As filed with the Securities and Exchange Commission on August 31, 1994
Registration No. 33-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
BB&T FINANCIAL CORPORATION
(Exact name of registrant as specified in charter)
================================================================================
North Carolina 6711 56-1056232
(state or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
================================================================================
223 West Nash Street
Wilson, North Carolina 27893
(919) 399-4291
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Scott E. Reed
Senior Executive Vice President,
Treasurer, and Chief Financial Officer
BB&T Financial Corporation
223 West Nash Street
Wilson, North Carolina 27893
(919) 399-4418
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Barbara E. Mathews, Esq. George Whitley, Esq.
Arnold & Porter LeClair, Ryan, Joynes, Epps
777 South Figueroa Street & Framme
Suite 4000 707 E. Main Street, 11th Floor
Los Angeles, CA 90017-2513 Richmond, VA 23219
(213) 243-4153 (804) 343-4089
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of the Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box [ ]
===================================================================================================
CALCULATION OF REGISTRATION FEE
===================================================================================================
Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be offering price per aggregate offering Amount of
registered registered/*/ unit price registration fee
- ---------------------------------------------------------------------------------------------------
Common Stock
($2.50 Par Value) 4,517,862 Not Applicable $29.875/**/ $46,542/***/
===================================================================================================
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
- ------------------
/*/ The estimated maximum number of shares to be issued.
/**/ Estimated solely for the purpose of computing the registration fee.
Computed in accordance with Rule 457(f)(1) based upon 2,732,523 shares of
Commerce Common Stock outstanding as of August 29, 1994; 266,545 shares of
Commerce Common Stock issuable upon the exercise of options outstanding as of
August 29, 1994, 200,000 shares of Commerce Common Stock issuable pursuant to
the Commerce Bank Dividend Reinvestment and Stock Purchase Plan and 262,895
shares of Commerce Common Stock issuable upon conversion of Commerce's 10%
Convertible Subordinated Capital Notes due August 31, 2002; a market value of
Commerce Common Stock as of August 26, 1994 of $29.875 per share; and an
Exchange Ratio of 1.305.
/***/ 1/29 of 1% of the proposed maximum aggregate offering price.
BB&T FINANCIAL CORPORATION
Cross Reference Sheet Pursuant to Item 501(b) of Regulation S-K
Heading in Proxy
Item of Form S-4 Statement/Prospectus
---------------- --------------------
1. Forepart of Registration Cover Page of Registration Statement;
Statement and Outside Front Cross-Reference Sheet; Outside Front Cover Page
Cover Page of Prospectus of Proxy Statement/Prospectus
2. Inside Front and Outside Available Information; Incorporation of Certain
Back Cover Pages of Documents by Reference; Table of Contents
Prospectus
3. Risk Factors, Ratio of Summary; Information Concerning the Special
Earnings to Fixed Charges Meeting; The Acquisition; Information About
and Other Commerce; Selected Financial Data; Selected
Consolidated Financial and Other Data of
Commerce; Ownership of Commerce Common Stock by
Certain Beneficial Owners and Management;
Market Prices and Dividends
4. Terms of Transaction Summary; The Acquisition; Description of BB&T
Financial Common Stock to be Issued in the
Acquisition and Comparison of Stockholders'
Rights
5. Pro Forma Financial Pro Forma Combined Condensed Financial
Information Statements
6. Material Contracts with Summary; The Acquisition--Background of and
the Company Being Acquired Reasons for the Acquisition Agreement
7. Additional Information Not Applicable
Required for Reoffering by
Persons and Parties Deemed
to be Underwriters
8. Interests of Named Experts; Opinions
Experts and Counsel
9. Disclosure of Commission Not Applicable
Position on Indemnification
for Securities Act
Liabilities
10. Information with Respect Summary; Information About BB&T Financial;
to S-3 Registrants Market Prices and Dividends
11. Incorporation of Certain Incorporation of Certain Documents by Reference
Information by Reference
12. Information with Respect Not Applicable
to S-2 or S-3 Registrants
13. Incorporation of Certain Not Applicable
Information by Reference
-ii-
Heading in Proxy
Item of Form S-4 Statement/Prospectus
---------------- --------------------
14. Information with Respect Not Applicable
to Registrants Other Than
S-3 or S-2 Registrants
15. Information with Respect Incorporation of Certain Documents by
to S-3 Companies Reference; Summary; Information About Commerce;
Market Prices and Dividends
16. Information with Respect Not Applicable
to S-2 or S-3 Companies
17. Information with Respect Not Applicable
to Companies Other than S-3
or S-2 Companies
18. Information If Proxies, Summary; Information Concerning the Special
Consents or Authorizations Meeting; The Acquisition
Are To Be Solicited
19. Information If Proxies, Not Applicable
Consents or Authorizations
Are Not To Be Solicited or
in an Exchange Offer
-iii-
[COMMERCE BANK LETTERHEAD]
[DATE]
Dear Fellow Stockholders:
You are cordially invited to attend the Special Meeting of Stockholders of
Commerce Bank ("Commerce") to be at [Address] on , 1994, at [Time], Eastern
Time (the "Special Meeting").
At this important meeting, you will be asked to consider and vote on the
approval of an Agreement and Plan of Reorganization and a related Plan of
Merger (collectively, the "Acquisition Agreement") pursuant to which Commerce
will be combined with BB&T Financial Corporation ("BB&T Financial") by merging
Commerce with a wholly owned subsidiary of BB&T Financial (the "Merger"). Upon
consummation of the Merger, each outstanding share of Commerce common stock
will be exchanged for 1.305 shares of BB&T Financial common stock, with cash
being paid in lieu of issuing fractional shares.
Your Board of Directors has retained the investment banking firm of Alex.
Brown & Sons Incorporated ("Alex. Brown") to act as its financial advisor in
connection with the proposed transaction with BB&T Financial. As discussed in
the accompanying Proxy Statement/Prospectus, Alex. Brown has delivered to the
Board of Directors its written opinion that, as of this date, the terms of the
proposed transaction with BB&T Financial are fair to Commerce's stockholders
from a financial point of view.
The exchange of Commerce common stock for BB&T Financial common stock (other
than cash in lieu of any fractional shares) pursuant to the Acquisition
Agreement will be a tax-free transaction for federal income tax purposes.
Details of the proposed transaction are set forth in the accompanying Proxy
Statement/Prospectus, which you are urged to read carefully in its entirety.
Approval of the transaction with BB&T Financial requires the affirmative vote
of at least a majority of the outstanding shares of the common stock of
Commerce.
We wish to call your attention to the discussion in the accompanying Proxy
Statement/Prospectus concerning BB&T Financial's proposed affiliation with
Southern National Corporation ("SNC"), a North Carolina based bank holding
company with total assets of $8.2 billion at June 30, 1994. It is anticipated
that the effective date for that transaction, which is intended to effect a
"merger of equals," will occur after completion of our transaction with BB&T
Financial. Under the terms of the agreement with SNC, each share of BB&T
Financial common stock will be converted into 1.45 shares of the common stock
of the merged company which will be named Southern National Corporation and
whose common stock will be listed on the New York Stock Exchange under the
symbol "SNB." See "COMPARATIVE PER SHARE DATA" and "INFORMATION ABOUT BB&T
FINANCIAL--SNC Merger."
Your Board of Directors has unanimously approved the Acquisition Agreement
and the transaction with BB&T Financial and believes they are in the best
interests of Commerce and our stockholders. Accordingly, the Board unanimously
recommends that you vote TO APPROVE the Acquisition Agreement.
In view of the importance of the action to be taken, we urge you to complete,
sign and date your proxy, and return it promptly in the enclosed envelope,
whether or not you plan to attend the Special Meeting. Your vote is important,
regardless of the number of shares you own. If you attend the Special Meeting,
you may vote in person even if you have previously mailed your proxy.
We deeply appreciate your continuing loyalty and support, and we look forward
to seeing you at the Special Meeting.
Sincerely,
Thomas C. Broyles G. Robert Aston, Jr.
Chairman of the Board President and Chief Executive Officer
COMMERCE BANK
VIRGINIA BEACH, VIRGINIA 23462
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1994
To Our Stockholders:
A Special Meeting of stockholders of Commerce Bank ("Commerce") will be held
at [Address] on , 1994 at [Time], Eastern Time ("Special Meeting"), for the
following purposes:
1. To consider and vote upon an Agreement and Plan of Reorganization
between Commerce and BB&T Financial Corporation ("BB&T Financial"), dated
as of June 24, 1994 and amended as of August 25, 1994, and a related Plan
of Merger, dated as of June 24, 1994 (collectively, the "Acquisition
Agreement"), pursuant to which Branch Banking and Trust Company of
Virginia, a to be formed Virginia chartered bank and wholly owned
subsidiary of BB&T Financial, will be merged with and into Commerce (the
"Merger") and the outstanding shares of Commerce common stock will be
converted into shares of BB&T Financial common stock in accordance with the
exchange ratio described in the enclosed Proxy Statement/Prospectus; and
2. To transact such other business as may properly come before the
Special Meeting or any adjournments thereof.
The Board of Directors has fixed [insert date], 1994 as the record date for
the Special Meeting, and only holders of record of Commerce common stock at the
close of business on that date are entitled to receive notice of and to vote at
the Special Meeting or any adjournments thereof.
By Order of the Board of Directors,
David W. Edmondson
Senior Vice President and Corporate
Secretary
Virginia Beach, Virginia
, 1994
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
THE BOARD OF DIRECTORS OF COMMERCE RECOMMENDS THAT
STOCKHOLDERS VOTE TO APPROVE THE ACQUISITION AGREEMENT.
PROXY STATEMENT/PROSPECTUS
COMMERCE BANK
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON , 1994
BB&T FINANCIAL CORPORATION
PROSPECTUS
SHARES OF COMMON STOCK
PAR VALUE $2.50 PER SHARE
(SUBJECT TO CERTAIN ADJUSTMENTS)
This Proxy Statement/Prospectus is furnished by the Board of Directors of
Commerce Bank, Virginia Beach, Virginia ("Commerce") in connection with the
solicitation of proxies from the holders of shares of Commerce's outstanding
common stock, $2.50 par value per share ("Commerce Common Stock"), for use at
the special meeting of stockholders of Commerce to be held on , 1994
("Special Meeting").
At the Special Meeting, stockholders will be asked to consider and vote upon
an Agreement and Plan of Reorganization, dated as of June 24, 1994 and amended
as of August 25, 1994 (as amended, the "Reorganization Agreement"), entered
into by and between Commerce and BB&T Financial Corporation, Wilson, North
Carolina ("BB&T Financial"), and a related Plan of Merger, dated as of June 24,
1994 (the "Plan of Merger"), pursuant to which Branch Banking and Trust Company
of Virginia ("BB&T-VA"), a to be formed Virginia chartered bank and wholly
owned subsidiary of BB&T Financial, will be merged with and into Commerce (the
"Merger"). The Reorganization Agreement and Plan of Merger are referred to
herein as the "Acquisition Agreement."
In the Merger, the stockholders of Commerce will receive 1.305 shares of BB&T
Financial common stock, $2.50 par value per share ("BB&T Financial Common
Stock"), for each share of Commerce Common Stock ("Exchange Ratio") (the Merger
and share exchange collectively are the "Acquisition"); provided, that in the
event that BB&T Financial shall have a record date between June 24, 1994 and
the effective date of the Acquisition for a special distribution to
stockholders, a stock split, stock dividend or similar change in
capitalization, an equitable and appropriate adjustment shall be made to the
Exchange Ratio to reflect the effect of such distribution or change.
Alex. Brown & Sons Incorporated ("Alex. Brown") has rendered its opinion,
updated to the date hereof, to the Board of Directors of Commerce that the
terms proposed by BB&T Financial are fair to Commerce's stockholders from a
financial point of view. See "THE ACQUISITION--Opinion of Financial Advisor."
THE BOARD OF DIRECTORS OF COMMERCE UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE TO APPROVE THE ACQUISITION AGREEMENT. FAILURE TO VOTE IS EQUIVALENT TO
VOTING AGAINST THE ACQUISITION AGREEMENT.
This Proxy Statement/Prospectus and the accompanying form of proxy are being
sent to stockholders of Commerce beginning on or about , 1994.
This Proxy Statement/Prospectus does not cover any resales of the BB&T
Financial Common Stock offered hereby to be received by the stockholders deemed
to be "affiliates" of Commerce or BB&T Financial upon consummation of the
Acquisition. No person is authorized to make use of this Proxy
Statement/Prospectus in connection with such resales, although such securities
may be traded without the use of this Proxy Statement/Prospectus by those
stockholders of BB&T Financial not deemed to be "affiliates" of BB&T Financial
or Commerce.
On July 29, 1994, BB&T Financial entered into an Agreement and Plan of
Reorganization with Southern National Corporation ("SNC") pursuant to which
BB&T Financial will be merged with SNC in a "merger of equals." See
"INFORMATION ABOUT BB&T FINANCIAL--SNC Merger."
THE BB&T FINANCIAL COMMON STOCK TO BE ISSUED IN THE ACQUISITION HAS NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE BUREAU OF FINANCIAL INSTITUTIONS OF THE
VIRGINIA STATE CORPORATION COMMISSION OR ANY STATE SECURITIES AUTHORITY, NOR
HAS ANY OF THEM PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
No person is authorized to give any information or make any representation
other than those contained or incorporated in this Proxy Statement/Prospectus,
and, if given or made, such information or representation should not be relied
upon as having been authorized. This Proxy Statement/Prospectus does not
constitute an offer to exchange or sell, or a solicitation of an offer to
exchange or purchase, the securities offered by this Proxy
Statement/Prospectus, or the solicitation of a proxy, in any jurisdiction in
which such offer or solicitation is not authorized or to or from any person to
whom it is unlawful to make such offer or solicitation. Neither the delivery of
this Proxy Statement/Prospectus nor any distribution of securities made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of BB&T Financial or Commerce since the date of
this Proxy Statement/Prospectus.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1994.
AVAILABLE INFORMATION
BB&T Financial has filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form S-4 under the Securities Act of
1933, as amended ("Securities Act"), relating to the shares of BB&T Financial
Common Stock that may be issued in connection with the Acquisition. This Proxy
Statement/Prospectus constitutes the prospectus of BB&T Financial filed as part
of the Registration Statement and does not contain all the information set
forth in the Registration Statement, certain portions of which have been
omitted pursuant to the rules and regulations of the Commission. The
information omitted may be obtained from the public reference facilities of the
Commission or inspected and copied at the principal or regional offices of the
Commission at the addresses listed in the next paragraph. Information contained
in this Proxy Statement/Prospectus regarding Commerce and its subsidiary has
been furnished by Commerce and information herein regarding BB&T Financial and
its subsidiaries has been furnished by BB&T Financial.
BB&T Financial and Commerce are subject to the informational requirements of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Commission in the case of BB&T Financial and the Federal Deposit Insurance
Corporation ("FDIC") in the case of Commerce. Such reports, proxy statements
and other information with regard to BB&T Financial can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
regional offices at 500 West Madison St., Suite 1400, Chicago, Illinois 60621
and 7 World Trade Center, New York, New York 11048. Copies of such materials
also can be obtained from the Commission's Public Reference Section, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Such reports, proxy
statements and other information with regard to Commerce can be inspected and
copied at the FDIC's Registration and Disclosure Section, Room 253, 1776 F
Street, N.W., Washington, D.C. 20429.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by BB&T Financial with the
Commission are hereby incorporated by reference in this Proxy
Statement/Prospectus:
(i) BB&T Financial's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993;
(ii) BB&T Financial's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1994 and June 30, 1994; and
(iii) BB&T Financial's Current Reports on Form 8-K dated January 10,
1994, February 4, 1994, August 2, 1994, August 31, 1994 and September ,
1994.
The following documents previously filed by Commerce with the FDIC are hereby
incorporated by reference in this Proxy Statement/Prospectus:
(i) Commerce's Annual Report on Form F-2 for the fiscal year ended
December 31, 1993 and the amendment thereto dated August 30, 1994;
(ii) Commerce's Quarterly Reports on Form F-4 for the quarters ended
March 31, 1994 and June 30, 1994;
(iii) Commerce's Current Report on Form F-3 dated July 5, 1994; and
(iv) The description of Commerce Common Stock contained in Commerce's
registration statement filed pursuant to section 12 of the Exchange Act,
and any amendment or report filed for the purpose of updating such
description.
All documents subsequently filed by BB&T Financial and Commerce pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
consummation of the Acquisition and issuance of the shares of BB&T Financial
Common Stock offered hereby are deemed to be incorporated by reference in this
Proxy
2
Statement/Prospectus and are deemed to be a part hereof from the date of filing
of such documents. Any statement contained in a document filed by BB&T
Financial or Commerce and incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part of this Proxy
Statement/Prospectus, except as so modified or superseded.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE OTHER DOCUMENTS
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS RELATING TO
BB&T FINANCIAL OR COMMERCE (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST
DIRECTED TO BB&T FINANCIAL'S SECRETARY, 223 WEST NASH STREET, WILSON, NORTH
CAROLINA 27893, TELEPHONE (919) 339-4291 OR UPON WRITTEN OR ORAL REQUEST
DIRECTED TO COMMERCE'S SECRETARY, 5101 CLEVELAND STREET, SUITE 206, VIRGINIA
BEACH, VIRGINIA 23462, TELEPHONE (804) 456-1007, RESPECTIVELY. IN ORDER TO
ENSURE TIMELY DELIVERY OF ANY REQUESTED DOCUMENTS, THE REQUEST SHOULD BE MADE
NO LATER THAN CLOSE OF BUSINESS ON [DATE]. PERSONS REQUESTING COPIES OF
EXHIBITS TO DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE IN
SUCH DOCUMENTS WILL BE CHARGED THE COST OF REPRODUCTION AND MAILING.
TABLE OF CONTENTS
Available Information......................................................
Incorporation of Certain Documents by Reference............................
Summary....................................................................
Selected Financial Data....................................................
Comparative Per Share Data.................................................
Information Concerning the Special Meeting.................................
The Acquisition............................................................
Pro Forma Combined Condensed Financial Statements..........................
Information About BB&T Financial...........................................
Information About Commerce.................................................
Selected Consolidated Financial and Other Data of Commerce.................
Ownership of Commerce Common Stock By Certain Beneficial Owners and
Management................................................................
Market Prices and Dividends................................................
Description of BB&T Financial Common Stock To Be Issued in the Acquisition
and Comparison of Stockholders' Rights....................................
Description of Stockholders' Rights of SNC.................................
Experts....................................................................
Opinions...................................................................
Stockholder Proposals......................................................
Other Matters..............................................................
Appendices:
I. Agreement and Plan of Reorganization and Amendment No. 1 to Agreement and
Plan of Reorganization
II. Plan of Merger
III. Option Agreement
IV. Opinion of Alex. Brown & Sons Incorporated.
3
SUMMARY
The following is a brief summary of this Proxy Statement/Prospectus and the
appendices hereto prepared in accordance with applicable disclosure
regulations. This summary is not intended to be complete and should be read in
conjunction with, and is qualified in its entirety by reference to, more
detailed information contained in this Proxy Statement/Prospectus, the
information incorporated by reference herein, the text of the Appendices hereto
and the other documents referred to herein and therein.
As used in this Proxy Statement/Prospectus, the terms "BB&T Financial" and
"Commerce" refer to such corporations respectively, and, unless the context
otherwise requires, to their respective subsidiaries or subsidiary.
TIME, PLACE, AND PURPOSE OF THE SPECIAL MEETING
The Special Meeting will be held on , 1994 at [Time], at [Address]. At the
Special Meeting, Commerce stockholders will vote upon a proposal to approve the
Acquisition Agreement, attached hereto as Appendices I and II. On , the
record date ("Record Date") for the Special Meeting, there were approximately
holders of record of the shares of Commerce Common Stock then
outstanding and entitled to vote at the Special Meeting. See "INFORMATION
CONCERNING THE SPECIAL MEETING."
PARTIES TO THE ACQUISITION
BB&T Financial
BB&T Financial, a North Carolina corporation headquartered in Wilson, North
Carolina, is a bank holding company registered under the Bank Holding Company
Act of 1956, as amended ("BHCA"). BB&T Financial also is registered as a
savings institution holding company under the savings institution holding
company laws of North Carolina. The principal executive offices of BB&T
Financial are located at 223 West Nash Street, Wilson, North Carolina 27893,
and its telephone number is (919) 399-4291.
As of June 30, 1994, BB&T Financial had total consolidated assets of
approximately $9.9 billion, total deposits through its depository institution
subsidiaries of approximately $7.4 billion and consolidated stockholders'
equity of approximately $804.1 million. See "SELECTED FINANCIAL DATA" and
"INFORMATION ABOUT BB&T FINANCIAL."
BB&T Financial owns and operates four commercial bank subsidiaries: Branch
Banking and Trust Company ("BB&T-NC"), a wholly owned North Carolina chartered
bank subsidiary; and, through BB&T Financial Corporation of South Carolina
("BB&T Financial-SC") (which is a wholly-owned subsidiary of BB&T Financial),
Branch Banking and Trust Company of South Carolina ("BB&T-SC"), a wholly owned
South Carolina chartered banking corporation headquartered in Greenville, South
Carolina; The Lexington State Bank ("Lexington"), a wholly-owned South Carolina
chartered banking corporation headquartered in Lexington, South Carolina; and
The Community Bank of South Carolina ("Community"), a wholly-owned South
Carolina chartered banking corporation headquartered in Varnville, South
Carolina. As of June 30, 1994, BB&T-NC had assets of $8.3 billion and deposit
liabilities of $6.2 billion, BB&T-SC had assets of $510.6 million and deposit
liabilities of $453.7 million, Lexington had assets of $602.5 million and
deposit liabilities of $491.4 million and Community had assets of $117.2
million and deposit liabilities of $99.1 million. The deposits of BB&T-NC,
BB&T-SC, Lexington and Community are insured by the FDIC.
BB&T Financial also owns and operates two North Carolina chartered savings
bank subsidiaries: Mutual Savings Bank of Rockingham County, S.S.B., Inc.,
Reidsville, North Carolina ("Mutual Savings") and Citizens Savings Bank of
Mooresville, S.S.B., Inc., Mooresville, North Carolina ("Citizens-
Mooresville"). The deposits of Mutual Savings and Citizens-Mooresville are
insured by the FDIC. Together, the two savings
4
bank subsidiaries had assets of $149 million and deposit liabilities of $124
million at June 30, 1994. These two institutions are expected to be merged or
otherwise consolidated into BB&T-NC in September, 1994. On August 22, 1994,
Citizens Savings Bank, S.S.B., Inc., Newton, North Carolina ("Citizens-
Newton"), which was a North Carolina chartered savings bank subsidiary of BB&T
Financial with assets of $247 million and deposit liabilities of $212 million
at June 30, 1994, was merged with and into BB&T-NC.
SNC Merger
On July 29, 1994, BB&T Financial and Southern National Corporation ("SNC")
entered into an Agreement and Plan of Reorganization, amended and restated as
of September , 1994, and a related Plan of Merger (the "SNC Agreement"),
pursuant to which BB&T Financial will be merged with SNC (after the effective
date of such merger, the "Continuing Corporation") in a "merger of equals" (the
"SNC Merger"). The Continuing Corporation will be named "Southern National
Corporation." The SNC Agreement also provides that after the SNC Merger, SNB-NC
will be merged with and into BB&T-NC and operate under the name "Branch Banking
and Trust Company," and that Southern National Bank of South Carolina ("SNB-
SC"), SNC's South Carolina national bank subsidiary, will be merged with and
into BB&T-SC and operate under the name "Branch Banking and Trust Company of
South Carolina." The headquarters of the Continuing Corporation will be located
in Winston-Salem, North Carolina, the present location of the administrative
headquarters of Southern National Bank of North Carolina ("SNB-NC"), SNC's
North Carolina national bank subsidiary. The SNC Agreement also provides that
the Board of Directors of the Continuing Corporation shall be comprised of 24
persons, 12 to be selected by the current Board of Directors of BB&T Financial
and 12 to be selected by the current Board of Directors of SNC. John A. Allison
IV, the current Chairman and Chief Executive Officer of BB&T Financial, will be
elected as Chairman of the Board and Chief Executive Officer of the Continuing
Corporation.
SNC is a registered bank holding company under the BHCA, having as its
principal assets all of the outstanding common stock of SNB-NC and SNB-SC. As
of June 30, 1994, SNC reported total assets of $8.2 billion, total deposits of
$6.2 billion and total stockholders' equity of $593.9 million. For the six
months ended June 30, 1994, SNC also reported earnings of $53 million, for a
1.31% return on assets and 19.88% return on common equity. Under the terms of
the SNC Agreement, each share of BB&T Financial Common Stock will be converted
into 1.45 shares of the common stock of the Continuing Corporation whose common
stock will be listed on the New York Stock Exchange under the Symbol "SNB." It
is anticipated that the SNC Merger will occur subsequent to the Acquisition.
For additional information concerning the SNC Merger, see "COMPARATIVE PER
SHARE DATA," "PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS" and
"INFORMATION ABOUT BB&T FINANCIAL-SNC Merger."
BB&T Financial continues to evaluate the possibility of acquiring additional
commercial banks, savings institutions, insurance agencies and other companies
in North Carolina, South Carolina and Virginia. BB&T Financial may enter into
acquisition agreements with one or more of such institutions after the date of
this Proxy Statement/Prospectus.
Commerce
Commerce is a Virginia banking corporation headquartered in Virginia Beach,
Virginia. Commerce operates 21 banking offices serving the cities of Virginia
Beach, Portsmouth, Norfolk, Chesapeake, Suffolk, Hampton and Newport News,
Virginia, together with the Grafton area of York County located on the western
side of Newport News. The principal executive offices of Commerce are located
at 5101 Cleveland Street, Virginia Beach, Virginia 23462, and its telephone
number is (804) 456-1007.
As of June 30, 1994, Commerce had total assets of approximately $692.1
million, total deposits of approximately $636.4 million and total stockholders'
equity of approximately $46.6 million. See "INFORMATION ABOUT COMMERCE" and
"SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF COMMERCE."
5
TERMS OF THE ACQUISITION
Under the Acquisition Agreement, if all of the required regulatory approvals
are received and all of the conditions to the Acquisition are satisfied, BB&T-
VA will be merged with and into Commerce (the "Merger"), whereupon the
separate existence of BB&T-VA will cease. (Commerce as existing on and after
the "Effective Date" (as defined below) being hereinafter sometimes referred
to as the "Surviving Corporation.") See "THE ACQUISITION--Regulatory
Considerations." Pursuant to the Acquisition Agreement, stockholders of
Commerce will receive for each share of Commerce Common Stock 1.305 shares of
BB&T Financial Common Stock ("Exchange Ratio") (the Merger and share exchange
collectively are the "Acquisition"); provided, that in the event that BB&T
Financial shall have a record date between June 24, 1994 and the effective
date of the Acquisition for a special distribution to stockholders, a stock
split, stock dividend or similar change in capitalization, an equitable and
appropriate adjustment shall be made to the Exchange Ratio to reflect the
effect of such distribution or change. See "THE ACQUISITION--Exchange of
Commerce Common Stock."
At the Effective Date, Commerce's obligations with respect to its authorized
and outstanding 10% Convertible Subordinated Capital Notes Due 2002 ("Capital
Notes"), issued by Commerce pursuant to the Indenture, dated as of September
13, 1990, between Commerce and NationsBank of Virginia, N.A., as Trustee
("Indenture"), will be assumed by BB&T Financial and the Surviving Corporation
by a supplemental indenture and each holder of a Capital Note will have the
right, during the period such Capital Note is convertible, to convert each
Capital Note into shares of BB&T Financial Common Stock at a conversion rate
("Conversion Rate") equal to 1.305 shares of BB&T Financial Common Stock for
each share of Commerce Common Stock into which such Capital Notes would have
been converted immediately prior to the Effective Date, and cash in lieu of
any fractional shares. The Conversion Rate is subject to adjustment in
accordance with the terms of the Indenture. See "THE ACQUISITION--Exchange of
Commerce Common Stock."
In addition, at the Effective Date, Commerce's obligations with respect to
options granted under its 1985 Stock Option Plan and its 1993 Incentive Stock
Plan (the "Commerce Stock Option Plans") (allowing holders to acquire an
aggregate of up to 266,545 shares of Commerce Common Stock as of August 29,
1994) will be assumed by BB&T Financial and each stock option outstanding
under such plans will become the right to receive, upon payment by the holder
of the adjusted exercise price, that number of shares of BB&T Financial Common
Stock the option holder would have received pursuant to the Acquisition if he
or she had exercised such option immediately prior thereto, and cash in lieu
of any fractional shares. The conversion of the Commerce stock options is
subject to the restrictions imposed on "incentive stock options" by federal
law. See "THE ACQUISITION--Exchange of Commerce Common Stock," "THE
ACQUISITION--Interests of Certain Persons in the Acquisition and Effect of the
Acquisition on Employees and Benefit Plans--Stock Options" and "OWNERSHIP OF
COMMERCE COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
EFFECTIVE DATE OF THE ACQUISITION
The "Effective Date" of the Acquisition will be the time and date specified
in the Articles of Merger that are delivered for filing to the Virginia State
Corporation Commission. The Effective Date will occur as soon as practicable
following the date that all conditions specified in the Acquisition Agreement
have been satisfied or waived. The Effective Date currently is anticipated to
be in the fourth quarter of 1994. See "THE ACQUISITION--Conditions to
Consummation of the Acquisition."
INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION AND EFFECT OF THE ACQUISITION
ON EMPLOYEES AND BENEFIT PLANS
Effective at the Effective Date of the Acquisition, BB&T Financial will
enter into employment agreements with Commerce's executive officers G. Robert
Aston, Jr. and R. Scott Morgan. The agreements will provide for employment
terms of ten years and for certain other benefits and will supercede existing
employment agreements. Commerce and BB&T Financial also will enter into a
five-year consulting
6
agreement with Commerce's Chairman of the Board, Thomas C. Broyles. The
Reorganization Agreement also contains provisions concerning the continued
employment of certain Commerce employees and with respect to employee benefits
after the Acquisition. See "THE ACQUISITION--Interests of Certain Persons in
the Acquisition and Effect of the Acquisition on Employees and Benefit Plans."
REGULATORY CONSIDERATIONS
The Acquisition cannot be consummated until all required approvals have been
received from the Board of Governors of the Federal Reserve System ("Federal
Reserve"), the FDIC and the Bureau of Financial Institutions of the Virginia
State Corporation Commission ("Bureau"). The FDIC approved the mailing of the
Proxy Statement and related materials on , 1994. The applications for
approval of the Acquisition by the Federal Reserve and the Bureau, the
organization of BB&T-VA by the Bureau and the Merger by the FDIC and the
Bureau, respectively, will be filed in September 1994. See "THE ACQUISITION--
Regulatory Considerations."
STOCKHOLDER APPROVAL
The Acquisition Agreement must be approved by the affirmative vote of at
least a majority of the outstanding shares of Commerce Common Stock. See
"INFORMATION CONCERNING THE SPECIAL MEETING--Record Date, Voting Rights and
Vote Required."
OPINION OF FINANCIAL ADVISOR
Commerce has retained Alex. Brown to act as its financial advisor in
connection with the Acquisition, and Alex. Brown has rendered its opinion to
Commerce's Board of Directors that the Exchange Ratio is fair from a financial
point of view to Commerce stockholders. The full text of Alex. Brown's opinion,
updated to the date hereof, is set forth as Appendix IV to this Proxy
Statement/Prospectus and should be read in its entirety with respect to the
assumptions made and other matters considered and limitations on the review
undertaken. See "THE ACQUISITION--Opinion of Financial Advisor."
OTHER CONDITIONS TO THE ACQUISITION
Consummation of the Acquisition is subject to the satisfaction of certain
conditions in addition to regulatory approvals, the approval of Commerce's
stockholders and receipt of the opinion of Alex. Brown. In particular, BB&T
Financial's obligations under the Acquisition Agreement are conditioned upon,
among other things, receipt of an opinion from KPMG Peat Marwick LLP that the
Acquisition will qualify for pooling-of-interests accounting treatment.
Commerce and BB&T Financial may waive certain of the conditions to their
respective obligations to consummate the Acquisition, other than (i) the
approvals required of Commerce's stockholders and of proper regulatory
authorities, and (ii) after approval of the Acquisition Agreement by Commerce's
stockholders, any reduction in the number of shares of BB&T Financial Common
Stock into which each share of Commerce Common Stock will be converted and
exchanged in the Acquisition or the payment terms for fractional interests. See
"THE ACQUISITION--Conditions to Consummation of the Acquisition."
TERMINATION
The Reorganization Agreement is subject to termination by the mutual
agreement in writing of the parties or, in case of certain defaults, by notice
of termination given by the party not in default. In addition, the
Reorganization Agreement may be terminated if the stockholders of Commerce do
not approve the Acquisition Agreement. Unless extended by the parties, the
Reorganization Agreement may be terminated by either party if the Acquisition
is not consummated before June 30, 1995, or at an earlier date if a required
approval of any regulatory agency is denied and the period for appeals from
that denial has expired. See "THE ACQUISITION--Termination."
7
AMENDMENT
The Acquisition Agreement may be amended or supplemented in writing by mutual
agreement of BB&T Financial and Commerce, provided that such amendment or
supplement must be approved by their respective Boards of Directors and
provided further that no amendment or supplement executed after approval of the
Acquisition Agreement by Commerce's stockholders may reduce either the number
of shares of BB&T Financial Common Stock into which each share of Commerce
Common Stock will be converted and exchanged in the Acquisition or the payment
terms for fractional interests. See "THE ACQUISITION--Amendment."
DISSENTERS' RIGHTS
Under Virginia law, stockholders of Commerce will have no dissenters' rights
in connection with the Acquisition. See "THE ACQUISITION--Dissenters' Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary discussion of certain federal income tax
consequences of the Acquisition to stockholders of Commerce. All stockholders
should read carefully the discussion in "THE ACQUISITION--Certain Federal
Income Tax Consequences of the Acquisition" and other sections of this Proxy
Statement/Prospectus.
Consummation of the Acquisition is conditioned upon receipt by the parties of
an opinion from KPMG Peat Marwick LLP, satisfactory in form and substance to
each of the parties, to the effect that the Acquisition will constitute one or
more reorganizations within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended ("Code"), and that the exchange of Commerce Common
Stock to the extent exchanged for BB&T Financial Common Stock will not give
rise to the recognition of gain or loss for federal income tax purposes to
Commerce's stockholders. See "THE ACQUISITION--Certain Federal Income Tax
Consequences of the Acquisition."
BECAUSE OF THE COMPLEXITIES OF THE FEDERAL INCOME TAX LAWS AND BECAUSE THE
TAX CONSEQUENCES MAY VARY DEPENDING UPON A HOLDER'S INDIVIDUAL CIRCUMSTANCES OR
TAX STATUS, IT IS RECOMMENDED THAT EACH STOCKHOLDER OF COMMERCE CONSULT HIS OR
HER TAX ADVISER CONCERNING THE FEDERAL (AND ANY APPLICABLE STATE, LOCAL OR
OTHER) TAX CONSEQUENCES OF THE ACQUISITION.
RESALES BY AFFILIATES
As a condition to BB&T Financial's obligation to consummate the Acquisition,
affiliates of Commerce must have entered into agreements that they will not
sell any shares of BB&T Financial Common Stock received upon consummation of
the Acquisition except in compliance with Rule 145 under the Securities Act or
otherwise in compliance with the Securities Act and the rules and regulations
promulgated thereunder. See "THE ACQUISITION--Restrictions on Resales by
Affiliates."
OPTION AGREEMENT
As a condition of BB&T Financial's entering into the Reorganization Agreement
and to increase the probability that the Acquisition will be consummated,
Commerce and BB&T Financial entered into an Option Agreement, dated as of June
24, 1994 ("Option Agreement"). The Option Agreement provides for the purchase
by BB&T Financial of up to 540,000 shares of Commerce Common Stock
(approximately 19.8% of the Commerce Common Stock), subject to adjustment, at
an exercise price of $31.50 per share ("Commerce Option"). The Option Agreement
is attached to this Proxy Statement/Prospectus as Appendix III.
Exercise of the Commerce Option is permitted only upon the occurrence of the
events and subject to the limitations specified in the Option Agreement. See
"THE ACQUISITION--The Option Agreement."
8
MARKET PRICES AND DIVIDENDS
The information presented in the following table reflects the last reported
sales prices for BB&T Financial Common Stock and Commerce Common Stock on June
23, 1994, the last trading day prior to the public announcement of the proposed
Acquisition, and the Commerce Common Stock equivalent per share basis,
calculated by multiplying the closing price of BB&T Financial Common Stock on
such date by the Exchange Ratio (1.305). The table also reflects the last
reported sales prices for BB&T Financial Common Stock and Commerce Common Stock
on or prior to [date immediately prior to mailing].
MARKET VALUE
HISTORICAL
-----------------------
COMMERCE EQUIVALENT
BB&T FINANCIAL COMMERCE PER SHARE BASIS
-------------- -------- -------------------
June 23, 1994................... $31.25 $32.50 $40.78
, 1994.......................
BB&T Financial Common Stock is traded in the NASDAQ Stock Market and the
shares are quoted on the Nasdaq/National Market System ("Nasdaq/NMS"). BB&T
Financial has paid regular quarterly cash dividends since 1921. Although BB&T
Financial currently intends to continue to pay quarterly cash dividends on the
BB&T Financial Common Stock, there can be no assurance that BB&T Financial's
dividend policy will remain unchanged after completion of the Acquisition. The
declaration and payment of dividends thereafter will depend upon business
conditions, operating results, capital and reserve requirements and the BB&T
Financial Board of Directors' consideration of other relevant factors. See
"MARKET PRICES AND DIVIDENDS."
Commerce Common Stock is traded in the NASDAQ Stock Market and the shares are
quoted on the Nasdaq/NMS. Commerce has paid regular quarterly cash dividends
since 1992. However, there can be no assurance that dividends would be paid in
the future. The declaration, payment and amount of any such future dividends
would depend upon business conditions, operating results, capital and reserve
requirements, regulatory authorizations and the consideration of other relevant
factors by the Commerce Board of Directors. See "MARKET PRICES AND DIVIDENDS."
CERTAIN DIFFERENCES IN RIGHTS OF STOCKHOLDERS
Upon completion of the Acquisition, stockholders of Commerce will become
stockholders of BB&T Financial and their rights as such will be governed by
North Carolina law and BB&T Financial's Amended Articles of Incorporation and
By-laws. The rights of the stockholders of BB&T Financial are different in some
respects from the rights of the stockholders of Commerce. See "DESCRIPTION OF
BB&T FINANCIAL COMMON STOCK TO BE ISSUED IN THE ACQUISITION AND COMPARISON OF
STOCKHOLDERS' RIGHTS" and "DESCRIPTION OF STOCKHOLDERS' RIGHTS OF SNC."
THE SHARES OF BB&T FINANCIAL COMMON STOCK TO BE ISSUED IN
THEACQUISITION ARE NOT DEPOSITS AND ARE NOT INSURED BY THE
FDIC OR ANY OTHER GOVERNMENT AGENCY.
9
SELECTED FINANCIAL DATA
The following tables represent selected historical financial information for
BB&T Financial, Commerce and SNC and selected combined pro forma financial
information for BB&T Financial, Commerce and SNC. This information is derived
from the historical consolidated financial statements of BB&T Financial,
Commerce and SNC. The information for BB&T Financial, Commerce and SNC set
forth below should be read in conjunction with such historical financial
statements and the notes thereto incorporated herein by reference.
The selected combined pro forma financial information showing the combined
results of BB&T Financial, Commerce and SNC is provided for informational
purposes only. It is not necessarily indicative of actual results that would
have been achieved had the Acquisition and the SNC Merger been consummated on
the dates at the beginning of the periods presented, nor is it necessarily
indicative of future results. For additional pro forma information, see "PRO
FORMA COMBINED CONDENSED FINANCIAL STATEMENTS."
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, AT OR FOR THE FISCAL YEARS ENDED DECEMBER 31,
----------------- -------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- --------- --------- --------- --------- ---------
BB&T FINANCIAL (HISTORI-
CAL)
INCOME DATA
($ in thousands):
Total interest and non-
interest income....... $391,720 $348,021 $724,678 $ 687,165 $ 702,387 $ 666,972 $ 654,914
Net income............. 55,379 50,939 105,012 82,621 68,335 61,309 53,015
PERIOD-END BALANCE SHEET
ITEMS
($ in millions):
Assets................. $ 9,878 $ 8,887 $ 9,867 $ 7,932 $ 7,391 $ 6,204 $ 6,204
Deposits............... 7,422 6,897 7,566 6,405 6,216 5,325 5,119
Long-term debt......... 396 106 351 127 118 104 116
Stockholders' equity... 804 763 797 654 576 457 407
PER SHARE DATA:
Net income............. $ 1.52 $ 1.47 $ 2.95 $ 2.53 $ 2.30 $ 2.20 $ 2.02
Fully diluted income... 1.52 1.43 2.91 2.43 2.21 2.13 1.95
Cash dividend declared. .54 .50 1.02 .91 .85 .81 .74
Book value, end of pe-
riod.................. 22.17 21.13 21.90 20.01 18.18 16.55 15.43
AVERAGE SHARES OUTSTAND-
ING:
(thousands):
Primary................ 36,552 34,684 35,620 32,705 29,760 27,834 26,278
Fully diluted.......... 36,552 35,843 36,188 34,741 31,756 29,772 28,221
Shares outstanding-end-
ing................... 36,271 36,113 36,399 32,685 31,647 27,638 26,385
COMMERCE (HISTORICAL)
INCOME DATA
($ in thousands):
Total interest and non-
interest income....... $ 28,694 $ 27,765 $ 57,902 $ 53,149 $ 46,787 $ 38,759 $ 31,505
Net income............. 3,602 3,148 6,551 4,942 2,599 547 1,687
PERIOD-END BALANCE SHEET
ITEMS
($ in millions):
Assets................. $ 692 $ 666 $ 690 $ 645 $ 479 $ 405 $ 303
Deposits............... 636 616 634 598 445 374 278
Long-term debt......... 7 7 7 6 6 6 1
Stockholders' equity... 47 40 44 37 24 21 21
PER SHARE DATA:
Net income............. $ 1.29 $ 1.15 $ 2.38 $ 2.05 $ 1.36 $ .29 $ .86
Fully diluted income... 1.23 1.11 2.28 1.97 1.35 .29 .86
Cash dividend declared. .30 .22 .51 .26 .05 -- --
Book value, end of pe-
riod.................. 17.10 15.91 16.22 14.90 13.63 12.79 13.07
AVERAGE SHARES OUTSTAND-
ING:
(thousands):
Primary................ 2,802 2,726 2,748 2,413 1,913 1,945 1,969
Fully diluted.......... 3,068 2,993 3,013 2,676 2,176 1,945 1,969
Shares outstanding-end-
ing................... 2,725 2,534 2,687 2,511 1,745 1,650 1,572
10
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, AT OR FOR THE FISCAL YEARS ENDED DECEMBER 31,
----------------- --------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- --------- --------- --------- --------- ---------
BB&T FINANCIAL/COMMERCE
(PRO FORMA)
INCOME DATA
($ in thousands):
Total interest and non-
interest income....... $420,414 $375,786 $782,580 $ 740,314 $ 749,174 $ 705,731 $ 686,419
Net income............. 58,981 54,087 111,563 87,563 70,934 61,856 54,702
PERIOD-END BALANCE SHEET
ITEMS
($ in millions):
Assets................. $ 10,570 $ 9,553 $ 10,557 $ 8,577 $ 7,870 $ 6,609 $ 6,507
Deposits............... 8,059 7,513 8,200 7,003 6,661 5,699 5,397
Long-term debt......... 403 113 358 133 124 110 117
Stockholders' equity... 851 803 841 691 600 478 428
PER SHARE DATA:
Net income............. $ 1.47 $ 1.41 $ 2.85 $ 2.44 $ 2.20 $ 2.04 $ 1.90
Fully diluted income... 1.46 1.37 2.80 2.35 2.11 1.98 1.84
Cash dividend declared. .54 .50 1.02 .91 .85 .81 .74
Book value, end of pe-
riod.................. 21.36 20.38 21.06 19.23 17.66 16.06 15.04
AVERAGE SHARES OUTSTAND-
ING:
(thousands):
Primary................ 40,209 38,242 39,206 35,854 32,257 30,372 28,847
Fully diluted.......... 40,556 39,749 40,120 38,233 34,596 32,310 30,791
Shares outstanding-end-
ing................... 39,827 39,419 39,905 35,962 33,924 29,791 28,436
SNC (HISTORICAL)
INCOME DATA
($ in thousands):
Total interest and non-
interest income....... $314,576 $324,918 $ 634,982 $653,348 $674,656 $667,803 $639,419
Net income............. 52,931 20,651 (19,024) 59,166 44,610 30,869 36,416
PERIOD-END BALANCE SHEET
ITEMS
($ in millions):
Assets................. $ 8,236 $ 7,585 $ 8,274 $ 7,380 $ 6,567 $ 6,403 $ 6,148
Deposits............... 6,229 6,042 6,323 6,041 5,504 5,149 4,981
Long-term debt......... 217 371 480 290 293 389 309
Common stockholders'
equity................ 520 522 487 501 425 370 349
Stockholders' equity... 594 595 564 575 425 370 349
PER SHARE DATA
Net income............. $ 1.15 $ .43 $ (.57) $ 1.34 $ 1.17 $ .82 $ .97
Fully diluted income... 1.10 .43 (.57) 1.31 1.17 .82 .97
Cash dividend declared. .34 .30 .64 .50 .46 .42 .39
Book value per common
share, end of period.. 11.98 12.63 11.34 13.15 12.15 10.95 10.33
AVERAGE SHARES OUTSTAND-
ING
(thousands):
Primary................ 43,636 41,899 42,331 40,778 38,079 37,461 37,375
Fully diluted.......... 48,189 46,468 46,889 44,994 38,112 37,461 37,375
Shares outstanding-end-
ing................... 43,386 41,333 42,961 38,090 34,993 33,776 33,770
11
AT, OR FOR THE
SIX MONTHS
ENDED JUNE 30, AT, OR FOR THE FISCAL YEARS ENDED DECEMBER 31,
----------------- ------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- ---------- ---------- ---------- ---------- ----------
BB&T FINANCIAL/COMMERCE/SNC
(PRO FORMA)
INCOME DATA
($ in thousands):
Total interest and non-
interest income....... $734,990 $700,704 $1,417,562 $1,393,662 $1,423,830 $1,373,534 $1,325,838
Net income............. 111,912 74,738 92,539 146,729 115,544 92,725 91,118
PERIOD-END BALANCE SHEET
ITEMS
($ in millions):
Assets................. $ 18,807 $ 17,138 $ 18,837 $ 15,957 $ 14,437 $ 13,012 $ 12,655
Deposits............... 14,288 13,555 15,523 13,044 12,165 10,848 10,378
Long-term debt......... 620 483 838 423 417 499 426
Common stockholders'
equity................ 1,371 1,325 1,328 1,192 1,025 848 777
Stockholders' equity... 1,445 1,399 1,407 1,266 1,025 848 777
PER SHARE DATA
Net income............. $ 1.07 $ .72 $ .88 $ 1.53 $ 1.36 $ 1.14 $ 1.15
Fully diluted income... 1.05 .74 .89 1.48 1.33 1.12 1.14
Cash dividend declared. .34 .30 .64 .50 .46 .42 .39
Book value per common
share, end of period.. 13.56 13.45 13.17 13.21 12.18 11.02 10.36
AVERAGE SHARES OUTSTAND-
ING
(thousands):
Primary................ 101,938 97,350 99,180 92,765 84,852 81,500 79,203
Fully diluted.......... 106,995 104,104 105,064 103,438 88,275 84,310 82,022
Shares outstanding-end-
ing................... 101,135 98,491 100,823 90,235 84,183 76,973 75,002
12
COMPARATIVE PER SHARE DATA
The following table presents at the dates and for the periods indicated (i)
certain historical and pro forma combined per share data for BB&T Financial
Common Stock after giving effect to the Acquisition and to the combination that
would be effected by both the Acquisition and the SNC Merger and (ii) certain
historical and pro forma data for Commerce Common Stock. The pro forma
financial data relating to the Acquisition is presented using the pooling-of-
interests method of accounting and the application of the Exchange Ratio of
1.305 shares of BB&T Financial Common Stock for each outstanding share of
Commerce Common Stock. The pro forma financial data relating to the SNC Merger
assumes the prior consummation of the Acquisition and is presented using the
pooling-of-interests method of accounting and the application of the exchange
ratio in the SNC Merger of 1.45 shares of the Continuing Corporation's common
stock for each outstanding share of BB&T Financial Common Stock. The data
presented should be read in conjunction with the historical financial
statements and the related notes thereto included elsewhere herein or
incorporated herein by reference and in conjunction with the pro forma combined
condensed financial information included elsewhere herein.
COMMERCE
COMMERCE EQUIVALENT
HISTORICAL BB&T/ EQUIVALENT BB&T/ PRO FORMA
------------------ COMMERCE PRO FORMA COMMERCE/ (BB&T/
BB&T PRO FORMA (BB&T/ SNC SNC COMMERCE/
FINANCIAL COMMERCE COMBINED COMMERCE) HISTORICAL PRO FORMA SNC)
--------- -------- --------- ---------- ---------- --------- ----------
PRIMARY EARNINGS PER
SHARE
Six Months Ended June
30, 1994............... $ 1.52 $ 1.29 $ 1.47 $ 1.92 $ 1.15 $ 1.07 $ 2.02
Fiscal Years Ended (1)
1993................... 2.95 2.38 2.85 3.71 (.57) .88 1.67
1992................... 2.53 2.05 2.44 3.18 1.34 1.53 2.90
1991................... 2.30 1.36 2.20 2.87 1.17 1.36 2.57
FULLY DILUTED EARNINGS
PER SHARE
Six Months Ended June
30, 1994............... $ 1.52 $ 1.23 $ 1.46 $ 1.91 $ 1.10 $ 1.05 $ 1.99
Fiscal Years Ended (1)
1993................... 2.91 2.28 2.80 3.65 (.57) .89 1.68
1992................... 2.43 1.97 2.35 3.07 1.31 1.48 2.80
1991................... 2.21 1.35 2.11 2.75 1.17 1.33 2.52
CASH DIVIDENDS DECLARED
PER SHARE
Six Months Ended June
30, 1994............... $ .54 $ .30 $ .54 $ .70 $ .34 $ .34 $ .64
Fiscal Years Ended (1)
1993................... 1.02 .51 1.02 1.33 .64 .64 1.21
1992................... .91 .26 .91 1.19 .50 .50 .95
1991................... .85 .05 .85 1.11 .46 .46 .87
BOOK VALUE PER SHARE
As of June 30, 1994..... $22.17 $17.10 $21.36 $27.87 $11.98 $13.56 $25.66
Fiscal Years Ended (1)
1993................... 21.90 16.22 21.06 27.48 12.63 13.17 24.92
1992................... 20.01 14.90 19.23 25.10 11.34 13.21 25.00
1991................... 18.18 13.63 17.66 23.05 13.15 12.18 23.05
- --------
(1) The fiscal years of BB&T Financial, Commerce and SNC end on December 31.
13
INFORMATION CONCERNING THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the stockholders of
Commerce as of the Record Date and is accompanied by a form of proxy which is
solicited by the Board of Directors of Commerce for use at the Special Meeting
of Commerce's stockholders to be held on , 1994 and any adjournment thereof.
At the Special Meeting, stockholders will vote on whether to approve the
Acquisition Agreement. Proxies may be voted on such other matters as may
properly come before the Special Meeting, or any adjournment thereof, in the
best judgment of the proxy holders named therein.
Holders of Commerce Common Stock are requested to complete, date and sign the
accompanying proxy and return it promptly to Commerce in the enclosed postage-
paid envelope.
RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED
Only the holders of Commerce Common Stock on the Record Date ( ) are
entitled to receive notice of and to vote at the Special Meeting and at any
adjournments thereof. On the Record Date, there were shares of Commerce
Common Stock outstanding which were held by approximately holders of
record. Each share of Commerce Common Stock outstanding on the Record Date is
entitled to one vote as to each of the matters submitted at the Special
Meeting.
APPROVAL OF THE ACQUISITION AGREEMENT WILL REQUIRE THE AFFIRMATIVE VOTE OF AT
LEAST A MAJORITY OF THE OUTSTANDING SHARES OF COMMERCE COMMON STOCK. FAILURE OF
A HOLDER OF COMMERCE COMMON STOCK TO VOTE SUCH SHARES WILL HAVE THE SAME EFFECT
AS A VOTE "AGAINST" THE ACQUISITION AGREEMENT.
As of the Record Date, the directors and executive officers of Commerce and
their affiliates owned a total of shares, or % of Commerce Common Stock,
all of which are expected to be voted in favor of the Acquisition Agreement.
VOTING AND REVOCATION OF PROXIES
The shares of Commerce Common Stock represented by properly completed proxies
received at or prior to the time for the Special Meeting will be voted as
directed by the stockholders, unless revoked as described below. If no
instructions are given, executed proxies will be voted "FOR" approval of the
Acquisition Agreement. If any other matters are properly presented at the
Special Meeting and may be properly voted on, the proxies solicited hereby will
be voted on such matters in accordance with the decision of a majority of the
Commerce Board of Directors. However, in such event, voting authority will only
be exercised to the extent permissible under the applicable federal securities
laws. Management is not aware of any other business to be presented at the
Special Meeting. This proxy is being solicited for the Special Meeting called
to consider the Acquisition Agreement and any adjournment(s) of the Special
Meeting and will not be used for any other meeting.
The presence of a stockholder at the Special Meeting will not automatically
revoke such stockholder's proxy. A stockholder may, however, revoke a proxy at
any time prior to its exercise by filing a written notice of revocation with,
or by delivering a duly executed proxy bearing a later date to, the Secretary
of Commerce at Commerce's principal executive offices prior to the Special
Meeting, or by attending the Special Meeting and voting in person. A proxy will
not be revoked by the death or incapacity of the stockholder executing it
unless, before the shares are voted, notice of such death or incapacity is
filed with the Secretary of Commerce or other person authorized to tabulate
votes.
14
SOLICITATION OF PROXIES
Commerce will bear the costs of soliciting proxies, except under certain
circumstances. In addition to use of the mails, proxies may be solicited
personally or by telephone or facsimile by directors, officers and other
employees of Commerce, who will not be specially compensated for such
solicitation activities. Arrangements also will be made with brokerage houses
and other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of shares held of record by
such persons, and such persons will be reimbursed for their reasonable expenses
incurred in that connection by Commerce. Commerce will not utilize the services
of a proxy soliciting firm in connection with the solicitation of proxies in
connection with the Special Meeting.
No person is authorized to give any information or to make any representation
not contained or incorporated by reference in this Proxy Statement/Prospectus
and, if given or made, such information or representation should not be relied
upon as having been authorized by Commerce, BB&T Financial or any other person.
The delivery of this Proxy Statement/Prospectus will not, under any
circumstances, create any implication that there has been no change in the
affairs of Commerce or BB&T Financial since the date of this Proxy
Statement/Prospectus.
RECOMMENDATION
The Board of Directors of Commerce has unanimously approved the Acquisition
Agreement and believes that the proposed transaction is fair to and in the best
interests of Commerce and its stockholders. The Board of Directors of Commerce
unanimously recommends that Commerce's stockholders vote FOR approval of the
Acquisition Agreement.
In making its recommendation, the Board of Directors of Commerce has
considered, among other things, the opinion of Alex. Brown that BB&T
Financial's proposal is fair to Commerce's stockholders from a financial point
of view. See "THE ACQUISITION--Opinion of Financial Advisor."
THE ACQUISITION
The following summary of certain terms and provisions of the Reorganization
Agreement, Plan of Merger and Option Agreement is qualified in its entirety by
reference to each of such documents, which are incorporated by reference herein
and are attached hereto as Appendices I, II and III.
BACKGROUND OF THE ACQUISITION
In October 1993, BB&T Financial and Commerce, together with Commerce's
financial advisor, Alex. Brown, entered into discussions concerning a preferred
stock purchase arrangement whereby BB&T Financial would commit to purchase up
to $12 million of a newly created class of Commerce preferred stock. The
preferred stock, which was designed to qualify as Tier 1 capital for regulatory
purposes, would allow Commerce to enhance its capital position and would make
available additional capital to help support the possible future expansion of
Commerce. The preferred stock purchase agreement with BB&T Financial was
publicly announced in April, 1994, but no shares of preferred stock have been
issued thereunder.
During the course of the negotiations with respect to the preferred stock
arrangement, John A. Allison, IV, Chief Executive Officer of BB&T Financial,
expressed an interest on several occasions to his counterpart at Commerce, G.
Robert Aston, Jr., in exploring the possibility of a business combination of
BB&T Financial and Commerce. The discussions were general and exploratory in
nature and did not result in any specific offers or proposals being made. In
March, 1994, Mr. Allison reiterated the interest of BB&T Financial in exploring
the possibility of a potential business combination with Commerce. Mr. Aston
indicated to Mr. Allison that Commerce would be in a better position to respond
to BB&T Financial after the Commerce annual stockholders' meeting scheduled for
the middle of May.
15
In late May 1994, a special committee of the Commerce Board of Directors was
formed (the "Special Committee") to study the strategic options available to
Commerce, including the possibility of pursuing discussions with BB&T Financial
concerning a possible business combination. The Special Committee was comprised
of five independent directors from the Commerce Board (Messrs. Thomas C.
Broyles; J.W. Whiting Chisman, Jr.; Andrew S. Fine; Ernest F. Hardee; and J.
Alan Lindauer) and three members of Commerce senior management (Messrs. G.
Robert Aston, Jr., President and Chief Executive Officer; R. Scott Morgan,
Executive Vice President and Senior Lending Officer; and Gerald T. McDonald,
Executive Vice President and Chief Financial Officer).
The Special Committee held its first meeting on May 25, 1994. At that
meeting, representatives of Alex. Brown presented and discussed a financial
evaluation of Commerce assuming Commerce continued as an independent entity or
merged with a larger institution. Alex. Brown identified potential merger
partners and furnished estimates of the exchange ratios or prices that Commerce
could reasonably expect to receive in a business combination. A second meeting
of the Special Committee was held on May 31, 1994 with representatives of Alex.
Brown that focused primarily on a potential business combination with BB&T
Financial.
After considering the information furnished by Alex. Brown and based on
various other factors, including the prospect of remaining independent in view
of the likelihood of further consolidation in the banking industry and the
relationship already established with BB&T Financial in connection with the
preferred stock purchase arrangement, the Special Committee concluded that it
would be advisable to explore a potential business combination with BB&T
Financial involving a tax-free exchange of Commerce Common Stock. The Special
Committee believed that BB&T Financial had the financial capacity and desire to
make a proposal which would be attractive to Commerce stockholders from a
financial point of view. In addition, the Special Committee believed BB&T
Financial had a banking culture that would be compatible with that of Commerce,
particularly since Commerce would be able to operate as a separate bank within
the holding company system. Accordingly, the Special Committee authorized Alex.
Brown to contact BB&T Financial. In view of the discussions which ensued with
BB&T Financial and the ultimate result of the negotiations, Alex. Brown was not
thereafter authorized to contact other institutions concerning their possible
interest in submitting a merger proposal.
During the period of June 8 through June 13, 1994, three meetings took place
between representatives of BB&T Financial and Commerce at which potential terms
and conditions of a possible transaction with BB&T Financial were discussed.
Based on the preliminary discussions at these meetings, the parties decided to
meet on June 21 to negotiate the terms of the transaction, including price, and
to arrive at a definitive agreement. Over the course of the next two days, the
managements of BB&T Financial and Commerce, with the assistance of their
respective legal advisors and Commerce's financial advisor, negotiated the
terms of the transaction as set forth in the Acquisition Agreement and the
Option Agreement.
At a meeting of the Commerce Board of Directors on June 23, 1994, the
management of Commerce, as well as Commerce's financial and legal advisors,
reviewed for the Commerce Board of Directors, among other things, a summary of
the terms of the Acquisition Agreement and the Option Agreement. Alex. Brown
presented its analysis of the BB&T Financial offer and delivered its opinion,
updated to the date hereof, that the terms of the offer are fair to the
Commerce stockholders from a financial point of view. See "--Opinion of
Financial Advisor." Based upon its review and after receiving the advice of
Alex. Brown and considering various other factors, the Commerce Board of
Directors unanimously approved and authorized the execution and adoption of the
Acquisition Agreement and the Option Agreement. See "--Reasons for the
Acquisition; Recommendation of the Commerce Board of Directors" and "--The
Option Agreement." The terms of the Acquisition and the execution of the
Acquisition Agreement and the Option Agreement were announced in a joint press
release on June 24, 1994.
16
REASONS FOR THE ACQUISITION; RECOMMENDATION OF THE COMMERCE BOARD OF DIRECTORS
The Commerce Board of Directors believes that the Acquisition and the
Acquisition Agreement are in the best interests of Commerce and the Commerce
stockholders. As explained below, this conclusion is supported by the opinion
of its independent financial advisor. In considering the terms and conditions
of the Acquisition Agreement, the Commerce Board of Directors considered a
number of factors. The Commerce Board of Directors did not assign any relative
or specific weights to the factors considered. The material factors considered
were:
(i) The Financial Terms of the Acquisition. In this regard, the Commerce
Board of Directors was of the view that, based on historical and
anticipated trading ranges for BB&T Financial Common Stock, the value of
the consideration to be received by Commerce stockholders resulting from
the Exchange Ratio represented a fair multiple of Commerce's per share book
value, market value and earnings. The Commerce Board of Directors also
considered that, under the proposed Exchange Ratio and based on the
Commerce Board of Directors' belief that BB&T Financial would continue to
pay dividends at its current rate, although there can be no assurance that
current dividends are indicative of future dividends, the Acquisition would
result in a substantial increase in dividend income to Commerce
stockholders. See "COMPARATIVE PER SHARE DATA." In addition, the Commerce
Board of Directors considered the fact that, based on the Exchange Ratio,
Commerce stockholders would own approximately 10% of the combined company,
which percentage compared favorably to the percentages indicated by the
contribution analysis presented to the Board. See "--Opinion of Financial
Advisor" for a discussion of this comparative information.
(ii) The Terms, Other than the Financial Terms, and Structure of the
Acquisition. In this respect, the Commerce Board of Directors considered
the benefits to the customers and employees of Commerce and the communities
it serves by allowing Commerce to remain a separate bank within the BB&T
Financial system. The Commerce Board of Directors further considered the
active role that Commerce, as BB&T Financial's first merger partner in
Virginia, would play in connection with additional financial institution
acquisitions in Virginia. The Commerce Board of Directors also considered
that the Acquisition would qualify as a tax-free reorganization under the
Internal Revenue Code of 1986, as amended (the "Code"). See "--Certain
Federal Income Tax Consequences."
(iii) Certain Financial and Other Information Concerning BB&T
Financial. In this respect, the Commerce Board of Directors considered,
among other things, the consistently high position of BB&T Financial among
its peer group of national and regional financial institutions in terms of
profitability, capital adequacy and asset quality. The Commerce Board of
Directors also considered that the historical dividends per share, net
income per share and book value per share of BB&T Financial Common Stock to
be received by Commerce stockholders, after giving effect to the Exchange
Ratio, would represent a substantial increase in the historical dividends
per share, net income per share and book value per share of Commerce Common
Stock, although there can be no assurance that pro forma amounts are
indicative of future dividends, income per share or book value per share of
BB&T Financial. The Commerce Board of Directors further considered the
diversification of risk associated with ownership in an institution which
serves a broad geographic area which encompasses most of North Carolina and
parts of South Carolina. In addition, the Commerce Board of Directors
considered the increased marketability and liquidity of BB&T Financial
Common Stock.
(iv) Opinion of Financial Advisor. The Commerce Board of Directors also
considered the opinion of Alex. Brown as to the fairness, from a financial
point of view, of the terms of the Acquisition Agreement to Commerce
stockholders. See "--Opinion of Financial Advisor."
(v) Certain other Considerations. The Commerce Board of Directors further
determined that the addition of resources resulting from the Acquisition
will enable Commerce to provide a wider and improved array of financial
services to consumers and businesses and to achieve added flexibility in
dealing with the changing competitive environment in its market area. In
addition, the Commerce Board of Directors considered the prospects of
nationwide interstate banking, the continued disintegration of
17
traditional geographic and industry lines and the likelihood of further
consolidation in the banking industry.
The Commerce Board of Directors believes that the Acquisition and the
Acquisition Agreement are in the best interests of Commerce and the Commerce
stockholders. The Commerce Board of Directors unanimously recommends that
Commerce's stockholders vote TO APPROVE the Acquisition Agreement.
OPINION OF FINANCIAL ADVISOR
Commerce retained Alex. Brown to act as its financial advisor in connection
with the Acquisition and related matters. Commerce selected Alex. Brown to act
as its financial advisor based upon Alex. Brown's qualifications, expertise and
reputation, as well as its familiarity with Commerce's business and market
area. Alex. Brown regularly publishes research reports regarding Commerce, the
financial services industry in general and the businesses and securities of
publicly owned companies in that industry.
Representatives of Alex. Brown attended the meeting of Commerce's Board of
Directors on June 23, 1994, at which time the Acquisition Agreement was
approved and adopted. Alex. Brown rendered an opinion to Commerce's Board of
Directors that, on June 23, 1994, based on the matters set forth therein, the
Exchange Ratio of 1.305 shares of BB&T Financial Common Stock for each share of
Commerce Common Stock is fair to the stockholders of Commerce from a financial
point of view. Alex. Brown did not determine or recommend the type or amount of
merger consideration. No limitations were imposed by the Commerce Board of
Directors upon Alex. Brown with respect to the investigations made or
procedures followed by it in rendering its opinion.
The full text of Alex. Brown's opinion, updated to the date hereof, which
sets forth assumptions made, matters considered and limits on the review
undertaken, is attached hereto as Appendix IV and is incorporated herein by
reference. Commerce stockholders are urged to read the opinion of Alex. Brown
in its entirety. The following summary of the opinion is qualified in its
entirety by reference to the full text of the opinion.
In rendering its opinion, Alex. Brown (i) reviewed the Acquisition Agreement,
certain publicly available business and financial information concerning
Commerce and BB&T Financial and certain internal financial analyses and
forecasts for Commerce prepared by Commerce's management; (ii) held discussions
with members of executive management of Commerce and BB&T Financial regarding
the past and current business operations, financial condition and future
prospects of Commerce and BB&T Financial; (iii) reviewed the reported price and
trading activity of Commerce Common Stock and BB&T Financial Common Stock and
compared certain financial and stock market information for Commerce and BB&T
Financial with similar information for certain other companies, the securities
of which are publicly traded; (iv) reviewed the financial terms of certain
recent business combinations which Alex. Brown deemed comparable in whole or in
part; and (v) performed such other studies and analyses as Alex. Brown
considered appropriate.
Alex. Brown relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by and
discussed with it for purposes of its opinion. With respect to the financial
forecasts reviewed by Alex. Brown in rendering its opinion, Alex. Brown assumed
that such forecasts were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of Commerce as to
the future financial performance of Commerce. Alex. Brown did not make an
independent evaluation or appraisal of the assets or liabilities of Commerce
nor was it furnished with any such appraisal.
The summary set forth below does not purport to be a complete description of
the analyses performed by Alex. Brown in this regard. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description.
18
Accordingly, notwithstanding the separate factors discussed below, Alex. Brown
believes that its analyses must be considered as a whole and that selecting
portions of its analyses or of the factors considered by it, without
considering all analyses and factors, could create an incomplete view of the
evaluation process underlying its opinion. No one of the analyses performed by
Alex. Brown was assigned a greater significance than any other. In performing
its analyses, Alex. Brown made numerous assumptions with respect to industry
performance, business and economic conditions and other matters, many of which
are beyond Commerce or BB&T Financial's control. The analyses performed by
Alex. Brown are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested by such
analyses. Additionally, analyses relating to the values of business do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.
Analysis of Selected Publicly Traded Companies. In preparing its opinion,
Alex. Brown, using publicly available information, compared selected financial
information including book value, tangible book value, recent earnings, asset
quality ratios and loan loss reserve levels, for Commerce and a group of
selected comparable financial institutions.
The group comprised ten selected banking organizations located in the states
of Arkansas, Georgia, North Carolina, South Carolina, Virginia and West
Virginia that possessed an asset base between $300 million and $1.5 billion
("Regional Comparable Group"). The Regional Comparable Group included Allied
Bankshares, Inc., Carolina First Corp., Century South Banks, Inc., L.S.B.
Bancshares, Inc. of South Carolina, NBSC Corp., Piedmont BankGroup, Inc.,
Premier Bankshares Corp., Simmons First National Corp., First United
Bancshares, Inc. and WesBanco, Inc. As of June 22, 1994, the relative multiples
of the market price of Commerce Common Stock and the mean market price of the
common stock of the Regional Comparable Group to such selected June 30, 1994
financial data were: to trailing 12 months earnings per share, 12.6x for
Commerce and 12.8x for the Regional Comparable Group; to stated book value,
172.6% for Commerce and 156.9% for the Regional Comparable Group; to tangible
book value, 176.2% for Commerce and 184.9% for the Regional Comparable Group;
and to total assets, 11.5% for Commerce and 15.2% for the Regional Comparable
Group.
Analysis of Comparable Acquisition Transactions. In preparing its opinion,
Alex. Brown analyzed certain comparable merger and acquisition transactions for
bank institutions based upon the acquisition price relative to stated book
value, latest twelve months earnings, total assets, premium to core deposits
and one month prior to announcement market price premium. The analysis included
a review and comparison of the mean multiples represented by a sample of
recently effected or pending bank acquisitions nationwide having a transaction
value between $50 million and $200 million which were announced since January
1, 1992 (a total of 55 transactions), as segmented into: (i) transactions in
Georgia, Maryland, North Carolina, South Carolina and Virginia (4 transactions)
("Regionally-Segmented Transactions"); (ii) transactions in which the selling
bank demonstrated a return on average assets of between 0.70% and 1.20% during
the year of an announced acquisition (25 transactions) ("Profitability-
Segmented Transactions"); and (iii) transactions in which the selling bank had
non-performing assets of less than 1.00% for the most recent quarter prior to
an announced acquisition (27 transactions) ("Asset Quality-Segmented
Transactions").
19
Based on the closing stock price of BB&T Financial Common Stock on June 22,
1994 ($31.25), the market value of the merger consideration at June 23, 1994
was $40.78 per Commerce share (the "Comparison Value"). The relative multiples
of the Comparison Value and each of the comparable acquisition transaction
segmentations are provided in the following table:
PURCHASE PRICE TO
---------------------------
ONE MONTH
LAST 12 PRIOR
MONTHS CORE MARKET
EARNINGS DEPOSIT PRICE
TRANSACTION GROUP BOOK VALUE PER SHARE ASSETS PREMIUM PREMIUM
----------------- ---------- --------- ------ ------- ---------
COMPARISON VALUE................ 238.6% 17.4x 18.2% 13.7% 51.7%
Comparable Acquisition Transac-
tions:
(a) Nationwide.................. 197.8% 14.7x 16.7% 10.9% 38.8%
(b) Regionally-Segmented........ 208.5% 21.0x 18.1% 11.3% 29.9%
(c) Profitability-Segmented..... 188.6% 15.9x 15.1% 9.5% 42.2%
(d) Asset Quality-Segmented..... 216.1% 15.7x 18.4% 12.7% 41.6%
Contribution Analysis. Alex. Brown analyzed the historical (March 31, 1994)
contribution of each of Commerce and BB&T Financial (pro forma for its
acquisition of L.S.B. Bancshares, Inc. of South Carolina) to, among other
things, the total assets, total equity and three months ended March 31, 1994
net income of the pro forma combined company. This analysis showed that
Commerce would have contributed 6.51% of the total assets, 5.49% of the total
equity and 6.11% of the three months ended March 31, 1994 net income to the pro
forma combined company, compared with a proposed ownership of 10.0% of the
combined company to be held by Commerce stockholders. This analysis did not
include any merger synergies.
Discounted Cash Flow Analysis. Using discounted cash flow analysis, Alex.
Brown estimated the present value of the future dividend streams that Commerce
could produce through December 31, 1998, under different assumptions as to
required equity levels, if Commerce performed in accordance with management's
forecasts and certain variants thereof. Alex. Brown also estimated the terminal
value for Commerce's common equity after the period by applying book value
acquisition multiples (188.6%--238.6%) derived from the average price to book
multiples generated by the different segmentations in the comparable
transaction analysis. The dividend streams and terminal values were then
discounted to present values using discount rates ranging from 13.5% to 16.5%
which reflect different assumptions regarding the required rates of return of
holders or prospective buyers of Commerce Common Stock.
Reference Range. Based in part on the several analyses discussed above, Alex.
Brown developed, for purposes of its opinion, a reference range for the value
of Commerce Common Stock of $30.50 to $42.27 per share of Commerce Common
Stock. The values reflected in the foregoing reference range were considered
along with the other analyses performed by Alex. Brown and were not intended to
represent the price at which 100% of the Commerce Common Stock could actually
be sold. The foregoing reference range was based in part on the application of
economic and financial models and is not necessarily indicative of actual
values, which may be significantly more or less than such estimates. The
reference ranges does not purport to be an appraisal.
Compensation of Financial Advisor. Pursuant to the terms of an engagement
letter dated June 4, 1993 and an addendum dated May 31, 1994, Commerce has
agreed to pay Alex. Brown a fee of 1.00% of the aggregate consideration to be
paid in the Acquisition for acting as financial advisor to Commerce in
connection with the Acquisition, including rendering its opinion. Commerce paid
$25,000 of this fee to Alex. Brown upon execution of the engagement letter and
the balance of this fee is payable to Alex. Brown upon consummation of the
Acquisition. Whether or not the Acquisition is consummated, Commerce has agreed
to reimburse Alex. Brown for certain reasonable out-of-pocket expenses and has
also agreed to indemnify Alex. Brown and certain related persons against
certain liabilities relating to or arising out of its engagement.
20
Certain Relationships. Alex. Brown has acted, from time to time, as financial
advisor to Commerce, including acting as financial advisor to Commerce in
connection with the Preferred Stock Purchase Agreement with BB&T Financial
dated April 21, 1994. In the ordinary course of its business, Alex. Brown makes
a market in Commerce and BB&T Financial securities and may hold positions in
securities of Commerce and BB&T Financial.
THE FULL TEXT OF ALEX. BROWN'S OPINION AS OF THE DATE OF THIS PROXY
STATEMENT/PROSPECTUS, WHICH SETS FORTH CERTAIN ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITATIONS ON REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX IV TO
THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE, AND
SHOULD BE READ IN ITS ENTIRETY IN CONNECTION WITH THIS PROXY
STATEMENT/PROSPECTUS. THE SUMMARY OF THE OPINION OF ALEX. BROWN SET FORTH IN
THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE OPINION.
GENERAL DESCRIPTION OF THE TERMS OF THE ACQUISITION
On the Effective Date, holders of Commerce Common Stock will receive a number
of shares of BB&T Financial Common Stock based on the Exchange Ratio. See "--
Exchange of Commerce Common Stock." BB&T-VA will be merged with and into
Commerce, with Commerce as the surviving corporation and wholly owned
subsidiary of BB&T Financial (Commerce as existing on and after the Effective
Date being hereinafter sometimes referred to as the "Surviving Corporation").
Immediately after the Effective Date, BB&T Financial will distribute all of the
outstanding common stock of the Surviving Corporation to BB&T Financial
Corporation of Virginia, a to be formed Virginia corporation and wholly owned
subsidiary of BB&T Financial ("BB&T Financial-Va"), and the Surviving
Corporation will become a wholly owned subsidiary of BB&T Financial-Va. Unless
the BB&T Financial-Va Board of Directors votes otherwise, the Surviving
Corporation will be named "Commerce Bank" for a period of not less than three
years after the Effective Date.
Upon consummation of the Merger, all of the members of the Commerce Board of
Directors will become members of the Board of Directors of the Surviving
Corporation. In addition, BB&T Financial has agreed to cause seven members of
the Commerce Board of Directors designated by Commerce's Chief Executive
Officer (the "BB&T Financial-Va Designees"), and three other persons designated
by BB&T Financial, to become members of the BB&T Financial-Va Board of
Directors upon consummation of the Acquisition. The BB&T Financial-Va Designees
are: G. Robert Aston, Jr.; Ramon W. Breeden, Jr.; Thomas C. Broyles; J.W.
Whiting Chisman, Jr.; Andrew S. Fine; Ernest F. Hardee; and J. Alan Lindauer.
Mr. Lindauer will become Chairman of the Board of BB&T Financial-Va.
The Reorganization Agreement provides that BB&T Financial and Commerce will
each bear and pay their own costs and expenses incurred in connection with the
transactions contemplated by the Reorganization Agreement, including fees and
expenses of each party's own financial consultants, accountants and counsel,
except that BB&T Financial and Commerce will each bear and pay 50 percent of
the cost of printing this Proxy Statement/Prospectus. BB&T Financial will,
however, reimburse Commerce for all reasonable out-of-pocket expenses incurred
by Commerce in connection with the transactions contemplated by the
Reorganization Agreement if the Reorganization Agreement is terminated.
However, the Reorganization Agreement further provides that BB&T Financial's
obligation to reimburse Commerce for such expenses will not apply if Commerce
materially breaches any provision of the Acquisition Agreement or the Option
Agreement.
EXCHANGE OF COMMERCE COMMON STOCK
At the Effective Date, each share of Commerce Common Stock outstanding
immediately prior to the Effective Date will be exchanged for 1.305 shares of
BB&T Financial Common Stock; provided, that in the event that BB&T Financial
shall have a record date between June 24, 1994 and the effective date of the
21
Acquisition for a special distribution to stockholders, a stock split, stock
dividend or similar change in capitalization, an equitable and appropriate
adjustment shall be made to the Exchange Ratio to reflect the effect of such
distribution or change.
No fractional shares of BB&T Financial Common Stock will be issued in
connection with the Acquisition. Instead, cash will be paid in lieu of
fractional shares in an amount equal to the product of the fractional share
multiplied by the average of the reported closing price of BB&T Financial
Common Stock on the Nasdaq/NMS on the ten trading days ending on the tenth
business day prior to the Effective Date of the Acquisition (the "BB&T
Financial Average Closing Price").
At the Effective Date, Commerce's obligations with respect to its authorized
and outstanding Capital Notes, issued by Commerce pursuant to the Indenture,
will be assumed by BB&T Financial and the Surviving Corporation by a
supplemental indenture and each holder of a Capital Note will have the right,
during the period such Capital Note is convertible, to convert each Capital
Note into shares of BB&T Financial Common Stock at a Conversion Rate equal to
1.305 shares of BB&T Financial Common Stock for each share of Commerce Common
Stock into which such Capital Notes would have been converted immediately prior
to the Effective Date, subject to payment of cash in lieu of any fractional
shares and to further adjustment in accordance with the terms of the Indenture.
To the extent not exercised prior to the Effective Date, Commerce's
obligations with respect to stock options granted under the Commerce Stock
Option Plans will be assumed by BB&T Financial and each stock option
outstanding under such plan shall become the right to receive, upon payment of
the adjusted exercise price, that number of shares of BB&T Financial Common
Stock the option holder would have received pursuant to the Acquisition if he
or she had exercised such option immediately prior thereto, and cash in lieu of
any fractional shares. The conversion of the Commerce stock options is subject
to the restrictions imposed on "incentive stock options" by federal law. See
"--Interests of Certain Persons in the Acquisition and Effect of the
Acquisition on Employees and Benefit Plans--Stock Options."
The market price of BB&T Financial Common Stock following the completion of
the Acquisition will depend on the results of operations and the financial
condition of BB&T Financial, the pending SNC Merger, the general level of
interest rates, the perception of the banking industry generally, and other
relevant factors that may affect the price of BB&T Financial Common Stock and
that may affect the securities markets generally. Accordingly, BB&T Financial
Common Stock could trade at prices higher or lower than those trading prices
that may have been considered by Commerce's Board of Directors in approving the
Exchange Ratio.
EXCHANGE OF COMMERCE COMMON STOCK CERTIFICATES
As soon as practical after the Effective Date, BB&T-NC, as the transfer agent
for BB&T Financial Common Stock ("Transfer Agent"), will mail to each holder of
record of Commerce Common Stock a letter of instruction regarding the
procedures to be followed in the exchange of certificates of Commerce Common
Stock for certificates of BB&T Financial Common Stock. When it is received,
holders of Commerce Common Stock should follow the instructions contained
therein.
Commerce's stockholders should not forward any certificates representing
shares of Commerce Common Stock except in accordance with the letter of
instruction from the Transfer Agent to be sent after the Effective Date.
COMMERCE'S STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES TO THE TRANSFER
AGENT UNTIL INSTRUCTED TO DO SO.
Upon surrender of certificates representing shares of Commerce Common Stock
to the Transfer Agent after the Effective Date, each holder of Commerce Common
Stock will receive a certificate representing the
22
number of shares of BB&T Financial Common Stock to which such holder is
entitled pursuant to the Exchange Ratio, and each holder of Commerce Common
Stock entitled to receive a fraction of a share of BB&T Financial Common Stock
shall also receive cash in an amount equal to such fractional part of a share
of BB&T Financial Common Stock multiplied by the BB&T Financial Average Closing
Price. At the Effective Date, Commerce's obligations with respect to its
Capital Notes will be assumed by BB&T Financial and the Surviving Corporation
by a supplemental indenture, and each holder of a Capital Note will have the
right, during the period such Capital Note is convertible, to convert each
Capital Note into the number of shares of BB&T Financial Common Stock to which
such holder is entitled pursuant to the Conversion Rate, subject to payment of
cash in lieu of any fractional shares and to further adjustment in accordance
with the terms of the Indenture. In addition, at the Effective Date, Commerce's
obligations with respect to stock options granted under the Commerce Stock
Option Plans will be assumed by BB&T Financial, and each stock option
outstanding under each such Plan will become the right to receive, upon payment
of the adjusted exercise price, that number of shares of BB&T Financial Common
Stock the option holder would have received pursuant to the Acquisition if he
or she had exercised such option immediately prior thereto. However, a holder
of any Commerce option who would otherwise be entitled to receive a fraction of
a share of BB&T Financial Common Stock upon exercise of all his or her options
at any one time will receive cash in an amount equal to such fractional part of
a share of BB&T Financial Common Stock multiplied by the BB&T Financial Average
Closing Price. The conversion of the Commerce stock options is subject to the
restrictions imposed on "incentive stock options" by federal law.
A certificate for BB&T Financial Common Stock will be issued only in the name
in which the certificate for Commerce Common Stock surrendered for exchange is
registered. BB&T Financial will issue a single certificate for shares of BB&T
Financial Common Stock to which a Commerce stockholder is entitled. In no event
will the Transfer Agent, BB&T Financial or any party to the Acquisition be
liable to any person for any BB&T Financial Common Stock or dividends thereon
or cash delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar law.
After the Effective Date and until surrender of Commerce Common Stock to the
Transfer Agent, each certificate that represented outstanding Commerce Common
Stock immediately prior to the Effective Date will be deemed to evidence
ownership of the number of shares of BB&T Financial Common Stock into which the
shares represented by such certificates have been exchanged and any right to
receive cash in lieu of fractional shares into which such shares would have
converted. No Commerce stockholder will, however, receive the dividends or
other distributions on BB&T Financial Common Stock until the certificates
representing Commerce Common Stock are surrendered for exchange. Upon surrender
of certificates representing Commerce Common Stock, each such stockholder will
receive the number of shares of BB&T Financial Common Stock to which such
stockholder is entitled under the Exchange Ratio and cash in lieu of any
fractional shares, plus any dividends or other distributions on BB&T Financial
Common Stock which are payable to holders as of any record date following the
Effective Date. No Commerce stockholder will be entitled to dividends, voting
rights or any other stockholder right in respect of any fractional share. All
fractional share interests of each stockholder will be aggregated, and no such
stockholder will receive a cash payment equal to, or greater than, the BB&T
Financial Average Closing Price.
CONDITIONS TO CONSUMMATION OF THE ACQUISITION
The respective obligations of BB&T Financial and Commerce to consummate the
Acquisition are subject to the satisfaction of certain conditions, including,
without limitation, the taking of all necessary corporate action with respect
to the Acquisition Agreement, including the approval of the Acquisition
Agreement by the stockholders of Commerce; the continuing effectiveness of the
registration statement under the Securities Act and applicable state securities
or "Blue Sky" laws or exemptions to those laws; the registration or exemption
from registration under applicable state securities or "Blue Sky" laws of the
BB&T Financial Common Stock to be issued pursuant to the Acquisition Agreement;
the absence of any order, decree or injunction of a court or agency of
competent jurisdiction which enjoins or prohibits consummation of the
23
transactions contemplated by the Reorganization Agreement; the receipt of an
opinion from BB&T Financial's counsel or tax advisor, in form and substance
satisfactory to Commerce and BB&T Financial, substantially to the effect that
the Acquisition will constitute one or more reorganizations under Section 368
of the Code, and that the stockholders of Commerce will not recognize any gain
or loss to the extent that such stockholders exchange shares of Commerce Common
Stock for shares of BB&T Financial Common Stock; the accuracy of the
representations and warranties set forth in the Reorganization Agreement in all
material respects as of the Effective Date as though made on and as of such
date; the performance by Commerce and BB&T Financial in all material respects
of all material obligations and compliance with all material covenants required
by the Reorganization Agreement; the receipt of certain opinions of counsel and
certificates from officers of Commerce and BB&T Financial; the receipt of all
necessary regulatory approvals for the Acquisition and expiration of all notice
periods and waiting periods required after the granting of any such approvals,
without any condition or requirement contained therein which, in the reasonable
opinion of the BB&T Financial Board of Directors, would so materially adversely
affect the business or economic benefits of the transactions contemplated by
the Reorganization Agreement as to render consummation of those transactions
inadvisable or unduly burdensome; and that neither BB&T Financial nor Commerce
has reasonably determined in good faith that there has been a material adverse
change in the condition, operations or prospects of the other party since
December 31, 1993.
Consummation of the Acquisition also is subject to the condition that BB&T
Financial will have received written agreements from the affiliates of Commerce
that they will not sell any shares of BB&T Financial Common Stock received upon
consummation of the Acquisition except in compliance with Rule 145 under the
Securities Act or otherwise in compliance with the Securities Act and the rules
and regulations promulgated thereunder. It is also a condition that BB&T
Financial will have determined that the Acquisition will qualify for the
pooling-of-interests method of accounting.
Either Commerce or BB&T Financial may waive certain of the conditions imposed
with respect to its or their respective obligations to consummate the
Acquisition, except for (i) the requirements that the Acquisition be approved
by Commerce's stockholders and that all required regulatory approvals for the
Acquisition be received and (ii) after approval of the Acquisition Agreement by
Commerce's stockholders, any reduction in the number of shares of BB&T
Financial Common Stock into which each share of Commerce Common Stock will be
converted in the Acquisition or the payment terms for fractional interests
thereof.
TERMINATION
The Reorganization Agreement may be terminated at any time on or prior to the
Effective Date by the mutual consent in writing of the parties. Either party
may elect to terminate the Reorganization Agreement by notifying the other
party in writing upon a breach by the other party in any material respect of
(i) any covenant or undertaking contained in the Reorganization Agreement, Plan
of Merger or Option Agreement, or (ii) any representation or warranty contained
in the Reorganization Agreement, which breach has been materially adverse. The
Reorganization Agreement may only be terminated as a result of such breach if
such breach has not been cured by the earlier of 30 days after the date on
which written notice of such breach is given to the party committing such
breach or the Effective Date. Either party may also elect to terminate the
Reorganization Agreement on the Effective Date if the conditions precedent to
the obligations of such party to consummate the transactions contemplated by
the Reorganization Agreement have not been satisfied or fulfilled. The
Reorganization Agreement also may be terminated by either party if any of the
regulatory applications for prior approval are denied and the time period for
appeals and requests for reconsideration of such denial has run, or if the
Commerce stockholder approval required to consummate the Acquisition is not
obtained. In addition, the Reorganization Agreement may be terminated by either
party if the Effective Date has not occurred prior to the close of business on
June 30, 1995. The Reorganization Agreement may also be terminated by either
party if such party determines in good faith that any condition precedent to
such party's obligations would be impossible to satisfy. The terminating party
must, however, give the other party notice
24
at least ten days prior to such termination and provide the other party a
reasonable opportunity to discuss the matter with a view to achieving a
mutually acceptable resolution.
AMENDMENT
The Acquisition Agreement may be amended or supplemented in writing by mutual
agreement of BB&T Financial and Commerce, provided that such amendment or
supplement must be approved by their respective Boards of Directors, and
provided further that no amendment or supplement executed after approval of the
Acquisition Agreement by Commerce's stockholders may reduce either the number
of shares of BB&T Financial Common Stock into which each share of Commerce
Common Stock will be converted in the Acquisition or the payment terms for
fractional interests. The Reorganization Agreement was amended as of August 25,
1994 to change the structure of the Acquisition to provide that BB&T-VA will be
a direct subsidiary of BB&T Financial prior to the Merger and, immediately
following the Merger, BB&T Financial will distribute all of the outstanding
common stock of the Surviving Corporation to BB&T Financial-Va and the
Surviving Corporation will become a subsidiary of BB&T Financial-Va.
CONDUCT OF COMMERCE'S AND BB&T FINANCIAL'S BUSINESS PRIOR TO THE EFFECTIVE DATE
Under the terms of the Reorganization Agreement, neither Commerce nor any
Commerce subsidiary may, without the prior written consent of BB&T Financial,
which consent may not be withheld on an arbitrary basis or basis inconsistent
with BB&T Financial's interests as an acquiror of Commerce, among other things:
(i) carry on its business other than in the usual, regular and ordinary course
in substantially the same manner as theretofore conducted, or establish or
acquire any new subsidiary or cause or permit any subsidiary to engage in any
new activity or expand any existing activities; (ii) declare, set aside, make
or pay any dividend or other distribution in respect of its capital stock that
would cause the Acquisition not to be accounted for as a pooling-of-interests,
as determined by BB&T Financial; (iii) issue any shares of its capital stock
other than pursuant to the Option Agreement, the Commerce Stock Option Plans,
the Capital Notes, or the Commerce Dividend Reinvestment and Stock Purchase
Plan; (iv) issue, grant or authorize any rights other than pursuant to the
Option Agreement or effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization; (v) amend its articles
of incorporation or by-laws; impose, or suffer the imposition, on any share of
stock held by Commerce in any Commerce subsidiary of any material lien, charge
or encumbrance or permit any such lien to exist; or waive or release any
material right or cancel or compromise any material debt or claim other than in
the ordinary course of business; (vi) merge with any other corporation or bank
or permit any other corporation, savings institution or bank to merge into it
or consolidate with any other corporation, savings institution or bank; acquire
control over any other firm, bank, corporation, savings institution or
organization; or liquidate, sell or otherwise dispose of any assets or acquire
any assets, other than in the ordinary course of its business; (vii) fail to
comply in any material respect with any laws, regulations, ordinances or
governmental actions applicable to it and to the conduct of its business except
where Commerce or any Commerce subsidiary is in good faith contesting the
validity of any of the foregoing; (viii) 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 a manner and amount consistent with
past practice; (ix) enter into or substantially modify (except as may be
required by applicable law) any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees; provided however, that this subpart shall not prevent renewals of
any of the foregoing consistent with past practice; (x) 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, Commerce or any Commerce subsidiary or any business
combination with Commerce or any Commerce subsidiary other than as contemplated
by the Reorganization Agreement; or authorize any officer, director, agent or
affiliate of it to do any of the above; or fail to notify BB&T Financial
25
immediately if any such inquiries or proposals are received by, any such
information is required from, or any such negotiations or discussions are
sought to be initiated with, Commerce; (xi) enter into (a) 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, (b) any agreement, indenture or
other instrument not made in the ordinary course of business relating to the
borrowing of money by Commerce or a Commerce subsidiary or guarantee by
Commerce or a Commerce subsidiary of any such obligation, (c) any agreement,
arrangement or commitment not cancellable by Commerce without penalty or cost
within 30 days after the Effective Date 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 normal election of directors by stockholders and the election of
officers by directors not pursuant to a specific agreement, arrangement or
commitment not previously disclosed as provided in the Reorganization
Agreement), or (d) any contract, agreement or understanding with a labor union;
(xii) change its lending, investment or asset liability management policies in
any material respect or materially change the mix (by type of security) and
average maturity of the securities portfolio, except as may be required by
applicable law, regulation or directives, and except that after approval of the
Acquisition Agreement by its stockholders, Commerce shall cooperate in good
faith with BB&T Financial to adopt policies, practices and procedures
consistent with those used by BB&T Financial, effective on or before the
consummation of the Acquisition; (xiii) change its methods of accounting in
effect at December 31, 1993, except as required by changes in generally
accepted accounting principles concurred in by its independent certified public
accountants, 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, 1993, except as
required by changes in law or regulation; or (xiv) agree to do any of the
foregoing.
Except with the prior written consent of Commerce, which consent may not be
arbitrarily or unreasonably withheld, prior to the Effective Date, neither BB&T
Financial nor any of its subsidiaries may: (i) exercise the Option Agreement
other than in accordance with its terms, or dispose of the shares of Commerce
Common Stock issuable upon exercise of the option rights conferred thereby
other than as permitted or contemplated by the terms of the Option Agreement,
see "THE ACQUISITION--The Option Agreement"; (ii) enter into a merger or other
business combination transaction with any other corporation or person in which
BB&T Financial would not be the surviving or continuing entity after the
consummation thereof; (iii) sell or lease all or substantially all of the
assets and business of BB&T Financial; or (iv) declare an extraordinary or
special dividend or distribution on BB&T Financial Common Stock in an amount
equal to more than 10% of BB&T Financial's stockholders' equity as reflected on
the financial statements of BB&T Financial as of the three months ended prior
to such payment.
REGULATORY CONSIDERATIONS
The Acquisition is subject to certain regulatory approvals, as set forth
below. To the extent that the following information describes statutes and
regulations, it is qualified in its entirety by reference to the particular
statutes and regulations and the regulations promulgated under such statutes.
The Acquisition is subject to approval by the Federal Reserve under the BHCA,
which prohibits a bank holding company, such as BB&T Financial or BB&T
Financial-Va, from acquiring direct or indirect ownership or control of more
than five percent (5%) of the voting shares of any bank, such as Commerce,
unless the Federal Reserve has approved the transaction. In considering an
application for approval of such an acquisition, the Federal Reserve reviews
the financial and managerial resources and future prospects of the bank holding
companies and the banks concerned and the convenience and needs of the
communities to be served. The Federal Reserve also is required to evaluate
whether the Acquisition would result in a monopoly or would be in furtherance
of any combination or conspiracy or attempt to monopolize the business of
banking in any part of the United States or otherwise would substantially
lessen competition or tend to create a monopoly or which in any manner would be
in restraint of trade, unless it finds that the
26
anticompetitive effects of the proposed transaction are clearly outweighed in
the public interest by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served. In addition, the Federal
Reserve must take into account the records of BB&T Financial and Commerce in
meeting the credit needs of the entire community, including low- and moderate-
income neighborhoods, served by such institutions. The BHCA requires that any
bank acquisition or merger may not be consummated until the 30th day after
approval, during which the United States Department of Justice ("DOJ") may
challenge the transaction on antitrust grounds. BB&T Financial will submit an
application to the Federal Reserve for approval to consummate the Acquisition
in September 1994.
The Acquisition also is subject to approval by the Bureau under Section 6.1-
399 of the Code of Virginia, which permits a regional bank holding company,
such as BB&T Financial, to acquire, directly or indirectly, more than five
percent (5%) of the voting shares of a Virginia bank holding company, such as
BB&T Financial-Va, or a Virginia bank, such as BB&T-VA or Commerce, if the
Bureau has approved of the transaction based upon its review of an application
submitted to the Bureau pursuant to applicable law. Approval of such an
application is conditioned upon, among other things, the Bureau's determination
that the laws of the state in which the regional bank holding company is
located, in this case, North Carolina, would permit Virginia bank holding
companies to acquire banks and bank holding companies in that state. North
Carolina law would permit a Virginia bank holding company to acquire a bank or
bank holding company located in that state, subject to appropriate regulatory
approvals. The Bureau also must determine whether (i) the proposed acquisition
would be detrimental to the safety and soundness of the companies involved;
(ii) the applicant, its directors and officers are qualified by character,
experience and financial responsibility to control and operate a Virginia bank;
(iii) the proposed acquisition would be prejudicial to the interests of the
depositors, creditors, beneficiaries of fiduciary accounts or stockholders of
the companies involved; and (iv) the acquisition is in the public interest.
The organization of an interim Virginia-chartered bank, such as BB&T-VA, is
subject to approval by the Bureau of an application of an interim institution
to begin business in Virginia. Approval of an application is conditioned upon,
among other things, the Bureau's determination that the authorization of the
application would be in the public interest.
The Merger, in and of itself, is subject to approval by the FDIC pursuant to
the Bank Merger Act. The Bank Merger Act requires that the FDIC take into
consideration the financial and managerial resources and future prospects of
the existing and proposed institutions and the convenience and needs of the
communities to be served. Further, the FDIC may not approve the Merger if it
would result in a monopoly or if it would be in furtherance of any combination
or conspiracy to monopolize or attempt to monopolize the business of banking in
any part of the United States, or if its effect in any section of the country
may be substantially to lessen competition or to tend to create a monopoly, or
if it would be in any other manner in restraint of trade, unless the FDIC finds
that the anticompetitive effects of the Merger are clearly outweighed in the
public interest by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served. In addition, the FDIC
must take into account the record of performance of the existing and proposed
institution under the Community Reinvestment Act of 1977 ("CRA") in meeting the
credit needs of the entire community, including low- and moderate-income
neighborhoods, served by such institution. Applicable regulations also require
publication of notice of the application for approval of the Merger and provide
an opportunity for the public to comment on the application in writing and to
request a hearing.
The Bank Merger Act requires that any bank merger, including the Merger, may
not be consummated until the 30th day after approval, during which time the DOJ
may challenge the Merger on antitrust grounds.
The Merger will proceed under Section 6.1-43 of the Code of Virginia, which
allows bank mergers when all applicable laws governing such merger are complied
with.
The Acquisition will not proceed in the absence of all required approvals.
There can be no assurance that such approvals will be received and, if they
are, there can be no assurance as to the date of such approvals
27
or that such approvals will not be conditioned upon matters that could cause
the BB&T Financial Board of Directors to abandon the Acquisition. If any
condition or requirement is imposed which, in the reasonable opinion of the
BB&T Financial Board of Directors, would so materially adversely affect the
economic or business benefits to BB&T Financial of the transactions
contemplated by the Reorganization Agreement as to render consummation of the
transactions inadvisable or unduly burdensome, the Reorganization Agreement
permits BB&T Financial to terminate the Reorganization Agreement.
BB&T Financial and Commerce are not aware of any other governmental approvals
or actions that are required for consummation of the Acquisition or the Merger
except as described above. Should any such approval or action be required, it
is presently contemplated that such approval or action would be sought or
taken. There can be no assurance that any such approval or action, if needed,
could be obtained, would not delay consummation of the Acquisition or would not
be conditioned in a manner that would cause BB&T Financial to abandon the
Acquisition.
INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION AND EFFECT OF THE ACQUISITION
ON EMPLOYEES AND BENEFIT PLANS
Directors. Upon consummation of the Merger, all of the members of the
Commerce Board of Directors will become members of the Board of Directors of
the Surviving Corporation. In addition, BB&T Financial has agreed to cause
seven members of the Commerce Board of Directors designated by Commerce's Chief
Executive Officer, and three other persons designated by BB&T Financial, to
become members of the BB&T Financial-Va Board of Directors upon consummation of
the Merger. See "--General Description of the Terms of the Acquisition".
In connection with the Acquisition, Commerce and BB&T Financial will enter
into a five year consulting agreement ("Consulting Agreement") with Thomas C.
Broyles, the current Chairman of the Board of Commerce. Under the Consulting
Agreement Mr. Broyles will continue to provide services to Commerce and BB&T
Financial, particularly focusing on building ties in the communities served by
Commerce and assisting BB&T Financial in introducing itself to the Virginia
financial services market, and will receive compensation of $2,500 per month.
The Consulting Agreement also will contain other terms and conditions customary
to such agreements.
Indemnification of Directors and Officers. Following the Effective Date, BB&T
Financial has agreed to indemnify the directors and officers of Commerce who
are currently entitled to indemnification pursuant to Virginia law to the
maximum extent permitted by North Carolina and federal law, if applicable. In
addition, BB&T Financial has agreed to purchase and to keep in force directors'
and officers' liability insurance to provide coverage for actions or omissions
by directors and officers of Commerce for claims made for the period commencing
with and after the Effective Date. However, such insurance will be provided
only if, and to the extent that, any similarly situated officer or director of
BB&T Financial is insured from time to time. From and after the Effective Date,
BB&T Financial has also agreed to indemnify each present and former director of
Commerce (the "Indemnified Parties") against any and all costs or expenses
(including reasonable attorney's fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any and all claims, actions,
suits or proceedings, whether civil, criminal, administrative or investigative,
arising out of or pertaining to matters existing or occurring at or prior to
the Effective Date, whether asserted or claimed prior to, at or after the
Effective Date, to the fullest extent permitted by applicable law (and also
advance expenses incurred to the fullest extent permitted by applicable law),
except for liability or litigation expense incurred on account of activities
known or believed by such person to be clearly in conflict with the best
interest of Commerce or BB&T Financial or activities such person had reasonable
cause to believe were criminal. Any Indemnified Party wishing to claim
indemnification under such provision must notify BB&T Financial thereof within
45 days of learning of such claim, action, suit, proceeding or investigation.
However,
28
failure to so notify shall not relieve BB&T Financial of any liability it may
have to such Indemnified Party if such failure does not materially prejudice
the indemnifying party. BB&T Financial has agreed to pay the reasonable fees
and expenses of the Indemnified Parties as provided in the Reorganization
Agreement.
Employment Agreements. Upon consummation of the Acquisition, Messrs. Aston
and Morgan, who currently are officers of Commerce as described below (each, an
"Officer"), will enter into agreements (each an "Employment Agreement") with
BB&T Financial and Commerce providing for continued employment with BB&T
Financial for a period of ten years, in the positions, and for the base
salaries ("Base Salary") as are set forth below:
CURRENT POSITION BASE
NAME WITH COMMERCE SALARY
---- ---------------- --------
G. Robert Aston............. President and Chief Executive Officer $418,000
R. Scott Morgan............. Executive Vice President and Senior $173,600
Lending Officer
Subject to adjustment as described below, each Officer will receive a minimum
annual salary at least equal to the Base Salary. After the Effective Date, each
Officer, provided each is otherwise eligible to participate in the BB&T
Financial Executive Incentive Compensation Plan and the BB&T Financial Long-
Term Incentive Compensation Plan (the "Long-Term Plan" and, collectively, the
"Plans"), may elect to participate in the Plans. In the event that an Officer
makes such an election, such Officer's Base Salary will be reduced to reflect a
base salary which, when added to the "Target Award" (as defined in the BB&T
Financial Executive Incentive Compensation Plan) and the assumed value of
options granted under the Long-Term Plan (pursuant to BB&T Financial's standard
practices for valuing such options) would result in compensation equal to such
Officer's Base Salary. After the first year following the Effective Date, any
salary increase for any Officer will be determined in accordance with BB&T
Financial's annual salary plan. Each Officer will be entitled to receive, on
the same basis as other officers of BB&T Financial, such group employee
benefits as BB&T Financial may from time to time extend to its employees. In
addition, BB&T Financial agrees either to provide health insurance to each
Officer's dependents or to reimburse each Officer for the cost of providing
such health insurance under the BB&T Financial health insurance plan. Mr.
Aston's Employment Agreement also provides that Commerce either will continue
to pay the premiums due on that portion for which Mr. Aston is the beneficiary
of the Commerce insurance policy maintained on the life of Mr. Aston, or will
reimburse Mr. Aston for any amounts paid to him to maintain such insurance
policy, including any taxes due on the amount of such reimbursements.
If an Officer voluntarily terminates employment with BB&T Financial, such
Officer will be entitled to receive 50% of that Officer's compensation then
provided under the Employment Agreement until the end of the term of the
Employment Agreement. Subject to the limitations set forth in the Employment
Agreement, if an Officer terminates employment with BB&T Financial at any time
during the term of the Employment Agreement, the Officer may not engage in
businesses that compete with Commerce in specified areas.
In the event of a "Change in Control" (as defined in the Employment
Agreements) of BB&T Financial, each Officer will have the right to voluntarily
terminate his employment with Commerce or BB&T Financial up until 18 months
after the Change in Control. Each Officer also will be entitled to receive
benefits equal to approximately three years' Base Salary, group employee and
health insurance benefits.
The Employment Agreements will supercede existing employment agreements.
Stock Options. Certain executive officers of Commerce hold options under the
Commerce Stock Option Plans to acquire up to 259,743 shares of Commerce Common
Stock as of August 29, 1994. Such options, to the extent not exercised prior to
the Effective Date, will become, by virtue of the Acquisition, the right to
receive, upon payment of the adjusted exercise price specified in the option,
that number of shares of BB&T Financial Common Stock the option holder would
have received pursuant to the Acquisition if he or she had exercised such
option immediately prior thereto, and cash in lieu of any fractional shares.
See "THE ACQUISITION-- Exchange of Commerce Common Stock."
29
Mr. Aston's Employment Agreement provides that, in addition to the other
options he may be entitled to exchange in the Acquisition, BB&T Financial
agrees to assume Commerce's obligations pursuant to certain nonqualified
options issued to him on December 16, 1992, to acquire up to 6,802 shares of
Commerce Common Stock. Each such stock option outstanding and held by Mr. Aston
shall become the right to receive, upon payment of the exercise price, 1.305
shares of BB&T Financial Common Stock for each share of Commerce Common Stock
covered by such options. The per share exercise price of the BB&T Financial
options shall equal the exercise price of the Commerce options of $23.50
divided by 1.305, or $18.01.
Employees and Benefit Plans. The Reorganization Agreement provides that, upon
the Effective Date, each person who is an employee of Commerce as of the
Effective Date (individually, an "Employee") shall automatically become an
employee of the Surviving Corporation, upon substantially the same terms and
conditions of employment, including compensation and benefits, and comparable
responsibilities that each Employee had on the day before the Effective Date.
BB&T Financial will attempt to avoid lay-offs of Commerce employees following
the Effective Date, and to meet efficiency goals for the Surviving Corporation
through attrition and reassignment. Each Employee will be eligible to receive
group hospitalization, medical, life, disability and other benefits comparable
to those provided to present employees of BB&T Financial without the imposition
of any waiting period or limitation on pre-existing conditions. Such benefits
shall not in the aggregate to all Employees as a group be less in amount or
value than those presently provided by Commerce. Employees also will have the
opportunity to participate in BB&T Financial's and its subsidiaries 401(k)
savings plans upon consummation of the Merger. Each participating employee will
have the right or option either to receive the benefits to which he or she is
entitled as a result of the termination of Commerce's 401(k) plan or to have
such benefits "rolled" into the 401(k) savings plans maintained by BB&T
Financial and its subsidiaries, on the same basis and applying the eligibility
standards as would apply to employees of BB&T Financial, recognizing past
service of those employees of Commerce as if such service had been performed on
behalf of BB&T Financial for vesting and qualification, but not for funding,
purposes.
Following the Merger, the Employees will be entitled to participate, to the
same extent and on the same terms as the employees of BB&T Financial, in any
retirement, pension or similar plans in effect for the benefit of BB&T
Financial employees (other than any employee stock ownership plan established
for the benefit of certain of BB&T Financial's employees) which when considered
as a whole will be no less favorable than the benefits currently provided to
such employees. Employees of Commerce will receive credit for their period of
service to such companies for participation and vesting purposes only.
RESTRICTIONS ON RESALES BY AFFILIATES
Certain directors and officers of Commerce may be deemed "affiliates" of
Commerce. Any sale or other disposition by such affiliates of BB&T Financial
Common Stock received by them pursuant to the Acquisition may be made only in
compliance with an exemption from the registration requirements of the
Securities Act and the restrictions set forth below.
The respective obligations of BB&T Financial and Commerce to consummate the
Acquisition are subject to the condition that each affiliate of Commerce must
execute and deliver to BB&T Financial a letter to the effect that each such
person will not dispose of any shares of BB&T Financial Common Stock to be
received pursuant to the Acquisition in violation of the Securities Act or the
applicable rules and regulations of the Commission.
This Proxy Statement/Prospectus may not be used by any such affiliate of
Commerce for the resale of any shares of BB&T Financial Common Stock received
pursuant to the Acquisition.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION
The following is a summary description of certain anticipated federal income
tax consequences of the Acquisition to stockholders of Commerce; it is not
intended to be a complete description of the federal income
30
tax consequences of the Acquisition. The federal income tax laws are complex,
and a stockholder's individual circumstances may affect the tax consequences to
the stockholder. In addition, no information is provided with respect to the
tax consequences of the Acquisition under applicable state, local and other tax
laws. Consequently, each Commerce stockholder is urged to consult his or her
own tax advisor regarding the tax consequences of the Acquisition.
Consummation of the Acquisition is conditioned upon the receipt by Commerce
and BB&T Financial of an opinion of KPMG Peat Marwick LLP, satisfactory in form
and substance to both parties, substantially to the effect that the Acquisition
will constitute one or more reorganizations under Section 368 of the Code and
that the stockholders of Commerce will not recognize any gain or loss for
federal income tax purposes to the extent that such stockholders exchange
shares of Commerce Common Stock for shares of BB&T Financial Common Stock. See
"--Conversion of Commerce Common Stock" and "--Conditions to Consummation of
the Acquisition."
If the Acquisition constitutes a reorganization within the meaning of Section
368 of the Code, (i) no gain or loss will be recognized by BB&T Financial or
Commerce by reason of the Acquisition; (ii) a stockholder of Commerce will
recognize no gain or loss for federal income tax purposes to the extent BB&T
Financial Common Stock is received in the Acquisition in exchange for Commerce
Common Stock; (iii) the tax basis in the BB&T Financial Common Stock received
by a stockholder will be the same as the tax basis in the Commerce Common Stock
surrendered in exchange therefor; and (iv) the holding period for BB&T
Financial Common Stock received in exchange for Commerce Common Stock will
include the period during which the stockholder held the Commerce Common Stock
surrendered in the exchange, provided that the Commerce Common Stock was held
as a capital asset at the Effective Date.
If Commerce Common Stock is held as a capital asset at the Effective Date,
the receipt of cash in lieu of a fractional share will give rise to capital
gain or loss measured by the difference, if any, between the amount of cash
received for such fractional share and a stockholder's basis in the fractional
share.
ACCOUNTING TREATMENT
BB&T Financial will use the pooling-of-interests method of accounting in
connection with the Acquisition. The pooling-of-interests method of accounting
combines assets and liabilities at their historical costs. It is a condition to
BB&T Financial's obligation to consummate the Acquisition that the Acquisition
qualify for treatment as a pooling-of-interests. See "PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS."
DISSENTERS' RIGHTS
Pursuant to Section 6.1-43 of the Code of Virginia, no stockholder of
Commerce is entitled to dissenters' rights in connection with the Acquisition.
Section 13.1-730 of the Code of Virginia generally grants dissenters' rights to
stockholders in connection with a plan of merger if stockholder approval is
required for the merger and the stockholder is entitled to vote on the merger.
However, Section 6.1-43 provides that in connection with the merger of Virginia
chartered banks, the dissenters' rights provision of Section 13.1-730 does not
apply.
THE OPTION AGREEMENT
The Option Agreement was entered into as a condition to BB&T Financial's
entering into the Reorganization Agreement and is intended to increase the
probability that the Acquisition will be consummated. Exercise of the Commerce
Option may tend to make the acquisition of a controlling interest in Commerce
more expensive to any prospective acquiror other than BB&T Financial even if
such an acquisition would be beneficial to Commerce's stockholders. The
existence of the Commerce Option is intended to make it less likely that a
prospective acquiror, other than BB&T Financial, will seek a business
combination with Commerce. The following is a brief summary of the Commerce
Option and is qualified in
31
its entirety by reference to the Option Agreement, a copy of which is attached
to this Proxy Statement/Prospectus as Appendix III and incorporated by
reference herein.
The Option Agreement permits the exercise by BB&T Financial of the Commerce
Option to purchase 540,000 shares of Commerce Common Stock at a price of $31.50
per share (subject to adjustments), payable in cash, upon the occurrence of
certain events described below. The shares subject to the Commerce Option
represent approximately 19.8% of the outstanding Commerce Common Stock.
BB&T Financial may exercise the Commerce Option, in whole or in part, at any
time or from time to time, upon or after the occurrence of a "Purchase Event."
As used in the Option Agreement, "Purchase Event" means:
(i) Commerce shall have entered into an agreement with a person (other
than BB&T Financial or its affiliates) to: (a) acquire, merge or
consolidate with, or enter into any similar transaction with Commerce, (b)
purchase, lease or otherwise acquire all or substantially all of the assets
of Commerce or (c) purchase or otherwise acquire (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing more than 10% of the voting power of Commerce or
its subsidiary;
(ii) any person shall have acquired beneficial ownership of more than 10%
of the outstanding shares of Commerce Common Stock or shall have merged,
consolidated with or consummated a similar transaction with Commerce or
shall have purchased, leased or otherwise acquired all or substantially all
of Commerce's assets; or
(iii) a bona fide proposal is made by any person (other than BB&T
Financial or its affiliates) by public announcement or written
communication that is or becomes the subject of public disclosure, or in an
application to any federal or state regulatory authority, to (a) acquire,
merge or consolidate with, or enter into any similar transaction with
Commerce, (b) purchase, lease or otherwise acquire all or substantially all
of the assets of Commerce or (c) purchase or otherwise acquire (including
by way of merger, consolidation, share exchange, tender or exchange offer
or any similar transaction) securities representing more than 25% of the
voting power of Commerce.
Commerce is required to notify BB&T Financial upon the occurrence of a
transaction, offer or event giving rise to a Purchase Event. In the event BB&T
Financial wishes to exercise the Commerce Option, it must send Commerce written
notice specifying (i) the total number of shares it will purchase and (ii) the
place and date not earlier than three business days nor later than 20 business
days after the date on which such notice is given for the closing of such
purchase. If prior notification to, or approval of, any federal or state
regulatory agency is required, BB&T Financial and/or Commerce will promptly
file the required notice or application for approval and the period of time
that otherwise would run pursuant to such notice period will run instead from
the date on which the last required notification period has expired or has been
terminated or such approvals have been obtained and any requisite waiting
period has passed.
The Option Agreement will expire and terminate, to the extent not previously
exercised, upon the earlier of (i) the Effective Date; (ii) the date on which
the Reorganization Agreement is terminated, other than a termination based upon
a material breach by Commerce of specified covenants in the Reorganization
Agreement or the failure of Commerce to obtain stockholder approval of the
transactions contemplated by the Reorganization Agreement by the vote required
under applicable law, in either case following the occurrence of a Purchase
Event or (iii) 18 months after the Reorganization Agreement is terminated based
upon a material breach by Commerce of a specified covenant or the failure of
Commerce to obtain stockholder approval of the transactions contemplated by the
Reorganization Agreement by the vote required under applicable law, in either
case following the occurrence of a Purchase Event.
In the event that Commerce's capitalization changes by reason of a stock
dividend, split-up, merger, recapitalization, combination, exchange of shares
or the like, the number of shares subject to the Commerce Option and the
purchase price per share thereof will be adjusted so that the economic value of
the Commerce Option remains unaltered.
32
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma combined condensed balance sheet as of June
30, 1994, and unaudited pro forma combined condensed statements of income for
the six months ended June 30, 1994 and 1993 and the years ended December 31,
1993, 1992 and 1991, combine the historical financial statements of BB&T
Financial and Commerce after giving effect to the Acquisition and combine the
pro forma financial statements of BB&T Financial after giving effect to the
Acquisition with the historical financial statements of SNC. The pro forma
combined condensed balance sheet gives effect to the Acquisition and the SNC
Merger as if they had occurred on June 30, 1994, and the pro forma combined
condensed statements of income give effect to the Acquisition and the SNC
Merger as if they had occurred at the beginning of the period presented, in
each case, by the pooling-of-interests method of accounting. The pro forma per
share data assumes the application of the Exchange Ratio of 1.305 shares of
BB&T Financial Common Stock for each outstanding share of Commerce Common Stock
in the Acquisition and an exchange ratio of 1.45 shares of common stock of the
Continuing Corporation ("Continuing Corporation Common Stock") for each
outstanding share of BB&T Financial Common Stock. For additional information
about the SNC Merger, see "INFORMATION ABOUT BB&T FINANCIAL--SNC Merger."
The pro forma adjustments and combined amounts are provided for informational
purposes only. The pro forma financial information presented is not necessarily
indicative of actual results that would have been achieved had the Acquisition
and the SNC Merger been consummated on June 30, 1994, or at the beginning of
the periods presented, nor is it necessarily indicative of future results.
33
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
BB&T FINANCIAL/ BB&T FINANCIAL/
BB&T FINANCIAL COMMERCE COMMERCE SNC COMMERCE/SNC
-------------- -------- --------------- ------- ---------------
INTEREST INCOME
Interest on loans....... $262,116 16,704 278,820 198,181 477,001
Interest and dividends
on securities.......... 64,358 6,885 71,243 73,444 144,687
Interest on short-term
investments............ 1,374 343 1,717 608 2,325
-------- ------ ------- ------- -------
Total interest income. 327,848 23,932 351,780 272,233 624,013
-------- ------ ------- ------- -------
INTEREST EXPENSE
Interest on deposits.... 109,167 9,602 118,769 89,696 208,465
Interest on short-term
borrowed funds......... 20,660 30 20,690 15,575 36,265
Interest on long-term
debt................... 9,745 331 10,076 9,281 19,357
-------- ------ ------- ------- -------
Total interest ex-
pense................ 139,572 9,963 149,535 114,552 264,087
Net Interest Income..... 188,276 13,969 202,245 157,681 359,926
Provision for loan loss-
es..................... 4,500 1,200 5,700 2,703 8,403
-------- ------ ------- ------- -------
Net Interest Income
After Provision for
Loan Losses............ 183,776 12,769 196,545 154,978 351,523
Noninterest income...... 63,872 4,762 68,634 42,343 110,977
Noninterest expense..... 163,776 12,226 176,002 116,356 292,358
-------- ------ ------- ------- -------
Income before income
taxes.................. 83,872 5,305 89,177 80,965 170,142
Income taxes............ 28,493 1,703 30,196 28,034 58,230
-------- ------ ------- ------- -------
Net income.............. 55,379 3,602 58,981 52,931 111,912
Preferred dividend re-
quirement.............. -- -- -- 2,598 2,598
-------- ------ ------- ------- -------
Net income applicable to
common shares.......... $ 55,379 3,602 58,981 50,333 109,314
======== ====== ======= ======= =======
EARNINGS PER SHARE
Primary net income.... $ 1.52 1.29 1.47 1.15 1.07
Fully diluted net in-
come................. 1.52 1.23 1.46 1.10 1.05
======== ====== ======= ======= =======
AVERAGE COMMON SHARES
(thousands)
Primary............... 36,552 2,802 40,209 43,636 101,938
Fully diluted......... 36,552 3,068 40,556 48,189 106,995
======== ====== ======= ======= =======
34
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
BB&T
BB&T FINANCIAL/ BB&T FINANCIAL/
FINANCIAL COMMERCE COMMERCE SNC COMMERCE/SNC
--------- -------- ---------- ------- ---------------
INTEREST INCOME
Interest on loans........ $230,686 15,002 245,688 200,581 446,269
Interest and dividends on
securities.............. 61,216 8,077 69,293 69,186 138,479
Interest on short-term
investments............. 717 323 1,040 1,530 2,570
-------- ------ ------- ------- -------
Total interest income.. 292,619 23,402 316,021 271,297 587,318
-------- ------ ------- ------- -------
INTEREST EXPENSE
Interest on deposits..... 107,185 10,311 117,496 100,491 217,987
Interest on short-term
borrowed funds.......... 9,758 9 9,767 7,465 17,232
Interest on long-term
debt.................... 3,990 304 4,294 11,661 15,955
-------- ------ ------- ------- -------
Total interest expense. 120,933 10,624 131,557 119,617 251,174
-------- ------ ------- ------- -------
Net Interest Income...... 171,686 12,778 184,464 151,680 336,144
Provision for loan loss-
es...................... 10,406 1,525 11,931 7,953 19,884
-------- ------ ------- ------- -------
Net Interest Income After
Provision for Loan
Losses.................. 161,280 11,253 172,533 143,727 316,260
Noninterest income....... 55,402 4,363 59,765 53,621 113,386
Noninterest expense...... 142,248 10,880 153,128 125,377 278,505
-------- ------ ------- ------- -------
Income before income tax-
es...................... 74,434 4,736 79,170 71,971 151,141
Income taxes............. 23,495 1,588 25,083 24,103 49,186
-------- ------ ------- ------- -------
Income before cumulative
effect of changes in
accounting principles... 50,939 3,148 54,087 47,868 101,955
Less cumulative effect of
changes in accounting
principles.............. -- -- -- 27,217 27,217
-------- ------ ------- ------- -------
Net income............... 50,939 3,148 54,087 20,651 74,738
-------- ------ ------- ------- -------
Preferred dividend re-
quirement............... -- -- -- 2,598 2,598
-------- ------ ------- ------- -------
Net income applicable to
common shares........... $ 50,939 3,148 54,087 18,053 72,140
======== ====== ======= ======= =======
EARNINGS PER SHARE
Primary
Income before
cumulative effect of
changes in accounting
principles............ $ 1.47 1.15 1.41 1.08 .98
Less: cumulative effect
of changes in
accounting principles. -- -- -- .65 .26
Net income........... 1.47 1.15 1.41 .43 .72
Fully diluted
Income before cumula-
tive effect of changes
in accounting princi-
ples.................. $ 1.43 1.11 1.37 1.03 1.02
Less: cumulative effect
of changes in
accounting principles. -- -- -- .60 .28
Net income........... 1.43 1.11 1.37 .43 .74
======== ====== ======= ======= =======
AVERAGE COMMON SHARES
(thousands)
Primary................ 34,684 2,726 38,242 41,899 97,350
Fully diluted.......... 35,843 2,993 39,749 46,468 104,104
======== ====== ======= ======= =======
35
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
BB&T FINANCIAL/ BB&T FINANCIAL/
BB&T FINANCIAL COMMERCE COMMERCE SNC COMMERCE/SNC
-------------- -------- --------------- ------- ---------------
INTEREST INCOME
Interest on loans....... $479,212 30,861 510,073 405,121 915,194
Interest and dividends
on securities.......... 124,271 15,689 139,960 139,834 279,794
Interest on short-term
investments............ 1,668 697 2,365 2,355 4,720
-------- ------ ------- ------- ---------
Total interest income. 605,151 47,247 652,398 547,310 1,199,708
-------- ------ ------- ------- ---------
INTEREST EXPENSE
Interest on deposits.... 212,668 20,322 232,990 195,204 428,194
Interest on short-term
borrowed funds......... 24,733 26 24,759 18,525 43,284
Interest on long-term
debt................... 10,961 635 11,596 23,118 34,714
-------- ------ ------- ------- ---------
Total interest
expense.............. 248,362 20,983 269,345 236,847 506,192
-------- ------ ------- ------- ---------
Net Interest Income..... 356,789 26,264 383,053 310,463 693,516
Provision for loan
losses................. 19,048 2,825 21,873 31,438 53,311
-------- ------ ------- ------- ---------
Net Interest Income
After Provision for
Loan Losses............ 337,741 23,439 361,180 279,025 640,205
Noninterest income...... 119,527 10,655 130,182 87,672 217,854
Noninterest expense..... 301,574 23,706 325,280 336,059 661,339
-------- ------ ------- ------- ---------
Income before income
taxes.................. 155,694 10,388 166,082 30,638 196,720
Income taxes............ 50,682 3,837 54,519 22,445 76,964
-------- ------ ------- ------- ---------
Net income before
cumulative effect of
changes in accounting
principles............. 105,012 6,551 111,563 8,193 119,756
Less cumulative effect
of changes in
accounting principles.. -- -- -- 27,217 27,217
-------- ------ ------- ------- ---------
Net income (loss)....... 105,012 6,551 111,563 (19,024) 92,539
Preferred dividend
requirement............ -- -- -- 5,196 5,196
-------- ------ ------- ------- ---------
Net income (loss)
applicable to common
shares................. $105,012 6,551 111,563 (24,220) 87,343
======== ====== ======= ======= =========
EARNINGS PER SHARE
Primary:
Income before
cumulative effect of
changes in accounting
principles........... $ 2.95 2.38 2.85 .07 1.16
Less: cumulative
effect of changes in
accounting
principles........... -- -- -- .64 .28
Net income (loss)... $ 2.95 2.38 2.85 (.57) .88
Fully-diluted:
Income before
cumulative effect of
changes in accounting
principles........... $ 2.91 2.28 2.80 .07 1.15
Less: cumulative
effect of changes in
accounting
principles........... -- -- -- .64 .26
Net income (loss)... $ 2.91 2.28 2.80 (.57) .89
======== ====== ======= ======= =========
AVERAGE COMMON SHARES
(thousands)
Primary............... 35,620 2,748 39,206 42,331 99,180
Fully diluted......... 36,189 3,013 40,120 46,889 105,064
======== ====== ======= ======= =========
36
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1992
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
BB&T FINANCIAL/ BB&T FINANCIAL/
BB&T FINANCIAL COMMERCE COMMERCE SNC COMMERCE/SNC
-------------- -------- --------------- ------- ---------------
INTEREST INCOME
Interest on loans....... $454,061 30,175 484,236 428,923 913,159
Interest and dividends
on securities.......... 135,529 13,689 149,218 137,025 286,243
Interest on short-term
investments............ 2,026 1,075 3,101 5,486 8,587
-------- ------ ------- ------- ---------
Total interest income. 591,616 44,939 636,555 571,434 1,207,989
-------- ------ ------- ------- ---------
INTEREST EXPENSE
Interest on deposits.... 249,876 21,845 271,721 251,172 522,893
Interest on short-term
borrowed funds......... 16,996 19 17,015 14,964 31,979
Interest on long-term
funds.................. 8,711 550 9,261 25,652 34,913
-------- ------ ------- ------- ---------
Total interest ex-
pense................ 275,583 22,414 297,997 291,788 589,785
-------- ------ ------- ------- ---------
Net Interest Income..... 316,033 22,525 338,558 279,646 618,204
Provision for loan loss-
es..................... 32,975 4,225 37,200 25,671 62,871
-------- ------ ------- ------- ---------
Net Interest Income
After Provision for
Loan Losses............ 283,058 18,300 301,358 253,975 555,333
Noninterest income...... 95,549 8,210 103,759 81,914 185,673
Noninterest expense..... 254,133 19,091 273,224 236,731 509,955
-------- ------ ------- ------- ---------
Income before income
taxes.................. 124,474 7,419 131,893 99,158 231,051
Income taxes............ 41,853 2,477 44,330 39,992 84,322
-------- ------ ------- ------- ---------
Net income.............. 82,621 4,942 87,563 59,166 146,729
Preferred dividend re-
quirement.............. -- -- -- 4,605 4,605
-------- ------ ------- ------- ---------
Net income applicable to
common shares.......... $ 82,621 4,942 87,563 54,561 142,124
======== ====== ======= ======= =========
EARNINGS PER SHARE
Primary net income.... $ 2.53 2.05 2.44 1.34 1.53
Fully diluted net
income............... 2.43 1.97 2.35 1.31 1.48
======== ====== ======= ======= =========
AVERAGE COMMON SHARES
(thousands)
Primary............... 32,705 2,413 35,854 40,778 92,765
Fully diluted......... 34,741 2,676 38,233 44,994 100,438
======== ====== ======= ======= =========
37
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1991
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
BB&T FINANCIAL/ BB&T FINANCIAL/
BB&T FINANCIAL COMMERCE COMMERCE SNC COMMERCE/SNC
-------------- -------- --------------- ------- ---------------
INTEREST INCOME
Interest on loans....... $467,671 31,725 499,396 456,154 955,550
Interest and dividends
on securities.......... 136,888 8,275 145,163 124,221 269,384
Interest on short-term
investments............ 6,939 1,027 7,966 10,569 18,535
-------- ------ ------- ------- ---------
Total interest income. 611,498 41,027 652,525 590,944 1,243,469
-------- ------ ------- ------- ---------
INTEREST EXPENSE
Interest on deposits.... 323,126 23,796 346,922 315,460 662,382
Interest on short-term
borrowed funds......... 18,023 94 18,117 20,078 38,195
Interest on long-term
debt................... 9,116 568 9,684 33,060 42,744
-------- ------ ------- ------- ---------
Total interest
expense.............. 350,265 24,458 374,723 368,598 743,321
-------- ------ ------- ------- ---------
Net Interest Income..... 261,233 16,569 277,802 222,346 500,148
Provision for loan
losses................. 42,317 2,925 45,242 30,602 75,844
-------- ------ ------- ------- ---------
Net Interest Income
After Provision for
Loan Losses............ 218,916 13,644 232,560 191,744 424,304
Noninterest income...... 90,888 5,760 96,648 83,712 180,360
Noninterest expense..... 214,999 15,584 230,583 206,944 437,527
-------- ------ ------- ------- ---------
Income before income
taxes.................. 94,805 3,820 98,625 68,512 167,137
Income taxes............ 26,470 1,221 27,691 23,902 51,593
-------- ------ ------- ------- ---------
Net income.............. $ 68,335 2,599 70,934 44,610 115,544
======== ====== ======= ======= =========
EARNINGS PER SHARE
Primary net income.... $ 2.30 1.36 2.20 1.17 1.36
Fully diluted net
income............... 2.21 1.35 2.11 1.17 1.33
======== ====== ======= ======= =========
AVERAGE COMMON SHARES
(thousands)
Primary............... 29,760 1,913 32,257 38,079 84,852
Fully diluted......... 31,756 2,176 34,596 38,112 88,275
======== ====== ======= ======= =========
38
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 1994
(DOLLARS IN THOUSANDS)
BB&T BB&T
BB&T PRO FORMA FINANCIAL/ PRO FORMA FINANCIAL/
FINANCIAL COMMERCE ADJUSTMENTS COMMERCE SNC ADJUSTMENTS COMMERCE/SNC(C)
---------- -------- ----------- ---------- --------- ----------- ---------------
ASSETS
Cash and due from banks,
noninterest-bearing.... $ 335,091 28,303 363,394 266,117 629,511
Interest-bearing bank
balances............... 31,447 12,613 44,060 12,760 56,820
Federal funds sold...... 31,260 -- 31,260 -- 31,260
Loans held for sale..... -- -- -- 45,327 45,327
Securities available for
sale................... 2,356,886 127,203 2,484,089 915,010 3,399,099
Securities held to
maturity............... 106,242 90,494 196,736 1,712,234 1,908,970
Loans................... 6,692,768 408,433 7,101,201 5,098,647 12,199,848
Less allowance for
loan losses............ 96,524 7,188 103,712 69,838 173,550
---------- ------- ---------- --------- ----------
Net loans.............. 6,596,244 401,245 6,997,489 5,028,809 12,026,298
Bank premises and
equipment.............. 150,662 19,229 169,891 146,725 316,616
Goodwill................ 32,635 385 33,020 6,377 39,397
Other assets............ 238,004 12,595 250,599 103,003 353,602
---------- ------- ---------- --------- ----------
Total assets........... $9,878,471 692,067 10,570,538 8,236,362 18,806,900
========== ======= ========== ========= ==========
LIABILITIES
Deposits
Noninterest-bearing.... $ 842,974 101,268 944,242 772,598 1,716,840
Interest-bearing....... 6,579,499 535,124 7,114,623 5,456,205 12,570,828
---------- ------- ---------- --------- ----------
Total deposits......... 7,422,473 636,392 8,058,865 6,228,803 14,287,668
Short-term borrowed
funds.................. 1,147,593 -- 1,147,593 1,131,961 2,279,554
Long-term debt.......... 396,252 6,790 403,042 216,686 619,728
Negative goodwill....... 35,155 -- 35,155 15,903 51,058
Other liabilities....... 72,895 2,292 75,187 49,142 124,329
---------- ------- ---------- --------- ----------
Total liabilities...... 9,074,368 645,474 9,719,842 7,642,495 17,362,337
---------- ------- ---------- --------- ----------
STOCKHOLDERS' EQUITY
Preferred stock......... -- -- -- 3,850 3,850
Common stock............ 90,678 6,813 2,077 (a) 99,568 216,928 189,179 (b) 505,675
Paid-in capital......... 278,775 29,787 (2,077)(a) 306,485 153,205 (189,179)(b) 270,511
Retained earnings....... 462,609 10,587 473,196 236,756 709,952
Unrealized holding gains
(losses) on securities
available for sale..... (21,632) (594) (22,226) (13,385) (35,611)
Less loan to employee
stock ownership plan... (4,419) -- (4,419) -- (4,419)
Less reserve for
restricted stock....... (1,908) -- (1,908) (3,487) (5,395)
---------- ------- ---------- --------- ----------
Total stockholders'
equity................. 804,103 46,593 850,696 593,867 1,444,563
---------- ------- ---------- --------- ----------
Total liabilities and
stockholders' equity.. $9,878,471 692,067 10,570,538 8,236,362 18,806,900
========== ======= ========== ========= ==========
39
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(a) To reflect the issuance of 3,556,125 shares of BB&T Financial Common Stock
for all of the 2,725,163 outstanding shares of Commerce Common Stock, based
upon an exchange ratio of 1.305 shares of BB&T Financial Common Stock for
each outstanding share of Commerce Common Stock.
