<PAGE>
As Filed with the Securities and Exchange Commission on September 19, 2000
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
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BB&T CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 6060 56-0939887
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation Classification Code
or organization) Number)
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:
Douglas A. Mays David H. Baris
Womble Carlyle Sandridge & Rice, Kennedy, Baris & Lundy, L.L.P.
PLLC 4701 Sangamore Road, Suite P-15
301 South College Street, Suite 3300 Bethesda, Maryland 20816
Charlotte, North Carolina 28202
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Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Proposed
Title of each Class of Amount Maximum Maximum Amount of
Securities to be to be Offering Price Aggregate Registration
Registered Registered Per Unit Offering Price Fee
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<S> <C> <C> <C> <C>
Common Stock, par value
$5.00 per share(1).... 9,000,000 (2) $252,155,172(3) $66,569
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</TABLE>
(1) Each share of the registrant's common stock includes one preferred share
purchase right.
(2) Not applicable.
(3) Computed in accordance with Rule 457(f) based on the average of the high
($20.625) and low ($20.00) sales price of the common stock of FCNB Corp on
September 12, 2000 as reported on The Nasdaq National Market.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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<PAGE>
FCNB Corp
7200 FCNB Court
Frederick, Maryland 21703
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
DECEMBER , 2000
FCNB Corp will hold a Special Meeting of Shareholders on , December ,
2000 at : .M. local time, at , Frederick, Maryland, for the following
purposes:
(1) To consider and vote on the proposed merger of FCNB into BB&T
Corporation.
In the merger each share of FCNB common stock will be automatically
converted into 0.725 shares of BB&T common stock. Cash will be paid in
lieu of fractional shares. A copy of the merger agreement is attached
as Appendix A to the accompanying proxy statement/prospectus.
(2) To transact any other business that may properly come before the
meeting or any adjournment or postponement of the meeting.
Holders of FCNB common stock as of the close of business on , 2000 are
entitled to notice of the meeting and to vote at the meeting. If your shares
are not registered in your own name, you will need additional documentation
from your record holder in order to vote personally at the meeting.
The proxy statement/prospectus follows this notice, and a proxy card is
enclosed. To ensure that your vote is counted, please complete, sign, date and
return the proxy card in the enclosed, postage-paid return envelope, whether
or not you plan to attend the meeting in person. If you attend the meeting,
you may revoke your proxy and vote your shares in person. However, attendance
at the meeting will not of itself revoke a proxy.
By Order of the Board of Directors
Helen G. Hahn, Secretary
Frederick, Maryland
, 2000
Please complete and sign the enclosed proxy and return it promptly in the
envelope provided, whether or not you plan to attend the meeting.
<PAGE>
[FCNB logo]
Special Meeting of Shareholders
MERGER PROPOSAL--YOUR
VOTE IS VERY IMPORTANT
The Board of Directors of FCNB Corp has unanimously approved a merger
combining FCNB and BB&T Corporation. In the merger, you will receive 0.725
shares of BB&T common stock for each share of FCNB common stock that you own.
You generally will not recognize gain or loss for federal income tax
purposes on your receipt of the BB&T common stock.
The merger will join FCNB's strengths as a community bank covering central
Maryland with BB&T's position as a leading bank throughout the Carolinas, West
Virginia, Virginia, Washington D.C. and parts of Maryland, Georgia and
Kentucky.
At the special meeting, you will consider and vote on the merger agreement.
The merger cannot be completed unless holders of at least two thirds of the
shares of FCNB common stock approve the merger agreement. FCNB's Board of
Directors believes the merger is in the best interests of FCNB shareholders and
unanimously recommends that the shareholders vote to approve the merger
agreement. No vote of BB&T shareholders is required to approve the merger
agreement.
BB&T common stock is listed on the New York Stock Exchange under the symbol
"BBT." On , 2000, the closing price of BB&T common stock was $ , making the
value of 0.725 shares of BB&T common stock equal to $ . This price and value
will, however, fluctuate between now and the merger.
The special meeting will be held at a.m., Eastern time, on December
, 2000 at , located at in Frederick, Maryland.
This proxy statement/prospectus provides you with detailed information about
the proposed merger. We encourage you to read this entire document carefully.
In addition, this proxy statement/prospectus incorporates important business
and financial information about BB&T and FCNB from other documents that we have
not included in the proxy statement/prospectus. You may obtain copies of these
other documents without charge by requesting them in writing or by telephone at
any time prior to , 2000 from the appropriate company at the following
addresses:
BB&T Corporation FCNB Corp
hareholderSReporting Mark A. Severson
Post Office Box 1290 7200 FCNB Court
Winston-Salem, Frederick, Maryland 21703
North Carolina 27102 (301) 662-2191
(336) 733-3021
Whether or not you plan to attend the meeting, please take the time to vote
by completing and mailing the enclosed proxy card to us. If you fail to return
your proxy card and fail to vote in person, the effect will be the same as a
vote against the merger agreement. Your vote is very important. You can revoke
your proxy at any time before its exercise by filing written revocation with,
or by delivering a later-dated proxy to, FCNB's Secretary before the meeting or
by attending the meeting and voting in person. If your shares are registered in
street name, you will need additional documentation from your record holder to
vote in person at the meeting.
On behalf of the Board of Directors of FCNB, I urge you to vote "FOR"
approval and adoption of the merger agreement.
A. Patrick Linton
President and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved of 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.
The shares of BB&T stock to be issued in the merger are not savings or
deposit accounts or other obligations of any bank or savings association and
are not insured by the Federal Deposit Insurance Corporation or any other
governmental agency.
This proxy statement/prospectus is dated , 2000 and is expected to be
first mailed to shareholders of FCNB on or about , 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<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.......................................... 9
Solicitation of Proxies................................................... 9
Recommendation of the FCNB Board.......................................... 9
THE MERGER.................................................................. 10
General................................................................... 10
Background of and Reasons for the Merger.................................. 10
Opinion of Financial Advisor to FCNB...................................... 15
Exchange Ratio............................................................ 18
Exchange of FCNB Stock Certificates....................................... 19
The Merger Agreement...................................................... 19
Interests of Certain Persons in the Merger................................ 25
Regulatory Considerations................................................. 30
Material Federal Income Tax Consequences of the Merger.................... 31
Accounting Treatment...................................................... 33
The Option Agreement...................................................... 33
Effect on Employees, Employee Benefit Plans and Stock Options............. 36
Restrictions on Resales by Affiliates..................................... 37
INFORMATION ABOUT BB&T...................................................... 39
General................................................................... 39
Operating Subsidiaries.................................................... 39
Acquisitions.............................................................. 39
Capital................................................................... 41
Deposit Insurance Assessments............................................. 41
INFORMATION ABOUT FCNB...................................................... 42
DESCRIPTION OF BB&T CAPITAL STOCK........................................... 42
General................................................................... 42
BB&T Common Stock......................................................... 43
BB&T Preferred Stock...................................................... 43
Shareholder Rights Plan................................................... 43
Other Anti-Takeover Provisions............................................ 46
COMPARISON OF THE RIGHTS OF BB&T SHAREHOLDERS AND FCNB SHAREHOLDERS......... 46
Authorized Capital Stock.................................................. 47
Special Meetings of Shareholders.......................................... 47
Directors................................................................. 47
Dividends and Other Distributions......................................... 48
Shareholder Nominations and Shareholder Proposals......................... 48
Discharge of Duties; Exculpation and Indemnification...................... 49
Mergers, Share Exchanges and Sales of Assets.............................. 50
Anti-takeover Statutes.................................................... 50
Amendments to Articles of Incorporation and Bylaws........................ 51
Shareholders' Rights of Dissent and Appraisal............................. 52
Liquidation Rights........................................................ 53
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SHAREHOLDER PROPOSALS....................................................... 53
OTHER BUSINESS.............................................................. 53
LEGAL MATTERS............................................................... 53
EXPERTS..................................................................... 54
WHERE YOU CAN FIND MORE INFORMATION......................................... 54
Appendix A--Agreement and Plan of Reorganization and Plan of Merger
Appendix B--Opinion of Danielson Associates, Inc.
</TABLE>
iii
<PAGE>
A WARNING ABOUT FORWARD-LOOKING INFORMATION
BB&T and FCNB have each made forward-looking statements in this document and
in other documents to which this document refers that are subject to risks and
uncertainties. These statements are based on the beliefs and assumptions of the
management of BB&T and FCNB 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" on page , information that was
available to management of BB&T and FCNB as of the date of the merger
agreement, and should be read in connection with the notices about forward-
looking statements made by each of BB&T and FCNB in its reports filed under the
Securities Exchange Act of 1934. Forward-looking statements include the
information concerning possible or assumed future results of operations of BB&T
or FCNB set forth under "Summary" and "The Merger--Background of and Reasons
for the Merger" and statements preceded by, followed by or that include the
words "believes," "expects," "assumes," "anticipates," "intends," "plans,"
"estimates" or other similar expressions. See "Where You Can Find More
Information" on page .
BB&T and FCNB have made statements in this document regarding estimated
earnings per share of BB&T and FCNB on a stand-alone basis, expected cost
savings from the merger, estimated restructuring charges relating to the
merger, maintenance of FCNB's 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 FCNB, the amount of general and administrative expense
consolidation, costs relating to converting FCNB'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
prove to be incorrect, and actual results may be materially different from
those expressed or implied by the forward-looking statements.
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. the loss of deposits, customers or revenues 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 FCNB, may be greater than
expected;
5. changes in the interest rate environment may reduce margins or the
volumes or values of loans made or held;
6. general economic or business conditions, either nationally or in the
states or regions in which BB&T and FCNB 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 FCNB
are engaged;
8. adverse changes may occur in the securities markets; and
9. competitors of BB&T and FCNB may develop products that enable those
competitors to compete more successfully than BB&T and FCNB.
iv
<PAGE>
Management of each of BB&T and FCNB believes the forward-looking statements
about its company are reasonable; however, shareholders of FCNB 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 FCNB's ability to control or predict.
All subsequent written and oral forward-looking statements concerning the
merger or other matters addressed in this document and attributable to BB&T or
FCNB or any person acting on their behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
Neither BB&T nor FCNB undertakes any obligation to release publicly any
revisions to such forward-looking statements to reflect events or circumstances
after the date of this document or to reflect the occurrence of unanticipated
events.
v
<PAGE>
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire document and the documents to which we refer you. See "Where You Can
Find More Information" on page .
Exchange Ratio to be 0.725 Shares of BB&T Common Stock for each Share of FCNB
Common Stock
If the merger is completed, you will receive 0.725 shares of BB&T common
stock for each share of FCNB common stock you own, plus cash instead of any
fractional share.
On , 2000, the closing price of BB&T common stock was $ , making the
value of 0.725 shares of BB&T common stock equal to $ . Because the market
price of BB&T stock fluctuates, you will not know when you vote what the shares
will be worth when issued in the merger.
No Federal Income Tax on Shares Received in Merger (Page )
Neither company is required to complete the merger unless it receives a
legal opinion from BB&T's counsel to the effect that, based on certain facts,
representations and assumptions, the merger will be treated as a
"reorganization" for federal income tax purposes. Therefore, we expect that,
for federal income tax purposes, you generally will not recognize any gain or
loss on the conversion of shares of FCNB common stock into shares of BB&T
common stock. You will be taxed, however, on any cash that you receive instead
of any fractional share of BB&T common stock. Tax matters are complicated, and
the tax consequences of the merger 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 regular quarterly dividends of $0.23 per share of its
common stock and, over the past five years, has had a dividend payout ratio in
the range of approximately 36.5% to 39.5% of recurring earnings and a compound
annualized dividend growth rate of 14.9%. BB&T expects that it will continue to
pay quarterly dividends consistent with this payout ratio, but may change that
policy based on business conditions, BB&T's financial condition, earnings and
other factors.
FCNB Board Unanimously Recommends Shareholder Approval (Page )
The FCNB Board of Directors believes that the merger is in the best
interests of FCNB shareholders and unanimously recommends that you vote "FOR"
approval of the merger agreement. The FCNB Board believes that, as a result of
the merger, you will be able to achieve greater value than you would if FCNB
remained independent.
Exchange Ratio Fair to Shareholders According to FCNB's Financial Advisor (Page
)
FCNB's financial advisor, Danielson Associates, Inc., has given an opinion
to the FCNB Board that, as of July 26, 2000, the exchange ratio in the merger
was fair from a financial point of view to you as FCNB shareholders [opinion to
be updated to date of proxy statement/prospectus]. The full text of this
opinion is attached as Appendix B to this proxy statement/prospectus. We
encourage you to read the opinion carefully to understand the assumptions made,
matters considered and limitations of the review undertaken by Danielson in
rendering its fairness opinion. FCNB has agreed to pay Danielson a fee equal to
0.5% of the total value of the merger to FCNB's shareholders, of which $ has
been paid. The total amount of the fee will be determined, and any amount due
will be paid, at the closing of the merger.
Dissent and Appraisal Rights (Page )
Under Maryland law, you have no right in connection with the merger to
object to the merger and obtain the fair value of your shares of FCNB common
stock in cash.
1
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Meeting to be held December , 2000 (Page )
FCNB will hold the special shareholders' meeting at a.m., Eastern time,
on , December , 2000 at , located at in Frederick, Maryland. At
the meeting, you will vote on the merger agreement and conduct any other
business that properly arises.
The Companies (Page )
BB&T Corporation
200 West Second Street
Winston-Salem, North Carolina 27101
(336) 733-2000
BB&T is a multi-bank holding company with more than $ billion in assets.
It is the largest bank holding company in the Southeast and, through its
banking subsidiaries, operates branch offices in the Carolinas, Virginia,
Maryland, Washington, D.C., West Virginia, Georgia and Kentucky. BB&T ranks
[first] in deposit market share in West Virginia, [second] in North Carolina
and [third] in South Carolina, and maintains a significant market presence in
Virginia, Maryland, Georgia and Washington, D.C.
FCNB Corp
7200 FCNB Court
Frederick, Maryland 21703
(301) 662-2191
FCNB, with $1.6 billion in assets, operates 34 banking offices through its
banking subsidiary, FCNB Bank, primarily in Frederick and Montgomery counties
of central Maryland. FCNB also offers insurance services, asset management,
trust services, mortgage banking and financial planning, and investment
services.
The Merger (Page )
In the merger, FCNB will merge into BB&T, and FCNB's banking and other
subsidiaries, through which it operates, will become wholly owned subsidiaries
of BB&T. If the FCNB shareholders approve the merger agreement at the special
meeting, we currently expect to complete the merger in the first quarter of
2001.
We have included the merger agreement as Appendix A to this proxy
statement/prospectus. We encourage you to read the merger agreement, as it is
the legal document that governs the merger.
Two Thirds Shareholder Vote Required (Page )
Approval of the merger agreement requires the affirmative vote of the
holders of at least two thirds of the outstanding shares of FCNB common stock.
If you fail to vote, it will have the effect of a vote against the merger
agreement and the merger. At the record date, the directors and executive
officers of FCNB and their affiliates together owned about % of the shares
entitled to vote at the meeting, and we expect them to vote their shares in
favor of the merger agreement and the merger.
Brokers who hold shares of FCNB common stock as nominees will not have
authority to vote them on the merger unless the beneficial owners of those
shares provide voting instructions. If you hold your shares in street name,
please see the voting form provided by your broker for additional information
regarding the voting of your shares. If your shares are not registered in your
name, you will need additional documentation from your record holder to vote
the shares in person.
The merger does not require the approval of BB&T's shareholders.
Record Date Set at , 2000; One Vote per Share of FCNB Common Stock (Page )
If you owned shares of FCNB common stock at the close of business on ,
2000, the record date, you are entitled to vote on the merger agreement and any
other matters that may be properly considered at the meeting.
On the record date, there were shares of FCNB common stock outstanding.
You will have one vote at the meeting for each share of FCNB common stock that
you owned on the record date.
Monetary Benefits to Management (Page )
When considering the recommendation of the FCNB Board, you should be aware
that some of FCNB's directors and officers have interests in the
2
<PAGE>
merger that differ from, or are in addition to, the interests of other FCNB
shareholders. These interests exist because of rights under benefit and
compensation plans maintained by FCNB and, in the case of certain executive
officers of FCNB, under employment agreements with Branch Banking and Trust
Company, BB&T's main bank subsidiary, which will become effective upon the
merger:
. FCNB's president and chief executive officer, A. Patrick Linton, has
been offered a six-year employment agreement providing for an annual
base salary of at least $ and the payment of additional amounts upon
completion of specified events relating to the merger; and
. Four other members of management, who have not been identified as of
this date, will be offered agreements at their current salaries in
effect at the effective time of the merger.
All of these employment agreements will provide severance payments and other
benefits if there is a change in control of BB&T. Also, BB&T has offered to
employ two other FCNB executives, Martin S. Lapera and Mark A. Severson,
following the merger and to pay them base salaries no less than their base
salaries with FCNB before the merger. BB&T has also agreed to pay these
executive specified bonus amounts under certain circumstances.
In addition, Mr. Linton will be elected to the board of directors of Branch
Banking and Trust Company, and the members of the FCNB Board who execute a
noncompetition agreement with BB&T will be offered a position on BB&T's local
advisory board for the bank's market area and, for at least two years after the
merger, will receive annual fees not less than those that they now receive as
FCNB Board members.
Also, as a result of the approval by FCNB shareholders of the merger, the
accounts of the FCNB directors participating in FCNB's Deferred Compensation
Plan for Directors will be credited with an aggregate of approximately $ .
The material terms and financial provisions of these arrangements are
described under the heading "Interests of Certain Persons in the Merger" on
page . The FCNB Board was aware of these and other interests and considered
them when it approved and adopted the merger agreement.
Regulatory Approvals We Must Obtain for the Merger to Occur (Page )
We cannot complete the merger unless the Board of Governors of the Federal
Reserve System approves it, and we have filed an application with the Federal
Reserve Board seeking its approval. In addition, the merger is subject to the
approval of, or notice to, certain state regulatory authorities, and we have
made the necessary filings with those authorities.
Although we do not know of any reason why we would not obtain these
regulatory approvals in a timely manner, we cannot be certain when we will
obtain them or that we will obtain them at all.
Other Conditions that Must be Satisfied for the Merger to Occur (Page )
A number of other conditions must be met for us to complete the merger,
including:
. approval of the merger agreement by the FCNB shareholders;
. receipt of legal opinions 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 covering the shares of BB&T stock to be issued in the merger;
and
. receipt by BB&T of letters from its accountants confirming the ability
to account for the merger as a pooling of interests.
Termination and Amendment of the Merger Agreement (Page )
We can jointly agree at any time to terminate the merger agreement without
completing the merger. Either company can also unilaterally terminate the
merger agreement if:
3
<PAGE>
. the merger is not completed by February 28, 2001;
. any of the conditions that must be satisfied to complete the merger 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 in a way that would 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 that you will
receive in the merger. Either company can waive any of the requirements of the
other company contained in the merger agreement, except that neither company
can waive any required regulatory approval or the satisfaction of any
condition imposed by law. Neither company intends to waive the condition that
it receives a tax opinion. If a tax opinion from BB&T's counsel is not
available and the FCNB Board determines to proceed with the merger, FCNB will
inform you and ask you to vote again on the merger agreement.
Option Agreement (Page )
As a condition to its offer to acquire FCNB, and to discourage other
companies from acquiring FCNB, BB&T required FCNB to grant BB&T a stock option
that allows BB&T to buy up to 2,370,000 shares of FCNB's common stock. The
exercise price of the option is $15.00 per share. Generally, BB&T can exercise
the option only if another party attempts to acquire control of FCNB. As of
the date of this document, we do not believe that has occurred.
BB&T to Use Pooling-of-Interests Accounting Treatment (Page )
BB&T will account for the merger as a pooling of interests. This will avoid
the creation of goodwill relating to the merger and will 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 FCNB had always been combined with BB&T.
Share Price Information (Page )
FCNB common stock is traded on The Nasdaq National Market under the symbol
"FCNB" and BB&T common stock is listed on the New York Stock Exchange under
the symbol "BBT". On July 26, 2000, the last full trading day before public
announcement of the proposed merger, FCNB common stock closed at $19.875, and
BB&T common stock closed at $25.00. On , 2000, FCNB common stock closed at
$ , and BB&T common stock closed at $ .
Listing of BB&T Stock
BB&T will list the shares of its common stock to be issued in the merger on
the New York Stock Exchange.
4
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Comparative Market Prices and Dividends
BB&T common stock is listed on the New York Stock Exchange under the symbol
"BBT," and FCNB common stock is included in the Nasdaq National Market under
the symbol "FCNB." The table below shows the high and low closing prices of
BB&T common stock and FCNB common stock and cash dividends paid per share for
the last two fiscal years plus the interim period. For BB&T, amounts reflect a
2-for-1 stock split on August 3, 1998. For FCNB, amounts reflect a 4-for-3
stock split in the form of a stock dividend paid in August 1998. The merger
agreement restricts FCNB's ability to increase dividends. See page .
<TABLE>
<CAPTION>
BB&T FCNB
---------------------- ----------------------
Cash Cash
High Low Dividend High Low Dividend
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended
March 31, 2000................. $29.19 $22.00 $0.20 $17.94 $13.00 $0.160
June 30, 2000.................. 31.75 23.88 0.20 18.06 12.19 0.160
September 30, 2000............. 0.23
December 31, 2000 (through
)............................
Quarter Ended
March 31, 1999................. 40.44 34.94 0.175 22.50 18.88 0.147
June 30, 1999.................. 40.25 33.81 0.175 22.44 18.50 0.152
September 30, 1999............. 36.63 30.50 0.20 21.88 17.63 0.139
December 31, 1999.............. 36.94 27.31 0.20 20.00 14.50 0.160
For year 1999................ 40.44 27.31 0.75 22.50 14.50 0.598
Quarter Ended
March 31, 1998................. 33.84 29.03 0.155 24.38 20.81 0.101
June 30, 1998.................. 34.06 32.03 0.155 24.94 24.44 0.103
September 30, 1998............. 36.03 28.00 0.175 26.81 23.88 0.108
December 31, 1998.............. 40.63 27.31 0.175 24.50 23.00 0.115
For year 1998................ 40.63 27.31 0.66 26.81 20.81 0.427
</TABLE>
The table below shows the closing price of BB&T common stock and FCNB common
stock on July 26, 2000, the last full trading day before public announcement of
the proposed merger.
<TABLE>
<S> <C>
BB&T historical................................................... $ 25.00
FCNB historical................................................... $19.875
FCNB pro forma equivalent*........................................ $18.125
</TABLE>
--------
* calculated by multiplying BB&T's per share closing price by the exchange
ratio of 0.725
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 1995 through 1999 and unaudited financial statements for the six
months ended June 30, 2000. The information provided for BB&T has been restated
to include the accounts of Premier Bancshares, Inc., Hardwick Holding Co.,
First Banking Company of Southeast Georgia and One Valley Bancorp, each of
which BB&T acquired during 2000 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 . You
should not rely on the six-month information as being indicative of results
expected for the entire year or for any future interim period.
BB&T--Historical Financial Information
(Dollars in thousands, except for per share amounts)
<TABLE>
<CAPTION>
As of/For the Six
Months Ended June 30, As of/For the Years Ended December 31,
----------------------- -----------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income..... $ 1,009,922 $ 938,418 $ 1,932,948 $ 1,759,705 $ 1,623,329 $ 1,486,488 $ 1,356,141
Net income.............. 351,722 365,004 705,574 651,744 501,726 467,309 354,714
Basic earnings per
share.................. 0.88 0.92 1.78 1.67 1.29 1.21 0.91
Diluted earnings per
share.................. 0.87 0.91 1.75 1.64 1.27 1.18 0.89
Cash dividends paid per
share.................. 0.40 0.35 0.75 0.66 0.58 0.50 0.43
Book value per share.... 10.69 9.89 10.19 10.17 9.12 8.62 8.34
Total assets............ 55,045,161 51,463,991 53,000,836 48,190,494 43,606,211 38,612,527 35,810,281
Long-term debt.......... 7,318,035 5,973,518 6,073,428 5,499,873 4,183,462 2,611,973 1,701,433
</TABLE>
FCNB--Historical Financial Information
(Dollars in thousands, except for per share amounts)
<TABLE>
<CAPTION>
As of/For the Six
Months Ended June 30, As of/For the Years Ended December 31,
--------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income..... $ 25,317 $ 24,677 $ 49,853 $ 46,787 $ 43,422 $ 39,159 $ 35,999
Net income.............. $ 7,013 $ 6,371 $ 10,429 $ 9,426 $ 11,168 $ 7,733 $ 8,948
Net income before
merger-related
expenses............... $ 7,039 $ 6,588 $ 13,520 $ 12,587 $ 11,453 $ 9,644 $ 9,251
Basic earnings per
share.................. $ 0.59 $ 0.54 $ 0.89 $ 0.82 $ 0.97 $ 0.67 $ 0.79
Diluted earnings per
share.................. $ 0.59 $ 0.53 $ 0.87 $ 0.79 $ 0.95 $ 0.66 $ 0.78
Basic earnings per share
before merger-related
expenses............... $ 0.59 $ 0.56 $ 1.15 $ 1.09 $ 0.99 $ 0.84 $ 0.81
Diluted earnings per
share before merger-
related expenses....... $ 0.59 $ 0.55 $ 1.13 $ 1.06 $ 0.97 $ 0.82 $ 0.80
Cash dividends declared
per share.............. $ 0.32 $ 0.30 $ 0.60 $ 0.43 $ 0.33 $ 0.27 $ 0.26
Book value per share.... $ 7.45 $ 8.18 $ 7.53 $ 8.52 $ 8.32 $ 7.43 $ 7.11
Total assets............ $1,593,067 $1,443,620 $1,505,796 $1,459,720 $1,179,435 $1,002,010 $849,928
Long-term debt.......... $ 40,250 $ 40,250 $ 40,250 $ 40,250 $ -- $ -- $ 5,680
</TABLE>
6
<PAGE>
Comparative Per Share Data
We have summarized below the per share information for our companies on a
historical, pro forma combined and equivalent basis. You should read this
information in conjunction with our historical financial statements (and
related notes) contained in the annual and quarterly reports and other
documents we have filed with the SEC. See "Where You Can Find More Information"
on page .
