<PAGE>
As Filed with the Securities and Exchange Commission on May 19, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------
BB&T CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
North Carolina 6060 56-0939887
(State or other jurisdic-
tion (Primary Standard Industrial (I.R.S. Employer
of incorporation or or-
ganization) Classification Code Number) Identification Number)
</TABLE>
200 West Second Street
Winston-Salem, North Carolina 27101
(336) 733-2000
(Address, including Zip Code, and telephone number, including
area code, of registrant's principal executive offices)
Jerone C. Herring, Esq.
200 West Second Street, 3rd Floor
Winston-Salem, North Carolina 27101
(336) 733-2180
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
The Commission is requested to send copies of
all communications to:
Peter A. Zorn Carla Stone Witzel
Womble Carlyle Sandridge & Rice, PLLC Gordon, Feinblatt, Rothman,
200 West Second Street, 17th Floor Hoffberger & Hollander, LLC
Winston-Salem, North Carolina 27101 223 East Redwood Street
Baltimore, Maryland 21202
---------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of each class of Proposed Proposed maximum
securities to be Amount to be maximum offering aggregate offering Amount of
registered registered price per unit price registration fee
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<S> <C> <C> <C> <C>
Common Stock, par value
$5.00 per share(1).... 6,657,509 (2) $322,056,998(3) $37,873(4)
</TABLE>
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(1) Each share of the registrant's common stock includes one preferred share
purchase right.
(2) Not applicable.
(3) Computed in accordance with Rule 457(f) based on the average of the high
($49.00) and low ($47.75) sales price of the common stock of Mason-Dixon
Bancshares, Inc. on May 17, 1999 as reported on The Nasdaq National
Market.
(4) Pursuant to Rule 457(b), the registration fee has been reduced by an
amount equal to the fee of $51,659.71 paid upon the filing with the
Commission of the preliminary proxy materials of Mason-Dixon Bancshares,
Inc. on May 5, 1999.
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<PAGE>
MASON-DIXON BANCSHARES, INC.
45 West Main Street
Westminster, Maryland 21157
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 12, 1999
----------------
TO THE SHAREHOLDERS OF MASON-DIXON BANCSHARES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of Mason-Dixon Bancshares, Inc., a Maryland corporation ("Mason-
Dixon"), will be held at the Wakefield Valley Golf Club, located at 1000 Fenby
Farm Road, Westminster, Maryland on Monday, July 12, 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 January 27, 1999 (the "Merger Agreement"),
between Mason-Dixon and BB&T Corporation, a North Carolina corporation
("BB&T"), and a related plan of merger, pursuant to which Mason-Dixon will
merge with and into BB&T (the "Merger") and each share of common stock of
Mason-Dixon then outstanding will be converted into the right to receive
1.30 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 A.
2. To elect four Class I directors of Mason-Dixon to serve until the earlier
of the effective time of the Merger, the 2002 annual meeting of Mason-Dixon
shareholders, or such time as their respective successors are elected and
qualified.
3. To transact such other business as may be properly brought before the
Meeting or at any and all adjournments or postponements thereof.
Shareholders of Mason-Dixon of record at the close of business on May 7,
1999 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
Vivian A. Davis
Corporate Secretary
Westminster, Maryland
May 27, 1999
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>
[Mason-Dixon logo]
Annual Meeting of Shareholders
MERGER PROPOSAL--YOUR
VOTE IS VERY IMPORTANT
The Board of Directors of Mason-Dixon Bancshares, Inc. has unanimously
approved a merger combining Mason-Dixon and BB&T Corporation. In the merger,
Mason-Dixon shareholders will receive 1.30 shares of BB&T common stock for
each share of Mason-Dixon common stock and generally will not recognize
federal income tax gain or loss for the BB&T common stock they receive. The
merger will join Mason-Dixon's strengths as a community banking system
covering central Maryland with BB&T's position as a leading bank throughout
the Carolinas, Virginia, the District of Columbia and parts of Maryland
enabling the combined company to offer Mason-Dixon's customers a broad range
of financial products and services.
At the Annual Meeting, you will consider and vote on the merger agreement.
The merger cannot be completed unless holders of at least two-thirds of Mason-
Dixon common stock approve it. The Board of Directors believes the merger is
in the best interests of Mason-Dixon shareholders and unanimously recommends
that shareholders vote to approve the merger agreement. No vote of BB&T
shareholders is required to approve the merger agreement.
On May 17, 1999, the closing price of BB&T common stock was $38.06, making
the value of 1.30 shares of BB&T common stock (which is what Mason-Dixon
shareholders will receive for each share of Mason-Dixon common stock) equal to
$49.48. The closing price of Mason-Dixon common stock on that date was $47.94.
These prices will, however, fluctuate between now and the merger.
The date, time and place of the meeting are:
July 12, 1999
10:00 a.m.
Wakefield Valley Golf Club
1000 Fenby Farm Road
Westminster, Maryland 21158
This proxy statement/prospectus provides you with detailed information about
the proposed merger. Mason-Dixon encourages you to read this entire document
carefully. You can also obtain other information about Mason-Dixon 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 Mason-
Dixon common stock please take the time to vote by completing and mailing the
enclosed proxy card to us. If you fail to return your card or vote in person,
the effect will be a vote against approval of the merger agreement. Your vote
is very important. You can revoke your proxy by writing to Mason-Dixon's
Secretary any time before the meeting or by attending the meeting and voting
in person.
On behalf of the Board of Directors of Mason-Dixon, I urge you to vote "FOR"
approval and adoption of the merger agreement.
Thomas K. Ferguson
President and Chief Executive Officer
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 May 19, 1999 and is expected to be
first mailed to shareholders of Mason-Dixon on or about May 27, 1999.
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
A WARNING ABOUT FORWARD-LOOKING INFORMATION............................... iv
SUMMARY................................................................... 1
MEETING OF SHAREHOLDERS................................................... 8
General................................................................. 8
Record Date, Voting Rights and Vote Required............................ 8
Voting and Revocation of Proxies........................................ 8
Solicitation of Proxies................................................. 9
Recommendation of the Mason-Dixon Board................................. 9
THE MERGER................................................................ 10
General................................................................. 10
Background of and Reasons for the Merger................................ 10
Opinion of Mason-Dixon's Financial Advisor.............................. 14
Exchange Ratio.......................................................... 18
Exchange of Mason-Dixon Common Stock Certificates....................... 20
The Merger Agreement.................................................... 21
Interests of Certain Persons in the Merger.............................. 27
Regulatory Considerations............................................... 29
Material Federal Income Tax Consequences of the Merger.................. 31
Accounting Treatment.................................................... 32
The Option Agreement.................................................... 33
Effect on Employees, Employee Benefit Plans and Stock Options........... 35
Restrictions on Resales by Affiliates................................... 37
Charitable Contribution................................................. 38
INFORMATION ABOUT BB&T.................................................... 38
General................................................................. 38
Operating Subsidiaries.................................................. 38
Acquisitions............................................................ 39
Capital................................................................. 40
Deposit Insurance Assessments........................................... 41
INFORMATION ABOUT MASON-DIXON............................................. 41
DESCRIPTION OF BB&T CAPITAL STOCK......................................... 42
BB&T Common Stock....................................................... 42
BB&T Preferred Stock.................................................... 42
Shareholder Rights Plan................................................. 42
Certain Provisions of the NCBCA, BB&T Articles and BB&T Bylaws.......... 45
COMPARISON OF SHAREHOLDERS' RIGHTS........................................ 45
Authorized Capital Stock................................................ 46
Special Meetings of Shareholders and Action by Shareholders without a
Meeting................................................................ 46
Directors............................................................... 46
Dividends and Other Distributions....................................... 47
Notice of Shareholder Nominations and Shareholder Proposals............. 47
Exculpation and Indemnification......................................... 48
Mergers, Share Exchanges and Sales of Assets............................ 49
Anti-takeover Statutes.................................................. 49
Amendments to Articles of Incorporation and Bylaws...................... 51
Shareholders' Rights of Dissent and Appraisal........................... 51
Liquidation Rights...................................................... 52
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ELECTION OF DIRECTORS...................................................... 53
INFORMATION ABOUT THE MASON-DIXON BOARD OF DIRECTORS....................... 55
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.................... 56
BENEFICIAL OWNERSHIP OF COMMON STOCK....................................... 56
EXECUTIVE COMPENSATION..................................................... 58
TRANSACTIONS AND RELATIONSHIPS WITH MANAGEMENT............................. 62
COMPENSATION COMMITTEE REPORT.............................................. 62
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION................ 63
PERFORMANCE GRAPH.......................................................... 64
INDEPENDENT AUDITORS....................................................... 64
SHAREHOLDER PROPOSALS...................................................... 65
OTHER BUSINESS............................................................. 65
LEGAL MATTERS.............................................................. 65
EXPERTS.................................................................... 65
WHERE YOU CAN FIND MORE INFORMATION........................................ 66
</TABLE>
Appendix A--Agreement and Plan of Reorganization and Plan of Merger
Appendix B--Opinion of Keefe, Bruyette & Woods, Inc.
iii
<PAGE>
A WARNING ABOUT FORWARD-LOOKING INFORMATION
BB&T and Mason-Dixon 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 the management of BB&T and Mason-Dixon, and on information
currently available to them or, in the case of information that appears under
the heading "The Merger--Background of, and Reasons for, the Merger" at page
10, information that was available to the managements of BB&T and Mason-Dixon
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 or Mason-Dixon 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 Mason-Dixon on a stand alone basis, expected cost savings
from the merger, estimated restructuring charges relating to the merger,
estimated increases in Mason-Dixon'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 Mason-Dixon, the amount of
general and administrative expense consolidation, costs relating to converting
Mason-Dixon's 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 costs 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,
and actual results may be materially different from those expressed or implied
by the forward-looking statements.
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, among 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 Mason-Dixon, 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 Mason-Dixon 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 Mason-
Dixon are engaged;
8. adverse changes may occur in the securities markets; and
9. competitors of BB&T and Mason-Dixon may have greater financial resources
and develop products that enable those competitors to compete more
successfully than BB&T and Mason-Dixon.
Management of each of BB&T and Mason-Dixon believes the forward-looking
statements about its company are reasonable; however, shareholders of Mason-
Dixon 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 or implied
in these forward-looking statements. Many of the factors that will determine
these results and values are beyond BB&T's and Mason-Dixon's ability to
control or predict.
iv
<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 66.
Exchange Ratio to be 1.30 Shares of BB&T Common Stock for each Mason-Dixon
Share (Page 18)
If the merger is completed, you will receive 1.30 shares of BB&T common
stock for each share of Mason-Dixon stock you own, plus cash instead of any
fractional share. On May 17, 1999, the closing price of BB&T common stock was
$38.06, making the value of 1.30 shares of BB&T common stock (which is what
Mason-Dixon shareholders will receive for each share of Mason-Dixon common
stock) equal to $49.48. 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.
If the price of BB&T common stock is below $32.67 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,
Mason-Dixon 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 $42.47 for each share of Mason-Dixon
common stock.
No Federal Income Tax on Shares Received in Merger (Page 31)
Mason-Dixon 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. Mason-Dixon shareholders
will be taxed on cash received instead of any fractional share of BB&T common
stock. 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.
Mason-Dixon Board Recommends Shareholder Approval (Page 13)
The Mason-Dixon Board believes that the merger is in the best interests of
Mason-Dixon shareholders and unanimously recommends that the shareholders vote
"FOR" approval of the merger agreement. The Mason-Dixon Board believes that,
as a result of the merger, Mason-Dixon shareholders will have less financial
risk and will experience greater stock value appreciation than they would if
Mason-Dixon remained independent.
Exchange Ratio Fair to Shareholders According to Mason-Dixon's Financial
Advisor (Page 14)
Keefe, Bruyette & Woods, Inc. has given an opinion to the Mason-Dixon 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 Mason-Dixon shareholders.
The full text of this opinion is attached as Appendix B to this proxy
statement/prospectus. We encourage you to read the opinion carefully. Mason-
Dixon has agreed to pay to Keefe, Bruyette & Woods at the effective time of
the merger a cash fee equal to 0.85% of the market value of the aggregate
consideration paid by BB&T in the merger.
Meeting to be held July 12, 1999 (Page 8)
Mason-Dixon will hold the annual shareholders' meeting at the Wakefield
Valley Golf Club, located at 1000 Fenby Farm Road, Westminster, Maryland on
Monday, July 12, 1999 at 10:00 a.m. At the meeting, you will vote on the
merger agreement. You will also elect four Class I directors and conduct any
other business that properly arises.
1
<PAGE>
The Companies (Page 38)
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 $37.8
billion in assets. It is the sixth largest bank holding company in the
Southeast, and through its banking subsidiaries operates 581 branch offices in
the Carolinas, Virginia, Maryland and Washington, D.C. BB&T ranks second in
deposit market share in North Carolina and third in South Carolina and
maintains a significant market presence in Richmond and much of Virginia, as
well as in Maryland and in Washington, D.C.
Mason-Dixon Bancshares, Inc.
45 West Main Street
Westminster, Maryland 21157
(410) 857-3401
Mason-Dixon is a multi-bank holding company with more than $1.1 billion in
assets. Through its subsidiaries, it operates in central Maryland 21 banking
offices, 12 consumer finance offices and three mortgage loan offices.
The Merger (Page 10)
In the merger, Mason-Dixon will merge into BB&T, and Mason-Dixon's banking
subsidiaries, through which it operates, will become wholly owned subsidiaries
of BB&T. The merger requires the approval of the holders of at least two-
thirds of the Mason-Dixon common stock. If we obtain this approval, we
currently expect to complete the merger in the third quarter of 1999.
We have attached the merger agreement and the related plan of merger
(Appendix A) at the back of this proxy statement/prospectus. We encourage you
to read the merger agreement, as it is the legal document that governs the
merger.
Two-Thirds Mason-Dixon Shareholder Vote Required (Page 8)
Approval of the merger agreement requires the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Mason-Dixon common
stock. Your failure to vote will have the effect of a vote against approval of
the merger agreement. The directors and executive officers of Mason-Dixon
together own about 6.4% of the shares entitled to be cast at the meeting, and
we expect them to vote their shares in favor of the merger.
Brokers who hold shares of Mason-Dixon 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 May 7, 1999; One Vote per Share of Mason-Dixon Stock (Page
8)
If you owned shares of Mason-Dixon common stock at the close of business on
May 7, 1999, the record date, you are entitled to vote on the merger agreement
and any other matters considered at the meeting.
On the record date, there were 5,076,924 shares of Mason-Dixon common stock
outstanding. You will have one vote at the meeting for each share of Mason-
Dixon common stock you own on the record date.
Monetary Benefits to Management in the Merger (Page 27)
When considering the recommendation of the Mason-Dixon Board, you should be
aware that some Mason-Dixon directors and officers have interests in the
merger that differ from the interests of other Mason-Dixon shareholders.
Mason-Dixon's President and CEO, Thomas K. Ferguson, has been offered a 5-year
employment agreement with a banking subsidiary of BB&T at his current salary.
Seven 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.
Also, Thomas K. Ferguson will be elected to the board of BB&T's North
Carolina bank and will earn annual fees of $5,000 plus $1,000 per meeting
attended, and the other Mason-Dixon directors will be offered positions on
BB&T's advisory board for the Westminster, Maryland area with annual fees not
2
<PAGE>
less than what they are now receiving as Mason-Dixon directors for at least
two years after the merger.
The Mason-Dixon Board was aware of these and other interests and considered
them before approving and adopting the merger agreement.
Conditions that Must be Satisfied for the Merger to Occur (Page 22)
The following conditions must be met for us to complete the merger:
. approval of the merger agreement by Mason-Dixon 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 Maryland Commissioner of
Financial Regulation and the Virginia Bureau of Financial Institutions. In
April 1999, BB&T filed the required applications seeking approval of the
merger. Although we believe the regulatory approvals will be received in a
timely manner, we cannot be certain when or if we will obtain them.
Termination and Amendment of the Merger Agreement (Page 25)
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 August 31, 1999;
. any of the conditions described above is 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
contained in the merger agreement, except that neither company can waive any
required regulatory approval. Neither company intends to waive the condition
that it receives a tax opinion. If a tax opinion is not available and the
Mason-Dixon Board wishes to proceed with the merger, Mason-Dixon will
resolicit its shareholders.
Option Agreement (Page 33)
As a condition to its offer to acquire Mason-Dixon, and to discourage other
companies from acquiring Mason-Dixon, BB&T required Mason-Dixon to grant BB&T
a stock option that allows BB&T to buy up to 1,006,868 shares of Mason-Dixon's
common stock. The exercise price of the option is $40.00 per share. BB&T can
exercise the option only if another party attempts to acquire control of
Mason-Dixon. As of the date of this document, we do not believe that has
occurred.
BB&T to Use Pooling-of-Interests Accounting Treatment (Page 32)
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 that would
result from amortizing goodwill. This accounting method also means that, after
the merger, BB&T will report financial results as if Mason-Dixon had always
been combined with BB&T.
No Appraisal Rights (Page 51)
Under Maryland law, you have no right to an appraisal of your shares in
connection with the merger.
3
<PAGE>
Share Price Information (Page 5)
Mason-Dixon common stock is listed on the Nasdaq National Market, and BB&T
common stock is listed on the New York Stock Exchange. On January 27, 1999, the
last full trading day before public announcement of the proposed merger, Mason-
Dixon common stock closed at $27.75 and BB&T common stock closed at $37.1875.
On May 17, 1999, Mason-Dixon common stock closed at $47.94 and BB&T common
stock closed at $38.06.
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.
4
<PAGE>
Comparative Market Prices and Dividends
BB&T common stock is listed on the NYSE under the symbol "BBT." Mason-Dixon
common stock is included on the Nasdaq National Market under the symbol
"MSDX." The table below shows the high and low closing prices of BB&T common
stock and Mason-Dixon common stock and cash dividends paid per share for the
last two fiscal years plus the interim period. For BB&T, prices reflect a 2-
for-1 stock split on August 3, 1998. Shareholders should note that the merger
agreement restricts Mason-Dixon's ability to pay dividends. See page 24.
<TABLE>
<CAPTION>
BB&T Mason-Dixon
--------------------------- ---------------------------
High Low Cash Dividend High Low Cash Dividend
------ ------ ------------- ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended
March 31, 1999........ $40.44 $34.94 $.175 $50.06 $26.75 $.19
June 30, 1999 (through
May 17).............. 40.25 36.31 .175 50.88 45.56 .19
Quarter Ended
March 31, 1998........ 33.84 29.03 .155 36.63 29.00 .17
June 30, 1998......... 34.06 32.03 .155 35.25 31.50 .17
September 30, 1998.... 36.03 28.00 .175 33.00 29.50 .17
December 31, 1998..... 40.63 27.31 .175 30.75 25.00 .19
For year 1998....... 40.63 27.31 .66 36.63 25.00 .70
Quarter Ended
March 31, 1997........ 20.38 17.63 .135 22.00 19.25 .15
June 30, 1997......... 23.56 17.88 .135 22.25 20.75 .15
September 30, 1997.... 27.56 22.66 .155 28.75 21.63 .15
December 31, 1997..... 32.50 25.97 .155 30.25 26.00 .17
For year 1997....... 32.50 17.63 .58 30.25 19.25 .62
</TABLE>
The table below shows the closing price of BB&T common stock and Mason-Dixon
common stock on January 27, 1999, the last full trading day before public
announcement of the proposed merger.
<TABLE>
<S> <C>
BB&T historical................................................... $37.1875
Mason-Dixon historical............................................ $27.75
Mason-Dixon pro forma equivalent*................................. $48.34
</TABLE>
- - - - - - - - - - - - - - - - - --------
* calculated by multiplying BB&T's per share closing price by the exchange
ratio of 1.30
5
<PAGE>
Selected Consolidated Financial Data
We are providing the following information to help you analyze the financial
aspects of the merger. We derived this information from audited financial
statements for 1994 through 1998 and unaudited financial statements for the
three months ended March 31, 1999. The information provided for BB&T has been
restated to include the account of MainStreet Financial Corporation, which was
acquired by BB&T on March 5, 1999 in a transaction accounted for as a pooling
of interests. This information is only a summary, and you should read it in
conjunction with our historical financial statements (and related notes)
contained in the annual and quarterly reports and other documents that we have
filed with the SEC. See "Where You Can Find More Information" on page 66. You
should not rely on the three-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
Three Months Ended
March 31, As of/For the Years Ended December 31,
--------------------- ------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income..... $ 344,377 $ 319,340 $1,317,129 $1,221,658 $1,119,910 $1,027,390 $ 988,203
Net income.............. 138,423 120,445 513,021 378,287 361,448 255,255 292,030
Diluted earnings per
share.................. .44 .39 1.65 1.23 1.17 .81 .94
Cash dividends paid per
share.................. .175 .155 .66 .58 .50 .43 .37
Book value per share.... 9.59 8.68 9.53 8.50 7.80 7.39 6.59
Total assets............ 37,791,490 34,243,806 36,388,330 33,165,141 29,134,267 27,396,168 25,868,138
Long-term debt.......... 5,187,639 3,942,804 4,964,797 3,750,484 2,392,688 1,544,236 1,104,699
Mason-Dixon--Historical Financial Information
(Dollars in thousands, except for per share amounts)
<CAPTION>
As of/For the
Three Months Ended
March 31, As of/For the Years Ended December 31,
--------------------- ------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income..... $ 10,346 $ 9,232 $ 37,875 $ 31,260 $ 29,552 $ 23,666 $ 19,398
Net income.............. 2,527 2,511 10,811 9,159 8,436 7,299 6,612
Diluted earnings per
share.................. .50 .49 2.13 1.77 1.60 1.54 1.52
Cash dividends paid per
share.................. .19 .17 .70 .62 .52 .485 .45
Book value per share.... 16.15 15.14 16.20 14.86 13.71 12.67 9.89
Total assets............ 1,186,780 1,053,226 1,102,242 992,180 841,074 765,781 507,572
Long-term debt.......... 326,396 179,011 328,347 160,889 85,275 49,129 23,114
</TABLE>
6
<PAGE>
Comparative Per Share Data
We have summarized below the per share information for our companies on an
historical, pro forma combined and equivalent basis. You should read this
information in conjunction with our historical financial statements (and
related notes) contained in the annual and quarterly reports and other
documents we have filed with the SEC. See "Where You Can Find More
Information" on page 66. The BB&T pro forma information gives effect to the
merger accounted for as a pooling of interests, assuming that 1.30 shares of
BB&T common stock are issued for each outstanding share of Mason-Dixon common
stock. Mason-Dixon 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 1.30 shares of
BB&T common stock so that the per share amounts equate to the respective
values for one share of Mason-Dixon 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 three-month
information as being indicative of results expected for the entire year.
<TABLE>
<CAPTION>
As of/For the
As of/For the Year Ended
Three Months December 31,
Ended March 31, --------------------
1999 1998 1997 1996
--------------- ------ ------ ------
<S> <C> <C> <C> <C>
Earnings per common share
Basic
BB&T historical....................... $ 0.45 $ 1.69 $ 1.25 $ 1.19
Mason-Dixon historical................ 0.50 2.13 1.77 1.60
Pro forma combined.................... 0.45 1.69 1.25 1.19
Mason-Dixon pro forma equivalent...... 0.59 2.20 1.63 1.55
Diluted
BB&T historical....................... 0.44 1.65 1.23 1.17
Mason-Dixon historical................ 0.50 2.13 1.77 1.60
Pro forma combined.................... 0.44 1.65 1.23 1.17
Mason-Dixon pro forma equivalent...... 0.57 2.15 1.60 1.52
Cash dividends declared per common share
BB&T historical......................... .175 .66 .58 .50
Mason-Dixon historical.................. .19 .70 .62 .52
Pro forma combined...................... .175 .66 .58 .50
Mason-Dixon pro forma equivalent........ .228 .86 .75 .65
Shareholders' equity per common share
BB&T historical......................... 9.59 9.53 8.50 7.80
Mason-Dixon historical.................. 16.15 16.20 14.86 13.71
Pro forma combined...................... 9.65 9.59 8.56 7.86
Mason-Dixon pro forma equivalent........ 12.55 12.47 11.13 10.22
</TABLE>
7
<PAGE>
MEETING OF SHAREHOLDERS
General
We are providing this proxy statement/prospectus to the shareholders of
Mason-Dixon as of the record date of May 7, 1999, along with a form of proxy
that the Mason-Dixon Board is soliciting for use at the annual meeting of
shareholders of Mason-Dixon to be held on Monday, July 12, 1999 at 10:00 a.m.,
Eastern Time, at the Wakefield Valley Golf Club, located at 1000 Fenby Farm
Road, Westminster, Maryland. At the meeting, the shareholders of Mason-Dixon
will vote upon proposals (i) to approve the merger agreement, which is dated
as of January 27, 1999 and pursuant to which Mason-Dixon would merge with and
into BB&T, and (ii) to elect four Class I directors to serve until the earlier
to occur of the effective time of the merger, the date of the 2002 annual
meeting of Mason-Dixon's shareholders or such time as their respective
successors are elected and qualified. Proxies may be voted on such other
matters as may properly come before the meeting at the discretion of the proxy
holders. The Mason-Dixon 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 A.
We request holders of the common stock of Mason-Dixon to complete, date and
sign the accompanying proxy and return it promptly to Mason-Dixon in the
enclosed postage prepaid envelope.
Record Date, Voting Rights and Vote Required
Only the holders of Mason-Dixon common stock on the record date are entitled
to receive notice of and to vote at the meeting. On the record date, there
were 5,076,924 shares of Mason-Dixon common stock outstanding, held by
approximately 1,800 holders of record. Each such share of Mason-Dixon common
stock is entitled to one vote on each matter submitted at the meeting.
Approval of the merger agreement and the plan of merger requires the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of Mason-Dixon common stock. Failure of a holder of Mason-Dixon common
stock to vote such shares will have the same effect as a vote "against" the
merger agreement and the plan of merger.
Except as described in the immediately preceding paragraph and except for
the election of directors, approval of any other matters that shareholders
consider at the meeting requires a majority of the votes cast at the meeting,
assuming the presence of a quorum. With respect to the election of directors,
the four nominees receiving the greatest number of votes cast for the election
of directors will be deemed elected even though not receiving a majority,
assuming the presence of a quorum. Presence in person or by proxy of a
majority of the outstanding shares of Mason-Dixon common stock entitled to
vote at the meeting will constitute a quorum.
As of the record date, the directors and executive officers of Mason-Dixon
and their affiliates beneficially owned approximately 6.4% of the issued and
outstanding shares of Mason-Dixon common stock (exclusive of shares that may
be acquired pursuant to the exercise of stock options). As of the record date,
neither the directors and executive officers of BB&T or their affiliates nor
BB&T or its subsidiaries beneficially owned any shares of Mason-Dixon common
stock.
Voting and Revocation of Proxies
The shares of Mason-Dixon common stock represented by properly completed
proxies received at or before the time for the meeting will be voted as
directed by the shareholders unless revoked as described below. If no
instructions are given, executed proxies will be voted "FOR" approval of the
merger agreement and the plan of merger. Proxies marked "FOR" approval of the
merger agreement and the plan of merger and executed but unmarked proxies will
be voted in the discretion of the persons named therein as to any proposed
adjournment of the meeting. Proxies which are voted "AGAINST" approval of the
merger agreement and the plan of merger will not be voted in favor of any
motion to adjourn the meeting to solicit more votes in favor of the merger.
8
<PAGE>
Shares held in street name that have been designated by brokers on proxy
cards as not voted with respect to a proposal ("Broker Shares") will not be
counted as votes cast on the proposal. Shares with respect to which proxies
have been marked as abstentions also will not be counted as votes cast on the
proposal. Shares with respect to which proxies have been marked as abstentions
and Broker Shares, however, will be treated as shares present for purposes of
determining whether a quorum is present.
The proposal to adopt the merger agreement and the plan of merger is a "non-
discretionary" item, meaning that brokerage firms may not vote shares in their
discretion on behalf of a client if the client has not furnished voting
instructions. Because the proposal to adopt the merger agreement and the plan
of merger must be approved by the holders of at least two-thirds of the
outstanding shares of Mason-Dixon 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 Mason-Dixon 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 Corporate Secretary of Mason-
Dixon at Mason-Dixon'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 Corporate Secretary of Mason-Dixon or other person authorized to tabulate
the votes receives notice of the death or incapacity.
Because approval of the merger agreement and the plan of merger requires the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of Mason-Dixon common stock, abstentions and Broker Shares will have
the same effect as negative votes. Accordingly, the Mason-Dixon Board urges
Mason-Dixon'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 Mason-Dixon will each pay 50% of the cost of printing this proxy
statement/prospectus, and Mason-Dixon will pay all other costs of soliciting
proxies. Directors, officers and other employees of Mason-Dixon or its
subsidiaries may solicit proxies personally or by telephone or facsimile. None
of these people will receive any special compensation for solicitation
activities. Mason-Dixon 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
Mason-Dixon will reimburse these record holders for their reasonable out-of-
pocket expenses. In addition, Mason-Dixon intends to use the services of
Corporate Investor Communications, Inc., a professional proxy solicitation
firm, to help with soliciting proxies for the meeting, at an estimated cost of
$5,000 plus individual solicitation and out-of-pocket expenses.
Recommendation of the Mason-Dixon Board
The Mason-Dixon 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 Mason-Dixon and its shareholders. The Mason-Dixon Board
unanimously recommends that Mason-Dixon's shareholders vote "FOR" approval of
the merger agreement and the plan of merger. See "The Merger-Background of and
Reasons for the Merger."
Shareholders should not send in stock certificates with their proxy cards.
See "The Merger-Exchange of Mason-Dixon Common Stock Certificates."
9
<PAGE>
THE MERGER
(Proposal One)
The following information describes the material aspects of the merger. This
description does not purport to be complete and is qualified in its entirety
by reference to the appendices hereto, including the merger agreement and the
plan of merger, which are attached to this proxy statement/prospectus as
Appendix A and incorporated herein by reference. All shareholders are urged to
read the appendices in their entirety.
General
In the merger, Mason-Dixon will be merged with and into BB&T and BB&T will
be the surviving corporation. Shareholders of Mason-Dixon will receive shares
of the common stock of BB&T in exchange for their shares of Mason-Dixon common
stock. During the first quarter of 2000, BB&T intends to merge Mason-Dixon's
various subsidiary banks into BB&T's North Carolina banking subsidiary.
Background of and Reasons for the Merger
Background of the Merger; Mason-Dixon's Reasons for the Merger
Mason-Dixon has been approached in recent years by interested merger
partners, one of which was BB&T. The Mason-Dixon Board did not pursue these
preliminary expressions of interest, believing it to be in the best interest
of Mason-Dixon's shareholders to focus on independently building a financial
services franchise operating in central Maryland. The Mason-Dixon Board
authorized Thomas K. Ferguson, President of Mason-Dixon, to maintain contacts
and further develop relationships with potential merger partners, including
BB&T, to provide Mason-Dixon with flexibility to pursue a business combination
should the Mason-Dixon Board later determine that it would be in the best
interest of the Mason-Dixon shareholders to negotiate a sale of Mason-Dixon.
In December 1997, Donald Delson, with the investment banking firm of Keefe,
Bruyette & Woods, Inc. ("KBW"), brought to Mr. Ferguson's attention the fact
that BB&T was again interested in expanding into Maryland. Mr. Ferguson asked
Mr. Delson to prepare a presentation to be delivered to the Mason-Dixon Board
during its January 1998 meeting, concerning bank consolidation, including
BB&T's likely expansion into Maryland and the possible effects such an
expansion could have on Mason-Dixon. After Mr. Delson's presentation and after
much discussion, the Mason-Dixon Board determined to continue its strategic
plan of continuing to increase shareholder value by expanding the Mason-Dixon
franchise in Maryland.
At a meeting on April 29, 1998, the Mason-Dixon Board authorized Mr.
Ferguson to become more familiar with some of Mason-Dixon's potential
acquirors by meeting with them. In the summer of 1998, Mr. Ferguson met with a
representative of BB&T to familiarize himself with BB&T and its philosophy and
business plan, and was invited to visit BB&T in North Carolina. At a meeting
held on October 28, 1998, the Mason-Dixon Board agreed that such a visit by
Mr. Ferguson was advisable.
Mr. Ferguson traveled to Winston-Salem, North Carolina in November 1998 to
meet with representatives of BB&T. Representatives of BB&T informed Mr.
Ferguson of BB&T's philosophy, its operations, its plan, its financial
performance, its values and its process for integrating newly acquired
institutions with BB&T. Mr. Ferguson updated the Mason-Dixon Board following
his visit to Winston-Salem and expressed his confidence in both BB&T and its
staff. The Mason-Dixon Board discussed the effects of an affiliation with BB&T
on Mason-Dixon's employees, constituent communities, and growth and stability
in light of the fact that Mason-Dixon had previously been a strong advocate of
independence, but also in light of the fact that Mason-Dixon was competing
with some very large financial institutions.
Mr. Ferguson presented the Mason-Dixon Board with a document that identified
attractive characteristics that Mason-Dixon might seek in a merger partner in
the event the Mason-Dixon Board thought an affiliation was
10
<PAGE>
in Mason-Dixon's best interest. These characteristics included above average
return on equity capital and return on assets, diversified revenue sources, a
diversified balance sheet, the ability to efficiently consummate a
transaction, a demonstrated track record of successful acquisitions of
companies like Mason-Dixon and the ability to improve the products offered to
Mason-Dixon's customers. The Mason-Dixon Board considered this document for a
week, and the Mason-Dixon Board members, individually, rated their
preferences. A compilation of these ratings was presented to KBW for analysis.
In December 1998, KBW analyzed the Mason-Dixon Board's choices and delivered
an oral and written report listing potential acquirors that presented the best
opportunities for the growth and financial stability of Mason-Dixon, among
which was BB&T.
Based on the Mason-Dixon Board's questions and comments at the December 1998
meeting, Mr. Ferguson determined that BB&T's past performance showed that it
could successfully address the strategic issues facing Mason-Dixon. Mr.
Ferguson additionally determined that BB&T could provide the best opportunity
for Mason-Dixon's employees to secure employment upon a merger of Mason-Dixon.
Mr. Ferguson sought direction from the Mason-Dixon Board as to the best course
of action for Mason-Dixon. The Mason-Dixon Board determined that it should
take some time to review all the information presented.
The Mason-Dixon Board met on January 7, 1999, after comprehensively
reviewing all the information presented and discussed with Mr. Ferguson Mason-
Dixon's prospects for earnings, the continuing pressure in the marketplace,
the intense competition with and among larger financial institutions and the
potential for Mason-Dixon's stock price to become depressed. Mr. Ferguson
informed the Mason-Dixon Board of various alternative strategies for Mason-
Dixon to pursue if it wished to continue pursuing independence, including
enlarging the geographic footprint beyond that described in Mason-Dixon's
strategic plan and reducing Mason-Dixon's earnings growth rate to permit
Mason-Dixon to make significant and necessary investment in its current
market.
