EXHIBIT 2
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
FIDELITY FINANCIAL BANKSHARES CORPORATION
AND
SOUTHERN NATIONAL CORPORATION
ARTICLE I
DEFINITIONS........................................................................................................... I-1
ARTICLE II
THE MERGER............................................................................................................ I-3
2.1 MERGER....................................................................................................... I-3
2.2 FILING; PLAN OF MERGER....................................................................................... I-3
2.3. EFFECTIVE TIME.............................................................................................. I-3
2.4 CLOSING...................................................................................................... I-3
2.5 EFFECT OF MERGER............................................................................................. I-3
2.6 FURTHER ASSURANCES........................................................................................... I-4
2.7 MERGER CONSIDERATION......................................................................................... I-4
2.8 CONVERSION OF SHARES; PAYMENT OF MERGER CONSIDERATION........................................................ I-4
2.9 DISSENTING SHARES............................................................................................ I-5
2.10 CONVERSION OF STOCK OPTIONS.................................................................................. I-5
2.11 MERGER OF SUBSIDIARY......................................................................................... I-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FIDELITY............................................................................ I-6
3.1 CAPITAL STRUCTURE............................................................................................ I-6
3.2 ORGANIZATION, STANDING AND AUTHORITY......................................................................... I-6
3.3 OWNERSHIP OF SUBSIDIARY...................................................................................... I-6
3.4 ORGANIZATION, STANDING AND AUTHORITY OF THE SUBSIDIARY....................................................... I-6
3.5 AUTHORIZED AND EFFECTIVE AGREEMENT........................................................................... I-6
3.6 SECURITIES AND OTS FILINGS................................................................................... I-7
3.7 FINANCIAL STATEMENTS; MINUTE BOOKS........................................................................... I-7
3.8 MATERIAL ADVERSE CHANGE...................................................................................... I-7
3.9 ABSENCE OF UNDISCLOSED LIABILITIES........................................................................... I-7
3.10 PROPERTIES................................................................................................... I-7
3.11 ENVIRONMENTAL MATTERS........................................................................................ I-8
3.12 ALLOWANCE FOR LOAN LOSSES.................................................................................... I-8
3.13 TAX MATTERS.................................................................................................. I-8
3.14 EMPLOYEES; COMPENSATION; BENEFIT PLANS....................................................................... I-8
3.15 CERTAIN CONTRACTS............................................................................................ I-10
3.16 LEGAL PROCEEDINGS; REGULATORY APPROVALS...................................................................... I-11
3.17 COMPLIANCE WITH LAWS......................................................................................... I-11
3.18 BROKERS AND FINDERS.......................................................................................... I-11
3.19 INSURANCE.................................................................................................... I-11
3.20 LOANS........................................................................................................ I-11
3.23 RELATED PARTY TRANSACTIONS................................................................................... I-12
3.24 VOTE REQUIRED................................................................................................ I-12
3.25 CERTAIN INFORMATION.......................................................................................... I-12
3.26 REORGANIZATION............................................................................................... I-12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SNC................................................................................. I-13
4.1 CAPITAL STRUCTURE OF SNC..................................................................................... I-13
4.2 ORGANIZATION, STANDING AND AUTHORITY OF SNC.................................................................. I-13
4.3 AUTHORIZED AND EFFECTIVE AGREEMENT........................................................................... I-13
4.4 ORGANIZATION, STANDING AND AUTHORITY OF SNC SUBSIDIARIES..................................................... I-13
4.5 SECURITIES DOCUMENTS......................................................................................... I-13
4.6 FINANCIAL STATEMENTS......................................................................................... I-14
4.7 MATERIAL ADVERSE CHANGE...................................................................................... I-14
4.8 LEGAL PROCEEDINGS; REGULATORY APPROVALS...................................................................... I-14
4.9 ABSENCE OF UNDISCLOSED LIABILITIES........................................................................... I-14
4.10 ALLOWANCE FOR LOAN LOSSES.................................................................................... I-14
4.11 TAX MATTERS.................................................................................................. I-14
4.12 COMPLIANCE WITH LAWS......................................................................................... I-14
4.13 CERTAIN INFORMATION.......................................................................................... I-15
4.14 REORGANIZATION............................................................................................... I-15
ARTICLE V
COVENANTS............................................................................................................. I-15
5.1 SHAREHOLDERS' MEETING........................................................................................ I-15
5.2 REGISTRATION STATEMENT; PROXY STATEMENT...................................................................... I-15
5.3 PLAN OF MERGER; RESERVATION OF SHARES........................................................................ I-15
5.4 ADDITIONAL ACTS.............................................................................................. I-16
5.5 BEST EFFORTS................................................................................................. I-16
5.6 CERTAIN ACCOUNTING MATTERS................................................................................... I-16
5.7 ACCESS TO INFORMATION........................................................................................ I-16
5.8 PRESS RELEASES............................................................................................... I-16
5.9 FORBEARANCES OF FIDELITY..................................................................................... I-17
5.10 EMPLOYMENT AGREEMENTS........................................................................................ I-18
5.11 AFFILIATES................................................................................................... I-18
5.12 EMPLOYEE BENEFIT PLANS....................................................................................... I-18
5.13 FIDELITY BOARD OF DIRECTORS.................................................................................. I-18
5.14 DIRECTORS AND OFFICERS PROTECTION............................................................................ I-19
5.15 FORBEARANCES OF SNC.......................................................................................... I-19
ARTICLE VI
CONDITIONS PRECEDENT.................................................................................................. I-20
6.1 CONDITIONS PRECEDENT -- SNC AND FIDELITY..................................................................... I-20
6.2 CONDITIONS PRECEDENT -- FIDELITY............................................................................. I-20
6.3 CONDITIONS PRECEDENT -- SNC.................................................................................. I-21
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT..................................................................................... I-21
7.1 TERMINATION.................................................................................................. I-21