The pro forma combined information gives effect to the merger accounted for
as a pooling of interests, assuming that 0.725 shares of BB&T common stock is
issued for each outstanding share of FCNB common stock. Pro forma equivalent of
FCNB common share amounts are calculated by multiplying the pro forma combined
amounts by 0.725. 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 six-month information as being indicative of results
expected for the entire year or for any future interim period.
<TABLE>
<CAPTION>
As of/For the
Year Ended
As of/For the December 31,
Six Months Ended ----------------
June 30, 2000 1999 1998 1997
---------------- ----- ----- ----
<S> <C> <C> <C> <C>
Earnings per common share
Basic
BB&T historical.......................... 0.88 1.78 1.67 1.29
FCNB historical.......................... 0.59 0.89 0.82 0.97
Pro forma combined....................... 0.88 1.77 1.66 1.29
Pro forma equivalent of one FCNB common
share................................... 0.64 1.28 1.20 0.94
Diluted
BB&T historical.......................... 0.87 1.75 1.64 1.27
FCNB historical.......................... 0.59 0.87 0.79 0.95
Pro forma combined....................... 0.87 1.74 1.62 1.27
Pro forma equivalent of one FCNB common
share................................... 0.63 1.26 1.18 0.92
Cash dividends declared per common share
BB&T historical............................ 0.40 0.75 0.66 0.58
FCNB historical............................ 0.32 0.60 0.43 0.33
Pro forma combined......................... 0.40 0.75 0.66 0.58
Pro forma equivalent of one FCNB common
share..................................... 0.29 0.54 0.48 0.42
Shareholders' equity per common share
BB&T historical............................ 10.69 10.19 10.17 9.11
FCNB historical............................ 7.45 7.53 8.52 8.32
Pro forma combined......................... 10.68 10.20 10.21 9.17
Pro forma equivalent of one FCNB common
share..................................... 7.74 7.39 7.40 6.65
</TABLE>
7
<PAGE>
MEETING OF SHAREHOLDERS
General
We are providing this proxy statement/prospectus to FCNB shareholders of
record as of , 2000, along with a form of proxy that the FCNB Board is
soliciting for use at a special meeting of shareholders of FCNB to be held on
, December , 2000 at a.m., Eastern time, at located at in
Frederick, Maryland. At the meeting, the shareholders of FCNB will vote upon a
proposal to approve the agreement and plan of reorganization, dated as of July
26, 2000, and the related plan of merger pursuant to which FCNB would merge
into BB&T. In this proxy statement/prospectus, we refer to the reorganization
agreement and related plan of merger as the merger agreement. Proxies may be
voted on other matters that may properly come before the meeting, if any, at
the discretion of the proxy holders. The FCNB Board knows of no such other
matters except those incidental to the conduct of the meeting. A copy of the
merger agreement is attached as Appendix A.
Whether or not you expect to attend the meeting, your vote is important. We
request that you complete, date and sign the accompanying proxy and return it
promptly to FCNB in the enclosed postage prepaid envelope.
Record Date, Voting Rights and Vote Required
Only the holders of FCNB common stock on , 2000, the record date, are
entitled to receive notice of and to vote at the meeting. On the record date,
there were shares of FCNB common stock outstanding, held by approximately
holders of record. Each such share of FCNB common stock is entitled to one
vote on each matter submitted at the meeting.
Approval of the merger agreement requires the affirmative vote of the
holders of at least two thirds of the outstanding shares of FCNB common stock.
If you do not vote your shares, it will have the same effect as a vote
"against" the merger agreement.
The proposal to adopt the merger agreement is a "non-discretionary" item,
meaning that brokerage firms can not vote shares in their discretion on behalf
of a client if the client has not given voting instructions. Accordingly,
shares held in street name that have been designated by brokers on proxy cards
as not voted with respect to that proposal ("broker non-vote shares") will not
be counted as votes cast on it. Shares with respect to which proxies have been
marked as abstentions also will not be counted as votes cast on that proposal.
Action on other matters, if any, that are properly presented at the meeting
for consideration of the shareholders will be approved if a quorum is present
and the votes in favor of the matter constitute a majority of the shares
represented at the meeting and entitled to vote. A quorum will be present if a
majority of the outstanding shares of FCNB common stock entitled to vote is
represented at the meeting in person or by proxy. Shares with respect to which
proxies have been marked as abstentions and broker non-vote shares will be
treated as shares present for purposes of determining whether a quorum is
present. The FCNB Board is not aware of any other business to be presented at
the meeting other than matters incidental to the conduct of the meeting.
Because approval of the merger agreement requires the affirmative vote of
the holders of at least two thirds of the outstanding shares of FCNB common
stock, abstentions and broker non-vote shares will have the same effect as
votes against the merger. Accordingly, the FCNB Board urges you to complete,
date and sign the accompanying proxy and return it promptly in the enclosed
postage prepaid envelope.
You should not send in your stock certificates with your proxy cards. See
"The Merger--Exchange of FCNB Stock Certificates" on page .
8
<PAGE>
As of the record date, the directors and executive officers of FCNB and
their affiliates beneficially owned a total of shares, or %, of the issued
and outstanding shares of FCNB common stock (exclusive of shares that may be
acquired pursuant to the exercise of stock options), and the directors and
executive officers of BB&T, their affiliates, BB&T and its subsidiaries owned
[no] shares of FCNB common stock, excluding the shares subject to the stock
option agreement described under the heading "The Option Agreement" on page .
Voting and Revocation of Proxies
The shares of FCNB common stock represented by properly completed proxies
received at or before the time for the meeting (or any adjournment) will be
voted as directed by the respective shareholders unless the proxies are revoked
as described below. If no instructions are given, executed proxies will be
voted "FOR" approval of the merger agreement. Proxies marked "FOR" approval of
the merger agreement and executed but unmarked proxies will be voted in the
discretion of the proxy holders named therein as to any proposed adjournment of
the meeting. Proxies that are voted "AGAINST" approval of the merger agreement
will not be voted in favor of any motion to adjourn the meeting to solicit more
votes in favor of the merger. If any other matters are properly presented at
the meeting and voted upon, the proxies solicited hereby will be voted on those
matters at the discretion of the proxy holders named therein.
Your attendance at the meeting will not automatically revoke your proxy. You
may, however, revoke a proxy any time before its exercise by: notifying the
Secretary of FCNB in writing at FCNB's principal executive offices; submitting
a later-dated proxy to the Secretary of FCNB at FCNB's principal executive
offices; or attending the meeting and withdrawing the proxy before it is voted.
If you hold your shares in street name, please see the voting form provided by
your broker for additional information regarding the voting of your shares. If
your shares are not registered in your name, you will need additional
documentation from your record holder to vote the shares in person.
Solicitation of Proxies
BB&T and FCNB will each pay 50% of the cost of printing this proxy
statement/prospectus, and FCNB will pay all other costs of soliciting proxies.
Directors, officers and other employees of FCNB or its subsidiaries may solicit
proxies personally, by telephone or facsimile or otherwise. None of these
people will receive any special compensation for solicitation activities. FCNB
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 brokerage firms and other custodians,
nominees and fiduciaries, and FCNB will reimburse these record holders for
their reasonable out-of-pocket expenses. In addition, FCNB intends to use the
services of , a professional proxy solicitation firm, to help with
soliciting proxies for the meeting, at an estimated cost of $ plus out-of-
pocket expenses.
Recommendation of the FCNB Board
The FCNB Board has approved the merger agreement and believes that the
proposed transaction is fair to and in the best interests of FCNB and its
shareholders. The FCNB Board unanimously recommends that FCNB's shareholders
vote "FOR" approval of the merger agreement. See "The Merger--Background of and
Reasons for the Merger" on page .
9
<PAGE>
THE MERGER
The following information describes the material aspects of the merger. This
description does not purport to be complete and is qualified in its entirety by
reference to the appendices to this proxy statement/prospectus, including the
merger agreement, which is 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, FCNB will be merged into BB&T. Shareholders of FCNB will
receive common stock of BB&T in exchange for their shares of FCNB common stock
on the basis of 0.725 shares of BB&T stock for each share of FCNB stock (plus
cash instead of any fractional share). During the quarter of 2001, BB&T
intends to merge FCNB Bank, FCNB's subsidiary bank, into Branch Banking and
Trust Company, BB&T's principal subsidiary bank.
FCNB Capital Trust, which is a subsidiary of FCNB, holds 8.25% Subordinated
Debentures that were issued by FCNB in July 1998 under an indenture between
FCNB and State Street Bank and Trust Company, as trustee, and has issued 8.25%
Cumulative Trust Preferred Securities. At the effective time of the merger,
BB&T will assume all of FCNB's obligations under the indenture (including being
substituted for FCNB), and after the merger will perform all of FCNB's
obligations with respect to the debentures and the trust preferred securities.
Background of and Reasons for the Merger
Background of the Merger
In November 1999, the Executive Committee of FCNB's Board of Directors,
comprised of Messrs. Clyde C. Crum, Gail T. Guyton, A. Patrick Linton, J.R.
Ramsburg, Jr. and Rand D. Weinberg, requested that Mr. Linton prepare
information regarding the market value of FCNB based upon the assumptions of
(1) the continued independent operation of FCNB for a period of three to five
years in accordance with its current business plan and (2) a sale of FCNB in
the immediate future. The Executive Committee requested this information as
part of the Board of Directors' continuing effort to maximize shareholder value
over the long term.
Utilizing internal resources and information developed by members of
management and information and resources provided by financial advisors with
which FCNB maintains relationships, Mr. Linton prepared for the Executive
Committee analyses of projected results of operations for a 5 year period, and
estimates of the value of the company in immediate and future sale scenarios.
He presented these analyses to the Executive Committee in January 2000.
Following lengthy discussion of these analyses and the reasonableness of the
assumptions and projections upon which they were based, the Executive Committee
concluded that there would be potential advantage to the shareholders in
pursuing a sale, and determined to further investigate the possibility of a
sale.
The Executive Committee developed a list of potential acquirors based upon a
number of factors, including the likelihood of interest in pursuing an
acquisition of FCNB, the ability to successfully acquire and integrate FCNB's
operations, the quality, pricing and liquidity of the potential acquiror's
stock, the quality and growth potential of acquiror's market, assets and
earnings, and the potential acquiror's reputation and banking and community
relations philosophies. Mr. Linton was instructed to make informal contact with
these institutions regarding their potential interest in acquiring FCNB,
structural and social issues relating to the transaction and an initial
indication of potential pricing.
Mr. Linton pursued these contacts between February and April 2000. In April
2000, Mr. Linton reported the full results of these contacts to the Executive
Committee. The Executive Committee reported the analyses and the results of Mr.
Linton's inquiries to the full Board of Directors, meeting in executive
session, on April 11, 2000. The Board conducted a lengthy discussion on the
question of merger versus continued independence, including a discussion of:
10
<PAGE>
. FCNB's prospects as an independent company,
. the competitive issues facing FCNB,
. prospects for growth of FCNB's assets and earnings from internal sources
and future acquisitions,
. the potential for increased shareholder value from continued independent
operations or an acquisition by an appropriate acquiror,
. the risks from continued independence associated with the continuing
consolidation in the banking industry, which could increase competitive
pressures on earnings and growth and reduce the universe of potential
acquirors, and
. the risks related to uncertainty resulting from changes in accounting
treatment of acquisitions.
Based on the presentations and this discussion, the Board of Directors
concluded that the interests of FCNB, its shareholders, employees and
customers could be best served through the sale of FCNB. The Board authorized
the Executive Committee to pursue opportunities for a sale of FCNB and to
report the results of their further efforts.
The Executive Committee met twice more in April 2000 to discuss the best
manner of proceeding with the investigation of a potential transaction. At its
meeting on April 25, 2000, the Executive Committee authorized Mr. Linton to
request Danielson Associates to make a presentation to the committee on the
current acquisitions environment and other matters.
On May 16, 2000, the Executive Committee met with Mr. Arnie Danielson of
Danielson Associates, a financial advisory firm with extensive experience and
expertise in valuing and advising banking institutions on strategic issues,
including in connection with the sale of banking institutions. Mr. Danielson
reviewed with the Executive Committee the history of FCNB's earnings, asset
growth, share price history and prospects for future growth. Mr. Danielson
also reviewed with the Executive Committee trends in bank acquisitions
relating to changes in the banking industry, including the diminution of the
number of potential acquirors, the necessity to reduce reliance on interest
rate spread income and increased reliance on fee based income sources
unrelated to traditional banking activities, and the impact of new and
nontraditional financial services products and delivery methods. Mr. Danielson
also reviewed with the committee recent merger and acquisition transactions
and the prices received in such transactions. Finally Mr. Danielson reviewed
with the committee twelve companies which Danielson Associates viewed as the
most likely potential acquirors for FCNB. Danielson Associates divided the
potential acquirors into three categories of desirability, based on (1) the
likelihood of the acquiror to be interested in FCNB and to offer to pay a fair
price, (2) the desirability of the potential acquiror's stock based on current
pricing, earnings and growth prospects, (3) capacity to consummate the
acquisition successfully and without material negative impact on share price
or earnings, and (4) social issues regarding local autonomy, employees,
corporate culture and banking philosophy and reputation.
Following discussion, the Executive Committee directed Mr. Danielson to
pursue solicitation of indications of interest from six of the companies
presented. In late May and early June 2000, packages of information regarding
FCNB were sent to each of the six companies, together with a request for an
indication of interest and potential pricing. Responses were requested by July
7, 2000. Four indications of interest, all of which were within the expected
range of pricing, were received in response to the information packages. One
company declined to submit an indication of interest and a second declined to
submit an indication of interest, but indicated an interest in submitting a
bid at a price range substantially below that indicated by the other
recipients.
On July 10, 2000, the Executive Committee reviewed the results of the
solicitation process with Mr. Danielson. Mr. Danielson made a presentation on
the value of the indications based on current trading value and recent trading
history of the potential acquiror's shares, the reasonableness of potential
acquiror's share pricing and relative market liquidity, and his discussions
with representatives of the various parties. Following the presentation and a
lengthy discussion of the indications of interest and the companies presenting
them, the
11
<PAGE>
Executive Committee determined that the indication of interest provided by BB&T
had the highest potential for maximizing long-term shareholder value. In
reaching this conclusion the Executive Committee considered the fact that the
value of one of the indications submitted exceeded the value of BB&T's
indication as of July 7, 2000 by approximately 3.7%. The Executive Committee
nevertheless determined that BB&T's indication was superior to the other
company's for a number of reasons, including (1) the lower multiple of earnings
at which BB&T's shares traded as compared to the other company's shares, (2)
their belief, based on Danielson's presentation and discussions with management
of the other company, that the other company's share price was unduly high
relative to the shares of similar institutions, (3) their belief that the other
company's share price would be materially adversely affected as a result of the
acquisition of FCNB, (4) the greater liquidity of BB&T's common stock, which
has an average daily trading volume of more than ten times that of the other
company's shares, and (5) the superior prospects for future earnings growth of
BB&T as compared to the other company. The Executive Committee directed Mr.
Danielson to contact BB&T in an effort to increase the level of their
indication of interest. On July 11, 2000, Mr. Danielson reported that BB&T had
agreed to increase their bid to 0.725 shares of BB&T common stock per share of
FCNB common stock, which was then valued at $20.03 per share of FCNB common
stock, based upon BB&T's closing price of $27 5/8 on July 11, 2000.
The Executive Committee discussed the revised BB&T proposal and determined
to recommend that the full Board of Directors authorize management to conduct
negotiations with BB&T toward a definitive agreement with BB&T. Later on July
11, 2000, the Board of Directors, following an extensive discussion of events
to date and Mr. Danielson's presentation, authorized Mr. Linton to conduct
negotiations with BB&T toward completion of a definitive agreement with BB&T.
The Board also authorized inviting BB&T to conduct its onsite due diligence
examination of FCNB.
On July 17, 2000, FCNB's counsel received drafts of the proposed merger
agreement, stock option agreement, employments agreements and other documents
relating to the transaction, and commenced review, discussion and negotiation
of these documents with management and counsel to BB&T. BB&T conducted its
onsite due diligence investigation between July 21 and July 23, 2000.
On July 25, 2000, the Board of Directors met with FCNB's counsel and Mr. Jon
Holtaway of Danielson Associates to discuss the proposed transaction with BB&T
and the status of negotiations. Mr. Holtaway presented a detailed analysis of
the proposed merger, including FCNB's current financial and market position,
recent acquisitions pricing, an analysis of the pricing of BB&T's common stock
and the fairness of the valuation of FCNB by BB&T's offer. Mr. Holtaway
explained Danielson's conclusion that BB&T's common stock was fairly valued and
that the proposed merger was fair to the shareholders of FCNB from a financial
point of view. The Board then discussed Danielson's opinion and FCNB's
prospects if it remained independent. The Board then received a presentation on
and discussed at length specific provisions of the merger agreement, the stock
option agreement and other transaction documents, and the status of proposed
changes to the various documents and open negotiation points. Following this
discussion, the Board directed Mr. Linton to continue negotiations with BB&T
and adjourned until the following day to further consider the proposed merger
and the results of FCNB's due diligence investigation of BB&T.
On July 26, 2000 the Board met with Mr. Danielson and counsel to further
consider the proposed merger. Following a lengthy discussion of the status of
negotiations, changes to the transaction documents and other items related to
the proposed merger, the Board of Directors unanimously approved the proposed
merger, subject to the satisfactory finalization of the merger documents, and
authorized Mr. Linton to execute and deliver the merger documents on behalf of
FCNB. At approximately 8:15 P.M., BB&T and FCNB exchanged executed signature
pages to the merger agreement and stock option agreement.
FCNB's Reasons for the Merger
In reaching the conclusion that the merger agreement and the merger are in
the best interests of and advisable for FCNB and its shareholders, and in
approving the merger agreement, the stock option agreement and the transactions
contemplated by those agreements, the FCNB Board of Directors considered and
reviewed
12
<PAGE>
with FCNB's senior management, as well as its financial and legal advisors, a
number of factors, including the following:
. Information regarding the business, operations, financial condition,
demographics, technological capabilities, management, earnings and
prospects of each of FCNB and BB&T, including the prospects of an
independent FCNB to achieve growth in investment value equal to or in
excess of that which BB&T is capable.
. The current financial services industry environment, including:
. the rapid consolidation within the industry,
. the increasing use of technology-based new product delivery systems,
such as the Internet, and the related expense and potential
advantages of scale,
. increased competition,
. decline in net interest spreads and the market's valuation of banking
organizations, and
. the apparent approaching end of pooling-of-interests accounting at
January 1, 2001 which may affect market premiums for at least some
period and would also negatively impact FCNB's ability to grow
through continued acquisitions.
. The directors' belief that the terms of the merger, the merger agreement
and the stock option agreement are fair to and in the best interests of
FCNB's shareholders.
. The fact that the exchange ratio of BB&T common stock being offered for
FCNB common stock represents a substantial premium over normalized
market prices of FCNB common stock.
. The analyses prepared by management and Danielson Associates.
. The opinion of Danielson Associates as of July 26, 2000 that the common
stock of BB&T was fairly priced and that the exchange ratio, as set out
in the merger agreement, was fair from a financial point of view to
FCNB's shareholders.
. That the merger is intended to be generally tax-free for federal income
tax purposes and a pooling of interests for accounting purposes.
. BB&T's record as an acquiror of other banks and its commitments relating
to the management structure for FCNB's franchise, FCNB's employees and
the communities which they serve.
. The interests of FCNB's officers and directors that are different from,
or in addition to, the interests of shareholders generally.
. The fact that Frederick will become a regional center for BB&T following
the merger.
. The continuity of management and employees in FCNB's market following
the merger.
. The fact that approval of the merger agreement requires the consent of
two thirds of the outstanding votes entitled to be cast.
The above discussion of the information and factors considered by FCNB's
Board of Directors is not meant to be exhaustive, but indicates the material
matters considered by the Board. In reaching its determination to approve the
merger agreement, the stock option agreement and the transactions which they
contemplate, the Board did not assign any relative or specific weight to the
foregoing factors, and individual directors may have considered various
factors differently.
Recommendation of FCNB's Board of Directors
Your Board of Directors unanimously recommends that you vote "FOR" the
merger agreement.
13
<PAGE>
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
asset size range. BB&T's management believes that FCNB is an exceptional
community bank, the acquisition of which will improve BB&T's financial
performance and franchise value and give BB&T the leading market share central
Maryland market. BB&T's management further believes that the merger will
benefit FCNB's customers by giving them access to new and expanded products
and services like capital markets, cash management services, leasing and
international banking.
In connection with BB&T's consideration of the merger, its management
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:
. Each of BB&T's 2000 and 2001 and FCNB's 2000 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 subsequent years
would increase at an assumed annual rate, determined solely for the
purpose of assessing the impact of the merger as described above, of
12%;
. FCNB's earnings on a stand-alone basis for periods after 2000 would
increase at an assumed rate, determined solely for the purpose of
assessing the impact of the merger as described above, of 12%, before
applying the effect of the assumptions described below;
. Annual cost savings of approximately $16.5 million, or 35% of FCNB's
expense base, would be realized as a result of the merger in the first
12 months of operations following conversion;
. FCNB's core net interest margin (non-fully taxable equivalent) would be
incrementally increased over years 2-6 from a projected 3.46% in 2001 to
4.20% in 2006, and would thereafter remain constant;
. FCNB's noninterest income would increase at a rate of 18% per year in
years 1-5 and at 12% per year thereafter;
. FCNB's net charge-off rate for loan losses would be increased to 0.28%
in 2001, 0.35% in 2002 and held constant thereafter; and
. FCNB's loan loss allowance would be raised to 1.30% to match BB&T's
reserve philosophy.
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, book value per share and leverage capital
ratio. This analysis indicated that the merger would:
. be accretive to estimated earnings per share, cash basis earnings per
share, return on equity and cash basis return on equity in year 1, to
return on assets in year 3 and to cash basis return on assets and book
value in year 4; and
. result in a combined leverage ratio over 7%.
BB&T excluded from its calculations of earnings per share, return on equity
and return on assets the effect of estimated one-time after-tax charges of
$22.5 million related to completing the merger.
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 FCNB, 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 FCNB merger indicated that
the projected internal rate of return is 23.70%.
None of the above information has been updated since the date of the merger
agreement. There can be no certainty that the results described in the above
information will be achieved or that actual results will not vary
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materially from the estimated results. For more information concerning the
factors that could affect actual results, see "A Warning About Forward-Looking
Information" on page iii.
Opinion of Financial Advisor to FCNB
FCNB retained Danielson Associates, Inc. to advise the FCNB Board of
Directors as to its "fair" sale value and the fairness to its shareholders of
the financial terms of the offer to be acquired by BB&T. Danielson Associates
is regularly engaged in the valuation of banks and bank holding companies in
connection with mergers, acquisitions, and other securities transactions; and
has knowledge of, and experience with, Maryland banking markets and banking
organizations operating in those markets. Danielson Associates was selected by
FCNB because of its knowledge of, expertise regarding, and reputation in the
financial services industry.
Danielson Associates reviewed the FCNB-BB&T merger agreement with respect to
the pricing and other terms and conditions of the merger, but the decision as
to accepting the offer was ultimately made by the Board of Directors of FCNB.
Danielson Associates rendered its oral opinion to the FCNB Board of Directors,
which it subsequently confirmed in writing, that as of the date of such
opinion, the financial terms of the BB&T offer were "fair" to FCNB and its
shareholders. No limitations were imposed by the FCNB Board of Directors upon
Danielson Associates with respect to the investigation made or procedures
followed by it in arriving at its opinion.
In arriving at its opinion, Danielson Associates:
. Reviewed certain business and financial information relating to FCNB and
BB&T including annual reports for the fiscal years ended December 31,
1998 and December 31, 1999; call report data from 1990 through June 30,
2000; and the Annual Reports on Form 10-K and the Quarterly Reports on
Form 10-Q for 1998, 1999 and March 31, 2000.
. Discussed the past and current operations, financial condition and
prospects of BB&T with its senior executives.
. Reviewed the reported prices and trading activity for the BB&T Common
Stock and compared it to similar bank holding companies.
. Reviewed and compared the financial terms, to the extent publicly
available, with comparable transactions.
. Reviewed the merger agreement and certain related documents.
. Considered such other factors as were deemed appropriate.
Danielson Associates did not obtain any independent appraisal of assets or
liabilities of FCNB or BB&T or their respective subsidiaries. Further,
Danielson Associates did not independently verify the information provided by
FCNB or BB&T and assumed the accuracy and completeness of all such information.
In arriving at its opinion, Danielson Associates performed a variety of
financial analyses. Danielson Associates believes that its analyses must be
considered as a whole and that consideration of portions of such analyses could
create an incomplete view of Danielson Associates' opinion. The preparation of
a fairness opinion is a complex process involving subjective judgments and is
not necessarily susceptible to partial analysis or summary description.
In its analyses, Danielson Associates made certain assumptions with respect
to industry performance, business and economic conditions, and other matters,
many of which were beyond FCNB's or BB&T's control. Any estimates contained in
Danielson Associates' analyses are not necessarily indicative of future results
or value, which may be significantly more or less favorable than such
estimates. Estimates of the value of companies do not purport to be appraisals
or necessarily reflect the prices at which companies or their securities may
actually be sold.
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<PAGE>
The following is a summary of selected analyses considered by Danielson
Associates in connection with its opinion letter.
Pro Forma Merger Analyses
Danielson Associates analyzed the changes in the amount of earnings and book
value represented by the receipt of about $221.9 million, based on BB&T's July
25, 2000 stock price, for all of the outstanding shares of FCNB common stock
and options to purchase common stock, which will be paid in BB&T common stock
or options to purchase BB&T common stock. The analysis evaluated, among other
things, possible dilution in earnings and capital per share for BB&T common
stock.
Comparable Companies
To determine the "fair" value of the BB&T common stock to be exchanged for
the common stock of FCNB, BB&T was compared to thirteen publicly-traded bank
holding companies ("comparable banks" or the "comparative group"). These
comparable banks had assets in the $30 billion to $100 billion range, no
extraordinary characteristics and were located in the East and Midwest.
Summary and Description of Comparable Banks
<TABLE>
<CAPTION>
Comparable Banks** Assets* Headquarters
------------------ ---------- ------------
(In mill.)
<S> <C> <C>
AmSouth Bancorporation........................... $ 43 Birmingham, Ala.
Comerica Inc..................................... 41 Detroit, Mich.
Fifth Third Bancorp.............................. 45 Cincinnati, Ohio
Firstar Corporation.............................. 74 Milwaukee, Wis.
KeyCorp.......................................... 85 Cleveland, Ohio
National City Corporation........................ 85 Cleveland, Ohio
PNC Financial Services Group, Inc................ 76 Pittsburgh, Pa.
Regions Financial Corporation.................... 43 Birmingham, Ala.
SouthTrust Corporation........................... 44 Birmingham, Ala.
Summit Bancorp................................... 39 Princeton, N.J.
SunTrust Banks, Inc.............................. 100 Atlanta, Ga.
Union Planters Corporation....................... 34 Memphis, Tenn.
Wachovia Corporation............................. 71 Winston-Salem, N.C.
BB&T............................................. $ 49 Winston-Salem, N.C.
</TABLE>
--------
* June 30, 2000.
** Publicly-traded with assets between $30 billion and $100 billion in the East
and Midwest
Source: SNL Securities LC, Charlottesville, Virginia.
Danielson Associates compared BB&T's:
. Stock price as of July 25, 2000 equal to 12.4 times core earnings and
245% of book.
. Dividend yield based on trailing four quarters as of June 30, 2000 and
stock price as of July 25, 2000 of 3.59%.
. Equity as of June 30, 2000 of 7.55% of assets.
. Nonperforming assets including loans 90 days past due as of June 30,
2000 equal to .41% of total assets.
. Return on average assets adjusted for nonrecurring items for the twelve
months ended June 30, 2000 of 1.54%.
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<PAGE>
. Return on average equity during the same period adjusted for
nonrecurring items of 20.35%, with the medians for the comparable banks.
BB&T--Comparable Banks Summary
<TABLE>
<CAPTION>
Comparable
Banks
--------------
BB&T Medians
----- -------
<S> <C> <C>
Income
Net income/Avg. Assets......................................... 1.54% 1.35%
Net oper. income*/Avg. Assets.................................. 2.73 2.40
Return on average equity....................................... 20.35 16.62
Balance Sheet
Equity/Assets.................................................. 7.55% 7.68%
NPAs**/Assets.................................................. .41 .56
Stock Price
Price/Earnings................................................. 12.4X 12.0X
Price/Book..................................................... 245% 194%
Dividend yield................................................. 3.59 3.84
Payout ratio................................................... 40 46
Shares traded***............................................... 619 778
</TABLE>
--------
* Net interest income plus noninterest income less operating expense.
** Nonperforming assets including loans 90 days past due and still accruing.
*** Average daily volume in 2000 through July 25, 2000 (in thousands).
Source: SNL Securities LC, Charlottesville, Virginia.
The comparable medians were:
. Stock price equal to 12 times earnings and 194% of book.
. Dividend yield of 3.84%.
. Equity of 7.68% of assets.
. .56% of assets nonperforming.
. Return on average assets adjusted for nonrecurring items of 1.35%.
. Return on average equity adjusted for nonrecurring items of 16.62%.
Comparable Transaction Analysis
Danielson Associates compared the consideration to be paid in the merger to
the latest twelve months earnings and equity capital of FCNB with earnings and
capital multiples paid in acquisitions of banks through July 25, 2000 in the
Middle Atlantic region. At the time Danielson Associates made its analysis, the
consideration to be paid in the merger was 250% of FCNB's June 30, 2000 book
value and 15.9 times adjusted earnings for the twelve months ended June 30,
2000. This compares to the median multiples of 192% of book value and 14.1
times earnings for comparable deals in the Middle Atlantic, adjusted for
changes in the acquirer's stock price through July 25, 2000.
There were nine comparable deals in the Middle Atlantic--broadly defined to
include Maryland, New Jersey, New York, Pennsylvania, Virginia, West Virginia
and the District of Columbia--announced since June 30, 1999--Staten Island
Bancorp Inc. acquiring First State Bancorp; Tompkins Trustco Inc. buying
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<PAGE>
Letchworth Independent Bancshares Corporation; First Niagara Financial Group,
Inc. buying Iroquois Bancorp Inc.; BB&T purchasing One Valley Bancorp Inc.; NBT
Bancorp Inc. buying Lake Ariel Bancorp Inc. and Pioneer American Holding
Company Corporation; M&T Bank Corporation acquiring Keystone Financial Inc. and
Premier National Bancorp Inc.; and Sterling Financial Corp. buying Hanover
Bancorp Inc. Based on announcement pricing, their median prices times earnings
and as a percent of book were 18.7 and 243%, respectively.
Discounted Future Earnings and Discounted Dividends Analysis
Danielson Associates applied present value calculations to FCNB's estimated
future earnings and dividend stream under several specific growth and earnings
scenarios. This analysis considered, among other things, scenarios for FCNB as
an independent institution and as part of another banking organization. The
projected dividend streams and terminal values, which were based on a range of
earnings multiples, were then discounted to present value using discount rates
based on assumptions regarding the rates of return required by holders or
prospective buyers of FCNB common stock.
Other Analysis
In addition to performing the analyses summarized above, Danielson
Associates also considered the general market for bank mergers, the historical
financial performance of FCNB and BB&T, the market positions of both banks and
the general economic conditions and prospects of those banks.
No company or transaction used in this composite analysis is identical to
FCNB or BB&T. Accordingly, an analyses of the results of the foregoing is not
mathematical; rather it involves complex consideration and judgments concerning
differences in financial and operating characteristics of the companies and
other factors that could affect the public trading values of the company or
companies to which they are being compared.
The summary set forth above does not purport to be a complete description of
the analyses and procedures performed by Danielson Associates in the course of
arriving at its opinions. In payment for its services as the financial advisor
to FCNB, Danielson Associates is to be paid a fee equal to 0.5% of the total
value of the merger to FCNB's shareholders, estimated at about $1,109,500, of
which $ has already been paid. The total amount of the fee will be
determined, and any amount due will be paid, at the closing of the merger.
The full text of the opinion of Danielson Associates dated as of July 26,
2000, which sets forth assumptions made and matters considered, is attached
hereto as Appendix B of this proxy statement/prospectus. FCNB shareholders are
urged to read this opinion in its entirety. Danielson Associates' opinion is
directed only to the consideration to be received by FCNB shareholders in the
merger and does not constitute a recommendation to any FCNB shareholder as to
how such shareholder should vote at the meeting.
Exchange Ratio
In the merger, each share of FCNB common stock outstanding when the merger
becomes effective will be converted into the right to receive 0.725 shares of
BB&T common stock.
You should be aware that the actual market value of a share of BB&T common
stock when the merger becomes effective and at the time certificates for those
shares are delivered following surrender and exchange of your certificates for
shares of FCNB common stock may be more or less than the closing price per
share of BB&T common stock at any other time. We urge you 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" on page .
No fractional shares of BB&T common stock will be issued in the merger. If
you would otherwise be entitled to a fractional share of BB&T common stock in
the merger, you will be paid an amount in cash
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<PAGE>
determined by multiplying the fractional part of the share of BB&T common stock
by the closing price per share of BB&T common stock on the NYSE at 4:00 p.m.
eastern time on the date that the merger becomes effective as reported on
NYSEnet.com or, if not reported on NYSEnet.com, another authoritative source.
Exchange of FCNB Stock Certificates
At the effective time of the merger and without any action on the part of
FCNB or the FCNB shareholders, shares of FCNB common stock will be converted
into and will represent the right to receive, upon surrender of the certificate
representing such shares as described below, whole shares of BB&T common stock
and cash instead of any fractional share interest. Promptly after the effective
time, BB&T will deliver or mail to you a form of letter of transmittal and
instructions for surrender of your FCNB stock certificates. When you properly
surrender your certificates or provide other satisfactory evidence of
ownership, and return the letter of transmittal duly executed and completed in
accordance with its instructions and any other documents as may be reasonably
requested, BB&T will promptly deliver to you the merger consideration to which
you are entitled, together with any declared and unpaid dividends on the merger
consideration.
You should not send in your stock certificates until you receive the letter
of transmittal and instructions.
After the effective time, and until surrendered as described above, each
outstanding FCNB stock certificate will be deemed for all purposes to represent
only the right to receive the merger consideration. No interest will be paid or
accrued on any cash payable for fractional shares as part of the merger
consideration upon the surrender of the certificate or certificates
representing shares of FCNB common stock. With respect to any FCNB stock
certificate 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 FCNB common
stock outstanding immediately prior to the effective time will be made on
BB&T's stock transfer books.
If FCNB declares a dividend on the FCNB common stock which has a record date
before the effective time, and that dividend has not been paid prior to the
effective time, BB&T will pay the dividend to the former FCNB shareholders.
To the extent permitted by law, you 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 your shares of FCNB common stock are converted,
regardless of whether you have exchanged your FCNB stock certificates for BB&T
stock certificates. Whenever BB&T declares a dividend or other distribution on
the BB&T common stock which has a record date 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. However, no dividend or
other distribution payable to the holders of record of BB&T common stock will
be delivered to you until you surrender your FCNB stock certificate for
exchange as described above. Upon surrender of your FCNB stock certificate, the
certificate representing the BB&T common stock into which your shares of FCNB
common stock have been converted, together with cash in lieu of any fractional
share of BB&T common stock to which you would otherwise be entitled and any
undelivered dividends, will be delivered and paid to you, without interest.
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 a later date
mutually acceptable to the parties. The effective time will occur at the time
and date
19
<PAGE>
specified in the articles of merger to be filed with the Secretary of State of
North Carolina and the Maryland Department of Assessments and Taxation. 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 is
approved by the FCNB shareholders and all other conditions to the respective
obligations of BB&T and FCNB to complete the merger have been satisfied. If the
merger is approved at the meeting, BB&T and FCNB currently anticipate that the
filing of the articles of merger and the effective time will occur during the
first quarter of 2001. In no event will the effective time occur before January
1, 2001 without the prior consent of FCNB.
Conditions to the Merger
The obligations of BB&T and FCNB 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 must have been duly and validly taken, including the
approval of the shareholders of FCNB of the merger agreement;
. 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, no proceedings may be pending or, to
BB&T's knowledge, 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 exempt from registration
under applicable state securities laws;
. the parties must have received all regulatory approvals required in
connection with the transactions contemplated by 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 FCNB 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 provided in the merger agreement; and
. FCNB and BB&T must have received an opinion of BB&T's legal counsel, in
form and substance satisfactory to FCNB 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 FCNB will not recognize any gain or loss to the
extent that such shareholders exchange shares of FCNB common stock for
shares of BB&T common stock.
The obligations of FCNB 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 FCNB:
. 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
. FCNB 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 at the effective time as though made at
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 FCNB. The representations and warranties of BB&T concerning:
. its capitalization,
. its and its subsidiaries' organization and authority to conduct
business,
. its authorization of, and the binding nature of, the merger agreement
and
20
<PAGE>
. the absence of any conflict between the transactions in the merger
agreement and BB&T's articles of incorporation or bylaws
must be true and correct (except for de minimis inaccuracies). Moreover, there
must not be any inaccuracies in the representations and warranties of BB&T 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 the consummation of
such transactions inadvisable or unduly burdensome;
. FCNB must have performed in all material respects all of its obligations
and complied in all material respects with all of its covenants required
by the merger agreement;
. BB&T must have received certain closing certificates and legal opinions
from FCNB 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 FCNB will be evaluated
at the date of the merger agreement and at the effective time as though made
on and at 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 FCNB concerning:
. its capitalization,
. its and its subsidiaries' organization and authority to conduct
business,
. its ownership of its subsidiaries and other equity interests,
. its authorization of, and the binding nature of, the merger agreement,
. the absence of conflict between the transactions in the merger agreement
and FCNB's articles of incorporation or bylaws,
. its forbearance from taking any actions that would negatively affect the
pooling-of-interests accounting treatment for, or the 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 de minimis inaccuracies). Moreover, there
must not be any inaccuracies in the representations and warranties of FCNB 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 FCNB (evaluated without regard to the merger of FCNB into BB&T).
Conduct of FCNB's and BB&T's Businesses Prior to the Effective Time of the
Merger
Except with the prior consent of BB&T, not to be unreasonably or
arbitrarily withheld or delayed, before the effective time of the merger,
neither FCNB nor any of its subsidiaries may:
21
<PAGE>
. 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 or expand any existing
activities;
. declare or pay any dividend or distribution on its capital stock, other
than regularly scheduled quarterly dividends of $0.16 per share of FCNB
common stock payable on record dates consistent with past practice
(except that, unless otherwise agreed, any dividend declared or payable
in the quarterly period during which the effective time occurs may 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 pursuant to options
outstanding as of the date of the merger agreement, or pursuant to the
option granted to BB&T in connection with the merger agreement;
. issue, grant or authorize any rights to acquire capital stock or effect
any recapitalization, reclassification, stock dividend, stock split or
similar change in capitalization, except that FCNB may grant options
under its stock option plans in the ordinary course of business
consistent with its practice during 1999;
. 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 FCNB 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;
. merge with any other entity or permit any other entity to merge into it,
acquire control over any other entity or dispose of any material amount
of assets or acquire any material amount of assets, in each case other
than in the ordinary course of its business consistent with past
practices;
. 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 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 of business consistent with past practice pursuant to
existing plans or arrangements and annual year-end salary increases not
to exceed in total 5% of payroll;
. enter into or substantially modify (except as may be required by law or
provided in the merger agreement) any employee benefit, incentive or
welfare arrangement, or any related trust agreement, relating to any of
its directors, officers or other employees (other than renewals
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 FCNB or any FCNB subsidiary, or fail to notify
BB&T immediately if any such inquiry or proposal is received, any such
information is requested or required or any such discussions are sought
(except that this would not apply to furnishing information,
negotiations or discussions following an unsolicited offer if FCNB 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 FCNB Board to the FCNB shareholders);
. enter into (a) any material agreement or commitment other than in the
ordinary course, (b) any agreement, indenture or other instrument other
than in the ordinary course relating to the borrowing of money by FCNB
or a FCNB subsidiary or guarantee by FCNB or a FCNB 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 or the reappointment of officers in the normal course) or
(d) any contract, agreement or understanding with a labor union;
22
<PAGE>
. change its lending, investment or asset liability management policies in
any material respect, except as required by applicable law, regulation
or directives, and except as provided for in the merger agreement;
. change its methods of accounting in effect at December 31, 1999, except
as required by changes in accounting principles 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, 1999, except as
required by changes in law;
. except for certain permitted expenditures, incur any new commitments for
capital expenditures or obligations to make capital expenditures in
excess of $100,000 for any one expenditure or $1,000,000 in the
aggregate;
. incur any new indebtedness other than deposits from customers, brokered
deposits, advances from the Federal Home Loan Bank or Federal Reserve
Bank, federal funds purchases, correspondent bank lines and reverse
repurchase arrangements in the ordinary course of business consistent
with past practice;
. take any action that would or 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 of
business; or
. agree to do any of the foregoing.
FCNB has also agreed:
. to take such actions as may be reasonably necessary to modify the
structure of the merger as long as the modification does not reduce the
consideration to be received by FCNB shareholders, abrogate the
covenants contained in the merger agreement or substantially delay the
completion of the merger;
. to cooperate with BB&T concerning accounting and financial matters
necessary to facilitate the merger, including issues arising in
connection with record keeping, loan classification, valuation
adjustments, levels of loan loss reserves and other accounting
practices;
. to keep BB&T advised of all material developments relevant to its
business prior to completion of the merger; and
. to provide BB&T access to FCNB's books and records.
Except with the prior consent of FCNB, not to be arbitrarily or unreasonably
withheld or delayed, 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 termination of the merger agreement,
. cause any of the conditions precedent to the transactions contemplated
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 FCNB common stock acquired under that agreement other than in
accordance with its terms; or
. fail to comply in any material respect with any laws, regulations,
ordinances or governmental actions applicable to it and to the conduct
of its business.
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<PAGE>
BB&T has also agreed to keep FCNB advised of all material developments
relevant to its business prior to completion of the merger.
Waiver; Amendment; Termination; Expenses
Except with respect to any required regulatory approval or other condition
imposed by law, BB&T or FCNB may at any time (whether before or after approval
of the merger agreement and the plan of merger by the FCNB 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 in the merger agreement or in the plan of
merger. The parties may also mutually amend or supplement the merger agreement
in writing at any time. However, no extension, waiver, amendment or supplement
which would reduce either the exchange ratio or the payment terms for
fractional interests to be provided to holders of FCNB common stock upon
completion of the merger will be made after the FCNB shareholders approve the
merger agreement and the plan of merger.
If any of the conditions to the obligation of either party to complete the
merger is not fulfilled, that party will consider the materiality of such
nonfulfillment. In the case of the nonfulfillment of a condition to FCNB's
obligations, FCNB will, if it determines it appropriate under the
circumstances, resolicit shareholder approval of the merger agreement and the
plan of merger and provide appropriate information concerning the obligation
that has not been satisfied.
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 FCNB;
. 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 in the
merger agreement (see "--Conditions to the Merger"); and, in either
case, if the breach or inaccuracy has not been cured by the earlier of
30 days following notice of the breach or inaccuracy to the party
committing it 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 contemplated by the merger agreement cannot be
satisfied or fulfilled before the effective time, and the party giving
the notice is not in material 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 FCNB do
not approve the merger agreement by the required vote; or
. at any time following February 28, 2001 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 material breach of any of
its representations, warranties, covenants or undertakings.
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 the 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.
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Each party will pay the expenses it incurs in connection with the merger
agreement and the merger, except that printing expenses and SEC filing fees
incurred in connection with the registration statement and this proxy
statement/prospectus will be paid 50% by BB&T and 50% by FCNB.
Interests of Certain Persons in the Merger
Certain members of FCNB's management have interests in the merger that are
in addition to their interests as FCNB shareholders and optionholders. The FCNB
Board was aware of these factors and considered them, among other matters, in
approving the merger agreement and the merger.
Employment Agreements
In connection with the merger, Branch Banking and Trust Company, BB&T's
North Carolina banking subsidiary ("BB&T-NC") has entered into a six-year
employment agreement with A. Patrick Linton and expects to offer to enter into
a three-year employment agreement with up to four other officers of FCNB, who
have not been determined as of the date of this proxy statement/prospectus. Mr.
Linton's employment agreement provides for his employment as Regional President
of the Frederick, Maryland area.
The employment agreement with Mr. Linton provides that he will receive a
base salary not less than the annual base salary rate payable to him by FCNB
just before the merger occurs (which may be no greater than 105% of his base
salary payable by FCNB on July 1, 2000, which was $ ), plus $15,000, and that
he will receive a percentage increase in Base Salary each year at least as
great as the average percentage increase received for such year by other
similarly situated officers of BB&T-NC. Each of the other employees will
receive a base salary at least equal to that previously received from FCNB and
may receive annual increases (subject to an annual review determined in
accordance with the compensation policies and procedures of BB&T-NC). Each
employee will be eligible to receive an annual bonus payment pursuant to the
terms of BB&T's Amended and Restated Short Term Incentive Plan. In addition,
the employees will be eligible to be granted stock options annually under
BB&T's Amended and Restated 1995 Omnibus Stock Incentive Plan or a successor
plan on the same basis as similarly situated officers of BB&T-NC; however, the
number of options granted, if any, as of the first BB&T grant date will be
equitably adjusted by BB&T so as to avoid duplication of such options with any
options to acquire FCNB common stock granted to the employees during the year
ending on that first BB&T grant date. Mr. Linton's agreement further provides
that he will receive annually options valued in accordance with option
valuation models used by BB&T at no less than 42% of his base salary.
The employment agreements further provide that the employee will receive, on
the same basis as other similarly situated officers of BB&T-NC, employee
pension and welfare 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, such benefits to commence
as of a date determined by not later than January 1 following the close of the
year in which FCNB bank is merged into BB&T or one of its subsidiaries. Until
that date, FCNB plans that provide benefits of the same type or class as a
corresponding BB&T plan will continue in effect for the employees. Mr. Linton's
employment agreement further provides that he will be entitled to receive
supplemental retirement payments from BB&T-NC having a present value equal to
the present value of the supplemental retirement benefit provided under the
FCNB supplemental retirement plan, reduced by the present value of the
benefits, if any, payable to Mr. Linton under any defined benefit pension plan
of BB&T-NC and any supplemental retirement plan of BB&T-NC. BB&T will
reasonably determine these benefits and present values, and will make the
payments at the times provided in the FCNB supplemental retirement benefit plan
as in effect on July 1, 2000. In applying employee plans of BB&T-NC having a
waiting period for eligibility or vesting, service by Mr. Linton with FCNB and
FCNB subsidiaries will be deemed to be service with BB&T-NC for purposes of
determining eligibility to participate and vesting, but not for the purposes of
benefit accrual.
In addition, under his employment agreement BB&T has agreed to pay Mr.
Linton the following conditional amounts upon the successful completion of the
designated tasks:
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. $305,500 upon consummation of the merger, payable within five days; and
. $305,500 upon substantial completion of the conversion of FCNB's data
processing systems to BB&T's computer systems, payable not later than
the end of the calendar quarter in which the conversion is substantially
completed.
If, before the date for payment of the amount referenced in the second bullet
point above, Mr. Linton dies, or his employment is terminated by BB&T-NC
because of his disability or for just cause (as that term is defined in the
employment agreement), or by Mr. Linton other than for good reason (as that
term is defined in the employment agreement), Mr. Linton will not be entitled
to receive the conditional payment corresponding to any uncompleted task. If
Mr. Linton's employment as a senior executive with BB&T-NC is terminated by
BB&T-NC other than because of his disability or just cause, or by Mr. Linton
for good reason, he will continue to be entitled to receive the conditional
payments upon completion of the uncompleted task. These conditional payments
will be deemed to be compensation for income tax purposes, but will not be
deemed to be compensation or otherwise taken into account for purposes of
determining benefits or contributions on behalf of Mr. Linton under any
retirement plan or program of BB&T-NC or any other plan, program or arrangement
of BB&T-NC (including for purposes of determining benefits under any
supplemental retirement plan), and will not be taken into account in
determining Termination Compensation for Mr. Linton as described below.
Mr. Linton's agreement provides that, at any time during the agreement's
term following 60 days after completion of conversion of FCNB's data processing
systems to those of BB&T-NC, Mr. Linton may elect to relinquish his
responsibilities as Regional President of the Frederick, Maryland area of BB&T-
NC and to become an independent consultant to BB&T-NC. As an independent
consultant, Mr. Linton would render services as an independent contractor (and
not as an employee) in the nature of customer and community relations, business
development, employee relations and general advice and assistance relating to
BB&T-NC's customers and employees and to the growth and development in Maryland
of the business of BB&T-NC. These services would be rendered at times and on a
schedule determined by Mr. Linton, and reasonably convenient to both BB&T-NC
and Mr. Linton. Mr. Linton would not be required to maintain records of hours
worked or to work in accordance with any fixed schedule during the portion of
the agreement's term that he is a consultant.
During the consulting period, the employment agreement would generally
continue in full force and effect in accordance with its terms except that Mr.
Linton would not be entitled during the consulting period to receive base
salary, bonuses, stock options or employee benefits on the same basis as he
would as an employee of BB&T-NC. Instead, he would receive during the
consulting period, as compensation for the consulting services and in
consideration of covenants not to compete that Mr. Linton has made in the
agreement, an annual amount equal to his annual base salary rate in effect
immediately preceding the start of the consulting period, payable in
substantially equal monthly installments. In addition, in consideration of his
consulting services and his noncompetition covenants, he would be provided:
. health insurance and life insurance benefits comparable to the group
employee benefits which BB&T-NC may from time to time extend to its
officers, at a cost to Mr. Linton no greater than the cost to such
officers;
. a retirement benefit payable directly by BB&T-NC economically equivalent
to the benefit he would have received under BB&T-NC's defined benefit
pension plan (and reduced by any duplicative benefits payable under such
defined benefit plan) if he had been an employee of BB&T-NC during the
consulting period, payable in accordance with the same payment options
as are available under such defined benefit plan at the end of the
agreement's term;
. a benefit economically equivalent to the benefit he would have been
entitled to receive under BB&T-NC's Section 401(k) plan if he were a
participant in such plan, based on compensation deferrals by Mr. Linton
during the Consulting Period and investment performance of investment
options available under such plan as selected from time to time by Mr.
Linton, payable in accordance with the same payment options as are
available under such plan at the end of the term of the agreement; and
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. the disability benefits otherwise provided for in the agreement or
economically equivalent benefits.
Each employment agreement provides that, if BB&T-NC terminates the
employee's employment other than because of disability or for cause and if the
employee complies with certain noncompetition provisions, he or she will be
entitled to receive as "Termination Compensation" an annual payment equal to
the highest amount of cash compensation (including bonuses) received during any
of the preceding three calendar years for the period commencing on the date of
the termination and ending at the end of the original term of the agreement. In
addition, each employee will continue to receive health insurance coverage and
other group employee benefits from, and to participate in retirement plans of,
BB&T-NC on the same terms as were in effect before the termination, either
under BB&T-NC's plans or comparable coverage, during the time payments of
Termination Compensation are made.
Each employment agreement further provides that, in the event of a "Change
of Control" (as defined below) of BB&T-NC or BB&T, the employee may voluntarily
terminate employment for "Good Reason" (as defined below) until twelve months
after the Change of Control 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 his or her Termination
Compensation times 2.99, and (b) continue for the remainder of the term of the
agreement, to receive health insurance coverage and other group employee
welfare benefits on the same terms as were in effect either (1) at the date of
termination or (2) 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 BB&T-NC than such plans and programs at the date of termination, at
the date of the Change of Control.
"Good Reason" means any of the following events occurring without the
consent of the employee in question:
. the assignment to him or her of duties inconsistent with the position
and status of his or her title;
. a reduction in his or her pay grade or base salary as then in effect, or
the exclusion of him or her from participation in benefit plans in which
he or she previously participated;
. an involuntary relocation of him or her more than 30 miles from the
location where he or she worked immediately before a Change in Control,
or BB&T-NC's breach of any material provision of the employment
agreement; or
. any purported termination of his or her employment by BB&T-NC not
effected in accordance with the employment agreement.
A "Change of Control" would be deemed to occur if:
. any person or group of persons (as defined in the Securities Exchange
Act of 1934, as amended) together with its affiliates, excluding
employee benefit plans of BB&T-NC or BB&T, is or becomes the beneficial
owner of securities of BB&T-NC or BB&T representing 20% or more of the
combined voting power of BB&T-NC's or BB&T's then outstanding
securities;
. as a result of a tender offer or exchange offer for the purchase of
securities of BB&T-NC 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
27
<PAGE>
by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 40% of the combined voting power of the
voting securities of BB&T or the other surviving entity outstanding
immediately after the merger or consolidation;
. the shareholders of BB&T approve a plan of complete liquidation or
winding-up of BB&T or an agreement for the sale or disposition by BB&T
of all or substantially all of BB&T's assets; or
. any other event occurs that the BB&T Board determines should constitute
a Change of Control.
If any of the payments to be made under any of 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
exceeds three times the "base amount," which is generally defined as an
individual's annualized includable compensation for the "base period," which
is generally the most recent five taxable years ending before the date of the
change in control. Sections 280G and 4999 of the Code generally provide that
if "parachute payments" are paid to an individual, everything above the base
amount will be subject to a 20% excise tax payable by the individual (in
addition to the payment of regular income taxes on the payments), as well as
be nondeductible by the employer for federal income tax purposes.
The employment agreements will supersede any of the existing employment
agreements and change of control arrangements of the employees with FCNB or
its subsidiaries.
BB&T has offered in writing to employ two other FCNB executives, Martin S.
Lapera, Executive Vice President of FCNB and FCNB Bank and Chief Operating and
Lending Officer of FCNB Bank and Mark A. Severson, Senior Vice President and
Treasurer of FCNB and Senior Vice President and Chief Financial Officer of
FCNB Bank, after the merger. BB&T will pay them base salaries no less than
their base salaries with FCNB immediately before the merger and provide them
with benefits comparable to those of similarly situated employees. In
recognition of the value of past and future services from these two
executives, BB&T has also agreed to pay these executives specified bonus
amounts under certain circumstances, as described below. Employment would
begin on the date of the merger and would continue at least until the earlier
of (a) 30 days following completion of the conversion of FCNB's operating
systems or (b) September 1, 2001.
If Mr. Lapera or Mr. Severson, as the case may be, is in the employ of FCNB
at the effective time of the merger and continues in the employ of BB&T, then
within ten days after the merger BB&T will pay the executive a bonus based on
the executive's "Compensation Average." The Compensation Average is equal to
the sum of the executive's average annual base salary as in effect immediately
before the merger, plus the average of the bonuses received by the executive
from FCNB for the calendar years 1998, 1999 and 2000. For Mr. Lapera, the
bonus would be his Compensation Average times 1.5, and for Mr. Severson the
bonus would be his Compensation Average times 0.75. In addition, if BB&T
terminates the executive's employment before the earlier of the two dates
described above, or if the executive is employed through the earlier of the
two dates and voluntarily leaves within the 30 days after that date, BB&T
would make a special payment to the executive of 1.5 times the executive's
Compensation Average (for Mr. Lapera) and 0.75 times the executive's
Compensation Average (for Mr. Severson). The executive would not receive any
other benefits or payments after termination of employment, other than those
to which he would be entitled under BB&T's employee benefit plans. If BB&T
terminated the executive before the earlier of the two dates, or if he
voluntarily terminated his employment during the 30 days after the earlier of
the two dates, he would be eligible to participate in BB&T's life, medical,
health, accident and disability insurance and survivor's income benefit plans
to the extent these benefits would have been provided if he had continued in
employment, for 30 months in the case of Mr. Lapera and 12 months in the case
of Mr. Severson. If both payments were made, then based upon their salaries in
effect on June 30, 2000 and using the average of bonuses received for 1997,
1998 and 1999, Mr. Lapera would receive $ and Mr. Severson would receive
$ .
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BB&T-NC Board of Directors; Advisory Board
The merger agreement provides that Mr. Linton will be elected to BB&T-NC's
board of directors and will be reelected (subject to his continuing to qualify
for service on the board) during the period in which he serves as Regional
President or as a consultant under his employment agreement with BB&T-NC.
Members of the BB&T-NC Board who are not employees of BB&T or any of its
affiliates are entitled to receive fees for service on the board in accordance
with BB&T's policies as in effect from time to time.
At the effective time of the merger of FCNB Bank into BB&T-NC, BB&T will
offer each member of the FCNB Board a seat on BB&T's advisory board for the
BB&T Community Bank region based in Frederick, Maryland, conditional upon
BB&T's receipt of a noncompetition agreement from such director. 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) at least equal in amount each year to those that they were receiving as
of July 1, 2000 as directors of FCNB. These advisory board members will
thereafter receive fees in accordance with BB&T's standard schedule of advisory
board service fees. Each advisory board member will be reappointed to the board
unless and until he or she is deemed by BB&T to be disqualified for good
reason, BB&T no longer maintains an advisory board for the area, or the member
is prohibited from serving because he or she has attained the maximum age for
service, which is currently age 70 (except that for five years after the
effective time, none of these board members may be prohibited from serving
because he or she has reached the maximum age for service). Until the merger of
FCNB Bank into BB&T-NC, the Board of Directors of FCNB will continue to serve
in that capacity.
Certain FCNB directors participate in a deferred compensation plan. Under
the terms of this plan, upon approval of the merger agreement by the
shareholders of FCNB, the account of each participating FCNB director will be
credited with approximately the amounts set forth below.
<TABLE>
<CAPTION>
Name Amount Credited to Account
---- --------------------------
<S> <C>
Miles M. Circo....................................
Shirley D. Collier................................
Clyde C. Crum.....................................
James S. Grimes...................................
Bernard L. Grove, Jr. ............................
Gail T. Guyton....................................
Frank L. Hewitt...................................
A. Patrick Linton.................................
Jacob R. Ramsburg, Jr. ...........................
Kenneth W. Rice...................................
Rand D. Weinberg..................................
</TABLE>
Participants under the deferred compensation plan will be required to begin
taking distributions of the amounts in their accounts, including previously
deferred director fees and accrued earnings on such amounts, two months after
termination of service. Payments may be stretched over a period of up to 10
years. Any amounts in the participants' accounts will continue to accrue
interest at a rate of 10% per year. As a result of the approval of the merger
agreement by shareholders, FCNB, or BB&T as its successor, will establish a
trust with sufficient assets to fund the distribution of the amounts credited
to the directors' accounts.
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 FCNB and its
subsidiaries for acts or omissions occurring before the effective time. This
insurance will provide at least the same coverage and amounts as contained in
FCNB'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 FCNB's policy,
in which
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<PAGE>
case BB&T would maintain the most advantageous policies of directors' and
officers' liability insurance obtainable for a premium equal to that amount.
BB&T has also agreed to indemnify all individuals who are or have been
officers, directors, employees of FCNB or a FCNB subsidiary before the
effective time of the merger from any acts or omissions in such capacities
before the effective time of the merger to the extent such indemnification is
provided under the articles of incorporation or bylaws of FCNB or the FCNB
subsidiary or permitted by the Maryland General Corporation Law, and in all
cases only to the extent permitted under the North Carolina Business
Corporation Act.
Regulatory Considerations
Financial holding companies (such as BB&T) and bank holding companies (such
as FCNB) and their depository institution subsidiaries are highly regulated
institutions, with numerous federal and state laws and regulations governing
their activities. These institutions are subject to ongoing supervision,
regulation and periodic examination by various federal and state financial
institution regulatory agencies. Financial holding companies that own one or
more commercial banks are considered bank holding companies under state and
federal law for certain transactions, including the merger. Detailed
discussions of this ongoing regulatory oversight and the laws and regulations
under which it is carried out can be found in the Annual Reports on Form 10-K
of BB&T and of FCNB incorporated by reference in this proxy
statement/prospectus. 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. See "Where
You Can Find More Information" on page .
The merger and the subsidiary bank mergers are subject to regulatory
approvals, as set forth below. To the extent that the following information
describes statutes and regulations, it is qualified in its entirety by
reference to those particular statutes and regulations.
The Merger
The merger is subject to approval by the Board of Governors of the Federal
Reserve System under 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, involves 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
the laws of any state, provided the bank holding company is adequately
capitalized and adequately managed and certain other limitations are not
exceeded. BB&T is considered well-capitalized and well-managed under the
Federal Reserve's Regulation Y, and the transaction does not exceed the other
limitations.
The merger also is subject to approval by the Maryland Commissioner of
Financial Regulation under the bank holding company 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 FCNB Bank, if the
Maryland Commissioner approves the transaction. In its review of the merger,
the Maryland Commissioner is required to consider, among other things, whether
the merger would be detrimental to the safety and soundness of 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.
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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
FCNB, 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.
All of the required applications and notices for the merger were submitted
to the appropriate regulatory agencies, and BB&T received the approval of the
Federal Reserve Bank of Richmond, under delegated authority, on , 2000, the
Maryland Department of Financial Regulation on , 2000 and the Virginia
Bureau of Financial Institutions on , 2000.
The Subsidiary Bank Mergers
Although not required by the terms of the merger agreement or the plan of
merger and not a condition to the merger, BB&T expects to effect the merger of
FCNB Corp's banking subsidiary into BB&T-NC during the quarter of 2001. The
subsidiary bank merger is 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
institutions under the Community Reinvestment Act of 1977 in meeting the credit
needs of the community, including low- and moderate-income neighborhoods,
served by the institutions. Applicable regulations also require publication of
notice of the applications for approval of the subsidiary bank merger 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 merger under the bank merger act provisions of the North Carolina General
Statutes. In its review of the subsidiary bank merger, 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 merger under
the bank merger 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 and whether it provides an adequate capital
structure and whether the merger is against the public interest.
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 FCNB and to BB&T and FCNB. 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:
. corporations, trusts, dealers in securities, financial institutions,
insurance companies or tax exempt organizations;
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. persons who are not United States citizens or resident aliens or
domestic entities (partnerships or trusts);
. persons who are subject to alternative minimum tax (to the extent that
tax affects the tax consequences of the merger) or are subject to the
"golden parachute" provisions of the Internal Revenue Code (to the
extent that tax affects the tax consequences of the merger);
. persons who acquired FCNB 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 FCNB 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.
Tax Consequences of the Merger Generally. In the opinion of Womble Carlyle
Sandridge & Rice, PLLC, counsel to BB&T:
. the merger will constitute a reorganization under Section 368(a) of the
Internal Revenue Code;
. each of BB&T and FCNB will be a party to that reorganization within the
meaning of Section 368(a) of the Code;
. no gain or loss will be recognized by BB&T or FCNB by reason of the
merger;
. the shareholders of FCNB 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 FCNB common stock;
. a shareholder of FCNB who receives cash instead 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 the fractional
share;
. 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 FCNB common stock surrendered in exchange
therefor; and
. the holding period for BB&T common stock received (including any
fractional share interest deemed received) in exchange for shares of
FCNB common stock will include the period during which the shareholder
held the shares of FCNB common stock surrendered in exchange, provided
that the FCNB 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
FCNB of the legal opinion of Womble Carlyle Sandridge & Rice, PLLC, counsel to
BB&T, dated as of the closing date, to the effect of the first and third
bulleted items described above. Neither party intends to waive this condition.
If the tax opinion is not available and the FCNB Board determines to proceed
with the merger, FCNB will resolicit its shareholders.
Cash Received in Lieu of a Fractional Share of BB&T Common Stock. A
shareholder of FCNB who receives cash in lieu of a fractional share of BB&T
common stock will be treated as having received the fractional share pursuant
to the merger and then as having exchanged the fractional share for cash in a
redemption by BB&T subject to Section 302 of the Code. As a result, a FCNB
shareholder will generally recognize gain or loss equal to the difference
between the amount of cash received and the portion of the basis of the shares
of BB&T common stock allocable to his or her fractional interest. This gain or
loss will generally be capital gain or loss, and will be long-term capital gain
or loss if, as of the date of the exchange, the holding period for such shares
is greater than one year. Long-term capital gain of a non-corporate holder is
generally subject to tax at a maximum federal tax rate of 20%.
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Accounting Treatment
It is anticipated that the merger will be accounted for as a pooling-of-
interests transaction under generally accepted accounting principles. Under
this accounting method, holders of FCNB 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 FCNB shares for shares of BB&T common
stock. Accordingly, the book value of the assets, liabilities and shareholders'
equity of FCNB, 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 FCNB 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. Completion of the merger is subject to BB&T's condition
that it receives reasonably satisfactory letters from its accountants to the
effect that the merger will qualify for pooling-of-interests accounting
treatment.
The Option Agreement
General
As a condition to BB&T entering into the merger agreement, FCNB entered into
an agreement with BB&T, pursuant to which FCNB granted BB&T an option to
purchase up to 2,370,000 newly issued shares of FCNB common stock (subject to
adjustment in certain circumstances) at a price of $15.00 per share (subject to
adjustment under certain circumstances). The purchase of any shares of FCNB
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, FCNB from
considering or proposing such an acquisition, even if they were prepared to
offer to pay consideration to shareholders of FCNB with a higher current market
price than the BB&T common stock to be received for FCNB common stock pursuant
to the merger agreement.
The option agreement is filed as an exhibit to the registration statement,
of which this proxy statement/ prospectus is a part, and the following
discussion is qualified in its entirety by reference to the option agreement.
See "Where You Can Find More Information" on page .
Exercisability
If BB&T is not in material breach of the option agreement or its covenants
and agreements contained in the merger agreement and if no injunction or other
court order against delivery of the shares covered by the option is in effect,
BB&T may generally exercise the option, in whole or in part, at any time and
from time to time prior to its termination, as described below, following the
happening of either of the following events (each a "Purchase Event"):
. without BB&T's prior consent, FCNB 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 FCNB 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
FCNB and its subsidiaries or (c) the issuance, sale or other disposition
of securities representing 15% or more of the voting power of FCNB or
any of its significant subsidiaries; or
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. any third party or group of third parties acquires or has the right to
acquire beneficial ownership of securities representing 15% or more of
the outstanding shares of FCNB common stock.
The obligation of FCNB to issue shares of FCNB 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 FCNB of a covenant or agreement in the merger agreement or
an inaccuracy in FCNB'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 FCNB to approve the merger agreement.
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
FCNB common stock or the filing of a registration statement with respect
to such an offer, or
. the failure of the shareholders of FCNB 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 FCNB
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 FCNB 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 FCNB, 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 FCNB 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 FCNB
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), FCNB
must, if the option has not terminated, and subject to any required
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regulatory approval, repurchase from the holder (a) the option and (b) all
shares of FCNB 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 FCNB
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 FCNB common stock over the purchase
price, multiplied by (b) the number of shares of FCNB common stock with
respect to which the option has not been exercised, plus
. the product of (a) the excess, if any, of the Applicable Price over the
purchase price paid (or payable in the case of the exercise of the
option for which the closing date has not occurred) by the holder for
each share of FCNB common stock with respect to which the option has
been exercised and with respect to which the holder then has beneficial
ownership (or the right to beneficial ownership if the option is
exercised but the closing date has not occurred) multiplied by (b) the
number of such shares.
A "Repurchase Event" occurs if: (a) any third party or "group" (as defined
under the Securities Exchange Act) acquires beneficial ownership of 50% or
more of the then outstanding shares of FCNB common stock, or (b) any of the
merger or other business combination transactions set forth in the paragraph
below describing substitute options is completed.
Substitute Options
If, before the termination of the option agreement, FCNB enters into an
agreement:
. to consolidate with or merge into any third party and FCNB will not be
the continuing or surviving corporation of the consolidation or merger;
. to permit any third party to merge into FCNB with FCNB as the continuing
or surviving corporation, but, in connection therewith, the then
outstanding shares of FCNB common stock are changed into or exchanged
for stock or other securities of FCNB or any other person or cash or any
other property, or the outstanding shares of FCNB 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
FCNB 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 FCNB'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 FCNB 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 FCNB common stock
or other securities that have been acquired by or are issuable upon exercise
of the option.
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Effect on Employees, Employee Benefit Plans and Stock Options
Employees
As of a date determined by BB&T to be not later than January 1 following the
close of the calendar year in which FCNB Bank is merged into BB&T-NC, BB&T will
cause FCNB's 401(k) plan either to be merged with BB&T's 401(k) plan or
terminated, in each case subject to all applicable regulatory or governmental
approvals. Each employee of FCNB or a FCNB subsidiary at the effective time who
becomes an employee immediately following the effective time (and who is an
employee as of the above-referenced date determined by BB&T) (a "transferred
employee") of BB&T or a BB&T subsidiary (a "BB&T employer") will be eligible to
participate in BB&T's 401(k) plan (subject to compliance with eligibility
requirements and to BB&T's right to terminate such plan). Until the date
determined by BB&T, BB&T will continue in effect FCNB's 401(k) plan for the
benefit of participating employees. For purposes of administering BB&T's 401(k)
plan, service by a transferred employee with FCNB and the FCNB subsidiaries
(including, as service with FCNB, service with acquired companies recognized
under FCNB's 401(k) plan) will be deemed to be service with BB&T or its
subsidiaries for participation and vesting purposes, but not for purposes of
benefit accrual.
Each transferred employee 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
eligibility requirements and other terms of the plans and programs and to the
right of the BB&T employer to terminate the plans and programs) commencing,
with respect to each such plan or program, on a date determined by BB&T no
later than January 1 following the close of the calendar year in which FCNB
bank is merged into BB&T or one of its subsidiaries. Until that date, the BB&T
employer will continue in effect for the benefit of the transferred employees
those welfare benefit plans and programs of FCNB that it determines, in its
sole discretion, provide benefits of the same type or class as a corresponding
plan or program maintained by the BB&T employer. For purposes of administering
each such plan or program, service with FCNB will be deemed to be service with
BB&T or its subsidiaries 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 (except as otherwise provided in the following
paragraph).
As a general matter, each transferred employee who is terminated after the
effective time (excluding any employee who has an existing employment or
special termination agreement that was disclosed to BB&T as of the date of the
merger agreement) will be entitled to severance pay in accordance with BB&T's
general severance policy if and to the extent such employee is entitled to
severance pay under the policy. However, if any transferred employee (excluding
any one who had an existing employment or special termination agreement with
FCNB which was disclosed to BB&T) who would have been entitled to severance pay
under FCNB's special severance plan for senior officers if the plan had
continued in effect is terminated by a BB&T employer, the transferred employee
would be entitled to receive the greater of the amount of the severance
payments under FCNB's severance plan or the amount of the severance payments
under BB&T's general severance policy. A transferred employee's service with
FCNB or its subsidiaries will be treated as service with BB&T for purposes of
determining the amount of severance pay, if any, under BB&T's severance policy
(and service with a BB&T employer will be deemed to be service with FCNB for
purposes of determining the amount of severance pay, if any, under FCNB's
severance plan).
BB&T has agreed to honor all employment agreements, severance agreements and
deferred compensation agreements that FCNB and its subsidiaries have with their
current and former employees and directors and which have been disclosed to
BB&T pursuant to the merger agreement, except to the extent any such agreements
are superseded or terminated at or after the effective time. Except for the
agreements described in the preceding sentence or as otherwise provided in the
merger agreement, FCNB's employee benefit plans of FCNB and its subsidiaries
will be either terminated or, in the sole discretion of BB&T, merged into
comparable BB&T plans, effective as determined in the sole discretion of BB&T.
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Stock Options; Stock Purchase Plan
At the effective time, each stock option then outstanding, whether or not
exercisable, granted under FCNB's 1992 Employee Stock Option Plan (including
the FCNB Amended and Restated Stock Option Plan for Former Employees of Capital
Bank, National Association) and 1997 Stock Option Plan for Directors 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 FCNB plans, except that (a) BB&T
and the compensation committee of the BB&T Board will be substituted for FCNB
and the Human Resources Committee of the FCNB Board in administering its stock
option plans, (b) each stock option may be exercised solely for shares of BB&T
common stock, (c) the number of shares of BB&T common stock subject to each
stock option will be the number of whole shares (omitting any fractional share)
determined by multiplying the number of shares of FCNB common stock subject to
the stock option by 0.725 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 0.725 and rounding up to the nearest cent.
As an alternative to assuming the stock options, BB&T may choose to
substitute options under the BB&T Corporation 1995 Omnibus Stock Incentive Plan
or any other comparable plan for all or a part of the stock options, subject to
the adjustments described in (c) and (d) in the preceding paragraph and the
condition that the substituted options continue in effect on the same terms and
conditions provided in FCNB's stock option plan and the stock option agreement
governing the option.
Each stock option that is an incentive stock option will be adjusted as
required by Section 424 of the Internal Revenue Code to continue as an
incentive stock option and not to constitute a modification, extension or
renewal within the meaning of Section 424(h) of the Code.
BB&T has reserved and will continue to reserve adequate shares of BB&T
common stock for the exercise of any converted or substitute options. As soon
as practicable after the effective time, if it has not already done so and to
the extent FCNB then 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 the registration statement (and maintain the current
status of the related prospectus or prospectuses) for so long as the 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 with respect to the converted or substitute options.
Based on stock options outstanding as of the date of the merger agreement
and subsequent exercises, options to purchase an aggregate of approximately
shares of FCNB common stock may be outstanding at the effective time. Any
shares of FCNB common stock issued pursuant to the exercise of stock options
under the stock option plan before the effective time will be converted into
shares of BB&T common stock and cash instead of any fractional share interest
in the same manner as other outstanding shares of FCNB common stock. Under the
merger agreement, FCNB is permitted to grant additional options under its stock
option plan in the ordinary course of business consistent with grants made in
1999.
At the effective time of the merger, BB&T will take over FCNB's Dividend
Reinvestment and Stock Purchase Plan, and all shares or rights to receive
shares of FCNB common stock held in the Stock Purchase Plan will be converted
at the exchange ratio into shares or rights to receive shares of BB&T common
stock.
Restrictions on Resales by Affiliates
The shares of BB&T common stock to be issued in the merger will be
registered under the Securities Act and will be freely transferable, except for
shares issued to any shareholder who may be deemed to be an affiliate of FCNB
for purposes of Rule 145 under the Securities Act. Affiliates include generally
directors, executive
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officers and beneficial owners of 10% or more of any class of capital stock of
FCNB. Affiliates may sell their shares of BB&T common stock acquired in the
merger only:
. in transactions that are registered under the Securities Act, permitted
by the resale provisions of Rules 145 under the Securities Act, or as
otherwise permitted by the Securities Act, and
. following the publication of financial results of at least 30 days of
post-merger combined operations of BB&T and FCNB, as required by the
SEC's Accounting Series Release Nos. 130 and 135.
The restrictions on resales by an affiliate extend also to related parties of
the affiliate, including parties related by marriage who live in the same home
as the affiliate.
It is a condition to BB&T's obligation to consummate the merger that each
person who may be deemed to be an affiliate of FCNB execute and deliver to BB&T
a written agreement stating, among other things, that the affiliate will not
offer to sell, transfer or otherwise dispose of any of the BB&T common stock
issued to that affiliate in the merger except in accordance with the above
restrictions.
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INFORMATION ABOUT BB&T
General
BB&T is a financial services holding company headquartered in Winston-Salem,
North Carolina. BB&T conducts operations in North Carolina, South Carolina,
Virginia, Maryland, Washington D.C., Georgia, West Virginia and Kentucky
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, Washington
D.C., West Virginia, Georgia and Kentucky. 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"),
excluding bank subsidiaries of recently acquired bank holding companies that
are expected to be merged into BB&T-NC during 2000. The principal assets of
BB&T are all of the issued and outstanding shares of common stock of BB&T-NC,
BB&T-SC, BB&T-VA and Scott and Stringfellow, Inc.