The Mason-Dixon Board determined that enlarging the geographic footprint
carried more risk for the shareholders of Mason-Dixon than was acceptable and
that slowing the earnings growth rate would likely further depress the stock
price of Mason-Dixon's common stock. The Mason-Dixon Board determined to
solicit a proposal from BB&T and authorized Mr. Ferguson to solicit a
proposal.
Mr. Ferguson and KBW representatives met with representatives of BB&T on
January 12, 1999. After comprehensive discussions, BB&T presented Mr. Ferguson
with an offer to acquire Mason-Dixon in a stock-for-stock transaction at a
fixed ratio of 1.3 shares of BB&T common stock for each share of Mason-Dixon
common stock. In addition, the offer required Mason-Dixon to issue an option
to BB&T to purchase up to 19.9% of Mason-Dixon's stock in the event the merger
was terminated under certain circumstances, provided for senior executives of
Mason-Dixon to enter into employment agreements in connection with the
acquisition and contained other customary terms and conditions.
Mr. Ferguson arranged a meeting on January 21, 1999 between representatives
of BB&T, KBW, the Mason-Dixon Board, key officers of Mason-Dixon, the
presidents of three of Mason-Dixon's subsidiaries and Mason-Dixon's outside
legal counsel, Gordon, Feinblatt, Rothman, Hoffberger, and Hollander, LLC.
BB&T made a presentation that comprehensively discussed BB&T and its products
and services, its philosophy and its business plan. After the BB&T
representatives left this meeting, a Mason-Dixon Board meeting was convened,
at which time the BB&T proposal was formally considered. Legal counsel
reviewed in detail the fiduciary duty that devolves upon the Mason-Dixon Board
in such a situation. KBW provided a financial analysis of the offer,
indicating on a preliminary basis that it was fair to shareholders from a
financial point of view.
Final negotiations and drafting of the merger agreement followed.
A special meeting of the Mason-Dixon Board was called for January 25, 1999
at which all directors were present except for Messrs. Baker and Campbell.
Legal counsel explained in detail the legal framework within which the Mason-
Dixon Board should act in both considering the offer and assessing the
information it would
11
<PAGE>
receive about the offer and discussed the proposed merger agreement and stock
option agreement. The Mason-Dixon Board engaged in a discussion with KBW via
speakerphone of all financial aspects and implications of the merger with
BB&T, including the benefits of the transaction to Mason-Dixon shareholders
and the potential effect of the merger on Mason-Dixon's management, employees,
customers and communities in which Mason-Dixon and its affiliated banks are
located. The Mason-Dixon Board engaged in a comprehensive question and answer
session with both Mr. Ferguson and legal counsel concerning BB&T's status
among its peers, how analysts generally perceive acquisitions by BB&T, the
negotiation process, BB&T's loan loss provisions, the potential treatment of
Mason-Dixon's constituent communities by BB&T, BB&T's plan and outlook for
management succession in the event of death or disability of present personnel
and the employment contracts offered by BB&T to certain Mason-Dixon employees.
The Mason-Dixon Board deferred consideration of approval of the merger
agreement and stock option agreement until the Mason-Dixon Board meeting
scheduled for January 27, 1999, but determined to take appropriate action to
facilitate the transactions by exempting the proposed transaction with BB&T
from restrictions under the Maryland business combination laws.
At the January 27, 1999 meeting of the Mason-Dixon Board, Mr. Delson of KBW
presented KBW's opinion that the transaction was fair to Mason-Dixon
shareholders from a financial standpoint. The Mason-Dixon Board specifically
evaluated whether the proposal was in the best interests of Mason-Dixon and
its subsidiaries by considering the best interests of the shareholders and
other factors, including the social, legal and economic effects on employees,
customers, depositors, and communities served by Mason-Dixon and any
subsidiary of Mason-Dixon, and evaluated the consideration being offered in
relation to the then current market value of Mason-Dixon and any subsidiary of
Mason-Dixon in a freely negotiated transaction and the Mason-Dixon Board's
estimate of the future value of stock of Mason-Dixon or any subsidiary of
Mason-Dixon as an independent entity. The Mason-Dixon Board determined that
the transaction was fair to Mason-Dixon shareholders from a financial
standpoint, relying on the advice of KBW, and considering specifically:
. Premium over market value of common stock: The exchange ratio of 1.3
shares of BB&T common stock for each share of Mason-Dixon common stock
approximated a 74% premium over the market value for Mason-Dixon stock
at that time.
. Premium over book value: The exchange ratio of 1.3 shares of BB&T common
stock for each share of Mason-Dixon common stock represented a multiple
of approximately 3.36 times the tangible book value of Mason-Dixon
common stock, based on Mason-Dixon's book value at September 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.
. Increased dividends: BB&T's most recent quarterly dividend was $0.175
per share, compared to Mason-Dixon's fixed quarterly dividend of $0.19
per share. The BB&T quarterly dividend, in conjunction with the exchange
ratio for the merger, would increase the Mason-Dixon shareholders'
dividends by 19.74%.
As discussed above, in addition to the financial analysis of Mason-Dixon's
financial advisor and the impact of the transaction on Mason-Dixon
shareholders from a financial point of view, the Mason-Dixon Board took into
account the effect of the merger on other constituencies and made the
following determinations:
. Because of BB&T's history of growth and promoting employees, the merger
with BB&T has the potential for most Mason-Dixon employees to increase
their opportunities for advancement;
. BB&T's extensive branch network would increase Mason-Dixon's presence
across Virginia and in other states through its affiliated banks and
provide Mason-Dixon's customers the wider variety of financial products
offered by BB&T; and
12
<PAGE>
. The communities served by Mason-Dixon would benefit due to BB&T's
commitment to make charitable contributions of land and of $2,250,000 in
cash for the construction of a building.
The Mason-Dixon 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 Mason-Dixon Board focused particular attention on the
opinion of KBW in discussing the fairness of the exchange ratio for the
merger.
Based on its discussion and consideration of the factors discussed above,
the Mason-Dixon Board voted unanimously to approve the merger and the related
stock option agreement as being in the best interests of Mason-Dixon, its
shareholders, its employees, its customers, and the communities in which it
operates.
The Mason-Dixon Board recommends that Mason-Dixon shareholders vote FOR
approval of the merger agreement and the related plan of merger.
BB&T's Reasons for the Merger
One of BB&T's announced objectives is to pursue in-market and contiguous
state acquisitions of banks and thrifts within the $250 million to $10 billion
range. BB&T management believes that Mason-Dixon is a customer-oriented,
service-driven institution and that its acquisition by BB&T will be a major
step toward expanding BB&T's franchise in Maryland with an emphasis on
customer service, value and personal attention, while maintaining autonomy and
local decision-making. The merger with Mason-Dixon will approximately double
BB&T's assets in Maryland to approximately $2.4 billion, substantially
increasing BB&T's presence in the economically strong markets in central
Maryland like Carroll County.
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 and Mason-Dixon's 1999 earnings per share on a stand alone basis
would be in line with the 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%.
. Mason-Dixon's earnings on a stand alone basis for periods after 1999
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 $9.3 million, or 25% of Mason-
Dixon's expense base, would be realized as a result of the merger, with
25% of such cost savings to be achieved in 1999 and the remaining 75% in
2000.
. Mason-Dixon's fee income ratio would ratably increase from 18.8% for
1998 to 25% for the full-year 2004.
. Mason-Dixon's net interest margin (non-FTE) would be maintained annually
at 4.03% of average earning assets.
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 book value per share in 1999,
to estimated earnings per share in 2000 and to return on equity by 2001. BB&T
excluded the effect of an estimated one-time charge of $10.4 million, after
income tax benefits, related to consummating the merger from calculations of
earnings per share, return on equity and return on assets.
13
<PAGE>
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 Mason-Dixon, after applying the
assumptions described above, would conform to BB&T's criteria. BB&T's current
minimum internal rate of return requirement for this type of investment is
15%. The analysis performed in connection with the Mason-Dixon merger
indicated that the projected internal rate of return is 16.08%.
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 iv.
Opinion of Mason-Dixon's Financial Advisor
Mason-Dixon engaged KBW to act as its exclusive financial advisor in
connection with the merger. KBW agreed to assist Mason-Dixon in analyzing,
structuring, negotiating and effecting a transaction with BB&T. Mason-Dixon
selected KBW because KBW is a nationally recognized investment banking firm
with substantial experience in transactions similar to the merger and is
familiar with Mason-Dixon and its business. As part of its investment banking
business, KBW is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions.
As part of its engagement, representatives of KBW attended the meeting of
the Mason-Dixon Board held on January 27, 1999 at which the Mason-Dixon Board
considered and approved the merger agreement. At such meeting, KBW rendered an
oral opinion (which was subsequently confirmed in writing) that, as of that
date, the exchange ratio was fair to Mason-Dixon and its shareholders from a
financial point of view. KBW's January 27, 1999 opinion was reconfirmed in
writing as of the date of this proxy statement/prospectus.
The full text of KBW's updated written opinion is attached as Appendix B to
this proxy statement/prospectus and is incorporated herein by reference.
Mason-Dixon shareholders are urged to read the opinion in its entirety for a
description of the procedures followed, assumptions made, matters considered
and qualifications and limitations on the review undertaken by KBW.
KBW's opinion is directed to the Mason-Dixon Board and addresses only the
exchange ratio. It does not address the underlying business decision to
proceed with merger and does not constitute a recommendation to any Mason-
Dixon shareholder as to how the shareholder should vote at Mason-Dixon's
meeting with respect to the merger or any matter related thereto.
In rendering its opinion, KBW:
. reviewed, among other things,
. the merger agreement,
. Annual Reports to Shareholders and Annual Reports on Form 10-K of
BB&T,
. Annual Reports on Form 10-K of Mason-Dixon,
. certain interim reports to shareholders and Quarterly Reports on
Form 10-Q of BB&T,
. Quarterly Reports on Form 10-Q of Mason-Dixon and
. certain internal financial analyses and forecasts for Mason-Dixon
and BB&T prepared by management;
. held discussions with members of senior management of BB&T and Mason-
Dixon regarding
. past and current business operations,
. regulatory relationships,
. financial condition and
. future prospects of the respective companies;
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<PAGE>
. compared certain financial and stock market information for BB&T and
Mason-Dixon with similar information for certain other companies with
publicly traded securities;
. reviewed the financial terms of certain recent business combinations in
the banking industry and
. performed other studies and analyses that it considered appropriate.
The projections furnished to KBW and used by it in certain of its analyses
were prepared by the senior management of Mason-Dixon. Mason-Dixon does not
publicly disclose internal management projections of the type provided to KBW
in connection with its review of the merger. As a result, such projections
were not prepared with a view towards public disclosure. The projections were
based on numerous variables and assumptions which are inherently uncertain,
including factors related to general economic and competitive conditions.
Accordingly, actual results could vary significantly from those set forth in
the projections.
The following is a summary of the material analyses presented by KBW to the
Mason-Dixon Board on January 27, 1999 in connection with its January 27, 1999
opinion:
Transaction Summary. KBW calculated the merger consideration to be paid
pursuant to the exchange ratio as a multiple of Mason-Dixon's book value, 1998
actual (excluding non-recurring charges and gains) and 1999 estimated
earnings. This computation assumed the KBW estimates of Mason-Dixon's earnings
per share of $2.00 in 1998 (excluding non-recurring charges and gains) and
$2.20 in 1999 and an exchange ratio of 1.30 BB&T shares for each Mason-Dixon
share. Based on those assumptions, this analysis indicated that Mason-Dixon
shareholders would receive shares of BB&T common stock worth $49.97 for each
share of Mason-Dixon common stock held and that this amount would represent a
multiple of 3.09 times Mason-Dixon's book value per share and 22.71 times
Mason-Dixon's estimated 1999 earnings per share.
Discounted Cash Flow Analysis. KBW estimated the present value of future
cash flows that would accrue to a holder of a share of Mason-Dixon common
stock assuming that the shareholder held the stock for five years and then
sold it. The analysis was based on earnings forecasts prepared by management
on a stand-alone, independent basis for 1999 and annual net income growth
rates from 8.0% to 10.0% for the years 2000 through 2003. A 36.0% dividend
payout ratio was assumed for Mason-Dixon through the year 2003. Mason-Dixon's
value in the event of a sale was determined by using terminal price to
earnings multiples from 22.0 times to 25.0 times. The terminal value and the
dividends received were discounted at a rate of 12.0%. This rate was selected
because, in KBW's experience, it represents the risk-adjusted rates of return
that investors in securities such as the common stock of Mason-Dixon would
require. On the basis of these assumptions, KBW calculated a range of present
values ranging from $40.63 to $49.07. These values were compared to the $49.97
offer from BB&T.
KBW stated that the discounted cash flow present value analysis is a widely
used valuation methodology but noted that it relies on numerous assumptions,
including asset and earnings growth rates, terminal values and discount rates.
The analysis did not purport to be indicative of the actual values or expected
values of Mason-Dixon common stock.
Selected Transaction Analysis. KBW reviewed certain financial data related
to two sets of comparable bank transactions. The first set of comparable
transactions included transactions in Delaware, the District of Columbia,
Pennsylvania, Maryland, New Jersey, New York and Virginia with transaction
values between $75 million and $1 billion which had been announced after
January 1, 1998.
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<PAGE>
KBW compared multiples of price to various factors for the BB&T-Mason-Dixon
merger to the same average multiples for this comparable group's mergers at
the time those mergers were announced. The results were as follows:
<TABLE>
<CAPTION>
Multiple of Price to Factor
--------------------------------
Comparable BB&T-
Factor Considered Group Average Mason-Dixon Merger
- - - - - - - - - - - - - - - - - ----------------- ------------- ------------------
<S> <C> <C>
Recurring Trailing 12 Months Earnings.......... 27.3x 25.0x
Stated Book Value.............................. 3.17x 3.09x
Estimated Tangible Book Value.................. 3.51x 3.37x
Deposit Premium................................ 27% 27%
The second set of comparable transactions included nationwide transactions
with transaction values between $75 million and $1 billion which had been
announced after January 1, 1998. The results were as follows:
<CAPTION>
Multiple of Price to Factor
--------------------------------
Comparable BB&T-
Factor Considered Group Average Mason-Dixon Merger
- - - - - - - - - - - - - - - - - ----------------- ------------- ------------------
<S> <C> <C>
Recurring Trailing 12 Months Earnings.......... 26.2x 25.0x
Stated Book Value.............................. 3.05x 3.09x
Estimated Tangible Book Value.................. 3.38x 3.37x
Deposit Premium................................ 30% 27%
</TABLE>
No company or transaction used as a comparison in the above analysis is
identical to BB&T, Mason-Dixon or the merger. Accordingly, an analysis of
these results 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 the companies to which they are being compared.
Selected Peer Group Analysis. KBW compared the financial performance and
market performance of BB&T to those of a group of comparable holding
companies. The comparisons were based on:
. various financial measures, including
. earnings performance,
. operating efficiency,
. capital adequacy and
. asset quality and
. various measures of market performance, including
. market/book values,
. price to earnings and
. dividend yields.
To perform this analysis, KBW used the financial information as of and for
the quarter ended December 31, 1998 and market price information as of January
26, 1999. The companies in the peer group were selected U.S. regional banks
that had total market capitalization ranging from $5 billion to $18 billion.
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<PAGE>
With respect to BB&T's financial performance, KBW's analysis showed the
following:
<TABLE>
<CAPTION>
Peer Group
Performance Measure BB&T Averages
- - - - - - - - - - - - - - - - - ------------------- ------ ----------
<S> <C> <C>
Return on Equity, annualized............................... 19.62% 16.11%
Return on Assets, annualized............................... 1.59% 1.38%
Net Interest Margin, annualized............................ 4.54% 4.04%
Efficiency Ratio, annualized............................... 51.75% 53.23%
Tangible Equity/Assets..................................... 7.02% 7.37%
Non-Performing Assets to Total Loans and Other Real Estate
Owned..................................................... 0.49% 0.59%
Loan Loss Reserve to Average Loans......................... 360.00% 334.00%
With respect to BB&T's market performance, KBW's analysis showed the
following:
<CAPTION>
Peer Group
Performance Measure BB&T Averages
- - - - - - - - - - - - - - - - - ------------------- ------ ----------
<S> <C> <C>
Price to Earnings Multiple, based on 1999 estimated
earnings.................................................. 19.9x 16.92x
Price to Earnings Multiple, based on 2000 estimated
earnings.................................................. 17.6x 15.38x
Price to Book Multiples.................................... 4.02x 3.11x
Price to Tangible Book Multiples........................... 4.66x 3.71x
Dividend Yield............................................. 1.82% 2.40%
</TABLE>
For purposes of the above calculations, all earnings estimates are based
upon the KBW estimates for BB&T.
Contribution Analysis. KBW analyzed the relative contribution of each of
BB&T and Mason-Dixon to certain pro forma balance sheet and income statement
items of the combined entity. Based on an exchange ratio of 1.30, the
contribution analysis showed:
<TABLE>
<S> <C>
Mason-Dixon Contribution To:
Combined Common Equity................................................. 2.7%
Annualized Recurring Net Income without Cost Savings................... 2.0%
Combined Total Assets.................................................. 2.9%
Mason-Dixon Estimated Pro Forma Ownership............................... 2.1%
</TABLE>
Other Analyses. KBW reviewed the relative financial and market performance
of Mason-Dixon and BB&T to a variety of relevant industry peer groups and
indices. KBW also reviewed earnings estimates, balance sheet composition,
historical stock performance and other financial data for BB&T.
In connection with its opinion dated as of the date of this proxy
statement/prospectus, KBW performed procedures to update, as necessary,
certain of the analyses described above. KBW reviewed the assumptions on which
the analyses described above were based and the factors considered in
connection therewith. KBW did not perform any analyses in addition to those
described above in updating its January 27, 1999 opinion.
KBW has not independently verified the information described above and for
purposes of this opinion has assumed the accuracy, completeness and fairness
thereof. With respect to information relating to the prospectus of Mason-Dixon
and BB&T, KBW has assumed that such information reflects the best currently
available estimates and judgments of the managements of Mason-Dixon and BB&T,
respectively, as to the likely future financial performance of Mason-Dixon and
BB&T. KBW also assumed, without independent verification, that the aggregate
allowances for loan losses for BB&T and Mason-Dixon are adequate to cover
those losses. KBW did not make or obtain any evaluations or appraisals of the
property of BB&T or Mason-Dixon, and KBW did not examine any individual credit
files.
The Mason-Dixon Board has retained KBW as an independent contractor to act
as financial advisor to Mason-Dixon regarding the merger. As part of its
investment banking business, KBW is continually engaged in the valuation of
banking businesses and their securities in connection with mergers and
acquisitions, negotiated
17
<PAGE>
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes. As specialists in the securities of banking companies, KBW
has experience in, and knowledge of, the valuation of banking enterprises. In
the ordinary course of its business as a broker-dealer, KBW may, from time to
time, purchase securities from, and sell securities to, Mason-Dixon and BB&T.
As a market maker in securities KBW may from time to time have a long or short
position in, and buy or sell, debt or equity securities of Mason-Dixon and
BB&T for KBW's own account and for the accounts of its customers.
Mason-Dixon and KBW have entered into an agreement relating to the services
to be provided by KBW in connection with the merger. Mason-Dixon has agreed to
pay KBW, at the time of closing, a cash fee equal to 0.85% of the market value
of the aggregate consideration offered in exchange for the outstanding shares
of common stock of Mason-Dixon in the merger transaction. Pursuant to the KBW
engagement agreement, Mason-Dixon also agreed to reimburse KBW for reasonable
out-of-pocket expenses and disbursements incurred in connection with its
retention and to indemnify against certain liabilities, including liabilities
under the federal securities laws.
Exchange Ratio
At the effective time of the merger, Mason-Dixon will be merged with and
into BB&T, and BB&T will be the surviving corporation in the merger. In the
merger, each share of Mason-Dixon common stock outstanding at the effective
time will be converted into the right to receive BB&T common stock at the
exchange ratio of 1.30 shares of BB&T common stock for each share of Mason-
Dixon common stock.
An upward adjustment to the exchange ratio could occur only if Mason-Dixon
elected to terminate the merger agreement as described below, and BB&T then
elected to avoid termination of the merger agreement by increasing the
exchange ratio. Under no circumstances would the exchange ratio be less than
1.30 shares of BB&T common stock for each share of Mason-Dixon common stock.
Mason-Dixon 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 (determined by excluding days on which the NYSE is
closed) before the Determination Date (defined below) (the "Closing
Value") is less than $32.67, and
. (a) the amount obtained by dividing the Closing Value by $38.4375 (such
amount, 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 on
January 27, 1999 (these terms are defined below) (the amount determined
pursuant to clause (b), the "Index Ratio").
Mason-Dixon 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 so that holders of Mason-Dixon common stock would
receive for each share of Mason-Dixon common stock the consideration that they
would have received had the Closing Value been $32.67 (i.e., BB&T common stock
having an implied market value of approximately $42.47). Such an election
would be made by giving notice to Mason-Dixon of the election and the revised
exchange ratio, whereupon Mason-Dixon would be required to proceed with the
merger with the adjusted exchange ratio in accordance with all other terms of
the merger agreement. Mason-Dixon 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 1.30 if BB&T were to
determine not to adjust the exchange ratio. In no event would BB&T have any
obligation to increase the exchange ratio.
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<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 comparable to BB&T and
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 January
27, 1999 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 January 27, 1999 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 (weighted in
accordance with the factors listed above and in the merger agreement) of
the closing sales prices of the companies composing the Index Group.
These conditions reflect the parties' agreement that Mason-Dixon'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 $32.67, but the Closing Value did not reflect a
decline in the price of BB&T common stock from $38.4375 (the closing price of
BB&T common stock on January 26, 1999) (the "Starting Price") of more than 10%
in comparison to the stock prices of the Index Group as measured from January
27, 1999 to the Determination Date, then Mason-Dixon's shareholders would
continue to assume the risk of decline in the value of BB&T common stock.
Mason-Dixon will have the right to terminate the merger agreement only when
both (a) the Closing Value is less than $32.67 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
January 27, 1999 to the Determination Date.
If the Mason-Dixon 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 Mason-Dixon'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, Mason-Dixon may elect to
withdraw its election to terminate and to proceed with the merger without
adjustment. In making this determination, the principal factors the Mason-
Dixon Board would consider include whether the merger remains in the best
interest of Mason-Dixon and its shareholders, despite the decline in the BB&T
common stock price, and whether the consideration to be received by Mason-
Dixon 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 Mason-Dixon 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
Mason-Dixon shareholders under the circumstances. If Mason-Dixon elected not
to exercise its right to terminate the merger agreement, the exchange ratio
would remain 1.30 and the dollar value of the consideration which the Mason-
Dixon shareholders would receive for each share of Mason-Dixon common stock
would be the value of 1.30 shares of BB&T common stock at the effective time.
If the termination right were triggered and BB&T did not increase the exchange
ratio, the Mason-Dixon Board could determine to proceed with the merger at the
1.30 exchange ratio. If Mason-Dixon decided to proceed on this basis, it would
resolicit shareholders only if the Mason-Dixon Board believed that it had a
fiduciary duty or otherwise decided to do so.
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<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 January 27, 1999, is deemed to be $100.)
. The first scenario is that the Closing Value of the BB&T common stock is
not less than $32.67. Under this scenario, the exchange ratio would be
1.30 and there would be no potential adjustment to the exchange ratio
and no right on the part of Mason-Dixon to terminate the merger
agreement due to a decline in the price of BB&T common stock. The
implied market value (based on the Closing Value) of the consideration
to be received by Mason-Dixon shareholders would be not less than
$32.67.
. The second scenario is that the Closing Value is less than $32.67 but
the BB&T Ratio is equal to or above the Index Ratio. In this case, the
exchange ratio would be 1.30 and there would be no right on the part of
Mason-Dixon 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 Mason-Dixon shareholders would have
fallen from a pro forma $48.34 as of January 27, 1999 to less than
$42.47 per share. For example, if the Closing Value were $25.75 and the
Index Price were $70.00, the BB&T Ratio would be 0.67, or
$25.75/$38.4375, and the Index Ratio would be 0.63, or 0.9 times
($70.00/$100.00). Based upon the assumed $25.75 Closing Value, the
consideration to be received by Mason-Dixon shareholders would have an
implied market value of $33.48 per share.
. The third scenario is that both the Closing Value is less than $32.67
and the BB&T Ratio is less than the Index Ratio. In this case, Mason-
Dixon 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 so that Mason-Dixon
shareholders would receive shares of BB&T common stock having an implied
market value (based upon the Closing Value) equal to approximately
$42.47 per share. For example, if the Closing Value were $25.15 and the
Index Price were $90.00, the BB&T Ratio would be 0.65, or
$25.15/$38.4375, and the Index Ratio would be 0.81, or 0.9 times
($90.00/$100.00). Based upon the assumed $25.15 Closing Value, the
consideration to be received by Mason-Dixon shareholders would have an
implied market value of $32.70 per share. If the Mason-Dixon 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 1.6887, which represents $42.47
divided by the Closing Value. Based upon the assumed $25.15 Closing
Value, the new exchange ratio would represent a value to Mason-Dixon
shareholders of $42.47 per share.
Mason-Dixon 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 Mason-Dixon common stock may be more or less than
the Closing Value. Mason-Dixon 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 Mason-Dixon 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 Value.
Exchange of Mason-Dixon Common Stock Certificates
At the effective time, by virtue of the merger and without any action on the
part of Mason-Dixon or the holders of Mason-Dixon common stock, each share of
Mason-Dixon 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 Mason-Dixon
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 Mason-Dixon 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
20
<PAGE>
shares of Mason-Dixon common stock. Upon surrender of these certificates or
other satisfactory evidence of ownership, together with such letter of
transmittal duly executed and completed in accordance with its instructions
and such other documents as may be reasonably requested, BB&T will promptly
transfer the merger consideration to the persons entitled to receive it.
Holders of Mason-Dixon 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 Mason-Dixon
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 Mason-Dixon common stock.
With respect to any certificate for Mason-Dixon 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 Mason-Dixon common stock
outstanding immediately before the effective time will be made on the stock
transfer books of BB&T.
BB&T will pay any dividends or other distributions with a record date before
the effective time that have been declared or made by Mason-Dixon in respect
of shares of Mason-Dixon 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 Mason-Dixon 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 Mason-Dixon common stock are converted, regardless of whether such
holders have exchanged their certificates representing Mason-Dixon 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 Mason-Dixon 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 under the merger agreement (without
interest) will be delivered and paid with respect to each share of Mason-Dixon
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 the
Secretary of State of North Carolina and the Department of Assessments and
Taxation of Maryland. It is currently anticipated that the filing of the
articles of merger will take place as soon as practicable following the date
on which the merger agreement and the plan of merger is approved by the Mason-
Dixon shareholders and all other conditions to the respective obligations of
BB&T and Mason-Dixon 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 during the third quarter
of 1999.
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<PAGE>
Conditions to the Merger
The obligations of BB&T and Mason-Dixon 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 shareholders of Mason-Dixon of the
merger agreement and the plan of merger;
. BB&T's registration statement on Form S-4 relating to the merger
(including any post-effective amendments) must be effective under the
Securities Act of 1933, as amended (the "Securities Act"), no
proceedings may be pending or threatened by the SEC to suspend the
effectiveness of the registration statement and the BB&T common stock to
be issued in the merger must either have been registered or be subject
to exemption from registration under applicable state securities laws;
. 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 Mason-Dixon 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
. Mason-Dixon 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 Mason-Dixon 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 Mason-Dixon will not recognize any gain or loss to the
extent that they exchange shares of Mason-Dixon common stock for shares
of BB&T common stock.
The obligations of Mason-Dixon 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 Mason-Dixon:
. 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;
. 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
. Mason-Dixon 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 Mason-Dixon. 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 bylaws
22
<PAGE>
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 BB&T Board, 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;
. Mason-Dixon 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 Mason-
Dixon concerning the shares of BB&T common stock to be received by them;
. BB&T must have received certain closing certificates and legal opinions
from Mason-Dixon and its counsel; and
. 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.
In addition, all representations and warranties of Mason-Dixon 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 Mason-
Dixon 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 the merger agreement
and Mason-Dixon's articles of incorporation or 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 Mason-Dixon 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
Mason-Dixon.
Conduct of Mason-Dixon'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 Mason-Dixon
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;
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. declare or pay any distribution on its capital stock, other than
regularly scheduled quarterly dividends of $0.19 per share of Mason-
Dixon 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,
outstanding stock options, the option granted to BB&T in connection with
the merger agreement or to the former shareholders of Bank Maryland Corp
upon delivery to Mason-Dixon of their Bank Maryland Corp stock
certificates in accordance with the merger agreement between Bank
Maryland Corp, Mason-Dixon and certain other parties;
. 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 Mason-Dixon
subsidiary or release any material right or cancel or compromise any
debt or claim, in each case other than in the ordinary course of
business;
. except for the merger of Sterling Bank & Trust Co. with and into the
Bank of Maryland, 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 consistent with past practice;
. fail to comply in any material respect with any legal requirements
applicable to it and to the conduct of its business;
. increase the compensation of any of its directors, officers or employees
(excluding increases resulting from the exercise of outstanding
compensatory stock options), or pay or agree to pay any bonus or provide
any new employee benefit or incentive, except for increases or payments
made in the ordinary course under existing arrangements;
. except for termination of the Sterling Bancorp 401(k) Plan and
completion of the conversion of Mason-Dixon's health insurance effective
January 1, 1999, enter into or substantially modify (except as may be
required by law) any employee benefit, incentive or welfare arrangement,
or any related trust agreement, relating to any of its directors,
officers or other employees (other than renewal of any of arrangement
consistent with past practice);
. solicit inquiries or proposals with respect to, furnish any information
relating to, or participate in any discussions concerning, any other
business combination with Mason-Dixon or any Mason-Dixon subsidiary, or
fail to notify BB&T immediately if any such inquiries or proposals are
received, any such information is requested or required or any such
discussions are sought (except that this would not apply to an
unsolicited offer if Mason-Dixon is advised by legal counsel that in its
opinion the failure to furnish information or negotiate would likely
constitute a breach of the fiduciary duty of the Mason-Dixon Board to
the Mason-Dixon 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 Mason-
Dixon or a Mason-Dixon subsidiary or guarantee by Mason-Dixon or a
Mason-Dixon 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 (except for the election of directors, the
reappointment of officers in the normal course or the hiring and firing
of at-will employees in the ordinary course of business) or (d) any
contract, agreement or understanding with a labor union;
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. change its lending, investment or asset liability management policies in
any material respect, except as required by applicable law and except
that, after shareholder approval of the merger agreement, receipt of
necessary regulatory approvals and written acknowledgment from BB&T that
it believes that all conditions to its obligation to consummate the
merger (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 will continue to
be a condition to BB&T's obligation to consummate the merger) have been
satisfied or waived, Mason-Dixon will cooperate with BB&T to adopt
policies, practices and procedures consistent with those used by BB&T;
. 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 tax returns for the year ended
December 31, 1997, except as required by changes in law;
. incur any commitments for capital expenditures or obligation to make
capital expenditures in excess of $25,000 for any one expenditure or
$100,000 in the aggregate;
. incur any new indebtedness other than deposits from customers, Fed Funds
purchased, 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 Mason-Dixon, 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 Mason-Dixon common stock acquired under that agreement other than in
accordance with its terms; or
. fail to comply in any material respect with any laws, regulations,
ordinances or governmental actions applicable to it and to the conduct
of its business.
Waiver; Amendment; Termination; Expenses
Except with respect to any required regulatory approval, BB&T or Mason-Dixon
may at any time (whether before or after approval of the merger agreement and
the plan of merger by the Mason-Dixon shareholders) extend the time for the
performance of any of the obligations or other acts of the other party and may
waive (a) any inaccuracies of the other party in the representations or
warranties contained in the merger agreement, the plan of merger or any
document delivered pursuant thereto, (b) compliance with any of the covenants,
undertakings or agreements of the other party, or satisfaction of any of the
conditions precedent to its obligations, contained in the merger agreement or
in the plan of merger or (c) the performance by the other party of any of its
obligations set out therein. The parties may also mutually amend or supplement
the merger agreement in writing at any time. No such extension, waiver,
amendment or supplement after approval by the Mason-Dixon
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shareholders of the merger agreement and the plan of merger, however, may
modify either the amount or the form of the consideration to be provided to
holders of Mason-Dixon 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 Mason-
Dixon's obligations, Mason-Dixon will, if it believes appropriate under the
circumstances, resolicit shareholder approval of the merger agreement and the
plan of merger and in connection therewith provide appropriate information
concerning such nonfulfillment.
The merger agreement may be terminated, and the merger may be abandoned:
. at any time before the effective time, by the mutual consent in writing
of BB&T and Mason-Dixon;
. 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;
. 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 date on which the effective time is to occur, 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 Mason-
Dixon do not approve the merger agreement and the plan of merger;
. at any time following August 31, 1999, by either party in writing, if
the effective time has not occurred by the close of business on such
date and the party giving the notice is not in breach of any of its
representations, warranties, covenants or undertakings; or
. by Mason-Dixon, 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 SEC registration fees incurred in connection with the
registration statement will be paid 50% by BB&T and 50% by Mason-Dixon.
Interests of Certain Persons in the Merger
Certain members of Mason-Dixon's management, including all of its directors,
have interests in the merger that are in addition to their interests as
shareholders of Mason-Dixon generally. The Mason-Dixon Board was aware of
these factors and considered them, among other matters, in approving the
merger agreement.
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Employment Agreements
In connection with the merger, it is anticipated that Branch Banking and
Trust Company, BB&T's North Carolina banking subsidiary ("BB&T-NC" or the
"Employer") will enter into a five-year employment agreement with Thomas K.
Ferguson and a three-year employment agreement with each of Michael L. Oster,
Mark A. Keidel, Louna S. Primm, Marcus L. Primm, Christine L. Whiteleather,
Hunter F. Calloway and Richard Springer (with Mr. Ferguson, the "Executives").
The employment agreements will provide for the employment of Mr. Ferguson as
Executive Vice President of BB&T-NC, Mr. Oster as Regional President of BB&T-
NC's newly created Westminster, Maryland region, Mr. Keidel as Senior Vice
President of BB&T-NC and Messrs. Primm, Calloway and Springer, and Ms.
Whiteleather and Ms. Primm, as Vice Presidents of BB&T-NC.
Each of the employment agreements provides that the Executive in question
will receive a base salary at least equal to that previously received from
Mason-Dixon, with the potential for an annual increase based on the Employer's
performance and the Executive's performance.
Each of the 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 similarly situated
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.
In addition, Mr. Ferguson's agreement provides that, if his employment is
terminated for any reason (other than death) prior to his sixty-fifth
birthday, Employer will make health benefits available to him from the date of
such termination to the date of his sixty-fifth birthday on terms and
conditions which are comparable to those applicable to continuing officers of
Employer; provided, that such obligation will terminate if any of the
noncompetition covenants contained in the agreement are applicable and
breached by Mr. Ferguson.
Each Executive's employment agreement provides that, if the Employer
terminates the Executive's employment other than because of disability or for
cause, the Executive will, if he or she complies with certain noncompetition
provisions, be entitled to receive an annual salary equal to the highest
amount of cash compensation (including bonuses) received during any of the
preceding three calendar years ("Termination Compensation") for the remainder
of what would otherwise have been the term of the agreement. In addition, each
Executive would continue to receive health insurance coverage and other group
employee benefits from the Employer on the same terms as were in effect before
the termination, either under the Employer's plans or comparable coverage,
during the time payments of Termination Compensation are made.
Each of the employment agreements provides that the Executive may
voluntarily terminate employment for "Good Reason" (defined below) until
twelve months after a "Change of Control" (defined below) of the Employer or
BB&T and (a) be entitled to receive in a lump sum (1) any compensation due but
not yet paid through the date of termination and (2) in lieu of any further
salary payments from the date of termination to the end of the term of the
agreement, an amount equal to the Termination Compensation times 2.99, and (b)
continue to receive health insurance coverage and other group employee
benefits for a period of three years following termination of employment by
the Executive on the same terms as were in effect either (1) at the date of
termination or (2) at the date of the Change of Control, if such plans and
programs in effect before the Change of Control were, considered together as a
whole, materially more generous to the officers of the Employer than such
plans and programs at the date of termination.
"Good Reason" means any of the following events occurring without the
Executive's consent:
. the assignment to the Executive of duties inconsistent with the position
and status of the Executive's title;
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. 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 previously participated;
. an involuntary relocation of the Executive more than 100 miles from the
location where the Executive worked immediately before a Change in
Control, or the breach by the Employer of any material provision of the
employment agreement; or
. any purported termination of the employment of the Executive by the
Employer not effected in accordance with the employment agreement.
A "Change of Control" would be deemed to occur if
. any person or group of persons (as defined in the Securities Exchange
Act of 1934, as amended, the "Securities Exchange Act") together with
its affiliates, excluding employee benefit plans of the Employer or
BB&T, is or becomes the beneficial owner of securities of the Employer
or BB&T representing 20% or more of the combined voting power of the
Employer's or BB&T's then outstanding securities;
. as a result of a tender offer or exchange offer for the purchase of
securities of the Employer or BB&T (other than an offer by BB&T for its
own securities), or as a result of a proxy contest, merger,
consolidation or sale of assets, or as a result of any combination of
the foregoing, individuals who at the beginning of any two-year period
constitute the BB&T Board, plus new directors whose election or
nomination for election by BB&T's shareholders is approved by a vote of
at least two-thirds of the directors still in office who were directors
at the beginning of the two-year period, cease for any reason during the
two-year period to constitute at least two-thirds of the members of the
BB&T Board;
. the shareholders of BB&T approve a merger or consolidation of BB&T with
any other corporation or entity, regardless of which entity is the
survivor, other than a merger or consolidation that would result in the
voting securities of BB&T outstanding immediately beforehand continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 40% of the combined
voting power of the voting securities of BB&T or the other surviving
entity outstanding immediately after the merger or consolidation;
. 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.
In addition, Mr. Keidel's agreement provides that, if he elects to resign
from employment subsequent to its one-year anniversary, and such resignation
is for reasons other than "Good Reason" or disability, he will be entitled to
receive an annual amount for the remainder of the term of the agreement as in
effect at the time of such resignation equal to sixty percent of his annual
base salary as in effect at the time of such resignation, payable in monthly
installments.
If any of the payments to be made under the employment agreements would
constitute a "parachute payment," as defined in Section 280G of the Internal
Revenue 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 Internal Revenue Code
generally provide that if "parachute payments" are paid to an individual,
everything above the base amount will be subject to a 20% excise tax payable
by the individual (in addition to the payment of regular income taxes on the
payments), as well as be nondeductible by the employer for federal income tax
purposes.
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The Executives' employment agreements will supersede their existing
employment agreements, if any, and change of control arrangements with Mason-
Dixon or its subsidiaries.
Mason-Dixon Board of Directors
In connection with the merger, BB&T will offer each member of the Mason-
Dixon Board a seat on its Advisory Board for the Westminster, Maryland area.
For two years after the effective time, those members will receive, as
compensation for service on the Advisory Board, member's fees (annual retainer
and attendance fees) equal in amount each year to the annual retainer and
schedule of attendance fees for directors of Mason-Dixon in effect on January
1, 1999. These Advisory Board members will thereafter receive fees in
accordance with BB&T's standard schedule of Advisory Board service fees. For
two years after the effective time, no such member may be prohibited from
serving because he or she has reached the maximum age for Advisory Board
service (currently age 70). In addition to the foregoing, Thomas K. Ferguson
will be appointed to the BB&T-NC Board.
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 Mason-Dixon for acts or
omissions before the effective time. This insurance will provide at least the
same coverage and amounts as contained in Mason-Dixon'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 Mason-Dixon's policy, in which case
BB&T would maintain the most advantageous policies of directors' and officers'
liability insurance obtainable for a premium equal to this amount. BB&T has
also agreed to indemnify all individuals who are or have been officers,
directors or employees of Mason-Dixon or any Mason-Dixon 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 Mason-Dixon's articles of incorporation or bylaws on the date hereof and
is permitted under North Carolina law.
In addition, BB&T or one of its subsidiaries will assume and fulfill the
obligation of Mason-Dixon or its subsidiaries under the Agreement and Plan of
Share Exchange and Merger with Sterling Bancorp and the Agreement of Merger
with Bank Maryland Corp concerning directors' and officers' liability
insurance and indemnification of the directors and officers of the Sterling
and Bank Maryland entities.
Regulatory Considerations
Bank holding companies (such as BB&T and Mason-Dixon) 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 Mason-Dixon incorporated by reference
herein. See "Where You Can Find More Information" on page 66. 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.
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The Merger
The merger is subject to approval by the Board of Governors of the Federal
Reserve System under Sections 3 and 4 of the Bank Holding Company Act of 1956.
In considering the approval of a transaction such as the merger, this act
requires the Federal Reserve to review the financial and managerial resources
and future prospects of the bank holding companies and the banks concerned and
the convenience and needs of the communities to be served. The Federal Reserve
also is required to evaluate whether the merger would result in a monopoly or
would be in furtherance of any combination or conspiracy or attempt to
monopolize the business of banking in any part of the United States or
otherwise would substantially lessen competition or tend to create a monopoly
or which in any manner would be in restraint of trade, unless it finds the
anti-competitive effects of the proposed transaction are clearly outweighed in
the public interest by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served.
Where a transaction, such as the merger, is the acquisition by a bank
holding company of a bank located in a state other than the home state of the
bank holding company (in this case North Carolina), the Bank Holding Company
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 Federal Reserve also must review the nonbanking activities being
acquired in the merger (such as consumer finance activities, certain insurance
agency activities and service corporation activities) to determine whether the
acquisition of such activities reasonably can be expected to produce benefits
to the public (such as greater convenience, increased competition or gains in
efficiency) that outweigh possible adverse effects (such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices). This consideration includes an
evaluation by the Federal Reserve of the financial and managerial resources of
BB&T and its subsidiaries and the nonbank subsidiaries of Mason-Dixon, and the
effect of the proposed transaction on those resources, as well as whether the
merger would result in a monopoly or otherwise would substantially lessen
competition.
The merger also is subject to approval by the Maryland Commissioner of
Financial Regulation under the bank holding company act provisions of the
Maryland Financial Institutions Code, which permit a bank holding company,
such as BB&T, to directly or indirectly acquire a Maryland bank, such as
Carroll County Bank and Trust Company or Bank of Maryland, if the Maryland
Commissioner approves the transaction. In its review of the transaction, the
Maryland Commissioner is required to consider, among other things, whether the
merger would be detrimental to the safety and soundness of the banks to be
acquired and whether the merger would result in an undue concentration of
resources or a substantial reduction in competition in Maryland.
BB&T also is required to provide notice to the Virginia Bureau of Financial
Institutions under the bank holding company act provisions of the Virginia
Code, which permit an out-of-state bank holding company that controls a
Virginia bank, such as BB&T, to acquire a bank outside of Virginia, such as
Carroll County Bank and Trust or Bank of Maryland, if the Bureau approves the
transaction. The Bureau is required to approve the transaction if it
determines that the transaction would not be detrimental to the safety and
soundness of the Virginia bank.
BB&T also must provide notice of the merger to the Georgia Department of
Banking and Finance at least thirty days prior to consummation of the merger.
All of the required applications and notices for the merger have been
submitted to the appropriate regulatory agencies, and BB&T and Mason-Dixon
anticipate that the regulatory approvals described herein will be obtained in
time to allow completion of the merger during the third quarter. 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
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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 discussed below) or, if such a challenge is made, as
to the results thereof.
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 the first
quarter of 2000. 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 to substantially 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 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 applications in writing and to request a
hearing.
The North Carolina Commissioner of Banks also must approve the subsidiary
bank mergers under the bank merger act provisions of the North Carolina
General Statutes. In its review of the subsidiary bank mergers, the N.C.
Commissioner is required to consider whether the interests of the depositors,
creditors and shareholders of each institution are protected, whether the
merger is in the public interest and whether the merger is for legitimate
purposes.
The Maryland Commissioner also must approve the subsidiary bank mergers
under the bank merger act provisions 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, whether it provides an
adequate capital structure and whether the merger is against the public
interest.
BB&T and Mason-Dixon are not aware of any other governmental approvals or
actions that are required for completion of the merger or the subsidiary bank
mergers, except as described above. Should any other approval or action be
required, it is currently expected that such approval or action would be
sought. There can be no assurance that any such approval or action, if needed,
could be obtained, would not delay completion of the merger or would not be
conditioned in a manner that would cause BB&T to abandon the merger in the
manner permitted by the merger agreement.
Material Federal Income Tax Consequences of the Merger
The following is a summary description of the material anticipated federal
income tax consequences of the merger generally applicable to the shareholders
of Mason-Dixon and to BB&T and Mason-Dixon. This summary is not intended to be
a complete description of all of the federal income tax consequences of the
merger. No information is provided with respect to the tax consequences of the
merger under any other tax laws, including applicable state, local and foreign
tax laws. In addition, the following discussion may not be applicable with
respect to certain specific categories of shareholders, including but not
limited to persons who are corporations, trusts, dealers in securities,
financial institutions, insurance companies or tax exempt organizations;
persons who are not United States citizens or resident aliens or domestic
entities (partnerships or trusts); persons who are subject to alternative
minimum tax (to the extent that tax affects the tax consequences of the
merger) or are
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subject to the "golden parachute" provisions of the Internal Revenue Code (to
the extent that tax affects the tax consequences of the merger); persons who
acquired Mason-Dixon 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." No ruling has been or will be requested from the IRS with
respect to the tax effects of the merger. The federal income tax laws are
complex, and a shareholder's individual circumstances may affect the tax
consequences to the shareholder. Consequently, each Mason-Dixon shareholder is
urged to consult his or her own tax advisor regarding the tax consequences,
including the applicable United States federal, state, local, and foreign tax
consequences, of the merger to him or her.
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
Mason-Dixon by reason of the merger; (c) the shareholders of Mason-Dixon 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 Mason-Dixon common
stock; (d) a shareholder of Mason-Dixon 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 Mason-Dixon 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
Mason-Dixon common stock will include the period during which the shareholder
held the shares of Mason-Dixon common stock surrendered in the exchange,
provided that the Mason-Dixon 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
Mason-Dixon 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 Mason-Dixon Board wished to proceed
with the merger, Mason-Dixon 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 Mason-Dixon 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 Mason-Dixon, 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 Mason-Dixon for the entire fiscal year in
which the merger occurs; however, certain expenses incurred to effect the
merger must be treated by BB&T as current charges against income rather than
adjustments to its balance sheet. The unaudited pro forma financial
information contained in this proxy statement/prospectus has been prepared
using the pooling-of-interests method of accounting. If the merger does not
qualify for pooling-of-interests accounting treatment, BB&T may, in its
discretion, terminate the transaction.
The Option Agreement
General
As a condition to BB&T entering into the merger agreement, Mason-Dixon (as
issuer) entered into an agreement with BB&T (as grantee), pursuant to which
Mason-Dixon granted an option to BB&T to purchase from Mason-Dixon up to
1,006,868 shares of Mason-Dixon common stock (subject to adjustment in certain
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circumstances) at a price of $40.00 per share (subject to adjustment under
certain circumstances). The purchase of any shares of Mason-Dixon common stock
pursuant to the option is subject to compliance with applicable law, including
the receipt of necessary approvals under the Bank Holding Company Act of 1956,
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 Mason-Dixon from
considering or proposing such an acquisition, even if they were prepared to
offer to pay consideration to shareholders of Mason-Dixon with a higher
current market price than the BB&T common stock to be received for Mason-Dixon
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 66.
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, Mason-Dixon 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 Mason-Dixon 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 Mason-Dixon and its subsidiaries or (c) the issuance, sale or other
disposition of securities representing 15% or more of the voting power
of Mason-Dixon 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 Mason-Dixon common stock.
The obligation of Mason-Dixon to issue shares of Mason-Dixon common stock upon
exercise of the option will be deferred (but will not terminate) (a) until the
receipt of all required governmental or regulatory approvals or consents, or
until the expiration or termination of any waiting period required by law, or
(b) so long as any injunction or other order, decree or ruling issued by any
federal or state court of competent jurisdiction is in effect that prohibits
the sale or delivery of the shares.
Termination
The option will terminate upon the earliest to occur of the following
events: (a) the effective time; (b) the termination of the merger agreement
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event
(as defined below) (other than a termination by BB&T based on either a
material breach by Mason-Dixon of a covenant or agreement in the merger
agreement or an inaccuracy in Mason-Dixon'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 Mason-Dixon to approve the merger agreement and
the plan of 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
Mason-Dixon common stock or the filing of a registration statement with
respect to such an offer, or
. the failure of the shareholders of Mason-Dixon to approve the merger
agreement, the failure of the meeting to have been held, the
cancellation of the meeting prior to the termination of the merger
agreement or the Mason-Dixon Board having withdrawn or modified in any
manner adverse to BB&T its recommendations with respect to the merger
agreement, in any case after a third party: (a) proposes to engage in an
Acquisition Transaction, (b) commences a tender offer or files a
registration statement under the Securities Act with respect to an
exchange offer such that it would thereafter own 15% or more of the
outstanding shares of Mason-Dixon 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 Mason-Dixon, 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 Mason-Dixon 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 Mason-Dixon common stock before termination of the option.
Repurchase Rights
At the request of the holder of the option any time during the 12 months
after the first occurrence of a Repurchase Event (as defined below), Mason-
Dixon 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 Mason-Dixon 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 Mason-
Dixon 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 Mason-Dixon common stock over the
purchase price, multiplied by (b) the number of shares of Mason-Dixon
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 Mason-Dixon 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 Mason-Dixon 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) is formed that has acquired actual ownership or
control of, 50% or more of the then outstanding shares of Mason-Dixon common
stock, or (b) any of the merger or other business combination transactions set
forth in the paragraph below describing substitute options is completed.
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Substitute Options
If, before the termination of the option agreement, Mason-Dixon enters into
an agreement:
. to consolidate with or merge into any third party and will not be the
continuing or surviving corporation of the consolidation or merger;
. to permit any third party to merge into Mason-Dixon with Mason-Dixon as
the continuing or surviving corporation, but, in connection therewith,
the then outstanding shares of Mason-Dixon common stock are changed into
or exchanged for stock or other securities of Mason-Dixon or any other
person or cash or any other property, or the outstanding shares of
Mason-Dixon 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
Mason-Dixon 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 Mason-Dixon'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 Mason-Dixon 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
Mason-Dixon 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 Mason-Dixon or a subsidiary of Mason-Dixon at the effective
time who remains or 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 employees of the BB&T employer,
subject to the terms of such plans and programs. Service with Mason-Dixon or a
Mason-Dixon subsidiary will be deemed to be service with the BB&T employer for
the purpose of determining eligibility to participate and vesting (if
applicable) in such welfare plans and programs, but not for the purpose of
computing benefits, if any, determined in whole or in part with reference to
service. In addition, coverage under the group health plans of Mason-Dixon and
its subsidiaries will be deemed "creditable coverage" within the meaning of
ERISA Section 701(c) for purposes of any preexisting condition limitation
which may apply under any group health plan maintained by BB&T or a subsidiary
of BB&T; provided, however, that no coverage prior to a "significant break in
coverage" as defined in ERISA Section 701(c)(2) will be counted as "creditable
coverage."
Each employee of Mason-Dixon or a Mason-Dixon subsidiary who remains or
becomes an employee of BB&T or a BB&T subsidiary and who is terminated after
the effective time (excluding any employee who has an existing employment or
special termination agreement) will be entitled to severance pay in accordance
with the general severance policy maintained by BB&T if and to the extent such
employee is entitled to severance pay under the policy. An employee's service
with Mason-Dixon or a Mason-Dixon subsidiary will be treated as
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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 Mason-Dixon 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 will cause the 401(k) plan of Mason-Dixon to be merged with the 401(k)
plan maintained by BB&T and its subsidiaries, and the account balances of
participants in the Mason-Dixon plan will be transferred to the accounts of
such participants 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 (subject to BB&T's right to
terminate such plan and the provisions of Internal Revenue Code Section
411(d)(6)). For purposes of administering the 401(k) plan, service with Mason-
Dixon 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.
Pension Plan
BB&T will either (i) terminate the noncontributory defined benefit pension
plan of Carroll County Bank and Trust Company (the "Pension Plan") pursuant to
a standard termination in accordance with Section 4041 of ERISA and provide
for full vesting of the accrued benefits of all participants in the Pension
Plan and the distribution of the assets thereof to the participants or (ii)
merge the Pension Plan with and into BB&T's defined benefit pension plan. If
BB&T terminates the Pension Plan, the actions relating to such termination
will be conditioned upon receiving a favorable determination letter from the
IRS with regard to the termination of the Pension Plan and the provisions of
Internal Revenue Code Section 411(d)(6). 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 Mason-Dixon or a subsidiary of Mason-
Dixon at the effective time who remains or becomes an employee immediately
following the effective time of BB&T or a subsidiary of BB&T will be given
credit under BB&T's defined benefit pension plan for service with Mason-Dixon
or its subsidiaries for participation and vesting purposes, but not for
purposes of benefit accrual; provided, that if BB&T merges the Pension Plan
into BB&T's defined benefit pension plan, BB&T's defined benefit pension plan
will provide credit for benefits accrued under the Pension Plan prior to the
effective time.
Stock Options
At the effective time, each stock option granted under the Mason-Dixon 1997
Omnibus Share Plan or pursuant to those stock option grants issued by Mason-
Dixon on February 12, 1997 and December 27, 1996 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 Mason-
Dixon's stock option plan or the option grants outside the plan, as the case
may be, except that (a) BB&T and the compensation committee of the BB&T Board
will be substituted for Mason-Dixon and the compensation committee of the
Mason-Dixon Board administering the stock option plan, (b) each stock option
may be exercised solely for shares of BB&T common stock, (c) the number of
shares of BB&T common stock subject to each stock option will be the number of
whole shares (omitting any fractional share) determined by multiplying the
number of shares of Mason-Dixon 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.
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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 or any other duly adopted comparable 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 Internal Revenue 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 Mason-Dixon 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 plan 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 44,237 shares of Mason-Dixon common stock may be outstanding at
the effective time. Any shares of Mason-Dixon common stock issued pursuant to
the exercise of stock options under the stock option plan or otherwise 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 Mason-Dixon common stock.
Restrictions on Resales by Affiliates
All shares of BB&T common stock issuable in the merger will be registered
under the Securities Act and will be freely transferable, except that any such
shares received by "persons" who are deemed to be "affiliates" (as such terms
are defined under the Securities Act) of Mason-Dixon 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 SEC's Accounting Series Release Nos.
130 and 135 relating to publication of financial results of the post-merger
combined operations of BB&T and Mason-Dixon. Those who may be deemed
affiliates of Mason-Dixon generally include individuals or entities that
directly, or indirectly through one or more intermediaries, control, are
controlled by or are under common control with Mason-Dixon and include
directors and certain executive officers of Mason-Dixon. 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 Mason-Dixon to use its best efforts 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.
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Charitable Contribution
In connection with the merger, BB&T has committed to cause a charitable
contribution to be made as soon as practicable after the effective time of the
merger to a Section 501(c)(3) organization or, at the option of the City of
Westminster, the City of Westminster, consisting of $2.25 million in cash and
of the property currently owned by Mason-Dixon and located in Westminster,
Maryland. The actual donee and structure of the gifts will be as mutually
agreed by Carroll County Bank and Trust Company and BB&T. It is expected that
$2 million of the cash will be applied to construct a general purpose office
building and parking deck on the donated property for the benefit of the donee
referenced above and that the remaining cash amount of $250,000 will be
donated to the same or to another acceptable donee for charitable purposes
related to the new building and parking deck and to general development of
downtown Westminster.
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 principal commercial bank subsidiaries are BB&T-NC, Branch Banking and
Trust Company of South Carolina ("BB&T-SC") and Branch Banking and Trust
Company of Virginia ("BB&T-VA"). 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
Corporation of Virginia (which in turn owns all of the issued and outstanding
shares of BB&T-VA and all of the issued and outstanding shares of the eleven
affiliate banks of the former MainStreet Financial Corporation ("MainStreet"))
and Scott & Stringfellow, Inc.
Operating Subsidiaries
BB&T-NC, BB&T's largest subsidiary, is the oldest bank in North Carolina and
currently operates through 345 banking offices throughout North Carolina and
35 offices in metropolitan Washington, D.C. and Maryland. 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.
BB&T-VA offers a full range of commercial and retail banking services
through 62 banking offices in the Hampton Roads and Richmond areas and the
southern, central and southwestern regions of Virginia.
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The eleven affiliate banks (including a trust company subsidiary) of
MainStreet provide full-service banking and trust services throughout
Virginia, southern Maryland and metropolitan Washington, D.C.
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.
Scott & Stringfellow, Inc. ("Scott & Stringfellow"), a full-service retail
brokerage, institutional equity and debt underwriting, investment advisory
services, corporate finance, equity trading and equity research firm, was
acquired on March 26, 1999 and was merged with Craigie Incorporated, which
specialized in the origination, trading and distribution of fixed income
securities and equity products in both the public and private capital markets,
on May 5, 1999.
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. BB&T Bankcard Corporation
is a special purpose credit card bank.
Acquisitions
BB&T's profitability and market share have been enhanced through both
internal growth and acquisitions of both financial and nonfinancial
institutions during recent years. BB&T's most recent acquisitions include the
following:
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 Bancorporation,
Inc. ("Franklin") in a transaction accounted for as a pooling-of-interests.
Franklin National Bank of Washington D.C., the banking subsidiary of Franklin,
operated ten banking offices in the metropolitan Washington, D.C. area and was
merged into BB&T-NC on February 22, 1999.
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 had
28 branch offices in the metropolitan Washington D.C. and southern Maryland
areas, into BB&T-NC in November 1998. MFB specializes 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 March 5, 1999, BB&T acquired MainStreet. With $2.3 million in assets,
MainStreet operated 46 full-service banking offices in Virginia and three in
Maryland.
BB&T acquired Scott & Stringfellow Financial, Inc., the holding company of
Scott & Stringfellow, on March 26, 1999. Scott & Stringfellow has 32 offices
in the Carolinas, Virginia and West Virginia and manages more than $10 billion
in total assets for clients.
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On January 27, 1999, BB&T announced that it had agreed to acquire First
Citizens Corporation ("First Citizens") in a tax-free transaction to be
accounted for as a pooling of interests in which First Citizens shareholders
would receive 1.0789 shares of BB&T common stock for each share of First
Citizens common stock. The transaction is valued, based on BB&T's closing
price of $37.5625 on January 25, at $125.9 million. First Citizens operates 13
banking offices and one mortgage loan office in the south metropolitan Atlanta
area.
On February 25, 1999, BB&T announced that it had agreed to acquire Matewan
BancShares Inc. ("Matewan") in a tax-free transaction. In the transaction,
Matewan common shareholders would receive 0.67 shares of BB&T common stock for
each share of Matewan common stock and Matewan preferred shareholders would
receive 0.8375 shares of BB&T common stock for each share of Matewan preferred
stock. Through its banking subsidiaries, Matewan National Bank and Matewan
FSB, Matewan operates 22 banking offices and one mortgage loan office in
southwestern Virginia, southern West Virginia and eastern Kentucky and is
expected to strengthen BB&T's western Virginia franchise and to expand such
franchise into southern West Virginia and eastern Kentucky.
On April 28, 1999, BB&T announced that it had agreed to acquire First
Liberty Financial Corp. ("First Liberty") in a tax-free transaction to be
accounted for as a pooling-of-interests. Based on BB&T's closing price of $39
per share on April 26, 1999, First Liberty shareholders would receive 0.8525
of a share of BB&T common stock for each share of First Liberty common stock,
or $33.25 per share. The final exchange ratio will be determined based on a
pricing period prior to closing and will be not less than 0.85 shares of BB&T
common stock for each share of First Liberty common stock or more than 0.87
shares of BB&T common stock for each share of First Liberty common stock.
First Liberty, which has approximately $1.7 billion in assets and operates 39
banking offices and 13 consumer finance offices in Macon and Savannah,
Georgia, is expected to expand BB&T's presence into economically strong
markets in Georgia.
BB&T expects to continue to take advantage of the consolidation of the
financial services industry by developing its franchise through the
acquisition of financial institutions. Such acquisitions may entail the
payment by BB&T of consideration in excess of the book value of the underlying
net assets acquired, may result in the issuance of additional shares of BB&T
capital stock or the incurring of an additional indebtedness by BB&T, and
could have a dilutive effect on the per share earnings or book value of BB&T
common stock. Moreover, such acquisitions sometimes result in significant
front-end charges against earnings, although cost savings, especially incident
to in-market acquisitions, also are frequently anticipated.
Capital
The Federal Reserve has established a minimum requirement for a bank holding
company's ratio of capital to risk-weighted assets (including on-balance sheet
activities and certain off-balance sheet activities, such as standby letters
of credit) of 8%. At least half of a bank holding company's total capital is
required to be composed of common equity, retained earnings, and qualifying
perpetual preferred stock, less certain intangibles ("Tier 1 capital"). The
remainder may consist of certain subordinated debt, certain hybrid capital
instruments and other qualifying preferred stock, and a limited amount of the
loan loss allowance ("Tier 2 capital" and, together with Tier 1 capital,
"total capital"). At March 31, 1999, BB&T's Tier 1 and total capital ratios
were 9.7% and 14.2%, respectively. Effective January 1, 1998, the Federal
Reserve is also requiring certain bank holding companies that engage in
trading activities to adjust their risk-based capital to take into
consideration market risk that may result from movements in market prices of
covered trading positions in trading accounts, or from foreign exchange or
commodity positions, whether or not in trading accounts, including changes in
interest rates, equity prices, foreign exchange rates or commodity prices. Any
capital required to be maintained pursuant to these provisions may consist of
new "Tier 3 capital" consisting of certain short term subordinated debt. In
addition, the Federal Reserve has issued a policy statement, pursuant to which
a bank holding company that is determined to have weaknesses in its risk
management processes or a high level of interest rate risk exposure may be
required to hold additional capital.
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The Federal Reserve also has established minimum leverage ratio requirements
for bank holding companies. These requirements provide for a minimum leverage
ratio of Tier 1 capital to adjusted average quarterly assets ("leverage
ratio") equal to 3% for bank holding companies that meet certain specified
criteria, including that they have the highest regulatory rating. All other
bank holding companies 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 March 31, 1999 was 6.9%. Bank holding companies experiencing
internal growth or making acquisitions are expected to maintain strong capital
positions substantially above the minimum supervisory levels without
significant reliance on intangible assets. Furthermore, these capital
requirements indicate that the Federal Reserve will continue to consider a
"tangible Tier 1 leverage ratio" (deducting all intangibles) in evaluating
proposals for expansion or new activity.
The FDIC has adopted minimum risk-based and leverage ratio regulations to
which BB&T's state bank subsidiaries are subject that are substantially
similar to those requirements established by the Federal Reserve described
above. The Office of the Comptroller of the Currency also has similar
regulations that would apply to BB&T's national bank subsidiaries. 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 March 31, 1999.
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 34% 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.
The FDIC has established the same assessment rates for both BIF-insured and
SAIF-insured deposits, effective January 1, 1997. For the semi-annual period
beginning December 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 legislation enacted in 1996 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 MASON-DIXON
Mason-Dixon is a bank holding company headquartered in Westminster, Maryland
that was incorporated in 1991. Mason-Dixon conducts its operations in Maryland
primarily through its principal operating subsidiaries, Carroll County Bank
and Trust Company, Bank of Maryland, Rose Shanis Financial Services, LLC and
Bay Insurance, LLC. Mason-Dixon's major activity since its inception has been
to provide advisory services and coordinate the general policies of its
subsidiaries. Through its bank subsidiaries, Mason-Dixon engages in commercial
and consumer lending, depository business, and trust business, including the
receiving of demand and time deposits and the making of loans to individuals,
associations, partnerships, and corporations. Through its nonbank
subsidiaries, Mason-Dixon offers consumer loans, sales finance, second
mortgage loans, as well as credit related insurance and other products.
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DESCRIPTION OF BB&T CAPITAL STOCK
The authorized capital stock of BB&T consists of 500,000,000 shares of BB&T
common stock, par value $5.00 per share, and 5,000,000 shares of preferred
stock, par value $5.00 per share. As of May 14, 1999, there were 307,875,228
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 Mason-Dixon
common stock outstanding at the record date, it is estimated that
approximately 6,600,001 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 BB&T's articles of incorporation, 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 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,
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could have the effect of discouraging a business combination that shareholders
believe to be in their best interests. The provisions of BB&T's shareholder
rights plan are discussed below.
On December 17, 1996, the BB&T Board declared a dividend distribution of one
right (a "Right," and collectively the "Rights") for each outstanding share of
BB&T common stock to shareholders of record at the close of business on
January 17, 1997. One Right will also be distributed for each share of BB&T
common stock issued between January 17, 1997 and the occurrence of a
"Distribution Date" (described in the next paragraph). Each Right entitles the
registered holder to purchase from BB&T a unit consisting of one-hundredth of
a share (a "Unit") of BB&T Junior Preferred Stock at a Purchase Price of
$145.00 per Unit, subject to adjustment, or, under certain circumstances,
other securities or property. The description and terms of the Rights are set
forth in the Rights Agreement, dated as of December 17, 1996, between BB&T and
BB&T-NC in the capacity of Rights Agent (the "Rights Agreement").
Initially, the Rights will be attached to all BB&T common stock certificates
representing shares then outstanding, and no separate Rights Certificates (as
defined in the Rights Agreement) will be distributed. A "Distribution Date"
will occur, and the Rights will separate from shares of BB&T common stock,
upon the earliest of (a) 10 business days following a public announcement that
a person or group of affiliated or associated persons (an "Acquiring Person")
has acquired, or obtained the right to acquire, beneficial ownership of 20% or
more of the outstanding shares of BB&T common stock (the "Stock Acquisition
Date"), (b) 10 business days following the commencement of a tender offer or
exchange offer that would if completed result in a person or group
beneficially owning 20% or more of such outstanding shares of BB&T common
stock or (c) 10 business days after the BB&T Board declares any Person to be
an "Adverse Person," as described in the following paragraph.
The BB&T Board will declare a person to be an Adverse Person upon its
determinations (a) that such person, alone or together with its affiliates and
associates, has or will become the beneficial owner of 10% or more of the
outstanding shares of BB&T common stock (provided that any such determination
will not be effective until such person has in fact become the beneficial
owner of 10% or more of the outstanding shares of BB&T common stock) and (b)
following consultation with such persons as the BB&T Board deems appropriate,
that (1) such beneficial ownership by such person is intended to cause, is
reasonably likely to cause or will cause BB&T to repurchase the BB&T common
stock beneficially owned by such person or to cause pressure on BB&T to take
action or enter into a transaction or series of transactions intended to
provide such person with short-term financial gain under circumstances where
the BB&T Board determines that the best long-term interests of BB&T and its
shareholders would not be served by taking such action or entering into such
transactions or series of transactions at that time or (2) such beneficial
ownership is causing or is reasonably likely to cause a material adverse
impact (including, but not limited to, impairment of relationships with
customers or impairment of BB&T's ability to maintain its competitive
position) on the business or prospects of BB&T or (iii) such beneficial
ownership otherwise is determined to be not in the best interests of BB&T and
its shareholders, employees, customers and communities in which BB&T and its
subsidiaries do business.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on December 31, 2006, subject to extension by the
BB&T Board, or unless earlier redeemed by BB&T as described below.
As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of BB&T common stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except for certain issuances in
connection with outstanding options and convertible securities and as
otherwise determined by the BB&T Board, only shares of BB&T common stock
issued before the Distribution Date will be issued with Rights.
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
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Agreement, (a) upon exercise and payment of the exercise price, BB&T common
stock (or, in certain circumstances, cash, property or other securities of
BB&T) having a value equal to two times the exercise price of the Right or (b)
at the discretion of the BB&T Board, upon exercise and without payment of the
exercise price, BB&T common stock (or, in certain circumstances, cash,
property or other securities of BB&T) having a value equal to the difference
between the exercise price of the Right and the value of the consideration
that would be payable under clause (a). Notwithstanding any of the foregoing,
following the occurrence of any of the events set forth in this paragraph, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person or Adverse Person
will be null and void. Rights will not become exercisable following the
occurrence of either of the events set forth above, however, until such time
as the Rights are no longer redeemable by BB&T as set forth below.
For example, at an exercise price of $145.00 per Right, each Right not owned
by an Acquiring Person or an Adverse Person (or by certain related parties)
following an event set forth in the preceding paragraph would entitle its
holder to purchase $290.00 worth of BB&T common stock (or other consideration,
as noted above) for $145.00. Assuming that the BB&T common stock had a per
share value of $36.25 at such time, the holder of each valid Right would be
entitled to purchase eight shares of BB&T common stock for $145.00.
Alternatively, at the discretion of the BB&T Board, each Right following an
event set forth in the preceding paragraph, without payment of the exercise
price, would entitle its holder to BB&T common stock (or other consideration,
as noted above) worth $145.00.