7.2 EFFECT OF TERMINATION........................................................................................ I-22
7.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS........................................................ I-22
7.4 WAIVER....................................................................................................... I-22
7.5 AMENDMENT OR SUPPLEMENT...................................................................................... I-22
ARTICLE VIII
MISCELLANEOUS......................................................................................................... I-22
8.1 EXPENSES..................................................................................................... I-22
8.2 ENTIRE AGREEMENT............................................................................................. I-23
8.3 NO ASSIGNMENT................................................................................................ I-23
8.4 NOTICES...................................................................................................... I-23
8.5 CAPTIONS..................................................................................................... I-23
8.6 COUNTERPARTS................................................................................................. I-23
8.7 GOVERNING LAW................................................................................................ I-24
8.8 PREDECESSOR AGREEMENT........................................................................................ I-24
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
("Reorganization Agreement" or "Agreement"), dated as of December 17, 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;
RECITALS:
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.
"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
I-1
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.
"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.
"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 Corporation 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 August 22, 1996, 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.
I-2
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.
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
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.
I-3
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).
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.
I-4
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 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 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.
I-5
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 August 22, 1996,
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.
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.
I-6
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, 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.
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.
I-7
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 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.
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
I-8
(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).
(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
I-9
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 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, 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
I-10
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 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.
I-11
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.
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.
I-12
3.26 REORGANIZATION
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 constitute a reorganization
under Section 368 of the Code.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SNC
SNC represents and warrants to Fidelity as follows:
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 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
I-13
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 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
I-14
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.
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 REORGANIZATION
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 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 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
I-15
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.
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, 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
I-16
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 August 22, 1996 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 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
I-17
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
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;
l. 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 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.
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.
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 and
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 and 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
I-18
Company of Virginia will attempt,
consistent with achieving corporate goals, to avoid lay-offs 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, SNC shall cause the persons who were members of the
Board of Directors of Fidelity and of Fidelity Federal Savings Bank ("FFSB")
immediately preceding the Closing (the "Fidelity Directors") to continue to
serve as members of the Board of Directors of FFSB and as members of a
Marketing and Development Board for the Richmond region. SNC shall cause the
Fidelity Directors to be reappointed to the Board of Directors of FFSB (and,
following the Merger described in Section 2.11, of Branch Banking and Trust
Company of Virginia ("BB&T-VA")) 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 FFSB and BB&T-VA, shall not have been involved in any action that
disqualifies him or her from serving or which would bring discredit to FFSB or
BB&T-VA or any other entity affiliated with SNC, and shall have carried out
his or her duties to FFSB and BB&T-VA in a reasonably competent, businesslike
and attentive manner. 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 BB&T-VA shall
be at the same level as paid by comparable SNC Subsidiaries to members of
their respective Boards of Directors. In recognition of proactive roles in
assuring a smooth transaction during and following the Merger, support for the
ongoing success of FFSB and BB&T-VA in the Richmond region as well as
throughout the Commonwealth of Virginia, and providing general business
consulting, each Fidelity Director who does not become an employee of SNC or any
of the SNC Subsidiaries, and who becomes a member of the Board of Directors of
FFSB 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 FFSB or BB&T-VA prior to the such third anniversary, any options
not so vested at the time he shall cease being a director 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. In addition to the foregoing, SNC shall cause Richard J. November, H. R.
Pollard, IV, Robert G. Watts and Barry D. Crawford, being Fidelity Directors, to
be appointed by BB&T Financial-Virginia to its Board of Directors as soon as
practicable following the Closing, subject in each case to his eligibility and
willingness to serve. Reappointments shall be subject to the same conditions as
provided hereinabove for reappointment to the Board of Directors of FFSB or
BB&T-VA.
5.14 DIRECTORS AND OFFICERS PROTECTION
a. Following the Effective Time, each director and officer of Fidelity and
the Subsidiary 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 and the
Subsidiary 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 August 22, 1996 and the
Effective Time, neither SNC nor any SNC Subsidiary shall:
I-19
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 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
I-20
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
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; and
h. 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;
I-21
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 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.
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.
I-22
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:
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
I-23
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.
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.
8.8 PREDECESSOR AGREEMENT
This Agreement amends and supersedes in its entirety the Agreement and Plan
of Reorganization (the "Predecessor Agreement") between the parties dated as of
August 22, 1996, and the Predecessor Agreement shall have no further force and
effect from and after the date hereof.
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
I-24
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 .
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: