0.32%, a low of 0.18%, and a
high of 0.68% for the Group; (iv) returns on average assets before
extraordinary items of 1.37% compared to an average of 1.28%, a low of 0.81%,
and a high of 1.92% for the Group;(v) returns on average equity before
extraordinary items of 17.59% compared to an average of 15.06%, a low of
10.95%, and a high of 22.83% for the Group; and (vi) an efficiency ratio
(defined as total noninterest expense divided by the sum of net interest income
before provision for loan loss reserves and total noninterest income) of 50.85%
compared to an average of 57.83%, a low of 50.92%, and a high of 70.23% for the
Group. Also, based on earnings per share estimates for the fiscal year ending
December 31, 1998, and earnings per share estimates for the fiscal year ending
December 31, 1999, as reported by "IBES" (IBES is a data service that monitors
and publishes a compilation of earnings estimates produced by selected research
analysts regarding companies of interest to institutional investors), BB&T had
projected compound annual earnings per share growth of 11.9%, compared with an
average of 11.6%, a low of 9.1%, and a high of 15.1% for the Group.
Based on the market values as of August 7, 1998 (the last trading day
preceding the announcement of the Merger), and financial data as of June 30,
1998, BB&T had: (i) a stock price to book value ratio of 399.7% compared to an
average of 285.2%, a low of 171.3%, and a high of 594.0% for the Group; (ii) a
stock price to IBES 1998 estimated earnings per share multiple of 20.0x
compared to an average of 18.2x, a low of 14.8x, and a high of 30.8x for the
Group; (iii) a stock price to IBES 1999 estimated earnings per share multiple
of 17.9x, compared to an average of 16.3x, a low of 12.9x, and a high of 27.0x
for the Group; (iv) indicated dividend yield of 2.03% compared to an average of
2.01%, a low of 1.01%, and a high of 3.78% for the Group; and (v) a ratio of
the stock price to IBES 1999 estimated earnings per share before extraordinary
items multiple to the percentage growth rate of the IBES 1999 estimated
earnings per share compared to the IBES 1998 estimated earnings per share of
1.50 compared to an average of 1.45, a low of 0.85, and a high of 1.91 for the
Group.
HISTORICAL STOCK PRICE PERFORMANCE. S&S Brokerage reviewed and analyzed
the daily closing per share market prices and trading volume for Scott &
Stringfellow and BB&T Common Stock from January 1, 1995 to August 7, 1998. S&S
Brokerage also reviewed the daily closing per share market prices of Scott &
Stringfellow Common Stock and BB&T Common Stock and compared the movement of
such daily closing prices with the movement of the S&P 500, the S&P -- Bank
Composite, and the Nasdaq Composite Indices over the period January 1, 1995
through August 7, 1998. S&S Brokerage noted that BB&T Common Stock and Scott &
Stringfellow Common Stock, both on a relative basis, outperformed the S&P 500,
the S&P -- Bank Composite, and the Nasdaq Composite Indices over the period
January 1, 1995 through August 7, 1998. This information was presented to give
the S&S Board background information regarding the respective stock price
performances of Scott & Stringfellow and BB&T over the periods indicated.
ANALYSIS OF SELECTED TRANSACTIONS. S&S Brokerage performed an analysis of
consideration paid in seven selected completed or pending acquisitions of
brokerage firms announced between June 9, 1997 and June 15, 1998 (the "Selected
Transactions"). To the extent that the consideration offered in the Selected
Transactions included a component of deferred payment (with such deferred
payment contingent upon the employees/shareholders being employed by the
company at the time of payment), S&S Brokerage analyzed the consideration
offered in the Selected Transactions and the corresponding multiples thereof
including and excluding the deferred payments. For those transactions with
deferred payments, such future payments were discounted to their present value
using a 10% discount rate. Then, multiples of book value and trailing earnings
in the Selected Transactions were compared to the multiples and premiums
implied by the consideration offered by BB&T in the Merger. The Selected
Transactions included the following completed or pending transactions:
KeyCorp/McDonald & Company; BankBoston Corporation/Robertson Stephens & Company
L.P.; U.S. Bancorp/Piper Jaffray; First Chicago NBD Corporation/Roney & Co.;
First Union Corporation/Wheat, First Securities, Inc.; NationsBank Corporation/
Montgomery Securities; and BancAmerica Corp./Robertson Stephens & Company
L.P.
Based on the market value of BB&T Common Stock on August 7, 1998, and
financial data for Scott & Stringfellow as of or for the twelve months ended
June 30, 1998, the following summarizes the S&S Brokerage analysis:
S&S Brokerage reviewed the financial terms, to the extent publicly
available, of seven pending or completed mergers and acquisitions since June
1997 involving domestic targets in the securities industry. S&S Brokerage
calculated various financial multiples and premiums over market price paid in
such transactions based on certain publicly available information for each
transaction and compared them to corresponding financial multiples and the
premiums over market paid in the Merger. S&S Brokerage noted that the multiple
of purchase price per share to stated book value was 3.7x for the Merger versus
a median of 3.8x, a low of 3.0x, and a high of 4.3x for the Selected
Transactions. S&S Brokerage further noted that the multiple of purchase price
per share to last twelve months earnings per share was 22.0x for the Merger
compared to a
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median of 14.8x, a low of 12.7x, and a high of 22.3x for the Selected
Transactions. S&S Brokerage also noted that the Selected Transactions were
effected at a range of premiums to the target's per share market price four
weeks prior to announcement of between 17.7% and 69.6% with a median of 29.9%
and to the target's per share market price one day prior to announcement
between 12.5% and 65.0% with a median of 22.3%, respectively, versus premiums
of 35.0% and 19.8%, respectively for the Merger (based on the per share market
price four weeks prior to the August 10, 1998 announcement of the Merger and
the August 7, 1998 closing price used for the one day prior to announcement
price). All multiples for the Selected Transactions were based on public
information available at the time of announcement of such transactions, without
taking into account differing market and other conditions over the period
during which the transactions occurred.
CONTRIBUTION ANALYSIS. S&S Brokerage analyzed the relative contributions
of Scott & Stringfellow and BB&T to the pro forma balance sheet of the combined
company, and the pro forma income statement of the combined company, based on
historical data, the IBES mean estimate for BB&T for 1998 and management's
projections for Scott & Stringfellow and compared such percentage contributions
to Scott & Stringfellow's relative pro forma ownership of approximately 1.30%
of the outstanding common stock of the combined company. This analysis showed
that on a pro forma basis, based on the two companies' financial positions at
June 30, 1998, Scott & Stringfellow and BB&T would account for approximately
0.53% and 99.47%, respectively, of the combined company's pro forma total
assets; and, 1.39% and 98.61%, respectively, of the combined company's pro
forma total common equity. This analysis also showed that on a pro forma
combined basis (excluding the effect of any synergies that may be realized as a
result of the Merger and nonrecurring expenses related to the Merger) Scott &
Stringfellow and BB&T would account for approximately 4.31% and 95.69%,
respectively, of the combined company's last twelve months revenue,
approximately 1.26% and 98.74%, respectively, of the combined company's last
twelve months net income, approximately 4.12% and 95.88%, respectively, of the
combined company's revenue for the projected calendar year 1998, and
approximately 1.26% and 98.74%, respectively, of the combined company's net
income for the projected calendar year 1998.
COMPARABLE PUBLIC COMPANIES TRADING ANALYSIS. S&S Brokerage compared the
multiples to earnings and book value implied by the Exchange Ratio to the
trading multiples of certain publicly traded regional broker-dealers (the
"Broker Group"). The Broker Group included: A.G. Edwards, Inc.; Advest Group,
Inc.; First Albany Companies; Dain Rauscher Corporation; Interstate/Johnson
Lane; Legg Mason, Inc.; Morgan Keegan & Co.; and Raymond James Financial, Inc.
The implied market value per share of Scott & Stringfellow was $34.44,
based on the one-to-one exchange ratio and the market value of BB&T Common
Stock on August 7, 1998. This implied market value was (i) a multiple of 1.2
times Scott & Stringfellow's last 12 months revenues per share, compared to a
low of 0.3, a high of 2.0, and median of 1.0 for the Broker Group, (ii) a
multiple of 22.0x Scott & Stringfellow's last 12 months' earnings per share,
compared to a low of 12.1, a high of 19.3, and a median of 13.6 for the Broker
Group, (iii) a multiple of 3.7x Scott & Stringfellow's book value per share,
compared to a low of 1.6, a high of 3.4 and a median of 2.2 for the Broker
Group, and (iv) a multiple of 20.0 times Scott & Stringfellow's estimated 1998
earnings per share, compared to a low of 11.9, a high of 18.2, and a median of
14.0 for the Broker Group.
DISCOUNTED DIVIDENDS ANALYSIS. Using discounted dividends analysis, S&S
Brokerage estimated the present value of the future stream of dividends that
Scott & Stringfellow could produce over the next five years, under various
circumstances, assuming Scott & Stringfellow performed in accordance with the
earnings forecasts of management. S&S Brokerage then estimated the terminal
value for Scott & Stringfellow Common Stock at the end of the period by
applying prices to earnings multiples ranging from 14.0x to 16.0x projected net
income in year five. The dividend streams and terminal values were then
discounted to present values using different discount rates (ranging from 13.0%
to 15.0%) chosen to reflect different assumptions regarding the required rates
of return to holders or prospective buyers of Scott & Stringfellow Common
Stock. This discounted dividends analysis indicated reference valuation ranges
of between $23.76 per share and $29.11 per share for Scott & Stringfellow.
These values compare to the implied consideration to be offered by BB&T to
Scott & Stringfellow in the Merger of $34.44 per share based on the market
value of BB&T Common Stock on August 7, 1998.
RELEVANT MARKET AND ECONOMIC FACTORS. In rendering its opinion, S&S
Brokerage considered, among other factors, the condition of the U.S. stock
markets, particularly in the securities industry sector and the current level
of economic activity.
No company or transaction used as a comparison in the above analysis is
identical to Scott & Stringfellow, BB&T or the Merger. Accordingly, an analysis
of the results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading value of
the companies used for comparison in the above analysis.
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The conclusion reached by S&S Brokerage in its opinion dated August 10,
1998 was reaffirmed as of December , 1998, the date of this Proxy
Statement/Prospectus, and is based solely upon the information available to S&S
Brokerage and the economic, market and other circumstances as they existed as
of such date. Events occurring after that date could materially affect the
assumptions and conclusions contained in S&S Brokerage's opinion. S&S Brokerage
has not undertaken to reaffirm or revise its opinion or otherwise comment on
any events occurring after that date. Subsequent to the date S&S Brokerage
rendered its original opinion, August 10, 1998, Scott & Stringfellow allocated
$300,000 to S&S Brokerage's corporate finance department for S&S Brokerage's
services performed in rendering the opinion.
EXCHANGE RATIO
At the Effective Time, each share of Scott & Stringfellow Common Stock
then outstanding will be converted into the right to receive one share of BB&T
Common Stock, subject to adjustment if there is a stock split, stock dividend
or similar recapitalization affecting BB&T Common Stock. No fractional shares
of BB&T Common Stock will be issued in the Merger.
Scott & Stringfellow 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 Scott & Stringfellow Common Stock may be more or
less than the actual market value of a share of BB&T Common Stock as of the
date of the Meeting. Scott & Stringfellow shareholders are urged to obtain
information on the trading 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."
EXCHANGE OF SCOTT & STRINGFELLOW COMMON STOCK CERTIFICATES
At the Effective Time, by virtue of the Merger and without any action on
the part of Scott & Stringfellow or the holders of Scott & Stringfellow Common
Stock, each share of Scott & Stringfellow 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 Scott & Stringfellow Common Stock as described below, one whole share of
BB&T Common Stock (the "Merger Consideration"). Promptly after the Effective
Time, BB&T will deliver or mail to each Scott & Stringfellow 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 Scott & Stringfellow 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 thereto.
HOLDERS OF SCOTT & STRINGFELLOW 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 Scott &
Stringfellow 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 Scott & Stringfellow
Common Stock. BB&T will pay the Merger Consideration attributable to any
certificate for Scott & Stringfellow Common Stock that has been lost or
destroyed 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 Scott & Stringfellow Common Stock outstanding
immediately before the Effective Time will be made on the stock transfer books
of BB&T.
THE MERGER AGREEMENT
EFFECTIVE DATE AND TIME OF THE MERGER
The Merger Agreement provides that the closing of the transactions
contemplated therein will take place on the business day designated by BB&T
that is not less than ten business days following the satisfaction of the
conditions to the consummation 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 the State Corporation
Commission of Virginia and the Office of the Secretary of State of North
Carolina. 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 are approved by the Scott & Stringfellow
shareholders and all other conditions to the respective obligations of BB&T and
Scott & Stringfellow to
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consummate the Merger have been satisfied or, to the extent waivable, waived.
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 in January
1999.
CONDITIONS TO THE MERGER
The respective obligations of BB&T and Scott & Stringfellow to carry out
the Merger and the other transactions contemplated by the Merger Agreement are
subject to satisfaction (or, if permissible, waiver) of the following
conditions at or before the Effective Time: (a) all corporate action necessary
to authorize the execution, delivery and performance of the Merger Agreement
and the Plan of Merger, and the consummation of the transactions contemplated
thereby, must have been duly and validly taken, including the approval of the
shareholders of Scott & Stringfellow of the Merger Agreement and the Plan of
Merger; (b) BB&T's Registration Statement on Form S-4 (the "Registration
Statement") (including any post-effective amendments) must be effective under
the Securities Act of 1933, as amended (the "Securities Act"), no proceedings
may be pending or threatened by the Securities and Exchange Commission (the
"Commission") 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; (c) the parties must have received all regulatory approvals
required in connection with the transactions contemplated by the Merger
Agreement and the Plan of Merger, and all notice periods and waiting periods
required with respect to the approvals must have passed and all approvals must
be in effect; (d) neither BB&T nor Scott & Stringfellow 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
consummation of the transactions contemplated by the Merger Agreement; and (e)
Scott & Stringfellow and BB&T must have received an opinion of Scott &
Stringfellow's legal counsel, McGuire, Woods, Battle & Boothe LLP, in form and
substance satisfactory to Scott & Stringfellow and BB&T, substantially to the
effect that the Merger will constitute a reorganization under Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code") and that the
shareholders of Scott & Stringfellow will not recognize any gain or loss to the
extent that they exchange shares of Scott & Stringfellow Common Stock for
shares of BB&T Common Stock.
The obligations of Scott & Stringfellow to carry out the transactions
contemplated by 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 Scott & Stringfellow: (a) 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 to be performed at or
before the Effective Time; (b) 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 (c) Scott & Stringfellow 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 Original Merger Agreement Date and as of the Effective Time as though
made on and as of the Effective Time (or, in the case of any representation or
warranty that specifically designates a different date, on the date
designated), except as otherwise contemplated by the Merger Agreement or
consented to in writing by Scott & Stringfellow. The representations and
warranties of BB&T concerning (a) its capitalization, (b) its and its
subsidiaries' organization and authority to conduct business, (c) its
authorization and the binding nature of the Merger Agreement, (d) the absence
of any conflict between the transactions contemplated by the Merger Agreement
and the Articles of Incorporation of BB&T (the "BB&T Articles") or the Bylaws
of BB&T (the "BB&T Bylaws") and (e) its forbearance from taking any actions
that would negatively affect the tax-free treatment of the Merger or the
receipt of necessary regulatory approvals 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 or warranties of BB&T 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 BB&T.
The obligations of BB&T to carry out the transactions contemplated by 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: (a) no regulatory approval may have imposed any condition or
requirement that, in the reasonable opinion of BB&T's Board of Directors (the
"BB&T Board"), would so materially adversely affect the business or economic
benefits to BB&T of the transactions contemplated by the Merger Agreement as to
render their consummation inadvisable or unduly burdensome; (b) Scott &
Stringfellow must have performed in all material respects all obligations and
complied in all material respects with all covenants required by the Merger
Agreement to be performed at or before the Effective Time; (c) BB&T must have
received certain closing certificates and legal opinions from Scott &
Stringfellow and its counsel; and (d) BB&T must have received written
agreements from affiliates of Scott & Stringfellow to the extent necessary to
promote compliance with Rule 145 promulgated by the Commission.
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In addition, all representations and warranties of Scott & Stringfellow
will be evaluated as of the Original Merger Agreement Date and as of the
Effective Time as though made on and as of the Effective Time (or, in the case
of any representation or warranty that specifically designates a different
date, on the date designated), except as otherwise contemplated by the Merger
Agreement or consented to in writing by BB&T. The representations and
warranties of Scott & Stringfellow concerning (a) its capitalization, (b) its
and the S&S Subsidiaries' organization and authority to conduct business, (c)
its ownership of the S&S Subsidiaries, (d) its authorization and the binding
nature of the Merger Agreement, (e) the absence of conflict between the
transactions contemplated by the Merger Agreement and the Articles of
Incorporation of Scott & Stringfellow (the "Scott & Stringfellow Articles") or
the Bylaws of Scott & Stringfellow (the "Scott & Stringfellow Bylaws"), (f) its
forbearance from taking any actions that would negatively affect the tax-free
treatment of the Merger or the receipt of necessary regulatory approvals and
(g) actions taken to exempt the Merger from Virginia anti-takeover laws must be
true and correct (except for inaccuracies that are DE MINIMIS in amount).
Moreover, there must not exist inaccuracies in any of the representations or
warranties of Scott & Stringfellow 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 Scott & Stringfellow.
CONDUCT OF SCOTT & STRINGFELLOW'S AND BB&T'S BUSINESS PRIOR TO THE
EFFECTIVE TIME OF THE MERGER
On September 22, 1998, Scott & Stringfellow declared a special cash
dividend equal to $.20 per share of Scott & Stringfellow Common Stock (the
"Special Dividend"), such Special Dividend was paid on October 15 and was in
addition to Scott & Stringfellow's regular quarterly cash dividend of $.10 per
share of Scott & Stringfellow Common Stock.
Except with the prior written consent of BB&T, before the Effective Time
Scott & Stringfellow may not, and must cause each of the S&S 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 subsidiary;
(b) declare, set aside, make or pay any dividend or other distribution in
respect of its capital stock, other than regularly scheduled dividends payable
in cash on record dates and in amounts consistent with past practices and other
than the Special Dividend, or permit or accept any contributions to capital or
other increases in equity, except pursuant to (i) the exercise of stock options
outstanding as of the Original Merger Agreement Date pursuant to the Scott &
Stringfellow 1987 Stock Option Plan (the "Option Plan"), (ii) the Option
Agreement, or (iii) the payment of principal on loans made pursuant to the
Scott & Stringfellow Management Stock Purchase Loan Plan (the "S&S Stock
Purchase Loan Plan") and secured by shares of Scott & Stringfellow Common Stock
purchased under the S&S Stock Purchase Loan Plan;
(c) issue any shares of its capital stock (except as permitted in (b)
preceding), pursuant to conversion rights or otherwise; issue, grant or
authorize any rights to acquire its capital stock; or effect any
recapitalization, reclassification, stock dividend, stock split or like change
in capitalization;
(d) amend its Articles of Incorporation or Bylaws;
(e) impose or permit imposition of any lien, charge or encumbrance on any
material asset, or permit any such lien, charge or encumbrance to exist, except
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 material to its
business or acquire any assets material to its business, other than in the
ordinary course of its business; or waive or release any material right or
cancel or compromise any debt or claim other than in the ordinary course of
business;
(g) with certain exceptions, increase the rate of compensation of any of
its directors, officers or employees, or pay or agree to pay any bonus to, or
provide any other employee benefit or incentive to, any of its directors,
officers or employees, except in the ordinary course of business consistent
with past practices, or change the commission payout schedule for its
registered representatives;
(h) 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;
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(i) 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, Scott & Stringfellow or any S&S
Subsidiary, or any business combination with Scott & Stringfellow or any S&S
Subsidiary other than as contemplated by the Merger Agreement; or authorize any
officer, director, agent or affiliate of Scott & Stringfellow 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 (i) does not apply to furnishing information, negotiations or
discussions following an unsolicited offer if, as a result of such offer, Scott
& Stringfellow is advised in writing by legal counsel that in its opinion the
failure so to furnish information or negotiate would likely constitute a breach
of the fiduciary duty of the S&S Board to Scott & Stringfellow shareholders;
(j) enter into any material (i) agreement, arrangement or commitment not
made in the ordinary course of business, including, without limitation,
agreements or memoranda of understanding with regulatory authorities, (ii)
agreement, indenture or other instrument not made in the ordinary course of
business relating to the borrowing of money by Scott & Stringfellow or any S&S
Subsidiary or guarantee by Scott & Stringfellow or any S&S Subsidiary of any
obligation, (iii) agreement, arrangement or commitment relating to the
employment or severance of a consultant or the employment, severance, election
or retention in office of any present or former director, officer or employee
(except for agreements with brokers, traders and investment bankers in the
ordinary course of business consistent with past practice); or (iv) contract,
agreement or understanding with a labor union;
(k) change its underwriting, trading, investment banking, sales,
investment or asset liability management policies in any material respect,
except as may be required by applicable law, regulation, or directives;
(l) change its method of accounting as in effect at June 27, 1997, except
as required by changes in generally accepted accounting principles concurred in
by BB&T or change in any material respect any of its methods of reporting
income and deductions for federal income tax purposes from those employed in
the preparation of its federal income tax returns for the year ended June 27,
1997, except as required by changes in law or regulation;
(m) incur any capital expenditures or obligation to make capital
expenditures in excess of $100,000 for any one expenditure or $500,000 in the
aggregate;
(n) incur any indebtedness other than in the ordinary course of business;
(o) take any action which would or would be reasonably likely to (i) cause
the business combination contemplated by the Merger Agreement not to constitute
a reorganization under Section 368 of the Code, (ii) result in any
representation or warranty in the Merger Agreement being untrue in any material
respect at or prior to the Effective Time, or (iii) cause any of the conditions
precedent to the transactions contemplated by the Merger Agreement to fail to
be satisfied; except, in each case, as may be required by applicable law or
regulation; or
(p) agree to do any of the foregoing.
Except with the prior written consent of Scott & Stringfellow, between the
Original Agreement Date and the Effective Time, BB&T must not, and must cause
each of its subsidiaries to not take any action which would or would be
reasonably likely to (i) cause the business combination contemplated by the
Merger Agreement not to constitute a reorganization under Section 368 of the
Code, (ii) result in any representation or warranty in the Merger Agreement
being untrue in any material respect at or prior to the Effective Time, or
(iii) cause any of the conditions precedent to the transactions contemplated by
the Merger Agreement to fail to be satisfied; except, in each case, as may be
required by applicable law or regulation.
WAIVER; AMENDMENT; TERMINATION; EXPENSES
Except with respect to any required regulatory approval, BB&T or Scott &
Stringfellow may at any time (whether before or after approval of the Merger
Agreement and the Plan of Merger by the Scott & Stringfellow 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. No such extension or waiver, or
amendment or supplement of the Merger Agreement and the Plan of Merger executed
after approval by the Scott & Stringfellow shareholders, however, may alter or
change (i) the amount or kind of the Merger Consideration to be received in
exchange
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for shares of Scott & Stringfellow Common Stock, (ii) any of the terms and
conditions of the Plan of Merger if such alternation or change would adversely
affect the shares of Scott & Stringfellow Common Stock, or (iii) any term of
the Scott & Stringfellow Articles.
If any of the conditions to the obligation of either party to complete the
Merger are not fulfilled, such party will consider the materiality of such
nonfulfillment. In the case of the nonfulfillment of a condition to Scott &
Stringfellow's obligations, Scott & Stringfellow 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:
(a) at any time before the Effective Time, by the mutual consent in
writing of BB&T and Scott & Stringfellow;
(b) at any time before the Effective Time, by either party (i) if there is
a material breach by the other party of any covenant or agreement contained in
the Merger Agreement or (ii) if there is 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 consummate the Merger
under the applicable standard set forth in the Merger Agreement (see " --
Conditions to the Merger"); and, in the case of (i) or (ii), if such breach or
inaccuracy has not been cured by the earlier of 30 days following written
notice of such breach to the party committing such breach or inaccuracy or the
Effective Time;
(c) 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
consummate the transactions contemplated in the Merger Agreement cannot be
satisfied or fulfilled before the date on which the Effective Time occurs (the
"Closing Date"), and the party giving the notice is not in breach of any of its
representations, warranties, covenants or undertakings so as to provide the
other party with the ability to refuse to consummate the Merger under the
applicable standards set forth in the Merger Agreement;
(d) 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;
(e) at any time, by either party in writing, if the shareholders of Scott
& Stringfellow do not approve the Merger Agreement and the Plan of Merger; or
(f) at any time following March 31, 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 so as to provide the other party with the
ability to refuse to consummate the Merger under the applicable standards set
forth in the Merger Agreement.
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. The Option Agreement is governed
by its own terms. See " -- The Option Agreement."
Each party to the Merger Agreement will bear all expenses incurred by it
in connection with the Merger Agreement and the transactions contemplated
thereby, except that printing expenses and Commission registration fees
incurred in connection with the Registration Statement will be borne 50% by
BB&T and 50% by Scott & Stringfellow.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Scott & Stringfellow's management, including all of its
directors, have certain interests in the Merger over and above their interests
as shareholders of Scott & Stringfellow generally. The S&S Board was aware of
these factors and considered them, among other matters, before approving the
Merger Agreement and the Plan of Merger.
EMPLOYMENT AGREEMENTS
In connection with the Merger, it is anticipated that New S&S will enter
into a five-year employment agreement with each of John Sherman, Jr., Steven C.
DeLaney, Charles E. Mintz and Mike D. Johnston (referred to herein individually
as an "Executive" and collectively as the "Executives"). The employment
agreements will provide for the employment with New S&S of (i) Mr. Sherman as
President and Chief Executive Officer, (ii) Mr. DeLaney as Executive Vice
President -- Director -- Capital Markets, (iii) Mr. Mintz as Executive Vice
President -- Director -- Retail Group, and (iv) Mr. Johnston as Senior Vice
President and Chief Financial Officer.
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The employment agreement for each of the Executives provides that the
Executive will receive a specified minimum base salary ($240,000 for Mr.
Sherman, $175,000 for Messrs. DeLaney and Mintz, and $100,000 for Mr.
Johnston), with a potential annual increase each year based on the performance
of New S&S and the Executive. In addition, the Executive will participate in a
bonus plan (the "Bonus Plan") each year (or partial year) under which the
criteria both for earning a bonus and for determining the amount of such bonus
will provide the Executive with an opportunity to earn a cash bonus at least
equal to the opportunity which he had under the annual cash bonus program of
Scott & Stringfellow immediately preceding the Merger. The Executive may elect
irrevocably, however, within thirty days following the Closing Date, for up to
25% of the amount of any bonus earned under the Bonus Plan to be distributed to
him in the form of options to acquire shares of BB&T Common Stock. Such
options, if any, will be issued under the BB&T 1995 Omnibus Stock Incentive
Plan on the same date as options are issued generally to employees of BB&T and
its affiliates in the following year. In addition to the Bonus Plan, each
Executive will participate in a Management Incentive Program (the "MIP"), which
will provide the Executive the opportunity to earn a percentage (35% in the
case of Mr. Sherman, 25% in the case of Messrs. DeLaney and Mintz and 15% in
the case of Mr. Johnston) of (x) a specified annual bonus amount for each of
the years in the period from 1999-2003 (the "MIP Period"), if the Pre-Tax Net
Income of New S&S exceeds specified targets for such year, and (y) a specified
cumulative bonus amount for the MIP Period, if the Pre-Tax Net Income of New
S&S exceeds specified targets for the MIP Period as a whole, all as described
in the MIP. The specified annual bonus and cumulative bonus amounts increase as
the amount by which the Pre-Tax Net Income of New S&S exceeds the specified
targets set forth in the MIP increases. Each Executive also will be entitled to
receive, on the same basis as similarly situated officers of New S&S, employee
pension (including 401(k)/profit sharing plan) and welfare benefits and group
employee benefits such as sick leave, vacation, group disability and health,
dental, life and accident insurance, stock option plan and similar indirect
compensation that New S&S may from time to time extend to its similarly
situated officers. Such benefits, taken as a whole, must be at least as
favorable as those provided to the Executive by Scott & Stringfellow prior to
the Merger.
Each Executive's employment agreement provides that, if New S&S terminates
his employment other than by reason of disability or for cause, the Executive
will, if he complies with certain noncompetition provisions, be entitled to
receive for the remainder of what would otherwise have been the term of the
agreement an annual salary equal to the highest amount of cash compensation
(including amounts under the cash bonus program maintained by Scott &
Stringfellow, Inc. prior to the Effective Time and under the Bonus Plan, but
excluding amounts under the MIP and amounts, if any, payable pursuant to the
Executive and Employee Retention Plan described below (the "Retention Plan"))
received during any of the immediately preceding five calendar years
("Termination Compensation"). If (i) New S&S assigns duties to an Executive
requiring him to relocate more than 35 miles from Richmond, Virginia, (ii) New
S&S effects a material change in an Executive's duties and responsibilities,
(iii) an Executive is terminated as a member of the Board of Directors of New
S&S in violation of the Merger Agreement or (iv) New S&S otherwise breaches any
of its material covenants or obligations contained in the employment
agreements, and any of the foregoing is not cured within 30 days following
receipt by New S&S of written notice thereof from the affected Executive, such
Executive would be entitled to terminate his employment at any time within 60
days following such 30-day cure period and, upon such termination, be entitled
to receive Termination Compensation. During any period in which payments of
Termination Compensation are being made to an Executive in accordance with the
foregoing, the Executive would continue to receive health insurance coverage
from New S&S on the same terms as were in effect before the termination, either
under New S&S's plans or comparable coverage, and would continue to be entitled
to receive distributions under the Retention Plan.
Each of the employment agreements provides that, if there is a "Change of
Control" (as defined below) of New S&S or BB&T at any time after the Original
Merger Agreement Date, the Executive may voluntarily terminate employment with
New S&S at any time until two years after the Change of Control for "Good
Reason" (as defined below) and (a) be entitled to receive in a lump sum (i) any
compensation due but not yet paid through the date of termination and (ii) in
lieu of any further salary payments from the date of termination to the end of
the term of the employment agreement, an amount equal to the Termination
Compensation times 2.99, (b) continue to participate in the same group
hospitalization plan, health care plan, dental care plan, life or other
insurance or death benefit plan, and any other present or future similar group
employee benefit plan or program for which officers of New S&S generally are
eligible, or comparable plans or coverage, 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 of New S&S or BB&T were, considered together as a whole, materially
more generous to the officers of New S&S than such plans and programs at the
date of termination, and (c) continue to receive distributions under the
Retention Plan (subject to cessation in the event of death).
"Good Reason" means the occurrence of any of the following events without
the Executive's express written consent: (a) the assignment to the Executive of
duties inconsistent with the duties of the Executive as described in the
employment
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agreement; (b) the failure of New S&S to comply with the compensation
provisions of the employment agreement; (c) an involuntary relocation of the
Executive more than 35 miles from Richmond, Virginia; or (d) any purported
termination of the employment of the Executive by New S&S that is not effected
in accordance with the employment agreement.
A "Change of Control" would be deemed to occur if (a) any person or group
of persons (as defined in the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) together with its affiliates, excluding employee benefit plans
of New S&S or BB&T, is or becomes the beneficial owner of securities of New S&S
or BB&T representing 20% or more of the combined voting power of New S&S's or
BB&T's then outstanding securities; (b) as a result of a tender offer or
exchange offer for the purchase of securities of New S&S 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; (c) 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 prior thereto continuing to represent (either by remaining
outstanding or 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; (d) 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; (e) BB&T sells or
otherwise conveys to a person, other than an affiliate of BB&T, control of New
S&S or causes New S&S to convey to such a person 50% or more of New S&S's
assets; or (f) any other event occurs that the BB&T Board determines should
constitute a Change of Control.
Notwithstanding the foregoing, the employment agreements provide that if
any of the payments to be made pursuant thereto would constitute a "parachute
payment," as defined in Section 280G of the Code, the payments shall 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 one time 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.
RETENTION PLAN
As of the Effective Time, New S&S will adopt the Retention Plan, pursuant
to which a retention pool comprised of shares of BB&T Common Stock will be held
for distribution. The number of such shares comprising the retention pool will
be determined by dividing $15,000,000 by the average closing price per share of
BB&T Common Stock on the NYSE Composite Transactions List (as reported by The
Wall Street Journal) for the five trading days (determined by excluding days on
which the NYSE is closed) ending on the fifth trading day immediately preceding
the Closing Date. The Retention Plan will provide certain specified management
personnel and employees with the opportunity to receive a distribution of a
specified percentage of the number of shares in the retention pool (rounded to
the nearest whole share). Subject to the condition set forth in the following
sentence, each such employee will be entitled to receive 15% of the shares of
BB&T Common Stock to which he or she is entitled as of July 31, 1999, 20% as of
July 31, 2000, 30% as of July 31, 2001 and 35% as of July 31, 2002 (each such
July 31, a "Retention Vesting Date"). Except (i) as provided in any employment
agreement with New S&S or (ii) as provided in the following paragraph, no
distribution will be made under the Retention Plan with respect to any
Retention Vesting Date to any employee who will not be actually employed by New
S&S (or BB&T or another subsidiary of BB&T) continuously from the Effective
Time through such Retention Vesting Date, and all rights to receive future
distributions under the Retention Plan will be forfeited by any employee from
and after the date of termination of the employment of such employee for any
reason; provided, that, notwithstanding the foregoing, if (x) a "Change of
Control" of BB&T shall occur and (y) all of John Sherman, Jr., Steven C.
DeLaney and Charles E. Mintz shall be involuntarily terminated as employees of
New S&S within six months following the effective date of such Change of
Control, each employee participating in the Retention Plan who was continually
employed by New S&S through the effective date of the Change of Control will be
entitled to receive, within 30 days after the last of the terminations of
employment referenced in
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(y) above, such employee's specified percentage of the shares of BB&T Common
Stock remaining in the retention pool. The Retention Plan will provide for the
registration with the Commission of the shares of BB&T Common Stock to be
distributed thereunder.
Notwithstanding anything in the preceding paragraph to the contrary, if an
employee who would otherwise be eligible to participate in the Retention Plan
becomes unable to carry out the essential functions of his employment by New
S&S (or BB&T or another subsidiary of BB&T) by reason of physical or mental
disability but continues to receive salary payments and benefits pending
termination of his or her employment on account of disability, such employee
will be deemed for purposes of the Retention Plan to have been continuously
employed during the period such salary payments and benefits continue (the
"Compensation Continuation Period"); provided, however, that the number of
shares distributable to such employee as of a Retention Vesting Date occurring
during a Compensation Continuation Period will be prorated based on the number
of days such employee actively rendered services for New S&S (or BB&T or
another subsidiary of BB&T).
NEW S&S BOARD
The Merger Agreement provides that, at the Effective Time of the
Subsidiary Merger, BB&T will elect a Board of Directors of New S&S comprised of
S. Buford Scott, Frederic S. Bocock, John Sherman, Jr., Steven C. DeLaney,
Charles E. Mintz (each of whom is a director of Scott & Stringfellow) and seven
additional members selected by BB&T. S. Buford Scott will be offered the
position of the initial Chairman of the Board of Directors, and Frederic S.
Bocock will be offered the position of the initial Vice Chairman of the Board
of Directors. Messrs. Scott and Bocock will remain on the Board of Directors of
New S&S until they reach age 70, and Messrs. Sherman, DeLaney and Mintz will
remain on the Board of Directors of New S&S for so long as they are employed by
New S&S pursuant to the employment agreements, in each case subject to (i) his
eligibility and willingness to serve and (ii) the conditions that he has
complied with all fiduciary duties to BB&T and New S&S, has not been involved
in any action that disqualifies him from serving or that would bring discredit
to BB&T, New S&S or any other entity affiliated with BB&T, and has carried out
his duties to BB&T and New S&S in a reasonably competent, businesslike and
attentive manner. No member of the Board of Directors of New S&S will receive
compensation for services provided in such capacity.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Merger Agreement provides that BB&T or one of its subsidiaries will
purchase and keep in force for a period of three years after the Effective Time
directors' and officers' liability insurance providing coverage to directors
and officers of Scott & Stringfellow for acts or omissions occurring before the
Effective Time. This insurance will provide at least the same coverage and
amounts as contained in Scott & Stringfellow's policy on the Original Merger
Agreement Date, except that in no event is BB&T obligated to pay an annual
premium exceeding 150% of the annual premium on Scott & Stringfellow's policy
(the "Maximum Amount"). If the amount of the premiums necessary to maintain or
procure this insurance coverage exceeds the Maximum Amount, BB&T will use its
reasonable best efforts to maintain the most advantageous policies of
directors' and officers' liability insurance obtainable for a premium equal to
the Maximum Amount. In addition, for a period of six years following the
Effective Time, BB&T has agreed to indemnify (and advance expenses to) all
individuals who are or have been officers, directors or employees of Scott &
Stringfellow or any S&S Subsidiary prior to the Effective Time ("Indemnified
Parties") from any acts or omissions (including any acts or omissions taken in
connection with the transactions contemplated by the Merger Agreement) in such
capacities prior to the Effective Time, to the fullest extent that such
indemnification is provided pursuant to the Scott & Stringfellow Articles on
the Original Merger Agreement Date and is permitted under the Virginia Stock
Corporation Act (the "VSCA"); provided, that (i) any determination as to
whether a purported Indemnified Party's conduct complied with the standards set
forth under Virginia law or the Scott & Stringfellow Articles must be made by
independent counsel (which cannot be counsel that provides material services to
BB&T) selected by BB&T and reasonably acceptable to the purported Indemnified
Party and (ii) in the absence of applicable Virginia judicial precedent to the
contrary, such counsel, in making such determination, must presume that the
conduct in question complied with the applicable standards, and BB&T will have
the burden to demonstrate that such conduct failed to comply with such
standards. See "COMPARISON OF SHAREHOLDERS' RIGHTS -- Exculpation and
Indemnification -- Scott & Stringfellow."
REGULATORY CONSIDERATIONS
Consummation of the Merger is conditioned on the receipt by BB&T and Scott
& Stringfellow of all necessary approvals by governmental regulatory agencies.
Consummation of the Merger is also conditioned on the expiration or termination
of the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. BB&T anticipates that the regulatory
approvals described herein will be obtained in time to allow for consummation
of the Merger
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in January 1999, but there is no assurance that all of such regulatory
approvals will be obtained so as to permit consummation of the Merger or that
such approvals will not be conditioned upon matters that would cause the
parties to abandon the Merger. There likewise is no assurance that an antitrust
regulatory body will not challenge the Merger or, if such challenge is made, as
to the results thereof. See " -- The Merger Agreement -- Conditions to the
Merger."
The Merger is subject to approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve") under Section 4 of the Bank Holding
Company Act (the "BHC Act") and the Federal Reserve's implementing regulation
thereunder, Regulation Y, which approval has been received. Under Section 4 of
the BHC Act and Regulation Y, BB&T is obligated to provide the Federal Reserve
with written notice before acquiring ownership or control of the shares of a
company, such as Scott & Stringfellow, that is engaged in nonbanking
activities. Such notice is deemed approved by the Federal Reserve 60 days after
the notice is deemed complete, unless the Federal Reserve issues an order
disapproving the transaction or extending the time for consideration. In
considering a notice submitted in connection with a transaction such as the
Merger, the BHC Act requires that the Federal Reserve consider whether
performance of the proposed activity by a bank holding company or a subsidiary
of such company can reasonably be expected to produce benefits to the public,
such as greater convenience, increased competition or gains in efficiency, that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest or unsound banking
practices. In addition, because a transaction such as the Merger involves the
acquisition of a nonbanking firm by a bank holding company, Regulation Y
requires that additional information be included in the notice, including
evidence that the proposed activity is so closely related to banking or
managing or controlling banks as to be a proper incident thereto, or, if the
Federal Reserve previously determined by order that the activity is permissible
for a bank holding company to conduct, a commitment to comply with all the
conditions and limitations established by the Federal Reserve governing the
activity. Further, because a transaction such as the Merger involves a bank
holding company subsidiary that will be engaged in securities underwriting and
dealing activities, the Federal Reserve requires that additional information be
provided with respect to the Merger, including information on revenues derived
from such securities activities, in order to determine whether the subsidiary
following consummation of the transaction will be in compliance with Section 20
of the Glass-Steagall Act. Under the Federal Reserve's application of Section
20 of the Glass-Steagall Act, no more than 25% of the gross revenues of the
subsidiary may be derived from underwriting or dealing in securities that
member banks may not underwrite or deal in.
In addition to the foregoing, certain self-regulatory organizations of
which S&S Brokerage or Craigie are members, including, without limitation, the
National Association of Securities Dealers, Inc. (the "NASD") and the NYSE, may
require notices, approvals or consents before the Subsidiary Merger may be
consummated.
BB&T and Scott & Stringfellow are not aware of any other governmental
approvals or actions that are required for consummation of the Merger or the
Subsidiary Merger, except as described above. Should any other approval or
action be required, it is contemplated presently that such approval or action
would be sought. There can be no assurance that any such approval or action, if
needed, could be obtained, would not delay consummation of the Merger or would
not be conditioned in a manner that would cause BB&T to abandon the Merger as
permitted by the Merger Agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A DISCUSSION OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. THE DISCUSSION IS INCLUDED FOR GENERAL INFORMATION
PURPOSES ONLY AND MAY NOT APPLY TO SPECIAL CATEGORIES OF SHAREHOLDERS, SUCH AS
SCOTT & STRINGFELLOW SHAREHOLDERS WHO RECEIVED THEIR SCOTT & STRINGFELLOW
COMMON STOCK AS COMPENSATION.
McGuire, Woods, Battle & Boothe LLP, counsel for Scott & Stringfellow, has
advised Scott & Stringfellow that, in their opinion:
(i) No gain or loss will be recognized for federal income tax purposes by
Scott & Stringfellow shareholders upon the exchange in the Merger of Scott
& Stringfellow Common Stock solely for BB&T Common Stock.
(ii) The basis of BB&T Common Stock received in the Merger by Scott &
Stringfellow shareholders will be the same as the basis of the shares of
Scott & Stringfellow Common Stock surrendered in exchange therefor.
(iii) The holding period of the BB&T Common Stock received in the Merger
by a Scott & Stringfellow shareholder will include the holding period of
the shares of Scott & Stringfellow Common Stock surrendered in exchange
therefor, provided such shares of Scott & Stringfellow Common Stock were
held as capital assets at the Effective Time.
In addition, consummation of the Merger is conditioned, among other
things, upon receipt by Scott & Stringfellow and BB&T of an opinion of McGuire,
Woods, Battle & Boothe LLP, dated as of the Closing Date, that:
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(i) the Merger constitutes a reorganization within the meaning of Section
368(a) of the Code, and
(ii) no gain or loss will be recognized by Scott & Stringfellow
shareholders who receive BB&T Common Stock in exchange for their shares of
Scott & Stringfellow Common Stock.
Scott & Stringfellow and BB&T do not currently intend to waive the receipt
of such tax opinions; however, if receipt of such tax opinions were waived and
the material federal income tax consequences of the Merger were materially
different from those summarized above, Scott & Stringfellow would resolicit its
shareholders prior to consummating the Merger. The tax opinion of McGuire,
Woods, Battle & Boothe LLP, as summarized above, will be based, among other
things, on representations relating to certain facts and circumstances of, and
the intentions of the parties to, the Merger.
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH SCOTT & STRINGFELLOW SHAREHOLDER AND OTHER
FACTORS, EACH SHAREHOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER
(INCLUDING THE APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX
LAWS).
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for under the purchase
method of accounting, pursuant to which BB&T will record the tangible and
identifiable intangible assets acquired and liabilities assumed at their fair
market values at the time of consummation of the Merger. Any excess of the
Merger Consideration over the sum of the fair market values of tangible and
identifiable intangible assets acquired less liabilities assumed will be
recorded as goodwill. Any goodwill recorded is expected to be amortized over of
the period of expected benefit. BB&T's reported income will include the
operations of Scott & Stringfellow after the Merger, and BB&T's financial
statements issued after consummation of the Merger will reflect the impact of
Scott & Stringfellow. Financial statements of BB&T issued after consummation of
the Merger would not be restated retroactively to reflect Scott &
Stringfellow's historical financial position or results of operations. The
unaudited pro forma financial information contained in this Proxy
Statement/Prospectus has been prepared using the purchase method of accounting.
THE OPTION AGREEMENT
GENERAL
As a condition to BB&T entering into the Merger Agreement, Scott &
Stringfellow (as issuer) entered into the Option Agreement with BB&T (as
grantee), pursuant to which Scott & Stringfellow granted an option (the
"Option") to BB&T to purchase from Scott & Stringfellow up to 654,629 shares of
Scott & Stringfellow Common Stock (subject to adjustment in certain
circumstances, but not to exceed 19.9% of the shares of Scott & Stringfellow
Common Stock outstanding upon any exercise of the Option) at a price of $26.75
per share (subject to adjustment under certain circumstances, as described
below) (the "Purchase Price"). The purchase of any shares of Scott &
Stringfellow 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 consummated 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 might now, or before the Effective Time, be
interested in acquiring all of or a significant interest in Scott &
Stringfellow from considering or proposing such an acquisition, even if they
were prepared to offer to pay consideration to shareholders of Scott &
Stringfellow with a higher current market price than the value of a share of
BB&T Common Stock to be received for each share of Scott & Stringfellow Common
Stock pursuant to the Merger Agreement.
The Option Agreement is filed as an exhibit to the Registration Statement,
and reference is made thereto for the complete terms of the Option Agreement
and the Option. The following discussion is qualified in its entirety by
reference to the Option Agreement. See "WHERE YOU CAN FIND MORE INFORMATION" on
page 49.
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"):
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(a) without BB&T's prior written consent, Scott & Stringfellow 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"): (i) a merger,
consolidation or similar transaction involving Scott & Stringfellow or any
significant S&S Subsidiary, (ii) the sale, lease, exchange or other disposition
of 25% or more of the consolidated assets of Scott & Stringfellow and the S&S
Subsidiaries (other than a sale of loan receivables in a financing transaction
in the normal course of business consistent with past practices) or (iii) the
issuance, sale or other disposition of securities representing 25% or more of
the voting power of Scott & Stringfellow or any significant S&S Subsidiary; or
(b) any third party or group of third parties acquires or has the right to
acquire beneficial ownership of securities representing 25% or more of the then
outstanding shares of Scott & Stringfellow Common Stock.
The obligation of Scott & Stringfellow to issue shares of Scott & Stringfellow
Common Stock upon exercise of the Option will be deferred (but will not
terminate) (i) 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 (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 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) subject to clause (e) below, 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 Scott & Stringfellow of a covenant or
agreement in the Merger Agreement or an inaccuracy in Scott & Stringfellow'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) subject to clause (d) above, 12 months after
a termination of the Merger Agreement based on the failure of the shareholders
of Scott & Stringfellow to approve the Merger Agreement and the Plan of Merger.
A "Preliminary Purchase Event" is defined as either of the following:
(a) the commencement by any third party of a tender or exchange offer such
that it would thereafter own 25% or more of the then outstanding shares of
Scott & Stringfellow Common Stock or the filing of a registration statement
with respect to such an offer, or
(b) the failure of the shareholders of Scott & Stringfellow 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 S&S 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: (i) proposes to engage in an Acquisition Transaction, (ii) commences a
tender offer or files a registration statement under the Securities Act with
respect to an exchange offer such that it would thereafter own 25% or more of
the outstanding shares of Scott & Stringfellow Common Stock or (iii) files an
application or notice under federal or state statutes relating to the
regulation of financial institutions or their holding companies to engage in an
Acquisition Transaction.
To the knowledge of BB&T and Scott & Stringfellow, 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 if
there is any change in Scott & Stringfellow Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction or if any additional shares of Scott &
Stringfellow Common Stock are issued 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), Scott &
Stringfellow 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 Scott & Stringfellow Common Stock purchased 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:
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(a) the aggregate Purchase Price paid by the holder for any shares of
Scott & Stringfellow Common Stock acquired pursuant to the Option with respect
to which the holder then has beneficial ownership, plus
(b) the excess, if any, of (i) the Applicable Price (as defined in the
Option Agreement) for each share of Scott & Stringfellow Common Stock over the
Purchase Price, multiplied by (ii) the number of shares of Scott & Stringfellow
Common Stock with respect to which the Option has not been exercised, plus
(c) the excess, if any, of (i) the Applicable Price over the Purchase
Price paid (or payable, in the case of shares of Scott & Stringfellow 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) by the holder for each
share of Scott & Stringfellow Common Stock with respect to which the Option has
been exercised and with respect to which the holder then has beneficial
ownership, multiplied by (ii) 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 Scott & Stringfellow 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 consummated.
SUBSTITUTE OPTIONS
If, before the termination of the Option Agreement, Scott & Stringfellow
enters into an agreement:
(a) to consolidate with or merge into any third party where Scott &
Stringfellow will not be the continuing or surviving corporation of the
consolidation or merger;
(b) to permit any third party to merge into Scott & Stringfellow with
Scott & Stringfellow as the continuing or surviving corporation, but, in
connection therewith, the then outstanding shares of Scott & Stringfellow
Common Stock are changed into or exchanged for stock or other securities of
Scott & Stringfellow or any other person or cash or any other property, or the
outstanding shares of Scott & Stringfellow Common Stock after the merger
represent less than 50% of the outstanding shares and share equivalents of the
merged company;
(c) to permit any third party to acquire all of the outstanding shares of
Scott & Stringfellow Common Stock pursuant to a statutory share exchange; or
(d) to sell or otherwise transfer all or substantially all of its assets
to any third party,
then, in each case, the agreement governing such transaction must provide that
the Option will be converted or exchanged for an option (a "Substitute Option")
to purchase shares of common stock of, at the holder's option, either (x) the
continuing or surviving corporation of a merger or consolidation or the
transferee of all or substantially all of Scott & Stringfellow'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 Scott & Stringfellow to prepare and file a
registration statement under the Securities Act if registration is necessary in
order to permit the sale or other disposition of any or all shares of Scott &
Stringfellow Common Stock or other securities that have been acquired by, or
are issuable to, BB&T or any permitted transferee upon exercise of the Option.
EFFECT ON EMPLOYEES, EMPLOYEE BENEFIT PLANS AND STOCK OPTIONS
EMPLOYEES
At the Effective Time, all employees of Scott & Stringfellow or any of the
S&S Subsidiaries ("S&S Employees") will become employees of New S&S. The Merger
Agreement provides that New S&S will maintain following the Effective Time the
401(k)/profit sharing, group hospitalization, medical, dental, life, disability
and other welfare benefit plans and programs available prior to the Effective
Time to S&S Employees (except for the Scott & Stringfellow Employee Stock
Purchase Plan (the "S&S Stock Purchase Plan")), subject to the right of the
Board of Directors of New S&S to amend or terminate such benefit plans and
programs. For purposes of determining eligibility to participate in and the
vesting of benefits under any
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such plan or program (but not for purposes of the accrual of benefits) and for
purposes of applying any preexisting condition exclusions or actively-at-work
requirements under any welfare benefit plan of New S&S, New S&S will treat
service with Scott & Stringfellow or any S&S Subsidiary as service with New
S&S. Any covered expenses incurred by the S&S Employees on or prior to the
Effective Time will be taken into account for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions after the
Effective Time to the extent that such expenses are taken into account for the
benefit of similarly situated employees of New S&S. Without limiting the
generality of the foregoing, BB&T has agreed (i) to make a lump sum severance
payment to any S&S Employee whose employment is terminated by New S&S without
fault of the S&S Employee within one year following the Closing Date, such
payment to equal the product of (A) the S&S Employee's weekly base salary as of
the effective date of his or her termination times (B) a number of weeks equal
to one week for each year that the S&S Employee served as such (but not fewer
than two weeks), (ii) to assume or to cause New S&S to assume as of the
Effective Time all employment agreements, severance agreements and all
agreements in respect of the Scott & Stringfellow Deferred Compensation Plan
that Scott & Stringfellow or the S&S Subsidiaries have with their current and
former employees and directors, except to the extent any such agreements will
be superseded or terminated at or following the Closing Date, and (iii) if the
Effective Time is prior to December 31, 1998, to cause New S&S to pay bonuses
to S&S Employees for 1998, in an aggregate amount consistent with past
practice, as determined by the Compensation Committee of the S&S Board as
constituted immediately prior to the Effective Time (the "S&S Compensation
Committee"). The bonus pool will be established by disregarding all
extraordinary expenses related to the Merger. The bonus pool will be allocated
among S&S Employees in the sole discretion of the S&S Compensation Committee.
EMPLOYEE STOCK PURCHASE PLAN
The S&S Stock Purchase Plan has been terminated.
STOCK OPTIONS
At the Effective Time, each option to purchase shares of Scott &
Stringfellow Common Stock (the "Stock Options") under the Stock Option Plan
which by its terms does not lapse on or before the Effective Time, whether or
not then exercisable, will be converted into and become rights with respect to
BB&T Common Stock, and BB&T will assume each Stock Option in accordance with
the terms of the Stock Option Plan and each stock option agreement evidencing
such Stock Option, except that from and after the Effective Time (i) BB&T and
its Compensation Committee will be substituted for Scott & Stringfellow and the
Committee of Scott & Stringfellow's Board of Directors administering the Stock
Option Plan, (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 will equal the number of shares of Scott &
Stringfellow Common Stock subject to such Stock Option immediately prior to the
Effective Time, and (iv) the per share exercise price under each such Stock
Option will be the same as the per share exercise price under each such Stock
Option immediately prior to the Effective Time. 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 will be met; (B) such substitution
will not constitute a modification, extension or renewal, within the meaning of
the Code, of any of the Stock Options which are incentive stock options; and
(C) 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 which is an incentive stock option will be
adjusted as required by Section 424 of the Code, and the regulations
promulgated thereunder, so as to continue as an incentive stock option under
Section 424(a) of the Code, and so as not to constitute a modification,
extension, or renewal of the option within the meaning of Section 424(h) of the
Code.
As soon as practicable following the Effective Time, BB&T will deliver to
the participants in the Stock Option Plan an appropriate notice setting forth
such participant's rights pursuant thereto. BB&T has reserved and will continue
to reserve adequate shares of BB&T Common Stock for delivery upon exercise of
any converted or substitute options, and as soon as practicable after the
Effective Time, BB&T will file a registration statement on Form S-3 or Form
S-8, as the case may be (or any successor or other appropriate forms), or
include any converted or substitute options under an existing registration
statement, 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.
Based on Stock Options outstanding as of the Original Merger Agreement
Date and subsequent exercises, options to purchase an aggregate of up to
approximately 401,858 shares of Scott & Stringfellow Common Stock may be
outstanding at the Effective Time. Any shares of Scott & Stringfellow Common
Stock issued pursuant to the exercise of Stock Options
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under the Stock Option Plan before the Effective Time will be converted into
shares of BB&T Common Stock in the same manner as other outstanding shares of
Scott & Stringfellow 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 Scott & Stringfellow at the Effective
Time may be resold by them only in transactions registered under the Securities
Act or permitted by the resale provisions of Rule 145 under the Securities Act
or as otherwise permitted by the Securities Act. Those who may be deemed
affiliates of Scott & Stringfellow generally include individuals or entities
that directly, or indirectly through one or more intermediaries, control, are
controlled by or are under common control with Scott & Stringfellow and include
certain executive officers and directors of Scott & Stringfellow. 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 live in the same home as the affiliate.
The Merger Agreement requires Scott & Stringfellow 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 the
Securities Act and the rules and regulations promulgated thereunder.
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
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 and the District of Columbia. BB&T's bank subsidiaries are
Branch Banking and Trust Company ("BB&T-NC"), Branch Banking and Trust Company
of South Carolina ("BB&T-SC"), Branch Banking and Trust Company of Virginia
("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, and FNB.
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, DC 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 61 banking offices in the Hampton Roads and Richmond areas and the
southern, central and southwestern regions of Virginia.
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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.
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 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 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 27, 1998, BB&T announced an agreement to acquire MainStreet
Financial Corporation ("MainStreet") in a stock transaction valued at $554.3
million, or $38.87 per MainStreet share based on BB&T's closing price of $32.94
on Tuesday, August 25, 1998. The exchange ratio will be 1.18 shares of BB&T
Common Stock for each share of MainStreet
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common stock. MainStreet, with approximately $2 billion in assets, is the
parent company to 11 community banks located in markets in southwestern,
central and northern Virginia and metropolitan Washington D.C. It operates 46
banking offices in Virginia and three banking offices in Maryland. The
acquisition, which will be accounted for as a pooling of interests, is subject
to approval of regulators and MainStreet shareholders and is expected to be
completed in the first quarter of 1999.
BB&T expects to continue to take advantage of the consolidation of the
financial services industry by further developing its franchise through the
acquisition of financial institutions. Such acquisitions may entail the payment
by BB&T of consideration in excess of the book value of the underlying net
assets acquired, may result in the issuance of additional shares of BB&T
capital stock or the incurring of an additional indebtedness by BB&T, and could
have a dilutive effect on the per share earnings or book value of BB&T Common
Stock. Moreover, such acquisitions sometimes result in significant front-end
charges against earnings, although cost savings, especially incident to
in-market acquisitions, also are frequently anticipated.