If, at any time following the Stock Acquisition Date, (a) BB&T is acquired
in a merger, statutory share exchange or other business combination
transaction in which BB&T is not the surviving corporation or (b) 50% or more
of BB&T's assets or earning power is sold or transferred, each holder of a
Right (except Rights that previously have been voided as set forth above) will
thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right. The Purchase Price payable, and the number of Units of BB&T Junior
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution if
certain events occur.
In general, BB&T may redeem the Rights in whole, but not in part, at a price
of $0.01 per Right at any time until 10 business days following the earlier of
the Stock Acquisition Date or the effective date of any declaration by the
BB&T Board that any person is an Adverse Person. After the redemption period
has expired, BB&T's right of redemption may be reinstated if an Acquiring
Person or Adverse Person reduces his or her beneficial ownership to less than
10% of the outstanding shares of BB&T common stock in a transaction or series
of transactions not involving BB&T and if there are no other Acquiring Persons
or Adverse Persons.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of BB&T, including, without limitation, the right to vote or
to receive dividends. While the distribution of the Rights will not be taxable
to shareholders or to BB&T, shareholders may, depending upon the
circumstances, recognize taxable income if the Rights become exercisable for
stock (or other consideration) of BB&T or for common stock of the acquiring
company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
BB&T Board before the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the BB&T Board in order
to cure any ambiguity, to make changes that do not adversely affect the
interests of holders of Rights (excluding the interests of any Acquiring
Person or Adverse Person) or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust the time
period governing redemption may be made when the Rights are not redeemable.
The Rights Agreement is filed as an exhibit to a registration statement on
Form 8-A dated January 10, 1997 that has been filed by BB&T with the SEC. 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
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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 66.
Certain Provisions of the NCBCA, BB&T Articles and BB&T Bylaws
Provisions of the North Carolina Business Corporation Act (the "NCBCA") and
BB&T's articles of incorporation and 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 and BB&T's articles of incorporation and bylaws that
may be deemed to have anti-takeover effects on BB&T.
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
BB&T's articles of incorporation and 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 BB&T's 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 Mason-Dixon 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 Mason-Dixon
common stock. Since BB&T is organized under the laws of the State of North
Carolina and Mason-Dixon is organized under the laws of the State of Maryland,
differences in the rights of holders of BB&T common stock and those of holders
of Mason-Dixon common stock arise from differing provisions of the NCBCA and
the Maryland General Corporation Law (the "MGCL") 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 Mason-Dixon 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
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MGCL and the governing corporate instruments of BB&T and Mason-Dixon, to which
the shareholders of Mason-Dixon 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. BB&T's articles of
incorporation 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 May
14, 1999, there were 307,875,228 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."
Mason-Dixon
Mason-Dixon's authorized capital stock consists of 20,000,000 shares of
Mason-Dixon common stock, par value $1.00 per share. As of May 7, 1999, there
were 5,076,924 shares of Mason-Dixon common stock outstanding.
Special Meetings of Shareholders and Action by Shareholders without a Meeting
BB&T
Special meetings of the shareholders of BB&T may be called at any time by
BB&T's Chief Executive Officer, President or Secretary or by the BB&T Board.
Under the NCBCA, shareholders of a North Carolina corporation may take action
without a meeting by one or more written consents signed by all shareholders
entitled to vote on the matter in question, provided that any required notice
is given to any shareholders not entitled to vote on such matter.
Mason-Dixon
Special meetings of the shareholders of Mason-Dixon may be called at any
time by Mason-Dixon's Chairman of the Board, by the President or by a majority
of the Mason-Dixon Board, and shall be called by the Chairman, President or
Secretary upon the request in writing of the holders of 50% of all the shares
outstanding and entitled to vote at the meeting. A special meeting need not be
called to consider any matter which is substantially the same as a matter
voted on at any special meeting of the shareholders held during the preceding
12 months.
Directors
BB&T
BB&T's articles of incorporation and 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 BB&T's articles of incorporation and
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.
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Mason-Dixon
Mason-Dixon's articles of incorporation and bylaws provide that the number
of directors of Mason-Dixon will consist of 12 to 14 individuals. The Mason-
Dixon Board is divided into three classes, with directors serving staggered
three-year terms. Directors may be removed only for cause, upon the
affirmative vote of a majority of the entire Mason-Dixon Board (exclusive of
the Director being considered for removal) or upon the affirmative vote of not
less than 67% of the outstanding voting stock of Mason-Dixon. Holders of
Mason-Dixon common stock do not have cumulative voting rights in the election
of directors.
Dividends and Other Distributions
BB&T
The NCBCA prohibits a North Carolina corporation from making any
distributions to shareholders, including the payment of cash dividends, that
would render it insolvent or unable to meet its obligations as they become due
in the ordinary course of business. BB&T is not subject to other express
regulatory restrictions on payments of dividends and other distributions. The
ability of BB&T to pay distributions to the holders of BB&T common stock will
depend, however, to a large extent upon the amount of dividends its bank
subsidiaries, which are subject to restrictions imposed by regulatory
authorities, pay to BB&T. In addition, the Federal Reserve could oppose a
distribution by BB&T if it determined that such a distribution would harm
BB&T's ability to support its bank subsidiaries. There can be no assurances
that dividends will be paid in the future. The declaration, payment and amount
of any such future dividends would depend on business conditions, operating
results, capital, reserve requirements and the consideration of other relevant
factors by the BB&T Board.
Mason-Dixon
The MGCL prohibits a Maryland corporation from making any distributions to
shareholders, including the payment of cash dividends, if either (a) the
corporation would not be able to pay its indebtedness as it becomes due in the
usual course of business or (b) the corporation's total assets would be less
than the sum of the corporation's total liabilities plus, unless the charter
permits otherwise, the amount that would be needed, if the corporation were to
be dissolved at the time of the distribution, to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights on
dissolution are superior to those receiving the distribution.
The ability of the Mason-Dixon Board to declare a dividend to pay
distributions to the holders of Mason-Dixon common stock depends, however,
upon the amount of dividends its bank subsidiaries pay to Mason-Dixon. Mason-
Dixon's bank subsidiaries, like BB&T's bank subsidiaries, are subject to
regulatory restrictions on the payment of dividends.
Notice of Shareholder Nominations and Shareholder Proposals
BB&T
BB&T's 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. BB&T's 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. In addition, a shareholder intending to make a proposal for
consideration at a regularly scheduled annual meeting of shareholders that is
not intended to be included in the proxy statement for such meeting must
notify the Secretary of BB&T in writing not later than 60 days before one year
after the date of the immediately
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preceding annual meeting of shareholders of such shareholder's intention. 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.
In accordance with Rule 14a-8, as promulgated by the SEC pursuant to the
Securities Exchange Act, shareholder proposals intended to be included in the
proxy statement and presented at a regularly scheduled annual meeting must be
received by BB&T no later than 120 days before the anniversary of the date
that the previous year's proxy statement was first mailed to shareholders.
Where the annual meeting has been changed by more than 30 days from the date
of the prior year's meeting, or for special meetings, the proposal must be
submitted within a reasonable time before BB&T begins to print and mail its
proxy materials.
Mason-Dixon
Mason-Dixon's bylaws describe the procedures for director nominations and
shareholder proposals. Nominations for election of a director may be made by
the Board or by any shareholder. Notice by a shareholder of intention to make
any nominations must be made in writing and delivered or mailed to Mason-
Dixon's President not less than 120 days nor more than 150 days before any
meeting of shareholders called for the election of directors. The notice must
include information about the shareholder making the nomination, and the
proposed nominee.
In accordance with Rule 14a-8, as promulgated by the SEC pursuant to the
Securities Exchange Act, shareholder proposals intended to be included in the
proxy statement and presented at a regularly scheduled annual meeting must be
received by Mason-Dixon no later than 120 days before the anticipated mailing
of the proxy statement, based on the prior year's mailing date. Where the
annual meeting has been changed by more than 30 days from the date of the
prior year's meeting, or for special meetings, the proposal must be submitted
within a reasonable time before Mason-Dixon begins to print and mail its proxy
materials. Shareholder proposals made outside of Rule 14a-8 must be received
no later than 45 days before the date on which Mason-Dixon first mailed its
proxy materials for the prior year's annual meeting of shareholders.
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. BB&T's articles of incorporation 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. BB&T's 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.
Mason-Dixon
The MGCL requires that a director of a Maryland corporation discharge duties
as a director in good faith, in a manner reasonably believed to be in the best
interest of the corporation and with the care that an ordinarily prudent
person in a like position would use under similar circumstances. Mason-Dixon's
bylaws provide further that Mason-Dixon must indemnify and advance expenses to
a director or officer of Mason-Dixon in connection with any proceeding, as
defined by the MGCL, to the fullest extent permitted by the MGCL and federal
law. Mason-Dixon may indemnify and advance expenses to other employees or
agents in an amount determined by and in the discretion of the Mason-Dixon
Board to the extent permitted by the MGCL. In accordance with the MGCL and
Mason-Dixon's charter and bylaws, Mason-Dixon may indemnify any director or
officer made a
48
<PAGE>
party to any proceeding unless it is established that (a) the director's or
officer's act or omission was material to the cause of action and was
committed in bad faith or resulted from active and deliberate dishonesty, (b)
the director or officer actually received an improper personal benefit in
money, property, or services, or (c) in the case of criminal proceedings, the
director or officer had reasonable cause to believe the act or omission was
unlawful. A director or officer who is successful, on the merits or otherwise,
in any proceeding must be indemnified by Mason-Dixon for reasonable expenses,
including attorneys' fees.
Mason-Dixon's charter provides that, to the fullest extent permitted by
applicable law, no director of Mason-Dixon will have personal liability for
monetary damage for breach of a duty as a director. Maryland law requires
directors to be liable (a) to the extent that it is proved that the person
actually received an improper benefit or profit in money, property or
services, for the amount of such benefit or profit actually received, or (b)
to the extent that a court finds that the person's action, or failure to act,
was the result of active and deliberate dishonesty which was material to the
cause of action adjudicated in the proceeding.
Mergers, Share Exchanges and Sales of Assets
BB&T
The NCBCA generally requires that any merger, share exchange or sale of all
or substantially all the assets of a corporation not in the ordinary course of
business be approved by the affirmative vote of the majority of the issued and
outstanding shares of each voting group entitled to vote. Approval of a merger
by the shareholders of the surviving corporation is not required in certain
instances, however, including (as in the case of the merger with Mason-Dixon)
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."
Mason-Dixon
The MGCL generally requires that any merger, share exchange or sale of
substantially all of the assets of a corporation not in the ordinary course of
business be approved by shareholders holding at least two-thirds of the votes
entitled to be cast by each voting group entitled to vote. For a Maryland
successor company, a share exchange or transfer of assets needs to be approved
by the Maryland successor only by its board and by any other action required
by its charter. Generally, a merger need be approved by a Maryland successor
only by a majority of its entire board of directors if the merger does not
reclassify or change its outstanding stock or otherwise amend its charter and
the number of its shares of stock to be issued or delivered in the merger is
not more than 20 percent of the number of its shares of the same class or
series outstanding immediately before the merger becomes effective. Mason-
Dixon has taken all actions required to exempt it from all otherwise
applicable statutory anti-takeover provisions. See "--Anti-takeover Statutes."
Anti-takeover Statutes
BB&T
The North Carolina Control Share Acquisition Act applies to BB&T. This act
is designed to protect shareholders of publicly owned North Carolina
corporations based within the state against certain changes in control and to
provide shareholders with the opportunity to vote on whether to afford voting
rights to certain shareholders. The act is triggered upon the acquisition by a
person of shares of voting stock of a covered corporation that, when added to
all other shares beneficially owned by the person, would result in that person
holding one-fifth, one-third or a majority of the voting power in the election
of directors. Under the act, the shares acquired that result in the crossing
of any of these thresholds ("Control Shares") have no voting rights until such
rights are conferred by the affirmative vote of the holders of a majority of
all outstanding voting shares, excluding those shares held by any person
involved or proposing to be involved in the acquisition of Control
49
<PAGE>
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.
Mason-Dixon
The MGCL establishes special requirements with respect to a "business
combination" between a Maryland corporation and an "interested shareholder,"
unless exemptions are applicable. "Interested shareholders" are all persons
owning beneficially, or who have the right to acquire ownership of, directly
or indirectly, 10% or more of the outstanding voting stock of a Maryland
corporation. "Business combinations" include any merger or similar transaction
subject to a statutory vote and additional transactions involving transfers of
assets or securities in specified amounts to interested shareholders or their
affiliates. Unless an exemption is available, a Maryland corporation may not
engage in certain business combinations with any interested shareholder (or
its affiliates) for a period of five years after the most recent date on which
the shareholder became an interested shareholder. After such five-year period,
business combinations with interested shareholders must be recommended by the
board of directors and approved by (a) the affirmative vote of at least 80% of
the votes entitled to be cast by all holders of outstanding shares of voting
stock and (b) at least two-thirds of the votes entitled to be cast by all
holders of outstanding shares of voting stock other than the interested
shareholder. A business combination with an interested shareholder which is
approved by the board of directors of a Maryland corporation before an
interested shareholder first becomes such is not subject to the special voting
requirements. An amendment to a Maryland corporation's charter electing not to
be subject to the foregoing requirements must be approved by the affirmative
vote of at least 80% of the votes entitled to be cast by all holders of
outstanding shares of voting stock and at least two-thirds of the votes
entitled to be cast by holders of outstanding shares of voting stock who are
not interested shareholders. Any such amendment is not effective until 18
months after the vote of shareholders and does not apply to any business
combination of a corporation with a shareholder who was an interested
shareholder on the date of the shareholder vote.
The MGCL also imposes limitations on the voting rights of "control shares"
acquired in a "control share acquisition." The MGCL provides that "control
shares" of a Maryland corporation acquired in a "control share acquisition"
have no voting rights except to the extent approved by a vote of two-thirds of
the votes entitled to be cast on the matter, excluding shares of stock owned
by the acquiror or by officers or directors who are employees of the
corporation. "Control shares" are voting shares of stock which, if aggregated
with all other shares of stock previously acquired by such a person, would
entitle the acquiror to exercise voting power in electing directors within one
of the following ranges of voting power: (a) 20% or more but less than 33
1/3%; (b) 33 1/3% or more but less than a majority; or (c) a majority of all
voting power. Control shares do not include shares the acquiring person is
then entitled to vote as a result of having previously obtained shareholder
approval. A "control share acquisition" means, subject to certain exceptions,
acquisition, directly or indirectly, by any person, of ownership of, or the
power to direct the exercise of voting power with respect to, control shares.
The statute also requires Maryland corporations to hold a special meeting at
the request of an actual or proposed control share acquiror generally within
50 days after a request is made with the submission of an "acquiring person
statement" of such special meeting (and, if requested by the board of
directors, a bond to secure such undertaking). In addition, unless the charter
or bylaws provide otherwise, the statute gives the Maryland corporation,
subject to certain conditions and limitations, various redemption rights if
there is a shareholder vote on the issue and the grant of voting rights is not
approved, or if an "acquiring person statement" is not delivered to the target
within 10 days following a control share acquisition. Moreover, unless the
articles of incorporation or bylaws provide otherwise, the statute provides
that if, before a control share acquisition occurs, voting rights are accorded
to control shares at a special meeting of shareholders that results in the
acquiring person having
50
<PAGE>
majority voting power, then minority shareholders have appraisal rights. An
acquisition of shares may be exempted from the control share statute, provided
that an articles of incorporation or bylaw provision is adopted for such
purpose prior to the control share acquisition.
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. BB&T's articles of
incorporation and bylaws also require the affirmative vote of more than two-
thirds of the outstanding shares entitled to vote to approve an amendment to
BB&T's articles of incorporation or bylaws amending, altering or repealing the
portions of such articles of incorporation 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 BB&T's articles of incorporation authorize the BB&T Board to
amend BB&T's bylaws.
Mason-Dixon
Under the MGCL, unless otherwise provided in the corporation's charter, a
proposed charter amendment requires an affirmative vote of two-thirds of all
the votes entitled to be cast on the matter. The MGCL also provides that the
power to adopt, alter, and repeal a Maryland corporation's bylaws is vested in
the shareholders, except to the extent that the charter or the bylaws vest
such power in the board of directors. No amendment to Mason-Dixon's articles
of incorporation generally may be made without the affirmative vote of at
least 67% of the outstanding voting stock. Mason-Dixon's bylaws may be amended
by a majority vote of the Board, or upon the affirmative vote of 67% of the
outstanding voting stock.
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
51
<PAGE>
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.
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.
Mason-Dixon
Under the MGCL, except as otherwise provided therein, objecting shareholders
have the right to demand and receive payment of the "fair value" of their
stock in the event of (a) a merger or consolidation, (b) a share exchange, (c)
a transfer of all or substantially all assets not in the ordinary course of
business, (d) an amendment to the charter that alters the contract rights, as
expressly set forth in the charter, of any outstanding stock and which
substantially adversely affects the shareholder's rights, unless the right to
do so is preserved by the charter, (e) certain business combinations or (f) an
approval by the shareholders of voting rights for control shares which
constitute a majority of the voting power of the corporation. However, except
as otherwise provided by the MGCL, shareholders do not have appraisal rights
if, among other things, the stock is listed on the Nasdaq National Market: (a)
with respect to a merger of a 90% or more owned subsidiary into its parent, on
the date notice of such merger is given or waived, or (b) with respect to any
other transaction, on the record date for determining shareholders entitled to
vote on the transaction.
A shareholder who has the right to object to a transaction and receive
payment of the "fair value" of his shares must follow specific procedural
requirements as set forth in the MGCL in order to maintain such right and
obtain such payment.
Holders of Mason-Dixon common stock do not have appraisal rights in
connection with the Merger because, as of the record date, shares of Mason-
Dixon common stock were listed on the Nasdaq National Market.
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
52
<PAGE>
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.
Mason-Dixon
The rights of holders of Mason-Dixon common stock upon liquidation are
virtually identical to those of holders of BB&T common stock.
ELECTION OF DIRECTORS
(Proposal Two)
Mason-Dixon's articles provide that the Mason-Dixon Board is divided into
three Classes, each Class to consist as nearly as possible of one-third of the
directors. The term of office of the Class I Directors expires at the 1999
Annual Meeting of Shareholders; the term of the Class II Directors will expire
at the 2000 Annual Meeting of Shareholders; and the term of Class III
Directors will expire at the 2001 Annual Meeting of Shareholders. The regular
term of only one Class of Directors expires annually and any particular
director will stand for election only once in any three-year period.
At the 1999 Annual Meeting of Shareholders, four Class I Directors are being
nominated for election, each to hold office for three years, or until the
effective time of the merger, or his or her successor has been elected and
qualified. Certain of the nominees also serve as directors of Mason-Dixon's
subsidiary, Carroll County Bank and Trust Company, as indicated; no director
or nominee holds any directorships in any other public companies. In the event
a nominee declines or is unable to serve as a director, which is not
anticipated, the proxies will be voted for the Mason-Dixon Board's substitute
nominee.
The following table provides certain information regarding the nominees for
Class I Directors to be elected and for the Class II and III Directors.
<TABLE>
<CAPTION>
Principal Occupation Director
Name During Past Five Years Age Since
---- ---------------------- --- --------
<C> <S> <C> <C>
NOMINEES FOR CLASS I DIRECTORS: NEW TERM WILL EXPIRE IN 2002
MIRIAM F. BECK............ Retired Administrator--Carroll 67 1991
County Board of Education; Officer-
Director--Highland View Cemetery
Assoc., Inc.; Director and
Treasurer--Carroll County Health
Services Corporation; Director--
Carroll Community College
Foundation; Trustee--Carroll
Hospice; Director--Carroll County
Bank and Trust Company.
THOMAS K. FERGUSON........ President and Chief Executive 57 1991
Officer of Mason-Dixon.
EDWIN W. SHAUCK........... Retired April 1990 as Executive Vice 73 1991
President Carroll County Bank and
Trust Company ; Director--Carroll
County Health Services Corporation;
Director--Carroll County Bank and
Trust Company.
STEVENSON B. YINGLING..... President/Owner--Yingling General 57 1992
Tire Service, Inc.; Director--
Carroll County Bank and Trust
Company.
</TABLE>
53
<PAGE>
The election of directors requires the affirmative vote of holders of a
majority of the shares of Mason-Dixon common stock present and voting;
therefore, withholding of votes, abstentions and broker non-votes will have no
effect on the outcome of the vote. THE MASON-DIXON BOARD RECOMMENDS THAT YOU
VOTE FOR THE ELECTION OF THE ABOVE NOMINEES.
The following tables contain information regarding directors of other
Classes who are not standing for reelection in 1999.
<TABLE>
<C> <S> <C> <C>
CLASS II DIRECTORS: TERM WILL EXPIRE IN 2000
DAVID S. BABYLON, JR. .... Retired Accountant--Tax Consultant; Vice 75 1991
Chairman of the Board--Carroll County
Bank and Trust Company.
R. NEAL HOFFMAN........... Managing Partner--Hoffman, Comfort, 56 1995
Galloway & Offutt, LLP, Attorneys-At-
Law; Board of Trustees--Carroll Lutheran
Village; Director--Carroll County Bank
and Trust Company; Board of Trustees,
Carroll County General Hospital
Foundation, Inc.
J. WILLIAM MIDDELTON...... Chairman--Middelton, Limberg & Co., 67 1998
Inc., a business consulting firm;
Director--Medical Group Holdings, Inc.;
Director--Medical Mutual Liability
Insurance Society of Maryland;
Director--ProAd Medical Insurance
Company; Director--Bank of Maryland .
DONALD H. CAMPBELL........ President and CEO--First State 62 1995
Packaging, Inc., Salisbury, MD;
Director--Bank of Maryland.
CLASS III DIRECTORS: TERM WILL EXPIRE IN 2001
WILLIAM B. DULANY......... Managing Partner--Dulany & Leahy, 71 1991
L.L.P., Attorneys-At-Law; Chairman of
the Board and Director--Mutual Fire
Insurance Company of Carroll County;
Trustee and Member Executive Committee--
Western Maryland College; Chairman of
Board and Director--Episcopal Ministries
To The Aging, Inc. (Fairhaven, Copper
Ridge, and related entities),
Sykesville, MD; Trustee--Maryland
Historical Society; Chairman of the
Boards--Mason-Dixon and Carroll County
Bank and Trust Company.
S. RAY HOLLINGER.......... Chairman--W. H. Davis Co. t/a Davis 68 1991
Buick-GMC Truck; President--Davis
Library, Inc.; Director--Community
Foundation of Carroll County, Inc.;
Director--Carroll County Bank and Trust
Company.
JAMES C. SNYDER........... Retired. Previously engaged in 68 1991
manufacturing and distribution of truck
equipment; Director--Carroll County Bank
and Trust Company.
HENRY S. BAKER, JR. ...... Self-employed management consultant; 72 1995
Chairman of the Board of Bank of
Maryland; Chairman, AAA Maryland;
Chairman, Keswick Multi Care Center;
Director, AAA MidAtlantic, Keystone
Insurance Co., and Keystone Insurance
Company of New Jersey.
</TABLE>
54
<PAGE>
INFORMATION ABOUT THE MASON-DIXON BOARD OF DIRECTORS
During 1998, the Mason-Dixon Board held 10 meetings consisting of 4 regular
meetings and 6 special meetings. No director during 1998 attended fewer than
75% of the aggregate of (1) the total number of meetings of the Mason-Dixon
Board (held during the period for which that person has been director) and (2)
the total number of meetings held by all committees of the Mason-Dixon Board
on which that person served (during the period served).
For 1998, Mason-Dixon paid its non-employee directors a fee of $5,000,
except for Mr. Dulany, the Chairman of the Mason-Dixon Board, who received a
fee of $12,500. Directors, whose ownership interest in common stock was less
than .5% of all outstanding shares, received 50% of the fee in cash other than
Mr. Dulany, who received 80% of his fee in cash. Messrs. Babylon, Hoffman and
Shauck elected to receive their fees in cash since their ownership interest
exceeded the minimum .5% requirement. Each other non-employee Mason-Dixon
director received in 1998 an option to purchase 706 shares at an exercise
price of $29.75 per share, the fair market value at the time of grant,
exercisable as follows: 236 shares on January 2, 1998, 235 shares on January
2, 1999, and 235 shares on January 2, 2000.
As of October 28, 1998 non-employee directors who attend special board
meetings are paid an additional $150.00 per meeting. Two special board
meetings were held in the last quarter of 1998.
Those directors who were also directors of Carroll County Bank and Trust
Company received an additional fee of $10,000 in that capacity, except for
Messrs. Dulany and Babylon, the Chairman and Vice Chairman, who received
additional fees of $40,000 and $11,500 respectively. Mr. Baker, in his
capacity as Chairman of the Board of Bank of Maryland, received an additional
$20,000. Mr. Middelton and Mr. Campbell, in their capacities as directors of
Bank of Maryland, received $400 per meeting attended, or $4,400 and $3,200
respectively. Any non-employee director of Mason-Dixon and each participating
subsidiary may defer all or a portion of his or her director's fees.
In addition to meeting as a group, certain members of the Mason-Dixon Board
also devote their time to certain standing committees. The Mason-Dixon Board
has established two standing committees: The Compensation Committee and the
Audit Committee.
The Compensation Committee has responsibility for establishing and
implementing compensation and benefit plans for executive officers of Mason-
Dixon. The Compensation Committee meets quarterly and reports its activities
to the Mason-Dixon Board. The members of the Compensation Committee are: Henry
S. Baker, Jr., Miriam F. Beck, S. Ray Hollinger, Edwin W. Shauck and Stevenson
B. Yingling. Each member of the Compensation Committee received an annual fee
of $1,600.
The Audit Committee is composed of directors that are not officers or
employees of Mason-Dixon or any of its subsidiaries, and are independent of
management. The duties of the Audit Committee are prescribed in the bylaws of
Mason-Dixon. The primary duties of the Audit Committee are to assure that a
suitable external audit of Mason-Dixon is conducted each year and the result
of such audit is reported, in writing, to the Mason-Dixon Board. Additionally,
the Audit Committee is responsible for reviewing the internal audit controls
and procedures and determining that adequate controls and procedures are in
place; for retaining a qualified firm of independent Certified Public
Accountants to audit the books and records of the company; to receive any
reports of the auditors and other related communications including management
letters provided by the auditors; and to accept on behalf of the Mason-Dixon
Board the certified financial reports delivered by the auditors. The following
directors serve as members of the Audit Committee: Henry S. Baker, Jr., Miriam
F. Beck, Donald H. Campbell, R. Neal Hoffman, J. William Middelton, S. Ray
Hollinger, Edwin W. Shauck, James C. Snyder and Stevenson B. Yingling. The
Audit Committee met 4 times in 1998. Audit Committee members do not receive
any additional fee for their service on the committee.
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<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires that Mason-Dixon's
directors and executive officers and persons who own more than 10% of Mason-
Dixon's common stock file with the SEC an initial report of beneficial
ownership and subsequent reports of changes in beneficial ownership of the
common stock. To Mason-Dixon's knowledge, all reports required to be so filed
by such persons have been filed on a timely basis. Mason-Dixon believes that
all of its directors and executive officers complied with all filing
requirements applicable to them with respect to transactions during the fiscal
year ended December 31, 1998.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following tables reflect the beneficial ownership of Mason-Dixon common
stock by directors and executive officers of Mason-Dixon and by each person
that, to the knowledge of management, beneficially owns more than 5% of the
common stock as of March 31, 1999. Unless otherwise indicated below, and
except for shares described below held in the Non-Employee Directors Deferred
Compensation and Fee Plan (the "Directors Plan") or the Management Deferred
Compensation Plan (the "Management Plan") which are voted by Mason-Dixon, each
person specified below has sole investment and voting power (or shares such
power as described below) with regard to the shares set forth in the following
table. Shares of common stock subject to options held by directors and
executive officers that are exercisable within 60 days are included in such
director's or executive officer's beneficial ownership and in the beneficial
ownership of the group. The address of each of the persons named below is the
address of Mason-Dixon.
<TABLE>
<CAPTION>
Number Percent
Name of Shares of Class
---- ------------ --------
<S> <C> <C> <C>
David S. Babylon, Jr............................... 44,425 (1) *
Henry S. Baker, Jr................................. 4,748 (2) *
Miriam F. Beck..................................... 17,836 (3) *
Donald H. Campbell................................. 10,903 (4) *
William B. Dulany.................................. 20,180 (5) *
Thomas K. Ferguson................................. 51,566 (6) 1.0%
R. Neal Hoffman.................................... 75,031 (7) 1.5%
S. Ray Hollinger................................... 13,871 (8) *
J. William Middelton............................... 745 (9) *
Edwin W. Shauck.................................... 45,000 (10) *
James C. Snyder.................................... 13,964 (11) *
Stevenson B. Yingling.............................. 8,126 (12) *
<CAPTION>
Named Executive Officers
------------------------
<S> <C> <C> <C>
Michael L. Oster................................... 6,676 (13) *
H. David Shumpert.................................. 0 *
A. Gary Rever...................................... 6,510 (14) *
Mark A. Keidel..................................... 8,492 (15) *
All Directors and Executive Officers as a group (22
persons).......................................... 349,230 7.0%
</TABLE>
* Signifies less than 1% of the common stock
- - - - - - - - - - - - - - - - - --------
(1) Includes 1,021 shares held in the Directors Plan.
(2) Includes 509 shares held in the Directors Plan and 471 shares that may be
purchased upon the exercise of stock options.
(3) Includes 3,639 shares held jointly with her husband, Edward R. Beck, 9,564
shares held in the Directors Plan, and 471 shares that may be purchased
upon the exercise of stock options.
56
<PAGE>
(4) Includes 3,667 shares held by his wife, Isabelle T. Campbell, 914 shares
held by a company controlled by Mr. Campbell, 827 shares held in the
Directors Plan, and 471 shares that may be purchased upon the exercise of
stock options.
(5) Includes 1,002 shares held by his wife, Winifred S. Dulany, 415 shares
held by his daughter, Anne French Dulany, 176 shares held in the Directors
Plan, and 471 shares that may be purchased upon the exercise of stock
options. Mr. Dulany disclaims beneficial ownership as to the common stock
held by his wife and daughter.
(6) Includes 4,303 shares held by his wife, Sandra L. Ferguson, 19,636 shares
held in the Employee Savings and Investment Plan, 15,768 shares that may
be purchased upon the exercise of stock options, and 6,931 shares held in
the Management Plan.
(7) Includes 1,575 shares held by his wife, Nancy L. Hoffman, 4,243 shares
held as trustee under a trust agreement, and 21,284 shares held as co-
trustee under the will of his father. Mr. Hoffman disclaims beneficial
ownership as to the common stock held by his wife.
(8) Includes 1,280 shares held by his wife, Joan R. Hollinger, 3,203 shares
held in the Directors Plan, and 471 shares that may be purchased upon the
exercise of stock options.
(9) Includes 74 shares held in the Directors Plan, and 471 shares that may be
purchased upon the exercise of stock options.
(10) Includes 43,500 shares held jointly with his wife, Mary Jane Shauck.
(11) Includes 1,168 shares held by his wife, Dolores J. Snyder, 4,632 shares
held in the Directors Plan, and 471 shares that may be purchased upon the
exercise of stock options.
(12) Includes 263 shares held jointly with his son, Edward R. Yingling, 263
shares held jointly with his daughter, Elizabeth A. Yingling, 263 shares
held jointly with his daughter, Stacy L. Yingling, 3,482 held in the
Directors Plan, and 471 shares that may be purchased upon the exercise of
stock options.
(13) Includes 2,530 shares that may be purchased upon the exercise of stock
options, 258 shares held in the Management Plan, and 2,923 shares held in
the Employee Savings and Investment Plan.
(14) Includes 3,507 shares held jointly with his wife, Mary Rever, 345 shares
held in the Management Plan, 961 shares held in the Employee Savings and
Investment Plan, and 1,213 shares that may be purchased upon the exercise
of stock options.
(15) Includes 719 shares held jointly with his wife, Leslie J. Keidel, 445
shares held in the Management Plan, 2,979 shares held in the Employee
Savings and Investment Plan, 1,502 shares held by his wife, Leslie J.
Keidel, and 2,001 shares that may be purchased upon the exercise of stock
options.
OTHER BENEFICIAL OWNERS
<TABLE>
<CAPTION>
Number Percent
Name of Shares of Class
---- --------- --------
<S> <C> <C>
Carroll County Bank and Trust Company................... 377,706 7.44%
</TABLE>
Carroll County Bank and Trust Company holds shares of Mason-Dixon common
stock in a fiduciary capacity for numerous trusts and agency accounts and
other fiduciary accounts. Carroll County Bank and Trust Company may be deemed
a "beneficial owner" of certain of these shares because of its power to vote
or direct the voting of, or to dispose or direct a disposition of, such
shares, even if these powers are shared with co-fiduciaries and others. The
full Board of Directors of Carroll County Bank and Trust Company, acting as
the Trust Committee, reviews quarterly the minutes and actions of the Trust
Investment Committee, which Committee reviews all individual trust accounts.
The Mason-Dixon Board has no power to directly or indirectly vote Mason-Dixon
common stock held in such accounts, except shares held under the Directors
Plan and the Management Plan; all other shares are voted by Mason-Dixon Trust
Company (a division of Carroll County Bank and Trust Company) in its sole
discretion. As of December 31, 1998, the Trust Company had sole voting power
with respect to approximately 128,595 shares of Mason-Dixon common stock,
which represents approximately 2.5% of the issued and outstanding shares of
common stock, and sole investment power with respect to approximately 115,381
shares of Mason-Dixon common stock, which represents 2.3% of the issued and
outstanding shares of common stock.