Operating Subsidiaries
BB&T-NC, BB&T's largest subsidiary, is the oldest bank in North Carolina and
currently operates through banking offices throughout North Carolina,
offices in metropolitan Washington, D.C. and Maryland and offices in
Georgia. BB&T-NC provides a wide range of banking and trust services in its
local market for retail and commercial customers, including small and mid-size
businesses, public agencies and local governments 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., 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. Other
subsidiaries of BB&T-NC include Raleigh, North Carolina-based BB&T Insurance
Services, Inc., which offers life, property and casualty and title insurance on
an agency basis, and Prime Rate Premium Finance Corporation, Inc., which
provides insurance premium financing and services to customers in Virginia and
the Carolinas.
BB&T-SC serves South Carolina through banking offices. BB&T-SC provides a
wide range of banking and trust services in its local market for retail and
commercial customers, including small and mid-size businesses, public agencies,
local governments and individuals.
BB&T-VA offers a full range of commercial and retail banking services
through banking offices throughout Virginia.
Scott & Stringfellow, Inc. provides services in retail brokerage,
institutional equity and debt underwriting, investment advice, corporate
finance, equity trading and equity research. In May 1999, it was merged with
another subsidiary of BB&T, 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.
BB&T also has a number of other operating subsidiaries. Regional Acceptance
Corporation specializes in indirect financing for consumer purchases of mid-
model and late-model used automobiles. BB&T Factors Corporation buys and
manages account receivables primarily in the furniture, textile 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. 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 internal
growth and acquisitions of both financial and nonfinancial institutions during
recent years. BB&T's most recent acquisitions include the following:
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On November 19, 1999, BB&T acquired First Liberty Financial Corp. in a tax-
free transaction accounted for as a pooling of interests. First Liberty
operated 38 banking offices and 13 consumer finance offices in Georgia and
Tennessee, and its acquisition by BB&T expanded BB&T's presence in Georgia.
First Liberty Bank, a subsidiary bank of BB&T (as the successor to First
Liberty), was merged into BB&T-NC during the second quarter of 2000.
On January 13, 2000, BB&T acquired Premier Bancshares Inc. in a tax-free
transaction accounted for as a pooling of interests. Through its banking
subsidiaries, Premier operated 32 banking offices in Atlanta and northwest
Georgia and, though Premier Lending, 10 mortgage banking offices. The
acquisition of Premier expanded BB&T's presence in the metropolitan Atlanta
market. Premier Bank, a subsidiary bank of BB&T (as the successor to Premier),
was merged into BB&T-NC during the third quarter of 2000.
On June 14, 2000, BB&T acquired Hardwick Holding Company in a tax-free
transaction accounted for as a pooling of interests. Through its banking
subsidiaries, Hardwick operated nine banking offices in northwest Georgia. It
is expected that Hardwick Bank & Trust and First National Bank of Northwest
Georgia, subsidiary banks of BB&T (as the successor to Hardwick), will be
merged into BB&T-NC during the second quarter of 2001.
On June 16, 2000, BB&T acquired First Banking Company of Southeast Georgia
in a tax-free transaction accounted for as a pooling of interests. Through its
banking subsidiaries, First Banking Company operated 12 banking offices in
southeast Georgia. The acquisition of First Banking Company expanded BB&T's
presence into southeast Georgia, including specifically the Savannah area. It
is expected that First Bulloch Bank & Trust Company of Statesboro, Metter
Banking Company of Metter, First National Bank of Effingham and Wayne National
Bank of Jesup, subsidiary banks of BB&T (as the successor to First Banking
Company), will be merged into BB&T-NC during the second quarter of 2001.
On July 6, 2000, BB&T acquired One Valley Bancorp in a tax-free transaction
accounted for as a pooling of interests that gave BB&T the top market share, as
measured by deposits, in West Virginia. One Valley, with $6.6 billion in
assets, was the parent company to nine community banks with 125 branches, 77 in
West Virginia and 48 in Virginia. One Valley also operated a trust division,
discount brokerage subsidiary and insurance agencies. It is expected that the
former banking subsidiaries of One Valley (now subsidiary banks of BB&T as the
successor to One Valley) will be merged into BB&T-NC during the fourth quarter
of 2000.
On August 23, 2000, BB&T announced that it had agreed to acquire BankFirst
Corporation of Knoxville, Tennessee in a tax-free transaction to be accounted
for as a purchase. In the transaction, valued at $149.7 million based on BB&T's
closing price on August 22, BankFirst shareholders would receive 0.4554 shares
of BB&T common stock for each share of BankFirst common stock. Through its
banking subsidiaries, BankFirst operates 32 banking offices in east Tennessee.
The acquisition, which is expected to be completed in the first quarter of
2001, would give BB&T its first entry into Tennessee and expand its presence
along the fast-growing corridors of Interstate 75 and Interstate 81.
On September 6, 2000, BB&T announced that it had agreed to acquire
FirstSpartan Financial Corp. of Spartanburg, South Carolina in a tax-free
transaction to be accounted for as a purchase. In the transaction, valued at
$103.9 million based on BB&T's closing price on September 5, FirstSpartan
shareholders would receive one share of BB&T common stock for each share of
FirstSpartan common stock. Through its banking subsidiary, FirstSpartan
operates 11 banking offices in South Carolina's Spartanburg and Greenville
counties. The acquisition, which is expected to be completed in the first
quarter of 2001, would increase BB&T's South Carolina assets to $5.8 billion.
BB&T ranks third in market share in South Carolina and first in Greenville and
Spartanburg counties.
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 additional indebtedness by
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BB&T, and could have a dilutive effect on the per share earnings or book value
of BB&T common stock. Moreover, acquisitions sometimes result in significant
front-end charges against earnings, although cost savings, especially incident
to in-market acquisitions, 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. This is called 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. This is called Tier 2 capital. Tier 1 capital and
Tier 2 capital combined are referred to as total capital. At June 30, 2000,
BB&T's Tier 1 and total capital ratios were 9.2% and 12.69%, respectively.
Since January 1, 1998, the Federal Reserve has required 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 forms of 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.
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 equal to 3% for
bank holding companies that meet specified criteria, including having the
highest regulatory rating. Bank holding companies that do not meet the
specified criteria 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 June 30, 2000 was 7.07%. 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. 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 June 30, 2000.
Deposit Insurance Assessments
The deposits of each of BB&T's bank subsidiaries are insured by the FDIC up
to the limits required by law. A majority of the deposits of the banks are
subject to the deposit insurance assessments of the Bank Insurance Fund of the
FDIC. However, approximately % 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 of the FDIC.
For the semi-annual period beginning December 30, 1999, 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
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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 both BIF-
insured deposits and SAIF-insured deposits an additional 2.06 basis points per
$100 of deposits on an annualized basis to cover those obligations.
You can find additional information about BB&T in BB&T's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2000 (as amended on Form 10-Q/A
filed on June 5, 2000) and June 30, 2000, and Current Reports on Form 8-K dated
January 12, 2000, February 7, 2000, April 11, 2000, April 28, 2000, July 18,
2000, July 27, 2000, August 23, 2000, September 6, 2000 , all of which are
incorporated by reference in this proxy statement/prospectus. See "Where You
Can Find More Information" on page .
INFORMATION ABOUT FCNB
History and Business
FCNB was organized in 1986 to serve as the holding company for FCNB Bank,
its principal operating subsidiary. FCNB Bank, which was originally chartered
in 1818, was converted from a national bank to a Maryland commercial bank in
1993, and is engaged in a general commercial and consumer banking business,
serving individuals and businesses from 34 offices in Frederick, Anne Arundel,
Baltimore, Carroll, Howard, Montgomery and Prince George's counties in
Maryland, the District of Columbia and Fairfax County, VA. FCNB Bank is the
fifth largest commercial banking institution headquartered in Maryland. FCNB
also provides insurance agency services through FCNB Bank's wholly owned
subsidiary, Frederick Underwriters, Inc.
Since 1994, FCNB has grown rapidly in both assets and geographic scope as a
result of five whole bank and thrift acquisitions and a number of purchases of
existing branches and related deposits from other institutions. These
transactions enabled FCNB to expand beyond its historic focus on Frederick
County to rapidly growing areas in Montgomery, Howard and Prince George's
County, and the District of Columbia.
At June 30, 2000, FCNB had assets of approximately $1.6 billion, total
deposits of approximately $1 billion, and total shareholders' equity of
approximately $88.9 million.
At June 30, 2000, FCNB's Tier 1 and total capital ratios were 10.91% and
12.22%, respectively, and its leverage ratio was 8.38%, and FCNB Bank's Tier 1,
total capital and leverage ratios were 7.07%, 10.19% and 5.41%, respectively.
You can find additional information about FCNB in FCNB's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2000 and June 30, 2000 and Current
Report on Form 8-K dated July 28, 2000, all of which are incorporated by
reference in this proxy statement/prospectus. See "Where You Can Find More
Information" on page .
DESCRIPTION OF BB&T CAPITAL STOCK
General
The authorized capital stock of BB&T consists of 500,000,000 shares of BB&T
common stock, par value $5.00 per share and 5,000,000 shares of preferred
stock, par value $5.00 per share. As of , 2000, there were shares of
BB&T common stock issued and outstanding. There were no shares of BB&T
preferred stock issued and outstanding as of such date, although 2,000,000
shares of BB&T preferred stock have been designated as Series B Junior
Participating Preferred Stock and are reserved for issuance in connection with
BB&T's shareholder rights plan. See "--Shareholder Rights Plan" on page .
Based on the number of shares
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of FCNB common stock outstanding at the record date, it is estimated that
approximately shares of BB&T common stock would be issued in the merger.
BB&T Common Stock
Each share of BB&T common stock is entitled to one vote on all matters
submitted to a vote at any meeting of shareholders. Holders of BB&T common
stock are entitled to receive dividends when, as, and if declared by the BB&T
Board out of funds legally available therefor and, upon liquidation, to receive
pro rata all assets, if any, of BB&T available for distribution after the
payment of necessary expenses and all prior claims. Holders of BB&T common
stock have no preemptive rights to subscribe for any additional securities of
any class that BB&T may issue, nor any conversion, redemption or sinking fund
rights. Holders of BB&T common stock have no right to cumulate votes in the
election of directors. The rights and privileges of holders of BB&T common
stock are subject to any preferences that the BB&T Board may set 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
shareholder rights plan provide that the holders 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 shares of BB&T preferred stock, or
merely the existing authorization of the BB&T Board to issue shares of BB&T
preferred stock, may tend to discourage or impede a merger or other change in
control of BB&T. See "--Shareholder Rights Plan" on page .
Shareholder Rights Plan
BB&T has adopted a shareholder rights plan that grants BB&T's shareholders
the right to purchase securities or other property of BB&T upon the occurrence
of certain triggering events involving a potentially hostile takeover of BB&T.
Like other shareholder rights plans, BB&T's plan is intended to give the BB&T
Board the opportunity to assess the fairness and appropriateness of a proposed
transaction in order to determine whether it is in the best interests of BB&T
and its shareholders and to encourage potential hostile acquirors to negotiate
with the BB&T Board. BB&T's plan, also like other shareholder rights plans,
could also have the unintended effect of discouraging a business combination
that shareholders believe to be in their best interests.
The terms of the rights are set forth in the Rights Agreement, dated as of
December 17, 1996, between BB&T and BB&T-NC, as Rights Agent and are summarized
below:
On December 17, 1996, the BB&T Board declared a dividend of one right for
each outstanding share of BB&T common stock, payable to shareholders of record
at the close of business on January 17, 1997. One right has also been
distributed, and will also be distributed in the future, for each share of BB&T
common stock issued, including shares to be issued to FCNB shareholders in
connection with the merger, between January 17, 1997 and the occurrence of a
"distribution date," as described in the next paragraph. Each right entitles
the
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holder to purchase from BB&T 1/100th of a share of BB&T Junior Preferred Stock
(which is substantially equivalent to one share of BB&T common stock) at a
price of $145.00, subject to anti-dilution adjustments, or, under certain
circumstances, other securities or property.
Initially, the rights are attached to all BB&T common stock certificates and
are not exercisable until a distribution date occurs. A "distribution date"
will occur, and the rights will separate from shares of BB&T common stock and
become exercisable, 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, (b) 10 business days following the commencement of a tender offer or
exchange offer (or the offeror's receipt of regulatory or shareholder approval
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 next paragraph.
The BB&T Board will declare a person to be an adverse person upon its
determinations (a) that the 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) the beneficial ownership by the 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 the person or to cause pressure on BB&T to take
action or enter into a transaction or series of transactions intended to
provide the 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 the action or entering into such
transactions or series of transactions at that time or (2) the 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 (3) the 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.
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.
It is expected that as long as the rights are exercisable only for 1/100th
of a share of BB&T Junior Preferred Stock at an exercise price of $145.00,
BB&T's shareholders would not find it economic to exercise the rights. However,
under the circumstances described below, the rights may be exercised for an
amount of BB&T common stock or other property (including BB&T Junior Preferred
Stock) having a value equal to two times the exercise price. The Rights
Agreement provides that 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 then outstanding shares of BB&T
common stock, a holder of a right will thereafter have the right to receive at
the time specified in the Rights Agreement, in lieu of 1/100th of a share of
BB&T Junior Preferred Stock, (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). Following 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
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adverse person will be null and void. Rights will not become exercisable,
however, until such time as they 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 a triggering event described in the preceding paragraph would entitle
its holder to purchase $290.00 worth of BB&T common stock (or cash, securities
or other property, as noted above) for $145.00. Assuming that the BB&T common
stock was determined as provided in the Rights Agreement to have a value of
$29.00 at such time the holder of each valid right would be entitled to
purchase 10 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 five shares of BB&T common stock (or cash, securities or other
property, as noted above).
In addition, if, at any time following the date on which there has been a
public announcement that 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, (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, a 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 shares 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.
The rights 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.
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 public
announcement that an acquiring person has become such or, if earlier, 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 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.
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 .
Other Anti-Takeover Provisions
Provisions of the North Carolina Business Corporation Act, or NCBCA, and
BB&T's articles of incorporation and bylaws described below 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 its shareholders.
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" on page .
Provisions Regarding the BB&T Board
BB&T's articles of incorporation and bylaws separate the BB&T Board into
classes 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" on page .
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.
The procedures governing the submission of nominations for directors and
other proposals by shareholders may also have a deterrent effect on shareholder
actions designed to result in change of control in BB&T. See "Comparison of
Shareholders' Rights--Shareholder Nominations and Shareholder Proposals" on
page .
COMPARISON OF THE RIGHTS OF BB&T SHAREHOLDERS
AND FCNB SHAREHOLDERS
When the merger becomes effective, holders of FCNB 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 FCNB common
stock. Since BB&T is organized under the laws of the State of North Carolina
and FCNB 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 FCNB common
stock arise from differing provisions of the NCBCA and the Maryland General
Corporation Law, or 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 FCNB common stock. The identification of specific
provisions or differences is not meant to indicate that other equally or more
significant
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differences do not exist. This summary is qualified in its entirety by
reference to the NCBCA and the MGCL and the governing corporate instruments of
BB&T and FCNB, to which the shareholders of FCNB 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 series. As of , 2000,
there were shares of BB&T common stock outstanding. No shares of BB&T
preferred stock were issued and outstanding as of that 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"
on page .
FCNB
FCNB's authorized capital stock consists of 50,000,000 shares of FCNB common
stock, and 1,000,000 shares of undesignated preferred stock. The FCNB Board
may, from time to time, by action of a majority of the Board of Directors,
issue shares of the authorized, undesignated preferred stock, in one or more
classes or series. In connection with any such issuance, the Board may by
resolution determine the designation, voting rights, preferences as to
dividends, in liquidation or otherwise, participation, redemption, sinking
fund, conversion, dividend or other special rights or powers, and the
limitations, qualifications and restrictions of such shares of preferred stock.
At , 2000, there were shares of FCNB common stock outstanding, options
to purchase shares of FCNB common stock outstanding and no shares of FCNB
preferred stock outstanding or designated.
Special Meetings of Shareholders
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.
FCNB
Special meetings of the shareholders of FCNB may be called by the Chairman
of the Board, President or a majority of the Board of Directors, or by the
request of the holders of at least 25% of the votes entitled to be cast at the
meeting. FCNB's bylaws provide that if any matter to be acted upon at the
meeting is substantially the same as a matter voted upon at any special meeting
of shareholders held during the preceding twelve months, the holders of at
least 50% of the votes entitled to be cast at the meeting must request the
meeting with respect to such matter. Additionally, shareholders of FCNB
requesting a special meeting must pay the reasonably estimated costs of
preparing and mailing a notice of such meeting prior to issuance of a notice
for the meeting.
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 23 directors.
The BB&T Board is divided into three classes, with directors serving staggered
three-year terms. Under BB&T's
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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.
FCNB
The articles of incorporation and bylaws of FCNB call for a board of
directors of between three and fifteen directors, with the exact number to be
determined by the resolution of the board of directors. Currently there are
fourteen directors, divided into one class of four directors and two classes
of five directors. At each annual meeting, one class is elected for a three
year term and until their successors shall have been duly elected and
qualified. FCNB's articles of incorporation provide that directors may be
removed at any time, but only for cause and upon the vote of the holders of
80% or more of the total number of votes entitled to be cast generally in the
election of directors. The provision regarding the removal of directors may be
amended only upon the vote of holders of 80% of all votes entitled to be cast
in the election of directors. Holders of FCNB 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 any 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.
FCNB
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 FCNB Board to declare a dividend to pay distributions to
the holders of FCNB common stock depends, however, upon the amount of
dividends its bank and other subsidiaries pay to FCNB. FCNB's bank subsidiary,
like BB&T's bank subsidiaries, is subject to regulatory restrictions on the
payment of dividends.
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 one
of its committees, 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 the nomination in writing to the
Secretary of BB&T at least 60 days before the one year anniversary of the most
recent annual meeting of shareholders, together with biographical information
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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 at least 60 days before the one year anniversary of the most recent
annual meeting of shareholders of the 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 the proposal.
In accordance with SEC Rule 14a-8 under 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 at
least 120 days before the anniversary of the date that the previous year's
proxy statement was first mailed to shareholders. As provided in the SEC rules,
if the annual meeting date 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.
FCNB
FCNB's articles of incorporation provide that any shareholder entitled to
vote at a meeting of shareholders who desires to nominate any person for
election as director of FCNB or who desires to bring up any new business at the
meeting, but who does not seek to have such nomination or proposal included in
the proxy materials prepared by FCNB, give at least 30 days, but not more than
60 days, written notice to FCNB of such nomination or business. Where less than
31 days notice of the meeting was given to shareholders by FCNB, notice must be
given by the shareholder within 10 days of the date on which the meeting was
announced to shareholders. If notice by the shareholder is not given in proper
form and in a timely manner, the matter will be laid over until the next
meeting of shareholders held more than 30 days following the meeting at which
the nomination or proposal, was made.
In accordance with SEC Rule 14a-8 under 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 at
least 120 days before the anniversary of the date that the previous year's
proxy statement was first mailed to shareholders. As provided in the SEC rules,
if the annual meeting date 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.
Discharge of Duties; Exculpation and Indemnification
BB&T
The NCBCA requires that a director of a North Carolina corporation discharge
his or her 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 is not subject to any different duties or
to 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, to the
fullest extent permitted by applicable law, against liabilities arising out of
his or her status as a director or officer, excluding any liability relating to
activities that were at the time taken known or believed by such person to be
clearly in conflict with the best interests of BB&T.
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FCNB
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.
FCNB's articles of incorporation and bylaws provide that FCNB must indemnify
and advance expenses to a director or officer of FCNB in connection with any
proceeding, as defined by the MGCL, to the fullest extent permitted by the
MGCL. FCNB may indemnify and advance expenses to other employees or agents in
an amount determined by and in the discretion of the FCNB Board to the extent
permitted by the MGCL. In accordance with the MGCL and FCNB's articles of
incorporation and bylaws, FCNB may indemnify any director or officer made a
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 FCNB for reasonable expenses, including
attorneys' fees. FCNB's articles of incorporation provides that, to the fullest
extent permitted by applicable law, no director of FCNB 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 otherwise than in the ordinary
course of business must 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 FCNB) 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"
below.
FCNB
The MGCL generally requires that any merger, consolidation, share exchange,
or sale of all or substantially all of the assets of a corporation must be
approved by the affirmative vote of two thirds of the votes entitled to be cast
on the transaction.
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 types of 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,
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the shares acquired that result in the crossing of any of these thresholds have
no voting rights until they 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
shares in excess of the thresholds, any officer of the corporation and any
employee of the corporation who is also a director of the corporation. If
voting rights are conferred on the acquired shares, all shareholders of the
corporation have the right to require that their shares be redeemed at the
highest price paid per share by the acquiror for any of the acquired shares.
The North Carolina Shareholder Protection Act requires that certain business
combinations with existing shareholders either be approved by a supermajority
of the other shareholders or meet certain "fair price" requirements. BB&T has
elected to opt out of the North Carolina Shareholder Protection Act, as
permitted by that Act.
FCNB
Under Maryland law, there are two statutory anti-takeover provisions
generally applicable to FCNB.
Restrictions on Business Combinations with Interested Shareholders. Section
3-602 of the MGCL imposes conditions and restrictions on certain "business
combinations" (including, among other various transactions, a merger,
consolidation, share exchange, or, in certain circumstances, an asset transfer
or issuance of equity securities) between a Maryland corporation and any person
who beneficially owns at least 10% of the corporation's stock (an "interested
shareholder"). Unless approved in advance by the board of directors, or
otherwise exempted by the statute, such a business combination is prohibited
for a period of five years after the most recent date on which the interested
shareholder became an interested shareholder. After such five-year period, a
business combination with an interested shareholder must be: (a) recommended by
the corporation's board of directors, and (b) approved by the affirmative vote
of at least (i) 80% of the corporation's outstanding shares entitled to vote
and (ii) two-thirds of the outstanding shares entitled to vote which are not
held by the interested shareholder with whom the business combination is to be
effected, unless, among other things, the corporation's common shareholders
receive a "fair price" (as defined by the statute) for their shares and the
consideration is received in cash or in the same form as previously paid by the
interested shareholder for his or her shares. As the merger of FCNB into BB&T
is pursuant the merger agreement, which has been approved by the FCNB Board,
Section 3-602 does not limit the ability of FCNB and BB&T to complete the
merger.
Control Share Acquisition Statute. Under the MGCL's control share
acquisition law, voting rights of shares of stock of a Maryland corporation
acquired by an acquiring person at ownership levels of 20%, 33 1/3% and 50% of
the outstanding shares are denied unless conferred by a special shareholder
vote of two-thirds of the outstanding shares held by persons other than the
acquiring person and officers and directors of the corporation or, among other
exceptions, such acquisition of shares is made pursuant to a merger agreement
with the corporation or the corporation's charter or bylaws permit the
acquisition of such shares prior to the acquiring person's acquisition thereof.
Unless a corporation's charter or bylaws provide otherwise, the statute permits
such corporation to redeem the acquired shares at "fair value" if the voting
rights are not approved or if the acquiring person does not deliver a "control
share acquisition statement" to the corporation on or before the tenth day
after the control share acquisition. The acquiring person may call a
shareholder's meeting to consider authorizing voting rights for control shares
subject to certain disclosure obligations and payment of certain costs. If
voting rights are approved for more than fifty percent of the outstanding
stock, objecting shareholders may have their shares appraised and repurchased
by the corporation for cash. As the merger of FCNB into BB&T is pursuant to the
merger agreement between FCNB and BB&T, the control share acquisition law is
not applicable to the merger.
Amendments to Articles of Incorporation and Bylaws
BB&T
The NCBCA provides generally that a North Carolina corporation's articles of
incorporation may be amended only upon approval by a majority of the votes cast
within each voting group entitled to vote. BB&T's
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articles of incorporation and bylaws impose a greater requirement, the
affirmative vote of more than two-thirds of the outstanding shares entitled to
vote, to approve an amendment that would amend, alter or repeal the provisions
of the 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 board of directors or its
shareholders, except that, unless the articles of incorporation or a bylaw
adopted by the shareholders provides otherwise, the board of directors may not
amend a bylaw approved by the shareholders. BB&T's articles of incorporation
authorize the BB&T Board to amend BB&T's bylaws.
FCNB
Except where applicable law or the articles of incorporation provide
otherwise, FCNB's article of incorporation may be amended by the affirmative
vote of two-thirds of the votes entitled to be cast thereon. The provision of
the FCNB's articles of incorporation relating to removal of directors may be
amended only upon the vote of the holders of 80% of the votes entitled to be
cast in the election of directors, voting as a single class. Except to the
extent a greater vote is required by law or the articles of incorporation,
FCNB's bylaws may generally be amended by the majority vote of the shareholders
or the Board of Directors.
Consideration of Business Combinations
BB&T
BB&T's articles of incorporation do not specify any factors to which the
BB&T Board must give consideration in evaluating a transaction involving a
potential change in control of BB&T.
FCNB
FCNB's articles of incorporation provide that where the Board of Directors
evaluates any actual or proposed transaction which would or may involve a
change in control of FCNB, the Board of Directors shall, in connection with the
exercise of its business judgement in determining what is in the best interests
of FCNB and its shareholders and in making any recommendation to its
shareholders, give due consideration to all relevant factors, including, but
not limited to the economic effect, both immediate and long term, upon FCNB's
shareholders, if any, not to participate in the transaction; the social and
economic effect on the employees, depositors and customers of, and others
dealing with, FCNB and its subsidiaries and on the communities in which FCNB
and its subsidiaries operate or are located; whether the proposal is acceptable
based on the historical and current operating results or financial condition of
FCNB; whether a more favorable price could be obtained for the FCNB common
stock or other securities in the future; the reputation and business practices
of the offeror and its management and affiliates as they would affect the
employees of FCNB and its subsidiaries; the future value of the stock or other
securities of FCNB; and any antitrust or other legal and regulatory issues that
are raised by the proposal. If the Board of Directors determines that any such
transaction should be rejected, it may take any lawful action to defeat such
transaction.
