AGREEMENT AND PLAN OF REORGANIZATION
FIDELITY FINANCIAL BANKSHARES CORPORATION
and
SOUTHERN NATIONAL CORPORATION
ARTICLE I
DEFINITIONS...............................................................1
ARTICLE II
THE MERGER................................................................4
2.1 Merger...........................................................4
2.2 Filing; Plan of Merger...........................................5
2.3. Effective Time...................................................5
2.4 Closing..........................................................5
2.5 Effect of Merger.................................................5
2.6 Further Assurances...............................................6
2.7 Merger Consideration.............................................6
2.8 Conversion of Shares; Payment of Merger Consideration............7
2.9 Dissenting Shares................................................7
2.10 Conversion of Stock Options......................................8
2.11 Merger of Subsidiary.............................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FIDELITY................................9
3.1 Capital Structure................................................9
3.2 Organization, Standing and Authority.............................9
3.3 Ownership of Subsidiary........................................10
3.4 Organization, Standing and Authority of the Subsidiary..........10
3.5 Authorized and Effective Agreement..............................10
3.6 Securities and OTS Filings......................................11
3.7 Financial Statements; Minute Books..............................11
3.8 Material Adverse Change.........................................11
3.9 Absence of Undisclosed Liabilities..............................12
3.10 Properties......................................................12
3.11 Environmental Matters...........................................12
3.12 Allowance for Loan Losses.......................................13
3.13 Tax Matters.....................................................13
3.14 Employees; Compensation; Benefit Plans..........................14
3.15 Certain Contracts...............................................17
3.16 Legal Proceedings; Regulatory Approvals.........................17
3.17 Compliance with Laws............................................18
3.18 Brokers and Finders.............................................18
3.19 Insurance.......................................................18
3.20 Loans...........................................................19
3.23 Related Party Transactions......................................20
3.24 Vote Required...................................................20
3.25 Certain Information.............................................20
3.26 Pooling of Interests............................................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SNC...................................................................20
4.1 Capital Structure of SNC........................................21
4.2 Organization, Standing and Authority of SNC.....................21
4.3 Authorized and Effective Agreement..............................21
4.4 Organization, Standing and Authority of SNC Subsidiaries........22
4.5 Securities Documents............................................22
4.6 Financial Statements............................................22
4.7 Material Adverse Change.........................................22
4.8 Legal Proceedings; Regulatory Approvals.........................22
4.9 Absence of Undisclosed Liabilities..............................23
4.10 Allowance for Loan Losses.......................................23
4.11 Tax Matters.....................................................23
4.12 Compliance with Laws............................................24
4.13 Certain Information.............................................24
4.14 Pooling of Interests............................................24
ARTICLE V
COVENANTS................................................................24
5.1 Shareholders' Meeting...........................................24
5.2 Registration Statement; Proxy Statement.........................25
5.3 Plan of Merger; Reservation of Shares...........................25
5.4 Additional Acts.................................................26
5.5 Best Efforts....................................................26
5.6 Certain Accounting Matters......................................26
5.7 Access to Information...........................................26
5.8 Press Releases..................................................27
5.9 Forbearances of Fidelity........................................27
5.10 Employment Agreements...........................................29
5.11 Affiliates......................................................30
5.12 Employee Benefit Plans..........................................30
5.13 Fidelity Board of Directors.....................................30
5.14 Directors and Officers Protection...............................31
5.15 Forbearances of SNC.............................................31
ARTICLE VI
CONDITIONS PRECEDENT.....................................................32
6.1 Conditions Precedent -- SNC and Fidelity........................32
6.2 Conditions Precedent -- Fidelity................................33
6.3 Conditions Precedent -- SNC ....................................34
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT........................................35
7.1 Termination.....................................................35
7.2 Effect of Termination...........................................36
7.3 Survival of Representations, Warranties and Covenants...........36
7.4 Waiver..........................................................36
7.5 Amendment or Supplement.........................................37
ARTICLE VIII
MISCELLANEOUS............................................................37
8.1 Expenses........................................................37
8.2 Entire Agreement................................................37
8.3 No Assignment...................................................37
8.4 Notices.........................................................37
8.5 Captions........................................................38
8.6 Counterparts....................................................39
8.7 Governing Law...................................................39
4
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION ("Reorganization Agreement" or
"Agreement"), dated as of August 22, 1996, between FIDELITY FINANCIAL
BANKSHARES CORPORATION ("Fidelity"), a Virginia corporation having its principal
office at Richmond, Virginia, and SOUTHERN NATIONAL CORPORATION ("SNC"), a North
Carolina corporation having its principal office at Winston-Salem, North
Carolina;
R E C I T A L S:
The parties desire that Fidelity shall be merged with and into BB&T
Financial Corporation of Virginia ("BB&T Financial-Virginia") (said transaction
being hereinafter referred to as the "Merger") pursuant to a plan of merger (the
"Plan of Merger") substantially in the form set forth in Articles of Merger
attached as Annex A hereto ("Articles of Merger"), and the parties desire to
provide for certain undertakings, conditions, representations, warranties and
covenants in connection with the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
"Bank Holding Company Act" shall mean the Bank Holding Company Act of
1956, as amended.
"Business Day" shall mean all days other than Saturdays, Sundays and
Federal Reserve holidays.
"Closing Date" shall mean the date specified pursuant to Section 2.4 as
the date on which the parties hereto shall close the transactions contemplated
herein.
"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.
"Effective Time" shall mean the time specified in Section 2.3 as the
Effective Time of the Merger.
1
"Environmental Claim" means any written notice from any governmental
authority or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based upon, or resulting from
the presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" means all applicable federal, state and local laws
and regulations, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, that relate to pollution or
protection of human health or the environment.
"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.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
"Financial Statements" shall mean (a) with respect to SNC, (i) the
consolidated balance sheet (including related notes and schedules, if any) of
SNC as of December 31, 1995, and the related consolidated statements of income,
shareholders' equity and cash flows (including related notes and schedules, if
any) for the year ended December 31, 1995, as filed by SNC in Securities
Documents and (ii) the consolidated balance sheets of SNC (including related
notes and schedules, if any) and related statements of income, shareholders'
equity and cash flows (including related notes and schedules, if any) included
in Securities Documents filed by SNC with respect to periods ended subsequent to
December 31, 1995, and (b) with respect to Fidelity, (i) the consolidated
balance sheets (including related notes and schedules, if any) of Fidelity as of
December 31, 1995, 1994, and 1993, 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, 1995,
1994, and 1993 as filed by Fidelity either in OTS filings or, beginning in 1995,
in Securities Documents and (ii) the consolidated balance sheets of Fidelity
(including related notes and schedules, if any) and related statements of
income, changes in shareholders' equity and cash flows (including related notes
and schedules, if any) included in Securities Documents filed by Fidelity with
respect to periods ended subsequent to December 31, 1995.
"FIRREA" shall mean the Financial Institutions Reform, Recovery and
Enforcement Act of 1989.
2
"Material Adverse Effect" shall mean a material adverse effect on the
financial condition, results of operations, business or prospects of Fidelity or
of the Subsidiary or of SNC, as the case may be.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Option Agreement" shall mean the Option Agreement dated as of even
date herewith between Fidelity and SNC, which shall be executed immediately
following execution of this Reorganization Agreement.
"OTS" shall mean the Office of Thrift Supervision.
"Previously Disclosed" shall mean disclosed in (i) a Securities
Document delivered by one party to the other or (ii) a letter from one party to
the other party, in either case delivered not later than twenty days after the
execution of this Agreement (and, in the case of (ii), dated as of the date of
this Agreement).
"Proxy Statement/Prospectus" shall mean the proxy statement and
prospectus, together with any supplements thereto, sent to shareholders of
Fidelity to solicit their votes in connection with this Agreement and the Plan
of Merger.
"Registration Statement" shall mean the registration statement with
respect to the SNC Common Stock to be issued in the Merger as declared effective
by the Commission under the Securities Act.
"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, and stock
appreciation rights, performance units and similar stock-based rights whether or
not they obligate the issuer thereof to issue stock or other securities or to
pay cash.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, proxy statements,
registration statements and all similar documents filed, or required to be
filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939 as amended; and the rules and
regulations of the Commission and the OTS promulgated thereunder.
3
"SNC Common Stock" shall mean the shares of common stock, par value
$5.00 per share, of SNC.
"SNC Subsidiaries" shall mean Branch Banking and Trust Company, a North
Carolina chartered bank, Branch Banking and Trust Company of South Carolina, a
South Carolina chartered bank, Branch Banking and Trust Company of Virginia, a
Virginia chartered bank, and BB&T Financial Corporation of Virginia, a Virginia
chartered holding company.
"State Board" shall mean the Virginia State Corporatio Commission,
Bureau of Financial Institutions.
"Stock Option Plan" shall mean the Fidelity Financial Bankshares
Corporation 1986 Stock Option and Incentive Plan, and the Fidelity Financial
Bankshares Corporation 1994 Stock Option and Incentive Plan.
"Stock Option" shall mean any option granted under the Stock Option
Plan and unexercised on the date hereof, to acquire shares of Fidelity Common
Stock, aggregating 95,116 shares.
"Subsidiary" shall mean Fidelity Federal Savings Bank and its
subsidiary, Fidelity Service Corporation.
"TILA" shall mean the Truth in Lending Act, as amended.
"VASCA" shall mean the Virginia Stock Corporation Act as amended.
Other terms used herein are defined in the preamble and elsewhere in
this Agreement.
ARTICLE II
THE MERGER
2.1 Merger
BB&T Financial-Virginia and Fidelity are constituent corporations (the
"Constituent Corporations") to the Merger as contemplated by the VASCA. At the
Effective Time:
a. Fidelity shall be merged with and into BB&T Financial-Virginia in
accordance with the applicable provisions of the VASCA, with BB&T
Financial-Virginia being the surviving corporate entity (hereinafter sometimes
referred to as the "Surviving Corporation").
b. The separate existence of Fidelity shall cease and the Merger shall
in all respects have the effect provided for in Section 2.5.
4
c. The Articles of Incorporation of BB&T Financial-Virginia at the
Effective Time shall become the Articles of Incorporation of the Surviving
Corporation.
d. The Bylaws of BB&T Financial-Virginia at the Effective Time shall
become the Bylaws of the Surviving Corporation.
2.2 Filing; Plan of Merger
The Merger shall not become effective unless this Agreement and the
Plan of Merger are duly approved by shareholders holding the requisite number of
shares of Fidelity and a majority of the shares of BB&T Financial Virginia. Upon
fulfillment or waiver of the conditions specified in Article VI and provided
that this Agreement has not been terminated pursuant to Article VII, the
Constituent Corporations will cause the Articles of Merger to be executed and
filed with the State Corporation Commission of Virginia as provided in Section
13.1-720 of Article 12 of the VASCA. The Plan of Merger is incorporated herein
by reference, and adoption of this Agreement by the Boards of Directors of the
Constituent Corporations and approval by the shareholders of the Constituent
Corporations shall constitute adoption and approval of the Plan of Merger.
2.3. Effective Time
The Merger shall be effective at the day and hour specified in the
Articles of Merger filed with the State Corporation Commission of Virginia
(herein sometimes referred to as the "Effective Time").
2.4 Closing
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the executive offices of SNC, BB&T Financial
Center, 200 West Second Street, Winston- Salem, North Carolina, at 11:00 a.m. on
the Business Day designated by SNC which is within thirty days following the
satisfaction of the conditions to Closing set forth in Article VI, 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 Fidelity
shall cease, and the Surviving Corporation shall thereupon and thereafter, to
the extent consistent with its Articles of Incorporation, possess all the
rights, privileges, immunities, and franchises, of a public as well as of a
private nature, of each of the Constituent Corporations; and all property, real,
personal and mixed, and all debts due on whatever account, and all other choses
in action, and all and every other interest of or belonging to or due to each of
the Constituent Corporations shall be taken and deemed to be transferred to and
vested in the Surviving Corporation without further act or deed; and the title
to any real estate or any interest therein vested in either of the Constituent
Corporations shall not revert or be in any way impaired by reason of the Merger.
The Surviving Corporation shall thenceforth be responsible and liable for all
the liabilities, obligations and penalties of each of the Constituent
5
Corporations; and any claim existing or action or proceeding, civil or criminal,
pending by or against either of the Constituent Corporations may be prosecuted
as if the Merger had not taken place, or the Surviving Corporation may be
substituted in its place; and any judgment rendered against either of the
Constituent Corporations may be enforced against the Surviving Corporation.
Neither the rights of creditors nor any liens upon the property of either of the
Constituent Corporations shall be impaired by reason of the Merger.
2.6 Further Assurances
If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any further deeds, assignments or assurances
in law or any other actions are necessary, desirable or proper to vest, perfect
or confirm of record or otherwise, in the Surviving Corporation, the title to
any property or rights of the Constituent Corporations acquired or to be
acquired by reason of, or as a result of, the Merger, the Constituent
Corporations agree that such Constituent Corporations and their proper officers
and directors shall and will execute and deliver all such proper deeds,
assignments and assurances in law and do all things necessary, desirable or
proper to vest, perfect or confirm title to such property or rights in the
Surviving Corporation and otherwise to carry out the purpose of this Agreement,
and that the proper officers and directors of the Surviving Corporation are
fully authorized and directed in the name of the Constituent Corporations or
otherwise to take any and all such actions.
2.7 Merger Consideration
As used herein, the term "Merger Consideration" shall mean whole shares
of SNC Common Stock to be exchanged for shares of Fidelity Common Stock issued
and outstanding as of the Effective Time, and cash to be payable in exchange for
any fractional shares of SNC Common Stock which would otherwise be exchanged for
shares of Fidelity Common Stock. The number of shares of SNC Common Stock to be
issued in exchange for each issued and outstanding share of Fidelity Common
Stock shall be in the ratio (the "Exchange Ratio") of .7931 shares of SNC Common
Stock for each share of Fidelity Common Stock issued and outstanding, if the
closing value per share of the SNC Common Stock ("Closing Value") is $26.50 or
more but not more than $31.50. If the Closing Value is less than $26.50 but not
less than $24.00, the Exchange Ratio shall be determined by dividing $21.02 by
the Closing Value. If the Closing Value is more than $31.50 but not more than
$35.00, the Exchange Ratio shall be determined by dividing $24.98 by the Closing
Value. In the event that the Closing Value shall be less than $24.00, the
Exchange Ratio shall be .8758; and in the event the Closing Value shall be more
than $35.00, the Exchange Ratio shall be .7137. For this purpose, the Closing
Value shall mean the average price per share of the last trade, as reported on
the New York Stock Exchange, of SNC's Common Stock for the twenty trading days
(determined by excluding days on which the New York Stock Exchange is closed)
immediately preceding the fifth calendar day preceding the date of the Fidelity
shareholder meeting (the fifth day will be determined by counting the day
preceding such meeting as the first day).
6
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 Fidelity or the holders of record of Fidelity Common Stock
(the "Fidelity Shareholders"), each share of Fidelity Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted into and
shall represent the right to receive, upon surrender of the certificate
representing such share of Fidelity Common Stock (as provided in paragraph (d)
below), the Merger Consideration.
b. Each share of the common stock of BB&T Financial-Virginia 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 Fidelity Common Stock shall be
deemed upon the Effective Time for all purposes to represent only the right to
receive the Merger Consideration as described in this Section 2.8. No interest
will be paid or accrued on the Merger Consideration upon the surrender of the
certificate or certificates representing shares of Fidelity Common Stock. With
respect to any certificate for Fidelity Common Stock that has been lost or
destroyed, the Surviving Corporation shall pay the Merger Consideration
attributable to such certificate upon receipt of adequate indemnity and evidence
reasonably satisfactory to it of ownership of the shares represented thereby.
After the Effective Time, no transfer of the shares of Fidelity 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, SNC shall cause to be delivered
or mailed to each Fidelity 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 Fidelity
Common Stock in exchange for the Merger Consideration. Upon surrender of such
certificates, together with such letter of transmittal duly executed and
completed in accordance with the instructions thereto, and such other documents
as may be reasonably requested, SNC shall promptly cause the transfer to the
persons entitled thereto of the Merger Consideration.
2.9 Dissenting Shares
Any Fidelity Shareholder who shall have lawfully dissented from the
Merger in accordance with the VASCA and who has properly exercised such
Shareholder's rights to demand payment of the value of the Shareholder's shares
(the "Dissenting Shares") as provided in the VASCA (the "Dissenting
Shareholder") shall thereafter have only such rights, if any, as are provided a
dissenting shareholder in accordance with the VASCA and shall have no rights
under Sections 2.7 and 2.8; provided, however, that if a Dissenting Shareholder
shall withdraw (in accordance with the VASCA) the demand for such appraisal or
shall become ineligible for such appraisal, then such Dissenting Shareholder's
Dissenting Shares automatically shall cease to be Dissenting Shares and shall be
converted into and represent only the right to receive from the Surviving
Corporation the Merger
7
Consideration provided for in Section 2.7, without interest thereon, upon
surrender of the certificate representing the Dissenting Shares.
2.10 Conversion of Stock Options
a. At the Effective Time, each Stock Option then outstanding, whether
or not then exercisable, shall be converted into and become rights with respect
to SNC Common Stock, and SNC shall assume each Stock Option, in accordance with
the terms of the Stock Option Plan and stock option agreement, or other
agreement, by which it is evidenced, except that from and after the Effective
Time (i) SNC and its Compensation Committee shall be substituted for Fidelity
and the Committee of Fidelity's Board of Directors administering the Stock
Option Plan, (ii) each Stock Option assumed by SNC may be exercised solely for
shares of SNC Common Stock, (iii) the number of shares of SNC Common Stock
subject to such Stock Option shall be the number of whole shares of SNC
(omitting any fractional share) determined by multiplying the number of shares
of Fidelity Common Stock subject to such Stock Option immediately prior to the
Effective Time by the Exchange Ratio, and (iv) the per share exercise price
under each such Stock Option shall be adjusted by dividing the per share
exercise price under each such Stock Option by the Exchange Ratio and rounding
up to the nearest cent. In addition, notwithstanding the provisions of clauses
(iii) and (iv) of the first sentence of this Section 2.10(a), each Stock Option
which is an "incentive stock option" shall be adjusted as required by Section
424 of the Code, and the Regulations promulgated thereunder, so as to continue
as an incentive stock option under Section 424(a) of the Code, and so as not to
constitute a modification, extension, or renewal of the option, within the
meaning of Section 424(h) of the Code. SNC and Fidelity agree to take all
necessary steps to effectuate the foregoing provisions of this Section 2.10.
b. As soon as practicable after the Effective Time, SNC shall deliver
to the participants in the Stock Option Plan an appropriate notice setting forth
such participant's rights pursuant thereto, and the grants pursuant to such
Stock Option Plan shall continue in effect on the same terms and conditions
(subject to the adjustments required by Section 2.10(a) after giving effect to
the Merger). SNC shall comply with the terms of the Stock Option Plan to ensure,
to the extent required by and subject to the provisions of such Stock Option
Plan, that Stock Options which qualified as incentive stock options prior to the
Effective Time continue to qualify as incentive stock options after the
Effective Time. At or prior to the Effective Time, SNC shall take all corporate
action necessary to reserve for issuance sufficient shares of SNC Common Stock
for delivery upon exercise of Stock Options assumed by it in accordance with
this Section 2.10. Fidelity hereby represents that the Stock Option Plan in its
current form complies with Rule 16b-3.
c. Notwithstanding the foregoing provisions of this Section 2.10, SNC
may at its election substitute as of the Effective Time options under the
Southern National Corporation 1995 Omnibus Stock Incentive Plan (the "SNC Option
Plan") for all or a part of the Stock Options, subject to the following
conditions: (i) the requirements of Section 2.10(a)(iii) and (iv) shall be met;
(ii) such substitution shall not constitute a modification, extension or renewal
of any of the Stock Options which are incentive stock options; and (iii) the
substituted options shall continue in effect on the same
8
terms and conditions as the Stock Option Plan or other document granting the
Stock Option. As soon as practicable following the Effective Time, SNC shall
deliver to the participants receiving substitute options under the SNC Option
Plan an appropriate notice setting forth such participant's rights pursuant
thereto. SNC has reserved under the SNC Option Plan adequate shares of SNC
Common Stock for delivery upon exercise of any such substituted options. SNC
hereby represents that the SNC Option Plan in its current form complies with
Rule 16b-3, as in effect on the date hereof, promulgated under the Exchange Act.
2.11 Merger of Subsidiary
In the event that SNC shall request, Fidelity shall take such actions,
and shall cause the Subsidiary to take such actions, as may be required in order
to effect the merger at the Effective Time of the Subsidiary with and into
Branch Banking and Trust Company of Virginia.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FIDELITY
Fidelity represents and warrants to SNC and BB&T Financial-Virginia as
follows:
3.1 Capital Structure
The authorized capital stock of Fidelity consists of 4,000,000 shares
of common stock, par value $1.00 per share ("Fidelity Common Stock"), and
1,000,000 shares of preferred stock, par value $1.00 per share. As of the date
hereof, there were 2,291,681 shares of Fidelity Common Stock issued and
outstanding, and no other shares of capital stock, common or preferred, issued
and outstanding. All outstanding shares of Fidelity Common Stock have been duly
authorized and are validly issued, fully paid and nonassessable. No other
classes of capital stock of Fidelity are authorized. No shares of capital stock
have been reserved for any purpose, except for (i) 114,016 shares of Fidelity
Common Stock in connection with Fidelity's Stock Option Plan, and (ii) 456,044
shares of Fidelity Common Stock in connection with the Option Agreement. Except
as set forth herein, there are no Rights authorized, issued or outstanding with
respect to the capital stock of Fidelity. Holders of Fidelity Common Stock do
not have preemptive rights.
3.2 Organization, Standing and Authority
Fidelity is a Virginia corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Virginia with full
corporate power and authority to carry on its business as now conducted.
Fidelity is not required to be qualified to do business in any other state of
the United States or foreign jurisdiction. Fidelity is a registered savings and
loan holding company.
9
3.3 Ownership of Subsidiary
Except as Previously Disclosed, Fidelity does not own, directly or
indirectly, any outstanding capital stock or other voting securities or
ownership interests of any corporation, partnership, joint venture, or other
organization, except for the Subsidiary. The outstanding shares of capital stock
of the Subsidiary are validly issued and outstanding, fully paid and
nonassessable, and all such shares are directly or indirectly owned by Fidelity
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 of the Subsidiary, and there are no agreements, understandings or
commitments relating to the right of Fidelity to vote or to dispose of said
shares. None of the shares of capital stock of the Subsidiary have been issued
in violation of the preemptive rights of any person.
3.4 Organization, Standing and Authority of the Subsidiary
The Subsidiary is a federally chartered stock savings bank, with full
power and authority to carry on its business as now conducted, and is qualified
to do business in the Commonwealth of Virginia. The Subsidiary is not required
to be qualified to do business in any other state of the United States or
foreign jurisdiction, and is not engaged in any activities that have not been
Previously Disclosed.
3.5 Authorized and Effective Agreement
a. Fidelity has all requisite corporate power and authority to enter
into and (subject to receipt of all necessary governmental approvals and the
receipt of approval of shareholders of Fidelity of the Plan of Merger) to
perform all of its obligations under this Reorganization Agreement, the Articles
of Merger and the Option Agreement. The execution and delivery of this
Reorganization Agreement, the Articles of Merger and the Option Agreement and
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary corporate action in respect thereof,
except in the case of this Agreement and the Plan of Merger contained in the
Articles of Merger, the approval of Fidelity shareholders pursuant to and to the
extent required by applicable law. This Agreement, the Plan of Merger and the
Option Agreement constitute legal, valid and binding obligations of Fidelity,
and each is enforceable against Fidelity in accordance with its terms, in each
such case subject to (i) bankruptcy, fraudulent transfer, insolvency,
moratorium, reorganization, conservatorship, receivership, or other similar laws
from time to time in effect relating to or affecting the enforcement of rights
of creditors of FDIC insured institutions or the enforcement of creditors'
rights generally; (ii) general principles of equity, and except that the
availability of equitable remedies or injunctive relief is within the discretion
of the appropriate court.
b. Neither the execution and delivery of this Agreement, the Articles
of Merger and the Option Agreement, nor consummation of the transactions
contemplated hereby or thereby, nor compliance by Fidelity 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 by-laws of Fidelity or the
Subsidiary, (ii) constitute or result in a breach of any term, condition or
provision of, or constitute a default under,
10
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 Fidelity or the Subsidiary pursuant to, any note, bond,
mortgage, indenture, license, 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
Fidelity or the Subsidiary.
3.6 Securities and OTS Filings
Fidelity has made available to SNC a true and complete copy of (i) each
Securities Document filed by Fidelity with the Commission prior to the date
hereof, which are all of the Securities Documents that Fidelity was required to
file; and (ii) each Securities Document filed with the OTS after December 31,
1993, which are all of the OTS filings that Fidelity was required to file during
such period. As of their respective dates of filing, the Securities Documents
and OTS filings complied in all material respects with the Securities Laws and
OTS requirements, respectively, 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.
3.7 Financial Statements; Minute Books
The Financial Statements of Fidelity fairly present or will fairly
present, as the case may be, the consolidated financial position of Fidelity and
the Subsidiary as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity and statements of cash flows for the
periods then ended (subject, in the case of unaudited interim statements, to
normal year-end audit adjustments that are not material in amount or effect) in
conformity with generally accepted accounting principles applicable to financial
institutions applied on a consistent basis. The minute books of Fidelity and the
Subsidiary contain legally sufficient records of all meetings and other
corporate actions of its shareholders and Board of Directors (including
committees of its Board of Directors).
3.8 Material Adverse Change
Except as Previously Disclosed, since December 31, 1995, Fidelity and
the Subsidiary have not incurred any material liability or entered into any
transactions with affiliates (within the meaning of Rule 145 promulgated by the
Commission) other than in the ordinary course of business, nor has there been
any change, or any event involving a prospective change, in the business,
financial condition or results of operations of Fidelity or of the Subsidiary
which has had, or is reasonably likely to have, a Material Adverse Effect.
11
3.9 Absence of Undisclosed Liabilities
Neither Fidelity nor the Subsidiary has any liability (contingent or
otherwise) except as has been Previously Disclosed and except for liabilities
made in the ordinary course of its business consistent with past practices since
the date of Fidelity's most recent Financial Statements.
3.10 Properties
a. Fidelity and the Subsidiary have good and marketable title, free and
clear of all liens, encumbrances, charges, defaults or equitable interests, to
all of the properties and assets, real and personal, reflected on the
consolidated balance sheet included in the Financial Statements of Fidelity as
of December 31, 1995 or acquired after such date, except (i) liens for current
taxes not yet due and payable, (ii) pledges to secure deposits and other liens
incurred in the ordinary course of banking business, (iii) such imperfections of
title, easements and encumbrances, if any, as are not material in character,
amount or extent, or (iv) dispositions and encumbrances for adequate
consideration in the ordinary course of business.
b. All leases pursuant to which Fidelity or the Subsidiary, as lessee,
leases real or personal property, are valid and enforceable in accordance with
their respective terms.
3.11 Environmental Matters
a. Fidelity and the Subsidiary are in compliance with all Environmental
Laws. Neither Fidelity nor the Subsidiary has received any communication
alleging that Fidelity or the Subsidiary is not in such compliance, and there
are no present circumstances that would prevent or interfere with the
continuation of such compliance.
b. Fidelity has not received notice of any pending, and there are no
pending or, to the best of Fidelity's knowledge, threatened, legal,
administrative, arbitral or other proceedings, asserting Environmental Claims or
other claims, causes of action or governmental investigations of any nature,
seeking to impose, or that could result in the imposition of, any liability
arising under any Environmental Laws upon (i) Fidelity or the Subsidiary, (ii)
any person or entity whose liability for any Environmental Claim Fidelity or the
Subsidiary has or may have retained or assumed, either contractually or by
operation of law, (iii) any real or personal property owned or leased by
Fidelity or the Subsidiary, or any real or personal property which Fidelity or
the Subsidiary has or is judged to have managed or supervised or participated in
the management of, or (iv) any real or personal property in which Fidelity or
the Subsidiary holds a security interest securing a loan recorded on the books
of Fidelity or the Subsidiary. Neither Fidelity nor the 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 such
liability.
c. Fidelity and the Subsidiary are in compliance in all material
respects with all recommendations contained in any environmental audits,
analyses and surveys relating to all real and
12
personal property owned or leased by Fidelity or the Subsidiary and all real and
personal property which Fidelity or the Subsidiary has or is judged to have
managed or supervised or participated in the management of.
d. There are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim or other claim or action or governmental investigation that
could result in the imposition of any liability arising under any Environmental
Laws against Fidelity or the Subsidiary or against any person or entity whose
liability for any Environmental Claim Fidelity or the Subsidiary has or may have
retained or assumed, either contractually or by operation of law.
3.12 Allowance for Loan Losses
The allowance for loan losses reflected in the opinion of Fidelity's
Management and Directors on each of the consolidated balance sheets included in
the Financial Statements of Fidelity is adequate in all material respects as of
its date under the requirements of generally accepted accounting principles.
3.13 Tax Matters
a. Fidelity and the Subsidiary, and each of their predecessors, have
timely filed (or requests for extensions have been timely filed and any such
extensions have been granted and have not expired) all federal, state and local
(and, if applicable, foreign) tax returns required by applicable law to be filed
by them (including, without limitation, estimated tax returns, income tax
returns, information returns, and withholding and employment tax returns) and
have paid, or where payment is not required to have been made, have set up an
adequate reserve or accrual for the payment of, all taxes required to be paid in
respect of the periods covered by such returns and, as of the Effective Time,
will have paid, or where payment is not required to have been made, will have
set up an adequate reserve or accrual for the payment of, all taxes for any
subsequent periods ending on or prior to the Effective Time. Neither Fidelity
nor the Subsidiary will have any material liability for any such taxes in excess
of the amounts so paid or reserves or accruals so established.
b. All federal, state and local (and, if applicable, foreign) tax
returns filed by Fidelity and the Subsidiary are complete and accurate in all
material respects. Neither Fidelity nor the 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 Fidelity or the Subsidiary which have not
been settled and paid. There are currently no agreements in effect with respect
to Fidelity or the 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.
13
3.14 Employees; Compensation; Benefit Plans.
a. Compensation. Fidelity has Previously Disclosed a complete and
correct list of the name, age, position, rate of compensation and any incentive
compensation arrangements, bonuses or commissions or fringe or other benefits,
whether payable in cash or in kind, of each director, shareholder, independent
contractor, consultant and agent of Fidelity and of each Subsidiary and each
other person to whom Fidelity or any Subsidiary pay or provide, or have an
obligation, agreement (written or unwritten), policy or practice of paying or
providing, retirement, health, welfare or other benefits of any kind or
description whatsoever.
b. Employee Benefit Plans.
(i) Fidelity has Previously Disclosed an accurate and
complete list of all Plans, as defined below, contributed to,
maintained or sponsored by Fidelity or the Subsidiary, to
which Fidelity or the Subsidiary is obligated to contribute or
has any liability or potential liability, whether direct or
indirect, including all Plans contributed to, maintained or
sponsored by each member of the controlled group of
corporations, within the meaning of Sections 414(b), 414(c),
414(m) and 414(o) of the Code, of which Fidelity or the
Subsidiary is a member. For purposes of this Agreement, the
term "Plan" shall mean a plan, arrangement, agreement or
program described in the foregoing provisions of this Section
3.14(b)(i) and which is: (A) a profit-sharing, deferred
compensation, bonus, stock option, stock purchase, pension,
retainer, consulting, retirement, severance, welfare or
incentive plan, agreement or arrangement, whether or not
funded and whether or not terminated, (B) an employment
agreement, (C) a personnel policy or fringe benefit plan,
policy, program or arrangement providing for benefits or
perquisites to current or former employees, officers,
directors or agents, whether or not funded, and whether or not
terminated, including without limitation benefits relating to
automobiles, clubs, vacation, child care, parenting,
sabbatical, sick leave, severance, medical, dental,
hospitalization, life insurance and other types of insurance,
or (D) any other employee benefit plan as defined in Section
3(3) of ERISA, whether or not funded and whether or not
terminated.
(ii) Except as Previously Disclosed, neither Fidelity
nor the Subsidiary contributes to, has an obligation to
contribute to or otherwise has any liability or potential
liability with respect to (A) any multiemployer plan as
defined in Section 3(37) of ERISA, (B) any plan of the type
described in Sections 4063 and 4064 of ERISA or in section 413
of the Code (and regulations promulgated thereunder), or (C)
any plan which provides health, life insurance, accident or
other "welfare-type" benefits to current or future retirees
or former employees or directors, their spouses or dependents,
other than in accordance with Section 4980B of the Code or
applicable state continuation coverage law.
(iii) Except as Previously Disclosed, none of the
Plans obligates Fidelity or the Subsidiary to pay separation,
severance, termination or similar-type benefits solely as a
result of any transaction contemplated by this Agreement or
solely as a result of a "change in control," as such term is
used in Section 280G of the Code (and regulations promulgated
thereunder).
14
(iv) Each Plan has been maintained, funded and
administered in compliance in all respects with its own terms
and in compliance in all respects with all applicable laws and
regulations, including but not limited to ERISA and the Code.
No actions, suits, claims, complaints, charges, proceedings,
hearings, examinations, investigations, audits or demands with
respect to the Plans (other than routine claims for benefits)
are pending or threatened, and there are no facts which could
give rise to or be expected to give rise to any actions,
suits, claims, complaints, charges, proceedings, hearings,
examinations, investigations, audits or demands. No Plan that
is subject to the funding requirements of Section 412 of the
Code or Section 302 of ERISA has incurred any "accumulated
funding deficiency" as such term is defined in such Sections
of ERISA and the Code, whether or not waived, and each Plan
has always fully met the funding standards required under
Title I of ERISA and Section 412 of the Code. No liability to
the Pension Benefit Guaranty Corporation ("PBGC") (except for
routine payment of premiums) has been or is expected to be
incurred with respect to any Plan that is subject to Title IV
of ERISA, no reportable event (as such term is defined in
Section 4043 of ERISA) has occurred with respect to any such
Plan, and the PBGC has not commenced or threatened the
termination of any Plan. None of the assets of Fidelity or the
Subsidiary is the subject of any lien arising under Section
302(f) of ERISA or Section 412(n) of the Code, neither
Fidelity nor the 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 Fidelity or the Subsidiary to any tax under
Sections 4971, 4972, 4977 or 4979 of the Code or to a fine or
penalty under Section 502(c) of ERISA.
(v) Each Plan that is intended to be qualified under
Section 401(a) of the Code, and each trust (if any) forming a
part thereof, has received a favorable determination letter
from the Internal Revenue Service as to the qualification
under the Code of such Plan and the tax exempt status of such
related trust, and nothing has occurred since the date of such
determination letter that could adversely affect the
qualification of such Plan or the tax exempt status of such
related trust.
(vi) No underfunded "defined benefit plan" (as such
term is defined in Section 3(35) of ERISA) has been, during
the five years preceding the Closing Date, transferred out of
the controlled group of corporations (within the meaning of
Sections 414(b), (c), (m) and (o) of the Code) of which
Fidelity or the Subsidiary is a member or was a member during
such five-year period.
(vii) As of the Closing Date, the fair market value
of the assets of each Plan that is a defined benefit plan
equals or exceeds the present value of all vested and
non-vested liabilities thereunder determined in accordance
with applicable PBGC methods, factors and assumptions
applicable to a defined benefit plan terminating on such date.
With respect to each Plan that is subject to the funding
requirements of Section 412 of the Code and Section 302 of
ERISA, all required
15
or recommended 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 or recommended
payments, premiums, contributions, reimbursements or accruals
for all periods ending prior to or as of the Closing Date
shall have been made. No Plan has any material unfunded
liabilities.
(viii) No prohibited transaction (which shall mean
any transaction prohibited by Section 406 of ERISA and not
exempt under Section 408 of ERISA or Section 4975 of the Code,
whether by statutory, class or individual exemption) has
occurred with respect to any Plan which would result in the
imposition, directly or indirectly, of any excise tax, penalty
or other liability under Section 4975 of the Code or Section
409 or 502(i) of ERISA. Neither Fidelity, nor the Subsidiary,
nor any trustee, administrator or other fiduciary of any Plan
nor any agent of any of the foregoing has engaged in any
transaction or acted or failed to act in a manner which could
subject Fidelity or the Subsidiary to any material 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) Fidelity and the Subsidiary have been and are
presently in compliance with all of the requirements of
Section 4980B of the Code.
(xi) Neither Fidelity nor the Subsidiary has a
liability under any Plan that is not reflected on the
consolidated balance sheet included in the Financial
Statements of Fidelity as of December 31, 1995 or otherwise
Previously Disclosed.
(xii) The Board of Directors of Fidelity or the
Subsidiary, or a committee or officer authorized by such
Board, has the authority to amend or terminate the Plans at
any time without limitation, and neither the consideration or
implementation of the transactions contemplated under this
Agreement nor the amendment or termination of any or all of
the Plans on or after the date of this Agreement will increase
(A) Fidelity's or the 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).
(xiii) With respect to each Plan, Fidelity has
Previously Disclosed true, complete and correct copies of (A)
all documents pursuant to which the Plans are maintained,
funded and administered, including summary plan descriptions,
(B) the three most recent annual reports (Form 5500 series)
filed with the Internal Revenue Service (with attachments),
(C) the three most recent actuarial reports,
16
if any, (D) the three most recent financial statements, (E)
all governmental filings for the last three years, including
without limitation, excise tax returns and reportable events
filings, and (F) all governmental rulings, determinations, and
opinions (and pending requests for governmental rulings,
determinations, and opinions).
3.15 Certain Contracts
a. Except as Previously Disclosed, neither Fidelity nor the Subsidiary
is a party to, is bound or affected by, or receives benefits under (i) any
agreement, arrangement or commitment, the default of which would have a Material
Adverse Effect or would adversely affect the transactions contemplated herein,
whether or not made in the ordinary course of business (other than loans or loan
commitments or certificates or deposit made 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
relating to the borrowing of money by Fidelity or the Subsidiary or the
guarantee by Fidelity or the Subsidiary of any such obligation, which cannot be
terminated within less than 30 days after the Closing Date by Fidelity or the
Subsidiary (without payment of any penalty or cost), (iii) any agreement,
arrangement or commitment relating to the employment of a consultant or the
employment, election or retention in office of any present or former director or
officer, which cannot be terminated within less than 30 days after the Closing
Date by Fidelity or the Subsidiary (without payment of any penalty or cost), or
that provides benefits which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Fidelity of
the nature contemplated by this Agreement or the Option Agreement, (iv) any
contract, agreement or understanding with a labor union, in each case whether
written or oral, or (v) any agreement or plan, including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the 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 Option Agreement.
b. Neither Fidelity nor the Subsidiary is in default, which default
would have a Material Adverse Effect or would adversely affect the transactions
contemplated herein, under any agreement, commitment, arrangement, lease,
insurance policy, or other instrument, whether entered into in the ordinary
course of business or otherwise and whether written or oral, and there has not
occurred any event that, with the lapse of time or giving of notice or both,
would constitute such a default.
3.16 Legal Proceedings; Regulatory Approvals
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or threatened against Fidelity or the Subsidiary
or against any asset, interest, or right of Fidelity or the Subsidiary, or
against any officer, director or employee of any of them that in any such case,
if decided adversely, might have a Material Adverse Effect, and there is no
reasonable basis therefor. There are no actions, suits or proceedings
instituted, pending or threatened against any
17
present or former director or officer of Fidelity or the Subsidiary that might
give rise to a claim against Fidelity or the Subsidiary for indemnification, and
there is no reasonable basis for any such action, suit or proceeding. There are
no actual or threatened actions, suits or proceedings which present a claim to
restrain or prohibit the transactions contemplated herein, in the Plan of Merger
or the Option Agreement. No fact or condition relating to Fidelity or the
Subsidiary exists (including without limitation noncompliance with the CRA) that
would prevent Fidelity or SNC from obtaining all of the federal and state
regulatory approvals contemplated herein.
3.17 Compliance with Laws
Each of Fidelity and the Subsidiary is in compliance in all material
respects with all statutes and regulations (including, but not limited to, the
CRA, TILA and regulations promulgated thereunder, and other consumer banking
laws) applicable and material to the conduct of its business, and neither
Fidelity nor the Subsidiary has received notification that has not elapsed, been
withdrawn or abandoned by any agency or department of federal, state or local
government (i) asserting a violation or possible violation of any such statute
or regulation which violation would have a Material Adverse Effect, (ii)
threatening to revoke any license, franchise, permit or government
authorization, or (iii) restricting or in any way limiting its operations.
Neither Fidelity nor the Subsidiary is subject to any regulatory or supervisory
cease and desist order, agreement, directive, memorandum of understanding or
commitment, and neither of them has received any communication requesting that
it enter into any of the foregoing.
3.18 Brokers and Finders
Neither Fidelity nor the Subsidiary, nor any of their respective
officers, directors or employees, has employed any broker, finder or financial
advisor or incurred any liability for any fees or commissions in connection with
the transactions contemplated herein, in the Plan of Merger or in the Option
Agreement, except for fees to accountants and lawyers and an obligation to
Danielson Associates Inc. which has been Previously Disclosed for investment
banking services.
3.19 Insurance
Fidelity and the Subsidiary currently maintain insurance in the amounts
and for the coverages Previously Disclosed. Neither Fidelity nor the Subsidiary
has received any notice of a premium increase or cancellation or a failure to
renew with respect to any insurance policy or bond, and within the last three
years, neither Fidelity nor the Subsidiary has been refused any insurance
coverage sought or applied for. Neither Fidelity nor the Subsidiary has any
reason to believe that existing insurance coverage cannot be renewed as and when
the same shall expire, upon terms and conditions as favorable as those presently
in effect, other than possible increases in premiums or unavailability of
coverage that do not result from any extraordinary loss experience on the part
of Fidelity or the Subsidiary.
18
3.20 Loans
To the best of Fidelity's knowledge, with respect to each loan on the
books and records of the Subsidiary: (i) such loan is a valid loan; (ii) its
principal balance as shown on the books and records of the Subsidiary is true
and correct as of the last date shown thereon; (iii) all purported signatures on
and executions of any document in connection with such loan are genuine; (iv)
all related documentation has been signed or executed by all necessary parties;
(v) the Subsidiary has custody of all documents or microfilm records thereof
related to such loan (as such documents relate to the matters described in
clauses (i)-(iv) and (vi)-(vii) hereof); (vi) to the extent secured, such loan
has been secured by valid liens and security interests which have been
perfected; and (vii) such loan is the legal, valid and binding obligation of the
obligor named therein, subject to bankruptcy, insolvency, fraudulent conveyance
and other laws of general applicability relating to or affecting creditors'
rights and to general equity principles. All loans on the books and records of
the Subsidiary have been originated and administered in accordance with the
terms of the underlying notes related thereto. Neither the terms of such loans,
nor any of the loan documentation, nor the manner in which such loans have been
administered and serviced, violates in any material respect any federal, state
or local law, rule, regulation or ordinance applicable thereto, including
without limitation, the TILA, FIRREA Regulations O and Z of the Federal Reserve
Board, the CRA, the Equal Credit Opportunity Act, as amended, and state laws,
rules and regulations relating to consumer protection, installment sales and
usury.
3.21 Repurchase Agreements
With respect to all agreements currently outstanding pursuant to which
Fidelity or the Subsidiary has purchased securities subject to an agreement to
resell, Fidelity and the Subsidiary have a valid, perfected first lien or
security interest in the securities or other collateral securing such agreement,
and the value of such collateral equals or exceeds the amount of the debt
secured thereby. With respect to all agreements currently outstanding pursuant
to which Fidelity or the Subsidiary has sold securities subject to an agreement
to repurchase, Fidelity and the Subsidiary have not pledged collateral
materially in excess of the amount of the debt secured thereby. Neither Fidelity
nor the Subsidiary has pledged collateral materially in excess of the amount
required under any interest rate swap or other similar agreement currently
outstanding.
3.22 Deposit Accounts
The deposit accounts of the Subsidiary are insured by the Savings
Association Insurance Fund of the FDIC to the maximum extent permitted by
federal law, and the Subsidiary has paid all premiums and assessments and filed
all reports required to have been paid or filed under the FDIA.
19
3.23 Related Party Transactions
Fidelity has Previously Disclosed all transactions, investments and
loans, including loan guarantees, to which Fidelity or the Subsidiary is a party
with any director, executive officer or 5% shareholder of Fidelity or any
person, corporation, or enterprise controlling, controlled by or under common
control with any of the foregoing. Other than residential loans made prior to
FIRREA, all such transactions, investments and loans are on terms no less
favorable to Fidelity than could be obtained from unrelated parties.
3.24 Vote Required
The affirmative vote of the holders of a majority (assuming that at
least two-thirds of Fidelity's continuing directors approve this Agreement) of
the outstanding shares of Fidelity Common Stock is the only vote of the holders
of any class or series of Fidelity capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
3.25 Certain Information
When the Proxy Statement/Prospectus is mailed, and at the time of the
meeting of shareholders of Fidelity to vote upon the Plan of Merger, the Proxy
Statement/Prospectus and all amendments or supplements thereto, with respect to
all information set forth therein relating to Fidelity, (i) shall comply in all
material respects 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.
3.26 Pooling of Interests
Neither Fidelity nor the Subsidiary has taken any action which would or
might be expected to cause the business combination contemplated hereby
(including without limitation the anticipated merger of the Subsidiary into
Branch Banking and Trust Company of Virginia) not to be accounted for as a
pooling of interests or not to constitute a reorganization under Section 368 of
the Code.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SNC
SNC represents and warrants to Fidelity as follows:
20
4.1 Capital Structure of SNC
The authorized capital stock of SNC consists of (i) 5,000,000 shares of
preferred stock, par value $5.00 per share, of which no shares are issued and
outstanding, and (ii) 300,000,000 shares of SNC Common Stock, of which
103,430,150 shares were issued and outstanding on June 30, 1996. All outstanding
shares of SNC Common Stock have been duly authorized and are validly issued,
fully paid and nonassessable. The shares of SNC Common Stock reserved as
provided in Section 5.3(b) 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 SNC Common Stock do not have
preemptive rights.
4.2 Organization, Standing and Authority of SNC
SNC 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 is duly
qualified to do business in the states of the United States where its ownership
or leasing of property or the conduct of its business requires such
qualification and where failure to so qualify would have a material adverse
effect on the financial condition, results of operation, or business of SNC on a
consolidated basis. SNC is registered as a bank holding company under the Bank
Holding Company Act.
4.3 Authorized and Effective Agreement
a. SNC has all requisite corporate power and authority to enter into
and perform all of its obligations under this Agreement and the Option
Agreement. The execution and delivery of this Agreement and the Option Agreement
and consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action in respect thereof
on the part of SNC. This Agreement, including the Plan of Merger attached
hereto, and the Option Agreement constitute legal, valid and binding obligations
of SNC, and each is enforceable against SNC 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 of
FDIC-insured institutions or the enforcement of creditors' rights generally;
(ii) general principles of equity, and except that the availability of remedies
or injunctive relief is within the discretion of the appropriate court.
b. Neither the execution and delivery of this Agreement nor the Option
Agreement, nor consummation of the transactions contemplated hereby or thereby,
nor compliance by SNC 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 SNC, (ii) constitute or result in a breach of any
term, condition or provision of, or constitute a default under, or give rise to
any right of termination, cancellation or acceleration with respect to, or
result in the creation of any lien, charge or encumbrance upon any property or
asset of SNC pursuant to any note, bond, mortgage, indenture, license, agreement
or other instrument or obligation, which would have a material adverse effect on
the business, operations
21
or financial condition of SNC and the SNC Subsidiaries taken as a whole, or
(iii) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to SNC.
4.4 Organization, Standing and Authority of SNC Subsidiaries
Each of the SNC Subsidiaries is a duly organized corporation, validly
existing and in good standing under applicable laws. SNC owns, directly or
indirectly, all of the stock of each of the SNC Subsidiaries. Each of the SNC
Subsidiaries (i) has full power and authority to carry on its business as now
conducted and (ii) is duly qualified to do business in the states of the United
States and foreign jurisdictions where its ownership or leasing of property or
the conduct of its business requires such qualification and where failure to so
qualify would have a material adverse effect on the financial condition, results
of operations, business or prospects of SNC on a consolidated basis. BB&T
Financial-Virginia is registered as a bank holding company under the Bank
Holding Company Act and applicable Virginia law.
4.5 Securities Documents
SNC has timely filed all Securities Documents required by the
Securities Laws since December 31, 1993, and such Securities Documents complied
in all material respects with the Securities Laws as in effect at the times of
such filings.
4.6 Financial Statements
The Financial Statements of SNC fairly present or will fairly present,
as the case may be, the consolidated financial position of SNC and the SNC
Subsidiaries as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity and changes in cash flows for the
periods then ended in conformity with generally accepted accounting principles
applicable to financial institutions.
4.7 Material Adverse Change
SNC has not, on a consolidated basis, suffered any material adverse
change in its business, financial condition, results of operations or prospects
since December 31, 1995.
4.8 Legal Proceedings; Regulatory Approvals
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of SNC, threatened (or
unasserted but considered by SNC to be probable of assertion and which, if
asserted, would have at least a reasonable probability of an unfavorable
outcome) against SNC or the SNC Subsidiaries or against any asset, interest or
right of SNC or the SNC Subsidiaries, or against any officer, director or
employee of any of them that, if decided adversely, might reasonably be expected
to have a material adverse effect on the financial
22
condition, results of operations, business or prospects of SNC on a consolidated
basis. To the best knowledge of SNC, there are no actual or threatened actions,
suits or proceedings which present a claim to restrain or prohibit the
transactions contemplated herein or in the Plan of Merger. No fact or condition
(including but not limited to the failure to comply with the CRA) relating to
SNC or the SNC Subsidiaries known to SNC exists that would prevent SNC from
obtaining all of the federal and state regulatory approvals contemplated herein.
4.9 Absence of Undisclosed Liabilities
Neither SNC nor any of the SNC Subsidiaries has any liability
(contingent or otherwise) that is material to SNC on a consolidated basis or
that, when combined with all similar liabilities, would be material to SNC on a
consolidated basis, except as disclosed in the Financial Statements of SNC and
except for liabilities made in the ordinary course of its business since the
date of SNC's most recent Financial Statements.
4.10 Allowance for Loan Losses
The allowance for loan losses reflected on the consolidated balance
sheets included in the Financial Statements of SNC is or will be in the opinion
of SNC's management adequate in all material respects as of their respective
dates under the requirements of generally accepted accounting principles
applicable to banks and bank holding companies to provide for reasonably
anticipated losses on outstanding loans net of recoveries.
4.11 Tax Matters
a. SNC and each of its predecessors, has timely filed all federal,
state and local (and, if applicable, foreign) tax returns required by applicable
law to be filed by it (including, without limitation, estimated tax returns,
income tax returns, information returns, and withholding and employment tax
returns) and have paid, or have set up an adequate reserve or accrual for the
payment of, all taxes required to be paid as shown on 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.
SNC will not to SNC's knowledge have any material liability for any such taxes
in excess of the amounts so paid or reserves or accruals so established.
b. All federal, state and local (and, if applicable, foreign) tax
returns filed by SNC are complete and accurate in all material respects. SNC is
not delinquent in the payment of any tax, assessment or governmental charge, and
has not failed to file any tax return which is currently past due. No
deficiencies for any tax, assessment or governmental charge have been proposed,
asserted or assessed (tentatively or otherwise) against SNC which have not been
settled and paid. There currently are no agreements in effect with respect to
SNC to extend the period of limitations for the assessment or collection of any
tax.
23
4.12 Compliance with Laws
Each of SNC and the SNC Subsidiaries is in compliance with all statutes
and regulations (including, but not limited to, the CRA, TILA and regulations
promulgated thereunder and other consumer banking laws) applicable and material
to the conduct of its business (except for any violations not material to the
business, operations or financial condition of SNC and the SNC Subsidiaries
taken as a whole), and neither SNC nor any of the SNC Subsidiaries has received
notification that has not elapsed, been withdrawn or abandoned from any agency
or department of federal, state or local government (i) asserting a violation or
possible violation of any such statute or regulation, and which violations would
be likely to have a material adverse effect on the business, operations or
financial condition of SNC and the SNC Subsidiaries taken as a whole, (ii)
threatening to revoke any license, franchise, permit or government
authorization, or (iii) restricting or in any way limiting its operations.
Neither SNC nor any of the SNC Subsidiaries is subject to any regulatory or
supervisory cease and desist order, agreement, directive or memorandum of
understanding, and none of them has received any communication requesting that
they enter into any of the foregoing.
4.13 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 Fidelity 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 SNC, (i) shall comply in all material respects with
the applicable provisions of the Securities Laws, and (ii) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading.
4.14 Pooling of Interests
Neither SNC nor the SNC Subsidiaries have taken any action which would
or might be expected to cause the business combination contemplated hereby
(including without limitation the anticipated merger of the Subsidiary into
Branch Banking and Trust Company of Virginia) not to be accounted for as a
pooling of interests or not to constitute a reorganization under Section 368 of
the Code.
ARTICLE V
COVENANTS
5.1 Shareholders' Meeting
Fidelity shall submit this Reorganization Agreement and the Plan of
Merger to its shareholders for approval at a special meeting to be held as soon
as practicable, and by approving execution of this Agreement the Board of
Directors of Fidelity agrees that it shall unanimously recommend that the
shareholders vote for such approval; provided, that the Board of Directors of
Fidelity may withdraw
24
or refuse to make such recommendation if and only if, in good faith reliance on
written advice of its financial and legal advisors, the Board of Directors shall
determine that such recommendation would violate its fiduciary duty to
shareholders of Fidelity.
5.2 Registration Statement; Proxy Statement
SNC and Fidelity shall cooperate in the timely preparation and filing
of the Registration Statement with the Commission. Fidelity will furnish to SNC
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 SNC on the form of, and any characterizations of such information
included in, the Registration Statement prior to the filing with the Commission.
SNC shall use its best efforts to cause such Registration Statement to be
declared effective under the Securities Act. Such Registration Statement, at the
time it becomes effective and on the Effective Time, shall in all material
respects conform to the requirements of the Securities Act and the applicable
rules and regulations of the Commission. SNC shall take all actions required to
register or obtain exemptions from such registration for the SNC Common Stock to
be issued in connection with the transactions contemplated by this Agreement and
the Plan of Merger under applicable state "Blue Sky" securities laws, as
appropriate. The Registration Statement shall include the form of Proxy
Statement for the meeting of Fidelity's shareholders to be held for the purpose
of voting upon approval of this Agreement and the Plan of Merger. SNC and
Fidelity shall use their best efforts to cause the Proxy Statement to be
approved by the SEC for mailing to Fidelity's stockholders, and the Proxy
Statement shall, on the date of mailing and at the Effective Time, conform in
all material respects to the requirements of the Securities Laws and the
applicable rules and regulations of the SEC thereunder. Fidelity shall cause the
Proxy Statement to be mailed to its shareholders in accordance with all
applicable notice requirements under the Securities Laws and the VASCA.
5.3 Plan of Merger; Reservation of Shares
a. At the Effective Time, the Merger shall be effected in accordance
with the Plan of Merger substantially in the form attached hereto as Annex A. In
this connection, SNC undertakes and agrees (i) to cause BB&T Financial-Virginia
to adopt the Plan of Merger; (ii) to vote the shares of BB&T Financial-Virginia
common stock for approval of the Plan of Merger; and (iii) to pay or cause to be
paid when due the number of shares of SNC Common Stock to be distributed
pursuant to Section 2.7 and any cash required to be paid for fractional shares.
b. SNC has reserved for issuance such number of shares of SNC Common
Stock as shall be necessary to pay the consideration to be distributed to
Fidelity's stockholders as contemplated in Section 2.8. If at any time the
aggregate number of shares of SNC Common Stock available for issuance hereunder
shall not be sufficient to effect the Merger, SNC shall take all appropriate
action as may be required to increase the amount of the authorized SNC Common
Stock.
25
5.4 Additional Acts
a. Fidelity agrees to approve, execute and deliver any amendment to
this Agreement and the Plan of Merger and any additional plans and agreements
requested by SNC to modify the structure of, or to substitute parties to, the
transactions contemplated hereby, provided that such modifications do not
adversely affect the economic benefits of such transactions or otherwise
abrogate the covenants and other agreements contained in this Agreement.
b. As promptly as practicable after the date hereof, SNC and Fidelity
shall submit notice or applications for prior approval of the transactions
contemplated herein to the Federal Reserve Board, the OTS, 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. Fidelity and SNC each represents and
warrants to the other that all information concerning it and its directors,
officers and shareholders and concerning the Subsidiary included (or submitted
for inclusion) in any such application shall be true, correct and complete in
all material respects as of the date presented.
5.5 Best Efforts
SNC and Fidelity shall each use its best efforts in good faith, and
Fidelity shall cause the Subsidiary to use its best efforts in good faith, to
(i) furnish such information as may be required in connection with and otherwise
cooperate in the preparation and filing of the documents referred to in Sections
5.2 and 5.4 or elsewhere herein, and (ii) take or cause to be taken all action
necessary or desirable on its part to fulfill the conditions in Article VI and
to consummate the transactions herein contemplated at the earliest possible
date. Neither SNC nor Fidelity 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, provided that nothing herein contained shall preclude SNC from
exercising its rights under the Option Agreement.
5.6 Certain Accounting Matters
Fidelity shall cooperate with SNC concerning accounting and financial
matters necessary or appropriate to facilitate the Merger (taking into account
SNC's policies, practices and procedures), including without limitation issues
arising in connection with record keeping, loan classification, valuation
adjustments, levels of loan loss reserves and other accounting practices.
5.7 Access to Information
Fidelity will keep SNC advised of all material developments relevant to
its business and the business of the Subsidiary and to consummation of the
Merger, and SNC will advise Fidelity of any public disclosures by SNC of
material adverse changes in its financial condition or operations. Upon
reasonable notice, Fidelity and the Subsidiary shall afford to representatives
of SNC access, during normal business hours during the period prior to the
Effective Time, to all its properties, books,
26
contracts, commitments and records and, during such period, shall make available
to representatives of SNC all information concerning its business as SNC may
reasonably request. No investigation pursuant to this Section 5.7 shall affect
or be deemed to modify any representation or warranty made by, or the conditions
to the obligations hereunder of, either party hereto. Each party hereto shall,
and shall cause each of its directors, officers, attorneys and advisors to,
maintain the confidentiality of all information obtained hereunder which is not
otherwise publicly disclosed by the other party, said undertaking with respect
to confidentiality to survive any termination of this Agreement pursuant to
Section 7.1. In the event of the termination of this Agreement, each party shall
return to the other party upon request all confidential information previously
furnished in connection with the transactions contemplated by this Agreement.
5.8 Press Releases
SNC and Fidelity shall agree with each other as to the form and
substance of any press release related to this Agreement and the Plan of Merger
or the transactions contemplated hereby and thereby, and consult with each other
as to the form and substance of other public disclosures related thereto;
provided, that nothing contained herein shall prohibit either party, following
notification to the other party, from making any disclosure which in the opinion
of its counsel is required by law.
5.9 Forbearances of Fidelity
Except with the prior written consent of SNC, between the date hereof
and the Effective Time Fidelity shall not, and shall cause the Subsidiary not
to:
(a) carry on its business other than in the usual, regular and
ordinary course in substantially the same manner as heretofore
conducted, or establish or acquire any new subsidiary or cause or
permit the Subsidiary to engage in any new 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 dividends payable on record dates and in amounts consistent
with past practices;
(c) issue any shares of its capital stock, except pursuant to
the Stock Option Plan and the Option Agreement;
(d) issue, grant or authorize any Rights or effect any
recapitalization, reclassification, stock dividend, stock split or like
change in capitalization other than options to acquire 18,900 shares of
Fidelity Common Stock to be granted by Fidelity under the Stock Option
Plan;
(e) amend its articles of incorporation or bylaws; impose or
permit imposition, of any lien, charge or encumbrance on any share of
stock held by it in the Subsidiary, or permit
27
any such lien, charge or encumbrance to exist; or waive or release any
material right or cancel or compromise any debt or claim other than in
the ordinary course of business;
(f) merge with any other entity or permit any other entity to
merge into it, or consolidate with any other entity; acquire control
over any other entity; or liquidate, sell or otherwise dispose of any
assets or acquire any assets, other than in the ordinary course of its
business;
(g) fail to comply in any material respects with any laws,
regulations, ordinances or governmental actions applicable to it and to
the conduct of its business;
(h) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus to, or provide
any other employee benefit or incentive to, any of its directors,
officers or employees, except in the ordinary course of business
consistent with past practices, with it being understood that Fidelity
has customarily increased directors' fees and employees' salaries in
January of each year.
(i) enter into or substantially modify (except as may be
required by applicable law or regulation) any pension, retirement,
stock option, stock purchase, stock appreciation right, savings, profit
sharing, deferred compensation, consulting, bonus, group insurance or
other employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement related thereto, in respect of any
of its directors, officers or other employees; provided, that this
subparagraph shall not prevent renewals of any of the foregoing
consistent with past practice;
(j) solicit or encourage inquiries or proposals with respect
to, furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition or purchase of
all or a substantial portion of the assets of, or a substantial equity
interest in, Fidelity or the Subsidiary or any business combination
with Fidelity or the Subsidiary other than as contemplated by this
Agreement (except where the failure to furnish such information or
participate in such negotiations or discussions would, pursuant to a
written opinion of its legal counsel, constitute a breach of the
fiduciary or legal obligations of Fidelity's Board of Directors to its
shareholders); or authorize any officer, director, agent or affiliate
of Fidelity or the Subsidiary to do any of the above; or fail to notify
SNC immediately if any such inquiries or proposals are received, any
such information is requested or required, or any such negotiations or
discussions are sought to be initiated;
(k) enter into (i) any material agreement, arrangement or
commitment not made in the ordinary course of business, including,
without limitation, agreements or memoranda of understanding with
regulatory authorities, (ii) any agreement, indenture or other
instrument not made in the ordinary course of business relating to the
borrowing of money by Fidelity or the Subsidiary or guarantee by
Fidelity or the Subsidiary of any obligation, (iii) any agreement,
arrangement or commitment relating to the employment or severance of a
28
consultant or the employment, severance, election or retention in
office of any present or former director, officer or employee (this
clause shall not apply to the election of directors by shareholders in
the normal course, and the election of officers by directors in the
normal course terminable at will except to the extent otherwise
provided in an agreement, arrangement or commitment Previously
Disclosed); or (iv) any contract, agreement or understanding with a
labor union;
(1) change its lending, investment or asset liability
management policies in any material respect, except as may be required
by applicable law, regulation, or directives, and except that after
approval of the Plan of Merger by its shareholders Fidelity shall
cooperate in good faith with SNC to adopt policies, practices and
procedures consistent with those utilized by SNC, effective on or
before the Closing Date;
(m) change its methods of accounting in effect at December 31,
1995, except as required by changes in generally accepted accounting
principles concurred in by SNC's independent certified public
accountants, 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, 1995,
except as required by changes in law or regulation;
(n) incur any capital expenditures or obligation to make
capital expenditures in excess of $75,000 for any one expenditure or
$750,000 in the aggregate;
(o) incur any indebtedness other than acceptance of deposits,
advances from the Federal Home Loan Bank and reverse repurchase
arrangements, in each case in the ordinary course of business;
(p) take any action which would or might be expected to (i)
cause the business combination contemplated hereby not to be accounted
for as a pooling of interests or not to constitute a reorganization
under Section 368 of the Code, in either case as determined by SNC,
(ii) result in any representation or warranty herein to be untrue in
any material respect, or (iii) cause any of the conditions precedent to
the transactions contemplated by this Agreement to fail to be
satisfied;
(q) dispose of any material assets other than in the ordinary
course of business; or
(r) agree to do any of the foregoing.
5.10 Employment Agreements
SNC shall enter into employment agreements with those Fidelity
employees and on the terms substantially as agreed by SNC and Fidelity prior to
the date hereof.
29
5.11 Affiliates
Fidelity shall cause all persons who are "affiliates" of Fidelity,
within the meaning of Rule 145 promulgated by the Commission under the
Securities Act, to deliver to SNC prior to the Effective Time a written
agreement providing that such person will not dispose of SNC Common Stock
received in the Merger except in compliance with the Securities Act and the
rules and regulations promulgated thereunder and except as consistent with
qualifying the transactions contemplated hereby for pooling of interests
accounting treatment.
5.12 Employee Benefit Plans
a. Each employee of Fidelity or the Subsidiary at the Effective Time
(herein "Employee") shall become an employee immediately following the Effective
Time of BB&T Financial-Virginia or of its subsidiary, upon substantially the
same terms and conditions as in effect immediately preceding the Effective Time.
Each Employee shall be eligible to receive bonus or incentive, retirement,
severance, group hospitalization, medical, life, disability and other benefits
comparable to those provided to the present employees of Branch Banking & Trust
Company of Virginia without the imposition of any waiting period or limitation
for pre-existing conditions. For purposes of participating in all plans and
benefits of Branch Banking & Trust Company of Virginia, service to Fidelity and
the Subsidiary by each Employee shall be deemed to be service with Branch
Banking and Trust Company of Virginia for participation and vesting purposes
only. Branch Banking and Trust Company of Virginia will attempt, consistent with
achieving corporate goals, to avoid layoffs of Employees following the Effective
Time and to meet future efficiency goals through attrition and reassignment.
b. SNC shall cause the 401(k) plan of Fidelity to be merged with the
401(k) plan maintained by SNC and the SNC Subsidiary, and the account balances
of the Employees who are participants in the Fidelity plan shall be transferred
to the accounts of such Employees under the SNC 401(k) plan. Following such
merger and transfer, such accounts shall be governed and controlled by the terms
of the SNC 401(k) plan as in effect from time to time.
5.13 Fidelity Board of Directors
Following the Closing, the persons who were members of the Board of
Directors of Fidelity immediately preceding the Closing (the "Fidelity
Directors") shall be appointed by Branch Banking & Trust Company of Virginia as
members of its Board of Directors and as members of a Marketing and Development
Board for the Richmond region. For a period of three years following the
Closing, the Fidelity Directors shall receive for such services fees and
compensation at the same levels and under the same conditions as are received by
them as members of Fidelity's Board of Directors as of the Effective Time.
Following such three-year period, fees and compensation payable to the Fidelity
Directors who continue as members of the Board of Directors of Branch Banking &
Trust Company of Virginia shall be at the same level as paid by comparable SNC
Subsidiaries to members of their respective Boards of Directors. SNC shall cause
the Fidelity Directors to be reappointed to the
30
Board of Directors of Branch Banking & Trust Company of Virginia for periods
extending at least through the third anniversary of the Closing Date, subject in
each case to his or her eligibility and willingness to serve, and subject
further to the conditions with respect to each that he or she shall have
complied with all fiduciary duties to Branch Banking & Trust Company of
Virginia, shall not have been involved in any action that disqualifies him or
her from serving or which would bring discredit to Branch Banking & Trust
Company of Virginia or any other entity affiliated with SNC, and shall have
carried out his or her duties to Branch Banking & Trust Company of Virginia in a
reasonably competent, businesslike and attentive manner. In recognition of
proactive roles in assuring a smooth transaction during and following the
Merger, support for the ongoing success of Branch Banking & Trust Company of
Virginia in the Richmond region as well as throughout the Commonweath of
Virginia and providing general business consulting, each Fidelity Director who
becomes a member of the Board of Directors of Branch Banking & Trust Company of
Virginia as provided in this Section 5.13 shall receive options to purchase
2,000 shares of SNC Common Stock pursuant to the terms of the SNC Omnibus Stock
Option Plan (the "SNC Omnibus Plan"). Such options shall be granted immediately
following the Closing, shall be exercisable at fair market value per share on
the date of grant, and shall vest as follows: 667 shares each on the first and
second anniversaries of the Closing Date, and 666 shares on the third such
anniversary. If any Fidelity Director shall cease being a member of the Board of
Directors of Branch Banking & Trust Company of Virginia prior to the such third
anniversary, any options not so vested shall be forfeited except to the extent
otherwise provided in the SNC Omnibus Plan. Such options which have vested shall
be exercisable at any time during the ten-year period following the Closing
Date, subject to the terms of the Omnibus Plan relating to exercise following a
termination of service, and shall in all respects be governed by the provisions
of the SNC Omnibus Plan as in effect from time to time.
5.14 Directors and Officers Protection
a. Following the Effective Time, each director and officer of Fidelity
who is currently entitled to indemnification pursuant to Virginia law shall be
indemnified for acts or omissions prior to and following the Effective Time, in
accordance with Branch Banking and Trust Company of Virginia's bylaw provisions,
to the maximum extent permitted under Virginia law, and federal law if
applicable.
b. SNC or Branch Banking and Trust Company of Virginia agrees to
purchase and to keep in force directors' and officers' liability insurance to
provide coverage for actions or omissions by directors and officers of Fidelity
for claims made for the period prior to or commencing with and after the
Effective Date.
5.15 Forbearances of SNC
Except with the prior written consent of Fidelity, which consent shall
not be arbitrarily or unreasonably withheld, between the date hereof and the
Effective Time, neither SNC nor any SNC Subsidiary shall:
31
a. Exercise the Option Agreement other than in accordance with its
terms, or dispose of the shares of Fidelity Common Stock issuable upon exercise
of the option rights conferred thereby other than as permitted or contemplated
by the terms thereof; or
b. Enter into a merger or other business combination transaction with
any other corporation or person in which SNC would not be the surviving or
continuing entity after the consummation thereof; or
c. Sell or lease all or substantially all of the assets and business of
BB&T Financial- Virginia or Branch Banking and Trust Company or Virginia.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent -- SNC and Fidelity
The respective obligations of SNC and Fidelity to effect the
transactions contemplated by this Agreement shall be subject to satisfaction or
waiver of the following conditions at or prior to the Effective Time:
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Reorganization Agreement and the
Option Agreement 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 Fidelity of the
Merger;
(b) The Registration Statement (including any post-effective
amendments thereto) shall be effective under the Securities Act, and
SNC shall have received all state securities or "Blue Sky" permits or
other authorizations, or confirmations as to the availability of an
exemption from registration requirements as may be necessary, and no
proceedings shall be pending or to the knowledge of SNC threatened by
the Commission or any state "Blue Sky" securities administration to
suspend the effectiveness of such Registration Statement; and the SNC
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
Reorganization Agreement, all notice periods and waiting periods
required after the granting of any such approvals shall have passed,
and all such approvals shall be in effect;
(d) None of SNC, any of the SNC Subsidiaries, Fidelity or the
Subsidiary shall be subject to any order, decree or injunction of a
court or agency of competent jurisdiction
32
which enjoins or prohibits consummation of the transactions
contemplated by this Reorganization Agreement; and
(e) Fidelity and SNC shall have received an opinion of SNC's
legal counsel, in form and substance satisfactory to Fidelity and SNC,
substantially to the effect that the Merger (and, if appropriate, the
merger of the Subsidiary into Branch Banking and Trust Company of
Virginia) will constitute one or more reorganizations under Section 368
of the Code and that the shareholders of Fidelity will not recognize
any gain or loss to the extent that such shareholders exchange shares
of Fidelity Common Stock for shares of SNC Common Stock.
6.2 Conditions Precedent -- Fidelity
The obligations of Fidelity to effect the transactions contemplated by
this Agreement shall be subject to the satisfaction of the following additional
conditions at or prior to the Effective Time, unless waived by Fidelity pursuant
to Section 7.4:
a. The representations and warranties of SNC set forth in Article IV
shall be true and correct in all material respects 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 Reorganization Agreement or consented to in writing by Fidelity;
b. SNC shall have performed all obligations and complied with all
covenants required by this Agreement;
c. SNC shall have delivered to Fidelity 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), 6.2(a) and 6.2(b), to the extent applicable to SNC, have been
satisfied and that there are no actions, suits, claims, governmental
investigations or procedures instituted, pending or, to the best of such
officer's knowledge, threatened that reasonably may be expected to have a
material adverse effect on SNC or that present a claim to restrain or prohibit
the transactions contemplated herein or in the Plan of Merger;
d. Fidelity shall have received opinions of counsel to SNC in the form
reasonably acceptable to Fidelity's legal counsel;
e. All approvals of the transactions contemplated herein from the
Federal Reserve Board, the OTS, and any other state or federal government
agency, department or body, the approval of which is required for the
consummation of the Merger, shall have been received and all waiting periods
with respect to such approvals shall have expired; and
33
f. Fidelity shall not have reasonably determined in good faith that
there has been a material adverse change in the condition, operations or
prospects of SNC since December 31, 1995.
6.3 Conditions Precedent -- SNC
The obligations of SNC to effect the transactions contemplated by this
Agreement shall be subject to satisfaction of the following additional
conditions at or prior to the Effective Time, unless waived by SNC pursuant to
Section 7.4:
a. The representations and warranties of Fidelity set forth in Article
III shall be, true and correct in all material respects 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 SNC;
b. No regulatory approval shall have imposed any condition or
requirement which, in the reasonable opinion of the Board of Directors of SNC,
would so materially adversely affect the business or economic benefits to SNC of
the transactions contemplated by this Agreement as to render consummation of
such transactions inadvisable or unduly burdensome;
c. Fidelity shall have performed all obligations and complied with all
covenants required by this Agreement;
d. Fidelity shall have delivered to SNC 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 Fidelity, have been satisfied and that there are no
actions, suits, claims, governmental investigations or procedures instituted,
pending or, to the best of such officer's knowledge, threatened that reasonably
may be expected to have a Material Adverse Effect on Fidelity or that present a
claim to restrain or prohibit the transactions contemplated herein or in the
Plan of Merger;
e. SNC shall have received opinions of counsel to Fidelity in the form
reasonably acceptable to SNC's legal counsel;
f. SNC shall not have reasonably determined in good faith that there
has been a material adverse change in the condition, operations or prospects of
Fidelity since December 31, 1995;
g. SNC shall have received the written agreements from affiliates as
specified in Section 5.11;
h. SNC shall have determined that the transactions contemplated herein
qualify for accounting treatment as a pooling of interests; and
34
i. If dissenters' rights apply to this transaction, the holders of no
more than 9% of the Fidelity Common Stock shall have given written notice of
their intent to demand payment for their shares and shall not have voted for the
Merger, pursuant to Article 15 of the VASCA.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
a. at any time prior to the Effective Time, by the mutual consent in
writing of the parties hereto;
b. at any time prior to the Effective Time, by SNC in writing if
Fidelity has, or by Fidelity in writing if SNC has, in any material respect,
breached (i) any covenant, agreement or undertaking contained herein, in the
Plan of Merger, in the Option Agreement, or (ii) any representation or warranty
contained herein, and, in the case of (i) or (ii), if such breach has not been
cured by the earlier of 30 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 such party to
consummate the transactions contemplated hereby have not been satisfied or
fulfilled, and the party giving the notice is not in breach of any of its
representations, warranties, covenants or undertakings herein;
d. at any time, by either party hereto in writing, if any of the
applications for prior approval referred to in Section 5.4 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 Fidelity do not approve the transactions contemplated herein;
f. at any time following June 30, 1997, by either party hereto in
writing, if the Effective Time has not occurred by the close of business on such
date, and the party giving the notice is not in breach of any of its
representations, warranties, covenants or undertakings herein;
g. at any time prior to November 30, 1996 by SNC in writing, if SNC
determines in its sole good faith judgment, through the performance of its due
diligence or otherwise, that the financial condition, business or prospects of
Fidelity are materially adversely different from what was reasonably expected by
SNC; provided that SNC shall inform Fidelity upon such termination as to the
reasons for SNC's determination; and, provided further, that this Section 7.1(g)
shall not limit in
35
any way the due diligence investigation of Fidelity which SNC may perform or
otherwise affect any other rights which SNC has after the date hereof under the
terms of this Agreement; and
h. at any time prior to October 1, 1996, by SNC in writing, in the
event that SNC shall not be satisfied with any information Previously Disclosed
by Fidelity.
7.2 Effect of Termination
In the event this Agreement or the Plan of Merger is terminated
pursuant to Section 7.1, both this Agreement and the Plan of Merger shall become
void and have no effect, except that (i) the provisions hereof relating to
confidentiality and expenses set forth in Sections 5.7 and 8.1, respectively,
shall survive any such termination and (ii) a termination pursuant to Section
7.1(b) shall not relieve the breaching party from liability for an uncured
breach of the covenant or agreement giving rise to such termination.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or the
Plan of Merger or in any instrument delivered pursuant hereto or thereto shall
expire on, and be terminated and extinguished at, the Effective Time, other than
covenants that by their terms are to be performed after the Effective Time,
provided that no such representations, warranties or covenants shall be deemed
to be terminated or extinguished so as to deprive SNC or Fidelity (or any
director, officer or controlling person thereof) of any defense at law or in
equity which otherwise would be available against the claims of any person,
including, without limitation, any shareholder or former shareholder of either
SNC or Fidelity, the aforesaid representations, warranties and covenants being
material inducements to consummation by SNC and Fidelity 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 shareholders of Fidelity) extend the time for the performance of
any of the obligations or other acts of the other party hereto and may waive (i)
any inaccuracies of the other party in the representations or warranties
contained in this Agreement, the Plan of Merger or any document delivered
pursuant hereto or thereto, (ii) compliance with any of the covenants,
undertakings or agreements of the other party, or satisfaction of any of the
conditions precedent to its obligations, contained herein or in the Plan of
Merger, or (iii) the performance by the other party of any of its obligations
set out herein or therein; provided that no such extension or waiver, or
amendment or supplement pursuant to Section 7.5, executed after approval by the
shareholders of Fidelity of this Agreement and the Plan of Merger shall reduce
either the number of shares of SNC Common Stock into which each share of
Fidelity Common Stock shall be converted in the Merger or the payment terms for
fractional interests.
36
7.5 Amendment or Supplement
This Agreement and the Plan of Merger may be amended or supplemented at
any time in writing by mutual agreement of SNC and Fidelity, 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 Reorganization
Agreement, including fees and expenses of its own financial consultants,
accountants and counsel, except that SNC and Fidelity shall each pay fifty
percent of the cost of printing and mailing the Proxy Statement. Notwithstanding
the foregoing, SNC shall reimburse Fidelity for all of its reasonable
out-of-pocket expenses if this Agreement is terminated for any reason other than
a termination pursuant to Section 7.1(b).
8.2 Entire Agreement
This Agreement and the Option Agreement contain the entire agreement
between the parties with respect to the transactions contemplated hereunder and
thereunder and supersede all prior arrangements or understandings with respect
thereto, written or oral, other than documents referred to herein or therein.
The terms and conditions of this Agreement and the 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 Option Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto and thereto, and their respective successors, any rights,
remedies, obligations or liabilities.
8.3 No Assignment
Neither of the parties hereto may assign any of its rights or
obligations under this Reorganization Agreement to any other person, except upon
the prior written consent of the other party.
8.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
nationally recognized overnight express courier or by facsimile transmission,
addressed or directed as follows:
37
If to Fidelity:
Fidelity Financial Bankshares Corporation
2809 Emerywood Parkway, Suite 500
Richmond, Virginia 23294
Attention: Mr. Barry D. Crawford
Fax No.: 804-755-7814
With a required copy to:
Parker, Pollard & Brown, P.C.
5511 Staples Mill Road
Richmond, Virginia 23228
Attention: Mr. H. R. Pollard, IV
Fax No.: 804-262-3284
If to SNC:
Southern National Corporation
200 West Second Street
Winston-Salem, North Carolina 27101
Attention: Scott E. Reed
Fax No.: 910-773-0340
With a required copy to:
Womble Carlyle Sandridge & Rice
200 West Second Street
Winston-Salem, North Carolina 27101
Attention: Mr. William A. Davis, II
Fax No.: 910-733-8364
Any party may by notice change the address to which notice or other
communications to it are to be delivered.
8.5 Captions
The captions contained in this Agreement are for reference only and are
not part of this Agreement.
38
8.6 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.7 Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia applicable to agreements made and
entirely to be performed within such jurisdiction, except to the extent federal
law may be applicable.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed in counterparts by their duly
authorized officers, all as of the day and year first above written.
SOUTHERN NATIONAL CORPORATION
By /s/ JOHN A. ALLISON, IV
Title: Chairman and Chief Executive Officer
FIDELITY FINANCIAL BANKSHARES CORPORATION
By /s/ BARRY D. CRAWFORD
Title: President and Chief Executive Officer
39
ANNEX A
ARTICLES OF MERGER
OF
FIDELITY FINANCIAL BANKSHARES CORPORATION
WITH AND INTO
BB&T FINANCIAL CORPORATION OF VIRGINIA
The undersigned corporations, pursuant to Section 13.1-720 of the
Virginia Stock Corporation Act, hereby execute the following articles of merger.
ONE
The merger of Fidelity Financial Bankshares Corporation, a Virginia
corporation ("Fidelity"), with and into BB&T Financial Corporation of Virginia,
a Virginia corporation ("BB&T Financial-Virginia"), shall be in accordance with
the Plan of Merger attached hereto as Exhibit A (the "Plan of Merger").
TWO
The Plan of Merger was submitted to the shareholders of each of
Fidelity and BB&T Financial-Virginia by its Board of Directors in accordance
with the provisions of Section 13.1-718 of the Virginia Stock Corporation Act:
A. The number of outstanding shares of common stock, par value $1.00
per share, of Fidelity (the only voting group entitled to vote on the Plan of
Merger) entitled to be cast and number of undisputed votes cast for the Plan of
Merger were:
Outstanding Shares Undisputed Votes Cast for the Plan
------------- ----------------------
The number of undisputed votes cast for the Plan of Merger was
sufficient for approval of the Plan of Merger.
B. The Plan of Merger was adopted by unanimous consent of the
shareholders of BB&T Financial-Virginia.
THREE
The articles of merger shall become effective at ______ __.m. on
_________________, 199_.
1
The undersigned, [Title] of each of Fidelity and BB&T
Financial-Virginia declares that the facts herein stated are true as of
__________________, 199_.
FIDELITY FINANCIAL BANKSHARES CORPORATION
By:_________________________________________
Name:_______________________________________
Title:______________________________________
BB&T FINANCIAL CORPORATION OF VIRGINIA
By:_________________________________________
Name:_______________________________________
Title:______________________________________
2
Exhibit A
PLAN OF MERGER
OF
FIDELITY FINANCIAL BANKSHARES CORPORATION
WITH AND INTO
BB&T FINANCIAL CORPORATION OF VIRGINIA
Section 1. Corporations Proposing to Merge and Surviving Corporation.
Fidelity Financial Bankshares Corporation, a Virginia corporation ("Fidelity"),
shall be merged (the "Merger") with and into BB&T Financial Corporation of
Virginia, a Virginia corporation ("BB&T Financial-Virginia"), pursuant to the
terms and conditions of this Plan of Merger (the "Plan of Merger") and of the
Agreement and Plan of Reorganization, dated as of August __, 1996 (the
"Agreement"), by and between Fidelity and Southern National Corporation, a North
Carolina corporation and parent corporation of BB&T Financial-Virginia ("SNC").
The effective time for the Merger (the "Effective Time") shall be set forth in
the Articles of Merger to be filed with the Clerk of the State Corporation
Commission of Virginia. BB&T Financial-Virginia shall continue as the surviving
corporation (the "Surviving Corporation") in the Merger and the separate
corporate existence of Fidelity shall cease.
Section 2. Effects of the Merger. The Merger shall have the effects set
forth in Section 13.1-721 of the Virginia Stock Corporation Act (the "VSCA").
Section 3. Articles of Incorporation and Bylaws. The Articles of
Incorporation and the Bylaws of BB&T Financial-Virginia as in effect immediately
prior to the Effective Time shall remain in effect as the Articles of
Incorporation and Bylaws of the Surviving Corporation following the Effective
Time until changed in accordance with their terms and the VSCA.
Section 4. Conversion of Shares.
(a) At the Effective Time, each share of common stock, $1.00 par value
per share, of Fidelity ("Fidelity Common Stock") outstanding immediately prior
to the Effective Time, shall by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and become _____ shares of
common stock, $5.00 par value per share, of SNC ("SNC Common Stock").
(b) At the Effective Time, each share of the common stock of BB&T
Financial-Virginia issued and outstanding immediately prior to the Effective
Time shall continue to be issued and outstanding.
Section 5. No Right to Dissent. Pursuant to Section 13.1-730C of the
VSCA, holders of Fidelity Common Stock shall have no right to dissent from the
Merger.
Section 6. No Fractional Shares. Notwithstanding any other term or
provision hereof, no fraction of a share of SNC Common Stock, and no
certificates or script therefor or other evidence
1
of ownership thereof, will be issued in connection with the conversion of
Fidelity Common Stock in the Merger, and no right to receive cash in lieu
thereof shall entitle the holder hereof to any voting or other rights of a
holder of shares or fractional share interests of Fidelity. In lieu of such
fractional shares, any holder of shares who would otherwise be entitled to
fractional shares of SNC Common Stock will, upon surrender of his certificate or
certificates representing shares of Fidelity Common Stock outstanding
immediately prior to the Effective Time, be paid the cash value of each such
fraction, computed in accordance with the ratio set forth in Section 4(a) above.
Section 7. Amendment. At any time before the Effective Time, this
Plan of Merger may be amended, provided that: (i) any such amendment is
approved by the Board of Directors of Fidelity ; and (ii) no such amendment
made subsequent to the submission of this Plan of Merger to the shareholders
of Fidelity shall have any of the effects specified in Section 13.1-718.I of
the VSCA without the approval of the shareholders affected thereby.
2