57
<PAGE>
EXECUTIVE COMPENSATION
The folowing table summarizes the remuneration earned in 1998 and the prior
two years by the Chief Executive Officer ("CEO") of Mason-Dixon and by any
other executive officer whose total remuneration in the last fiscal year
exceeded $100,000 and who performed a policy-making function for Mason-Dixon.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
--------------------------
Annual Compensation Awards
--------------------------------------- --------------------------
Restricted Securities
Name and Other Annual Stock Underlying All Other
Principal Position Year Salary(a) Bonus Compensation(b) Awards(c) Options/SARs(d) Compensation(e)
- - - - - - - - - - - - - - - - - ------------------ ---- --------- -------- --------------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas K. Ferguson...... 1998 $183,753 $ 0 $ 5,308 $ 0 7,259 $ 31,685
President and CEO of 1997 $170,872 $ 14,744 $ 5,633 $ 0 2,547 $ 0
Mason-Dixon 1996 $170,366 $ 16,107 $ 4,629 $32,193 4,500 $ 0
Michael L. Oster........ 1998 $162,719 $ 5,138 $ 5,528 $ 8,712 1,108 $ 14,989
President and CEO 1997 $137,875 $ 3,237 $ 4,716 $ 4,918 953 $ 0
of Carroll County Bank 1996 $114,781 $ 0 $ 3,750 $ 0 0 $ 0
and Trust Company
H. David Shumpert....... 1998 $216,145 $ 36,017 $18,008 $11,088 1,408 $455,180
President and CEO of 1997 $180,350 $110,000 $ 6,095 $ 0 0 $ 0
Bank of Maryland 1996 $166,528 $ 95,000 $ 5,411 $ 0 0 $ 0
A. Gary Rever........... 1998 $133,800 $ 3,515 $ 7,138 $ 5,973 760 $ 12,133
Executive Vice
President, 1997 $ 95,127 $ 46,600 $ 1,087 $ 0 0 $ 0
CFO and Secretary of 1996 $ 89,158 $ 45,000 $ 1,065 $ 0 0 $ 0
Bank of Maryland
Mark A. Keidel.......... 1998 $105,771 $ 3,358 $ 3,578 $ 5,742 728 $ 8,196
Vice President and CFO 1997 $ 89,558 $ 0 $ 3,078 $ 3,002 581 $ 0
of Mason-Dixon 1996 $ 77,577 $ 0 $ 2,986 $ 0 0 $ 0
</TABLE>
- - - - - - - - - - - - - - - - - --------
NOTES:
(a) Includes base salary plus amounts deferred under the Management Deferred
Compensation Plan. Mr. Ferguson deferred the following amounts during the
years shown: 1998--$27,000; 1997--$18,000; 1996--$54,450; Mr. Oster
deferred $8,702 in 1998, $4,918 in 1997, and $1,515 in 1996; Mr. Keidel
deferred $6,346 in 1998.
(b) For 1998, includes $4,702, $5,036, $5,694, $3,969, and $3,255, reflecting
matching contributions to Mr. Ferguson, Mr. Oster, Mr. Shumpert, Mr. Rever
and Mr. Keidel, respectively, to each of their ESIP accounts. For 1997,
includes $5,028, $4,270, $3,566, $926, and $2,745, reflecting matching
contributions to Mr. Ferguson, Mr. Oster, Mr. Shumpert, Mr. Rever and Mr.
Keidel, respectively, to each of their ESIP accounts. For 1996, includes
$3,478, $3,398, $3,350, $880 and $2,704, reflecting matching contributions
to Mr. Ferguson, Mr. Oster, Mr. Shumpert, Mr. Rever and Mr. Keidel,
respectively, to each of their ESIP accounts. Also includes, for 1998,
$12,000, representing the value of the use of a company automobile for Mr.
Shumpert, and $3,000 representing an automobile allowance for Mr. Rever.
Remaining amounts are attributable to the group term life insurance
coverage premiums paid for each named executive officer.
(c) For Mr. Ferguson, for shares awarded in 1996, represents 1,533 restricted
shares of common stock, valued at $21.00 per share as of December 27,
1996, the date of grant, all of which are vested. For Mr. Oster, for
shares awarded in 1997, represents 249 restricted shares of common stock,
valued at $19.75 per share as of February 12, 1997, the date of grant,
with a four year vesting term; for shares awarded in 1998, represents 264
restricted shares of common stock, valued at $33.00 per share as of
January 27, 1998, the date of grant, with a one year vesting term. For Mr.
Shumpert, for shares awarded in 1998, represents 336 restricted shares of
common stock, valued at $33.00 per share as of January 27, 1998, the date
of grant, with a one year vesting term. For Mr. Rever, for shares awarded
in 1998, represents 181 restricted shares of common stock, valued at
$33.00 per share as of January 27, 1998, the date of grant, with a one
year vesting term. For Mr. Keidel, for shares awarded in 1998, represents
174 restricted shares of common stock, valued at $33.00 per share as of
January 27, 1998, the date of grant, with a three year vesting term; for
shares awarded in 1997, represents 152 restricted shares of common stock,
valued at $19.75 per share as of February 12, 1997, the date of grant,
with a four year vesting term. Restricted stock holders are entitled to
exercise the voting rights associated with, and to collect any dividends
on, all such shares. The value of the aggregate restricted stock holdings
(whether or not vested) as of December 31, 1998 is $44,840, $15,122,
$9,974, $5,294, and $5,090, for Mr. Ferguson, Mr. Oster, Mr. Shumpert, Mr.
Rever and Mr. Keidel, respectively.
58
<PAGE>
(d) The exercise price for options awarded is $33.00, $19.75, and $21.00 per
share, for 1998, 1997 and 1996 respectively, a price equal to the mid-
point of the bid and ask prices on NASDAQ as of the grant date.
(e) Represents amounts contributed in 1998 for fiscal year 1997 by Mason-Dixon
under the Supplemental Executive Retirement Plan (SERP) and, for Mr.
Shumpert, also includes a one-time severance payment.
Stock Options
The following table sets forth information regarding stock options to
purchase Mason-Dixon's common stock granted to the named executives during
1998:
Option Grants in Fiscal Year 1998
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------------------------
Percent of Total
Number of Securities Options Granted Exercise
Underlying Options to Employees in or Base Expiration Grant Date
Name Granted(1) Fiscal Year Price ($/Sh) Date Present Value $(2)
- - - - - - - - - - - - - - - - - ---- -------------------- ---------------- ------------ ---------- ------------------
<S> <C> <C> <C> <C> <C>
Thomas K. Ferguson...... 7,259 55.9% $33.00 1-27-08 $90,738
Michael L. Oster........ 1,108 8.5% $33.00 1-27-08 $13,850
H. David Shumpert....... 1,408 10.8% $33.00 1-27-08 $17,600
A. Gary Rever........... 760 5.9% $33.00 1-27-08 $ 9,500
Mark A. Keidel.......... 728 5.6% $33.00 1-27-08 $ 9,100
</TABLE>
- - - - - - - - - - - - - - - - - --------
NOTES:
(1) Options were granted on January 27, 1998, at a price equal to the mid-
point of the bid and ask prices on NASDAQ as of the grant date and are
exercisable in three increments on January 27, 1998, 1999, and 2000.
(2) This value, calculated by utilizing the Modified Black-Scholes American
option-pricing model, assumes a 5.69% risk-free interest rate, 10-year
expected life, 30% expected volatility of the stock, and 2.06% expected
dividend yield on the stock.
The following table sets forth information regarding the number and value of
underlying unexercised stock options held by the named executives as of
December 31, 1998. No options were exercised in 1998 by any named executive.
1998 Year End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year-End (#) In-the-Money Options at
----------------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- - - - - - - - - - - - - - - - - ---- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Thomas K. Ferguson...... 9,467 4,839 $61,321 $8,065
Michael L. Oster........ 1,005 1,056 $ 6,042 $3,011
H. David Shumpert....... 469 939 $ 0 $ 0
A. Gary Rever........... 253 507 $ 0 $ 0
Mark A. Keidel.......... 631 678 $ 3,686 $1,833
</TABLE>
- - - - - - - - - - - - - - - - - --------
NOTES:
(1) Represents the total gain which would be realized if all in-the-money
options held at December 31, 1998 were exercised, determined by
multiplying the number of shares underlying the options by the difference
between the per share option exercise price and the fair market value of
the shares at December 31, 1998 of $29.25 per share.
59
<PAGE>
Severance, Key Employee Retention and Supplemental Executive Retirement Plans
Effective November 1, 1997, Mason-Dixon adopted an updated, uniform
severance plan for Mason-Dixon and its banking subsidiaries. The plan was
restated in its entirety and represents a continuation of the prior Carroll
County Bank and Trust Company Severance Plan with the Bank of Maryland
adopting this restated plan as well, on the effective date. The Mason-Dixon
Severance Plan now reflects updated eligibility criteria allowing for
increased coverage and flexibility of use by the individual participating
employer, while providing for a common schedule of severance benefits using a
formula based on the number of full years of service.
Under the plan, eligible employees who are not officers are eligible for one
week of base pay for each full year of service, but in no event less than
eight weeks nor more than 13 weeks; appointed/elected officers (bank and
corporate secretaries, assistant vice presidents, officers, and senior
officers) are eligible for one week of base pay for each full year of service
with a minimum of 13 weeks and a maximum of 26 weeks; vice presidents and
managing directors are eligible for two weeks of base pay for each full year
of service with a minimum of 26 weeks and a maximum of 39 weeks; and other
elected officers (senior vice presidents, executive vice president,
president/CEO) are eligible for a flat 52 weeks of base pay. Effective July,
1998, the plan was amended by the Mason-Dixon Board to provide 104 weeks of
base pay for any bank or corporate president or CEO who has been employed in
that position for at least 5 years. All participants are also eligible to
continue to receive the same group term life and health insurance benefits
until the termination of the severance payments or the employee becomes
eligible under another group plan.
In addition, in July 1996, the Mason-Dixon Board adopted a Key Employee
Retention Plan (the "Retention Plan"). Mason-Dixon adopted and modified
Carroll County Bank and Trust Company's Retention Plan to provide certain
incentives to attract and retain key employees of Mason-Dixon and all of its
participating subsidiaries.
The Retention Plan provides severance benefits (including health insurance)
in the event a participant's employment is terminated or if the participant
resigns for good cause as a result of a change in control of Mason-Dixon. The
Retention Plan provides that participants with less than five years of service
may receive 12 months of base salary; participants with five to 10 years of
service may receive 24 months of base salary; and participants with more than
10 years of service may receive 36 months of base salary; provided that 50% of
these benefits are reduced by any amount the participant may be eligible for
under any other severance plan of or similar benefit from Mason-Dixon. The
remaining 50% of the separation payments will be reduced by any amount which
the participant receives, or is entitled to receive, from other employment,
including self employment, during the time that the employee is receiving
benefits from the Retention Plan. Finally, the amounts payable under the
Retention Plan are limited so that the aggregate present value of all payments
to be received by the participant upon termination may not exceed 2.99 times
the participant's average annual compensation for the preceding five years.
Effective October 23, 1996, the Mason-Dixon Board adopted a Supplemental
Executive Retirement Plan (SERP), administered by Mason-Dixon's Compensation
Committee, which has discretionary authority over the plan. The plan is
performance based and directly linked to Mason-Dixon and its subsidiary banks
attaining or exceeding their respective pre-established annual goals.
Effective for 1998, the ratio of actual to budgeted earnings per share
attributable to Mason-Dixon's banking affiliates is the key factor in
determining the SERP contribution. The SERP was established to provide
supplemental income to the participant at an estimated rate of 10% of the
participant's final base pay at age 65, assuming 30 years of service. Any
amounts credited to a participant's SERP account are deferred through a rabbi
trust; such amounts are restricted during the term of the participant's
employment.
60
<PAGE>
Pension Plan
Carroll County Bank and Trust Company sponsors a non-contributory defined
benefit Pension Plan and Trust (the "Pension Plan") which covers eligible
employees of Carroll County Bank and Trust Company. The Pension Plan also
covers employees of Mason-Dixon who are covered by the Pension Plan as
employees of Carroll County Bank and Trust Company at the time they become
employees of Mason-Dixon.
The Pension Plan provides a pension benefit value that is calculated by
multiplying years of credited service by a percentage multiplier (ranging from
7% to 11% per year of service), the result of which is multiplied by final
average compensation. The pension benefit value is then converted into a
monthly benefit. No participant's monthly benefit will be less than his/her
accrued benefit as of June 1, 1997.
Benefits eligibility is as follows: normal retirement at age 65; early
retirement after completing 10 years of service and attaining age 55; vested
benefits after completing five years of service; and actuarial reduction of
benefits for commencement before age 65.
The Pension Plan Table below shows estimated annual benefits payable upon
retirement to qualified persons in the specified remuneration and years-of-
service categories if such retirement had occurred on December 31, 1998. The
benefits listed are calculated as a life annuity and are not integrated with
Social Security or subject to other offsets. Compensation, as defined in the
Pension Plan, reflects each participant's total compensation, including
overtime, incentives and bonuses, as well as pre-tax contributions through
payroll deductions to Sections 401(k) and 125 Plans as provided by the
Internal Revenue Code of 1986 ("Code"), as amended.
ESTIMATED ANNUAL BENEFITS
Years of Service
<TABLE>
<CAPTION>
FAC* 10 15 20 25
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 20,000 $ 1,301 $ 2,081 $ 2,948 $ 3,902
30,000 1,975 3,121 4,422 5,852
40,000 2,909 4,623 6,511 8,572
50,000 3,906 6,184 8,678 11,390
60,000 4,903 7,744 10,846 14,208
70,000 5,900 9,305 13,013 17,025
80,000 6,897 10,866 15,181 19,843
90,000 7,894 12,426 17,349 22,661
100,000 8,891 13,987 19,516 25,479
110,000 9,888 15,547 21,684 28,297
120,000 10,885 17,108 23,851 31,114
130,000 11,882 18,669 26,019 33,932
140,000 12,879 20,229 28,186 36,750
150,000 13,876 21,790 30,354 39,568
160,000 14,873 23,350 32,521 42,385
</TABLE>
- - - - - - - - - - - - - - - - - --------
* Final Average Compensation, computed as the average of annual compensation
for the five consecutive years (out of the most recent ten years) for which
compensation is the highest.
Covered compensation under the Pension Plan includes those amounts shown in
the Summary Compensation Table as to Mason-Dixon's President and CEO, with the
exception of amounts deferred through the Management Deferred Compensation
Plan. Covered compensation for 1998 is limited to $160,000. As of December 31,
1998, Mr. Ferguson had accumulated 25 years of credited service toward
retirement.
61
<PAGE>
TRANSACTIONS AND RELATIONSHIPS WITH MANAGEMENT
Mason-Dixon, through its subsidiaries, has had in the past, and expects to
have in the future, banking transactions in the ordinary course of business
with directors and executive officers on substantially the same terms,
including interest rates and collateral on loans, as those prevailing at the
same time for comparable transactions with other unaffiliated persons and, in
the opinion of management, these transactions do not and will not involve more
than the normal risk of collectibility or present other unfavorable features.
COMPENSATION COMMITTEE REPORT
The fundamental philosophy of Mason-Dixon's executive compensation program
is to provide competitive compensation opportunities for its executive
officers which is based both on the individual's contribution and on Mason-
Dixon's performance. Compensation levels are designed to attract, retain, and
reward executive officers who are capable of leading Mason-Dixon in achieving
its business objectives in an industry characterized by complexity,
competitiveness, and constant change. The compensation of Mason-Dixon's key
executives is established by and reviewed regularly for continued relevance by
the Compensation Committee, and actions taken are reported in summary form to
the full Mason-Dixon Board.
Annual compensation for Mason-Dixon's President/CEO, and other executive
officers, consists of two elements: 1) base salary, and 2) both annual and
long-term incentives or bonuses. These are awarded in the form of cash and/or
stock, are variable in amount, fluctuate in value annually, and are linked
directly to individual and Mason-Dixon's corporate goals attainment.
For Mr. Ferguson, Mason-Dixon's President/CEO, cash incentives provided
during 1996 represented 9.4% of base salary. In 1997 and 1998, no cash
incentive was provided; however, consistent with the Committee's executive
compensation strategy, stock options were awarded reflecting an amount to help
make up the difference in value for a base pay gap, compared to a selected
external banking peer group, and to reflect a performance bonus award, in lieu
of cash. These stock grants represent, in aggregate, 53% of Mr. Ferguson's
base salary as of year end 1997, and 51% of his 1998 base salary, which was
increased by 4%. The Committee determined that this compensation was warranted
in view of Mason-Dixon's and its subsidiaries meeting or exceeding certain
business goals during 1997. For example, key profitability goals were met or
exceeded for the year, including return on equity and earnings per share.
Return on assets, net income, and net interest margin were less than goal for
the year, primarily because of management's emphasis on increasing earnings
per share and return on equity, as well as volatility of pricing, and strong
regional competition for quality loans. Compared on a year to year basis,
return on equity, earnings per share, and net income increased significantly
while return on assets and net interest margin decreased somewhat.
Both base salary and the variable portion of compensation is closely linked
to Mason-Dixon's performance. The variable compensation element is directly
contingent upon Mason-Dixon's goal attainment, and provides the executive the
opportunity to make up the difference between his base salary and comparable
base salaries paid by similarly situated commercial and retail banking
organizations. Beginning in 1997 and updated for 1998, the Compensation
Committee of the Mason-Dixon Board formalized a system of paying incentives to
Mason-Dixon's CEO and other executive officers based on Mason-Dixon's
performance, exclusive of extraordinary events, in the following areas: return
on assets, return on equity, ratio of net overhead to average assets,
efficiency ratio, net income, net charge offs and non-performing loans as a
percentage of outstanding, and regulatory ratings.
The Compensation Committee has implemented an executive salary structure for
executive officers which includes the assignment of salary grades for
individual officers. Additionally, the Committee has established a long-term
goal of compensating executive officers with a mix of base salary plus
variable compensation based upon Mason-Dixon's performance. The goal is to
provide 60% of compensation as base salary and 40% as variable or incentive
based. The purpose of this structure is to align the executives' pay
opportunities with
62
<PAGE>
increased values returned to shareholders. The executive salary structure was
developed through identification of and comparison with regional and local
peer groups consisting of commercial banks and holding companies having an
asset size and performance characteristics comparable to Mason-Dixon. Finally,
various other performance indicators are used to establish executive officer
compensation, including achievement of individual and divisional goals,
satisfactory or better audit and regulatory reviews and examinations, asset
quality, and increases in per share earnings, dividends and book value.
The performance of Mason-Dixon's common stock during the past fiscal year is
reflected in the following Performance Graph. The Compensation Committee
considers the performance of the common stock in determining compensation for
Mason-Dixon's President/CEO but is not weighted heavily in view of the
historically limited trading activity.
BY THE COMPENSATION COMMITTEE:
Edwin W. Shauck
Miriam F. Beck
Henry S. Baker, Jr.
S. Ray Hollinger
Stevenson B. Yingling
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee currently serves as an officer of
Mason-Dixon or any of its subsidiaries. However, Mr. Edwin W. Shauck,
currently a Mason-Dixon director, is a retired Executive Vice President of
Carroll County Bank and Trust Company.
63
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the cumulative total return to
Mason-Dixon's stockholders over the most recent five-year period with the
NASDAQ Composite Index (reflecting overall stock market performance), the
NASDAQ Bank Index (reflecting changes in banking industry stocks), and a peer
group selected by Mason-Dixon. The peer group is made up of publicly traded
bank holding companies in Maryland, Virginia, Pennsylvania, Delaware, and the
District of Columbia with total assets between $500 million and $2.5 billion.
This peer group was added to facilitate stock performance comparisons between
Mason-Dixon and a comparable group based on asset size and geography. Returns
are shown on a total return basis, assuming the reinvestment of dividends.
Mason-Dixon's Common Stock was listed on the NASDAQ National Market System
effective April 1, 1993.
(CHART APPEARS HERE)
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- - - - - - - - - - - - - - - - - --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mason-Dixon $100.00 $109.78 $137.71 $148.89 $220.00 $222.81
- - - - - - - - - - - - - - - - - --------------------------------------------------------------------------
NASDAQ Composite $100.00 $97.75 $138.26 $170.01 $208.58 $293.21
- - - - - - - - - - - - - - - - - --------------------------------------------------------------------------
NASDAQ Bank Index $100.00 $99.64 $148.38 $195.91 $328.02 $324.90
- - - - - - - - - - - - - - - - - --------------------------------------------------------------------------
Peer Group* $100.00 $101.00 $127.00 $139.00 $222.00 $218.00
</TABLE>
Assumes $100 invested on January 1, 1994 in Mason-Dixon Bancshares, Inc.,
NASDAQ Composite Index, NASDAQ Bank Index & Peer Group.
*Peer group includes bank holding companies in DC, DE, MD, PA and VA with
assets between $500 million and $2.5 billion.
INDEPENDENT AUDITORS
The Mason Dixon Board has engaged Stegman & Company ("Stegman"), independent
certified public accountants, to audit the books and accounts of Mason-Dixon
for the fiscal year ending December 31, 1999. Stegman has served as
independent auditors for Mason-Dixon since its inception in 1991 and for
Carroll County Bank and Trust Company without interruption for many years.
Stegman is to report on Mason-Dixon's consolidated balance sheets, and related
consolidated statements of income, consolidated statements of cash flow, and
consolidated changes in shareholders' equity and to perform such other
appropriate accounting services as may be required by the Mason-Dixon Board
(except as such services are no longer required because of the
64
<PAGE>
merger). For the year ended December 31, 1998, Stegman provided, in addition
to audit services, certain non-audit professional services which were
considered to have no effect on the independence of the accountants. Such
additional non-audit services included review of proxy material and annual
report filings with the FDIC and the SEC, and consultation on various non-
audit-related matters.
Stegman has also advised Mason-Dixon that neither it nor any of its members
or associates have any direct financial interest in or any connection with
Mason-Dixon other than as independent public auditors. A representative of
Stegman will be present at this year's annual meeting, will have the
opportunity to make a statement and will also be available to respond to
appropriate questions.
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 Mason-Dixon's proxy materials must be received at the main
office of Mason-Dixon, 45 West Main Street, Westminster, Maryland 21157, no
later than November 17, 1999. If such proposal is in compliance with all of
the requirements of Rule 14a-8 of the Securities Exchange Act, it will be
included in Mason-Dixon'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 Mason-Dixon's proxy materials) must also give notice of such proposals
to Mason-Dixon no later than January 28, 2000. It is urged that any proposals
be sent by certified mail, return receipt requested.
OTHER BUSINESS
The Mason-Dixon 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 38,000 shares of BB&T common stock.
EXPERTS
The consolidated financial statements of BB&T Corporation and its
subsidiaries which are incorporated by reference in this proxy
statement/prospectus from BB&T's Current Report on Form 8-K dated April 30,
1999, 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, 1998 to reflect the acquisition by BB&T of MainStreet
Financial Corporation on March 5, 1999, 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 Mason-Dixon Bancshares, Inc. and
its subsidiaries which are incorporated by reference in this proxy
statement/prospectus from Mason-Dixon's Annual Report on Form 10-K for the
year ended December 31, 1998 have been audited by Stegman & Company,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said report.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
BB&T and Mason-Dixon file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or certain other information that the companies file with
the SEC at the SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. These SEC filings are also
available to the public from commercial document retrieval services and at the
Internet world wide web site maintained by the SEC 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 Mason-Dixon.
BB&T has filed the registration statement to register with the SEC the BB&T
common stock to be issued to Mason-Dixon 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 SEC 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 SEC allows Mason-Dixon 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 SEC. 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 Mason-Dixon and BB&T have previously filed with the SEC.
These documents contain important information about Mason-Dixon and BB&T and
their businesses.
<TABLE>
<CAPTION>
BB&T SEC Filings (File No. 1-10853)
- - - - - - - - - - - - - - - - - -----------------------------------
<S> <C>
Annual Report on Form 10-K................. For the fiscal year ended December 31, 1998
Quarterly Reports on Form 10-Q............. For the fiscal quarter ended March 31, 1999
Current Reports on Form 8-K................ Filed January 8, 1999, January 14, 1999,
January 27, 1999 (two filings), January 28,
1999, February 25, 1999 (amended on April
28, 1999), April 9, 1999, April 12, 1999,
April 28, 1999 (three filings) and April
30, 1999
Registration Statement on Form 8-A
(concerning BB&T's shareholder rights
plan)..................................... Filed January 10, 1997
<CAPTION>
Mason-Dixon SEC Filings (File No. 0-20516)
- - - - - - - - - - - - - - - - - ------------------------------------------
<S> <C>
Annual Report on Form 10-K................. For the fiscal year ended December 31, 1998
Quarterly Reports on Form 10-Q............. For the fiscal quarter ended March 31, 1999
Current Reports on Form 8-K................ Filed January 8, 1999 and January 29, 1999
The description of Mason-Dixon common stock
in Mason-Dixon's Registration Statement on
Form S-4.................................. Filed May 12, 1995
</TABLE>
Mason-Dixon and BB&T also incorporate by reference additional documents that
may be filed with the SEC 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
66
<PAGE>
Form 10-Q and Current Reports on Form 8-K, as well as proxy statements. Mason-
Dixon's 1998 Annual Report accompanies this proxy statement/prospectus.
BB&T has supplied all information contained or incorporated by reference in
this proxy statement/prospectus relating to BB&T, and Mason-Dixon has supplied
all such information relating to Mason-Dixon 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 SEC or the SEC'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 Vivian A. Davis, Corporate Secretary
BB&T Corporation Mason-Dixon Bancshares, Inc.
Post Office Box 1290 45 West Main Street
Winston-Salem, North Carolina 27104 Westminster, Maryland 21157
(336) 733-3021 (410) 857-3401
If you would like to request documents from us, please do so by July 1, 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 Mason-Dixon 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 May 19, 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.
67
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
MASON-DIXON BANCSHARES, INC.
and
BB&T CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I DEFINITIONS..................................................... 1
ARTICLE II THE MERGER..................................................... 5
2.1 Merger........................................................... 5
2.2 Filing; Plan of Merger........................................... 5
2.3 Effective Time................................................... 6
2.4 Closing.......................................................... 6
2.5 Effect of Merger................................................. 6
2.6 Further Assurances............................................... 6
2.7 Merger Consideration............................................. 6
2.8 Conversion of Shares; Payment of Merger Consideration............ 7
2.9 Conversion of Stock Options...................................... 8
2.10 Merger of Subsidiaries........................................... 9
2.11 Anti-Dilution.................................................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF MASON-DIXON................. 9
3.1 Capital Structure................................................ 9
3.2 Organization, Standing and Authority............................. 9
3.3 Ownership of Subsidiaries........................................ 10
3.4 Organization, Standing and Authority of the Subsidiaries......... 10
3.5 Authorized and Effective Agreement............................... 10
3.6 Securities Filings; Financial Statements; Statements True........ 11
3.7 Minute Books..................................................... 11
3.8 Adverse Change................................................... 11
3.9 Absence of Undisclosed Liabilities............................... 11
3.10 Properties....................................................... 12
3.11 Environmental Matters............................................ 12
3.12 Loans; Allowance for Loan Losses................................. 12
3.13 Tax Matters...................................................... 13
3.14 Employees; Compensation; Benefit Plans........................... 14
3.15 Certain Contracts................................................ 16
3.16 Legal Proceedings; Regulatory Approvals.......................... 17
3.17 Compliance with Laws; Filings.................................... 17
3.18 Brokers and Finders.............................................. 17
3.19 Repurchase Agreements; Derivatives............................... 17
3.20 Deposit Accounts................................................. 18
3.21 Related Party Transactions....................................... 18
3.22 Certain Information.............................................. 18
3.23 Tax and Regulatory Matters....................................... 18
3.24 State Takeover Laws.............................................. 18
3.25 Labor Relations.................................................. 18
3.26 Fairness Opinion................................................. 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BB&T......................... 19
4.1 Capital Structure of BB&T........................................ 19
4.2 Organization, Standing and Authority of BB&T..................... 19
4.3 Authorized and Effective Agreement............................... 19
4.4 Organization, Standing and Authority of BB&T Subsidiaries........ 20
4.5 Securities Documents; Statements True............................ 20
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
4.6 Financial Statements........................................... 20
4.7 Certain Information............................................ 20
4.8 Adverse Change ................................................ 21
4.9 Tax and Regulatory Matters..................................... 21
4.10 Share Ownership................................................ 21
4.11 Legal Proceedings; Regulatory Approvals........................ 21
ARTICLE V COVENANTS..................................................... 21
5.1 Mason-Dixon Shareholder Meeting................................ 21
5.2 Registration Statement; Proxy Statement/Prospectus............. 21
5.3 Plan of Merger; Reservation of Shares.......................... 22
5.4 Additional Acts................................................ 22
5.5 Best Efforts................................................... 22
5.6 Certain Accounting Matters..................................... 23
5.7 Access to Information.......................................... 23
5.8 Press Releases................................................. 23
5.9 Forbearances of Mason-Dixon.................................... 23
5.10 Employment Agreements.......................................... 25
5.11 Affiliates..................................................... 26
401(k) Plan; Pension Plan; Other Employee Benefits; Stock
5.12 Purchase Plan.................................................. 26
5.13 Directors and Officers Protection.............................. 27
5.14 Forbearances of BB&T........................................... 27
5.15 Reports........................................................ 28
5.16 Exchange Listing............................................... 28
5.17 Advisory Board for the Mason-Dixon Market Area................. 28
5.18 Board of Directors of BB&T..................................... 28
ARTICLE VI CONDITIONS PRECEDENT......................................... 29
6.1 Conditions Precedent--BB&T and Mason-Dixon..................... 29
6.2 Conditions Precedent--Mason-Dixon.............................. 29
6.3 Conditions Precedent--BB&T..................................... 30
ARTICLE VII TERMINATION, DEFAULT, WAIVER AND AMENDMENT.................. 31
7.1 Termination.................................................... 31
7.2 Effect of Termination.......................................... 33
7.3 Survival of Representations, Warranties and Covenants.......... 33
7.4 Waiver......................................................... 33
7.5 Amendment or Supplement........................................ 33
ARTICLE VIII MISCELLANEOUS.............................................. 33
8.1 Expenses....................................................... 33
8.2 Entire Agreement............................................... 34
8.3 No Assignment.................................................. 34
8.4 Notices........................................................ 34
8.5 Specific Performance........................................... 35
8.6 Captions....................................................... 35
8.7 Counterparts................................................... 35
8.8 Governing Law.................................................. 35
</TABLE>
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<PAGE>
ANNEXES
<TABLE>
<C> <S>
Annex A Articles of Merger
Annex B Employment Agreement with Thomas K. Ferguson
Annex C Employment Agreement with Michael L. Oster
Annex D Employment Agreement with Mark A. Keidel
Annex E Employment Agreements with Louna S. Primm, Marcus L. Primm,
Christine L. Whiteleather, Hunter F. Calloway and Richard Springer
Annex F Form of Opinion of Counsel to BB&T
Annex G Form of Opinion of Counsel to Mason-Dixon
Annex H Form of Affiliates Agreement
</TABLE>
A-iii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of
January 27, 1999, is among MASON-DIXON BANCSHARES, INC. ("Mason-Dixon"), a
Maryland corporation having its principal office at Westminster, Maryland, and
BB&T CORPORATION ("BB&T"), a North Carolina corporation having its principal
office at Winston-Salem, North Carolina;
RECITALS:
The parties desire that Mason-Dixon shall be merged with and into BB&T (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, Mason-Dixon is concurrently granting
to BB&T an option to acquire, under certain circumstances, 1,006,868 shares of
the common stock, par value $1.00 per share, of Mason-Dixon.
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:
"Affiliate" means, 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 office of the Secretary of State of North Carolina, as provided in
Section 55-11-05 of the NCBCA, and with the Department, as provided in Section
3-107 of the MGCL.
"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 Mason-Dixon Common Stock, which shall be executed
immediately following execution of this Agreement.
"BB&T Subsidiaries" shall mean Branch Banking and Trust Company, Branch
Banking and Trust Company of South Carolina and Branch Banking and Trust
Company of Virginia.
"Business Day" shall mean all days other than Saturdays, Sundays and Federal
Reserve holidays.
A-1
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"CRA" shall mean the Community Reinvestment Act of 1977, as amended.
"Department" shall mean the Department of Assessments and Taxation of the
State of Maryland.
"Disclosed" shall mean disclosed in the Mason-Dixon Disclosure Memorandum,
referencing the Section number herein pursuant to which such disclosure is
being made.
"Environmental Claim" means any notice from any governmental authority or
third party alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup or remediation costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based upon, or resulting from
a violation of the Environmental Laws or the presence or release into the
environment of any Hazardous Substances.
"Environmental Laws" means all applicable federal, state and local laws and
regulations, as amended, relating to pollution or protection of human health
or the environment (including ambient air, surface water, ground water, land
surface, or subsurface strata) and which are administered, interpreted, or
enforced by the United States Environmental Protection Agency and state and
local agencies with jurisdiction over and including common law in respect of,
pollution or protection of the environment, including the Comprehensive
Environmental Response Compensation and Liability Act, as amended, 42 U.S.C.
9601 et seq. ("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 Advisor" shall mean Keefe, Bruyette & Woods, Inc.
"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 Mason-Dixon, (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of Mason-Dixon as of December 31, 1997, 1996 and 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, 1996 and 1995, as filed by Mason-Dixon in Securities
Documents, and (ii) the consolidated statements of financial condition of
Mason-Dixon (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 Mason-Dixon with respect to periods ended subsequent to
December 31, 1997.
A-2
<PAGE>
"GAAP" shall mean generally accepted accounting principles applicable to
financial institutions and their holding companies, as in effect at the
relevant date.
"Hazardous Substances" means any substance or material (i) identified in
CERCLA; (ii) determined to be toxic, a pollutant or a contaminant under any
applicable federal, state or local statutes, law, ordinance, rule or
regulation, including but not limited to petroleum products; (iii) asbestos;
(iv) radon; (v) poly-chlorinated biphiphenyls and (vi) such other materials,
substances or waste which are otherwise dangerous, hazardous, harmful to human
health or the environment.
"IRS" shall mean the Internal Revenue Service.
"Mason-Dixon Common Stock" shall mean the shares of voting common stock, par
value $1.00 per share, of Mason-Dixon.
"Mason-Dixon Disclosure Memorandum" shall mean the written information in
one or more documents, each of which is entitled "Mason-Dixon Disclosure
Memorandum" and dated on or before the date of this Agreement and delivered
not later than February 10, 1999 by Mason-Dixon 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.
"Mason-Dixon Subsidiaries" shall mean Carroll County Bank and Trust Company,
Mason-Dixon Merger Sub, Inc., Bank of Maryland, Mason-Dixon Capital Trust and
Rose Shanis Loans, LLC, any and all other Subsidiaries of Mason-Dixon as of
the date hereof and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of Mason-Dixon after the date hereof and
held as a Subsidiary by Mason-Dixon at the Effective Time.
"Material Adverse Effect" on BB&T or Mason-Dixon 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 Mason-Dixon and the Mason-Dixon
Subsidiaries taken as a whole, or (ii) materially impairs the ability of BB&T
or Mason-Dixon 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 Mason-Dixon 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.
"MGCL" shall mean the General Corporation Law of the State of Maryland, as
amended.
"NCBCA" shall mean the North Carolina Business Corporation Act, as amended.
"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 Mason-
Dixon 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.
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<PAGE>
"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 Agreement described under the definition of "BB&T
Common Stock"), and stock appreciation rights, performance units and similar
stock-based rights whether or not they obligate the issuer thereof to issue
stock or other securities or to pay cash.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, proxy statements,
registration statements and all similar documents filed, or required to be
filed, pursuant to the Securities Laws, including but not limited to periodic
and other reports filed pursuant to Section 13 of the Exchange Act.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of
1940, as amended; the Trust Indenture Act of 1939 as amended; and the rules
and regulations of the Commission promulgated thereunder.
"Stock Based Plans" shall mean, collectively the Stock Option Plan, the
Stock Purchase Plan, Mason-Dixon's Employee Stock Savings and Investment Plan,
Mason-Dixon's Deferred Compensation and Fee Plan for Non-Employee Directors
and Trust Agreement and Mason-Dixon's Management Deferred Compensation Plan
and Trust Agreement (including Mason-Dixon's Supplemental Executive Retirement
Plan).
"Stock Option" shall mean, collectively, any option granted under the Stock
Based Plans or otherwise, outstanding and unexercised on the date hereof to
acquire shares of Mason-Dixon Common Stock, aggregating 52,690 shares.
"Stock Option Plan" shall mean collectively, Mason-Dixon's 1997 Omnibus
Share Plan and those stock option grant agreements issued by Mason-Dixon to
the persons named therein on February 12, 1997 and December 27, 1996.
"Stock Purchase Plan" shall mean the Mason-Dixon Dividend Reinvestment and
Stock Purchase 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).
"TILA" shall mean the Truth in Lending Act, as amended.
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<PAGE>
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 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 2.7(b)
Constituent Corporations Section 2.1
Determination Date Section 7.1(h)
Effective Time Section 2.3
Employer Entity Section 5.12(b)
Exchange Ratio Section 2.7(a)
Index Group Section 7.1(h)
Index Price Section 7.1(h)
Mason-Dixon Introduction
Maximum Amount Section 5.13
Merger Recitals
Merger Consideration Section 2.7(a)
PBGC Section 3.14(b)(iv)
Plan Section 3.14(b)(i)
Plan of Merger Recitals
Pension Plan Section 5.12(b)
Starting Date Section 7.1(h)
Surviving Corporation Section 2.1(a)
</TABLE>
ARTICLE II
THE MERGER
2.1 Merger
BB&T and Mason-Dixon are constituent corporations (the "Constituent
Corporations") to the Merger as contemplated by the NCBCA. At the Effective
Time:
(a) Mason-Dixon shall be merged with and into BB&T in accordance with
the applicable provisions of the NCBCA and the MGCL, with BB&T being the
surviving corporate entity (hereinafter sometimes referred to as the
"Surviving Corporation").
(b) The separate existence of Mason-Dixon 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 at the Effective Time shall
become the Articles of Incorporation of the Surviving Corporation.
(d) The Bylaws of BB&T at the Effective Time shall become the Bylaws of
the Surviving Corporation.
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 at least two-thirds of the
shares of Mason-Dixon Common Stock. Upon fulfillment or
A-5
<PAGE>
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 Secretary of State of North Carolina and the Department, as provided in
Section 55-11-05 of the NCBCA and Section 3-107 of the MGCL, respectively. 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 Mason-Dixon 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 Mason-Dixon
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, desirable or proper to vest, perfect
or confirm of record or otherwise, in the Surviving Corporation, the title to
any property or rights of the Constituent Corporations acquired or to be
acquired by reason of, or as a result of, the Merger, the Constituent
Corporations agree that such Constituent Corporations and their proper
officers and directors shall and will execute and deliver all such proper
deeds, assignments and assurances in law and do all things necessary,
desirable or proper to vest, perfect or confirm title to such property or
rights in the Surviving Corporation and otherwise to carry out the purpose of
this Agreement, and that the proper officers and directors of the Surviving
Corporation are fully authorized and directed in the name of the Constituent
Corporations or otherwise to take any and all such actions.
2.7 Merger Consideration
As used herein, the term "Merger Consideration" shall mean the number of
shares of BB&T Common Stock (to the nearest one-hundredth of a share) to be
exchanged for each share of Mason-Dixon Common Stock
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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 Mason-Dixon shareholder as provided in
Section 2.8(d), determined as follows:
(a) The number of shares of BB&T Common Stock to be issued for each
issued and outstanding share of Mason-Dixon Common Stock shall be in the
ratio of 1.30 shares of BB&T Common Stock for each share of Mason-Dixon
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 Value. The "Closing Value" shall mean the average
closing price per share of BB&T Common Stock on the NYSE Composite
Transaction List (as reported by The Wall Street Journal--Eastern Edition)
for the five trading days (determined by excluding days on which the NYSE
is closed) ending on the tenth calendar day immediately preceding the
Effective Time (the tenth day to be determined by counting the first
calendar day preceding the Effective Time as the first day).
2.8 Conversion of Shares; Payment of Merger Consideration
(a) At the Effective Time, by virtue of the Merger and without any action on
the part of Mason-Dixon or the holders of record of Mason-Dixon Common Stock,
each share of Mason-Dixon 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
Mason-Dixon Common Stock (as provided in subsection (d) below), the Merger
Consideration.
(b) Each share of the common stock of BB&T 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 Mason-Dixon 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 Mason-Dixon Common Stock. With respect to
any certificate for Mason-Dixon 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 Mason-Dixon 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 Mason-Dixon 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 Mason-Dixon
Common Stock. Upon surrender of such certificates or other evidence of
ownership meeting the requirements of Section 2.8(c), together with such
letter of transmittal duly executed and completed in accordance with the
instructions thereto, and such other documents as may be reasonably requested,
BB&T shall promptly cause the transfer to the persons entitled thereto of the
Merger Consideration.
(e) The Surviving Corporation shall pay any dividends or other distributions
with a record date prior to the Effective Time which have been declared or
made by Mason-Dixon in respect of shares of Mason-Dixon Common Stock in
accordance with the terms of this Agreement and which remain unpaid at the
Effective Time, subject to compliance by Mason-Dixon with section 5.9(b). To
the extent permitted by law, former shareholders of record of Mason-Dixon
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 Mason-Dixon Common Stock are converted, regardless of
whether such holders have exchanged their certificates representing Mason-
Dixon Common Stock for certificates representing BB&T Common Stock in
accordance with the
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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 Mason-Dixon
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 Mason-Dixon 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 Stock Option Plan, except that from and after the Effective Time
(i) BB&T and its Compensation Committee shall be substituted for Mason-Dixon
and the Compensation Committee of Mason-Dixon's Board of Directors
administering the Stock Option Plan, (ii) each Stock Option assumed by BB&T
may be exercised solely for shares of BB&T Common Stock, (iii) the number of
shares of BB&T Common Stock subject to each such Stock Option shall be the
number of whole shares of BB&T (omitting any fractional share) determined by
multiplying the number of shares of Mason-Dixon 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 or any
other duly adopted comparable plan (in either case, 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 Mason-Dixon agree to take all
necessary steps to effectuate the foregoing provisions of this Section 2.9. As
soon as practicable following the Effective Time, BB&T shall deliver to the
participants in the Stock Option Plan an appropriate notice setting forth such
participant's rights pursuant thereto. BB&T has reserved and shall continue to
reserve adequate shares of BB&T Common Stock for delivery upon exercise of any
converted or substitute options. As soon as practicable after the Effective
Time, if it has not already done so, and to the extent Mason-Dixon 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 Plan
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. Mason-Dixon hereby represents that the Stock Option Plan in
its current form complies with Rule 16b-3 to the extent, if any, required as
of the date hereof.
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(b) As soon as practicable following the Effective Time, BB&T shall deliver
to the participants receiving converted options under the BB&T Option Plan an
appropriate notice setting forth such participant's rights pursuant thereto.
2.10 Merger of Subsidiaries
In the event that BB&T shall request, Mason-Dixon shall take such actions,
and shall cause the Mason-Dixon 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 Mason-Dixon Subsidiaries with and into, in each case, one of the BB&T
Subsidiaries or any other Subsidiary of BB&T.
2.11 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 Exchange Ratio shall be
proportionately adjusted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MASON-DIXON
Except as Disclosed, Mason-Dixon represents and warrants to BB&T as follows
(the representations and warranties herein of Mason-Dixon are made subject to
the applicable standard set forth in Section 6.3(a), and no such
representation or warranty shall be deemed to be inaccurate unless the
inaccuracy would permit BB&T to refuse to consummate the Merger under such
applicable standard). The mere inclusion of an item in the Mason-Dixon
Disclosure Memorandum as an exception to a representation or warranty shall
not be deemed an admission by Mason-Dixon that such item represents a material
exception or fact, event or circumstance:
3.1 Capital Structure
The authorized capital stock of Mason-Dixon consists of 20,000,000 shares of
Mason-Dixon Common Stock, par value $1.00 per share. As of the date hereof,
5,059,639 shares of Mason-Dixon Common Stock are issued and outstanding. No
other classes of capital stock of Mason-Dixon, common or preferred, are
authorized, issued or outstanding. All outstanding shares of Mason-Dixon
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 Mason-Dixon Common Stock reserved in connection with
the Stock Based Plans, (ii) 1,006,868 shares of Mason-Dixon Common Stock
reserved in connection with the BB&T Option Agreement and (iii) 28,079 shares
of Mason-Dixon Common Stock reserved for issuance to the former shareholders
of Bank Maryland Corp upon delivery to Mason-Dixon of their Bank Maryland Corp
stock certificates in accordance with the Agreement and Plan of Merger between
Bank Maryland Corp, Mason-Dixon et al. Mason-Dixon has granted options to
acquire 52,690 shares of Mason-Dixon Common Stock under the Stock Option Plan,
which options remain outstanding as of the date hereof. Except as set forth in
this Section 3.1, there are no Rights attached to the shares of Mason-Dixon
Common Stock or authorized, issued or outstanding with respect to, nor are
there any agreements, understandings or commitments relating to the right of
any Mason-Dixon shareholder to own, to vote or to dispose of, the capital
stock of Mason-Dixon. Holders of Mason-Dixon Common Stock do not have
preemptive rights.
3.2 Organization, Standing and Authority
Mason-Dixon is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland, with full corporate power
and authority to carry on its business as now conducted and to own, lease and
operate its properties and assets. Mason-Dixon is not required to be qualified
to do business in any other state of the United States or foreign
jurisdiction.
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3.3 Ownership of Subsidiaries
Section 3.3 of the Mason-Dixon Disclosure Memorandum lists all of the Mason-
Dixon Subsidiaries and, with respect to each, its jurisdiction of
organization, jurisdictions in which it is qualified or otherwise licensed to
conduct business, the number of shares or ownership interests owned by Mason-
Dixon (directly or indirectly), the percentage ownership interest so owned by
Mason-Dixon and its business activities. The outstanding shares of capital
stock or other equity interests of the Mason-Dixon Subsidiaries are validly
issued and outstanding, fully paid and nonassessable, and all such shares are
directly or indirectly owned by Mason-Dixon 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 Mason-Dixon Subsidiaries, and there are no agreements,
understandings or commitments relating to the right of Mason-Dixon to own, to
vote or to dispose of said interests. None of the shares of capital stock or
other equity interests of the Mason-Dixon Subsidiaries have been issued in
violation of the preemptive rights of any person. Section 3.3 of the Mason-
Dixon Disclosure Memorandum also lists all shares of capital stock or other
securities or ownership interests of any corporation, partnership, joint
venture, or other organization (other than the Mason-Dixon Subsidiaries) owned
directly or indirectly by Mason-Dixon other than shares comprising less than
5% of the ownership interest in such corporation, partnership, joint venture
or other organization and held in the marketable securities portfolio of
Mason-Dixon or a Mason-Dixon Subsidiary in the ordinary course of its
business.
3.4 Organization, Standing and Authority of the Subsidiaries
Each Mason-Dixon Subsidiary which is a depository institution is a federally
chartered savings association or a Maryland chartered banking institution with
its deposits insured by the FDIC. Each of the Mason-Dixon Subsidiaries is
validly existing and in good standing under the laws of its jurisdiction of
organization. Each of the Mason-Dixon 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 Mason-Dixon
Subsidiary is required to be qualified to do business in any other state of
the United States or foreign jurisdiction, or is engaged in any type of
nonbanking activities that have not been Disclosed.
3.5 Authorized and Effective Agreement
(a) Mason-Dixon 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 Mason-Dixon shareholders of this Agreement and the
Plan of Merger) to perform all of its obligations under this 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 Mason-Dixon 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 Mason-
Dixon, and each is enforceable against Mason-Dixon 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 (whether applied in a court of law or in equity).
(b) Neither the execution and delivery of this Agreement, the Articles of
Merger or the BB&T Option Agreement, nor consummation of the transactions
contemplated hereby or thereby, nor compliance by Mason-Dixon 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 Mason-Dixon or any
Mason-Dixon 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 Mason-Dixon or any Mason-Dixon Subsidiary pursuant
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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 Mason-Dixon or any Mason-Dixon 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 Mason-Dixon of the Merger and the other transactions
contemplated in this Agreement.
3.6 Securities Filings; Financial Statements; Statements True
(a) Mason-Dixon has timely filed all Securities Documents required by the
Securities Laws to be filed since December 31, 1995. Mason-Dixon has Disclosed
or made available to BB&T a true and complete copy of each Securities Document
filed by Mason-Dixon with the Commission after December 31, 1995 and prior to
the date hereof, which are all of the Securities Documents that Mason-Dixon
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 Mason-Dixon fairly present or will fairly
present, as the case may be, the consolidated financial position of Mason-
Dixon and the Mason-Dixon 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 Mason-Dixon or any Mason-Dixon 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 Mason-Dixon and each of the Mason-Dixon Subsidiaries
contain or will contain at Closing accurate records of all meetings and other
corporate actions of their respective shareholders and Boards of Directors
(including committees of the Board of Directors), and the signatures contained
therein are the true signatures of the persons whose signatures they purport
to be.
3.8 Adverse Change
Since December 31, 1997 and except as specifically identified (by footnote
or otherwise) in the most recent Financial Statements of Mason-Dixon, (i)
Mason-Dixon and the Mason-Dixon Subsidiaries have not incurred any liability,
whether accrued, absolute or contingent, or entered into any transactions with
Affiliates, in each case other than in the ordinary course of business
consistent with past practices, and (ii) there has not been any adverse change
or any event involving a prospective adverse change in the business, financial
condition, results of operations or business prospects of Mason-Dixon or any
of the Mason-Dixon Subsidiaries.
3.9 Absence of Undisclosed Liabilities
All liabilities (including contingent liabilities) of Mason-Dixon and the
Mason-Dixon Subsidiaries are disclosed in the most recent Financial Statements
of Mason-Dixon or were incurred in the ordinary course of its business since
the date of Mason-Dixon's most recent Financial Statements.
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3.10 Properties
(a) Mason-Dixon and the Mason-Dixon 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,
tangible and intangible, reflected on the consolidated balance sheet included
in the Financial Statements of Mason-Dixon as of December 31, 1997 or acquired
after such date, except for (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 Mason-Dixon or any Mason-Dixon
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) Mason-Dixon and the Mason-Dixon Subsidiaries are and at all times have
been in compliance with all Environmental Laws. Neither Mason-Dixon nor any
Mason-Dixon Subsidiary has received any communication alleging that Mason-
Dixon or the Mason-Dixon 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 Mason-Dixon nor any
Mason-Dixon 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) Mason-Dixon or any Mason-Dixon Subsidiary, (ii) any person or
entity whose liability for any Environmental Claim Mason-Dixon or any Mason-
Dixon 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
Mason-Dixon or any Mason-Dixon Subsidiary, or any real or personal property
which Mason-Dixon or any Mason-Dixon 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 Mason-Dixon or any Mason-Dixon Subsidiary holds
a security interest securing a loan recorded on the books of Mason-Dixon or
any Mason-Dixon Subsidiary. Neither Mason-Dixon nor any Mason-Dixon 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) Mason-Dixon and the Mason-Dixon Subsidiaries are in compliance with all
recommendations contained in any environmental audits, analyses and surveys
received by Mason-Dixon relating to all real and personal property owned or
leased by Mason-Dixon or any Mason-Dixon Subsidiary and all real and personal
property of which Mason-Dixon or any Mason-Dixon 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 Mason-Dixon or any Mason-Dixon Subsidiary or
against any person or entity whose liability for any Environmental Claim
Mason-Dixon or any Mason-Dixon Subsidiary has or may have retained or assumed,
either contractually or by operation of law.
3.12 Loans; Allowance for Loan Losses
(a) All of the loans on the books of Mason-Dixon and the Mason-Dixon
Subsidiaries are valid and properly documented, and were made in the ordinary
course of business. Neither the terms of such loans, nor
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any of the loan documentation, nor the manner in which such loans have been
administered and serviced, nor Mason-Dixon's procedures and practices of
approving or rejecting loan applications, violates any federal, state or local
law, rule, regulation or ordinance applicable thereto, including, without
limitation, the TILA, Regulations O and Z of the Federal Reserve Board, the
CRA, the Equal Credit Opportunity Act, as amended, and state laws, rules and
regulations relating to consumer protection, installment sales and usury.
(b) The allowances for loan losses reflected on the consolidated balance
sheets included in the Financial Statements of Mason-Dixon are adequate as of
their respective dates under the requirements of GAAP and applicable
regulatory requirements and guidelines.
3.13 Tax Matters
(a) Mason-Dixon and the Mason-Dixon Subsidiaries and each of their
predecessors have timely filed (or requests for extensions have been timely
filed and any such extensions either are pending or have been granted and have
not expired) all federal, state and local (and, if applicable, foreign) tax
returns required by applicable law to be filed by them (including, without
limitation, estimated tax returns, income tax returns, information returns,
and withholding and employment tax returns) and have paid, or where payment is
not required to have been made, have set up an adequate reserve or accrual for
the payment of, all taxes required to be paid in respect of the periods
covered by such returns and, as of the Effective Time, will have paid, or
where payment is not required to have been made, will have set up an adequate
reserve or accrual for the payment of, all taxes for any subsequent periods
ending on or prior to the Effective Time. Neither Mason-Dixon nor any Mason-
Dixon Subsidiary has or will have any liability for any such taxes in excess
of the amounts so paid or reserves or accruals so established. Mason-Dixon and
the Mason-Dixon 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 Mason-Dixon and the Mason-Dixon Subsidiaries are complete and
accurate. Neither Mason-Dixon nor any Mason-Dixon 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 Mason-Dixon or any Mason-Dixon
Subsidiary which have not been settled and paid. There are currently no
agreements in effect with respect to Mason-Dixon or any Mason-Dixon Subsidiary
to extend the period of limitations for the assessment or collection of any
tax. No audit examination or deficiency or refund litigation with respect to
such returns is pending.
(c) Deferred taxes have been provided for in accordance with GAAP
consistently applied.
(d) Neither Mason-Dixon nor any of the Mason-Dixon 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 Mason-Dixon or a Mason-Dixon subsidiary)
or has any liability for taxes of any person (other than Mason-Dixon and the
Mason-Dixon Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law) as a transferee or successor
or by contract or otherwise.
(e) Each of Mason-Dixon and the Mason-Dixon Subsidiaries is in compliance
with, and its records contain all information and documents (including
properly completed IRS Forms W-9) necessary to comply with, all applicable
information reporting and tax withholding requirements under federal, state,
and local tax laws, and such records identify with specificity all accounts
subject to backup withholding under Section 3406 of the Code.
(f) Neither Mason-Dixon nor any of the Mason-Dixon Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any contract
that could obligate it to make any payments that would be disallowed as a
deduction under Section 280G or 162(m) of the Code.
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3.14 Employees; Compensation; Benefit Plans
(a) Compensation. Mason-Dixon 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 Mason-Dixon and of each Mason-Dixon
Subsidiary and each other person (in each case other than as an employee) to
whom Mason-Dixon or any Mason-Dixon 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) Mason-Dixon has Disclosed an accurate and complete list of all
Plans, as defined below, contributed to, maintained or sponsored by Mason-
Dixon or any Mason-Dixon Subsidiary, to which Mason-Dixon or any Mason-
Dixon 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 Mason-Dixon or any Mason-Dixon
Subsidiary is a member. For purposes of this Agreement, the term "Plan"
shall mean a plan, arrangement, agreement or program described in the
foregoing provisions of this Section 3.14(b)(i) and which is: (A) a profit-
sharing, deferred compensation, bonus, stock option, stock purchase,
pension, retainer, consulting, retirement, severance, welfare or incentive
plan, agreement or arrangement, whether or not funded and whether or not
terminated, (B) an employment agreement, (C) a personnel policy or fringe
benefit plan, policy, program or arrangement providing for benefits or
perquisites to current or former employees, officers, directors or agents,
whether or not funded, and whether or not terminated, including, without
limitation, benefits relating to automobiles, clubs, vacation, child care,
parenting, sabbatical, sick leave, severance, medical, dental,
hospitalization, life insurance and other types of insurance, or (D) any
other employee benefit plan as defined in Section 3(3) of ERISA, whether or
not funded and whether or not terminated.
(ii) Neither Mason-Dixon nor any Mason-Dixon Subsidiary contributes to,
has an obligation to contribute to or otherwise has any liability or
potential liability with respect to (A) any multi employer 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 Mason-Dixon or any Mason-Dixon
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, and all related trusts, insurance contracts and funds,
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
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ERISA, no reportable event (as such term is defined in Section 4043 of
ERISA) has occurred with respect to any such Plan within the last three
years and, prior to such three-year period, no reportable event has
occurred for which the reporting requirements have not been waived by the
PBGC, and the PBGC has not commenced or threatened the termination of any
Plan. None of the assets of Mason-Dixon or any Mason-Dixon Subsidiary is
the subject of any lien arising under Section 302(f) of ERISA or Section
412(n) of the Code, neither Mason-Dixon nor any Mason-Dixon 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 Mason-Dixon or any
Mason-Dixon 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 Mason-Dixon or any Mason-Dixon Subsidiary is a member or was a member
during such five-year period.
(vii) As of the date hereof, the fair market value of the assets of each
Plan that is a tax qualified defined benefit plan equals or exceeds, and as
of the Closing Date will equal or exceed, the present value of all vested
and non-vested liabilities thereunder determined in accordance with
reasonable actuarial methods, factors and assumptions applicable to a
defined benefit plan on an ongoing basis. With respect to each Plan that is
subject to the funding requirements of Section 412 of the Code and Section
302 of ERISA, all required contributions for all periods ending prior to or
as of the Closing Date (including periods from the first day of the then-
current plan year to the Closing Date and including all quarterly
contributions required in accordance with Section 412(m) of the Code) shall
have been made. With respect to each other Plan, all required payments,
premiums, contributions, reimbursements or accruals for all periods ending
prior to or as of the Closing Date shall have been made.
(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 Mason-Dixon nor, to the best knowledge of Mason-
Dixon, any Mason-Dixon 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
Mason-Dixon or any Mason-Dixon 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) Mason-Dixon and each Mason-Dixon Subsidiary has been and is
presently in compliance with all of the requirements of Section 4980B of
the Code.
(xi) Neither Mason-Dixon nor any Mason-Dixon 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 Mason-Dixon as of December 31, 1997
or otherwise Disclosed.
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(xii) Neither the consideration nor implementation of the transactions
contemplated under this Agreement will increase (A) Mason-Dixon's or any
Mason-Dixon 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, Mason-Dixon 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 Mason-Dixon and any Mason-Dixon
Subsidiary may be amended or terminated at any time by action of Mason-
Dixon's Board of Directors, or such Mason-Dixon's Subsidiary's Board of
Directors, as the case may be, or a committee of such 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 multi employer plans, to termination of the participation of Mason-Dixon
or a Mason-Dixon Subsidiary thereunder).
3.15 Certain Contracts
(a) Neither Mason-Dixon nor any Mason-Dixon 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 Mason-Dixon or any Mason-Dixon Subsidiary or the
guarantee by Mason-Dixon or any Mason-Dixon Subsidiary of any such obligation,
which cannot be terminated within less than 30 days after the Closing Date by
Mason-Dixon or any Mason-Dixon Subsidiary (without payment of any penalty or
cost, except with respect to Federal Home Loan Bank or Federal Reserve Bank
advances), (iii) any agreement, arrangement or commitment, written or oral,
relating to the employment of a consultant, independent contractor or agent,
or the employment, election or retention in office of any present or former
director or officer, which cannot be terminated within less than 30 days after
the Closing Date by Mason-Dixon or any Mason-Dixon Subsidiary (without payment
of any penalty or cost), or that provides benefits which are contingent, or
the application of which is altered, upon the occurrence of a transaction
involving Mason-Dixon 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 Mason-Dixon nor any Mason-Dixon 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.
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3.16 Legal Proceedings; Regulatory Approvals
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of Mason-Dixon,
threatened against Mason-Dixon or any Mason-Dixon Subsidiary or against any
asset, interest, plan or right of Mason-Dixon or any Mason-Dixon Subsidiary,
or, to the best knowledge of Mason-Dixon, 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 Mason-Dixon,
threatened against any present director or officer of Mason-Dixon or any
Mason-Dixon Subsidiary, and, to the best knowledge of Mason-Dixon, there are
no actions, suits or proceedings instituted, pending or threatened against any
former director or officer of Mason-Dixon or of any Mason-Dixon Subsidiary,
that would reasonably be expected to give rise to a claim against Mason-Dixon
or any Mason-Dixon Subsidiary for indemnification. There are no actual or, to
the best knowledge of Mason-Dixon, 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 Mason-Dixon,
no fact or condition relating to Mason-Dixon or any Mason-Dixon Subsidiary
exists (including, without limitation, noncompliance with the CRA) that would
prevent Mason-Dixon or BB&T from obtaining all of the federal and state
regulatory approvals contemplated herein.
3.17 Compliance with Laws; Filings
Each of Mason-Dixon and each Mason-Dixon Subsidiary is in compliance with
all statutes and regulations (including, but not limited to, the CRA, the TILA
and regulations promulgated thereunder, and other consumer banking laws), and
has obtained and maintained all permits, licenses and registrations applicable
to the conduct of its business, and neither Mason-Dixon nor any Mason-Dixon
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 Mason-Dixon nor any Mason-Dixon 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, 1995, Mason-Dixon and each of the Mason-Dixon 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, Commission, FDIC, Federal
Reserve Board and applicable state Regulators. Each such report, registration,
notice and statement, and each amendment thereto, complied with applicable
legal requirements.
3.18 Brokers and Finders
Neither Mason-Dixon nor any Mason-Dixon 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 an obligation to the Financial
Advisor, the nature and extent of which has been Disclosed, for investment
banking services, and except for fees to accountants and lawyers.
3.19 Repurchase Agreements; Derivatives
(a) With respect to all agreements currently outstanding pursuant to which
Mason-Dixon or any Mason-Dixon Subsidiary has purchased securities subject to
an agreement to resell, Mason-Dixon or the Mason-Dixon 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 Mason-Dixon or any Mason-Dixon
Subsidiary has sold securities subject to an agreement to repurchase, neither
Mason-Dixon nor the Mason-Dixon Subsidiary has pledged collateral in excess of
the amount of the debt secured thereby other than in the ordinary course of
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business. Neither Mason-Dixon nor any Mason-Dixon Subsidiary has pledged
collateral in excess of the amount required under any interest rate swap or
other similar agreement currently outstanding.
(b) Neither Mason-Dixon nor any Mason-Dixon 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 Mason-Dixon Subsidiaries that are depository
institutions are insured by the FDIC to the maximum extent permitted by
federal law, and the Mason-Dixon 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
All existing transactions, investments and loans, including loan guarantees
existing as of the date hereof, to which Mason-Dixon or any Mason-Dixon
Subsidiary is a party with any director, executive officer or 5% shareholder
of Mason-Dixon or any person, corporation, or enterprise controlling,
controlled by or under common control with any of the foregoing were made in
compliance with applicable law and on terms no less favorable to Mason-Dixon
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 Mason-Dixon 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 Mason-Dixon, (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 Mason-Dixon nor any Mason-Dixon 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) 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
Mason-Dixon and, to the extent required, each Mason-Dixon 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 Mason-Dixon nor any Mason-Dixon Subsidiary is the subject of any
claim or allegation that it has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or comparable state law) or
seeking to compel it to bargain with any labor organization as to wages or
conditions of employment, nor is Mason-Dixon or any Mason-Dixon Subsidiary
party to any collective bargaining agreement. There is no
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strike or other labor dispute involving Mason-Dixon or any Mason-Dixon
Subsidiary, pending or threatened, or to the best knowledge of Mason-Dixon, is
there any activity involving any employees of Mason-Dixon or any Mason-Dixon
Subsidiary seeking to certify a collective bargaining unit or engaging in any
other organization activity.
3.26 Fairness Opinion
Mason-Dixon has received from the Financial Advisor an opinion that, as of
the date hereof, the Merger Consideration is fair to the shareholders of
Mason-Dixon from a financial point of view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BB&T
BB&T represents and warrants to Mason-Dixon as follows (the representations
and warranties herein of BB&T are made subject to the applicable standard set
forth in Section 6.2(a), and no such representation or warranty shall be
deemed to be inaccurate unless the inaccuracy would permit Mason-Dixon to
refuse to consummate the Merger under such applicable standard):
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
290,210,766 shares were issued and outstanding on December 31, 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) BB&T has all requisite corporate power and authority to enter into and
(subject to receipt of all necessary government approvals) perform all of its
obligations under this Agreement. The execution 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 BB&T. This Agreement and the Plan of Merger attached hereto constitute
legal, valid and binding obligations of BB&T, and each is enforceable against
BB&T 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.
(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 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 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 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. Each of the BB&T Subsidiaries (i) has full power and authority
to carry on its business as now conducted and (ii) is duly qualified to do
business in the states of the United States and foreign jurisdictions where
its ownership or leasing of property or the conduct of its business requires
such qualification.
4.5 Securities Documents; Statements True
BB&T has timely filed all Securities Documents required by the Securities
Laws to be filed since December 31, 1995. 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
Mason-Dixon 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
Mason-Dixon 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 Adverse Change
Since December 31, 1997 and except as specifically identified (by footnote
or otherwise) in the most recent BB&T Financial Statements, there has not been
any adverse change or any event involving a prospective adverse change in the
business, financial condition, results of operations or business prospects of
BB&T or any of the BB&T Subsidiaries.
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4.9 Tax and Regulatory Matters
Neither BB&T nor any BB&T 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).
4.10 Share Ownership
As of the date of this Agreement, BB&T does not own (except in a fiduciary
capacity) any shares of Mason-Dixon Common Stock.
4.11 Legal Proceedings; Regulatory Approvals
There are no actual or, to the best knowledge of BB&T, threatened actions,
suits or proceedings instituted, which present a claim to restrain or prohibit
the transactions contemplated herein. 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
Mason-Dixon from obtaining all of the federal and state regulatory approvals
contemplated herein.
ARTICLE V
COVENANTS
5.1 Mason-Dixon Shareholder Meeting
Mason-Dixon 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 Mason-
Dixon agrees that it shall, at the time the Proxy Statement/Prospectus is
mailed to the shareholders of Mason-Dixon, recommend that Mason-Dixon's
shareholders vote for such approval; provided, that the Board of Directors of
Mason-Dixon 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 Mason-Dixon' shareholders
after consideration of (i) written advice of legal counsel that, in the
opinion of such counsel, such recommendation or the failure to withdraw or
modify such recommendation would more likely than not constitute a breach of
the fiduciary duty of the Board of Directors to the shareholders of Mason-
Dixon, and (ii) either (A) the written withdrawal by the Financial Advisor of
its opinion referred to in Section 3.26 or (B) the delivery to the Board of
Directors of written advice from the Financial Advisor that the Merger
Consideration is either not fair or inadequate to the Mason-Dixon shareholders
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. Mason-Dixon will furnish
to BB&T the information required to be included in the Registration Statement
with respect to its business and affairs before it is filed with the
Commission and again before any amendments are filed, and shall have the right
to review and consult with BB&T on the form of, and any characterizations of
such information included in, the Registration Statement prior to the filing
with the Commission. Such Registration Statement, at the time it becomes
effective and on the Effective Time, shall in all material respects conform to
the requirements of the Securities Act and the applicable rules and
regulations of the Commission. The Registration Statement shall include the
form of Proxy Statement/Prospectus. BB&T and Mason-Dixon shall use their
reasonable best efforts to cause the Proxy Statement/Prospectus to be approved
by the Commission for mailing to the Mason-Dixon 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
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applicable rules and regulations of the Commission thereunder. Mason-Dixon
shall cause the Proxy Statement/Prospectus to be mailed to shareholders in
accordance with all applicable notice requirements under the Securities Laws
and the MGCL.
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 connection therewith, BB&T undertakes and agrees to pay or
cause to be paid when due the Merger Consideration. BB&T has reserved for
issuance such number of shares of BB&T Common Stock as shall be necessary to
pay the Merger Consideration and agrees not to take any action that would
cause the aggregate number of authorized shares of BB&T Common Stock available
for issuance hereunder not to be sufficient to effect the Merger. If at any
time the aggregate number of shares of BB&T Common Stock reserved for issuance
hereunder is not sufficient to effect the Merger, BB&T shall take all
appropriate action as may be required to increase the number of shares of BB&T
Common Stock reserved for such purpose.
5.4 Additional Acts
(a) Mason-Dixon agrees to take such actions 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 the economic rights and obligations of the Mason-Dixon
shareholders 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 Mason-Dixon
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. Mason-Dixon 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. Mason-Dixon and
BB&T shall provide promptly to each other copies of all correspondence with
regulatory bodies to which applications are submitted.
(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 Mason-Dixon shall use, and shall cause each of their
respective Subsidiaries to use, its best efforts in good faith to (i) furnish
such information as may be required in connection with and otherwise cooperate
in the preparation and filing of the documents referred to in Sections 5.2 and
5.4 or elsewhere herein, and (ii) take or cause to be taken all action
necessary or desirable on its part to fulfill the conditions in Article VI,
including, without limitation, executing and delivering, or causing to be
executed and delivered, such representations, certificates and other
instruments or documents as may be reasonably requested by BB&T's legal
counsel for such counsel to issue the opinion contemplated by Section 6.1(e),
and to consummate the transactions herein contemplated at the earliest
possible date. Neither BB&T nor Mason-Dixon 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.
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5.6 Certain Accounting Matters
Mason-Dixon shall cooperate with BB&T concerning accounting and financial
matters necessary or appropriate to facilitate the Merger (taking into account
BB&T's policies, practices and procedures), including, without limitation,
issues arising in connection with record keeping, loan classification,
valuation adjustments, levels of loan loss reserves and other accounting
practices; provided, that (i) 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 Mason-Dixon contained in this Agreement and (ii)
no action shall be required to be taken by Mason-Dixon pursuant to this
Section 5.6 unless and until BB&T agrees in writing that it believes that all
conditions to its 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 a
condition to BB&T's obligation to consummate the Merger) have been satisfied
or waived.