Shareholders' Rights of Dissent and Appraisal
BB&T
The NCBCA provides that dissenters' rights are not available to the holders
of shares of a corporation, such as BB&T, that are either listed on a national
securities exchange or held by more than 2,000 record shareholders 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. BB&T's articles of incorporation do not authorize any special
dissenters' rights.
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FCNB
The MGCL provides that rights of objecting stockholders to obtain the fair
value of their shares in cash in connection with a merger do not exist where a
corporation's shares, like FCNB's, are designated as a Nasdaq National Market
Security on the record date for the shareholder meeting at which the merger
will be considered.
Liquidation Rights
BB&T
In the event of the liquidation, dissolution or winding-up of the affairs of
BB&T, holders of outstanding shares of BB&T common stock are entitled to share,
in proportion to their respective interests, in BB&T's assets and funds
remaining after payment, or provision for payment, of all debts and other
liabilities of BB&T.
Because BB&T is a bank holding company, its rights, the rights of its
creditors and of its shareholders, including the holders of the shares of any
BB&T preferred stock that may be issued, to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization may be subject to
the prior claims of (a) the subsidiary's creditors, except to the extent that
BB&T may itself be a creditor with recognized claims against the subsidiary,
and (b) any interests in the liquidation accounts established by savings
associations or savings banks acquired by BB&T for the benefit of eligible
account holders in connection with conversion of the savings associations from
mutual to stock form.
FCNB
The rights of holders of FCNB common stock upon liquidation are virtually
identical to those of holders of BB&T common stock.
SHAREHOLDER PROPOSALS
In the event that the merger is not completed, any proposal which a
shareholder wishes to have presented at the next annual meeting of shareholders
and included in FCNB's proxy materials must be received at the main office of
FCNB, 7200 FCNB Court, Frederick, Maryland 21703, no later than , 2000. 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 FCNB'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 FCNB's proxy materials) must also give notice
of such proposals to FCNB no later than , 2000. It is urged that any
proposals be sent by certified mail, return receipt requested.
OTHER BUSINESS
The FCNB 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 by this proxy
statement/prospectus will be passed upon by Womble Carlyle Sandridge & Rice,
PLLC, 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 [54,000] shares of BB&T common stock.
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EXPERTS
The consolidated financial statements of BB&T Corporation and its
subsidiaries which are incorporated by reference in this proxy
statement/prospectus from BB&T's Current Report on Form 8-K dated , 2000,
which restates the consolidated financial statements for the year ended
December 31, 1999 that are incorporated by reference from BB&T's Current Report
on Form 8-K dated April 28, 2000 to reflect the acquisitions by BB&T of
Hardwick Holding Company on June 13, 2000, First Banking Company of Southeast
Georgia on June 15, 2000 and One Valley Bancorp on July 6, 2000, 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 FCNB Corp which are incorporated by
reference herein have been audited by Keller Bruner & Company, LLP, independent
certified public accountants, as indicated in their report dated January 26,
2000 with respect thereto, and are incorporated by reference herein in reliance
upon the authority of said firm as experts in accounting and auditing.
FCNB expects representatives of Keller Bruner & Company, L.L.P. to attend
FCNB's special meeting. These representatives will have an opportunity to make
a statement if they desire to do so, and FCNB expects that they will be
available to respond to any appropriate questions you may have.
WHERE YOU CAN FIND MORE INFORMATION
BB&T and FCNB 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 following SEC locations:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-
2511
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.
BB&T has filed the registration statement to register with the SEC the BB&T
common stock to be issued to FCNB 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 FCNB 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 FCNB and BB&T have previously filed with the SEC. These
documents contain important information about FCNB and BB&T and their
businesses.
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<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, 1999
Quarterly Reports on Form 10-Q.... For the fiscal quarters ended March 31,
2000 (as amended on Form 10-Q/A filed on
June 5, 2000) and June 30, 2000
Current Reports on Form 8-K....... Filed January 12, 2000, February 7, 2000,
February 9, 2000, April 11, 2000, April 28,
2000, July 18, 2000, July 27, 2000, August
23, 2000, September 6, 2000,
Registration Statements on Form 8-
A (describing BB&T's common stock
and concerning BB&T's shareholder Filed September 4, 1991 and January 10,
rights plan)..................... 1997
</TABLE>
<TABLE>
<CAPTION>
FCNB SEC Filings (File No. 0-
15645)
-----------------------------
<S> <C>
Annual Report on Form 10-K........ For the fiscal year ended December 31, 1999
Quarterly Reports on Form 10-Q.... For the fiscal quarters ended March 31,
2000 and June 30, 2000
Current Report on Form 8-K........ Filed July 28, 2000
Registration Statement on Form 8-A
(describing FCNB's common
stock)........................... Filed April 24, 1987
</TABLE>
FCNB 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 Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
BB&T has supplied all information contained or incorporated by reference in
this proxy statement/prospectus relating to BB&T, and FCNB has supplied all
such information relating to FCNB 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:
BB&T Corporation FCNB Corp
Shareholder Reporting Mark A. Severson
Post Office Box 1290 7200 FCNB Court
Winston-Salem, North Carolina 27102 Frederick, Maryland 21703
(336) 733-3021 (301) 662-2191
If you would like to request documents, please do so by , 2000 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 FCNB have not authorized
anyone to provide you with information that is different from what is contained
in this proxy statement/prospectus or in any of the materials that have been
55
<PAGE>
incorporated by reference into this document. If you are in a jurisdiction
where offers to exchange or sell, or solicitations of offers to exchange or
purchase, the securities offered by this document or the solicitation of
proxies is unlawful, or if you are a person to whom it is unlawful to direct
these types of activities, then the offer presented in this document does not
extend to you. This proxy statement/prospectus is dated , 2000. You should
not assume that the information contained in this proxy statement/prospectus is
accurate as of any date other than that date. Neither the mailing of this proxy
statement/prospectus to shareholders nor the issuance of BB&T common stock in
the merger creates any implication to the contrary.
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AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
FCNB CORP
and
BB&T CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I DEFINITIONS..................................................... A-1
1.1 Definitions...................................................... A-1
1.2 Terms Defined Elsewhere.......................................... A-5
ARTICLE II THE MERGER..................................................... A-5
2.1 Merger........................................................... A-5
2.2 Filing; Plan of Merger........................................... A-5
2.3 Effective Time................................................... A-6
2.4 Closing.......................................................... A-6
2.5 Effect of Merger................................................. A-6
2.6 Further Assurances............................................... A-6
2.7 Merger Consideration............................................. A-6
2.8 Conversion of Shares; Payment of Merger Consideration............ A-7
2.9 Conversion of Stock Options...................................... A-8
2.10 Merger of Subsidiaries........................................... A-8
2.11 Anti-Dilution.................................................... A-9
2.12 Assumption of Trust Preferred Obligations........................ A-9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF FCNB........................ A-9
3.1 Capital Structure................................................ A-9
3.2 Organization, Standing and Authority............................. A-9
3.3 Ownership of Subsidiaries........................................ A-10
3.4 Organization, Standing and Authority of the Subsidiaries......... A-10
3.5 Authorized and Effective Agreement............................... A-10
3.6 Securities Filings; Financial Statements; Statements True........ A-11
3.7 Minute Books..................................................... A-11
3.8 Adverse Change................................................... A-11
3.9 Absence of Undisclosed Liabilities............................... A-11
3.10 Properties....................................................... A-12
3.11 Environmental Matters............................................ A-12
3.12 Loans; Allowance for Loan Losses................................. A-12
3.13 Tax Matters...................................................... A-13
3.14 Employees; Compensation; Benefit Plans........................... A-13
3.15 Certain Contracts................................................ A-16
3.16 Legal Proceedings; Regulatory Approvals.......................... A-16
3.17 Compliance with Laws; Filings.................................... A-17
3.18 Brokers and Finders.............................................. A-17
3.19 Repurchase Agreements; Derivatives............................... A-17
3.20 Deposit Accounts................................................. A-17
3.21 Related Party Transactions....................................... A-18
3.22 Certain Information.............................................. A-18
3.23 Tax and Regulatory Matters....................................... A-18
3.24 State Takeover Laws; Rights of Objecting Shareholders............ A-18
3.25 Labor Relations.................................................. A-18
3.26 Fairness Opinion................................................. A-18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BB&T......................... A-19
4.1 Capital Structure of BB&T........................................ A-19
4.2 Organization, Standing and Authority of BB&T..................... A-19
4.3 Authorized and Effective Agreement............................... A-19
4.4 Organization, Standing and Authority of BB&T Subsidiaries........ A-20
4.5 Securities Documents; Statements True............................ A-20
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
4.6 Certain Information.............................................. A-20
4.7 Tax and Regulatory Matters....................................... A-20
4.8 Share Ownership.................................................. A-20
4.9 Legal Proceedings; Regulatory Approvals.......................... A-20
4.10 Adverse Change................................................... A-21
4.11 Rights Agreement................................................. A-21
ARTICLE V COVENANTS....................................................... A-21
5.1 FCNB Shareholder Meeting......................................... A-21
5.2 Registration Statement; Proxy Statement/Prospectus............... A-21
5.3 Plan of Merger; Reservation of Shares............................ A-21
5.4 Additional Acts.................................................. A-22
5.5 Best Efforts..................................................... A-22
5.6 Certain Accounting Matters....................................... A-22
5.7 Access to Information............................................ A-23
5.8 Press Releases................................................... A-23
5.9 Forbearances of FCNB............................................. A-23
5.10 Employment Agreements............................................ A-25
5.11 Affiliates....................................................... A-25
5.12 401(k) Plan; Pension Plan; Other Employee Benefits............... A-25
5.13 Directors and Officers Protection................................ A-26
5.14 Forbearances of BB&T............................................. A-27
5.15 Reports.......................................................... A-27
5.16 Exchange Listing................................................. A-27
5.17 Advisory Board for the Fredericks, Maryland Area................. A-27
5.18 Board of Directors of Branch Banking and Trust Company........... A-28
ARTICLE VI CONDITIONS PRECEDENT........................................... A-28
6.1 Conditions Precedent--BB&T and FCNB.............................. A-28
6.2 Conditions Precedent--FCNB....................................... A-28
6.3 Conditions Precedent--BB&T....................................... A-29
ARTICLE VII TERMINATION, DEFAULT, WAIVER AND AMENDMENT.................... A-30
7.1 Termination...................................................... A-30
7.2 Effect of Termination............................................ A-30
7.3 Survival of Representations, Warranties and Covenants............ A-31
7.4 Waiver........................................................... A-31
7.5 Amendment or Supplement.......................................... A-31
ARTICLE VIII MISCELLANEOUS................................................ A-31
8.1 Expenses......................................................... A-31
8.2 Entire Agreement................................................. A-31
8.3 No Assignment.................................................... A-32
8.4 Notices.......................................................... A-32
8.5 Specific Performance............................................. A-32
8.6 Captions......................................................... A-33
8.7 Counterparts..................................................... A-33
8.8 Governing Law.................................................... A-33
</TABLE>
ANNEXES
<TABLE>
<C> <S>
Annex A Articles of Merger
Annex B Employment Agreement with A. Patrick Linton (omitted)
Annex C Form Employment Agreement for Additional Officers (omitted)
Annex D Form of Opinion of Counsel to BB&T (omitted)
Annex E Form of Opinion of Counsel to FCNB (omitted)
</TABLE>
A-ii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of July
26, 2000, is between FCNB CORP ("FCNB"), a Maryland corporation having its
principal office at Frederick, Maryland, and BB&T CORPORATION ("BB&T"), a
North Carolina corporation having its principal office at Winston-Salem, North
Carolina;
R E C I T A L S:
The parties desire that FCNB 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, FCNB is concurrently granting to BB&T
an option to acquire, under certain circumstances, 2,370,000 shares of the
common stock, par value $1.00 per share, of FCNB.
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 FCNB 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.
"Benefit Plan Determination Date" shall mean, with respect to any employee
pension or welfare benefit plan or program maintained by FCNB at the Effective
Time, the date determined by BB&T with respect to
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each such plan or program which shall be not later than January 1 following the
close of the calendar year in which the last of the FCNB Subsidiaries that is a
bank is merged into BB&T or one of the BB&T Subsidiaries.
"Business Day" shall mean all days other than Saturdays, Sundays and Federal
Reserve holidays.
"CERCLA" shall mean the Comprehensive Environmental Response Compensation
and Liability Act, as amended, 42 U.S.C. 9601 et seq.
"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 FCNB 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 investigative 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 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.
"FCNB Common Stock" shall mean the shares of voting common stock, par value
$1.00 per share, of FCNB.
"FCNB Disclosure Memorandum" shall mean the written information in one or
more documents, each of which is entitled "FCNB Disclosure Memorandum" and
dated and delivered by FCNB to BB&T on or before the date of this Agreement,
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.
"FCNB Subsidiaries" shall mean FCNB Capital Trust, FCNB Bank, Monocacy
Management Company, FCNB Investment Holdings, Inc., Frederick Underwriters,
Inc., Maryland Title Center-West, LLC, FCNB Mortgage Company, Inc. (inactive),
First Bank Mortgage Company (inactive), Capital Asset Recovery (inactive), any
and all other Subsidiaries of FCNB as of the date hereof and any corporation,
bank, savings
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association, or other organization acquired as a Subsidiary of FCNB after the
date hereof and held as a Subsidiary by FCNB at the Effective Time.
"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 Danielson Associates, 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, 1999, 1998, and 1997, 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,
1999, 1998, and 1997, 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, 1999, and (b) with respect to FCNB, (i) the consolidated balance
sheets (including related notes and schedules, if any) of FCNB as of December
31, 1999, 1998 and 1997, and the related consolidated statements of income, and
cash flows (including related notes and schedules, if any) for each of the
three years ended December 31, 1999, 1998 and 1997, as filed by FCNB in
Securities Documents, and (ii) the consolidated balance sheets of FCNB
(including related notes and schedules, if any) and the related consolidated
statements of income and cash flows (including related notes and schedules, if
any) included in Securities Documents filed by FCNB with respect to periods
ended subsequent to December 31, 1999.
"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.
"Knowledge" relating to the awareness of FCNB shall mean the personal
knowledge of the president and chief executive officer, chief operating
officer, chief financial officer, human resources director and comptroller of
FCNB.
"Material Adverse Effect" on BB&T or FCNB 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 FCNB and the FCNB Subsidiaries taken as a
whole, or (ii) materially impairs the ability of BB&T or FCNB 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 FCNB 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 Maryland General Corporation Law, as amended.
"NCBCA" shall mean the North Carolina Business Corporation Act, as amended.
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"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 FCNB 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 under
the Securities Act, including any post-effective amendments or supplements
thereto as filed with the Commission under the Securities Act, with respect to
the BB&T Common Stock to be issued in connection with the transactions
contemplated by this Agreement.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests (other than rights
pursuant to the Rights 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 Option" shall mean, collectively, any option granted under the Stock
Option Plan outstanding and unexercised on the date hereof to acquire shares of
FCNB Common Stock, aggregating 573,581 shares.
"Stock Option Plan" shall mean, collectively, FCNB's 1992 Employee Stock
Option Plan (including the FCNB Amended and Restated Stock Option Plan for
Former Employees of Capital Bank, National Association) and 1997 Stock Option
Plan for Directors.
"Stock Purchase Plan" shall mean FCNB's 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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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)
Closing Section 2.4
Closing Date Section 2.4
Closing Value Section 2.7(b)
Constituent Corporations Section 2.1
Debentures Section 2.12
Effective Time Section 2.3
Employer Entity Section 5.12(a)
Exchange Ratio Section 2.7(a)
FCNB Introduction
Indenture Section 2.12
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
Surviving Corporation Section 2.1(a)
Trust Preferred Section 2.12
</TABLE>
ARTICLE II
THE MERGER
2.1 Merger
BB&T and FCNB are constituent corporations (the "Constituent Corporations")
to the Merger as contemplated by the NCBCA. At the Effective Time:
(a) FCNB 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 FCNB 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
votes entitled to be cast on the Merger. Upon fulfillment or waiver of the
conditions specified in Article VI and provided that this Agreement has not
been terminated pursuant to Article VII, the Constituent Corporations will
cause the Articles of Merger to be executed and filed with the 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 FCNB shall constitute adoption and approval of the Plan of Merger.
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2.3 Effective Time
The Merger shall be effective at the day and hour specified in the Articles
of Merger as filed as provided in Section 2.2 (herein sometimes referred to as
the "Effective Time").
2.4 Closing
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Womble Carlyle Sandridge & Rice,
PLLC, Winston-Salem, North Carolina, at 10:00 a.m. on the date designated by
BB&T which is within thirty days following the satisfaction of the conditions
to Closing set forth in Article VI (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing),
or such later date as the parties may otherwise agree (the "Closing Date");
provided that in no event shall the Closing take place prior to January 1,
2001, without FCNB's consent.
2.5 Effect of Merger
From and after the Effective Time, the separate existence of FCNB 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
(a) As used herein, the term "Merger Consideration" shall mean the number of
shares of BB&T Common Stock (to the nearest one thousandth of a share) to be
exchanged for each share of FCNB Common Stock issued and outstanding as of the
Effective Time and cash (without interest) to be payable in exchange for any
fractional share of BB&T Common Stock which would otherwise be distributable to
a FCNB shareholder as provided in Section 2.8(d). The number of shares of BB&T
Common Stock to be issued for each issued and outstanding share of FCNB Common
Stock shall be in the ratio of 0.7250 shares of BB&T Common Stock for each
share of FCNB Common Stock (the "Exchange Ratio").
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(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 4:00 p.m.
closing price per share of BB&T Common Stock on the NYSE on the Closing Date as
reported on NYSEnet.com (or, if not reported thereon, another authoritative
source).
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 FCNB or the holders of record of FCNB Common Stock, each share of
FCNB 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 FCNB 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 FCNB 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 FCNB Common Stock. With respect to any certificate for
FCNB 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
FCNB 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 FCNB 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 FCNB 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 delivery to the persons entitled thereto of the Merger
Consideration, together with any declared and unpaid dividends thereon.
(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 FCNB in respect of shares of FCNB Common Stock in accordance with the terms
of this Agreement and which remain unpaid at the Effective Time, subject to
compliance by FCNB with the proviso in Section 5.9(b). To the extent permitted
by law, former shareholders of record of FCNB 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 FCNB Common
Stock are converted, regardless of whether such holders have exchanged their
certificates representing FCNB Common Stock for certificates representing BB&T
Common Stock in accordance with the provisions of this Agreement. Whenever a
dividend or other distribution is declared by BB&T on the BB&T Common Stock,
the record date for which is at or after the Effective Time, the declaration
shall include dividends or other distributions on all shares of BB&T Common
Stock issuable pursuant to this Agreement, but no dividend or other
distribution payable to the holders of record of BB&T Common Stock as of any
time subsequent to the Effective Time shall be delivered to the holder of any
certificate representing FCNB 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 FCNB Common Stock represented
by such certificate.
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(f) At the Effective Time, BB&T shall take over the Stock Purchase Plan, and
all shares or rights to receive shares of FCNB Common Stock held in the Stock
Purchase Plan shall be converted by applying the Exchange Ratio into shares or
rights to receive shares of BB&T Common Stock.
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 FCNB and the
Human Resources Committee of FCNB's Board of Directors in 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 FCNB 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; and (C) the substituted
options shall continue in effect on the same terms and conditions as provided
in the Stock Option Agreements and the Stock Option Plan governing 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 FCNB agree to take all
necessary steps to effectuate the foregoing provisions of this Section 2.9.
BB&T has reserved and shall continue to reserve adequate shares of BB&T Common
Stock for delivery upon exercise of any converted or substitute options. As
soon as practicable after the Effective Time, if it has not already done so,
and to the extent FCNB 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. FCNB 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.
(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, FCNB shall take such actions, and
shall cause the FCNB Subsidiaries to take such actions, as may be required in
order to effect, at the Effective Time, the merger of one
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or more of the FCNB 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.
2.12 Assumption of Trust Preferred Obligations
BB&T acknowledges that FCNB Capital Trust ("FCNB Capital Trust"), an FCNB
Subsidiary, holds 8.25% Subordinated Debentures ("Debentures") issued by FCNB
pursuant to an Indenture (the "Indenture") between FCNB and State Street Bank
and Trust Company, as trustee, dated as of July 20, 1998 and has issued 8.25%
Cumulative Trust Preferred Securities (the "Trust Preferred"). BB&T shall upon
the Effective Time expressly assume all of FCNB's obligations under the
Indenture (including, without limitation, being substituted for FCNB) and
execute any and all documents, instruments and agreements, including any
supplemental indentures, required by the Indenture, the Debentures or the Trust
Preferred and thereafter shall perform all of FCNB's obligations with respect
to the Debentures and the Trust Preferred.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FCNB
Except as Disclosed, FCNB represents and warrants to BB&T as follows (the
representations and warranties herein of FCNB 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):
3.1 Capital Structure
The authorized capital stock of FCNB consists of 50,000,000 shares of FCNB
Common Stock and 1,000,000 shares of preferred stock, par value $1.00 per
share. As of the date hereof, 11,924,558 shares of FCNB Common Stock are issued
and outstanding, and no shares of preferred stock are issued and outstanding.
No other classes of capital stock of FCNB, common or preferred, are authorized,
issued or outstanding. All outstanding shares of FCNB 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
FCNB Common Stock reserved in connection with the Stock Option Plan, (ii)
2,370,000 shares of FCNB Common Stock reserved in connection with the BB&T
Option Agreement and (iii) 165,062 shares of FCNB Common Stock reserved in
connection with the Stock Purchase Plan. FCNB has granted options to acquire
573,581 shares of FCNB Common Stock under the Stock Option Plan, which options
remain outstanding as of the date hereof. There are no Rights authorized,
issued or outstanding with respect to, nor are there any agreements,
understandings or commitments relating to the right of any FCNB shareholder to
own, to vote or to dispose of, the capital stock of FCNB. Holders of FCNB
Common Stock do not have preemptive rights.
3.2 Organization, Standing and Authority
FCNB 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. FCNB is not required to be qualified to do
business in any other state of the United States or foreign jurisdiction. FCNB
is registered as a bank holding company under the Bank Holding Company Act.
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3.3 Ownership of Subsidiaries
Section 3.3 of the FCNB Disclosure Memorandum lists all of the FCNB
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 FCNB (directly
or indirectly), the percentage ownership interest so owned by FCNB and its
business activities. The outstanding shares of capital stock or other equity
interests of the FCNB Subsidiaries are validly issued and outstanding, fully
paid and nonassessable, and all such shares are directly or indirectly owned by
FCNB 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 FCNB Subsidiaries, and there
are no agreements, understandings or commitments relating to the right of FCNB
to own, to vote or to dispose of said interests. None of the shares of capital
stock or other equity interests of the FCNB Subsidiaries have been issued in
violation of the preemptive rights of any person. Section 3.3 of the FCNB
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 FCNB Subsidiaries and stock or
other securities held in a fiduciary capacity) owned directly or indirectly by
FCNB.
3.4 Organization, Standing and Authority of the Subsidiaries
FCNB Bank, the sole FCNB Subsidiary that is a depository institution, is a
Maryland-chartered banking institution with its deposits insured by the FDIC.
Each of the FCNB Subsidiaries is validly existing and in good standing under
the laws of its jurisdiction of organization. Each of the FCNB 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
FCNB 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
activities that have not been Disclosed.
3.5 Authorized and Effective Agreement
(a) FCNB 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 FCNB shareholders of this Agreement and the Plan of Merger) to
perform all of its obligations under this Agreement, the Articles of Merger and
the BB&T Option Agreement. The execution and delivery of this Agreement, the
Articles of Merger and the BB&T Option Agreement, and consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action, except, in the case of this
Agreement and the Plan of Merger, the approval of the FCNB 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 FCNB, and each is enforceable against FCNB 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 FCNB 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 FCNB or any FCNB
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 FCNB
or any FCNB Subsidiary pursuant to, any note, bond, mortgage, indenture,
license, permit, contract, agreement or other instrument or obligation, or
(iii) subject to receipt of all required governmental approvals, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to FCNB
or any FCNB Subsidiary.
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(c) Other than consents or approvals required from, or notices to,
regulatory authorities as provided in Section 5.4(b), no notice to, filing
with, or consent of, any public body or authority is necessary for the
consummation by FCNB of the Merger and the other transactions contemplated in
this Agreement.
3.6 Securities Filings; Financial Statements; Statements True
(a) FCNB has timely filed all Securities Documents required by the
Securities Laws to be filed since December 31, 1996. FCNB has Disclosed or made
available to BB&T a true and complete copy of each Securities Document filed by
FCNB with the Commission after December 31, 1996 and prior to the date hereof,
which are all of the Securities Documents that FCNB 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 FCNB fairly present or will fairly present,
as the case may be, the consolidated financial position of FCNB and the FCNB
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 FCNB or any FCNB 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 FCNB and each of the FCNB 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, provided,
however, that this representation shall relate only to the minute books of FCNB
and each FCNB Subsidiary since January 1, 1995, or, if later the date of
acquisition or organization of such FCNB Subsidiary.
3.8 Adverse Change
Since December 31, 1999, FCNB and the FCNB Subsidiaries have not incurred
any liability, whether accrued, absolute or contingent, except as disclosed in
the most recent FCNB Financial Statements, or entered into any transactions
with Affiliates, in each case other than in the ordinary course of business
consistent with past practices, nor has there been any adverse change or any
event involving a prospective adverse change in the business, financial
condition, results of operations or business prospects of FCNB or any of the
FCNB Subsidiaries.
3.9 Absence of Undisclosed Liabilities
All liabilities (including contingent liabilities) of FCNB and the FCNB
Subsidiaries are disclosed in the most recent Financial Statements of FCNB or
are normally recurring business obligations incurred in the ordinary course of
their respective businesses since the date of FCNB's most recent Financial
Statements.
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3.10 Properties
(a) FCNB and the FCNB 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 FCNB as of December 31, 1999 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 FCNB or any FCNB 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) FCNB and the FCNB Subsidiaries are and at all times have been in
compliance with all Environmental Laws. Neither FCNB nor any FCNB Subsidiary
has received any communication alleging that FCNB or the FCNB 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 FCNB nor any FCNB
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) FCNB
or any FCNB Subsidiary, (ii) any person or entity whose liability for any
Environmental Claim FCNB or any FCNB 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 FCNB or any FCNB Subsidiary, or any real
or personal property which FCNB or any FCNB 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 FCNB or any FCNB Subsidiary holds a security
interest securing a loan recorded on the books of FCNB or any FCNB Subsidiary.
Neither FCNB nor any FCNB 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) FCNB and the FCNB Subsidiaries are in compliance with all
recommendations contained in any environmental audits, analyses and surveys
received by FCNB relating to all real and personal property owned or leased by
FCNB or any FCNB Subsidiary and all real and personal property of which FCNB or
any FCNB 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 FCNB or any FCNB Subsidiary or against any person
or entity whose liability for any Environmental Claim FCNB or any FCNB
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 FCNB and the FCNB Subsidiaries are
valid and properly documented and were made in the ordinary course of business,
and the security therefor, if any, is valid and properly perfected. Neither the
terms of such loans, nor any of the loan documentation, nor the manner in which
such loans have been administered and serviced, nor FCNB'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
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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 FCNB are, in the reasonable
judgment of management of FCNB, adequate as of their respective dates under the
requirements of GAAP and applicable regulatory requirements and guidelines.
3.13 Tax Matters
(a) FCNB and the FCNB 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 FCNB nor any FCNB Subsidiary has or will have any
liability for any such taxes in excess of the amounts so paid or reserves or
accruals so established. FCNB and the FCNB 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 FCNB and the FCNB Subsidiaries are complete and accurate. Neither FCNB
nor any FCNB 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 FCNB or any FCNB Subsidiary which have not been settled and paid. There
are currently no agreements in effect with respect to FCNB or any FCNB
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 FCNB nor any of the FCNB 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 FCNB or a FCNB subsidiary) or has any liability for taxes
of any person (other than FCNB and the FCNB 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 FCNB and the FCNB 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 FCNB nor any of the FCNB Subsidiaries has made any payments, is
obligated to make any payments, or is a party to any contract that could
obligate it to make any payments that would be disallowed as a deduction under
Section 280G or 162(m) of the Code.
3.14 Employees; Compensation; Benefit Plans
(a) Compensation. FCNB 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
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and agent of FCNB and of each FCNB Subsidiary and each other person (in each
case other than as an employee) to whom FCNB or any FCNB 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) FCNB has Disclosed an accurate and complete list of all Plans (as
defined below) contributed to, maintained or sponsored by FCNB or any FCNB
Subsidiary, to which FCNB or any FCNB 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 FCNB or any FCNB
Subsidiary is a member, and which is still in effect or is terminated and a
final report on Form 5500 is required and has not been filed. 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 FCNB nor any FCNB Subsidiary contributes to, has an
obligation to contribute to or otherwise has any liability or potential
liability with respect to (A) any multiemployer plan as defined in Section
3(37) of ERISA, (B) any plan of the type described in Sections 4063 and
4064 of ERISA or in Section 413 of the Code (and regulations promulgated
thereunder), or (C) any plan which provides health, life insurance,
accident or other "welfare-type" benefits to current or future retirees or
former employees or directors, their spouses or dependents, other than in
accordance with Section 4980B of the Code or applicable state continuation
coverage law.
(iii) None of the Plans obligates FCNB or any FCNB 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 ERISA, no reportable event (as such term is defined in
Section 4043 of ERISA) for which the PBGC has not waived notice has
occurred with respect to any such Plan, and the PBGC has not commenced or
threatened the termination of any Plan. None of the assets of FCNB or any
FCNB Subsidiary is the subject of any lien arising under Section 302(f) of
ERISA or Section 412(n) of the Code,
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neither FCNB nor any FCNB 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 FCNB or any FCNB 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 FCNB or any FCNB Subsidiary is a member or was a member during such
five-year period.
(vii) As of December 31, 1999, the fair market value of the assets of
each Plan that is a tax qualified defined benefit plan equaled or exceeded,
and as of the Closing Date will equal or exceed, the present value of all
vested and nonvested liabilities thereunder determined in accordance with
reasonable actuarial methods, factors and assumptions applicable to a
defined benefit plan on an ongoing basis. With respect to each Plan that is
subject to the funding requirements of Section 412 of the Code and Section
302 of ERISA, all required contributions for all periods ending prior to or
as of the Closing Date (including periods from the first day of the then-
current plan year to the Closing Date and including all quarterly
contributions required in accordance with Section 412(m) of the Code) shall
have been made. With respect to each other Plan, all required payments,
premiums, contributions, reimbursements or accruals for all periods ending
prior to or as of the Closing Date shall have been made. No tax qualified
Plan has any unfunded liabilities.
(viii) No prohibited transaction (which shall mean any transaction
prohibited by Section 406 of ERISA and not exempt under Section 408 of
ERISA or Section 4975 of the Code, whether by statutory, class or
individual exemption) has occurred with respect to any Plan which would
result in the imposition, directly or indirectly, of any excise tax,
penalty or other liability under Section 4975 of the Code or Section 409 or
502(i) of ERISA. Neither FCNB nor, to the best knowledge of FCNB, any FCNB
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 FCNB or any FCNB 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) FCNB and each FCNB Subsidiary has been and is presently in
compliance with all of the requirements of Section 4980B of the Code.
(xi) Neither FCNB nor any FCNB Subsidiary has a liability as of December
31, 1999 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 FCNB as of December 31, 1999 or otherwise
Disclosed.
(xii) Neither the consideration nor implementation of the transactions
contemplated under this Agreement will increase (A) FCNB's or any FCNB
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.
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(xiii) With respect to each Plan, FCNB 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 FCNB and any FCNB Subsidiary may
be amended or terminated at any time by action of FCNB's Board of
Directors, or such FCNB'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 multiemployer
plans, to termination of the participation of FCNB or a FCNB Subsidiary
thereunder).
3.15 Certain Contracts
(a) Neither FCNB nor any FCNB 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 FCNB
or any FCNB Subsidiary or the guarantee by FCNB or any FCNB Subsidiary of any
such obligation, that cannot be terminated within less than 30 days after the
Closing Date by FCNB or any FCNB 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 FCNB or any FCNB 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 FCNB 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 FCNB nor any FCNB Subsidiary is in default under any agreement,
commitment, arrangement, lease, insurance policy, or other instrument, whether
entered into in the ordinary course of business or otherwise and whether
written or oral, and there has not occurred any event that, with the lapse of
time or giving of notice or both, would constitute such a default.
3.16 Legal Proceedings; Regulatory Approvals
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of FCNB, threatened
against FCNB or any FCNB Subsidiary or against any asset, interest, plan or
right of FCNB or any FCNB Subsidiary, or, to the best knowledge of FCNB,
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 FCNB, threatened against any present director or officer of
FCNB or any FCNB Subsidiary, and, to the best knowledge of FCNB, there are no
actions, suits or
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proceedings instituted, pending or threatened against any former director or
officer of FCNB or of any FCNB Subsidiary, that would reasonably be expected to
give rise to a claim against FCNB or any FCNB Subsidiary for indemnification.
There are no actual or, to the best knowledge of FCNB, 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 FCNB, no fact or condition relating to FCNB or any FCNB Subsidiary
exists (including, without limitation, noncompliance with the CRA) that would
prevent FCNB or BB&T from obtaining all of the federal and state regulatory
approvals contemplated herein.
3.17 Compliance with Laws; Filings
Each of FCNB and each FCNB 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 FCNB nor any FCNB Subsidiary has received written or,
to FCNB's Knowledge, oral 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 FCNB nor any FCNB 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 written or, to
FCNB's Knowledge, oral communication requesting that it enter into any of the
foregoing. Since December 31, 1996, FCNB and each of the FCNB 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 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 FCNB nor any FCNB 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 (i) an obligation to the Financial Advisor for investment
banking services, the nature and extent of which has been Disclosed, and (ii)
fees to accountants and lawyers.
3.19 Repurchase Agreements; Derivatives
(a) With respect to all agreements currently outstanding pursuant to which
FCNB or any FCNB Subsidiary has purchased securities subject to an agreement to
resell, FCNB or the FCNB 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 FCNB or any FCNB Subsidiary has sold securities subject to an
agreement to repurchase, neither FCNB nor the FCNB Subsidiary has pledged
collateral in excess of the amount of the debt secured thereby. Neither FCNB
nor any FCNB Subsidiary has pledged collateral in excess of the amount required
under any interest rate swap or other similar agreement currently outstanding.
(b) Neither FCNB nor any FCNB 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 FCNB Subsidiaries that are depository
institutions are insured by the FDIC to the maximum extent permitted by federal
law, and the FCNB Subsidiaries have paid all premiums and
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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 FCNB or any FCNB Subsidiary is a party
with any director, executive officer or 5% shareholder of FCNB or any person,
corporation, or enterprise controlling, controlled by or under common control
with any of the foregoing were made on terms which FCNB in good faith believes
were no less favorable to FCNB than could be obtained from unrelated parties
and have been Disclosed.
3.22 Certain Information
When the Proxy Statement/Prospectus is mailed, and at the time of the
meeting of shareholders of FCNB 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 FCNB, (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 FCNB nor any FCNB 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; Rights of Objecting Shareholders
FCNB and each FCNB 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,
and no such law shall be triggered or applied as a result of such transactions.
FCNB shareholders do not have rights of Objecting Shareholders within the
meaning of Subtitle 2 of Title 3 of the MGCL.
3.25 Labor Relations
Neither FCNB nor any FCNB 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 FCNB or any FCNB Subsidiary party to any collective
bargaining agreement. There is no strike or other labor dispute involving FCNB
or any FCNB Subsidiary, pending or threatened, or to the best knowledge of
FCNB, is there any activity involving any employees of FCNB or any FCNB
Subsidiary seeking to certify a collective bargaining unit or engaging in any
other organization activity.
3.26 Fairness Opinion
FCNB has received from the Financial Advisor an opinion that, as of the date
hereof, the Merger Consideration is fair to the shareholders of FCNB from a
financial point of view.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BB&T
BB&T represents and warrants to FCNB 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 FCNB 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 356,760,711 shares were issued
and outstanding on June 30, 2000. 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 financial 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 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.
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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
(a) BB&T has timely filed all Securities Documents required by the
Securities Laws to be filed since December 31, 1996. 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 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 statements of
income and retained earnings, changes in shareholders' equity and statements of
cash flows for the period 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 BB&T or any other BB&T Subsidiary to FCNB 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 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
FCNB 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.
4.7 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) 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).
4.8 Share Ownership
BB&T does not own (except in a fiduciary capacity) any shares of FCNB Common
Stock.
4.9 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,
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noncompliance with the CRA) that would prevent BB&T or FCNB from obtaining all
of the federal and state regulatory approvals contemplated herein.
4.10 Adverse Change
Since March 31, 2000, there has not been any adverse change or any event
involving a prospective adverse change in the business, financial condition, or
results of operations of BB&T or any of the BB&T Subsidiaries.
4.11 Rights Agreement
Execution of this Agreement and consummation of the transactions
contemplated hereby will not result in the grant of any Rights or other
securities or property, or any right or claim thereto, to any person, or any
other change with respect to the BB&T capital structure, under the Rights
Agreement described in the definition of BB&T Common Stock.
ARTICLE V
COVENANTS
5.1 FCNB Shareholder Meeting
FCNB shall submit this Agreement and the Plan of Merger to its shareholders
for approval at a meeting to be held as soon as reasonably practicable
following effectiveness of the Registration Statement. By approving execution
of this Agreement, the Board of Directors of FCNB agrees that it shall, at the
time the Proxy Statement/Prospectus is mailed to the shareholders of FCNB,
unanimously recommend that FCNB's shareholders vote for such approval;
provided, that the Board of Directors of FCNB 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 FCNB's 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 could reasonably be expected
to constitute a breach of the fiduciary duty of the Board of Directors to the
shareholders of FCNB and (ii) a written determination from the Financial
Advisor that the Merger Consideration is not fair or is inadequate to the FCNB
shareholders from a financial point of view, accompanied by a detailed analysis
of the reasons for such determination.
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. FCNB 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
at 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 FCNB shall use their reasonable best efforts to
cause the Proxy Statement/Prospectus to be approved by the Commission for
mailing to the FCNB shareholders, and such Proxy Statement/Prospectus shall, on
the date of mailing, conform in all material respects to the requirements of
the Securities Laws and the applicable rules and regulations of the Commission
thereunder. FCNB 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 acknowledges that it (i) has
adopted the Plan of Merger and (ii) will pay or cause to be paid
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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) FCNB 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 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 FCNB 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. FCNB 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. FCNB 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 the issuance of the Merger
Consideration and 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 FCNB 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 FCNB shall take, or cause, or to the best of its ability permit to be
taken, any action that would substantially delay or impair the prospects of
completing the Merger pursuant to this Agreement and the Plan of Merger.
5.6 Certain Accounting Matters
FCNB shall cooperate with BB&T concerning accounting and financial matters
necessary or appropriate to facilitate the Merger (taking into account BB&T's
policies, practices and procedures), including, without limitation, issues
arising in connection with record keeping, loan classification, valuation
adjustments, levels of loan loss reserves and other accounting practices;
provided, that any action taken pursuant to this Section 5.6 shall not be
deemed to constitute or result in the breach of any representation, warranty,
covenant or agreement of FCNB contained in this Agreement, or constitute the
basis of a failure of satisfaction of any condition to the obligation of BB&T
to consummate the Merger, and shall be disregarded in determining eligibility
of FCNB employees for bonuses for 2000. FCNB shall not be required to modify or
change any of its policies to
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accommodate or take into account BB&T's policies, practices or procedures
until the earlier of (i) written acknowledgment by BB&T that all of the
conditions to its obligation to consummate the Merger have been satisfied or
waived (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at 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), and (ii) immediately prior to
the Effective Time.
5.7 Access to Information
FCNB 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, FCNB 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 FCNB and the FCNB 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 that 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 FCNB 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 FCNB
Except with the prior written consent of BB&T, between the date hereof and
the Effective Time, FCNB shall not, and shall cause each of the FCNB
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 or expand any existing activities;
(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 $0.16 per share of FCNB Common Stock payable on record dates
consistent with past practice; provided that any dividend declared or
payable on the shares of FCNB Common Stock in the quarterly period during
which the Effective Time occurs shall, unless otherwise agreed upon in
writing by BB&T and FCNB, be declared with a record date prior to the
Effective Time only if the normal record date for payment of the
corresponding quarterly dividend to holders of BB&T Common Stock is before
the Effective Time;
(c) issue any shares of its capital stock (including treasury shares),
except pursuant to the Stock Options or the BB&T Option Agreement;
(d) issue, grant or authorize any Rights or effect any recapitalization,
reclassification, stock dividend, stock split or like change in
capitalization, except that FCNB may grant Stock Options under the Stock
Option Plan in the ordinary course of business consistent with the prior
year (1999);
(e) amend its Articles of Incorporation or Bylaws;
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(f) impose or permit imposition, of any lien, charge or encumbrance on
any share of stock held by it in any FCNB 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) 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 actions 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 annual year end salary increases not to
exceed in the aggregate 5% of payroll;
(j) subject to Section 5.12, 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
Section 5.9(j) 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, FCNB or any
FCNB Subsidiary or any business combination with FCNB or any FCNB
Subsidiary other than as contemplated by this Agreement; or authorize any
officer, director, agent or affiliate of FCNB or any FCNB 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, FCNB 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 FCNB's Board of
Directors to the FCNB shareholders;
(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 FCNB or a FCNB Subsidiary or guarantee by FCNB or
a FCNB Subsidiary of any obligation, (iii) any agreement, arrangement or
commitment relating to the employment or severance of a consultant or the
employment, severance, election or retention in office of any present or
former director, officer or employee (this clause shall not apply to the
election of directors by shareholders or the reappointment of officers in
the normal course), or (iv) any contract, agreement or understanding with a
labor union;
(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 as provided in Section 5.6;
(n) change its methods of accounting in effect at December 31, 1999,
except as required by changes in GAAP 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, 1999, except as required by changes in law or
regulation;
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(o) except for expenditures and commitments in respect of the relocation
of FCNB's Poolesville branch (including costs of site acquisition,
construction, renovation, furnishings and equipping, anticipated to cost in
the range of $1.3 million), incur any commitments for capital expenditures
or obligation to make capital expenditures in excess of $100,000 for any
one expenditure or $1,000,000 in the aggregate;
(p) incur any indebtedness other than deposits from customers, brokered
deposits, advances from the Federal Home Loan Bank or Federal Reserve Bank,
federal funds purchases, correspondent bank lines, and reverse repurchase
arrangements in the ordinary course of business consistent with past
practice;
(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 A. Patrick Linton substantially in the form of Annex B hereto,
and with four additional employees of FCNB to be identified jointly by A.
Patrick Linton and BB&T substantially in the form of Annex C hereto.
5.11 Affiliates
FCNB shall use its best efforts to cause all persons who are Affiliates of
FCNB 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
(a) Effective on the Benefit Plan Determination Date with respect to the
401(k) plan of FCNB, BB&T shall cause the 401(k) plan of FCNB either to be
merged with the 401(k) plan maintained by BB&T and the BB&T Subsidiaries or
terminated, in each case subject to the receipt of all applicable regulatory or
governmental approvals. Each employee of FCNB at the Effective Time who becomes
an employee immediately following the Effective Time of BB&T or a BB&T
Subsidiary ("Employer Entity") and is an employee of an Employer Entity as of
the Benefit Plan Determination Date shall be eligible to participate in BB&T's
401(k) plan (subject to complying with eligibility requirements and to BB&T's
right to terminate such plan). Until the Benefit Plan Determination Date, BB&T
shall continue in effect for the benefit of participating employees the Section
401(k) plan of FCNB. For purposes of administering BB&T's 401(k) plan, service
with FCNB and the FCNB Subsidiaries (including, as service with FCNB, service
with acquired entities recognized under the FCNB 401(k) Plan) 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) Each employee of FCNB or a FCNB Subsidiary at the Effective Time who
becomes an employee immediately following the Effective Time of an Employer
Entity (a "Transferred Employee") shall be eligible to participate in 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, as of the Benefit Plan Determination Date
with respect to each such plan or program, conditional upon the Transferred
Employee's being employed by an Employer Entity as of such Benefit Plan
Determination Date.
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With respect to any welfare benefit plan or program of FCNB that the Employer
Entity determines, in its sole discretion, provides benefits of the same type
or class as a corresponding plan or program maintained by the Employer Entity,
the Employer Entity shall continue such FCNB plan or program in effect for the
benefit of the Transferred Employees until they shall become eligible to become
participants in the corresponding plan or program maintained by the Employer
Entity (and, with respect to any such plan or program, subject to complying
with eligibility requirements and subject to the right of the Employer Entity
to terminate such plan or program). For purposes of administering each such
plan or program, service with FCNB 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 (except as otherwise provided in Section 5.12(c)).
(c) Each Transferred Employee who is terminated by an Employer Entity
subsequent to the Effective Time, excluding any employee who has an existing
employment or special termination agreement with is Disclosed, shall be
entitled to severance pay in accordance with the general severance policy
maintained by BB&T, if and to the extent that such employee is entitled to
severance pay under such policy. Notwithstanding the foregoing, FCNB has
previously adopted and has in effect a special severance plan (the "FCNB
Severance Plan") for officers at the level of Senior Vice President and higher.
In the event any Transferred Employee (excluding any employee who has an
existing employment or special termination agreement which is Disclosed) who
would have been entitled to severance pay under the FCNB Severance Plan if it
had continued in effect is terminated by an Employer Entity, such Transferred
Employee shall be entitled to receive the greater of the amount of the
severance payments under the FCNB Severance Plan or the amount of the severance
payments under the BB&T general severance policy. All severance payments as
provided in this Section 5.12(c) shall be payable pursuant to BB&T's general
severance policy. A Transferred Employee's service with FCNB or a FCNB
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 (and service
with an Employer Entity shall be deemed to be service with FCNB for purposes of
determining the amount of severance pay, if any, under the FCNB Severance
Plan).
(d) BB&T agrees to honor all employment agreements, severance agreements and
deferred compensation agreements that FCNB and the FCNB 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 except as
otherwise provided in this Agreement, all employee benefit plans of FCNB shall
be terminated or, in the sole discretion of BB&T, merged into comparable plans
of BB&T, effective as BB&T shall determine in its sole discretion.
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 FCNB and the FCNB
Bank Subsidiaries for acts or omissions occurring prior to the Effective Time.
Such insurance shall provide at least the same coverage and amounts as
contained in FCNB'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
FCNB'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 (including advancement of expenses
to the extent permitted by BB&T under its officer and director indemnification
procedures) all individuals who are or have been officers, directors or
employees of FCNB or any FCNB 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
or bylaws of FCNB or such FCNB Subsidiary, or permitted by the GCL (and not
limited by the FCNB Articles of Incorporation or bylaws) on the date hereof,
and in all cases only to the extent permitted under the NCBCA.
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5.14 Forbearances of BB&T
Except with the prior written consent of FCNB, 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 FCNB 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.
5.15 Reports
Each of FCNB and BB&T shall file (and shall cause the FCNB 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 FCNB, 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 FCNB 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 Frederick, Maryland Area
As of the Effective Time, BB&T shall offer to each of the members of the
Board of Directors of FCNB a seat on the Advisory Board for the BB&T Community
Bank region based in Frederick, Maryland. 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 FCNB in effect on
July 1, 2000. 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. Each such Advisory Board Member shall be reappointed to the Advisory
Board for the above area unless and until (i) he or she is deemed by BB&T to be
disqualified for good reason, (ii) BB&T no longer maintains an Advisory Board
for the above area, or (iii) the Member is prohibited from serving because he
or she has attained the maximum age for service thereon (currently age 70);
provided, that for five 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). Membership on
the Advisory Board shall be conditional upon execution by such person of an
agreement providing that such member will not engage in activities competitive
with BB&T for two years following the Effective Time.
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5.18 Board of Directors of Branch Banking and Trust Company
BB&T agrees that it shall take such actions as shall be necessary to cause
Branch Banking and Trust Company, a North Carolina banking corporation, to
elect A. Patrick Linton 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. BB&T agrees that A. Patrick Linton shall
be reelected to the Board of Directors of Branch Banking and Trust Company
(subject to his continuing to qualify) during the period that he serves as
Regional President or as a Consultant under the Employment Agreement between A.
Patrick Linton and BB&T of even date herewith, as amended from time to time.
Any member of such Board of Directors who is not an employee of BB&T or any of
its Affiliates shall be entitled to receive fees for service on the Board in
accordance with BB&T's policies as in effect from time to time.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent--BB&T and FCNB
The respective obligations of BB&T and FCNB 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 FCNB 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, FCNB or any of the FCNB
Subsidiaries shall be subject to any order, decree or injunction of a court
or agency of competent jurisdiction that enjoins or prohibits consummation
of the transactions contemplated by this Agreement; and
(e) FCNB and BB&T shall have received an opinion of BB&T's legal
counsel, in form and substance satisfactory to FCNB 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 FCNB will not
recognize any gain or loss to the extent that such shareholders exchange
shares of FCNB Common Stock for shares of BB&T Common Stock.
6.2 Conditions Precedent--FCNB
The obligations of FCNB 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 FCNB 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 FCNB. The representations and
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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). 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 FCNB a certificate, dated the Closing
Date and signed by its Chairman or President or an Executive Vice
President, to the effect that the conditions set forth in Sections 6.1(a),
6.1(b), 6.1(c), 6.1(d), 6.2(a) and 6.2(b), 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) FCNB shall have received opinions of counsel to BB&T substantially
in the form attached as Annex D 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 FCNB 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 FCNB 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). There shall not
exist inaccuracies in the representations and warranties of FCNB 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 FCNB (evaluated without regard
to the merger of FCNB into BB&T);
(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) FCNB shall have performed in all material respects all obligations
and complied in all material respects with all covenants required by this
Agreement;
(d) FCNB 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), to the
extent applicable to FCNB, 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 FCNB
or that present a claim to restrain or prohibit the transactions
contemplated herein or in the Plan of Merger;
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(e) BB&T shall have received opinions of counsel to FCNB substantially
in the form attached as Annex E hereto;
(f) BB&T shall have received the written agreements, substantially in
the form attached as Annex G hereto, from Affiliates as specified in
Section 5.11 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.
(h) BB&T shall have received an Employment Agreement substantially in
the form of Annex B hereto executed by A. Patrick Linton.
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) in the case of FCNB and Section 6.3(a) in the case of BB&T; and, in
the case of (i) or (ii), if such breach or inaccuracy has not been cured by
the earlier of thirty days following written notice of such breach to the
party committing such breach or the Effective Time.
(c) At any time prior to the Effective Time, by either party hereto in
writing, if any of the conditions precedent to the obligations of the other
party to consummate the transactions contemplated hereby cannot be
satisfied or fulfilled prior to the Closing Date, and the party giving the
notice is not in material breach of any of its representations, warranties,
covenants or undertakings herein.
(d) At any time, by either party hereto in writing, if any of the
applications for prior approval referred to in Section 5.4 are denied, and
the time period for appeals and requests for reconsideration has run.
(e) At any time, by either party hereto in writing, if the shareholders
of FCNB do not approve the Agreement and the Plan of Merger.
(f) At any time following February 28, 2001 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 material breach of any
of its representations, warranties, covenants or undertakings herein.
7.2 Effect of Termination
In the event this Agreement and the Plan of Merger is terminated pursuant
to Section 7.1, both this Agreement and the Plan of Merger shall become void
and have no effect, except that (i) the provisions hereof relating to
confidentiality and expenses set forth in Sections 5.7 and 8.1, respectively,
shall survive any such termination and (ii) a termination pursuant to Section
7.1(b) shall not relieve the breaching party from liability for 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.
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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 FCNB (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 FCNB, the
aforesaid representations, warranties and covenants being material inducements
to consummation by BB&T and FCNB 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 FCNB 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 FCNB
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 FCNB, 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 FCNB.
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 FCNB to enforce
rights in Sections 5.13, 5.17 and 5.18.
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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 FCNB:
A. Patrick Linton
7200 FCNB Court
Frederick, Maryland 21703
Telephone: 301-662-2191
Fax: 301- -
With a required copy to:
David H. Baris
Kennedy, Baris & Lundy, L.L.P.
4701 Sangamore Road, Suite P-15
Bethesda, Maryland 20816
Telephone: 301-229-3400
Fax: 301-229-2443
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
With a required copy to:
William A. Davis, II
Womble Carlyle Sandridge & Rice, PLLC
200 West Second Street
Winston-Salem, North Carolina 27102
Telephone: 336-721-3624
Fax: 336-733-8364
Any party may by notice change the address to which notice or other
communications to it are to be delivered.
8.5 Specific Performance
FCNB acknowledges that the FCNB Common Stock and the FCNB business and
assets are unique, and that if FCNB 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 FCNB shall, without cause, refuse to consummate the transactions
contemplated by this Agreement.
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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]
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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: _________________________________
John A. Allison, IV
Chairman and Chief Executive
Officer
FCNB CORP
By: _________________________________
A. Patrick Linton
President and Chief Executive
Officer
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ANNEX A-NC
ARTICLES OF MERGER
OF
FCNB CORP
WITH AND INTO
BB&T CORPORATION
The undersigned corporations, pursuant to Section 3-105 of the Maryland
General Corporation Law ("MGCL") and Section 55-11-05 of the North Carolina
Business Corporation Act ("NCBCA"), hereby execute the following Articles of
Merger.
ONE
The merger of FCNB Corp, a Maryland corporation ("FCNB"), with and into BB&T
Corporation, a North Carolina corporation ("BB&T"), shall be in accordance with
the Plan of Merger attached hereto as Exhibit I-NC (the "Plan of Merger").
TWO
The Plan of Merger was submitted to the shareholders of FCNB by its Board of
Directors in accordance with the provisions of Section 3-105 of the MGCL and
55-11-03 of the NCBCA and was duly approved in the manner prescribed by law by
the shareholders of FCNB on the day of , 200 . The shareholders of
BB&T were not required to approve the Plan of Merger.
THREE
These Articles of Merger shall become effective at 11:59 p.m. on ,
2001.
[Remainder of Page Intentionally Left Blank]
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The undersigned, each of BB&T and FCNB, declares the facts herein stated are
true as of , 2001.
BB&T CORPORATION
By: _________________________________
Name:
Title:
FCNB CORP
By: _________________________________
Name:
Title:
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EXHIBIT I-NC
PLAN OF MERGER
OF
FCNB CORP
WITH AND INTO
BB&T CORPORATION
Section 1. Corporations Proposing to Merge and Surviving Corporation. FCNB
Corp, a Maryland corporation ("FCNB"), shall be merged (the "Merger") with and
into BB&T Corporation, a North Carolina corporation ("BB&T"), pursuant to the
terms and conditions of this Plan of Merger (the "Plan of Merger") and of the
Agreement and Plan of Reorganization, dated as of July 26, 2000 (the
"Agreement"), by and among FCNB and BB&T. The effective time for the Merger
(the "Effective Time") shall be set forth in the Articles of Merger to be filed
with the Office of the Secretary of State of North Carolina and the Articles of
Merger to be filed with the Department of Assessments and Taxation of the State
of Maryland. BB&T shall continue as the surviving corporation (the "Surviving
Corporation") in the Merger and the separate corporate existence of FCNB shall
cease.
Section 2. Effects of the Merger. The Merger shall have the effects set
forth in Section 3-114 of the General Corporation Law of the State of Maryland
(the "MGCL") and in Section 55-11-06 of the North Carolina Business Corporation
Act (the "NCBCA").
Section 3. Articles of Incorporation and Bylaws. The Articles of
Incorporation and the Bylaws of BB&T as in effect immediately prior to the
Effective Time shall remain in effect as the Articles of Incorporation and
Bylaws of the Surviving Corporation following the Effective Time until changed
in accordance with their terms and the NCBCA.
Section 4. 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 FCNB or the holders of record of the voting common stock, par value
$1.00 per share, of FCNB ("FCNB Common Stock"), each share of FCNB 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 FCNB Common Stock (as provided in
Section 4(d)), 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 FCNB 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 FCNB Common Stock. With respect to any certificate for
FCNB 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
FCNB 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 FCNB 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 FCNB Common
Stock. Upon surrender of such certificates or other evidence of ownership
meeting the requirements of Section 4(c), together
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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 FCNB in respect of shares of FCNB Common Stock in
accordance with the terms of the Agreement and which remain unpaid at the
Effective Time, subject to compliance by FCNB with Section 5.9(b) of the
Agreement. To the extent permitted by law, former shareholders of record of
FCNB 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 FCNB Common Stock are converted, regardless of whether
such holders have exchanged their certificates representing FCNB Common Stock
for certificates representing BB&T Common Stock in accordance with the
provisions of the 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 the
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 FCNB Common
Stock until such holder surrenders such certificate for exchange as provided
in this Section 4. 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 FCNB Common Stock represented by such certificate.
Section 5. Merger Consideration
As used herein, the term "Merger Consideration" shall mean the number of
shares of the voting common stock, par value $5.00 per share, of BB&T ("BB&T
Common Stock") (to the nearest one-hundredth of a share) to be exchanged for
each share of FCNB Common Stock issued and outstanding as of the Effective
Time and cash (without interest) to be payable in exchange for any fractional
share of BB&T Common Stock which would otherwise be distributable to a FCNB
shareholder as provided in Section 4(d), determined as follows:
(a) The number of shares of BB&T Common Stock to be issued for each
issued and outstanding share of FCNB Common Stock shall be in the ratio of
.7250 shares of BB&T Common Stock for each share of FCNB 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 4:00
p.m. closing price per share of BB&T Common Stock on the NYSE Composite
Transaction List on the Closing Date as reported by NYSEnet.com.
Section 6. Conversion of Stock Options
(a) At the Effective Time, each option granted under FCNB's 1992 Stock
Option Plan (including the FCNB Amended and Restated Stock Option Plan for
Former Employees of Capital Bank, National Association) and 1997 Stock Option
Plan for Directors (the "Stock Option Plan") to acquire shares of FCNB Common
Stock then outstanding (and which by its terms does not lapse on or before the
Effective Time), whether or not then exercisable (a "Stock Option"), 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 FCNB and the Compensation
Committee of FCNB'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 FCNB
Common Stock subject to such Stock Option immediately prior to the Effective
Time by the
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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 FCNB shall take all necessary
steps to effectuate the foregoing provisions of this Section 5. 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 FCNB 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 Securities Exchange Act of 1934, as amended (the "Exchange
Act"), BB&T shall administer the Stock Option Plan assumed pursuant to this
Section 5 (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.
(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.
Section 7. Amendment. At any time before the Effective Time, this Plan of
Merger may be amended, provided that no such amendment executed after approval
by the FCNB shareholders of the Agreement and this Plan of Merger shall modify
either the amount or the form of the consideration to be provided to holders of
FCNB Common Stock upon consummation of the Merger.
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<PAGE>
ANNEX A-MD
ARTICLES OF MERGER
MERGING
FCNB CORP
(a Corporation of the State of Maryland)
INTO
BB&T CORPORATION
(a Corporation of the State of North Carolina)
First: BB&T Corporation, a corporation organized and existing under the laws
of the State of North Carolina ("BB&T"), and FCNB Corp, a corporation organized
and existing under the laws of the State of Maryland ("FCNB"), agree that FCNB
shall be merged into BB&T, pursuant to the terms of these Articles of Merger
and the Plan of Merger attached hereto as Exhibit I-MD.
Second: BB&T shall survive the merger and shall continue under the name BB&T
Corporation.
Third: The parties to the Articles of Merger are BB&T, a corporation
organized on the 24th day of September, 1968 under the North Carolina Business
Corporation Act, as amended, and FCNB, a corporation organized and existing
under the laws of the State of Maryland. BB&T is not required to be registered
or qualified in the State of Maryland.
Fourth: The principal office of FCNB is located in Frederick County, State
of Maryland. FCNB owns real property located at 7200 FCNB Court, Frederick,
Maryland.
Fifth: The location of the principal office of the surviving corporation in
the State of North Carolina, its state of incorporation, is 200 West Second
Street, Winston-Salem, North Carolina 27101, and the name and post office
address of the resident agent of the surviving corporation in Maryland is A.
Patrick Linton, 7200 FCNB Court, Frederick, Maryland 21703.
Sixth: The terms and conditions of the merger transaction as set forth in
these Articles of Merger and the Plan of Merger set forth as Exhibit I-MD
hereto were advised, authorized and approved by FCNB, in the manner and by the
vote required by its Articles of Incorporation and the laws of Maryland. The
manner in which the merger was approved is as follows:
The merger was (a) duly advised by the board of directors of FCNB by the
adoption on July 26, 2000 of a resolution approving the merger
substantially upon the terms and conditions set forth in these Articles of
Merger and directing that the proposed merger be submitted for action
thereon at a meeting of the stockholders of said corporation, and (b) duly
approved by the stockholders of said corporation in the manner and by the
vote required by law at the said meeting of the stockholders held on ,
200 , by the affirmative vote of the holders of at least two-thirds of all
the votes entitled to be cast on the matter by the holders of the only
class of stock entitled to vote separately thereon.
Seventh: The terms and conditions of the transaction as set forth in these
articles were duly advised and authorized and approved by said BB&T in the
manner and by the vote required by its Articles of Incorporation and the laws
of the State of North Carolina. The manner in which the merger was approved is
as follows:
The merger was duly advised by the board of directors of BB&T by the
adoption on July 26, 2000 of a resolution approving the merger
substantially upon the terms and conditions set forth in these Articles of
Merger.
Eighth: The total number of shares of stock of all classes which BB&T has
authority to issue is Five Hundred Five Million (505,000,000) shares, divided
into Five Hundred Million (500,000,000) shares of common stock, par value Five
Dollars ($5.00) per share, and Five Million (5,000,000) shares of preferred
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<PAGE>
stock, par value Five Dollars ($5.00) per share, for an aggregate par value of
Two Billion Five Hundred Twenty Five Million Dollars ($2,525,000,000).
The total number of shares of stock of all classes which FCNB has authority
to issue is shares of FCNB Common Stock, par value $1.00 per share, for an
aggregate par value of Dollars ($ ).
Ninth: The manner and basis of converting or exchanging issued stock of the
merged corporation into different stock or other consideration and the manner
of dealing with any issued stock of the merged corporation not to be so
converted or exchanged shall be as set forth in the Plan of Merger set forth as
Exhibit I-MD hereto and incorporated herein.
Tenth: The provisions of the Plan of Merger set forth as Exhibit I-MD hereto
are deemed necessary to effect the merger.
Eleventh: No amendment is made to the Articles of Incorporation of BB&T, the
surviving corporation in the Merger.
Twelfth: These Articles of Merger shall become effective as of p.m. on
, 2001.
IN WITNESS WHEREOF, FCNB and BB&T, the parties to the merger, have caused
these Articles of Merger to be signed in their respective corporate names and
on their behalf by their respective presidents or vice-presidents and witnessed
or attested by their respective secretaries or assistant secretaries, as of the
day of , 2001
FCNB CORP
By: _________________________________
President (or Vice-President)
Attest: (Witness:)
_____________________________________
Secretary (or Assistant Secretary)
BB&T CORPORATION
By: _________________________________
President (or Vice-President)
Attest: (Witness:)
_____________________________________
Secretary (or Assistant Secretary)
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<PAGE>
THE UNDERSIGNED, President (or Vice-President) of FCNB Corp, who executed on
behalf of said corporation the foregoing Articles of Merger, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles of Merger to be the corporate act of
said corporation and further certifies under the penalties for perjury that, to
the best of his knowledge, information and belief, the matters and facts set
forth therein with respect to the approval thereof are true in all material
respects.
FCNB CORP
By: _________________________________
Title:
THE UNDERSIGNED, President (or Vice-President) of BB&T Corporation, who
executed on behalf of said corporation the foregoing Articles of Merger, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said corporation, the foregoing Articles of Merger to be the
corporate act of said corporation and further certifies under the penalties for
perjury that, to the best of his knowledge, information and belief, the matters
and facts set forth therein with respect to the approval thereof are true in
all material respects.
BB&T CORPORATION
By: _________________________________
Title:
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<PAGE>
EXHIBIT I-MD
PLAN OF MERGER
OF
FCNB CORP
WITH AND INTO
BB&T CORPORATION
Section 1. Corporations Proposing to Merge and Surviving Corporation. FCNB
Corp, a Maryland corporation ("FCNB"), shall be merged (the "Merger") with and
into BB&T Corporation, a North Carolina corporation ("BB&T"), pursuant to the
terms and conditions of this Plan of Merger (the "Plan of Merger") and of the
Agreement and Plan of Reorganization, dated as of July 26, 2000 (the
"Agreement"), by and among FCNB and BB&T. The effective time for the Merger
(the "Effective Time") shall be set forth in the Articles of Merger to be filed
with the Office of the Secretary of State of North Carolina and the Articles of
Merger to be filed with the Department of Assessments and Taxation of the State
of Maryland. BB&T shall continue as the surviving corporation (the "Surviving
Corporation") in the Merger and the separate corporate existence of FCNB shall
cease.
Section 2. Effects of the Merger. The Merger shall have the effects set
forth in Section 3-114 of the General Corporation Law of the State of Maryland
(the "MGCL") and in Section 55-11-06 of the North Carolina Business Corporation
Act (the "NCBCA").
Section 3. Articles of Incorporation and Bylaws. The Articles of
Incorporation and the Bylaws of BB&T as in effect immediately prior to the
Effective Time shall remain in effect as the Articles of Incorporation and
Bylaws of the Surviving Corporation following the Effective Time until changed
in accordance with their terms and the NCBCA.
Section 4. 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 FCNB or the holders of record of the voting common stock, par value
$1.00 per share, of FCNB ("FCNB Common Stock"), each share of FCNB 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 FCNB Common Stock (as provided in
Section 4(d)), 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 FCNB 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 FCNB Common Stock. With respect to any certificate for
FCNB 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
FCNB 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 FCNB 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 FCNB Common
Stock. Upon surrender of such certificates or other evidence of ownership
meeting the requirements of Section 4(c), together
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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 FCNB in respect of shares of FCNB Common Stock in accordance with the terms
of the Agreement and which remain unpaid at the Effective Time, subject to
compliance by FCNB with Section 5.9(b) of the Agreement. To the extent
permitted by law, former shareholders of record of FCNB 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 FCNB
Common Stock are converted, regardless of whether such holders have exchanged
their certificates representing FCNB Common Stock for certificates representing
BB&T Common Stock in accordance with the provisions of the 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 the 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 FCNB Common Stock until such holder surrenders such certificate
for exchange as provided in this Section 4. 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 FCNB Common Stock represented by such certificate.
Section 5. Merger Consideration
As used herein, the term "Merger Consideration" shall mean the number of
shares of the voting common stock, par value $5.00 per share, of BB&T ("BB&T
Common Stock") (to the nearest one-hundredth of a share) to be exchanged for
each share of FCNB Common Stock issued and outstanding as of the Effective Time
and cash (without interest) to be payable in exchange for any fractional share
of BB&T Common Stock which would otherwise be distributable to a FCNB
shareholder as provided in Section 4(d), determined as follows:
(a) The number of shares of BB&T Common Stock to be issued for each
issued and outstanding share of FCNB Common Stock shall be in the ratio of
.7250 shares of BB&T Common Stock for each share of FCNB 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 4:00
p.m. closing price per share of BB&T Common Stock on the NYSE Composite
Transaction List on the Closing Date as reported by NYSEnet.com.
Section 6. Conversion of Stock Options
(a) At the Effective Time, each option granted under FCNB's 1992 Stock
Option Plan (including the FCNB Amended and Restated Stock Option Plan for
Former Employees of Capital Bank, National Association) and 1997 Stock Option
Plan for Directors (the "Stock Option Plan") to acquire shares of FCNB Common
Stock then outstanding (and which by its terms does not lapse on or before the
Effective Time), whether or not then exercisable (a "Stock Option"), 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 FCNB and the Compensation
Committee of FCNB'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 FCNB
Common Stock subject to such Stock Option immediately prior to the Effective
Time by the
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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 FCNB shall take all necessary
steps to effectuate the foregoing provisions of this Section 5. 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 FCNB 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 Securities Exchange Act of 1934, as amended (the "Exchange
Act"), BB&T shall administer the Stock Option Plan assumed pursuant to this
Section 5 (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.
(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.
Section 7. Amendment. At any time before the Effective Time, this Plan of
Merger may be amended, provided that no such amendment executed after approval
by the FCNB shareholders of the Agreement and this Plan of Merger shall modify
either the amount or the form of the consideration to be provided to holders of
FCNB Common Stock upon consummation of the Merger.
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<PAGE>
Appendix B
[To be updated to the date of the proxy statement/prospectus]
[Letterhead of Danielson Associates Inc.]
July 26, 2000
Board of Directors
FCNB Corp.
7200 FCNB Court
Frederick, Maryland 21703
Dear Members of the Board:
Set forth herein is the opinion of Danielson Associates Inc. ("Danielson
Associates") as to the "fairness" of the offer by BB&T Corporation ("BB&T") of
Winston-Salem, North Carolina to acquire all of the common stock of FCNB Corp.
("FCNB") of Frederick, Maryland through an exchange of stock valued at the time
of the announcement of about $221.9 million, and to convert the options to buy
FCNB common stock into options to buy BB&T common stock. The "fair" sale value
is defined as the price at which all of the shares of FCNB's common stock would
change hands between a willing seller and a willing buyer, each having
reasonable knowledge of the relevant facts. In opining as to the "fairness" of
the offer, it also had to be determined if the BB&T common stock that is to be
exchanged for FCNB's stock is "fairly" valued.
In preparing the opinion, FCNB's and BB&T's markets and performance were
analyzed and their business and prospects were reviewed. Also conducted were
other financial analyses as we deemed appropriate such as comparable company
analyses, comparable transactions and pro forma dilution. Any unique
characteristics also were considered.
This opinion is based partly on data supplied to Danielson Associates by
FCNB and BB&T, but it relied on some public information all of which was
believed to be reliable, but neither the completeness nor accuracy of such
information could be guaranteed. In particular, the opinion has assumed, based
on BB&T's management's representation, that there were no significant asset
quality problems at BB&T beyond what was stated in recent reports to regulatory
agencies and in the monthly report to the directors.
In determining the "fair" sale value of FCNB, the primary emphasis was on
prices paid relative to earnings for Middle Atlantic banks that had similar
financial, structural and market characteristics. These prices were then
related to equity capital, also referred to as "book."
The "fair" market value of BB&T's common stock to be exchanged for FCNB
stock was determined by comparisons with other similar bank holding companies.
The comparisons showed BB&T's stock to be valued above that of the comparable
bank holding companies, but within a range of "fairness."
Based on FCNB's recent performance, its future potential and comparisons
with similar transactions, it has been determined that FCNB's "fair" sale value
is between $209 and $230 million, or $17.54 to $19.23 per share. Thus, BB&T's
offer of $221.9 million, or $18.58 per share, through an exchange of BB&T
common stock, which is "fairly" valued, for FCNB common stock is a "fair" offer
for FCNB and its shareholders from a financial point of view.
Respectfully submitted,
Arnold G. Danielson
Chairman
Danielson Associates Inc.
B-1
<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 July 26, 2000,
between BB&T Corporation and FCNB Corp (included as Appendix A to
the Proxy Statement/Prospectus)
4(a) Articles of Amendment to Amended and Restated Articles of
Incorporation of the Registrant related to Junior Participating
Preferred Stock (Incorporated herein by reference to Exhibit 3(a)
to the Registrant's Annual Report on Form 10-K filed March 17,
1997)
4(b) Rights Agreement dated as of December 17, 1996 between the
Registrant and Branch Banking and Trust Company, Rights Agent
(Incorporated herein by reference to Exhibit 1 to the Registrant's
Form 8-A filed January 10, 1997)
4(c) Subordinated Indenture (including Form of Subordinated Debt
Security) between the Registrant and State Street Bank and Trust
Company, Trustee, dated as of May 24, 1996 (Incorporated herein by
reference to Exhibit 4(d) to Registration No. 333-02899)
4(d) Senior Indenture (including Form of Senior Debt Security) between
the Registrant and State Street Bank and Trust company, Trustee,
dated as of May 24, 1996 (Incorporated herein by reference to
Exhibit 4(c) to Registration No. 333-02899)
5 Form of Opinion of Womble Carlyle Sandridge & Rice, PLLC
8 Form of Opinion of Womble Carlyle Sandridge & Rice, PLLC
23(a) Consent of Womble Carlyle Sandridge & Rice, PLLC (included in
Exhibit 5)*
23(b) Consent of Womble Carlyle Sandridge & Rice, PLLC (included in
Exhibit 8)*
23(c) Consent of Arthur Andersen LLP
23(d) Consent of Keller Bruner & Company, L.L.P.
23(e) Consent of Danielson Associates, Inc. *
24 Power of Attorney
99(a) Form of FCNB Corp Proxy Card
99(b) Option Agreement dated as of July 26, 2000 between BB&T
Corporation and FCNB Corp
</TABLE>
--------
* to be filed by amendment
(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
II-2
<PAGE>
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
D. The registrant undertakes that every prospectus (i) that is filed
pursuant to Paragraph (C) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
E. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
F. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
G. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-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 September 18, 2000.
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 September 18, 2000.
/s/ John A. Allison*
_____________________________________
Name: John A. Allison, IV
Title: Chairman of the Board and
Chief Executive Officer
(principal executive officer)
/s/ Sherry A. Kellett*
_____________________________________
Name: Sherry A. Kellett
Title: Executive Vice President and
Controller (principal
accounting officer)
/s/ Nelle Ratrie Chilton*
_____________________________________
Name: Nelle Ratrie Chilton
Title: Director
/s/ W. R. Cuthbertson, Jr.*
_____________________________________
Name: W. R. Cuthbertson, Jr.
Title: Director
/s/ A. J. Dooley, Sr.*
_____________________________________
Name: A. J. Dooley, Sr.
Title: Director
/s/ Paul S. Goldsmith*
_____________________________________
Name: Paul S. Goldsmith
Title: Director
/s/ Jane P. Helm*
_____________________________________
Name: Jane P. Helm
Title: Director
/s/ J. Ernest Lathem, M.D.*
_____________________________________
Name: J. Ernest Lathem, M.D.
Title: Director
/s/ Scott E. Reed*
_____________________________________
Name: Scott E. Reed
Title: Senior Executive Vice
President and Chief Financial
Officer (principal financial
officer)
/s/ Paul B. Barringer*
_____________________________________
Name: Paul B. Barringer
Title: Director
/s/ Alfred E. Cleveland*
_____________________________________
Name: Alfred E. Cleveland
Title: Director
/s/ Ronald E. Deal*
_____________________________________
Name: Ronald E. Deal
Title: Director
_____________________________________
Name: Tom D. Efird
Title: Director
/s/ L. Vincent Hackley*
_____________________________________
Name: L. Vincent Hackley
Title: Director
/s/ Richard Janeway, M.D.*
_____________________________________
Name: Richard Janeway, M.D.
Title: Director
/s/ James H. Maynard*
_____________________________________
Name: James H. Maynard
Title: Director
II-4
<PAGE>
/s/ Joseph A. McAleer, Jr.*
_____________________________________
Name: Joseph A. McAleer, Jr.
Title: Director
/s/ J. Holmes Morrison*
_____________________________________
Name: J. Holmes Morrison
Title: Director
/s/ C. Edward Pleasants*
_____________________________________
Name: C. Edward Pleasants
Title: Director
/s/ E. Rhone Sasser*
_____________________________________
Name: E. Rhone Sasser
Title: Director
/s/ Harold B. Wells*
_____________________________________
Name: Harold B. Wells
Title: Director
/s/ Jerone C. Herring
*By: ________________________________
Jerone C. Herring
Attorney-in-Fact
/s/ Albert O. McCauley*
_____________________________________
Name: Albert O. McCauley
Title: Director
/s/ Richard L. Player, Jr.*
_____________________________________
Name: Richard L. Player, Jr.
Title: Director
/s/ Nido R. Qubein*
_____________________________________
Name: Nido R. Qubein
Title: Director
/s/ Jack E. Shaw*
_____________________________________
Name: Jack E. Shaw
Title: Director
II-5
