As Filed with the Securities and Exchange Commission on March 6, 2001
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 Industrial (I.R.S. Employer
jurisdiction Classification Code Number) Identification Number)
of incorporation or
organization)
200 West Second Street
Winston-Salem, North Carolina 27101
(336) 733-2000
(Address, including Zip Code, and telephone number, including
area code, of registrant's principal executive offices)
Jerone C. Herring, Esq.
200 West Second Street, 3rd Floor
Winston-Salem, North Carolina 27101
(336) 733-2180
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
The Commission is requested to send copies of
all communications to:
Peter A. Zorn, Esq. Lori M. Beresford, Esq.
Womble Carlyle Sandridge & Rice, PLLC Muldoon, Murphy & Faucette LLP
200 West Second Street, 17th Floor 5101 Wisconsin Ave., N.W.
Winston-Salem, North Carolina 27101 Washington, DC 20016
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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
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Proposed Proposed
Amount maximum maximum Amount of
Title of each class of to be offering price aggregate registration
securities to be registered registered per unit offering price fee
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Common Stock,
par value $5.00 per share(1).. 6,320,378 (2) $191,645,113(3) $47,912
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(1) Each share of the registrant's common stock includes one preferred share
purchase right.
(2) Not applicable.
(3) Computed in accordance with Rule 457(f) based on the average of the high
($18.50) and low ($18.25) sales price of the common stock of Virginia
Capital Bancshares, Inc. on March 1, 2001 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 ef-
fective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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Virginia Capital Bancshares, Inc.
400 George Street
Fredericksburg, Virginia 22404
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE , 2001
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Virginia Capital Bancshares, Inc. will hold a special meeting of shareholders
on , June , 2001 at 10:00 a.m. Eastern time, at the , for
the following purposes:
. To consider and vote on the proposed merger of Virginia Capital into
BB&T Corporation. In the merger, each share of Virginia Capital common
stock will be automatically converted into not less than 0.4958 or more
than 0.6060 of a share of common stock of BB&T, plus cash in lieu of any
fractional share of BB&T common stock, all as described in more detail
in the accompanying proxy statement/prospectus. A copy of the merger
agreement is attached as Appendix A to the accompanying proxy
statement/prospectus.
. To transact any other business that may properly come before the meeting
or any adjournment or postponement of the meeting.
Holders of Virginia Capital common stock as of the close of business on
, 2001 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 the record holder in order to vote personally at the meet-
ing.
The proxy statement/prospectus follows this notice, and a proxy card is en-
closed. 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. You may revoke your proxy at any
time before it is voted at the meeting. If you attend the meeting, you may re-
voke 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
Peggy J. Newman, Corporate Secretary
Fredericksburg, Virginia
, 2001
Please complete and sign the enclosed proxy and return it promptly in the
envelope provided, whether or not you plan to attend the meeting.
[Virginia Capital logo]
Special Meeting of Shareholders
MERGER PROPOSAL -- YOUR VOTE IS VERY IMPORTANT
The Board of Directors of Virginia Capital Bancshares, Inc. has unanimously
approved a merger combining Virginia Capital and BB&T Corporation. In the
merger, you will receive not less than 0.4958 or more than 0.6060 of a share of
BB&T common stock for each share of Virginia Capital common stock that you own,
depending on the average reported closing price of BB&T common stock over the
ten-trading day period ending on the day before the special meeting of Virginia
Capital shareholders to vote on the merger.
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 Virginia Capital's strengths as a community-oriented
institution serving Fredericksburg, Virginia and the greater Washington D.C.-
Baltimore metropolitan service area with BB&T's position as a leading bank
throughout the Carolinas, West Virginia, Virginia, Washington D.C. and parts of
Maryland, Georgia, Kentucky and Tennessee.
At the special meeting, you will consider and vote on the merger agreement. The
merger cannot be completed unless holders of more than two-thirds of the shares
of Virginia Capital common stock entitled to vote approve the merger agreement.
Virginia Capital's Board of Directors believes the merger is in the best
interests of Virginia Capital 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 April , 2001, the closing price of BB&T common stock was $ , making
the value of of a share of BB&T common stock (which is what Virginia
Capital shareholders would receive for each share of Virginia Capital common
stock if the average closing price of BB&T common stock over the ten-trading
day pricing period was $ ) equal to $ . This price will, however, fluctuate
between now and the merger.
The special meeting will be held at 10:00 a.m., Eastern time, on , June ,
2001 at the .
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 Virginia Capital 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 [insert date five business days prior to
meeting] from the appropriate company at the following addresses:
BB&T Corporation Virginia Capital
Shareholder Bancshares, Inc.
Reporting 400 George Street
Post Office Box Fredericksburg,
1290 Virginia 22404
Winston-Salem, (540) 899-5500
North Carolina Attn: Corporate
27102 Secretary
(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, Virginia Capital's Corporate 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 the record holder to vote in person at the meeting.
On behalf of the Board of Directors of Virginia Capital, I urge you to vote
"FOR" approval and adoption of the merger agreement.
Samuel C. Harding, Jr., President
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 common 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 , 2001 and is expected to be
first mailed to shareholders of Virginia Capital on or about , 2001.
TABLE OF CONTENTS
A WARNING ABOUT FORWARD-LOOKING INFORMATION................................ iii
SUMMARY.................................................................... 1
MEETING OF SHAREHOLDERS.................................................... 9
General.................................................................. 9
Who Can Vote at the Meeting.............................................. 9
Attending the Meeting.................................................... 9
Vote Required............................................................ 9
Voting and Revocation of Proxies......................................... 10
Solicitation of Proxies.................................................. 10
Participants in Fredericksburg State Bank's Employee Stock Ownership
Plan.................................................................... 11
Recommendation of the Virginia Capital Board............................. 11
THE MERGER................................................................. 12
General.................................................................. 12
Background of and Reasons for the Merger................................. 12
Opinion of Virginia Capital's Financial Advisor.......................... 16
Material Federal Income Tax Consequences of the Merger................... 21
Exchange Ratio........................................................... 23
Exchange of Virginia Capital Stock Certificates.......................... 23
The Merger Agreement..................................................... 24
Interests of Virginia Capital's Directors and Officers in the Merger That
Differ from Yours....................................................... 30
Regulatory Considerations................................................ 33
Accounting Treatment..................................................... 34
Stock Option Agreement................................................... 35
Effect on Employee Benefit Plans and Stock Options....................... 37
Restrictions on Resales by Affiliates.................................... 39
No Appraisal or Dissenters' Rights....................................... 40
INFORMATION ABOUT BB&T..................................................... 40
General.................................................................. 40
Operating Subsidiaries................................................... 40
Acquisitions............................................................. 41
Capital.................................................................. 42
Deposit Insurance Assessments............................................ 43
Additional Information................................................... 43
INFORMATION ABOUT VIRGINIA CAPITAL......................................... 44
DESCRIPTION OF BB&T CAPITAL STOCK.......................................... 44
General.................................................................. 44
BB&T Common Stock........................................................ 44
BB&T Preferred Stock..................................................... 45
Shareholder Rights Plan.................................................. 45
Other Anti-Takeover Provisions........................................... 47
COMPARISON OF THE RIGHTS OF BB&T SHAREHOLDERS AND VIRGINIA CAPITAL
SHAREHOLDERS.............................................................. 48
Authorized Capital Stock................................................. 48
Special Meetings of Shareholders......................................... 49
i
Directors................................................................ 49
Dividends and Other Distributions........................................ 49
Shareholder Nominations and Shareholder Proposals........................ 50
Discharge of Duties; Exculpation and Indemnification..................... 51
Mergers, Share Exchanges and Sales of Assets............................. 51
Anti-takeover Statutes................................................... 52
Amendments to Articles of Incorporation and Bylaws....................... 53
Consideration of Business Combinations................................... 53
Shareholders' Rights of Dissent and Appraisal............................ 54
Liquidation Rights....................................................... 54
Limitations on Voting Rights............................................. 55
SHAREHOLDER PROPOSALS...................................................... 55
OTHER BUSINESS............................................................. 55
LEGAL MATTERS.............................................................. 55
EXPERTS.................................................................... 56
WHERE YOU CAN FIND MORE INFORMATION........................................ 56
Appendix A--Agreement and Plan of Reorganization (excluding certain
annexes)
Appendix B--Fairness Opinion of Trident Securities [to be updated]
ii
A WARNING ABOUT FORWARD-LOOKING INFORMATION
BB&T and Virginia Capital 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 as-
sumptions of the management of BB&T and Virginia Capital 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 Virginia Capital as of
the date of the merger agreement, and should be read in connection with the no-
tices about forward-looking statements made by each of BB&T and Virginia Capi-
tal in its reports filed under the Securities Exchange Act of 1934. Forward-
looking statements include the information concerning possible or assumed fu-
ture results of operations of BB&T or Virginia Capital set forth under "Summa-
ry" and "The Merger--Background of and Reasons for the Merger" and statements
preceded by, followed by or that include the words "believes," "expects," "as-
sumes," "anticipates," "intends," "plans," "estimates" or other similar expres-
sions. See "Where You Can Find More Information" on page .
BB&T and Virginia Capital have made statements in this document and in other
documents to which this document refers regarding estimated earnings per share
of BB&T and Virginia Capital on a stand-alone basis, expected cost savings from
the merger, the anticipated accretive effect of the merger and BB&T's antici-
pated performance in future periods. With respect to estimated cost savings,
BB&T has made assumptions about, among other things, the extent of operational
overlap between BB&T and Virginia Capital, the amount of general and adminis-
trative expense consolidation, costs relating to converting Virginia Capital'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 ac-
counting reserve policies and the costs related to the merger. The realization
of cost savings are subject to the risk that the foregoing assumptions prove to
be incorrect, and actual results may be materially different from those ex-
pressed 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 var-
ious risks relating to, among other things, the following:
. expected cost savings from the merger or other previously announced
mergers may not be fully realized or realized within the expected time
frame;
. the loss of deposits, customers or revenues following the merger or
other previously announced mergers may be greater than expected;
. competitive pressures among depository and other financial institutions
may increase significantly;
. costs or difficulties related to the integration of the businesses of
BB&T and its merger partners, including Virginia Capital, may be greater
than expected;
. changes in the interest rate environment may reduce margins or the vol-
umes or values of loans made or held;
. general economic or business conditions, either nationally or in the
states or regions in which BB&T and Virginia Capital do business, may be
less favorable than expected, resulting in, among other things, a dete-
rioration in credit quality or a reduced demand for credit;
. legislative or regulatory changes, including changes in accounting stan-
dards, may adversely affect the businesses in which BB&T and Virginia
Capital are engaged;
. adverse changes may occur in the securities markets; and
. competitors of BB&T and Virginia Capital may develop products that ena-
ble them to compete more successfully than BB&T and Virginia Capital.
iii
Management of each of BB&T and Virginia Capital believes the forward-looking
statements about its company are reasonable. However, shareholders of Virginia
Capital should not place undue reliance on them. Forward-looking statements are
not guarantees of performance. They involve risks, uncertainties and assump-
tions. 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 re-
sults and values are beyond BB&T's and Virginia Capital'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
Virginia Capital 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 Virginia Capital 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.
iv
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is impor-
tant 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 docu-
ment and the documents to which we refer you. See "Where You Can Find More In-
formation" on page .
Exchange Ratio to be not less than 0.4958 or more than 0.6060 of a Share of
BB&T Common Stock for each Share of Virginia Capital Common Stock
If the merger is completed, you will receive not less than 0.4958 or more
than 0.6060 of a share of BB&T common stock for each share of Virginia Capital
common stock you own, plus cash in lieu of any fractional share of BB&T common
stock that would otherwise be issued. The portion of a share of BB&T common
stock that you will receive will depend on the average reported closing price
of BB&T common stock over the ten-trading day period ending on the day before
the special meeting of Virginia Capital shareholders to vote on the merger:
. if the average closing price is $37.31 or more, you will receive 0.4958
of a share of BB&T common stock for each share of Virginia Capital com-
mon stock that you own;
. if the average closing price is $30.53 or less, you will receive 0.6060
of a share of BB&T common stock for each share of Virginia Capital com-
mon stock that you own; and
. if the average closing price is greater than $30.53 and less than
$37.31, you will receive a portion of a share of BB&T common stock equal
to $18.50 divided by the average closing price for each share of Vir-
ginia Capital common stock that you own.
On April , 2001, the closing price of BB&T common stock was $ . Because
the market price of BB&T common 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, repre-
sentations 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 conver-
sion of shares of Virginia Capital common stock into shares of BB&T common
stock. You will be taxed, however, if you receive any cash in lieu of a frac-
tional 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 38% 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.
Virginia Capital Board Unanimously Recommends Shareholder Approval (Page )
The Virginia Capital Board of Directors believes that the merger is in the
best interests of Virginia Capital shareholders and unanimously recommends that
you vote "FOR" approval of the merger agreement. The Virginia Capital Board be-
lieves that, as a result of the merger, you will be able to achieve greater
value than you would if Virginia Capital remained independent.
Exchange Ratio Fair to Shareholders According to Virginia Capital's Financial
Advisor (Page )
Virginia Capital's financial advisor, Trident Securities, a Division of Mc-
Donald Investments,
Inc., has given an opinion to the Virginia Capital Board that, as of [the date
of this proxy statement/ prospectus], the exchange ratio in the merger is fair
from a financial point of view to you as holders of Virginia Capital common
stock. [to be updated] The full text of this opinion is attached as Appendix B
to this proxy statement/prospectus. We encourage you to read the opinion care-
fully to understand the assumptions made, matters considered and limitations of
the review undertaken by Trident Securities in rendering its fairness opinion.
Virginia Capital has agreed to pay Trident a fee equal to a percentage of the
merger consideration received in the merger. Based on an assumed merger consid-
eration value of $18.50 per share of Virginia Capital common stock, Trident's
total fee would be approximately $765,000. Trident has received $145,000 as of
the date of this proxy statement/ prospectus.
Virginia Capital Shareholders Do Not Have Dissent and Appraisal Rights (Page )
Under Virginia law, you do not have the right to dissent from the merger and
to demand a statutory appraisal of the fair value of your shares of Virginia
Capital common stock.
Meeting to be held June , 2001 (Page )
Virginia Capital will hold the special shareholders' meeting at 10:00 a.m.,
Eastern time, on , June , 2001 at , located at . At the meet-
ing, 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 $[60.9] billion in as-
sets. It is the [fifth] largest financial holding company in the Southeast and,
through its banking subsidiaries, operates [889] branch offices in the Caroli-
nas, Georgia, Virginia, Maryland, West Virginia, Tennessee, Kentucky and Wash-
ington, D.C. BB&T ranks [first] in deposit market share in West Virginia, [sec-
ond] in North Carolina and [third] in South Carolina, and maintains a signifi-
cant market presence in Virginia, Maryland, Georgia and Washington, D.C. [to be
updated]
Virginia Capital Bancshares, Inc.
380 East Main Street
Fredericksburg, Virginia 22404
(550) 899-5500
Virginia Capital Bancshares, Inc., with $532.7 million in assets, operates
one banking office in Fredericksburg, Virginia, two banking offices in Spotsyl-
vania County, Virginia and one banking office in Stafford County, Virginia
through its banking subsidiary, Fredericksburg State Bank.
The Merger (Page )
In the merger, Virginia Capital will merge into BB&T, and Virginia Capital's
banking subsidiary, through which it operates, will become a wholly owned sub-
sidiary of BB&T. If the Virginia Capital shareholders approve the merger agree-
ment at the special meeting, we currently expect to complete the merger in the
[third] 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 in full, as
it is the legal document that governs the merger.
More than Two-Thirds Virginia Capital Shareholder Vote Required (Page )
Approval of the merger agreement requires the affirmative vote of the holders
of more than two-thirds of the outstanding shares of Virginia Capital common
stock entitled to vote. 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 Virginia Capital and their affiliates together owned
about % of the Virginia Capital common stock 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 Virginia Capital stock as nominees will not have
authority to vote them on the merger unless the beneficial owners of
2
those shares provide voting instructions. If you hold your shares in street
name, please see the voting form provided by your broker for additional infor-
mation 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 , 2001; One Vote per Share of Virginia Capital Common
Stock (Page )
If you owned shares of Virginia Capital common stock at the close of busi-
ness on , 2001, the record date, you are entitled to vote on the merger
agreement and any other matters that may be properly considered at the meet-
ing.
On the record date, there were [9,289,280] shares of Virginia Capital common
stock outstanding. At the meeting, you will have one vote for each share of
Virginia Capital common stock that you owned on the record date.
Interests of Our Directors and Officers in the Merger that Differ From Your
Interests (Page )
When considering the recommendation of the Virginia Capital Board, you
should be aware that some of Virginia Capital's directors and officers have
interests in the merger that differ from, or are in addition to, the interests
of other Virginia Capital shareholders. These interests exist because of
rights under benefit and compensation plans maintained by Virginia Capital
and, in the case of certain executive officers of Virginia Capital, under em-
ployment agreements with Branch Banking and Trust Company of Virginia, BB&T's
Virginia banking subsidiary ("Branch Bank-VA"), that will become effective
upon completion of the merger.
Stock-Based Benefit Plans. As a result of the merger, restricted stock and
stock options awarded under Virginia Capital's 1999 Stock-Based Incentive Plan
will vest. Directors and executive officers of Virginia Capital currently hold
[291,956] shares of unvested restricted stock and unvested stock options to
acquire [729,906] shares of Virginia Capital common stock.
Employment Agreements. Virginia Capital's President, Samuel C. Harding, Jr.,
and Executive Vice President, Secretary and Treasurer, Peggy J. Newman, have
agreed to employment agreements with Branch Bank-VA that will become effective
upon completion of the merger pursuant to which each will become a Senior Vice
President of Branch Bank-VA. Each agreement provides for an employment term to
extend until the later of March 31, 2002 or the sixty-first day after the con-
version of Virginia Capital's data services systems to BB&T's data services
systems at an annual base salary at least equal to $251,750, plus additional
payments if the data services systems conversion is substantially completed
and the employee remains with BB&T through the end of the employment term.
Each agreement also provides for a five-year consulting term following the em-
ployment term during which Mr. Harding and Ms. Newman will receive additional
amounts.
Each employment agreement may also provide for severance payments and other
benefits if employment is terminated following the merger.
Fredericksburg, Virginia Advisory Board. The members of the Virginia Capital
Board who execute a noncompetition agreement with BB&T will be offered a posi-
tion on BB&T's local advisory board for the Fredericksburg, Virginia area. For
at least two years after the merger, the advisory board members will receive
fees equal in amount to the retainer and schedule of attendance fees for di-
rectors of Virginia Capital in effect on December 1, 2000.
The material terms and financial provisions of these arrangements are de-
scribed under the heading "Interests of Virginia Capital's Directors and Offi-
cers in the Merger That Differ From Yours" on page . The Virginia Capital
Board was aware of these and other interests and considered them when it ap-
proved 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
3
approves it. We have filed an application with the Federal Reserve Board seek-
ing its approval. In addition, the merger is subject to the approval of, or no-
tice 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 regula-
tory approvals in a timely manner, we cannot be certain when we will obtain
them or that we will obtain them at all. [to be updated]
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, in-
cluding:
. approval of the merger agreement by the Virginia Capital shareholders;
. receipt of the opinion of BB&T's counsel concerning the tax consequences
of the merger;
. the continuing accuracy of the parties' representations in the merger
agreement; and
. the continuing effectiveness of the registration statement filed with
the Securities and Exchange Commission covering the shares of BB&T com-
mon stock to be issued in the merger.
Termination and Amendment of the Merger Agreement (Page )
We can agree at any time to terminate the merger agreement without completing
the merger. Either company can also unilaterally terminate the merger agreement
if:
. the merger is not completed by October 31, 2001;
. any condition that must be satisfied to complete the merger is not met;
or
. the other company violates, in a material way, any of its representa-
tions, warranties or obligations under the merger agreement and the vio-
lation is not cured in a timely fashion.
Generally, the company seeking to terminate cannot itself be in violation of
the merger agreement in a manner that would allow the other party to terminate
the merger agreement.
In addition:
. BB&T can terminate the merger agreement if the Virginia Capital Board
withdraws, modifies, conditions or refuses to make its recommendation
that the Virginia Capital shareholders vote to approve the merger agree-
ment; and
. Virginia Capital can terminate the merger agreement if:
. the value of the portion of a share of BB&T common stock to be
received for each share of Virginia Capital common stock (based on
the average closing price of BB&T common stock over the ten-trading
day pricing period) is less than $16.53; and
. BB&T does not notify Virginia Capital in a timely manner that it will
increase the merger consideration in the form of cash, BB&T common
stock or a combination of cash and BB&T common stock so that the
consideration to be received for each share of Virginia Capital
common stock equals $16.53.
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 re-
ceive 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. 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 Virginia Capital Board determines to proceed
with the merger, Virginia Capital will inform you and ask you to vote again on
the merger agreement.
Option Agreement (Page )
As a condition to its offer to acquire Virginia Capital, and to discourage
other companies from
4
attempting to acquire Virginia Capital, BB&T required Virginia Capital to grant
BB&T a stock option that allows BB&T to buy up to 1,848,560 shares of Virginia
Capital'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 ac-
quire control of Virginia Capital. As of the date of this document, we do not
believe that has occurred.
BB&T to Use Purchase Accounting Treatment (Page )
BB&T expects to account for the merger using the purchase method of account-
ing. Under the purchase method, BB&T will record, at fair value, the acquired
assets and assumed liabilities of Virginia Capital. To the extent the total
purchase price exceeds the fair value of assets acquired and liabilities as-
sumed, BB&T will record goodwill. Any goodwill will be amortized over the pe-
riod of the expected benefit. BB&T will include in its consolidated results of
operations the results of Virginia Capital's operations after the merger is
completed.
Share Price Information (Page )
Virginia Capital common stock is traded on the Nasdaq National Market under
the symbol "VCAP" and BB&T common stock is listed on the New York Stock Ex-
change under the symbol "BBT." On January 23, 2001, the last full trading day
before public announcement of the proposed merger, Virginia Capital common
stock closed at $20.50, and BB&T common stock closed at $37.3125. On April ,
2001, Virginia Capital common stock closed at $ , and BB&T common stock
closed at $ .
Listing of BB&T Common Stock
BB&T will list the shares of its common stock to be issued in the merger on
the New York Stock Exchange.
5
Comparative Market Prices and Dividends
BB&T common stock is listed on the New York Stock Exchange under the symbol
"BBT," and Virginia Capital common stock is included in the Nasdaq National
Market under the symbol "VCAP." The table below shows the high and low sales
prices of BB&T common stock and the high and low bid prices for Virginia Capi-
tal common stock and cash dividends paid per share for BB&T and Virginia Capi-
tal for the last two fiscal years plus the interim period. The merger agreement
restricts Virginia Capital's ability to increase dividends. See page .
BB&T Virginia Capital
------------------------ -----------------------
Cash Cash
High Low Dividend High Low Dividend
------- ------- -------- ------- ------ --------
Quarter Ended
March 31, 2001.............. $ $ $0.23 $ $ $0.11
June 30, 2001 (through April
, 2001)...................
Quarter Ended
March 31, 2000.............. 29.25 21.6875 0.20 16.3125 13.00 0.21
June 30, 2000............... 31.875 23.875 0.20 16.3125 13.875 0.11
September 30, 2000.......... 30.4375 23.8125 0.23 17.50 15.00 0.11
December 31, 2000........... 38.25 26.5625 0.23 17.3125 15.50 0.11
For year 2000............. 38.25 21.6875 0.86 17.50 13.00 0.54
Quarter Ended
March 31, 1999.............. 40.625 34.5625 0.175 13.875 12.625 0.10
June 30, 1999............... 40.25 33.50 0.175 15.438 11.875 0.10
September 30, 1999.......... 36.6875 30.1875 0.20 17.125 14.75 0.10
December 31, 1999........... 37.125 27.1875 0.20 16.50 14.375 0.10
For year 1999............. 40.625 27.1875 0.75 17.125 11.875 0.40
The table below shows the closing price of BB&T common stock and Virginia
Capital common stock on January 23, 2001, the last full trading day before pub-
lic announcement of the proposed merger.
BB&T historical.................................................. $37.3125
Virginia Capital historical...................................... $ 20.50
Virginia Capital pro forma equivalent*........................... $ 18.50
- --------
* calculated by multiplying BB&T's per share closing price by an assumed ex-
change ratio of 0.4958, which is what the exchange ratio would be if the av-
erage reported closing price of BB&T common stock over the ten-trading day
pricing period is equal to the closing price on January 23
6
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 BB&T's and Virginia
Capital's audited financial statements for 1996 through 2000 and unaudited fi-
nancial statements for the three months ended March 31, 2001. [to be updated]
The information provided for BB&T has been restated to include the accounts of
FCNB Corp, which BB&T acquired on January 8, 2001 in a transaction accounted
for as a pooling of interests. [to be updated] This information is only a sum-
mary, 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 Securities and Exchange Commis-
sion. See "Where You Can Find More Information" on page . You should not rely
on the three-month information for BB&T or Virginia Capital 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)
As of/For the
Three Months Ended
March 31, As of/For the Years Ended December 31,
----------------------- -----------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income..... $ $ $ $ 1,932,948 $ 1,759,705 $ 1,623,329 $ 1,486,488
Net income.............. 705,574 651,744 501,726 467,309
Basic earnings per
share.................. 1.78 1.67 1.29 1.21
Diluted earnings per
share.................. 1.75 1.64 1.27 1.18
Cash dividends paid per
share.................. 0.75 0.66 0.58 0.50
Book value per share.... 10.19 10.17 9.12 8.62
Total assets............ 53,000,836 48,190,494 43,606,211 38,612,527
Long-term debt.......... 6,073,428 5,499,873 4,183,462 2,611,973
Virginia Capital--Historical Financial Information
(Dollars in thousands, except for per share amounts)
As of/For the
Three Months
Ended March 31, As of/For the Years Ended December 31,/1/
----------------- --------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- --------
Net interest income..... $ $ 5,373 $ 20,765 $ 21,877 $ 17,265 $ 17,086 $ 16,463
Net income.............. 2,080 7,978 9,040 1,396 6,425 4,581
Basic earnings per
share/1/............... .22 .91 .88 -- -- --
Diluted earnings per
share/1/............... .22 .91 .88 -- -- --
Cash dividends paid per
share/1/............... .21 .54 .40 -- -- --
Book value per
share/1/............... 16.08 16.74 15.98 -- -- --
Total assets............ 537,078 532,675 541,639 576,676 471,920 469,917
Long-term debt.......... 5,000 0 5,000 5,000 8,000 8,000
- --------
/1/Virginia Capital was formed on September 4, 1998 as the holding company for
its banking subsidiary, which converted from mutual to stock form in December
1998.
7
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 in-
formation 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 Securities and Exchange Commission. See "Where You Can Find
More Information" on page .
The pro forma combined information gives effect to the merger accounted for
as a purchase, assuming that 0.6060 of a share of BB&T common stock is issued
for each outstanding share of Virginia Capital common stock. Pro forma equiva-
lent of one Virginia Capital common share amounts are calculated by multiplying
the pro forma combined basic and diluted earnings per share, BB&T's historical
per share dividend and the pro forma combined shareholders' equity by an as-
sumed exchange ratio of 0.6060 of a share of BB&T common stock so that the per
share amounts equate to the respective values for one share of Virginia Capital
common stock. You should not rely on the pro forma information as being indica-
tive of the historical results that we would have had if we had been combined
or the future results that we will experience after the merger, nor should you
rely on the three-month information as being indicative of results expected for
the entire year or for any future interim period.
As of/For the As of/For the
Three Months Ended Year Ended
March 31, 2001 December 31, 2000
------------------ -----------------
Earnings per common share
Basic
BB&T historical.......................
Virginia Capital historical........... 0.91
Pro forma combined....................
Pro forma equivalent of one Virginia
Capital common share.................
Diluted
BB&T historical.......................
Virginia Capital historical........... 0.91
Pro forma combined....................
Pro forma equivalent of one Virginia
Capital common share.................
Cash dividends declared per common share
BB&T historical.........................
Virginia Capital historical............. 0.54
Pro forma combined......................
Pro forma equivalent of one Virginia
Capital common share...................
Shareholders' equity per common share
BB&T historical.........................
Virginia Capital historical............. 16.74
Pro forma combined......................
Pro forma equivalent of one Virginia
Capital common share...................
8
MEETING OF SHAREHOLDERS
General
We are providing this proxy statement/prospectus to Virginia Capital share-
holders of record as of , 2001, along with a form of proxy that the Vir-
ginia Capital Board is soliciting for use at a special meeting of shareholders
of Virginia Capital to be held on , June , 2001 at 10:00 a.m., Eastern
time, at . At the meeting, the shareholders of Virginia
Capital will vote upon a proposal to approve the agreement and plan of reorga-
nization dated as of January 23, 2001 and related agreement and plan of merger
pursuant to which Virginia Capital would merge into BB&T. In this proxy
statement/prospectus, we refer to agreement and plan of reorganization and re-
lated agreement and 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 Virginia Capital 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.
Who Can Vote at the Meeting
You are entitled to vote your Virginia Capital common stock if the records of
Virginia Capital show that you held your shares on , 2001, which is the
record date. On the record date, there were [9,289,280] shares of Virginia Cap-
ital common stock outstanding, held by approximately holders of record.
Each such share of Virginia Capital common stock is entitled to one vote on
each matter submitted at the meeting, except that, pursuant to Virginia Capi-
tal's articles of incorporation, no shareholder who beneficially owns more than
10% of Virginia Capital's outstanding shares of common stock will be entitled
to vote the shares held in excess of 10% of Virginia Capital's outstanding
shares of common stock. As of the date of this proxy statement/prospectus, we
do not believe that any Virginia Capital shareholder beneficially owns more
than 10% of Virginia Capital's outstanding shares of common stock.
Attending the Meeting
If you are a beneficial owner of Virginia Capital common stock held by a bro-
ker, bank or other nominee (i.e., in "street name"), you will need proof of
ownership to be admitted to the meeting. A recent brokerage statement or letter
from a bank or broker are examples of proof of ownership. If you want to vote
your shares of Virginia Capital common stock held in street name in person at
the meeting, you will have to get a written proxy in your name from the broker,
bank or other nominee who holds your shares.
