THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN RESTRICTIONS CONTAINED HEREIN.
OPTION AGREEMENT
This OPTION AGREEMENT, dated as of the 22nd day of August, 1996,
between SOUTHERN NATIONAL CORPORATION ("SNC"), a North Carolina corporation, and
FIDELITY FINANCIAL BANKSHARES CORPORATION ("Fidelity"), a Virginia corporation;
R E C I T A L S:
The Boards of Directors of SNC and Fidelity have approved an Agreement
and Plan of Reorganization (the "Reorganization Agreement"), dated as of
August 22, 1996, between SNC and Fidelity, providing for the merger of
Fidelity into BB&T Financial-Virginia, a subsidiary of SNC (the "Merger"), which
Reorganization Agreement has been executed by the parties concurrently with this
Agreement. As a condition to SNC's execution of the Reorganization Agreement,
and in consideration thereof, Fidelity has agreed to grant to SNC the option set
forth herein.
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Definitions. Capitalized terms defined in the Reorganization
Agreement and used herein shall have the same meanings as in the Reorganization
Agreement.
2. Grant of Option. Fidelity hereby grants to SNC an option (the
"Option") to purchase up to 456,044 shares of authorized but unissued shares of
Fidelity Common Stock at a price of $13.00 per share (the "Exercise Price")
payable in cash as provided in Section 4; provided, however, that such number of
shares shall be reduced if and to the extent necessary so that the number of
shares for which this Option is exercisable shall not exceed 19.9% of the issued
and outstanding Fidelity Common Stock, as of the date hereof. The number of
shares of Fidelity Common Stock that may be received upon the exercise of the
Option is subject to adjustment as set forth herein.
3. Exercise of Option.
(a) Subject to compliance with applicable law and regulations, and
unless SNC shall have breached in any material respect and failed to cure any
covenant or representation in the Reorganization Agreement, SNC may exercise the
Option, in whole or in part, at any time or from time to time following the
occurrence of a Purchase Event (as defined below) and prior to the occurrence of
a Termination Event (as defined below).
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(b) (i) As used herein, "Purchase Event" shall mean when:
(A) Fidelity or the Subsidiary shall have authorized,
recommended, proposed or publicly announced an intention to authorize, recommend
or propose a transaction with a person (other than SNC or its affiliates) to, or
entered into an agreement with a person (other than SNC or its affiliates) to:
(a) effect a merger or consolidation with, or enter into any similar business
combination with, Fidelity or the Subsidiary, (b) sell, lease or otherwise
dispose of the assets of Fidelity to such person aggregating 10% or more of the
consolidated assets of Fidelity and the Subsidiary (other than a sale of loan
receivables in a financing transaction in the normal course of business
consistent with past practices), or (c) issue, sell or otherwise dispose of to
such person (including by way of merger, consolidation, share exchange or any
similar transaction) securities representing more than 10 percent of the voting
power of Fidelity or the Subsidiary; or
(B) any person other than SNC or any of its Subsidiaries shall
have acquired beneficial ownership of more than 10 percent of the outstanding
shares of Fidelity Common Stock; or any person shall have merged, consolidated
with or consummated a similar transaction with Fidelity or any person shall have
purchased, leased or otherwise acquired 10% of more of Fidelity's assets (other
than a sale of loan receivables in a financing transaction in the normal course
of business consistent with past practices); or
(C) a bona fide proposal is made by any person (other than SNC
or its Affiliates) by public announcement or written communication that is or
becomes the subject of public disclosure, or disclosure in an application to any
federal or state regulatory authority, to (a) acquire, merge or consolidate
with, or enter into any similar transaction with Fidelity, (b) purchase, lease
or otherwise acquire 10% or more of the assets of Fidelity (other than a sale of
loan receivables in a financing transaction), or (c) purchase or otherwise
acquire (including by way of tender offer, merger, consolidation, share
exchange, tender or exchange offer or any similar transaction) securities
representing more than 10 percent of the voting power of Fidelity;
(ii) The term "person" shall have the meaning specified in
Section 3(a)(9), and "beneficial ownership" shall have the meaning specified
under Section 13(d)(3), of the Exchange Act.
(c) Fidelity shall notify SNC promptly in writing of the
occurrence of any transaction, offer or event giving rise to a Purchase Event.
(d) In the event SNC wishes to exercise the Option, it shall
send to Fidelity a written notice (an "Exercise Notice," the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares SNC will purchase pursuant to such exercise, and (ii) a place and date
not earlier than three business days nor later than 20 business days from the
Notice Date for the closing of such purchase with respect to such exercise (the
"Option Closing Date"); provided that if the closing of the purchase and sale
pursuant to the Option cannot be consummated by reason of any applicable
judgment, decree, order, law or regulation, the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which
such restriction on
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consummation has expired or been terminated; and provided further, without
limiting the foregoing, if prior notification to, or approval of, any federal or
state regulatory agency is required in connection with such purchase, SNC, and
Fidelity if required by applicable law, shall promptly file the required notice
or application for approval and shall expeditiously process the same and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which the last required notification period has expired
or been terminated or such approvals have been obtained and any requisite
waiting periods shall have passed.
(e) The Option shall expire and terminate, to the extent not
previously exercised, upon the earliest of (a "Termination Event"):
(i) the Effective Time of the Merger; or
(ii) the termination of the Reorganization Agreement
without a Purchase Event having occurred, other than a termination based upon,
following, or in connection with, either (A) a willful and material breach by
Fidelity of any of its covenants or agreements in the Reorganization Agreement,
or (B) the failure of Fidelity to obtain shareholder approval of the
transactions contemplated by the Reorganization Agreement by the vote required
under applicable law; or
(iii) 18 months after the first occurrence of a
Purchase Event; or
(iv) 36 months after the date hereof.
(f) Notwithstanding the termination of the Option, SNC shall
be entitled to purchase any shares with respect to which it has exercised the
Option in accordance with the terms hereof prior to the termination of the
Option. The termination of the Option shall not affect any rights hereunder
which by their terms extend beyond the date of such termination.
4. Payment and Delivery of Certificates.
(a) On each Option Closing Date, SNC shall pay to Fidelity the
aggregate purchase price for the shares being purchased on that Option Closing
Date in immediately available funds by a wire transfer to a financial
institution designated by Fidelity.
(b) At each closing relating to an exercise of the Option,
simultaneously with the delivery of cash by SNC as provided in subsection (a)
with respect to the Option, Fidelity shall deliver to SNC a certificate or
certificates representing the number of shares of Fidelity purchased by SNC, and
SNC shall deliver to Fidelity a letter agreeing that SNC will not offer to sell
or otherwise dispose of such shares in violation of applicable law or the
provisions of this Option Agreement and providing such undertakings and
representations as necessary for the issuance and sale of such shares to be
exempt from registration under applicable securities laws.
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5. Representations. Fidelity hereby represents and warrants to, and
covenants with, SNC as follows:
(a) Fidelity has all requisite corporate power and authority
to enter into this Option Agreement and, subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Option Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Fidelity. This Option Agreement has been duly executed and
delivered by Fidelity and constitutes a valid and binding obligation of
Fidelity, enforceable in accordance with its terms.
(b) Fidelity has taken all necessary corporate action to
authorize and reserve for issuance the full number of shares of Fidelity Common
Stock issuable upon exercise of the Option, and shall continue to reserve such
shares until the Option is exercised or until this Agreement is terminated as
provided herein.
(c) The shares to be issued upon due exercise, in whole or in
part, of the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable and shall be delivered free and
clear of all liens, claims, charges and encumbrances of any kind or nature
whatsoever, including any preemptive rights of any shareholder of Fidelity, but
subject to restrictions on transfer imposed by applicable securities laws.
(d) The execution and delivery of this Option Agreement does
not, and the consummation of the transactions contemplated hereby will not,
conflict with or result in any violation of any provision of the Articles of
Incorporation or By-laws of Fidelity or the Subsidiary or, subject to obtaining
any approvals or consents contemplated hereby, result in any violation of any
loan or credit agreement, note, mortgage, indenture, lease, benefit plan or
other agreement, obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Fidelity or the Subsidiary or their respective properties or assets which
violation would, individually or in the aggregate, have a Material Adverse
Effect.
(e) The provisions of the Virginia Control Share Acquisition
Act do not and will not apply to this Option Agreement or the purchase of shares
of Fidelity Common Stock pursuant to this Option Agreement.
6. Adjustment upon Changes in Capitalization, etc. In the event of any
change in the outstanding Fidelity Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, exchanges of shares or the
like, the number of shares subject to the Option and its purchase price per
share shall be adjusted appropriately so that the Option will entitle the holder
thereof to acquire, at a price economically equivalent to the Exercise Price,
all of the shares or other securities, property, or rights to which ownership of
the underlying shares of Fidelity Common Stock would have entitled the holder
had they been outstanding immediately prior to such change. In the event that
any shares of Fidelity Common Stock are issued after the date of this Agreement
other than in a transaction described in the first sentence of this Section 6 or
pursuant to
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the exercise of the Option, the number of shares subject to the Option shall be
adjusted so that, immediately after such issuance, the number of shares subject
to the Option (together with the number of shares previously issued under the
Option) equals 19.9 percent (subject to reduction as provided in Section 2
hereof) of the number of the then-outstanding shares of Fidelity Common Stock.
Nothing contained in this Section 6 shall be deemed to authorize Fidelity to
breach any provision of the Reorganization Agreement or the Plan of Merger.
7. Registration Rights. Fidelity shall, if requested by SNC at any time
and from time to time within two years of the first exercise of the Option, as
expeditiously as possible, prepare and file a registration statement under the
Securities Act if such registration is necessary in order to permit the sale or
other disposition of any or all shares or securities that have been acquired by
or are issuable to SNC upon exercise of the Option in accordance with the
intended method of sale or other disposition stated by SNC, including a "shelf"
registration statement under Rule 415 under the Securities Act or any successor
provision. Fidelity shall use its best efforts to qualify such shares or other
securities under any applicable state securities laws, to cause such
registration statement to become effective, to obtain all consents or waivers of
other parties which are required therefor, and to keep such registration
statement effective for such period not in excess of 360 days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sale or other disposition. The obligations of Fidelity hereunder to
file a registration statement and to maintain its effectiveness may be suspended
for one or more periods of time not exceeding 60 days in the aggregate if the
Board of Directors of Fidelity shall have determined that the filing of such
registration statement or the maintenance of its effectiveness would require
disclosure of nonpublic information that would materially and adversely affect
Fidelity. Any registration statement prepared and filed under this Section 7,
and any sale covered thereby, shall be at Fidelity's expense except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of SNC's counsel related thereto. SNC shall provide all
information reasonably requested by Fidelity for inclusion in any registration
statement to be filed hereunder. If during the time periods referred to in the
first sentence of this Section 7 Fidelity effects a registration under the
Securities Act of Fidelity Common Stock for its own account or for any other
stockholders of Fidelity (other than on Form S-4 or Form S-8, or any successor
form), it shall allow SNC the right to participate in such registration, and
such participation shall not affect the obligation of Fidelity to effect two
registration statements for SNC under this Section 7; provided that, if the
managing underwriters of such offering advise Fidelity in writing that in their
opinion the number of shares of Fidelity Common Stock requested to be included
in such registration exceeds the number which can be sold in such offering,
Fidelity shall include the shares requested to be included therein by SNC only
to the maximum extent such managing underwriter determines to be feasible. In
connection with any registration pursuant to this Section 7, Fidelity and SNC
shall provide each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification and contribution in
connection with such registration.
8. Listing. If Fidelity Common Stock or any other securities to be
acquired upon exercise of the Option are then listed on The NASDAQ National
Market or any other national market or exchange, Fidelity, upon the request of
SNC, will promptly file an application to list the shares of
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Fidelity Common Stock or other securities to be acquired upon exercise of the
Option on The NASDAQ National Market or such other market or exchange and will
use its best efforts to obtain approval of such listing as soon as practicable.
9. Division of Option. This Option Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of SNC, upon
presentation and surrender of this Option Agreement at the principal office of
Fidelity for other Agreements providing for Options of different denominations
entitling the holder thereof to purchase in the aggregate the same number of
shares of Fidelity Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any other Agreements and related Options for
which this Agreement (and the Option granted hereby) may be exchanged. Upon
receipt by Fidelity of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Agreement, and (in the case of loss,
theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, Fidelity will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Fidelity, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable by anyone.
10. Severability. If any term, provision, covenant or restriction
contained in this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions contained in this Option Agreement shall remain in full force and
effect, and shall in no way be affected, impaired or invalidated. If for any
reason such court or regulatory agency determines that the Option will not
permit the holder to acquire the full number of shares of Fidelity Common
Stock provided in Section 2 hereof (as adjusted pursuant to Section 6
hereof), it is the express intention of Fidelity to allow the holder to acquire
such lesser number of shares as may be permissible, without any amendment or
modification hereof.
11. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) Entire Agreement. Except as otherwise expressly provided
herein, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors. Nothing
in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
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(c) Assignment. Neither of the parties hereto may assign any
of its rights or obligations under this Agreement to any other person, without
the express written consent of the other party, except that SNC may assign in
whole or in part the Option and other benefits and obligations hereunder without
limitation to any of its wholly owned subsidiaries and SNC may assign in whole
or in part the Option and other benefits and obligations hereunder without
limitation if a Purchase Event has occurred and SNC shall have delivered to
Fidelity a copy of a letter from the staff of the Commission, or an opinion of
counsel, in form and substance reasonably satisfactory to Fidelity, to the
effect that such Assignment will not violate the requirements of the Securities
Act; provided, that prior to any such assignment, SNC shall give written notice
of the proposed assignment to Fidelity, and within 24 hours of receipt of such
notice of a bona fide proposed assignment, Fidelity may purchase the Option at a
price and on other terms at least as favorable to SNC as that set forth in the
notice of assignment.
(d) 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 or by facsimile
transmission, addressed or directed as follows:
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: Mr. Scott E. Reed
Fax No.: 910-733-0340
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With a required copy to:
Womble Carlyle Sandridge & Rice
1600 BB&T Financial Center
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 or mailed.
(e) 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.
(f) Specific Performance. The parties agree that damages
would be an inadequate remedy for a breach of the provisions of this Agreement
by Fidelity and that this Agreement may be enforced by SNC through injunctive or
other equitable relief.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia without
regard to principles of conflicts of laws thereof.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first written above.
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
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