5.7 Access to Information
Mason-Dixon 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,
Mason-Dixon 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 Mason-Dixon and the
Mason-Dixon Subsidiaries and, during such period, shall make available all
information concerning their businesses as may be reasonably requested. No
investigation pursuant to this Section 5.7 shall affect or be deemed to modify
any representation or warranty made by, or the conditions to the obligations
hereunder of, either party hereto. Each party hereto shall, and shall cause
each of its directors, officers, attorneys and advisors to, maintain the
confidentiality of all information obtained hereunder which is not otherwise
publicly disclosed by the other party, said 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 Mason-Dixon 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 Mason-Dixon
Except with the prior written consent of BB&T, between the date hereof and
the Effective Time, Mason-Dixon shall not, and shall cause each of the Mason-
Dixon 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 $0.19 per share of Mason-Dixon Common Stock payable on record
dates and in amounts consistent with past practices; provided that any
dividend declared or payable on the shares of Mason-Dixon Common Stock for
the quarterly period during which the Effective Time occurs shall, unless
otherwise agreed upon in writing by BB&T and Mason-Dixon, be declared with
a
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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 Options, the BB&T Option Agreement or to the
former shareholders of Bank Maryland Corp as contemplated by Section
3.1(iii);
(d) issue, grant or authorize any Rights or effect any recapitalization,
reclassification, stock dividend, stock split or like change in
capitalization;
(e) amend its Articles of Incorporation or Bylaws;
(f) impose or permit imposition, of any lien, charge or encumbrance on
any share of stock held by it in any Mason-Dixon 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;
(g) except for the merger of Sterling Bank & Trust Co. with and into the
Bank of Maryland, 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;
(h) fail to comply in any material respect with any laws, regulations,
ordinances or governmental orders and decrees applicable to it and to the
conduct of its business;
(i) increase the rate of compensation of any of its directors, officers
or employees (excluding increases in compensation resulting from 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 and except for severance benefits and retention
bonuses under Section 6.10 of the Agreement and Plan of Share Exchange and
Merger by and among Mason-Dixon, certain Mason-Dixon Subsidiaries, Sterling
Bancorp and Sterling Bank and Trust Co. dated October 16, 1998. BB&T shall
not unreasonably withhold its consent to bonuses for 1998 and base salary
increases for 1999;
(j) except for termination of the Sterling Bancorp 401(k) Plan and
completion of the conversion of Mason-Dixon's health and dental insurance
to CIGNA effective January 1, 1999, 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;
(k) 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, Mason-Dixon
or any Mason-Dixon Subsidiary or any business combination with Mason-Dixon
or any Mason-Dixon Subsidiary other than as contemplated by this Agreement;
or authorize any officer, director, agent or affiliate of Mason-Dixon or
any Mason-Dixon 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 (k)
shall not apply to furnishing information, negotiations or discussions
following an unsolicited offer if, as a result of such offer, Mason-Dixon
is advised in writing by legal counsel that in its opinion the failure to
so furnish information or negotiate would likely constitute a breach of the
fiduciary duty of Mason-Dixon's Board of Directors to the Mason-Dixon
shareholders;
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(l) 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 Mason-Dixon or a Mason-Dixon Subsidiary or
guarantee by Mason-Dixon or a Mason-Dixon 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,
the reappointment of officers in the normal course or the hiring and firing
of at-will employees in the ordinary course of business), or (iv) any
contract, agreement or understanding with a labor union;
(m) 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
(i) the requisite regulatory approvals for the transactions contemplated by
this Agreement and the Plan of Merger and (ii) written acknowledgment from
BB&T that it believes that all conditions to its 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 a condition to BB&T's obligation to
consummate the Merger) have been satisfied or waived, Mason-Dixon 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;
(n) change its methods of accounting in effect at December 31, 1997,
except as required by changes in GAAP concurred in by BB&T, which
concurrence shall not be unreasonably withheld, or change any of its
methods of reporting income and deductions for federal income tax purposes
from those employed in the preparation of its federal income tax returns
for the year ended December 31, 1997, except as required by changes in law
or regulation;
(o) incur any commitments for capital expenditures or obligation to make
capital expenditures in excess of $25,000, for any one expenditure, or
$100,000, in the aggregate. BB&T hereby consents to capital expenditures of
(i) $175,000 for establishment of the Buckingham Choice Branch, (ii)
$313,000 for Year 2000 remediation expenses and (iii) $280,000 for
establishment of Mason-Dixon's Wide Area Network;
(p) incur any indebtedness other than deposits from customers, Fed Funds
purchased, advances from the Federal Home Loan Bank or Federal Reserve Bank
and reverse repurchase arrangements in the ordinary course of business;
(q) 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;
(r) dispose of any material assets other than in the ordinary course of
business; or
(s) agree to do any of the foregoing.
5.10 Employment Agreements
BB&T (or its specified BB&T Subsidiary) agrees to enter into an employment
agreement with Thomas K. Ferguson substantially in the form of Annex B hereto,
with Michael L. Oster substantially in the form of Annex C hereto, with Mark
A. Keidel substantially in the form of Annex D hereto and with Louna S. Primm,
Marcus L. Primm, Christine L. Whiteleather, Hunter F. Calloway and Richard
Springer substantially in the form of Annex E hereto.
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5.11 Affiliates
Mason-Dixon shall use its best efforts to cause all persons who are
Affiliates of Mason-Dixon to deliver to BB&T promptly following the execution
of 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.
5.12 401(k) Plan; Pension Plan; Other Employee Benefits; Stock Purchase Plan
(a) BB&T shall cause the 401(k) plan of Mason-Dixon to be merged with the
401(k) plan maintained by BB&T and the BB&T Subsidiaries, and the account
balances of participants in the Mason-Dixon plan shall be transferred to the
accounts of such participants 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 and the provisions of Code Section
411(d)(6)). For purposes of administering the 401(k) plan, service with Mason-
Dixon and the Mason-Dixon Subsidiaries shall be deemed to be service with BB&T
or the BB&T Subsidiaries for participation 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 either (i) to terminate the noncontributory defined
benefit pension plan of Carroll County Bank and Trust Company (the "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 Pension Plan and the distribution of the assets thereof to
the participants or (ii) to merge the Pension Plan with and into BB&T's
defined benefit pension plan. If BB&T terminates the Pension Plan, the actions
relating to such termination shall be conditioned upon receiving a favorable
determination letter from the IRS with regard to the termination of the
Pension Plan and the provisions of Code Section 411(d)(6). 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 Mason-Dixon or a
Mason-Dixon Subsidiary at the Effective Time who remains or becomes an
employee immediately following the Effective Time of BB&T, a BB&T Subsidiary
or another Subsidiary of BB&T ("Employer Entity") shall be given credit under
BB&T's defined benefit pension plan for service with Mason-Dixon and the
Mason-Dixon Subsidiaries for participation and vesting purposes, but not for
purposes of benefit accrual; provided, that if BB&T merges the Pension Plan
into BB&T's defined benefit pension plan, BB&T's defined benefit pension plan
shall provide credit for benefits accrued under the Pension Plan prior to the
Effective Time.
(c) Each employee of Mason-Dixon or a Mason-Dixon Subsidiary at the
Effective Time who remains or becomes an employee immediately following the
Effective Time of an Employer Entity shall be eligible to participate in the
group hospitalization, medical, dental, life, disability and other welfare
benefit plans and programs available to employees of the Employer Entity,
subject to the terms of such plans and programs; provided, that service with
Mason-Dixon or a Mason-Dixon Subsidiary shall be deemed to be service with the
Employer Entity for the purpose of determining eligibility to participate and
vesting (if applicable) in such welfare plans and programs, but not for the
purpose of computing benefits, if any, determined in whole or in part with
reference to service. Coverage under the group health plans of Mason-Dixon and
the Mason-Dixon Subsidiaries will be deemed "creditable coverage" within the
meaning of ERISA Section 701(c) for purposes of any preexisting condition
limitation which may apply under any group health plan maintained by an
Employer Entity; provided, however, that no coverage prior to a "significant
break in coverage" as defined in ERISA Section 701(c)(2) shall be counted as
"creditable coverage."
(d) Each employee of Mason-Dixon or a Mason-Dixon Subsidiary who becomes an
employee of an Employer Entity and is terminated by such or another Employer
Entity 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
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to the extent that such employee is entitled to severance pay under such
policy. Such employee's service with Mason-Dixon or a Mason-Dixon 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 agrees to honor all employment agreements, severance agreements and
deferred compensation agreements that Mason-Dixon and the Mason-Dixon
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. Except for the agreements described in the
preceding sentence and as provided in subsections (a) and (b) of this Section
5.12, the Stock Option Plan and other employee benefit plans of Mason-Dixon
shall be terminated as of the Effective Time.
(f) Notwithstanding and without limiting the generality of Section 5.12(e),
as soon as practicable following the date hereof, Mason-Dixon shall take any
and all action necessary to terminate the Stock Purchase Plan, and no
purchases of shares of Mason-Dixon Common Stock shall be made under the Stock
Purchase Plan after the Effective Time.
5.13 Directors and Officers Protection
BB&T or a BB&T Subsidiary shall provide 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 Mason-Dixon for acts
or omissions occurring prior to the Effective Time. Such insurance shall
provide at least the same coverage and amounts as contained in Mason-Dixon'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 Mason-Dixon'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. Notwithstanding the
foregoing, BB&T further agrees to indemnify all individuals who are or have
been officers, directors or employees of Mason-Dixon or any Mason-Dixon
Subsidiary prior to the Effective Time from any acts or omissions in such
capacities prior to the Effective Time, to the extent that such
indemnification is provided pursuant to the Articles of Incorporation of
Mason-Dixon on the date hereof and is permitted under the NCBCA.
BB&T or a BB&T Subsidiary shall assume and fulfill the obligation of Mason-
Dixon or a Mason-Dixon Subsidiary under the Agreement and Plan of Share
Exchange and Merger with Sterling Bancorp and the Agreement of Merger with
Bank Maryland Corp concerning directors' and officers' liability insurance and
indemnification of the directors and officers of the Sterling and Bank
Maryland entities.
5.14 Forbearances of BB&T
Except with the prior written consent of Mason-Dixon, 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 Mason-Dixon 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 Reports
Each of Mason-Dixon and BB&T shall file (and shall cause the Mason-Dixon
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 Mason-Dixon, 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.
5.16 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 Mason-Dixon 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.
5.17 Advisory Board for the Mason-Dixon Market Area
As of the Effective Time, BB&T shall offer to each of the members of the
Board of Directors of Mason-Dixon a seat on the Advisory Board for the
Westminster area. 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 Mason-Dixon in effect on January
1, 1999. 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). Mason-Dixon shall use
its best efforts to cause each member of its 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 with BB&T for two years
following the Effective Time.
5.18 Board of Directors of BB&T
As of the Effective Time, Branch Banking and Trust Company, a North Carolina
banking corporation, shall elect Thomas K. Ferguson to its Board of Directors,
to serve until its next annual meeting (subject to the right of removal for
cause) and thereafter so long as he is elected and qualifies.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent--BB&T and Mason-Dixon
The respective obligations of BB&T and Mason-Dixon to effect the
transactions contemplated by this Agreement shall be subject to satisfaction
or waiver of the following conditions at or prior to the Effective Time:
(a) All corporate action necessary to authorize the execution, delivery
and performance of this Agreement and the Plan of Merger, and consummation
of the transactions contemplated hereby and thereby, shall have been duly
and validly taken, including, without limitation, the approval of the
shareholders of Mason-Dixon of the Agreement and the Plan of Merger;
(b) The Registration Statement (including any post-effective amendments
thereto) shall be effective under the Securities Act, no proceedings shall
be pending or to the knowledge of BB&T threatened by the Commission to
suspend the effectiveness of such Registration Statement and the BB&T
Common Stock to be issued as contemplated in the Plan of Merger shall have
either been registered or be subject to exemption from registration under
applicable state securities laws;
(c) The parties shall have received all regulatory approvals required in
connection with the transactions contemplated by this Agreement and the
Plan of Merger, all notice periods and waiting periods with respect to such
approvals shall have passed and all such approvals shall be in effect;
(d) None of BB&T, any of the BB&T Subsidiaries, Mason-Dixon or any of
the Mason-Dixon Subsidiaries shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction issued after the
date of this Agreement which enjoins or prohibits consummation of the
transactions contemplated by this Agreement; and
(e) Mason-Dixon and BB&T shall have received an opinion of BB&T's legal
counsel, in form and substance satisfactory to Mason-Dixon 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
Mason-Dixon will not recognize any gain or loss to the extent that such
shareholders exchange shares of Mason-Dixon Common Stock for shares of BB&T
Common Stock.
6.2 Conditions Precedent--Mason-Dixon
The obligations of Mason-Dixon 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
Mason-Dixon 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 Mason-Dixon. The representations and warranties of BB&T set
forth in Sections 4.1, 4.2 (except as relates to qualification), 4.3(a),
4.3(b)(i) and 4.4 (except as relates to qualification) shall be true and
correct (except for inaccuracies which are de minimis in amount). There
shall not exist inaccuracies in the representations and warranties of BB&T
set forth in this Agreement (including the representations and warranties
set forth in Sections 4.1, 4.2, 4.3(a), 4.3(b)(i) and 4.4) such that the
aggregate effect of such inaccuracies has, or is reasonably likely to have,
a Material Adverse Effect on BB&T;
(b) BB&T shall have performed in all material respects all obligations
and complied in all material respects with all covenants required by this
Agreement;
(c) BB&T shall have delivered to Mason-Dixon 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
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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) Mason-Dixon shall have received opinions of counsel to BB&T
substantially in the form attached as Annex F hereto; and
(e) The shares of BB&T Common Stock issuable pursuant to the Merger
shall have been approved for listing on the NYSE, subject to official
notice of issuance.
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 Mason-Dixon 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 Mason-Dixon 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 Mason-Dixon 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 Mason-Dixon and the Mason-Dixon 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 inadvisable or unduly burdensome;
(c) Mason-Dixon shall have performed in all material respects all
obligations and complied in all material respects with all covenants
required by this Agreement;
(d) Mason-Dixon 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 Mason-Dixon, 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 Mason-Dixon 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 Mason-Dixon
substantially in the form attached as Annex G hereto;
(f) BB&T shall have received the written agreements, substantially in
the form attached as Annex H hereto, 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; and
(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.
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<PAGE>
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 Mason-Dixon 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.
(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 Mason-Dixon do not approve the Agreement and the Plan of Merger.
(f) At any time following August 31, 1999 by either party hereto in
writing, if the Effective Time has not occurred by the close of business on
such date, and the party giving the notice is not in breach of any of its
representations, warranties, covenants or undertakings herein.
(g) At any time prior to 11:59 p.m. on March 15, 1999 by BB&T in
writing, if BB&T determines in its sole good faith judgment, through review
of information Disclosed by Mason-Dixon, or otherwise, that the financial
condition, results of operations, business or business prospects of Mason-
Dixon and of the Mason-Dixon 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 Mason-Dixon in writing upon such termination as to the reasons
for BB&T's determination. The fact that Mason-Dixon 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 Mason-Dixon 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 $32.67; and
(2) (i) the quotient obtained by dividing the Closing Value by
$38.4375 (such number being referred to herein as the "BB&T Ratio")
shall be less than (ii) 90% of the quotient obtained by dividing the
Index Price on the Determination Date by the Index Price on the Starting
Date;
subject, however, to the following three sentences. If Mason-Dixon 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, with respect to a failure
to satisfy the condition in clause (1), to elect to increase the Exchange
Ratio to a number
A-31
<PAGE>
such that the value (based on the Closing Value) of the amount of BB&T Common
Stock to be received in the Merger for each share of Mason-Dixon Common Stock
shall equal the value (based on the Closing Value) that would have been
received if the Closing Value were $32.67. The election contemplated by the
preceding sentence shall be made by giving notice to Mason-Dixon 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 have the meaning provided in Section 2.7(b).
"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>
Wachovia Corporation.......................................... 9.64
Fifth Third Bancorp........................................... 12.69
Comerica Incorporation........................................ 7.40
Summit Bancorp................................................ 8.23
Mercantile Bancorporation, Inc................................ 7.48
First Security Corporation.................................... 8.95
Huntington Bancshares Inc..................................... 10.06
SouthTrust Corporation........................................ 7.86
Regions Financial Corporation................................. 10.52
Marshall & Ilsley Corp........................................ 5.05
AmSouth Bancorporation........................................ 5.67
Union Planters Corp........................................... 6.45
------
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
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).
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<PAGE>
7.2 Effect of Termination
In the event this Agreement and the Plan of Merger is terminated pursuant to
Section 7.1 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 hereof,
respectively, shall survive any such termination and (ii) a termination
pursuant to Section 7.1(b) hereof 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 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or the Plan
of Merger or in any instrument delivered pursuant hereto or thereto shall
expire on, and be terminated and extinguished at, the Effective Time, other
than covenants that by their terms are to be performed after the Effective
Time (including Sections 5.13, 5.17 and 5.18), provided that no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive BB&T or Mason-Dixon (or any director, officer or
controlling person thereof) of any defense at law or in equity which otherwise
would be available against the claims of any person, including, without
limitation, any shareholder or former shareholder of either BB&T or Mason-
Dixon, the aforesaid representations, warranties and covenants being material
inducements to consummation by BB&T and Mason-Dixon of the transactions
contemplated herein.
7.4 Waiver
Except with respect to any required regulatory approval, each party hereto,
by written instrument signed by an executive officer of such party, may at any
time (whether before or after approval of the Agreement and the Plan of Merger
by the Mason-Dixon 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 Mason-
Dixon 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 Mason-Dixon, 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,
without limitation, 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 Mason-Dixon.
A-33
<PAGE>
8.2 Entire Agreement
This Agreement, including the documents and other writings referenced herein
or delivered pursuant hereto, contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and thereunder
and supersedes all arrangements or understandings with respect thereto,
written or oral, entered into on or before the date hereof. The terms and
conditions of this Agreement and the BB&T Option Agreement shall inure to the
benefit of and be binding upon the parties hereto and thereto and their
respective successors. Nothing in this Agreement or the BB&T Option Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto and thereto, and their respective successors, any rights,
remedies, obligations or liabilities, except for the rights of directors and
officers of Mason-Dixon to enforce rights in Sections 5.13, 5.17 and 5.18.
8.3 No Assignment
Except for a substitution of parties pursuant to Section 5.4(a), 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 deemed given and received if delivered
personally or sent by nationally recognized overnight express courier or by
facsimile transmission, addressed or directed as follows:
If to Mason-Dixon:
Thomas K. Ferguson
Mason-Dixon Bancshares, Inc.
45 West Main Street
Westminster, Maryland 21158-0199
Telephone: 410-857-3400
Fax: 410-857-3410
With a required copy to:
Carla Stone Witzel
Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC
The Garrett Building
233 E. Redwood Street
Baltimore, Maryland 21202
Telephone: 410-576-4192
Fax: 410-576-4246
If to BB&T:
Scott E. Reed
150 South Stratford Road
4th Floor
Winston-Salem, North Carolina 27104
Telephone: 336-733-3088
Fax: 336-733-2296
A-34
<PAGE>
With a required copy to:
William A. Davis, II
Womble Carlyle Sandridge & Rice, PLLC
200 West Second Street
Winston-Salem, North Carolina 27102
Telephone: 336-733-8364
Fax: 336-721-3624
Any party may by notice change the address to which notice or other
communications to it are to be delivered.
8.5 Specific Performance
Mason-Dixon acknowledges that the Mason-Dixon Common Stock and the Mason-
Dixon business and assets are unique, and that if Mason-Dixon 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 Mason-Dixon shall, without cause,
refuse to consummate the transactions contemplated by this Agreement.
8.6 Captions
The captions contained in this Agreement are for reference only and are not
part of this Agreement.
8.7 Counterparts
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina, without regard to the principles of
conflicts of laws, except to the extent federal law may be applicable.
[remainder of page intentionally left blank]
A-35
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed in counterparts by their
duly authorized officers, all as of the day and year first above written.
BB&T CORPORATION
By: /s/ John A. Allison, IV
___________________________________
Name: John A. Allison, IV
Title: Chairman and Chief
Executive Officer
MASON-DIXON BANCSHARES, INC.
By: /s/ Thomas K. Ferguson
___________________________________
Name: Thomas K. Ferguson
Title: President and Chief
Executive Officer
A-36
<PAGE>
APPENDIX B
May 19, 1999
The Board of Directors
Mason-Dixon Bancshares, Inc.
45 West Main Street
Westminster, MD 21157
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of Mason-Dixon Bancshares, Inc. ("Mason-Dixon") of
the exchange ratio in the proposed merger (the "Merger") of Mason-Dixon with
and into BB&T Corporation ("BB&T") pursuant to the Agreement dated as of
January 27, 1999 between Mason-Dixon and BB&T. It is our understanding that
the Merger will be structured as a pooling-of-interests transaction under
generally accepted accounting principles.
As is more specifically set forth in the Agreement, upon consummation of the
Merger, each outstanding share of the common stock of Mason-Dixon ("Mason-
Dixon Common Stock"), except for any dissenting shares and certain other
shares held by Mason-Dixon and BB&T, will be exchanged for 1.30 (the "Exchange
Ratio") of a share of BB&T ("BB&T Common Stock").
KBW, as part of its investment banking business, is continually engaged in
the valuation of bank holding companies and banks, thrift holding companies
and thrifts and their securities in connection with mergers and acquisitions,
underwriting, private placements, competitive bidding processes, market making
as a NASD market maker, and valuations for various other purposes. As
specialists in the securities of banking companies we have experience in, and
knowledge of, the valuation of banking enterprises. In the ordinary course of
our business as a broker-dealer, we may, from time to time, trade the
securities of Mason-Dixon or BB&T, for our own account, and for the accounts
of our customers and, accordingly, may at any time hold a long or short
position in such securities. To the extent we have any such positions as of
the date of this opinion it has been disclosed to Mason-Dixon. KBW has served
as financial advisor to Mason-Dixon in the negotiation of the Agreement and in
rendering this fairness opinion and will receive a fee from Mason-Dixon for
those services.
In arriving at our opinion, we have reviewed, analyzed and relied upon
material bearing upon the financial and operating condition of Mason-Dixon and
BB&T and the merger, including among other things, the following:
i. Reviewed the Agreement;
ii. Reviewed certain historical financial and other information
concerning Mason-Dixon for the three months ended March 31, 1999 and the
three years ended December 31, 1998, including Mason-Dixon's Annual Report
to Stockholders and Annual Reports on Forms 10-K, and interim quarterly
reports on Form 10-Q;
iii. Reviewed certain historical financial and other information
concerning BB&T for the three months ended March 31, 1999 and the three
years ended December 31, 1998, including BB&T' Annual Report to
Stockholders and Annual Reports on Forms 10-K, and interim quarterly
reports on Form 10-Q;
iv. Reviewed and studied the historical stock prices and trading
volumes of the common stock of both Mason-Dixon and BB&T;
v. Held discussions with senior management of Mason-Dixon and BB&T with
respect to their past and current financial performance, financial
condition and future prospects;
vi. Reviewed certain internal financial data, projections and other
information of Mason-Dixon and BB&T, including financial projections
prepared by management;
B-1
<PAGE>
vii. Analyzed certain publicly available information of other
financial institutions that we deemed comparable or otherwise relevant to
our inquiry, and compared Mason-Dixon and BB&T from a financial point of
view with certain of these institutions;
viii. Reviewed the financial terms of certain recent business
combinations in the banking that we deemed comparable or otherwise relevant
to our inquiry; and
ix. Conducted such other financial studies, analyses and
investigations and reviewed such other information as we deemed appropriate
to enable us to render our opinion.
In conducting our review and arriving at our opinion, we have relied upon
the accuracy and completeness of all of the financial and other information
provided to us or publicly available and we have not assumed any
responsibility for independently verifying the accuracy or completeness of any
such information. We have relied upon the management of Mason-Dixon and BB&T
as to the reasonableness and achievability of the financial and operating
forecasts and projections (and the assumptions and bases therefor) provided to
us, and we have assumed that such forecasts and projections reflect the best
currently available estimates and judgments of such managements and that such
forecasts and projections will be realized in the amounts and in the time
periods currently estimated by such managements. We are not experts in the
independent verification of the adequacy of allowances for loan and lease
losses and we have assumed that the current and projected aggregate reserves
for loan and lease losses for Mason-Dixon and BB&T are adequate to cover such
losses. We did not make or obtain any independent evaluations or appraisals of
any assets or liabilities of Mason-Dixon, BB&T, or any of their respective
subsidiaries nor did we verify any of Mason-Dixon's or BB&T' books or records
or review any individual loan or credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including, among others, the following:
(i) the historical and financial position and results of operations of Mason-
Dixon and BB&T; (ii) the assets and liabilities of Mason-Dixon and BB&T; and
(iii) the nature and terms of certain other merger transactions involving
banks and bank holding companies. We also have taken into account our
assessment of general economic, market and financial conditions and our
experience in other transactions, as well as our experience in securities
valuation and knowledge of the banking industry generally. Our opinion is
necessarily based upon conditions as they exist and can be evaluated on the
date hereof and the information made available to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio pursuant to the Agreement is fair, from a
financial point of view, to the holders of the Mason-Dixon Common Stock.
Very truly yours,
/s/ Keefe Bruyette & Woods, Inc.
Keefe, Bruyette & Woods, Inc.
B-2
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporation
Act contain specific provisions relating to indemnification of directors and
officers of North Carolina corporations. In general, such sections provide
that: (i) a corporation must indemnify a director or officer who is wholly
successful in his defense of a proceeding to which he is a party because of
his status as such, unless limited by the articles of incorporation, and (ii)
a corporation may indemnify a director or officer if he is not wholly
successful in such defense if it is determined as provided by statute that the
director or officer meets a certain standard of conduct, except that when a
director or officer is liable to the corporation or is adjudged liable on the
basis that personal benefit was improperly received by him, the corporation
may not indemnify him. A director or officer of a corporation who is a party
to a proceeding may also apply to a court for indemnification, and the court
may order indemnification under certain circumstances set forth in statute. A
corporation may, in its articles of incorporation or bylaws or by contract or
resolution of the board of directors, provide indemnification in addition to
that provided by statute, subject to certain conditions.
The registrant's bylaws provide for the indemnification of any director or
officer of the registrant against liabilities and litigation expenses arising
out of his status as such, excluding: (i) any liabilities or litigation
expenses relating to activities that were at the time taken known or believed
by such person to be clearly in conflict with the best interest of the
registrant and (ii) that portion of any liabilities or litigation expenses
with respect to which such person is entitled to receive payment under any
insurance policy.
The registrant's articles of incorporation provide for the elimination of
the personal liability of each director of the registrant to the fullest
extent permitted by law.
The registrant maintains directors' and officers' liability insurance that,
in general, insures: (i) the registrant's directors and officers against loss
by reason of any of their wrongful acts and (ii) the registrant against loss
arising from claims against the directors and officers by reason of their
wrongful acts, all subject to the terms and conditions contained in the
policy.
Certain rules of the Federal Deposit Insurance Corporation limit the ability
of certain depository institutions, their subsidiaries and their affiliated
depository institution holding companies to indemnify affiliated parties,
including institution directors. In general, subject to the ability to
purchase directors and officers liability insurance and to advance
professional expenses under certain circumstances, the rules prohibit such
institutions from indemnifying a director for certain costs incurred with
regard to an administrative or enforcement action commenced by any federal
banking agency that results in a final order or settlement pursuant to which
the director is assessed a civil money penalty, removed from office,
prohibited from participating in the affairs of an insured depository
institution or required to cease and desist from or take an affirmative action
described in Section 8(b) of the Federal Deposit Insurance Act (12 U.S.C. (S)
1818(b)).
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
(a) The following documents are filed as exhibits to this registration
statement on Form S-4:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
2 Agreement and Plan of Reorganization dated as of January 26, 1999
between BB&T Corporation and Mason-Dixon Bancshares, Inc.
(included as Appendix A to the Proxy Statement/Prospectus)
5 Opinion of Womble Carlyle Sandridge & Rice, PLLC
8 Opinion of Womble Carlyle Sandridge & Rice, PLLC
Consent of Womble Carlyle Sandridge & Rice, PLLC (included in
23(a) Exhibit 5)
Consent of McGuire, Woods, Battle & Boothe, LLP (included in
23(b) Exhibit 8)
23(c) Consent of Arthur Andersen LLP
23(d) Consent of Stegman and Company
23(e) Consent of Keefe, Bruyette & Woods, Inc.
24 Power of Attorney
99(a) Form of Mason-Dixon Bancshares, Inc. Proxy Card
99(b) Option Agreement, dated January 27, 1999, between BB&T Corporation
and Mason-Dixon Bancshares, Inc.
</TABLE>
(b) Financial statement schedules: Not applicable.
Item 22. Undertakings
A. The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-2
<PAGE>
C. The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
D. The registrant undertakes that every prospectus (i) that is filed
pursuant to Paragraph (C) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
E. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
F. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
G. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Winston-Salem, State of North Carolina, on May 19, 1999.
BB&T CORPORATION
By: /s/ Jerone C. Herring
_______________________________
Name: Jerone C. Herring
Title: Executive Vice President and
Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on May 19, 1999.
/s/ John A. Allison IV* /s/ Scott E. Reed*
_____________________________________ _____________________________________
Name: John A. Allison IV Name: Scott E. Reed
Title: Chairman of the Board and Title: Senior Executive Vice
Chief Executive Officer President and Chief Financial
(principal executive officer) Officer (principal financial
officer)
/s/ Sherry A. Kellett* /s/ Paul B. Barringer*
_____________________________________ _____________________________________
Name: Sherry A. Kellett Name: Paul B. Barringer
Title: Executive Vice President and Title: Director
Controller (principal
accounting officer)
/s/ Alfred E. Cleveland* /s/ W. R. Cuthbertson, Jr.*
_____________________________________ _____________________________________
Name: Alfred E. Cleveland Name: W. R. Cuthbertson, Jr.
Title: Director Title: Director
/s/ Ronald E. Deal* /s/ A. J. Dooley, Sr.*
_____________________________________ _____________________________________
Name: Ronald E. Deal Name: A. J. Dooley, Sr.
Title: Director Title: Director
/s/ Paul S. Goldsmith*
_____________________________________ _____________________________________
Name: Tom D. Efird Name: Paul S. Goldsmith
Title: Director Title: Director
/s/ L. Vincent Hackley* /s/ Jane P. Helm*
_____________________________________ ______ _______________________________
Name: L. Vincent Hackley Name: Jane P. Helm
Title: Director Title: Director
/s/ Richard Janeway, M.D.* /s/ James H. Maynard*
_____________________________________ _____________________________________
Name: Richard Janeway, M.D. Name: James H. Maynard
Title: Director Title: Director
/s/ J. Ernest Lathem, M.D.* /s/ Joseph A. McAleer, Jr.*
_____________________________________ _____________________________________
Name: J. Ernest Lathem, M.D. Name: Joseph A. McAleer, Jr.
Title: Director Title: Director
II-4
<PAGE>
/s/ Richard L. Player, Jr.* /s/ Albert O. McCauley*
_____________________________________ _____________________________________
Name: Richard L. Player, Jr. Name: Albert O. McCauley
Title: Director Title: Director
/s/ Nido R. Qubein* /s/ C. Edward Pleasants, Jr.*
_____________________________________ _____________________________________
Name: Nido R. Qubein Name: C. Edward Pleasants, Jr.
Title: Director Title: Director
/s/ Jack E. Shaw* /s/ E. Rhone Sasser*
_____________________________________ _____________________________________
Name: Jack E. Shaw Name: E. Rhone Sasser
Title: Director Title: Director
/s/ Jerone C. Herring /s/ Harold B. Wells*
*By__________________________________ _____________________________________
Jerone C. Herring Name: Harold B. Wells
Attorney-in-Fact Title: Director
II-5
<PAGE>
Garza Baldwin, III
Direct Dial: 704-331-4907
Direct Fax: 704-338-7816
E-mail: [email protected]
May 19, 1999
BB&T Corporation
200 West Second Street
Winston-Salem, North Carolina 27101
Re: Registration Statement on Form S-4 (the "Registration Statement") with
respect to shares to be issued pursuant to the Agreement and Plan of
Reorganization by and between BB&T Corporation ("BB&T") and Mason-Dixon
Bancshares, Inc. dated as of January 27, 1999 (the "Merger Agreement")
Ladies and Gentlemen:
We have acted as counsel to BB&T in connection with the registration of
6,657,609 shares of its Common Stock, par value $5.00 per share (the "Common
Stock"), issuable pursuant to the Merger Agreement, as set forth in the
Registration Statement that is being filed on the date hereof by BB&T with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Act of 1933, as amended (the "Securities Act"). This opinion is provided
pursuant to the requirements of Item 21(a) of Form S-4 and Item 601(b)(5) of
Regulation S-K.
In connection with the foregoing, we have examined such records, documents,
and proceedings as we have deemed relevant as a basis for the opinion expressed
herein, and we have relied upon an officer's certificate as to certain factual
matters.
Based on the foregoing, we are of the opinion that, when the shares of
Common Stock have been issued upon the terms and conditions set forth in the
Merger Agreement, the shares of Common Stock will be validly issued, fully paid,
and nonassessable.
We hereby consent to be named in the Registration Statement under the
heading "LEGAL MATTERS" as attorneys who passed upon the validity of the shares
of Common Stock and to the filing of a copy of this opinion as Exhibit 5 to the
Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required by Section 7 of the
Securities Act or other rules and regulations of the Commission thereunder.
Very truly yours,
WOMBLE CARLYLE SANDRIDGE & RICE,
A Professional Limited Liability Company
By: /s/ Garza Baldwin, III
------------------------
Garza Baldwin, III
GB/WAD
<PAGE>
Neil G.O'Rourke
Direct Dial: 336-721-3752
Direct Fax: 336-726-6997
E-mail: [email protected]
May 19, 1999
BB&T Corporation
200 West Second Street
Winston-Salem, North Carolina 27101
Re: Registration Statement on Form S-4 (the "Registration Statement") with
respect to shares to be issued pursuant to the Agreement and Plan of
Reorganization, dated as of January 27, 1999 (the "Reorganization
Agreement"), by and between Mason-Dixon Bancshares, Inc., a Maryland
corporation ("Mason-Dixon"), and BB&T Corporation, a North Carolina
corporation ("BB&T")
Ladies and Gentlemen:
We have acted as counsel to BB&T in connection with the registration of
6,657,509 shares of its Common Stock, par value $5.00 per share (the "BB&T
Common Stock"), issuable pursuant to the Reorganization Agreement, as set forth
in the Registration Statement that is being filed on the date hereof by BB&T
with the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Act of 1933, as amended (the "Securities Act"). This opinion is
provided pursuant to the requirements of Item 21(a) of Form S-4 and Item
601(b)(8) of Regulation S-K. All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Reorganization Agreement.
In the Merger, Mason-Dixon will merge into BB&T pursuant to North Carolina
and Maryland law, and each outstanding share of Mason-Dixon Common Stock (the
only class outstanding) is to be converted into a number of shares of BB&T
Common Stock determined under a formula in the Reorganization Agreement. Also,
cash will be paid in lieu of issuance of fractional shares. Mason-Dixon
shareholders are entitled by state law to dissent from the Merger.
In giving this opinion we have reviewed, and with your permission we have
relied upon the representations and warranties contained in or the facts
described in, the Reorganization Agreement, the Registration Statement, and
certificates dated May 19, 1999 in which officers of Mason-Dixon and officers of
BB&T make certain representations on behalf of Mason-Dixon and BB&T,
respectively, regarding the Merger (the "Tax Certificates"). We also have
reviewed such other documents as we have considered necessary and appropriate
for the purposes of this opinion.
In giving this opinion we have with your permission assumed that the
statements in the Tax Certificates are correct as of the date of this opinion,
and any representation or statement made "to the best of knowledge" or similarly
qualified is correct without such qualification. As to all matters in which a
person or entity has represented that such person or entity either is not a
party to, or does not have, or is not aware of, any plan or intention,
understanding or agreement, we have assumed that there is in fact no such
<PAGE>
BB&T Corporation
May 19, 1999
Page 2
plan, intention, understanding or agreement. We also assume that (a) the Merger
will be consummated in accordance with the Reorganization Agreement, (b) Mason-
Dixon's only outstanding stock (as that term is used in Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code")) is the Mason-Dixon
Common Stock, and (c) the Rights attached to the shares of BB&T Common Stock
issued in the Merger will not be exchanged by BB&T for any part of the value of
the Mason-Dixon Common Stock, and such Rights will have no ascertainable fair
market value at the Effective Time.
Based on the foregoing, and subject to the limitations herein, we are of
the opinion that under existing law, upon consummation of the Merger in
accordance with the Reorganization Agreement, for federal income tax purposes:
(1) The Merger will constitute a "reorganization" within the meaning
of Section 368 of the Code.
(2) No gain or loss will be recognized by Mason-Dixon or BB&T by
reason of the Merger.
(3) No gain or loss will be recognized by the shareholders of Mason-
Dixon upon the receipt of BB&T Common Stock (including any
fractional share interest to which they may be entitled) solely
in exchange for their shares of Mason-Dixon Common Stock.
(4) A shareholder of Mason-Dixon who receives cash in lieu of a
fractional share of BB&T Common Stock will recognize gain or loss
as if the fractional share has been received and then redeemed
for cash equal to the amount paid by BB&T in respect of such
fractional share, subject to the provisions and limitations of
Section 302 of the Code.
(5) The tax basis in the BB&T Common Stock received by a Mason-Dixon
shareholder (including any fractional share interest deemed
received) will be the same as the tax basis in the Mason-Dixon
Common Stock surrendered in exchange therefor.
(6) The holding period for BB&T Common Stock received (including any
fractional share interest deemed received) in exchange for shares
of Mason-Dixon Common Stock will include the period during which
the shareholder held the shares of Mason-Dixon Common Stock
surrendered in the exchange, provided that the Mason-Dixon Common
Stock was held as a capital asset at the Effective Time.
We express no opinion as to the laws of any jurisdiction other than the
United States of America. Further, our opinion is limited to the specific
conclusions set forth above, and no other opinions are expressed or implied.
The opinions stated with respect to shares of Mason-Dixon Common Stock do not
apply to any stock rights, warrants or options to acquire Mason-Dixon Common
Stock. The opinions stated as to Mason-Dixon shareholders are general in nature
and do not necessarily apply to any particular Mason-
<PAGE>
BB&T Corporation
May 19, 1999
Page 3
Dixon shareholder, and, for example, may not apply to shareholders who are
corporations, trusts, dealers in securities, financial institutions, insurance
companies or tax exempt organizations; or to persons who are not United States
citizens or resident aliens or domestic entities (partnerships or trusts), are
subject to the alternative minimum tax (to the extent that tax affects the tax
consequences), or are subject to the "golden parachute" provisions of the Code
(to the extent that tax affects the tax consequences); or to shareholders who
acquired Mason-Dixon Common Stock pursuant to employee stock options or
otherwise as compensation if such shares are subject to any restriction related
to employment, who do not hold their shares as capital assets, or who hold their
shares as part of a "straddle" or "conversion transaction."
This opinion represents our best legal judgment, but it has no binding
effect or official status of any kind. Changes to the Code or in regulations or
rulings thereunder, or changes by the courts in the interpretation of the
authorities relied upon, may be applied retroactively and may affect the
opinions expressed herein. This opinion is rendered based upon applicable laws,
rules and regulations as in effect on the date hereof, and we assume no duty or
responsibility to inform you of any changes hereafter in our opinion due to any
change hereafter in such laws, rules and regulations. Any material defect in
any assumption or representation on which we have relied would adversely affect
our opinion.
We furnish this opinion to you solely to support the discussion set forth
under the headings "SUMMARY-No Federal Income Tax on Shares Received in Merger,"
"THE MERGER--The Merger Agreement--Conditions to the Merger," "THE MERGER--
Material Federal Income Tax Consequences of the Merger" and "LEGAL MATTERS" in
the Registration Statement, and we do not consent to its use for any other
purpose. We hereby consent to be named in the Registration Statement under the
foregoing headings and to the filing of a copy of this opinion as Exhibit 8 to
the Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required by Section 7 of the
Securities Act or the rules and regulations of the Commission thereunder.
Very truly yours,
WOMBLE CARLYLE SANDRIDGE & RICE
A Professional Limited Liability Company
By: /s/ Neil G. O'Rourke
--------------------------
Neil G. O'Rourke
<PAGE>
EXHIBIT 23(c)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated April 30, 1999,
included in BB&T Corporation's Form 8-K dated April 30, 1999, and to all
references to our firm included in this registration statement. Our report
dated January 29, 1999, included in BB&T Corporation's financial statements
previously filed on Form 10-K and incorporated by reference in this registration
statement is no longer appropriate since restated financial statements have been
presented giving effect to a business combination accounted for as a pooling of
interests.
/s/ ARTHUR ANDERSEN LLP
Charlotte, North Carolina
May 19, 1999
<PAGE>
EXHIBIT 23(d)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use of our report included in Mason-Dixon Bancshares,
Inc. Annual Report on Form 10-K for the year ended December 31, 1998
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the proxy statement/prospectus.
/s/ STEGMAN AND COMPANY
Baltimore, Maryland
May 19, 1999
<PAGE>
EXHIBIT 23(e)
CONSENT OF KEEFE, BRUYETTE & WOODS, INC.
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of Mason-Dixon Bancshares, Inc. (the "Company") as Appendix B to the
proxy statement/prospectus relating to the proposed merger of the Company with
and into BB&T Corporation and contained in the Registration Statement on Form S-
4, filed with the Securities and Exchange Commission as of the date hereof, and
to the references to our firm and such opinion in such proxy statement/
prospectus. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended (the "Act"), or the rules and regulations of the
Securities and Exchange Commission thereunder (the "Regulations"), nor do we
admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "experts" as used in the Act or the
Regulations.
/s/ KEEFE, BRUYETTE & WOODS, INC.
New York, New York
May 19, 1999
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
Each of the undersigned, being a director and/or officer of BB&T
Corporation (the "Company"), hereby nominates, constitutes and appoints John A.
Allison, Scott E. Reed and Jerone C. Herring, or any one of them severally, to
be his or her true and lawful attorney-in-fact and to sign in his or her name
and on his or her behalf in any and all capacities stated below, and to file
with the Securities and Exchange Commission (the "Commission"), a Registration
Statement on Form S-4 (the "Registration Statement") relating to the issuance of
shares of the Company's common stock, $5.00 par value per share, in connection
with the acquisition by the Company of Mason-Dixon Bancshares, Inc., a Maryland
corporation, and to file any and all amendments, including post-effective
amendments, to the Registration Statement, making such changes in the
Registration Statement as such attorney-in-fact deems appropriate, and generally
to do all such things on his or her behalf in any and all capacities stated
below to enable the Company to comply with the provisions of the Securities Act
of 1933, as amended, and all requirements of the Commission.
This Power of Attorney has been signed by the following persons in the
capacities indicated on February 23, 1999.
/s/ John A. Allison IV /s/ Scott E. Reed
- - - - - - - - - - - - - - - - - ------------------------------------- --------------------------------------
Name: John A. Allison IV Name: Scott E. Reed
Title: Chairman of the Board and Title: Senior Executive Vice President
Chief Executive Officer and Chief Financial Officer
(principal executive officer) (principal financial officer)
/s/ Sherry A. Kellett /s/ Paul B. Barringer
- - - - - - - - - - - - - - - - - ------------------------------------- --------------------------------------
Name: Sherry A. Kellett Name: Paul B. Barringer
Title: Executive Vice President Title: Director
and Controller
(principal accounting officer)
/s/ Alfred E. Cleveland /s/ W. R. Cuthbertson, Jr.
- - - - - - - - - - - - - - - - - ------------------------------------- --------------------------------------
Name: Alfred E. Cleveland Name: W. R. Cuthbertson, Jr.
Title: Director Title: Director
/s/ Ronald E. Deal /s/ A. J. Dooley, Sr.
- - - - - - - - - - - - - - - - - ------------------------------------- --------------------------------------
Name: Ronald E. Deal Name: A. J. Dooley, Sr.
Title: Director Title: Director
/s/ Tom D. Efird /s/ Paul S. Goldsmith
- - - - - - - - - - - - - - - - - ------------------------------------- --------------------------------------
Name: Tom D. Efird Name: Paul S. Goldsmith
Title: Director Title: Director
/s/ L. Vincent Hackley
- - - - - - - - - - - - - - - - - -------------------------------------
Name: L. Vincent Hackley
Title: Director
/s/ Jane P. Helm /s/ Richard Janeway, M.D.
- - - - - - - - - - - - - - - - - ------------------------------------- --------------------------------------
<PAGE>
Name: Jane P. Helm Name: Richard Janeway, M.D.
Title: Director Title: Director
/s/ J. Ernest Lathem, M.D. /s/ James H. Maynard
- - - - - - - - - - - - - - - - - ------------------------------------- --------------------------------------
Name: J. Ernest Lathem, M.D. Name: James H. Maynard
Title: Director Title: Director
/s/ Joseph A. McAleer, Jr. /s/ Albert O. McCauley
- - - - - - - - - - - - - - - - - ------------------------------------- --------------------------------------
Name: Joseph A. McAleer, Jr. Name: Albert O. McCauley
Title: Director Title: Director
/s/ Richard L. Player, Jr. /s/ C. Edward Pleasants, Jr.
- - - - - - - - - - - - - - - - - ------------------------------------- --------------------------------------
Name: Richard L. Player, Jr. Name: C. Edward Pleasants, Jr.
Title: Director Title: Director
/s/ Nido R. Qubein /s/ E. Rhone Sasser
- - - - - - - - - - - - - - - - - ------------------------------------- --------------------------------------
Name: Nido R. Qubein Name: E. Rhone Sasser
Title: Director Title: Director
/s/ Jack E. Shaw /s/ Harold B. Wells
- - - - - - - - - - - - - - - - - ------------------------------------- --------------------------------------
Name: Jack E. Shaw Name: Harold B. Wells
Title: Director Title: Director
<PAGE>
PROXY
MASON-DIXON BANCSHARES, INC.
45 W. Main Street
Westminster, Maryland 21157
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MASON-DIXON
BANCSHARES, INC. The undersigned hereby appoints Vivian A. Davis, Edith S.
Haschert and Christine L. Whiteleather and any of them, as Proxies, each with
the power to appoint substitutions, and hereby authorizes each of them to
represent and to vote, as designated on the reverse side hereof, all of the
shares of Common Stock of Mason-Dixon Bancshares, Inc. held of record by the
undersigned on May 7, 1999 at the Annual Meeting of Shareholders to be held on
July 12, 1999 or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREBY
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION AND RELATED PLAN
OF MERGER AND FOR THE ELECTION OF THE NOMINEES FOR CLASS I DIRECTORS SET FORTH
IN ITEM 2.
(See Reverse Side)
<PAGE>
1. TO CONSIDER AND VOTE UPON A PROPOSAL TO APPROVE the Agreement and Plan of
Reorganization dated as of January 27, 1999, and a related Plan of Merger,
pursuant to which Mason-Dixon will merge with and into BB&T Corporation,
and each share of Common Stock of Mason-Dixon outstanding immediately prior
thereto will be converted into the right to receive 1.3 shares of Common
Stock of BB&T Corporation.
[_] FOR [_] AGAINST [_] ABSTAIN
<TABLE>
<S> <C>
2. ELECTION OF DIRECTORS: FOR all nominees listed at right [ ] Miriam F. Beck
(except as marked to the contrary below) Thomas K. Ferguson
Edwin W. Shauck
Stevenson B. Yingling
</TABLE>
WITHHOLD AUTHORITY to vote for all nominees listed at right [ ]
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike
---------
a line through the nominee's name in the list at right)
______________________________________________________________________
3. In their discretion, the proxies are authorized to vote upon any other
business which properly comes before the meeting and any adjournments
thereof.
Please sign exactly as your name appears. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
PLEASE MARK, SIGN, DATE AND MAIL THE CARD IN
THE ENCLOSED ENVELOPE.
DATED: __________________________, 1999
Signature______________________________________
DATED: __________________________, 1999
Signature______________________________________
<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of January 27, 1999 by and between MASON-DIXON BANCSHARES, INC., a Maryland
corporation ("Mason-Dixon" or "Issuer"), and BB&T CORPORATION, a North Carolina
corporation ("Grantee").
R E C I T A L S:
- - - - - - - -
WHEREAS, Grantee and Issuer have entered into that certain Agreement and
Plan of Reorganization, dated this date (the "Merger Agreement"), providing for,
among other things, the merger of Issuer with and into Grantee; and
WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement, Grantee has required that Issuer agree, and Issuer has agreed, to
grant to Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 1,006,868 shares (as adjusted as set forth herein, the "Option Shares,"
which term shall refer to the Option Shares before and after any transfer of
such Option Shares), of the common stock of Issuer, par value $1.00 per share
("Issuer Common Stock"), at a purchase price per Option Share (subject to
adjustment as set forth herein, the "Purchase Price") equal to $40.00.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, Holder may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of a Purchase Event (as
hereinafter defined); provided, that the Option shall terminate and be of no
further force and effect upon the earliest to occur of (A) the Effective Time,
(B) subject to clause (E) below, termination of the Merger Agreement in
accordance with the terms thereof prior to the occurrence of a Purchase Event or
a Preliminary Purchase Event
<PAGE>
(as hereinafter defined) (other than a termination of the Merger Agreement by
Grantee pursuant to Section 7.1(b) thereof (a "Default Termination")), (C) 12
months after a Default Termination, (D) 12 months after any termination of the
Merger Agreement (other than a Default Termination) following the occurrence of
a Purchase Event or a Preliminary Purchase Event, and (E) subject to clause (D)
above, 12 months after termination of the Merger Agreement pursuant to Section
7.1(e) thereof; provided further, that any purchase of shares upon exercise of
the Option shall be subject to compliance with applicable law, including,
without limitation, the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). Subject to compliance with Section 12(h) hereof, the term "Holder" shall
mean the holder or holders of the Option from time to time, including initially
Grantee. The rights set forth in Section 8 hereof shall terminate when the right
to exercise the Option terminates (other than as a result of a complete exercise
of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any Subsidiary of Grantee) to effect
an Acquisition Transaction (as defined below). As used herein, the term
"Acquisition Transaction" shall mean (A) a merger, consolidation or similar
transaction involving Issuer or any of its Subsidiaries (other than
transactions solely between Issuer's Subsidiaries or between Issuer's
Subsidiaries and Issuer), (B) the disposition, by sale, lease, exchange or
otherwise, of assets of Issuer or any of its Subsidiaries representing in
either case 15% or more of the consolidated assets of Issuer and its
Subsidiaries (other than a sale of loan receivables in a financing
transaction in the normal course of business consistent with past
practices), or (C) the issuance, sale or other disposition (including by
way of merger, consolidation, share exchange or any similar transaction) of
securities representing 15% or more of the voting power of Issuer or any of
its Subsidiaries; or
(ii) any person (other than Grantee or any Subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under the
Exchange Act), other than a group of which Grantee or any of the
Subsidiaries of Grantee is a member, shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 15%
or more of the then-outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any Subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement under the
Securities Act with respect to, a tender offer or exchange offer to
purchase any shares of Issuer Common Stock such that, upon consummation of
such offer, such person would own or control 15% or more of the then-
-2-
<PAGE>
outstanding shares of Issuer Common Stock (such an offer being referred to
herein as a "Tender Offer" or an "Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have approved
the Merger Agreement at the meeting of such shareholders held for the
purpose of voting on the Merger Agreement, such meeting shall not have been
held or shall have been canceled prior to termination of the Merger
Agreement, or Issuer's Board of Directors shall have withdrawn or modified
in a manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Merger Agreement, in each case after any
person (other than Grantee or any Subsidiary of Grantee) shall have (A)
made, or disclosed an intention to make, a proposal to engage in an
Acquisition Transaction, (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an Exchange
Offer, or (C) filed an application (or given a notice), whether in draft or
final form, under any federal or state statute or regulation (including an
application or notice filed under the BHC Act, the Bank Merger Act, the
Home Owners' Loan Act or the Change in Bank Control Act of 1978) seeking
the consent to an Acquisition Transaction from any federal or state
governmental or regulatory authority or agency.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Notwithstanding the foregoing, the obligation of Mason-Dixon to
issue Option Shares upon exercise of the Option shall be deferred (but shall not
terminate): (i) until the receipt of all required governmental or regulatory
approvals or consents necessary for Mason-Dixon to issue the Option Shares or
Holder to exercise the Option, or until the expiration or termination of any
waiting period required by law, or (ii) so long as any injunction or other
order, decree or ruling issued by any federal or state court of competent
jurisdiction is in effect which prohibits the sale or delivery of the Option
Shares.
(e) In the event Holder wishes to exercise the Option, it shall send
to Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior consent
of any governmental or regulatory agency or authority is required in connection
with such purchase, Issuer shall cooperate with Holder in the filing of the
required notice or application for such consent and the obtaining of such
consent at Holder's expense, and the Closing shall occur not earlier than three
business days nor later than 15 business days following receipt of such consents
(and expiration of any mandatory waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present
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and surrender this Agreement to the Issuer at the address of the Issuer
referenced in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a)
hereof, (i) Issuer shall deliver to Holder (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which Option
Shares shall be free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever and subject to no preemptive rights, and (B) if the Option
is exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter evidencing Holder's agreement not to offer, sell or otherwise dispose of
such Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK
OPTION AGREEMENT DATED AS OF JANUARY 27, 1999. A COPY OF
SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Holder shall have delivered
to Issuer a copy of a letter from the staff of the Commission, or an opinion of
counsel in form and substance reasonably satisfactory to Issuer and its counsel,
to the effect that such legend is not required for purposes of the Securities
Act.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to its obtaining any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Issuer. This Agreement has been duly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue and, at all times from the date
hereof until the obligation to deliver Issuer Common Stock upon the exercise of
the Option terminates, will have reserved for issuance,
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upon exercise of the Option, the number of shares of Issuer Common Stock
necessary for Holder to exercise the Option, and Issuer will take all necessary
corporate action to authorize and reserve for issuance all additional shares of
Issuer Common Stock or other securities which may be issued pursuant to Section
7 hereof upon exercise of the Option. The shares of Issuer Common Stock to be
issued upon due exercise of the Option, including all additional shares of
Issuer Common Stock or other securities which may be issuable pursuant to
Section 7 hereof, upon issuance pursuant hereto, shall be duly and validly
issued, fully paid, and nonassessable, and shall be delivered free and clear of
all liens, claims, charges, and encumbrances of any kind or nature whatsoever,
including any preemptive rights of any shareholder of Issuer.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to its obtaining any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been duly executed
and delivered by Grantee.
(b) Grantee represents that it is acquiring the Option for Grantee's
own account and not with a view to, or for sale in connection with, any
distribution of the Option or the Option Shares. Grantee represents that it is
aware that neither the Option nor the Option Shares is the subject of a
registration statement filed with and declared effective by the Commission
pursuant to Section 5 of the Securities Act, but instead each is being offered
in reliance upon the exemption from the registration requirement provided by
Section 4(2) thereof and the representations and warranties made by Grantee in
connection therewith. Grantee represents that neither the Option nor the Option
Shares will be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Laws, and that with
respect to any transfer or other disposition proposed to be made in reliance
upon an exemption from registration, such transfer or other disposition shall
not be made unless Mason-Dixon first receives an opinion of counsel in form and
substance reasonably acceptable to it regarding the availability of such
exemption.
7. Adjustment upon Changes in Capitalization, etc.
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option and the Purchase Price therefor shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted
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so that, after such issuance, it, when added to the number of shares of Issuer
Common Stock previously issued pursuant hereto, equals 19.9% of the number of
shares of Issuer Common Stock then issued and outstanding, without giving effect
to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter into an agreement (prior to
termination of the Option pursuant to Section 3(a) hereof): (i) to consolidate
with or merge into any person, other than Grantee or one of its Subsidiaries,
and Issuer shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Grantee or one of
its Subsidiaries, to merge into Issuer, and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company; (iii) to permit any person, other than
Grantee or one of its Subsidiaries, to acquire all of the outstanding shares of
Issuer Common Stock pursuant to a statutory share exchange; or (iv) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Grantee, deemed granted by either
(x) the Acquiring Corporation (as defined below), (y) any person that controls
the Acquiring Corporation, or (z) in the case of a merger described in clause
(ii), the Issuer (in each case, such person being referred to as the "Substitute
Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be identical to those of the Option, such terms shall be as similar as possible
and in no event less advantageous to Grantee. The Substitute Option Issuer
shall also enter into an agreement with the then-holder or holders of the
Substitute Option in substantially the same form as this Agreement, which
agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of
the Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), Issuer in a merger
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in which Issuer is the continuing or surviving person, the corporation that
shall acquire all of the outstanding shares of Issuer Common Stock pursuant
to a statutory share exchange, or the transferee of all or substantially
all of the Issuer's assets (or the assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the highest of (x) the price
per share of the Issuer Common Stock at which a Tender Offer or Exchange
Offer therefor has been made by any person (other than Grantee), (y) the
price per share of the Issuer Common Stock to be paid by any person (other
than the Grantee) pursuant to an agreement with Issuer, and (z) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
National Market System within the six-month period immediately preceding
the agreement; provided, that in the event of a sale of less than all of
Issuer's assets, the Assigned Value shall be the sum of the price paid in
such sale for such assets and the current market value of the remaining
assets of Issuer as determined by a nationally recognized investment
banking firm selected by Grantee (or by a majority in interest of the
Grantees if there shall be more than one Grantee (a "Grantee Majority")),
divided by the number of shares of the Issuer Common Stock outstanding at
the time of such sale. In the event that an exchange offer is made for the
Issuer Common Stock or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for the
Issuer Common Stock shall be determined by a nationally recognized
investment banking firm mutually selected by Grantee and Issuer (or if
applicable, Acquiring Corporation). (If there shall be more than one
Grantee, any such selection shall be made by a Grantee Majority.)
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one-year period immediately
preceding effectiveness of the consolidation, merger, share exchange or
sale in question, but in no event higher than the closing price of the
shares of the Substitute Common Stock on the day preceding the
effectiveness of such consolidation, merger, share exchange or sale;
provided, that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common stock
issued by Issuer, the person merging into Issuer or by any company which
controls or is controlled by such merger person, as Grantee may elect.
(f) In no event pursuant to any of the foregoing sections shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute Option Issuer shall make a cash payment
to Grantee equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f).
This difference in value shall be determined by a nationally recognized
investment banking firm selected by Grantee (or a Grantee Majority).
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(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9, 10 and 11 hereof shall apply,
with appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock" shall
be deemed to be references to "Substitute Option Issuer," "Substitute Option,"
"Substitute Purchase Price" and "Substitute Common Stock," respectively.
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a) hereof, at the
request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d)) and ending 12 months immediately
thereafter, Issuer shall repurchase from Holder the Option and all shares of
Issuer Common Stock purchased by Holder pursuant hereto with respect to which
Holder then has beneficial ownership. The date on which Holder exercises its
rights under this Section 8 is referred to as the "Request Date." Such
repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares
of Issuer Common Stock acquired by Holder pursuant to the Option with
respect to which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or, in
the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has been
exercised and with respect to which Holder then has beneficial ownership,
multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within ten business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and Holder shall
warrant that
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it has sole record and beneficial ownership of such shares and that the same are
then free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever. Notwithstanding the foregoing, to the extent that prior notification
to or the consent or approval of any governmental or regulatory agency or
authority is required in connection with the payment of all or any portion of
the Section 8 Repurchase Consideration, Holder shall have the ongoing option to
revoke its request for repurchase pursuant to Section 8, in whole or in part, or
to require that Issuer deliver from time to time that portion of the Section 8
Repurchase Consideration that it is not then so prohibited from paying and
promptly file the required notice or application for approval and expeditiously
process the same (and each party shall cooperate with the other in the filing of
any such notice or application and the obtaining of any such approval), in which
case the ten business day period of time that would otherwise run pursuant to
the preceding sentence for the payment of the portion of the Section 8
Repurchase Consideration shall run instead from the date on which, as the case
may be, any required notification period has expired or been terminated or such
approval has been obtained and, in either event, any requisite waiting period
shall have passed. If any governmental or regulatory agency or authority
disapproves of any part of Issuer's proposed repurchase pursuant to this Section
8, Issuer shall promptly give notice of such fact to Holder. If any governmental
or regulatory agency or authority prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such agency or authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's
rights under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a) hereof.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i) hereof, (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Sections 7(b)(i), 7(b)(ii), 7(b)(iii) or 7(b)(iv) hereof, or (iii)
the highest closing sales price per share of Issuer Common Stock quoted on the
Nasdaq National Market (or if Issuer Common Stock is not quoted on the Nasdaq
National Market, the highest bid price per share as quoted on the principal
trading market or securities exchange on which such shares are traded as
reported by a recognized source chosen by Holder) during the 60 business days
preceding the Request Date; provided,, however, that in the event of a sale of
less than all of Issuer's assets, the Applicable Price shall be the sum of the
price paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by an independent nationally recognized
investment banking firm selected by Holder and reasonably acceptable to Issuer
(which determination shall be conclusive for all purposes of this Agreement),
divided by the number of shares of the Issuer Common Stock outstanding at the
time of such sale. If the consideration to be
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offered, paid or received pursuant to either of the foregoing clauses (i) or
(ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally recognized investment
banking firm selected by Holder and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person
(other than Grantee or any Subsidiary of Grantee) shall have acquired actual
ownership or control, or any "group" (as such term is defined under the Exchange
Act) shall have been formed which shall have acquired actual ownership or
control, of 50% or more of the then-outstanding shares of Issuer Common Stock,
or (ii) any of the transactions described in Section 7(b)(i), 7(b)(ii),
7(b)(iii) or 7(b)(iv) shall be consummated.
9. Registration Rights.
(a) For a period of 24 months following termination of the Merger
Agreement, Issuer shall, subject to the conditions of subsection (c) below, if
requested by any Holder, including Grantee and any permitted transferee of the
Option Shares ("Selling Holder"), as expeditiously as possible prepare and file
a registration statement under the Securities Laws if necessary in order to
permit the sale or other disposition of any or all shares of Issuer Common Stock
or other securities that have been acquired by or are issuable to Selling Holder
upon exercise of the Option in accordance with the intended method of sale or
other disposition stated by the Selling Holder in such request, including,
without limitation, a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and Issuer shall use its best efforts
to qualify such shares or other securities for sale under any applicable state
securities laws.
(b) If Issuer at any time after the exercise of the Option proposes to
register any shares of Issuer Common Stock under the Securities Laws in
connection with an underwritten public offering of such Issuer Common Stock,
Issuer will promptly give written notice to Holder of its intention to do so
and, upon the written request of Holder given within 30 days after receipt of
any such notice (which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten public offering by
Selling Holder), Issuer will cause all such shares, the holders of which shall
have requested participation in such registration, to be so registered and
included in such underwritten public offering; provided,, that Issuer may elect
to cause any such shares not to be so registered (i) if the underwriters in good
faith object for a valid business reason, or (ii) in the case of a registration
solely to implement a dividend reinvestment or similar plan, an employee benefit
plan or a registration filed on Form S-4 or any successor form, or a
registration filed on a form which does not permit registration of resales;
provided,, further, that such election pursuant to clause (i) may be made only
one time. If some but not all the shares of Issuer Common Stock, with respect
to which Issuer shall have received requests for registration pursuant to this
subsection (b), shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Selling Holders and any
other person (other than Issuer or any person exercising demand registration
rights in connection with such registration) who or which is permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each Selling Holder bears to the
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total number of shares requested to be registered by all persons then desiring
to have Issuer Common Stock registered for sale.
(c) Issuer shall use all reasonable efforts to cause each registration
statement referred to in subsection (a) above to become effective and to obtain
all consents or waivers of other parties which are required therefor and to keep
such registration statement effective, provided,, that Issuer may delay any
registration of Option Shares required pursuant to subsection (a) above for a
period not exceeding 90 days in the event that Issuer shall in good faith
determine that any such registration would adversely affect an offering or
contemplated offering of other securities by Issuer, and Issuer shall not be
required to register Option Shares under the Securities Laws pursuant to
subsection (a) above:
(i) prior to the occurrence of a Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a registration
referred to in subsection (b) above pursuant to which the Selling Holders
concerned were afforded the opportunity to register such shares under the
Securities Laws and such shares were registered as requested; and
(v) unless a request therefor is made to Issuer by Selling
Holders holding at least 25% or more of the aggregate number of Option
Shares then outstanding.
In addition to the foregoing, Issuer shall not be required to
maintain the effectiveness of any registration statement after the expiration of
nine months from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided,, that Issuer shall
not be required to consent to general jurisdiction or qualify to do business in
any state where it is not otherwise required to so consent to such jurisdiction
or to so qualify to do business.
(d) Except where applicable state law prohibits such payments, Issuer
will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of counsel), accounting expenses, legal expenses, including reasonable fees and
expenses of one counsel to the Selling Holders whose Option Shares are being
registered, printing expenses, reasonable expenses of underwriters, excluding
discounts and commissions but including liability insurance if Issuer so desires
or the underwriters so require, and the reasonable fees and expenses of any
necessary special experts) in connection with each registration pursuant to
subsection (a) or (b) above (including the related offerings and sales by
Selling Holders) and all other qualifications, notifications or exemptions
pursuant to subsection (a) or (b) above. Underwriting discounts and commissions
relating to Option Shares and any other
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expenses incurred by such Selling Holders in connection with any such
registration shall be borne by such Selling Holders.
(e) In connection with any registration under subsection (a) or (b)
above Issuer hereby indemnifies the Selling Holders, and each underwriter
thereof, including each person, if any, who controls such holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in any registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such expenses, losses,
claims, damages or liabilities of such indemnified party are caused by any
untrue statement or alleged untrue statement or omission or alleged omission
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Selling Holder, or by such underwriter, as the case may be,
for all such expenses, losses, claims, damages and liabilities caused by any
untrue or alleged untrue statement or omission or alleged omission that was
included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information furnished in
writing to Issuer by such holder or such underwriter, as the case may be,
expressly for such use.
Promptly upon receipt by a party indemnified under this subsection
(e) of notice of the commencement of any action against such indemnified party
in respect of which indemnity or reimbursement may be sought against any
indemnifying party under this subsection (e), such indemnified party shall
notify the indemnifying party in writing of the commencement of such action, but
the failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
subsection (e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the indemnifying party agrees
to pay them, (ii) the indemnifying party fails to assume the defense of such
action with counsel satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
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If the indemnification provided, for in this subsection (e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, all Selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, all Selling Holders and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; provided,, that in no case shall any Selling Holder be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to subsection (a) or
(b) above, Issuer and each Selling Holder (other than Grantee) shall enter into
an agreement containing the indemnification provisions of this subsection (e).
(f) Issuer shall comply with all reporting requirements and will do
all such other things as may be necessary to permit the expeditious sale at any
time of any Option Shares by the Selling Holders in accordance with and to the
extent permitted by any rule or regulation promulgated by the Commission from
time to time, including, without limitation, Rules 144 and 144A. Issuer shall
at its expense provide the Selling Holders with any information necessary in
connection with the completion and filing of any reports or forms required to be
filed by them under the Securities Laws, or required pursuant to any state
securities laws or the rules of any stock exchange.
(g) Issuer will pay all stamp taxes in connection with the issuance
and the sale of the Option Shares and in connection with the exercise of the
Option, and will save Holder harmless, without limitation as to time, against
any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the Nasdaq National Market or any other securities
exchange or any automated quotations system maintained by a self-regulatory
organization, Issuer will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of Issuer Common Stock
or other securities to be acquired upon exercise of the Option on the Nasdaq
National Market or any other securities exchange or any automated quotations
system maintained by a self-regulatory organization and will use its best
efforts to obtain approval, if required, of such quotation or listing as soon as
practicable.
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11. Division of Option. This Agreement (and the Option granted hereby) is
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided, herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 12(h) hereof) any
rights or remedies hereunder. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or a federal or
state governmental or regulatory agency or authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit Holder to acquire,
or does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided, in Sections 3 and 8 hereof (as adjusted pursuant to
Section 7 hereof), it is the express intention of Issuer to allow Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible without any amendment or modification hereof.
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(d) Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of North Carolina without
regard to any applicable conflicts of law rules, except to the extent that the
federal laws of the United States shall govern.
(e) Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Merger Agreement (or
at such other address for a party as shall be specified by like notice).
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) Assignment; Transfer. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option shall be assigned
or transferred by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, except that
Grantee may assign this Agreement to a wholly owned subsidiary of Grantee and
Grantee may assign or transfer its rights hereunder in whole or in part after
the occurrence of a Purchase Event. In the case of any permitted assignment or
transfer of the Option, Issuer shall do all things necessary to facilitate the
same, and the Holder to whom the Option is assigned or transferred shall make
the representations contained in Section 6 hereof (with Holder substituted for
Grantee) and shall agree in writing to the terms and conditions hereof. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided, for by such exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
MASON-DIXON BANCSHARES, INC. BB&T CORPORATION
By: /s/ Thomas K. Ferguson By: /s/ John A Allison, IV
Name: Thomas K. Ferguson Name: John A. Allison, IV
Title: President and CEO Title: Chairman and CEO
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