Vote Required
Approval of the merger agreement requires the affirmative vote of the holders
of more than two-thirds of the outstanding shares of Virginia Capital common
stock entitled to vote. 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 may 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 cast favoring the action exceed the votes cast opposing the ac-
tion. A quorum will be present if a majority of the outstanding shares of Vir-
ginia Capital 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 Virginia Capital Board
is not aware of any other business to be presented at the meeting other than
matters incidental to the conduct of the meeting.
9
Because approval of the merger agreement requires the affirmative vote of the
holders of more than two-thirds of the outstanding shares of Virginia Capital
common stock entitled to vote, abstentions and broker non-vote shares will have
the same effect as votes against the merger. Accordingly, the Virginia Capital
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 Virginia Capital Stock Certificates" on page .
As of the record date, the directors and executive officers of Virginia Capi-
tal and their affiliates beneficially owned a total of shares, or , of
the issued and outstanding shares of Virginia Capital common stock (not includ-
ing shares that may be acquired pursuant to the exercise of stock options). The
directors and executive officers of BB&T, their affiliates, BB&T and its sub-
sidiaries owned no shares of Virginia Capital common stock, excluding shares
that might be deemed to be owned in connection with the stock option agreement
described under the heading "Stock Option Agreement" on page .
Voting and Revocation of Proxies
The shares of Virginia Capital 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.
You may revoke your proxy at any time before the vote is taken at the meet-
ing. To revoke your proxy, you must either: deliver before the meeting a writ-
ten revocation of your proxy or a later-dated proxy to Virginia Capital's Cor-
porate Secretary at Virginia Capital's principal executive offices; or attend
the meeting, revoke your proxy and vote your shares in person. Your attendance
at the meeting will not automatically revoke your proxy. 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.
Your broker may allow you to deliver your voting instructions via the tele-
phone or the internet. Please see the voting instruction form from your broker.
If your shares are not registered in your name, you will need additional docu-
mentation from your record holder to vote the shares in person.
Solicitation of Proxies
BB&T and Virginia Capital will each pay 50% of the cost of printing this
proxy statement/prospectus, and Virginia Capital will pay all other costs of
soliciting proxies. Directors, officers and other employees of Virginia Capital
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. Virginia Capital 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 Virginia Capital will
reimburse these record holders for their reasonable out-of-pocket expenses. In
addition, Virginia Capital intends to use the services of Georgeson Shareholder
Communications Inc., a professional proxy solicitation firm, to help with so-
liciting proxies for the meeting, at an estimated cost of $7,500 plus out-of-
pocket expenses.
10
Participants in Fredericksburg State Bank's Employee Stock Ownership Plan
If you participate in Fredericksburg State Bank's Employee Stock Ownership
Plan, voting instruction forms that reflect all shares you may vote under these
plans accompany this proxy statement/prospectus. As a participant in the em-
ployee stock ownership plan, you may direct the trustees as to the manner in
which shares of Virginia Capital common stock allocated or credited to your ac-
counts are to be voted. Under the employee stock ownership plan, unallocated
shares of common stock held by the employee stock ownership plan and allocated
shares for which no voting instructions are received will be voted by the
trustee in the same proportion as shares for which the trustee has received
voting instructions, subject to its fiduciary duties.
Recommendation of the Virginia Capital Board
The Virginia Capital Board has approved the merger agreement and believes
that the proposed transaction is fair to and in the best interests of Virginia
Capital and its shareholders. The Virginia Capital Board unanimously recommends
that Virginia Capital's shareholders vote "FOR" approval of the merger agree-
ment. See "The Merger--Background of and Reasons for the Merger" on page .
11
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 Ap-
pendix A and incorporated herein by reference. All shareholders are urged to
read the appendices in their entirety.
General
In the merger, Virginia Capital will be merged into BB&T. Shareholders of
Virginia Capital will receive not less than 0.4958 or more than 0.6060 of a
share of BB&T common stock for each share of Virginia Capital common stock, de-
pending on the average reported closing price of BB&T common stock over the
ten-trading day period ending on the day before the special meeting of Virginia
Capital shareholders to vote on the merger (plus cash in lieu of any fractional
share of BB&T common stock that would otherwise be issued). During the third
quarter of 2001, BB&T intends to merge Fredericksburg State Bank, Virginia Cap-
ital's banking subsidiary, into Branch Banking and Trust Company of Virginia,
BB&T's Virginia banking subsidiary. Until then, Fredericksburg State Bank will
operate as a separate subsidiary of BB&T.
Background of and Reasons for the Merger
Background of the Merger
Fredericksburg State Bank was originally chartered as a savings and loan as-
sociation known as Fredericksburg Savings Bank that converted from mutual to
stock form in December 1998 (at which time Virginia Capital was created as its
holding company), and then converted from a federally chartered savings bank to
a Virginia state-chartered commercial bank in January 2001.
The period following the conversion from mutual to stock form was challenging
for Virginia Capital given the substantial capital level held by Fredericksburg
Savings following its conversion, and intensifying competition and consolida-
tion in its market area. During this period, management considered various op-
tions for enhancing shareholder value, including the expansion of Fredericks-
burg Savings' franchise through acquisitions.
In July 1999, the Virginia Capital Board met with Trident Securities, Inc.
(Virginia Capital's financial advisor in connection with the conversion of
Fredericksburg State Bank) to review its business plan and strategies for de-
ploying Virginia Capital's capital and enhancing shareholder value, including
stock repurchases and acquisition opportunities. The significant issues facing
Virginia Capital, including Fredericksburg Savings' high capital and the sig-
nificant competition faced by Fredericksburg Savings, were discussed in detail.
On October 21 and 22, 1999, the Virginia Capital Board met with a financial
institution consulting firm for a strategic planning retreat. During the re-
treat the Virginia Capital Board focused on significant strategic issues, in-
cluding the viability of expanding through mergers and acquisitions or branch-
ing, the possibility of expanding Fredericksburg Savings' commercial lending,
means to manage and deploy Fredericksburg Savings' capital, the conversion to a
commercial bank charter, the difficult labor market and the corresponding dif-
ficulty in expanding the senior management team, and other issues, including
the cost to, and ability of, Fredericksburg Savings to introduce new products
and services to its customers.
On November 4, 1999, Burney Warren, BB&T's Executive Vice President, Mergers
and Acquisitions met with Sam Harding and Peggy Newman at Virginia Capital's
main office. During that meeting, Mr. Warren suggested the possibility of a po-
tential strategic alliance between Virginia Capital and BB&T.
Following this meeting, the Virginia Capital Board continued to focus on Vir-
ginia Capital's primary strategy of building shareholder value as an indepen-
dent community financial institution and to consider the implications of that
strategy as compared to the potential sale of Virginia Capital. On May 9, 2000,
the Virginia Capital Board authorized Mr. Harding to take the steps necessary
to determine the likely market value of
12
Virginia Capital in the event the Board were to consider abandoning its strat-
egy of remaining independent. On June 15, 2000, Mr. Harding and Ms. Newman met
with Mr. Warren and John Allison, BB&T's Chairman and Chief Executive Officer,
at BB&T's offices in Winston-Salem, North Carolina to discuss further BB&T's
possible interest in acquiring Virginia Capital. Following that meeting, three
different investment advisors, including Trident Securities, were invited to
make presentations to the Virginia Capital Board. The Virginia Capital Board
subsequently hired Trident Securities to evaluate means of enhancing share-
holder value, including the sale of Virginia Capital.
On August 22, 2000, Trident Securities met with the Virginia Capital Board
to assess Virginia Capital's strategic options. Trident Securities reviewed
Virginia Capital's business plan and the effects of Fredericksburg Savings'
high level of capital, current competitive pressures and industry and market
factors. Following that meeting, the Virginia Capital Board authorized Trident
Securities to assess the market value of Virginia Capital by contacting vari-
ous companies Trident believed might have an interest in acquiring Virginia
Capital. Trident contacted eight potential acquirors to determine their inter-
est in acquiring Virginia Capital.
Of those companies, six requested further information regarding Virginia
Capital. On October 20, 2000, two of those companies submitted written, non-
binding expressions of interest. On October 26, 2000, Trident Securities met
with the Virginia Capital Board to present the two expressions of interest.
The Virginia Capital Board deemed BB&T's interest to be the more favorable.
BB&T's non-binding expression of interest expressed an intent to offer to ac-
quire each outstanding share of Virginia Capital common stock in exchange for
0.606 shares of BB&T common stock, which, given the then current trading price
of BB&T common stock, represented a value of $17.50 per share of Virginia Cap-
ital common stock. The other potential acquiror's proposal was for a fixed
price. The Virginia Capital Board directed Trident Securities to negotiate
further with the two bidders in an effort to increase the merger consideration
to be received by Virginia Capital shareholders.
On November 9, 2000, Mr. Allison and Mr. Warren met with the Virginia Capi-
tal Board to make a presentation about BB&T and BB&T's interest in acquiring
Virginia Capital.
On November 14, 2000, the Virginia Capital Board met with Trident Securities
and discussed the two expressions of interest further. While neither bidder
had increased its proposal, the market value of BB&T stock had increased such
that the value of BB&T's proposal was substantially higher than it had been
originally, as opposed to the other bidder's proposal which was for a fixed
price. The Board directed Trident Securities to pursue discussions with BB&T.
On November 21, 2000, Trident Securities met with the Virginia Capital Board
to provide an update regarding the BB&T proposal. BB&T advised Trident Securi-
ties that, given the then market price of BB&T common stock, it could no
longer offer a fixed exchange ratio of 0.606. Instead, BB&T proposed a pricing
mechanism whereby the minimum exchange ratio would be fixed as of the date the
definitive merger agreement was executed. Thereafter, if the market price of
BB&T common stock declined over a prescribed pricing period, the exchange ra-
tio would increase up to a maximum of 0.606; if the market price of BB&T com-
mon stock increased over the prescribed pricing period, the exchange ratio
would remain the same, enabling Virginia Capital shareholders to receive
greater value.
In evaluating BB&T's proposal, the Virginia Capital Board considered a num-
ber of factors, including the long-term viability of BB&T and the ability of
Fredericksburg Savings' franchise to complement BB&T's operations. The Vir-
ginia Capital Board studied pro forma information and the historical perfor-
mance of BB&T common stock as well as the values received by other comparable
companies in recent merger transactions. Following extensive discussions, the
Virginia Capital Board determined that the BB&T proposal was still attractive,
but that additional time was needed to evaluate the new terms. However, Vir-
ginia Capital's legal counsel was advised to begin to negotiate a definitive
agreement with BB&T's legal counsel.
13
On January 9, 2001, the Virginia Capital Board met with legal counsel to re-
view in detail its legal responsibilities to Virginia Capital and its share-
holders, as well as the proposed terms of the definitive merger agreement and
related stock option agreement. At the conclusion of the meeting, the Virginia
Capital Board resolved to invite Trident Securities to make a final presenta-
tion and recommendation to the Board regarding the BB&T proposal, which was
scheduled for January 23, 2001.
On January 23, 2001, Trident Securities presented an analysis of BB&T's pro-
posal and BB&T's past and likely future operating results. Trident Securities
provided an oral opinion (which was subsequently confirmed in writing) that
the consideration to be received pursuant to the definitive merger agreement
was fair, from a financial point of view, to Virginia Capital's shareholders.
Following Trident Securities' presentation and discussions with Trident Secu-
rities and Virginia Capital's legal counsel, during which members of the Vir-
ginia Capital Board asked questions related to Trident Securities' presenta-
tion and fairness opinion and the timing and application of the pricing peri-
od, the Virginia Capital Board determined that acceptance of the proposal sub-
mitted by BB&T was in the best interest of Virginia Capital and its sharehold-
ers, unanimously approved the merger agreement and related stock option agree-
ment, and authorized their execution.
Virginia Capital's Reasons for the Merger
The Virginia Capital Board has unanimously approved the merger agreement and
recommends that Virginia Capital shareholders vote "FOR" the approval of the
merger agreement.
The Virginia Capital Board has determined that the merger and the merger
agreement are fair to, and in the best interests of, Virginia Capital and its
shareholders. In approving the merger agreement, the Virginia Capital Board
consulted with legal counsel as to its legal duties and the terms of the
merger agreement and with its financial advisor with respect to the financial
aspects and fairness of the transaction from a financial point of view. In ar-
riving at its determination, the Virginia Capital Board also considered a num-
ber of factors, including the following:
. Information concerning the businesses, earnings, operations, financial
condition and prospects of Virginia Capital and BB&T, both individually
and as combined.
. The results that could be obtained by continuing to operate independent-
ly, and the likely benefits to shareholders, compared with the value of
the merger consideration being offered by BB&T.
. The opinion rendered by Trident Securities, as financial advisor to Vir-
ginia Capital, that the merger consideration is fair, from a financial
standpoint, to Virginia Capital's shareholders (see "--Opinion of Vir-
ginia Capital's Financial Advisor" on page ).
. The determination that there did not likely exist other companies that
were interested in acquiring Virginia Capital and able to provide con-
sideration greater than that being paid by BB&T.
. The terms of the merger agreement and the structure of the merger, in-
cluding the fact that the merger is intended to qualify as a transaction
of a type that is generally tax-free for United States federal income
tax purposes.
. The community banking approach of BB&T and the fact that Mr. Harding and
Ms. Newman will serve first as employees of and then as consultants to
BB&T during a transition period and that members of the Virginia Capital
Board will be invited to serve as advisory directors.
. The historical trading prices for Virginia Capital common stock and BB&T
common stock.
. The current and prospective economic, competitive and regulatory envi-
ronment facing Virginia Capital, BB&T and the financial services indus-
try generally.
. The effect of the merger on Virginia Capital's customers and communities
served by Virginia Capital and its employees.
14
The discussion of the information and factors considered by the Virginia Capi-
tal Board is not intended to be exhaustive, but includes all material factors
considered. In reaching its determination to approve and recommend the merger,
the Virginia Capital Board did not assign any specific or relative weights to
any of the foregoing factors, and individual directors may have weighed factors
differently.
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 Virginia Capital is a well-
respected, community-oriented bank, the acquisition of which will give BB&T the
number one market share for deposits in the growing Fredericksburg, Virginia
market, part of the economically viable Washington-Baltimore metropolitan serv-
ice area.
In connection with BB&T's consideration of the merger, its management ana-
lyzed certain investment criteria designed to assess the impact of the merger
on BB&T and its shareholders. For the purpose of this analysis, BB&T made the
following assumptions:
. BB&T's earnings per share, and Virginia Capital's earnings per share
(prior to the effects of the merger), on a stand-alone basis for 2001
would be in line with the estimates published by First Call Corporation;
. Annual cost savings of approximately $4.1 million, or 50% of Virginia
Capital's expense base, would be realized as a result of the merger in
the first 12 months following conversion; and
. Income statement and balance sheet growth rates would be 5% in year 1,
7% in year 2 and 12% thereafter, except that:
. Virginia Capital's noninterest income would increase so as to
achieve a fee income ratio of 25% by year 6 and would hold constant
thereafter;
. Virginia Capital's core net interest margin would decline initially
and then increase incrementally in years 2 through 6 to obtain a
margin of 4.15%;
. Virginia Capital's loan loss allowance would be raised to 1.30%; and
. Virginia Capital's net charge-off rate for loan losses would be
0.35%.
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, re-
turn on equity, return on assets, book value per share and leverage capital ra-
tio. This analysis indicated that the merger would:
. be accretive to estimated earnings per share in 2001 and to cash basis
earnings per share in 2002;
. be accretive to book value per share, return on equity and cash basis
return on equity immediately;
. be accretive to return on assets in 2008 and cash basis return on assets
in 2007; and
. result in a combined leverage ratio that remains over 7%.
BB&T excluded the effect of estimated one-time after-tax charges of $3.1 mil-
lion related to completing the merger from its calculations of earnings per
share, return on equity and return on assets.
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 Virginia Capital, 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 Virginia Capital merger indicated
that the projected internal rate of return is 15.50%.
15
None of these assumptions and projections has been updated since the date of
the merger agreement. Actual results may be materially different from the pro-
jected results described above. For more information concerning the factors
that could affect actual results, see "A Warning About Forward-Looking Informa-
tion" on page iii.
Opinion of Virginia Capital's Financial Advisor
Virginia Capital retained Trident to act as its financial advisor in connec-
tion with a possible merger and related matters. As part of its engagement,
Trident agreed, if requested by Virginia Capital, to render an opinion with re-
spect to the fairness, from a financial point of view, to the holders of Vir-
ginia Capital common stock, of the merger consideration as set forth in the
agreement. Trident is a nationally recognized specialist for the financial
services industry, in general, and for thrifts in particular. Trident is regu-
larly engaged in evaluations of similar businesses and in advising institutions
with regard to mergers and acquisitions, as well as raising debt and equity
capital for such institutions. Virginia Capital selected Trident as its finan-
cial advisor based upon Trident's qualifications, expertise and reputation in
such capacity.
Trident delivered a written opinion dated January 23, 2001 that the exchange
ratio was fair to Virginia Capital shareholders, from a financial point of
view, as of the date of such opinion. [Trident updated its January 23, 2001
opinion as of the date of this proxy statement/prospectus.] [to be updated] No
limitations were imposed by Virginia Capital on Trident with respect to the in-
vestigations made or the procedures followed in rendering its opinion.
The full text of Trident's written opinion to the Virginia Capital Board,
[dated as of the date of this proxy statement/prospectus,] which sets forth the
assumptions made, matters considered and extent of review by Trident, is at-
tached as Appendix B and is incorporated herein by reference. [to be updated]
You should read the fairness opinion carefully and in its entirety. The follow-
ing summary of Trident's opinion is qualified in its entirety by reference to
the full text of the opinion. Trident's opinion is addressed to the Virginia
Capital Board and does not constitute a recommendation to any shareholder of
Virginia Capital as to how such shareholder should vote at the Virginia Capital
special meeting described in this document.
Trident, in connection with rendering its original opinion:
. reviewed Virginia Capital's Annual Reports to Shareholders and Annual
Reports on Form 10-K for each of the years ended December 31, 1999 and
December 31, 1998, including the audited financial statements contained
therein, and Virginia Capital's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2000, June 30, 2000 and September 30, 2000;
. reviewed BB&T's Annual Reports to Shareholders and Annual Reports on
Form 10-K for each of the years ended December 31, 1999 and December 31,
1998, including the audited financial statements contained therein,
BB&T's Quarterly Reports on Form 10-Q for the quarters ended March 31,
2000, June 30, 2000 and September 30, 2000 and BB&T's Current Reports on
Form 8-K dated April 28, 2000 and October 27, 2000, including the re-
stated audited financial statements contained therein;
. reviewed certain other public and non-public information, primarily fi-
nancial in nature, relating to the respective businesses, earnings, as-
sets and prospects of Virginia Capital and BB&T provided to Trident or
publicly available;
. participated in meetings and telephone conferences with members of se-
nior management of Virginia Capital and BB&T concerning the financial
condition, business, assets, financial forecasts and prospects of the
respective companies, as well as other matters Trident believed relevant
to its inquiry;
. reviewed certain stock market information for Virginia Capital common
stock and BB&T common stock and compared it with similar information for
certain companies, the securities of which are publicly traded;
. compared the results of operations and financial condition of Virginia
Capital and BB&T with that of certain companies which Trident deemed to
be relevant for purposes of its opinion;
16
. reviewed the financial terms, to the extent publicly available, of cer-
tain acquisition transactions which Trident deemed to be relevant for
purposes of its opinion;
. reviewed the merger agreement and its schedules and exhibits and certain
related documents; and
. performed such other reviews and analyses as Trident deemed appropriate.
The written opinions provided by Trident to Virginia Capital (as of January
23, 2001 [and as of the date of this proxy statement/prospectus]) were neces-
sarily based upon economic, monetary, financial market and other relevant con-
ditions as of the dates thereof. [to be updated]
In connection with its review and arriving at its opinion, Trident relied
upon the accuracy and completeness of the financial information and other per-
tinent information provided by Virginia Capital and BB&T to Trident for pur-
poses of rendering its opinion. Trident did not assume any obligation to inde-
pendently verify any of the provided information as being complete and accu-
rate in all material respects. With regard to the financial forecasts estab-
lished and developed for Virginia Capital and BB&T with the input of their re-
spective managements, as well as projections of cost savings and operating
synergies, Trident assumed that this information reflects the best available
estimates and judgments of Virginia Capital and BB&T as to the future perfor-
mance of the separate and combined entities and that the projections provided
a reasonable basis upon which Trident could formulate its opinion. Neither
Virginia Capital nor BB&T publicly discloses internal management projections
of the type utilized by Trident in connection with Trident's role as financial
advisor to Virginia Capital. Therefore, the projections cannot be assumed to
have been prepared with a view towards public disclosure. The projections were
based upon numerous variables and assumptions that are inherently uncertain,
including, among others, factors relative to the general economic and competi-
tive conditions facing Virginia Capital and BB&T. Accordingly, actual results
could vary materially from those set forth in the respective projections.
Trident does not claim to be an expert in the evaluation of loan portfolios
or the allowance for loan losses with respect to loan portfolios and therefore
assumes that the allowances for Virginia Capital and BB&T are adequate to
cover such losses. In addition, Trident does not assume responsibility for the
review of individual credit files and did not make an independent evaluation,
appraisal or physical inspection of the assets or individual properties of
Virginia Capital or BB&T, nor was Trident provided with appraisals. Further-
more, Trident assumed that the merger will be consummated in accordance with
the terms set forth in the merger agreement, without any waiver of any mate-
rial terms or conditions by Virginia Capital, and that obtaining the necessary
regulatory approvals for the merger will not have an adverse effect on either
separate institution or the combined entity. Moreover, in each analysis that
involves per share data for Virginia Capital, Trident adjusted the data to the
dilutive effects of stock options using the Treasury method. In particular,
Trident assumed that the merger will be recorded as a "purchase" in accordance
with generally accepted accounting principles.
In connection with rendering its opinion to the Virginia Capital Board, Tri-
dent performed a variety of financial and comparative analyses, which are
briefly summarized below. The summary of analyses does not purport to be a
complete description of the analyses performed by Trident. Moreover, Trident
believes that these analyses must be considered as a whole and that selecting
portions of such analyses and the factors considered by it, without consider-
ing all such analyses and factors, could create an incomplete understanding of
the scope of the process underlying the analyses and, more importantly, the
opinion derived from them. The preparation of a financial advisor's opinion is
a complex process involving subjective judgments and is not necessarily sus-
ceptible to partial analyses or a summary description of such analyses. In its
full analysis, Trident also included assumptions with respect to general eco-
nomic, financial market and other financial conditions. Furthermore, Trident
drew from its past experience in similar transactions, as well as its experi-
ence in the valuation of securities and its general knowledge of the banking
industry as a whole. Any estimates in Trident's analyses were not necessarily
indicative of actual future results or values, which may significantly diverge
more or less favorably from such estimates. Estimates of company valuations do
not purport to be appraisals or to necessarily reflect the prices at which
companies or their respective securities actually may be sold. None of the
17
analyses performed by Trident were assigned a greater significance by Trident
than any other in deriving its opinion.
Accretion/Dilution Analysis: On the basis of financial projections developed
with the assistance of management, and estimates of on-going cost savings ac-
cruing to the pro forma company, as well as estimated one-time costs related to
the transaction, Trident compared pro forma equivalent earnings, cash divi-
dends, book value and tangible book value to the stand-alone projections for
Virginia Capital and BB&T. No assumptions were made regarding revenue enhance-
ments following the completion of the transaction. However, Trident assumed
BB&T would furnish all of the shares issued in the merger through open market
purchases of its own stock prior to the consummation of the transaction.
The accretion/dilution analysis demonstrated, among other things, the merger
would result in:
. 33% accretion to earnings for Virginia Capital shareholders in the first
year of combined operations, and increasing over the period of the anal-
ysis;
. no dilution to earnings for BB&T shareholders in the first year of com-
bined operations;
. 5% higher cash dividends for Virginia Capital shareholders, assuming
BB&T maintained its current dividend policy;
. no change in cash dividends for BB&T shareholders;
. 64% dilution to book value and 70% dilution to tangible book value for
Virginia Capital shareholders; and
. no change to book value and less than 1% dilution to tangible book value
for BB&T shareholders.
Contribution Analysis: Trident compared the contribution of Virginia Capital
to the pro forma company relative to the approximate ownership of the pro forma
company. The analysis indicated that Virginia Capital shareholders would hold
approximately 1.1% of the pro forma shares of BB&T. Virginia Capital's approxi-
mate contributions are listed below by category:
Virginia
Capital
Contribution
------------
Assets.......................... 0.9%
Loans........................... 1.1%
Deposits........................ 1.0%
Equity.......................... 3.5%
Tangible equity................. 3.6%
Last twelve months reported
earnings/1/.................... 1.1%
Projected year 1 reported
earnings....................... 1.0%
Projected year 2 reported
earnings....................... 0.9%
Pro Forma Ownership............. 1.1%
--------
/1/Includes estimated cost savings of 50% of Virginia
Capital's last twelve month's non-interest expense base
attributable to the merger
Comparable Transaction Analysis: Trident reviewed and compared financial per-
formance and pricing information for groups of comparable pending and completed
thrift merger transactions (through January 16, 2001) it deemed pertinent to an
analysis of the merger. The pricing ratios for the merger were compared to the
average and median ratios of (1) price to last twelve months earnings, (2)
price to tangible book value, (3) price to capital-adjusted tangible book val-
ue, (4) tangible book value premium to core deposits for each of the following
comparable transaction groups:
. all recent thrift acquisitions in the United States announced within the
preceding 12 months ("All Recent Median");
18
. all thrift acquisitions in the United States announced within the pre-
ceding 90 days ("Last 90 Days Median");
. all pending thrift acquisitions in the United States that have been an-
nounced but have yet to close ("All Pending Median");
. all Southeast thrift acquisitions announced within the preceding 12
months ("Southeast Recent Median");
. all Virginia thrift acquisitions announced within the preceding 12
months ("Virginia Recent Median");
. all thrift acquisitions in the United States announced within the pre-
ceding 12 months involving acquired thrifts with assets of $400-$700
million ("Assets $400mm-$700mm Median");
. all thrift acquisitions in the United States announced within the pre-
ceding 12 months with a total deal size of $150-$200 million ("Deal Size
$150mm-$200mm Median");
. all thrift acquisitions in the United States announced within the pre-
ceding 12 months involving acquired thrifts with returns on average as-
sets of 130-170 basis points ("ROAA 130bp-170bp Median");
. all thrift acquisitions in the United States announced within the pre-
ceding 12 months involving acquired thrifts with returns on average eq-
uity of 4%-6% ("ROAE 4%-6% Median");
. all thrift acquisitions in the United States announced within the pre-
ceding 12 months involving acquired thrifts with tangible capital of
20%-40% ("Tangible Capital 20%-40% Median"); and
. guideline thrift acquisitions announced since the beginning of 1999 in-
volving acquired thrifts of similar size, with capital levels and re-
turns on average equity similar to Virginia Capital ("Guideline Medi-
an").
The following table represents a summary analysis of the comparable transac-
tions analyzed by Trident based on the announced transaction values:
Price/ Tangible
Price/ Capital Book
Tangible Adjusted Premium/
Book Tangible Price/ LTM Core
Deals Value Book/2/ Earnings/3/ Deposits/4/
----- -------- -------- ----------- -----------
All Recent Median............. 62 139.8% 171.2% 18.6x 8.2%
Last 90 Days Median........... 13 123.0% 151.9% 21.6x 7.6%
All Pending Median............ 27 125.9% 152.5% 18.7x 6.9%
Southeast Recent Median....... 8 126.5% 161.6% 18.3x 6.9%
Virginia Recent Median........ 3 126.5% 136.0% 17.8x 3.1%
Assets $400mm-$700mm Median... 5 149.0% 184.2% 14.1x 11.5%
Deal Size $150mm-$200mm
Median....................... 5 158.1% 173.4% 17.5x 8.0%
ROAA 130bp-170bp Median....... 6 153.6% 235.4% 14.1x 15.3%
ROAE 4%-6% Median............. 16 123.6% 172.0% 20.1x 6.4%
Tangible Capital 20%-40%
Median....................... 5 112.3% 151.2% 28.1x 11.2%
Guideline Median.............. 9 130.0% 182.0% 24.0x 11.2%
Virginia Capital/1/........... 114.3% 175.9% 21.3x 7.0%
- --------
/1/Virginia Capital pricing data based on per share consideration of $18.50.
/2/Price and capital adjusted to eliminate the impact of excess capital (as-
sumes 7% capital is adequate).
/3/Last 12 months fully diluted earnings per share (assuming Treasury method of
accounting for stock options).
/4/Tangible book value premium as a percentage of core deposits.
Based on multiples of trailing twelve months earnings, the value of the pro-
posed merger falls within the range of similar transactions represented by the
comparable groups. The price to tangible book value, price to capital-adjusted
tangible book value, and tangible book value premium to core deposits ratios
for the proposed merger are also similar to the median ratios for the compara-
ble groups.
19
Discounted Cash Flow Analysis: Trident prepared a discounted cash flow anal-
ysis with regard to Virginia Capital's estimated acquisition value on a stand-
alone basis. This analysis utilized a range of discount rates of 10.5% to
13.5% and a range of earnings terminal multiples of 11.0x to 16.0x. The analy-
ses resulted in a range of present values of between $8.91 and $13.17 per
share. This analysis was based on estimates by Trident in determining the
earnings multiples used in projecting Virginia Capital's acquisition value and
is not necessarily indicative of actual values or actual future results and
does not purport to reflect the prices at which any securities may trade at
the present or at any time in the future. Trident noted that the discounted
cash flow analysis was included because it is a widely used valuation method-
ology, but noted that the results of such methodology are highly dependent
upon the numerous assumptions that must be made, including earnings growth
rates, dividend payout rates and discount rates. The discounted cash flow
analysis also has a tendency to produce a very low valuation when applied to
an over-capitalized company such as Virginia Capital.
Financial Due Diligence Examination of BB&T: Trident reviewed its on-site
financial due diligence examination of BB&T. Trident examined BB&T's histori-
cal balance sheets and income statements, along with recent operating results
and a variety of financial ratios through September 30, 2000. Trident dis-
cussed BB&T's business strategy, strengths and weaknesses, profitability,
growth, net interest margin, non-interest income, operating expenses, intangi-
ble assets, funding and deposit composition, market share and geographic cov-
erage, capital, asset quality and reserve coverage, concentrations of credit
and loan portfolio composition, interest rate risk, foreign investments, merg-
ers and acquisitions, subsidiary activities, culture, use of technology, stock
pricing, recent bank analysts' reports, and other issues.