CAPITAL
The Federal Reserve has established a minimum requirement for a bank
holding company's ratio of capital to risk-weighted assets (including certain
off-balance-sheet activities, such as standby letters of credit) of 8%. At
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 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
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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 SCOTT & STRINGFELLOW
Information about Scott & Stringfellow can be found in Scott &
Stringfellow's Annual Report on Form 10-K for the fiscal year ended June 26,
1998 and Scott & Stringfellow's Quarterly Report on Form 10-Q for the quarter
ended September 25, 1998, each of which is incorporated herein by reference. A
copy of such Form 10-K and such Form 10-Q accompanies this Proxy
Statement/Prospectus.
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 (the "BB&T Preferred Stock"). As of October 31, 1998, there were
290,968,400 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 Scott &
Stringfellow 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,
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dissolution or winding up of BB&T, or both. In addition, any shares of BB&T
Preferred Stock may have class or series voting rights. Under certain
circumstances, the issuance of BB&T Preferred Stock or the existence of the
unissued BB&T Preferred Stock may tend to discourage or render more difficult a
merger or other change in control of BB&T. See " -- Shareholder Rights Plan."
SHAREHOLDER RIGHTS PLAN
BB&T has adopted a shareholder rights plan pursuant to which holders of
shares of BB&T Common Stock also hold rights to purchase securities or other
property that may be exercised upon the occurrence of certain "triggering
events." Shareholder rights plans such as BB&T's plan are intended to encourage
potential hostile acquirors of a "target" corporation to negotiate with the
board of directors of the target corporation in order to avoid occurrence of
the "triggering events" specified in such plans. Shareholder rights plans are
intended to give the directors of a target corporation the opportunity to
assess the fairness and appropriateness of a proposed transaction in order to
determine whether or not it is in the best interests of the corporation and its
shareholders. Notwithstanding these purposes and intentions of shareholder
rights plans, such plans, including that of BB&T, could have the effect of
discouraging a business combination that shareholders believe to be in their
best interests. The provisions of BB&T's shareholder rights plan are discussed
below.
On December 17, 1996, the BB&T Board declared a dividend distribution of
one right (a "Right," and collectively the "Rights") for each outstanding share
of BB&T Common Stock to shareholders of record at the close of business on
January 17, 1997. One Right will also be distributed for each share of BB&T
Common Stock issued between January 17, 1997 and the occurrence of a
"Distribution Date" (described in the next paragraph). Each Right entitles the
registered holder to purchase from BB&T a unit consisting of one-hundredth of a
share (a "Unit") of BB&T Junior Preferred Stock at a Purchase Price of $145.00
per Unit, subject to adjustment, or, under certain circumstances, other
securities or property. The description and terms of the Rights are set forth
in the Rights Agreement, dated as of December 17, 1996, between BB&T and
BB&T-NC in the capacity of Rights Agent (the "Rights Agreement").
Initially, the Rights will be attached to all BB&T Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates (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 consummated result in a person or
group beneficially owning 20% or more of such outstanding shares of BB&T Common
Stock or (c) 10 business days after the BB&T Board declares any Person to be an
"Adverse Person," as described in the following paragraph.
The BB&T Board will declare a person to be an Adverse Person upon its
determinations (a) that such person, alone or together with its affiliates and
associates, has or will become the beneficial owner of 10% or more of the
outstanding shares of BB&T Common Stock (provided that any such determination
will not be effective until such person has in fact become the beneficial owner
of 10% or more of the outstanding shares of BB&T Common Stock) and (b)
following consultation with such persons as the BB&T Board deems appropriate,
that (i) such beneficial ownership by such person is intended to cause, is
reasonably likely to cause or will cause BB&T to repurchase the BB&T Common
Stock beneficially owned by such person or to cause pressure on BB&T to take
action or enter into a transaction or series of transactions intended to
provide such person with short-term financial gain under circumstances where
the BB&T Board determines that the best long-term interests of BB&T and its
shareholders would not be served by taking such action or entering into such
transactions or series of transactions at that time or (ii) such beneficial
ownership is causing or is reasonably likely to cause a material adverse impact
(including, but not limited to, impairment of relationships with customers or
impairment of BB&T's ability to maintain its competitive position) on the
business or prospects of BB&T or (iii) such beneficial ownership otherwise is
determined to be not in the best interests of BB&T and its shareholders,
employees, customers and communities in which BB&T and its subsidiaries do
business.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on December 31, 2006, subject to extension by the BB&T
Board, or unless earlier redeemed by BB&T as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of BB&T Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except for certain issuances in
connection with outstanding options and convertible securities and
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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.
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
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" on page 49.
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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 provisions of the BB&T Articles and the BB&T Bylaws with respect to
the classification of the BB&T Board and the removal of directors only for
cause could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from acquiring, control of BB&T. For
a description of such provisions, see "COMPARISON OF SHAREHOLDERS' RIGHTS --
Directors."
MEETING OF SHAREHOLDERS; SHAREHOLDERS' NOMINATIONS AND PROPOSALS
Under the BB&T Bylaws, meetings of the shareholders may be called by the
Chief Executive Officer, 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 have the effect of delaying until the next annual shareholders'
meeting shareholder actions that are favored by the holders of a majority of
the outstanding voting securities of BB&T.
Certain procedures governing the submission of nominations for directors
and other proposals by 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 Scott & Stringfellow 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 Scott &
Stringfellow Common Stock. Since BB&T is organized under the laws of the State
of North Carolina and Scott & Stringfellow 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 Scott & Stringfellow Common Stock arise from
differing provisions of the NCBCA and the VSCA in addition to differing
provisions of their respective articles of incorporation and bylaws.
The following summary does not purport to be a complete statement of the
provisions affecting, and differences between, the rights of holders of BB&T
Common Stock and holders of Scott & Stringfellow Common Stock. The
identification of specific provisions or differences is not meant to indicate
that other equally or more significant differences do not exist. This summary
is qualified in its entirety by reference to the NCBCA and the VSCA and the
governing corporate instruments of BB&T and Scott & Stringfellow, to which the
shareholders of Scott & Stringfellow 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 October 31, 1998,
there were 290,968,400 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."
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SCOTT & STRINGFELLOW
Scott & Stringfellow's authorized capital stock consists of 10,000,000
shares of Scott & Stringfellow Common Stock. As of November 17, 1998, 3,516,446
shares of Scott & Stringfellow Common Stock were outstanding.
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.
SCOTT & STRINGFELLOW
Special meetings of the shareholders of Scott & Stringfellow may be called
at any time by the Chairman of the S&S Board, the President, the S&S Board or
the holders of ten percent or more of the shares entitled to vote at the
meeting. Under the VSCA, shareholders of a Virginia corporation may take action
without a meeting by one or more written consents signed by all shareholders
entitled to vote on the matter, provided that any required notice is given to
any shareholder not entitled to vote on such matter.
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 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.
SCOTT & STRINGFELLOW
The Scott & Stringfellow Articles and the Scott & Stringfellow Bylaws
provide for a board of directors of 12 members. The S&S Board is divided into
three classes of four directors each, with directors serving staggered
three-year terms. Under the Scott & Stringfellow Bylaws, directors may be
removed with or without cause at a meeting called for that purpose by vote of a
majority of the shares entitled to vote at an election of directors. Holders of
Scott & Stringfellow Common Stock do not have cumulative voting rights in the
election of directors.
DIVIDENDS AND OTHER DISTRIBUTIONS
BB&T
The NCBCA prohibits a North Carolina corporation from making any
distributions to shareholders, including the payment of cash dividends, that
would render it insolvent or unable to meet its obligations as they become due
in the ordinary course of business. BB&T is not subject to other express
regulatory restrictions on payments of dividends and other distributions. The
ability of BB&T to pay distributions to the holders of BB&T Common Stock will
depend, however, to a large extent upon the amount of dividends its bank
subsidiaries, which are subject to restrictions imposed by regulatory
authorities, pay to BB&T. In addition, the Federal Reserve could oppose a
distribution by BB&T if it determined that such a distribution would harm
BB&T's ability to support its bank subsidiaries. There can be no assurances
that dividends will be paid in the future. The declaration, payment and amount
of any such future dividends would depend on business conditions, operating
results, capital, reserve requirements and the consideration of other relevant
factors by the BB&T Board.
SCOTT & STRINGFELLOW
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. Scott & Stringfellow is not subject to other express
regulatory restrictions on payments of dividends and other distributions.
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NOTICE OF SHAREHOLDER NOMINATIONS AND SHAREHOLDER PROPOSALS
BB&T
The BB&T Bylaws establish advance notice procedures for shareholder
proposals and the nomination, other than by or at the direction of the BB&T
Board or a committee thereof, of candidates for election as directors. The BB&T
Bylaws provide that a shareholder wishing to nominate a person as a candidate
for election to the BB&T Board must submit such nomination in writing to the
Secretary of BB&T not later than 60 days before one year after the date of the
immediately preceding annual meeting of shareholders, together with
biographical information about the candidate and the shareholder's name and
shareholdings. Nominations not made in accordance with the foregoing provisions
may be ruled out of order by the presiding officer or the chairman of the
meeting.
Similarly, a shareholder must notify the Secretary of BB&T in writing not
later than 60 days before one year after the date of the immediately preceding
annual meeting of shareholders of the shareholder's intention to make a
proposal for consideration at the next annual meeting. The notice must contain:
(a) a brief description of the proposal, (b) the name and shareholdings of the
shareholder submitting the proposal and (c) any material interest of the
shareholder in such proposal.
SCOTT & STRINGFELLOW
The Scott & Stringfellow Bylaws do not establish any advance notice
procedures for the nomination of directors or for shareholder proposals. The
Nominating Committee of the S&S Board nominates candidates for election to the
Board at each annual meeting, but other candidates can be nominated from the
floor at such meeting. Also, other shareholder proposals can be made from the
floor at any annual meeting.
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.
SCOTT & STRINGFELLOW
The VSCA requires that a director of a Virginia corporation discharge the
duties as a director in accordance with the director's good faith business
judgment of the best interests of the corporation. The VSCA permits Virginia
corporations to provide indemnification for directors, officers and agents and
also permits Virginia corporations to eliminate personal liability for
directors and officers for certain actions. The Scott & Stringfellow Articles
require Scott & Stringfellow to indemnify its directors and officers against
any liabilities arising out of such person's status as such, except for
liabilities arising because of such person's willful misconduct or knowing
violation of criminal law. The Scott & Stringfellow Articles also provide that,
to the full extent permitted by Virginia law, the liability of directors and
officers to Scott & Stringfellow and its shareholders shall be limited to one
dollar. Virginia law does not permit the liability of a director or officer to
be limited in this manner if the director or officer engaged in a knowing
violation of criminal law or of any federal or state securities law.
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."
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SCOTT & STRINGFELLOW
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).
ANTI-TAKEOVER STATUTES
BB&T
The North Carolina Control Share Acquisition Act (the "Control Share Act")
applies to BB&T. The Control Share Act is designed to protect shareholders of
publicly owned North Carolina corporations based within the state against
certain changes in control and to provide shareholders with the opportunity to
vote on whether to afford voting rights to certain shareholders. The Control
Share Act is triggered upon the acquisition by a person of shares of voting
stock of a covered corporation that, when added to all other shares
beneficially owned by the person, would result in that person holding one-fifth,
one-third or a majority of the voting power in the election of directors. Under
the Control Share Act, the shares acquired that result in the crossing of any
of these thresholds ("Control Shares") have no voting rights until such rights
are conferred by the affirmative vote of the holders of a majority of all
outstanding voting shares, excluding those shares held by any person involved
or proposing to be involved in the acquisition of Control Shares, any officer
of the corporation and any employee of such corporation who is also a director
of 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.
SCOTT & STRINGFELLOW
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 (i) the transaction is approved by majority vote of the
Disinterested Directors, or (ii) 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 (i) the fair market
value of the shares at the time of the second step or (ii) 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.
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Neither the Affiliated Transactions provisions of the VSCA nor the Control
Share Acquisitions provisions of the VSCA apply to the Merger because the S&S
Board has approved the Merger Agreement and Plan of Merger and has recommended
to the Scott & Stringfellow shareholders that they approve the Merger Agreement
and Plan of Merger.
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 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.
SCOTT & STRINGFELLOW
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.
The Scott & Stringfellow Articles do not reserve to the shareholders the right
to amend Bylaws, and the Scott & Stringfellow shareholders have not provided
that any particular Bylaw may not be amended 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: (a) consummation of a
plan of merger to which the corporation is a party, unless (i) the corporation
is a parent merging with a subsidiary pursuant to a particular NCBCA provision
for such transactions; (ii) the merger is subject to an NCBCA provision that
exempts from the shareholder approval requirement certain mergers that do not
result in a substantial change to the corporation or the rights of its
shareholders; or (iii) the shares in question are then redeemable by the
corporation at a price not greater than the cash to be received for such
shares; (b) consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such shares
are then redeemable by the corporation at a price not greater than the cash to
be received in exchange for such shares; (c) consummation of a sale or exchange
of all or substantially all of the property of the corporation other than in
the regular course of business, including a sale in dissolution but not
including a sale pursuant to court order or a sale pursuant to a plan by which
all or substantially all of the net proceeds are to be distributed in cash to
shareholders within one year; (d) an amendment to the articles of incorporation
that materially and adversely affects rights in respect of a dissenter's shares
because it (i) alters or abolishes a preferential right of the shares; (ii)
creates, alters or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of the
shares; (iii) alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities; (iv) excludes or limits the right
of shares to vote on any matter; (v) reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional share so created is to
be acquired for cash; or (vi) changes the corporation into a nonprofit
corporation or cooperative organization; or (e) any 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
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anything other than (i) cash, (ii) shares in another corporation that are
either listed on a national securities exchange or held by more than 2,000
record shareholders or (iii) a combination of cash and such shares.
A shareholder who has the right to dissent from a transaction and receive
payment of the "fair value" of his or her shares must follow specific
procedural requirements as set forth in the NCBCA in order to maintain such
right and obtain such payment.
SCOTT & STRINGFELLOW
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: (a)
consummation of a merger to which the corporation is a party, provided that
either (i) shareholder approval is required for the merger pursuant to the VSCA
or the corporation's articles of incorporation and the shareholder is entitled
to vote or (ii) the corporation is a subsidiary being merged with its parent
pursuant to a particular VSCA provision for such transactions; (b) consummation
of a plan of share exchange in which the corporation is the party whose shares
will be acquired, provided that the shareholder is entitled to vote on the
plan; (c) consummation of the sale or exchange of all or substantially all the
property of the corporation, if the shareholder is entitled to vote on the
transaction or the transaction is in furtherance of a dissolution on which the
shareholder is entitled to vote, and provided that the transaction is neither
(i) a transaction pursuant to court order nor (ii) a transaction for cash
pursuant to a plan by which all or substantially all of the net proceeds will
be distributed to shareholders within one year; or (d) any corporate action
taken pursuant to a shareholder vote, to the extent that the articles of
incorporation, the bylaws, or a resolution of the board of directors provides
that voting and nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
With respect to corporations that have a class or series of shares either
listed on a national securities exchange or the Nasdaq market (such as Scott &
Stringfellow) or held by more than 2,000 record shareholders, dissenters'
rights are not available to the holders of such shares by reason of a merger,
share exchange or sale or exchange of property unless (a) the articles of
incorporation of the corporation issuing such shares provided otherwise (Scott
& Stringfellow's Articles do not provide otherwise); (b) in the case of a
merger or share exchange (unlike the Merger), the holders of such shares are
required to accept anything other than (i) cash, (ii) shares in another
corporation that are either listed on a national securities exchange or held by
more than 2,000 record shareholders or (iii) a combination of cash and such
shares; or (c) the transaction is with a shareholder who owns more than 10
percent of a class of shares and has not been approved by a majority of the
directors unaffiliated with such shareholder.
A shareholder who has the right to 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 Scott & Stringfellow Common Stock do not have appraisal rights
in connection with the Merger because, as of the Record Date, shares of Scott &
Stringfellow Common Stock were listed on the Nasdaq National Market and the
shares of BB&T Common Stock are held of record by at least 2000 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 (i) the subsidiary's creditors, except to the extent that
BB&T may itself be a creditor with recognized claims against the subsidiary,
and (ii) 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.
SCOTT & STRINGFELLOW
In the event of the liquidation, dissolution or winding up of the affairs
of Scott & Stringfellow, holders of the outstanding shares of Scott &
Stringfellow Common Stock are entitled to share, in proportion to their
respective interests, Scott & Stringfellow's assets and funds remaining after
payment, or the provision for payment, of all liabilities of Scott &
Stringfellow.
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ELECTION OF DIRECTORS
(PROPOSAL TWO)
The Scott & Stringfellow Articles provide for three classes of directors
with staggered terms of office and provide that upon the expiration of the term
of office for a class of directors, nominees for that class shall be elected
for a term of three years. At the Meeting, Robert L. Hintz, Charles E. Mintz,
David Plageman and John Sherman, Jr. are nominees for re-election as directors
for terms expiring at the earlier of the Effective Time of the Merger, the date
of the 2001 annual meeting of Scott & Stringfellow shareholders or such time as
their respective successors are elected and qualified. Proxies may not be voted
for a greater number of persons than the number of nominees named herein.
Although Scott & Stringfellow anticipates that all of the nominees will be
able to serve on the S&S Board, if at the time of the Meeting any nominees are
unable or unwilling to serve, shares represented by properly executed proxies
will be voted at the discretion of the persons named therein for such other
person or persons as the S&S Board may designate.
Scott & Stringfellow was formed in 1984 for the purpose of becoming the
holding company of S&S Brokerage. Accordingly, all service by Scott &
Stringfellow's officers and directors prior to 1984 refers to service as an
officer or director of S&S Brokerage.
The following contains certain information concerning the nominees for
election and those directors whose terms continue beyond the date of the
Meeting.
THE S&S BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" ALL OF THE NOMINEES.
NOMINEES FOR ELECTION
ROBERT L. HINTZ, age 68, has served as a director of Scott & Stringfellow
since 1989. He is Chairman of the Board of R. L. Hintz and Associates, a
management consulting firm. He was an Executive Vice President of CSX
Corporation from 1984 to 1988, during which time he held the additional
positions of Chief Executive Officer of CSX Energy and Property Groups,
1985-1988, and Chairman and Chief Executive Officer of Sea-Land Corporation,
1987-1988. Mr. Hintz is a director of Reynolds Metals Company, Chesapeake
Corporation, and Ashland Coal, Inc.
CHARLES E. MINTZ, age 44, has served as a director of Scott & Stringfellow
since January 1998. Mr. Mintz serves as Executive Vice President, Retail Group,
with overall responsibility for the Scott & Stringfellow retail branch system.
Mr. Mintz served as Chief Administrative Officer of Scott & Stringfellow from
May 1995 until January 1996 and as Chief Financial Officer from January 1996
until March of 1997 when he became Executive Vice President, Retail Group.
Prior to joining Scott & Stringfellow in 1990 as Branch Manager of the
Wilmington, North Carolina office, Mr. Mintz was President of Fox, Graham &
Mintz Securities, Inc.
DAVID PLAGEMAN, age 58, has served as a director of Scott & Stringfellow
since 1976. He has served as Executive Vice President and Secretary of Scott &
Stringfellow since 1984. Mr. Plageman, an Investment Broker, joined Scott &
Stringfellow in 1974.
JOHN SHERMAN, JR., age 52, has served as a director of Scott &
Stringfellow since 1995. Mr. Sherman was elected President and Chief Executive
Officer of Scott & Stringfellow in January 1996. Prior to that, he served as
Executive Vice President and Chief Operating Officer during 1995, Senior Vice
President for Branch Administration from 1993 to 1995, and Branch Manager of
the Kinston, N.C. office from 1988, upon joining Scott & Stringfellow, until
1993. Mr. Sherman is a member of the Executive Committee.
DIRECTORS CONTINUING IN OFFICE
DIRECTORS WHOSE TERMS EXPIRE IN 1999
SIDNEY BUFORD SCOTT, age 65, has served as Chairman of the Board of Scott
& Stringfellow since 1974. Mr. Scott, a first cousin of Mr. Bocock (see below),
joined Scott & Stringfellow in 1958. He is a member of the Executive Committee,
and serves as a Director of Ethyl Corporation.
JOHN J. MULDOWNEY, age 60, has served as a director of Scott &
Stringfellow since 1974. Mr. Muldowney, an Investment Broker and Chairman of
the Credit Committee, joined Scott & Stringfellow in 1970 and was named Senior
Vice President in 1980. Prior to January 1994, Mr. Muldowney also served as
head of the Over-the-Counter Trading Department.
WILLIAM W. BERRY, age 66, has served as a director of Scott & Stringfellow
since June of 1993. Mr. Berry is currently Chairman of the Board of New England
Independent System Operator. He is retired from the position of Chairman of the
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Board of Dominion Resources, Inc., which he held from May 1990 to December
1992. Prior to May 1990, he served as Chairman of the Board and Chief Executive
Officer of Dominion Resources since July 1986. Mr. Berry is a director of Ethyl
Corporation and Universal Corporation.
WILLIAM F. CALLIOTT, age 54, has served as a director of Scott &
Stringfellow since October 1993. He has been an Executive Vice President and
director of Scott & Stringfellow since the 1989 acquisition of Investment
Corporation of Virginia, which he joined in 1967. Mr. Calliott is an Investment
Broker in S&S Brokerage's Norfolk office.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
FREDERIC SCOTT BOCOCK, age 66, Vice Chairman of the S&S Board, has served
as a director of Scott & Stringfellow since 1974 and is a member of the
Executive Committee. He also serves as Chairman of S&S Capital Management, an
investment advisory subsidiary of Scott & Stringfellow. Mr. Bocock, a first
cousin of Mr. Scott (see above), joined Scott & Stringfellow in 1957.
R. BRUCE CAMPBELL, age 58, joined Scott & Stringfellow in 1971 and has
served as a director of Scott & Stringfellow since 1978. Mr. Campbell is an
Investment Broker and has was named a Senior Vice President in 1987. Mr.
Campbell serves as Branch Manager of the Staunton office and Regional Manager
for the Blue Ridge Region.
R. GORDON SMITH, age 60, has served as a director of Scott & Stringfellow
since 1987. He has been a partner in the law firm of McGuire, Woods, Battle &
Boothe LLP, which serves as General Counsel to Scott & Stringfellow, since 1969
and a director of Trigon Healthcare, Inc. since 1995.
STEVEN C. DELANEY, age 44, has served as a director of Scott &
Stringfellow since 1995. Mr. DeLaney serves as Executive Vice President and
Director of Capital Markets with overall responsibility for the research,
investment banking, institutional sales, and trading functions of Scott &
Stringfellow. Mr. DeLaney served as Chief Financial Officer of Scott &
Stringfellow from 1992 to 1995. Prior to joining Scott & Stringfellow in 1992,
Mr. DeLaney was a senior financial executive for a diversified financial
services company for fifteen years. Mr. DeLaney is a member of the Executive
Committee.
CERTAIN INFORMATION CONCERNING THE
S&S BOARD AND ITS COMMITTEES
COMMITTEES OF THE BOARD AND BOARD MEETINGS
The S&S Board held 11 meetings during the fiscal year ended June 26, 1998.
All directors attended at least 75% of the aggregate of the meetings of the S&S
Board and the meetings of all committees thereof on which they serve.
Messrs. Scott, Bocock, Sherman, DeLaney and Mintz serve on the Executive
Committee, which held approximately 38 meetings during fiscal 1998. The
Executive Committee is empowered to exercise all of the authority of the S&S
Board during the interim between S&S Board meetings, subject to the limitations
of the VSCA.
Messrs. Plageman, Sherman, Berry, Hintz, and Smith serve on the Audit
Committee, which held five meetings during fiscal 1998. The Audit Committee
meets with Scott & Stringfellow's internal auditing staff and reports to the
S&S Board with respect to various auditing and accounting matters, including
the selection and fees of Scott & Stringfellow's independent auditors, the
scope of audit procedures, the nature of services to be performed by the
independent auditors, and Scott & Stringfellow's accounting practices.
Messrs. Berry, Hintz, Scott and Smith serve on the Nominating Committee,
which held one meeting during fiscal 1998. The function of the Nominating
Committee is to recommend to the S&S Board those persons to be nominated for
election as directors of Scott & Stringfellow. The Nominating Committee will
consider nominees recommended by shareholders, whose recommendations should be
submitted to it through the Secretary of Scott & Stringfellow.
Messrs. Berry, Hintz and Smith serve on the Compensation Committee, which
met once during fiscal 1998. The Compensation Committee administers and
monitors certain executive and management compensation programs. For additional
information on this committee and the compensation programs that it
administers, see the section of this Proxy Statement/ Prospectus entitled
"EXECUTIVE COMPENSATION -- Committee Report on Executive Compensation."
COMPENSATION OF DIRECTORS
Directors who are S&S Employees receive no fees for serving as directors
or for serving on any committee of the S&S Board. Any director who is not an
employee of Scott & Stringfellow receives an annual directors' fee of $6,000,
in the form of Scott & Stringfellow Common Stock, and an additional fee of $500
for each S&S Board meeting that they attend.
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding shares of Scott &
Stringfellow Common Stock beneficially owned as of November 17, 1998 by (i)
each person who is known by Scott & Stringfellow to beneficially own more than
5% of the outstanding shares of Scott & Stringfellow Common Stock; (ii) each
director and nominee for director of Scott & Stringfellow; and (iii) the
directors and executive officers as a group. Unless otherwise noted, each
individual has sole voting power and sole investment power with respect to the
number of shares set forth opposite his name. The address of Messrs. Bocock and
Scott is 909 East Main Street, Richmond, Virginia 23219. The address of Mr.
Kellogg is c/o Spear, Leeds & Kellogg, 120 Broadway, New York, New York 10271.
<TABLE>
<CAPTION>
PERCENT OF
NAME NUMBER OF SHARES (1) OUTSTANDING SHARES
- ------------------------------------------------------ ---------------------- -------------------
<S> <C> <C>
Peter R. Kellogg (2) 375,000 10.7%
Frederic Scott Bocock (3) 294,300 8.4
Sidney Buford Scott (4) 219,316 6.2
John J. Muldowney 129,600 3.7
John Sherman, Jr. (6) 56,941 1.6
R. Bruce Campbell (7) 53,795 1.5
William F. Calliott 50,434 1.4
David Plageman (5) 47,450 1.3
Steven C. DeLaney (6) 33,558 1.0
Charles E. Mintz (6) 33,494 1.0
Robert L. Hintz 9,569 0.3
R. Gordon Smith 7,769 0.2
William W. Berry 4,169 0.1
All directors and executive officers as a group
(19 persons)(6) 998,356 28.1
</TABLE>
- ---------
(1) Beneficial ownership shown for the following individuals and group includes
the indicated number of shares of Scott & Stringfellow Common Stock that
may be purchased upon the exercise of stock options which are exercisable
within the next 60 days: Mr. Muldowney (3,600), Mr. Sherman (6,870), Mr.
Campbell (4,500), Mr. DeLaney (6,750), Mr. Mintz (5,550) and all directors
and executive officers as a group (40,317).
(2) Information concerning the shares owned by Mr. Kellogg was derived from a
Form 4 filed with the Securities and Exchange Commission on March 7, 1995.
According to this filing, Mr. Kellogg owns 90,000 shares directly. He also
indirectly controls: 142,500 shares owned by LAT Reinsurance Syndicate
Ltd., a Bermuda corporation of which he is the sole holder of voting
stock, 90,000 shares owned by his wife; and 52,500 shares owned by a
family trust of which he is a trustee. Mr. Kellogg disclaims beneficial
ownership of the shares owned by the corporation, his wife, and the trust.
(3) Includes 222,800 shares owned by Mr. Bocock's children and trusts for his
children, as to which shares Mr. Bocock disclaims beneficial ownership.
(4) Includes 31,816 shares owned by Mr. Scott's wife, children and
grandchildren, as to which shares Mr. Scott disclaims beneficial
ownership.
(5) Includes 3,300 shares owned by Mr. Plageman's children as to which Mr.
Plageman shares voting and/or investment power.
(6) Includes shares purchased pursuant to the S&S Stock Purchase Loan Plan for
the following individuals: Mr. Sherman -- 22,940 shares; Mr. DeLaney --
20,440 shares; Mr. Mintz -- 20,440; Mr. Campbell -- 1,500 shares; and all
directors and executive officers as a group -- 90,320 shares.
(7) Includes 19,500 shares owned by Mr. Campbell's wife, as to which shares Mr.
Campbell disclaims beneficial ownership.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires Scott & Stringfellow's
directors and officers, and persons who own more than 10% of the Scott &
Stringfellow Common Stock, to file reports of ownership and changes in
ownership with the Commission and the National Association of Securities
Dealers, Inc. Directors, officers and greater than 10% shareholders are
required by regulation to furnish Scott & Stringfellow with copies of all forms
they file under Section 16(a). Based solely on a review of the copies of such
forms furnished to Scott & Stringfellow, Scott & Stringfellow believes that
during fiscal 1998, all officers, directors and 10% shareholders complied with
the filing requirements of Section 16(a).
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<PAGE>
EXECUTIVE COMPENSATION
The following table provides information concerning the compensation and
stock option grants received by Scott & Stringfellow's Chief Executive Officer
and each of its four other most highly compensated executive officers (the
"Named Executive Officers") for the fiscal year ended June 26, 1998 and for
each of the two previous fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- -------------
OTHER SECURITIES ALL OTHER
ANNUAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) COMP. (2) OPTIONS (3)(4)(5)
- -------------------------------- ------ ----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John Sherman, Jr. 1998 $200,000 $337,000 $ 4,312 0 $ 42,296
President and Chief Executive 1997 184,769 163,731 3,889 0 42,453
Officer 1996 149,054 98,678 12,072 2,500 45,866
Sidney Buford Scott 1998 0 130,000 2,272 0 261,188
Chairman of the Board 1997 0 120,657 1,404 0 207,763
1996 0 120,000 1,404 0 250,380
Frederic Scott Bocock 1998 40,000 225,000 1,197 0 342,656
Vice Chairman 1997 40,000 207,357 2,810 0 285,205
1996 40,000 139,500 1,776 0 249,381
Steven C. DeLaney 1998 150,000 238,000 2,344 0 15,371
Executive Vice President 1997 139,259 134,640 2,128 0 13,141
1996 107,500 106,500 204 2,500 9,046
Charles E. Mintz 1998 150,000 240,000 10,712 0 18,601
Executive Vice President 1997 128,731 114,695 11,560 0 13,189
1996 94,382 57,849 9,918 2,500 16,050
</TABLE>
- ---------
(1) Scott & Stringfellow pays discretionary cash bonuses to executive and
management personnel based on individual performance and Scott &
Stringfellow's financial results. See Committee Report on Executive
Compensation -- Cash Bonuses. Included in the amounts shown as Bonus for
1998 are the following discretionary cash bonuses: Mr. Sherman --
$337,000; Mr. Scott -- $130,000; Mr. Bocock -- $125,000; Mr. DeLaney --
$238,000; and Mr. Mintz -- $240,000. The 1998 Bonus amounts also include a
bonus of $100,000 paid to Mr. Bocock based on departmental results.
(2) Included in Other Annual Compensation for 1998 are amounts representing
forgivable loan expense for Mr. Mintz in the amount of $6,944. Also
included are the following amounts representing non-cash awards and other
miscellaneous perquisites and benefits: Mr. Sherman -- $4,312; Mr. Scott
-- $2,272; Mr. Bocock -- $1,197; Mr. DeLaney -- $2,344; and Mr. Mintz --
$3,768.
(3) Included in All Other Compensation for fiscal 1998 are the following
amounts of commissions and incentives earned from securities brokerage
activities: Mr. Sherman -- $22,887; Mr. Scott -- $245,730; Mr. Bocock --
$323,247; Mr. DeLaney -- $492 and Mr. Mintz -- $4,182.
(4) Scott & Stringfellow has a voluntary contributory profit sharing plan that
covers substantially all employees. See "Committee Report on Executive
Compensation -- Profit Sharing and Deferral Plans." Scott & Stringfellow
contributions to the plan may be in the form of either discretionary
matching contributions or additional discretionary contributions. Included
in All Other Compensation for fiscal year 1998 are the following amounts
representing Scott & Stringfellow contributions to the profit sharing
plan: Mr. Sherman -- $8,969; Mr. Scott -- $8,969; Mr. Bocock -- $8,969;
Mr. DeLaney -- $8,969; and Mr. Mintz -- $8,969.
(5) Scott & Stringfellow has established a nonqualified deferred compensation
plan for selected highly-compensated employees. See "Committee Report on
Executive Compensation -- Profit Sharing and Deferral Plans." Voluntary
deferrals under the deferred compensation plan during fiscal 1998 are
included in the category of compensation from which such deferrals were
elected. Scott & Stringfellow contributions under the deferred
compensation plan for fiscal 1998 in the following amounts are included in
All Other Compensation: Mr. Sherman -- $10,440; Mr. Scott -- $6,489; Mr.
Bocock -- $10,440; Mr. DeLaney -- $5,909; and Mr. Mintz -- $5,450.
44
<PAGE>
There were no stock options granted to Scott & Stringfellow's Named
Executive Officers during the fiscal year ended June 26, 1998.
The following table provides information concerning any stock options
exercised during the fiscal year ended June 26, 1998 by Scott & Stringfellow's
Named Executive Officers and the value of their unexercised stock options at
June 26, 1998.
AGGREGATE OPTION EXERCISES DURING FISCAL 1998
AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
JUNE 26, 1998 (#) AT JUNE 26, 1998 (1)(2)
----------------------------- ----------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ----------------- ---------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
John Sherman, Jr. 5,670 $80,182 -- 6,870 $ -- $111,294
Sidney Buford Scott -- -- 6,660 540 116,685 9,202
Frederic Scott Bocock -- -- 9,360 540 172,883 9,202
Steven C. DeLaney 2,910 40,279 2,220 6,870 36,332 111,294
Charles E. Mintz -- -- 2,010 4,440 32,762 70,225
</TABLE>
- ---------
(1) The closing price of the Scott & Stringfellow Common Stock was $24.75 per
share on June 26, 1998.
(2) The value of unexercised options is determined by the difference between
the fair market value of the option shares ($24.75 per share) and the
exercise prices of the options held at June 26, 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee (the "Committee") consists of Messrs. Berry,
Hintz and Smith. No interlocking relationship exists between any member of the
Committee and any member of any other company's board of directors or
compensation committee. None of the Committee members is or was an officer or
employee of Scott & Stringfellow or the S&S Subsidiaries during fiscal 1998.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The S&S Board has granted authority to the Committee to administer the
various forms of compensation paid to executive officers. The Committee reviews
and approves, subject to S&S Board ratification in certain cases, actions
regarding the executive compensation programs of Scott & Stringfellow. The
Committee is composed entirely of outside directors.
GENERAL OBJECTIVE
Scott & Stringfellow believes that maintaining and motivating a highly
qualified management team is essential for the continued growth and prosperity
of Scott & Stringfellow, and will inure to the benefit of the shareholders. The
objective of Scott & Stringfellow's compensation programs is to provide its
executive officers with both a short-term incentive for maintaining and
improving the profitability of Scott & Stringfellow, and a long-term incentive
aligned with four components: base salary, annual cash bonus, profit sharing
contributions, and non-qualified deferred compensation. Before October 1996,
Scott & Stringfellow also maintained the Stock Option Plan. However, this plan
expired on October 31, 1996, and stock option awards have been generally
discontinued with the exception of a limited number of non-qualified stock
options granted in connection with the recruitment of new employees.
BASE SALARY
Scott & Stringfellow strives to maintain base salaries for full-time
management at levels which are generally competitive with the marketplace.
Annual increases in base salary are determined largely by individual
performance. Given the relatively cyclical nature of the securities industry,
Scott & Stringfellow attempts to limit its exposure to fixed salary expense by
providing its executives with the opportunity for additional cash bonus
payments when Scott & Stringfellow's performance dictates.
45
<PAGE>
ANNUAL CASH BONUS
Scott & Stringfellow has traditionally established a calendar year cash
bonus pool based largely on Scott & Stringfellow's financial performance.
Individual awards made from this bonus pool are determined by the Committee
with input from executive management and are based on factors such as
individual and departmental performance and length of service. In the year
ended June 26, 1998, total cash bonus awards of $1,713,700 were paid to a total
of 25 individuals. This total bonus amount was equivalent to 16% of operating
income before discretionary compensation and income taxes for calendar year
1997.
CHIEF EXECUTIVE OFFICER
The Committee determines the compensation of Scott & Stringfellow's Chief
Executive Officer based upon the same competitive market criteria it uses to
determine the salaries of other senior executives of Scott & Stringfellow. Any
bonus paid to the Chief Executive Officer is determined by the Committee based
upon Scott & Stringfellow's overall financial performance and the Chief
Executive Officer's success in meeting strategic objectives. For the fiscal
year ended June 26, 1998, Scott & Stringfellow's current Chief Executive
Officer, John Sherman, Jr., earned a base salary of $200,000 and a
discretionary cash bonus of $337,000. In addition, Mr. Sherman participates in
each of the other compensation programs available to Scott & Stringfellow
executives.
PROFIT SHARING AND DEFERRAL PLANS
Scott & Stringfellow maintains a voluntary contributory profit sharing
plan which covers substantially all of its employees. At its discretion, Scott
& Stringfellow may make both matching contributions on employee contributions
and additional contributions based on Scott & Stringfellow's performance.
Employee participants may contribute up to 15% of their earnings to the plan
per year, subject to a maximum Internal Revenue Code limitation. For the year
ended June 26, 1998, Scott & Stringfellow's contributions to the profit sharing
plan included matching contributions of approximately $365,000 and an
additional discretionary contribution of approximately $1,985,000. The
additional discretionary contribution was equivalent to approximately 16% of
operating income before discretionary compensation and income taxes for
calendar year 1996.
In addition, Scott & Stringfellow has established the Scott & Stringfellow
Deferral Plan for selected highly compensated employees. This non-qualified and
unfunded deferred compensation plan allows participants to defer compensation
and to receive discretionary profit sharing contributions beyond the Internal
Revenue Code limitations governing Scott & Stringfellow's profit sharing plan.
For the year ended June 26, 1998, Scott & Stringfellow's expense pursuant to
the deferral plan, which covers 81 employees, was approximately $1,154,000.
Submitted by the
Compensation and Stock Option Committee
of Scott & Stringfellow's Board of
Directors:
William W. Berry
Robert L. Hintz
R. Gordon Smith
46
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph and table compare the cumulative total shareholder
return on Scott & Stringfellow Common Stock for the last five fiscal years with
the cumulative total return of the NASDAQ Market Value Index and the cumulative
total return of a peer group index consisting of 11 publicly-held, regional
investment companies, which management believes are relatively comparable to
Scott & Stringfellow. In prior years the peer group index included Alex. Brown
Inc. and Piper Jaffray Companies; however, these companies no longer exist as
independent entities and, accordingly, have been deleted from the peer group
index. The peer group index, which is weighted by market value, consists of the
common stock of the following companies:
<TABLE>
<S> <C>
A.G. Edwards, Inc. Morgan Keegan, Inc.
First Albany Companies Inc. Raymond James Financial, Inc.
Interstate/Johnson Lane, Inc. Scott & Stringfellow Financial, Inc.
Legg Mason, Inc. The Ziegler Company, Inc.
McDonald & Company Investments, Inc.
</TABLE>
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG SCOTT & STRINGFELLOW FINANCIAL, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
Scott & Stringfellow
Financial, Inc. NASDAQ Market Index Peer Group Index
DOLLARS
1993 100.00 100.00 100.00
1994 97.00 110.00 97.00
1995 108.00 129.00 130.00
1996 150.00 162.00 159.00
1997 243.00 195.00 266.00
1998 348.00 259.00 418.00
ASSUMES $100 INVESTED ON JUNE 25, 1993
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING JUNE 26, 1998
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<PAGE>
The graph and table assume that $100 was invested on June 25, 1993, in
Scott & Stringfellow Common Stock, the NASDAQ Market Index and the peer group
index, and that all dividends were reinvested over the ensuing 5-year period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE,
------------------------------------------
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Scott & Stringfellow Financial $100 $ 97 $108 $150 $243 $348
NASDAQ Market Index $100 $110 $129 $162 $195 $259
Selected Peer Group Index $100 $ 97 $130 $159 $266 $418
</TABLE>
CERTAIN TRANSACTIONS
Pursuant to the terms of a S&S Stock Purchase Loan Plan, Scott &
Stringfellow issues Scott & Stringfellow Common Stock to certain management
employees, including some directors and executive officers, in exchange for
promissory notes. The stock is issued at fair market value. The notes are
payable upon demand, full recourse, secured by a collateral pledge of the
stock, and bear interest at the short-term applicable federal rate. The
following table lists directors and executive officers with indebtedness in
excess of $60,000 under this plan:
<TABLE>
<CAPTION>
LARGEST AMOUNT BALANCE
NAME POSITION OF INDEBTEDNESS OCTOBER 30, 1998 INTEREST RATE
- --------------------- ------------------- ----------------- ------------------ ---------------
<S> <C> <C> <C> <C>
John Sherman, Jr. Director $304,635 $ 0 5.39% to 6.23%
Charles E. Mintz Director 262,510 242,510 5.39% to 6.23%
Steven C. DeLaney Director 267,010 185,641 5.39% to 6.23%
Kenneth A. Thomas Executive Officer 94,375 94,375 5.39% to 6.23%
William F. Gunter Executive Officer 83,438 83,438 5.39% to 6.23%
Mike D. Johnston Executive Officer 84,250 84,250 5.39% to 6.23%
Diann D. Fox Executive Officer 73,313 73,313 5.39% to 6.23%
Norman L. Hancock Executive Officer 73,313 73,313 5.39% to 6.23%
</TABLE>
Certain directors and executive officers of Scott & Stringfellow maintain
margin accounts with S&S Brokerage. Such extensions of credit are made in the
ordinary course of business on the same terms, including interests rates and
collateral, as those prevailing at the time for comparable transactions with
unaffiliated persons and do not involve more than the usual risk of
collectability or present other unfavorable features.
McGuire, Woods, Battle & Boothe LLP, of which R. Gordon Smith, a director
of Scott & Stringfellow, is a partner, serves as General Counsel to Scott &
Stringfellow and the S&S Subsidiaries.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
(PROPOSAL THREE)
Upon the recommendation of Scott & Stringfellow's Audit Committee, the S&S
Board has designated KPMG Peat Marwick LLP to serve as Scott & Stringfellow's
independent certified public accountants for the fiscal year ending June 25,
1999 if the Merger is not consummated and has directed a vote of shareholders
to be taken to ascertain their approval or disapproval of that designation. If
the shareholders do not approve the Merger and do not ratify this designation,
the election of other independent public accountants will be considered by the
S&S Board. A representative of KPMG Peat Marwick LLP is expected to be present
at the Meeting. He will have an opportunity to make a statement if he so
desires and will be available to answer appropriate questions from
shareholders.
THE S&S BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE APPOINTMENT OF
KPMG PEAT MARWICK LLP AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE
FISCAL YEAR ENDING JUNE 25, 1999.
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, must be received at the main office of Scott & Stringfellow, 909
East Main Street, Richmond, Virginia 23219, no later than May 23, 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 Scott & Stringfellow'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
48
<PAGE>
meeting (but not include them in Scott & Stringfellow's proxy materials) must
give notice of such proposals to Scott & Stringfellow no later than August 5,
1999. It is urged that any proposals be sent by certified mail, return receipt
requested.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
Carroll D. Moore, owner of sixteen shares of Scott & Stringfellow Common
Stock, has advised Scott & Stringfellow that he intends to introduce two
proposals for consideration at Scott & Stringfellow's 1998 annual meeting of
shareholders. One proposal would require Scott & Stringfellow to make
accounting records and minutes of meetings of the Directors available to Mr.
Moore for his review. The other proposal would require Scott & Stringfellow to
request the Justice Department to investigate the activities of Scott &
Stringfellow and other persons in connection with sales of stock of Mining
Technology and Resources, Inc. in the 1980s. Mr. Moore was an investor in
Mining Technology and Resources, Inc. and has asserted a claim against Scott &
Stringfellow for his losses. The proxy holders intend to exercise their
discretionary authority to vote against these proposals should they be properly
presented at the Meeting.
Management knows of no other matters to be presented at the Meeting.
However, if other matters are presented for a vote at the Meeting, the proxy
holders will vote the shares represented by properly executed proxies according
to their judgment on those matters. Any shareholder has the power to revoke his
or her proxy at any time during or prior to the Meeting. See "MEETING OF
SHAREHOLDERS -- Voting and Revocation of Proxies."
ANNUAL REPORTS
A copy of Scott & Stringfellow's Annual Report to Shareholders for the
fiscal year ended June 26, 1998 and a copy of Scott & Stringfellow's Annual
Report on Form 10-K for the fiscal year ended June 26, 1998 accompany this
Proxy Statement/Prospectus.
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 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 Scott & Stringfellow Financial,
Inc. and subsidiaries as of June 26, 1998 and June 27, 1997 and for the years
ended June 26, 1998, June 27, 1997 and June 28, 1996 are incorporated by
reference herein in reliance upon the report of KPMG Peat Marwick LLP,
independent auditors, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
BB&T and Scott & Stringfellow file annual, quarterly and special reports,
proxy statements and other information with the Commission. You may read and
copy any reports, statements or 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 Scott & Stringfellow.
49
<PAGE>
BB&T filed the Registration Statement to register with the Commission the
BB&T Common Stock to be issued to Scott & Stringfellow 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 Scott & Stringfellow 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 Scott & Stringfellow and BB&T have previously filed with
the Commission. These documents contain important information about Scott &
Stringfellow and BB&T and their businesses.
BB&T COMMISSION FILINGS (FILE NO. 1-10853)
Annual Report on Form 10-K For the fiscal year ended December 31, 1997
Quarterly Report 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
BB&T's shareholder rights plan) Filed January 10, 1997
SCOTT & STRINGFELLOW COMMISSION FILINGS (FILE NO. 0-15105)
Annual Report on Form 10-K For the fiscal year ended June 26, 1998
Quarterly Report on Form 10-Q For the fiscal quarter ended September 25,
1998, as amended on Form 10-Q/A filed
November 17, 1998
Current Report on Form 8-K Filed August 10, 1998
Registration Statement on Form 8-A (describing
Scott & Stringfellow Common Stock) Filed November 5, 1986
Scott & Stringfellow 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 Scott & Stringfellow
has supplied all such information relating to Scott & Stringfellow 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:
<TABLE>
<S> <C>
Shareholder Reporting Investor Relations
BB&T Corporation Scott & Stringfellow Financial, Inc.
Post Office Box 1290 909 East Main Street
Winston-Salem, North Carolina 27104 Richmond, VA 23219
(336) 733-3021 (804) 643-1811
</TABLE>
If you would like to request documents from us, please do so by January 6, 1999
in order to receive them before the Meeting.
50
<PAGE>
You should rely only on the information contained or incorporated by
reference in this Proxy Statement/Prospectus. BB&T and Scott & Stringfellow
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 , 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.
51
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
BB&T CORPORATION
AND
SCOTT & STRINGFELLOW FINANCIAL, INC.
SEPTEMBER 16, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I
The Merger ........................................................................... A-1
1.1 Merger .......................................................................... A-1
1.2 Filing; Plan of Merger .......................................................... A-1
1.3 Effective Time................................................................... A-1
1.4 Closing ......................................................................... A-2
1.5 Effect of Merger ................................................................ A-2
1.6 Further Assurances .............................................................. A-2
1.7 Merger Consideration. ........................................................... A-2
1.8 Conversion of Shares; Payment of Merger Consideration; Surrendering Procedure ... A-3
1.9 Conversion of Stock Options ..................................................... A-3
1.10 Anti-Dilution ................................................................... A-4
1.11 Special Cash Dividend ........................................................... A-4
ARTICLE II
Representations and Warranties of Scott & Stringfellow ............................... A-4
2.1 Subsidiaries and Investments .................................................... A-4
2.2 Organization and Good Standing. ................................................. A-4
2.3 Authority ....................................................................... A-4
2.4 Capitalization .................................................................. A-5
2.5 No Conflict ..................................................................... A-5
2.6 Regulatory Consents ............................................................. A-5
2.7 Certain Contracts ............................................................... A-5
2.8 Minute Books .................................................................... A-6
2.9 Securities Filings; Financial Statements ........................................ A-6
2.10 Absence of Certain Changes ...................................................... A-6
2.11 Undisclosed Liabilities; Hedges and Derivatives ................................. A-7
2.12 Title to Assets ................................................................. A-7
2.13 Securities; Repurchase Agreements; Derivatives .................................. A-7
2.14 Insurance ....................................................................... A-8
2.15 Licenses and Permits ............................................................ A-8
2.16 Litigation and Compliance ....................................................... A-8
2.17 Tax Matters ..................................................................... A-9
2.18 Environmental Matters ........................................................... A-10
2.19 Intangible Rights ............................................................... A-11
2.20 Employees: Compensation; Benefit Plans. ......................................... A-11
2.21 Labor Matters ................................................................... A-12
2.22 Contracts with Affiliates ....................................................... A-12
2.23 Accounting, Tax and Regulatory Matters .......................................... A-13
2.24 Certain Information ............................................................. A-13
2.25 Brokers ......................................................................... A-13
2.26 State Takeover Laws ............................................................. A-13
2.27 No Dissenters' Rights ........................................................... A-13
ARTICLE III
Representations and Warranties of BB&T ............................................... A-13
3.1 Capital Structure of BB&T ....................................................... A-13
3.2 Organization, Standing and Authority of BB&T .................................... A-14
3.3 Authorized and Effective Agreement .............................................. A-14
3.4 Securities Filings; Financial Statements ........................................ A-14
3.5 Accounting, Tax and Regulatory Matters .......................................... A-14
3.6 Certain Information ............................................................. A-15
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE IV
Covenants ........................................................ A-15
4.1 Shareholders' Meeting ....................................... A-15
4.2 Registration Statement; Proxy Statement/Prospectus .......... A-15
4.3 Plan of Merger; Reservation of Shares ....................... A-15
4.4 Additional Acts ............................................. A-16
4.5 Best Efforts ................................................ A-16
4.6 Certain Accounting Matters .................................. A-16
4.7 Access to Information ....................................... A-16
4.8 Press Releases .............................................. A-16
4.9 Forbearances of Scott & Stringfellow ........................ A-16
4.10 Employment and Noncompetition Agreements .................... A-18
4.11 Affiliates .................................................. A-18
4.12 Employee Benefit Plans ...................................... A-18
4.13 Off-Balance Sheet Positions ................................. A-19
4.14 Retention Plan .............................................. A-19
4.15 Exchange Listing. ........................................... A-20
4.16 Directors and Officers Protection ........................... A-20
4.17 Merger of Subsidiaries ...................................... A-20
4.18 Board of Directors of the Surviving Subsidiary .............. A-20
4.19 Forbearances of BB&T ........................................ A-21
ARTICLE V
Conditions Precedent ............................................. A-21
5.1 Conditions Precedent -- BB&T and Scott & Stringfellow ....... A-21
5.2 Conditions Precedent -- Scott & Stringfellow ................ A-21
5.3 Conditions Precedent -- BB&T ................................ A-22
ARTICLE VI
Closing .......................................................... A-23
6.1 Deliveries By Scott & Stringfellow .......................... A-23
6.2 Deliveries By BB&T .......................................... A-23
ARTICLE VII
Termination, Waiver and Amendment ................................ A-23
7.1 Termination ................................................. A-23
7.2 Effect of Termination ....................................... A-24
7.3 Expiration of Representations, Warranties and Covenants ..... A-24
7.4 Waiver ...................................................... A-24
7.5 Amendment or Supplement ..................................... A-24
ARTICLE VIII
Miscellaneous .................................................... A-25
8.1 Notices ..................................................... A-25
8.2 Complete Agreement .......................................... A-25
8.3 Expenses .................................................... A-25
8.4 Governing Law ............................................... A-25
8.5 Binding Effect .............................................. A-26
8.6 Severability ................................................ A-26
8.7 Counterparts ................................................ A-26
8.8 Captions .................................................... A-26
8.9 Specific Performance ........................................ A-26
8.10 Initial Merger Agreement .................................... A-26
8.11 BB&T Option Agreement ....................................... A-26
</TABLE>
A- ii
<PAGE>
SCHEDULES
<TABLE>
<S> <C>
Schedule 2.1 Subsidiaries and Investments
Schedule 2.4 Rights to Acquire Shares
Schedule 2.5 Conflicts
Schedule 2.7(a) Material Contracts
Schedule 2.7(b) Certain Contracts
Schedule 2.10 Certain Changes
Schedule 2.12(a) Title to Certain Assets
Schedule 2.14 Insurance
Schedule 2.15 Licenses and Permits
Schedule 2.16 Litigation and Compliance
Schedule 2.20 Certain Payments on Change in Control
Schedule 2.22 Contracts with Affiliates
Schedule 4.9(g) Compensation and Bonuses
Schedule 4.10 Employment and Noncompetition Agreements
Schedule 4.14 Retention Pool Executives
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Articles of Merger
Exhibit B Employment Agreements
Exhibit C Affiliates Letter
Exhibit D Form of Opinion of Counsel to BB&T
Exhibit E Form of Opinion of Counsel to Scott & Stringfellow
</TABLE>
DEFINITIONS
The capitalized terms set forth below are defined in the following
sections:
<TABLE>
<S> <C>
Agreement Introduction
Articles of Merger Section 1.2
Associated Person Section 2.15
Average Closing Price Section 1.7(b)
BB&T Introduction
BB&T Common Stock Section 1.7
BB&T Material Adverse
Effect Section 5.2(a)
BB&T Option Agreement Section 8.11
BB&T Option Plan Section 1.9
BB&T Securities FilingsSection 3.4
Closing Section 1.4
Closing Date Section 1.4
Code Section 1.9
Commission Section 2.6
Compensation Continuation
Period Section 4.14(b)
Constituent CorporationSection 1.1
Effective Time Section 1.3
Employee Contracts Section 2.7(a)
Employment Agreement Section 4.10
Environmental Laws Section 2.18(a)
Environmental Claim Section 2.18(b)
ERISA Section 2.20(b)(i)
Exchange Section 2.5
</TABLE>
A- iii
<PAGE>
<TABLE>
<S> <C>
Exchange Act Section 1.9
Exchange Ratio Section 1.7(a)
Hazardous Materials Section 2.18(b)
Immediate Family Section 2.22
Indemnified Parties Section 4.16(b)
Initial Merger Agreement Recitals
Intangible Rights Section 2.19
Last Audit Date Section 2.9(b)
Material Contract Section 2.7(a)
Maximum Amount Section 4.16(a)
Merger Recitals
Merger Consideration Section 1.7
NASD Section 2.5
NCBCA Section 1.1
NYSE Section 1.7(b)
PBGC Section 2.20(b)(iv)
Plan Section 2.20(b)(i)
Plan of Merger Recitals
Proxy Statement/ProspectuSection 4.2
Registration Statement Section 4.2
Retention Plan Section 4.14
Retention Vesting Date Section 4.14
Scott & Stringfellow Introduction
Scott & Stringfellow
Common Stock Section 1.7
Scott & Stringfellow
Compensation Committee Section 4.12(b)
Scott & Stringfellow
Employees Section 4.12(a)
Scott & Stringfellow
Financial Introduction
Scott & Stringfellow
Financial Statements Section 2.9(b)
Scott & Stringfellow
Material Adverse Effect Section 5.3(a)
Scott & Stringfellow
Securities Filings Section 3.5
Scott & Stringfellow
Subsidiaries Section 2.1
Securities Act Section 2.9
Shareholders Section 1.8
Stock Options Section 1.9
Stock Option Plan Section 1.9
Stock Purchase Loan Plan Section 2.10(a)
Stock Purchase Plan Section 2.10(a)
Surviving Corporation Section 1.1(a)
Surviving Subsidiary Section 4.17
Taxes Section 2.17
Tax Returns Section 2.17
VSCA Section 1.1
</TABLE>
A- iv
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
This Amended and Restated Agreement and Plan of Reorganization, dated as
of September 16, 1998 (the "Agreement"), is by and between BB&T CORPORATION, a
North Carolina corporation ("BB&T"), and SCOTT & STRINGFELLOW FINANCIAL, INC.,
a Virginia corporation ("Scott & Stringfellow");
STATEMENT OF PURPOSE
By Agreement and Plan of Reorganization dated August 10, 1998 (the
"Initial Merger Agreement") Scott & Stringfellow agreed to be merged with and
into BB&T in a transaction to be accounted for as a pooling-of-interests. The
parties have determined that certain facts and circumstances preclude the use
of pooling-of-interests accounting. In addition, the parties have determined
that it will be in their best interests for certain changes to be the Initial
Merger Agreement. The parties desire to amend and restate the Initial Merger
Agreement to provide for such changes and otherwise to provide for the merger
of Scott & Stringfellow with and into BB&T (the "Merger") in the form set forth
in the Articles of Merger attached hereto as Exhibit A ("Plan of Merger").
To accomplish such purposes and in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 MERGER.
BB&T and Scott & Stringfellow are constituent corporations (the
"Constituent Corporations") to the Merger as contemplated by the Virginia Stock
Corporation Act (the "VSCA") and the North Carolina Business Corporation Act
(the "NCBCA"). From and after the Effective Time (as defined in Section 1.3):
(a) Scott & Stringfellow shall be merged with and into BB&T in accordance
with the applicable provisions of the VSCA and the NCBCA, with BB&T
remaining as the surviving corporate entity (hereinafter sometimes referred
to as the "Surviving Corporation").
(b) The separate existence of Scott & Stringfellow shall cease and the
Merger shall in all respects have the effect provided for in Section 1.5.
(c) The Articles of Incorporation of BB&T at the Effective Time shall
become the Articles of Incorporation of the Surviving Corporation.
(d) The Bylaws of BB&T at the Effective Time shall become the Bylaws of
the Surviving Corporation.
1.2 FILING; PLAN OF MERGER.
The Merger shall not become effective unless and until this Agreement is
duly approved by shareholders holding two-thirds of the shares of Scott &
Stringfellow Common Stock. Upon fulfillment or waiver of the conditions
specified in Article V, and provided that this Agreement has not been
terminated pursuant to Article VII, the Constituent Corporations will cause
Articles of Merger in substantially the form of Exhibit A (the "Articles of
Merger") to be executed and filed with the State Corporation Commission of
Virginia and the Secretary of State of North Carolina. The Plan of Merger,
which is a part of the Articles of Merger, is incorporated herein by reference,
and adoption of this Agreement by the Boards of Directors of the Constituent
Corporations and approval by the shareholders of Scott & Stringfellow shall
constitute adoption and approval of the Plan of Merger.
1.3 EFFECTIVE TIME.
The Merger shall be effective at the day and hour on the Closing Date
specified in the Articles of Merger filed with the State Corporation Commission
of Virginia and the Secretary of State of North Carolina (hereinafter sometimes
referred to as the "Effective Time").
A-1
<PAGE>
1.4 CLOSING.
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Womble Carlyle Sandridge & Rice,
PLLC, 200 West Second Street, Winston-Salem, North Carolina, at 11:00 a.m. not
later than the tenth business day following the satisfaction of the conditions
to Closing set forth in Article V (the "Closing Date") unless the parties
hereto agree in writing upon a different time, date or place. The Closing shall
not be deemed to have occurred until all actions necessary to complete the
Closing have occurred.
1.5 EFFECT OF MERGER.
From and after the Effective Time, the separate existence of Scott &
Stringfellow shall cease, and the Surviving Corporation shall thereupon and
thereafter, to the extent consistent with its Articles of Incorporation,
possess all the rights, privileges, immunities, and franchises, of a public as
well as of a private nature, of each of the Constituent Corporations; and all
property, real, personal and mixed, and all debts due on whatever account, and
all other chooses in action, and all and every other interest, of or belonging
to or due to each of the Constituent Corporations shall be taken and deemed to
be transferred to and vested in the Surviving Corporation without further act
or deed; and the title to any real estate or any interest therein, vested in
either of the Constituent Corporations, shall not revert or be in any way
impaired by reason of the Merger. The Surviving Corporation shall thenceforth
be responsible and liable for all of the liabilities, obligations and penalties
of each of the Constituent Corporations; and any claim existing or action or
proceeding, civil or criminal, pending by or against either of the Constituent
Corporations may be prosecuted as if the Merger had not taken place, or the
Surviving Corporation may be substituted in its place; and any judgment
rendered against either of the Constituent Corporations may be enforced against
the Surviving Corporation. Neither the rights of creditors nor any liens upon
the property of either of the Constituent Corporations shall be impaired by
reason of the Merger.
1.6 FURTHER ASSURANCES.
If, at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any further deeds, assignments or assurances in law
or any other actions are necessary, desirable or proper to vest, perfect or
confirm of record or otherwise, in the Surviving Corporation, the title to any
property or rights of the Constituent Corporations acquired or to be acquired
by reason of, or as a result of, the Merger, the Constituent Corporations agree
that such Constituent Corporations and their proper officers and directors
shall and will execute and deliver all such proper instruments, documents,
deeds, assignments and assurances in law and do all things necessary, desirable
or proper to vest, perfect or confirm title to such property or rights in the
Surviving Corporation and otherwise to carry out the intent and 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.
1.7 MERGER CONSIDERATION.
As used herein, the term "Merger Consideration" shall mean the portion of
a whole share of the common stock of BB&T, par value $5.00 per share ("BB&T
Common Stock"), to be exchanged for each share of the common stock of Scott &
Stringfellow ("Scott & Stringfellow 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 issued in
the Merger, 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 Scott & Stringfellow Common Stock
shall be in the ratio of one share of BB&T Common Stock for each share of
Scott & Stringfellow Common Stock, subject to adjustment in the manner set
forth in Section 1.10 (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 average closing price per share of BB&T Common Stock on
the New York Stock Exchange ("NYSE") Composite Transactions List (as
reported by The Wall Street Journal) for the five trading days (determined
by excluding days on which the NYSE is closed) ending on the fifth trading
day immediately preceding the Closing Date (the fifth day to be determined
by counting the first trading day preceding the Closing Date as the first
day) (the "Average Closing Price"). No person will be entitled to
dividends, voting rights or any other rights as a BB&T shareholder in
respect of any fractional share.
A-2
<PAGE>
1.8 CONVERSION OF SHARES; PAYMENT OF MERGER CONSIDERATION; SURRENDERING
PROCEDURE.
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of Scott & Stringfellow or its shareholders as of the Effective
Time (the "Shareholders"), all of the shares of Scott & Stringfellow 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 certificates representing the shares of Scott & Stringfellow Common
Stock (as provided in paragraph (d) below), the Merger Consideration in
accordance with Section 1.7.
(b) Until surrendered, each outstanding certificate which prior to the
Effective Time represented one or more shares of Scott & Stringfellow
Common Stock shall be deemed upon the Effective Time for all purposes to
represent only the right to receive the Merger Consideration as described
in Section 1.7. No interest will be paid or accrued on the Merger
Consideration. Any certificate for shares of Scott & Stringfellow Common
Stock that has been lost or destroyed shall be deemed to be surrendered
upon receipt by the Surviving Corporation of evidence of ownership of the
shares of Scott & Stringfellow Common Stock represented thereby and of an
agreement for indemnification, in each case in form and substance
reasonably satisfactory to the Surviving Corporation. After the Effective
Time, no transfer of shares of Scott & Stringfellow Common Stock of any
Shareholder shall be made on the stock transfer books of the Surviving
Corporation.
(c) Promptly after the Effective Time, the Surviving Corporation shall
cause to be delivered or mailed to each 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
shares of Scott & Stringfellow Common Stock, in exchange for the Merger
Consideration. Upon surrender of such certificates, together with such
letter of transmittal, duly executed and completed in accordance with the
instructions thereto, and such other documents as may be reasonably
requested, the Surviving Corporation shall promptly cause the Merger
Consideration to be transferred as provided in Section 1.7 to the persons
entitled thereto.
1.9 CONVERSION OF STOCK OPTIONS.
Scott & Stringfellow has in effect the Scott & Stringfellow 1987 Stock
Option Plan (the "Stock Option Plan"), pursuant to which options to acquire
514,502 shares of Scott & Stringfellow Common Stock (the "Stock Options") are
outstanding and unexercised on the date hereof. At the Effective Time, each
Stock Option 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 Stock Option Plan and each stock option
agreement evidencing such Stock Option, except that from and after the
Effective Time (i) BB&T and its Compensation Committee shall be substituted for
Scott & Stringfellow and the Committee of Scott & Stringfellow's Board of
Directors administering the Stock Option Plan, (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
equal the product of the number of shares of Scott & Stringfellow Common Stock
subject to such Stock Option immediately prior to the Effective Time multiplied
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, within the meaning of Internal Revenue Code of 1986, as
amended (the "Code"), 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 executive
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 Scott & Stringfellow agree to take all necessary steps to
effectuate the foregoing provisions of this Section 1.9. As soon as practicable
following the Effective Time, BB&T shall deliver to the participants in the
Stock Option Plan an appropriate notice setting forth such participant's rights
pursuant thereto. 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, 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), or include
A-3
<PAGE>
any converted or substitute options under an existing registration statement,
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 Securities Exchange Act of
1934, as amended (the "Exchange Act"), BB&T shall administer the Stock Option
Plans assumed pursuant to this Section 1.9 (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. Scott & Stringfellow 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.
1.10 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.
1.11 SPECIAL CASH DIVIDEND.
Notwithstanding any other provisions hereof, prior to the Closing Date
Scott & Stringfellow shall pay to shareholders of record on a record date
selected by Scott & Stringfellow a special cash dividend of $.20 per share.
Such special dividend shall be in addition to Scott & Stringfellow's regular
quarterly cash dividend of $.10 per share.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SCOTT & STRINGFELLOW
Scott & Stringfellow represents and warrants to BB&T as follows (no
representation or warranty herein of Scott & Stringfellow 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 5.3(a)):
2.1 SUBSIDIARIES AND INVESTMENTS.
Except for Scott & Stringfellow, Inc., Scott & Stringfellow Capital
Management, Inc. and Scott & Stringfellow Realty, Inc. (individually, a "Scott
& Stringfellow Subsidiary" and collectively, the "Scott & Stringfellow
Subsidiaries"), each of which is wholly owned by Scott & Stringfellow, and
except as disclosed on Schedule 2.1, Scott & Stringfellow has no subsidiary or
direct or indirect interest in any partnership, limited liability company,
joint venture, corporation, or other business, except for marketable securities
held as inventory for sale in the ordinary course of business.
2.2 ORGANIZATION AND GOOD STANDING.
Each of Scott & Stringfellow and the Scott & Stringfellow Subsidiaries 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
own, lease and operate its properties and assets, and to carry on its business
as now conducted and as presently proposed to be conducted, and, except as
provided on SCHEDULE 2.15, is duly qualified to do business in all other
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification and where failure to qualify would have a
Scott & Stringfellow Material Adverse Effect (as defined in Section 5.3(a)).
2.3 AUTHORITY.
Scott & Stringfellow has all requisite corporate power and authority to
enter into and to perform all of its obligations under this Agreement,
including the Plan of Merger, and the BB&T Option Agreement. The execution,
delivery and performance of this Agreement, including the Plan of Merger, and
the BB&T Option Agreement by Scott & Stringfellow have been duly and validly
authorized by all necessary corporate action, except for approval by
shareholders holding more than two-thirds of the shares of Scott & Stringfellow
Common Stock. This Agreement, including the Plan of Merger, and the BB&T Option
Agreement constitute the legal, valid and binding obligation of Scott &
Stringfellow, and are enforceable against Scott & Stringfellow in accordance
with their respective terms, subject to (i) bankruptcy, insolvency, moratorium,
reorganization, conservatorship, receivership, or similar laws affecting the
rights of creditors and (ii) general principles of equity.
A-4
<PAGE>
2.4 CAPITALIZATION.
The entire authorized capital stock of Scott & Stringfellow consists of
10,000,000 shares of common stock, par value $0.10 per share, of which
3,289,595 are issued and outstanding. The shares of Scott & Stringfellow Common
Stock issued and outstanding have been duly authorized and are validly issued,
fully paid and nonassessable, with no liability attaching to the ownership
thereof. No shares of Scott & Stringfellow Common Stock have been reserved for
any purpose, except for 514,502 shares reserved in connection with the Stock
Option Plan and 654,629 shares reserved in connection with the BB&T Option
Agreement and except as set forth on SCHEDULE 2.4. Except as provided in
SCHEDULE 2.4 and in respect of the Stock Option Plan, there are no authorized,
outstanding or existing (a) voting trusts or other agreements or understandings
with respect to the voting of Scott & Stringfellow's common stock; (b)
securities convertible into or exchangeable for voting common stock; (c)
options, warrants or other rights (including, without limitation, preemptive
rights) to purchase, repurchase or subscribe for any of Scott & Stringfellow's
common stock; (d) agreements of any kind relating to the issuance of common
stock of Scott & Stringfellow, any other type or form of securities or any
options, warrants or rights; or (e) agreements of any kind which may obligate
Scott & Stringfellow to issue or purchase any of its securities. None of the
shares of Scott & Stringfellow Common Stock has been issued in violation of any
preemptive or other rights of shareholders.
2.5 NO CONFLICT.
Except as provided in SCHEDULE 2.5, neither the execution and delivery by
Scott & Stringfellow of this Agreement or the BB&T Option Agreement, nor
consummation by Scott & Stringfellow of the transactions contemplated hereby or
thereby, nor compliance by Scott & Stringfellow 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 Scott & Stringfellow or
any Scott & Stringfellow 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 Scott & Stringfellow or any Scott & Stringfellow Subsidiary
pursuant to, any note, bond, mortgage, indenture, license, permit, contract,
agreement or other instrument or obligation, or, subject to prior receipt of
all required governmental approvals and self-regulatory organization approvals,
will result in any loss by Scott & Stringfellow or a Scott & Stringfellow
Subsidiary of any membership in or seat on any securities or commodities
exchange (an "Exchange"), the National Association of Securities Dealers, Inc.
(the "NASD") or other self-regulatory organization or will result in any
restriction on, or revocation of, rights in respect thereof, or (iii) subject
to prior receipt of all required governmental approvals, violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Scott &
Stringfellow or any Scott & Stringfellow Subsidiary.
2.6 REGULATORY CONSENTS.
Other than (i) consents or approvals required from, or notices to,
regulatory authorities as provided in Section 4.4(b), (ii) filings of
applications or notices with state securities licensing or supervisory
authorities and self-regulatory organizations, (iii) the filing with the
Securities and Exchange Commission (the "Commission") of the Proxy Statement in
definitive form, (iv) approval of the NYSE and consents of the other applicable
Exchanges to the transfer of ownership of seats or memberships, and (v) the
issuance of a certificate of merger by the Virginia State Corporation
Commission pursuant to the VSCA, no notice to, filing with, or consent of, any
public body or authority is necessary for the consummation by Scott &
Stringfellow of the Merger and the other transactions contemplated in this
Agreement. There is no condition relating to Scott & Stringfellow or any Scott
& Stringfellow Subsidiary which should cause the approvals of governmental
authorities or self-regulatory organizations necessary to permit consummation
of the transactions contemplated by this Agreement to not be received or to be
received subject to a condition or requirement described in Section 5.3(b).
2.7 CERTAIN CONTRACTS.
(a) SCHEDULE 2.7(A) sets forth a true, complete and correct list of all
Material Contracts. For purposes of this Agreement, a "Material Contract"
means any written or oral contract, agreement, undertaking or commitment
relating to Scott & Stringfellow or any Scott & Stringfellow Subsidiary
with or to any person or entity whatsoever, other than (i) those governing
the employment of brokers, traders and investment bankers at a level below
Executive Vice President ("Employee Contracts"), (ii) leases of real or
personal property and (iii) those which (A) may be terminated on not more
than ninety days notice without liability to Scott & Stringfellow or any
Scott & Stringfellow Subsidiary, or (B) involve payments in the aggregate
of less than $250,000. Neither Scott & Stringfellow nor any Scott &
Stringfellow Subsidiary is a party to any written or oral contract,
agreement, undertaking or commitment relating to the employment, election
or retention in office of any present or former director or officer at the
level of Executive Vice President or higher. Except as set forth in
SCHEDULE 2.7(A), all of the Material Contracts and Employee Contracts are
valid and in full force and effect,
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and there are no defaults by any party thereunder and no event, act or
omission has occurred which (with or without notice, lapse of time or the
happening or occurrence of any other event) would result in a default under
any Material Contract or any Employee Contract. Scott & Stringfellow and
the Scott & Stringfellow Subsidiaries have performed all the obligations
required to be performed thereby under the Material Contracts and the
Employee Contracts.
(b) Except as set forth on SCHEDULE 2.7(B), neither Scott & Stringfellow
nor any Scott & Stringfellow Subsidiary is a party to, is bound or affected
by, or receives benefits under (i) 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
Scott & Stringfellow or any Scott & Stringfellow Subsidiary or the
guarantee by Scott & Stringfellow or any Scott & Stringfellow Subsidiary of
any such obligation, which cannot be terminated within less than thirty
days after the Closing Date by Scott & Stringfellow or such Scott &
Stringfellow Subsidiary, (iii) any agreement, arrangement or commitment,
written or oral, relating to the employment of a consultant, independent
contractor or agent, which cannot be terminated within less than thirty
days after the Closing Date by Scott & Stringfellow or the applicable Scott
& Stringfellow Subsidiary (without payment of any penalty or cost), or that
provides benefits which are contingent, or the application of which is
altered, upon the occurrence of a transaction involving Scott &
Stringfellow 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 of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement or the BB&T Option Agreement, except for (A) stock option
agreements in respect of the Stock Option Plan, (B) forgivable loans in the
amount of approximately $475,000 and (C) the option of Atlantic Capital to
purchase Scott & Stringfellow's interest in Atlantic Capital.
2.8 MINUTE BOOKS.
The minute books of Scott & Stringfellow and the Scott & Stringfellow
Subsidiaries contain accurate records of all actions taken by their respective
shareholders and Board of Directors, and all signatures contained therein are
the true signatures of the persons whose signatures they purport to be.
2.9 SECURITIES FILINGS; FINANCIAL STATEMENTS.
(a) Scott & Stringfellow has timely filed with the Commission all
documents required to be filed by it by the Securities Act of 1933, as
amended (the "Securities Act") or the Exchange Act ("Scott & Stringfellow
Securities Filings") since June 30, 1995. The Scott & Stringfellow
Securities Filings (i) complied as to form with the applicable requirements
under the Securities Act or the Exchange Act, as the case may be, and (ii)
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 Scott & Stringfellow included in the
Scott & Stringfellow Securities Filings (the "Scott & Stringfellow
Financial Statements"), including without limitation those Scott &
Stringfellow Financial Statements as of June 27, 1997 (the "Last Audit
Date"), fairly present the consolidated financial position of Scott &
Stringfellow and the Scott & Stringfellow 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 generally accepted
accounting principles applied on a consistent basis. Since the Last Audit
Date, there has been no Scott & Stringfellow Material Adverse Effect.
2.10 ABSENCE OF CERTAIN CHANGES.
Except as described in the Scott & Stringfellow Securities Filings or on
SCHEDULE 2.10, following the Last Audit Date, Scott & Stringfellow and the
Scott & Stringfellow Subsidiaries have conducted their respective operations
and business only in the ordinary course, and have not:
(a) Declared, set aside, made or paid any dividend or other distribution
in respect of its capital stock, other than regularly scheduled dividends
payable on record dates and in amounts publicly disclosed or permitted or
accepted any contributions to capital or other increases in equity, except
pursuant to (i) the exercise of Stock Options, (ii) the purchase of Scott &
Stringfellow Common Stock under the Scott & Stringfellow Employee Stock
Purchase Plan (the
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"Stock Purchase Plan") and (iii) the payment of principal on loans made
pursuant to the Scott & Stringfellow Management Stock Purchase Loan Plan
(the "Stock Purchase Loan Plan") and secured by shares of Scott &
Stringfellow Common Stock purchased under the Stock Purchase Loan Plan;
(b) Made or entered into any general wage, salary or commission increase
for their respective employees as a group, except in the ordinary course of
business consistent with past practices;
(c) Incurred any obligation or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due), except incurred
in the ordinary course of business;
(d) Introduced any new method of management, operations or accounting;
(e) Suffered any event or condition of any character that has had or
might reasonably be expected to have an adverse effect on their businesses,
financial condition, results of operations or business prospects considered
on a consolidated basis; or
(f) Agreed, whether in writing or otherwise, to take any action described
in this Section 2.10.
2.11 UNDISCLOSED LIABILITIES; HEDGES AND DERIVATIVES.
Neither Scott & Stringfellow nor any Scott & Stringfellow Subsidiary has
any indebtedness, liabilities or obligations of any nature, whether absolute,
accrued, contingent or otherwise, other than (a) those reflected in the Scott &
Stringfellow Financial Statements and not heretofore paid or discharged (and in
the actual amounts so reflected); (b) those incurred during the period from the
Last Audit Date to the date of this Agreement in the ordinary course of
business; and (c) those incurred in the ordinary course of business and
otherwise in compliance with the provisions of this Agreement from the date
hereof to the Closing Date. Scott & Stringfellow will have no liability or
obligation under any contract (including any off-balance sheet hedge or
derivative) attributable to any actual or alleged breach thereof or
nonperformance thereunder prior to the Closing Date or accruing with respect to
any period prior to the Closing Date.
2.12 TITLE TO ASSETS.
(a) Except as provided in SCHEDULE 2.12(A) and specifically reserved
against or otherwise disclosed on the Scott & Stringfellow Financial
Statements, Scott & Stringfellow and the Scott & Stringfellow 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 Scott & Stringfellow Financial Statements as of the Last
Audit Date or acquired after such date, except (i) liens for current taxes
not yet due and payable, (ii) such imperfections of title, easements and
encumbrances, if any, as do not adversely affect marketability or Scott &
Stringfellow's use of the properties or (iii) dispositions and encumbrances
for adequate consideration in the ordinary course of business.
(b) Except for Scott & Stringfellow Realty, Inc., neither Scott &
Stringfellow nor any Scott & Stringfellow Subsidiary owns any real
property. All leases and licenses for all assets, real and personal, leased
or licensed by Scott & Stringfellow or any Scott & Stringfellow Subsidiary
are valid and enforceable in accordance with their respective terms.
2.13 SECURITIES; REPURCHASE AGREEMENTS; DERIVATIVES.
(a) All securities carried on the books of Scott & Stringfellow and the
Scott & Stringfellow Subsidiaries are valued in accordance with generally
accepted accounting principles and the rules and regulations of the
Commission. Neither Scott & Stringfellow nor any Scott & Stringfellow
Subsidiary has any securities or hedging or derivatives transactions which
are not fully reflected and accounted for in the Scott & Stringfellow
Financial Statements.
(b) Neither Scott & Stringfellow nor any Scott & Stringfellow Subsidiary
has in effect or is a party to any agreement pursuant to which Scott &
Stringfellow or the Scott & Stringfellow Subsidiary has (i) purchased
securities subject to an agreement to resell, (ii) sold securities subject
to an agreement to repurchase or (iii) any interest rate swap or other
similar agreement.
(c) Neither Scott & Stringfellow nor any Scott & Stringfellow 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 Scott &
Stringfellow Financial Statements, which is a financial derivative contract
(including various combinations thereof).
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2.14 INSURANCE.
SCHEDULE 2.14 contains a true, correct and complete list of all policies
of fire and casualty, property, product and other liability, workers'
compensation and other forms of insurance maintained by or with respect to
Scott & Stringfellow, the Scott & Stringfellow Subsidiaries or their respective
properties. Scott & Stringfellow and the Scott & Stringfellow Subsidiaries are
insured with reputable insurers against such risks and in such amounts as the
management of Scott & Stringfellow has reasonably determined to be prudent in
accordance with industry practices. All of such policies are in full force and
effect in accordance with their respective terms. Neither Scott & Stringfellow
nor any Scott & Stringfellow Subsidiaries are in default under such policies,
and all claims thereunder have been filed in due and timely fashion. Except as
set forth in SCHEDULE 2.14, there are no claims pending or threatened under any
of such policies and there are no disputes between Scott & Stringfellow or any
Scott & Stringfellow Subsidiary and any of the underwriters of said policies.
2.15 LICENSES AND PERMITS.
Scott & Stringfellow, Inc. is a member in good standing of the NASD, the
Securities Investor Protection Corporation, the Securities Industry
Association, the Public Securities Association and the NYSE and has two seats
on the NYSE and one seat on each of the American Stock Exchange, Inc., the New
York Cotton Exchange and the Chicago Stock Exchange, which Exchanges constitute
all of the Exchanges of which Scott & Stringfellow or any Scott & Stringfellow
Subsidiary is a member or on which it has a seat. In addition to the foregoing,
Scott & Stringfellow, Inc. is a registered broker-dealer with the Commission,
and each of Scott & Stringfellow, Inc. and Scott & Stringfellow Capital
Management, Inc., is a registered investment adviser with the Commission. Each
Associated Person as defined in Article I(q) of the By-Laws of the NASD
("Associated Person") of Scott & Stringfellow or any Scott & Stringfellow
Subsidiary who is engaged in activities requiring registration with the NASD,
is properly registered with the NASD as a principal or representative of Scott
& Stringfellow or the appropriate Scott & Stringfellow Subsidiary. Except as
set forth on SCHEDULE 2.15, Scott & Stringfellow and each Scott & Stringfellow
Subsidiary has all permits, licenses, authorizations, orders and approvals of,
and has made all filings, applications and registrations with, all federal and
state governmental and self-regulatory organization authorities that are
required in order for Scott & Stringfellow and the Scott & Stringfellow
Subsidiaries to conduct their respective businesses. All such permits,
licenses, authorizations, orders and approvals are in full force and effect,
and the continued validity thereof shall not be adversely affected by this
Agreement or the consummation of the transactions contemplated hereby. Neither
Scott & Stringfellow nor any Scott & Stringfellow Subsidiary has received any
notice of any claim of revocation of any such permit, license, authorizations,
orders and approvals, or of any restriction thereto or limitation thereon, nor
does Scott & Stringfellow have any knowledge of any event that might give rise
to such a claim. Neither Scott & Stringfellow nor any Scott & Stringfellow
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.
2.16 LITIGATION AND COMPLIANCE.
Except as set forth in SCHEDULE 2.16, there are no actions, suits, claims,
proceedings or governmental or administrative investigations pending or, to the
best of Scott & Stringfellow's knowledge, threatened against Scott &
Stringfellow, any Scott & Stringfellow Subsidiary or any of their respective
assets or which present a claim to restrain or prohibit the transactions
contemplated hereby or by the BB&T Option Agreement. None of the claims or
proceedings set forth on SCHEDULE 2.16, if determined adversely against Scott &
Stringfellow, would have a Scott & Stringfellow Material Adverse Effect (as
defined in Section 5.3(a)). Scott & Stringfellow, the Scott & Stringfellow
Subsidiaries and their respective personnel have complied with and are not in
default or violation under any applicable law, ordinance, requirement,
regulation, policy, guideline, decree or order (including, without limitation,
the Investment Advisers Act of 1940, as amended, and the rules and regulations
promulgated thereunder, the rules of the NASD (as defined in Article I(s) of
the By-Laws of the NASD) and the rules of conduct of any Exchange of which
Scott & Stringfellow or any Scott & Stringfellow Subsidiary is a member)
affecting Scott & Stringfellow, any Scott & Stringfellow Subsidiary or their
respective personnel. Except in connection with routine examinations by
regulatory authorities, neither Scott & Stringfellow nor any Scott &
Stringfellow Subsidiary has received, since June 30, 1995, any notice of any
claimed default or violation with respect to any such law, ordinance,
requirement, regulation, policy, guideline, decree or order. Neither Scott &
Stringfellow nor any Scott & Stringfellow Subsidiary is subject to any
judgment, order or decree entered in any action or proceeding adverse to Scott
& Stringfellow, any Scott & Stringfellow Subsidiary or any of their respective
assets. Except as set forth on SCHEDULE 2.16, there are no disciplinary
proceedings or investigations by the Commission, the NASD, any Exchange or any
state securities regulatory agency, and there are no complaints filed with any
District Business Conduct Committee or similar committee of the NASD, any
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Exchange or any state securities regulatory agency pending against Scott &
Stringfellow, any Scott & Stringfellow Subsidiary or any of their respective
Associated Persons. Scott & Stringfellow and the Scott & Stringfellow
Subsidiaries have duly filed all reports, returns, registrations, notices and
statements required to be filed thereby with governmental authorities relating
thereto, including, without limitation, reports required to be filed with the
Commission, the NASD and any Exchange, and each such report at the time of
filing complied with the rules and regulations of the Commission, the NASD and
any such Exchange, as the case may be. Scott & Stringfellow and the Scott &
Stringfellow Subsidiaries have paid when due all required premiums to the
Securities Investor Protection Corporation. Scott & Stringfellow and the Scott
& Stringfellow Subsidiaries are in compliance with the rules and regulations of
all federal and state governmental authorities and agencies and self-regulatory
organizations governing their respective securities activities, including but
not limited to rules and regulations relating to capital and reserves
promulgated by the Commission, the NASD, any Exchange and state governmental
agencies.
2.17 TAX MATTERS
(a) Scott & Stringfellow and the Scott & Stringfellow Subsidiaries (and
any predecessors thereof) 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,
collectively, the "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 United States, state and local income, profits,
franchise, sales, use, occupancy, property, severance, excise, value added,
withholding, transfer, documentary and other taxes, and all taxes owing to
any foreign countries or political subdivisions thereof (including
interest, penalties and additions to such taxes) (collectively, the
"Taxes") required to be paid in respect of the periods covered by such Tax
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 required to be paid for any
subsequent periods ending on or prior to the Effective Time. Neither Scott
& Stringfellow nor any Scott & Stringfellow Subsidiary has or will have any
liability for any such Taxes in excess of the amounts so paid or reserves
or accruals so established. All Tax Returns required to be filed after the
date hereof by Scott & Stringfellow or the Scott & Stringfellow
Subsidiaries shall, in each case, be prepared and filed in a timely manner
consistent in all respects (including elections and accounting methods and
conventions) with such Tax Return most recently filed by Scott &
Stringfellow or such Scott & Stringfellow Subsidiary in the relevant
jurisdiction prior to the date hereof, except as otherwise required by law
or regulation or agreed to by BB&T. Scott & Stringfellow and the Scott &
Stringfellow 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 Tax Return is not yet due.
(b) All Tax Returns filed by Scott & Stringfellow and the Scott &
Stringfellow Subsidiaries are complete and accurate. Neither Scott &
Stringfellow nor any Scott & Stringfellow 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 Scott & Stringfellow or any
Scott & Stringfellow Subsidiary which have not been settled and paid. There
are currently no agreements in effect with respect to Scott & Stringfellow
or any Scott & Stringfellow 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 Tax Returns is
pending.
(c) Deferred taxes have been provided for on the Scott & Stringfellow
Financial Statements in accordance with generally accepted accounting
principles applied on a consistent basis.
(d) Neither Scott & Stringfellow nor any Scott & Stringfellow Subsidiary
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 Scott & Stringfellow or
any Scott & Stringfellow Subsidiary) or has any liability for Taxes of any
person (other than Scott & Stringfellow and the Scott & Stringfellow
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law) as a transferee or successor or
by contract or otherwise.
(e) Each of Scott & Stringfellow and the Scott & Stringfellow
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.
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(f) Except for Stock Options that vest upon a change of control, neither
Scott & Stringfellow nor any Scott & Stringfellow Subsidiary 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.
2.18 ENVIRONMENTAL MATTERS.
(a) Scott & Stringfellow and the Scott & Stringfellow Subsidiaries are
and at all times have been in compliance with all any applicable federal,
state, county or local statutes, laws, regulations, rules, ordinances,
codes, licenses or permits of any governmental authorities relating to
environmental matters (collectively "Environmental Laws"). The
Environmental Laws include by way of illustration and not by way of
limitation the Comprehensive Environmental Response, Compensation and
Liability Act as amended, the Resource Conservation and Recovery Act as
amended, the Clean Air Act, the Clean Water Act, the Occupational Safety
and Health Act, the Toxic Substances Control Act, any "Superfund" or
"Superlien" law, or any other federal, state or local statute, law,
ordinance, code, rule, regulation, order, decree or guideline (whether
published or unpublished) regulating, relating to or imposing liability or
standards of conduct concerning any petroleum, petroleum by-product
(including but not limited to crude oil, diesel oil, fuel oil, gasoline,
lubrication oil, oil refuse, oil mixed with other waste, oil sludge, and
all other liquid hydrocarbons, regardless of specific gravity), natural or
synthetic gas, Hazardous Materials (as defined in Section 2.18(b)), toxic
or dangerous waste, substance or material, pollutant or contaminant.
Neither Scott & Stringfellow nor any Scott & Stringfellow Subsidiary has
received any communication alleging that Scott & Stringfellow or any Scott
& Stringfellow Subsidiary is not in such compliance, and there are no
present circumstances that would prevent or interfere with the continuation
of such compliance.
(b) Neither Scott & Stringfellow nor any Scott & Stringfellow Subsidiary
has received 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) (an "Environmental Claim") arising out of, based upon, or
resulting from a violation of the Environmental Laws or the presence or
release into the environment of any substance or material (i) identified in
CERCLA; (ii) determined to be toxic, a pollutant or a contaminant under any
Environmental Law, 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 (collectively, "Hazardous
Materials"). There are no Environmental Claims pending, and, to the best
knowledge of Scott & Stringfellow, 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 Law upon (1) Scott &
Stringfellow or any Scott & Stringfellow Subsidiary, (2) any person or
entity whose liability for any Environmental Claim Scott & Stringfellow or
any Scott & Stringfellow Subsidiary has or may have retained or assumed,
either contractually or by operation of law, (3) any real or personal
property owned or leased by Scott & Stringfellow or any Scott &
Stringfellow Subsidiary, or any real or personal property which Scott &
Stringfellow or any Scott & Stringfellow Subsidiary has or is judged to
have managed or supervised or participated in the management of, or (4) any
real or personal property in which Scott & Stringfellow or any Scott &
Stringfellow Subsidiary holds a security interest securing a loan recorded
on the books of Scott & Stringfellow or any Scott & Stringfellow
Subsidiary. Neither Scott & Stringfellow nor any Scott & Stringfellow
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) Scott & Stringfellow and the Scott & Stringfellow Subsidiaries are in
compliance with all recommendations contained in any environmental audits,
analyses and surveys received by Scott & Stringfellow relating to all real
and personal property owned or leased by Scott & Stringfellow or any Scott
& Stringfellow Subsidiary and all real and personal property of which Scott
& Stringfellow or any Scott & Stringfellow 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 Scott & Stringfellow or any
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Scott & Stringfellow Subsidiary or against any person or entity whose
liability for any Environmental Claim Scott & Stringfellow or any Scott &
Stringfellow Subsidiary has or may have retained or assumed, either
contractually or by operation of law.
2.19 INTANGIBLE RIGHTS.
Scott & Stringfellow or a Scott & Stringfellow Subsidiary owns or
possesses the right to use the patents, trademarks, service marks, trade names,
brands, copyrights, licenses and designs and rights and applications with
respect to the foregoing ("Intangible Rights") used in or required for the
conduct of the businesses of Scott & Stringfellow and the Scott & Stringfellow
Subsidiaries as now being conducted or presently proposed to be conducted.
There are no assignments, licenses or sublicenses with respect to any of the
Intangible Rights. There are no pending or, to the best of Scott &
Stringfellow's knowledge, threatened claims by any person to the use of any of
the Intangible Rights and, to the best of Scott & Stringfellow's knowledge,
none of the Intangible Rights infringes on the rights of any person and no
valid basis exists for any such claim.
2.20 EMPLOYEES: COMPENSATION; BENEFIT PLANS.
(a) COMPENSATION. Scott & Stringfellow has previously given to BB&T 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 or officer at the level of Executive Vice President or higher of
Scott & Stringfellow and the Scott & Stringfellow Subsidiaries, and a list
of each other person (other than a current employee or director) to whom
Scott & Stringfellow or a Scott & Stringfellow 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 (other than through a tax qualified
defined contribution pension plan).
(b) EMPLOYEE BENEFIT PLANS.
(i) Scott & Stringfellow has previously delivered to BB&T copies of
all Plans, as defined below, contributed to, maintained or sponsored by
Scott & Stringfellow or any Scott & Stringfellow Subsidiary, to which
Scott & Stringfellow or any Scott & Stringfellow Subsidiary is obligated
to contribute or with respect to which Scott & Stringfellow or any Scott
& Stringfellow Subsidiary has any liability or potential liability,
whether direct or indirect. For purposes of this Agreement, the term
"Plan" shall mean a plan, arrangement, agreement or program described in
the foregoing provisions of this Section 2.20(b)(i) and which is: (A) an
employee benefit plan as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), whether or
not funded and whether or not terminated, or (B) a personnel policy or
fringe benefit plan, policy, program or arrangement, whether or not
subject to ERISA, whether or not funded, and whether or not terminated,
including without limitation, any stock bonus, deferred compensation,
pension, severance, bonus, vacation, travel, incentive, health,
disability or other pension or welfare plan.
(ii) Except as disclosed on SCHEDULE 2.20, neither Scott &
Stringfellow nor any Scott & Stringfellow 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 such
term is 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 current former employees, their
spouses or dependents, other than in accordance with Section 4980B of the
Code or applicable state continuation coverage law.
(iii) Except as disclosed in SCHEDULE 2.20, none of the Plans
obligates Scott & Stringfellow or any Scott & Stringfellow 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 the ownership or effective control of Scott &
Stringfellow or in the ownership of a substantial part of the assets of
Scott & Stringfellow within the meaning of Section 280G of the Code (and
regulations promulgated thereunder).
(iv) Each Plan and all related trusts, insurance contracts, and funds
have been maintained, funded and administered in compliance in all
respects with all applicable laws and regulations, including but not
limited to ERISA and the Code. None of Scott & Stringfellow, any Scott &
Stringfellow Subsidiary or, to the knowledge of Scott & Stringfellow, any
trustee or administrator of any Plan, or any other person has engaged in
any transaction with respect to any Plan which could subject Scott &
Stringfellow, any Scott & Stringfellow Subsidiary, any trustee or
administrator of any Plan, or any party dealing with any Plan, or BB&T to
any tax or penalty imposed by ERISA
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or the Code. No actions, suits, claims, complaints, charges, proceedings,
hearings, investigations, or demands with respect to the Plans (other
than routine claims for benefits) are pending or threatened, and Scott &
Stringfellow has no knowledge of any facts which could give rise to or be
expected to give rise to any actions, suits, claims, complaints, charges,
proceedings, hearings, investigations, or demands. Neither Scott &
Stringfellow nor any Scott & Stringfellow Subsidiary has in effect or has
had in effect any Plan subject to the funding requirements of Section 412
of the Code or Section 302 of ERISA.
(v) Each Plan that is intended to be qualified under Section 401(a) of
the Code, and each trust (if any) forming a part thereof, has received a
favorable determination letter from the Internal Revenue Service as to
the qualification under the Code of such Plan and the tax exempt status
of such related trust, and nothing has occurred since the date of such
determination letter that could adversely affect the qualification of
such Plan or the tax exempt status of such related trust.
(vi) No underfunded "defined benefit plan" (as such term is defined in
Section 3(35) of ERISA) has been, during the five years preceding the
Closing Date, transferred out of the controlled group of companies
(within the meaning of Sections 414(b), (c), (m) and (o) of the Code) of
which Scott & Stringfellow or any Scott & Stringfellow Subsidiary is a
member or was a member during such five-year period.
(vii) With respect to each Plan, all required or recommended payments,
premiums, contributions, reimbursements or accruals for all periods
ending prior to or as of the Closing Date shall have been made.
(viii) The Board of Directors of Scott & Stringfellow or the
appropriate Scott & Stringfellow Subsidiary, or a committee or officer
authorized by such Board, has authority to amend or terminate the Plans
at any time without limitation, and neither the consideration or
implementation of the transactions contemplated under this Agreement nor
the amendment or termination of any or all of the Plans on or after the
date of this Agreement will increase (A) Scott & Stringfellow's or any
Scott & Stringfellow 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.
(ix) With respect to each Plan, Scott & Stringfellow has provided BB&T
with true, complete and correct copies, to the extent applicable, of (A)
all documents pursuant to which the Plans are maintained, funded and
administered, (B) the two most recent annual reports (Form 5500 series)
filed with the Internal Revenue Service (with attachments), (C) the two
most recent financial statements, (D) all governmental rulings,
determinations, and opinions (and pending requests for governmental
rulings, determinations, and opinions), and (E) the most recent valuation
(but in any case at least one that has been completed within the last
calendar year) of the present and future obligations under each Plan that
provides post-retirement or post-employment health, life insurance,
accident or other "welfare-type" benefits.
2.21 LABOR MATTERS.
Scott & Stringfellow and the Scott & Stringfellow Subsidiaries are in
compliance with all federal, state and local laws affecting employment and
employment practices, including terms and conditions of employment, and wages
and hours, and have not engaged in any unfair labor practice. There are no
complaints against Scott & Stringfellow or any Scott & Stringfellow Subsidiary
pending or, to the best of Scott & Stringfellow's knowledge, threatened with
respect to employees of Scott & Stringfellow or any Scott & Stringfellow
Subsidiary before the National Labor Relations Board. There are no labor
strikes, slowdowns or stoppages pending or, to the best of Scott &
Stringfellow's knowledge, threatened by or with respect to employees of Scott &
Stringfellow or any Scott & Stringfellow Subsidiary. No representation
questions exist with respect to the employees of Scott & Stringfellow or any
Scott & Stringfellow Subsidiary, there are no grievances asserted which might
have a Scott & Stringfellow Material Adverse Effect, and neither Scott &
Stringfellow nor or any Scott & Stringfellow Subsidiary has experienced any
labor strikes, slowdowns or work stoppages. There are no collective bargaining
agreements now or previously in effect. All pending and, to the best of Scott &
Stringfellow's knowledge, threatened worker's compensation claims against Scott
& Stringfellow or any Scott & Stringfellow Subsidiary are adequately covered by
insurance.
2.22 CONTRACTS WITH AFFILIATES.
Except as set forth in SCHEDULE 2.22, none of the Material Contracts or
any other agreement, document or instrument (except for brokerage accounts and
brokerage transactions entered into in the ordinary course of business and
agreements governing employment) to which Scott & Stringfellow or any Scott &
Stringfellow Subsidiary has been a party during the
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past three years: (a) involves as a party (i) any officer, director or
shareholder of Scott & Stringfellow or any Scott & Stringfellow Subsidiary,
(ii) a member of the Immediate Family of any of the persons referred to in (i),
or (iii) any entity which any person or entity referred to in (i) or (ii)
controls or in which any such person or entity has a substantial interest,
direct or indirect, or is a director, officer, partner or trustee; or (b)
requires or required or is or was contingent upon the payment by or on behalf
of Scott & Stringfellow or any Scott & Stringfellow Subsidiary of commissions
or compensation to any person not a party to such agreement, document or
instrument. For purposes of this Agreement, "Immediate Family" means children
(including stepchildren), grandchildren, parents, stepparents, grandparents,
spouses, siblings, children, stepchildren and grandchildren of siblings,
mother-in-laws, father-in-laws, son-in-laws, daughter-in-laws, brother-in-laws
and sister-in-laws, including all adoptive relationships.
2.23 ACCOUNTING, TAX AND REGULATORY MATTERS.
Neither Scott & Stringfellow nor any Scott & Stringfellow Subsidiary has
taken or agreed to take any action which would or could reasonably be expected
to (i) cause the Merger not to constitute a reorganization under Section 368 of
the Code (except to the extent actions taken pursuant to this Agreement could
have such effect) or (ii) impede or delay receipt of any consents of regulatory
authorities referred to in Section 4.4(b) or result in failure of the
conditions set forth in Section 5.3.
2.24 CERTAIN INFORMATION.
When the Proxy Statement/Prospectus (as defined in Section 4.2) is mailed
to Shareholders, and at the time of the meeting of Shareholders to vote on the
Plan of Merger, the Proxy Statement/Prospectus and all amendments or
supplements thereto shall, with respect to all information set forth therein
relating to Scott & Stringfellow, 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.
2.25 BROKERS.
No finder, broker, agent, investment banker or other intermediary has
acted for or on behalf of Scott & Stringfellow in connection with the
negotiation or consummation of this Agreement or the BB&T Option Agreement, and
there are no claims for any brokerage commission, finders' fee, investment
banking fee or similar payment due from Scott & Stringfellow.
2.26 STATE TAKEOVER LAWS.
Scott & Stringfellow and the Scott & Stringfellow Subsidiaries have taken
all necessary action to exempt the transactions contemplated by this Agreement
from any applicable moratorium, fair price, business combination, control share
or other anti-takeover laws, including, without limitation, the provisions of
Sections 13.1-725 through 13.1-727.1 and 13.1-728.1 through 13.1-728.9 of the
VSCA.
2.27 NO DISSENTERS' RIGHTS.
Nothing in the Articles of Incorporation or the Bylaws of Scott &
Stringfellow or any Scott & Stringfellow Subsidiary provides or would provide
to any person, including without limitation the Shareholders, upon execution of
this Agreement, the Plan of Merger or the BB&T Option Agreement and
consummation of the transactions contemplated hereby and thereby, rights of
dissent and appraisal of any kind.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BB&T
BB&T hereby represents and warrants to Scott & Stringfellow as follows (no
representation or warranty herein of BB&T shall be deemed to be inaccurate
unless the inaccuracy would permit Scott & Stringfellow to refuse to consummate
the Merger under the applicable standard set forth in Section 5.2(a)):
3.1 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 no shares are issued and
outstanding, and (ii) 500,000,000 shares of BB&T Common Stock, of which
140,504,072 shares were issued and outstanding on June 30, 1998 with rights
attached pursuant to the Rights Agreement dated December 17, 1996 between BB&T
and Branch Banking and Trust Company. All outstanding shares of BB&T Common
Stock
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have been duly authorized and are validly issued, fully paid and nonassessable.
The shares of BB&T Common Stock reserved as provided in Section 4.3(b) are free
of any liens, claims or encumbrances 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.
3.2 ORGANIZATION, STANDING AND AUTHORITY OF BB&T.
BB&T is a corporation duly organized and validly existing under the laws
of the state of North Carolina, with full corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as now
conducted, 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 and where failure to qualify would have a
BB&T Material Adverse Effect (as defined in Section 5.2(a)). BB&T is registered
as a bank holding company under the Federal Bank Holding Company Act of 1956,
as amended.
3.3 AUTHORIZED AND EFFECTIVE AGREEMENT.
(a) BB&T 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, delivery and
performance of this Agreement have been duly and validly authorized by all
necessary corporate action on the part of BB&T. This Agreement, including
the Plan of Merger, constitutes the legal, valid and binding obligation of
BB&T, enforceable against BB&T in accordance with its terms subject to (i)
bankruptcy, insolvency, moratorium, reorganization, conservatorship,
receivership or 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).
(b) Neither the execution and delivery by BB&T of this Agreement nor the
performance of any other obligation of BB&T under this Agreement, conflicts
with, will result in the breach of, or constitutes a default under, the
terms of its Articles of Incorporation or Bylaws, any indenture or other
instrument or agreement to which BB&T is a party or by which any of its
assets may be bound or affected, or any statute, ordinance, judgment,
order, decree, regulation or rule of any court or governmental body
affecting or relating to BB&T or its assets, or will result in the creation
of any lien upon any assets of BB&T.
(c) Other than filings contemplated by Section 1.2 and the regulatory
consents required as provided in Section 4.4(b), no notice to, filing with
or consent of any public body or authority is necessary for the
consummation by BB&T of the Merger and the other transactions contemplated
by this Agreement.
3.4 SECURITIES FILINGS; FINANCIAL STATEMENTS.
(a) BB&T has timely filed with the Commission all documents required to
be filed by it by the Securities Act or the Exchange Act ("BB&T Securities
Filings") since December 31, 1995. The BB&T Securities Filings (i) complied
as to form with the applicable requirements under the Securities Act or the
Exchange Act, as the case may be, and (ii) 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 included in the BB&T Securities Filings
fairly present the consolidated financial position of BB&T and its
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 generally accepted accounting principles applied on a
consistent basis. Since December 31, 1997, there has been no BB&T Material
Adverse Effect.
3.5 ACCOUNTING, TAX AND REGULATORY MATTERS.
BB&T has not taken or agreed to take any action which would or could
reasonably be expected to (i) cause the Merger not to constitute a
reorganization under Section 368 of the Code (except to the extent actions
taken pursuant to this Agreement could have such effect), or (ii) impede or
delay receipt of any consents of regulatory authorities referred to in Section
4.4(b) or result in failure of the conditions set forth in Section 5.2.
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3.6 CERTAIN INFORMATION.
When the Proxy Statement/Prospectus (as defined in Section 4.2) is mailed
to Shareholders, and at the time of the meeting of Shareholders 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 relating
to BB&T, shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.
ARTICLE IV
COVENANTS
4.1 SHAREHOLDERS' MEETING.
Scott & Stringfellow shall submit this Reorganization Agreement and the
Plan of Merger to its shareholders for approval at a special meeting to be held
as soon as practicable, and by approving execution of this Agreement the Board
of Directors of Scott & Stringfellow agrees that it shall recommend that the
shareholders vote for such approval; provided, that the Board of Directors of
Scott & Stringfellow may withdraw or refuse to make such recommendation if and
only if, in good faith reliance on written advice of its financial and legal
advisors, the Board of Directors shall determine that such recommendation would
violate its fiduciary duty to shareholders of Scott & Stringfellow. Subject to
the foregoing, each of Frederic Scott Bocock, Sidney Buford Scott, John J.
Muldowney, David Plageman, William F. Calliott, John Sherman, Jr. and R. Bruce
Campbell, as a shareholder of Scott & Stringfellow, agrees by executing this
Agreement (i) that he will vote all shares of Scott & Stringfellow owned by him
in favor of the Plan of Merger and (ii) that he will not transfer any shares of
Scott & Stringfellow from and after the date hereof, except pursuant to this
Agreement or with the prior written consent of BB&T.
4.2 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS.
As promptly as practicable after the date hereof, BB&T shall prepare and
file a registration statement (including any pre-effective and post-effective
amendments, the "Registration Statement") 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. Scott &
Stringfellow 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 and prospectus, together with any
supplements thereto, to be sent to the Shareholders to solicit their votes in
connection with a proposal to approve this Agreement and the Plan of Merger
(the "Proxy Statement/Prospectus"). BB&T and Scott & Stringfellow shall use
their reasonable best efforts to cause the Proxy Statement/Prospectus to be
approved by the Commission for mailing to the Shareholders, and such Proxy
Statement/Prospectus shall, on the date of mailing, conform in all material
respects to the requirements of applicable securities laws and the applicable
rules and regulations of the Commission thereunder. Scott & Stringfellow shall
cause the Proxy Statement/Prospectus to be mailed to Shareholders in accordance
with all applicable notice requirements.
4.3 PLAN OF MERGER; RESERVATION OF SHARES.
(a) Subject to the provisions of Article V, the Merger shall be effected
at the Effective Time in accordance with the Plan of Merger substantially
in the form attached hereto as Exhibit A. Subject to consummation of the
Merger, BB&T further undertakes and agrees to effect the merger of
subsidiaries contemplated by Section 4.17.
(b) BB&T has reserved for issuance such number of shares of BB&T Common
Stock estimated to be necessary to pay the Merger Consideration as
contemplated in Section 1.7, and BB&T undertakes and agrees to pay the
Merger Consideration when due. If at any time the aggregate number of
shares of BB&T Common Stock reserved for issuance hereunder shall not be
sufficient to effect the Merger, BB&T shall take all appropriate action as
may be required to increase the number of shares of BB&T Common Stock
reserved for such purpose.
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4.4 ADDITIONAL ACTS.
(a) With the consent of Scott & Stringfellow, which consent shall not
unreasonably be withheld, BB&T may modify the structure of, or substitute
parties to, the transactions contemplated hereby, provided that such
modifications do not adversely affect the economic benefits of such
transactions to shareholders of Scott & Stringfellow or otherwise abrogate
the covenants and other agreements contained in this Agreement.
(b) As promptly as practicable after the date hereof, BB&T shall submit
notice or applications for prior approval of the transactions contemplated
herein to the Board of Governors of the Federal Reserve 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. Scott &
Stringfellow shall provide information required for such filings promptly
upon the request of BB&T. Scott & Stringfellow represents and warrants that
all information concerning it and its directors, officers and shareholders
submitted for inclusion in any such application shall be true, correct and
complete in all material respects as of the date presented.
4.5 BEST EFFORTS.
BB&T and Scott & Stringfellow shall each use its best efforts in good
faith (i) to furnish such information as may be required in connection with,
and otherwise cooperate in, the preparation and filing of the Registration
Statement and the documents referred to in Section 4.4(b) and elsewhere herein,
and (ii) to take or cause to be taken all action necessary or desirable on its
part to fulfill the conditions in Article V, including without limitation,
executing and delivering, or causing to be executed and delivered such
representations, certificates and other instruments or documents as may be
reasonably requested by Scott & Stringfellow's legal counsel for such counsel
to issue the opinion contemplated by Section 5.1(e), and to consummate the
transactions herein contemplated at the earliest possible date. Neither BB&T
nor Scott & Stringfellow 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.
4.6 CERTAIN ACCOUNTING MATTERS.
Scott & Stringfellow 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).
4.7 ACCESS TO INFORMATION.
Scott & Stringfellow will keep BB&T advised of all material developments
relevant to its business and to consummation of the Merger. Upon reasonable
notice, Scott & Stringfellow shall afford to representatives of BB&T access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments and records and, during such
period, shall make available to representatives of BB&T all information
concerning its business as BB&T may reasonably request. No investigation
pursuant to this Section 4.7 or otherwise in this Agreement shall affect or be
deemed to modify any representation or warranty made by Scott & Stringfellow,
or the conditions to any of its obligations hereunder. 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 respect
to confidentiality to survive any termination of this Agreement notwithstanding
Section 7.3. 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.
4.8 PRESS RELEASES.
BB&T and Scott & Stringfellow 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.
4.9 FORBEARANCES OF SCOTT & STRINGFELLOW.
Except with the prior written consent of BB&T, between the date hereof and
the Effective Time, Scott & Stringfellow shall not, and shall cause each of the
Scott & Stringfellow Subsidiaries to not:
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(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 subsidiary;
(b) declare, set aside, make or pay any dividend or other distribution in
respect of its capital stock, other than regularly scheduled dividends
payable in cash on record dates and in amounts consistent with past
practices and other than as provided in Section 1.11, or permit or accept
any contributions to capital or other increases in equity, except pursuant
to (i) the exercise of Stock Options outstanding as of the date hereof
pursuant to the Stock Option Plan, (ii) the BB&T Option Agreement, or (iii)
the payment of principal on loans made pursuant to the Stock Purchase Loan
Plan and secured by shares of Scott & Stringfellow Common Stock purchased
under the Stock Purchase Loan Plan;
(c) issue any shares of its capital stock (except as permitted in (b)
preceding), pursuant to conversion rights or otherwise; issue, grant or
authorize any rights to acquire its capital stock; or effect any
recapitalization, reclassification, stock dividend, stock split or like
change in capitalization;
(d) amend its Articles of Incorporation or Bylaws;
(e) impose or permit imposition of any lien, charge or encumbrance on any
material asset, or permit any such lien, charge or encumbrance to exist,
except 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 material to
its business or acquire any assets material to its business, other than in
the ordinary course of its business; or waive or release any material right
or cancel or compromise any debt or claim other than in the ordinary course
of business;
(g) except as set forth on SCHEDULE 4.9(G), increase the rate of
compensation of any of its directors, officers or employees, or pay or
agree to pay any bonus to, or provide any other employee benefit or
incentive to, any of its directors, officers or employees, except in the
ordinary course of business consistent with past practices, or change the
commission payout schedule for its registered representatives;
(h) 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;
(i) 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, Scott &
Stringfellow or any Scott & Stringfellow Subsidiary, or any business
combination with Scott & Stringfellow or any Scott & Stringfellow
Subsidiary other than as contemplated by this Agreement; or authorize any
officer, director, agent or affiliate of Scott & Stringfellow 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 (i) shall not apply to furnishing information,
negotiations or discussions following an unsolicited offer if, as a result
of such offer, Scott & Stringfellow is advised in writing by legal counsel
that in its opinion the failure so to furnish information or negotiate
would likely constitute a breach of the fiduciary duty of Scott &
Stringfellow's Board of Directors to shareholders;
(j) enter into any material (i) agreement, arrangement or commitment not
made in the ordinary course of business, including, without limitation,
agreements or memoranda of understanding with regulatory authorities, (ii)
agreement, indenture or other instrument not made in the ordinary course of
business relating to the borrowing of money by Scott & Stringfellow or any
Scott & Stringfellow Subsidiary or guarantee by Scott & Stringfellow or any
Scott & Stringfellow Subsidiary of any obligation, (iii) agreement,
arrangement or commitment relating to the employment or severance of a
consultant or the employment, severance, election or retention in office of
any present or former director, officer or employee (except for agreements
with brokers, traders and investment bankers in the ordinary course of
business consistent with past practice); or (iv) contract, agreement or
understanding with a labor union;
(k) change its underwriting, trading, investment banking, sales,
investment or asset liability management policies in any material respect,
except as may be required by applicable law, regulation, or directives;
(l) change its method of accounting as in effect at June 27, 1997, except
as required by changes in generally accepted accounting principles
concurred in by BB&T or change in any material respect any of its methods
of reporting income and deductions for federal income tax purposes from
those employed in the preparation of its federal income tax returns for the
year ended June 27, 1997, except as required by changes in law or
regulation;
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(m) incur any capital expenditures or obligation to make capital
expenditures in excess of $100,000 for any one expenditure or $500,000 in
the aggregate;
(n) incur any indebtedness other than in the ordinary course of business;
(o) take any action which would or would be reasonably likely to (i)
cause the business combination contemplated hereby not to constitute a
reorganization under Section 368 of the Code, (ii) result in any
representation or warranty herein being untrue in any material respect at
or prior to the Effective Time, or (iii) cause any of the conditions
precedent to the transactions contemplated by this Agreement to fail to be
satisfied; except, in each case, as may be required by applicable law or
regulation;
(p) agree to do any of the foregoing.
4.10 EMPLOYMENT AND NONCOMPETITION AGREEMENTS.
BB&T shall cause the Surviving Subsidiary (as defined in Section 4.17) to
enter into Employment and Noncompetition Agreements substantially in the form
of Exhibit B (each, an "Employment Agreement") with those employees of Scott &
Stringfellow set forth on SCHEDULE 4.10, and, by his signature hereto, each
such employee agrees to execute such agreement.
4.11 AFFILIATES.
Scott & Stringfellow shall cause all persons who are "affiliates" of Scott
& Stringfellow, within the meaning of Rule 145 promulgated by the Commission to
deliver to BB&T prior to the Effective Time a written agreement substantially
in the form of Exhibit C hereto.
4.12 EMPLOYEE BENEFIT PLANS.
(a) At the Effective Time, all then employees of Scott & Stringfellow and
the Scott & Stringfellow Subsidiaries ("Scott & Stringfellow Employees")
will become employees of the Surviving Subsidiary (as defined in Section
4.17). Except as provided in Section 4.12(c), the Surviving Subsidiary
shall maintain following the Effective Time the 401(k)/ profit sharing,
group hospitalization, medical, dental, life, disability, severance and
other welfare benefit plans and programs available prior to the Effective
Time to Scott & Stringfellow Employees, subject to the right of the Board
of Directors of the Surviving Subsidiary to amend or terminate such benefit
plans and programs. For purposes of determining eligibility to participate
in and the vesting of benefits under any such plan or program, but not for
purposes of the accrual of benefits, service with Scott & Stringfellow or a
Scott & Stringfellow Subsidiary shall be deemed to be service with the
Surviving Subsidiary. For the purpose of applying any preexisting condition
exclusions or actively-at-work requirements under any welfare benefit plan
of the Surviving Subsidiary, the Surviving Subsidiary shall treat service
with Scott & Stringfellow or any Scott & Stringfellow Subsidiary as service
with the Surviving Subsidiary. Any covered expenses incurred by the Scott &
Stringfellow Employees on or prior to the Effective Time shall be taken
into account for purposes of satisfying applicable deductible, coinsurance
and maximum out-of-pocket provisions after the Effective Time to the extent
that such expenses are taken into account for the benefit of similarly
situated employees of the Surviving Subsidiary. Without limiting the
generality of the foregoing, BB&T agrees to make a lump sum severance
payment to any Scott & Stringfellow Employee whose employment is terminated
by the Surviving Subsidiary without fault of the Scott & Stringfellow
Employee within one year following the Closing Date, such payment to equal
the product of (i) the Scott & Stringfellow Employee's weekly base salary
as of the effective date of his or her termination times (ii) a number of
weeks equal to one week for each year that the Scott & Stringfellow
Employee served as such (but not fewer than two weeks).
(b) BB&T agrees to assume or to cause the Surviving Subsidiary to assume
as of the Effective Time all employment agreements, severance agreements
and all agreements in respect of the Scott & Stringfellow Deferred
Compensation Plan that Scott & Stringfellow or the Scott & Stringfellow
Subsidiaries have with their current and former employees and directors,
except to the extent any such agreements shall be superseded or terminated
at the Closing or following the Closing Date. In the event that the
Effective Time is prior to December 31, 1998, BB&T further agrees to cause
the Surviving Subsidiary to pay bonuses to Scott & Stringfellow Employees
for 1998, the aggregate amount of such bonuses not to exceed the bonus pool
established consistent with past practice by the Compensation Committee of
the Scott & Stringfellow Board of Directors as constituted immediately
prior to the Effective Time (the "Scott & Stringfellow Compensation
Committee"); provided, that the bonus pool shall be established before all
extraordinary expenses related to the Merger are expensed, and such
extraordinary expenses shall be disregarded in establishing the
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bonus pool. The bonus pool will be allocated among Scott & Stringfellow
Employees in the sole discretion of the Scott & Stringfellow Compensation
Committee.
(c) Effective August 10, 1998, Scott & Stringfellow shall take or shall
have taken any and all action necessary to terminate the Stock Purchase
Plan, and no purchases of shares of Scott & Stringfellow Common Stock shall
be made under the Stock Purchase Plan after July 2, 1998.
4.13 OFF-BALANCE SHEET POSITIONS.
As promptly as practicable, and in any event not later than thirty days
after the date of this Agreement, Scott & Stringfellow shall notify BB&T of all
of its or any Scott & Stringfellow Subsidiary's off-balance sheet hedges and
derivatives. Thereafter, the parties shall use their best efforts to develop
and complete prior to the Closing Date a hedging strategy or strategies
relating to the different classes of securities forming part of Scott &
Stringfellow's inventories.
4.14 RETENTION PLAN.
(a) As of the Effective Time, BB&T shall establish a retention pool
comprised of shares of BB&T Common Stock. The number of such shares
comprising the retention pool shall be determined by dividing $15,000,000
by the Average Closing Price. Such shares will be held for distribution
pursuant to the Executive and Employee Retention Plan (the "Retention
Plan"), which will be adopted by the Surviving Subsidiary as of the
Effective Time and will provide to each employee listed on SCHEDULE 4.14
the opportunity to receive a distribution of the percentage set forth
beside the employee's name on SCHEDULE 4.14 of the number of shares in the
retention pool (rounded to the nearest whole share). Subject to the
condition set forth in the following sentence, each such employee will be
entitled to receive 15% of the shares of BB&T Common Stock to which he or
she is entitled (based on the percentage set forth on SCHEDULE 4.14) as of
July 31, 1999, 20% as of July 31, 2000, 30% as of July 31, 2001 and 35% as
of July 31, 2002 (each such July 31, a "Retention Vesting Date"). Except as
provided in (i) any Employment Agreement contemplated by Section 4.10 or
(ii) Section 4.14(b), no distribution shall be made under the Retention
Plan with respect to any Retention Vesting Date to any employee who shall
not be actually employed by the Surviving Subsidiary (or BB&T or another
subsidiary of BB&T) continuously from the Effective Time through such
Retention Vesting Date, and all rights to receive future distributions
under the Retention Plan shall be forfeited by any employee from and after
the date of termination of the employment of such employee for any reason;
provided, that, notwithstanding anything in this Section 4.14(a) to the
contrary, in the event of both (x) a "Change of Control" (as defined in the
Employment Agreements) of BB&T and (y) the involuntary termination of the
employment with the Surviving Subsidiary of all of John Sherman, Jr.,
Steven C. DeLaney and Charles E. Mintz within six months following the
effective date of such Change of Control, each employee listed on SCHEDULE
4.14 who was continually employed by the Surviving Subsidiary through the
effective date of the Change of Control shall be entitled to receive,
within thirty days after the last of the terminations of employment
referenced in (y), the percentage set forth on SCHEDULE 4.14 for such
employee of the shares of BB&T Common Stock remaining in the retention
pool. Except as provided in the immediately preceding proviso, all
distributions pursuant to the Retention Plan to any employee as of any
Retention Vesting Date shall be made within thirty days following such
Retention Vesting Date. The Retention Plan shall provide for registration
of the shares of BB&T Common Stock to be distributed pursuant thereto.
(b) Notwithstanding anything in Section 4.14(a) to the contrary, if an
employee who would otherwise be eligible to participate in the Retention
Plan shall be unable to carry out the essential functions of his employment
by the Surviving Subsidiary (or BB&T or another subsidiary of BB&T) by
reason of physical or mental disability but shall continue to receive
salary payments and benefits pending termination of his employment on
account of disability, such employee shall be deemed for purposes of the
Retention Plan to have been continuously employed during the period such
salary payments and benefits continue (the "Compensation Continuation
Period"); provided, however, that the number of shares distributable to
such employee as of a Retention Vesting Date occurring during a
Compensation Continuation Period shall equal the number of shares that
would have been distributable to such employee if his or her employment had
actually continued uninterrupted through the Retention Vesting Date
multiplied by a fraction, the numerator of which is the number of days on
which such employee actively rendered services for the Surviving Subsidiary
(or BB&T or another subsidiary of BB&T) during the one-year period ending
on the Retention Vesting Date, and the denominator of which is the number
of days in such period.
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4.15 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 Shareholders 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.
4.16 DIRECTORS AND OFFICERS PROTECTION.
(a) BB&T or a subsidiary of BB&T shall purchase and keep in force
(through its existing policy or otherwise) for a period of three years
after the Effective Time directors' and officers' liability insurance
providing coverage to directors and officers of Scott & Stringfellow for
acts or omissions occurring prior to the Effective Time. Such insurance
shall provide at least the same coverage and amounts as contained in Scott
& Stringfellow'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 Scott & Stringfellow'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.
(b) Notwithstanding Section 4.16(a), for a period of six years following
the Effective Time, BB&T agrees to indemnify (and advance expenses to) all
individuals who are or have been officers, directors or employees of Scott
& Stringfellow or any Scott & Stringfellow Subsidiary prior to the
Effective Time ("Indemnified Parties") from any acts or omissions
(including any acts or omissions taken in connection with the transactions
contemplated by this Agreement) in such capacities prior to the Effective
Time, to the fullest extent that such indemnification is provided pursuant
to the Articles of Incorporation of Scott & Stringfellow on the date hereof
and is permitted under the VSCA; provided, that (i) any determination as to
whether a purported Indemnified Party's conduct complied with the standards
set forth under Virginia law or the Articles of Incorporation of Scott &
Stringfellow shall be made by independent counsel (which shall not be
counsel that provides material services to BB&T) selected by BB&T and
reasonably acceptable to the purported Indemnified Party and (ii) in the
absence of applicable Virginia judicial precedent to the contrary, such
counsel, in making such determination, shall presume that the conduct in
question complied with the applicable standards, and BB&T shall have the
burden to demonstrate that such conduct failed to comply with such
standards.
(c) The provisions of this Section 4.17 are intended to be for the
benefit of, and enforceable by, Indemnified Parties.
4.17 MERGER OF SUBSIDIARIES.
Simultaneously with the Closing, or as soon thereafter as practicable,
BB&T shall cause Scott & Stringfellow, Inc. (and, in BB&T's sole discretion,
Scott & Stringfellow Realty, Inc.) to merge with Craigie Incorporated, a
Virginia corporation and a wholly owned subsidiary of BB&T. The name of the
surviving corporation of such merger shall be Scott & Stringfellow, Inc. (the
"Surviving Subsidiary").
4.18 BOARD OF DIRECTORS OF THE SURVIVING SUBSIDIARY.
Upon effectiveness of the merger contemplated by Section 4.17, BB&T shall
elect a Board of Directors of the Surviving Subsidiary comprised of S. Buford
Scott, Frederick S. Bocock, John Sherman, Jr., Steven C. DeLaney, Charles E.
Mintz and seven additional members selected by BB&T. S. Buford Scott shall be
appointed the initial Chairman of the Board of Directors, and Frederick S.
Bocock shall be appointed as initial Vice Chairman of the Board of Directors.
Subject to the proviso at the end of this sentence, Messrs. Scott and Bocock
shall remain on the Board of Directors of the Surviving Subsidiary until they
reach age 70, and Messrs. Sherman, DeLaney and Mintz shall remain on the Board
of Directors of the Surviving Subsidiary for so long as they are employed by
the Surviving Subsidiary pursuant to the Employment Agreements contemplated by
Section 4.10; provided, however, that the service as a director of each of the
foregoing is subject to (i) his eligibility and willingness to serve and (ii)
the conditions that he shall have complied with all fiduciary duties to BB&T
and the Surviving Subsidiary, shall not have been involved in any action that
disqualifies him from serving or that would bring discredit to BB&T, the
Surviving Subsidiary or any other entity affiliated with BB&T and shall have
carried out his duties to BB&T and the Surviving Subsidiary in a reasonably
competent, businesslike and attentive manner. The provisions of this Section
4.18 are intended to be for the benefit of, and enforceable by, the individuals
named in this Section 4.18. No member of the Board of Directors of the
Surviving Subsidiary following the Merger shall receive compensation for
services provided in such capacity.
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4.19 FORBEARANCES OF BB&T.
Except with the prior written consent of Scott & Stringfellow, between the
date hereof and the Effective Time, BB&T shall not, and shall cause each of its
subsidiaries to not take any action which would or would be reasonably likely
to (i) cause the business combination contemplated hereby not to constitute a
reorganization under Section 368 of the Code, (ii) result in any representation
or warranty herein being untrue in any material respect at or prior to the
Effective Time, or (iii) cause any of the conditions precedent to the
transactions contemplated by this Agreement to fail to be satisfied; except, in
each case, as may be required by applicable law or regulation;
ARTICLE V
CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT -- BB&T AND SCOTT & STRINGFELLOW.
The respective obligations of BB&T and Scott & Stringfellow to effect the
transactions contemplated by this Agreement shall be subject to satisfaction or
waiver of the following conditions at or prior to the Effective Time:
(a) All corporate action necessary to authorize the execution, delivery
and performance of this Agreement and the Plan of Merger, and consummation
of the transactions contemplated hereby and thereby, shall have been duly
and validly taken, including, without limitation, the approval of the
Shareholders of the Agreement and the Plan of Merger.
(b) The Registration Statement (including any post-effective amendments
thereto) shall be effective under the Securities Act, no proceedings shall
be pending or to the knowledge of BB&T threatened by the Commission 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 BB&T's subsidiaries, Scott & Stringfellow or any
Scott & Stringfellow Subsidiary shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated by this Agreement.
(e) Each of BB&T and Scott & Stringfellow shall have received an opinion
of McGuire, Woods, Battle & Boothe LLP, Scott & Stringfellow's legal
counsel, in form and substance satisfactory to BB&T and Scott &
Stringfellow, substantially to the effect that the Merger will constitute a
"reorganization" within the meaning of Section 368 of the Code and that the
Shareholders will not recognize any gain or loss to the extent that such
Shareholders exchange shares of Scott & Stringfellow Common Stock for
shares of BB&T Common Stock, except with respect to cash received in lieu
of fractional shares. In rendering its opinion, McGuire, Woods, Battle &
Boothe LLP may require and rely upon representations contained in letters
or certificates from Scott & Stringfellow, BB&T and certain Shareholders.
5.2 CONDITIONS PRECEDENT -- SCOTT & STRINGFELLOW.
The obligations of Scott & Stringfellow 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 Scott & Stringfellow pursuant to Section 7.4:
(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 Scott & Stringfellow. The representations and warranties of BB&T
set forth in Sections 3.1, 3.2 (except as relates to qualification), 3.3
(with respect to Section 3.3(b), only as relates to BB&T's Articles of
Incorporation and Bylaws) and 3.5 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
the Sections designated in the preceding sentence) such that the effect of
such inaccuracies individually or in the aggregate (i) has, or is
reasonably likely to have, a material adverse effect on the financial
condition, results of operations, business or business prospects of BB&T
and its subsidiaries taken as
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a whole, or (ii) materially impairs the ability of BB&T to perform its
obligations under this Agreement or to consummate the Merger and the other
transactions contemplated by this Agreement (herein, a "BB&T Material
Adverse Effect").
(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 Scott & Stringfellow 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 5.1(a), 5.1(b), 5.1(c), 5.2(a) and 5.2(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 result in a BB&T Material Adverse Effect or
that present a claim to restrain or prohibit the transactions contemplated
herein or in the Plan of Merger.
(d) Scott & Stringfellow shall have received opinions of Womble Carlyle
Sandridge & Rice, PLLC, counsel to BB&T, substantially in the form attached
as Exhibit D.
(e) 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.
5.3 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 Scott & Stringfellow 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
Scott & Stringfellow set forth in Sections 2.1, 2.2 (except as relates to
qualification), 2.3, 2.4, 2.5 (as such Section 2.5 relates to Scott &
Stringfellow's Articles of Incorporation and Bylaws), 2.23 and 2.26 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 Scott & Stringfellow 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 (i) has, or is reasonably likely to have,
a material adverse effect on the financial condition, results of
operations, business or business prospects of Scott & Stringfellow and the
Scott & Stringfellow Subsidiaries taken as a whole, or (ii) materially
impairs the ability of Scott & Stringfellow to perform its obligations
under this Agreement or to consummate the Merger and the other transactions
contemplated by this Agreement (herein, a "Scott & Stringfellow Material
Adverse Effect").
(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 inadvisable or unduly burdensome.
(c) Scott & Stringfellow shall have performed in all material respects
all obligations and complied in all material respects with all covenants
required by this Agreement.
(d) Scott & Stringfellow 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 5.1(a), 5.1(c), 5.3(a) and
5.3(c) hereof, to the extent applicable to Scott & Stringfellow, 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
Scott & Stringfellow Material Adverse Effect 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 McGuire, Woods, Battle & Boothe,
L.L.P., counsel to Scott & Stringfellow, substantially in the form of
Exhibit E.
(f) BB&T shall have received the written agreements from Affiliates as
specified in Section 4.11 hereof to the extent necessary, in the reasonable
judgment of BB&T, to promote compliance with Rule 145 promulgated by the
Commission.
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ARTICLE VI
CLOSING
6.1 DELIVERIES BY SCOTT & STRINGFELLOW.
At the Closing, Scott & Stringfellow shall deliver, or cause to be
delivered, to BB&T the following:
(a) An opinion of McGuire, Woods, Battle & Boothe, L.L.P., counsel to
Scott & Stringfellow, in compliance with Section 5.3(e) and dated the
Closing Date;
(b) Corporate resolutions duly adopted by the Board of Directors and
shareholders of Scott & Stringfellow, authorizing the execution, delivery
and performance of this Agreement, duly certified by the Secretary of Scott
& Stringfellow, and an incumbency certificate certifying the names and true
signatures of the officers of Scott & Stringfellow executing and delivering
this Agreement;
(c) A copy of the Articles of Incorporation of Scott & Stringfellow and
each Scott & Stringfellow Subsidiary, certified as of a date not more than
ten days prior to the Closing Date by the State Corporation Commission of
Virginia;
(d) A certificate of good standing or corporate existence for Scott &
Stringfellow and each Scott & Stringfellow Subsidiary, issued as of a date
not more than ten days prior to the Closing Date by the State Corporation
Commission of Virginia, and a certificate from the Department of Revenue or
Taxation of the Commonwealth of Virginia stating that all required taxes
have been paid in full by Scott & Stringfellow and each Scott &
Stringfellow Subsidiary;
(e) The compliance certificate required pursuant to Section 5.3(d); and
(f) Such other documents as are required hereby to be delivered by Scott
& Stringfellow or as otherwise shall reasonably be required to carry out
the transactions contemplated by this Agreement, duly executed by Scott &
Stringfellow.
6.2 DELIVERIES BY BB&T.
At the Closing, BB&T shall deliver, or cause to be delivered, to Scott &
Stringfellow the following:
(a) An opinion of Womble Carlyle Sandridge & Rice, PLLC, counsel to BB&T,
in compliance with Section 5.2(d) and dated the Closing Date;
(b) Corporate resolutions duly adopted by the Boards of Directors of BB&T
authorizing the execution, delivery and performance of this Agreement, duly
certified by the Secretary of BB&T, and an incumbency certificate
certifying the names and true signatures of the officers of BB&T executing
and delivering this Agreement;
(c) The compliance certificate required pursuant to Section 5.2(c); and
(d) Such other documents as are required hereby to be delivered by BB&T
or as otherwise shall reasonably be required to carry out the transactions
contemplated by this Agreement, duly executed by BB&T.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 TERMINATION.
This Agreement may be terminated:
(a) At any time prior to the Effective Time, by the mutual consent in
writing of the parties hereto.
(b) At any time prior to the Effective Time, by either party (i) in the
event of a material breach by the other party of any covenant or agreement
contained in this Agreement, or (ii) in the event of an inaccuracy of any
representation or warranty of the other party contained in this Agreement,
which inaccuracy would provide the nonbreaching party the ability to refuse
to consummate the Merger under the applicable standard set forth in Section
5.2(a) in the case of Scott & Stringfellow and Section 5.3(a) 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.
(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 so as to provide the other party with the
ability to refuse to consummate the Merger under
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the applicable standards set forth in Sections 5.2(a) and 5.2(b), in the
case of Scott & Stringfellow, and Sections 5.3(a) and 5.3(c), in the case
of BB&T.
(d) At any time, by either party hereto in writing, if any of the
applications for prior approval referred to in Section 5.1(c) 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
do not approve the Agreement and the Plan of Merger.
(f) At any time following March 31, 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 so as to
provide the other party with the ability to refuse to consummate the Merger
under the applicable standards set forth in Sections 5.2(a) and 5.2(b), in
the case of Scott & Stringfellow, and 5.3(a) and 5.3(c), in the case of
BB&T.
7.2 EFFECT OF TERMINATION.
In the event this Agreement and the Plan of Merger is terminated pursuant
to Section 7.1, both this Agreement and the Plan of Merger shall become void
and have no effect, except that (i) the provisions hereof relating to
confidentiality and expenses set forth in the last two sentences of Section 4.7
and in Section 8.3, respectively, shall survive any such termination and (ii) a
termination pursuant to Section 7.1(b) shall not relieve the breaching party
from liability for an uncured breach of the covenant, agreement, understanding,
representation or warranty giving rise to such termination. The BB&T Option
Agreement shall be governed by its own terms.
7.3 EXPIRATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Except as otherwise provided herein, 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.
7.4 WAIVER.
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 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 parties 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 parties, or satisfaction of any of the
conditions precedent to its obligations, contained herein or in the Plan of
Merger (except with respect to any required regulatory approval), or (iii) the
performance by the other parties of any of their 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 Shareholders of
this Agreement and the Plan of Merger, shall have the effects set forth in
Section 13.1-718(I) of the VSCA without the approval of the Shareholders.
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 Scott & Stringfellow, subject
to the proviso to Section 7.4.
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ARTICLE VIII
MISCELLANEOUS
8.1 NOTICES.
All notices, requests, demands and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been given (a) when received, if delivered in person, (b) when sent, if sent by
facsimile transmission, or (c) the day following the date deposited with a
nationally recognized overnight courier (with charges prepaid), in any such
case as follows:
If to Scott & Stringfellow, to:
John Sherman, Jr.
909 East Main Street
Richmond, Virginia 23219
Fax No.: 804-643-4918
with a copy (which shall not constitute notice) to:
R. Gordon Smith
McGuire, Woods, Battle, & Boothe, L.L.P.
One James Center
901 East Cary Street
Richmond, Virginia 23219-4030
Fax No.: 804-775-1061
If to BB&T, to:
BB&T Corporation
200 West Second Street
Winston-Salem, North Carolina 27101
Attention: Scott E. Reed
Fax No.: 336-773-0340
with a copy (which shall not constitute notice) to:
William A. Davis, II
Womble Carlyle Sandridge & Rice, PLLC
Post Office Drawer 84
Winston-Salem, NC 27102
Fax No.: 336-733-8364
or at such other address or addresses as any party may have advised the other
in the manner provided in this Section 8.1.
8.2 COMPLETE AGREEMENT.
This Agreement, together with its exhibits and schedules, sets forth the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements, contracts, promises, representations,
warranties, statements, arrangements and understandings, if any, among the
parties hereto or their representatives. No waiver, modification or amendment
of any provision, term or condition hereof shall be valid unless in writing and
signed by the party to be charged therewith, and any such waiver, modification
or amendment shall be valid only to the extent therein set forth.
8.3 EXPENSES.
Whether or not the transactions contemplated by this Agreement are
consummated, each of Scott & Stringfellow and BB&T shall pay its own expenses
(including, without limitation, attorneys' and accountants' fees and
disbursements) incident to this Agreement and the transactions contemplated
hereby.
8.4 GOVERNING LAW.
The validity, performance, construction and effect of this Agreement shall
be governed by the substantive laws of the State of North Carolina, without
regard to the provisions for choice of law thereunder.
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8.5 BINDING EFFECT.
This Agreement (and the BB&T Option Agreement) shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
8.6 SEVERABILITY.
Any provision of this Agreement which may be determined by competent
authority to be prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
8.7 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which taken together shall constitute a
single agreement.
8.8 CAPTIONS.
The captions appearing in this Agreement are inserted only as a matter of
convenience and for reference and shall in no way affect the interpretation or
construction of this Agreement or any of the provisions hereof.
8.9 SPECIFIC PERFORMANCE.
Scott & Stringfellow, the Shareholders and Scott & Stringfellow Employees
who are parties hereto, acknowledge that if Scott & Stringfellow or any such
Shareholder or employee 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 to seek, in
addition to other remedies at law or at equity, specific performance of this
Agreement if Scott & Stringfellow or any such Shareholder or employee shall,
without cause, refuse to consummate the transactions contemplated by this
Agreement.
8.10 INITIAL MERGER AGREEMENT.
This Agreement, executed September 16, 1998, amends and supersedes in its
entirety the Initial Merger Agreement which was effective August 10, 1998, and
following execution hereof the Initial Merger Agreement shall have no further
force and effect. All references in this Agreement to "the date hereof" or "the
date of this Agreement" shall mean August 10, 1998, and all agreements,
covenants, representations and warranties set forth in this Agreement shall be
deemed to have been made on August 10, 1998 or, in the case of any agreement,
covenant, representation or warranty that specifically designates a different
date, on the date designated (except that the provisions of Section 1.11,
providing for payment of a special cash dividend, shall be effective September
16, 1998, the date of execution of this Agreement as amended and restated).
8.11 BB&T OPTION AGREEMENT.
As a condition and inducement to BB&T to enter into the Initial Merger
Agreement, Scott & Stringfellow granted to BB&T concurrently with execution
thereof an option to acquire, under certain circumstances, 652,399 shares of
the common stock of Scott & Stringfellow pursuant to the terms of a Stock
Option Agreement dated August 10, 1998 (the "BB&T Option Agreement"). The
parties hereto acknowledge that this Agreement represents ongoing consideration
for the BB&T Option Agreement, and that the BB&T Option Agreement shall
continue in effect in accordance with its terms.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
A-26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
BB&T CORPORATION
By: /s/ JOHN A. ALLISON
----------------------------------
Title: Chairman and Chief
Executive Officer
SCOTT & STRINGFELLOW FINANCIAL,
INC.
By: /s/ S. B. SCOTT
----------------------------------
Title: Chairman
The undersigned, being Shareholders of Scott & Stringfellow Financial,
Inc. on the date hereof, hereby consent to the provisions of the foregoing
Amended and Restated Agreement and Plan of Reorganization as applicable to
them, including, without limitation, the provisions of Section 4.1 obligating
them to vote in favor of the Merger and restricting rights to transfer shares
of Scott & Stringfellow Common Stock; Article VII relating to termination of
the Agreement and Plan of Reorganization; and Section 8.9 relating to specific
performance.
This the 16th day of September, 1998.
/s/ FREDERICK SCOTT BOCOCK
----------------------------------
FREDERIC SCOTT BOCOCK
/s/ SIDNEY BUFORD SCOTT
----------------------------------
SIDNEY BUFORD SCOTT
/s/ JOHN J. MULDOWNEY
----------------------------------
JOHN J. MULDOWNEY
/s/ DAVID PLAGEMAN
----------------------------------
DAVID PLAGEMAN
/s/ WILLIAM F. CALLIOTT
----------------------------------
WILLIAM F. CALLIOTT
/s/ JOHN SHERMAN, JR.
----------------------------------
JOHN SHERMAN, JR.
/s/ R. BRUCE CAMPBELL
----------------------------------
R. BRUCE CAMPBELL
The undersigned, being employees of Scott & Stringfellow Financial, Inc.
on the date hereof, hereby agree to execute on the Closing Date an Employment
and Noncompetition Agreement substantially in the form of Exhibit B to this
Agreement.
This the 16th day of September, 1998.
/s/ JOHN SHERMAN, JR.
----------------------------------
JOHN SHERMAN, JR.
/s/ STEVEN C. DELANEY
----------------------------------
STEVEN C. DELANEY
/s/ CHARLES E. MINTZ
----------------------------------
CHARLES E. MINTZ
/s/ MIKE D. JOHNSTON
----------------------------------
MIKE D. JOHNSTON
A-27
<PAGE>
EXHIBIT A
ARTICLES OF MERGER
OF
SCOTT & STRINGFELLOW FINANCIAL, INC.
WITH AND INTO
BB&T CORPORATION
The undersigned corporations, pursuant to Section 13.1-720 of the Virginia
Stock Corporation Act (the "VSCA") and Section 55-11-05 of the North Carolina
Business Corporation Act (the "NCBCA"), hereby execute the following Articles
of Merger.
ONE
The merger of Scott & Stringfellow Financial, Inc., a Virginia corporation
("Scott & Stringfellow"), with and into BB&T Corporation, a North Carolina
corporation ("BB&T"), shall be in accordance with the Plan of Merger attached
hereto as Annex A (the "Plan of Merger").
TWO
The Plan of Merger was submitted to the shareholders of Scott &
Stringfellow by its Board of Directors in accordance with the provisions of
Section 13.1-718 of the VSCA and Section 55-11-03 of the NCBCA:
A. The number of outstanding shares of common stock, $0.10 par value, of
Scott & Stringfellow (the only voting group entitled to vote on the Plan of
Merger) entitled to be cast and number of undisputed votes cast for the Plan of
Merger were:
<TABLE>
<CAPTION>
OUTSTANDING SHARES UNDISPUTED VOTES CAST FOR THE PLAN
- -------------------- -----------------------------------
<S> <C>
</TABLE>
The number of undisputed votes cast for the Plan of Merger was sufficient
for approval of the Plan of Merger under the VSCA and the NCBCA.
B. The shareholders of BB&T were not required to approve the Plan of
Merger.
THREE
These Articles of Merger shall become at 11:59 p.m. on , 199 .
The undersigned, each of BB&T and Scott & Stringfellow, declares that the
facts herein stated are true as of , 199 .
BB&T INCORPORATED
By:-------------------------------------------
Name:-----------------------------------------
Title:------------------------------------------
SCOTT & STRINGFELLOW FINANCIAL, INC.
By:-------------------------------------------
Name:-----------------------------------------
Title:------------------------------------------
A-28
<PAGE>
AMENDED AND RESTATED
PLAN OF MERGER
OF
SCOTT & STRINGFELLOW FINANCIAL, INC.
WITH AND INTO
BB&T CORPORATION
Section 1. CORPORATIONS PROPOSING TO MERGE AND SURVIVING CORPORATION.
Scott & Stringfellow Financial, Inc., a Virginia corporation ("Scott &
Stringfellow"), shall be merged (the "Merger") with and into BB&T Corporation,
a North Carolina corporation ("BB&T"), pursuant to the terms and conditions of
this Amended and Restated Plan of Merger (the "Plan of Merger") and of the
Amended and Restated Agreement and Plan of Reorganization dated as of September
16, 1998 (the "Agreement") by and between Scott & Stringfellow and BB&T, which
Agreement amends and restates the Agreement and Plan of Reorganization dated as
of August 10, 1998 (the "Original Agreement Date"). 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 and the
Secretary of State of North Carolina. BB&T shall continue as the surviving
corporation (the "Surviving Corporation") in the Merger and the separate
corporate existence of Scott & Stringfellow 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")
and Section 55-11-06 of the North Carolina Business Corporation Act (the
"NCBCA").
Section 3. ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation and the Bylaws of BB&T as in effect immediately prior to the
Effective Time shall become the Articles of Incorporation and Bylaws of the
Surviving Corporation following the Effective Time until changed in accordance
with their terms and the NCBCA.
Section 4. CONVERSION OF SHARES.
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of Scott & Stringfellow or its shareholders as of the Effective
Time (the "Shareholders"), all of the shares of Scott & Stringfellow 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 certificates representing the shares of Scott & Stringfellow Common
Stock (as provided in paragraph (d) below), the Merger Consideration in
accordance with Section 5.
(b) Until surrendered, each outstanding certificate which prior to the
Effective Time represented one or more shares of Scott & Stringfellow
Common Stock shall be deemed upon the Effective Time for all purposes to
represent only the right to receive the Merger Consideration as described
in Section 5. No interest will be paid or accrued on the Merger
Consideration. Any certificate for shares of Scott & Stringfellow Common
Stock that has been lost or destroyed shall be deemed to be surrendered
upon receipt by the Surviving Corporation of evidence of ownership of the
shares of Scott & Stringfellow Common Stock represented thereby and of an
agreement for indemnification, in each case in form and substance
reasonably satisfactory to the Surviving Corporation. After the Effective
Time, no transfer of shares of Scott & Stringfellow Common Stock of any
Shareholder shall be made on the stock transfer books of the Surviving
Corporation.
(c) Promptly after the Effective Time, the Surviving Corporation shall
cause to be delivered or mailed to each 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
shares of Scott & Stringfellow Common Stock, in exchange for the Merger
Consideration. Upon surrender of such certificates, together with such
letter of transmittal, duly executed and completed in accordance with the
instructions thereto, and such other documents as may be reasonably
requested, the Surviving Corporation shall promptly cause the Merger
Consideration to be transferred as provided in Section 5 to the persons
entitled thereto.
Section 5. MERGER CONSIDERATION. As used herein, the term "Merger
Consideration" shall mean the portion of a whole share of the common stock of
BB&T, par value $5.00 per share ("BB&T Common Stock"), to be exchanged for each
share of the common stock of Scott & Stringfellow ("Scott & Stringfellow 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 issued in the Merger, 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 Scott & Stringfellow Common Stock
shall be in the ratio of one share of BB&T Common Stock for each share of
Scott & Stringfellow Common Stock, subject to adjustment in the manner set
forth in Section 1.10 of the Agreement (the "Exchange Ratio").
A-29
<PAGE>
(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 average closing price per share of BB&T Common Stock on
the New York Stock Exchange ("NYSE") Composite Transactions List (as
reported by The Wall Street Journal) for the five trading days (determined
by excluding days on which the NYSE is closed) ending on the fifth trading
day immediately preceding the Closing Date (the fifth day to be determined
by counting the first trading day preceding the Closing Date as the first
day). No person will be entitled to dividends, voting rights or any other
rights as a BB&T shareholder in respect of any fractional share.
Section 6. CONVERSION OF STOCK OPTIONS. Scott & Stringfellow has in effect
the Scott & Stringfellow 1987 Stock Option Plan (the "Stock Option Plan"),
pursuant to which options to acquire 514,502 shares of Scott & Stringfellow
Common Stock (the "Stock Options") were outstanding and unexercised as of the
Original Agreement Date. At the Effective Time, each Stock Option 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 Stock Option Plan and each stock option agreement evidencing such
Stock Option, except that from and after the Effective Time (i) BB&T and its
Compensation Committee shall be substituted for Scott & Stringfellow and the
Committee of Scott & Stringfellow's Board of Directors administering the Stock
Option Plan, (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 equal the product of the number of
shares of Scott & Stringfellow Common Stock subject to such Stock Option
immediately prior to the Effective Time multiplied 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, within
the meaning of Internal Revenue Code of 1986, as amended (the "Code"), 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 executive 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. As soon as practicable following the
Effective Time, BB&T shall deliver to the participants in the Stock Option Plan
an appropriate notice setting forth such participant's rights pursuant thereto.
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, 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), or include any converted or substitute options under
an existing registration statement, 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
Securities Exchange Act of 1934, as amended (the "Exchange Act"), BB&T shall
administer the Stock Option Plans assumed pursuant to this Section 6 (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.
Section 7. AMENDMENT. At any time before the Effective Time, this Plan of
Merger may be amended, provided that: (i) any such amendment is approved by the
Boards of Directors of Scott & Stringfellow and BB&T; and (ii) no such
amendment made subsequent to the submission of this Plan of Merger to the
shareholders of Scott & Stringfellow shall have any of the effects specified in
Section 13.1-718.I of the VSCA without the approval of the shareholders
affected thereby.
A-30
<PAGE>
APPENDIX B
[SCOTT & STRINGFELLOW, INC. LETTERHEAD]
December ___, 1998
Board of Directors
Scott & Stringfellow Financial, Inc.
909 East Main Street
Richmond, VA 23219
Gentlemen:
You have asked us to render our opinion relating to the fairness, from a
financial point of view, to the shareholders of Scott & Stringfellow Financial,
Inc. ("S&S") of the consideration to be paid to them in connection with the
proposed merger (the "Merger") of S&S with BB&T Corporation ("BB&T"). Pursuant
to the terms of an Amended and Restated Agreement and Plan of Reorganization
(the "Merger Agreement") between BB&T and S&S dated September 16, 1998, S&S will
merge with and into BB&T. The Merger Agreement provides that each share of
Common Stock of S&S which is issued and outstanding immediately prior to the
Effective Time of the Merger shall be exchanged for one share of BB&T Common
Stock (as defined in Article I of the Agreement), subject to certain
adjustments, and the implementation of which is contingent on shareholder
approval of the holders of Common Stock of S&S. We have assumed, with your
consent, that the Merger will qualify as a tax-free transaction for the S&S
shareholders. You have requested our opinion as to whether the Exchange Ratio is
fair, from a financial point of view, to the S&S shareholders.
Scott & Stringfellow, Inc. ("Scott & Stringfellow"), as a customary part
of its investment banking business, is engaged in the valuation of businesses
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
S&S in connection with the transaction described above. Scott & Stringfellow is
a wholly owned subsidiary of S&S and certain employees of Scott & Stringfellow
are stockholders of S&S.
In developing our opinion, we have, among other things, reviewed and
analyzed: (1) the Merger Agreement; (2) S&S's audited financial statements for
the four fiscal years ended June 30, 1997 and unaudited, internally prepared
financial statements for the fiscal year ended June 30, 1998; (2) other internal
information relating to S&S prepared by S&S's management; (3) information
regarding the trading market for the common stocks of S&S 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, revenues, and earnings
and certain other terms in certain investment banking and brokerage
<PAGE>
Board of Directors
Scott & Stringfellow Financial, Inc.
December ___, 1998
Page 2 of 2
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 quarter and
six months ended June 30, 1997 and 1998; (7) other internal information relating
to BB&T prepared by BB&T's management; and, (8) certain financial and stock
market information for S&S and compared it to similar information for certain
other similar companies whose securities are publicly traded. We have discussed
with members of management of S&S and BB&T the background of the Merger, the
reasons and basis for the Merger and the business and future prospects of S&S
and BB&T individually and as a combined entity. Finally, we have conducted such
other studies, analyses and investigations, particularly of the banking and
investment banking and brokerage 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 S&S and BB&T. We have not attempted independently to verify such
information, nor have we made any independent appraisal of the assets of S&S or
BB&T. With respect to the information relating to the prospects of S&S and BB&T,
we have assumed that such information reflects the best currently available
judgments and estimates of the managements of S&S and BB&T as to the likely
future financial performance 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 operations or financial condition of S&S or BB&T.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any other party with respect to the acquisition of S&S or
any of its assets. Moreover, we are expressing no opinion as to the price at
which BB&T's Common Stock will trade at any future time.
Our advisory services and opinion expressed herein were prepared for the
use of the Board of Directors of S&S and do not constitute a recommendation to
the S&S 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 S&S Common Stock.
Very truly yours,
SCOTT & STRINGFELLOW, INC.
By:
G. Jacob Savage III, CFA
Managing Director
Financial Institutions Group
Corporate Finance Department
<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. ss.1818(b)).
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) The following documents are filed as exhibits to this registration
statement on Form S-4:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------------------------
<S> <C>
2 Amended and Restated Agreement and Plan of Reorganization dated as of September 16, 1998
between BB&T Corporation and Scott & Stringfellow Financial, Inc. (included as Appendix A to the
Proxy Statement/Prospectus)
5 Form of Opinion of Womble Carlyle Sandridge & Rice, PLLC
8 Form of Opinion of McGuire, Woods, Battle & Boothe, LLP
23(a) Consent of Womble Carlyle Sandridge & Rice, PLLC (included in Exhibit 5)
23(b) Consent of McGuire, Woods, Battle & Boothe, LLP (included in Exhibit 8)
23(c) Consent of Arthur Andersen LLP
23(d) Consent of KPMG Peat Marwick, LLP
23(e) Consent of Scott & Stringfellow, Inc. (to be filed by amendment)
24 Power of Attorney
99(a) Form of Scott & Stringfellow Financial, Inc. Proxy Card
99(b) Option Agreement, dated August 10, 1998, between BB&T Corporation and Scott & Stringfellow
Financial, Inc.
</TABLE>
(b) Financial statement schedules: Not applicable.
II-1
<PAGE>
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. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
D. The registrant undertakes that every prospectus (i) that is filed
pursuant to Paragraph (C) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
E. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
F. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
G. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<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 November 24, 1998.
BB&T CORPORATION
By: /s/ JERONE C. HERRING
-------------------------------------
NAME: JERONE C. HERRING
TITLE: EXECUTIVE VICE PRESIDENT AND
SECRETARY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-4 has been signed by the following
persons in the capacities indicated on November 24, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------- ----------------------------------------
<S> <C>
/s/ JOHN A. ALLISON IV* Chairman of the Board and Chief
----------------------------------Executive Officer (principal executive
JOHN A. ALLISON IV officer)
/s/ SCOTT E. REED* Senior Executive Vice President and
----------------------------------Chief Executive Officer (principal
SCOTT E. REED financial officer)
/s/ SHERRY A. KELLETT* Executive Vice President and Controller
----------------------------------(principal accounting officer)
SHERRY A. KELLETT
/s/ PAUL B. BARRINGER* Director
----------------------------------
PAUL B. BARRINGER
/s/ ALFRED E. CLEVELAND* Director
----------------------------------
ALFRED E. CLEVELAND
/s/ W.R. CUTHBERTSON, JR.* Director
----------------------------------
W.R. CUTHBERTSON, JR.
/s/ RONALD E. DEAL* Director
----------------------------------
RONALD E. DEAL
/s/ A.J. DOOLEY, SR.* Director
----------------------------------
A.J. DOOLEY, SR.
Director
----------------------------------
TOM D. EFIRD
/s/ PAUL S. GOLDSMITH* Director
----------------------------------
PAUL S. GOLDSMITH
/s/ L. VINCENT HACKLEY* Director
----------------------------------
L. VINCENT HACKLEY
/s/ JANE P. HELM* Director
----------------------------------
JANE P. HELM
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- ---------
<S> <C>
/s/ RICHARD JANEWAY, M.D.* Director
----------------------------------
RICHARD JANEWAY, M.D.
/s/ J. ERNEST LATHEM, M.D.* Director
----------------------------------
J. ERNEST LATHEM, M.D.
/s/ JAMES H. MAYNARD* Director
----------------------------------
JAMES H. MAYNARD
/s/ JOSEPH A. MCALEER, JR.* Director
----------------------------------
JOSEPH A. MCALEER, JR.
/s/ ALBERT O. MCCAULEY* Director
----------------------------------
ALBERT O. MCCAULEY
/s/ RICHARD L. PLAYER, JR.* Director
----------------------------------
RICHARD L. PLAYER, JR.
/s/ C. EDWARD PLEASANTS, JR.* Director
----------------------------------
C. EDWARD PLEASANTS, JR.
/s/ NIDO R. QUBEIN* Director
----------------------------------
NIDO R. QUBEIN
/s/ E. RHONE SASSER* Director
----------------------------------
E. RHONE SASSER
/s/ JACK E. SHAW* Director
----------------------------------
JACK E. SHAW
/s/ HAROLD B. WELLS* Director
----------------------------------
HAROLD B. WELLS
</TABLE>
*By: /s/ JERONE C. HERRING
-----------------------------
JERONE C. HERRING
ATTORNEY-IN-FACT
II-4
<PAGE>
EXHIBIT 5
Garza Baldwin, III
Direct Dial: 704-331-4907
Direct Fax: 704-338-7816
E-mail: [email protected]
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 Amended and Restated
Agreement and Plan of Reorganization by and between BB&T Corporation
("BB&T") and Scott & Stringfellow Financial, Inc. dated as of September
16, 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 (1) the
Registration Statement shall have been declared effective by order of the
Commission and (2) the shares of Common Stock have been issued upon the terms
and conditions set forth in the Merger Agreement and in accordance with the
Registration Statement, then 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
[FORM OF TAX OPINION OF MCGUIRE, WOODS, BATTLE & BOOTHE LLP]
December , 1998
BB&T Corporation
200 West Second Street
Winston-Salem, North Carolina 27101
Scott & Stringfellow Financial, Inc.
909 East Main Street
Richmond, VA 23219
Ladies and Gentlemen:
We have acted as Scott & Stringfellow's special tax counsel in connection
with the Registration Statement on Form S-4 (the "Registration Statement"),
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Securities Act") relating to the merger of Scott &
Stringfellow Financial, Inc. with and into BB&T Corporation pursuant to an
Amended and Restated Agreement and Plan of Reorganization dated as of September
16, 1998.
We have reviewed the statements set forth in the Registration Statement
under the captions "SUMMARY -- Federal Income Tax Consequences" and "THE MERGER
- -- Certain Federal Income Tax Consequences of the Merger" and hereby advise you
that such statements, insofar as they are or refer to statements of United
States law or legal conclusions relating thereto, are accurate in all material
respects.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the statement made in reference to our firm under the caption
"THE MERGER -- Certain Federal Income Tax Consequences of the Merger" therein.
We do not admit by giving this consent that we are in the category of persons
whose consent is required under Section 7 of the Securities Act.
Very truly yours,
<PAGE>
EXHIBIT 23(C)
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
November 23, 1998
<PAGE>
EXHIBIT 23(D)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Scott & Stringfellow Financial, Inc.:
We consent to the use of our report dated August 14, 1998, with respect to
the consolidated statements of financial condition of Scott & Stringfellow
Financial, Inc. and subsidiaries as of June 26, 1998 and June 27, 1997 and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the years ended June 26, 1998, June 27, 1997 and June 28, 1996,
which report is incorporated by reference in this Proxy Statement/Prospectus;
and to the reference to our firm under the heading "Experts" in the Proxy
Statement/Prospectus.
/s/ KPMG PEAT MARWICK LLP
Richmond, Virginia
November 24, 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 Scott & Stringfellow
Financial, Inc., 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------- ----------------------------------------
<S> <C>
/s/ JOHN A. ALLISON IV Chairman of the Board and Chief
----------------------------------Executive Officer (principal executive
JOHN A. ALLISON IV officer)
/s/ SCOTT E. REED Senior Executive Vice President and
----------------------------------Chief Executive Officer (principal
SCOTT E. REED financial officer)
/s/ SHERRY A. KELLETT Executive Vice President and Controller
----------------------------------(principal accounting officer)
SHERRY A. KELLETT
/s/ PAUL B. BARRINGER Director
----------------------------------
PAUL B. BARRINGER
/s/ ALFRED E. CLEVELAND Director
----------------------------------
ALFRED E. CLEVELAND
/s/ W.R. CUTHBERTSON, JR. Director
----------------------------------
W.R. CUTHBERTSON, JR.
/s/ RONALD E. DEAL Director
----------------------------------
RONALD E. DEAL
/s/ A.J. DOOLEY, SR. Director
----------------------------------
A.J. DOOLEY, SR.
Director
----------------------------------
TOM D. EFIRD
/s/ PAUL S. GOLDSMITH Director
----------------------------------
PAUL S. GOLDSMITH
/s/ L. VINCENT HACKLEY Director
----------------------------------
L. VINCENT HACKLEY
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- ---------
<S> <C>
/s/ JANE P. HELM Director
----------------------------------
JANE P. HELM
/s/ RICHARD JANEWAY, M.D. Director
----------------------------------
RICHARD JANEWAY, M.D.
/s/ J. ERNEST LATHEM, M.D. Director
----------------------------------
J. ERNEST LATHEM, M.D.
/s/ JAMES H. MAYNARD Director
----------------------------------
JAMES H. MAYNARD
/s/ JOSEPH A. MCALEER, JR. Director
----------------------------------
JOSEPH A. MCALEER, JR.
/s/ ALBERT O. MCCAULEY Director
----------------------------------
ALBERT O. MCCAULEY
/s/ RICHARD L. PLAYER, JR. Director
----------------------------------
RICHARD L. PLAYER, JR.
/s/ C. EDWARD PLEASANTS, JR. Director
----------------------------------
C. EDWARD PLEASANTS, JR.
/s/ NIDO R. QUBEIN Director
----------------------------------
NIDO R. QUBEIN
/s/ E. RHONE SASSER Director
----------------------------------
E. RHONE SASSER
/s/ JACK E. SHAW Director
----------------------------------
JACK E. SHAW
/s/ HAROLD B. WELLS Director
----------------------------------
HAROLD B. WELLS
</TABLE>
<PAGE>
EXHIBIT 99(A)
P R O X Y SCOTT & STRINGFELLOW FINANCIAL, INC.
PROXY MATERIAL SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON JANUARY 13, 1999
The undersigned hereby appoints Steven C. DeLaney and John J. Muldowney
(each with power to act alone and with power of substitution), as Proxies, and
hereby authorizes them to represent and vote, as directed herein, all of the
shares of Common Stock of Scott & Stringfellow Financial, Inc. held of record
by the undersigned on December 2, 1998, at the Annual Meeting of Shareholders
to be held on January 13, 1999, and any adjournment thereof.
Proposals 1 through 3 are more particularly described in the Company's
Proxy Statement for the Annual Meeting of Shareholders to be held on January
13, 1999. The undersigned hereby acknowledges receipt of the Proxy Statement,
the Company's Annual Report on Form 10-K and the Company's Quarterly Report on
Form 10-Q for the quarter ended September 25, 1998.
This proxy when properly executed will be voted in the manner described
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR proposal 1, FOR each of the nominees named in proposal 2, FOR
proposal 3 and in the Proxies' discretion, on any other matter coming before
the meeting.
1. TO CONSIDER AND VOTE UPON A PROPOSAL TO APPROVE the Amended and Restated
Agreement and Plan of Reorganization dated as of September 16, 1998, and a
related Amended and Restated Plan of Merger, pursuant to which Scott &
Stringfellow will merge with and into BB&T, and each share of Common Stock of
Scott & Stringfellow outstanding immediately prior thereto will be converted
into the right to receive one share of Common Stock of BB&T.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS for the terms set forth in the Proxy Statement.
Robert L. Hintz, Charles E. Mintz, David Plageman and John Sherman, Jr.
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all
nominees listed
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
<PAGE>
3. RATIFICATION OF THE APPOINTMENT of KPMG Peat Marwick LLP as independent
certified public accountants for the Company for fiscal year ending June 25,
1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. IN THEIR DISCRETION the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
PLEASE SIGN THIS PROXY CARD EXACTLY AS YOUR NAME APPEARS ON YOUR
CERTIFICATE(S) FOR SHARES OF COMPANY COMMON STOCK. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated________________________ 199__
___________________________________
Signature
___________________________________
___________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE, AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE>
EXHIBIT 99(B)
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of August 10, 1998 by and between SCOTT & STRINGFELLOW FINANCIAL, INC., a
Virginia corporation ("Scott & Stringfellow" or "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 "Merger Agreement"), providing
for, among other things, the merger of Issuer with and into Grantee; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has
agreed, to grant to Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree
as follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 654,629 shares as adjusted as set forth herein (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares), of the common stock of Issuer, par value $0.10 per share
("Issuer Common Stock"), at a purchase price per Option Share, subject to
adjustment as set forth herein (the "Purchase Price"), equal to $26.75.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, Holder may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of a Purchase Event (as
hereinafter defined); PROVIDED that the Option shall terminate and be of no
further force and effect upon the earliest to occur of (A) the Effective Time,
(B) subject to clause (E) below, termination of the Merger Agreement in
accordance with the terms thereof prior to the occurrence of a Purchase Event
or a Preliminary Purchase Event (as hereinafter defined) (other than a
termination of the Merger Agreement by Grantee pursuant to Section 7.1(b)
thereof (a "Default Termination")), (C) 12 months after a Default Termination,
(D) 12 months after any termination of the Merger Agreement (other than a
Default Termination) following the occurrence of a Purchase Event or a
Preliminary Purchase Event and (E) subject to clause (D) above, 12 months after
termination of the Merger 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").
Notwithstanding anything to the contrary contained herein, the Option may not
be exercised (nor may any of Grantee's rights under Sections 8 and 9 hereof be
exercised) at any time when Grantee shall be in willful breach of any of its
covenants or agreements contained in the Merger Agreement under circumstances
that would entitle Issuer to terminate the Merger Agreement. Subject to
compliance with Section 12(h) hereof, the term "Holder" shall mean the holder
or holders of the Option from time to time, with Grantee to be the initial
Holder. 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:
(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 Significant Subsidiaries (as
defined in Rule 1-02 of Regulation S-X promulgated by the Commission)
(other than transactions solely between subsidiaries of Issuer), (B) the
disposition, by sale, lease, exchange or otherwise, of assets of Issuer or
any of its subsidiaries representing in either case 25% or more of the
consolidated assets of Issuer and its subsidiaries (other than a sale of
loan receivables in a financing transaction in the normal course of
business consistent with past practices), or (C) the issuance, sale or
other disposition of (including by way of merger,
1
<PAGE>
consolidation, share exchange or any similar transaction) securities
representing 25% or more of the voting power of any of Issuer's Significant
Subsidiaries or 25% or more of the voting power of Issuer; 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, 25%
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 25% or more of the then-outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer" or
an "Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have approved the
Merger Agreement at the meeting of such shareholders held for the purpose
of voting on the Merger Agreement, such meeting shall not have been held or
shall have been canceled prior to termination of the Merger Agreement, or
Issuer's Board of Directors shall have withdrawn or modified in a manner
adverse to Grantee the recommendation of Issuer's Board of Directors with
respect to the Merger Agreement, in each case after any person (other than
Grantee or any subsidiary of Grantee) shall have (A) made, or disclosed an
intention to make, a proposal to engage in an Acquisition Transaction, (B)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (C) filed an
application (or given a notice), whether in draft or final form, under any
federal or state statute or regulation (including an application or notice
filed under the BHC Act, the Bank Merger Act, the Home 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 Scott & Stringfellow
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 Scott & Stringfellow 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 is entitled to and wishes to exercise the Option,
it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of Option
Shares it intends to purchase pursuant to such exercise and (ii) a place and
date not earlier than three business days nor later than 15 business days from
the Notice Date for the closing (the "Closing") of such purchase (the "Closing
Date"). If prior notification to or consent of any governmental or regulatory
agency or authority is required in connection with such purchase, Issuer and
Holder shall cooperate 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 (other than those created by any Holder) 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
2
<PAGE>
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 10, 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 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 (other than those
created by any Holder), 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 (as defined in
Section 6(c)), 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 Scott & Stringfellow
first receives an opinion of counsel in form and substance reasonably
acceptable to it regarding the availability of such exemption.
(c) For purposes of this Agreement, "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.
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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 19.9% of the number of shares of Issuer Common Stock
then issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option.
(b) In the event that Issuer shall enter into an agreement (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,
and Issuer 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
below), (y) any person that controls the Acquiring Corporation, or (z) in the
case of a merger described in clause (ii), the Issuer (in each case, such
person being referred to as the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be 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 hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of
the Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), Issuer in a merger in which Issuer is the continuing or surviving
person, the corporation that shall acquire all of the outstanding shares of
Issuer Common Stock pursuant to a statutory share exchange, 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.
(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 ("Nasdaq") 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
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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.
(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, if applicable, 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 issued upon exercise of a Substitute Option are in no
way distinguishable from or have lesser economic value than other shares of
Substitute 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 below)
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.
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(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 Issuer deliver
from time to time that portion of the Section 8 Repurchase Consideration that
it is not then 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 any required notification period has expired or
been terminated or such approval has been obtained, as the case may be, 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
Nasdaq (or if Issuer Common Stock is not quoted on Nasdaq, 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 of the transactions 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 the following termination of the Merger
Agreement (or such number of months as shall be the holding period provided in
Rule 144(k) at the time of such termination), 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
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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. Each Selling Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by such Selling Holder in
connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of the representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements for Issuer.
(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
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related offerings and sales by Selling Holders) and all other qualifications,
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.
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, Rule 144.
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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 Nasdaq 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 Nasdaq 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 Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 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 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 Merger Agreement
(or at such other address for a party as shall be specified by like notice).
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(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.
SCOTT & STRINGFELLOW BB&T CORPORATION
FINANCIAL, INC.
By: /s/ SIDNEY BUFORD SCOTT By: /s/ JOHN A. ALLISON, IV
Name: Sidney Buford Scott Name: John A. Allison, IV
Title: Chairman Title: Chairman and Chief Executive Officer
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