<PAGE>
Filed Pursuant to Rule 424(B)(3)
Registration No. 333-68643
MAINSTREET FINANCIAL CORPORATION
200 EAST CHURCH STREET
MARTINSVILLE, VIRGINIA 24112
-----------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 17, 1999
-----------------------------------------------
TO THE SHAREHOLDERS OF MAINSTREET FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the
"Meeting") of MainStreet Financial Corporation, a Virginia corporation
("MainStreet"), will be held in the Frith Performance Hall of the Piedmont
Arts Association Building, located at 215 Starling Avenue, Martinsville,
Virginia on Wednesday, February 17, 1999 at 10:00 a.m. Eastern Time, for the
following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan of
Reorganization, dated as of August 26, 1998 (the "Merger Agreement"), among
MainStreet, BB&T Corporation, a North Carolina corporation ("BB&T"), and
BB&T Financial Corporation of Virginia, a Virginia corporation and a wholly
owned subsidiary of BB&T ("BB&T Financial-VA"), and a related plan of
merger, pursuant to which MainStreet will merge with and into BB&T
Financial-VA and each share of common stock of MainStreet then outstanding
will be converted into the right to receive 1.18 shares of common stock of
BB&T, plus cash in lieu of any fractional share interest. A copy of the
Merger Agreement and the plan of merger set forth therein is attached to
the accompanying proxy statement/prospectus as Appendix I.
2. To transact such other business as may be properly brought before the
Meeting or at any and all adjournments or postponements thereof.
Shareholders of MainStreet of record at the close of business on December
11, 1998 are entitled to notice of and to vote at the Meeting. You are
cordially invited to attend the Meeting in person; however, whether or not you
plan to attend, we urge you to complete, date and sign the accompanying proxy
card and to return it promptly in the enclosed postage prepaid envelope.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Rebecca J. Jenkins
Martinsville, Virginia Rebecca J. Jenkins
January 14, 1999 Secretary
Please complete, sign, date and return the enclosed proxy card promptly
whether or not you plan to be present at the Meeting. Failure to return a
properly executed proxy or to vote at the Meeting will have the same effect as
a vote against the Merger Agreement and the plan of merger. Please do not send
in any certificates for your shares at this time.
<PAGE>
Special Meeting of Shareholders
MERGER PROPOSAL--YOUR
VOTE IS VERY IMPORTANT
The Board of Directors of MainStreet Financial Corporation has unanimously
approved a merger combining MainStreet and BB&T Corporation. In the merger,
MainStreet shareholders will receive 1.18 shares of BB&T common stock for each
share of MainStreet common stock, and generally will not recognize federal
income tax gain or loss for the BB&T common stock they receive.
On January 13, 1999 the closing price of BB&T common stock was $38.38, making
the value of 1.18 shares of BB&T common stock equal to $45.28. The closing
price of MainStreet common stock on that date was $44.88. These prices will,
however, fluctuate between now and the merger. After the merger, MainStreet
shareholders will own about 5.4% of BB&T's common stock.
The merger will join MainStreet's strengths as a community banking system
covering southwestern, central and northern Virginia, southern Maryland and
metropolitan Washington D.C. with BB&T's position as a leading bank throughout
the Carolinas and Virginia, enabling the combined company to offer
MainStreet's customers a broad range of financial products and services.
At the special meeting, you will consider and vote on the merger. The merger
cannot be completed unless holders of two-thirds of MainStreet common stock
approve it. The Board of Directors believes the merger is in the best interests
of MainStreet shareholders and unanimously recommends that shareholders vote to
approve the merger. No vote of BB&T shareholders is required to approve the
merger.
The date, time and place of the meeting are:
February 17, 1999, 10:00 a.m.
Frith Performance Hall
Piedmont Arts Association Building
215 Starling Avenue
Martinsville, Virginia
This proxy statement/prospectus provides you with detailed information about
the proposed merger. We encourage you to read this entire document carefully.
You can also obtain other information about MainStreet and BB&T from documents
filed with the Securities and Exchange Commission.
Whether or not you plan to attend the meeting, if you are a holder of
MainStreet common stock please take the time to vote by completing and mailing
the enclosed proxy card to us. If you fail to return your card or vote in
person, the effect will be a vote against approval of the merger. Your vote is
very important. You can revoke your proxy by writing to MainStreet's Secretary
any time before the meeting or by attending the meeting and voting in person.
On behalf of the Board of Directors of MainStreet, we urge you to vote "FOR"
approval and adoption of the merger.
Michael R. Brenan
Chairman, Chief Executive Officer and President
Neither the Securities and Exchange Commission nor any state securities
regulators have approved the BB&T common stock to be issued in the merger
or determined if this proxy statement/prospectus is accurate or adequate.
Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated January 14, 1999 and was first mailed
to shareholders of MainStreet on January 19, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
A WARNING ABOUT FORWARD-LOOKING INFORMATION................................ iii
SUMMARY.................................................................... 1
MEETING OF SHAREHOLDERS.................................................... 7
General.................................................................. 7
Record Date, Voting Rights and Vote Required............................. 7
Voting and Revocation of Proxies......................................... 7
Solicitation of Proxies.................................................. 8
Recommendation of the MainStreet Board................................... 8
THE MERGER................................................................. 9
General.................................................................. 9
Background of, and Reasons for, the Merger............................... 9
BB&T's Reasons for the Merger............................................ 12
Opinions of MainStreet's Financial Advisors.............................. 14
Exchange Ratio........................................................... 24
Exchange of MainStreet Common Stock Certificates......................... 26
The Merger Agreement..................................................... 27
Interests of Certain Persons in the Merger............................... 32
Regulatory Considerations................................................ 35
Material Federal Income Tax Consequences of the Merger................... 37
Accounting Treatment..................................................... 37
The Option Agreement..................................................... 38
Effect on Employees, Employee Benefit Plans and Stock Options............ 40
Restrictions on Resales by Affiliates.................................... 42
INFORMATION ABOUT BB&T..................................................... 42
General.................................................................. 42
Subsidiaries............................................................. 42
Acquisitions............................................................. 43
Capital.................................................................. 44
Deposit Insurance Assessments............................................ 45
INFORMATION ABOUT MAINSTREET............................................... 45
DESCRIPTION OF BB&T CAPITAL STOCK.......................................... 46
General.................................................................. 46
BB&T Common Stock........................................................ 46
BB&T Preferred Stock..................................................... 46
Shareholder Rights Plan.................................................. 46
Anti-takeover Provisions of the NCBCA, BB&T Articles and BB&T Bylaws..... 48
COMPARISON OF SHAREHOLDERS' RIGHTS......................................... 49
Authorized Capital Stock................................................. 49
Special Meetings of Shareholders and Action by Shareholders Without a
Meeting................................................................. 50
Directors................................................................ 50
Dividends and Other Distributions........................................ 50
Notice of Shareholder Nominations and Shareholder Proposals.............. 51
Exculpation and Indemnification.......................................... 52
Mergers, Share Exchanges and Sales of Assets............................. 52
Anti-takeover Statutes................................................... 52
Amendments to Articles of Incorporation and Bylaws....................... 54
Shareholders' Rights of Dissent and Appraisal............................ 54
Liquidation Rights....................................................... 56
SHAREHOLDER PROPOSALS...................................................... 56
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
OTHER BUSINESS............................................................ 56
LEGAL MATTERS............................................................. 56
EXPERTS................................................................... 57
WHERE YOU CAN FIND MORE INFORMATION....................................... 57
Appendix I - Agreement and Plan of Reorganization
Appendix II - Opinion of Sandler O'Neill & Partners, L.P.
Appendix III - Opinion of Scott & Stringfellow, Inc.
</TABLE>
ii
<PAGE>
A WARNING ABOUT FORWARD-LOOKING INFORMATION
BB&T and MainStreet have each made forward-looking statements in this
document and in certain documents that we refer to in this document that are
subject to risks and uncertainties. These statements are based on the beliefs
and assumptions of BB&T and MainStreet's managements, and on information
currently available to them or, in the case of information that appears under
the heading "The Merger--BB&T's Reasons for the Merger" at page 12,
information that was available to management of BB&T as of the date of the
merger agreement. Forward-looking statements include the information
concerning possible or assumed future results of operations of BB&T and/or
MainStreet set forth under "Summary," "The Merger--Background of, and Reasons
for, the Merger" and "The Merger--BB&T's Reasons for the Merger" and
statements preceded by, followed by or that include the words "believes,"
"expects," "anticipates," "intends," "plans," "estimates," or similar
expressions.
We have made statements in this document regarding estimated earnings per
share of BB&T and MainStreet on a stand alone basis, expected cost savings
from the merger, estimated restructuring charges relating to the merger,
estimated increases in MainStreet's fee income ratio and net interest margin,
the anticipated accretive effect of the merger, and BB&T's anticipated
performance in future periods. With respect to estimated cost savings and
restructuring charges, BB&T has made assumptions about, among other things,
the extent of operational overlap between BB&T and MainStreet, the amount of
general and administrative expense consolidation, costs relating to converting
MainStreet bank operations and data processing to BB&T's systems, the size of
anticipated reductions in fixed labor costs, the amount of severance expenses,
the extent of the charges that may be necessary to align the companies'
respective accounting reserve policies, and the cost related to the merger.
The realization of cost savings and the amount of restructuring charges are
subject to the risk that the foregoing assumptions are inaccurate.
Moreover, any statements in this document about the anticipated accretive
effect of the merger and BB&T's anticipated performance in future periods are
subject to risks relating to, amount other things, the following:
1. expected cost savings from the merger or other previously announced
mergers may not be fully realized or realized within the expected time-
frame;
2. deposit attrition, customer loss or revenue loss following the merger or
other previously announced mergers may be greater than expected;
3. competitive pressures among depository and other financial institutions
may increase significantly;
4. costs or difficulties related to the integration of the businesses of
BB&T and its merger partners, including MainStreet, may be greater than
expected;
5. changes in the interest rate environment may reduce margins;
6. general economic or business conditions, either nationally or in the
states or regions in which BB&T and MainStreet do business, may be less
favorable than expected, resulting in, among other things, a
deterioration in credit quality or a reduced demand for credit;
7. legislative or regulatory changes, including changes in accounting
standards, may adversely affect the businesses in which BB&T and
MainStreet are engaged;
8. adverse changes may occur in the securities markets; and
9. competitors of BB&T and MainStreet may have greater financial resources
and develop products that enable those competitors to compete more
successfully than BB&T and MainStreet.
Management of BB&T and MainStreet each believes the forward-looking
statements about their respective company are reasonable; however,
shareholders of MainStreet should not place undue reliance on them. Forward-
looking statements are not guarantees of performance. They involve risks,
uncertainties and assumptions. The future results and shareholder values of
BB&T following completion of the merger may differ materially from those
expressed in these forward-looking statements. Many of the factors that will
determine these results and values are beyond BB&T's and MainStreet's ability
to control or predict.
iii
<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 57.
EXCHANGE RATIO TO BE 1.18 SHARES OF BB&T COMMON STOCK FOR EACH MAINSTREET SHARE
(PAGE 24)
If the merger is completed, you will receive 1.18 shares of BB&T common stock
for each share of MainStreet stock you own, plus cash instead of any fractional
share. On January 13, 1999, the closing price of BB&T common stock was $38.38,
making the value of 1.18 shares of BB&T common stock equal to $45.28. Because
the market price of BB&T stock fluctuates, you will not know when you vote what
the shares will be worth when issued in the merger. After the merger,
MainStreet shareholders will own about 5.4% of BB&T's common stock.
If the price of BB&T common stock is below $28.85 just before the merger and
the stock prices of certain other bank holding companies have not experienced
similar relative declines since the time that the companies agreed to merge,
MainStreet may terminate the merger agreement. If this were to happen, BB&T
could choose to proceed with the merger by increasing the consideration that
you would receive in the merger so that you would receive BB&T common stock
valued, shortly before the merger, at $34.04 for each share of MainStreet
common stock.
NO FEDERAL INCOME TAX ON SHARES RECEIVED IN MERGER (PAGE 37)
MainStreet shareholders generally will not recognize gain or loss for federal
income tax purposes for the shares of BB&T common stock they receive in the
merger. BB&T's attorneys have issued a legal opinion to this effect, which we
have included as an exhibit to the registration statement filed with the SEC
for the shares to be issued in the merger. MainStreet shareholders will be
taxed on cash received instead of any fractional share. TAX MATTERS ARE
COMPLICATED, AND TAX RESULTS MAY VARY AMONG SHAREHOLDERS. We urge you to
contact your own tax advisor to understand fully how the merger will affect
you.
BB&T DIVIDEND POLICY FOLLOWING THE MERGER
BB&T currently pays quarterly dividends of $.175 per share of common stock.
BB&T expects that it will continue to pay at least this amount in quarterly
dividends, but may change that policy based on business conditions, BB&T's
financial condition and earnings or other factors.
BB&T's next dividend is payable February 1, 1999, to shareholders of record on
January 15, 1999. Because the merger will not be effective by January 15, 1999,
the dividend will not be paid on shares of BB&T common stock issued in the
merger to MainStreet's shareholders. However, MainStreet will pay a dividend of
$.15 per share on February 1, 1999 to its shareholders of record on January 11,
1999.
MAINSTREET BOARD RECOMMENDS SHAREHOLDER APPROVAL (PAGE 9)
The MainStreet Board believes that the merger is in the best interests of
MainStreet shareholders and unanimously recommends that the shareholders vote
"FOR" approval of the merger. The MainStreet Board believes that, as a result
of the merger, MainStreet shareholders will have less financial risk and will
experience greater stock value appreciation than they would if MainStreet
remained independent.
EXCHANGE RATIO FAIR TO SHAREHOLDERS, ACCORDING TO TWO INVESTMENT BANKS (PAGE
14)
Scott & Stringfellow, Inc. and Sandler O'Neill & Partners, L.P. have both given
an opinion to the MainStreet Board that, as of the date of this proxy
statement/prospectus, the exchange ratio in the merger is fair from a financial
point of view to MainStreet shareholders. The full text of these opinions are
attached as Appendices II and III to this proxy statement/prospectus. We
encourage you to read both opinions carefully. Sandler O'Neill was paid
$300,000 for providing its opinion. If the merger is completed, Scott &
Stringfellow will be paid $3,000,000 in exchange for its advice and for
providing its financial opinion. You should be aware that BB&T is in the
process of acquiring Scott & Stringfellow.
MEETING TO BE HELD FEBRUARY 17, 1999 (PAGE 7)
MainStreet will hold the special shareholders' meeting at 10:00 a.m. on
Wednesday, February 17, 1999 in the Frith Performance Hall of the Piedmont Arts
Association Building, 215 Starling Avenue, Martinsville, Virginia.
1
<PAGE>
At the meeting, you will vote on the merger and conduct any other business that
properly arises.
THE COMPANIES (PAGE 42)
BB&T CORPORATION
200 West Second Street
Winston-Salem, NC 27101
(336) 733-2000
BB&T Corporation is a multi-bank holding company with more than $33.9 billion
in assets. It is the sixth largest bank holding company in the Southeast, and
through its banking subsidiaries operates 534 branch offices in the Carolinas,
Virginia, Maryland and Washington, D.C. BB&T ranks first in deposit market
share in North Carolina and third in South Carolina, maintains a significant
market presence in Richmond and in the Tidewater region of Virginia and
recently established a presence in Maryland and in Washington, D.C.
MAINSTREET FINANCIAL CORPORATION
200 East Church Street
Martinsville, VA 24112
(540) 666-6724
MainStreet Financial Corporation is the holding company for a system of 10
community banks with approximately $2.1 billion in assets and 49 branch offices
in southwestern, central and northern Virginia, southern Maryland and the
metropolitan Washington, D.C. area.
THE MERGER (PAGE 27)
We have attached the merger agreement and the related plan of merger as
Appendix I at the back of this proxy statement/prospectus. We encourage you to
read the merger agreement, as it is the legal document that governs the merger.
TWO-THIRDS MAINSTREET SHAREHOLDER VOTE REQUIRED (PAGE 7)
Approval of the merger requires the affirmative vote of the holders of more
than two-thirds of the outstanding shares of MainStreet common stock. Your
failure to vote will have the effect of a vote against approval of the merger.
Certain directors and executive officers of MainStreet together own about 1.75%
of the shares entitled to be cast at the meeting, and we expect them to vote
their shares in favor of the merger. If we obtain shareholder approval, we
currently expect to complete the merger in February 1999.
Brokers who hold shares of MainStreet common stock as nominees will not have
authority to vote such shares with respect to the merger unless shareholders
provide voting instructions.
The merger does not require the approval of BB&T's shareholders.
RECORD DATE SET AT DECEMBER 11, 1998; ONE VOTE PER SHARE OF MAINSTREET STOCK
(PAGE 7)
If you owned shares of MainStreet common stock at the close of business on
December 11, 1998, you are entitled to vote on the merger and any other matters
considered at the meeting.
On December 11, 1998, there were 14,169,964 shares of MainStreet common stock
outstanding. You will have one vote at the meeting for each share of MainStreet
common stock you own on December 11, 1998.
MONETARY BENEFITS TO MANAGEMENT IN THE MERGER (PAGE 32)
When considering the recommendation of the MainStreet Board, you should be
aware that some MainStreet directors and officers have interests in the merger
that differ from the interests of other MainStreet shareholders. MainStreet
president and CEO Michael R. Brenan has been offered a 10-year employment
agreement with BB&T at an annual salary of $275,000, $10,000 more than his
present annual salary. In addition, Mr. Brenan has the opportunity to earn
bonuses targeted at between 50% and 100% of base salary. Six other members of
management have been offered 3-year employment agreements at their current
salaries. These agreements will provide severance payments and other benefits
if there is a change in control of BB&T. Stock options held by MainStreet
executive officers that are not yet vested will vest immediately upon
completion of the merger. However, except for options to acquire 2,746 shares
of MainStreet common stock held by two executive officers, all of these options
will vest by January of 1999.
2
<PAGE>
Sixteen officers of MainStreet, including Mr. Brenan and the other six members
of management referred to above, will receive severance payments if their
employment is terminated under the circumstances described in their severance
agreements with MainStreet. The aggregate amount of such payments is
approximately $4.9 million.
Also, two MainStreet directors will be put on the board of BB&T's Virginia bank
and will each earn annual fees of $1,000 plus $1,000 per meeting; two
MainStreet directors will be put on the board of BB&T's North Carolina bank and
will each earn annual fees of $5,000 plus $1,000 per meeting; and the other
MainStreet directors will be offered positions on a BB&T advisory board with
annual fees not less than what they are now receiving as MainStreet directors
for at least two years after the merger.
The MainStreet Board was aware of these and other interests and considered them
before approving and adopting the merger agreement.
CONDITIONS THAT MUST BE SATISFIED FOR THE MERGER TO OCCUR (PAGES 27 AND 35)
The following conditions must be met for us to complete the merger:
. approval of the merger by MainStreet shareholders;
. the absence of legal restraints that prevent the completion of the merger;
. receipt of a legal opinion concerning the tax consequences of the merger;
. the continuing accuracy of the parties' representations in the merger
agreement;
. the continuing effectiveness of the registration statement filed with the
SEC; and
. the ability to account for the merger as a pooling of interests.
We cannot complete the merger unless we obtain the approval of the Board of
Governors of the Federal Reserve System, the Virginia Bureau of Financial
Institutions and the Maryland Commissioner of Financial Regulation. On November
3, 1998, BB&T filed the required applications seeking approval of the merger.
The Federal Reserve Board approved the merger on December 16, 1998. Although we
believe the other regulatory approvals will be received in a timely manner, we
cannot be certain when or if we will obtain them.
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT (PAGE 31)
We can agree at any time to terminate the merger agreement without completing
the merger. Either company can also terminate the merger agreement in the
following circumstances:
. the merger is not completed by April 30, 1999 and the company that wants to
terminate the merger agreement is not at that time in breach of it in a
material way;
. the conditions described above are not met; or
. the other company violates, in a material way, any of its representations,
warranties or obligations under the merger agreement.
Generally, the company seeking to terminate cannot itself be in violation of
the merger agreement so as to allow the other party to terminate.
We can agree to amend the merger agreement in any way, except that after the
shareholders' meeting we cannot decrease the consideration you will receive in
the merger. Either company can waive any of the requirements of the other
company in the merger agreement, except that neither company can waive any
required regulatory approval. Neither company intends to waive the tax opinion
condition. If a tax opinion is not available and the MainStreet board wishes to
proceed with the merger, MainStreet will resolicit its shareholders.
OPTION AGREEMENT (PAGE 38)
As a condition to its offer to acquire MainStreet, and to discourage other
companies from acquiring MainStreet, BB&T required MainStreet to grant BB&T a
stock option that allows BB&T to buy up to 1,650,000 shares of MainStreet's
common stock. The exercise price of the option is $28.00 per share. BB&T can
exercise the option only if another party attempts to acquire control of
MainStreet. As of the date of this document, we do not believe that has
occurred.
BB&T TO USE POOLING-OF-INTERESTS ACCOUNTING TREATMENT (PAGE 37)
BB&T will account for the merger as a pooling of interests. This will enhance
future earnings by avoiding the creation of goodwill relating to the merger and
enable BB&T to avoid charges against future earnings resulting from amortizing
goodwill. This accounting
3
<PAGE>
method also means that after the merger BB&T will report financial results as
if MainStreet had always been combined with BB&T.
NO APPRAISAL RIGHTS (PAGE 55)
Under Virginia law, you have no right to an appraisal of your shares in
connection with the merger.
SHARE PRICE INFORMATION
MainStreet common stock is listed on the Nasdaq National Market, and BB&T
common stock is listed on the New York Stock Exchange. On August 26, 1998, the
last full trading day before public announcement of the proposed merger,
MainStreet common stock closed at $25.50 and BB&T common stock closed at
$32.19. On January 13, 1999, MainStreet stock closed at $44.88 and BB&T stock
closed at $38.38.
LISTING OF BB&T STOCK
BB&T will list the shares of its common stock to be issued in the merger on the
New York Stock Exchange.
Comparative Market Prices and Dividends
BB&T common stock is listed on the NYSE under the symbol "BBT." MainStreet
common stock is included in the Nasdaq National Market under the symbol "MSBC."
The table below shows the high and low closing prices of BB&T common stock and
MainStreet common stock and cash dividends paid per share for the last three
years. For BB&T, prices reflect a 2-for-1 stock split on August 3, 1998, and
for MainStreet, prices reflect a 2-for-1 stock split on March 15, 1996.
Shareholders should note that the merger agreement restricts MainStreet's
ability to pay dividends. See page 29. MainStreet has restated its dividends to
reflect the acquisition of Regency Financial Shares, Incorporated in March
1998, which was accounted for using the pooling-of-interests method of
accounting.
<TABLE>
<CAPTION>
BB&T MAINSTREET
---------------------- ----------------------
CASH CASH
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended
March 31, 1999 (through January
13)........................... $40.44 $38.38 $47.25 $44.56
Quarter Ended
March 31, 1998................. 33.84 29.03 $.155 31.88 26.75 $.15
June 30, 1998.................. 34.06 32.03 .155 32.50 26.25 .15
September 30, 1998............. 36.03 28.00 .175 37.25 30.00 .15
December 31, 1998.............. 40.63 27.31 .175 47.00 30.88 .15
For year 1998................ 40.63 27.31 .66 47.00 26.25 .60
Quarter Ended
March 31, 1997................. 20.38 17.63 .135 23.75 18.00 .13
June 30, 1997.................. 23.56 17.88 .135 28.00 18.75 .13
September 30, 1997............. 27.56 22.66 .155 29.50 24.75 .16
December 31, 1997.............. 32.50 25.97 .155 30.25 26.38 .15
For year 1997................ 32.50 17.63 .58 30.25 18.00 .57
Quarter Ended
March 31, 1996................. 14.88 12.94 .115 17.00 12.75 .10
June 30, 1996.................. 15.88 14.44 .115 17.00 15.50 .10
September 30, 1996............. 16.94 14.31 .135 19.50 16.25 .12
December 31, 1996.............. 18.38 16.69 .135 19.50 16.75 .15
For year 1996................ 18.38 12.94 .50 19.50 12.75 .47
</TABLE>
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
We are providing the following information to help you analyze the financial
aspects of the merger. We derived this information from audited financial
statements for 1993 through 1997 and unaudited financial statements for the
nine months ended September 30, 1998. This information is only a summary, and
you should read it in conjunction with our historical financial statements and
the related notes contained in the annual and quarterly reports and other
documents that we have filed with the SEC. See "Where You Can Find More
Information" on page 57. You should not rely on the nine-month information as
being indicative of results expected for the entire year.
BB&T--HISTORICAL FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AS OF/FOR THE NINE
MONTHS ENDED SEPTEMBER 30, AS OF/FOR THE YEARS ENDED DECEMBER 31,
-------------------------- -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- -------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income..... $ 921,743 $ 864,534 $ 1,158,525 $ 1,060,194 $ 974,360 $ 940,026 $ 865,734
Net income.............. 365,332 270,978 360,418 343,312 239,799 284,222 132,770
Diluted earnings per
share.................. 1.25 .93 1.23 1.17 0.80 0.96 0.47
Cash dividends paid per
share.................. .485 .425 .58 .50 .43 .37 .32
Book value per share.... 9.42 8.01 8.46 7.78 7.38 6.61 5.91
Total assets............ 33,875,788 29,205,372 31,290,247 27,625,225 26,135,308 24,758,727 23,274,795
Long-term debt.......... 4,386,201 3,251,531 3,575,517 2,320,978 1,542,064 1,095,781 1,010,168
MAINSTREET--HISTORICAL FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<CAPTION>
AS OF/FOR THE NINE
MONTHS ENDED SEPTEMBER 30, AS OF/FOR THE YEARS ENDED DECEMBER 31,
-------------------------- -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- -------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income..... $ 52,934 $ 44,664 $ 59,750 $ 56,461 $ 49,814 $ 45,429 $ 42,204
Net income.............. 15,053 13,624 17,098 17,397 14,834 7,501 10,128
Diluted earnings per
share.................. 1.09 1.08 1.35 1.38 1.17 .63 .85
Cash dividends paid per
share.................. .45 .42 .57 .47 .34 .28 .24
Book value per share.... 12.43 10.58 10.72 9.66 8.77 7.12 7.47
Total assets............ 2,080,622 1,620,722 1,794,242 1,430,125 1,192,398 1,047,991 1,012,497
Long-term debt.......... 658,250 406,050 579,238 299,149 121,655 41,469 36,127
</TABLE>
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COMPARATIVE PER SHARE DATA
We have summarized below the per share information for our companies on an
historical, pro forma combined and equivalent basis. You should read this
information in conjunction with our historical financial statements and the
related notes contained in the annual and quarterly reports and other documents
we have filed with the SEC. See "Where You Can Find More Information" on page
57. The BB&T pro forma information gives effect to the merger accounted for as
a pooling of interests, assuming that 1.18 shares of BB&T common stock are
issued for each outstanding share of MainStreet common stock. MainStreet
equivalent share amounts are calculated by multiplying the pro forma basic and
diluted earnings per share, historical per share dividend and historical
shareholders' equity by the exchange ratio of 1.18 shares of BB&T common stock
so that the per share amounts equate to the respective values for one share of
MainStreet common stock. You should not rely on the pro forma information as
being indicative of the historical results that we would have had if we had
been combined or the future results that we will experience after the merger,
nor should you rely on the nine-month information as being indicative of
results expected for the entire year.
<TABLE>
<CAPTION>
AS OF/FOR THE YEAR
AS OF/FOR THE NINE ENDED DECEMBER 31,
MONTHS ENDED ------------------
SEPTEMBER 30, 1998 1997 1996 1995
------------------ ------ ----- -----
<S> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE
Basic
BB&T historical...................... $ 1.28 $ 1.25 $1.19 $0.82
MainStreet historical................ 1.08 1.36 1.38 1.26
Pro forma combined................... 1.26 1.25 1.19 0.83
MainStreet pro forma equivalent...... 1.49 1.48 1.40 0.98
Diluted
BB&T historical...................... 1.25 1.23 1.17 0.80
MainStreet historical................ 1.09 1.35 1.38 1.17
Pro forma combined................... 1.23 1.23 1.17 0.81
MainStreet pro forma equivalent...... 1.45 1.45 1.38 0.96
CASH DIVIDENDS DECLARED PER COMMON SHARE
BB&T historical........................ .485 .580 .500 .430
MainStreet historical.................. .45 .57 .47 .34
Pro forma combined..................... .485 .580 .500 .430
MainStreet pro forma equivalent........ .572 .684 .590 .507
SHAREHOLDERS' EQUITY PER COMMON SHARE
BB&T historical........................ 9.42 8.46 7.78 7.63
MainStreet historical.................. 12.43 10.72 9.66 8.77
Pro forma combined..................... 9.48 8.49 7.80 7.62
MainStreet pro forma equivalent........ 11.19 10.02 9.20 8.99
</TABLE>
RECENT DEVELOPMENTS
On January 13, 1999, BB&T reported earnings during fiscal 1998 of $512.8
million, or $1.75 per diluted share, before after-tax nonrecurring charges of
$11.0 million associated with two mergers completed during that year. Excluding
nonrecurring charges, net income increased 19.7% and earnings per share
increased 19.0% compared to 1997. BB&T's 1998 results produced a return on
average assets of 1.58% and a return on average equity of 20.16%, compared to
prior year ratios of 1.48% and 18.58%, respectively. For the fourth quarter of
1998, BB&T's net income totaled $136.5 million, an increase of 18.8% compared
to $114.9 million earned on a recurring basis in 1997. Diluted earnings per
share were $.46 for the fourth quarter compared to $.39 in 1997, an increase of
17.9%. Including nonrecurring charges, net income for 1998 increased 39.2% to
$501.8 million, or $1.71 per diluted share, compared to $360.4 million, or
$1.23 per share, in 1997. For the fourth quarter, net income was $136.5
million, or $.46 per share, compared to $89.4 million, or $.31 per share,
including nonrecurring charges recorded last year. BB&T's complete earnings
announcement is included in the Form 8-K filed by BB&T on January 14, 1999. See
"Where You Can Find More Information" on Page 57.
6
<PAGE>
MEETING OF SHAREHOLDERS
GENERAL
We are providing this proxy statement/prospectus to the shareholders of
MainStreet as of December 11, 1998, along with a form of proxy that the board
of directors of MainStreet is soliciting for use at a special meeting of
shareholders of MainStreet to be held on Wednesday, February 17, 1999 at 10:00
a.m. Eastern Time at the Frith Performance Hall of the Piedmont Arts
Association Building, located at 215 Starling Avenue, Martinsville, Virginia.
At the meeting, the shareholders of MainStreet will vote upon a proposal to
approve the merger, which is dated as of August 26, 1998 and under which
MainStreet would merge with and into BB&T Financial Corporation of Virginia
("BB&T Financial-VA"), a wholly owned subsidiary of BB&T. Proxies may be voted
on such other matters as may properly come before the meeting at the
discretion of the proxy holders. The MainStreet board knows of no such other
matters except those incidental to the conduct of the meeting. The merger
agreement and the related plan of merger are attached as Appendix I.
We request holders of the common stock of MainStreet to complete, date and
sign the accompanying proxy and return it promptly to MainStreet in the
enclosed postage prepaid envelope.
RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED
Only the holders of MainStreet common stock on December 11, 1998 are
entitled to receive notice of and to vote at the meeting. On December 11,
1998, there were 14,169,964 shares of MainStreet common stock outstanding,
held by approximately 3,915 holders of record. Each such share of MainStreet
common stock is entitled to one vote on each matter submitted at the meeting.
Approval of the merger requires the affirmative vote of the holders of more
than two-thirds of the outstanding shares of MainStreet common stock. FAILURE
OF A HOLDER OF MAINSTREET COMMON STOCK TO VOTE SUCH SHARES WILL HAVE THE SAME
EFFECT AS A VOTE "AGAINST" THE MERGER.
Action on any other matters that shareholders consider at the meeting will
be approved if a quorum is present and the votes in favor of the matter
constitute a majority of the shares represented at the meeting and entitled to
vote. Presence in person or by proxy of a majority of the outstanding shares
of MainStreet common stock entitled to vote at the meeting will constitute a
quorum.
As of December 11, 1998, the directors and executive officers of MainStreet
and their affiliates beneficially owned a total of 247,559 shares, or 1.75%,
of the issued and outstanding shares of MainStreet common stock, not counting
shares that may be acquired pursuant to the exercise of stock options. As of
December 11, 1998, the directors and executive officers of BB&T and their
affiliates and BB&T and its subsidiaries beneficially owned a total of less
than 1% of the outstanding shares of MainStreet common stock. Scott &
Stringfellow Financial, Inc., which is expected to merge into BB&T during
first quarter of 1999, and its affiliates also beneficially owned a total of
less than 1% of the outstanding shares of MainStreet common stock as of
December 11, 1998.
VOTING AND REVOCATION OF PROXIES
The shares of MainStreet common stock represented by properly completed
proxies received at or before the time for the meeting will be voted as
directed by the shareholders unless revoked as described below. If no
instructions are given, executed proxies will be voted "FOR" approval of the
merger. Proxies marked "FOR" approval of the 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 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.
7
<PAGE>
The proposal to approve the merger is a "non-discretionary" item, meaning
that brokerage firms may not vote shares in their discretion on behalf of a
client if the client has not furnished voting instructions. Because this
proposal must be approved by the holders of more than two-thirds of the
outstanding shares of MainStreet common stock, abstentions and Broker Shares
will have the same effect as a vote against the merger at the meeting.
If any other matters are properly presented at the meeting and voted upon,
the proxies solicited hereby will be voted on such matters at the discretion
of the proxy holders named therein. The MainStreet board is not aware of any
other business to be presented at the meeting other than matters incidental to
the conduct of the meeting.
A shareholder's attendance at the meeting will not automatically revoke his
or her proxy. A shareholder may, however, revoke a proxy any time before its
exercise by filing a written notice of revocation with, or by delivering a
duly executed proxy bearing a later date to, the Secretary of MainStreet at
MainStreet's principal executive offices before the meeting, or by attending
the meeting and voting in person. A shareholder's proxy will not be revoked by
his or her death or incapacity unless, before the shares are voted, the
Secretary of MainStreet or other person authorized to tabulate the votes
receives notice of the death or incapacity.
BECAUSE APPROVAL OF THE MERGER REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS
OF MORE THAN TWO-THIRDS OF THE OUTSTANDING SHARES OF MAINSTREET COMMON STOCK,
ABSTENTIONS AND BROKER SHARES WILL HAVE THE SAME EFFECT AS NEGATIVE VOTES.
ACCORDINGLY, THE MAINSTREET BOARD URGES MAINSTREET'S SHAREHOLDERS TO COMPLETE,
DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PREPAID ENVELOPE.
SOLICITATION OF PROXIES
BB&T and MainStreet will each pay 50% of the cost of printing this proxy
statement/prospectus, and MainStreet will pay all other costs of soliciting
proxies. Directors, officers and other employees of MainStreet or its
subsidiaries may solicit proxies personally or by telephone or facsimile. None
of these people will receive any special compensation for solicitation
activities. MainStreet will arrange with brokerage firms and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of stock held of record by such persons, and MainStreet will
reimburse these record holders for their reasonable out-of-pocket expenses.
MainStreet intends to use the services of Morrow & Co., a professional proxy
solicitation firm, to help with soliciting proxies for the meeting, at an
estimated cost of $7,000 plus individual solicitation and out-of-pocket
expenses.
RECOMMENDATION OF THE MAINSTREET BOARD
The MainStreet board has unanimously adopted the merger agreement and the
plan of merger and believes that the proposed transaction is fair to and in
the best interests of MainStreet and its shareholders. The MainStreet board
unanimously recommends that MainStreet's shareholders vote "FOR" approval of
the merger. See "The Merger-Background of, and Reasons for, the Merger."
SHAREHOLDERS SHOULD NOT SEND IN STOCK CERTIFICATES WITH THEIR PROXY CARDS.
See "The Merger--Exchange of MainStreet Common Stock Certificates."
8
<PAGE>
THE MERGER
The following information describes the material aspects of the merger. This
description does not purport to be complete and is qualified in its entirety
by reference to the appendices hereto, including the merger agreement and the
plan of merger, which are attached to this proxy statement/prospectus as
Appendix I and incorporated herein by reference. All shareholders are urged to
read the appendices in their entirety.
GENERAL
In the merger, MainStreet will be merged with and into BB&T Financial-VA,
and BB&T Financial-VA will be the surviving corporation. Shareholders of
MainStreet will receive shares of the common stock of BB&T in exchange for
their shares of MainStreet common stock. During 1999, BB&T intends to merge
MainStreet's various subsidiary banks into subsidiary banks of BB&T.
BACKGROUND OF, AND REASONS FOR, THE MERGER
In recent years, several interested parties, including BB&T, have contacted
MainStreet to explore the possibility of a merger or acquisition. The
MainStreet board elected not to pursue preliminary expressions of interests,
believing it to be in the best interests of MainStreet shareholders for
MainStreet to focus on independently building a franchise of semi-autonomous
community banks operating within a strong centralized support system provided
by MainStreet.
Michael Brenan, Chairman and Chief Executive Officer of MainStreet, and
Albert Prillaman, a member of both the MainStreet board and the board's
Executive Committee and the Chairman, Chief Executive Officer and President of
Stanley Furniture Company, Inc., visited with John A. Allison IV, Chairman and
Chief Executive Officer of BB&T, in December 1997 at Mr. Allison's request.
Mr. Allison again expressed BB&T's interest in exploring an affiliation. On
January 7, 1998, a meeting of the executive committee was called during which
the committee discussed the strategy of independence versus affiliating with a
larger institution. The committee stated its agreement with the board's
position that MainStreet should remain independent, but expressed the view
that management and the board should revisit the issue if MainStreet failed to
perform satisfactorily.
In the MainStreet board's regular meetings on February 18, and June 17,
1998, the board authorized Mr. Brenan to maintain contacts and further develop
relationships with potential merger partners, including BB&T, as a means of
providing MainStreet with flexibility to pursue a business combination should
the board later determine that it would be in the best interest of the
shareholders for management to negotiate a sale of the institution.
During the first half of 1998, MainStreet management continued to develop a
strategy for moving forward independently. A part of this strategy was the
consolidation of MainStreet's subsidiary banks into regional units, and the
use of a single name ("MainStreet Bank") for all of the MainStreet banking
subsidiaries. MainStreet management began to consolidate its banks, consistent
with this plan, in the third quarter of 1998, with the first consolidated
MainStreet Bank commencing operations on August 1, 1998.
Early in 1998 Mr. Brenan engaged Furash & Company to provide the board of
directors and management assistance with the selection, design and
implementation of an optimal vision and organizational structure to position
the company to create long-term shareholder value. The board of directors
firmly believed that MainStreet had to "earn the right to be independent" by
growing earnings per share by 12-15% per annum. The challenge for management
was to develop a strategy and structure in conjunction with Furash that
positioned MainStreet to grow earnings and build long-term shareholder value.
It became clear during the summer of 1998 that traditional commercial banking
strategies were giving way under heavy pressure from emergent technologies,
changing customer preferences, and decreasing regulations to a new financial
dynamic centered around deposit intermediation businesses, capital markets,
fee businesses and other specialty lines of business.
Management believed that MainStreet was at a strategic crossroads, with the
option of positioning itself as a community bank or expanding to become a
super-community bank. For MainStreet to be considered a community bank
9
<PAGE>
in the new market structure, management believed MainStreet would have to
offer a limited product line delivered with highly tailored service at above
market prices, focus its earnings more on deposit intermediation, remain small
but profitable, and emphasize dividend yield over capital appreciation to
investors. This would require improved core earnings through charter
consolidation and integration, improved capital efficiency, enhanced sales
culture and development of fee based businesses. Management believed that to
transform MainStreet into a super-community bank, significant organizational
change would be required, but that a successful execution of the strategy
could result in a diversified financial services corporation able to compete
effectively in the marketplace.
Mr. Brenan reviewed preliminary minimum cost estimates provided by
management for the initial restructuring required. These estimates indicated
that it would cost MainStreet $6.4 million to complete the initial
restructuring strategies under consideration, which would directly impact
profitability in the short-run. This estimate did not include the longer term
changes in management and operations suggested by the Furash report. Mr.
Brenan believed that MainStreet did not yet have the management depth
necessary to initiate and complete the longer term changes outlined by Furash,
which projected MainStreet becoming a much larger and more geographically
diverse institution. Mr. Brenan also was uncertain about the impact of unknown
future market changes and competitive pressures on the resulting organization,
even assuming flawless implementation of the restructuring. Mr. Brenan, after
consulting Scott & Stringfellow, was convinced that only two regional
institutions had the ability to pay a premium value for MainStreet stock, and
of these two, only BB&T had expressed interest in MainStreet. This led Mr.
Brenan to pursue a merger with BB&T, an organization he believed had
successfully encountered and addressed in the past the strategic issues facing
MainStreet.
Mr. Brenan believed that BB&T shared MainStreet's respect for the individual
employee, commitment to customer service, and care for the communities which
it serves. In addition, Mr. Brenan believed that the proximity of the BB&T
headquarters would provide the best opportunity for the MainStreet
headquarters employees to secure employment with BB&T.
Mr. Brenan then spoke with his Executive Vice Presidents concerning his
conclusions, soliciting their views on the progress of MainStreet's plans to
consolidate operations. With his conclusions confirmed, Mr. Brenan on August
12, 1998 discussed with Mr. Allison the prospects for MainStreet's joining the
BB&T franchise. BB&T presented a letter to Mr. Brenan on August 13, 1998,
formally expressing an interest in acquiring MainStreet in a stock for stock
transaction at a fixed ratio of between 1.09 and 1.15 shares of BB&T common
stock for each share of MainStreet common stock. In addition, the BB&T letter
provided for senior executives of MainStreet to enter into employment
agreements in connection with the acquisition and other customary terms. Mr.
Brenan called a meeting of the Executive Committee of the MainStreet board for
Monday, August 17, 1998. Mr. Brenan at that time also hired Scott &
Stringfellow, Inc. to advise MainStreet regarding the proposed transaction,
and he asked the company's outside counsel, Flippin, Densmore, Morse,
Rutherford & Jessee, a Professional Corporation, to analyze the legal issues
involved. Scott & Stringfellow had announced on August 10, 1998 that it had
entered into an agreement to be acquired by BB&T. Mr. Brenan nevertheless
engaged Scott & Stringfellow based on its longstanding relationship with and
knowledge of MainStreet, its familiarity with BB&T and his belief that Scott &
Stringfellow could render independent advice to MainStreet, notwithstanding
that it had agreed to be acquired by BB&T.
The Executive Committee met on Monday, August 17 and reviewed the offer of
BB&T. The committee is composed of Messrs. Brenan (Chairman), Prillaman, W.
Christopher Beeler, Jr., William L. Cooper, III, Ms. I. Patricia Henry and
Larry E. Hutchens, of whom all except Mr. Brenan are nonemployee directors of
MainStreet. Mr. Brenan described his recent conversations with BB&T and
provided the committee with a copy of the proposal letter from BB&T. The
committee reviewed the proposal letter, discussing the effect of the
transaction on shareholders, employees, and customers of MainStreet, and voted
unanimously to proceed with negotiations with BB&T. Scott & Stringfellow
provided a financial analysis of the offer, indicating on a preliminary basis
that it was fair to shareholders, from a financial point of view, but that
management might be able to improve the exchange ratio slightly. Specifically,
Scott & Stringfellow advised the committee that BB&T probably could afford to
pay between 1.18 and 1.20 shares of BB&T common stock for each share of
MainStreet common stock, based on its analysis of dilution to current BB&T
shareholders. Mr. Brenan and Ms. Jenkins, Executive Vice President and
Secretary of MainStreet, were authorized by the committee to proceed with
negotiations at a minimum consideration in the range of 1.18 to 1.20 shares of
BB&T common stock for each share of MainStreet common stock outstanding. They
also were authorized to engage such accountants, lawyers, and financial
advisors as they deemed necessary and appropriate. The committee discussed the
10
<PAGE>
effect of the fact that Scott & Stringfellow had agreed to be acquired by
BB&T. Mr. Brenan explained the basis for his engagement of Scott &
Stringfellow, as described above. The committee decided to obtain the opinion
of an additional financial advisor and after discussing possible choices it
was decided that Mr. Brenan would approach Sandler O'Neill & Partners, L.P., a
firm that had worked with MainStreet in the past and was well-known to the
board, with regard to furnishing an additional fairness opinion.
Following the August 17 meeting of the Executive Committee, Mr. Brenan
conducted additional negotiations with BB&T. As a result of these
negotiations, the parties agreed to an exchange ratio of 1.18 shares of BB&T
common stock for each outstanding share of MainStreet common stock. Mr. Brenan
also received confirmation that BB&T would provide employment agreements for
six members of MainStreet senior management, in addition to Mr. Brenan. Mr.
Brenan and BB&T also discussed issues relating to the retention of other
MainStreet employees and office locations.
Final negotiations and drafting of the merger agreement were completed on
August 24 and August 25, 1998. A regular meeting of the MainStreet board had
been scheduled for Wednesday, August 26, with discussion of strategic issues
and review of the final Furash report regarding the strategy of MainStreet to
remain independent the primary items on the agenda. All MainStreet directors
were present either in person or via telephone. Mr. Brenan explained to the
board the events that had taken place in the previous few weeks and reminded
the board of the strategic initiatives that the board had considered,
including a comparison of independence and the potential sale of the company.
He advised the board of his views concerning MainStreet's strategic plan to
consolidate its banks, the nature and magnitude of the operational changes
needed for MainStreet to remain independent, industry consolidation, and
market conditions. He further advised the board that he believed a combination
with a larger institution would be in the best interests of MainStreet's
shareholders, customers and employees, and he informed the board that he had
engaged in discussions with BB&T which culminated in a formal expression of
interest. Mr. Brenan explained how the discussions with BB&T had commenced,
and he outlined the discussion held and decisions made at the Executive
Committee meeting on August 17. He informed the MainStreet board that the
committee had voted unanimously to proceed with negotiations with BB&T, and he
summarized the negotiations that resulted in the proposed exchange ratio. He
advised the board that a definitive agreement had been negotiated, that
outside counsel had been retained, and that Scott & Stringfellow had been
retained to provide financial advice and Sandler O'Neill had been retained to
opine on the fairness of the exchange ratio, from a financial point of view,
to the MainStreet shareholders.
Outside counsel explained the legal framework within which the MainStreet
board should act in considering the offer from BB&T and assessing the
information it would receive about the offer. The board heard a report from
Mr. Edward Furash, President of Furash, who explained a strategy for moving
forward as an independent organization, but also explained several risks
associated with that strategy. In this connection, the board discussed the
risks Furash raised by a strategy of independence and compared them to the
risks raised by Scott & Stringfellow and Sandler O'Neill related to
"investing" in BB&T common stock. Among other matters, the board discussed
BB&T's recent performance and the strategic consideration that BB&T was
currently a regional institution in a market that was consolidating
nationally. The board then heard reports from Scott & Stringfellow and from
Sandler O'Neill. Both financial advisors opined that the exchange ratio was
fair, from a financial point of view, to MainStreet shareholders.
The board discussed both the financial aspects of the proposed merger,
including the benefits of the transaction to MainStreet shareholders, as well
as the potential effect of the merger on MainStreet's management, employees,
customers and communities in which MainStreet and its affiliated banks are
located, without assigning relative weights to the various constituencies.
Relying on the opinion of its financial advisors, the MainStreet board
determined that the transaction was fair to shareholders from a financial
point of view. In reaching this determination, the board considered the
following:
. Premium over market value of common stock: The exchange ratio of 1.18
shares of BB&T common stock for each share of MainStreet common stock
represented a 52% premium over the market value for MainStreet stock at
that time.
. Premium over book value: The exchange ratio of 1.18 shares of BB&T common
stock for each share of MainStreet common stock represented a multiple of
approximately 3.5 times the tangible book value of
11
<PAGE>
MainStreet common stock, based on MainStreet's book value at June 30, 1998.
This premium compared favorably to an average of 3.2 times tangible book
value for transactions that were completed or announced in the southeastern
United States in 1998 involving financial institutions with assets of more
than $15 million. It also compared favorably to an average of 3.1 times
tangible book value for transactions in the southeast over the same time
period involving financial institutions with assets of between $1 billion
and $10 billion.
. Price/earnings multiple: This exchange ratio represented a multiple of
25.6 times MainStreet's prior year's earnings. This compared favorably to
an average of 22.8 times earnings for transactions that were completed or
announced in the southeastern United States in 1998 involving financial
institutions with assets of more than $15 million. It also compared
favorably to an average of 22.3 times earnings for transactions in the
southeast over the same time period involving financial institutions with
assets of between $1 billion and $10 billion.
. Increased dividends: BB&T's quarterly dividend is currently $0.175 per
share, compared to MainStreet's quarterly dividend of $0.15 per share.
The BB&T quarterly dividend, in conjunction with the exchange ratio for
the merger, would increase the MainStreet shareholders' dividends by 38%.
As discussed above, in addition to the financial analyses of MainStreet's
financial advisers and the impact of the transaction on MainStreet
shareholders from a financial point of view, the board took into account the
effect of the merger on other constituencies and made the following
determinations:
. Management and employees; The board considered BB&T's history of growing
through acquisition and promoting employees that it gained through the
acquisition process. On the basis of BB&T's track record, the board
concluded that, while some of MainStreet's management and employees may
choose not to work for a larger organization or otherwise may lose their
jobs or have to relocate in order to retain their positions, most
employees will have greater opportunities for advancement as a result of
the merger.
. Customers: The board concluded that the merger should enable MainStreet
to better serve its customers. The board determined that BB&T's extensive
branch network would increase the bank's presence across Virginia and in
other states and provide MainStreet customers a wider variety of
financial products offered by BB&T.
. Service to communities: The board concluded that the communities served
by MainStreet's affiliated banks will benefit from the merger as a result
of BB&T's commitment to make charitable contributions totaling at least
$1,000,000 in the aggregate.
The board consulted and relied on the written materials presented to them
for purposes of assessing the financial value of the offer, the effect of the
transaction on other constituencies, and the risks inherent with the offer.
The board focused particular attention on the opinion of Sandler O'Neill in
discussing the fairness of the exchange ratio for the merger. During the
course of the meeting, the MainStreet board had excused Mr. Brenan and members
of management from the meeting while it engaged in a discussion of the
proposed merger. At the conclusion of deliberations, management was asked to
return to the meeting. Mr. Brenan asked if there were additional questions or
discussion, and then the matter was put to a vote.
Based on its discussion and consideration of the factors discussed above,
the MainStreet board voted unanimously to approve the merger and the related
stock option agreement as being in the best interests of MainStreet, its
shareholders, its employees, its customers, and the communities in which it
operates.
THE MAINSTREET BOARD RECOMMENDS THAT MAINSTREET SHAREHOLDERS VOTE FOR
APPROVAL OF THE MERGER.
BB&T'S REASONS FOR THE MERGER
One of BB&T's announced acquisition objectives is to build a statewide
franchise in Virginia with an emphasis on customer service, value and personal
attention. BB&T management believes that MainStreet is a well-run
12
<PAGE>
organization that stresses customer service and loyalty and that its
acquisition by BB&T, which will give BB&T a substantial presence in
southwestern and central Virginia as well as expand its presence in the
metropolitan Washington, D.C. area, is a major step toward achieving this
goal.
In connection with BB&T's consideration of the merger, management of BB&T
analyzed certain investment criteria designed to assess the impact of the
merger on BB&T and its shareholders. For the purpose of this analysis, BB&T
made the following assumptions:
. BB&T's 1998 and 1999 earnings per share on a stand alone basis would be
in line with mean estimates published by First Call Corporation.
. BB&T's earnings per share on a stand alone basis for periods after 1999
would increase at an assumed annual rate, determined solely for the
purpose of assessing the impact of the merger as described above, of
approximately 9%.
. MainStreet's 1998 earnings on a stand alone basis would be in line with
the mean estimates of earnings per share published by First Call
Corporation.
. MainStreet's earnings on a stand alone basis for periods after 1998
would increase at an assumed rate, determined solely for the purpose of
assessing the impact of the merger as described above, of approximately
9% before applying the effect of the assumptions described below.
. Annual cost savings of approximately $15 million, or 30% of
MainStreet's expense base, would be realized as a result of the merger.
. MainStreet's fee income ratio would ratably increase from 18.9% to 23%
of total revenue by the fifth year after the merger.
. MainStreet's net interest margin would ratably increase from 3.61% to
4.00% of average earning assets by the third year after the merger.
Using the above assumptions, BB&T analyzed the merger to determine whether
it would have an accretive or dilutive effect on estimated earnings per share,
return on equity, return on assets and book value per share. This analysis
indicated that the merger would be accretive to estimated earnings per share,
return on assets and book value per share in the first year and accretive to
return on equity by the third year. The following table illustrates the
results of this analysis excluding the effect of an estimated one-time charge
of $12.5 million related to consummating the merger:
<TABLE>
<CAPTION>
BASE YEAR YEAR YEAR
YEAR ONE TWO THREE
1998 1999 2000 2001
----- ------ ------ ------
<S> <C> <C> <C> <C>
BB&T Estimated Earnings Per Share........... $1.72 $ 1.92 $ 2.10 $ 2.29
BB&T and MainStreet Combined Pro Forma
Estimated Earnings Per Share............... 1.73 1.94 2.12 2.32
BB&T Estimated Return on Equity............. 20.60% 20.25% 19.56% 18.976%
BB&T and MainStreet Combined Pro Forma
Estimated Return on Equity................. 20.51 20.12 19.53 18.983
BB&T Estimated Return on Assets............. 1.563% 1.540% 1.543% 1.546%
BB&T and MainStreet Combined Pro Forma
Estimated Return on Assets................. 1.564 1.544 1.555 1.562
BB&T Estimated Book Value Per Share......... $8.90 $10.08 $11.36 $12.75
BB&T and MainStreet Combined Pro Forma
Estimated Book Value Per Share............. 9.02 10.22 11.53 12.95
</TABLE>
In addition to the analysis described above, BB&T performed an Internal Rate
of Return analysis for this transaction. The purpose of this analysis was to
determine if the projected performance of MainStreet, after applying the
assumptions described above, would conform to BB&T's criteria. BB&T's current
minimum Internal Rate of
13
<PAGE>
Return requirement for this type of investment is 15%. The analysis performed
in connection with the MainStreet merger indicated that the projected Internal
Rate of Return is 16.02%.
None of the above information has been updated since the date of the merger
agreement. There can be no certainty that the results reflected in the above
information will be achieved or that actual results will not vary materially
from the estimated results. For more information concerning the factors that
could affect actual results, see "A Warning About Forward-Looking Information"
on page iii.
Opinions of MainStreet's Financial Advisors
The fairness opinions of MainStreet's two financial advisors, Sandler
O'Neill and Scott & Stringfellow, are described below. MainStreet would
require fairness opinions to be revised or updated if MainStreet's termination
rights under the merger agreement were triggered due to a decline in stock
prices generally and a substantial decline in BB&T's stock price. MainStreet
has used, directly or indirectly, both of these advisors in the past. The
table below shows compensation paid by MainStreet or by one of its acquired
institutions to these parties in the last three years. A majority of the
payments made to Scott & Stringfellow were in compensation for Scott &
Stringfellow's representation of banks that were acquired by MainStreet.
<TABLE>
<CAPTION>
1996 1997 1998
-------- ---------- --------
<S> <C> <C> <C>
Scott & Stringfellow*.......................... $362,362 $ 13,000 $131,452
Sandler O'Neill**.............................. $ -- $1,000,000 $407,308
-------- ---------- --------
Total.......................................... $362,362 $1,013,000 $538,760
======== ========== ========
</TABLE>
- -------
* Payments to Scott & Stringfellow include $362,362 paid in 1996 and $88,311
paid in 1998 on behalf of three acquired institutions that used Scott &
Stringfellow as their financial advisor when acquired by MainStreet.
** Payments to Sandler O'Neill represent $300,000 paid in 1998 in connection
with the proposed merger with BB&T, with the remainder for services
associated with MainStreet's sale of trust preferred securities in 1997.
Opinion of Sandler O'Neill
Pursuant to an engagement letter dated as of August 19, 1998, MainStreet
retained Sandler O'Neill as an independent financial advisor to render an
opinion as to the fairness, from a financial point of view, of the exchange
ratio to the holders of MainStreet common stock. Sandler O'Neill is a
nationally recognized investment banking firm whose principal business
specialty is financial institutions. In the ordinary course of its investment
banking business, Sandler O'Neill is regularly engaged in the valuation of
such businesses and their securities in connection with mergers and
acquisitions and other corporate transactions. Sandler O'Neil did not act as
MainStreet's financial advisor in connection with its consideration of the
merger or in connection with the negotiation of the merger agreement.
On August 26, 1998, Sandler O'Neill delivered to the MainStreet board its
oral and written opinion that, as of such date, the Exchange Ratio was fair to
the holders of shares of MainStreet common stock from a financial point of
view. Sandler O'Neill has also delivered to the MainStreet board a written
opinion dated the date of this proxy statement/prospectus (the "Sandler
O'Neill Fairness Opinion") which is substantially identical to the August 26,
1998 opinion. THE FULL TEXT OF THE SANDLER O'NEILL FAIRNESS OPINION, WHICH
SETS FORTH THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH
SUCH OPINION, IS ATTACHED AS APPENDIX II TO THIS PROXY STATEMENT/PROSPECTUS
AND IS INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION OF THE OPINION SET
FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX II. HOLDERS
OF SHARES OF MAINSTREET COMMON STOCK ARE URGED TO READ THE SANDLER O'NEILL
FAIRNESS OPINION IN ITS ENTIRETY IN CONNECTION WITH THEIR CONSIDERATION OF THE
PROPOSED MERGER.
THE SANDLER O'NEILL FAIRNESS OPINION WAS PROVIDED TO THE MAINSTREET BOARD
FOR ITS INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL
POINT OF VIEW, OF THE EXCHANGE RATIO TO HOLDERS OF SHARES OF MAINSTREET COMMON
STOCK. IT DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION OF MAINSTREET TO
ENGAGE IN THE MERGER OR ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE
A RECOMMENDATION TO ANY HOLDER OF SHARES OF MAINSTREET COMMON STOCK AS TO HOW
SUCH SHAREHOLDER SHOULD VOTE AT THE MEETING WITH RESPECT TO THE MERGER OR ANY
OTHER MATTER RELATED THERETO.
14
<PAGE>
In connection with rendering its August 26, 1998 opinion, Sandler O'Neill
performed a variety of financial analyses. The following is a summary of the
material analyses performed by Sandler O'Neill, but does not purport to be a
complete description of all the analyses underlying Sandler O'Neill's opinion.
The preparation of a fairness opinion is a complex process involving
subjective judgments and is not necessarily susceptible to a partial analysis
or summary description. Sandler O'Neill believes that its analyses must be
considered as a whole and that selecting portions of such analyses and the
factors considered therein, without considering all factors and analyses,
could create an incomplete view of the analyses and processes underlying its
opinion. In performing its analyses, Sandler O'Neill made numerous assumptions
with respect to industry performance, business and economic conditions and
various other matters, many of which cannot be predicted and are beyond the
control of MainStreet, BB&T and Sandler O'Neill. Any estimates contained in
Sandler O'Neill's analyses are not necessarily indicative of future results or
values, which may be significantly more or less favorable than such estimates.
Estimates on the values of companies do not purport to be appraisals or
necessarily reflect the prices at which companies or their securities may
actually be sold.
The projections for MainStreet relied upon by Sandler O'Neill in its
analyses were prepared by Sandler O'Neill based upon earnings estimates for
1998 and 1999 of $1.62 and $2.00, respectively, provided by MainStreet. The
projections for BB&T relied upon by Sandler O'Neill in its analyses were
prepared by Sandler O'Neill based upon published earnings estimates for BB&T
for 1998 and 1999 of $1.71 and $1.92 per share, respectively. Sandler O'Neill
was advised by senior management of BB&T that reliance on such published
earnings estimates would be reasonable. In addition, Sandler O'Neill relied on
estimates provided by BB&T's senior management of the expected annual cost
savings from the merger of approximately 30% of MainStreet's expense base and
an expected one-time charge related to consummating the merger of $12.5
million. BB&T provided no other material forward-looking financial information
to Sandler O'Neill in connection with its analyses. For periods after 1999,
Sandler O'Neill assumed an annual growth rate on earning assets of 15%.
Summary of Proposal. Sandler O'Neill reviewed the financial terms of the
proposed transaction. Based on the closing price of BB&T common stock on
August 25, 1998 of $32.94 and an exchange ratio of 1.18, Sandler calculated an
implied transaction value per share of MainStreet of $38.87. Based upon such
implied transaction value and MainStreet's June 30, 1998 financial
information, Sandler O'Neill calculated the price to tangible book value and
price to last twelve months' normalized earnings. This analysis yielded a
price to tangible book value multiple of 3.48x and a price to normalized last
twelve months' earnings multiple of 25.6x.
Stock Trading History. Sandler O'Neill reviewed the history of the reported
trading prices and volume of MainStreet common stock and BB&T common stock,
and the relationship between the movements in the prices of MainStreet common
stock and BB&T common stock, respectively, to movements in certain stock
indices, including the Standard & Poor's 500 Index (the "S&P Index"), the
NASDAQ Bank Index (the "Bank Index") and selected composite groups of publicly
traded commercial banks in the case of MainStreet and larger publicly traded
commercial banks in the case of BB&T. During the one-year period ended August
25, 1998, MainStreet common stock underperformed each of the indices to which
it was compared. During the three-year period ended August 25, 1998,
MainStreet common stock outperformed each of the indices to which it was
compared. During the one and three-year period ended August 25, 1998, BB&T
common stock outperformed each of the indices to which it was compared.
Comparable Company Analysis. Sandler O'Neill used publicly available
information to compare selected financial and market trading information,
including balance sheet composition, asset quality ratios, loan loss reserve
levels, profitability, capital adequacy, dividends and trading multiples, for
MainStreet and two groups of commercial banks. The first group consisted of
MainStreet and the following twelve publicly traded regional commercial banks
(the "Regional Group"): F&M National Corp., Hancock Holding Co., First United
Bancshares Inc., Carolina First Corp., WesBanco Inc., Republic Bancshares
Inc., Triangle Bancorp Inc., Hamilton Bancorp Inc., Republic Banking Corp. of
FL, City Holding Co., Alabama National BanCorp. and Simmons First National
Corp. Sandler O'Neill also compared MainStreet to a group of twelve publicly
traded commercial banks which had a return on average equity of greater than
16.2% based on last twelve months' earnings and a price to tangible book value
of greater than 244% (the "Highly Valued Group"). The Highly Valued Group
included the following institutions: Westamerica Bancorp, U.S. Trust Corp.,
Silicon Valley Bancshares, TrustCo Bank Corp. of NY, Park National Corp.,
Republic Bancorp Inc., Chittenden Corp., Southwest Bancorp. of Texas, Irwin
Financial Corp., National Penn Bancshares Inc., Investors Financial Services
and Santa Barbara Bancorp. The analysis compared publicly available financial
information for MainStreet and the median data for each of the Regional Group
and the Highly Valued Group as of and for each of the years ended December 31,
1993 through December 31, 1997 and as of and for the twelve months ended June
30, 1998.
15
<PAGE>
<TABLE>
<CAPTION>
HIGHLY-VALUED
MAINSTREET REGIONAL GROUP GROUP
---------- -------------- -------------
<S> <C> <C> <C>
Total Assets......................... $2,041,955 $2,041,955 $2,084,568
Annual Growth Rate of Total Assets... 42.66% 33.55% 15.85%
Tangible Equity/Total Assets......... 7.33% 8.06% 6.88%
Intangible Assets/Total Equity....... 6.55% 8.50% 4.25%
Net Loans/Total Assets............... 48.36% 61.30% 55.64%
Cash & Securities/Total Assets....... 47.86% 31.41% 37.18%
Gross Loans/Total Deposits........... 86.02% 78.95% 70.57%
Total Borrowings/Total Assets........ 31.71% 6.61% 8.99%
Nonperforming Assets/Total Assets.... 0.26% 0.47% 0.41%
Loans Loss Reserves/Nonperforming
Loans............................... 345.93% 261.93% 338.68%
Loans Loss Reserves/Gross Loans...... 1.41% 1.41% 2.09%
Net Interest Margin.................. 3.77% 4.30% 4.87%
Loan Loss Provision/Average Assets... 0.24% 0.25% 0.24%
Non-interest Income/Average Assets... 0.82% 1.27% 1.27%
Non-interest Expense/Average Assets.. 2.52% 3.43% 3.39%
Efficiency Ratio..................... 56.97% 59.93% 58.07%
ROAA................................. 1.09% 1.09% 1.45%
ROAE................................. 13.40% 11.99% 18.47%
Price/Tangible Book Value per Share.. 228.29% 228.29% 331.18%
Price/Earnings per Share............. 16.77 18.25 19.20
Market Capitalization/Assets......... 16.73% 19.97% 25.20%
Dividend Yield....................... 2.15% 1.82% 1.67%
Dividend Payout Ratio................ 40.14% 34.94% 30.30%
</TABLE>
Sandler O'Neill also used publicly available information to perform a
similar comparison of selected financial and market trading information for
BB&T and two different groups of commercial banks. The first group consisted
of BB&T and the following six publicly traded commercial banks (the "Peer
Group"): Wachovia Corp., SunTrust Banks, Inc., SouthTrust Corp., Regions
Financial Corp., AmSouth Bancorp. and First American Corp. Sandler O'Neill
also compared BB&T to a group of twelve publicly traded commercial banks which
had a return on average equity of greater than 15.7% based on last twelve
months' earnings and a price to tangible book value of greater than 275% (the
"Larger Highly Valued Group"). The Larger Highly Valued Group consisted of
BB&T and Fleet Financial Group, PNC Bank Corp., KeyCorp, BankBoston Corp.,
State Street Corp., Comerica Inc., Summit Bancorp, Northern Trust Corp., Fifth
Third Bancorp, Regions Financial Corp., M&T Bank Corp. and AmSouth Bancorp.
The analysis compared publicly available financial information for BB&T and
the median data for each of the Peer Group and the Larger Highly Valued Group
as of and for each of the years ended December 31, 1993 through December 31,
1997 and as of and for the twelve months ended June 30, 1998.
Analysis of Selected Merger Transactions. Sandler O'Neill reviewed 153
transactions announced from January 1, 1998 through August 25, 1998 involving
commercial banks nationwide as acquired institutions with transaction values
greater than $15 million ("Nationwide Transactions") and 53 transactions
announced from January 1, 1998 through August 25, 1998 involving commercial
banks in the Southeast Region as acquired institutions with transaction values
greater than $15 million ("Regional Transactions"). For this purpose,
"Southeast Region" means Alabama, Arkansas, Florida, Georgia, Mississippi,
North Carolina, South Carolina, Tennessee, Virginia and West Virginia. Sandler
O'Neill reviewed the ratios of deal price to last four quarters' earnings,
deal price to book value, deal price to tangible book value, tangible book
premium to core deposits, deal price to total deposits and deal price to total
assets and computed high, low, mean, and median ratios and premiums for the
respective groups of transactions. These median multiples were applied to
MainStreet's financial information as of and for the twelve months ended June
30, 1998. As illustrated in the following table, based upon the median
multiples for Nationwide Transactions, Sandler O'Neill derived an imputed
range of values per share of MainStreet common stock of $31.00 to $47.07.
Based upon the median multiples for Regional Transactions, Sandler O'Neill
derived an imputed range of values per share of MainStreet common stock of
$32.34 to $48.07. As calculated by Sandler O'Neill, the implied transaction
value per share of MainStreet common stock in the merger was $38.87.
16
<PAGE>
<TABLE>
<CAPTION>
NATIONWIDE SOUTHEAST
TRANSACTIONS TRANSACTIONS
---------------- ----------------
MEDIAN IMPLIED MEDIAN IMPLIED
MULTIPLE VALUE MULTIPLE VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Deal Price/LTM Normalized Earnings Per
Share...................................... 22.89x $34.79 22.81x $34.78
Deal Price/Book Value....................... 300.05% $35.86 320.91% $38.35
Deal Price/Tangible Book Value.............. 319.06% $35.64 323.90% $36.18
Tangible Book Premium/Core Deposits......... 26.62% $35.26 27.86% $36.35
Deal Price/Total Deposits................... 33.53% $31.00 34.98% $32.34
Deal Price/Total Assets..................... 29.03% $47.07 29.65% $48.07
</TABLE>
No company involved in the transactions included in the above analysis is
identical to MainStreet and no transaction included in the above analysis is
identical to the merger. Accordingly, an analysis of the results of the
foregoing analysis is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the
public trading value of MainStreet and BB&T and the companies to which they
are being compared.
Discounted Dividend Stream and Terminal Value Analysis. Sandler O'Neill also
performed an analysis which estimated the future stream of after-tax dividend
flows of MainStreet through the year 2002 under various circumstances,
assuming the current dividend payout ratio and that MainStreet performed in
accordance with earnings forecasts prepared by Sandler O'Neill and certain
variations thereof. To approximate the terminal value of MainStreet common
stock at December 31, 2002, Sandler O'Neill applied price to earnings
multiples ranging from 14x to 32x and applied multiples of tangible book value
ranging from 200% to 380%. The dividend income streams and terminal values
were then discounted to present values using different discount rates ranging
from 9% to 14%, chosen to reflect different assumptions regarding required
rates of return of holders or prospective buyers of MainStreet common stock.
As illustrated in the following table, this analysis indicated an imputed
range of values per share of MainStreet common stock of between $21.58 and
$55.91 when applying the price to earnings multiples, and an imputed range of
values per share of MainStreet common stock of between $21.99 and $47.92 when
applying multiples of tangible book value. As calculated by Sandler O'Neill,
the implied transaction value per share of MainStreet common stock in the
merger was $38.87.
<TABLE>
<CAPTION>
TANGIBLE BOOK
PRICE/EARNINGS VALUE
MULTIPLES MULTIPLES
--------------- -------------
DISCOUNT RATE 14.0X 32.0X 2.0X 3.8X
- ------------- ------- ------- ------ ------
<S> <C> <C> <C> <C>
9.00%............................................. $26.12 $55.91 $26.62 $47.92
10.00%............................................ $25.12 $53.71 $25.60 $46.04
11.00%............................................ $24.17 $51.62 $24.63 $44.25
12.00%............................................ $23.27 $49.63 $23.71 $42.55
13.00%............................................ $22.40 $47.73 $22.82 $40.93
14.00%............................................ $21.58 $45.92 $21.99 $39.39
</TABLE>
Using a sensitivity analysis, Sandler O'Neill considered and discussed with
the MainStreet board how the present value would be affected by changes in the
underlying assumptions, including variations with respect to the growth rate
of assets, net interest spread, non-interest income, non-interest expense and
dividend payout ratio. Sandler O'Neill noted that the discounted dividend
stream and terminal value analysis is a widely used valuation methodology, but
the results of such methodology are highly dependent upon the numerous
assumptions that must be made, and the results thereof are not necessarily
indicative of actual values or actual future results.
Pro Forma Merger Analysis. Sandler O'Neill analyzed certain potential pro
forma effects of the merger based upon an exchange ratio of 1.18, MainStreet's
and BB&T's current and projected income statements and balance sheets, and
assumptions regarding the economic environment, accounting and tax treatment
of the merger, charges associated with the merger, operating efficiencies and
other adjustments discussed with senior managements of MainStreet and BB&T.
This analysis indicated that the merger would be accretive to BB&T's 1999
earnings per share and slightly accretive to 1999 tangible book value per
share. This analysis also indicated that, from a MainStreet shareholder's
perspective, as compared to the projected stand-alone performance of
MainStreet, the merger would be accretive to
17
<PAGE>
MainStreet's 1999 earnings per share and dilutive to 1999 tangible book value
per share. The actual results achieved by the combined company may vary from
projected results and the variations may be material.
<TABLE>
<CAPTION>
BB&T(1) MAINSTREET(1)
------- -------------
<S> <C> <C>
1999 Stand Alone EPS................................... $ 1.92 $ 1.94
1999 Pro Forma EPS..................................... $ 1.94 $ 2.29(2)
1999 EPS Accretion..................................... 0.74% 18.21%
1999 Stand Alone Tangible Book Value Per Share......... $10.30 $13.07
1999 Pro Forma Tangible Book Value Per Share........... $10.32 $12.17(3)
1999 Tangible Book Value Per Share Accretion
(Dilution)............................................ 0.26% (6.83%)
</TABLE>
- -------
(1) Numbers have been rounded for presentation purposes.
(2) Calculated by multiplying the BB&T EPS by an exchange ratio of 1.18.
(3) Calculated by multiplying the BB&T Tangible Book Value by an exchange
ratio of 1.18.
In connection with rendering its August 26, 1998 opinion, Sandler O'Neill
reviewed, among other things:
. the merger agreement and exhibits thereto;
. the related option agreement;
. certain publicly available financial statements of MainStreet and other
historical financial information provided by MainStreet that Sandler
O'Neill deemed relevant;
. certain publicly available financial statements of BB&T and other
historical financial information provided by BB&T that Sandler O'Neill
deemed relevant;
. certain financial analyses and forecasts for MainStreet prepared by
Sandler O'Neill based upon certain assumptions discussed with MainStreet
and the views of senior management of MainStreet regarding MainStreet's
past and current business, operations, results thereof, financial
condition and future prospects;
. certain financial analyses and forecasts for BB&T prepared by Sandler
O'Neill based upon certain assumptions discussed with BB&T and the views
of senior management of BB&T regarding BB&T's past and current business,
operations, results thereof, financial condition and future prospects;
. the pro forma impact of the merger;
. the publicly reported historical price and trading activity for
MainStreet's and BB&T's common stock, including a comparison of certain
financial and stock market information for MainStreet and BB&T with
similar publicly available information for certain other companies the
securities of which are publicly traded;
. the financial terms of recent business combinations in the banking
industry, to the extent publicly available;
. the current market environment generally and the banking environment in
particular; and
. such other information, financial studies, analyses and investigations
and financial, economic and market criteria as Sandler O'Neill
considered relevant.
Sandler O'Neill was not asked to, and did not, solicit indications of interest
in a potential transaction from third parties.
In connection with rendering the Sandler O'Neill Fairness Opinion, Sandler
O'Neill confirmed the appropriateness of its reliance on the analyses used to
render its August 26, 1998 opinion by performing procedures to update certain
of such analyses and by reviewing the assumptions upon which such analyses
were based and the factors considered in connection therewith.
In performing its reviews and analyses, Sandler O'Neill assumed and relied
upon, without independent verification, the accuracy and completeness of all
the financial information, analyses and other information that was publicly
available or otherwise furnished to, reviewed by or discussed with it, and
Sandler O'Neill does not assume any responsibility or liability therefor.
Sandler O'Neill did not make an independent evaluation or appraisal of the
specific assets, the collateral securing assets or the contingent and other
liabilities of MainStreet or BB&T or any of their respective subsidiaries, or
the collectibility of any such assets, nor was it furnished with any such
evaluations or appraisals. Sandler O'Neill is not an expert in the evaluation
of allowances for loan losses and it has not made an
18
<PAGE>
independent evaluation of the adequacy of the allowance for loan losses of
MainStreet or BB&T, nor has it reviewed any individual credit files relating
to MainStreet or BB&T. With MainStreet's consent, Sandler O'Neill has assumed
that the respective allowances for loan losses for both MainStreet and BB&T
are adequate to cover such losses and will be adequate on a pro forma basis
for the combined entity. In addition, Sandler O'Neill has not conducted any
physical inspection of the properties or facilities of MainStreet or BB&T.
With respect to all projections reviewed with each company's management,
Sandler O'Neill assumed that they reflect the best currently available
estimates and judgments of the respective managements of the respective future
financial performances of MainStreet and BB&T and that such performances will
be achieved. Sandler O'Neill expressed no opinion as to such financial
projections or the assumptions on which they were based.
Sandler O'Neill's opinion was necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
such opinion. Sandler O'Neill assumed, in all respects material to its
analysis, that all of the representations and warranties contained in the
merger agreement and all related agreements are true and correct and that each
party to such agreements will perform all of the covenants required to be
performed by such party under such agreements. Sandler O'Neill also assumed,
with MainStreet's consent, that there has been no material change in
MainStreet's or BB&T's assets, financial condition, results of operations,
business or prospects since the date of the last publicly filed financial
statements available to them, that MainStreet and BB&T will remain as going
concerns for all periods relevant to its analyses, and that the merger will be
accounted for as a pooling of interests and will qualify as a tax-free
reorganization for federal income tax purposes. Sandler O'Neill further
assumed that the termination provision set forth in Section 7.1 (g) of the
merger agreement would not be exercised and that the terms and conditions
precedent in the merger agreement are not waived or modified.
Under its engagement letter, Sandler O'Neill has received a fee of $300,000
for rendering its fairness opinion. MainStreet has also agreed to reimburse
Sandler O'Neill for its reasonable out-of-pocket expenses incurred in
connection with its engagement and to indemnify Sandler O'Neill and its
affiliates and their respective partners, directors, officers, employees,
agents, and controlling persons against certain expenses and liabilities,
including liabilities under securities laws.
Sandler O'Neill has in the past provided certain other investment banking
services to MainStreet and has received compensation for such services. In the
ordinary course of its business as a broker-dealer, Sandler O'Neill may buy
securities from and sell securities to MainStreet and BB&T. In addition,
Sandler O'Neill may actively trade the debt and equity securities of
MainStreet and BB&T and their respective affiliates for its own account and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
Opinion of Scott & Stringfellow
Pursuant to an engagement letter dated as of August 17, 1998, MainStreet
retained Scott & Stringfellow as a financial advisor in connection with
MainStreet's consideration of a possible business combination with BB&T. In
connection therewith, the MainStreet board requested Scott & Stringfellow to
render its opinion as to the fairness, from a financial point of view, of the
exchange ratio to the holders of MainStreet common stock. At the August 26,
1998 meeting at which MainStreet's board considered and approved the merger
agreement, Scott & Stringfellow delivered to MainStreet's board both its oral
and written opinion that as of such date, the exchange ratio was fair, from a
financial point of view, to the holders of shares of MainStreet common stock.
Scott & Stringfellow has reconfirmed its opinion dated as of August 26, 1998,
by delivering a written opinion to the MainStreet board, dated the date of
this proxy statement/prospectus, to the effect that, as of the date thereof,
the exchange ratio was fair to the holders of shares of MainStreet common
stock from a financial point of view. Scott & Stringfellow is a regional
investment banking firm and was selected by MainStreet based on the firm's
reputation and experience in investment banking, its extensive experience and
knowledge of the Virginia banking market, its recognized expertise in the
valuation of commercial banking businesses and because of its familiarity
with, and prior work for MainStreet. Scott & Stringfellow, through its
investment banking business and specifically through its Financial
Institutions Group, specializes in commercial banking institutions and is
continually engaged in the valuation of such businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive biddings and other corporate transactions.
BB&T entered into an agreement on August 10, 1998 to acquire Scott &
Stringfellow and its affiliated companies. BB&T did not impose any limitations
or otherwise provide any input or direction as to Scott & Stringfellow's
19
<PAGE>
engagement by MainStreet or its opinion as to the fairness, from a financial
point of view, of the exchange ratio to the holders of MainStreet common
stock.
The full text of Scott & Stringfellow's opinion, dated the date of this
proxy statement/prospectus, which sets forth the assumptions made, procedures
followed, matters considered and limits on the review undertaken, is attached
as Appendix III to this proxy statement/prospectus. The description of the
Scott & Stringfellow opinion set forth herein is qualified in its entirety by
reference to Appendix III. The Scott & Stringfellow opinion is provided for
the information of MainStreet shareholders because it was provided to the
MainStreet board in connection with its consideration of the merger. However,
in considering the Scott & Stringfellow fairness opinion, the MainStreet
shareholders should note the potential conflict of interest to which Scott &
Stringfellow was subject in providing such opinion as described above, which
led MainStreet to engage a second firm, Sandler O'Neill, to provide an
independent opinion as to the fairness of the exchange ratio. The Sandler
O'Neill opinion is attached as Appendix II to this proxy statement/prospectus.
In developing its opinion, Scott & Stringfellow reviewed and analyzed:
. the merger agreement;
. this proxy statement/prospectus;
. MainStreet's audited financial statements for the three years ended
December 31, 1997;
. MainStreet's unaudited financial statements for the nine months ended
September 30, 1998 and 1997, and other internal information relating to
MainStreet prepared by MainStreet's management;
. information regarding the trading market for MainStreet common stock and
BB&T common stock and the price ranges within which the respective
stocks have traded;
. the relationship of prices paid to relevant financial data such as net
worth, earnings, deposits and assets in certain bank and bank holding
company mergers and acquisitions in recent years;
. BB&T's annual reports to shareholders and its audited financial
statements for the three years ended December 31, 1997;
. BB&T's unaudited financial statements for the nine months ended
September 30, 1998 and 1997 and other internal information relating to
BB&T prepared by BB&T's management; and
. such other information as it deemed appropriate, the material portion of
which is described below.
In connection with its opinion, Scott & Stringfellow also took into account
its assessment of general economic, market and financial conditions and its
experience in other transactions, as well as its experience in securities
valuations and knowledge of the commercial banking industry generally. Scott &
Stringfellow also has discussed with members of MainStreet's and BB&T's
management past and current business operations, the background of the merger,
the reasons and basis for the merger, results of regulatory examinations, and
the business and future prospects of MainStreet and BB&T individually and as a
combined entity, as well as other matters relevant to its inquiry. In these
discussions, BB&T did not discuss with or provide to Scott & Stringfellow any
forward looking financial information.
Scott & Stringfellow relied without independent verification upon the
accuracy and completeness of all of the financial and other information
reviewed by it and discussed with it for purposes of its opinion. With respect
to financial forecasts reviewed by Scott & Stringfellow in rendering its
opinion, Scott & Stringfellow assumed that such financial forecasts were
reasonably prepared on the basis reflecting the best currently available
estimates and judgment of the managements of MainStreet and BB&T as to the
future financial performance of MainStreet and BB&T, respectively. Scott &
Stringfellow did not make an independent evaluation or appraisal of the assets
or liabilities of MainStreet and BB&T nor was it furnished with any such
appraisal.
In connection with rendering its August 26, 1998 opinion, Scott &
Stringfellow performed a variety of financial analyses. Scott & Stringfellow
evaluated the financial terms of the transaction using standard valuation
methods, including stock trading history, comparable acquisition analysis,
contribution analysis, pro forma merger analysis, dividend discount analysis,
ability to pay analysis and comparable company analysis, among others. The
following is a summary of the material analyses presented by Scott &
Stringfellow to the MainStreet board of directors on August 26, 1998, in
connection with its fairness opinion dated as of such date.
20
<PAGE>
Summary of Proposal. Scott & Stringfellow reviewed the terms of the proposed
transaction, including the exchange ratio and the implied aggregate
transaction value. Based on BB&T's closing stock price of $32.94 on August 25,
1998, Scott & Stringfellow calculated an implied transaction value per share
of MainStreet common stock of $38.87, and an implied total transaction value
of approximately $552 million. Scott & Stringfellow calculated the premium
over the closing price of MainStreet common stock on August 25, 1998, price to
book, price to tangible book, implied core deposit premium and price to
trailing twelve months' earnings multiple for MainStreet based on such implied
total transaction value. For this purpose, "core deposit premium" means the
transaction value minus the tangible book value divided by core deposits. This
analysis yielded a premium over the closing price of MainStreet common stock
on August 25, 1998 of 52.42%, a price to book value multiple of 3.25x, a price
to tangible book value multiple of 3.45x, an implied core deposit premium of
37.64% and a price to trailing twelve months' earnings multiple of 25.57x.
Stock Trading History. Scott & Stringfellow reviewed the history of the
reported trading prices and volume of the MainStreet common stock and the BB&T
common stock, and the relationship between the movements in the prices of the
MainStreet common stock and the BB&T common stock to each other and to
movements in certain stock indices, including the Standard & Poor's 500 Index,
the Standard & Poor's Bank Composite Index, the Nasdaq Composite Index, the
Dow Jones Industrials, the Russell 3000 and the Wilshire Small Capitalization
Index.
INDEX PERFORMANCE: JAN. 1, INDEX PERFORMANCE: JAN. 1,
1995--AUG. 25, 1998 1995--JAN. 8, 1999
BB&T...................... 344.4% BB&T...................... 417.0%
S&P--Bank Composite....... 296.5% S&P--Bank Composite....... 327.7%
MainStreet................ 272.0% Nasdaq Composite Index.... 311.8%
Nasdaq Composite Index.... 239.1% S&P 500 Index............. 277.6%
S&P 500 Index............. 238.0% Russell 3000.............. 260.8%
Dow Jones Industrials..... 224.3% Dow Jones Industrials..... 251.5%
Russell 3000.............. 223.5% Wilshire Small Cap Index.. 187.3%
Wilshire Small Cap Index.. 168.7%
Comparable Acquisition Analysis. Scott & Stringfellow reviewed 14
transactions announced from January 1, 1997 to August 25, 1998 involving
commercial banking institutions nationwide with assets between $1.0 and $5.0
billion ("Nationwide Transactions") and 11 transactions announced from January
1, 1996 to August 25, 1998 involving commercial banking institutions with
assets between $1.0 and $10.0 billion and located in the Southeast and Mid-
Atlantic, including Alabama, Arkansas, Delaware, Florida, Georgia, Maryland,
Mississippi, New York, New Jersey, North Carolina, Pennsylvania, South
Carolina, Tennessee, Virginia, and West Virginia ("Regional Transactions").
Scott & Stringfellow compared the price to book value, price to tangible book
value, price to last twelve months' earnings, price to deposits, price to
assets, the implied core deposit premium and the premium over the seller's
prior day closing price at the announcement date for such Nationwide
Transactions and Regional Transactions to the proposed merger at announcement.
<TABLE>
<CAPTION>
BB&T/ NATIONWIDE REGIONAL
MAINSTREET TRANSACTIONS TRANSACTIONS
---------- ------------ ------------
<S> <C> <C> <C>
Deal Price/Book Value.................... 3.25x 2.99x 2.94x
Deal Price/Tangible Book................. 3.45x 3.37x 3.05x
Deal Price/LTM Earnings.................. 25.57x 23.72x 22.25x
Deal Price/Deposits...................... 45.17% 36.25% 34.77%
Deal Price/Assets........................ 26.08% 28.15% 27.70%
Tangible Book Premium/Core Deposits...... 37.64% 29.28% 26.81%
Deal/Price Seller's Prior Day Closing
Price................................... 52.42% 10.40% 22.30%
</TABLE>
21
<PAGE>
Contribution Analysis. Scott & Stringfellow reviewed the relative
contributions of, among other things, last twelve months' core net income,
last twelve months' non-interest income, estimated 1998 net income, estimated
1999 net income, total equity and market capitalization to be made by
MainStreet to the combined institution based on data at and for the twelve
months ended June 30, 1998. Scott & Stringfellow compared such contributions
to the percentage of outstanding shares of the combined institution which
would be owned by the shareholders of MainStreet, based upon the exchange
rato.
<TABLE>
<CAPTION>
MAINSTREET MAINSTREET
CONTRIBUTION OWNERSHIP
TO BB&T OF BB&T
------------ ----------
<S> <C> <C>
Last 12 Months Core Net Income.......................... 4.26% 5.59%
Last 12 Months Non-Interest Income...................... 2.99% 5.59%
Estimated 1998 Net Income............................... 4.45% 5.59%
Estimated 1999 Net Income............................... 4.59% 5.59%
Total Equity............................................ 6.50% 5.59%
Market Capitalization................................... 3.74% 5.59%
</TABLE>
Pro Forma Merger Analysis. Scott & Stringfellow analyzed certain pro forma
effects of the merger using 1998 and 1999 earnings estimates provided by IBES
for MainStreet and BB&T. In addition, Scott & Stringfellow utilized cost
savings assumptions ranging from 5% to 25% of MainStreet's non-interest
expense. Such range of cost savings was based upon Scott & Stringfellow's
judgment and experience in analyzing similar bank merger transactions. This
analysis indicated that the transaction would be slightly dilutive to BB&T's
1998 and 1999 earnings per share under the 5% cost savings scenario and would
be slightly accretive to BB&T's 1998 and 1999 earnings per share under the 25%
cost savings scenario. The merger would be accretive to BB&T's book value and
tangible book value per share. The actual results achieved by BB&T may vary
from projected results.
<TABLE>
<CAPTION>
COST SAVINGS
-------------
5% 25%
------- -----
<S> <C> <C>
1998 EPS Accretion (Dilution)..................................... (0.93%) 0.31%
1999 EPS Accretion (Dilution)..................................... (0.82%) 0.29%
Book Value Accretion.............................................. 0.98% 0.98%
Tangible Book Value Accretion..................................... 1.25% 1.25%
</TABLE>
Dividend Discount Analysis. Scott & Stringfellow performed a dividend
discount analysis to determine a range of present values per share of
MainStreet common stock assuming MainStreet continued to operate as a stand-
alone entity. This range was determined by adding the present value of the
estimated future dividend stream that MainStreet could generate, and the
present value of the "terminal value" of MainStreet common stock at the end of
year 2003. To determine a projected dividend stream, Scott & Stringfellow
assumed a dividend payout equal to 40% of MainStreet's projected net income.
Scott & Stringfellow used earnings estimates available from IBES for 1998. The
net income projections were grown using an earnings growth rate of 9% for
years 1999 through 2003. The "terminal value" of MainStreet common stock at
the end of the period was determined by applying to year 2003 projected
earnings a range of price-to-earnings multiples from 16.0x to 18.0x. The
dividend stream and terminal values were discounted to present value using
discount rates of 11% to 13%, which Scott & Stringfellow viewed as the
appropriate discount rate range for a commercial bank with MainStreet's risk
characteristics. Based upon the above assumptions, the stand-alone value of
MainStreet common stock ranged from approximately $25.73 to $31.11 per share.
<TABLE>
<CAPTION>
TERMINAL PRICE/EARNINGS MULTIPLE
DISCOUNT -------------------------------------------------------------------------------
RATE 16.0x 16.5x 17.0x 17.5x 18.0x
-------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
11.00% $28.01 $28.79 $29.56 $30.34 $31.11
11.50% $27.42 $28.18 $28.93 $29.69 $30.45
12.00% $26.84 $27.58 $28.32 $29.06 $29.80
12.50% $26.28 $27.00 $27.73 $28.45 $29.18
13.00% $25.73 $26.44 $27.15 $27.86 $28.56
</TABLE>
22
<PAGE>
Ability to Pay Analysis. Scott & Stringfellow performed an analysis
comparing the merger to hypothetical acquisitions of MainStreet by five
banking institutions other than BB&T for consideration equivalent in value to
the value of the consideration proposed in the merger and reviewed certain
publicly available information with respect to such hypothetical acquirors.
The analyses used IBES median earnings estimates for the hypothetical
acquirors and assumed cost savings ranging from 5% to 25% of MainStreet's
annualized noninterest expenses. Scott & Stringfellow analyzed the effect of
such transactions on the hypothetical acquirors' 1998 and 1999 earnings per
share. Then Scott & Stringfellow estimated the prices at which an acquisition
of MainStreet by such hypothetical acquirors would be neither accretive nor
dilutive to earnings per share in 1998 and 1999, respectively. The indicated
prices per share of MainStreet common stock were $24.09 to $40.15 per share in
1998 and $25.29 to $39.50 per share in 1999.
5% COST SAVINGS
<TABLE>
<CAPTION>
BANK A BANK B BANK C BANK D BANK E
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
1998 Estimated EPS........................... $24.09 $29.41 $26.08 $30.48 $31.80
1999 Estimated EPS........................... $25.29 $30.26 $27.18 $31.30 $32.20
<CAPTION>
25% COST SAVINGS
BANK A BANK B BANK C BANK D BANK E
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
1998 Estimated EPS........................... $30.37 $37.08 $32.89 $38.43 $40.15
1999 Estimated EPS........................... $31.05 $37.16 $33.38 $38.45 $39.50
</TABLE>
Analysis of Selected Comparable Companies. Scott & Stringfellow analyzed the
performance and financial condition of BB&T relative to a group of commercial
banks consisting of AmSouth Bancorporation, CCB Financial Corporation, Centura
Banks, Inc., Colonial BancGroup, Inc., Compass Bancshares, Inc., First
Citizens BancShares, Inc., First Tennessee National Corporation, First
Virginia Banks, Inc., One Valley Bancorp, Inc., SouthTrust Corporation,
Synovus Financial Corp., Trustmark Corporation, Union Planters Corporation,
and Wachovia Corporation (the "Bank Peer Group"). The financial ratios shown
in the table below are as of September 30, 1998; the market price multiples
are based on market prices as of December 2, 1998.
<TABLE>
<CAPTION>
BB&T BANK PEER
CORPORATION GROUP AVERAGE
----------- -------------
<S> <C> <C>
Last 12 Months Net Interest Margin.................... 4.36% 4.34%
Last 12 Months Efficiency Ratio....................... 50.36% 57.93%
Last 12 Months Return on Avg. Assets.................. 1.45% 1.25%
Last 12 Months Return on Avg. Equity.................. 18.70% 15.02%
Tangible Equity/Assets................................ 7.00% 7.51%
Equity/Assets......................................... 8.08% 8.49%
Risk Based Capital Ratio.............................. 14.82% 12.68%
Nonperforming Assets/Assets........................... 0.34% 0.32%
Reserves/Nonperforming Assets......................... 270.40% 318.33%
Market Price/Last 12 Months Earnings.................. 23.25x 18.48x
Market Price/1998 Estimated Earnings.................. 21.91x 17.47x
Market Price/1999 Estimated Earnings.................. 19.75x 15.70x
Market Price/Book Value............................... 4.05x 2.75x
Current Dividend Yield................................ 1.84% 2.22%
</TABLE>
Other Analyses. Scott & Stringfellow also reviewed, among other things,
selective investment research reports on, and earnings estimates for,
MainStreet and BB&T and analyzed available information regarding the ownership
of BB&T common stock. In addition, Scott & Stringfellow prepared an overview
of BB&T's business, prepared a summary of the historical financial performance
of BB&T, summarized BB&T's financial goals and objectives, and, based on
publicly available information, analyzed BB&T's deposit market share and
branch presence in the states in which it operates.
In connection with its opinion dated as of the date of this proxy
statement/prospectus, Scott & Stringfellow performed procedures to update, as
necessary, certain of the analyses described above and reviewed the
assumptions on which such analyses described above were based and the factors
considered in connection therewith.
23
<PAGE>
The summary set forth above includes all the material factors considered by
Scott & Stringfellow in developing its opinion. The preparation of a fairness
opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances and, therefor, such an opinion is not readily
susceptible to summary description. Accordingly, notwithstanding the separate
factors discussed above, Scott & Stringfellow believes that its analyses must
be considered as a whole and that selecting portions of its analysis and of
the factors considered by it, without considering all analyses and factors,
could create an incomplete view of the evaluation process underlying its
opinion. As a whole, these various analyses contributed to Scott &
Stringfellow's opinion that the exchange ratio is fair from a financial point
of view to MainStreet's shareholders.
Pursuant to an engagement letter dated August 17, 1998 between MainStreet
and Scott & Stringfellow, in exchange for its services, MainStreet has agreed
to pay Scott & Stringfellow a transaction fee of $3.0 million, which is
payable and contingent upon the consummation of the merger. In the past, Scott
& Stringfellow has provided investment banking services to MainStreet for
which services Scott & Stringfellow received customary fees. In the ordinary
course of its business, Scott & Stringfellow may actively trade the equity
securities of MainStreet for its own account or the account of its customers,
and, accordingly, may at any time hold a long or short position in such
securities.
EXCHANGE RATIO
At the effective time of the merger, MainStreet will be merged with and into
BB&T Financial-VA, and BB&T Financial-VA will be the surviving corporation in
the merger. In the merger, each share of MainStreet common stock outstanding
at the effective time will be converted into the right to receive BB&T common
stock at the exchange ratio of 1.18 shares of BB&T common stock for each share
of MainStreet common stock.
An upward adjustment to the exchange ratio could occur only if MainStreet
elected to terminate the merger agreement as described below, and if BB&T then
elected to avoid termination of the merger agreement by adjusting the exchange
ratio. Under no circumstances would the exchange ratio be less than 1.18
shares of BB&T common stock for each share of MainStreet common stock.
MainStreet may elect to terminate the merger agreement and abandon the
merger if both of the following circumstances exist:
. the average closing price per share of BB&T common stock on the NYSE on
the five trading days before the Determination Date as defined below
(the "Closing Value") is less than $28.85, and
. (a) the amount obtained by dividing the Closing Value by $32.19 (the
"BB&T Ratio") is less than (b) 90% of the amount obtained by dividing
the Index Price on the Determination Date by the Index Price, as such
terms are defined below, on August 26, 1998. The amount determined
pursuant to clause (b) is referred to below as the "Index Ratio."
MainStreet may refuse to complete the merger pursuant to this provision by
giving notice to BB&T during the five-day period following the Determination
Date. BB&T will thereafter have a five-day period in which it could elect to
increase the exchange ratio, rounded to the nearest thousandth, so that
holders of MainStreet common stock would receive the consideration that they
would have received had the Closing Value been $28.85, i.e., BB&T common stock
having an implied market value, based on the Closing Value, of approximately
$34.04 per share of MainStreet common stock. BB&T WOULD HAVE NO OBLIGATION TO
ELECT TO INCREASE THE EXCHANGE RATIO. Such an election would be made by giving
notice to MainStreet of the election and the revised exchange ratio, whereupon
MainStreet would be required to proceed with the merger with the adjusted
exchange ratio in accordance with all other terms of the merger agreement.
MainStreet could withdraw its notice of termination at any time during the
ten-day period following the Determination Date and elect to proceed with the
merger at the exchange ratio of 1.18 if BB&T were to determine not to adjust
the exchange ratio.
24
<PAGE>
For purposes of the rights of termination and adjustment described above,
the following terms are defined as follows:
"Determination Date" means the tenth calendar day preceding the date
designated by BB&T as the closing date of the merger.
"Index Group" means 12 bank holding companies designated in the merger
agreement, the common stocks of all of which must be publicly traded and as
to which there may not have been, since August 26, 1998 and before the
Determination Date, any public announcement of a proposal for such company
to be acquired or for such company to acquire another company or companies
in transactions with a value exceeding 25% of the acquiror's market
capitalization. If any such company or companies are removed from the Index
Group, the weights, which have been determined based upon the number of
shares of outstanding common stock, will be redistributed proportionately
in determining the Index Price. If any company belonging to the Index
Group, or BB&T, declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or similar
transaction between August 26, 1998 and the Determination Date, the prices
for the common stock of such company or BB&T will be appropriately
adjusted.
"Index Price" on a given date means the weighted average of the closing
sales prices of the companies composing the Index Group.
These conditions reflect the parties' agreement that MainStreet's
shareholders will assume certain risks of decline in the market value of BB&T
common stock. If the value of BB&T common stock were to decline so that the
Closing Value was below $28.85, but the Closing Value did not reflect a
decline in the price of BB&T common stock from $32.19, which was the closing
price of BB&T common stock on August 26, 1998 (the "Starting Price"), of more
than 10% in comparison to the stock prices of the Index Group as measured from
August 26, 1998 to the Determination Date, then MainStreet's shareholders
would continue to assume the risk of decline in the value of BB&T common
stock. MainStreet will have the right to terminate the merger agreement only
when both (a) the Closing Value is less than $28.85 and (b) the decline from
the value of the Starting Price to the Closing Value exceeds by more than 10%
the decline in value for the group of comparable bank holding companies from
August 26, 1998 to the Determination Date.
If the MainStreet board elects to terminate the merger agreement because of
a decline in the price of BB&T common stock, BB&T may avoid termination by
increasing the exchange ratio. In deciding whether to increase the exchange
Ratio, the principal factors BB&T would consider include the projected effect
of the merger on BB&T's pro forma earnings and book value per share and
whether BB&T's assessment of MainStreet's earning potential as part of BB&T
justifies the issuance of a greater number of shares of BB&T common stock. If
BB&T should decline to adjust the exchange ratio, MainStreet may elect to
withdraw its election to terminate and to proceed with the merger without
adjustment. In making this determination, the principal factors the MainStreet
board would consider include whether the merger remains in the best interest
of MainStreet and its shareholders, despite the decline in the BB&T common
stock price, and whether the consideration to be received by MainStreet
shareholders remains fair from a financial point of view. Prior to making any
decision to terminate the merger agreement or to proceed with the merger
without adjustment of the exchange ratio, the MainStreet board would consult
with its financial and other advisors and would consider all financial and
other information it deemed relevant to its decision, including considerations
relating to the necessity or desirability of resoliciting MainStreet
shareholders under the circumstances. If MainStreet elected not to exercise
its right to terminate the merger agreement, the exchange ratio would remain
1.18 and the dollar value of the consideration which the MainStreet
shareholders would receive for each share of MainStreet common stock would be
the value of 1.18 shares of BB&T common stock at the effective time. If the
termination right were triggered and BB&T will not increase the exchange
ratio, the MainStreet board could determine to proceed with the merger at the
1.18 exchange ratio. If MainStreet decided to proceed, it would resolicit
shareholders only if the MainStreet board believed that it had a fiduciary
duty or otherwise decided to do so.
25
<PAGE>
The operation of the exchange ratio and the adjustment mechanism can be
illustrated by three scenarios. For purposes of the numerical examples, the
Index Price, as of August 26, 1998, is deemed to be $100.
. The first scenario is that the Closing Value of the BB&T common stock is
not less than $28.85. Under this scenario, the exchange ratio would be
1.18 and there would be no potential adjustment to the exchange ratio
and no right on the part of MainStreet to terminate the merger agreement
due to a decline in the price of BB&T common stock. The market value of
the consideration to be received by MainStreet shareholders implied by
the Closing Value would be not less than $34.04.
. The second scenario is that the Closing Value is less than $28.85 but
the BB&T Ratio is equal to or above the Index Ratio. In this case, the
exchange ratio would be 1.18 and there would be no right on the part of
MainStreet to terminate the merger agreement due to the decline in the
value of BB&T common stock and therefore no potential adjustment to the
exchange ratio, even though the implied market value of the
consideration to be received by MainStreet shareholders would have
fallen from a pro forma $37.98 as of August 26, 1998 to less than $34.04
per share. For example, if the Closing Value were $25.75 and the Index
Price were $85.00, the BB&T Ratio would be 0.8 ($25.75 / $32.19) and the
Index Ratio would be 0.765 (0.9 x ($85.00 / $100.00)). Based upon the
assumed $25.75 Closing Value, the consideration to be received by
MainStreet shareholders would have an implied market value of $30.39 per
share.
. The third scenario is that both the Closing Value is less than $28.85
and the BB&T Ratio is less than the Index Ratio. In this case,
MainStreet would have the right to terminate the merger agreement. BB&T
would have the right, but not the obligation, to reinstate the merger
agreement by increasing the exchange ratio, rounded to the nearest
thousandth, so that MainStreet shareholders would receive shares of BB&T
common stock having an implied market value equal to approximately
$34.04 per share. For example, if the Closing Value were $25.15 and the
Index Price were $90.00, the BB&T Ratio would be 0.78 ($25.15 / $32.19)
and the Index Ratio would be 0.81 (0.9 x ($90.00 / $100.00)). Based upon
the assumed $25.15 Closing Value, the consideration to be received by
MainStreet shareholders would have an implied market value of $29.68 per
share. If the MainStreet board elected to terminate the merger
agreement, BB&T would have the right, but not the obligation, to
reinstate the merger agreement by increasing the exchange ratio within
five days to 1.353, which represents $34.04 divided by the Closing
Value, rounded to the nearest thousandth. Based upon the assumed $25.15
Closing Value, the new exchange ratio would represent a value to
MainStreet shareholders of $34.03 per share.
MainStreet shareholders should be aware that the actual market value of a
share of BB&T common stock at the effective time and at the time certificates
for those shares are delivered following surrender and exchange of
certificates for shares of MainStreet common stock may be more or less than
the Closing Value. MainStreet shareholders are urged to obtain information on
the market value of BB&T common stock that is more recent than that provided
in this proxy statement/prospectus. See "Summary--Comparative Market Prices
and Dividends."
No fractional shares of BB&T common stock will be issued in the merger.
Holders of MainStreet common stock otherwise entitled to a fractional share
will be paid an amount in cash determined by multiplying the fractional part
of such share of BB&T common stock by the closing price of BB&T common stock
on the last trading day before the effective time.
EXCHANGE OF MAINSTREET COMMON STOCK CERTIFICATES
At the effective time, by virtue of the merger and without any action on the
part of MainStreet or the holders of MainStreet common stock, each share of
MainStreet common stock issued and outstanding immediately before the
effective time will be converted into and will represent the right to receive,
upon surrender of the certificate representing such share of MainStreet common
stock as described below, whole shares of BB&T common stock and cash in lieu
of any fractional share interest. Promptly after the effective time, BB&T will
deliver or mail to each MainStreet shareholder a form of letter of transmittal
and instructions for use in effecting the surrender of the certificates that,
immediately before the effective time, represented any shares of MainStreet
common stock. Upon surrender of these certificates or other satisfactory
evidence of ownership, together with such letter of transmittal duly executed
and completed in accordance with its instructions and such other documents as
may be reasonably requested, BB&T will promptly transfer the merger
consideration to the persons entitled to receive it.
26
<PAGE>
HOLDERS OF MAINSTREET COMMON STOCK SHOULD NOT SEND IN THEIR STOCK
CERTIFICATES UNTIL THEY RECEIVE TRANSMITTAL FORMS AND INSTRUCTIONS.
Until surrendered as described above, each outstanding certificate that
prior to the effective time represented one or more shares of MainStreet
common stock will be deemed upon the effective time for all purposes to
represent only the right to receive the merger consideration. No interest will
be paid or accrued on the merger consideration upon the surrender of the
certificate or certificates representing shares of MainStreet common stock.
With respect to any certificate for MainStreet common stock that has been lost
or destroyed, BB&T will pay the merger consideration attributable to such
certificate upon receipt of a surety bond or other adequate indemnity as
required in accordance with BB&T's standard policy and evidence reasonably
satisfactory to BB&T of ownership of the shares in question. After the
effective time, no transfer of the shares of MainStreet common stock
outstanding immediately before the effective time will be made on the stock
transfer books of BB&T Financial-VA.
BB&T Financial-VA will pay any dividends or other distributions with a
record date before the effective time that have been declared or made by
MainStreet in respect of shares of MainStreet common stock in accordance with
the terms of the merger agreement and that remain unpaid at the effective
time. To the extent permitted by law, former shareholders of record of
MainStreet will be entitled to vote after the effective time at any meeting of
BB&T shareholders the number of whole shares of BB&T common stock into which
their respective shares of MainStreet common stock are converted, regardless
of whether such holders have exchanged their certificates representing
MainStreet common stock for certificates representing BB&T common stock.
Whenever a dividend or other distribution is declared by BB&T on the BB&T
common stock, the record date for which is at or after the effective time, the
declaration will include dividends or other distributions on all shares of
BB&T common stock issuable pursuant to the merger agreement, but after the
effective time no dividend or other distribution payable to the holders of
record of BB&T common stock as of any time subsequent to the effective time
will be delivered to the holder of any certificate representing MainStreet
common stock until such holder surrenders such certificate for exchange as
described above. Upon surrender of such certificate, both the BB&T common
stock certificate and any undelivered dividends and cash payments payable
hereunder, without interest, will be delivered and paid with respect to each
share of MainStreet common stock represented by such certificate.
THE MERGER AGREEMENT
Effective Date and Time of the Merger
The merger agreement provides that the closing of the merger will take place
on the business day designated by BB&T that is within 30 days following the
satisfaction of the conditions to the completion of the merger, or such later
date as the parties may otherwise agree. The effective time will occur at the
time and date specified in the articles of merger to be filed with State
Corporation Commission of the Commonwealth of Virginia. It is currently
anticipated that the filing of the articles of merger will take place as soon
as practicable following the date on which the merger is approved by the
MainStreet shareholders and all other conditions to the respective obligations
of BB&T and MainStreet to complete the merger have been satisfied. If the
merger is approved at the meeting, it is currently anticipated that the filing
of the articles of merger and the effective time will occur by February 19,
1999.
Conditions to the Merger
The obligations of BB&T and MainStreet to carry out the merger are subject
to satisfaction or, if permissible, waiver of the following conditions at or
before the effective time:
. all corporate action necessary to authorize the performance of the
merger agreement and the plan of merger must have been duly and validly
taken, including the approval of the merger by the shareholders of
MainStreet;
. BB&T's registration statement on Form S-4 relating to the merger must be
effective under the Securities Act of 1933, as amended, and BB&T must
have received all state securities authorizations or confirmations as to
the availability of exemptions, no proceedings may be pending or
threatened by the SEC or any state securities administration to suspend
the effectiveness of the registration statement and the BB&T common
27
<PAGE>
stock to be issued in the merger must either have been registered or be
subject to exemption from registration under applicable state securities
laws;
. the parties must have received all regulatory approvals required in
connection with the transactions in the merger agreement, all notice
periods and waiting periods required with respect to the approvals must
have passed and all approvals must be in effect;
. neither BB&T nor MainStreet nor any of their respective subsidiaries may
be subject to any order, decree or injunction of a court or agency of
competent jurisdiction that enjoins or prohibits completion of the
transactions in the merger agreement; and
. MainStreet and BB&T must have received an opinion of BB&T's legal
counsel, Womble Carlyle Sandridge & Rice, PLLC, in form and substance
satisfactory to MainStreet and BB&T, substantially to the effect that
the merger will constitute one or more reorganizations under Section 368
of the Internal Revenue Code of 1986, as amended, and that the
shareholders of MainStreet will not recognize any gain or loss to the
extent that they exchange shares of MainStreet common stock for shares
of BB&T common stock.
The obligations of MainStreet to carry out the transactions in the merger
agreement are also subject to the satisfaction of the following additional
conditions at or before the effective time, unless, where permissible, waived
by MainStreet:
. BB&T must have performed in all material respects all obligations and
complied in all material respects with all covenants required by the
merger agreement;
. all approvals of the transactions in the merger agreement from the
Federal Reserve and any other state or federal government agency,
department or body whose approval is required for the completion of the
merger must have been received and all waiting periods with respect to
such approvals must have expired;
. the shares of BB&T common stock to be issued in the merger must have
been approved for listing on the NYSE, subject to official notice of
issuance; and
. MainStreet must have received certain closing certificates and legal
opinions from BB&T and its counsel.
In addition, all representations and warranties of BB&T will be evaluated as
of the date of the merger agreement and as of the effective time as though
made on and as of the effective time or on the date designated, in the case of
any representation and warranty that specifically relates to an earlier date,
except as otherwise provided in the merger agreement or consented to in
writing by MainStreet. The representations and warranties of BB&T concerning
. its capitalization,
. its and its subsidiaries' organization and authority to conduct
business,
. its authorization and the binding nature of the merger agreement and
. the absence of any conflict between the transactions in the merger
agreement and BB&T's articles of incorporation or its bylaws
must be true and correct except for inaccuracies that are de minimis in
amount. Moreover, there must not exist inaccuracies in any of the
representations and warranties of BB&T set forth in the merger agreement such
that the aggregate effect of such inaccuracies has, or is reasonably likely to
have, a material adverse effect on BB&T.
The obligations of BB&T to carry out the transactions in the merger
agreement are also subject to satisfaction of the following additional
conditions at or before the effective time, unless, where permissible, waived
by BB&T:
. no regulatory approval may have imposed any condition or requirement
that, in the reasonable opinion of the board of directors of BB&T, would
so materially adversely affect the business or economic benefits to BB&T
of the transactions in the merger agreement as to render their
completion inadvisable or unduly burdensome;
. MainStreet must have performed in all material respects all obligations
and complied in all material respects with all covenants required by the
merger agreement;
. BB&T must have received agreements from certain affiliates of MainStreet
concerning the shares of BB&T common stock to be received by them;
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. BB&T must have received letters from Arthur Andersen, LLP dated as of
the filing of the Registration Statement and as of the effective time to
the effect that the merger will qualify for pooling-of-interests
accounting treatment; and
. BB&T must have received certain closing certificates and legal opinions
from MainStreet and its counsel.
In addition, all representations and warranties of MainStreet will be
evaluated as of the date of the merger agreement and as of the effective time
as though made on and as of the effective time or on the date designated, in
the case of any representation and warranty that specifically relates to an
earlier date, except as otherwise provided in the merger agreement or
consented to in writing by BB&T. The representations and warranties of
MainStreet concerning
. its capitalization,
. its and its subsidiaries' organization and authority to conduct
business,
. its ownership of its subsidiaries,
. its authorization and the binding nature of the merger agreement,
. the absence of conflict between the transactions in them merger
agreement and MainStreet's articles of incorporation or its bylaws,
. its forbearance from taking any actions that would negatively affect the
pooling-of-interest or tax-free elements of the merger or the receipt of
necessary regulatory approvals and
. actions taken to exempt the merger from any applicable anti-takeover
laws
must be true and correct except for inaccuracies that are de minimis in
amount. Moreover, there must not exist inaccuracies in any of the
representations and warranties of MainStreet set forth in the merger agreement
such that the effect of such inaccuracies individually or in the aggregate
has, or is reasonably likely to have, a material adverse effect on MainStreet.
Conduct of MainStreet's and BB&T's Business Prior to the Effective Time of
the Merger
Except with the prior consent of BB&T, before the effective time MainStreet
may not, and must cause each of its subsidiaries not to:
. carry on its business except in the ordinary course and in substantially
the same manner as previously conducted, or establish or acquire any new
subsidiary or engage in any new type of activity;
. declare or pay any distribution on its capital stock, other than
regularly scheduled quarterly dividends of $0.15 per share of MainStreet
common stock payable on record dates and in amounts consistent with past
practices (except that any dividend declared or payable in the quarterly
period during which the effective time occurs may, unless otherwise
agreed, be declared with a record date before the effective time only if
the normal record date for payment of the corresponding quarterly
dividend on BB&T common stock is before the effective time);
. issue any shares of capital stock except under its stock option plans,
the option granted to BB&T in connection with the merger or its dividend
reinvestment plan;
. issue or authorize any rights to acquire capital stock or effect any
recapitalization, reclassification, stock dividend, stock split or
similar change in capitalization;
. amend its articles of incorporation or bylaws, impose or permit the
imposition or existence of any lien, charge or encumbrance on any share
of stock held by it in any MainStreet subsidiary or release any material
right or cancel or compromise any debt or claim, in each case other than
in the ordinary course;
. merge with any other entity or permit any other entity to merge into it,
acquire control over any other entity or dispose of any assets or
acquire any assets, in each case other than in the ordinary course of
its business;
. fail to comply in any material respect with any legal requirements
applicable to it and to the conduct of its business;
. increase the compensation of any of its directors, officers or employees
other than increases resulting from the normal vesting of restricted
stock awards or the exercise of stock options, pay or agree to pay any
bonus
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or provide any new employee benefit or incentive, except for increases
or payments made in the ordinary course under existing arrangements;
. enter into or except as required by law substantially modify any
employee benefit, incentive or welfare arrangement, or any related trust
agreement, relating to any of its directors, officers or other
employees, other than renewal of any arrangement consistent with past
practice;
. solicit inquiries or proposals with respect to, furnish any information
relating to, or participate in any discussions concerning, any other
business combination with MainStreet or any MainStreet subsidiary, or
fail to notify BB&T immediately if any such inquiries or proposals are
received, any such information is requested or required or any such
discussions are sought, unless MainStreet is advised by legal counsel
that the failure to furnish information or negotiate in response to an
unsolicited offer would more likely than not constitute a breach of the
fiduciary duties of the MainStreet board to its shareholders;
. enter into (a) any material agreement or commitment not made in the
ordinary course, (b) any agreement, indenture or other instrument not
made in the ordinary course relating to the borrowing of money by
MainStreet or a MainStreet subsidiary or guarantee by MainStreet or a
MainStreet subsidiary of any obligation, (c) any agreement or commitment
relating to the employment or severance of a consultant or the
employment, severance or retention in office of any director, officer or
employee other than the election of directors or the reappointment of
officers in the normal course or (d) any contract, agreement or
understanding with a labor union;
. change its lending, investment or asset liability management policies in
any material respect, except as required by applicable law and except
that after shareholder approval of the merger and receipt of necessary
regulatory approvals, MainStreet will cooperate with BB&T to adopt
policies, practices and procedures consistent with those used by BB&T,
except that MainStreet will not be required to implement any such
changes until BB&T agrees that all conditions to BB&T's obligation to
complete the merger, other than delivery of documents to be delivered at
closing or otherwise to be dated as of the effective time, have been
satisfied or waived;
. change its methods of accounting in effect at December 31, 1997, except
as required by changes in accounting principles reasonably concurred in
by BB&T, or change any of its federal income tax reporting methods from
those used in the preparation of its 1997 tax returns, except as
required by changes in law;
. incur any commitments for capital expenditures or obligation to make
capital expenditures in excess of $100,000 for any single item, or
$1,000,000 in the aggregate, unless otherwise agreed by BB&T, which
agreement may not be unreasonably withheld;
. incur any new indebtedness other than deposits from customers, advances
from the Federal Home Loan Bank or Federal Reserve Bank and reverse
repurchase arrangements, in each case in the ordinary course;
. take any action that could reasonably be expected to (a) cause the
merger not to be accounted for as a pooling of interests or not to
constitute a tax-free reorganization as determined by BB&T, (b) result
in any inaccuracy of a representation or warranty that would permit
termination of the merger agreement or (c) cause any of the conditions
to the merger to fail to be satisfied;
. dispose of any material assets other than in the ordinary course; or
. agree to do any of the foregoing.
Except with the prior consent of MainStreet, before the effective time
neither BB&T nor any subsidiary of BB&T may take any action that would or
might be expected to
. cause the merger not to constitute a pooling of interests or a tax-free
reorganization;
. result in any inaccuracy of a representation or warranty that would
allow for termination of the merger agreement;
. cause any of the conditions precedent to the transactions in the merger
agreement to fail to be satisfied;
. exercise the option agreement executed concurrently with the merger
agreement other than in accordance with its terms or dispose of shares
of MainStreet common stock acquired under that agreement other than in
accordance with its terms; or
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. fail to comply in any material respect with any laws, regulations,
ordinances or governmental actions applicable to it and to the conduct
of its business.
Waiver; Amendment; Termination; Expenses
Except with respect to any required regulatory approval, BB&T or MainStreet
may at any time before or after approval of the merger extend the time for the
performance of any of the obligations or other acts of the other party and may
waive (a) any inaccuracies of the other party in the representations or
warranties contained in the merger agreement, the plan of merger or any
document delivered pursuant thereto, (b) compliance with any of the covenants,
undertakings or agreements of the other party, or satisfaction of any of the
conditions precedent to its obligations, contained in the merger agreement or
in the plan of merger or (c) the performance by the other party of any of its
obligations set out therein. The parties may also mutually amend or supplement
the merger agreement in writing at any time. No such extension, waiver,
amendment or supplement after approval by the MainStreet shareholders of the
merger, however, may modify either the amount or the form of the consideration
to be provided to holders of MainStreet common stock upon completion of the
merger.
If any of the conditions to the obligation of either party to complete the
merger is not fulfilled, such party will consider the materiality of such
nonfulfillment. In the case of the nonfulfillment of a condition to
MainStreet's obligations, MainStreet will, if appropriate under the
circumstances, resolicit shareholder approval of the merger and in connection
therewith provide appropriate information concerning such nonfulfillment.
The merger agreement may be terminated, and the merger may be abandoned:
. at any time before the effective time, by the mutual consent in writing
of BB&T and MainStreet;
. at any time before the effective time, by either party (a) in the event
of a material breach by the other party of any covenant or agreement
contained in the merger agreement or (b) in the event of an inaccuracy
of any representation or warranty of the other party contained in the
merger agreement that would provide the nonbreaching party the ability
to refuse to complete the merger under the applicable standard set forth
in the merger agreement (see "--Conditions to the Merger"); and, in the
case of (a) or (b), if such breach or inaccuracy has not been cured by
the earlier of 30 days following notice of such breach to the party
committing such breach or inaccuracy or the effective time and the
terminating party is not in breach of the merger agreement;
. at any time before the effective time, by either party in writing, if
any of the conditions precedent to the obligations of the other party to
complete the transactions in the merger agreement cannot be satisfied or
fulfilled before the Closing Date, and the party giving the notice is
not in breach of any of its representations, warranties, covenants or
undertakings;
. at any time, by either party in writing, if any of the applications for
prior regulatory approval are denied, and the time period for appeals
and requests for reconsideration has run;
. at any time, by either party in writing, if the shareholders of
MainStreet do not approve the merger;
. at any time following April 30, 1999, by either party in writing, if the
effective time has not occurred by the close of business on such date
and the party giving the notice is not in breach of any of its
representations, warranties, covenants or undertakings; or
. by MainStreet, pursuant to the provisions of the merger agreement
described above under "--Exchange Ratio."
If the merger agreement is terminated pursuant to any of the provisions
described above, both the merger agreement and the plan of merger will become
void and have no effect, except that (a) provisions in the merger agreement
relating to confidentiality and expenses will survive any such termination and
(b) a termination for an uncured breach of a covenant or agreement or
inaccuracy in a representation or warranty will not relieve the breaching
party from liability for that breach or inaccuracy.
Each party to the merger agreement will pay all expenses incurred by it in
connection with the merger agreement and the merger, except that printing
expenses and Commission registration fees incurred in connection with the
registration statement will be paid 50% by BB&T and 50% by MainStreet.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of MainStreet's management, including all of its directors,
have certain interests in the merger that are in addition to their interests
as shareholders of MainStreet generally. The MainStreet board was aware of
these factors and considered them, among other matters, in approving the
merger.
Employment Agreements
In connection with the merger, it is anticipated that a BB&T subsidiary (in
each case, the "Employer") will enter into a ten-year employment agreement
with Mr. Brenan and a three-year employment agreement with each of Rebecca J.
Jenkins, Darryl J. Landreneau, Mark J. Wenick, R. Bruce Valley, Merlin A.
Henkel and George Kapusta (with Mr. Brenan, the "Executives"). The employment
agreements will provide for the employment of Mr. Brenan as Executive Vice
President of Branch Banking and Trust Company ("BB&T-NC"), which is BB&T's
North Carolina banking subsidiary, Mr. Valley as a Regional President and each
of the remaining Executives as a Senior Vice President of the Employer in
question.
Mr. Brenan's employment agreement provides for a base annual salary of
$275,000, with an annual increase at least equal to the average percentage
increase provided to similarly situated officers of BB&T-NC. Each of the other
employment agreements provides that the Executive in question will receive a
base salary at least equal to that previously received from MainStreet, with
the potential for an annual increase based on the Employer's performance and
the Executive's performance.
Mr. Brenan's agreement provides that he will participate in BB&T's Short
Term Incentive Plan and be eligible to receive a bonus under the plan
calculated at a target level of 50% of his base salary, with a maximum bonus
not to exceed 100% of base salary. The targets for achieving bonuses each year
will be determined in good faith by BB&T. Mr. Brenan also will be granted
options under the BB&T's 1995 Omnibus Stock Incentive Plan each year having a
value (determined by BB&T in the same manner as for other executives receiving
options under the plan) of at least 42% of his base salary in effect at the
time of the grant and in no event less than the value, as a percentage of base
salary, of options granted to similarly situated officers of BB&T. Each of the
other Executives will be entitled to participate in any bonus or incentive
plan, whether it provides for awards in cash or securities, made available to
similarly situated officers, or such other similar plans for which the
Executive may become eligible and designated a participant. Each Executive
also will receive, on the same basis as other officers of the Employer,
employee pension and welfare benefits and group employee benefits such as sick
leave, vacation, group disability and health, dental, life and accident
insurance and similar indirect compensation that may be extended to similarly
situated officers.
Each Executive's employment agreement provides that, if the Employer
terminates the Executive's employment other than because of disability or for
cause, the Executive will, if he or she complies with certain noncompetition
provisions, be entitled to receive an annual salary equal to the highest
amount of cash compensation and bonuses received during any of the preceding
three calendar years ("Termination Compensation") for the remainder of what
would otherwise have been the term of the agreement. In addition, each
Executive would continue to receive health insurance coverage and other group
employee benefits from the Employer on the same terms as were in effect before
the termination, either under the Employer's plans or comparable coverage,
during the time payments of Termination Compensation are made.
Each of the employment agreements provides that the Executive may
voluntarily terminate employment for "Good Reason" until twelve months after a
"Change of Control" of the Employer or BB&T and (a) be entitled to receive in
a lump sum (1) any compensation due but not yet paid through the date of
termination and (2) in lieu of any further salary payments from the date of
termination to the end of the term of the agreement, an amount equal to the
Termination Compensation times 2.99, and (b) continue to receive health
insurance coverage and other group employee benefits for a period of three
years following termination of employment by the Executive on the same terms
as were in effect either (A) at the date of termination or (B) at the date of
the Change of Control, if such plans and programs in effect before the Change
of Control were, considered together as a whole, materially more generous to
the officers of the Employer than such plans and programs at the date of
termination.
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"Good Reason" means any of the following events occurring without the
Executive's consent:
. the assignment to the Executive of duties inconsistent with the position
and status of the Executive's title;
. a reduction in the Executive's pay grade or base salary as then in
effect, or the exclusion of the Executive from participation in benefit
plans in which he or she previously participated;
. an involuntary relocation of the Executive more than 35 miles from the
location where the Executive worked immediately before a Change in
Control, or the breach by the Employer of any material provision of the
employment agreement; or
. any purported termination of the employment of the Executive by the
Employer not effected in accordance with the employment agreement.
A "Change of Control" would be deemed to occur if
. any person or group of persons, excluding employee benefit plans of the
Employer or BB&T, is or becomes the beneficial owner of securities of
the Employer or BB&T representing 20% or more of the combined voting
power of the Employer's or BB&T's then outstanding securities;
. as a result of a tender offer or exchange offer for the purchase of
securities of the Employer or BB&T, other than an offer by BB&T for its
own securities, or as a result of a proxy contest, merger, consolidation
or sale of assets, or as a result of any combination of the foregoing,
individuals who at the beginning of any two-year period constitute the
BB&T board, plus new directors whose election or nomination for election
by BB&T's shareholders is approved by a vote of at least two-thirds of
the directors still in office who were directors at the beginning of the
two-year period, cease for any reason during the two-year period to
constitute at least two-thirds of the members of the BB&T board;
. the shareholders of BB&T approve a merger or consolidation of BB&T with
any other corporation or entity, regardless of which entity is the
survivor, other than a merger or consolidation that would result in the
voting securities of BB&T outstanding immediately beforehand continuing
to represent, either by remaining outstanding or by being converted into
voting securities of the surviving entity, at least 40% of the combined
voting power of the voting securities of BB&T or the other surviving
entity outstanding immediately after the merger or consolidation;
. the shareholders of BB&T approve a plan of complete liquidation or
winding-up of BB&T or an agreement for the sale or disposition by BB&T
of all or substantially all of BB&T's assets; or
. any other event occurs that the BB&T board determines should constitute
a Change of Control.
If any of the payments to be made under the employment agreements would
constitute a "parachute payment," as defined in Section 280G of the Code, the
payments would be reduced by the smallest amount necessary so that no portion
of such payments would be a "parachute payment." A "parachute payment"
generally is a payment which is contingent on a change in the control of the
corporation and the present value of which equals or exceed three times the
"base amount," which is generally defined as the Executive's annualized
includable compensation for the "base period," which is generally the most
recent five taxable years of the Executive ending before the date of the
change in control. Sections 280G and 4999 of the Code generally provide that
if "parachute payments" are paid to an individual, everything above the base
amount will be (1) subject to a 20% excise tax payable by the individual, in
addition to the payment of regular income taxes on the payments, and (2)
nondeductible by the employer for federal income tax purposes.
The Executives' employment agreements will supersede any of their existing
employment agreements and change of control arrangements with MainStreet or
its subsidiaries.
Management Severance Benefits
Management will receive some benefits as a result of this merger. All
executive officers and all MainStreet bank presidents have stock options that
vest over time. All of these options will vest automatically on completion of
the merger. This will benefit only two executive officers, however. Options
for 1,379 shares held by Mr. Valley and options for 1,367 shares held by Mr.
Wenick are not due to vest until 1999 or until 2000. All other stock options
held
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by Mr. Valley, Mr. Wenick and other executive officers of MainStreet will vest
in January of 1999 according to the normal vesting schedule, whether or not
this merger is completed. The options held by MainStreet bank presidents are
scheduled to vest over time, with the last options vesting in January 2000,
and the merger also will accelerate the vesting of those options.
Sixteen officers of MainStreet have severance agreements that provide for
compensation if their employment terminates within a certain period after
consummation of an acquisition. As mentioned earlier, seven of these officers
have offers of employment from BB&T, and others may be retained by BB&T.
However, upon termination of employment under the circumstances described in
the severance agreements, the officers will receive the following approximate
severance payments:
<TABLE>
<CAPTION>
APPROXIMATE
SEVERANCE
NAME PAYMENT
---- -----------
<S> <C>
James E. Adams................................................... $ 885,000
S. Richard Bagby................................................. 138,000
Michael R. Brenan................................................ 1,285,000
James Hal Campbell............................................... 108,000
William S. Clark................................................. 106,000
James W. Clement................................................. 102,000
Larry A. Heaton.................................................. 94,000
Merlin A. Henkel................................................. 377,000
Rebecca J. Jenkins............................................... 583,000
George Kapusta, Jr............................................... 225,000
D.J. Landreneau.................................................. 411,000
Beverly L. Mitchell.............................................. 83,000
Lamont Thomas.................................................... 110,000
William O. Turner................................................ 70,000
R. Bruce Valley.................................................. 214,000
Mark J. Wenick................................................... 140,000
----------
Total.......................................................... $4,931,000
</TABLE>
MainStreet Board of Directors
In connection with the merger, BB&T will offer each member of the MainStreet
board a seat on either the Advisory Board for the southwest Virginia area or
the Advisory Board for the community in which the member resides. For two
years after the effective time, those members will receive, as compensation
for service on the Advisory Board, annual retainer and attendance fees equal
in amount each year to the annual retainer and schedule of attendance fees for
directors of MainStreet in effect on July 1, 1998. These Advisory Board
members will thereafter receive fees in accordance with BB&T's standard
schedule of Advisory Board service fees. For two years after the effective
time, no such member may be prohibited from serving because he or she has
reached age 70 or the then current maximum age for Advisory Board service. In
addition to the foregoing, two members of the MainStreet board will be
appointed to the board of directors of BB&T-NC and two members will be
appointed to the board of directors of Branch Banking and Trust Company of
Virginia ("BB&T-VA"), which is BB&T's Virginia banking subsidiary, subject in
each case to the member's eligibility and willingness to serve. Members of the
BB&T-NC board receive an annual retainer $5,000 plus $1,000 for each meeting
attended, and members of the BB&T-VA board receive an annual retainer of
$1,000 plus $1,000 for each meeting attended.
Indemnification of Directors and Officers
The merger agreement provides that BB&T or one of its subsidiaries will
maintain for three years after the effective time directors' and officers'
liability insurance covering directors and officers of MainStreet for acts or
omissions before the effective time. This insurance will provide at least the
same coverage and amounts as contained in MainStreet's policy on the date of
the merger agreement, unless the annual premium on the policy would exceed
150% of the annual premium payments on MainStreet's policy, in which case BB&T
would maintain the most
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advantageous policies of directors' and officers' liability insurance
obtainable for a premium equal to this amount. BB&T has also agreed to
indemnify all individuals who are or have been officers, directors or
employees of MainStreet or any MainStreet subsidiary before the effective time
from any acts or omissions in these capacities before the effective time to
the fullest extent that such indemnification is provided under MainStreet's
articles or bylaws or by contract and is permitted under Virginia law.
REGULATORY CONSIDERATIONS
Bank holding companies such as BB&T and MainStreet and their depository
institution subsidiaries are highly regulated institutions, with numerous
federal and state laws and regulations governing their activities. Among these
laws and regulations are requirements of prior approval by applicable
government regulatory authorities in connection with acquisition and merger
transactions such as the merger, as summarized below. In addition, these
institutions are subject to ongoing supervision, regulation and periodic
examination by various federal and state financial institution regulatory
agencies. Detailed discussions of such ongoing regulatory oversight and the
laws and regulations under which it is carried out can be found in the Annual
Report on Form 10-K of each of BB&T and MainStreet incorporated by reference
herein. See "Where You Can Find More Information" on page 57. Those
discussions are qualified in their entirety by the actual language of the laws
and regulations, which are subject to change based on possible future
legislation and action by regulatory agencies.
The merger and the subsidiary bank mergers are subject to certain regulatory
approvals, as set forth below. To the extent that the following information
describes statutes and regulations, it is qualified in its entirety by
reference to those particular statutes and regulations.
The Merger
The merger is subject to approval by the Board of Governors of the Federal
Reserve System under Section 3 of the Bank Holding Company Act of 1956, which
approval was granted on December 16, 1998. In considering the approval of a
transaction such as the merger, this act requires the Federal Reserve to
review the financial and managerial resources and future prospects of the bank
holding companies and the banks concerned and the convenience and needs of the
communities to be served. The Federal Reserve is also required to evaluate
whether the merger would result in a monopoly or would be in furtherance of
any combination or conspiracy or attempt to monopolize the business of banking
in any part of the United States or otherwise would substantially lessen
competition or tend to create a monopoly or which in any manner would be in
restraint of trade, unless it finds the anti-competitive effects of the
proposed transaction are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and needs of the
communities to be served.
Where a transaction, such as the merger, is the acquisition by a bank
holding company of a bank located in North Carolina or in any state other than
the home state of the bank holding company, the BHC Act authorizes the Federal
Reserve to approve the transaction without regard to whether such transaction
is prohibited under the laws of any state, provided the bank holding company
is adequately capitalized and adequately managed and certain other limitations
are not exceeded. BB&T is considered well-capitalized and well-managed under
the Federal Reserve's Regulation Y, and the transaction does not exceed the
other limitations.
The merger also is subject to approval by the Virginia Bureau of Financial
Institutions under Section 6.1-399 of the Code of Virginia, which permits an
out-of-state bank holding company with a Virginia bank subsidiary, such as
BB&T, to acquire a Virginia bank holding company, such as MainStreet, if the
Virginia Bureau approves the transaction. In its review of the merger, the
Virginia Bureau is required to consider, among other things, whether all of
the bank subsidiaries of MainStreet have been in existence and continuously
operating for more than two years.
The merger also is subject to approval by the Maryland Commissioner of
Financial Regulation under Section 5-903 of the Maryland Financial
Institutions Code, which permits a bank holding company, such as BB&T or BB&T
Financial-VA, to directly or indirectly acquire a Maryland bank, such as
MainStreet subsidiary Commerce Bank, if the Maryland Commissioner approves the
transaction. In its review of the merger, the Maryland Commissioner is
required to consider, among other things, whether the merger would be
detrimental to the safety and soundness of Commerce
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Bank and whether the merger would result in an undue concentration of
resources or a substantial reduction in competition in Maryland.
The Subsidiary Bank Mergers
Although not required by the terms of the merger agreement or the plan of
merger, BB&T expects to effect the subsidiary bank mergers during 1999. The
Subsidiary Bank Mergers are each subject to approval of the Federal Deposit
Insurance Corporation under the Bank Merger Act. In granting its approval
under the Bank Merger Act, the FDIC must consider the financial and managerial
resources and future prospects of the existing and proposed institutions and
the convenience and needs of the communities to be served. Further, the FDIC
may not approve any subsidiary bank merger if it would result in a monopoly,
if it would be in furtherance of any combination or conspiracy to monopolize
or to attempt to monopolize the business of banking in any part of the United
States, if the effect of the subsidiary bank merger in any section of the
country may be substantially to lessen competition or to tend to create a
monopoly or if it would be in any other manner in restraint of trade, unless
the FDIC finds that the anticompetitive effects of the subsidiary bank merger
are clearly outweighed in the public interest by the probable effect of such
merger in meeting the convenience and needs of the communities to be served.
In addition, the FDIC must take into account the record of performance of the
existing and proposed institution under the Community Reinvestment Act of 1977
in meeting the credit needs of the entire community, including low- and
moderate-income neighborhoods, served by such institution. Applicable
regulations also require publication of notice of the application for approval
of the subsidiary bank mergers and an opportunity for the public to comment on
the application in writing and to request a hearing.
The Virginia Bureau must approve the merger of MainStreet's Virginia state-
chartered and national bank subsidiaries into BB&T-VA under Sections 6.1-43
and 6.1-44 of the Code of Virginia, which authorize the merger of Virginia
chartered banks, or a Virginia chartered bank and a national bank located in
Virginia, where a Virginia chartered bank is the resulting bank.
The Maryland Commissioner must approve the merger of Commerce Bank into
BB&T-NC under Sections 3-701 and 3-703 of the Maryland Financial Institutions
Code. In its review of the merger, the Maryland Commissioner is required to
consider whether the agreement of merger is fair and whether its provides an
adequate capital structure and whether the merger is against the public
interest.
The North Carolina Commissioner of Banks must also approve the merger of
Commerce Bank into BB&T-NC, under Section 53-12 of the North Carolina General
Statutes. In its review of the merger, the N.C. Commissioner is required to
consider whether the interests of the depositors, creditors and shareholders
of each bank are protected, whether the merger is in the public interest and
whether the merger is for legitimate purposes.
All of the required applications and notices for the merger have been
submitted to the appropriate regulatory agencies. As noted above, the Federal
Reserve approved the merger on December 16, 1998. BB&T and MainStreet
anticipate that the other regulatory approvals described herein will be
obtained in time to allow completion of the merger by February 19, 1999.
However, there can be no assurance that such regulatory approvals will be
obtained or that such approvals will not be conditioned upon matters that
would cause BB&T to abandon the merger in the manner permitted by the merger
agreement. There likewise is no assurance that the U.S. Department of Justice
or a state attorney general will not challenge the merger or any of the
subsidiary bank mergers, or, if such a challenge is made, as to the results
thereof.
BB&T and MainStreet are not aware of any other governmental approvals or
actions that are required for completion of the merger or the subsidiary bank
mergers, except as described above. Should any other approval or action be
required, it is currently expected that such approval or action would be
sought. There can be no assurance that any such approval or action, if needed,
could be obtained, would not delay completion of the merger or would not be
conditioned in a manner that would cause BB&T to abandon the merger in the
manner permitted by the merger agreement.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary description of the material anticipated federal
income tax consequences of the merger generally applicable to the shareholders
of MainStreet and to BB&T and MainStreet. This summary is not intended to be a
complete description of all of the federal income tax consequences of the
merger. No information is provided with respect to the tax consequences of the
merger under any other tax laws, including applicable state, local and foreign
tax laws. In addition, the following discussion may not be applicable with
respect to certain specific categories of shareholders, including but not
limited to persons who are corporations, trusts, dealers in securities,
financial institutions, insurance companies or tax exempt organizations;
persons who are not United States citizens or resident aliens or domestic
entities such as partnerships or trusts; persons who are subject to
alternative minimum tax to the extent that tax affects the tax consequences of
the merger or who are subject to the "golden parachute" provisions of the
Internal Revenue Code to the extent that tax affects the consequences of the
merger; persons who acquired MainStreet common stock pursuant to employee
stock options or otherwise as compensation if such shares are subject to any
restriction related to employment; persons who do not hold their shares as
capital assets; or persons who hold their shares as part of a "straddle" or
"conversion transaction." The federal income tax laws are complex, and a
shareholder's individual circumstances may affect the tax consequences to the
shareholder. Consequently, each MainStreet shareholder is urged to consult his
or her own tax advisor regarding the tax consequences of the merger. No ruling
has been or will be requested from the IRS with respect to the tax effects of
the merger.
In the opinion of Womble Carlyle Sandridge & Rice, PLLC, counsel to BB&T:
(a) the merger will constitute a reorganization under Section 368 of the
Internal Revenue Code; (b) no gain or loss will be recognized by BB&T or
MainStreet by reason of the merger; (c) the shareholders of MainStreet will
recognize no gain or loss for federal income tax purposes to the extent BB&T
common stock is received in the merger in exchange for MainStreet common
stock; (d) a shareholder of MainStreet who receives cash in lieu of a
fractional share of BB&T common stock will recognize gain or loss as if the
shareholder received the fractional share and it was then redeemed for cash in
an amount equal to the amount paid by BB&T in respect of such fractional
share; (e) the tax basis in the BB&T common stock received by a shareholder,
including any fractional share interest deemed received, will be the same as
the tax basis in the MainStreet common stock surrendered in exchange therefor;
and (f) the holding period for BB&T common stock received, including any
fractional share interest deemed received, in exchange for shares of
MainStreet common stock will include the period during which the shareholder
held the shares of MainStreet common stock surrendered in the exchange,
provided that the MainStreet common stock was held as a capital asset at the
effective time.
The completion of the merger is conditioned upon the receipt by BB&T and
MainStreet of the legal opinion of Womble Carlyle Sandridge & Rice, PLLC,
counsel to BB&T, dated as of the closing date to the effect of items (a) and
(c) as described above. Neither party intends to waive this condition. If the
tax opinion were not available and the MainStreet board wished to proceed with
the merger, MainStreet would resolicit its shareholders.
Accounting Treatment
It is anticipated that the merger will be accounted for as a pooling-of-
interests transaction under generally accepted accounting principles. Under
such accounting method, holders of MainStreet common stock will be deemed to
have combined their existing voting common stock interest with that of holders
of BB&T common stock by exchanging their shares for shares of BB&T common
stock. Accordingly, the book value of the assets, liabilities and
shareholders' equity of MainStreet, as reported on its consolidated balance
sheet, will be carried over to the consolidated balance sheet of BB&T, and no
goodwill will be created. BB&T will be able to include in its consolidated
income the consolidated income of MainStreet for the entire fiscal year in
which the merger occurs; however, certain expenses incurred to effect the
merger must be treated by BB&T as current charges against income rather than
adjustments to its balance sheet. The unaudited pro forma financial
information contained in this proxy statement/prospectus has been prepared
using the pooling-of-interests method of accounting. If the merger does not
qualify for pooling-of-interests accounting treatment, BB&T may, in its
discretion, terminate the transaction.
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THE OPTION AGREEMENT
General
As a condition to BB&T entering into the merger agreement, MainStreet
entered into an agreement with BB&T, pursuant to which MainStreet granted an
option to BB&T to purchase from MainStreet up to 1,650,000 shares of
MainStreet common stock at a price of $28.00 per share. The number of shares
subject to the option and the option price are subject to adjustment in
certain circumstances. The purchase of any shares of MainStreet common stock
pursuant to the option is subject to compliance with applicable law, including
the receipt of necessary approvals under the BHC Act, and to BB&T's compliance
with its covenants in the merger agreement.
The option agreement is intended to increase the likelihood that the merger
will be completed in accordance with the terms set forth in the merger
agreement. Consequently, certain aspects of the option agreement may have the
effect of discouraging persons who, before the effective time, might be
interested in acquiring all of or a significant interest in MainStreet from
considering or proposing such an acquisition, even if they were prepared to
offer to pay consideration to shareholders of MainStreet with a higher current
market price than the BB&T common stock to be received for MainStreet common
stock pursuant to the merger agreement.
The option agreement is filed as an exhibit to the registration statement,
and the following discussion is qualified in its entirety by reference to the
option agreement. See "Where You Can Find More Information" on page 57.
Exercisability
If BB&T is not in material breach of the option agreement or its covenants
and agreements contained in the merger agreement and if no injunction or other
court order against delivery of the shares covered by the option is in effect,
BB&T may generally exercise the option, in whole or in part, at any time and
from time to time prior to its termination, as described below, following the
happening of either of the following events (each a "Purchase Event"):
. without BB&T's prior consent, MainStreet authorizes, recommends,
publicly proposes or publicly announces an intention to authorize,
recommend or propose, or enters into an agreement with any third party
to effect any of the following (each an "Acquisition Transaction"): (a)
a merger, consolidation or similar transaction involving MainStreet or
any of its significant subsidiaries, (b) the sale, lease, exchange or
other disposition of 15% or more of the consolidated assets or deposits
of MainStreet and its subsidiaries or (c) the issuance, sale or other
disposition of securities representing 15% or more of the voting power
of MainStreet or any of its significant subsidiaries; or
. any third party or group of third parties acquires or has the right to
acquire beneficial ownership of securities representing 15% or more of
the outstanding shares of MainStreet common stock.
The obligation of MainStreet to issue shares of MainStreet common stock upon
exercise of the option will be deferred (a) until the receipt of all required
governmental or regulatory approvals or consents, or until the expiration or
termination of any waiting period required by law, or (b) so long as any
injunction or other order, decree or ruling issued by any federal or state
court of competent jurisdiction is in effect that prohibits the sale or
delivery of the shares.
Termination
The option will terminate upon the earliest to occur of the following
events: (a) the effective time; (b) the termination of the merger agreement
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event,
other than a termination by BB&T based on either a material breach by
MainStreet of a covenant or agreement in the merger agreement or an inaccuracy
in MainStreet's representations or warranties in the merger agreement of a
nature entitling BB&T to terminate (a "Default Termination"); (c) 12 months
after a Default Termination; (d) 12 months after termination of the merger
agreement, other than a Default Termination, following the occurrence of a
Purchase Event or a Preliminary Purchase Event; or (e) 12 months after a
termination of the merger agreement based on the failure of the shareholders
of MainStreet to approve the merger.
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A "Preliminary Purchase Event" is defined as either of the following:
. the commencement by any third party of a tender or exchange offer such
that it would thereafter own 15% or more of the outstanding shares of
MainStreet common stock or the filing of a registration statement with
respect to such an offer, or
. the failure of the shareholders of MainStreet to approve the merger, the
failure of the meeting to have been held, the cancellation of the
meeting prior to the termination of the merger agreement or the
MainStreet board having withdrawn or modified in any manner adverse to
BB&T its recommendations with respect to the merger, in any case after a
third party: (a) proposes to engage in an Acquisition Transaction, (b)
commences a tender offer or files a registration statement under the
Securities Act with respect to an exchange offer such that it would
thereafter own 10% or more of the outstanding shares of MainStreet
common stock or (c) files an application or notice under federal or
state statutes relating to the regulation of financial institutions or
their holding companies to engage in an Acquisition Transaction.
To the knowledge of BB&T and MainStreet, no Purchase Event or Preliminary
Purchase Event has occurred as of the date of this proxy statement/prospectus.
Adjustments
The option agreement provides for certain adjustments in the option in the
event of any change in MainStreet common stock by reason of a stock dividend,
stock split, split-up, recapitalization, combination, exchange of shares or
similar transaction or in the event of the issuance of any additional shares
of MainStreet common stock before termination of the option.
Repurchase Rights
At the request of the holder of the option any time during the 12 months
after the first occurrence of a Repurchase Event, MainStreet must, if the
option has not terminated, and subject to any required regulatory approval,
repurchase from the holder (a) the option and (b) all shares of MainStreet
common stock purchased by the holder pursuant to the option with respect to
which the holder then has beneficial ownership. The repurchase will be at an
aggregate price equal to the sum of:
. the aggregate purchase price paid by the holder for any shares of
MainStreet common stock acquired pursuant to the option with respect to
which the holder then has beneficial ownership, plus
. the excess, if any, of (a) the Applicable Price, as defined in the
option agreement, for each share of MainStreet common stock over the
purchase price, multiplied by (b) the number of shares of MainStreet
common stock with respect to which the option has not been exercised,
plus
. the excess, if any, of (a) the Applicable Price over the purchase price
paid (or, in the case of shares of MainStreet common stock covered by
the option with respect to which the option has been exercised but the
closing date for the purchase has not occurred, payable) by the holder
for each share of MainStreet common stock with respect to which the
option has been exercised and with respect to which the holder then has
beneficial ownership, multiplied by (b) the number of such shares.
A "Repurchase Event" occurs if: (a) any third party acquires actual
ownership or control of, or any "group," as such term is defined under the
Securities Exchange Act of 1934, as amended, is formed that has acquired
actual ownership or control of, 50% or more of the then outstanding shares of
MainStreet common stock, or (b) any of the merger or other business
combination transactions described in the paragraph below describing
substitute options is completed.
Substitute Options
If, before the termination of the option agreement, MainStreet enters into
an agreement:
. to consolidate with or merge into any third party and will not be the
continuing or surviving corporation of the consolidation or merger;
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. to permit any third party to merge into MainStreet with MainStreet as
the continuing or surviving corporation, but, in connection therewith,
the then outstanding shares of MainStreet common stock are changed into
or exchanged for stock or other securities of MainStreet or any other
person or cash or any other property, or the outstanding shares of
MainStreet common stock after the merger represent less than 50% of the
outstanding shares and share equivalents of the merged company;
. to permit any third party to acquire all of the outstanding shares of
MainStreet common stock pursuant to a statutory share exchange; or
. to sell or otherwise transfer all or substantially all of its assets or
deposits to any third party,
then the agreement must provide that the option will be converted or exchanged
for an option to purchase shares of common stock of, at the holder's option,
either (x) the continuing or surviving corporation of a merger or
consolidation or the transferee of all or substantially all of MainStreet's
assets or (y) any person controlling the continuing or surviving corporation
or transferee. The number of shares subject to the substitute option and the
exercise price per share will be determined in accordance with a formula in
the option agreement. To the extent possible, the substitute option will
contain terms and conditions that are the same as those in the option
agreement.
Registration Rights
The option agreement grants to BB&T and any permitted transferee of the
option certain rights to require MainStreet to prepare and file a registration
statement under the Securities Act if registration is necessary in order to
permit the sale or other disposition of any or all shares of MainStreet common
stock or other securities that have been acquired by or are issuable upon
exercise of the option.
EFFECT ON EMPLOYEES, EMPLOYEE BENEFIT PLANS AND STOCK OPTIONS
Employees
Each employee of MainStreet or a MainStreet subsidiary at the effective time
who becomes an employee of BB&T or a BB&T subsidiary immediately following the
effective time will be eligible to participate in the group hospitalization,
medical, dental, life, disability and other welfare benefit plans and programs
available to similarly situated employees of the BB&T employer, subject to the
terms of such plans and programs. Service with MainStreet will be deemed to be
service with the BB&T employer for the purpose of determining eligibility to
participate in and periods applicable to such welfare plans and programs.
Any employee of MainStreet or a MainStreet subsidiary who becomes an
employee of BB&T or a BB&T subsidiary and who is terminated after the
effective time, other than any employee who has an existing employment or
special termination agreement, will be entitled to severance pay in accordance
with the general severance policy maintained by BB&T if and to the extent such
employee is entitled to severance pay under the policy. An employee's service
with MainStreet or a MainStreet subsidiary will be treated as service with
BB&T for purposes of determining the amount of severance pay, if any, under
BB&T's severance policy.
BB&T has agreed to honor all employment agreements, severance agreements and
deferred compensation agreements that MainStreet and its subsidiaries have
with their current and former employees and directors and which have been
disclosed to BB&T, except to the extent any such agreements are superseded or
terminated at or after the effective time.
401(k) Plan
BB&T shall cause the 401(k) plan of MainStreet to be merged with the 401(k)
plan maintained by BB&T and its subsidiaries, and the account balances of
former employees of MainStreet or its subsidiaries who are participants in the
MainStreet plan will be transferred to the accounts of such employees under
the BB&T 401(k) plan. Following the merger and transfer, these accounts will
be governed and controlled by the terms of the BB&T 401(k) plan as in effect
from time to time and will be subject to BB&T's right to terminate such plan.
For purposes of administering the 401(k) plan, service with MainStreet and its
subsidiaries will be deemed to be service with BB&T or its subsidiaries for
eligibility and vesting purposes, but not for purposes of benefit accrual.
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Defined Benefit Pension Plans
As soon as practicable after the effective time, BB&T will terminate
MainStreet's defined benefit pension plans pursuant to a standard termination
in accordance with Section 4041 of the Employee Retirement Income Security Act
of 1974, as amended, and provide for full vesting of the accrued benefits of
all participants in the MainStreet pension plans and the distribution of its
assets to the participants. Actions relating to termination of the MainStreet
pension plans will be conditioned upon receiving a favorable determination
letter from the IRS, which BB&T will seek as soon as practicable after the
effective time. Each employee of MainStreet or a MainStreet subsidiary at the
effective time who becomes an employee of BB&T or a BB&T subsidiary
immediately following the effective time will be given credit under BB&T's
defined benefit pension plan for service with MainStreet and its subsidiaries
for eligibility and vesting purposes, but not for purposes of benefit accrual.
Stock Options
At the effective time, each stock option granted under the Piedmont Bank
Group Incorporated 1990 Stock Option Plan or the MainStreet Bankgroup
Incorporated 1997 Stock Incentive Plan then outstanding, whether or not
exercisable, will be converted into rights with respect to BB&T common stock.
Unless it elects to substitute options as described below, BB&T will assume
each of these stock options in accordance with the terms of the applicable
stock option plan, except that (a) BB&T and its Compensation Committee will be
substituted for MainStreet and the committee of the MainStreet board
administering the stock option plans, (b) each stock option may be exercised
solely for shares of BB&T common stock, (c) the number of shares of BB&T
common stock subject to each stock option will be the number of whole shares
determined by multiplying the number of shares of MainStreet common stock
subject to the stock option by the exchange ratio and (d) the per share
exercise price for each stock option will be adjusted by dividing the per
share exercise price for the stock option by the exchange ratio and rounding
up to the nearest cent.
As an alternative to assuming the stock options, BB&T may choose to
substitute as of the effective time options under the BB&T Corporation 1995
Omnibus Stock Incentive Plan for all or a part of the stock options, subject
to the conditions that the requirements of (c) and (d) in the preceding
paragraph will apply, the substitution may not constitute a modification,
extension or renewal of any stock options that are incentive stock options and
the substituted options will continue in effect on the same terms and
conditions as provided in the stock options and the stock option plan granting
each stock option.
Each Stock Option that is an incentive stock option will be adjusted as
required by Section 424 of the Internal Revenue Code to continue as an
incentive stock option and not to constitute a modification, extension or
renewal within the meaning of Section 424(h) of the Code.
BB&T has reserved and will continue to reserve adequate shares of BB&T
common stock for the exercise of any converted or substitute options. As soon
as practicable after the effective time, if it has not already done so, and to
the extent MainStreet has a registration statement in effect or an obligation
to file a registration statement, BB&T will file a registration statement
under the Securities Act with respect to the shares of BB&T common stock
subject to converted or substitute options and will use its reasonable efforts
to maintain the effectiveness of such registration statement and maintain the
current status of the prospectus or prospectuses contained therein for so long
as such converted or substitute options remain outstanding.
BB&T will deliver to each participant in the stock option plans who receives
converted or substitute options an appropriate notice setting forth the
participant's rights in this regard.
Based on stock options outstanding as of the date of execution of the merger
agreement and subsequent exercises, options to purchase an aggregate of up to
approximately 88,876 shares of MainStreet common stock may be outstanding at
the effective time. Any shares of MainStreet common stock issued pursuant to
the exercise of stock options under the stock option plans before the
effective time will be converted into shares of BB&T common stock and cash in
lieu of any fractional share interest in the same manner as other outstanding
shares of MainStreet common stock.
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RESTRICTIONS ON RESALES BY AFFILIATES
All shares of BB&T common stock issuable in the merger will be registered
under the Securities Act and will be freely transferable, except that any such
shares received by "persons" who are deemed to be "affiliates," as such terms
are defined under the Securities Act, of MainStreet at the effective time may
be resold by them (a) only in transactions registered under the Securities Act
or permitted by the resale provisions of Rule 145 under the Securities Act or
as otherwise permitted by the Securities Act and (b) following the
satisfaction of the requirements of the Commission's Accounting Series Release
Nos. 130 and 135 relating to publication of financial results of the post-
merger combined operations of BB&T and MainStreet. Those who may be deemed
affiliates of MainStreet generally include individuals or entities that
directly, or indirectly through one or more intermediaries, control, are
controlled by or are under common control with MainStreet and include
directors and certain executive officers of MainStreet. The restrictions on
resales by an affiliate extend also to certain related parties of the
affiliate, including spouse, relatives and spouse's relatives who in each case
have the same home as the affiliate.
The merger agreement requires MainStreet to cause each of its affiliates to
deliver to BB&T a written agreement to the effect generally that such person
will not offer or otherwise dispose of any shares of BB&T common stock issued
to that person in the merger, except in compliance with (a) the Securities Act
and the rules and regulations promulgated thereunder and (b) the requirements
of the accounting releases described above.
INFORMATION ABOUT BB&T
GENERAL
BB&T is a multi-bank holding company headquartered in Winston-Salem, North
Carolina. BB&T conducts operations in North Carolina, South Carolina,
Virginia, Maryland and the District of Columbia primarily through its
commercial banking subsidiaries and, to a lesser extent, through its other
subsidiaries. Substantially all of BB&T's loans are to businesses and
individuals in the Carolinas, Virginia, Maryland and the District of Columbia.
BB&T's commercial bank subsidiaries are BB&T-NC, Branch Banking and Trust
Company of South Carolina ("BB&T-SC"), BB&T-VA, Franklin National Bank of
Washington D.C. ("FNB") and BB&T Bankcard Corporation. The principal assets of
BB&T are all of the issued and outstanding shares of common stock of BB&T-NC;
BB&T Financial Corporation of South Carolina, Greenville, South Carolina,
which in turn owns all of the issued and outstanding shares of BB&T-SC; BB&T
Financial-VA, which in turn owns all of the issued and outstanding shares of
BB&T-VA; and FNB.
SUBSIDIARIES
BB&T-NC, BB&T's largest subsidiary, is the oldest bank in North Carolina and
currently operates through 347 banking offices throughout North Carolina and
29 offices in the metropolitan Washington D.C. area. BB&T-NC provides a wide
range of banking services in its local market for retail and commercial
customers, including small and mid-size businesses, public agencies and local
governments, trust customers, and individuals. BB&T Leasing Corporation, a
wholly owned subsidiary of BB&T-NC, located in Charlotte, North Carolina,
offers lease financing to commercial businesses and municipal governments.
BB&T Investment Services, Inc., also a wholly owned subsidiary of BB&T-NC,
located in Charlotte, North Carolina, offers customers investment
alternatives, including discount brokerage services, fixed-rate and variable-
rate annuities, mutual funds, and government and municipal bonds. BB&T
Insurance Services, Inc., located in Raleigh, North Carolina, is also a
subsidiary of BB&T-NC and offers life, property and casualty and title
insurance on an agency basis. Additional subsidiaries of BB&T-NC include Prime
Rate Premium Finance Corporation, Inc., which provides insurance premium
financing and services to customers in Virginia and the Carolinas.
BB&T-SC serves South Carolina through 90 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.
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BB&T-VA offers a full range of commercial and retail banking services
through 59 banking offices in the Hampton Roads and Richmond areas and the
southern, central and southwestern regions of Virginia.
FNB, the banking subsidiary of Franklin Bancorporation, Inc. ("Franklin"),
of Washington, D.C., was acquired on July 1, 1998 and operates nine banking
offices in the metropolitan Washington D.C. area.
Regional Acceptance Corporation ("RAC"), of Greenville, North Carolina, was
acquired on September 1, 1996. RAC, which has 28 branch offices in North
Carolina, South Carolina, Tennessee and Virginia, specializes in indirect
financing for consumer purchases of mid-model and late-model used automobiles.
Craigie Incorporated ("Craigie") is a registered broker-dealer with offices
in Richmond, Virginia and Charlotte, North Carolina that specializes in the
origination, trading and distribution of fixed income securities and equity
products in both the public and private capital markets. Phillips Factors
Corporation buys and manages account receivables primarily in the furniture,
textiles and home furnishings-related industries. W.E. Stanley & Company, Inc.
is primarily engaged in actuarial and employee group, health and welfare
benefit plan consulting, plan administration, and the design, communication
and administration of all types of corporate retirement plans. Sheffield
Financial Corp. ("Sheffield") specializes in loans to small commercial lawn
care businesses across the country.
ACQUISITIONS
BB&T's profitability and market share have been enhanced through both
internal growth and acquisitions during recent years. Specifically, BB&T has
expanded by both the acquisition of financial institutions (including thrift
institutions) and the purchase of deposits and assets from the Resolution
Trust Corporation in federally assisted transactions.
On October 1, 1997, BB&T completed the acquisition of the investment banking
firm Craigie. Craigie's public finance department provides investment banking
services, financial advisory services and municipal bond financing to a
variety of regional tax-exempt issuers. The firm's corporate finance
department specializes in raising capital for corporate clients and has an
active mergers and acquisitions practice.
On December 1, 1997, BB&T completed the acquisition of Virginia First
Financial Corporation, which was a Virginia corporation that served as the
holding company for Virginia First Savings Bank, F.S.B. ("VFSB"), in a
transaction accounted for as a purchase. Effective April 17, 1998, VFSB, which
operated 23 banking offices in the south, central and southwestern areas of
Virginia, was merged into BB&T-VA.
On March 1, 1998, BB&T completed the acquisition of Life Bancorp, Inc.,
which was a Virginia corporation that served as the holding company for Life
Savings Bank, F.S.B. ("LSB"), in a transaction accounted for as a pooling of
interests. Effective August 14, 1998, LSB was merged into BB&T-VA.
On June 18, 1998, BB&T completed the acquisition of Dealers Credit Inc.
("DCI"), a commercial finance company based in Menomonee Falls, Wisconsin that
specializes in extending secured, installment loan credit and direct financing
lease credit to commercial, agricultural, municipal and consumer end-users of
turf care equipment, outdoor power equipment, agricultural equipment and
related products. DCI was merged into Refloat, Inc., the holding company for
Sheffield, and its assets were transferred to Sheffield immediately
thereafter.
On June 30, 1998, BB&T completed the acquisition of W.E. Stanley & Company,
Inc. and two of its sister companies (collectively, "W.E. Stanley"). W.E.
Stanley operates as a wholly owned subsidiary of BB&T-NC under the name W.E.
Stanley & Company, Inc.
On July 1, 1998, BB&T completed the acquisition of Franklin in a transaction
accounted for as a pooling-of-interests. BB&T intends to convert the systems
of FNB into BB&T-NC during the first quarter of 1999.
Also on July 1, 1998, BB&T established BB&T Bankcard Corporation, a special
purpose credit card bank headquartered in Columbus, Georgia.
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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
engaged 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 MFB's market area and in consumer loans.
On August 10, 1998, BB&T announced an agreement to acquire Scott &
Stringfellow Financial, Inc. ("Scott & Stringfellow Financial") in a stock
transaction valued at $131 million, based on BB&T's closing price of $34.44 on
August 7, 1998. The exchange ratio will be one share of BB&T common stock for
each share of Scott & Stringfellow Financial common stock. Scott &
Stringfellow Financial, established in 1893, has 31 offices in the Carolinas,
Virginia and West Virginia. It specializes in full-service retail brokerage,
institutional equity and debt underwriting, investment advisory services,
corporate finance, equity trading, equity research and a wide range of other
investment-related financial services, and manages more than $10 billion in
total assets for clients. Scott & Stringfellow Financial is the parent company
of Scott & Stringfellow, which advised MainStreet in connection with the
merger. See "The Merger-- Opinions of MainStreet's Financial Advisors--Opinion
of Scott & Stringfellow." The acquisition, which will be accounted for as a
purchase, is subject to the approval of regulators and Scott & Stringfellow
Financial shareholders and is expected to be completed during the first
quarter of 1999.
BB&T expects to continue to take advantage of the consolidation of the
financial services industry by developing its franchise through the
acquisition of financial institutions. Such acquisitions may entail the
payment by BB&T of consideration in excess of the book value of the underlying
net assets acquired, may result in the issuance of additional shares of BB&T
capital stock or the incurring of an additional indebtedness by BB&T, and
could have a dilutive effect on the per share earnings or book value of BB&T
common stock. Moreover, such acquisitions sometimes result in significant
front-end charges against earnings, although cost savings, especially incident
to in-market acquisitions, also are frequently anticipated.
CAPITAL
The Federal Reserve has established a minimum requirement for a bank holding
company's ratio of capital to risk-weighted assets of 8%. For this purpose,
"risk-weighted assets" includes on-balance sheet activities and certain off-
balance sheet activities, such as standby letters of credit. At least half of
a bank holding company's total capital is required to be composed of common
equity, retained earnings, and qualifying perpetual preferred stock, less
certain intangibles ("Tier 1 capital"). The remainder may consist of certain
subordinated debt, certain hybrid capital instruments and other qualifying
preferred stock, and a limited amount of the loan loss allowance ("Tier 2
capital" and, together with Tier 1 capital, "total capital"). At September 30,
1998, BB&T's Tier 1 and total capital ratios were 10.0% and 14.8%,
respectively. Effective January 1, 1997, with mandatory compliance as of
January 1, 1998, the Federal Reserve also requires certain bank holding
companies that engage in trading activities to adjust their risk-based capital
to take into consideration market risk that may result from movements in
market prices of covered trading positions in trading accounts, or from
foreign exchange or commodity positions, whether or not in trading accounts,
including changes in interest rates, equity prices, foreign exchange rates or
commodity prices. Any capital required to be maintained pursuant to these
provisions may consist of new "Tier 3 capital" consisting of certain short
term subordinated debt. In addition, the Federal Reserve has issued a policy
statement, pursuant to which a bank holding company that is determined to have
weaknesses in its risk management processes or a high level of interest rate
risk exposure may be required, among other things, to hold additional capital.
The Federal Reserve also has established minimum leverage ratio requirements
for bank holding companies. These requirements provide for a minimum leverage
ratio of Tier 1 capital to adjusted average quarterly assets ("leverage
ratio") equal to 3% for bank holding companies that meet certain specified
criteria, including that they have the highest regulatory rating. BB&T meets
such criteria and its leverage ratio requirement is 3%. All other bank holding
companies generally are required to maintain a leverage ratio of from at least
100 to 200 basis points above the stated minimum. BB&T's leverage ratio at
September 30, 1998 was 7.1%. Bank holding companies experiencing internal
growth or making acquisitions are expected to maintain strong capital
positions substantially above the
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minimum supervisory levels without significant reliance on intangible assets.
Furthermore, these capital requirements indicate that the Federal Reserve will
continue to consider a "tangible Tier 1 leverage ratio," which reflects the
deduction of all intangibles, in evaluating proposals for expansion or new
activity.
The FDIC has adopted minimum risk-based and leverage ratio regulations to
which BB&T's bank subsidiaries are subject that are substantially similar to
those requirements established by the Federal Reserve described above. Under
federal banking laws, failure to meet the minimum regulatory capital
requirements could subject a banking institution to a variety of enforcement
remedies available to federal regulatory authorities, including, in the most
severe cases, the termination of deposit insurance by the FDIC and placing the
institution into conservatorship or receivership. The capital ratios of each
of BB&T's bank subsidiaries exceeded all minimum regulatory capital
requirements as of September 30, 1998.
DEPOSIT INSURANCE ASSESSMENTS
The deposits of each of BB&T's bank subsidiaries are insured by the FDIC up
to the limits set forth under applicable law. A majority of the deposits of
the banks are subject to the deposit insurance assessments of the Bank
Insurance Fund ("BIF") of the FDIC. However, approximately 40% of the deposits
of BB&T-NC and BB&T-SC and a portion of the deposits of BB&T-VA, related to
the banks' acquisition of various savings associations, are subject to
assessments imposed by the Savings Association Insurance Fund ("SAIF") of the
FDIC.
Pursuant to budget reconciliation legislation enacted in 1996, the FDIC
imposed a special assessment on SAIF-assessable deposits of 65.7 basis points
per $100 of SAIF-assessable deposits in order to increase the SAIF's net worth
to 1.25 percent of SAIF-insured deposits as of October 1, 1996. Certain
institutions that engaged in thrift acquisitions, including BB&T-NC, received
a 20 percent discount on the assessment. As a result, the pre-tax impact of
the special assessment on BB&T was approximately $38 million, and was recorded
as an expense as of September 30, 1996.
The FDIC has since lowered the assessment rates for SAIF-insured deposits,
effective January 1, 1997, to the same levels as the assessment rates
currently applicable to BIF-insured deposits. For the semi-annual period
beginning June 30, 1998, the effective rate of assessments imposed on all FDIC
deposits for deposit insurance ranges from 0 to 27 basis points per $100 of
insured deposits, depending on the institution's capital position and other
supervisory factors. However, because the 1996 legislation requires that both
SAIF-insured and BIF- insured deposits pay a pro rata portion of the interest
due on the obligations issued by the Financing Corporation, the FDIC is
currently assessing BIF-insured deposits an additional 1.22 basis points per
$100 of deposits, and SAIF-insured deposits an additional 6.10 basis points
per $100 of deposits, in each case on an annualized basis, to cover those
obligations.
INFORMATION ABOUT MAINSTREET
MainStreet is a multi-bank holding company headquartered in Martinsville,
Virginia, with total assets of $2.1 billion and total shareholders' equity of
$175.6 million at September 30, 1998. Organized in 1977, MainStreet through
its ten affiliate banks (the "MainStreet Banks"), and MainStreet Trust
Company, National Association, a nationally chartered bank with powers limited
to fiduciary activities and related business (the "Trust Company"), engages in
a general banking business and, provides a broad spectrum of full-service
banking and trust services to consumers, businesses, institutions and
governments, including accepting demand, savings and time deposits; making
commercial, personal, installment, mortgage and construction loans; issuing
letters of credit; and providing discount brokerage, trust services, bank-card
services, mortgage banking and investment services. MainStreet offers banking
services in several communities in Virginia, and also in southern Maryland and
Washington, D.C.
In November 1997, MainStreet created a Delaware statutory business trust
subsidiary ("MainStreet Capital Trust I") which issued approximately $50
million of trust preferred securities. MainStreet Capital Trust I then, in
turn, used the proceeds from the sale of the trust securities to acquire
Junior Subordinated Debentures of MainStreet which have the same rate, payment
of dividends and maturity. These debentures are included in MainStreet's
capital calculation for bank regulatory purposes only.
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DESCRIPTION OF BB&T CAPITAL STOCK
GENERAL
The authorized capital stock of BB&T consists of 500,000,000 shares of BB&T
common stock and 5,000,000 shares of preferred stock, par value $5.00 per
share. As of December 11, 1998, there were 290,048,991 shares of BB&T common
stock issued and outstanding. There were no shares of BB&T preferred stock
issued and outstanding as of such date, although 2,000,000 shares of BB&T
preferred stock have been designated as Series B Junior Participating
Preferred Stock (the "BB&T Junior Preferred Stock") and are reserved for
issuance in connection with BB&T's shareholder rights plan. See "--Shareholder
Rights Plan." Based on the number of shares of MainStreet common stock
outstanding on December 11, 1998, it is estimated that approximately
16,720,558 shares of BB&T common stock would be issued in the merger.
BB&T COMMON STOCK
Each share of BB&T common stock is entitled to one vote on all matters
submitted to a vote at any meeting of shareholders. Holders of BB&T common
stock are entitled to receive dividends when, as, and if declared by the BB&T
board out of funds legally available therefor and, upon liquidation, to
receive pro rata all assets, if any, of BB&T available for distribution after
the payment of necessary expenses and all prior claims. Holders of BB&T common
stock have no preemptive rights to subscribe for any additional securities of
any class that BB&T may issue, nor any conversion, redemption or sinking fund
rights. Holders of BB&T common stock have no right to cumulate votes in the
election of directors. The rights and privileges of holders of BB&T common
stock are subject to any preferences provided for by resolution of the BB&T
board for any series of BB&T preferred stock that BB&T may issue in the
future. The terms of the BB&T Junior Preferred Stock reserved for issuance in
connection with BB&T's shareholders rights plan provide that holders of such
shares will have rights and privileges that are substantially identical to
those of holders of BB&T common stock.
The transfer agent and registrar for BB&T common stock is BB&T-NC. BB&T
intends to apply for the listing on the NYSE, subject to official notice of
issuance, of the shares of BB&T common stock to be issued in the merger.
BB&T PREFERRED STOCK
Under the BB&T articles, BB&T may issue shares of BB&T preferred stock in
one or more series as may be determined by the BB&T board or a duly authorized
committee. The BB&T board or committee may also establish, from time to time,
the number of shares to be included in each series and may fix the
designation, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof, and may increase
or decrease the number of shares of any series without any further vote or
action by the shareholders. Any BB&T preferred stock issued may rank senior to
the BB&T common stock with respect to the payment of dividends or amounts paid
upon liquidation, dissolution or winding up of BB&T, or both. In addition, any
shares of BB&T preferred stock may have class or series voting rights. Under
certain circumstances, the issuance of BB&T preferred stock or the existence
of the unissued BB&T preferred stock may tend to discourage or render more
difficult a merger or other change in control of BB&T. See "--Shareholder
Rights Plan."
SHAREHOLDER RIGHTS PLAN
BB&T has adopted a shareholder rights plan pursuant to which holders of
shares of BB&T common stock also hold rights to purchase securities or other
property that may be exercised upon the occurrence of certain "triggering
events." Shareholder rights plans such as BB&T's plan are intended to
encourage potential hostile acquirors of a "target" 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.
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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". Each Right entitles the registered holder to purchase
from BB&T a unit consisting of one-hundredth of a share (a "Unit") of BB&T
Junior Preferred Stock at a Purchase Price of $145.00 per Unit, subject to
adjustment, or, under certain circumstances, other securities or property. The
description and terms of the Rights are set forth in the Rights Agreement,
dated as of December 17, 1996, between BB&T and BB&T-NC in the capacity of
Rights Agent (the "Rights Agreement").
Initially, the Rights will be attached to all BB&T common stock certificates
representing shares then outstanding, and no separate Rights Certificates, as
defined in the Rights Agreement, will be distributed. A "Distribution Date"
will occur, and the Rights will separate from shares of BB&T common stock,
upon the earliest of (a) 10 business days following a public announcement that
a person or group of affiliated or associated persons (an "Acquiring Person")
has acquired, or obtained the right to acquire, beneficial ownership of 20% or
more of the outstanding shares of BB&T common stock (the "Stock Acquisition
Date"), (b) 10 business days following the commencement of a tender offer or
exchange offer that would if completed result in a person or group
beneficially owning 20% or more of such outstanding shares of BB&T common
stock or (c) 10 business days after the BB&T board declares any Person to be
an "Adverse Person," as described in the following paragraph.
The BB&T board will declare a person to be an Adverse Person upon its
determinations (a) that such person, alone or together with its affiliates and
associates, has or will become the beneficial owner of 10% or more of the
outstanding shares of BB&T common stock, provided that any such determination
will not be effective until such person has in fact become the beneficial
owner of 10% or more of the outstanding shares of BB&T common stock, and (b)
following consultation with such persons as the BB&T board deems appropriate,
that (1) such beneficial ownership by such person is intended to cause, is
reasonably likely to cause or will cause BB&T to repurchase the BB&T common
stock beneficially owned by such person or to cause pressure on BB&T to take
action or enter into a transaction or series of transactions intended to
provide such person with short-term financial gain under circumstances where
the BB&T board determines that the best long-term interests of BB&T and its
shareholders would not be served by taking such action or entering into such
transactions or series of transactions at that time or (2) such beneficial
ownership is causing or is reasonably likely to cause impairment of BB&T's
relationships with its customers or BB&T's ability to maintain its competitive
position or other material adverse effect on the business or prospects of BB&T
or (iii) such beneficial ownership otherwise is determined to be not in the
best interests of BB&T and its shareholders, employees, customers and
communities in which BB&T and its subsidiaries do business.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on December 31, 2006, subject to extension by the
BB&T board, or unless earlier redeemed by BB&T as described below.
As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of BB&T common stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except for certain issuances in
connection with outstanding options and convertible securities and as
otherwise determined by the BB&T board, only shares of BB&T common stock
issued before the Distribution Date will be issued with Rights.
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.
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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 other than 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 other than 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 57.
ANTI-TAKEOVER PROVISIONS OF THE NCBCA, BB&T ARTICLES AND BB&T BYLAWS
Provisions of the North Carolina Business Corporation Act (the "NCBCA"), the
BB&T articles and the BB&T bylaws may be deemed to have an anti-takeover
effect and, together with 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 delay or prevent takeover attempts not first approved by the BB&T
board. These provisions also could delay or deter the removal of incumbent
directors or the assumption of control by shareholders. BB&T believes that
these provisions are appropriate to protect the interests of BB&T and all of
its shareholders. The following describes the principal provisions of the
NCBCA applicable to BB&T, the BB&T articles and BB&T bylaws that may be deemed
to have anti-takeover effects.
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Control Share Acquisition Act
The Control Share Acquisition Act of the NCBCA may make an unsolicited
attempt to gain control of BB&T more difficult by restricting the right of
certain shareholders to vote newly acquired large blocks of stock. For a
description of this statute, see "Comparison of Shareholders' Rights--Anti-
takeover Statutes."
Provisions Regarding the BB&T Board
The BB&T articles and the BB&T bylaws classify the BB&T board and permit the
removal of directors only for cause. This could make it more difficult for a
third party to acquire, or discourage a third party from acquiring, control of
BB&T. For a description of such provisions, see "Comparison of Shareholders'
Rights--Directors."
Meeting of Shareholders; Shareholders' Nominations and Proposals
Under the BB&T bylaws, meetings of the shareholders may be called only by
the Chief Executive Officer, President, Secretary or the BB&T board.
Shareholders of BB&T may not request that a special meeting of shareholders be
called. This provision could delay until the next annual shareholders' meeting
shareholder actions that are favored by the holders of a majority of the
outstanding voting securities of BB&T.
Certain procedures governing the submission of nominations for directors and
other proposals by shareholders may have some deterrent effect on shareholder
actions designed to result in change of control in BB&T. See "Comparison of
Shareholders' Rights--Notice of Shareholder Nominations and Shareholder
Proposals."
COMPARISON OF SHAREHOLDERS' RIGHTS
At the effective time, holders of MainStreet common stock will become
shareholders of BB&T. The following is a summary of material differences
between the rights of holders of BB&T common stock and holders of MainStreet
common stock. Since BB&T is organized under the laws of the State of North
Carolina and MainStreet is organized under the laws of the Commonwealth of
Virginia, differences in the rights of holders of BB&T common stock and those
of holders of MainStreet common stock arise from differing provisions of the
NCBCA and the Virginia Stock Corporation Act (the "VSCA") in addition to
differing provisions of their respective articles of incorporation and bylaws.
The following summary does not purport to be a complete statement of the
provisions affecting, and differences between, the rights of holders of BB&T
common stock and holders of MainStreet common stock. The identification of
specific provisions or differences is not meant to indicate that other equally
or more significant differences do not exist. This summary is qualified in its
entirety by reference to the NCBCA and the VSCA and the governing corporate
instruments of BB&T and MainStreet, to which the shareholders of MainStreet
are referred.
AUTHORIZED CAPITAL STOCK
BB&T
BB&T's authorized capital stock consists of 500,000,000 shares of BB&T
common stock and 5,000,000 shares of BB&T preferred stock. The BB&T articles
authorize the BB&T board to issue shares of BB&T preferred stock in one or
more series and to fix the designation, powers, preferences, and rights of the
shares of BB&T preferred stock in each such series. As of December 11, 1998,
there were 290,048,991 shares of BB&T common stock outstanding. No shares of
BB&T preferred stock were issued and outstanding as of such date, although
2,000,000 shares of BB&T preferred stock have been designated as BB&T Junior
Preferred Stock and are reserved for issuance in connection with BB&T's
shareholder rights plan. See "Description of BB&T Capital Stock--Shareholder
Rights Plan."
MainStreet
MainStreet's authorized capital stock consists of 20,000,000 shares of
MainStreet common stock and 1,000,000 shares of preferred stock. The
MainStreet articles authorize the MainStreet board to issue shares of
MainStreet
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preferred stock in one or more series and to fix the designation, powers,
preferences, and rights of the shares of MainStreet preferred stock in each
such series. As of December 11, 1998, there were 14,169,964 shares of
MainStreet common stock outstanding. No shares of MainStreet preferred stock
were issued and outstanding as of such date, although 100,000 shares of
MainStreet preferred stock have been designated as Series A Participating
Cumulative Preferred Stock and are reserved for issuance in connection with
MainStreet's shareholder rights plan.
SPECIAL MEETINGS OF SHAREHOLDERS AND ACTION BY SHAREHOLDERS WITHOUT A MEETING
BB&T
Special meetings of the shareholders of BB&T may be called at any time by
BB&T's Chief Executive Officer, President or Secretary or by the BB&T board.
Under the NCBCA, shareholders of a North Carolina corporation may take action
without a meeting by one or more written consents signed by all shareholders
entitled to vote on the matter in question, provided that any required notice
is given to any shareholders not entitled to vote on such matter.
MainStreet
Under the VSCA, a special meeting of shareholders may be called by the board
of directors or by any other person authorized to do so in the certificate of
incorporation or the bylaws. The MainStreet bylaws provide that a special
meeting of shareholders may be called by the Chairman, the Vice-Chairman, the
President or a majority of the directors.
DIRECTORS
BB&T
The BB&T articles and the BB&T bylaws provide for a board of directors
having not less than three nor more than 30 members as determined from time to
time by vote of a majority of the members of the BB&T board or by resolution
of the shareholders of BB&T. Currently, the BB&T board consists of 21
directors. The BB&T board is divided into three classes, with directors
serving staggered three-year terms. Under the BB&T articles and the BB&T
bylaws, BB&T directors may be removed only for cause and only by the vote of a
majority of the outstanding shares entitled to vote in the election of
directors. Holders of BB&T common stock do not have cumulative voting rights
in the election of directors.
MainStreet
Under the VSCA, the number of directors of a corporation may be fixed in the
articles of incorporation or bylaws of a corporation. The MainStreet Bylaws
provide that the MainStreet board shall consist of 11 persons. All of the
MainStreet directors are elected each year. Any vacancy occurring on the
MainStreet board, including a vacancy resulting from an increase in the number
of directors, may be filled by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the MainStreet board.
However, the VSCA provides that, when the bylaws fix the number of directors,
the board may increase or decrease that number only by 30% or less without
shareholder action. No decrease in the number of directors constituting the
MainStreet board shall shorten the term of any incumbent director. Subject to
the rights of the holders of any preferred stock then outstanding, any
director may be removed by the affirmative vote of the holders of at least
two-thirds of outstanding voting shares. MainStreet shareholders do not have
cumulative voting in the election of directors.
DIVIDENDS AND OTHER DISTRIBUTIONS
BB&T
The NCBCA prohibits a North Carolina corporation from making any
distributions to shareholders, including the payment of cash dividends, that
would render it insolvent or unable to meet its obligations as they become due
in the ordinary course of business. BB&T is not subject to other express
regulatory restrictions on payments of dividends and other distributions. The
ability of BB&T to pay distributions to the holders of BB&T common stock will
depend, however, to a large extent upon the amount of dividends its bank
subsidiaries, which are subject to restrictions imposed
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by regulatory authorities, pay to BB&T. In addition, the Federal Reserve could
oppose a distribution by BB&T if it determined that such a distribution would
harm BB&T's ability to support its bank subsidiaries. There can be no
assurances that dividends will be paid in the future. The declaration, payment
and amount of any such future dividends would depend on business conditions,
operating results, capital, reserve requirements and the consideration of
other relevant factors by the BB&T board.
MainStreet
The VSCA prohibits a Virginia corporation from making any distributions to
shareholders, including the payment of cash dividends, that would render it
insolvent or unable to meet its obligations as they become due in the usual
course of business. MainStreet is not subject to other express regulatory
restrictions on payments of dividends and other distributions. The ability of
MainStreet to pay distributions to the holders of MainStreet common stock may
depend, however, upon the amount of dividends its bank subsidiaries pay to
MainStreet. MainStreet's bank subsidiaries, like BB&T's, are subject to
regulatory restrictions on the payment of dividends.
NOTICE OF SHAREHOLDER NOMINATIONS AND SHAREHOLDER PROPOSALS
BB&T
The BB&T bylaws establish advance notice procedures for shareholder
proposals and the nomination, other than by or at the direction of the BB&T
board or a committee thereof, of candidates for election as directors. The
BB&T bylaws provide that a shareholder wishing to nominate a person as a
candidate for election to the BB&T board must submit such nomination in
writing to the Secretary of BB&T not later than 60 days before one year after
the date of the immediately preceding annual meeting of shareholders, together
with biographical information about the candidate and the shareholder's name
and shareholdings. Nominations not made in accordance with the foregoing
provisions may be ruled out of order by the presiding officer or the chairman
of the meeting.
Similarly, a shareholder must notify the Secretary of BB&T in writing not
later than 60 days before one year after the date of the immediately preceding
annual meeting of shareholders of the shareholder's intention to make a
proposal for consideration at the next annual meeting. The notice must
contain: (a) a brief description of the proposal, (b) the name and
shareholdings of the shareholder submitting the proposal and (c) any material
interest of the shareholder in such proposal.
MainStreet
The MainStreet bylaws provide that any nomination for director made by a
shareholder must be made in writing to the Secretary of MainStreet not less
than 90 days prior to the meeting of shareholders at which directors are to be
elected. Any such shareholder's notice shall include (a) the name and address
of the shareholder and of each person to be nominated, (b) a representation
that the shareholder is a holder of record of stock of MainStreet entitled to
vote and intends to appear in person or by proxy at the meeting to nominate
each person specified, (c) a description of all arrangements or understandings
between the shareholder and each nominee and any other person, naming such
person, pursuant to which the nomination is made by the shareholder, (d) such
other information regarding each nominee as would be required to be included
in a proxy statement filed pursuant to the proxy rules of the Commission had
the nominee been nominated by the MainStreet board, and (e) the consent of
each nominee to serve as a director if so elected. There is no residency
requirement for the directors and no requirement that directors of MainStreet
own any capital stock of MainStreet.
Only business that is properly brought before the meeting may be presented
to and acted upon by the shareholders. To be properly brought before the
meeting, business must be brought (a) by or at the direction of the MainStreet
board or (b) by a shareholder who has given written notice of business he
expects to bring before the meeting to the Secretary of MainStreet by December
1 of the year preceding the meeting. A shareholder's notice to the Secretary
shall set forth as to each matter the shareholder proposes to bring before the
meeting (a) a brief description of the business to be brought before the
meeting and the reasons for conducting such business at the meeting, (b) the
name and address, as they appear on MainStreet's books, of the shareholder
proposing such business, (c) the class and number of shares of
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MainStreet's stock beneficially owned by the shareholder, and (d) any material
interest of the shareholder in such business.
EXCULPATION AND INDEMNIFICATION
BB&T
The NCBCA requires that a director of a North Carolina corporation discharge
the duties as a director (a) in good faith, (b) with the care an ordinarily
prudent person in a like position would exercise under similar circumstances
and (c) in a manner the director reasonably believes to be in the best
interests of the corporation. The NCBCA expressly provides that a director
facing a change of control situation shall not be subject to any different
duties or a higher standard of care. The BB&T articles provide that, to the
fullest extent permitted by applicable law, no director of BB&T will have any
personal liability for monetary damage for breach of a duty as a director. The
BB&T bylaws require BB&T to indemnify its directors and officers against
liabilities arising out of such person's status as such, excluding any
liability relating to activities that were at the time taken known or believed
by such person to be clearly in conflict with the best interests of BB&T.
MainStreet
The VSCA requires that a director of a Virginia corporation discharge the
duties as a director in accordance with the director's good faith business
judgment of the best interests of the corporation. The VSCA permits Virginia
corporations to provide indemnification for directors, officers and agents and
also permits Virginia corporations to eliminate personal liability for
directors and officers for certain actions.
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 a merger in which the number of voting shares
outstanding immediately after the merger, plus the number of voting shares
issuable as a result of the merger, does not exceed by more than 20% the
number of voting shares outstanding immediately before the merger. BB&T is
also subject to certain statutory anti-takeover provisions. See "--Anti-
takeover Statutes."
MainStreet
The VSCA generally requires that any merger, share exchange or sale of all
or substantially all of the assets of a corporation not in the ordinary course
of business be approved by more than two-thirds of the votes entitled to be
cast by each voting group entitled to vote, unless the articles of
incorporation provide for a greater or lesser vote, but in no event less than
a majority of votes cast by each such voting group at a meeting at which a
quorum of the voting group exists. The VSCA does permit such an amendment or
transaction to be approved by as few as a majority of the votes cast, if the
articles of incorporation so state. Approval of a merger or a share exchange
by the shareholders of the surviving corporation is not required in certain
instances by either the VSCA or the rules of the National Association of
Securities Dealers, which governs the market on which MainStreet common stock
trades, when the number of voting shares outstanding immediately after the
transaction, plus the number of voting shares issuable as a result of the
transaction, do not exceed by more than 20% the number of voting shares
outstanding immediately before the transaction. MainStreet is also subject to
certain statutory anti-takeover provisions. See "--Anti-takeover Statues."
ANTI-TAKEOVER STATUTES
BB&T
The North Carolina Control Share Acquisition Act applies to BB&T. This act
is designed to protect shareholders of publicly owned North Carolina
corporations based within the state against certain changes in control and to
provide shareholders with the opportunity to vote on whether to afford voting
rights to certain shareholders. The act is triggered
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upon the acquisition by a person of shares of voting stock of a covered
corporation that, when added to all other shares beneficially owned by the
person, would result in that person holding one-fifth, one-third or a majority
of the voting power in the election of directors. Under the act, the shares
acquired that result in the crossing of any of these thresholds ("Control
Shares") have no voting rights until such rights are conferred by the
affirmative vote of the holders of a majority of all outstanding voting
shares, excluding those shares held by any person involved or proposing to be
involved in the acquisition of Control Shares, any officer of the corporation
and any employee of such corporation who is also a director of such
corporation. If voting rights are conferred on Control Shares, all
shareholders of such corporation have the right to require that their shares
be redeemed at the highest price paid per share by the acquiror for any
Control Shares.
In accordance with the provisions of such statute, BB&T has elected not to
be governed by the North Carolina Shareholder Protection Act, which requires
that certain business combinations with existing shareholders either be
approved by a supermajority of the other shareholders or meet certain "fair
price" requirements.
MainStreet
The VSCA contains provisions governing "Affiliated Transactions." These
provisions, with several exceptions discussed below, require approval of
specified material acquisition transactions between a Virginia corporation and
any holder of more than 10% of any class of its outstanding voting shares (an
"Interested Shareholder") by the holders of more than two-thirds of the
remaining voting shares. Affiliated Transactions subject to this approval
requirement include mergers, share exchanges, dispositions of corporate assets
with an aggregate fair market value in excess of 5% of the corporation's net
worth, any dissolution of the corporation proposed by or on behalf of an
Interested Shareholder, or any reclassification of securities, including a
reverse stock split, recapitalization or merger of the corporation with its
subsidiaries which increases the percentage of voting shares owned
beneficially by an Interested Shareholder by more than 5%.
For three years following the time that an Interested Shareholder becomes an
owner of 10% of the outstanding voting shares, a Virginia corporation cannot
engage in an Affiliated Transaction with such Interested Shareholder without
the approval of two-thirds of the voting shares other than those shares
beneficially owned by the Interested Shareholder and the approval of a
majority of the "Disinterested Directors," as defined in the statute. At the
expiration of the three year period, the VSCA requires approval of Affiliated
Transactions by two-thirds of the voting shares other than those beneficially
owned by the Interested Shareholder.
After the three-year period has expired, the requirement for a two-thirds
vote by holders of shares other than those held by an Interested Shareholder
does not apply if (1) the transaction is approved by majority vote of the
Disinterested Directors, or (2) the transaction satisfies the fair-price
provisions of the statute. In general, the fair price provisions require that
in a two-step acquisition, the Interested Shareholder must pay the
shareholders in the second step a price that is equal to the higher of (1) the
fair market value of the shares at the time of the second step or (2) the
highest price paid by the Interested Shareholder to acquire its shares in the
first step.
In addition, the VSCA provides that, by affirmative vote of a majority of
the voting shares other than shares owned by an Interested Shareholder, a
corporation can provide in its articles of incorporation or bylaws that the
Affiliated Transactions provisions shall not apply to the corporation.
The VSCA also regulates "Control Share Acquisitions," as defined therein,
and provides that shares acquired in a transaction that would cause the
acquiring person's voting strength to meet or exceed a 20%, 33 1/3% or 50%
threshold have no voting rights unless granted by a majority vote of shares
not owned by the acquiring person or any officer or employee-director of the
Virginia corporation. This provision empowers an acquiring person to require
the Virginia corporation to hold a special meeting of shareholders to consider
the matter within 50 days of its request. A Virginia corporation can provide
in its articles of incorporation or bylaws that the Control Share Acquisition
provisions do not apply to such corporation.
Since the merger was approved by more than a majority of MainStreet's
disinterested directors, the Affiliated Transactions statute will not apply in
this case. Similarly, if the MainStreet shareholders approve the merger, the
Control Share Acquisition statute also will not apply to this transaction.
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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.
MainStreet
The VSCA generally requires that any amendment to a Virginia corporation's
articles of incorporation be approved by more than two-thirds of the votes
entitled to be cast by each voting group entitled to vote on such amendment,
unless the articles of incorporation provide for a greater or lesser vote, but
in no event less than a majority of all of the votes cast by each such voting
group at a meeting at which a quorum of the voting group exists.
The VSCA provides generally that a Virginia corporation's board of directors
may amend or repeal the corporation's bylaws except to the extent that (a)
such power is reserved to the shareholders by the articles of incorporation,
(b) the shareholders in adopting or amending a particular bylaw provided
expressly that the board of directors could not amend or repeal such bylaw and
(c) the corporation's shareholders may amend or repeal the bylaws even though
the bylaws may be amended or repealed by the board of directors.
SHAREHOLDERS' RIGHTS OF DISSENT AND APPRAISAL
BB&T
Under the NCBCA, a shareholder of a North Carolina corporation is entitled
to dissent from, and obtain payment of the "full value" of his or her shares
in the event of any of the following corporate transactions:
. completion of a plan of merger to which the corporation is a party,
unless (a) the corporation is a parent merging with a subsidiary
pursuant to a particular NCBCA provision for such transactions; (b) the
merger is subject to an NCBCA provision that exempts from the
shareholder approval requirement certain mergers that do not result in a
substantial change to the corporation or the rights of its shareholders;
or (c) the shares in question are then redeemable by the corporation at
a price not greater than the cash to be received for such shares;
. completion of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater
than the cash to be received in exchange for such shares;
. completion of a sale or exchange of all or substantially all of the
property of the corporation other than in the regular course of
business, including a sale in dissolution but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds are to be distributed in cash to
shareholders within one year;
. an amendment to the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(a) alters or abolishes a preferential right of the shares; (b) creates,
alters or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (c) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (d) excludes or limits
the right of shares to vote on any matter; (e) reduces the number of
shares owned by the shareholder to a fraction of a share if the
fractional share so created is to be acquired for cash; or (f) changes
the corporation into a nonprofit corporation or cooperative
organization; or
. 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.
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With respect to corporations that have a class or series of shares either
listed on a national securities exchange or held by more than 2,000 record
shareholders, dissenters' rights are not available to the holders of these
shares by reason of a merger, share exchange or sale or exchange of property
unless (a) the articles of incorporation of the corporation that issued the
shares provide otherwise or (b) in the case of a merger or share exchange, the
holders of the shares are required to accept anything other than (1) cash, (2)
shares in another corporation that are either listed on a national securities
exchange or held by more than 2,000 record shareholders or (3) a combination
of cash and such shares.
A shareholder who has the right to dissent from a transaction and receive
payment of the "fair value" of his or her shares must follow specific
procedural requirements as set forth in the NCBCA in order to maintain such
right and obtain such payment.
MainStreet
Under the VSCA, a shareholder of a Virginia corporation is entitled to
dissent from, and to receive payment of the "fair value" of his or her shares
in the event of, any of the following corporation transactions:
. completion of a merger to which the corporation is a party, provided
that either (a) shareholder approval is required for the merger pursuant
to the VSCA or the corporation's articles of incorporation and the
shareholder is entitled to vote or (b) the corporation is a subsidiary
being merged with its parent pursuant to a particular VSCA provision for
such transactions;
. completion of a plan of share exchange in which the corporation is the
party whose shares will be acquired, provided that the shareholder is
entitled to vote on the plan;
. completion of the sale or exchange of all or substantially all the
property of the corporation, if the shareholder is entitled to vote on
the transaction or the transaction is in furtherance of a dissolution on
which the shareholder is entitled to vote, and provided that the
transaction is neither (a) a transaction pursuant to court order nor (b)
a transaction for cash pursuant to a plan by which all or substantially
all of the net proceeds will be distributed to shareholders within one
year; or
. any corporate action taken pursuant to a shareholder vote, to the extent
that the articles of incorporation, the bylaws, or a resolution of the
board of directors provides that voting and nonvoting shareholders are
entitled to dissent and obtain payment for their shares.
With respect to corporations such as MainStreet that have a class or series
of shares either listed on a national securities exchange or the Nasdaq market
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
. unlike the MainStreet Articles, the articles of incorporation of the
corporation issuing such shares provided otherwise;
. in the case of a merger or share exchange, unlike the merger, the
holders of such shares are required to accept anything other than (a)
cash, (b) shares in another corporation that are either listed on a
national securities exchange or held by more than 2,000 record
shareholders or (c) a combination of cash and such shares; or
. the transaction is with a shareholder who owns more than 10 percent of a
class of shares and has not been approved by a majority of the directors
unaffiliated with such shareholder.
A shareholder who has the right to object to a transaction and receive
payment of the "fair value" of his or her shares must follow specific
procedural requirements as set forth in the VSCA in order to maintain such
right and obtain such payment.
Holders of MainStreet common stock do not have appraisal rights in
connection with the merger because, as of the record date for the meeting,
shares of MainStreet common stock were listed on the Nasdaq National Market
and the shares of BB&T common stock are held of record by at least 2,000
record shareholders.
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LIQUIDATION RIGHTS
BB&T
In the event of the liquidation, dissolution or winding-up of the affairs of
BB&T, holders of outstanding shares of BB&T common stock are entitled to
share, in proportion to their respective interests, in BB&T's assets and funds
remaining after payment, or provision for payment, of all debts and other
liabilities of BB&T.
Because BB&T is a bank holding company, its rights, the rights of its
creditors and of its shareholders, including the holders of the shares of any
BB&T preferred stock that may be issued, to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization may be subject to
the prior claims of (a) the subsidiary's creditors, except to the extent that
BB&T may itself be a creditor with recognized claims against the subsidiary,
and (b) any interests in the liquidation accounts established by savings
associations or savings banks acquired by BB&T for the benefit of eligible
account holders in connection with conversion of such savings associations
from mutual to stock form.
MainStreet
In the event of the liquidation, dissolution or winding up of the affairs of
MainStreet, holders of the outstanding shares of MainStreet common stock are
entitled to share, in proportion to their respective interests, MainStreet's
assets and funds remaining after payment, or the provision for payment, of all
liabilities of MainStreet.
SHAREHOLDER PROPOSALS
Any proposal which a shareholder wishes to have presented at the next annual
meeting of shareholders, which will not be held if the merger is completed,
and included in MainStreet's proxy materials must be received at the main
office of MainStreet, 200 East Church Street, Martinsville, Virginia 24112, no
later than November 21, 1999. If such proposal is in compliance with all of
the requirements of Rule 14a-8 under the Exchange Act, it will be included in
MainStreet's proxy statement and set forth on the form of proxy issued for the
next annual meeting of shareholders, if applicable. Shareholders wishing to
present proposals at such meeting but not include them in MainStreet's proxy
materials must also give notice of such proposals to MainStreet no later than
November 21, 1999. It is urged that any proposals be sent by certified mail,
return receipt requested.
OTHER BUSINESS
The MainStreet board is not aware of any business to come before the meeting
other than those matters described in this proxy statement/prospectus.
However, if any other matters should properly come before the meeting, it is
intended that the proxies solicited hereby will be voted with respect to those
other matters in accordance with the judgment of the persons voting the
proxies.
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.
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EXPERTS
The consolidated financial statements of BB&T Corporation and its
subsidiaries which are incorporated by reference in this proxy
statement/prospectus from BB&T's Current Report on Form 8-K dated September
18, 1998, which restates the consolidated financial statements that are
incorporated by reference from BB&T's Annual Report on Form 10-K for the year
ended December 31, 1997, to reflect the acquisitions by BB&T of Life Bancorp,
Inc. on March 1, 1998 and Franklin Bancorporation, Inc. on July 1, 1998, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
The consolidated financial statements of MainStreet Financial Corporation
and its subsidiaries which are incorporated by reference in this proxy
statement/prospectus from MainStreet's Current Report on Form 8-K dated
October 23, 1998, which restates the consolidated financial statements that
are incorporated by reference from MainStreet's Annual Report on Form 10-K for
the year ended December 31, 1997, to reflect the acquisition by MainStreet of
Regency Financial Shares, Incorporated on March 10, 1998, have been audited by
PricewaterhouseCoopers LLP, independent public accountants, as indicated in
their reports with respect thereto, and are incorporated by reference herein
in reliance upon the authority of said firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
BB&T and MainStreet file annual, quarterly and special reports, proxy
statements and other information with the Commission. You may read and copy
any reports, statements or certain other information that the companies file
with the Commission at the Commission's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. These
Commission filings are also available to the public from commercial document
retrieval services and at the Internet world wide web site maintained by the
Commission at "http://www.sec.gov." Reports, proxy statements and other
information should also be available for inspection at the offices of the
NYSE, for BB&T, and Nasdaq, for MainStreet.
BB&T has filed the Registration Statement to register with the Commission
the BB&T common stock to be issued to MainStreet shareholders in the merger.
This proxy statement/prospectus is a part of that Registration Statement and
constitutes a prospectus of BB&T. As allowed by Commission rules, this proxy
statement/prospectus does not contain all the information you can find in
BB&T's Registration Statement or the exhibits to the Registration Statement.
The Commission allows MainStreet and BB&T to "incorporate by reference"
information into this proxy statement/prospectus, which means that the
companies can disclose important information to you by referring you to
another document filed separately with the Commission. The information
incorporated by reference is considered part of this proxy
statement/prospectus, except for any information superseded by information
contained directly in this proxy statement/prospectus or in later filed
documents incorporated by reference in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that MainStreet and BB&T have previously filed with the
Commission. These documents contain important information about MainStreet and
BB&T and their businesses.
BB&T COMMISSION FILINGS (FILE NO. 1-10853)
<TABLE>
<S> <C>
Annual Report on Form 10-K............... For the fiscal year ended December 31,
1997
Quarterly Reports on Form 10-Q........... For the fiscal quarters ended March
31, June 30 and September 30, 1998
Current Reports on Form 8-K.............. Filed January 15, 1998, February 26,
1998, February 27, 1998, April 13,
1998, May 13, 1998, June 23, 1998,
July 7, 1998, July 13, 1998, August
10, 1998, August 11, 1998, August 27,
1998 (amended on Form 8-K/A filed
January 8, 1999), September 18, 1998,
October 14, 1998 and January 14, 1999
</TABLE>
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<TABLE>
<S> <C>
Registration Statement on Form 8-A
(concerning BB&T's shareholder rights
plan).................................. Filed January 10, 1997
Mainstreet Commission Filings
(File No. 0-8622)
Annual Report on Form 10-K.............. For the fiscal year ended December 31,
1997
Quarterly Reports on Form 10-Q.......... For the fiscal quarters ended March
31, June 30 and September 30, 1998
Current Reports on Form 8-K............. Filed March 5, 1998, March 13, 1998,
March 13, 1998, June 4, 1998, July 21,
1998, October 1, 1998 and October 23,
1998
The description of MainStreet common
stock in MainStreet's Registration
Statement on Form S-4 under the caption
"Description of MSBC Capital Stock".... Filed May 27, 1998 and amended June
11, 1998
</TABLE>
MainStreet and BB&T also incorporate by reference additional documents that
may be filed with the Commission between the date of this proxy
statement/prospectus and the completion of the merger or the termination of
the merger agreement. These include periodic reports, such as Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K,
as well as proxy statements.
BB&T has supplied all information contained or incorporated by reference in
this proxy statement/prospectus relating to BB&T, and MainStreet has supplied
all such information relating to MainStreet before the merger.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the
companies, the Commission or the Commission's Internet web site as described
above. Documents incorporated by reference are available from the companies
without charge, excluding all exhibits except those that the companies have
specifically incorporated by reference in this proxy statement/prospectus.
Shareholders may obtain documents incorporated by reference in this proxy
statement/prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses:
Shareholder Reporting Rebecca J. Jenkins
BB&T Corporation Corporate Secretary
Post Office Box 1290 MainStreet Financial
Winston-Salem, North Corporation
Carolina 27104 200 East Church Street
(336) 733-3021 Martinsville, VA 24112
(540) 666-3272
If you would like to request documents from us, please do so by February 9,
1999 to receive them before the meeting.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. BB&T and MainStreet have not
authorized anyone to provide you with information that is different from what
is contained in this proxy statement/prospectus. This proxy
statement/prospectus is dated January 14, 1999. 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.
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APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
MAINSTREET FINANCIAL CORPORATION,
BB&T CORPORATION
and
BB&T FINANCIAL CORPORATION OF VIRGINIA
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS.............................................................. 1
ARTICLE II
THE MERGER............................................................... 4
2.1 Merger.............................................................. 4
2.2 Filing; Plan of Merger.............................................. 5
2.3 Effective Time...................................................... 5
2.4 Closing............................................................. 5
2.5 Effect of Merger.................................................... 5
2.6 Further Assurances.................................................. 5
2.7 Merger Consideration................................................ 6
2.8 Conversion of Shares; Payment of Merger Consideration............... 6
2.9 Conversion of Stock Options......................................... 7
2.10 Assumption of Indenture Obligations................................. 8
2.11 Merger of Subsidiary................................................ 8
2.12 Anti-Dilution....................................................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MAINSTREET............................. 8
3.1 Capital Structure................................................... 8
3.2 Organization, Standing and Authority................................ 9
3.3 Ownership of Subsidiaries........................................... 9
3.4 Organization, Standing and Authority of the Subsidiaries............ 9
3.5 Authorized and Effective Agreement.................................. 9
3.6 Securities Filings; Financial Statements; Statements True........... 10
3.7 Minute Books........................................................ 10
3.8 Adverse Change...................................................... 10
3.9 Absence of Undisclosed Liabilities.................................. 10
3.10 Properties.......................................................... 10
3.11 Environmental Matters............................................... 11
3.12 Loans; Allowance for Loan Losses.................................... 11
3.13 Tax Matters......................................................... 11
3.14 Employees; Compensation; Benefit Plans.............................. 12
3.15 Certain Contracts................................................... 14
3.16 Legal Proceedings; Regulatory Approvals............................. 15
3.17 Compliance with Laws; Filings....................................... 15
3.18 Brokers and Finders................................................. 15
3.19 Repurchase Agreements; Derivatives.................................. 16
3.20 Deposit Accounts.................................................... 16
3.21 Related Party Transactions.......................................... 16
3.22 Certain Information................................................. 16
3.23 Tax and Regulatory Matters.......................................... 16
3.24 State Takeover Laws................................................. 16
3.25 Labor Relations..................................................... 16
3.26 Fairness Opinion.................................................... 17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BB&T................................... 17
4.1 Capital Structure of BB&T........................................... 17
4.2 Organization, Standing and Authority of BB&T........................ 17
4.3 Authorized and Effective Agreement.................................. 17
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.4 Organization, Standing and Authority of BB&T Subsidiaries............ 18
4.5 Securities Documents; Statements True................................ 18
4.6 Financial Statements................................................. 18
4.7 Certain Information.................................................. 18
4.8 Tax and Regulatory Matters........................................... 18
4.9 Share Ownership...................................................... 18
4.10 Legal Proceedings; Regulatory Approvals.............................. 19
4.11 Material Adverse Change.............................................. 19
4.12 Compliance with Laws................................................. 19
ARTICLE V
COVENANTS................................................................. 19
5.1 MainStreet Shareholder Meeting....................................... 19
5.2 Registration Statement; Proxy Statement/Prospectus................... 19
5.3 Plan of Merger; Reservation of Shares................................ 20
5.4 Additional Acts...................................................... 20
5.5 Best Efforts......................................................... 20
5.6 Certain Accounting Matters........................................... 20
5.7 Access to Information................................................ 21
5.8 Press Releases....................................................... 21
5.9 Forbearances of MainStreet........................................... 21
5.10 Employment Agreements................................................ 23
5.11 Affiliates........................................................... 23
5.12 Section 401(k) Plan; Employee Benefits............................... 23
5.13 Directors and Officers Protection.................................... 24
5.14 Forbearances of BB&T................................................. 24
5.15 Assumption of Agreement by Acquiror of BB&T.......................... 25
5.16 Reports.............................................................. 25
5.17 Exchange Listing..................................................... 25
5.18 MainStreet Board of Directors........................................ 25
5.19 Charitable Contribution.............................................. 25
ARTICLE VI
CONDITIONS PRECEDENT...................................................... 26
6.1 Conditions Precedent--BB&T and MainStreet............................ 26
6.2 Conditions Precedent--MainStreet..................................... 26
6.3 Conditions Precedent--BB&T........................................... 27
ARTICLE VII
TERMINATION, DEFAULT, WAIVER AND AMENDMENT................................ 28
7.1 Termination.......................................................... 28
7.2 Effect of Termination................................................ 30
7.3 Termination of Representations, Warranties and Covenants............. 30
7.4 Waiver............................................................... 30
7.5 Amendment or Supplement.............................................. 30
ARTICLE VIII
MISCELLANEOUS............................................................. 30
8.1 Expenses............................................................. 30
8.2 Entire Agreement..................................................... 30
8.3 No Assignment........................................................ 31
8.4 Notices.............................................................. 31
8.5 Specific Performance................................................. 31
8.6 Captions............................................................. 32
8.7 Counterparts......................................................... 32
8.8 Governing Law........................................................ 32
</TABLE>
<PAGE>
ANNEXES
Annex A Articles of Merger
Annex B (not included) Employment Agreement with Michael R.
Annex C (not included) Brenan
Employment Agreements with Rebecca J.
Jenkins, Darryl J. Lamdreneau, Mark J.
Wenick, R. Bruce Valley, Merlin A.
Henkel and George Kapusta
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of August
26, 1998, is among MAINSTREET FINANCIAL CORPORATION ("MainStreet"), a Virginia
corporation having its principal office at Martinsville, Virginia, BB&T
CORPORATION ("BB&T"), a North Carolina corporation having its principal office
at Winston-Salem, North Carolina, and BB&T FINANCIAL CORPORATION OF VIRGINIA
("BB&T Financial"), a Virginia corporation having its principal office at
Virginia Beach, Virginia and a wholly owned subsidiary of BB&T;
R E C I T A L S:
The parties desire that MainStreet shall be merged with and into BB&T
Financial (said transaction being hereinafter referred to as the "Merger")
pursuant to a plan of merger (the "Plan of Merger") substantially in the form
attached as Annex A hereto, and the parties desire to provide for certain
undertakings, conditions, representations, warranties and covenants in
connection with the transactions contemplated hereby. As a condition and
inducement to BB&T's willingness to enter into the Agreement, MainStreet is
concurrently granting to BB&T an option to acquire, under certain
circumstances, up to 2,800,000 shares of the common stock, par value $5.00 per
share, of MainStreet (the "BB&T Option Agreement").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
Definitions
1.1 Definitions
When used herein, the capitalized terms set forth below shall have the
following meanings:
"Advisors" shall mean Sandler O'Neill & Partners, L.P. and Scott &
Stringfellow, Inc.
"Affiliate" shall mean, with respect to any Person, any Person, who directly
or indirectly, through one or more intermediaries, controls or is controlled
by, or is under common control with such Person and, without limiting the
generality of the foregoing, includes any executive officer or director of
such Person and any Affiliate of such executive officer or director.
"Articles of Merger" shall mean the Articles of Merger required to be filed
with the Virginia State Corporation Commission, as provided in Section 13.1-
720 of the VSCA,
"Bank Holding Company Act" shall mean the Federal Bank Holding Company Act
of 1956, as amended.
"BB&T Common Stock" shall mean the shares of voting common stock, par value
$5.00 per share, of BB&T, with rights attached issued pursuant to Rights
Agreement dated December 17, 1996 between BB&T and Branch Banking and Trust
Company, as Rights Agent, relating to BB&T's Series B Junior Participating
Preferred Stock, $5.00 par value per share.
"BB&T Option Agreement" shall mean the Stock Option Agreement dated as of
even date herewith, as amended from time to time, under which BB&T has an
option to purchase shares of MainStreet Common Stock, which shall be executed
concurrently with execution of this Agreement.
"BB&T Subsidiaries" shall mean all bank Subsidiaries of BB&T at the
Effective Time.
"Business Day" shall mean all days other than Saturdays, Sundays and Federal
Reserve holidays.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
<PAGE>
"Commission" shall mean the Securities and Exchange Commission.
"CRA" shall mean the Community Reinvestment Act of 1977, as amended.
"Disclosed" shall mean disclosed in the MainStreet Disclosure Memorandum,
referencing the Section number herein pursuant to which such disclosure is
being made.
"Environmental Claim" shall mean any notice from any governmental authority
or third party alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup or remediation costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based upon, or resulting from
a violation of the Environmental Laws or the presence or release into the
environment of any Hazardous Substances.
"Environmental Laws" shall mean all applicable federal, state and local laws
and regulations, as amended, relating to pollution or protection of human
health or the environment (including ambient air, surface water, ground water,
land surface, or subsurface strata) and which are administered, interpreted,
or enforced by the United States Environmental Protection Agency and state and
local agencies with jurisdiction over and including common law in respect of,
pollution or protection of the environment, including the Comprehensive
Environmental Response Compensation and Liability Act, as amended, 42 U.S.C.
9601 et seq. ("CERCLA"), the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. 6901 et seq., and other laws and regulations relating to
emissions, discharges, releases, or threatened releases of any Hazardous
Substances, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System.
"Financial Statements" shall mean (a) with respect to BB&T, (i) the
consolidated balance sheet (including related notes and schedules, if any) of
BB&T as of December 31, 1997, 1996, and 1995, and the related consolidated
statements of income, shareholders' equity and cash flows (including related
notes and schedules, if any) for each of the three years ended December 31,
1997, 1996, and 1995, as filed by BB&T in Securities Documents and (ii) the
consolidated balance sheets of BB&T (including related notes and schedules, if
any) and the related consolidated statements of income, shareholders' equity
and cash flows (including related notes and schedules, if any) included in
Securities Documents filed by BB&T with respect to periods ended subsequent to
December 31, 1997, and (b) with respect to MainStreet, (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of MainStreet as of December 31, 1997, December 31, 1996 and December 31,
1995, and the related consolidated statements of income and retained earnings,
and cash flows (including related notes and schedules, if any) for each of the
three years ended December 31, 1997, December 31, 1996 and December 31, 1995
as filed by MainStreet in Securities Documents and (ii) the consolidated
statements of financial condition of MainStreet (including related notes and
schedules, if any) and the related consolidated statements of income and
retained earnings, and cash flows (including related notes and schedules, if
any) included in Securities Documents filed by MainStreet with respect to
periods ended subsequent to December 31, 1997.
"GAAP" shall mean generally accepted accounting principles applicable to
financial institutions and their holding companies, as in effect at the
relevant date.
"Hazardous Substances" shall mean any substance or material (i) identified
in CERCLA; (ii) determined to be toxic, a pollutant or a contaminant under any
applicable federal, state or local statutes, law, ordinance, rule or
regulation, including but not limited to petroleum products; (iii) asbestos;
(iv) radon; (v) poly-chlorinated biphiphenyls and (vi) such other materials,
substances or waste which are otherwise dangerous, hazardous, harmful to human
health or the environment.
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<PAGE>
"IRS" shall mean the Internal Revenue Service.
"MainStreet Common Stock" shall mean the shares of voting common stock, par
value $5.00 per share, of MainStreet, with MainStreet Rights attached.
"MainStreet Disclosure Memorandum" shall mean the written information in one
or more documents, each of which is entitled "MainStreet Disclosure
Memorandum" and dated on or before the date of this Agreement and delivered
not later than September 1, 1998 by MainStreet to BB&T, and describing in
reasonable detail the matters contained therein. Each disclosure made therein
shall be in existence on the date of this Agreement and shall specifically
reference each Section of this Agreement under which such disclosure is made.
Information disclosed with respect to one Section shall not be deemed to be
disclosed for purposes of any other Section not specifically referenced.
"MainStreet Rights" shall mean rights issued by MainStreet pursuant to the
MainStreet Rights Agreement.
"MainStreet Rights Agreement" shall mean the Rights Agreement, dated January
18, 1990, between MainStreet and Crestar Bank, as Rights Agent, relating to
100,000 shares of MainStreet's Series A Participating Cumulative Preferred
Stock, par value $5.00 per share.
"MainStreet Subsidiaries" shall mean The Bank of Northern Virginia,
MainStreet Bank (Central Virginia), Bank of Carroll, Bank of Ferrum, Commerce
Bank, The First Bank of Stuart, First Community Bank of Saltville, The First
National Bank of Clifton Forge, MainStreet Capital Trust I, MainStreet Trust
Company, N.A., Piedmont Trust Bank, Tysons National Bank, Tysons Financial
Corporation, any and all other Subsidiaries of MainStreet as of the date
hereof and any corporation, bank, savings association, or other organization
acquired as a Subsidiary of MainStreet after the date hereof and held as a
Subsidiary by MainStreet at the Effective Time.
"Material Adverse Effect" on BB&T or MainStreet shall mean an event, change,
or occurrence which, individually or together with any other event, change or
occurrence, (i) has a material adverse effect on the financial condition,
results of operations, business or business prospects of BB&T and the BB&T
Subsidiaries taken as a whole, or MainStreet and the MainStreet Subsidiaries
taken as a whole, or (ii) materially impairs the ability of BB&T or MainStreet
to perform its obligations under this Agreement or to consummate the Merger
and the other transactions contemplated by this Agreement; provided that
"Material Adverse Effect" shall not be deemed to include the impact of (a)
actions and omissions of BB&T or MainStreet taken with the prior written
consent of the other in contemplation of the transactions contemplated hereby
and (b) the direct effects of compliance with this Agreement on the operating
performance of the parties, including expenses incurred by the parties in
consummating the transactions contemplated by this Agreement or relating to
any litigation arising as a result of the Merger.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Proxy Statement/Prospectus" shall mean the proxy statement and prospectus,
together with any supplements thereto, to be sent to shareholders of
MainStreet to solicit their votes in connection with a proposal to approve
this Agreement and the Plan of Merger.
"Registration Statement" shall mean the registration statement of BB&T as
declared effective by the Commission under the Securities Act, including any
post-effective amendments or supplements thereto as filed with the Commission
under the Securities Act, with respect to the BB&T Common Stock to be issued
in connection with the transactions contemplated by this Agreement.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests (other than rights
pursuant to the Rights Agreements described under the definitions of "BB&T
Common Stock" and "MainStreet Common Stock"), and stock appreciation rights,
performance units and similar stock-based rights whether or not they obligate
the issuer thereof to issue stock or other securities or to pay cash.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, proxy statements,
registration statements and all similar documents filed, or required to be
filed, pursuant to the Securities Laws, including but not limited to periodic
and other reports filed pursuant to Section 13 of the Exchange Act.
3
<PAGE>
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of
1940, as amended; the Trust Indenture Act of 1939 as amended; and the rules
and regulations of the Commission promulgated thereunder.
"Stock Option" shall mean, collectively, any option granted under the Stock
Option Plans, outstanding and unexercised on the date hereof to acquire shares
of MainStreet Common Stock, aggregating 138,177 shares.
"Stock Option Plans" shall mean the Piedmont Bankshares, Inc. 1990 Stock
Option Plan and the MainStreet Bankgroup, Inc. 1997 Stock Incentive Plan.
"Subsidiaries" shall mean all those corporations, associations, or other
business entities of which the entity in question either owns or controls 50%
or more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the outstanding
equity securities is owned directly or indirectly by its parent (in
determining whether one entity owns or controls 50% or more of the outstanding
equity securities of another, equity securities owned or controlled in a
fiduciary capacity shall be deemed owned and controlled by the beneficial
owner).
"VSCA" shall mean the Virginia Stock Corporation Act, as amended.
1.2 Terms Defined Elsewhere
The capitalized terms set forth below are defined in the following Sections:
<TABLE>
<S> <C>
Agreement Introduction
BB&T Introduction
BB&T Financial Introduction
BB&T Option Agreement Recitals
BB&T Option Plan Section 2.9(a)
BB&T Ratio Section 7.1(h)
Closing Section 2.4
Closing Date Section 2.4
Closing Value Section 7.1(h)
Constituent Corporations Section 2.1
Determination Date Section 7.1(h)
Effective Time Section 2.3
Employer Entity Section 5.12(c)
Exchange Ratio Section 2.7(a)
Index Group Section 7.1(h)
Index Price Section 7.1(h)
MainStreet Introduction
MainStreet Preferred Stock Section 3.1
Merger Recitals
Merger Consideration Section 2.7
PBGC Section 3.14(b)(iv)
Plan Section 3.14(b)(i)
Plan of Merger Recitals
Starting Date Section 7.1(h)
Surviving Corporation Section 2.1(a)
</TABLE>
ARTICLE II
The Merger
2.1 Merger
BB&T Financial and MainStreet are constituent corporations (the "Constituent
Corporations") to the Merger as contemplated by the VSCA. At the Effective
Time:
4
<PAGE>
(a) MainStreet shall be merged with and into BB&T Financial in accordance
with the applicable provisions of the VSCA, with BB&T Financial being the
surviving corporate entity (hereinafter sometimes referred to as the
"Surviving Corporation").
(b) The separate existence of MainStreet shall cease and the Merger shall
in all respects have the effect provided in Section 2.5.
(c) The Articles of Incorporation of BB&T Financial at the Effective Time
shall become the Articles of Incorporation of the Surviving Corporation.
(d) The Bylaws of BB&T Financial at the Effective Time shall become the
Bylaws of the Surviving Corporation.
2.2 Filing; Plan of Merger
The Merger shall not become effective unless this Agreement and the Plan of
Merger are duly approved by shareholders holding the requisite number of
shares of each of MainStreet and BB&T Financial. Upon fulfillment or waiver of
the conditions specified in Article VI and provided that this Agreement has
not been terminated pursuant to Article VII, the Constituent Corporations will
cause the Articles of Merger to be executed and filed with the Virginia State
Corporation Commission, as provided in Section 13.1-720 of the VSCA. The Plan
of Merger is incorporated herein by reference, and adoption of this Agreement
by the Boards of Directors of the Constituent Corporations and approval by the
shareholders of the Constituent Corporations shall constitute adoption and
approval of the Plan of Merger.
2.3 Effective Time
The Merger shall be effective at the day and hour specified in the Articles
of Merger as filed as provided in Section 2.2 (herein sometimes referred to as
the "Effective Time").
2.4 Closing
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Womble Carlyle Sandridge & Rice,
PLLC, Winston-Salem, North Carolina, at 10:00 a.m. on the date designated by
BB&T which is within thirty days following the satisfaction of the conditions
to Closing set forth in Article VI (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing),
or such later date as the parties may otherwise agree (the "Closing Date").
2.5 Effect of Merger
From and after the Effective Time, the separate existence of MainStreet
shall cease, and the Surviving Corporation shall thereupon and thereafter, to
the extent consistent with its Articles of Incorporation, possess all of the
rights, privileges, immunities and franchises, of a public as well as a
private nature, of each of the Constituent Corporations; and all property,
real, personal and mixed, and all debts due on whatever account, and all other
choses in action, and each and every other interest of or belonging to or due
to each of the Constituent Corporations shall be taken and deemed to be
transferred to and vested in the Surviving Corporation without further act or
deed; and the title to any real estate or any interest therein vested in
either of the Constituent Corporations shall not revert or be in any way
impaired by reason of the Merger. The Surviving Corporation shall thenceforth
be responsible for all the liabilities, obligations and penalties of each of
the Constituent Corporations; and any claim, existing action or proceeding,
civil or criminal, pending by or against either of the Constituent
Corporations may be prosecuted as if the Merger had not taken place, or the
Surviving Corporation may be substituted in its place; and any judgment
rendered against either of the Constituent Corporations may be enforced
against the Surviving Corporation. Neither the rights of creditors nor any
liens upon the property of either of the Constituent Corporations shall be
impaired by reason of the Merger.
2.6 Further Assurances
If, at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any further deeds, assignments or assurances in
law or any other actions are necessary, reasonably desirable or proper to
vest,
5
<PAGE>
perfect or confirm of record or otherwise, in the Surviving Corporation, the
title to any property or rights of the Constituent Corporations acquired or to
be acquired by reason of, or as a result of, the Merger, the Constituent
Corporations agree that such Constituent Corporations and their proper
officers and directors shall and will execute and deliver all such proper
deeds, assignments and assurances in law and do all things necessary,
reasonably desirable or proper to vest, perfect or confirm title to such
property or rights in the Surviving Corporation and otherwise to carry out the
purpose of this Agreement, and that the proper officers and directors of the
Surviving Corporation are fully authorized and directed in the name of the
Constituent Corporations or otherwise to take any and all such actions.
2.7 Merger Consideration
As used herein, the term "Merger Consideration" shall mean the number of
shares of BB&T Common Stock (to the nearest one-hundredth of a share) to be
exchanged for each share of MainStreet Common Stock issued and outstanding as
of the Effective Time and cash (without interest) to be payable in exchange
for any fractional share of BB&T Common Stock which would otherwise be
distributable to a MainStreet shareholder as provided in Section 2.8(d),
determined as follows:
(a) The number of shares of BB&T Common Stock to be issued in exchange
for each issued and outstanding share of MainStreet Common Stock shall be
in the ratio of 1.18 shares of BB&T Common Stock for each share of
MainStreet Common Stock (the "Exchange Ratio").
(b) The amount of cash payable with respect to any fractional share of
BB&T Common Stock shall be determined by multiplying the fractional part of
such share by the closing price per share on the NYSE Composite
Transactions List (as reported by The Wall Street Journal--Eastern Edition)
for the last trading day preceding the Effective Time. No person will be
entitled to dividends, voting rights or any other rights as a BB&T
shareholder with respect to any fractional share.
2.8 Conversion of Shares; Payment of Merger Consideration
(a) At the Effective Time, by virtue of the Merger and without any action on
the part of MainStreet or the holders of record of MainStreet Common Stock,
each share of MainStreet Common Stock issued and outstanding immediately prior
to the Effective Time shall be converted into and shall represent the right to
receive, upon surrender of the certificate representing such share of
MainStreet Common Stock (as provided in subsection (d) below), the Merger
Consideration.
(b) Each share of the common stock of BB&T Financial issued and outstanding
immediately prior to the Effective Time shall continue to be issued and
outstanding.
(c) Until surrendered, each outstanding certificate which prior to the
Effective Time represented one or more shares of MainStreet Common Stock shall
be deemed upon the Effective Time for all purposes to represent only the right
to receive the Merger Consideration. No interest will be paid or accrued on
the Merger Consideration upon the surrender of the certificate or certificates
representing shares of MainStreet Common Stock. With respect to any
certificate for MainStreet Common Stock that has been lost or destroyed, BB&T
shall pay the Merger Consideration attributable to such certificate upon
receipt of a surety bond or other adequate indemnity as required in accordance
with BB&T's standard policy, and evidence reasonably satisfactory to BB&T of
ownership of the shares represented thereby. After the Effective Time, no
transfer of the shares of MainStreet Common Stock outstanding immediately
prior to the Effective Time shall be made on the stock transfer books of the
Surviving Corporation.
(d) Promptly after the Effective Time, BB&T shall cause to be delivered or
mailed to each MainStreet shareholder a form of letter of transmittal and
instructions for use in effecting the surrender of the certificates which,
immediately prior to the Effective Time, represented any shares of MainStreet
Common Stock. Upon surrender of such certificates or other evidence of
ownership meeting the requirements of Section 2.8(c), together with such
letter of transmittal duly executed and completed in accordance with the
instructions thereto, and such other documents as may be reasonably requested,
BB&T shall promptly cause the transfer to the persons entitled thereto of the
Merger Consideration.
6
<PAGE>
(e) The Surviving Corporation shall pay any dividends or other distributions
with a record date prior to the Effective Time which have been declared or
made by MainStreet in respect of shares of MainStreet Common Stock in
accordance with the terms of this Agreement and which remain unpaid at the
Effective Time, subject to compliance by MainStreet with Section 5.9(b). To
the extent permitted by law, former shareholders of record of MainStreet shall
be entitled to vote after the Effective Time at any meeting of BB&T
shareholders the number of whole shares of BB&T Common Stock into which their
respective shares of MainStreet Common Stock are converted, regardless of
whether such holders have exchanged their certificates representing MainStreet
Common Stock for certificates representing BB&T Common Stock in accordance
with the provisions of this Agreement. Whenever a dividend or other
distribution is declared by BB&T on the BB&T Common Stock, the record date for
which is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares of BB&T Common Stock issuable
pursuant to this Agreement, but no dividend or other distribution payable to
the holders of record of BB&T Common Stock as of any time subsequent to the
Effective Time shall be delivered to the holder of any certificate
representing MainStreet Common Stock until such holder surrenders such
certificate for exchange as provided in this Section 2.8. Upon surrender of
such certificate, both the BB&T Common Stock certificate and any undelivered
dividends and cash payments payable hereunder (without interest) shall be
delivered and paid with respect to the shares of MainStreet Common Stock
represented by such certificate.
2.9 Conversion of Stock Options
(a) At the Effective Time, each Stock Option then outstanding (and which by
its terms does not lapse on or before the Effective Time), whether or not then
exercisable, shall be converted into and become rights with respect to BB&T
Common Stock, and BB&T shall assume each Stock Option in accordance with the
terms of the applicable Stock Option Plan, except that from and after the
Effective Time (i) BB&T and its Compensation Committee shall be substituted
for MainStreet and the Committee of MainStreet's Board of Directors
administering the Stock Option Plans, (ii) each Stock Option assumed by BB&T
may be exercised solely for shares of BB&T Common Stock, (iii) the number of
shares of BB&T Common Stock subject to each such Stock Option shall be the
number of whole shares of BB&T (omitting any fractional share) determined by
multiplying the number of shares of MainStreet Common Stock subject to such
Stock Option immediately prior to the Effective Time by the Exchange Ratio,
and (iv) the per share exercise price under each such Stock Option shall be
adjusted by dividing the per share exercise price under each such Stock Option
by the Exchange Ratio and rounding up to the nearest cent. Notwithstanding the
foregoing, BB&T may at its election substitute as of the Effective Time
options under the BB&T Corporation 1995 Omnibus Stock Incentive Plan (the
"BB&T Option Plan") for all or a part of the Stock Options, subject to the
following conditions: (A) the requirements of (iii) and (iv) above shall be
met; (B) such substitution shall not constitute a modification, extension or
renewal of any of the Stock Options which are incentive stock options; and (C)
the substituted options shall continue in effect on the same terms and
conditions as provided in the Stock Options and the Stock Option Plan granting
each Stock Option. Each grant of a converted or substitute option to any
individual who subsequent to the Merger will be a director or officer of BB&T
as construed under Rule 16b-3 shall, as a condition to such conversion or
substitution, be approved in accordance with the provisions of Rule 16b-3.
Each Stock Option which is an incentive stock option shall be adjusted as
required by Section 424 of the Code, and the Regulations promulgated
thereunder, so as to continue as an incentive stock option under Section
424(a) of the Code, and so as not to constitute a modification, extension, or
renewal of the option within the meaning of Section 424(h) of the Code. BB&T
and MainStreet agree to take all necessary steps to effectuate the foregoing
provisions of this Section 2.9. BB&T has reserved and shall continue to
reserve adequate shares of BB&T Common Stock for delivery upon exercise of any
converted or substitute options. As soon as practicable after the Effective
Time, if it has not already done so, and to the extent MainStreet shall have a
registration statement in effect or an obligation to file a registration
statement, BB&T shall file a registration statement on Form S-3 or Form S-8,
as the case may be (or any successor or other appropriate forms), with respect
to the shares of BB&T Common Stock subject to converted or substitute options
and shall use its reasonable efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such converted or substitute
options remain outstanding. With respect to those individuals, if any, who
subsequent to the Merger may be subject to the reporting requirements under
Section 16(a) of the Exchange Act, BB&T shall administer the Stock Option
Plans assumed pursuant to this Section 2.9 (or the BB&T Option Plan, if
applicable) in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act to the extent necessary to preserve for such individuals the
benefits of Rule 16b-3 to the extent such benefits were available to them
prior to the Effective Time. MainStreet hereby represents that each of the
Stock Option Plans in its current form complies with Rule 16b-3 to the extent,
if any, required as of the date hereof.
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<PAGE>
(b) As soon as practicable following the Effective Time, BB&T shall deliver
to each participant in the Stock Option Plans receiving converted or
substitute options an appropriate notice setting forth such participant's
rights pursuant thereto.
2.10 Assumption of Indenture Obligations
BB&T and BB&T Financial acknowledge the Junior Subordinated Deferrable
Interest Debentures in the principal amount of up to $51,547,000 issued to
MainStreet Capital Trust I by MainStreet on November 19, 1997 and governed by
the Indenture dated as of such date between MainStreet and the Bank of New
York, as Debenture Trustee, and BB&T Financial agrees to assume all
obligations of MainStreet under such outstanding Debentures and such Indenture
at the Effective Time. Without limiting the generality of the foregoing, BB&T
Financial agrees that it shall comply with the provisions of Article X of such
Indenture and shall execute and deliver at the Effective Time the supplemental
indenture provided for therein.
2.11 Merger of Subsidiary
In the event that BB&T shall request, MainStreet shall take such actions,
and shall cause the MainStreet Subsidiaries to take such actions, as may be
required in order to effect, at the Effective Time, the merger of one or more
of the MainStreet Subsidiaries with and into, in each case, one of the BB&T
Subsidiaries. In the event any such actions shall be taken and the Merger
shall not be consummated for reasons other than due to a breach of this
Agreement by MainStreet, BB&T shall reimburse MainStreet for all legal and
regulatory costs incurred by MainStreet with respect to such actions.
2.12 Anti-Dilution
In the event BB&T changes the number of shares of BB&T Common Stock issued
and outstanding prior to the Effective Time as a result of a stock split,
stock dividend or other similar recapitalization, and the record date thereof
(in the case of a stock dividend) or the effective date thereof (in the case
of a stock split or similar recapitalization for which a record date is not
established) shall be prior to the Effective Time, the Merger Consideration
and the Exchange Ratio shall be proportionately adjusted.
ARTICLE III
Representations and Warranties of Mainstreet
Except as Disclosed, MainStreet represents and warrants to BB&T as follows
(no representation or warranty herein of MainStreet shall be deemed to be
inaccurate unless the inaccuracy would permit BB&T to refuse to consummate the
Merger under the applicable standard set forth in Section 6.3(a)):
3.1 Capital Structure
The authorized capital stock of MainStreet consists of 20,000,000 shares of
MainStreet Common Stock, par value $5.00 per share, and 1,000,000 shares of
preferred stock, par value $5.00 per share ("MainStreet Preferred Stock"). As
of the date hereof, the total number of shares of MainStreet Common Stock
issued and outstanding and subject to options granted under the Stock Option
Plans was 14,232,170 of which approximately 14,093,993 shares of such Common
Stock are issued and outstanding and approximately 138,177 are subject to such
options. No shares of the MainStreet Preferred Stock are issued and
outstanding. No other classes of capital stock of MainStreet, common or
preferred, are authorized, issued or outstanding. All outstanding shares of
MainStreet Common Stock have been duly authorized and are validly issued,
fully paid and nonassessable. No shares of capital stock have been reserved
for any purpose, except for (i) shares of MainStreet Common Stock reserved in
connection with the Stock Option Plans, (ii) shares of Series A MainStreet
Preferred Stock reserved for issuance pursuant to the MainStreet Rights
Agreement, and (iii) 1,650,000 shares of MainStreet Common Stock reserved in
connection with the BB&T Option Agreement. Except as set forth in this Section
3.1, there are no Rights authorized, issued or outstanding with respect to the
capital stock of MainStreet. Holders of MainStreet Common Stock do not have
preemptive rights.
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3.2 Organization, Standing and Authority
MainStreet is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia, with full corporate
power and authority to carry on its business as now conducted and to own,
lease and operate its assets. MainStreet has not failed to qualify to do
business in any other state of the United States or foreign jurisdiction where
such failure would have a Material Adverse Effect.
3.3 Ownership of Subsidiaries
Section 3.3 of the MainStreet Disclosure Memorandum lists all of the
MainStreet Subsidiaries and, with respect to each, its jurisdiction of
organization, jurisdictions in which it is qualified or otherwise licensed to
conduct business, the percentage ownership interest so owned by MainStreet and
its business activities. The outstanding shares of capital stock or other
equity interests of the MainStreet Subsidiaries are validly issued and
outstanding, fully paid and nonassessable, and all such shares are directly or
indirectly owned by MainStreet free and clear of all liens, claims and
encumbrances or preemptive rights of any person. No Rights are authorized,
issued or outstanding with respect to the capital stock or other equity
interests of the MainStreet Subsidiaries, and there are no agreements,
understandings or commitments relating to the right of MainStreet to own, to
vote or to dispose of said interests. Section 3.3 of the MainStreet Disclosure
Memorandum also discloses all ownership interests of any corporation,
partnership, joint venture, or other organization (other than the MainStreet
Subsidiaries) owned directly or indirectly by MainStreet.
3.4 Organization, Standing and Authority of the Subsidiaries
Each MainStreet Subsidiary which is a depository institution is a United
States or State-chartered banking association with deposits insured by the
FDIC. Each of the MainStreet Subsidiaries is validly existing and in good
standing under the laws of its jurisdiction of organization. Each of the
MainStreet Subsidiaries has full power and authority to carry on its business
as now conducted, and is duly qualified to do business in each jurisdiction
Disclosed with respect to it. No MainStreet Subsidiary is required to be
qualified to do business in any other jurisdiction of the United States or
foreign jurisdiction, or is engaged in any type of activities that have not
been Disclosed.
3.5 Authorized and Effective Agreement
(a) MainStreet has all requisite corporate power and authority to enter into
and (subject to receipt of all necessary governmental approvals and the
receipt of approval of the MainStreet shareholders of this Agreement and the
Plan of Merger) to perform all of its obligations under this Agreement, the
Articles of Merger, the Certificate of Merger and the BB&T Option Agreement.
The execution and delivery of this Agreement, the Articles of Merger and the
BB&T Option Agreement, and consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all necessary
corporate action, except, in the case of this Agreement and the Plan of
Merger, the approval of the MainStreet shareholders pursuant to and to the
extent required by applicable law. This Agreement, the Plan of Merger and the
BB&T Option Agreement constitute legal, valid and binding obligations of
MainStreet, and each is enforceable against MainStreet in accordance with its
terms, in each such case subject to (i) bankruptcy, fraudulent transfer,
insolvency, moratorium, reorganization, conservatorship, receivership, or
other similar laws from time to time in effect relating to or affecting the
enforcement of the rights of creditors of FDIC insured institutions or the
enforcement of creditors' rights generally; and (ii) general principles of
equity, and except that the availability of equitable remedies or injunctive
relief is within the discretion of the appropriate court.
(b) Neither the execution and delivery of this Agreement, the Articles of
Merger, the Certificate of Merger or the BB&T Option Agreement, nor
consummation of the transactions contemplated hereby or thereby, nor
compliance by MainStreet with any of the provisions hereof or thereof, shall
(i) conflict with or result in a breach of any provision of the Articles of
Incorporation or bylaws of MainStreet or any MainStreet Subsidiary, (ii)
constitute or result in a breach of any term, condition or provision of, or
constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of MainStreet or any
MainStreet Subsidiary pursuant to, any note, bond, mortgage, indenture,
license, permit, contract, agreement or other instrument or obligation, or
(iii) subject to receipt of all required governmental approvals, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
MainStreet or any MainStreet Subsidiary.
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(c) Other than consents or approvals required from, or notices to,
regulatory authorities as provided in Section 5.4(b), no notice to, filing
with, or consent of, any public body or authority is necessary for the
consummation by MainStreet of the Merger and the other transactions
contemplated in this Agreement.
(d) Effective prior to execution of this Agreement, MainStreet has taken all
action necessary to amend the MainStreet Rights Agreement so that execution of
this Agreement and the BB&T Option Agreement and consummation of the
transactions contemplated herein and therein, including without limitation
consummation of the Merger pursuant to this Agreement or acquisition of shares
pursuant to the BB&T Option Agreement, shall not result in the grant of any
MainStreet Rights to any person under the MainStreet Rights Agreement or
enable or require any of the MainStreet Rights thereunder to be exercised,
distributed or triggered.
3.6 Securities Filings; Financial Statements; Statements True
(a) MainStreet has timely filed all Securities Documents required by the
Securities Laws since December 31, 1994. MainStreet has Disclosed or made
available to BB&T a true and complete copy of each Securities Document filed
by MainStreet with the Commission after December 31, 1994 and prior to the
date hereof, which are all of the Securities Documents that MainStreet was
required to file during such period. As of their respective dates of filing,
such Securities Documents complied with the Securities Laws as then in effect,
and did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The Financial Statements of MainStreet fairly present or will fairly
present, as the case may be, the consolidated financial position of MainStreet
and the MainStreet Subsidiaries as of the dates indicated and the consolidated
statements of income and retained earnings, changes in shareholders' equity
and statements of cash flows for the periods then ended (subject, in the case
of unaudited interim statements, to the absence of notes and to normal year-
end audit adjustments that are not material in amount or effect) in conformity
with GAAP applied on a consistent basis.
(c) No statement, certificate, instrument or other writing furnished or to
be furnished hereunder by MainStreet or any MainStreet Subsidiary to BB&T
contains or will contain any untrue statement of a material fact or will omit
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
3.7 Minute Books
The minute books of MainStreet and each of the MainStreet Subsidiaries
contain or will contain at Closing accurate records of all meetings and other
corporate actions of its shareholders and Board of Directors (including
committees of its Board of Directors).
3.8 Adverse Change
Since December 31, 1997, MainStreet and the MainStreet Subsidiaries have not
incurred any liability except as disclosed in the most recent MainStreet
Financial Statements, or entered into any transactions with Affiliates, in
each case other than in the ordinary course of business consistent with past
practices, nor has there been any adverse change or any event involving a
prospective adverse change in the business, financial condition, results of
operations or business prospects of MainStreet and any of the MainStreet
Subsidiaries.
3.9 Absence of Undisclosed Liabilities
All liabilities (including contingent liabilities) of MainStreet and the
MainStreet Subsidiaries are disclosed in the most recent Financial Statements
of MainStreet or were incurred in the ordinary course of its business since
the date of MainStreet's most recent Financial Statements.
3.10 Properties
(a) MainStreet and the MainStreet Subsidiaries have good and marketable
title, free and clear of all liens, encumbrances, charges, defaults or
equitable interests, to all of the properties and assets, real and personal,
reflected
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on the consolidated balance sheet included in the Financial Statements of
MainStreet as of December 31, 1997 or acquired after such date, except (i)
liens for current taxes not yet due and payable, (ii) pledges to secure
deposits and other liens incurred in the ordinary course of banking business,
(iii) such imperfections of title, easements and encumbrances, if any, as are
not material in character, amount or extent, or (iv) dispositions and
encumbrances for adequate consideration in the ordinary course of business.
(b) All leases and licenses pursuant to which MainStreet or any MainStreet
Subsidiary, as lessee or licensee, leases or licenses rights to real or
personal property, are valid and enforceable in accordance with their
respective terms.
3.11 Environmental Matters
(a) MainStreet and the MainStreet Subsidiaries are and at all times have
been in compliance with all Environmental Laws. Neither MainStreet nor any
MainStreet Subsidiary has received any communication alleging that MainStreet
or the MainStreet Subsidiary is not in such compliance, and there are no
present circumstances that would prevent or interfere with the continuation of
such compliance.
(b) There are no pending Environmental Claims, neither MainStreet nor any
MainStreet Subsidiary has received notice of any pending Environmental Claims,
and there are no conditions or facts existing which might reasonably be
expected to result in legal, administrative, arbitral or other proceedings
asserting Environmental Claims or other claims, causes of action or
governmental investigations of any nature seeking to impose, or that could
result in the imposition of, any liability arising under any Environmental
Laws upon (i) MainStreet or any MainStreet Subsidiary, (ii) any person or
entity whose liability for any Environmental Claim MainStreet or any
MainStreet Subsidiary has or may have retained or assumed, either
contractually or by operation of law, (iii) any real or personal property
owned or leased by MainStreet or any MainStreet Subsidiary, or any real or
personal property which MainStreet or any MainStreet Subsidiary has or is
judged to have managed or supervised or participated in the management of, or
(iv) any real or personal property in which MainStreet or any MainStreet
Subsidiary holds a security interest securing a loan recorded on the books of
MainStreet or any MainStreet Subsidiary. Neither MainStreet nor any MainStreet
Subsidiary is subject to any agreement, order, judgment, decree or memorandum
by or with any court, governmental authority, regulatory agency or third party
imposing any liability under any Environmental Laws.
(c) MainStreet and the MainStreet Subsidiaries are in compliance with all
recommendations contained in any environmental audits, analyses and surveys
received by MainStreet relating to all real and personal property owned or
leased by MainStreet or any MainStreet Subsidiary and all real and personal
property of which MainStreet or any MainStreet Subsidiary has or is judged to
have managed or supervised or participated in the management of.
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim, or other claim or action or governmental investigation
that could result in the imposition of any liability arising under any
Environmental Laws, against MainStreet or any MainStreet Subsidiary or against
any person or entity whose liability for any Environmental Claim MainStreet or
any MainStreet Subsidiary has or may have retained or assumed, either
contractually or by operation of law.
3.12 Loans; Allowance for Loan Losses
(a) In the aggregate, the loans on the books of MainStreet and the
MainStreet Subsidiaries are valid and properly documented, and were made in
the ordinary course of business. The terms, documentation, administration, and
servicing of those loans do not contain systemic violations of federal, state
or local laws, rules, regulations or ordinances applicable thereto.
(b) The allowances for loan losses reflected on the consolidated balance
sheets included in the Financial Statements of MainStreet are adequate as of
their respective dates under the requirements of GAAP and applicable
regulatory requirements and guidelines.
3.13 Tax Matters
(a) MainStreet and the MainStreet Subsidiaries and each of their
predecessors have timely filed (or requests for extensions have been timely
filed and any such extensions either are pending or have been granted and have
not
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expired) all federal, state and local (and, if applicable, foreign) tax
returns required by applicable law to be filed by them (including, without
limitation, estimated tax returns, income tax returns, information returns,
and withholding and employment tax returns) and have paid, or where payment is
not required to have been made, have set up an adequate reserve or accrual for
the payment of, all taxes required to be paid in respect of the periods
covered by such returns and, as of the Effective Time, will have paid, or
where payment is not required to have been made, will have set up an adequate
reserve or accrual for the payment of, all taxes for any subsequent periods
ending on or prior to the Effective Time. Neither MainStreet nor any
MainStreet Subsidiary has or will have any liability for any such taxes in
excess of the amounts so paid or reserves or accruals so established.
MainStreet and the MainStreet Subsidiaries have paid, or where payment is not
required to have been made have set up an adequate reserve or accrual for
payment of, all taxes required to be paid or accrued for the preceding or
current fiscal year for which a return is not yet due.
(b) All federal, state and local (and, if applicable, foreign) tax returns
filed by MainStreet and the MainStreet Subsidiaries are complete and accurate.
Neither MainStreet nor any MainStreet Subsidiary is delinquent in the payment
of any tax, assessment or governmental charge. No deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against MainStreet or any MainStreet Subsidiary
which have not been settled and paid. There are currently no agreements in
effect with respect to MainStreet or any MainStreet Subsidiary to extend the
period of limitations for the assessment or collection of any tax. No audit
examination or deficiency or refund litigation with respect to such returns is
pending.
(c) Neither MainStreet nor any of the MainStreet Subsidiaries is a party to
any tax allocation or sharing agreement or has been a member of an affiliated
group filing a consolidated federal income tax return (other than a group the
common parent of which was MainStreet or a MainStreet subsidiary) or has any
liability for taxes of any person (other than MainStreet and the MainStreet
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law) as a transferee or successor or by
contract or otherwise.
(d) Each of MainStreet and the MainStreet Subsidiaries is in compliance
with, and its records contain all information and documents (including
properly completed IRS Forms W-9) necessary to comply with, all applicable
information reporting and tax withholding requirements under federal, state,
and local tax laws, and such records identify with specificity all accounts
subject to backup withholding under Section 3406 of the Code.
(e) Neither MainStreet nor any of the MainStreet Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any contract
that could obligate it to make any payments that would be disallowed as a
deduction under Section 280G or 162(m) of the Code.
3.14 Employees; Compensation; Benefit Plans
(a) Compensation. MainStreet has Disclosed a complete and correct list of
the name, age, position, rate of compensation and any incentive compensation
arrangements, bonuses or commissions or fringe or other benefits, whether
payable in cash or in kind, of each director, shareholder, independent
contractor, consultant and agent of MainStreet and of each MainStreet
Subsidiary and each other person (in each case other than as an employee) to
whom MainStreet or any MainStreet Subsidiary pays or provides, or has an
obligation, agreement (written or unwritten), policy or practice of paying or
providing, retirement, health, welfare or other benefits of any kind or
description whatsoever.
(b) Employee Benefit Plans.
(i) MainStreet has Disclosed an accurate and complete list of all Plans, as
defined below, contributed to, maintained or sponsored by MainStreet or any
MainStreet Subsidiary, to which MainStreet or any MainStreet Subsidiary is
obligated to contribute or has any liability or potential liability, whether
direct or indirect, including all Plans contributed to, maintained or
sponsored by each member of the controlled group of corporations, within the
meaning of Sections 414(b), 414(c), 414(m) and 414(o) of the Code, of which
MainStreet or any MainStreet Subsidiary is a member. For purposes of this
Agreement, the term "Plan" shall mean a plan, arrangement, agreement or
program described in the foregoing provisions of this Section 3.14(b)(i) and
which is: (A) a profit-sharing, deferred compensation, bonus, stock option,
stock purchase, pension, retainer, consulting, retirement, severance, welfare
or incentive plan, agreement or arrangement, whether or not funded, (B) an
employment agreement, (C) a personnel
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policy or fringe benefit plan, policy, program or arrangement providing for
benefits or perquisites to current or former employees, officers, directors or
agents, whether or not funded, and whether or not terminated, including
without limitation benefits relating to automobiles, clubs, vacation, child
care, parenting, sabbatical, sick leave, severance, medical, dental,
hospitalization, life insurance and other types of insurance, or (D) any other
employee benefit plan as defined in Section 3(3) of ERISA, whether or not
funded. With respect to any terminated Plans which were tax-qualified,
approvals of the terminations by the IRS (and, if applicable, the PBGC) were
sought and obtained.
(ii) Neither MainStreet nor any MainStreet Subsidiary contributes to, has an
obligation to contribute to or otherwise has any liability or potential
liability with respect to (A) any multiemployer plan as defined in Section
3(37) of ERISA, (B) any plan of the type described in Sections 4063 and 4064
of ERISA or in Section 413 of the Code (and regulations promulgated
thereunder), or (C) any plan which provides health, life insurance, accident
or other "welfare-type" benefits to current or future retirees or former
employees or directors, their spouses or dependents, other than in accordance
with Section 4980B of the Code or applicable state continuation coverage law.
(iii) None of the Plans obligates MainStreet or any MainStreet Subsidiary to
pay separation, severance, termination or similar-type benefits solely as a
result of any transaction contemplated by this Agreement or solely as a result
of a "change in control," as such term is used in Section 280G of the Code
(and regulations promulgated thereunder).
(iv) Each Plan has been maintained, funded and administered in compliance in
all respects with its own terms and in compliance in all respects with all
applicable laws and regulations, including but not limited to ERISA and the
Code. No actions, suits, claims, complaints, charges, proceedings, hearings,
examinations, investigations, audits or demands with respect to the Plans
(other than routine claims for benefits) are pending or threatened, and there
are no facts which could give rise to or be expected to give rise to any
actions, suits, claims, complaints, charges, proceedings, hearings,
examinations, investigations, audits or demands. No Plan that is subject to
the funding requirements of Section 412 of the Code or Section 302 of ERISA
has incurred any "accumulated funding deficiency" as such term is defined in
such Sections of ERISA and the Code, whether or not waived, and each Plan has
always fully met the funding standards required under Title I of ERISA and
Section 412 of the Code. No liability to the Pension Benefit Guaranty
Corporation ("PBGC") (except for routine payment of premiums) has been or is
expected to be incurred with respect to any Plan that is subject to Title IV
of ERISA, no reportable event (as such term is defined in Section 4043 of
ERISA) has occurred with respect to any such Plan, and the PBGC has not
commenced or threatened the termination of any Plan. None of the assets of
MainStreet or any MainStreet Subsidiary is the subject of any lien arising
under Section 302(f) of ERISA or Section 412(n) of the Code, neither
MainStreet nor any MainStreet Subsidiary has been required to post any
security pursuant to Section 307 of ERISA or Section 401(a)(29) of the Code,
and there are no facts which could be expected to give rise to such lien or
such posting of security. No event has occurred and no condition exists that
would subject MainStreet or any MainStreet Subsidiary to any tax under
Sections 4971, 4972, 4976, 4977 or 4979 of the Code or to a fine or penalty
under Section 502(c) of ERISA.
(v) Each Plan that is intended to be qualified under Section 401(a) of the
Code, and each trust (if any) forming a part thereof, has received a favorable
determination letter from the IRS as to the qualification under the Code of
such Plan and the tax exempt status of such related trust, and nothing has
occurred since the date of such determination letter that could adversely
affect the qualification of such Plan or the tax exempt status of such related
trust.
(vi) No underfunded "defined benefit plan" (as such term is defined in
Section 3(35) of ERISA) has been, during the five years preceding the Closing
Date, transferred out of the controlled group of corporations (within the
meaning of Sections 414(b), (c), (m) and (o) of the Code) of which MainStreet
or any MainStreet Subsidiary is a member or was a member during such five-year
period.
(vii) As of the close of the last plan year preceding the date hereof, the
fair market value of the assets of each Plan that is a tax qualified defined
benefit plan equaled or exceeded the then present value of all vested and non-
vested liabilities thereunder determined in accordance with reasonable
actuarial methods, factors and assumptions applicable to a defined benefit
plan on an ongoing basis. With respect to each Plan that is subject to the
funding requirements of Section 412 of the Code and Section 302 of ERISA, all
required contributions for all periods ending prior to or as of the Closing
Date (including periods from the first day of the then-current plan year to
the Closing Date and including all quarterly contributions required in
accordance with Section 412(m) of the Code) shall have been made. With respect
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to each other Plan, all required payments, premiums, contributions,
reimbursements or accruals for all periods ending prior to or as of the
Closing Date shall have been made. No tax qualified Plan has any unfunded
liabilities.
(viii) No prohibited transaction (which shall mean any transaction
prohibited by Section 406 of ERISA and not exempt under Section 408 of ERISA
or Section 4975 of the Code, whether by statutory, class or individual
exemption) has occurred with respect to any Plan which would result in the
imposition, directly or indirectly, of any excise tax, penalty or other
liability under Section 4975 of the Code or Section 409 or 502(i) of ERISA.
Neither MainStreet nor, to the best knowledge of MainStreet, any MainStreet
Subsidiary, any trustee, administrator or other fiduciary of any Plan, or any
agent of any of the foregoing has engaged in any transaction or acted or
failed to act in a manner that could subject MainStreet or any MainStreet
Subsidiary to any liability for breach of fiduciary duty under ERISA or any
other applicable law.
(ix) With respect to each Plan, all reports and information required to be
filed with any government agency or distributed to Plan participants and their
beneficiaries have been duly and timely filed or distributed.
(x) MainStreet and each MainStreet Subsidiary has been and is presently in
compliance with all of the requirements of Section 4980B of the Code.
(xi) Neither MainStreet nor any MainStreet Subsidiary has a liability as of
December 31, 1997 under any Plan that, to the extent disclosure is required
under GAAP, is not reflected on the consolidated balance sheet included in the
Financial Statements of MainStreet as of December 31, 1997 or otherwise
Disclosed.
(xii) Neither the consideration nor implementation of the transactions
contemplated under this Agreement will increase (A) MainStreet's or any
MainStreet Subsidiary's obligation to make contributions or any other payments
to fund benefits accrued under the Plans as of the date of this Agreement or
(B) the benefits accrued or payable with respect to any participant under the
Plans (except to the extent benefits may be deemed increased by accelerated
vesting, accelerated allocation of previously unallocated Plan assets or by
the conversion of all stock options in accordance with Section 2.9 hereof.
(xiii) With respect to each Plan, MainStreet has Disclosed or made available
to BB&T, true, complete and correct copies of (A) all documents pursuant to
which the Plans are maintained, funded and administered, including summary
plan descriptions, (B) the three most recent annual reports (Form 5500 series)
filed with the IRS (with attachments), (C) the three most recent actuarial
reports, if any, (D) the three most recent financial statements, (E) all
governmental filings for the last three years, including without limitation,
excise tax returns and reportable events filings, and (F) all governmental
rulings, determinations, and opinions (and pending requests for governmental
rulings, determinations, and opinions) during the past three years.
(xiv) Each of the Plans as applied to MainStreet and any MainStreet
Subsidiary may be amended or terminated at any time by action of MainStreet's
Board of Directors, committee of the board of Directors or duly authorized
officer, in each case subject to the terms of the Plan and compliance with
applicable laws and regulations (and limited, in the case of multiemployer
plans, to termination of the participation of MainStreet or a MainStreet
Subsidiary thereunder).
3.15 Certain Contracts
(a) Neither MainStreet nor any MainStreet Subsidiary is a party to, is bound
or affected by, or receives benefits under (i) any agreement, arrangement or
commitment, written or oral, the default of which would have a Material
Adverse Effect, whether or not made in the ordinary course of business (other
than loans or loan commitments made or certificates or deposits received in
the ordinary course of the banking business), or any agreement restricting its
business activities, including without limitation agreements or memoranda of
understanding with regulatory authorities, (ii) any agreement, indenture or
other instrument, written or oral, relating to the borrowing of money by
MainStreet or any MainStreet Subsidiary or the guarantee by MainStreet or any
MainStreet Subsidiary of any such obligation, which cannot be terminated
within less than 30 days after the Closing Date by MainStreet or any
MainStreet Subsidiary (without payment of any penalty or cost, except with
respect to Federal Home Loan Bank or Federal Reserve Bank advances), (iii) any
agreement, arrangement or commitment, written or oral, relating to the
employment of a consultant,
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independent contractor or agent, or the employment, election or retention in
office of any present or former director or officer, which cannot be
terminated within less than 30 days after the Closing Date by MainStreet or
any MainStreet Subsidiary (without payment of any penalty or cost), or that
provides benefits which are contingent, or the application of which is
materially altered, upon the occurrence of a transaction involving MainStreet
of the nature contemplated by this Agreement or the BB&T Option Agreement, or
(iv) any agreement or plan, written or oral, including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the BB&T Option Agreement or the value of
any of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement or the BB&T Option Agreement. Each
matter Disclosed pursuant to this Section 3.15(a) is in full force and effect
as of the date hereof.
(b) Neither MainStreet nor any MainStreet Subsidiary is in default under any
agreement, commitment, arrangement, lease, insurance policy, or other
instrument, whether entered into in the ordinary course of business or
otherwise and whether written or oral, and there has not occurred any event
that, with the lapse of time or giving of notice or both, would constitute
such a default.
3.16 Legal Proceedings; Regulatory Approvals
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of MainStreet,
threatened against MainStreet or any MainStreet Subsidiary or against any
asset, interest, plan or right of MainStreet or any MainStreet Subsidiary, or,
to the best knowledge of MainStreet, against any officer, director or employee
of any of them in their capacity as such. There are no actions, suits or
proceedings instituted, pending or, to the best knowledge of MainStreet,
threatened against any present or former director or officer of MainStreet or
any MainStreet Subsidiary that would reasonably be expected to give rise to a
claim against MainStreet or any MainStreet Subsidiary for indemnification.
There are no actual or, to the best knowledge of MainStreet, threatened
actions, suits or proceedings which present a claim to restrain or prohibit
the transactions contemplated herein or in the BB&T Option Agreement. To the
best knowledge of MainStreet, no fact or condition relating to MainStreet or
any MainStreet Subsidiary exists (including without limitation noncompliance
with the CRA) that would prevent MainStreet or BB&T from obtaining all of the
federal and state regulatory approvals contemplated herein.
3.17 Compliance with Laws; Filings
Each of MainStreet and each MainStreet Subsidiary is in compliance with all
statutes and regulations (including, but not limited to, the CRA and
regulations promulgated thereunder, and other consumer banking laws), and has
obtained and maintained all permits, licenses and registrations applicable to
the conduct of its business, and neither MainStreet nor any MainStreet
Subsidiary has received notification that has not lapsed, been withdrawn or
abandoned by any agency or department of federal, state or local government
(i) asserting a violation or possible violation of any such statute or
regulation, (ii) threatening to revoke any permit, license, registration, or
other government authorization, or (iii) restricting or in any way limiting
its operations. Neither MainStreet nor any MainStreet Subsidiary is subject to
any regulatory or supervisory cease and desist order, agreement, directive,
memorandum of understanding or commitment, and none of them has received any
communication requesting that it enter into any of the foregoing. Since
December 31, 1994, MainStreet and each of the MainStreet Subsidiaries has
filed all reports, registrations, notices and statements, and any amendments
thereto, that it was required to file with federal and state regulatory
authorities, including without limitation the OTS, the Commission, the FDIC
and the Federal Reserve Board. Each such report, registration, notice and
statement, and each amendment thereto, complied with applicable legal
requirements.
3.18 Brokers and Finders
Neither MainStreet nor any MainStreet Subsidiary, nor any of their
respective officers, directors or employees, has employed any broker, finder
or financial advisor or incurred any liability for any fees or commissions in
connection with the transactions contemplated herein, in the Plan of Merger or
in the BB&T Option Agreement, except for obligations to the Advisors, the
nature and extent of which have been Disclosed, for investment banking
services, and except for fees to accountants and lawyers.
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3.19 Repurchase Agreements; Derivatives
(a) With respect to all agreements currently outstanding pursuant to which
MainStreet or any MainStreet Subsidiary has purchased securities subject to an
agreement to resell, MainStreet or the MainStreet Subsidiary has a valid,
perfected first lien or security interest in the securities or other
collateral securing such agreement, and the value of such collateral equals or
exceeds the amount of the debt secured thereby. With respect to all agreements
currently outstanding pursuant to which MainStreet or any MainStreet
Subsidiary has sold securities subject to an agreement to repurchase, neither
MainStreet nor the MainStreet Subsidiary has pledged collateral materially in
excess of the amount of the debt secured thereby. Neither MainStreet nor any
MainStreet Subsidiary has pledged collateral materially in excess of the
amount required under any interest rate swap or other similar agreement
currently outstanding.
(b) Neither MainStreet nor any MainStreet Subsidiary is a party to or has
agreed to enter into an exchange-traded or over-the-counter swap, forward,
future, option, cap, floor, or collar financial contract, or any other
interest rate or foreign currency protection contract not included on its
balance sheets in the Financial Statements, which is a financial derivative
contract (including various combinations thereof), except for options and
forwards entered into in the ordinary course of its mortgage lending business
consistent with past practice and current policy.
3.20 Deposit Accounts
The deposit accounts of the MainStreet Subsidiaries that are depository
institutions are insured by the FDIC to the maximum extent permitted by
federal law, and the MainStreet Subsidiaries have paid all premiums and
assessments and filed all reports required to have been paid or filed under
all rules and regulations applicable to the FDIC.
3.21 Related Party Transactions
MainStreet has Disclosed all existing transactions, investments and loans,
including loan guarantees existing as of the date hereof, to which MainStreet
or any MainStreet Subsidiary is a party with any director, executive officer
or 5% shareholder of MainStreet or any person, corporation, or enterprise
controlling, controlled by or under common control with any of the foregoing.
All such transactions, investments and loans are on terms no less favorable to
MainStreet than could be obtained from unrelated parties.
3.22 Certain Information
When the Proxy Statement/Prospectus is mailed, and at the time of the
meeting of shareholders of MainStreet to vote on the Plan of Merger, the Proxy
Statement/Prospectus and all amendments or supplements thereto, with respect
to all information set forth therein provided by MainStreet, (i) shall comply
with the applicable provisions of the Securities Laws, and (ii) shall not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
3.23 Tax and Regulatory Matters
Neither MainStreet nor any MainStreet Subsidiary has taken or agreed to take
any action which would or could reasonably be expected to (i) cause the Merger
not to be accounted for as a pooling of interests or not to constitute a
reorganization under Section 368 of the Code or (ii) materially impede or
delay receipt of any consents of regulatory authorities referred to in Section
5.4(b) or result in failure of the condition in Section 6.3(b).
3.24 State Takeover Laws
MainStreet and each MainStreet Subsidiary have taken all necessary action to
exempt the transactions contemplated by this Agreement from any applicable
moratorium, fair price, business combination, control share or other anti-
takeover laws.
3.25 Labor Relations
Neither MainStreet nor any MainStreet Subsidiary is the subject of any claim
or allegation that it has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or comparable state law) or
seeking
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to compel it to bargain with any labor organization as to wages or conditions
of employment, nor is MainStreet or any MainStreet Subsidiary party to any
collective bargaining agreement. There is no strike or other labor dispute
involving MainStreet or any MainStreet Subsidiary, pending or threatened, or
to the best knowledge of MainStreet, is there any activity involving any
employees of MainStreet or any MainStreet Subsidiary seeking to certify a
collective bargaining unit or engaging in any other organization activity.
3.26 Fairness Opinion
MainStreet has received from the Advisors opinions that, as of the date
hereof, the Merger Exchange Ratio is fair to the shareholders of MainStreet
from a financial point of view.
ARTICLE IV
Representations and Warranties
of BB&T
BB&T represents and warrants to MainStreet as follows (no representation or
warranty herein of BB&T shall be deemed to be inaccurate unless the inaccuracy
would permit MainStreet to refuse to consummate the Merger under the
applicable standard set forth in Section 6.2(a)):
4.1 Capital Structure of BB&T
The authorized capital stock of BB&T consists of (i) 5,000,000 shares of
preferred stock, par value $5.00 per share, of which 2,000,000 shares have
been designated as Series B Junior Participating Preferred Stock and the
remainder are undesignated, and none of which shares are issued and
outstanding, and (ii) 500,000,000 shares of BB&T Common Stock, of which
284,377,132 shares were issued and outstanding on August 7, 1998. All
outstanding shares of BB&T Common Stock have been duly authorized and are
validly issued, fully paid and nonassessable. The shares of BB&T Common Stock
reserved as provided in Section 5.3 are free of any Rights and have not been
reserved for any other purpose, and such shares are available for issuance as
provided pursuant to the Plan of Merger. Holders of BB&T Common Stock do not
have preemptive rights.
4.2 Organization, Standing and Authority of BB&T
BB&T is a corporation duly organized, validly existing and in good standing
under the laws of the State of North Carolina, with full corporate power and
authority to carry on its business as now conducted and to own, lease and
operate its assets, and is duly qualified to do business in the states of the
United States where its ownership or leasing of property or the conduct of its
business requires such qualification. BB&T is registered as a bank holding
company under the Bank Holding Company Act.
4.3 Authorized and Effective Agreement
(a) Each of BB&T and BB&T Financial has all requisite corporate power and
authority to enter into and (subject to receipt of all necessary government
approvals) perform all of its obligations under this Agreement. The execution
and delivery of this Agreement and consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of each of BB&T and BB&T
Financial. This Agreement and the Plan of Merger attached hereto constitute
legal, valid and binding obligations of BB&T and BB&T Financial, and each is
enforceable against BB&T and BB&T Financial in accordance with its terms, in
each case subject to (i) bankruptcy, insolvency, moratorium, reorganization,
conservatorship, receivership or other similar laws in effect from time to
time relating to or affecting the enforcement of the rights of creditors; and
(ii) general principles of equity (whether applied in a court of law or in
equity), and except that the availability of equitable remedies or injunctive
relief is within the discretion of the appropriate court.
(b) Neither the execution and delivery of this Agreement or the Articles of
Merger, nor consummation of the transactions contemplated hereby, nor
compliance by BB&T or BB&T Financial with any of the provisions hereof or
thereof shall (i) conflict with or result in a breach of any provision of the
Articles of Incorporation or bylaws of BB&T
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or any BB&T Subsidiary, (ii) constitute or result in a breach of any term,
condition or provision of, or constitute a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, or result
in the creation of any lien, charge or encumbrance upon any property or asset
of BB&T or any BB&T Subsidiary pursuant to, any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation, or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to BB&T or any BB&T Subsidiary.
(c) Other than consents or approvals required from, or notices to,
regulatory authorities as provided in Section 5.4(b), no notice to, filing
with, or consent of, any public body or authority is necessary for the
consummation by BB&T and BB&T Financial of the Merger and the other
transactions contemplated in this Agreement.
4.4 Organization, Standing and Authority of BB&T Subsidiaries
Each of the BB&T Subsidiaries and BB&T Financial is duly organized, validly
existing and in good standing under applicable laws. BB&T owns, directly or
indirectly, all of the issued and outstanding shares of capital stock of each
of the BB&T Subsidiaries and BB&T Financial. Each of the BB&T Subsidiaries and
BB&T Financial (i) has full power and authority to carry on its business as
now conducted and (ii) is duly qualified to do business in the states of the
United States and foreign jurisdictions where its ownership or leasing of
property or the conduct of its business requires such qualification.
4.5 Securities Documents; Statements True
BB&T has timely filed all Securities Documents required by the Securities
Laws since December 31, 1994. As of their respective dates of filing, such
Securities Documents complied with the Securities Laws as then in effect, and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No statement, certificate, instrument or other writing
furnished or to be furnished hereunder by BB&T or any other BB&T Subsidiary to
MainStreet contains or will contain any untrue statement of material fact or
will omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4.6 Financial Statements
The Financial Statements of BB&T fairly present or will fairly present, as
the case may be, the consolidated financial position of BB&T and the BB&T
Subsidiaries as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity and changes in cash flows for the
periods then ended (subject, in the case of unaudited interim statements, to
the absence of any notes and to normal year-end audit adjustments that are not
material in amount or effect) in conformity with GAAP consistently applied.
4.7 Certain Information
When the Proxy Statement/Prospectus is mailed, and at all times subsequent
to such mailing up to and including the time of the meeting of shareholders of
MainStreet to vote on the Merger, the Proxy Statement/Prospectus and all
amendments or supplements thereto, with respect to all information set forth
therein relating to BB&T, (i) shall comply with the applicable provisions of
the Securities Laws, and (ii) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.
4.8 Tax and Regulatory Matters
Neither BB&T nor any BB&T Subsidiary has taken, agreed to take or will take
any action which would or could reasonably be expected to (i) cause the Merger
not to be accounted for as a pooling of interests or not to constitute a
reorganization under Section 368 of the Code, or (ii) materially impede or
delay receipt of any consents of regulatory authorities referred to in Section
5.4(b) or result in failure of the condition in Section 6.3(b).
4.9 Share Ownership
As of the date of this Agreement, BB&T does not own (except in a fiduciary
capacity) any shares of MainStreet Common Stock. BB&T has entered into an
agreement to acquire Scott & Stringfellow Financial, Inc., which BB&T
understands maintains a position in shares of MainStreet.
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4.10 Legal Proceedings; Regulatory Approvals
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of BB&T, threatened
against BB&T or any BB&T Subsidiary or against any assets, interest, or right
of BB&T or any BB&T Subsidiary, or against any officer, director or employee
of any of them that in any such case, if decided adversely, would reasonably
be expected to have a Material Adverse Effect. There are no actions, suits or
proceedings instituted, pending or, to the best knowledge of BB&T, threatened
against any present or former director of officers of BB&T or any BB&T
Subsidiary that would reasonably be expected to give rise to a claim against
BB&T or any BB&T Subsidiary for indemnification. There are no actual or, to
the best knowledge of BB&T, threatened actions, suits or proceedings which
present a claim to restrain or prohibit the transactions contemplated herein,
in the Plan of Merger or the BB&T Option Agreement. To the best knowledge of
BB&T, no fact or condition relating to BB&T or any BB&T Subsidiary exists
(including without limitation noncompliance with the CRA) that would prevent
BB&T or MainStreet from obtaining all of the federal and state regulatory
approvals contemplated herein.
4.11 Material Adverse Change
Since December 31, 1997, BB&T and the BB&T Subsidiaries have not incurred
any material liability except as disclosed on the most recent BB&T Financial
Statements, or entered into any transactions with Affiliates, in each case
other than in the ordinary course of business consistent with past practices,
nor has there been any adverse change or any event involving a prospective
change in the business, financial condition or results of operations of BB&T
Subsidiaries
4.12 Compliance with Laws
Each of BB&T and the BB&T Subsidiaries is in compliance with all statutes
and regulations (including, but not limited to, the CRA and regulations
promulgated thereunder and other consumer banking laws) applicable and
material to the conduct of its business, and neither BB&T nor any of the BB&T
Subsidiaries has received any notification that has not lapsed, been withdrawn
or abandoned from any agency or department of federal, state or local
government (i) asserting a violation or possible violation of any such statute
or regulation, (ii) threatening to revoke any license, franchise, permit or
government authorization, or (iii) restricting or in any way limiting its
operations. Neither BB&T nor any of the BB&T Subsidiaries is subject to any
regulatory or supervisory cease and desist order, agreement, directive or
memorandum or understanding, and none of them has received any communication
requesting that they enter into any of the foregoing.
ARTICLE V
Covenants
5.1 MainStreet Shareholder Meeting
MainStreet shall submit this Agreement and the Plan of Merger to its
shareholders for approval at a meeting to be held as soon as practicable, and
by approving execution of this Agreement, the Board of Directors of MainStreet
agrees that it shall, at the time the Proxy Statement/Prospectus is mailed to
the shareholders of MainStreet, recommend that MainStreet's shareholders vote
for such approval; provided, that the Board of Directors of MainStreet may
withdraw or refuse to make such recommendation only if the Board of Directors
shall determine in good faith that such recommendation should not be made in
light of its fiduciary duty to MainStreet shareholders following consideration
of (i) written advice of legal counsel to the effect that making such
recommendation or failing to withdraw or modify such recommendation would more
likely than not constitute a breach of the fiduciary duties of such Board to
MainStreet or its shareholders; and (ii) either (A) the withdrawal by either
Financial Advisor in writing of its opinion referred to in Section 3.26 or (B)
the delivery to the MainStreet Board of Directors of written advice from
either Financial Advisor that the Merger Consideration is either not fair or
is inadequate to the shareholders of MainStreet from a financial point of
view.
5.2 Registration Statement; Proxy Statement/Prospectus
As promptly as practicable after the date hereof, BB&T shall prepare and
file the Registration Statement with the Commission. MainStreet will furnish
to BB&T the information required to be included in the Registration Statement
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with respect to its business and affairs before it is filed with the
Commission and again before any amendments are filed, and shall have the right
to review and consult with BB&T on the form of, and any characterizations of
such information included in, the Registration Statement prior to the filing
with the Commission. Such Registration Statement, at the time it becomes
effective and on the Effective Time, shall in all material respects conform to
the requirements of the Securities Act and the applicable rules and
regulations of the Commission. The Registration Statement shall include the
form of Proxy Statement/Prospectus. BB&T and MainStreet shall use their
reasonable best efforts to cause the Proxy Statement/Prospectus to be approved
by the Commission for mailing to the MainStreet shareholders, and such Proxy
Statement/Prospectus shall, on the date of mailing, conform in all material
respects to the requirements of the Securities Laws and the applicable rules
and regulations of the Commission thereunder. MainStreet shall cause the Proxy
Statement/Prospectus to be mailed to shareholders in accordance with all
applicable notice requirements under the Securities Laws and the VSCA.
5.3 Plan of Merger; Reservation of Shares
At the Effective Time, the Merger shall be effected in accordance with the
Plan of Merger. In this connection, BB&T undertakes and agrees (i) to cause
BB&T Financial to adopt the Plan of Merger; (ii) to vote the shares of BB&T
Financial common stock for approval of the Plan of Merger; (iii) to pay or
cause to be paid when due the Merger Consideration; and (iv) to reserve for
issuance such number of shares of BB&T Common Stock as shall be necessary to
pay the portion of the Consideration to be distributed in the form of BB&T
Common Stock, and not to take any action that would cause the aggregate number
of shares of BB&T Common Stock available for issuance hereunder not to be
sufficient to effect the Merger.
5.4 Additional Acts
(a) MainStreet agrees to take such actions reasonably requested by BB&T as
may be reasonably necessary to modify the structure of, or to substitute
parties to (so long as such substitute is BB&T or a BB&T Subsidiary) the
transactions contemplated hereby, provided that such modifications do not
change the Merger Consideration or abrogate the covenants and other agreements
contained in this Agreement, including without limitation the covenant not to
take any action that would substantially delay or impair the prospects of
completing the Merger pursuant to this Agreement and the Plan of Merger.
(b) As promptly as practicable after the date hereof, BB&T and MainStreet
shall submit notice or applications for prior approval of the transactions
contemplated herein to the Federal Reserve Board and any other federal, state
or local government agency, department or body to which notice is required or
from which approval is required for consummation of the Merger and the other
transactions contemplated hereby. MainStreet and BB&T each represents and
warrants to the other that all information included (or submitted for
inclusion) concerning it, its respective Subsidiaries, and any of its
respective directors, officers and shareholders, shall be true, correct and
complete in all material respects as of the date presented.
(c) BB&T agrees that its Board of Directors or authorized Board committee
shall approve prior to the Effective Time each grant of a converted option (as
described in Section 2.9(a)) to any individual who, subsequent to consummation
of the Merger, will be a director or officer of BB&T under Rule 16b-3 of the
Exchange Act.
5.5 Best Efforts
Each of BB&T and MainStreet shall use, and shall cause each of their
respective Subsidiaries to use, its reasonable best efforts in good faith to
(i) furnish such information as may be required in connection with and
otherwise cooperate in the preparation and filing of the documents referred to
in Sections 5.2 and 5.4 or elsewhere herein, and (ii) take or cause to be
taken all action necessary or reasonably desirable on its part to fulfill the
conditions in Article VI and to consummate the transactions herein
contemplated at the earliest practicable date. Neither BB&T nor MainStreet
shall take, or cause, or to the best of its ability permit to be taken, any
action that would substantially delay or impair the prospects of completing
the Merger pursuant to this Agreement and the Plan of Merger.
5.6 Certain Accounting Matters
MainStreet shall cooperate with BB&T concerning accounting and financial
matters necessary or appropriate to facilitate the Merger (taking into account
BB&T's policies, practices and procedures), including without limitation
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issues arising in connection with record keeping, loan classification,
valuation adjustments, levels of loan loss reserves and other accounting
practices; provided, that any action taken pursuant to this Section 5.6 shall
not be deemed to constitute or result in the breach of any representation or
warranty of MainStreet contained in this Agreement; and provided further, that
MainStreet shall not be required to implement any changes in accounting or
financial matters unless and until BB&T agrees in writing that all conditions
to BB&T's obligation to consummate the Merger set forth in Sections 6.1 and
6.3 (other than the delivery of certificates, opinions and other instruments
and documents to be delivered at the Closing or otherwise to be dated at the
Effective Time, the delivery of which shall continue to be conditions to
BB&T's obligation to consummate the Merger) have been satisfied or waived.
5.7 Access to Information
MainStreet and BB&T will each keep the other advised of all material
developments relevant to its business and the businesses of its Subsidiaries,
and to consummation of the Merger, and each shall provide to the other, upon
request, reasonable details of any such development. Upon reasonable notice,
MainStreet shall afford to representatives of BB&T access, during normal
business hours during the period prior to the Effective Time, to all of the
properties, books, contracts, commitments and records of MainStreet and the
MainStreet Subsidiaries and, during such period, shall make available all
information concerning their businesses as may be reasonably requested. BB&T
shall make available to representatives of MainStreet information consistent
with information provided by BB&T in the past to other corporations similarly
situated. No investigation pursuant to this Section 5.7 shall affect or be
deemed to modify any representation or warranty made by, or the conditions to
the obligations hereunder of, either party hereto. Each party hereto shall,
and shall cause each of its directors, officers, attorneys and advisors to,
maintain the confidentiality of all information obtained hereunder which is
not otherwise publicly disclosed by the other party, said undertakings with
respect to confidentiality to survive any termination of this Agreement
pursuant to Section 7.1. In the event of the termination of this Agreement,
each party shall return to the other party upon request all confidential
information previously furnished in connection with the transactions
contemplated by this Agreement.
5.8 Press Releases
BB&T and MainStreet shall agree with each other as to the form and substance
of any press release related to this Agreement and the Plan of Merger or the
transactions contemplated hereby and thereby, and consult with each other as
to the form and substance of other public disclosures related thereto;
provided, that nothing contained herein shall prohibit either party, following
notification to the other party, from making any disclosure which in the
opinion of its counsel is required by law.
5.9 Forbearances of MainStreet
Except with the prior written consent of BB&T, between the date hereof and
the Effective Time, MainStreet shall not, and shall cause each of the
MainStreet Subsidiaries not to:
(a) carry on its business other than in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted, or establish
or acquire any new Subsidiary or engage in any new type of activity;
(b) declare, set aside, make or pay any dividend or other distribution in
respect of its capital stock, other than regularly scheduled quarterly
dividends of $0.15 per share of MainStreet Common Stock payable on record
dates and in amounts consistent with past practices; provided that any
dividend declared or payable on the shares of MainStreet Common Stock for the
quarterly period during which the Effective Time occurs shall, unless
otherwise agreed upon in writing by BB&T and MainStreet, be declared with a
record date prior to the Effective Time only if the normal record date for
payment of the corresponding quarterly dividend to holders of BB&T Common
Stock is before the Effective Time;
(c) issue any shares of its capital stock (including treasury shares),
except pursuant to the Stock Option Plans or the BB&T Option Agreement, and
except pursuant to its dividend reinvestment plan;
(d) issue, grant or authorize any Rights or effect any recapitalization,
reclassification, stock dividend, stock split or like change in
capitalization;
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(e) amend its articles of incorporation or bylaws; impose or permit
imposition, of any lien, charge or encumbrance on any share of stock held by
it in any MainStreet Subsidiary, or permit any such lien, charge or
encumbrance to exist; or waive or release any material right or cancel or
compromise any debt or claim, in each case other than in the ordinary course
of business;
(f) merge with any other entity or permit any other entity to merge into it,
or consolidate with any other entity; acquire control over any other entity;
or liquidate, sell or otherwise dispose of any assets or acquire any assets,
other than in the ordinary course of its business consistent with past
practices;
(g) fail to comply in any material respect with any laws, regulations,
ordinances or governmental actions applicable to it and to the conduct of its
business;
(h) increase the rate of compensation of any of its directors, officers or
employees (excluding increases in compensation resulting from the vesting in
the normal course of restricted stock awards outstanding as of the date of
this Agreement, if any, or the exercise of compensatory stock options
outstanding as of the date of this Agreement), or pay or agree to pay any
bonus to, or provide any new employee benefit or incentive to, any of its
directors, officers or employees, except for increases or payments made in the
ordinary course of business consistent with past practice pursuant to plans or
arrangements in effect on the date hereof;
(i) enter into or substantially modify (except as may be required by
applicable law or regulation) any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees; provided, however, that this subparagraph shall not prevent renewal
of any of the foregoing consistent with past practice;
(j) solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition or purchase of all or a substantial portion of the
assets of, or a substantial equity interest in, MainStreet or any MainStreet
Subsidiary or any business combination with MainStreet or any MainStreet
Subsidiary other than as contemplated by this Agreement; or authorize any
officer, director, agent or affiliate of MainStreet or any MainStreet
Subsidiary to do any of the above; or fail to notify BB&T immediately if any
such inquiries or proposals are received, any such information is requested or
required, or any such negotiations or discussions are sought to be initiated;
provided, that this subsection (j) shall not apply to furnishing information,
negotiations or discussions following an unsolicited offer if, as a result of
such offer, MainStreet is advised in writing by legal counsel that the failure
to so furnish information or negotiate would more likely than not constitute a
breach of the fiduciary duties of MainStreet's Board of Directors to its
shareholders;
(k) enter into (i) any material agreement, arrangement or commitment not
made in the ordinary course of business, (ii) any agreement, indenture or
other instrument not made in the ordinary course of business relating to the
borrowing of money by MainStreet or a MainStreet Subsidiary or guarantee by
MainStreet or a MainStreet Subsidiary of any obligation, (iii) any agreement,
arrangement or commitment relating to the employment or severance of a
consultant or the employment, severance, election or retention in office of
any present or former director, officer or employee (this clause shall not
apply to the election of directors by shareholders or the reappointment of
officers in the normal course), or (iv) any contract, agreement or
understanding with a labor union;
(l) change its lending, investment or asset liability management policies in
any material respect, except as may be required by applicable law, regulation,
or directives, and except that after approval of the Agreement and the Plan of
Merger by its shareholders and after receipt of the requisite regulatory
approvals for the transactions contemplated by this Agreement and the Plan of
Merger, MainStreet shall cooperate in good faith with BB&T to adopt policies,
practices and procedures consistent with those utilized by BB&T, effective on
or before the Closing Date; provided, that MainStreet shall not be required to
implement any changes in such policies, practices and procedures unless and
until BB&T agrees in writing that all conditions to BB&T's obligation to
consummate the Merger set forth herein (other than the delivery of
certificates, opinions and other instruments and documents to be delivered at
the Closing or otherwise to be dated at the Effective Time, the delivery of
which shall continue to be conditions to obligations to consummate the Merger)
have been satisfied or waived.
(m) change its methods of accounting in effect at December 31, 1997, except
as required by changes in GAAP concurred in by BB&T, which concurrence shall
not be unreasonably withheld, or change any of its methods of
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reporting income and deductions for federal income tax purposes from those
employed in the preparation of its federal income tax returns for the year
ended December 31, 1997, except as required by changes in law or regulation;
(n) incur any commitments for capital expenditures or obligation to make
capital expenditures in excess of $100,000 for any single item, or $1,000,000
in the aggregate, unless otherwise agreed by BB&T in writing, which agreement
may not be unreasonably withheld;
(o) incur any new indebtedness other than deposits from customers, advances
from the Federal Home Loan Bank or Federal Reserve Bank and reverse repurchase
arrangements, all in the ordinary course of business;
(p) take any action which would or could reasonably be expected to (i) cause
the Merger not to be accounted for as a pooling of interests or not to
constitute a reorganization under Section 368 of the Code as determined by
BB&T, (ii) result in any inaccuracy of a representation or warranty herein
which would allow for a termination of this Agreement, or (iii) cause any of
the conditions precedent to the transactions contemplated by this Agreement to
fail to be satisfied;
(q) dispose of any material assets other than in the ordinary course of
business; or
(r) agree to do any of the foregoing.
5.10 Employment Agreements
BB&T (or its specified banking subsidiary) agrees to enter into an
employment agreement with Michael R. Brenan substantially in the form of Annex
B hereto, and employment agreements with Rebecca J. Jenkins, Darryl J.
Lamdreneau, Mark J. Wenick, R. Bruce Valley, Merlin A. Henkel and George
Kapusta substantially in the form of Annex C hereto.
5.11 Affiliates
MainStreet shall use its best efforts to cause all persons who are
Affiliates of MainStreet to deliver to BB&T promptly following this Agreement
a written agreement providing that such person will not dispose of BB&T Common
Stock received in the Merger except in compliance with the Securities Act and
the rules and regulations promulgated thereunder and except as consistent with
qualifying the transactions contemplated hereby for pooling of interests
accounting treatment, and in any event shall use its best efforts to cause
such affiliates to deliver to BB&T such written agreement prior to the Closing
Date.
5.12 Section 401(k) Plan; Employee Benefits
(a) BB&T shall cause the 401(k) plan of MainStreet to be merged with the
401(k) plan maintained by BB&T and the BB&T Subsidiaries, and the account
balances of former employees of MainStreet or the MainStreet Subsidiaries who
are participants in the MainStreet plan shall be transferred to the accounts
of such employees under the BB&T 401(k) plan. Following such merger and
transfer, such accounts shall be governed and controlled by the terms of the
BB&T 401(k) plan as in effect from time to time (and subject to BB&T's right
to terminate such plan). For purposes of administering the 401(k) plan,
service with MainStreet and the MainStreet Subsidiaries shall be deemed to be
service with BB&T or the BB&T Subsidiaries for eligibility and vesting
purposes, but not for purposes of benefit accrual.
(b) As soon as practicable following the Effective Time, BB&T shall take any
and all action necessary to terminate MainStreet's defined benefit pension
plans (the "MainStreet Pension Plan") pursuant to a standard termination in
accordance with Section 4041 of ERISA and to provide for full vesting of the
accrued benefits of all participants in the MainStreet Pension Plan and the
distribution of the assets thereof to the participants. The actions relating
to termination of the MainStreet Pension Plan shall be conditioned upon
receiving a favorable determination letter from the IRS with regard to the
termination of the MainStreet Pension Plan. BB&T will use its reasonable best
efforts to seek the issuance of such letter as soon as practicable following
the Effective Time. Each employee of MainStreet or a MainStreet Subsidiary at
the Effective Time who becomes an employee immediately following the Effective
Time of BB&T or a BB&T Subsidiary ("Employer Entity") shall be given credit
under BB&T's defined
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benefit pension plan for service with MainStreet and the MainStreet
Subsidiaries for eligibility and vesting purposes, but not for purposes of
benefit accrual.
(c) Each employee of MainStreet or of a MainStreet Subsidiary at the
Effective Time who becomes an employee immediately following the Effective
Time of BB&T or a BB&T Subsidiary ("Employer Entity") shall be eligible to
participate in the group hospitalization, medical, dental, life, disability
and other welfare benefit plans and programs available to similarly situated
employees of the Employer Entity, subject to the terms of such plans and
programs; provided, that service with MainStreet shall be deemed to be service
with the Employer Entity for the purpose of determining eligibility to
participate in and periods applicable to such welfare plans and programs.
(d) Each employee of MainStreet or a MainStreet Subsidiary who becomes an
employee of BB&T or a BB&T Subsidiary and is terminated by BB&T or a BB&T
Subsidiary subsequent to the Effective Time, excluding any employee who has an
existing employment or special termination agreement which is Disclosed, shall
be entitled to severance pay in accordance with the general severance policy
maintained by BB&T, if and to the extent that such employee is entitled to
severance pay under such policy. Such employee's service with MainStreet or a
MainStreet Subsidiary shall be treated as service with BB&T for purposes of
determining the amount of severance pay, if any, under BB&T's severance
policy.
(e) BB&T shall honor all employment agreements, severance agreements and
deferred compensation agreements that MainStreet and the MainStreet
Subsidiaries have with their current and former employees and directors and
which have been Disclosed to BB&T pursuant to this Agreement, except to the
extent any such agreements shall be superseded or terminated at the Closing or
following the Closing Date.
5.13 Directors and Officers Protection
BB&T or a BB&T Subsidiary shall purchase and keep in force for a period of
three years after the Effective Time directors' and officers' liability
insurance providing coverage to directors and officers of MainStreet for acts
or omissions occurring prior to the Effective Time. Such insurance shall
provide at least the same coverage and amounts as contained in MainStreet's
policy on the date hereof; provided, that in no event shall the annual premium
on such policy exceed 150% of the annual premium payments on MainStreet's
policy in effect as of the date hereof (the "Maximum Amount"). If the amount
of the premiums necessary to maintain or procure such insurance coverage
exceeds the Maximum Amount, BB&T shall use its reasonable efforts to maintain
the most advantageous policies of directors' and officers' liability insurance
obtainable for a premium equal to the Maximum Amount. BB&T further agrees to
indemnify all individuals who are or have been officers, directors or
employees of MainStreet or any MainStreet Subsidiary prior to the Effective
Time from any acts or omissions in such capacities prior to the Effective
Time, to the fullest extent that such indemnification is provided pursuant to
the Articles of Incorporation, bylaws and contracts of MainStreet on the date
hereof and is permitted under the VSCA. If BB&T or the BB&T Subsidiary
maintaining the insurance provided for in this Section 5.13 or any successors
or assigns shall consolidate with or merge into any other entity and shall not
be the continuing or surviving entity of the consolidation or merger, or shall
transfer all or substantially all of its assets to any entity, proper
provision shall be made so that the successor or assign of BB&T or the BB&T
Subsidiary shall assume the obligations in this Section 5.13. This Section
5.13 is intended for the benefit of and shall be enforceable by each
indemnified officer and director and their respective heirs and
representatives.
5.14 Forbearances of BB&T
Except with the prior written consent of MainStreet, which consent shall not
be arbitrarily or unreasonably withheld, between the date hereof and the
Effective Time, neither BB&T nor any BB&T Subsidiary shall take any action
which would or might be expected to (i) cause the business combination
contemplated hereby not to be accounted for as a pooling of interests or not
to constitute a reorganization under Section 368 of the Code; (ii) result in
any inaccuracy of a representation or warranty herein which would allow for
termination of this Agreement; (iii) cause any of the conditions precedent to
the transactions contemplated by this Agreement to fail to be satisfied; (iv)
exercise the BB&T Option Agreement other than in accordance with its terms, or
dispose of the shares of MainStreet Common Stock issuable upon exercise of the
option rights conferred thereby other than as permitted by the terms thereof;
or (v) fail to comply in any material respect with any laws, regulations,
ordinances or governmental actions applicable to it and to the conduct of its
business.
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5.15 Assumption of Agreement by Acquiror of BB&T
It shall be a condition precedent to BB&T entering into any agreement
whereby BB&T shall (i) consolidate or merge into any other entity and shall
not be the continuing or surviving person of such consolidation or merger, or
(ii) transfers all or substantially all of its assets to any entity, that
proper provision shall be made so that the successor and assigns of BB&T shall
specifically agree to assume BB&T's obligations under this Agreement.
5.16 Reports
Each of MainStreet and BB&T shall file (and shall cause the MainStreet
Subsidiaries and the BB&T Subsidiaries, respectively, to file), between the
date of this Agreement and the Effective Time, all reports required to be
filed by it with the Commission and any other regulatory authorities having
jurisdiction over such party, and shall deliver to BB&T or MainStreet, as the
case may be, copies of all such reports promptly after the same are filed. If
financial statements are contained in any such reports filed with the
Commission, such financial statements will fairly present the consolidated
financial position of the entity filing such statements as of the dates
indicated and the consolidated results of operations, changes in shareholders'
equity, and cash flows for the periods then ended in accordance with GAAP
(subject in the case of interim financial statements to the absence of notes
and to normal recurring year-end adjustments that are not material). As of
their respective dates, such reports filed with the Commission will comply in
all material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to a regulatory authority other than
the Commission shall be prepared in accordance with requirements applicable to
such reports.
5.17 Exchange Listing
BB&T shall use its reasonable best efforts to list, prior to the Effective
Time, on the NYSE, subject to official notice of issuance, the shares of BB&T
Common Stock to be issued to the holders of MainStreet Common Stock pursuant
to the Merger, and BB&T shall give all notices and make all filings with the
NYSE required in connection with the transactions contemplated herein.
5.18 MainStreet Board of Directors
As of the Effective Time, BB&T shall offer to each of the members of the
Board of Directors of MainStreet a seat on either the Advisory Board for the
southwest Virginia area or the Advisory Board in the community in which such
member resides. For two years following the Effective Time, the Advisory Board
members appointed pursuant to this Section 5.17 and who continue to serve
shall receive, as compensation for service on the Advisory Board, Advisory
Board member's fees (annual retainer and attendance fees) equal in amount each
year (prorated for any partial year) to the annual retainer and schedule of
attendance fees for directors of MainStreet in effect on July 1, 1998.
Following such two-year period, Advisory Board Members, if they continue to
serve in such capacity, shall receive fees in accordance with BB&T's standard
schedule of fees for service thereon as in effect from time to time. For two
years after the Effective Time, no such Advisory Board member shall be
prohibited from serving thereon because he or she shall have attained the
maximum age for service thereon (currently age 70). In addition to the
foregoing, as soon as practicable following the Effective Time, BB&T shall
cause two members of the Board of Directors of MainStreet designated by such
Board to be appointed to the Board of Directors of Branch Banking and Trust
Company and two additional members of the Board of Directors of MainStreet
designated by such Board to be appointed to the Board of Directors of Branch
Banking and Trust Company of Virginia, subject in each case to such member's
eligibility and willingness to serve. MainStreet shall use its best efforts to
cause each member of the MainStreet Board of Directors to enter into an
agreement with BB&T on or before the Closing Date providing that such member
will not engage in activities competitive to BB&T for two years following the
Effective Time.
5.19 Charitable Contribution
As soon as practicable after the Effective Time, BB&T shall make available
the amount of $1 million for the purpose of making charitable and community
development contributions within the geographic area served on the date hereof
by MainStreet and the MainStreet Subsidiaries. Such sum shall be distributed
consistent with such purposes by
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a group of five individuals, three of whom shall be designated by BB&T and two
of whom shall be designated by the Board of Directors of MainStreet as it
exists prior to the Effective Time.
ARTICLE VI
Conditions Precedent
6.1 Conditions Precedent--BB&T and MainStreet
The respective obligations of BB&T and MainStreet to effect the transactions
contemplated by this Agreement shall be subject to satisfaction or waiver of
the following conditions at or prior to the Effective Time:
(a) All corporate action necessary to authorize the execution, delivery and
performance of this Agreement and the Plan of Merger, and consummation of the
transactions contemplated hereby and thereby, shall have been duly and validly
taken, including without limitation the approval by the shareholders of
MainStreet and of BB&T Financial of the Agreement and the Plan of Merger;
(b) The Registration Statement (including any post-effective amendments
thereto) shall be effective under the Securities Act, and BB&T shall have
received all state securities or "Blue Sky" permits or other authorizations,
or confirmations as to the availability of an exemption from registration
requirements as may be necessary, and no proceedings shall be pending or to
the knowledge of BB&T threatened by the Commission or any state "Blue Sky"
securities administration to suspend the effectiveness of such Registration
Statement and the BB&T Common Stock to be issued as contemplated in the Plan
of Merger shall have either been registered or be subject to exemption from
registration under applicable state securities laws;
(c) The parties shall have received all regulatory approvals required in
connection with the transactions contemplated by this Agreement and the Plan
of Merger, all notice periods and waiting periods with respect to such
approvals shall have passed and all such approvals shall be in effect;
(d) None of BB&T, any of the BB&T Subsidiaries, MainStreet or any of the
MainStreet Subsidiaries shall be subject to any order, decree or injunction of
a court or agency of competent jurisdiction which enjoins or prohibits
consummation of the transactions contemplated by this Agreement; and
(e) MainStreet and BB&T shall have received an opinion of BB&T's legal
counsel, in form and substance satisfactory to MainStreet and BB&T,
substantially to the effect that the Merger will constitute one or more
reorganizations under Section 368 of the Code and that the shareholders of
MainStreet will not recognize any gain or loss to the extent that such
shareholders exchange shares of MainStreet Common Stock for shares of BB&T
Common Stock.
6.2 Conditions Precedent--MainStreet
The obligations of MainStreet to effect the transactions contemplated by
this Agreement shall be subject to the satisfaction of the following
additional conditions at or prior to the Effective Time, unless waived by
MainStreet pursuant to Section 7.4:
(a) All representations and warranties of BB&T shall be evaluated as of the
date of this Agreement and as of the Effective Time as though made on and as
of the Effective Time (or on the date designated in the case of any
representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated by this Agreement or consented to in writing
by MainStreet. The representations and warranties of BB&T set forth in
Sections 4.1, 4.2, 4.3(a), 4.3(b)(i) and 4.4 shall be true and correct (except
for inaccuracies which are de minimis in amount). There shall not exist
inaccuracies in the representations and warranties of BB&T set forth in this
Agreement (including the representations and warranties set forth in Sections
4.1, 4.2, 4.3(a), 4.3(b)(i) and 4.4) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Material Adverse Effect
on BB&T.
(b) BB&T shall have performed in all material respects all obligations and
complied in all material respects with all covenants required by this
Agreement.
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(c) BB&T shall have delivered to MainStreet a certificate, dated the Closing
Date and signed by its Chairman or President or an Executive Vice President,
to the effect that the conditions set forth in Sections 6.1(a), 6.1(b),
6.1(c), 6.1(d), 6.2(a) and 6.2(b) hereof, to the extent applicable to BB&T,
have been satisfied and that there are no actions, suits, claims, governmental
investigations or procedures instituted, pending or, to the best of such
officer's knowledge, threatened that reasonably may be expected to have a
Material Adverse Effect on BB&T or that present a claim to restrain or
prohibit the transactions contemplated herein or in the Plan of Merger.
(d) MainStreet shall have received opinions of counsel to BB&T in the form
reasonably acceptable to MainStreet's legal counsel.
(e) All approvals of the transactions contemplated herein from the Federal
Reserve Board and any other state or federal government agency, department or
body, the approval of which is required for the consummation of the Merger,
shall have been received and all waiting periods with respect to such
approvals shall have expired.
(f) The shares of BB&T Common Stock issuable pursuant to the Merger shall
have been approved for listing on the NYSE, subject to official notice of
issuance.
6.3 Conditions Precedent--BB&T
The obligations of BB&T to effect the transactions contemplated by this
Agreement shall be subject to satisfaction of the following additional
conditions at or prior to the Effective Time, unless waived by BB&T pursuant
to Section 7.4:
(a) All representations and warranties of MainStreet shall be evaluated as
of the date of this Agreement and as of the Effective Time as though made on
and as of the Effective Time (or on the date designated in the case of any
representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated by this Agreement or consented to in writing
by BB&T. The representations and warranties of MainStreet set forth in
Sections 3.1, 3.2 (except the last sentence thereof), 3.3, 3.4 (except the
last sentence thereof), 3.5(a), 3.5(b)(i), 3.23 and 3.24 shall be true and
correct (except for inaccuracies which are de minimis in amount). There shall
not exist inaccuracies in the representations and warranties of MainStreet set
forth in this Agreement (including the representations and warranties set
forth in the Sections designated in the preceding sentence) such that the
effect of such inaccuracies individually or in the aggregate has, or is
reasonably likely to have, a Material Adverse Effect on MainStreet and the
MainStreet Subsidiaries taken as a whole.
(b) No regulatory approval shall have imposed any condition or requirement
which, in the reasonable opinion of the Board of Directors of BB&T, would so
materially adversely affect the business or economic benefits to BB&T of the
transactions contemplated by this Agreement as to render consummation of such
transactions unduly burdensome.
(c) MainStreet shall have performed in all material respects all obligations
and complied in all material respects with all covenants required by this
Agreement.
(d) MainStreet shall have delivered to BB&T a certificate, dated the Closing
Date and signed by its Chairman or President, to the effect that the
conditions set forth in Sections 6.1(a), 6.1(c), 6.3(a) and 6.3(c) hereof, to
the extent applicable to MainStreet, have been satisfied and that there are no
actions, suits, claims, governmental investigations or procedures instituted,
pending or, to the best of such officer's knowledge, threatened that
reasonably may be expected to have a Material Adverse Effect on MainStreet or
that present a claim to restrain or prohibit the transactions contemplated
herein or in the Plan of Merger.
(e) BB&T shall have received opinions of counsel to MainStreet in the form
reasonably acceptable to BB&T's legal counsel.
(f) BB&T shall have received the written agreements from Affiliates as
specified in Section 5.11 hereof to the extent necessary, in the reasonable
judgment of BB&T, to ensure that the Merger will be accounted for as a pooling
of interests under GAAP and to promote compliance with Rule 145 promulgated by
the Commission.
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(g) BB&T shall have received letters, dated as of the date of filing of the
Registration Statement with the Commission and as of the Effective Time,
addressed to BB&T, in form and substance reasonably satisfactory to BB&T, from
Arthur Andersen, LLP to the effect that the Merger will qualify for pooling of
interests accounting treatment.
ARTICLE VII
Termination, Default, Waiver and Amendment
7.1 Termination
This Agreement may be terminated:
(a) At any time prior to the Effective Time, by the mutual consent in
writing of the parties hereto.
(b) At any time prior to the Effective Time, by either party (i) in the
event of a material breach by the other party of any covenant or agreement
contained in this Agreement, or (ii) in the event of an inaccuracy of any
representation or warranty of the other party contained in this Agreement,
which inaccuracy would provide the nonbreaching party the ability to refuse to
consummate the Merger under the applicable standard set forth in Section
6.2(a) hereof in the case of MainStreet and Section 6.3(a) hereof in the case
of BB&T; and, in the case of (i) or (ii), if such breach or inaccuracy has not
been cured by the earlier of thirty days following written notice of such
breach to the party committing such breach or the Effective Time and the party
terminating the Agreement is not in breach of any of its representations,
warranties, covenants or undertakings herein.
(c) At any time prior to the Effective Time, by either party hereto in
writing, if any of the conditions precedent to the obligations of the other
party to consummate the transactions contemplated hereby cannot be satisfied
or fulfilled prior to the Closing Date, and the party giving the notice is not
in breach of any of its representations, warranties, covenants or undertakings
herein.
(d) At any time, by either party hereto in writing, if any of the
applications for prior approval referred to in Section 5.4 hereof are denied,
and the time period for appeals and requests for reconsideration has run.
(e) At any time, by either party hereto in writing, if the shareholders of
MainStreet do not approve the Agreement and the Plan of Merger.
(f) At any time following April 30, 1999 by either party hereto in writing,
if the Effective Time has not occurred by the close of business on such date,
and the party giving the notice is not in breach of any of its
representations, warranties, covenants or undertakings herein.
(g) At any time prior to 11:59 p.m. on September 30, 1998 by BB&T in
writing, if BB&T determines in its sole good faith judgment, through review of
information Disclosed by MainStreet, or otherwise, that the financial
condition, results of operations, business or business prospects of MainStreet
and of the MainStreet Subsidiaries, taken as a whole, are materially adversely
different from BB&T's reasonable expectations with respect thereto on the date
of execution of this Agreement; provided that BB&T shall inform MainStreet
upon such termination as to the reasons for BB&T's determination. The fact
that MainStreet has Disclosed information shall not prevent BB&T from
terminating this Agreement pursuant to this Section 7.1(g) on account of such
information.
(h) By MainStreet at any time during the five-day period commencing after
the Determination Date if both of the following conditions are satisfied:
(1) the Closing Value shall be less than $28.85; and
(2) (i) the quotient obtained by dividing the Closing Value by $32.1875
(such number being referred to herein as the "BB&T Ratio") shall be less
than (ii) 90% of the quotient obtained by dividing the Index Price on the
Determination Date by the Index Price on the Starting Date;
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subject, however, to the following three sentences. If MainStreet determines
not to consummate the Merger pursuant to this Section 7.1(h), it shall give
prompt written notice of its election to terminate to BB&T, which notice may
be withdrawn at any time prior to the lapse of the ten-day period commencing
on the Determination Date. During the five-day period commencing with its
receipt of such notice, BB&T shall have the option to elect to increase the
Exchange Ratio (rounded to the nearest thousandth) to a number such that the
value (based on the Closing Value) of the amount of BB&T Common Stock to be
received in the merger in exchange for each share of MainStreet Common Stock
shall equal the value (based on the Closing Value) that would have been
received if the Closing Value were $28.85. The election contemplated by the
preceding sentence shall be made by giving notice to MainStreet of such
election and the revised Exchange Ratio, whereupon no termination shall have
occurred pursuant to this Section 7.1(h), and this Agreement shall remain in
effect in accordance with its terms (except as the Exchange Ratio shall have
been so modified), and any references in this Agreement to "Exchange Ratio"
shall thereafter be deemed to refer to the Exchange Ratio as adjusted pursuant
to this Section 7.1(h). If the Closing Date shall occur during the five-day
period such option is in effect, the Closing Date shall be extended until the
fifth Business Day following the close of such five-day period.
For purposes of this Section 7.1(h), the following terms shall have the
meanings indicated:
"Closing Value" shall mean the average closing price per share of BB&T
Common Stock on the NYSE Composite Transactions List (as reported by The Wall
Street Journal--Eastern Edition) on the five trading days (determined by
excluding days on which the NYSE is closed) immediately preceding the
Determination Date.
"Determination Date" shall mean the tenth calendar day preceding the date
designated by BB&T as the Closing Date.
"Index Group" shall mean the 12 bank holding companies listed below, the
common stocks of all of which shall be publicly traded and as to which there
shall not have been, since the Starting Date and before the Determination
Date, any public announcement of a proposal for such company to be acquired or
for such company to acquire another company or companies in transactions with
a value exceeding 25% of the acquiror's market capitalization. In the event
that any such company or companies are removed from the Index Group, the
weights (which have been determined based upon the number of shares of
outstanding common stock) shall be redistributed proportionately for purposes
of determining the Index Price. The 12 bank holding companies and the weights
attributed to them are as follows:
<TABLE>
<CAPTION>
Bank Holding Companies % Weighting
---------------------- -----------
<S> <C>
AmSouth Bancorporation........................................ 6.37%
Comerica Incorporated......................................... 8.24%
Fifth Third Bancorp........................................... 14.20%
Huntington Bancshares Inc..................................... 11.22%
Mercantile Bancorporation, Inc................................ 7.07%
Northern Trust Corporation.................................... 5.90%
Regions Financial Corporation................................. 7.95%
SouthTrust Corporation........................................ 8.73%
Marshall & Illsley Corp....................................... 5.62%
Union Planters Corp........................................... 4.51%
Summit Bancorp................................................ 9.22%
Wachovia Corporation.......................................... 10.96%
------
Total....................................................... 100.00%
======
</TABLE>
"Index Price" on a given date shall mean the weighted average (weighted in
accordance with the "% Weighting" listed above) of the closing sales prices of
the companies composing the Index Group (determined as provided with respect
to the Closing Value).
"Starting Date" shall mean the date of this Agreement.
If any company belonging to the Index Group or BB&T declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares, or similar transaction between the Starting Date and the
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Determination Date, the prices for the common stock of such company or BB&T
shall be appropriately adjusted for the purposes of applying this Section
7.1(h).
7.2 Effect of Termination
In the event this Agreement and the Plan of Merger is terminated pursuant to
Section 7.1 hereof, both this Agreement and the Plan of Merger shall become
void and have no effect, except that (i) the provisions hereof relating to
confidentiality and expenses set forth in Sections 5.7 and 8.1, respectively,
shall survive any such termination and (ii) a termination pursuant to Section
7.1(b) shall not relieve the breaching party from liability for a breach of
the covenant, agreement, representation or warranty giving rise to such
termination. The BB&T Option Agreement shall be governed by its own terms.
7.3 Termination of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or the Plan
of Merger or in any instrument delivered pursuant hereto or thereto shall
expire on, and be terminated and extinguished at, the Effective Time, other
than covenants that by their terms are to be performed after the Effective
Time (including Sections 5.12, 5.13 and 5.17).
7.4 Waiver
Except with respect to any required regulatory approval, each party hereto,
by written instrument signed by an executive officer of such party, may at any
time (whether before or after approval of the Agreement and the Plan of Merger
by the MainStreet shareholders) extend the time for the performance of any of
the obligations or other acts of the other party hereto and may waive (i) any
inaccuracies of the other party in the representations or warranties contained
in this Agreement, the Plan of Merger or any document delivered pursuant
hereto or thereto, (ii) compliance with any of the covenants, undertakings or
agreements of the other party, or satisfaction of any of the conditions
precedent to its obligations, contained herein or in the Plan of Merger, or
(iii) the performance by the other party of any of its obligations set out
herein or therein; provided that no such extension or waiver, or amendment or
supplement pursuant to this Section 7.4, executed after approval by the
MainStreet shareholders of this Agreement and the Plan of Merger, shall reduce
either the Exchange Ratio or the payment terms for fractional interests.
7.5 Amendment or Supplement
This Agreement or the Plan of Merger may be amended or supplemented at any
time in writing by mutual agreement of BB&T and MainStreet, subject to the
proviso to Section 7.4.
ARTICLE VIII
Miscellaneous
8.1 Expenses
Each party hereto shall bear and pay all costs and expenses incurred by it
in connection with the transactions contemplated by this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel;
provided, however, that the filing fees and printing costs incurred in
connection with the Registration Statement and the Proxy Statement/Prospectus
shall be borne 50% by BB&T and 50% by MainStreet.
8.2 Entire Agreement
This Agreement, including the documents and other writings referenced herein
or delivered pursuant hereto, contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and thereunder
and supersedes all arrangements or understandings with respect thereto,
written or oral, entered into on or before the date hereof. The terms and
conditions of this Agreement and the BB&T Option Agreement shall inure to the
benefit of and be binding upon the parties hereto and thereto and their
respective successors. Nothing in this Agreement or the BB&T Option Agreement,
expressed or implied, is intended to confer upon any party, other than the
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parties hereto and thereto, and their respective successors, any rights,
remedies, obligations or liabilities, except for the rights of directors and
officers of MainStreet to enforce rights in Sections 5.13 and 5.17.
8.3 No Assignment
None of the parties hereto may assign any of its rights or obligations under
this Agreement to any other person, except upon the prior written consent of
each other party.
8.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent
by nationally recognized overnight express courier or by facsimile
transmission, addressed or directed as follows:
If to MainStreet:
Rebecca J. Jenkins
200 East Church Street
Martinsville, Virginia 24112
Telephone: 540-666-3272
Fax: 540-666-3675
With a required copy to:
Hugh B. Wellons
Flippin, Densmore, Morse, Rutherford & Jessee
300 First Campbell Square
Roanoke, Virginia 24006
Telephone: 540-510-3000
Fax: 540-510-3050
If to BB&T or BB&T Financial:
Scott E. Reed
150 South Stratford Road
4th Floor
Winston-Salem, North Carolina 27104
Telephone: 336-733-3088
Fax: 336-733-2296
With a required copy to:
William A. Davis, II
Womble Carlyle Sandridge & Rice, PLLC
200 West Second Street
Winston-Salem, North Carolina 27102
Telephone: 336-721-3624
Fax: 336-733-8364
Any party may by notice change the address to which notice or other
communications to it are to be delivered.
8.5 Specific Performance
MainStreet acknowledges that the MainStreet Common Stock and the MainStreet
business and assets are unique, and that if MainStreet fails to consummate the
transactions contemplated by this Agreement such failure will cause
irreparable harm to BB&T for which there will be no adequate remedy at law,
BB&T shall be entitled, in addition to its other remedies at law, to specific
performance of this Agreement if MainStreet shall, without cause, refuse to
consummate the transactions contemplated by this Agreement.
31
<PAGE>
8.6 Captions
The captions contained in this Agreement are for reference only and are not
part of this Agreement.
8.7 Counterparts
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina applicable to agreements made and entirely
to be performed within such jurisdiction, except to the extent federal law may
be applicable.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed in counterparts by their
duly authorized officers, all as of the day and year first above written.
BB&T CORPORATION
By ____________________________________
Name:
Title:
BB&T FINANCIAL CORPORATION OF VIRGINIA
By ____________________________________
Name:
Title:
MAINSTREET FINANCIAL CORPORATION
By ____________________________________
Name:
Title:
32
<PAGE>
ANNEX A
ARTICLES OF MERGER
OF
MAINSTREET FINANCIAL CORPORATION
WITH AND INTO
BB&T FINANCIAL CORPORATION OF VIRGINIA
The undersigned corporations, pursuant to Section 13.1-720 of the Virginia
Stock Corporation Act (the "Act"), hereby execute the following Articles of
Merger.
ONE
The merger of MainStreet Financial Corporation, a Virginia corporation
("MainStreet"), with and into BB&T Financial Corporation of Virginia, a
Virginia corporation ("BB&T Financial"), shall be in accordance with the Plan
of Merger attached hereto as Exhibit A and incorporated herein by reference
(the "Plan of Merger").
TWO
The Plan of Merger was submitted to the shareholders of each of BB&T
Financial and MainStreet by its Board of Directors in accordance with the
provisions of Section 13.1-718 of the Act:
A. The Plan of Merger was approved by the Board of Directors of MainStreet
on August 26, 1998 and recommended and submitted to the shareholders of common
stock of MainStreet, the only class of capital stock outstanding, at a special
meeting of shareholders called and held in accordance with the Act, on ,
1998. As of the record date of that meeting, shares of MainStreet common
stock were outstanding and entitled to vote. At that meeting, undisputed
shares were voted in favor of the Plan of Merger, shares abstained, and
shares were voted against the Plan of Merger. This represented approval by
% of the total MainStreet common stock issued and outstanding, sufficient
for approval by MainStreet shareholders.
B. Pursuant to Section 13.1-657 of the Act, the Plan of Merger was adopted
by unanimous consent of the shareholders of BB&T Financial.
THREE
The effective time and date of the Plan of Merger shall be local time on
, 19 , or as soon thereafter as practicable.
The undersigned, in behalf of each of BB&T Financial and MainStreet,
declares that the facts herein stated are true as of , 19 .
BB&T Financial Corporation of Virginia
By: ___________________________________
Name:
Title:
MainStreet Financial Corporation
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT A
PLAN OF MERGER
OF
MAINSTREET FINANCIAL CORPORATION
WITH AND INTO
BB&T FINANCIAL CORPORATION OF VIRGINIA
Section 1. Corporations Proposing to Merge and Surviving Corporation.
MainStreet Financial Corporation, a Virginia corporation ("MainStreet") shall be
merged (the "Merger") with and into BB&T Financial Corporation of Virginia, a
Virginia corporation ("BB&T Financial"), pursuant to the terms and conditions of
this Plan of Merger (the "Plan of Merger") and of the Agreement and Plan of
Reorganization, dated as of August , 1998, (the "Agreement"), by and among
MainStreet, BB&T Financial and BB&T Corporation, a North Carolina corporation
and parent corporation of BB&T Financial ("BB&T"). The effective time for the
Merger (the "Effective Time") shall be set forth in the Articles of Merger to be
filed with the Clerk of the State Corporation Commission of Virginia. BB&T
Financial shall continue as the surviving corporation (the "Surviving
Corporation") in the Merger and the separate corporate existence of MainStreet
shall cease.
Section 2. Effects of the Merger. The Merger shall have the effects set
forth in Section 13.1-721 of the Virginia Stock Corporation Act (the "VSCA").
Section 3. Articles of Incorporation and Bylaws. The Articles of
Incorporation and the Bylaws of BB&T Financial as in effect immediately prior
to the Effective Time shall remain in effect as the Articles of Incorporation
and Bylaws of the Surviving Corporation following the Effective Time until
changed in accordance with their terms and the VSCA.
Section 4. Conversion of Shares.
(a) At the Effective Time, each share of common stock, par value $5.00 per
share, of MainStreet ("MainStreet Common Stock") outstanding immediately prior
to the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and become the right to
receive shares of common stock, par value $5.00 per share, of BB&T ("BB&T
Common Stock") as described in Section 5.
(b) At the Effective Time, each share of the common stock of BB&T Financial
issued and outstanding immediately prior to the Effective Time shall continue
to be issued and outstanding.
Section 5. Merger Consideration. The number of shares of BB&T Common Stock
(to the nearest one-hundredth of a share) to be exchanged for each share of
MainStreet Common Stock issued and outstanding as of the Effective Time and
cash (without interest) to be payable in exchange for any fractional share of
BB&T Common Stock which would otherwise be distributable to a MainStreet
shareholder shall be determined as follows:
(a) The number of shares of BB&T Common Stock to be issued in exchange for
each issued and outstanding share of MainStreet Common Stock shall be in the
ratio of 1.18 shares of BB&T Common Stock for each share of MainStreet Common
Stock (the "Exchange Ratio").
(b) The amount of cash payable with respect to any fractional share of BB&T
Common Stock shall be determined by multiplying the fractional part of such
share by the closing price per share on the NYSE Composite Transactions List
(as reported by The Wall Street Journal--Eastern Edition) for the last trading
day preceding the Effective Time. No person will be entitled to dividends,
voting rights or any other rights as a BB&T shareholder in respect of any
fractional share.
Section 6. Conversion of Stock Options. At the Effective Time, each option
to acquire shares of MainStreet Common Stock ("Stock Option") granted under
the Piedmont Bankshares, Inc. 1990 Stock Option Plan and the MainStreet
Bankgroup, Inc. 1997 Stock Incentive Plan (the "Stock Option Plans") then
outstanding (and which by its terms does not lapse on or before the Effective
Time), whether or not then exercisable, shall be converted into and become
rights with respect to BB&T Common Stock, and BB&T shall assume each such
Stock Option in accordance
<PAGE>
with the terms of the applicable Stock Option Plan, except that from and after
the Effective Time (i) BB&T and its Compensation Committee shall be
substituted for MainStreet and the Committee of MainStreet's Board of
Directors administering the Stock Option Plans, (ii) each Stock Option assumed
by BB&T may be exercised solely for shares of BB&T Common Stock, (iii) the
number of shares of BB&T Common Stock subject to each such Stock Option shall
be the number of whole shares of BB&T (omitting any fractional share)
determined by multiplying the number of shares of MainStreet Common Stock
subject to such Stock Option immediately prior to the Effective Time by the
Exchange Ratio, and (iv) the per share exercise price under each such Stock
Option shall be adjusted by dividing the per share exercise price under each
such Stock Option by the Exchange Ratio and rounding up to the nearest cent.
Notwithstanding the foregoing, BB&T may at its election substitute as of the
Effective Time options under the BB&T Corporation 1995 Omnibus Stock Incentive
Plan (the "BB&T Option Plan") for all or a part of the Stock Options, subject
to the following conditions: (A) the requirements of (iii) and (iv) above
shall be met; (B) such substitution shall not constitute a modification,
extension or renewal of any of the Stock Options which are incentive stock
options; and (C) the substituted options shall continue in effect on the same
terms and conditions as provided in the Stock Options and the Stock Option
Plan granting each Stock Option. Each grant of a converted or substitute
option to any individual who subsequent to the Merger will be a director or
officer of BB&T as construed under Rule 16b-3 shall, as a condition to such
conversion or substitution, be approved in accordance with the provisions of
Rule 16b-3. Each Stock Option which is an incentive stock option shall be
adjusted as required by Section 424 of the Internal Revenue Code of 1986, as
amended (the "Code"), and the Regulations promulgated thereunder, so as to
continue as an incentive stock option under Section 424(a) of the Code, and so
as not to constitute a modification, extension, or renewal of the option
within the meaning of Section 424(h) of the Code. With respect to those
individuals, if any, who subsequent to the Merger may be subject to the
reporting requirements under Section 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), BB&T shall administer the Stock Option
Plans assumed pursuant to the Agreement (or the BB&T Option Plan, if
applicable) in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act to the extent necessary to preserve for such individuals the
benefits of Rule 16b-3 to the extent such benefits were available to them
prior to the Effective Time.
Section 7. No Fractional Shares. Notwithstanding any other term or provision
hereof, no fraction of a share of BB&T Common Stock, and no certificates or
scrip therefor or other evidence of ownership thereof, will be issued in
connection with the conversion of MainStreet Common Stock in the Merger, and
no right to receive cash in lieu thereof shall entitle the holder thereof to
any voting or other rights of a holder of shares or fractional share interests
of the Surviving Corporation. In lieu of such fractional shares, any holder of
shares who would otherwise be entitled to fractional shares of BB&T Common
Stock will, upon receipt by the Surviving Corporation of the letter of
transmittal and other documents described in Section 2.8(d) of the Agreement,
be paid the cash value of each such fraction, computed in accordance with the
ratio set forth in Section 5 above.
Section 8. Amendment. At any time before the Effective Time, this Plan of
Merger may be amended, provided that: (i) any such amendment is approved by
the Boards of Directors of MainStreet and BB&T Financial; and (ii) no such
amendment made subsequent to the submission of this Plan of Merger to the
shareholders of MainStreet shall have any of the effects prohibited in Section
13.1-718.I of the VSCA without the approval of the shareholders affected
thereby.
<PAGE>
APPENDIX II
January 14, 1999
Board of Directors
MainStreet Financial Corporation
200 East Church Street
P.O. Box 4831
Martinsville, VA 24115-4831
Ladies and Gentlemen:
MainStreet Financial Corporation ("MainStreet"), BB&T Financial Corporation
of Virginia ("BB&T Financial") and BB&T Corporation ("BB&T") have entered into
an Agreement and Plan of Reorganization, dated as of August 26, 1998 (the
"Agreement"), pursuant to which MainStreet will be merged with and into BB&T
Financial (the "Merger"). Upon consummation of the Merger, each share of
MainStreet common stock, par value $5.00 per share (together with the rights
attached thereto issued pursuant to the Rights Agreement dated January 18,
1990 between Piedmont Bankgroup Incorporated and Crestar Bank, as Rights
Agent, the "MainStreet Stock"), issued and outstanding immediately prior to
the Merger will be converted into the right to receive 1.18 shares (the
"Exchange Ratio") of BB&T common stock, par value $5.00 per share (together
with the rights attached thereto issued pursuant to the Rights Agreement dated
December 17, 1996 between BB&T and Branch Banking and Trust Company, as Rights
Agent, the "BB&T Stock"), subject to adjustment as described in the Agreement.
The terms and conditions of the Merger are more fully set forth in the
Agreement. You have requested our opinion as to the fairness, from a financial
point of view, of the Exchange Ratio to the holders of MainStreet Stock.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other
corporate transactions. In connection with this opinion, we have reviewed,
among other things: (i) the Agreement and exhibits thereto; (ii) the Stock
Option Agreement, dated August 26, 1998, by and between MainStreet and BB&T;
(iii) certain publicly available financial statements of MainStreet and other
historical financial information provided by MainStreet that we deemed
relevant; (iv) certain publicly available financial statements of BB&T and
other historical financial information provided by BB&T that we deemed
relevant; (v) certain financial analyses and forecasts for MainStreet prepared
by us based upon certain assumptions discussed with MainStreet and the views
of senior management of MainStreet regarding MainStreet's past and current
business, operations, results thereof, financial condition and future
prospects; (vi) certain financial analyses and forecasts for BB&T prepared by
us based upon certain assumptions discussed with BB&T and the views of senior
management of BB&T regarding BB&T's past and current business, operations,
results thereof, financial condition and future prospects; (vii) the pro forma
impact of the Merger; (viii) the publicly reported historical price and
trading activity for MainStreet's and BB&T's common stock, including a
comparison of certain financial and stock market information for MainStreet
and BB&T with similar publicly available information for certain other
companies the securities of which are publicly traded; (ix) the financial
terms of recent business combinations in the banking industry, to the extent
publicly available; (x) the current market environment generally and the
banking environment in particular; and (xi) such other information, financial
studies, analyses and investigations and financial, economic and market
criteria as we considered relevant. Other than in connection with rendering
this opinion, we did not act as MainStreet's financial advisor in connection
with its consideration of the Merger or in connection with the negotiation of
the Agreement, and we have not been asked to, and did not, solicit indications
of interest in a potential transaction from other third parties.
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information that was publicly available or
otherwise
<PAGE>
Sandler O'Neill
furnished to, reviewed by or discussed with us, and we do not assume any
responsibility or liability for the accuracy or completeness thereof. We did
not make an independent evaluation or appraisal of the specific assets, the
collateral
securing assets or the liabilities (contingent or otherwise) of MainStreet or
BB&T or any of their subsidiaries, or the collectibility of any such assets,
nor have we been furnished with any such evaluations or appraisals. With
respect to the financial projections reviewed with management, we have assumed
that they reflect the best currently available estimates and judgments of the
respective managements of the respective future financial performances of
MainStreet and BB&T and that such performances will be achieved, and we
express no opinion as to such financial projections or the assumptions on
which they are based. We have also assumed that there has been no material
change in MainStreet's or BB&T's assets, financial condition, results of
operations, business or prospects since the date of the most recent financial
statements made available to us. We have assumed in all respects material to
our analysis that MainStreet and BB&T will remain as going concerns for all
periods relevant to our analyses, that all of the representations and
warranties contained in the Agreement and all related agreements are true and
correct, that each party to such agreements will perform all of the covenants
required to be performed by such party under such agreements and that the
Merger will be accounted for as a pooling of interests. We have further
assumed that the terms and conditions of the Agreement in effect on the date
hereof will not be modified or waived by the parties thereto.
Our opinion is necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to us as of,
the date hereof. Events occurring after the date hereof could materially
affect this opinion. We have not undertaken to update, revise or reaffirm this
opinion or otherwise comment upon events occurring after the date hereof. We
are expressing no opinion herein as to what the value of BB&T common stock
will be when issued to MainStreet's shareholders pursuant to the Agreement or
the prices at which MainStreet's or BB&T's common stock will trade at any
time.
We have been retained by you to render this opinion and will receive a fee
for our services. In the past, we have also provided certain other investment
banking services for MainStreet and have received compensation for such
services.
In the ordinary course of our business as a broker-dealer, we may buy
securities from and sell securities to MainStreet and BB&T. In addition, we
may actively trade the debt and equity securities of MainStreet and BB&T and
their respective affiliates for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
Our opinion is directed to the Board of Directors of MainStreet in
connection with its consideration of the Merger and does not constitute a
recommendation to any shareholder of MainStreet as to how such shareholder
should vote at any meeting of shareholders called to consider and vote upon
the Merger. Our opinion is not to be quoted or referred to, in whole or in
part, in a registration statement, prospectus, proxy statement or in any other
document, nor shall this opinion be used for any other purposes, without
Sandler O'Neill's prior written consent; provided, however, that we hereby
consent to the inclusion of this opinion as an appendix to MainStreet's and
BB&T's Proxy Statement/Prospectus dated the date hereof and to the references
to this opinion therein.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the Exchange Ratio is fair, from a financial point of view, to
the holders of MainStreet Stock.
Very truly yours,
Sandler O'Neill & Partners, L.P.
<PAGE>
APPENDIX III
January 14, 1999
Board of Directors
MainStreet Financial Corporation
One Ellsworth Street
Martinsville, Virginia 24115
Dear Madame and Gentlemen:
MainStreet Financial Corporation ("MainStreet") and BB&T Corporation
("BB&T") have entered into an Agreement and Plan of Merger, dated as of August
26, 1998 (the "Merger Agreement"), pursuant to which MainStreet will be merged
with and into BB&T (the "Merger"). You have requested our opinion as to the
fairness to the holders of the outstanding shares of Common Stock, par value
$5.00 per share, of MainStreet (the "MainStreet Common Stock") of the exchange
ratio of 1.18 shares of Common Stock, par value $5.00 per share, of BB&T to be
received for each share of MainStreet Common Stock (the "Exchange Ratio")
pursuant to the terms of the Merger Agreement.
Scott & Stringfellow, as a customary part of its investment banking
business, is engaged in the valuation of financial institutions and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements, and valuations for estate, corporate and
other purposes. We have acted as financial advisor to the Board of Directors
of MainStreet in connection with the transaction described above. We are
familiar with MainStreet, having acted as its financial advisor in the past
and have provided certain investment banking services from time to time.
In developing our opinion, we have, among other things, reviewed and
analyzed: (1) the Merger Agreement; (2) the proxy statement/prospectus
relating to the Merger; (3) MainStreet's annual reports to shareholders and
its financial statements for the four years ended December 31, 1997; (4)
MainStreet's unaudited financial statements for the nine months ended
September 30, 1998 and 1997, and other internal information relating to
MainStreet prepared by MainStreet's management; (5) information regarding the
trading market for the common stocks of MainStreet and BB&T and the price
ranges within which the respective stocks have traded; (6) the relationship of
prices paid to relevant financial data such as net worth, earnings, assets and
deposits in certain bank and bank holding company mergers and acquisitions in
recent years; (7) BB&T's annual reports to shareholders and its financial
statements for the four fiscal years ended December 31, 1997; and (8) BB&T's
unaudited financial statements for the nine months ended September 30, 1998
and 1997, and certain other internal historical information relating to BB&T
prepared by BB&T's management. We have discussed with members of management of
MainStreet and BB&T the background of the Merger, the reasons and basis for
the Merger and the business and future prospects of MainStreet and BB&T
individually and as a combined entity. In these discussions, BB&T did not
discuss with or provide to Scott & Stringfellow any forward-looking financial
information. Finally, we have conducted such other studies, analyses and
investigations, particularly of the banking industry, and considered such
other information as we have deemed appropriate.
In conducting our review and arriving at our opinion, we have relied upon and
assumed the accuracy and completeness of the information furnished to us by or
on behalf of MainStreet and BB&T. We have not attempted independently to
verify such information, nor have we made any independent appraisal of the
assets of MainStreet or BB&T. 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 MainStreet or BB&T. Furthermore, we are expressing no
opinion as to the price which BB&T's Common Stock will trade at in any future
time.
<PAGE>
Our advisory services and opinion expressed herein were prepared for the use
of the Board of Directors of MainStreet and do not constitute a recommendation
to the MainStreet shareholders as to how they should vote at the stockholders'
meeting in connection with the Merger. We hereby consent, however, to the
inclusion of this opinion as an exhibit to any proxy or registration statement
distributed in connection with the Merger.
On the basis of our analyses and review and in reliance on the accuracy and
completeness of the information furnished to us and subject to the conditions
and assumptions noted above, it is our opinion that, as of the date hereof,
the Exchange Ratio is fair from a financial point of view to the shareholders
of MainStreet Common Stock.
Very truly yours,
Scott & Stringfellow, Inc.
By: __________________________________
Gary S. Penrose
Managing Director
Financial Institutions Group