Comparable Company Analysis: Trident reviewed and compared stock market data
and selected financial information for BB&T with corresponding information for
actively-traded banks possessing similar financial and performance character-
istics as BB&T. The comparison banks ("Comparable Groups") were grouped ac-
cording to the parameters listed below:
Comparable Groups Companies in Group
----------------- ------------------
Median for All U.S. Banks............................... 442
Median for Southeast Banks.............................. 100
Median for North Carolina Banks......................... 20
Median for Banks with Assets--$40-$80 Billion........... 11
Median for Banks with Market Capitalization--$10-$20
Billion................................................ 7
Median for Banks with Return on Average Assets--150bp-
170bp.................................................. 41
Median for Banks with Return on Average Equity--18%-
22%.................................................... 57
Median for Banks with Tangible Capital Median--6%-8%.... 128
Median for Guideline Companies*......................... 8
--------
* Consists of actively-traded companies of similar asset size, tangible
capital levels, and return on equity.
The table below represents a summary analysis of all of the comparable
groups based on market prices as of January 18, 2001 and the latest publicly
available financial data as of or for the trailing twelve months.
Mean Median BB&T/2/
----- ------ -------
Price to last twelve months reported earnings......... 14.2x 13.0x 23.9x
Price to last twelve months core earnings/1/.......... 13.6x 13.2x 17.4x
Price to book value................................... 207.0% 212.9% 310.5%
Price to tangible book value.......................... 239.4% 201.7% 369.3%
Dividend yield........................................ 3.0% 3.0% 2.5%
Return on average assets.............................. 1.28% 1.19% 1.14%
Return on average equity.............................. 15.5% 16.0% 14.6%
--------
/1/Core earnings are defined as reported earnings, minus non-recurring
income, plus non-recurring expenses, taxed at a 35% rate
/2/At or for the twelve months ended December 31, 2000
20
The analysis revealed that BB&T trades at a premium to banks included in com-
parable groups based on price to core earnings for the last twelve months, as
well as price to book value and price to tangible book value. Because of its
higher stock price, BB&T has a slightly lower dividend yield than the compara-
ble groups.
No company used as a comparison in the above analyses is identical to Vir-
ginia Capital, BB&T or the combined entity and no other transaction is identi-
cal to the merger. Accordingly, an analysis of the results of the foregoing is
not purely mathematical; rather, such analyses involve complex considerations
and judgments concerning differences in financial market and operating charac-
teristics of the companies and other factors that could affect the public trad-
ing volume of the companies to which Virginia Capital, BB&T and the combined
entity are being compared.
In connection with the delivery of its opinion dated as of [the date of this
proxy statement/prospectus], Trident performed procedures to update, as neces-
sary, certain of the analyses described above and reviewed the assumptions on
which the analyses described above were based and the factors considered in
connection therewith. Trident did not perform any analyses in addition to those
described above in updating the opinion. [to be updated]
Virginia Capital has agreed to pay Trident a fee equal to a percentage of the
merger consideration for financial advisory services in connection with the
proposed merger. Based on a merger consideration value of $18.50 per share of
Virginia Capital common stock, Trident's total fee would be approximately
$765,000. Trident has received $145,000 as of the date of this proxy
statement/prospectus. The remainder is payable upon completion of the proposed
merger. In addition, Virginia Capital has agreed to reimburse Trident for all
reasonable out-of-pocket expenses incurred by it on Virginia Capital's behalf
and to indemnify Trident against certain liabilities, including any which may
arise under the federal securities laws.
Trident/McDonald Investments is a member of all principal securities ex-
changes in the United States and in the conduct of its broker-dealer activities
has from time to time purchased securities from, and sold securities to, Vir-
ginia Capital and/or BB&T. As a market maker, Trident may also have purchased
and sold the securities of Virginia Capital and/or BB&T for Trident's own ac-
count and for the accounts of its customers. Additionally, Trident served as
Virginia Capital's sales agent in its mutual-to-stock conversion in 1998 and
received total fees and commissions of $535,000 for that transaction.
Material Federal Income Tax Consequences of the Merger
The following is a summary of the material anticipated federal income tax
consequences of the merger generally applicable to the shareholders of Virginia
Capital and to BB&T and Virginia Capital. This summary is not intended to be a
complete description of all of the federal income tax consequences of the merg-
er. 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 re-
spect to certain specific categories of shareholders, including but not limited
to:
. corporations, trusts, dealers in securities, financial institutions, in-
surance companies or tax exempt organizations;
. persons who are not United States citizens or resident aliens or domes-
tic 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 ex-
tent that tax affects the tax consequences of the merger);
. persons who acquired Virginia Capital 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."
21
No ruling has been or will be requested from the Internal Revenue Service with
respect to the tax effects of the merger. The federal income tax laws are com-
plex, and a shareholder's individual circumstances may affect the tax conse-
quences to the shareholder. Consequently, each Virginia Capital shareholder is
urged to consult his or her own tax advisor regarding the tax consequences, in-
cluding 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 Virginia Capital will be a party to that reorganization
within the meaning of Section 368(b) of the Internal Revenue Code;
. no gain or loss will be recognized by BB&T or Virginia Capital by reason
of the merger;
. the shareholders of Virginia Capital 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 Virginia Capital common stock;
. a shareholder of Virginia Capital who receives cash in lieu of a frac-
tional 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 (in-
cluding any fractional share interest deemed received) will be the same
as the tax basis in the Virginia Capital common stock surrendered in ex-
change; and
. the holding period for BB&T common stock received (including any frac-
tional share interest deemed received) in exchange for shares of Vir-
ginia Capital common stock will include the period during which the
shareholder held the shares of Virginia Capital common stock surrendered
in exchange, provided that the Virginia Capital common stock was held as
a capital asset at the time the merger becomes effective.
The completion of the merger is conditioned upon the receipt by BB&T and Vir-
ginia Capital 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
fourth bulleted items described above. Neither party intends to waive this con-
dition. If the tax opinion is not available and the Virginia Capital Board de-
termines to proceed with the merger, Virginia Capital will resolicit its share-
holders.
Cash Received in Lieu of a Fractional Share of BB&T Common Stock. A share-
holder of Virginia Capital who receives cash in lieu of a fractional share of
BB&T common stock will be treated as having received the fractional share pur-
suant 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 Internal Revenue Code. As
a result, a Virginia Capital 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%.
Backup Withholding and Information Reporting. Payments of cash to a holder
surrendering shares of Virginia Capital stock will be subject to information
reporting and backup withholding (whether or not the holder also receives BB&T
common stock) at a rate of 31% of the cash payable to the holder, unless the
holder furnishes its taxpayer identification number in the manner prescribed in
applicable Treasury Regulations, certifies that such number is correct, certi-
fies as to no loss of exemption from backup withholding and meets certain other
conditions. Any amounts withheld from payments to a holder under the backup
withholding rules will be allowed as a refund or credit against the holder's
U.S. federal income tax liability, provided the required information is fur-
nished to the Internal Revenue Service.
22
Exchange Ratio
Upon completion of the merger, each outstanding share of Virginia Capital
common stock will be converted into the right to receive not less than 0.4958
or more than 0.6060 of a share of BB&T common stock, plus cash in lieu of any
fractional share of BB&T common stock that would otherwise be issued. The por-
tion of a share of BB&T common stock that will be issued in exchange for each
share of Virginia Capital common stock will depend on the average reported
closing price of BB&T common stock over the ten-trading day period ending on
the day before the special meeting of Virginia Capital shareholders to vote on
the merger, as follows:
. if the average closing price is $37.31 or more, each share of Virginia
Capital common stock will convert into the right to receive 0.4958 of a
share of BB&T common stock;
. if the average closing price is $30.53 or less, each share of Virginia
Capital common stock will convert into the right to receive 0.6060 of a
share of BB&T common stock; and
. if the average closing price is greater than $30.53 and less than
$37.31, each share of Virginia Capital common stock will convert into
the right to receive a portion of a share of BB&T common stock equal to
$18.50 divided by the average closing price.
If the value of the portion of a share of BB&T common stock to be received for
each share of Virginia Capital common stock (based on the average closing price
of BB&T common stock over the ten-trading day pricing period) is less than
$16.53, Virginia Capital will have the right to terminate the merger agreement
and the merger unless BB&T agrees to increase the merger consideration in the
form of cash, BB&T common stock or a combination of cash and BB&T common stock
so that the merger consideration to be received for each share of Virginia Cap-
ital common stock equals $16.53.
You should be aware that the market value of a share of BB&T common stock
will fluctuate and that neither BB&T nor Virginia Capital can give you any as-
surance as to what the price of BB&T common stock will be when the merger be-
comes effective or when certificates for those shares are delivered following
surrender and exchange of your certificates for shares of Virginia Capital
stock. 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 6.
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 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, as reported
on NYSEnet.com on the date that the merger becomes effective.
Exchange of Virginia Capital Stock Certificates
At the time the merger becomes effective and without any action on the part
of Virginia Capital or the Virginia Capital shareholders, shares of Virginia
Capital common stock will be converted into and will represent the right to re-
ceive, upon surrender of the certificate representing the shares as described
below, whole shares of BB&T common stock and cash in lieu of any fractional
share interest. Promptly after the merger becomes effective, BB&T will deliver
or mail to you a form of letter of transmittal and instructions for surrender
of your Virginia Capital 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 shares of BB&T common stock and cash, if any, to
which you are entitled.
23
You should not send in your stock certificates until you receive the letter
of transmittal and instructions.
After the merger becomes effective, and until surrendered as described above,
each outstanding Virginia Capital stock certificate will be deemed for all pur-
poses to represent only the right to receive the merger consideration. No in-
terest will be paid or accrued on any cash payable for fractional shares as
part of the merger consideration. With respect to any Virginia Capital stock
certificate that has been lost or destroyed, BB&T will pay the merger consider-
ation 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 ques-
tion. After the merger becomes effective, Virginia Capital's transfer books
will be closed and no transfer of the shares of Virginia Capital stock out-
standing immediately prior to the time that the merger becomes effective will
be made on BB&T's stock transfer books.
If Virginia Capital declares a dividend on the Virginia Capital common stock
in accordance with the merger agreement that has a record date before the date
on which the merger becomes effective, and that dividend has not been paid be-
fore the date on which the merger becomes effective, BB&T will pay the dividend
to the former Virginia Capital shareholders.
To the extent permitted by law, after the merger becomes effective, you will
be entitled to vote at any meeting of BB&T shareholders the number of whole
shares of BB&T common stock into which your shares of Virginia Capital stock
are converted, regardless of whether you have exchanged your Virginia Capital
stock certificates for BB&T stock certificates. Whenever BB&T declares a divi-
dend or other distribution on the BB&T common stock that has a record date af-
ter the merger becomes effective, 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 sur-
render your Virginia Capital stock certificate for exchange as described above.
Upon surrender of your Virginia Capital stock certificate, the certificate rep-
resenting the BB&T common stock into which your shares of Virginia Capital
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 undeliv-
ered 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 merger will be completed on a business
day designated by BB&T within 30 days following the satisfaction of the condi-
tions to the completion of the merger, or a later date mutually acceptable to
the parties. The merger will become effective at the time and date specified in
the articles of merger to be filed with the Secretary of State of North Caro-
lina and the Virginia State Corporation Commission. It is currently anticipated
that the filing of the articles of merger will take place in [July] 2001, as-
suming all conditions to the respective obligations of BB&T and Virginia Capi-
tal to complete the merger have been satisfied.
Conditions to the Merger
The obligations of BB&T and Virginia Capital to carry out the merger are sub-
ject to satisfaction (or, if permissible, waiver) of the following conditions
at or before the time that the merger becomes effective:
. 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 Virginia Capital of the merger agree-
ment;
. BB&T's registration statement on Form S-4 relating to the merger (in-
cluding any post-effective amendments) must be effective under the Secu-
rities Act of 1933, no proceedings may be pending or,
24
to the best knowledge of BB&T, threatened by the Securities and Exchange
Commission to suspend the effectiveness of the registration statement
and the BB&T common stock to be issued in the merger must either have
been registered or exempt from registration under applicable state
securities laws;
. the parties must have received all regulatory approvals required in con-
nection with the transactions contemplated by the merger agreement, all
notice periods and waiting periods required with respect to the approv-
als must have passed and all approvals must be in effect;
. neither BB&T nor Virginia Capital nor any of their respective subsidiar-
ies 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
. Virginia Capital and BB&T must have received an opinion of BB&T's legal
counsel, in form and substance satisfactory to Virginia Capital and
BB&T, to the effect that the merger will constitute one or more reorga-
nizations under Section 368 of the Internal Revenue Code and that the
shareholders of Virginia Capital will not recognize any gain or loss to
the extent that they exchange shares of Virginia Capital common stock
for shares of BB&T common stock.
The obligations of Virginia Capital to carry out the transactions in the
merger agreement are subject to the satisfaction of the following additional
conditions at or before the time that the merger becomes effective, unless,
where permissible, waived by Virginia Capital:
. 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 is-
suance; and
. Virginia Capital must have received certain closing certificates and le-
gal opinions from BB&T and its counsel.
All representations and warranties of BB&T will be evaluated as of the date of
the merger agreement and at the time the merger becomes effective as though
made at the time the merger becomes effective (or, in the case of any represen-
tation and warranty that specifically relates to an earlier date, on the date
designated), except as otherwise provided in the merger agreement or consented
to in writing by Virginia Capital. The representations and warranties of BB&T
concerning the following must be true and correct (except for de minimis inac-
curacies):
. its capitalization;
. its and its subsidiaries' organization and authority to conduct busi-
ness;
. its authorization of, and the binding nature of, the merger agreement;
. the absence of any conflict between the transactions in the merger
agreement and BB&T's articles of incorporation or bylaws; and
. its forbearance from taking any actions that would negatively affect the
tax-free treatment of the merger or the receipt of necessary regulatory
approvals.
Moreover, there must not be inaccuracies in the representations and warranties
of BB&T in the merger agreement that, individually or in the aggregate, have or
are reasonably likely to have a material adverse effect on BB&T and its subsid-
iaries taken as a whole.
The obligations of BB&T to carry out the transactions in the merger agreement
are subject to satisfaction of the following additional conditions at or before
the time that the merger becomes effective, 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 trans-
actions in the merger agreement as to render their completion inadvis-
able or unduly burdensome;
25
. Virginia Capital must have performed in all material respects all of its
obligations and complied in all material respects with all of its cove-
nants required by the merger agreement; and
. BB&T must have received certain closing certificates and legal opinions
from Virginia Capital and its counsel.
All representations and warranties of Virginia Capital will be evaluated at
the date of the merger agreement and at the time the merger becomes effective
as though made on and at the time the merger becomes effective (or, in the case
of any representation and warranty that specifically relates to an earlier
date, on the date designated), except as otherwise provided in the merger
agreement or consented to in writing by BB&T. The representations and warran-
ties of Virginia Capital concerning the following must be true and correct (ex-
cept for de minimis inaccuracies):
. its capitalization;
. its and its subsidiary's 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 Virginia Capital's articles of incorporation or bylaws;
. its forbearance from taking any actions that would negatively affect the
tax-free treatment of the merger or the receipt of necessary regulatory
approvals; and
. actions taken to exempt the merger from any applicable anti-takeover
laws and the absence of any provision binding on Virginia Capital that
would require a greater percentage of the outstanding shares of Virginia
Capital common stock entitled to vote to approve the merger than is re-
quired by the Virginia Stock Corporation Act.
Moreover, there must not be inaccuracies in the representations and warranties
of Virginia Capital in the merger agreement that, individually or in the aggre-
gate, have or are reasonably likely to have a material adverse effect on Vir-
ginia Capital and its subsidiary taken as a whole (evaluated without regard to
completion of the merger).
Conduct of Virginia Capital's and BB&T's Businesses Prior to the Merger
Becoming Effective
Except with the prior consent of BB&T, which will not be arbitrarily withheld
or delayed, before the merger becomes effective, neither Virginia Capital nor
its subsidiary may:
. 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 make any distribution on its capital
stock other than regularly scheduled quarterly dividends of $0.11 per
share of Virginia Capital common stock payable in a manner consistent
with past practices, except that any dividend declared or payable on
Virginia Capital common stock may, unless otherwise agreed by BB&T and
Virginia Capital, be declared with a record date before the merger be-
comes effective only if the normal record date for payment of the corre-
sponding quarterly dividend to holders of BB&T common stock is before
the merger becomes effective;
. issue any shares of capital stock, except pursuant to options outstand-
ing as of the date of the merger agreement or pursuant to the option
granted to BB&T in connection with the merger agreement;
26
. issue, grant or authorize any rights to acquire capital stock or effect
any recapitalization, reclassification, stock dividend, stock split or
similar change in capitalization;
. amend its articles of incorporation or bylaws;
. impose or permit the imposition or existence of any encumbrance on any
share of stock held by Virginia Capital in its 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 or consolidate with any other entity or acquire control over any
other entity;
. dispose of any assets or acquire any assets, other than in the ordinary
course of its business consistent with past practices;
. fail to comply in any material respect with any legal requirements ap-
plicable 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 outstanding as of the date of the merger agreement), 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 arrange-
ments;
. enter into or substantially modify (except as may be required by law)
any employee benefit, incentive or welfare arrangement, or any related
trust agreement, relating to any of its directors, officers or other em-
ployees (other than renewals consistent with past practice);
. solicit inquiries or proposals with respect to, furnish any information
relating to, or participate in any negotiations or discussions concern-
ing, any other business combination with Virginia Capital or its subsid-
iary, 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 with the offeror following an
unsolicited offer if Virginia Capital is advised by legal counsel in
writing that the failure to furnish information or negotiate could rea-
sonably be expected to constitute a breach of the fiduciary duty of the
Virginia Capital Board to the Virginia Capital shareholders);
. enter into (a) any material agreement or commitment other than in the
ordinary course of business, (b) any agreement, indenture or other in-
strument other than in the ordinary course relating to the borrowing of
money by Virginia Capital or its subsidiary or guarantee by Virginia
Capital or its subsidiary of any obligation, (c) any agreement or com-
mitment 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 under-
standing with a labor union;
. 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 in any
material respect, except as required by changes in accounting principles
concurred in by BB&T (which may not unreasonably withhold its concur-
rence) or change any of its federal income tax reporting methods from
those used in the preparation of its tax returns for the year ended De-
cember 31, 1999, except as required by changes in law;
. incur any commitments for capital expenditures or obligations to make
capital expenditures in excess of $25,000 for any one expenditure or
$100,000 in the aggregate;
. incur any new indebtedness other than deposits from customers, advances
from the Federal Home Loan Bank and reverse repurchase arrangements in
the ordinary course of business;
27
. take any action that would or could reasonably be expected to (a) cause
the merger 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; or
. agree to do any of the foregoing.
Virginia Capital has also agreed:
. to take such actions as may be reasonably necessary to modify the struc-
ture of the merger, as long as the modification does not reduce the con-
sideration to be received by Virginia Capital shareholders, abrogate the
covenants contained in the merger agreement or substantially delay or
impair the completion of the merger;
. to cooperate with BB&T in certain respects concerning (a) accounting and
financial matters necessary to facilitate the merger, including issues
arising in connection with record keeping, loan classification, valua-
tion adjustments, levels of loan loss reserves and other accounting
practices and (b) Virginia Capital's lending, investment or
asset/liability management policies;
. to keep BB&T advised of all material developments relevant to its busi-
ness prior to completion of the merger; and
. to provide BB&T access to Virginia Capital's books and records.
Except with the prior consent of Virginia Capital, before the merger becomes
effective, 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 tax-free reorganization;
. result in any inaccuracy of a representation or warranty that would al-
low termination of the merger agreement;
. cause any of the conditions precedent to the transactions contemplated
in the merger agreement to fail to be satisfied; or
. fail to comply in any material respect with any laws, regulations, ordi-
nances or governmental actions applicable to it and to the conduct of
its business.
BB&T has also agreed to keep Virginia Capital advised of all material devel-
opments relevant to its business prior to completion of the merger.
Waiver; Amendment; Termination; Expenses
Except with respect to any required regulatory approval, BB&T or Virginia
Capital may at any time (whether before or after approval of the merger agree-
ment by the Virginia Capital shareholders) extend the time for the performance
of any of the obligations or other acts of the other party and may waive: any
inaccuracies of the other party in the representations or warranties contained
in the merger agreement or any document delivered pursuant to the merger agree-
ment; compliance with any of the covenants, undertakings or agreements of the
other party, or satisfaction of any of the conditions precedent to the other
party's obligations, contained in the merger agreement; or the performance by
the other party of any of its obligations set out in the merger agreement. The
parties may also mutually amend or supplement the merger agreement in writing
at any time. However, no extension, waiver, amendment or supplement that would
reduce either the exchange ratio or the payment terms for fractional interests
to be provided to holders of Virginia Capital common stock upon completion of
the merger will be made after the Virginia Capital shareholders approve the
merger agreement.
If any condition 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 material condition to
28
Virginia Capital's obligations, Virginia Capital will, if it determines it ap-
propriate under the circumstances, resolicit shareholder approval of the merger
agreement 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 merger becomes effective, by the mutual consent
in writing of BB&T and Virginia Capital;
. at any time before the merger becomes effective, by either party in
writing (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 the inaccuracy of any representation or warranty of the other
party contained in the merger agreement that would provide the non-
breaching 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 written notice of the breach
or inaccuracy to the party committing it or the time the merger becomes
effective;
. at any time before the merger becomes effective, 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 date on which the
merger is to become effective, and the party giving the notice is not in
material breach of any of its representations, warranties, covenants or
undertakings in the merger agreement;
. 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 Virginia
Capital do not approve the merger agreement by the required vote at a
meeting called and held for the purpose of voting thereon;
. at any time following October 31, 2001 by either party in writing, if
the merger has not yet become effective and the party giving the notice
is not in material breach of any of its representations, warranties,
covenants or undertakings in the merger agreement;
. at any time before the merger becomes effective, by BB&T in writing, if
the Virginia Capital Board withdraws, modifies, conditions or refuses to
make its recommendation to the shareholders of Virginia Capital that
they vote to approve the merger agreement; or
. at any time before the merger becomes effective, by Virginia Capital in
writing, if:
. the value of the portion of a share of BB&T common stock to be
received for each share of Virginia Capital common stock (based on
the average closing price of BB&T common stock over the ten-trading
day pricing period) is less than $16.53; and
. BB&T does not notify Virginia Capital in a timely manner that it
will increase the merger consideration in the form of cash, BB&T
common stock or a combination of cash and BB&T common stock so that
the value of the consideration to be received for each share of
Virginia Capital common stock equals $16.53.
If the merger agreement is terminated pursuant to any of the provisions de-
scribed above, the merger agreement will become void and have no effect, except
that (a) provisions in the merger agreement relating to confidentiality and ex-
penses 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.
Each party will pay the expenses it incurs in connection with the merger
agreement and the merger, except that printing expenses and Securities and Ex-
change Commission filing fees incurred in connection with the registration
statement and this proxy statement/prospectus will be paid 50% by BB&T and 50%
by Virginia Capital.
29
Interests of Virginia Capital's Directors and Officers in the Merger That
Differ from Yours
Some members of Virginia Capital's management and the Virginia Capital Board
have interests in the merger that are in addition to or different from their
interests as Virginia Capital shareholders. The Virginia Capital Board was
aware of these interests and considered them in approving the merger agreement
and the merger.
Vesting of Virginia Capital Restricted Stock Awards
Directors, officers and employees of Virginia Capital have received grants of
restricted stock under Virginia Capital's 1999 Stock-Based Incentive Plan, with
vesting to occur over a period of five years. Under the terms of the plan, all
unvested shares of restricted stock will become vested and free of any restric-
tions upon completion of the merger. The directors and executive officers of
Virginia Capital currently hold a total of [291,956] shares of unvested re-
stricted stock, which will be converted into the right to receive the same
merger consideration as all other shares of Virginia Capital common stock. The
following table sets forth the number of shares of unvested restricted stock
held by each director and executive officer of Virginia Capital and the value
of the merger consideration that each will receive in exchange for his or her
shares, based on an assumed price of $ for one share of BB&T common stock
(the closing price on April , 2001) and a corresponding assumed exchange ratio
of shares of BB&T common stock for each share of Virginia Capital common
stock. [to be updated]
Value of BB&T
Number of Common Stock Received
Unvested Shares of for Unvested Shares
Name Restricted Stock Awards of Restricted Stock
- ---- ----------------------- ---------------------
William M. Anderson, Jr. ......... 15,640
O'Connor Ashby.................... 15,640
Ronald G. Beck.................... 15,640
Ernest N. Donahoe, Jr. ........... 15,640
Samuel C. Harding, Jr. ........... 91,238
DuVal Q. Hicks, Jr. .............. 15,640
H. Smith McKann................... 15,640
Peggy J. Newman................... 91,238
Charles S. Rowe................... 15,640
Vesting of Stock Options
Directors, officers and employees of Virginia Capital have received grants of
stock options under Virginia Capital's 1999 Stock-Based Incentive Plan, with
vesting to occur over a period of five years. Under the terms of the plan, all
unvested options will become vested upon completion of the merger. Each non-em-
ployee director currently holds unvested options to acquire [39,102] shares.
The executive officers hold unvested options to acquire the following numbers
of shares: Samuel C. Harding, Jr., [228,096]; and Peggy J. Newman, [228,096].
Upon completion of the merger, each outstanding option to acquire Virginia Cap-
ital common stock will be converted into an option to acquire BB&T common
stock. See "Effect on Employee Benefit Plans and Options--Stock Options" on
page . [to be updated]
Employment Agreements
In connection with the merger, Branch Banking and Trust Company of Virginia,
BB&T's Virginia banking subsidiary ("Branch Bank-VA") has entered into an em-
ployment agreement with each of Virginia Capital's President, Samuel C. Har-
ding, Jr., and Executive Vice President, Secretary and Treasurer, Peggy J. New-
man, that will become effective upon completion of the merger. The employment
term of each agreement extends until the later of March 31, 2002 or the sixty-
first day following the conversion of the data systems of Virginia Capital to
those of BB&T. Each agreement provides that the employee will become a Senior
Vice President of Branch Bank-VA and receive an annual base salary at least
equal to $251,750 and the following conditional amounts:
30
. if the conversion of the data services systems of Virginia Capital to
those of BB&T is substantially completed, $150,000, payable not later
than the end of the calendar quarter in which the conversion is substan-
tially completed; and
. if the employee remains employed by Branch Bank-VA until the end of the
employment term, $150,000, payable within five business days after the
end of the employment term.
The employee will not be entitled to receive either of these payments if, prior
to the date for a payment, the employment of the employee is terminated for any
reason other than (A) by Branch Bank-VA for reasons other than Just Cause (as
that term is defined in the employment agreements), (B) as a result of the em-
ployee's disability or (C) by the employee because of an uncured breach of the
employment agreement by Branch Bank-VA. The employee will, however, have the
right to receive such payments following a termination of the type described in
(A), (B) or (C). The conditional payments will be compensation for payroll tax
and income tax purposes but will not be taken into account for purposes of de-
termining benefits or contributions under any retirement or other plan, program
or arrangement of Branch Bank-VA or in determining the termination compensation
payable to the employee as described below.
During the employment term, each of Mr. Harding and Ms. Newman will also be
eligible to receive, on the same basis as other similarly situated officers of
Branch Bank-VA, an annual bonus payment pursuant to the terms of BB&T's Amended
and Restated Short Term Incentive Plan (prorated for any partial year) and em-
ployee pension and welfare benefits such as sick leave, vacation, group dis-
ability and health, dental, life and accident insurance and similar indirect
compensation. These pension and welfare benefits will commence as of the dates
on which the former Virginia Capital employees generally become eligible to
participate in the plans. BB&T will continue those Virginia Capital plans that
BB&T determines provide benefits of the same type or class as a corresponding
BB&T plan in effect for Mr. Harding and Ms. Newman until they become eligible
to participate in the corresponding BB&T plan.
The employment agreements for Mr. Harding and Ms. Newman further provide
that, at the end of the employment term, each will become an independent con-
sultant to Branch Bank-VA to serve for five years. In such capacity, each will
render services as an independent contractor (and not as an employee) in the
nature of customer and community relations, business development, employee re-
lations and general advice and assistance relating to Branch Bank-VA's custom-
ers and employees and to the growth and development of the business of Branch
Bank-VA in the Fredericksburg, Virginia area. Mr. Harding and Ms. Newman will
render these consulting services at times and on a schedule mutually reasonably
convenient to Branch Bank-VA, but will not be required to maintain records of
hours worked or to work in accordance with any fixed schedule.
During the consulting period, certain noncompetition provisions of the em-
ployment agreements will continue to apply and, in consideration for the con-
tinued applicability of those provisions, each of Mr. Harding and Ms. Newman
will receive $12,500 per month. In addition, each will receive consulting fees
of $4,166.67 per month, as well as a death benefit of at least $750,000 (as
long as he or she pays his or her portion of the cost of such death benefit as
if an employee of Branch Bank-VA). Each will also be eligible to participate in
Branch Bank-VA's retiree health insurance plan, which will take into account
years of employment with Virginia Capital.
If either the employment term or the consulting period is terminated prior to
its expiration (A) by Branch Bank-VA for reasons other than Just Cause (as that
term is defined in the employment agreements), (B) as a result of Mr. Harding's
or Ms. Newman's disability or (C) by Mr. Harding or Ms. Newman because of an
uncured breach of the employment agreement by Branch Bank-VA, Mr. Harding and
Ms. Newman will nevertheless be entitled to receive the payments he or she
would have received if the five-year consulting period had continued until its
expiration. Mr. Harding and Ms. Newman will not be entitled to receive such
payments, however, if he or she violates the noncompetition provisions or fails
to render consulting services as requested by Branch Bank-VA and does not rem-
edy such failure within twenty days following notice from Branch Bank-VA.
Each employment agreement provides that, if Branch Bank-VA terminates the em-
ployee's employment other than because of disability or for cause and the em-
ployee complies with certain noncompetition provisions,
31
the employee will be entitled to receive as "termination compensation" his or
her base salary and bonus until the end of the employment term. In addition,
the employee will continue to receive health, retirement and other group em-
ployee benefits from Branch Bank-VA on the same terms as were in effect before
the termination, either under Branch Bank-VA's plans or comparable coverage,
during the time payments of termination compensation are made.
Each employment agreement also provides that for any taxable year(s) in which
Mr. Harding or Ms. Newman is liable for the payment of an excise tax under Sec-
tion 4999 of the Internal Revenue Code (or any successor provision) with re-
spect to any payment or benefit by Virginia Capital (to the extent approved in
advance by BB&T), BB&T, Branch Bank-VA or any other affiliate of BB&T (except
for certain payments or benefits incident to a change of control of BB&T,
Branch Bank-VA or any other affiliate), Branch Bank-VA will pay an additional
amount (the "reimbursement payment") such that the net amount of the payments
or benefits retained by Mr. Harding or Ms. Newman, as the case may be, after
deduction of any excise tax imposed and any interest charges or penalties as a
result of the imposition of the excise tax and income taxes resulting from the
reimbursement payment is equivalent, on an after-tax basis, to the amount that
he or she would have retained if the excise tax had not been imposed. For pur-
poses of determining the amount of the reimbursement payment, Mr. Harding and
Ms. Newman will be deemed to be taxed at the highest federal, state and local
marginal rates (taking into account any phase-out of otherwise available deduc-
tions or exemptions) in the calendar year in which the reimbursement payment is
made, net of the maximum reduction of federal income taxes that may be obtained
from the deduction of state and local income taxes.
In addition to the foregoing, Branch Bank-VA (or its successors) will indem-
nify Mr. Harding and Ms. Newman from any and all losses and expenses that he or
she incurs as a result of any administrative or judicial review of his or her
liability for the excise tax by the Internal Revenue Service or any comparable
state agency through a final judicial determination or final administrative
settlement of any dispute arising out of the employee's liability for the ex-
cise tax or otherwise relating to the classification for purposes of Section
280G of the Internal Revenue Code of any payment or benefit in the nature of
compensation as described in the preceding paragraph.
The employment agreements will supersede any employment agreements or change
of control arrangements which any of the employees had with Virginia Capital or
its subsidiary, except to the extent of amounts earned before and payable after
the merger becoming effective that were disclosed to BB&T as of the date of the
merger agreement.
Supplemental Executive Retirement Plan
Fredericksburg State Bank maintains the Fredericksburg Bank Supplemental Ex-
ecutive Retirement Plan (SERP). In addition to making up for benefits lost un-
der the 401(k) Plan and Employee Stock Ownership Plan (ESOP) due to Internal
Revenue Service limitations, the SERP also provides a supplemental ESOP benefit
to participants in connection with a change in control of Virginia Capital or
Fredericksburg State Bank prior to the complete repayment of the loan to the
ESOP. In connection with the merger, Mr. Harding and Ms. Newman will receive
$1.1 million and $1.0 million, respectively. These respective amounts represent
the difference between the benefit each executive would have received under the
ESOP and the SERP if he or she had remained employed throughout the scheduled
term of the ESOP loan and the benefits he or she actually received under the
ESOP.
Fredericksburg, Virginia Advisory Board
When the merger becomes effective, BB&T will offer to each member of the Vir-
ginia Capital Board a seat on BB&T's advisory board for the Fredericksburg,
Virginia area. Membership of any person on the advisory board will be condi-
tional upon BB&T's receipt of a noncompetition agreement from such person. For
two years after the merger becomes effective, Virginia Capital directors who
become members of the Fredericksburg, Virginia advisory board will receive, as
compensation for service on the advisory board, members' fees (annual retainer
and attendance fees) at least equal in amount each year to those received as of
December 1, 2000 by directors of Virginia Capital. After the two-year period,
they will receive fees in accordance with
32
BB&T's standard schedule of advisory board service fees, as in effect from time
to time. For two years after the merger becomes effective, no Virginia Capital
director who becomes a member of the Fredericksburg, Virginia advisory board
will be prohibited from serving because he or she has reached the maximum age
for service, which is currently age 70.
Indemnification of Directors and Officers
The merger agreement provides that BB&T or one of its subsidiaries will main-
tain for three years after the merger becomes effective directors' and offi-
cers' liability insurance covering directors and officers of Virginia Capital
for acts or omissions occurring before the merger becomes effective. This in-
surance will provide at least the same coverage and amounts as contained in
Virginia Capital's policy on the date of the merger agreement, unless the an-
nual premium on the policy would exceed 150% of the annual premium payments on
Virginia Capital's policy, in which case BB&T would maintain the most advanta-
geous 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 were officers, directors or employees of Virginia Capital or its subsidiary
prior to the time that the merger becomes effective from any acts or omissions
in such capacities occurring prior to the time that the merger becomes effec-
tive and to advance indemnifiable expenses as incurred, in each case to the ex-
tent permitted by the articles of incorporation or bylaws of Virginia Capital
as of the date of the merger agreement and permitted under the Virginia Stock
Corporation Act and the North Carolina Business Corporation Act.
Regulatory Considerations
Financial holding companies (such as BB&T) and bank holding companies (such
as Virginia Capital) 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 supervi-
sion, regulation and periodic examination by various federal and state finan-
cial 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 discus-
sions 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 Virginia Capital which are 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 merger are subject to regulatory approv-
als, 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 Federal Reserve under the Bank Hold-
ing Company Act. In considering the approval of a transaction such as the merg-
er, this Act requires the Federal Reserve to review the financial and manage-
rial resources and future prospects of the bank holding companies and the banks
concerned and the convenience and needs of the communities to be served. The
Federal Reserve is also required to evaluate whether the merger would result in
a monopoly or would be in furtherance of any combination or conspiracy or at-
tempt 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 be in any manner in restraint of trade, unless it finds that the anti-com-
petitive effects of the proposed transaction are clearly outweighed in the pub-
lic interest by the probable effect of the transaction in meeting the conve-
nience and needs of the communities to be served. In addition, the Federal Re-
serve must take into account the record of performance of the financial insti-
tution subsidiaries of the acquiring and target holding company under the Com-
munity Reinvestment Act in meeting the credit needs of the community, including
low- and moderate-income neighborhoods, served by each institution.
33
Where a transaction, such as the merger, is the acquisition by a bank holding
company of a bank located in a state other than the home state of the bank
holding company (in this case North Carolina), the Act authorizes the Federal
Reserve to approve the transaction without regard to whether such transaction
is prohibited under the laws of any state, as long as the bank holding company
is adequately capitalized and adequately managed and certain other limitations
are not exceeded. BB&T is considered well-capitalized and well-managed under
the Federal Reserve's Regulation Y, and the transaction does not exceed the
other limitations.
The merger also is subject to approval by the Virginia Bureau of Financial
Institutions of the Virginia State Corporation Commission under the bank hold-
ing company provisions of the Virginia Code, which permits an out-of-state bank
holding company, such as BB&T, to acquire a Virginia commercial bank, such as
Virginia Capital's subsidiary, Fredericksburg State Bank, if the Virginia Bu-
reau approves the transaction. In its review of the merger, the Virginia Bureau
will consider, among other things, whether the transaction would be detrimental
to the safety and soundness of BB&T or the Virginia commercial bank.
BB&T has filed the required applications with the Federal Reserve and the
Virginia Bureau. Although BB&T does not know of any reason why it will not ob-
tain approval from these regulators in a timely manner, BB&T cannot be certain
when it will obtain them or that it will obtain them at all. [to be updated]
The Subsidiary Bank Merger
Although not required by the terms of the merger agreement, BB&T expects to
merge Fredericksburg State Bank into Branch Bank-VA during the third 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 re-
sources and future prospects of the existing and proposed institution and the
convenience and needs of the communities to be served. Further, the FDIC may
not approve the 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 to lessen competition or to tend to create a monopoly or if
it would be in any other manner in restraint of trade, unless the FDIC finds
that the anticompetitive effects of the subsidiary bank merger are clearly out-
weighed 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 pro-
posed institution under the Community Reinvestment Act in meeting the credit
needs of the community, including low- and moderate-income neighborhoods,
served by such institution. Applicable regulations also require publication of
notice of the application for approval of the subsidiary bank merger and an op-
portunity for the public to comment on the application in writing and to re-
quest a hearing.
The Virginia Bureau also must approve the merger of Fredericksburg State Bank
with and into Branch Bank-VA under the bank merger provisions of the Virginia
Code, which authorize the merger of two Virginia commercial banks where a Vir-
ginia commercial bank is the resulting bank.
Branch Bank-VA expects to file these required applications closer to the ex-
pected effective date of the subsidiary bank merger.
Accounting Treatment
It is anticipated that BB&T will account for the merger using the purchase
method of accounting. Under this accounting method, BB&T would record the ac-
quired identifiable assets and liabilities assumed at their fair market value
at the time the merger is completed. Any excess of the cost of Virginia Capital
and the sum of the fair values of tangible and identifiable intangible assets
less liabilities assumed would be recorded as goodwill. Any goodwill recorded
would be amortized over the period of expected benefit. BB&T's reported income
would include the operations of Virginia Capital after the acquisition, based
on the cost of the transaction. Financial statements of BB&T issued after com-
pletion of the merger would reflect the impact of Virginia Capital. Financial
statements of BB&T issued before completion of the merger would not be restated
retroactively to reflect Virginia Capital's historical financial position or
results of operations. The unaudited pro forma financial information contained
in this proxy statement/prospectus has been prepared using the purchase method
of accounting. See "Summary--Comparative Per Share Data" on page 8.
34
Stock Option Agreement
General
As a condition to BB&T entering into the merger agreement, Virginia Capital
granted BB&T an option to purchase up to 1,848,560 newly issued shares of Vir-
ginia Capital common stock (subject to adjustment in certain circumstances) at
a price of $15.00 per share (also subject to adjustment in certain circumstanc-
es). The purchase of any shares of Virginia Capital 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.
Certain aspects of the option agreement may have the effect of discouraging
persons who, before the merger becomes effective, might be interested in ac-
quiring all of, or a significant interest in, Virginia Capital from considering
or proposing such an acquisition, even if they were prepared to offer to pay
consideration to shareholders of Virginia Capital with a higher current market
price than the BB&T common stock to be received for Virginia Capital common
stock pursuant to the merger agreement. Consequently, the option agreement is
intended to increase the likelihood that the merger will be completed in accor-
dance with the terms set forth in 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, Virginia Capital authorizes, recommends,
publicly proposes (or publicly announces an intention to authorize, rec-
ommend 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 Virginia Capital
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 Virginia Capital and its subsidiary or (c) the issuance, sale or
other disposition of securities representing 15% or more of the voting
power of Virginia Capital or any of its significant subsidiaries; or
. any third party or group of third parties acquires or has the right to
acquire beneficial ownership of securities representing 15% or more of
the outstanding shares of Virginia Capital common stock.
The obligation of Virginia Capital to issue shares of Virginia Capital 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 con-
sents, 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 pro-
hibits the sale or delivery of the shares.
35
Termination
The option will terminate upon the earliest to occur of the following events:
(a) the time that the merger becomes effective; (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 Virginia Capital of a covenant or agreement in the
merger agreement or an inaccuracy in Virginia Capital's representations or war-
ranties in the merger agreement of a nature entitling BB&T to terminate (a "De-
fault 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 fail-
ure of the shareholders of Virginia Capital 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
Virginia Capital common stock or the filing of a registration statement
with respect to such an offer; or
. the failure of the shareholders of Virginia Capital to approve the
merger agreement, the failure of the meeting to have been held, the can-
cellation of the meeting prior to the termination of the merger agree-
ment or the Virginia Capital 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 regis-
tration statement under the Securities Act of 1933 with respect to an
exchange offer such that it would thereafter own 15% or more of the out-
standing shares of Virginia Capital common stock or (c) files an appli-
cation or notice under federal or state statutes relating to the regula-
tion of financial institutions or their holding companies to engage in
an Acquisition Transaction.
To the knowledge of BB&T and Virginia Capital, 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 Virginia Capital common stock by reason of a stock divi-
dend, stock split, split-up, recapitalization, combination, exchange of shares
or similar transaction or in the event of the issuance of any additional shares
of Virginia Capital common stock before termination of the option.
Repurchase Rights
At the request of the holder of the option any time during the 12 months af-
ter the first occurrence of a Repurchase Event (as defined below), Virginia
Capital must, if the option has not terminated, and subject to any required
regulatory approval, repurchase from the holder (a) the option and (b) all
shares of Virginia Capital common stock purchased by the holder pursuant to the
option with respect to which the holder then has beneficial ownership. The re-
purchase will be at an aggregate price equal to the sum of:
. the aggregate purchase price paid by the holder for any shares of Vir-
ginia Capital 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 op-
tion agreement) for each share of Virginia Capital common stock over the
purchase price, multiplied by (b) the number of shares of Virginia Capi-
tal common stock with respect to which the option has not been exer-
cised, 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 op-
tion for which the closing date has not occurred) by the holder for each
share of Virginia Capital common stock with respect to which the option
has been exercised and
36
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 of 1934) acquires beneficial ownership of
50% or more of the then outstanding shares of Virginia Capital 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, Virginia Capital enters
into an agreement:
. to consolidate with or merge into any third party and Virginia Capital
will not be the continuing or surviving corporation of the consolidation
or merger;
. to permit any third party to merge into Virginia Capital with Virginia
Capital as the continuing or surviving corporation, but, in connection
therewith, the then outstanding shares of Virginia Capital common stock
are changed into or exchanged for stock or other securities of Virginia
Capital or of any other entity, or cash, or any other property, or the
outstanding shares of Virginia Capital 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
Virginia Capital 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 consolida-
tion or the transferee of all or substantially all of Virginia Capital's as-
sets or (y) any entity controlling the continuing or surviving corporation or
transferee. The number of shares subject to the substitute option and the ex-
ercise 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 op-
tion certain rights to require Virginia Capital to prepare and file a regis-
tration statement under the Securities Act of 1933 for a period of 24 months
following termination of the merger agreement if registration is necessary in
order to permit the sale or other disposition of any or all shares of Virginia
Capital common stock or other securities that have been acquired by or are is-
suable upon exercise of the option.
Effect on Employee Benefit Plans and Stock Options
Employee Benefit Plans
As of a date determined by BB&T (the "benefit plan date") to be not later
than January 1 of the first year that begins after Fredericksburg State Bank
is merged into BB&T or one of its subsidiaries, BB&T will cause Virginia Capi-
tal's 401(k) plan either to be merged with BB&T's 401(k) plan, frozen or ter-
minated, as determined by BB&T and subject to receipt of applicable regulatory
approvals. Each employee of Virginia Capital who (a) is a participant in Vir-
ginia Capital's 401(k) plan, (b) becomes an employee of BB&T or a BB&T subsid-
iary (a "BB&T employer") when the merger becomes effective, and (c) continues
in the employment of a BB&T employer until the benefit plan date, will be eli-
gible to participate in BB&T's 401(k) plan as of that date. Any other former
employee of Virginia Capital who is employed by a BB&T employer on or after
the
37
benefit plan date will be eligible to participate in BB&T's 401(k) plan upon
complying with eligibility requirements. All rights to participate in BB&T's
401(k) plan are subject to BB&T's right to amend or terminate the plan. BB&T
will maintain Virginia Capital's 401(k) plan for the benefit of participating
employees until the benefit plan date. In administering BB&T's 401(k) plan,
service with Virginia Capital and its subsidiary will be deemed service with
BB&T for participation and vesting purposes, but not for benefit accrual pur-
poses.
Each employee of Virginia Capital or its subsidiary who becomes an employee
of a BB&T employer when the merger becomes effective (a "transferred employee")
will be eligible to participate in group hospitalization, medical, dental,
life, disability and other welfare benefit plans and programs available to em-
ployees of the BB&T employer, subject to the terms of the plans and programs,
as of the benefit plan date for each such plan or program, conditional upon the
transferred employee's being employed by the BB&T employer as of the benefit
plan date and compliance with eligibility requirements of the respective plans
and programs. With respect to health care coverage, participation in BB&T's
plans may be subject to availability of HMO options. In any case in which HMO
coverage is not available, substitute coverage will be provided that may not be
fully comparable to the HMO coverage. With respect to any benefit plan or pro-
gram of Virginia Capital that a BB&T employer determines, in its sole discre-
tion, provides benefits of the same type or class as a corresponding plan or
program maintained by the BB&T employer, the BB&T employer will continue the
Virginia Capital plan or program in effect for the benefit of the transferred
employees so long as they remain eligible to participate and until they become
eligible to participate in the corresponding plan or program maintained by the
BB&T employer (and, with respect to any such plan or program, subject to com-
pliance with eligibility requirements and subject to the right of the BB&T em-
ployer to terminate the plan or program). For purposes of administering these
plans and programs: (a) service with Virginia Capital will be deemed to be
service with the BB&T employer for the purpose of determining eligibility to
participate and vesting (if applicable) in such 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 described in the next paragraph); and
(b) each transferred employee will receive credit for any deductible amounts
and out-of-pocket expenses paid prior to the applicable benefit plan date (to
the same extent such credit was given under the analogous Virginia Capital plan
prior to such benefit plan date) in satisfying any applicable deductibles or
out-of-pocket expenses.
Except to the extent of commitments in the merger agreement or other contrac-
tual commitments specifically made or assumed by BB&T, neither BB&T nor any
BB&T employer will have any obligation arising from the merger to continue any
transferred employees in its employ or in any specific job or to provide to any
transferred employee any specified level of compensation or any incentive pay-
ments, benefits or perquisites. Each transferred employee who is terminated by
a BB&T employer after the merger becomes effective will be entitled to sever-
ance pay in accordance with the general severance policy maintained by BB&T, if
and to the extent that the transferred employee is entitled to severance pay
under that policy. In that event, the transferred employee's service with Vir-
ginia Capital or its subsidiary will be treated as service with BB&T for pur-
poses of determining the amount of severance pay, if any, payable under BB&T's
severance policy.
BB&T has agreed to honor all employment agreements, severance agreements and
deferred compensation agreements that Virginia Capital and its subsidiary have
with their current and former employees and directors that were disclosed to
BB&T pursuant to the merger agreement, except to the extent any agreements are
superseded or terminated at or after the time the merger becomes effective. Ex-
cept for these agreements and except as otherwise described above, the employee
benefit plans of Virginia Capital will be frozen, terminated or merged into
comparable plans of BB&T, as BB&T may determine in its sole discretion.
Termination of Employee Stock Ownership Plan
Virginia Capital will terminate the Fredericksburg State Bank's Employee
Stock Ownership Plan as of the time that the merger becomes effective and will
cause the trustee of the plan to repay any outstanding indebtedness of such
plan and to allocate shares of Virginia Capital common stock to the partici-
pants in such plan in accordance with its terms. No purchase of shares of Vir-
ginia Capital common stock will be made after the date of the merger agreement.
38
Stock Options
When the merger becomes effective, each then outstanding stock option granted
under the Virginia Capital Bancshares 1999 Stock-Based Incentive Plan 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 these stock options in
accordance with the terms of the Virginia Capital plan, except that (a) BB&T
and the compensation committee of the BB&T Board will be substituted for Vir-
ginia Capital and its compensation committee with respect to administering its
stock option plan, (b) each stock option may be exercised solely for shares of
BB&T common stock, (c) the number of shares of BB&T common stock subject to
each stock option will be the number of whole shares (omitting any fractional
share) determined by multiplying the number of shares of Virginia Capital com-
mon stock subject to the stock option by the exchange ratio in the merger and
(d) the per share exercise price for each stock option will be adjusted by di-
viding the per share exercise price for the stock option by the exchange ratio
in the merger and rounding up to the nearest cent.
As an alternative to assuming the stock options, BB&T may choose to substi-
tute options under the BB&T Corporation 1995 Omnibus Stock Incentive Plan or
any other comparable plan for all or a part of the Virginia Capital stock op-
tions, subject to the adjustments described in (c) and (d) in the preceding
paragraph and the conditions that the substitutions do not constitute a modifi-
cation, extension or renewal of the options and that the substituted options
continue in effect on the same terms and conditions provided in Virginia Capi-
tal plan and the stock option agreements evidencing the options.
BB&T will deliver to each participant in the stock option plan who receives
converted or substitute options an appropriate notice setting forth the partic-
ipant's rights with respect to the converted or substitute options.
Each stock option that is an incentive stock option will be adjusted as re-
quired by Section 424 of the Internal Revenue Code to continue as an incentive
stock option and not to constitute a modification, extension or renewal within
the meaning of Section 424(h) of the Internal Revenue Code.
BB&T has reserved and will continue to reserve adequate shares of BB&T common
stock for the exercise of any converted or substitute options. As soon as prac-
ticable after the merger becomes effective, if it has not already done so and
to the extent Virginia Capital 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 of 1933 with respect to the shares of BB&T
common stock subject to converted or substitute options and will use its rea-
sonable 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.
Based on stock options outstanding as of the date of the merger agreement and
subsequent exercises, options to purchase an aggregate of approximately
[1,140,386] shares of Virginia Capital common stock may be outstanding when the
merger becomes effective. Any shares of Virginia Capital common stock issued
pursuant to the exercise of stock options under the stock option plan before
the merger becomes effective will be converted into shares of BB&T common stock
and cash in lieu of any fractional share interest in the same manner as other
outstanding shares of Virginia Capital common stock.
Eligibility to receive stock option grants after the merger becomes effective
will be determined by BB&T in accordance with its plans and procedures and sub-
ject to any contractual obligations.
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 of 1933 and will be freely transferable, except for
shares issued to any shareholder who may be deemed to be an affiliate of Vir-
ginia Capital for purposes of Rule 145 under the Securities Act. Affiliates in-
clude generally directors, executive officers and beneficial owners of 10% or
more of any class of capital stock of Virginia Capital. 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 provi-
sions of Rule 145 under the Securities Act, or as otherwise permitted by the
Securities Act. The restrictions on resales by an affiliate extend also to re-
lated parties of the affiliate, including parties related by marriage who live
in the same home as the affiliate.
39
Virginia Capital has agreed to use its best efforts to cause each affiliate
of Virginia Capital to execute and deliver to BB&T a written agreement stating,
among other things, that the affiliate will not offer to sell, transfer or oth-
erwise dispose of any of the BB&T common stock issued to that affiliate in the
merger except in accordance with restrictions described in the preceding para-
graph.
No Appraisal or Dissenters' Rights
Under Virginia law, Virginia Capital shareholders will not be entitled to
dissent from the merger or to demand a statutory appraisal of the fair value of
their shares of Virginia Capital common stock.
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, Kentucky and Ten-
nessee 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, Kentucky and Tennessee. BB&T's principal commer-
cial bank subsidiaries are Branch Banking and Trust Company ("Branch Bank"),
Branch Banking and Trust Company of South Carolina ("Branch Bank-SC") and
Branch Banking and Trust Company of Virginia ("Branch Bank-VA"), excluding bank
subsidiaries of recently acquired bank holding companies that are expected to
be merged into one of BB&T's subsidiaries during 2001. The principal assets of
BB&T are all of the issued and outstanding shares of common stock of Branch
Bank, Branch Bank-SC, Branch Bank-VA and Scott and Stringfellow, Inc.
Operating Subsidiaries
Branch Bank, 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, offices in Georgia,
offices in West Virginia and offices in Kentucky. Branch Bank 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 Branch Bank located in Charlotte, North Carolina, offers lease
financing to commercial businesses and municipal governments. BB&T Investment
Services, Inc., a wholly owned subsidiary of Branch Bank 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 Branch Bank include Ra-
leigh, 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.
Branch Bank-SC serves South Carolina through banking offices. Branch Bank-
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, pub-
lic agencies, local governments and individuals.
40
Branch Bank-VA offers a full range of commercial and retail banking services
through banking offices throughout Virginia.
Scott & Stringfellow, Inc. provides services in retail brokerage, institu-
tional equity and debt underwriting, investment advice, corporate finance, eq-
uity trading, equity research and 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 man-
ages account receivables primarily in the furniture, textile and home furnish-
ings-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:
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 sub-
sidiaries, Hardwick operated nine banking offices in northwest Georgia. It is
expected that Hardwick Bank & Trust and First National Bank of Northwest Geor-
gia, subsidiary banks of BB&T (as the successor to Hardwick), will be merged
into Branch Bank during the second quarter of 2001. [to be updated]
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 Jessup, subsidiary banks of BB&T (as the successor to First Banking
Company), will be merged into Branch Bank during the second quarter of 2001.
[to be updated]
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 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 Vir-
ginia. One Valley also operated a trust division, discount brokerage subsidi-
ary and insurance agencies. The former banking subsidiaries of One Valley were
merged into Branch Bank or Branch Bank-VA in November 2000.
On November 15, 2000, BB&T acquired Edgar M. Norris & Co. Inc. of Green-
ville, South Carolina in a tax-free transaction accounted for as a purchase.
Edgar M. Norris, which will become part of Scott & Stringfellow, Inc., was the
largest independent broker-dealer in South Carolina, operating offices in
Greenville, Anderson, Greenwood and Columbia, South Carolina.
On December 5, 2000, BB&T announced that it had agreed to acquire Century
South Banks, Inc. of Alpharetta, Georgia in a tax-free transaction to be ac-
counted for as a pooling of interests. In the transaction, valued at $428.2
million based on BB&T's closing price on December 5, Century South sharehold-
ers would receive 0.93 shares of BB&T common stock for each share of Century
South common stock. Century South, with $1.6 billion in assets, operates 40
banking offices through 12 community banking subsidiaries. The acquisition,
which is expected to be completed in the second quarter of 2001, would expand
BB&T's franchise in the metropolitan Atlanta, Savannah, Macon and north Geor-
gia areas.
41
On December 27, 2000, BB&T acquired BankFirst Corporation in a tax-free
transaction accounted for as a purchase. In the transaction, BankFirst Corpo-
ration shareholders received 0.4554 shares of BB&T common stock for each share
of BankFirst Corporation common stock and 1.406 shares of BB&T common stock
for each share of BankFirst Corporation preferred stock. BankFirst Corpora-
tion, with $848.8 million in assets, operated 32 offices in Knox, Sevier,
Blount, Loudon, McMinn and Jefferson Counties of Tennessee through its banking
subsidiaries. The acquisition gave BB&T its first entry into Tennessee and ex-
panded its presence along Interstate 75 and Interstate 81. It is expected that
BankFirst and First National Bank and Trust Company, subsidiary banks of BB&T
(as the successor to BankFirst Corporation ), will be merged into Branch Bank
during July 2001.
On January 8, 2001, BB&T acquired FCNB Corp of Frederick, Maryland in a tax-
free transaction accounted for as a pooling of interests. In the transaction,
FCNB shareholders received 0.725 shares of BB&T common stock for each share of
FCNB common stock. FCNB, with $1.6 billion in assets, operated 34 banking of-
fices, primarily in Frederick and Montgomery counties of central Maryland,
through its banking subsidiary, FCNB Bank. The acquisition expanded BB&T's
presence in economically strong central Maryland and the fast-growing Washing-
ton, D.C. corridor. It is expected that FCNB Bank, a subsidiary bank of BB&T
(as the successor to FCNB), will be merged into Branch Bank during March 2001.
[to be updated]
On January 24, 2001, BB&T announced that it had agreed to acquire F&M Na-
tional Corporation of Winchester, Virginia in a tax-free transaction to be ac-
counted for as a pooling of interests. In the transaction, valued at $1.17
billion based on BB&T's closing price on January 23, F&M shareholders would
receive 1.09 shares of BB&T common stock for each share of F&M common stock.
F&M, with $4 billion in assets, operates 163 banking offices, 13 mortgage
banking offices, three trust offices and six insurance offices through 12 com-
munity banking subsidiaries (includes pending acquisitions). The acquisition,
which is expected to be completed in the third quarter of 2001, would increase
BB&T's market share in Washington D.C., give BB&T the number one market share
in the Tidewater, Virginia area and strengthen BB&T's position in Richmond,
Virginia, a growing technology center.
On March 2, 2001, BB&T acquired FirstSpartan Financial Corp. of Spartanburg,
South Carolina in a tax-free transaction accounted for as a purchase. In the
transaction, FirstSpartan shareholders received one share of BB&T common stock
for each share of FirstSpartan common stock. FirstSpartan, with $591 million
in assets, operated 11 banking offices in South Carolina's Spartanburg and
Greenville counties through its banking subsidiaries. The acquisition in-
creased BB&T's South Carolina assets to $5.8 billion. BB&T ranks third in mar-
ket share in South Carolina and first in Greenville and Spartanburg counties.
BB&T expects to continue to take advantage of the consolidation of the fi-
nancial 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 ac-
quired, may result in the issuance of additional shares of BB&T capital stock
or the incurring of additional indebtedness by BB&T, and could have a dilutive
effect on the per share earnings or book value of BB&T common stock. Moreover,
acquisitions sometimes result in significant front-end charges against earn-
ings, 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 hy-
brid capital instruments and other qualifying preferred stock, and a limited
amount of the loan loss allowance. This
42
is called Tier 2 capital. Tier 1 capital and Tier 2 capital combined are re-
ferred to as total capital. At March 31, 2001, BB&T's Tier 1 and total capital
ratios were % and %, respectively. [to be updated] 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 posi-
tions 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 high-
est 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
March 31, 2001 was %. [to be updated] Bank holding companies experiencing in-
ternal growth or making acquisitions are expected to maintain strong capital
positions substantially above the minimum supervisory levels without signifi-
cant reliance on intangible assets. Furthermore, these capital requirements in-
dicate that the Federal Reserve will continue to consider a "tangible Tier 1
leverage ratio" (deducting all intangibles) in evaluating proposals for expan-
sion 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 authori-
ties, including, in the most severe cases, the termination of deposit insurance
by the FDIC and placing the institution into conservatorship or receivership.
[The capital ratios of each of BB&T's bank subsidiaries exceeded all minimum
regulatory capital requirements as of March 31, 2001.] [to be updated]
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 sub-
ject to the deposit insurance assessments of the Bank Insurance Fund of the
FDIC. However, approximately % of the deposits of Branch Bank and Branch
Bank-SC and a portion of the deposits of Branch Bank-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 January 1, 2001, the effective rate of
assessments imposed on all FDIC deposits for deposit insurance ranges from 0 to
27 basis points per $100 of insured deposits, depending on the institution's
capital position and other supervisory factors. However, because legislation
enacted in 1996 requires that both SAIF-insured and BIF-insured deposits pay a
pro rata portion of the interest due on the obligations issued by the Financing
Corporation, the FDIC is currently assessing both BIF-insured deposits and
SAIF-insured deposits an additional 1.96 basis points per $100 of deposits on
an annualized basis to cover those obligations.
Additional Information
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, 2000] and Current Reports on
Form 8-K dated January 12, 2001, January 24, 2001 (two filings), February 8,
2001 and , all of which are incorporated by reference in this proxy
statement/prospectus. See "Where You Can Find More Information" on page . [to
be updated]
43
INFORMATION ABOUT VIRGINIA CAPITAL
Virginia Capital Bancshares, Inc. is a bank holding company. Its principal
business activities are conducted through its wholly owned subsidiary, Freder-
icksburg State Bank, which is a Virginia state commercial bank. Fredericksburg
State Bank conducts its business from its main office and three branch of-
fices, all of which are located in Virginia. Fredericksburg State Bank's main
office is located in the City of Fredericksburg, two branch offices are lo-
cated in Spotsylvania County and one is in Stafford County. The deposits of
Fredericksburg State Bank are insured up to applicable limits by the Savings
Association Insurance Fund of the Federal Deposit Insurance Corporation.
Fredericksburg State Bank is a community oriented financial institution
whose business historically has been focused on the origination and servicing
of residential mortgage loans and attracting retail deposits (principally cer-
tificates of deposit and savings accounts) from the general public. In recent
years, Fredericksburg State Bank has diversified its products and now offers a
full range of consumer and commercial products and services.
You can find additional information about Virginia Capital in Virginia Capi-
tal's Annual Report on Form 10-K for the fiscal year ended December 31, 2000
and Current Reports on Form 8-K dated January 26, 2001 and , all of which
are incorporated by reference in this proxy statement/prospectus. See "Where
You Can Find More Information" on page . [to be updated]
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 , 2001, there were shares of
BB&T common stock issued and outstanding, which excludes shares expected to be
issued in pending acquisitions. There were no shares of BB&T preferred stock
issued and outstanding as of such date, although 2,000,000 shares of BB&T pre-
ferred 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 of Virginia Capital common stock outstanding at the record date (and
assuming an exchange ratio of 0.6060), it is estimated that approximately
[5,629,304] shares of BB&T common stock would be issued in the merger. [to be
updated]
BB&T Common Stock
Each share of BB&T common stock is entitled to one vote on all matters sub-
mitted 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 Ju-
nior Preferred Stock reserved for issuance in connection with BB&T's share-
holder 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 Branch Bank. 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.
44
BB&T Preferred Stock
Under BB&T's articles of incorporation, BB&T may issue shares of BB&T pre-
ferred 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 se-
ries and any qualifications, limitations or restrictions thereof, and may in-
crease 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" below.
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 Branch Bank, as Rights Agent and are summa-
rized 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 distrib-
uted, and will also be distributed in the future, for each share of BB&T common
stock issued including shares to be issued to Virginia Capital 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 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 pub-
lic 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 of-
fer 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 "ad-
verse person," as described in the next paragraph.
The BB&T Board will declare a person to be an adverse person upon its deter-
minations (a) that the person, alone or together with its affiliates and asso-
ciates, has or will become the beneficial owner of 10% or more of the outstand-
ing 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 con-
sultation 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
45
BB&T to take action or enter into a transaction or series of transactions in-
tended 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 own-
ership 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 busi-
ness or prospects of BB&T or (3) the beneficial ownership otherwise is deter-
mined 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 distribu-
tion 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 pro-
vides 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) hav-
ing 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 un-
der clause (a). Following any of the events set forth in this paragraph, all
rights that are, or (under certain circumstances specified in the Rights Agree-
ment) were, beneficially owned by any acquiring person or 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 pur-
chase 10 shares of BB&T common stock for $145.00. Alternatively, at the discre-
tion of the BB&T Board, each right following an event set forth in the preced-
ing 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 ex-
change or other business combination transaction in which BB&T is not the sur-
viving 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 ex-
ercise, 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.
46
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 an-
nouncement that an acquiring person has become such or, if earlier, the effec-
tive 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 divi-
dends. While the distribution of the rights will not be taxable to sharehold-
ers or to BB&T, shareholders may, depending upon the circumstances, recognize
taxable income if the rights become exercisable for stock (or other considera-
tion) 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 pro-
visions 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 ad-
verse person) or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to adjust the time period gov-
erning 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 Securi-
ties and Exchange Commission. This registration statement and the Rights
Agreement are incorporated by reference in this proxy statement/prospectus,
and we refer you to them for the complete terms of the Rights Agreement and
the rights. The foregoing discussion is qualified in its entirety by reference
to the Rights Agreement. See "Where You Can Find More Information" on page .
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, prefer-
ences 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 sharehold-
ers. BB&T believes that these provisions are appropriate to protect the inter-
ests of BB&T and its shareholders.
Control Share Acquisition Act
The Control Share Acquisition Act of the NCBCA may make an unsolicited at-
tempt to gain control of BB&T more difficult by restricting the right of cer-
tain shareholders to vote newly acquired large blocks of stock. For a descrip-
tion 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 "Compar-
ison of Shareholders' Rights--Directors" on page .
47
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 VIRGINIA CAPITAL SHAREHOLDERS
When the merger becomes effective, holders of Virginia Capital common stock
will become shareholders of BB&T. The following is a summary of material dif-
ferences between the rights of holders of BB&T common stock and holders of Vir-
ginia Capital common stock. Since BB&T is organized under the laws of the State
of North Carolina and Virginia Capital is organized under the laws of the Com-
monwealth of Virginia, differences in the rights of holders of BB&T common
stock and those of holders of Virginia Capital common stock arise from differ-
ing provisions of the NCBCA and the Virginia Stock Corporation Act, or the
VSCA, in addition to differing provisions of their respective incorporation
documents and bylaws.
The following summary does not purport to be a complete statement of the pro-
visions affecting, and differences between, the rights of holders of BB&T com-
mon stock and holders of Virginia Capital common stock. The identification of
specific provisions or differences is not meant to indicate that other equally
or more significant differences do not exist. This summary is qualified in its
entirety by reference to the NCBCA and the VSCA and the governing corporate in-
struments of BB&T and Virginia Capital, to which the shareholders of Virginia
Capital 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 incorpo-
ration 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 , 2001, there were
shares of BB&T common stock outstanding, which excludes shares expected to be
issued in pending acquisitions. 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 .
Virginia Capital
Virginia Capital's authorized capital stock consists of 75,000,000 shares of
Virginia Capital common stock, par value $.01 per share, and 5,000,000 shares
of Virginia Capital preferred stock. As of , 2001 there were [9,289,280]
shares of Virginia Capital common stock outstanding. No shares of Virginia Cap-
ital preferred stock were issued and outstanding as of that date.
48
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.
Virginia Capital
Special meetings of the shareholders for any purpose may be called at any
time by the majority of the Virginia Capital Board. Special meetings may not be
called by any other person.
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 articles of incorporation and bylaws, BB&T di-
rectors 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.
Virginia Capital
Virginia Capital's articles of incorporation provide that the number of di-
rectors shall be fixed from time to time exclusively by a majority of the Vir-
ginia Capital Board. Virginia Capital's bylaws have set the number of directors
at nine, to be divided into three classes as nearly equal in number as possi-
ble, with directors serving staggered three-year terms. Pursuant to Virginia
Capital's articles of incorporation, directors may be removed at any time, but
only for cause and only by the affirmative vote of the holders of at least 80%
of the outstanding shares of Virginia Capital common stock entitled to vote
generally in an election of directors.
Dividends and Other Distributions
BB&T
The NCBCA prohibits a North Carolina corporation from making any distribu-
tions to shareholders, including the payment of cash dividends, that would ren-
der it insolvent or unable to meet its obligations as they become due in the
ordinary course of business or that would result in its total assets being less
than the sum of its total liabilities plus the amount that would be needed, if
it were to be dissolved at the time of the dividend payment, to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. BB&T is not subject to any
other express regulatory restrictions on payments of dividends and other dis-
tributions. 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 divi-
dends its bank subsidiaries, which are subject to restrictions imposed by regu-
latory 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 re-
sults, capital, reserve requirements and the consideration of other relevant
factors by the BB&T Board.
Virginia Capital
Pursuant to the VSCA, a Virginia corporation may declare and pay dividends to
its shareholders, unless, after giving the effect to the dividends: (1) the
corporation would not be able to pay its debts as they become due in the usual
course of business; or (2) the corporation's total assets would be less than
the sum of its total
49
liabilities plus the amount that would be needed, if the corporation were to be
dissolved at the time of the dividend payment, to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights are superior
to those receiving the distribution. Virginia Capital is not subject to any
other express regulatory restrictions on payments of dividends or other distri-
butions. A major portion of Virginia Capital's revenues comes from dividends
distributed by Fredericksburg State Bank. As a Virginia state commercial bank,
Fredericksburg State Bank is subject to certain restrictions on the amount of
dividends it may pay. Additionally, other regulatory policies and requirements
impact Fredericksburg State Bank's ability to pay dividends, including the re-
quirement that Fredericksburg State Bank maintain adequate levels of capital
above regulatory minimums. Banking regulatory authorities may also restrict
payments if the payment of dividends would be an unsafe or unsound banking
practice.
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 pro-
vide that a shareholder wishing to nominate a person as a candidate for elec-
tion 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 an-
nual meeting of shareholders, together with biographical information about the
candidate and the shareholder's name and shareholdings. Nominations not made in
accordance with these provisions may be ruled out of order by the presiding of-
ficer 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 be-
fore the one year anniversary of the most recent annual meeting of shareholders
of the shareholder's intention. The notice must contain: (a) a brief descrip-
tion of the proposal; (b) the name and shareholdings of the shareholder submit-
ting the proposal; and (c) any material interest of the shareholder in the pro-
posal.
In accordance with Securities and Exchange Commission Rule 14a-8 under the
Securities Exchange Act of 1934, 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 Securities and Exchange Commission 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 rea-
sonable time before BB&T begins to print and mail its proxy materials.
Virginia Capital
Virginia Capital's articles of incorporation provide for advance notice for
director nominations and shareholder proposals to be taken up at any annual or
special meeting of shareholders. Pursuant to Virginia Capital's articles of in-
corporation, a shareholder must give notice of his or her nomination and/or
proposal in writing to the Secretary of Virginia Capital not less than 90 days
prior to the meeting of shareholders. However, if less than 100 days notice of
the meeting is given to shareholders, the written notice of nomination and/or
proposal must be given to the Secretary no later than the close of business on
the 10th day following the day notice of the annual meeting was mailed or pub-
lic disclosure of the date of the annual meeting was made. The notice of nomi-
nation must include, as to each nominee, all information relating to the nomi-
nee that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934 (including the nominee's written con-
sent to being named in the proxy statement as a nominee and to serving as a di-
rector if elected). In addition, the shareholder making the nomination must
provide his or her name and address as they appear on Virginia Capital's books,
and the class and number of shares of Virginia Capital common stock benefi-
cially owned. The shareholder must also supply Virginia Capital with any other
information reasonably requested.
50
The notice of a proposal to be considered at a meeting of shareholders must
contain in writing: (1) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business de-
sired to be brought before the meeting and the reasons for conducting such
business at the meeting; (2) the name and address as they appear on Virginia
Capital's books of the shareholder proposing such business; (3) the class and
number of shares of Virginia Capital common stock beneficially owned by the
shareholder; and (4) any material interest of the shareholder in such proposed
business.
Virginia Capital, like BB&T, is also subject to the Securities and Exchange
Commission's rules regarding shareholder proposals intended to be included in
the proxy statement and presented at a regularly scheduled annual meeting.
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 ordi-
narily prudent person in a like position would exercise under similar circum-
stances 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 di-
rector. 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 re-
lating 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.
Virginia Capital
The VSCA requires that a director of a Virginia corporation discharge his or
her duties as a director, including his or her duties as a member of a commit-
tee, in accordance with his or her good faith business judgment of the best
interests of the corporation. Virginia Capital's articles of incorporation
provide for indemnification to the same extent permitted by the VSCA of any
person who is or was a director or officer of Virginia Capital, or who serves
as a director, officer, employee, agent, partner or trustee at Virginia Capi-
tal's request of another entity. This indemnity covers all expenses in advance
of any final disposition, subject to the indemnitee undertaking in writing
that he or she will repay all amounts so advanced in the event it is deter-
mined that he or she was not entitled to indemnification for such expenses.
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 other 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. Ap-
proval of a merger by the shareholders of the surviving corporation is not re-
quired in certain instances, however, including (as in the case of the merger
with Virginia Capital) a merger in which the number of voting shares outstand-
ing 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 cer-
tain statutory anti-takeover provisions. See "--Anti-takeover Statutes" below.
Virginia Capital
Under the VSCA, a two-thirds ( 2/3) vote of all votes entitled to be cast at
a meeting is required for approval of a merger. However, Virginia Capital's
articles of incorporation require the approval of the holders of at least 80%
of Virginia Capital's outstanding shares of voting stock to approve certain
"business combina-
51
tions" involving an "interested shareholder," unless the proposed transaction
has been approved in advance by a majority of those members of the Virginia
Capital Board who are unaffiliated with the interested shareholder and were ei-
ther directors prior to the time when the interested shareholder became an in-
terested shareholder or, with the recommendation of a majority of the unaffili-
ated directors, are successors of directors who are unaffiliated with the in-
terested shareholder and were directors prior to the time when the interested
shareholder became an interested shareholder.
The term "interested shareholder" includes any individual or entity that owns
beneficially or controls, directly or indirectly, 10% or more of the outstand-
ing shares of common stock of Virginia Capital, and any "affiliate" (as the
term is defined in Rule 12b-2 under the Securities Exchange Act of 1934) of any
such individual or entity. A "business combination" includes: (1) any merger or
consolidation of Virginia Capital with or into any interested shareholder; (2)
any sale, lease, exchange, mortgage, pledge, transfer, or other disposition of
25% or more of the assets of Virginia Capital or combined assets of Virginia
Capital and Fredericksburg State Bank to an interested shareholder; (3) the is-
suance of any securities of Virginia Capital or Fredericksburg State Bank to an
interested shareholder in exchange for cash, securities or other property hav-
ing an aggregate fair market value equaling or exceeding 25% of the combined
fair market value of the outstanding common stock of Virginia Capital and Fred-
ericksburg State Bank; (4) the adoption of any plan or proposal for the liqui-
dation or dissolution of the corporation proposed by or on behalf of an inter-
ested shareholder; or (5) any reclassification of the common stock of Virginia
Capital or any recapitalization involving the common stock of Virginia Capital.
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 share-
holders with the opportunity to vote on whether to afford voting rights to cer-
tain types of shareholders. The Act is triggered upon the acquisition by a per-
son of shares of voting stock of a covered corporation that, when added to all
other shares beneficially owned by the person, would result in that person
holding one-fifth, one-third or a majority of the voting power in the election
of directors. Under the Act, the shares acquired that result in the crossing of
any of these thresholds 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 share-
holders of the corporation have the right to require that their shares be re-
deemed at the highest price paid per share by the acquiror for any of the ac-
quired shares. The North Carolina Shareholder Protection Act requires that cer-
tain business combinations with existing shareholders either be approved by a
supermajority of the other shareholders or meet certain "fair price" require-
ments. BB&T has elected to opt out of the North Carolina Shareholder Protection
Act, as permitted by that Act.
Virginia Capital
Similar to the North Carolina Control Share Acquisition Act, the VSCA also
places restrictions on control share acquisitions, or acquisitions by a person
of shares of voting stock of a 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. Shares acquired that result
in the crossing of these thresholds have no voting rights unless voting rights
are granted pursuant to a resolution adopted by a majority of all the votes
which could be cast in a vote on the election of directors by all the outstand-
ing shares other than shares held by the person making the control share acqui-
sition, officers of the corporation and employees of the corporation who are
also directors of the corporation.
52
The VSCA also prohibits a corporation from engaging in any business combina-
tion with an interested shareholder (defined as a 10% shareholder) for a pe-
riod of three years after the date that shareholder became an interested
shareholder unless the transaction is approved by a majority of the disinter-
ested directors and by the affirmative vote of the holders of two-thirds of
the voting shares other than shares beneficially owned by the interested
shareholder. A corporation may engage in a business combination with an inter-
ested shareholder beginning three years after that shareholder became an in-
terested shareholder provided the transaction is approved by the affirmative
vote of the holders of two-thirds of the voting shares other than shares bene-
ficially owned by the interested shareholder; however, such voting requirement
does not apply if the transaction is approved by a majority of the disinter-
ested directors or if the transaction meets certain "fair price" requirements.
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 articles of incorpora-
tion 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 share-
holders provides otherwise, the board of directors may not amend a bylaw ap-
proved by the shareholders. BB&T's articles of incorporation authorize the
BB&T Board to amend BB&T's bylaws.
Virginia Capital
Nonsubstantive amendments to the Virginia Capital articles of incorporation
may be approved by a majority vote of the Virginia Capital Board. All other
amendments must be approved by a majority vote of the Virginia Capital Board
and also by a two-thirds vote of the outstanding shares of its voting stock;
provided, however, that an affirmative vote of at least 80% of the outstanding
voting stock entitled to vote is required to amend or repeal certain provi-
sions of the articles of incorporation, including the provisions relating to
the voting limitations imposed on 10% shareholders, the notice for director
nominations and shareholders' proposals, the number, removal and classifica-
tion of directors, calling special meetings, the provisions relating to ap-
proval of certain business combinations and director and officer indemnifica-
tion by Virginia Capital.
The Virginia Capital bylaws may be amended by a majority of the Virginia
Capital Board, or by a vote of 80% of the total outstanding shares of stock
entitled to vote generally in the election 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 po-
tential change in control of BB&T.
Virginia Capital
Virginia Capital's articles of incorporation provide that when evaluating a
business combination, the Virginia Capital Board may, in addition to consider-
ing the adequacy of the amount to be paid in connection with the transaction,
give due consideration to all relevant factors, including, without limitation,
those factors that the directors of Fredericksburg State Bank may consider in
evaluating any action that may result in a change or potential change in the
control of Fredericksburg State Bank, and the social and economic effect of
acceptance of such offer: on Virginia Capital's present and future customers
and employees and those of Fredericksburg
53
State Bank; on the communities in which Virginia Capital and Fredericksburg
State Bank operate or are located; on the ability of Virginia Capital to ful-
fill its corporate objective as a holding company under applicable laws and
regulations; and on the ability of Fredericksburg State Bank to fulfill its ob-
jectives under applicable statutes and regulations.
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 arti-
cles of incorporation of the corporation that issued the shares provide other-
wise 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 an-
other 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 dis-
senters' rights.
Virginia Capital
The VSCA provides that appraisal rights are not available to holders of com-
mon stock of a constituent corporation in a merger when such stock is either
listed on a national securities exchange or on Nasdaq or is held by at least
2,000 record shareholders. Despite this exception, appraisal rights will be
available to holders of common stock of a constituent corporation in a merger
if: (1) the articles of incorporation provide otherwise (Virginia Capital's ar-
ticles of incorporation do not authorize any special dissenters' rights); (2)
in the case of a merger or share exchange, shareholders are required by the
terms of the merger to accept anything for their shares other than (a) cash,
(b) shares of another corporation that are either listed on an national securi-
ties exchange or held of record by more than 2,000 shareholders or (c) a combi-
nation of cash and such shares.
Holders of Virginia Capital common stock do not have appraisal rights in con-
nection with the merger with BB&T because, as of the record date, Virginia Cap-
ital common stock was listed on Nasdaq and BB&T common stock was listed on the
New York Stock Exchange.
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 remain-
ing 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 credi-
tors 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 subsid-
iary 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.
Virginia Capital
In the event of liquidation, dissolution or winding up of the affairs of Vir-
ginia Capital, the rights of shareholders of Virginia Capital's common stock
are similar to those outlined above the BB&T's shareholders. Additionally, Vir-
ginia Capital's rights to participate in the assets of Fredericksburg State
Bank upon its liquidation or recapitalization are similar to the rights out-
lined above for BB&T.
54
Limitations on Voting Rights
BB&T
BB&T does not have any limitation on voting rights that is similar to the
limitation described below for Virginia Capital common stock.
Virginia Capital
Virginia Capital's articles of incorporation provide that no record owner of
any outstanding Virginia Capital common stock which is beneficially owned, di-
rectly or indirectly, by a person who beneficially owns in excess of 10% of the
then outstanding shares of Virginia Capital common stock will be entitled or
permitted to any vote in respect of the shares held in excess of the 10% limit.
Beneficial ownership is determined pursuant to the federal securities laws and
includes shares beneficially owned by that person or his or her affiliates (as
defined in the articles of incorporation), shares which that person or his or
her affiliate have the right to acquire upon the exercise of conversion rights
or options and shares as to which that person and his or her affiliates have or
share investment or voting power, but does not include shares beneficially
owned by directors, officers, and employees of Fredericksburg State Bank or
Virginia Capital or shares that are subject to a revocable proxy and that are
not otherwise beneficially, or deemed by Virginia Capital to be beneficially,
owned by that person or his or her affiliates. BB&T's articles of incorporation
do not contain any such prohibition.
SHAREHOLDER PROPOSALS
In the event that the merger is not completed, any proposal which a share-
holder wishes to have presented at the next annual meeting of shareholders and
included in Virginia Capital's proxy materials must be received at the main of-
fice of Virginia Capital, 400 George Street, Fredericksburg, Virginia 22404, a
reasonable time before Virginia Capital prints and mails its proxy materials
for such annual meeting. If such proposal is in compliance with all of the re-
quirements of Rule 14a-8 of the Securities Exchange Act, it will be included in
Virginia Capital's proxy statement and set forth on the form of proxy issued
for the next annual meeting of shareholders, if applicable. Shareholders wish-
ing to present proposals at such meeting (but not include them in Virginia Cap-
ital's proxy materials) must also give notice of such proposals to Virginia
Capital in accordance with Virginia Capital's articles of incorporation as de-
scribed above (see "Comparison of Shareholders' Rights--Shareholder Nominations
and Shareholder Proposals" on page .) It is urged that any proposals be sent by
certified mail, return receipt requested.
OTHER BUSINESS
The Virginia Capital 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 prox-
ies.
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 88,473 shares of BB&T common stock.
55
EXPERTS
The consolidated financial statements of BB&T Corporation and its subsidiar-
ies which are incorporated by reference in this proxy statement/prospectus
from BB&T's Current Report on Form 8-K dated , 2001, which restates the
consolidated financial statements for the year ended December 31, 2000 to re-
flect the acquisition by BB&T of FCNB Corp on January 8, 2001, have been au-
dited 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.
[to be updated]
The consolidated financial statements of Virginia Capital Bancshares, Inc.
as of [December 31, 2000] and 1999 and for the years then ended have been in-
corporated by reference herein and in the registration statement in reliance
upon the report of KPMG LLP, independent certified public accountants, incor-
porated by reference herein, and upon the authority of said firm as experts in
accounting and auditing. [to be updated]
The consolidated financial statements of Virginia Capital Bancshares, Inc.
for the year ended December 31, 1998 have been incorporated by reference
herein and in the registration statement in reliance upon the report of Cher-
ry, Bekaert & Holland, L.L.P., independent certified public accountants, in-
corporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing. [to be updated]
WHERE YOU CAN FIND MORE INFORMATION
BB&T and Virginia Capital file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or certain other information
that the companies file with the Securities and Exchange Commission at the
following Securities and Exchange Commission 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 Securities and Exchange Commission at 1-800-SEC-0330 for fur-
ther information on the public reference rooms. These Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the Internet world wide web site maintained by the
Securities and Exchange Commission at "http://www.sec.gov." Reports, proxy
statements and other information should also be available for inspection at
the offices of the NYSE in the case of BB&T and Nasdaq, in the case of Vir-
ginia Capital.
BB&T has filed the registration statement to register with the Securities
and Exchange Commission the BB&T common stock to be issued to Virginia Capital
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 Se-
curities and Exchange Commission rules, this proxy statement/prospectus does
not contain all the information you can find in BB&T's registration statement
or the exhibits to the registration statement.
The Securities and Exchange Commission allows Virginia Capital 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 Securities and Ex-
change Commission. The information incorporated by reference is considered
part of this proxy statement/prospectus, except for any information superseded
by information contained directly in this proxy statement/prospectus or in
later filed documents incorporated by reference in this proxy
statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that Virginia Capital and BB&T have previously filed with the Se-
curities and Exchange Commission. These documents contain important informa-
tion about Virginia Capital and BB&T and their businesses.
56
BB&T Securities and Exchange
Commission
Filings (File No. 1-10853) [to be updated]
---------------------------- ---------------
For the fiscal year ended [December 31,
Annual Report on Form 10-K............ 2000]
Current Reports on Form 8-K........... Filed January 12, 2001, January 24, 2001
(two filings), February 8, 2001 and
Registration Statements on Form 8-A
(concerning BB&T's common stock and Filed September 4, 1991 and January 10,
shareholder rights plan)............. 1997
Virginia Capital Securities and
Exchange Commission
Filings (File No. 0-26254) [to be updated]
------------------------------- ---------------
Annual Report on Form 10-K............ For the fiscal year ended [December 31,
2000]
Current Reports on Form 8-K........... January 26, 2001 and
Registration Statement on Form 8-A
(concerning Virginia Capital's common
stock)............................... Filed November 4, 1998
Virginia Capital and BB&T also incorporate by reference additional documents
that may be filed with the Securities and Exchange Commission between the date
of this proxy statement/prospectus and (a) in the case of BB&T, the completion
of the merger or the termination of the merger agreement and (b) in the case
of Virginia Capital, the date of the special meeting of shareholders or, if
sooner, the termination of the merger agreement. These include periodic re-
ports, 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 Virginia Capital has
supplied all such information relating to Virginia Capital before the merger.
If you are a shareholder, we may have sent you some of the documents incor-
porated by reference, but you can obtain any of them through the companies,
the Securities and Exchange Commission or the Securities and Exchange Commis-
sion's Internet web site as described above. Documents incorporated by refer-
ence 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 incorpo-
rated by reference in this proxy statement/prospectus by requesting them in
writing or by telephone from the appropriate company at the following address-
es:
BB&T Corporation Virginia Capital Bancshares, Inc.
Shareholder Reporting 400 George Street
Post Office Box 1290 Fredericksburg, Virginia 22404
Winston-Salem, North Carolina 27102 (540) 899-5500
(336) 733-3021 Attn: Corporate Secretary
If you would like to request documents, please do so by [insert date five
business days before the meeting], 2001 to receive them before the meeting.
You should rely only on the information contained or incorporated by refer-
ence in this proxy statement/prospectus. BB&T and Virginia Capital 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 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 solicita-
tion 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 , 2001.
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 issu-
ance of BB&T common stock in the merger creates any implication to the con-
trary.
57
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
VIRGINIA CAPITAL BANCSHARES, INC.
and
BB&T CORPORATION
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.................................................... A-1
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-7
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-9
2.11 Anti-Dilution................................................... A-9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF VIRGINIA CAPITAL........... A-9
3.1 Capital Structure............................................... A-10
3.2 Organization, Standing and Authority............................ A-10
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-11
3.6 Securities Filings; Financial Statements; Statements True....... A-11
3.7 Minute Books.................................................... A-12
3.8 Adverse Change.................................................. A-12
3.9 Absence of Undisclosed Liabilities.............................. A-12
3.10 Properties...................................................... A-12
3.11 Environmental Matters........................................... A-12
3.12 Loans; Allowance for Loan Losses................................ A-13
3.13 Tax Matters..................................................... A-13
3.14 Employees; Compensation; Benefit Plans.......................... A-14
3.15 Certain Contracts............................................... A-17
3.16 Legal Proceedings; Regulatory Approvals......................... A-17
3.17 Compliance with Laws; Filings................................... A-17
3.18 Brokers and Finders............................................. A-18
3.19 Repurchase Agreements; Derivatives.............................. A-18
3.20 Deposit Accounts................................................ A-18
3.21 Related Party Transactions...................................... A-18
3.22 Certain Information............................................. A-19
3.23 Tax and Regulatory Matters...................................... A-19
3.24 State Takeover Laws; Corporate Documents........................ A-19
3.25 Labor Relations................................................. A-19
3.26 Fairness Opinion................................................ A-19
3.27 No Right to Dissent............................................. A-19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BB&T........................ A-20
4.1 Capital Structure of BB&T....................................... A-20
4.2 Organization, Standing and Authority of BB&T.................... A-20
4.3 Authorized and Effective Agreement.............................. A-20
4.4 Organization, Standing and Authority of BB&T Subsidiaries....... A-21
4.5 Securities Documents; Financial Statements; Statements True..... A-21
4.6 Certain Information............................................. A-21
A-i
Page
----
4.7 Tax and Regulatory Matters....................................... A-21
4.8 Share Ownership.................................................. A-21
4.9 Legal Proceedings; Regulatory Approvals.......................... A-22
4.10 Adverse Change................................................... A-22
ARTICLE V COVENANTS....................................................... A-22
5.1 Virginia Capital Shareholder Meeting............................. A-22
5.2 Registration Statement; Proxy Statement/Prospectus............... A-22
5.3 Plan of Merger; Reservation of Shares............................ A-23
5.4 Additional Acts.................................................. A-23
5.5 Best Efforts..................................................... A-23
5.6 Certain Accounting Matters....................................... A-23
5.7 Access to Information............................................ A-24
5.8 Press Releases................................................... A-24
5.9 Forbearances of Virginia Capital................................. A-24
5.10 Employment Agreements............................................ A-26
5.11 Affiliates....................................................... A-26
5.12 Section 401(k) Plan; Other Employee Benefits..................... A-26
5.13 Directors and Officers Protection................................ A-27
5.14 Forbearances of BB&T............................................. A-28
5.15 Reports.......................................................... A-28
5.16 Exchange Listing................................................. A-28
5.17 Advisory Board................................................... A-28
5.18 Special Payments and Distributions............................... A-29
ARTICLE VI CONDITIONS PRECEDENT........................................... A-29
6.1 Conditions Precedent--BB&T and Virginia Capital.................. A-29
6.2 Conditions Precedent--Virginia Capital........................... A-30
6.3 Conditions Precedent--BB&T....................................... A-30
ARTICLE VII TERMINATION, DEFAULT, WAIVER AND AMENDMENT.................... A-31
7.1 Termination...................................................... A-31
7.2 Effect of Termination............................................ A-31
7.3 Survival of Representations, Warranties and Covenants............ A-32
7.4 Waiver........................................................... A-32
7.5 Amendment or Supplement.......................................... A-32
ARTICLE VIII MISCELLANEOUS................................................ A-32
8.1 Expenses......................................................... A-32
8.2 Entire Agreement................................................. A-32
8.3 No Assignment.................................................... A-33
8.4 Notices.......................................................... A-33
8.5 Specific Performance............................................. A-34
8.6 Captions......................................................... A-34
8.7 Counterparts..................................................... A-34
8.8 Governing Law.................................................... A-34
ANNEXES
Annex A Articles of Merger, with attached Agreement and Plan of Merger
Annex B Employment Agreement with Samuel C. Harding, Jr.
Annex C Employment Agreement with Peggy J. Newman
A-ii
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of January
23, 2001 is between VIRGINIA CAPITAL BANCSHARES, INC. ("Virginia Capital"), a
Virginia corporation having its principal office at 400 George Street, Freder-
icksburg, Virginia 22404-0748, and BB&T CORPORATION ("BB&T"), a North Carolina
corporation having its principal office at Winston-Salem, North Carolina;
RECITALS:
The parties desire that Virginia Capital shall be merged with and into BB&T
(said transaction being hereinafter referred to as the "Merger") pursuant to an
agreement and plan of merger (the "Plan of Merger") substantially in the form
attached as Annex A hereto, and the parties desire to provide for certain un-
dertakings, 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, Virginia Capital is concur-
rently granting to BB&T an option to acquire, under certain circumstances,
1,848,560 shares of the common stock, par value $0.01 per share, of Virginia
Capital.
NOW, THEREFORE, in consideration of the premises and of the mutual represen-
tations, 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 fol-
lowing meanings:
"Affiliate" means, with respect to any Person, any other Person, who, di-
rectly or indirectly through one or more intermediaries, controls or is con-
trolled 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 Sec-
tion 55-11-05 of the NCBCA and with the Virginia State Corporation Commission
as provided in Section 13.1-720 of the VSCA.
"Bank Holding Company Act" shall mean the Federal Bank Holding Company Act of
1956, as amended.
"BB&T Common Stock" shall mean the shares of voting common stock, par value
$5.00 per share, of BB&T, with rights attached issued pursuant to Rights Agree-
ment 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 op-
tion to purchase shares of Virginia Capital Common Stock, which shall be exe-
cuted immediately following execution of this Agreement.
"BB&T Subsidiaries" shall mean Branch Banking and Trust Company, Branch Bank-
ing and Trust Company of South Carolina and Branch Banking and Trust Company of
Virginia.
"Benefit Plan Determination Date" shall mean, with respect to each employee
pension or welfare benefit plan or program maintained by Virginia Capital at
the Effective Time, the date determined by BB&T with respect to such plan or
program which shall be not later than January 1 following the close of the cal-
endar year in which the last of the Virginia Capital Subsidiaries which is a
bank or other savings institution is merged into BB&T or one of the BB&T Sub-
sidiaries.
A-1
"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.
"Disclosed" shall mean disclosed in the Virginia Capital Disclosure Memoran-
dum, 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, poten-
tial liability for investigatory costs, cleanup or remediation costs, govern-
mental response costs, natural resources damages, property damages, personal
injuries or penalties) arising out of, based upon, or resulting from a viola-
tion 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 sur-
face, or subsurface strata) and which are administered, interpreted, or en-
forced by the United States Environmental Protection Agency and state and local
agencies with jurisdiction over and including common law in respect of, pollu-
tion or protection of the environment, including without limitation CERCLA, the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq., and
other laws and regulations relating to emissions, discharges, releases, or
threatened releases of any Hazardous Substances, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of any Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the Federal Re-
serve System.
"Financial Advisor" shall mean Trident Securities, a division of McDonald In-
vestments, Inc.
"Financial Statements" shall mean (a) with respect to BB&T, (i) the consoli-
dated balance sheets (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, changes in 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, changes in sharehold-
ers' equity and cash flows (including related notes and schedules, if any) in-
cluded in Securities Documents filed by BB&T with respect to periods ended sub-
sequent to December 31, 1999, and (b) with respect to Virginia Capital, (i) the
consolidated balance sheets (including related notes and schedules, if any) of
Virginia Capital as of December 31, 1999, 1998 and 1997, and the related con-
solidated statements of income, changes in stockholders' 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 Virginia Capital in Securi-
ties Documents and (ii) the consolidated balance sheets of Virginia Capital
(including related notes and schedules, if any) and the related consolidated
statements of income, changes in stockholders' equity, and cash flows (includ-
ing related notes and schedules, if any) included in Securities Documents filed
by Virginia Capital with respect to periods ended subsequent to December 31,
1999.
A-2
"GAAP" shall mean generally accepted accounting principles applicable to fi-
nancial 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 ap-
plicable 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.
"Home Owners' Loan Act" means the Home Owners' Loan Act of 1989, as amended.
"IRS" shall mean the Internal Revenue Service.
"Material Adverse Effect" on BB&T or Virginia Capital shall mean (i) a mate-
rial adverse effect on the financial condition, results of operations or busi-
ness of BB&T and the BB&T Subsidiaries taken as a whole, or Virginia Capital
and the Virginia Capital Subsidiaries taken as a whole, or (ii) the material
impairment of the ability of BB&T or Virginia Capital to perform its obliga-
tions under this Agreement or to consummate the Merger and the other transac-
tions 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 Virginia Capital taken with the prior written consent of the other in con-
templation 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 re-
sult of the Merger (provided that, with respect to Virginia Capital, only if
and to the extent any such expenses payable to third parties are Disclosed by
Virginia Capital or incurred by Virginia Capital following the date hereof as
permitted by this Agreement).
"NCBCA" shall mean the North Carolina Business Corporation Act, as amended.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OTS" shall mean the Office of Thrift Supervision
"Person" shall mean any individual, corporation, partnership, limited liabil-
ity company, joint venture, trust, association, unincorporated organization,
agency, other entity or group of entities, or governmental body.
"Proxy Statement/Prospectus" shall mean the proxy statement and prospectus,
together with any supplements thereto, to be sent to shareholders of Virginia
Capital to solicit their votes in connection with a proposal to approve this
Agreement and the Plan of Merger.
"Registration Statement" shall mean the registration statement of BB&T as de-
clared effective by the Commission under the Securities Act, including any
post-effective amendments or supplements thereto as filed with the Commission
under the Securities Act, with respect to the BB&T Common Stock to be issued in
connection with the transactions contemplated by this Agreement.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests (other than rights
pursuant to the Rights 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.
A-3
"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 In-
vestment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939 as amended; and, in each case, the
rules and regulations of the Commission promulgated thereunder.
"Stock Option" shall mean any option to acquire shares of Virginia Capital
Common Stock granted under the Stock Option Plan that is outstanding and unex-
ercised on the date hereof.
"Stock Option Plan" shall mean the Virginia Capital Bancshares, Inc. 1999
Stock-Based Incentive Plan, as amended and restated.
"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 un-
broken chain of entities as to each of which 50% or more of the outstanding eq-
uity securities is owned directly or indirectly by its parent (in determining
whether one entity owns or controls 50% or more of the outstanding equity secu-
rities of another, equity securities owned or controlled in a fiduciary capac-
ity shall be deemed owned and controlled by the beneficial owner).
"TILA" shall mean the Truth in Lending Act, as amended.
"Virginia Capital Common Stock" shall mean the shares of voting common stock,
par value $0.01 per share, of Virginia Capital.
"Virginia Capital Preferred Stock" shall mean the shares of preferred stock
of Virginia Capital.
"Virginia Capital Disclosure Memorandum" shall mean the written information
in one or more documents, each of which: (a) is entitled "Virginia Capital Dis-
closure Memorandum"; (ii) is dated on or before the date of this Agreement;
(iii) was delivered to BB&T not later than the date of execution of this Agree-
ment by Virginia Capital; and (iv) describes 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 re-
spect to one Section shall not be deemed to be disclosed for purposes of any
other Section not specifically referenced. The inclusion of a given item in the
Virginia Capital Disclosure Memorandum shall not be deemed a conclusion or ad-
mission that such item (or any other item) is material or has a Material Ad-
verse Effect.
"Virginia Capital Subsidiaries" shall mean Fredericksburg State Bank and any
and all other Subsidiaries of Virginia Capital as of the date hereof and any
corporation, bank, savings association, or other organization acquired as a
Subsidiary of Virginia Capital after the date hereof and held as a Subsidiary
by Virginia Capital at the Effective Time.
"VSCA" shall mean the Virginia Stock Corporation Act, as amended.
A-4
1.2 Terms Defined Elsewhere
The capitalized terms set forth below are defined in the following sections:
Agreement Introduction
Adjusted Exchange Ratio Section 2.7(b)
Average Closing Price Section 2.7(b)
BB&T Introduction
BB&T Option Plan Section 2.9(a)
Cash Amount Section 2.7(b)(B)
Closing Section 2.4
Closing Date Section 2.4
Closing Value Section 2.7(c)
Constituent Corporations Section 2.1
Effective Time Section 2.3
Employer Entity Section 5.12(a)
ESOP Section 3.14(b)(xviii)
Exchange Ratio Section 2.7(b)
Interim Exchange Ratio Section 2.7(b)
Merger Recitals
Merger Consideration Section 2.7(a)
PBGC Section 3.14(b)(iv)
Plan Section 3.14(b)(i)
Plan of Merger Recitals
Starting Price Section 2.7(b)
Surviving Corporation Section 2.1(a)
Transferred Employee Section 5.12(a)
Virginia Capital Introduction
ARTICLE II
THE MERGER
2.1 Merger
BB&T and Virginia Capital are constituent corporations (the "Constituent
Corporations") to the Merger as contemplated by the NCBCA and the VSCA. At the
Effective Time:
(a) Virginia Capital shall be merged into BB&T in accordance with the
applicable provisions of the NCBCA and the VSCA, with BB&T being the sur-
viving corporate entity (hereinafter sometimes referred to as the "Surviv-
ing Corporation").
(b) The separate existence of Virginia Capital shall cease and the
Merger shall in all respects have the effects provided in Section 2.5.
(c) The Articles of Incorporation of BB&T at the Effective Time shall be
the Articles of Incorporation of the Surviving Corporation.
(d) The Bylaws of BB&T at the Effective Time shall be 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 more than two-thirds of the
shares of Virginia Capital Common Stock entitled to vote. Upon fulfillment or
waiver of the conditions specified in Article VI and provided that this Agree-
ment has not been terminated pursuant to Article VII, the Constituent Corpora-
tions will cause the Articles of Merger to be
A-5
executed and filed with the Secretary of State of North Carolina, as provided
in Section 55-11-05 of the NCBCA, and with the Virginia State Corporation Com-
mission, as provided in Section 13.1-720 of the VSCA. The Plan of Merger is in-
corporated herein by reference, and adoption of this Agreement by the respec-
tive Boards of Directors of the Constituent Corporations and approval by the
shareholders of Virginia Capital shall constitute adoption and approval of the
Plan of Merger.
2.3 Effective Time
The Merger shall be effective at the day and hour specified in the Articles
of Merger 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 "Clos-
ing") 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, opin-
ions and other instruments and documents to be delivered at the Closing), or
such later date as the parties may otherwise agree (the "Closing Date").
2.5 Effect of Merger
From and after the Effective Time, the separate existence of Virginia Capital
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, per-
sonal and mixed, and all debts due on whatever account, and all other choices
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 Con-
stituent 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 Corpora-
tions; 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 Cor-
porations may be enforced against the Surviving Corporation. Neither the rights
of creditors nor any liens upon the property of either of the Constituent Cor-
porations 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 as-
surances in law and do all things necessary, desirable or proper to vest, per-
fect 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.
A-6
2.7 Merger Consideration
As used herein, the term "Merger Consideration" shall mean the consideration
to be provided by BB&T to the holders of shares of Virginia Capital Common
Stock at the Effective Time, to be comprised of (i) the number of shares of
BB&T Common Stock to be exchanged for each share of Virginia Capital Common
Stock issued and outstanding as of the Effective Time, (ii) cash (without in-
terest) to be payable as provided in Section 2.7(b), if any, and (iii) cash
(without interest) to be payable in exchange for any fractional share of BB&T
Common Stock that would otherwise be distributable to a Virginia Capital
shareholder as provided in Section 2.7(c). The amount of the Merger Considera-
tion shall be determined as follows:
(a) Except as provided in Section 2.7(b), the number of shares of BB&T
Common Stock to be issued for each issued and outstanding share of Virginia
Capital Common Stock (the "Exchange Ratio") shall be determined in
accordance with this Section 2.7(a). If the BB&T Average Price (as defined
below) is:
(1) equal to or greater than $37.31, the Exchange Ratio shall be
.4958;
(2) less than $37.31 but greater than $30.53, the Exchange Ratio
shall be the result obtained by dividing $18.50 by the BB&T Average
Price; or
(3) $30.53 or less, the Exchange Ratio shall be .6060.
The "BB&T Average Price" shall mean the average 4:00 p.m. eastern time
closing price per share of BB&T Common Stock on the NYSE for the ten
trading days (determined by excluding days on which the NYSE is closed)
ending on the day preceding the date of the Virginia Capital Shareholder
Meeting described in Section 5.1.
(b) Notwithstanding the provisions of Section 2.7(a), in the event
that the value of the Merger Consideration, based on the Exchange Ratio de-
termined under Section 2.7(a) and BB&T Average Price, is less than $16.53,
Virginia Capital may terminate this Agreement as provided in Section 7.1(h)
unless, not later than the fifth Business Day following the close of the
period for determining the BB&T Average Price as provided in Section
2.7(a), BB&T shall have provided written notice to Virginia Capital that it
agrees, in its sole and absolute discretion, to provide additional Merger
Consideration in the form of cash, BB&T Common Stock (valued at the BB&T
Average Price) or a combination thereof in an amount so that the value of
the Merger Consideration shall equal $16.53.
(c) 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. eastern time closing price per share of BB&T Common Stock on the NYSE
on the Closing Date as reported on NYSEnet.com.
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 Virginia Capital or the holders of record of Virginia Capital Com-
mon Stock, each share of Virginia Capital Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into and shall rep-
resent the right to receive, upon surrender of the certificate representing
such share of Virginia Capital Common Stock (as provided in subsection (d) be-
low), the Merger Consideration.
(b) Each share of BB&T Common Stock 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 Ef-
fective Time represented one or more shares of Virginia Capital 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 certifi-
cates representing shares of Virginia Capital Common Stock. With respect to
any certificate for Virginia Capital Common Stock that has been lost or de-
stroyed, BB&T shall pay the Merger Consideration attributable to such certifi-
cate upon receipt of a surety bond or other
A-7
adequate indemnity as required in accordance with BB&T's standard policy, and
evidence reasonably satisfactory to BB&T of ownership of the shares repre-
sented thereby. After the Effective Time, Virginia Capital's transfer books
shall be closed and no transfer of the shares of Virginia Capital 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 Virginia Capital 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 Virginia
Capital Common Stock. Upon proper surrender of such certificates or other evi-
dence of ownership meeting the requirements of Section 2.8(c), together with
such letter of transmittal duly executed and completed in accordance with the
instructions thereto, and such other documents as may be reasonably requested,
BB&T shall promptly cause the transfer to the persons entitled thereto of the
Merger Consideration.
(e) The Surviving Corporation shall pay any dividends or other distributions
with a record date prior to the Effective Time that have been declared or made
by Virginia Capital in respect of shares of Virginia Capital Common Stock in
accordance with the terms of this Agreement and that remain unpaid at the Ef-
fective Time, subject to compliance by Virginia Capital with Section 5.9(b).
To the extent permitted by law, former shareholders of record of Virginia Cap-
ital 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 Virginia Capital Common Stock are converted, regardless
of whether such holders have exchanged their certificates representing Vir-
ginia Capital 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 divi-
dends or other distributions on all shares of BB&T Common Stock issuable pur-
suant 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 Effec-
tive Time shall be delivered to the holder of any certificate representing
Virginia Capital Common Stock until such holder surrenders such certificate
for exchange as provided in this Section 2.8. Upon surrender of such certifi-
cate, 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 Virginia Capital Common Stock represented by
such certificate.
2.9 Conversion of Stock Options
(a) At the Effective Time, each Stock Option then outstanding (and which by
its terms does not lapse on or before the Effective Time), whether or not then
exercisable, shall be converted into and become rights with respect to BB&T
Common Stock, and BB&T shall assume each Stock Option in accordance with the
terms of the Stock Option Plan, except that from and after the Effective Time
(i) BB&T and its Compensation Committee shall be substituted for Virginia Cap-
ital and its Compensation Committee with respect to 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 Virginia Capital Common Stock subject to such Stock Option immedi-
ately 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 divid-
ing 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 compa-
rable 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 indi-
vidual who subsequent to the Merger will be a director or officer of BB&T as
construed under Commission Rule
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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 in-
centive 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 Virginia Capital 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 Vir-
ginia Capital 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 effec-
tiveness 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 applica-
ble) 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 Ef-
fective Time. Virginia Capital 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.
(c) Eligibility to receive stock option grants following the Effective Time
with respect to BB&T Common Stock shall be determined by BB&T in accordance
with its plans and procedures as in effect from time to time, and subject to
any contractual obligations.
2.10 Merger of Subsidiaries
In the event that BB&T shall request, Virginia Capital shall take such ac-
tions, and shall cause the Virginia Capital Subsidiaries to take such actions,
as may be required in order to effect, at the Effective Time, the merger of one
or more of the Virginia Capital Subsidiaries with and into, in each case, one
of the BB&T Subsidiaries.
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 proportion-
ately adjusted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF VIRGINIA CAPITAL
Except as Disclosed, Virginia Capital represents and warrants to BB&T as fol-
lows (the representations and warranties herein of Virginia Capital 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 it is inac-
curate to the extent that BB&T would be entitled to refuse to consummate the
Merger pursuant to Section 7.1(b)(ii) on account of such inaccuracy):
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3.1 Capital Structure
The authorized capital stock of Virginia Capital consists of 75,000,000
shares of Virginia Capital Common Stock and 5,000,000 shares of Virginia Capi-
tal Preferred Stock. As of the date of this Agreement, Virginia Capital has
9,289,280 shares of Virginia Capital Common Stock issued and outstanding and no
shares of Virginia Capital Preferred Stock issued and outstanding. No other
classes of capital stock of Virginia Capital, common or preferred, are autho-
rized, issued or outstanding. All outstanding shares of Virginia Capital capi-
tal stock have been duly authorized and are validly issued, fully paid and non-
assessable. No shares of capital stock have been reserved for any purpose, ex-
cept for (i) shares of Virginia Capital Common Stock reserved for issuance in
connection with the Stock Option Plan and (ii) 1,848,560 shares of Virginia
Capital Common Stock reserved for issuance in connection with the BB&T Option
Agreement. Virginia Capital has granted options to acquire 1,140,386 shares of
Virginia Capital Common Stock under the Stock Option Plan, which options remain
outstanding as of the date hereof. Except as set forth in this Section 3.1,
there are no Rights authorized, issued or outstanding with respect to, nor are
there any agreements, understandings or commitments relating to the right of
any Virginia Capital shareholder to own, to vote or to dispose of, the capital
stock of Virginia Capital. Holders of Virginia Capital Common Stock do not have
preemptive rights.
3.2 Organization, Standing and Authority
Virginia Capital is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia, with full corpo-
rate power and authority to carry on its business as now conducted and to own,
lease and operate its properties and assets. Virginia Capital is not required
to be qualified to do business in any other state of the United States or for-
eign jurisdiction. Virginia Capital is registered as a bank holding company un-
der the Bank Holding Company Act.
3.3 Ownership of Subsidiaries
Section 3.3 of the Virginia Capital Disclosure Memorandum lists all of the
Virginia Capital 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 Virginia
Capital (directly or indirectly), the percentage ownership interest so owned by
Virginia Capital and its business activities. The outstanding shares of capital
stock or other equity interests of the Virginia Capital Subsidiaries are val-
idly issued and outstanding, fully paid and nonassessable, and all such shares
are directly or indirectly owned by Virginia Capital 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 Virginia Capital Subsidiaries, and there are no
agreements, understandings or commitments relating to the right of Virginia
Capital to own, to vote or to dispose of said interests. None of the shares of
capital stock or other equity interests of the Virginia Capital Subsidiaries
have been issued in violation of the preemptive rights of any person. Section
3.3 of the Virginia Capital Disclosure Memorandum also lists all shares of cap-
ital stock or other securities or ownership interests of any corporation, part-
nership, joint venture, or other organization (other than the Virginia Capital
Subsidiaries and stock or other securities held in a fiduciary capacity) owned
directly or indirectly by Virginia Capital.
3.4 Organization, Standing and Authority of the Subsidiaries
Each Virginia Capital Subsidiary that is a depository institution is a Vir-
ginia chartered bank with its deposits insured by the FDIC. Each of the Vir-
ginia Capital Subsidiaries is validly existing and in good standing under the
laws of its jurisdiction of organization. Each of the Virginia Capital Subsidi-
aries has full power and authority to carry on its business as now conducted,
and is duly qualified to do business and in good standing in each jurisdiction
Disclosed with respect to it. No Virginia Capital Subsidiary is required to be
qualified to do business in any other state of the United States or foreign ju-
risdiction, or is engaged in any type of activities that have not been Dis-
closed.
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3.5 Authorized and Effective Agreement
(a) Virginia Capital has all requisite corporate power and authority to en-
ter into and (subject to receipt of all necessary governmental approvals and
the receipt of approval of the Virginia Capital shareholders of this Agreement
and the Plan of Merger) perform all of its obligations under this Agreement,
the Plan of Merger and the BB&T Option Agreement. The execution and delivery
of this Agreement, the Plan of Merger and the BB&T Option Agreement, and con-
summation 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 Virginia Capital
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 Virginia Capital, and each is enforceable
against Virginia Capital in accordance with its terms, in each such case sub-
ject to (i) bankruptcy, fraudulent transfer, insolvency, moratorium, reorgani-
zation, 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 general-
ly; 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 Plan of Merg-
er, or the BB&T Option Agreement, nor consummation of the transactions contem-
plated hereby or thereby, nor compliance by Virginia Capital 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 Virginia Capital
or the comparable governing documents of any Virginia Capital 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, cancel-
lation or acceleration with respect to, or result in the creation of any lien,
charge or encumbrance upon any property or asset of Virginia Capital or any
Virginia Capital 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
Virginia Capital or any Virginia Capital Subsidiary.
(c) Other than consents or approvals required from, or notices to, regula-
tory 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
Virginia Capital of the Merger and the other transactions contemplated in this
Agreement.
3.6 Securities Filings; Financial Statements; Statements True
(a) Virginia Capital has timely filed all Securities Documents required by
the Securities Laws to be filed since December 31, 1998. Virginia Capital has
Disclosed or made available to BB&T a true and complete copy of each Securi-
ties Document filed by Virginia Capital with the Commission after December 31,
1998 and prior to the date hereof, which are all of the Securities Documents
that Virginia Capital was required to file during such period. As of their re-
spective dates of filing, such Securities Documents complied with the Securi-
ties Laws as then in effect and did not contain any untrue statement of a ma-
terial 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 Virginia Capital fairly present or will
fairly present, as the case may be, the consolidated financial position of
Virginia Capital and the Virginia Capital Subsidiaries as of the dates indi-
cated 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 Virginia Capital or any Virginia Capital 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.
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3.7 Minute Books
The minute books of Virginia Capital and each of the Virginia Capital Sub-
sidiaries contain or will contain at Closing accurate records of all meetings
and other corporate actions of their respective shareholders and Boards of Di-
rectors (including committees of the Board of Directors), and the signatures
contained therein are the true signatures of the persons whose signatures they
purport to be.
3.8 Adverse Change
Since December 31, 1999, Virginia Capital and the Virginia Capital Subsidi-
aries have not incurred any liability, whether accrued, absolute or contin-
gent, except as disclosed in the Virginia Capital Financial Statements, or en-
tered 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 that has resulted in, or is reasonably likely
to result in, an adverse change in the business, financial condition or re-
sults of operations of Virginia Capital or any of the Virginia Capital Subsid-
iaries.
3.9 Absence of Undisclosed Liabilities
All liabilities (including contingent liabilities) of Virginia Capital and
the Virginia Capital Subsidiaries are disclosed in the most recent Financial
Statements of Virginia Capital or are normally recurring business obligations
incurred in the ordinary course of its business since the date of Virginia
Capital's most recent Financial Statements.
3.10 Properties
(a) Virginia Capital and the Virginia Capital 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 person-
al, tangible and intangible, reflected on the consolidated balance sheet in-
cluded in the Financial Statements of Virginia Capital 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 Virginia Capital or any Vir-
ginia Capital 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) Virginia Capital and the Virginia Capital Subsidiaries are and at all
times have been in compliance with all Environmental Laws. Neither Virginia
Capital nor any Virginia Capital Subsidiary has received any communication al-
leging that Virginia Capital or the Virginia Capital Subsidiary is not in such
compliance, and there are no present circumstances that would prevent or in-
terfere with the continuation of such compliance.
(b) There are no pending Environmental Claims, neither Virginia Capital nor
any Virginia Capital Subsidiary has received notice of any pending Environmen-
tal Claims, and there are no conditions or facts existing which might reasona-
bly be expected to result in legal, administrative, arbitral or other proceed-
ings asserting Environmental Claims or other claims, causes of action or gov-
ernmental investigations of any nature seeking to impose, or that could result
in the imposition of, any liability arising under any Environmental Laws upon
(i) Virginia Capital or any Virginia Capital Subsidiary, (ii) any person or
entity whose liability for any Environmental Claim Virginia Capital or any
Virginia Capital Subsidiary has or may have retained or assumed, either con-
tractually or by operation of law, (iii) any real or personal property owned
or leased by Virginia Capital or any Virginia Capital Subsidiary, or any real
or personal property which Virginia Capital or any Virginia Capital Subsidiary
has or is judged to have managed or supervised or participated in the manage-
ment of, or (iv) any real or personal property in which Virginia Capital or
any Virginia Capital Subsidiary holds a security
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interest securing a loan recorded on the books of Virginia Capital or any Vir-
ginia Capital Subsidiary. Neither Virginia Capital nor any Virginia Capital
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) Virginia Capital and the Virginia Capital Subsidiaries are in compliance
with all recommendations contained in any environmental audits, analyses and
surveys received by Virginia Capital relating to all real and personal property
owned or leased by Virginia Capital or any Virginia Capital Subsidiary and all
real and personal property of which Virginia Capital or any Virginia Capital
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, condi-
tions, events or incidents that could reasonably form the basis of any Environ-
mental Claim, or other claim or action or governmental investigation that could
result in the imposition of any liability arising under any Environmental Laws,
against Virginia Capital or any Virginia Capital Subsidiary or against any per-
son or entity whose liability for any Environmental Claim Virginia Capital or
any Virginia Capital 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 Virginia Capital and the Virginia Capi-
tal Subsidiaries are valid and properly documented and were made in the ordi-
nary course of business, and the security therefor, if any, is valid and prop-
erly perfected. Neither the terms of such loans, nor any of the loan documenta-
tion, nor the manner in which such loans have been administered and serviced,
nor Virginia Capital's procedures and practices of approving or rejecting loan
applications, violates any federal, state or local law, rule, regulation or or-
dinance applicable thereto, including, without limitation, the TILA, Regula-
tions O and Z of the Federal Reserve Board, the CRA, the Equal Credit Opportu-
nity Act, as amended, and state laws, rules and regulations relating to con-
sumer protection, installment sales and usury.
(b) The allowances for loan losses reflected on the consolidated balance
sheets included in the Financial Statements of Virginia Capital are, in the
reasonable, good faith judgment of Virginia Capital's management, adequate as
of their respective dates under the requirements of GAAP and applicable regula-
tory requirements and guidelines.
3.13 Tax Matters
(a) Virginia Capital and the Virginia Capital 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 re-
turns required by applicable law to be filed by them (including, without limi-
tation, 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 Virginia Capital nor any Virginia Capital Subsidi-
ary has or will have any liability for any such taxes in excess of the amounts
so paid or reserves or accruals so established. Virginia Capital and the Vir-
ginia Capital 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 Virginia Capital and the Virginia Capital Subsidiaries are complete
and accurate. Neither Virginia Capital nor any Virginia Capital
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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 Virginia
Capital or any Virginia Capital Subsidiary which have not been settled and
paid. There are currently no agreements in effect with respect to Virginia Cap-
ital or any Virginia Capital 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 with respect to Virginia Capital and the Virginia Capital
Subsidiaries have been provided for in accordance with GAAP consistently ap-
plied.
(d) Neither Virginia Capital nor any of the Virginia Capital Subsidiaries is
a party to any tax allocation or sharing agreement (other than among Virginia
Capital and the Virginia Capital Subsidiaries) or has been a member of an af-
filiated group filing a consolidated federal income tax return (other than a
group the common parent of which was Virginia Capital or a Virginia Capital
subsidiary) or has any liability for taxes of any person (other than Virginia
Capital and the Virginia Capital Subsidiaries) under Treasury Regulation Sec-
tion 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 Virginia Capital and the Virginia Capital Subsidiaries is in com-
pliance with, and its records contain all information and documents (including
properly completed IRS Forms W-9) necessary to comply with, all applicable in-
formation 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 Virginia Capital nor any of the Virginia Capital Subsidiaries has
made any payments, is obligated to make any payments, or is a party to any con-
tract 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. Virginia Capital 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 pay-
able in cash or in kind, of each director, shareholder, independent contractor,
consultant and agent of Virginia Capital and of each Virginia Capital Subsidi-
ary and each other person (in each case other than as an employee) to whom Vir-
ginia Capital or any Virginia Capital 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 de-
scription whatsoever.
(b) Employee Benefit Plans.
(i) Virginia Capital has Disclosed an accurate and complete list of all
Plans, as defined below, contributed to, maintained or sponsored by Vir-
ginia Capital or any Virginia Capital Subsidiary, to which Virginia Capital
or any Virginia Capital 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 con-
trolled group of corporations, within the meaning of Sections 414(b),
414(c), 414(m) and 414(o) of the Code, of which Virginia Capital or any
Virginia Capital Subsidiary is a member. For purposes of this Agreement,
the term "Plan" shall mean a plan, arrangement, agreement or program de-
scribed in the foregoing provisions of this Section 3.14(b)(i) that is: (A)
a profit-sharing, deferred compensation, employee stock ownership, 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, offi-
cers, directors or agents, whether or not funded, and whether or not termi-
nated, 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 insur-
ance, or (D) any other employee benefit plan as defined in Section 3(3) of
ERISA, whether or not funded and whether or not terminated.
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(ii) Neither Virginia Capital nor any Virginia Capital Subsidiary con-
tributes to, has an obligation to contribute to or otherwise has any lia-
bility 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 regula-
tions 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 Virginia Capital or any Virginia Capi-
tal Subsidiary to pay separation, severance, termination or similar-type
benefits solely as a result of any transaction contemplated by this Agree-
ment 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, exami-
nations, 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 ac-
tions, suits, claims, complaints, charges, proceedings, hearings, examina-
tions, 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 Ti-
tle IV of ERISA, including without limitation Fredericksburg State Bank's
qualified noncontributory defined benefit plan. 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 Virginia Capital or any Virginia Capital Subsidiary is the subject of
any lien arising under Section 302(f) of ERISA or Section 412(n) of the
Code, neither Virginia Capital nor any Virginia Capital 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 Virginia Capital or any Virginia
Capital 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 or, in the case of an employee stock ownership plan, qualifies as
such under Section 4975(c)(7) 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 sta-
tus 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 Clos-
ing 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 Vir-
ginia Capital or any Virginia Capital Subsidiary is a member or was a mem-
ber 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 de-
fined benefit plan on an ongoing basis. With respect to
A-15
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 pro-
hibited 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 ex-
emption) has occurred with respect to any Plan which would result in the
imposition, directly or indirectly, of any excise tax, penalty or other li-
ability under Section 4975 of the Code or Section 409 or 502(i) of ERISA.
Neither Virginia Capital nor, to the best knowledge of Virginia Capital,
any Virginia Capital Subsidiary, any trustee, administrator or other fidu-
ciary of any Plan (including, without limitation, The Fredericksburg Sav-
ings Bank Employee Stock Ownership Plan (the "ESOP")), 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 Virginia Capital or any Virginia Capital
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) Virginia Capital and each Virginia Capital Subsidiary has been and
is presently in compliance with all of the requirements of Section 4980B of
the Code.
(xi) Neither Virginia Capital nor any Virginia Capital Subsidiary has a
liability as of December 31, 1999 under any Plan that, to the extent dis-
closure is required under GAAP, is not reflected on the consolidated bal-
ance sheet included in the Financial Statements of Virginia Capital as of
December 31, 1999 or otherwise Disclosed.
(xii) Neither the consideration nor implementation of the transactions
contemplated under this Agreement will increase (A) Virginia Capital's or
any Virginia Capital 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 un-
allocated Plan assets or by the conversion of all stock options in accor-
dance with Section 2.9).
(xiii) With respect to each Plan, Virginia Capital 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, in-
cluding 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, includ-
ing, 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 Virginia Capital and any Virginia
Capital Subsidiary may be amended or terminated at any time by action of
Virginia Capital's Board of Directors, or such Virginia Capital'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 partici-
pation of Virginia Capital or a Virginia Capital Subsidiary thereunder).
(xv) The ESOP was adopted in December 1998. Virginia Capital will take
all steps necessary to cause any loan (as described in Treasury Regulation
(S)54.4975-7(b)(1)(ii)) made to the ESOP to be satisfied in full as soon as
practicable following the Closing Date.
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3.15 Certain Contracts
(a) Neither Virginia Capital nor any Virginia Capital Subsidiary is a party
to, is bound or affected by, or receives benefits under (i) any agreement, ar-
rangement or commitment, written or oral, the default of which would have a Ma-
terial 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 Vir-
ginia Capital or any Virginia Capital Subsidiary or the guarantee by Virginia
Capital or any Virginia Capital Subsidiary of any such obligation, which cannot
be terminated within less than 30 days after the Closing Date by Virginia Capi-
tal or any Virginia Capital Subsidiary (without payment of any penalty or cost,
except with respect to Federal Home Loan Bank or Federal Reserve Bank advanc-
es), (iii) any agreement, arrangement or commitment, written or oral, relating
to the employment of a consultant, independent contractor or agent, or the em-
ployment, 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 Virginia Capital or any Virginia Capital 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
Virginia Capital of the nature contemplated by this Agreement or the BB&T Op-
tion Agreement, or (iv) any agreement or plan, written or oral, including any
stock option plans, 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 Virginia Capital nor any Virginia Capital Subsidiary is in de-
fault 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 proceed-
ings instituted, pending or, to the best knowledge of Virginia Capital, threat-
ened against Virginia Capital or any Virginia Capital Subsidiary or against any
asset, interest, Plan or right of Virginia Capital or any Virginia Capital Sub-
sidiary, or, to the best knowledge of Virginia Capital, against any officer,
director or employee of any of them in their capacity as such. There are no ac-
tions, suits or proceedings instituted, pending or, to the best knowledge of
Virginia Capital, threatened against any present or former director or officer
of Virginia Capital or any Virginia Capital Subsidiary that would reasonably be
expected to give rise to a claim against Virginia Capital or any Virginia Capi-
tal Subsidiary for indemnification. There are no actual or, to the best knowl-
edge of Virginia Capital, threatened actions, suits or proceedings that present
a claim to restrain or prohibit the transactions contemplated herein or in the
BB&T Option Agreement. To the best knowledge of Virginia Capital, no fact or
condition relating to Virginia Capital or any Virginia Capital Subsidiary ex-
ists (including, without limitation, noncompliance with the CRA) that would
prevent Virginia Capital or BB&T from obtaining all of the federal and state
regulatory approvals contemplated herein.
3.17 Compliance with Laws; Filings
Each of Virginia Capital and each Virginia Capital Subsidiary is in compli-
ance 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 Virginia Capital nor any
Virginia Capital Subsidiary has received written or, to the best knowledge of
Virginia Capital, 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 possi-
A-17
ble violation of any such statute or regulation, (ii) threatening to revoke any
permit, license, registration, or other government authorization or (iii) re-
stricting or in any way limiting its operations. Neither Virginia Capital nor
any Virginia Capital Subsidiary is subject to any regulatory or supervisory
cease and desist order, agreement, directive, memorandum of understanding or
commitment, and none of them has received any communication requesting that it
enter into any of the foregoing. Since December 31, 1998, Virginia Capital and
each of the Virginia Capital 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 limita-
tion, the Commission, FDIC, OTS, 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 Virginia Capital nor any Virginia Capital 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 commis-
sions in connection with the transactions contemplated herein, in the Plan of
Merger or in the BB&T Option Agreement, except for an obligation to the Finan-
cial Advisor for investment banking services, the nature and extent of which
has been Disclosed, and except for fees to accountants and lawyers.
3.19 Repurchase Agreements; Derivatives
(a) With respect to all agreements currently outstanding pursuant to which
Virginia Capital or any Virginia Capital Subsidiary has purchased securities
subject to an agreement to resell, Virginia Capital or the Virginia Capital
Subsidiary has a valid, perfected first lien or security interest in the secu-
rities or other collateral securing such agreement, and the value of such col-
lateral equals or exceeds the amount of the debt secured thereby. With respect
to all agreements currently outstanding pursuant to which Virginia Capital or
any Virginia Capital Subsidiary has sold securities subject to an agreement to
repurchase, neither Virginia Capital nor the Virginia Capital Subsidiary has
pledged collateral in excess of the amount required to secure the debt. Neither
Virginia Capital nor any Virginia Capital Subsidiary has pledged collateral in
excess of the amount required under any interest rate swap or other similar
agreement currently outstanding.
(b) Neither Virginia Capital nor any Virginia Capital 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 bal-
ance sheets in the Financial Statements, which is a financial derivative con-
tract (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 Virginia Capital Subsidiaries that are depository
institutions are insured by the FDIC to the maximum extent permitted by federal
law, and the Virginia Capital Subsidiaries have paid all premiums and assess-
ments 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
Virginia Capital has Disclosed all existing transactions, investments and
loans, including loan guarantees existing as of the date hereof, to which Vir-
ginia Capital or any Virginia Capital Subsidiary is a party with any director,
executive officer or 5% shareholder of Virginia Capital or any person, corpora-
tion, or enterprise controlling, controlled by or under common control with any
of the foregoing. All such transactions, investments and loans are on terms no
less favorable to Virginia Capital than could be obtained from unrelated par-
ties.
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3.22 Certain Information
When the Proxy Statement/Prospectus is mailed, and at the time of the meeting
of shareholders of Virginia Capital to vote on this Agreement and the Plan of
Merger, the Proxy Statement/Prospectus and all amendments or supplements there-
to, with respect to all information set forth therein provided by Virginia Cap-
ital, (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 Virginia Capital nor any Virginia Capital Subsidiary has taken or
agreed to take any action that would or could reasonably be expected to (i)
cause the Merger not to constitute a reorganization under Section 368 of the
Code or (ii) materially impede or delay receipt of any consents of regulatory
authorities referred to in Section 5.4(b) or result in failure of the condition
in Section 6.3(b).
3.24 State Takeover Laws; Corporate Documents
Virginia Capital and each Virginia Capital Subsidiary have taken all neces-
sary action to exempt the transactions contemplated by this Agreement from any
applicable moratorium, fair price, business combination, control share or other
anti-takeover laws (including, without limitation, those set forth in Section
13.1-725 et seq. and Section 13.1-728.1 et seq. of the VSCA), and no such law
shall be activated or applied as a result of such transactions. Neither the Ar-
ticles of Incorporation nor the Bylaws of Virginia Capital, nor any other docu-
ment of Virginia Capital or to which Virginia Capital is a party, contains a
provision that requires more than two-thirds of the shares of Virginia Capital
Common Stock entitled to vote, or the vote or approval of any other class of
capital stock or voting security, to approve the Merger or any of the other
transactions contemplated in this Agreement.
3.25 Labor Relations
Neither Virginia Capital nor any Virginia Capital 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 Virginia Capital or any Virginia Capital
Subsidiary party to any collective bargaining agreement. There is no strike or
other labor dispute involving Virginia Capital or any Virginia Capital Subsidi-
ary, pending or threatened, or to the best knowledge of Virginia Capital, is
there any activity involving any employees of Virginia Capital or any Virginia
Capital Subsidiary seeking to certify a collective bargaining unit or engaging
in any other organization activity.
3.26 Fairness Opinion
Virginia Capital has received from the Financial Advisor an opinion that, as
of the date hereof, the Merger Consideration is fair to the shareholders of
Virginia Capital from a financial point of view.
3.27 No Right to Dissent
Nothing in the Articles of Incorporation or the Bylaws of Virginia Capital or
the similar governing documents of any Virginia Capital Subsidiary provides or
would provide to any person, including without limitation the holders of Vir-
ginia Capital Common Stock, upon execution of this Agreement or the Plan of
Merger and consummation of the transactions contemplated hereby and thereby,
rights of dissent and appraisal of any kind.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BB&T
BB&T represents and warrants to Virginia Capital as follows (the representa-
tions 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 it is inaccurate to the extent that Virginia
Capital would be entitled to refuse to consummate the Merger pursuant to Sec-
tion 7.1(b)(ii) on account of such inaccuracy):
4.1 Capital Structure of BB&T
The authorized capital stock of BB&T consists of (i) 5,000,000 shares of pre-
ferred 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 395,951,280 shares were issued
and outstanding as of November 30, 2000. All outstanding shares of BB&T Common
Stock have been duly authorized and are validly issued, fully paid and nonas-
sessable. 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 oper-
ate its properties and 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 and the Plan of Merger. The execution and de-
livery of this Agreement and the Plan of Merger and consummation of the trans-
actions contemplated hereby and thereby 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 (whether applied in a court of
law or in equity).
(b) Neither the execution and delivery of this Agreement, the Plan of Merger
or the Articles of Merger, nor consummation of the transactions contemplated
hereby or thereby, 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) con-
stitute or result in a breach of any term, condition or provision of, or con-
stitute 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 pursu-
ant to, any note, bond, mortgage, indenture, license, agreement or other in-
strument or obligation, or (iii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to BB&T or any BB&T Subsidiary.
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(c) Other than consents or approvals required from, or notices to, regula-
tory authorities as provided in Section 5.4(b), no notice to, filing with, or
consent of, any public body or authority is necessary for the consummation by
BB&T of the Merger and the other transactions contemplated in this Agreement.
4.4 Organization, Standing and Authority of BB&T Subsidiaries
Each of the BB&T Subsidiaries is duly organized, validly existing and in
good standing under applicable laws. BB&T owns, directly or indirectly, all of
the issued and outstanding shares of capital stock of each of the BB&T Subsid-
iaries. 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 busi-
ness 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; Financial Statements; Statements True
(a) BB&T has timely filed all Securities Documents required by the Securi-
ties Laws to be filed since December 31, 1997. 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 in-
come, changes in shareholders' equity and 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 BB&T or any BB&T Subsidiary to Virginia Capital con-
tains 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
Virginia Capital 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 ma-
terial 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 circum-
stances 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
constitute a reorganization under Section 368 of the Code, or (ii) materially
impede or delay receipt of any consents of regulatory authorities referred to
in Section 5.4(b) or result in failure of the condition in Section 6.3(b).
4.8 Share Ownership
As of the date of this Agreement, BB&T does not own (except in a fiduciary
capacity) any shares of Virginia Capital Common Stock.
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4.9 Legal Proceedings; Regulatory Approvals
There are no actual or, to the best knowledge of BB&T, threatened actions,
suits or proceedings that present a claim to restrain or prohibit the transac-
tions contemplated herein. To the best knowledge of BB&T, no fact or condition
relating to BB&T or any BB&T Subsidiary exists (including, without limitation,
noncompliance with the CRA) that would prevent BB&T or Virginia Capital from
obtaining all of the federal and state regulatory approvals contemplated here-
in.
4.10 Adverse Change
Since September 30, 2001 there has been no adverse change or any event that
has resulted in, or is reasonably likely to result in, an adverse change in
the business, financial condition or results of operations of BB&T or any of
its Subsidiaries.
ARTICLE V
COVENANTS
5.1 Virginia Capital Shareholder Meeting
Virginia Capital shall submit this Agreement and the Plan of Merger to its
shareholders for approval at a meeting to be held as soon as reasonably prac-
ticable following the effectiveness of the Registration Statement. By approv-
ing this Agreement and authorizing its execution, the Board of Directors of
Virginia Capital agrees that it shall, at the time the Proxy
Statement/Prospectus is mailed to the shareholders of Virginia Capital, recom-
mend that Virginia Capital's shareholders vote for such approval; provided,
that the Board of Directors of Virginia Capital may withdraw, modify, condi-
tion 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 Virginia Capital's shareholders after consider-
ation of (i) written advice of legal counsel that 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 Virginia Capital, and (ii) a written determination from the
Financial Advisor that the Merger Consideration is not fair or is inadequate
to the Virginia Capital shareholders from a financial point of view, accompa-
nied 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. Virginia Capital 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. BB&T shall prepare such Registration Statement such that,
at the time it becomes effective and on the Effective Time, it conforms in all
material respects to the requirements of the Securities Act and the applicable
rules and regulations of the Commission (provided that no covenant is made by
BB&T as to information provided by Virginia Capital for inclusion in the Reg-
istration Statement). The Registration Statement shall include the form of
Proxy Statement/Prospectus. BB&T and Virginia Capital shall use all reasonable
efforts to cause the Proxy Statement/Prospectus to be approved by the Commis-
sion for mailing to the Virginia Capital 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. BB&T shall notify Virginia Capi-
tal, as promptly as reasonably practicable following BB&T's receipt of notice
thereof, if a stop order is issued with respect to the Registration Statement
or the Proxy Statement/Prospectus. Virginia Capital shall cause the Proxy
Statement/Prospectus to be mailed to its shareholders in accordance with all
applicable notice requirements under the Securities Laws, the VSCA and the
rules and regulations of the Nasdaq Stock Market.
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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 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 autho-
rized 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 ef-
fect 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) Virginia Capital 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 con-
templated 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 Virginia Capi-
tal 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. Virginia Capital and BB&T each represents and
warrants to the other that all information included (or submitted for inclu-
sion) concerning it, its respective Subsidiaries, and any of its respective di-
rectors, officers and shareholders, shall be true, correct and complete in all
material respects as of the date presented. Virginia Capital and BB&T shall
provide promptly to each other copies of all correspondence with regulatory
bodies to which notices or applications are submitted.
5.5 Best Efforts
Each of BB&T and Virginia Capital 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 neces-
sary or desirable on its part to fulfill the conditions in Article VI, includ-
ing, without limitation, executing and delivering, or causing to be executed
and delivered, such representations, certificates and other instruments or doc-
uments 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 Virginia Capital 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
Virginia Capital shall cooperate with BB&T concerning (i) accounting and fi-
nancial matters necessary or appropriate to facilitate the Merger (taking into
account BB&T's policies, practices and procedures), including, without limita-
tion, issues arising in connection with record keeping, loan classification,
valuation adjustments, levels of loan loss reserves and other accounting prac-
tices, and (ii) Virginia Capital's lending, investment or asset/liability man-
agement policies; provided, that any action taken pursuant to this Section 5.6
shall not be deemed to constitute or result in the breach of any representa-
tion, warranty or covenant of Virginia Capital contained in this Agreement.
Virginia Capital shall not be required to modify or change any such policies or
practices, however, until the earlier of (A) such time as BB&T acknowledges
that all conditions to its obligation to consummate the Merger have been waived
or satisfied (other than the delivery of certificates, opinions
A-23
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) or (B) immediately
prior to the Effective Time.
5.7 Access to Information
Virginia Capital 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,
Virginia Capital 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 Virginia Capital and
the Virginia Capital 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 confi-
dentiality of all information obtained hereunder which is not otherwise pub-
licly disclosed by the other party, said undertakings with respect to confiden-
tiality 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 Virginia Capital shall agree with each other as to the form and sub-
stance 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; pro-
vided, that nothing contained herein shall prohibit either party, following no-
tification to the other party, from making any disclosure which in the opinion
of its counsel is required by law.
5.9 Forbearances of Virginia Capital
Except with the prior written consent of BB&T (which consent shall not be ar-
bitrarily withheld or delayed), between the date hereof and the Effective Time,
Virginia Capital shall not, and shall cause each of the Virginia Capital Sub-
sidiaries 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 estab-
lish 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 $0.11 per share of Virginia Capital Common Stock payable on
record dates and in amounts consistent with past practices; provided that
any dividend declared or payable on the shares of Virginia Capital Common
Stock in the quarterly period during which the Effective Time occurs shall,
unless otherwise agreed upon in writing by BB&T and Virginia Capital, be
declared with a record date prior to the Effective Time only if the normal
record date for payment of the corresponding quarterly dividend to holders
of BB&T Common Stock is before the Effective Time;
(c) issue any shares of its capital stock (including treasury shares),
except pursuant to the Stock Option Plan with respect to the options out-
standing on the date hereof or pursuant to 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 capitaliza-
tion;
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(e) amend its Articles of Incorporation or Bylaws;
(f) impose or permit imposition, of any lien, charge or encumbrance on
any share of stock held by it in any Virginia Capital Subsidiary, or permit
any such lien, charge or encumbrance to exist; or waive or release any ma-
terial 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 exer-
cise 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 em-
ployee benefit or incentive to, any of its directors, officers or employ-
ees, except for increases or payments made in the ordinary course of busi-
ness consistent with past practice pursuant to plans or arrangements in ef-
fect on the date hereof;
(j) enter into or substantially modify (except as may be required by ap-
plicable law or regulation) any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred com-
pensation, 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 em-
ployees; provided, however, that this subparagraph shall not prevent re-
newal 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 discus-
sions concerning, any acquisition or purchase of all or a substantial por-
tion of the assets of, or a substantial equity interest in, Virginia Capi-
tal or any Virginia Capital Subsidiary or any business combination with
Virginia Capital or any Virginia Capital Subsidiary other than as contem-
plated by this Agreement; or authorize any officer, director, agent or af-
filiate of Virginia Capital or any Virginia Capital Subsidiary to do any of
the above; or fail to notify BB&T immediately if any such inquiries or pro-
posals are received, any such information is requested or required, or any
such negotiations or discussions are sought to be initiated; provided, that
this Section 5.9(k) shall not apply to furnishing information, negotiations
or discussions with the offeror following an unsolicited offer if, as a re-
sult of such offer, Virginia Capital is advised in writing by legal counsel
that the failure to so furnish information or negotiate could reasonably be
expected to constitute a breach of the fiduciary duty of Virginia Capital's
Board of Directors to the Virginia Capital 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 Virginia Capital or a Virginia Capital Subsidiary
or guarantee by Virginia Capital or a Virginia Capital Subsidiary of any
obligation, (iii) any agreement, arrangement or commitment relating to the
employment or severance of a consultant or the employment, severance, elec-
tion 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 poli-
cies in any material respect, except (i) as may be required by applicable
law, regulation, or directives, and (ii) that after approval of the Agree-
ment and the Plan of Merger by its shareholders and after receipt of the
requisite regulatory approvals for the transactions contemplated by this
Agreement and the Plan of Merger, and subject to Section 5.6, Virginia Cap-
ital shall cooperate in good faith with BB&T to adopt policies, practices
and procedures consistent with those utilized by BB&T, effective on or be-
fore the Closing Date;
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(n) change its methods of accounting in effect at December 31, 1999 in
any material respect, except as required by changes in GAAP concurred in by
BB&T, which concurrence shall not be unreasonably withheld, or change any
of its methods of reporting income and deductions for federal income tax
purposes from those employed in the preparation of its federal income tax
returns for the year ended December 31, 1999, except as required by changes
in law or regulation;
(o) incur any commitments for capital expenditures or obligation to make
capital expenditures in excess of $25,000, for any one expenditure, or
$100,000, in the aggregate;
(p) incur any indebtedness other than deposits from customers, advances
from the Federal Home Loan Bank and reverse repurchase arrangements in the
ordinary course of business;
(q) take any action which would or could reasonably be expected to (i)
cause the Merger not to constitute a reorganization under Section 368 of
the Code as determined by BB&T, (ii) result in any inaccuracy of a repre-
sentation or warranty herein that would allow for a termination of this
Agreement, or (iii) cause any of the conditions precedent to the transac-
tions 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) has entered into an employment agree-
ment with Samuel C. Harding, Jr. in the form of Annex B hereto and with Peggy
J. Newman in the form of Annex C hereto, both of which shall become effective
as of the Effective Time.
5.11 Affiliates
Virginia Capital shall use its best efforts to cause all persons who are Af-
filiates of Virginia Capital to deliver to BB&T promptly following execution of
this Agreement, and in any event prior to the Closing Date, 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 regu-
lations promulgated thereunder.
5.12 Section 401(k) Plan; Other Employee Benefits
(a) Effective on the Benefit Plan Determination Date with respect to the
401(k) plan of Virginia Capital, BB&T shall cause such plan to be merged with
the 401(k) plan maintained by BB&T and the BB&T Subsidiaries, or to be frozen
or terminated, in each case as determined by BB&T and subject to the receipt of
all applicable regulatory or governmental approvals. Each employee of Virginia
Capital at the Effective Time who (i) is a participant in the 401(k) plan of
Virginia Capital, (ii) becomes an employee immediately following the Effective
Time of BB&T or of any subsidiary of BB&T ("Employer Entity"), and (iii) con-
tinues in the employment of an Employer Entity until the Benefit Plan Determi-
nation Date for the 401(k) plan, shall be eligible to participate in BB&T's
401(k) plan as of such Benefit Plan Determination Date. Any other former em-
ployee of Virginia Capital who is employed by an Employer Entity on or after
such Benefit Plan Determination Date shall be eligible to be a participant in
the BB&T 401(k) plan upon complying with eligibility requirements. All rights
to participate in BB&T's 401(k) plan are subject to BB&T's right to amend or
terminate the plan. Until such Benefit Plan Determination Date, BB&T shall con-
tinue in effect for the benefit of participating employees the 401(k) plan of
Virginia Capital. For purposes of administering BB&T's 401(k) plan, service
with Virginia Capital and the Virginia Capital Subsidiaries shall be deemed to
be service with BB&T for participation and vesting purposes, but not for pur-
poses of benefit accrual. Each employee of Virginia Capital or a Virginia Capi-
tal Subsidiary at the Effective Time who becomes an employee immediately fol-
lowing the Effective Time of an Employer Entity is referred to herein as a
"Transferred Employee."
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(b) Each Transferred Employee shall be eligible to participate in group hos-
pitalization, 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 for each such plan or program, conditional upon the Transferred Employ-
ee's being employed by an Employer Entity as of such Benefit Plan Determina-
tion Date and subject to complying with eligibility requirements of the re-
spective plans and programs. With respect to health care coverages, participa-
tion in BB&T's plans may be subject to availability of HMO options. In any
case in which HMO coverage is not available, substitute coverage will be pro-
vided that may not be fully comparable to the HMO coverage. With respect to
any welfare benefit plan or program of Virginia Capital that the Employer En-
tity 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 Virginia Capital plan or program in
effect for the benefit of the Transferred Employees so long as they remain el-
igible to participate and until they shall become eligible to become partici-
pants in the corresponding plan or program maintained by the Employer Entity
(and, with respect to any such plan or program, subject to complying with eli-
gibility requirements and subject to the right of the Employer Entity to ter-
minate such plan or program). For purposes of administering the welfare plans
and programs subject to this Section 5.12(b), (A) service with Virginia Capi-
tal 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 oth-
erwise provided in Section 5.12(c)), and (B) each Transferred Employee shall
receive credit for any deductibles and out-of pocket expenses paid prior to
the applicable Benefit Plan Determination Date (to the same extent such credit
was given under the analogous plan prior to such Benefit Plan Determination
Date) in satisfying any applicable deductibles or out-of-pocket expenses.
(c) Except to the extent of commitments herein or other contractual commit-
ments, if any, specifically made or assumed hereunder by BB&T, neither BB&T
nor any Employer Entity shall have any obligation arising from the Merger to
continue any Transferred Employees in its employ or in any specific job or to
provide to any Transferred Employee any specified level of compensation or any
incentive payments, benefits or perquisites. Each Transferred Employee who is
terminated by an Employer Entity subsequent to the Effective Time shall be en-
titled to severance pay in accordance with the general severance policy main-
tained by BB&T, if and to the extent that such employee is entitled to sever-
ance pay under such policy. Such employee's service with Virginia Capital or a
Virginia Capital 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.
(d) BB&T agrees to honor all employment agreements, severance agreements and
deferred compensation agreements that Virginia Capital and the Virginia Capi-
tal 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 Clos-
ing or following the Closing Date. Except for the agreements described in the
preceding sentence and except as otherwise provided in this Section 5.12, the
employee benefit plans of Virginia Capital shall, in the sole discretion of
BB&T, be frozen, terminated or merged into comparable plans of BB&T, effective
as BB&T shall determine in its sole discretion.
(e) Notwithstanding and without limiting the generality of Section 5.12(d),
as soon as practicable following the date hereof but, in any event, prior to
the Effective Time, Virginia Capital shall take any and all action necessary
to terminate the ESOP as of the Effective Time, to repay any outstanding in-
debtedness thereof and to allocate shares of Virginia Capital Common Stock
held thereby to the participants therein in accordance with the terms thereof.
No purchases of shares of Virginia Capital Common Stock shall be made thereun-
der after the date hereof.
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 insur-
ance providing coverage to directors and officers of Virginia Capital for acts
or omissions occurring prior to the Effective Time. Such insurance shall pro-
vide at least the same coverage and amounts as contained in Virginia Capital's
policy on the date hereof; provided, that in no
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event shall the annual premium on such policy exceed 150% of the annual premium
payments on Virginia Capital's policy in effect as of the date hereof (the
"Maximum Amount"). If the amount of the premiums necessary to maintain or pro-
cure such insurance coverage exceeds the Maximum Amount, BB&T shall use its
reasonable efforts to maintain the most advantageous policies of directors' and
officers' liability insurance obtainable for a premium equal to the Maximum
Amount. Notwithstanding the foregoing, BB&T further agrees to indemnify all in-
dividuals who are or have been officers, directors or employees of Virginia
Capital or any Virginia Capital 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 Virginia Capital on the date hereof and is permitted under the
VSCA and the NCBCA. BB&T shall also advance indemnifiable expenses as incurred
to the extent permitted by the Articles of Incorporation or Bylaws of Virginia
Capital on the date hereof and permitted under the VSCA and the NCBCA.
5.14 Forbearances of BB&T
Except with the prior written consent of Virginia Capital, 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 combina-
tion contemplated hereby not to constitute a reorganization under Section 368
of the Code; (ii) result in any inaccuracy of a representation or warranty
herein that 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; or (iv) 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 Virginia Capital and BB&T shall file (and shall cause the Virginia
Capital 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 ju-
risdiction over such party, and shall deliver to BB&T or Virginia Capital, 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 Com-
mission, such financial statements will fairly present the consolidated finan-
cial 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 re-
spects 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 circum-
stances under which they were made, not misleading. Any financial statements
contained in any other reports to a regulatory authority other than the Commis-
sion shall be prepared in accordance with requirements applicable to such re-
ports.
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 Virginia Capital Common Stock pur-
suant 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
As of the Effective Time, BB&T shall offer to (i) the members of the Board of
Directors of Virginia Capital a seat on the BB&T Advisory Board for the Freder-
icksburg, Virginia area. For two years following the Effective Time, the Advi-
sory Board members appointed pursuant to this Section 5.17 and who continue to
serve shall receive, as compensation for service on the Advisory Board, Advi-
sory Board member's fees (annual retainer and attendance fees) equal in amount
each year (prorated for any partial year) to the annual retainer
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and schedule of attendance fees for directors of Virginia Capital in effect on
December 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. For two years after the Effective Time, no such Advisory Board member
shall be prohibited from serving thereon because he or she shall have attained
the maximum age for service thereon (currently age 70). Membership of any per-
son on any Advisory Board shall be conditional upon execution of an agreement
providing that such person will not engage in activities competitive with BB&T
for two years following the Effective Time or, if longer, the period that he or
she is a member of the Advisory Board.
5.18 Special Payments and Distributions
Virginia Capital shall not (a) make any distributions or payments to Samuel
C. Harding, Jr. or Peggy J. Newman or accelerate vesting with respect to any
benefits distributable or payable to either if BB&T, acting in good faith, de-
termines that such distributions, payments or acceleration could constitute ex-
cess parachute payments within the meaning of Section 280G of the Code, and (b)
in addition to the restrictions in (a), make any cash severance payment to
Samuel C. Harding, Jr. in excess of $100,000 or to Peggy J. Newman in excess of
$300,000. At least ten days prior to the Closing Date, Virginia Capital shall
submit to BB&T schedules showing amounts to be paid or distributed to Samuel C.
Harding, Jr. and Peggy J. Newman, and the value of any accelerated benefits
distributable or payable to each, and BB&T shall determine if (a) or (b) is po-
tentially violated and, if it makes such determination, Virginia Capital shall
reduce the amounts as appropriate to the satisfaction of BB&T.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent--BB&T and Virginia Capital
The respective obligations of BB&T and Virginia Capital to effect the trans-
actions 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 Virginia Capital 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 best 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, Virginia Capital or any
of the Virginia Capital Subsidiaries shall be subject to any order, decree
or injunction of a court or agency of competent jurisdiction which enjoins
or prohibits consummation of the transactions contemplated by this Agree-
ment; and
(e) Virginia Capital and BB&T shall have received an opinion of BB&T's
legal counsel, in form and substance satisfactory to Virginia Capital 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 sharehold-
ers of Virginia Capital will not recognize any gain or loss to the extent
that such shareholders exchange shares of Virginia Capital Common Stock for
shares of BB&T Common Stock.
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6.2 Conditions Precedent--Virginia Capital
The obligations of Virginia Capital to effect the transactions contemplated
by this Agreement shall be subject to the satisfaction of the following addi-
tional conditions at or prior to the Effective Time, unless waived by Virginia
Capital 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 writ-
ing by Virginia Capital. The representations and warranties of BB&T set
forth in Sections 4.1, 4.2 (except as relates to qualification), 4.3(a),
4.3(b)(i), 4.4 (except as relates to qualification) and 4.7 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 the Sections designated in the preceding sentence) such that the aggre-
gate 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 Virginia Capital 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 ex-
pected 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) Virginia Capital shall have received opinions of counsel to BB&T in
the form reasonably acceptable to Virginia Capital's legal counsel.
(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 no-
tice 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 condi-
tions at or prior to the Effective Time, unless waived by BB&T pursuant to Sec-
tion 7.4:
(a) All representations and warranties of Virginia Capital 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 Vir-
ginia Capital set forth in Sections 3.1, 3.2 (except as relates to qualifi-
cation), 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 Virginia Capital 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 Ad-
verse Effect on Virginia Capital (evaluated without regard to consummation
of the Merger).
(b) No regulatory approval shall have imposed any condition or require-
ment 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 con-
summation of such transactions inadvisable or unduly burdensome.
A-30
(c) Virginia Capital shall have performed in all material respects all
obligations and complied in all material respects with all covenants re-
quired by this Agreement.
(d) Virginia Capital 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 Virginia Capital, 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 knowl-
edge, threatened that reasonably may be expected to have a Material Adverse
Effect on Virginia Capital (evaluated without regard to the Merger) or that
present a claim to restrain or prohibit the transactions contemplated
herein or in the Plan of Merger.
(e) BB&T shall have received opinions of counsel to Virginia Capital in
the form reasonably acceptable to BB&T's legal counsel.
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 hereto in
writing (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
the inaccuracy of any representation or warranty of the other party con-
tained 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 Virginia Capital 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 satis-
fied or fulfilled prior to the Closing Date, and the party giving the no-
tice 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 appli-
cations 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 Virginia Capital do not approve the Agreement and the Plan of Merger at
a meeting called and held for the purpose of voting thereon.
(f) At any time following October 31, 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.
(g) At any time prior to the Effective Time, by BB&T in writing, if the
Board of Directors of Virginia Capital shall have withdrawn, modified, con-
ditioned or refused to make its recommendation to the shareholders of Vir-
ginia Capital that they vote to approve this Agreement and the Plan of
Merger.
(h) At any time prior to the Effective Time, by Virginia Capital in
writing, under the circumstances described in Section 2.7(b).
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
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relating to confidentiality and expenses set forth in Sections 5.7 and 8.1, re-
spectively, 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,
and no provision contained herein shall limit the ability of BB&T to exercise
its rights under the BB&T Option Agreement.
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 ex-
pire 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 (in-
cluding Sections 5.13 and 5.17); provided that no such representations, warran-
ties or covenants shall be deemed to be terminated or extinguished so as to de-
prive BB&T or Virginia Capital (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 share-
holder or former shareholder of either BB&T or Virginia Capital, the aforesaid
representations, warranties and covenants being material inducements to consum-
mation by BB&T and Virginia Capital 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 Virginia Capital 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 pur-
suant hereto or thereto, (ii) compliance with any of the covenants, undertak-
ings 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 Vir-
ginia Capital shareholders of this Agreement and the Plan of Merger, shall re-
duce 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 Virginia Capital, 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, accoun-
tants 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 Virginia Capital.
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 su-
persedes all arrangements or understandings with respect thereto, written or
oral, entered
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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 re-
spective successors, any rights, remedies, obligations or liabilities, except
for the rights of directors and officers of Virginia Capital to enforce rights
in Sections 5.13 and 5.17.
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 sufficient if delivered personally or sent by nation-
ally recognized overnight express courier or by facsimile transmission, ad-
dressed or directed as follows:
If to Virginia Capital:
Samuel C. Harding, Jr.
President
Virginia Capital Bancshares, Inc.
400 George Street
Fredericksburg, Virginia 22404
Telephone: 540-899-5500
Fax: 540-373-7012
With a required copy to:
Lori M. Beresford
Muldoon Murphy & Faucette LLP
5101 Wisconsin Avenue, N.W.
Washington, DC 20016
Telephone: 202-686-4917
Fax: 202-966-9409
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
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Any party may by notice change the address to which notice or other communi-
cations to it are to be delivered.
8.5 Specific Performance
Virginia Capital acknowledges that the Virginia Capital Common Stock and the
Virginia Capital business and assets are unique, and that if Virginia Capital
fails to consummate the transactions contemplated by this Agreement such fail-
ure 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 Virginia Capital shall, with-
out cause, refuse to consummate the transactions contemplated by this Agree-
ment.
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 and the Plan of Merger may be executed in any number of coun-
terparts, and each such counterpart shall be deemed to be an original instru-
ment, 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 autho-
rized officers, all as of the day and year first above written.
BB&T CORPORATION
By: /s/ John A. Allison IV
___________________________________
Name: John A. Allison IV
Title: Chairman and Chief
Executive Officer
VIRGINIA CAPITAL BANCSHARES, INC.
By: /s/ Samuel C. Harding, Jr.
___________________________________
Name: Samuel C. Harding, Jr.
Title: President
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ARTICLES OF MERGER
OF
VIRGINIA CAPITAL BANCSHARES, INC.
WITH
BB&T CORPORATION
The undersigned corporations, pursuant to Section 55-11-05 of the North Caro-
lina Business Corporation Act (the "NCBCA") and Section 13.1-720 of the Vir-
ginia Stock Corporation Act (the "VSCA"), hereby execute the following Articles
of Merger.
ONE
The merger of Virginia Capital Bancshares, Inc., a Virginia corporation
("Virginia Capital"), into BB&T Corporation, a North Carolina corporation
("BB&T"), shall be in accordance with the Agreement and Plan of Merger attached
hereto as Exhibit A and incorporated herein by reference (the "Plan of Merg-
er").
TWO
The Plan of Merger was submitted to the shareholders of Virginia Capital by
its Board of Directors in accordance with the provisions of Section 13.1-718 of
the VSCA and Section 55-11-03 of the NCBCA:
A. The Plan of Merger was approved by the Board of Directors of Vir-
ginia Capital on January 23, 2001 and recommended and submitted to the
holders of common stock of Virginia Capital, the only class of capital
stock outstanding, at a special meeting of shareholders called and held in
accordance with the VSCA, on , 2001. As of the record date of
that meeting, shares of Virginia Capital common stock were out-
standing, of which shares were entitled to vote. At that
meeting, undisputed shares were voted in favor of the Plan
of Merger, shares abstained, and shares were voted
against the Plan of Merger. This represented approval by % of the to-
tal Virginia Capital common stock issued and outstanding, sufficient for
approval by Virginia Capital shareholders.
B. Pursuant to Section 55-11-03(g) of the NCBCA, approval of the Plan
of Merger by shareholders of B&BT was not required.
THREE
The effective time and date of the Plan of Merger shall be 11:59 p.m. local
time on , 2001.
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The undersigned, on behalf of BB&T, declares that the facts herein stated are
true as of , 2001.
BB&T CORPORATION
By:
:
___________________________________
Name:
:
___________________________________
Title:
:
___________________________________
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Exhibit A
AGREEMENT AND PLAN OF MERGER
OF
VIRGINIA CAPITAL BANCSHARES, INC.
WITH
BB&T CORPORATION
Section 1. Corporations Proposing to Merge and Surviving Corporation. Vir-
ginia Capital Bancshares, Inc., a Virginia corporation ("Virginia Capital")
shall be merged (the "Merger") into BB&T Corporation, a North Carolina corpora-
tion ("BB&T"), pursuant to the terms and conditions of this Agreement and Plan
of Merger (the "Plan of Merger") and the Agreement and Plan of Reorganization,
dated as of January 23, 2001 (the "Agreement"), between Virginia Capital 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 Secretary of State of
North Carolina and with the Clerk of the State Corporation Commission of Vir-
ginia. BB&T shall continue as the surviving corporation (the "Surviving Corpo-
ration") in the Merger and the separate corporate existence of Virginia Capital
shall cease.
Section 2. Effects of the Merger. The Merger shall have the effects set forth
in Section 55-11-06 of the North Carolina Business Corporation Act (the
"NCBCA") and Section 13.1-721 of the Virginia Stock Corporation Act (the
"VSCA").
Section 3. Articles of Incorporation and Bylaws. The Articles of Incorpora-
tion 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.
(a) At the Effective Time, each share of common stock, par value $0.01
per share, of Virginia Capital ("Virginia Capital Common Stock") outstand-
ing immediately prior to the Effective Time shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into
and become the right to receive, upon surrender of the certificate repre-
senting such share of Virginia Capital Common Stock, shares of common
stock, par value $5.00 per share, of BB&T ("BB&T Common Stock"), and cash
in lieu of any fractional share interest, as described in Section 5.
(b) At the Effective Time, 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 Virginia Capital Common
Stock shall be deemed upon the Effective Time for all purposes to represent
only the right to receive the Merger Consideration (as defined in Section
5). No interest will be paid or accrued on the Merger Consideration upon
the surrender of the certificate or certificates representing shares of
Virginia Capital Common Stock. With respect to any certificate for Virginia
Capital 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 Virginia Capital Common Stock outstanding immedi-
ately prior to the Effective Time shall be made on the stock transfer books
of the Surviving Corporation.
A-38
(d) Promptly after the Effective Time, BB&T shall cause to be delivered
or mailed to each Virginia Capital shareholder a form of letter of trans-
mittal and instructions for use in effecting the surrender of the certifi-
cates that, immediately prior to the Effective Time, represented any shares
of Virginia Capital Common Stock. Upon surrender of such certificates or
other evidence of ownership meeting the requirements of Section 4(c), to-
gether with such letter of transmittal duly executed and completed in ac-
cordance 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 distribu-
tions with a record date prior to the Effective Time which have been de-
clared or made by Virginia Capital in respect of shares of Virginia Capital
Common Stock in accordance with the terms of the Agreement and which remain
unpaid at the Effective Time, subject to compliance by Virginia Capital
with Section 5.9(b) of the Agreement. To the extent permitted by law, for-
mer shareholders of record of Virginia Capital 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
Virginia Capital Common Stock are converted, regardless of whether such
holders have exchanged their certificates representing Virginia Capital
Common Stock for certificates representing BB&T Common Stock in accordance
with the provisions of the Agreement. Whenever a dividend or other distri-
bution 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 div-
idends 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 repre-
senting Virginia Capital 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 undeliv-
ered dividends and cash payments payable hereunder (without interest) shall
be delivered and paid with respect to the shares of Virginia Capital Common
Stock represented by such certificate.
Section 5. Merger Consideration. As used herein, the term "Merger Considera-
tion" shall mean the number of shares of BB&T Common Stock (to the nearest
one-hundredth of a share) to be exchanged for each share of Virginia Capital
Common Stock issued and outstanding as of the Effective Time, cash (without
interest) to be payable as provided in Section 5(b) and cash (without inter-
est) to be payable in exchange for any fractional share of BB&T Common Stock
which would otherwise be distributable to a Virginia Capital shareholder, de-
termined as follows:
(a) Except as provided in Section 5(b), the number of shares of BB&T
Common Stock to be issued for each issued and outstanding share of Virginia
Capital Common Stock (the "Exchange Ratio") shall be determined in accor-
dance with this Section 5(a). If the BB&T Average Price (as defined below)
is:
(1) equal to or greater than $37.31, the Exchange Ratio shall be .4958;
(2) less than $37.31 but greater than $30.53, the Exchange Ratio shall
be the result obtained by dividing $18.50 by the BB&T Average Price; or
(3) $30.53 or less, the Exchange Ratio shall be .6060.
The "BB&T Average Price" shall mean the average 4:00 p.m. eastern time closing
price per share of BB&T Common Stock on the NYSE for the ten trading days (de-
termined by excluding days on which the NYSE is closed) ending on the day pre-
ceding the date of the special meeting of the Virginia Capital shareholders to
vote on the merger.
A-39
(b) Notwithstanding the provisions of Section 5(a), in the event that
the value of the Merger Consideration, based on the Exchange Ratio deter-
mined under Section 5(a) and BB&T Average Price, is less than $16.53, Vir-
ginia Capital may terminate the Agreement unless, not later than the fifth
business day following the close of the period for determining the BB&T Av-
erage Price as provided in Section 5(a), BB&T shall have provided written
notice to Virginia Capital that it agrees, in its sole and absolute discre-
tion, to provide additional Merger Consideration in the form of cash, BB&T
Common Stock (valued at the BB&T Average Price) or a combination thereof in
an amount so that the value of the Merger Consideration shall equal $16.53.
(c) 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 4:00 p.m. eastern time closing price per share on the New
York Stock Exchange on the closing date, as reported on NYSEnet.com.
Section 6. Conversion of Stock Options. At the Effective Time, each option
to acquire shares of Virginia Capital Common Stock ("Stock Option") granted
under the Virginia Capital Bancshares, Inc. 1999 Stock Based Incentive Plan
(the "Stock Option Plan") then outstanding (and which by its terms does not
lapse on or before the Effective Time), whether or not then exercisable, shall
be converted into and become rights with respect to BB&T Common Stock, and
BB&T shall assume each such Stock Option in accordance with the terms of the
Stock Option Plan, except that from and after the Effective Time (i) BB&T and
its Compensation Committee shall be substituted for Virginia Capital and the
Committee of Virginia Capital's Board of Directors administering the Stock Op-
tion Plans, (ii) each Stock Option assumed by BB&T may be exercised solely for
shares of BB&T Common Stock, (iii) the number of shares of BB&T Common Stock
subject to each such Stock Option shall be the number of whole shares of BB&T
(omitting any fractional share) determined by multiplying the number of shares
of Virginia Capital Common Stock subject to such Stock Option immediately
prior to the Effective Time by the Exchange Ratio, and (iv) the per share ex-
ercise price under each such Stock Option shall be adjusted by dividing the
per share exercise price under each such Stock Option by the Exchange Ratio
and rounding up to the nearest cent. Notwithstanding the foregoing, BB&T may
at its election substitute as of the Effective Time options under the BB&T
Corporation 1995 Omnibus Stock Incentive Plan (the "BB&T Option Plan") for all
or a part of the Stock Options, subject to the following conditions: (A) the
requirements of (iii) and (iv) above shall be met; (B) such substitution shall
not constitute a modification, extension or renewal of any of the Stock Op-
tions 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. Each grant of a converted or substitute op-
tion to any individual who subsequent to the Merger will be a director or of-
ficer of BB&T as construed under Rule 16b-3 shall, as a condition to such con-
version or substitution, be approved in accordance with the provisions of Rule
16b-3. Each Stock Option which is an incentive stock option shall be adjusted
as required by Section 424 of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Regulations promulgated thereunder, so as to continue as
an incentive stock option under Section 424(a) of the Code, and so as not to
constitute a modification, extension, or renewal of the option within the
meaning of Section 424(h) of the Code. With respect to those individuals, if
any, who subsequent to the Merger may be subject to the reporting requirements
under Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), BB&T shall administer the Stock Option Plan (or the BB&T Op-
tion Plan, if applicable) in a manner that complies with Rule 16b-3 promul-
gated under the Exchange Act to the extent necessary to preserve for such in-
dividuals the benefits of Rule 16b-3 to the extent such benefits were avail-
able to them prior to the Effective Time.
A-40
Section 7. No Fractional Shares. Notwithstanding any other term or provision
hereof, no fraction of a share of BB&T Common Stock, and no certificates or
scrip therefor or other evidence of ownership thereof, will be issued in con-
nection with the conversion of Virginia Capital Common Stock in the Merger, and
no right to receive cash in lieu thereof shall entitle the holder thereof to
any voting or other rights of a holder of shares or fractional share interests
of the Surviving Corporation. In lieu of such fractional shares, any holder of
shares who would otherwise be entitled to fractional shares of BB&T Common
Stock will, upon receipt by the Surviving Corporation of the letter of trans-
mittal and other documents described in Section 2.8(d) of the Agreement, be
paid the cash value of each such fraction, computed in accordance with Section
5(c).
Section 8. Amendment. At any time before the Effective Time, this Plan of
Merger may be amended, provided that: (i) any such amendment is approved by the
Boards of Directors of Virginia Capital and BB&T; and (ii) no such amendment
made subsequent to the submission of this Plan of Merger to the shareholders of
Virginia Capital shall reduce either the Exchange Ratio or the payment terms
for fractional interests, or otherwise have any of the effects prohibited in
Section 13.1-718.I of the VSCA without the approval of the shareholders af-
fected thereby.
A-41
[FORM OF FAIRNESS OPINION]
Board of Directors
Virginia Capital Bancshares, Inc.
400 George Street
Fredericksburg, Virginia 22401
Members of the Board:
You have requested our opinion with respect to the fairness, from a financial
point of view, as of the date hereof, to the holders of the common stock, par
value of $0.01 per share ("Virginia Capital Common Stock"), of Virginia Capital
Bancshares, Inc. ("Virginia Capital"), of the Exchange Ratio, as set forth in
the Agreement and Plan of Reorganization dated as of January 23, 2001 (the
"Agreement"), between Virginia Capital and BB&T Corporation ("BB&T").
The Agreement provides for the merger (the "Merger") of Virginia Capital with
and into BB&T. Pursuant to the Agreement, at the Effective Time (as defined in
the Agreement) each outstanding share of Virginia Capital Common Stock will be
converted into the right to receive shares of common stock, par value of $5.00
per share, of BB&T ("BB&T Common Stock"), at a rate initially determined by di-
viding $18.50 per share by the closing price of the BB&T Common Stock on the
date immediately prior to the announcement of the proposed Merger (the "Ex-
change Ratio"). The Exchange Ratio is subject to upward adjustment in certain
events as provided in the Agreement. The terms and conditions of the Merger are
more fully set forth in the Agreement.
Trident Securities, a division of McDonald Investments Inc., as part of its
investment banking business, is customarily engaged in the valuation of busi-
nesses and their securities in connection with mergers and acquisitions, nego-
tiated underwritings, secondary distributions of listed and unlisted securi-
ties, private placements and valuations for estate, corporate and other purpos-
es.
We have acted as Virginia Capital's financial advisor in connection with, and
have participated in certain negotiations leading to, the Agreement. In connec-
tion with rendering our opinion set forth herein, we have among other things:
(i) Reviewed Virginia Capital's Annual Reports to Shareholders and An-
nual Reports on Form 10-K for each of the years ended December 31, 1999,
December 31, 1998 and December 31, 1997, including the audited financial
statements contained therein, and Virginia Capital's Quarterly Reports on
Form 10-Q for each of the quarters ended March 31, 2000, June 30, 2000 and
September 30, 2000;
(ii) Reviewed BB&T's Annual Reports to Shareholders and Annual Reports
on Form 10-K for each of the years ended December 31, 1999, December 31,
1998 and December 31, 1997, including the audited financial statements con-
tained therein, BB&T's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2000, June 30, 2000 and September 30, 2000 and BB&T's Cur-
rent Reports on Form 8-K dated April 28, 2000 and October 27, 2000, includ-
ing the restated audited financial statements contained therein;
(iii) Reviewed certain other information, primarily financial in nature,
relating to the respective businesses, earnings, assets and prospects of
Virginia Capital and BB&T provided to us or publicly available;
(iv) Participated in meetings and telephone conferences with members of
senior management of Virginia Capital and BB&T concerning the financial
condition, business, assets, financial forecasts and prospects of the re-
spective companies, as well as other matters we believed relevant to our
inquiry;
(v) Reviewed certain stock market information for Virginia Capital Com-
mon Stock and BB&T Common Stock, and compared it with similar information
for certain companies, the securities of which are publicly traded;
B-1
(vi) Compared the results of operations and financial condition of Vir-
ginia Capital and BB&T with that of certain companies which we deemed to be
relevant for purposes of this opinion;
(vii) Reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions which we deemed to be relevant for pur-
poses of this opinion;
(viii) Reviewed the Agreement and certain related documents; and
(ix) Performed such other reviews and analyses as we have deemed appro-
priate.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information reviewed by us and have relied upon the accuracy and completeness
of the representations, warranties and covenants of Virginia Capital and BB&T
contained in the Agreement. We have not been engaged to undertake, and have not
assumed any responsibility for, nor have we conducted, an independent investi-
gation or verification of such matters. We have not been engaged to and we have
not conducted a physical inspection of any of the assets, properties or facili-
ties of either Virginia Capital or BB&T, nor have we made or obtained or been
furnished with any independent valuation or appraisal of any such assets, prop-
erties or facilities or any of the liabilities of either Virginia Capital or
BB&T. With respect to financial forecasts used in our analysis, we have assumed
that such forecasts reflect the best currently available estimates and
judgements of the management of Virginia Capital and BB&T, as to the future
performance of Virginia Capital, BB&T, and Virginia Capital and BB&T combined,
as the case may be. We have not been engaged to and we have not assumed any re-
sponsibility for, nor have we conducted any independent investigation or veri-
fication of such matters, and we express no view as to such financial forecasts
or the assumptions on which they are based. We have also assumed that all of
the conditions to the consummation of the Merger, as set forth in the Agree-
ment, including the tax-free treatment of the Merger to the holders of Virginia
Capital Common Stock, would be satisfied and that the Merger would be consum-
mated on a timely basis in the manner contemplated by the Agreement.
We will receive a fee for our services as financial advisor to Virginia Capi-
tal and for rendering this opinion, a substantial portion of which is contin-
gent upon closing of the Merger. In the past, we have also provided certain
other investment banking services for Virginia Capital and BB&T and have re-
ceived compensation for such services.
In the ordinary course of business, we may actively trade securities of Vir-
ginia Capital and BB&T for our own account and for the accounts of customers
and, accordingly, we may at any time hold a long or short position in such se-
curities.
This opinion is based on economic and market conditions and other circum-
stances existing on, and information made available as of, the date hereof. In
addition, our opinion is, in any event, limited to the fairness, as of the date
hereof, from a financial point of view, of the Exchange Ratio to be received by
the holders of Virginia Capital Common Stock, and does not address the under-
lying business decision of Virginia Capital's Board of Directors to effect the
Merger, does not compare or discuss the relative merits of any other terms of
the Merger, and does not constitute a recommendation to any Virginia Capital
shareholder as to how such shareholder should vote with respect to the Merger.
This opinion does not represent an opinion as to what the value of Virginia
Capital Common Stock or BB&T Common Stock may be at the Effective Time of the
Merger or as to the prospects of Virginia Capital's business or BB&T's busi-
ness.
This opinion is directed to the Board of Directors of Virginia Capital and
may not be reproduced, summarized, described or referred to or given to any
other person without our prior consent. Notwithstanding the foregoing, this
opinion may be included in the proxy statement to be mailed to the holders of
Virginia Capital Common Stock in connection with the Merger, provided that this
opinion will be reproduced in such proxy statement in full, and any description
of or reference to us or our actions, or any summary of the opinion in such
proxy statement, will be in form reasonably acceptable to us and our counsel.
B-2
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of Virginia Capital Com-
mon Stock from a financial point of view.
Very truly yours,
TRIDENT SECURITIES
A Division of McDonald Investments
Inc.
B-3
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 suc-
cessful 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 of-
ficer is liable to the corporation or is adjudged liable on the basis that per-
sonal 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 indemnifica-
tion 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 ex-
penses 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 de-
pository institution holding companies to indemnify affiliated parties, includ-
ing institution directors. In general, subject to the ability to purchase di-
rectors and officers liability insurance and to advance professional expenses
under certain circumstances, the rules prohibit such institutions from indemni-
fying 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 af-
fairs 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)).
Item 21. Exhibits and Financial Statement Schedules
(a) The following documents are filed as exhibits to this registration state-
ment on Form S-4:
Exhibit No. Description
----------- -----------
2 Agreement and Plan of Reorganization dated as of January 23, 2001
between BB&T Corporation and Virginia Capital Bancshares, Inc.
(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)
II-1
Exhibit No. Description
----------- -----------
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 KPMG LLP*
23(e) Consent of Cherry, Bekaert & Holland, L.L.P.*
23(f) Consent of Trident Securities, a Division of McDonald Investments,
Inc.*
24 Power of Attorney
99(a) Form of Virginia Capital Bancshares, Inc. Proxy Card
99(b) Option Agreement dated as of January 23, 2001 between BB&T
Corporation and Virginia Capital Bancshares, Inc.
- --------
*to be filed by amendment
(b)Financial statement schedules: Not applicable.
(c)Reports, opinion or appraisals: The opinion Trident Securities, a division
of McDonald Investments, Inc., is included as Appendix B to the proxy
statement/prospectus.*
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 aggre-
gate, represent a fundamental change in the information set forth in
the registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration state-
ment.
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2. That, for the purpose of determining any liability under the Securi-
ties 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 termina-
tion of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of deter-
mining any liability under the Securities Act of 1933, each filing of the reg-
istrant's annual report pursuant to section 13(a) or section 15(d) of the Se-
curities Exchange Act of 1934 (and, where applicable, each filing of an em-
ployee benefit plan's annual report pursuant to section 15(d) of the Securi-
ties Exchange Act of 1934) that is incorporated by reference in the registra-
tion 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 infor-
mation called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the in-
formation called for by the other Items of the applicable form.
D. The registrant undertakes that every prospectus (i) that is filed pursu-
ant 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 regis-
trant has been advised that in the opinion of the Securities and Exchange Com-
mission such indemnification is against public policy as expressed in the Se-
curities 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 control-
ling 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 pre-
cedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Secu-
rities Act of 1933 and will be governed by the final adjudication of such is-
sue.
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 in-
cluded in the registration statement when it became effective.
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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 March 6, 2001.
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 March 6, 2001.
/s/ John A. Allison IV* /s/ Scott E. Reed*
_____________________________________ _____________________________________
Name: John A. Allison IV Name: Scott E. Reed
Title: Chairman of the Board and Title: Senior Executive Vice
Chief Executive Officer President and Chief Financial
(principal executive officer) Officer (principal financial
officer)
/s/ Sherry A. Kellett* /s/ Paul B. Barringer*
_____________________________________ _____________________________________
Name: Sherry A. Kellett Name: Paul B. Barringer
Title: Executive Vice President and Title: Director
Controller (principal
accounting officer)
/s/ Nelle Ratrie Chilton* /s/ Alfred E. Cleveland*
_____________________________________ _____________________________________
Name: Nelle Ratrie Chilton Name: Alfred E. Cleveland
Title: Director Title: Director
/s/ W. R. Cuthbertson, Jr.* /s/ Ronald E. Deal*
_____________________________________ _____________________________________
Name: W. R. Cuthbertson, Jr. Name: Ronald E. Deal
Title: Director Title: Director
/s/ A. J. Dooley, Sr.* /s/ Tom D. Efird*
_____________________________________ _____________________________________
Name: A. J. Dooley, Sr. Name: Tom D. Efird
Title: Director Title: Director
/s/ Paul S. Goldsmith* /s/ L. Vincent Hackley*
_____________________________________ _____________________________________
Name: Paul S. Goldsmith Name: L. Vincent Hackley
Title: Director Title: Director
/s/ Jane P. Helm* /s/ Richard Janeway, M.D.*
_____________________________________ _____________________________________
Name: Jane P. Helm Name: Richard Janeway, M.D.
Title: Director Title: Director
/s/ James H. Maynard*
_____________________________________ _____________________________________
Name: J. Ernest Lathem, M.D. Name: James H. Maynard
Title: Director Title: Director
II-4
/s/ Joseph A. McAleer, Jr.*
_____________________________________ _____________________________________
Name: Joseph A. McAleer, Jr. Name: Albert O. McCauley
Title: Director Title: Director
/s/ J. Holmes Morrison* /s/ Richard L. Player, Jr.*
_____________________________________ _____________________________________
Name: J. Holmes Morrison Name: Richard L. Player, Jr.
Title: Director Title: Director
/s/ C. Edward Pleasants*
_____________________________________ _____________________________________
Name: C. Edward Pleasants Name: Nido R. Qubein
Title: Director Title: Director
/s/ E. Rhone Sasser* /s/ Jack E. Shaw*
_____________________________________ _____________________________________
Name: E. Rhone Sasser Name: Jack E. Shaw
Title: Director Title: Director
/s/ Jerone C. Herring /s/ Harold B. Wells*
*By _________________________________ _____________________________________
Jerone C. Herring Name: Harold B. Wells
Attorney-in-Fact Title: Director
II-5