(b) To reflect the issuance of 57,749,354 shares of common stock of the
Continuing Corporation for all of the 39,827,141 outstanding shares of BB&T
Financial Common Stock, assuming the consummation of the Acquisition and an
exchange ratio of 1.45 shares of common stock of the Continuing Corporation
for each outstanding share of BB&T Financial Common Stock.
(c) In consummating the SNC Merger, BB&T Financial and SNC will incur one-time
charges to close and/or consolidate overlapping branch facilities and
eliminate other duplicative operations. It is estimated that these charges
will total approximately $ on an after tax basis and will be equal to
approximately 3.00%-4.50% of fully consolidated shareholders' equity.
40
INFORMATION ABOUT BB&T FINANCIAL
BB&T FINANCIAL CORPORATION
BB&T Financial is a bank holding company, the principal assets of which are
all of the outstanding shares of common stock of BB&T-NC, BB&T Financial-SC
(which in turn owns all of the outstanding shares of capital stock of BB&T-SC,
Lexington and Community) and its two North Carolina savings bank subsidiaries.
BB&T Financial also includes among its assets interest-bearing bank balances
with and loans to BB&T-NC. BB&T Financial's principal sources of revenue are
interest, dividends and management fees received from its subsidiaries. There
are limitations on the subsidiaries' ability to supply funds to BB&T Financial.
See "MARKET PRICES AND DIVIDENDS." At June 30, 1994, BB&T Financial had
consolidated assets of approximately $9.9 billion, total insured deposits
through its subsidiaries of approximately $7.4 billion and total consolidated
stockholders' equity of approximately $804.1 million.
BRANCH BANKING AND TRUST COMPANY
BB&T-NC is a North Carolina chartered commercial bank. At June 30, 1994,
BB&T-NC operated 224 offices in 121 cities and towns in North Carolina and had
4,015 employees. BB&T-NC provides a wide range of commercial, consumer banking,
trust and investment services primarily through its branch network. BB&T-NC
also operates an insurance department and a travel department and is a broker-
dealer in government and municipal securities. At June 30, 1994, BB&T-NC had
total assets of approximately $8.3 billion, consolidated deposit liabilities of
approximately $6.2 billion and consolidated stockholders' equity of
approximately $655.5 million.
BRANCH BANKING AND TRUST COMPANY OF SOUTH CAROLINA
BB&T-SC, a South Carolina chartered commercial bank, is among the ten largest
banks in South Carolina. At June 30, 1994, BB&T-SC operated 19 offices in five
counties in South Carolina and had approximately 182 employees. BB&T-SC
provides a full range of commercial banking, consumer banking, trust and
investment services through its branch network. At June 30, 1994, BB&T-SC had
total assets of approximately $510.6 million, deposit liabilities of
approximately $453.7 million and stockholders' equity of approximately $44.2
million.
LEXINGTON AND COMMUNITY
Lexington and Community are both South Carolina chartered commercial banks.
At June 30, 1994, Lexington operated 17 offices in 9 cities and towns in South
Carolina, had 350 employees and had total assets of approximately $602.5
million, deposit liabilities of approximately $491.4 million and stockholders'
equity of approximately $55.8 million. At June 30, 1994, Community operated 8
offices in 7 cities and towns in South Carolina, had 75 employees and had total
assets of approximately $117.2 million, deposit liabilities of approximately
$99.1 million and stockholders' equity of approximately $9.0 million. Both
banks provide a full range of commercial banking, trust and investment services
through their respective branch networks. Lexington and Community also offer
discount brokerage services both directly and through Carolina Securities
Corporation.
BB&T-SC, Lexington and Community are expected to be merged or otherwise
consolidated into a single bank to be named "Branch Banking and Trust Company
of South Carolina."
SAVINGS BANK SUBSIDIARIES
BB&T Financial owns two North Carolina chartered savings banks in North
Carolina: Mutual Savings, with $87 million in assets at June 30, 1994; and
Citizens-Mooresville, with $64 million in assets at June 30, 1994. A third
North Carolina chartered savings bank subsidiary, Citizens-Newton, with $247
million in assets at June 30, 1994, was merged into BB&T-NC on August 22, 1994.
The savings banks are engaged primarily
41
in the business of attracting deposits from the public and originating
residential mortgage, commercial and consumer loans. At June 30, 1994, the
three savings banks had 155 employees of whom 47 were officers, and operated 16
offices in 12 cities in North Carolina. Mutual Savings and Citizens-Mooresville
are expected to be merged or otherwise consolidated into BB&T-NC in September,
1994.
BB&T FINANCIAL'S ACQUISITION PROGRAM
BB&T Financial primarily has focused its business strategy on meeting the
banking needs of the retail and small and middle market commercial customer
through an extensive branch network. To complement this strategy, since 1990,
BB&T Financial has expanded its customer base through the acquisition of 14
North Carolina-based savings institutions with aggregate assets of
approximately $3.1 billion and branches of a 15th savings institution and,
through the acquisition of L.S.B. Bancshares, Inc. of South Carolina, a
registered bank holding company, two South Carolina-based commercial banks
(Lexington and Community) with aggregate assets of approximately $706 million
and aggregate deposit liabilities of approximately $574 million as of June 30,
1994. All the acquired savings institutions have been or will be merged into
BB&T-NC, and Lexington and Community are expected to be merged or otherwise
consolidated with BB&T-SC into a single bank to be named "Branch Banking and
Trust Company of South Carolina."
On July 29, 1994, BB&T Financial entered into the SNC Agreement pursuant to
which SNC will be merged with BB&T Financial in a "merger of equals." See
"SUMMARY--Parties to the Acquisition." For additional detailed information
regarding the SNC Merger, see "--SNC Merger" below.
In the last three years, BB&T Financial also has acquired the assets and
liabilities of eleven insurance agencies with operations in several cities
throughout North Carolina. The agencies write commercial and personal insurance
policies as agents on behalf of various insurance underwriters. All insurance
operations are conducted through a department of BB&T-NC in the communities
where the acquired agencies operated.
BB&T Financial continues to evaluate possible acquisitions of commercial
banks, savings institutions, insurance agencies and other companies in the
Carolinas and Virginia and may after the date of this Proxy
Statement/Prospectus enter into agreements to acquire one or more such
institutions.
Additional information about BB&T Financial's completed acquisitions and the
SNC Merger is included in the BB&T Financial documents incorporated by
reference in this Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE." See also "PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS."
42
MANAGEMENT
The following tables set forth the current directors and executive officers
of BB&T Financial and certain information concerning their background.
DIRECTORS
DIRECTOR OF
BB&T
AGE AS OF PRINCIPAL OCCUPATION(S) FINANCIAL
NAME 12/31/93 DURING LAST FIVE YEARS SINCE
---- --------- ----------------------- -----------
Joseph B. Alala, Jr... 60 Senior Partner, Alala, 1983
Mullen, Holland and Cooper,
P.A. (Attorneys), Gastonia,
N.C.
John A. Allison IV.... 45 Chairman of the Board and 1986
Chief Executive Officer of
BB&T Financial and Branch
Banking and Trust Company,
Wilson, N.C.
W. Watson Barnes...... 57 President, Wilson Petroleum 1981
Company, Inc. (Distributor
of Petroleum products),
Wilson, N.C.
Paul B. Barringer..... 63 President and Chief 1975
Executive Officer, Coastal
Lumber Company (Dealer in
lumber products), Weldon,
N.C.
Robert L. Brady....... 63 Senior Vice President, 1991
Branch Banking and Trust
Company, Greensboro, N.C.
Prior to April 1992,
President, Gate City
Federal Savings Bank,
Greensboro, N.C.
Raymond S. Caughman... 67 President, The Lexington June 1994
State Bank, Lexington, S.C.
W. G. Clark III....... 60 President, Clark Industries, 1981
Inc. (Farming), Tarboro,
N.C.
Jesse W. Corbett, Jr.. 57 Personal Investments, 1981
Morehead City, N.C. Prior
to June 1988, President,
Corbett Motor Company, Inc.
(Automobile dealership),
Wilson, N.C.
W. R. Cuthbertson, Jr. 63 Senior Vice President, 1983
Branch Banking and Trust
Company, Charlotte, N.C.
Fred H. Deaton, Jr.... 62 Personal Investments, 1974
Statesville, N.C.
Albert J. Dooley, Sr.. 64 Partner, Dooley, Dooley, June 1994
Spence & Parker, P.A.
(Attorneys), Lexington,
S.C.
Joe L. Dudley, Sr..... 56 President and Chief 1992
Executive Officer, Dudley
Products, Inc. (Hair care
products), Greensboro, N.C.
Tom D. Efird.......... 54 President, Standard 1982
Distributors, Inc.
(Beverage wholesaler),
Gastonia, N.C.
O. William Fenn, Jr... 67 Personal Investments, High 1991
Point, N.C. Prior to April
1992, Vice Chairman, LADD
Furniture Company
(Furniture manufacturer),
High Point, N.C.
James E. Heins........ 63 Telecommunications 1985
Consultant, Pinehurst, N.C.
Prior to August, 1991, Vice
President of Government
Relations, ALLTEL
Corporation
(Telecommunications),
Sanford, N.C.
Raymond A. Jones, Jr.. 69 Personal Investments, 1975
Charlotte, N.C.
Kelly S. King......... 45 Senior Executive Vice 1991
President, BB&T, and
President, Branch Banking
and Trust Company.
J. Ernest Lathem, M.D. 60 Urologist, The Willow 1987
Practice, P.A., Greenville,
S.C.
James H. Maynard...... 54 Chairman, Investors 1985
Management Corporation
(Restaurants), Raleigh,
N.C.
A. Winniett Peters.... 67 Chairman of the Board, 1977
Standard Commercial Tobacco
Company (Tobacco processors
and exporters), Wilson,
N.C.
43
DIRECTOR OF
BB&T
AGE AS OF PRINCIPAL OCCUPATION(S) FINANCIAL
NAME 12/31/93 DURING LAST FIVE YEARS SINCE
---- --------- ----------------------- -----------
Richard L. Player, Jr... 59 President, Player, Inc. 1990
(Commercial and
industrial general
contractor),
Fayetteville, N.C.
Larry J. Waggoner....... 58 Real Estate Development 1985
and Investments, Naples,
Fla. Prior to August
1991 President, Rental
Towel & Uniform
Services, Inc. (Rental
services), Graham, N.C.
Henry G. Williamson, Jr. 46 President and Chief 1986
Operating Officer, BB&T
Financial and Chief
Operating Officer,
Branch Banking and Trust
Company, Wilson, N.C.
William B. Young, M.D... 68 Retired Specialist in 1974
Internal Medicine,
Wilson, N.C.
EXECUTIVE OFFICERS
EMPLOYEE OF
AGE AS OF PRINCIPAL OCCUPATION(S) BB&T-
NAME 12/31/93 DURING LAST FIVE YEARS NC SINCE
---- --------- ----------------------------- -----------
John A. Allison IV...... 45 Chairman of the Board and 1971
Chief Executive Officer,
BB&T Financial and Branch
Banking and Trust Company
Henry G. Williamson, Jr. 46 President and Chief Operating 1972
Officer, BB&T Financial and
Chief Operating Officer,
Branch Banking and Trust
Company
Kelly S. King........... 45 Senior Executive Vice 1972
President, BB&T Financial
and President, Branch
Banking and Trust Company
W. Kendall Chalk........ 48 Senior Executive Vice 1975
President, BB&T Financial
and Branch Banking and Trust
Company
Scott E. Reed........... 45 Senior Executive Vice 1972
President and Treasurer,
BB&T Financial and Senior
Executive Vice President,
Branch Banking and Trust
Company
CAPITAL ADEQUACY GUIDELINES
Bank Holding Companies. The Federal Reserve has adopted risk-based capital
guidelines for bank holding companies. Under these guidelines, the minimum
ratio of total capital to risk-weighted assets (including certain off-balance
sheet activities, such as standby letters of credit) is 8%. At least half of
the total capital is required to be "Tier 1 capital," principally consisting of
common stockholders' equity, noncumulative perpetual preferred stock, and a
limited amount of cumulative perpetual preferred stock, less certain goodwill
items. The remainder ("Tier 2 capital") may consist of a limited amount of
subordinated debt, certain hybrid capital instruments and other debt
securities, perpetual preferred stock, and a limited amount of the general loan
loss allowance. In addition to the risk-based capital guidelines, the Federal
Reserve has adopted a minimum Tier 1 (leverage) capital ratio, under which a
bank holding company must maintain a minimum level of Tier 1 capital to average
total consolidated assets of at least 3% in the case of a bank holding company
which has the highest regulatory examination rating and is not contemplating
significant growth or expansion. All other bank holding companies are expected
to maintain a ratio of at least 100 to 200 basis points above the stated
minimum.
The following table sets forth BB&T Financial's regulatory capital position
at June 30, 1994 on a historical basis as well as a pro forma basis assuming
consummation of the Acquisition. See "PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS."
44
AT JUNE 30, 1994
------------------------------
HISTORICAL PRO FORMA
-------------- --------------
Stockholders' Equity............................ $804,103 $850,696
======== ========
REGULATORY CAPITAL
Tier 1 risk-based:
Actual........................................ $781,765 12.26% $828,069 12.13%
Required...................................... 254,959 4.00 272,993 4.00
-------- ----- -------- -----
Excess........................................ $526,806 8.26% $555,076 8.13%
======== ===== ======== =====
Total risk-based:
Actual........................................ $861,648 13.52% $918,593 13.46%
Required...................................... 509,917 8.00 545,987 8.00
-------- ----- -------- -----
Excess........................................ $351,731 5.52% $372,606 5.46%
======== ===== ======== =====
Leverage:
Actual........................................ $781,765 7.96% $828,069 7.88%
Required...................................... 294,698 3.00 315,270 3.00
-------- ----- -------- -----
Excess........................................ $487,067 4.96% $512,799 4.88%
======== ===== ======== =====
45
The Federal Deposit Insurance Corporation Improvement Act of 1991 requires
each federal banking agency, including the Federal Reserve, to revise its risk-
based capital standards to ensure that those standards take adequate account of
interest rate risk, concentration of credit risk and the risks of
nontraditional activities, as well as reflect the actual performance and
expected risk of loss on multi-family mortgages. The Federal Reserve, the FDIC
and the Office of the Comptroller of the Currency ("OCC") have issued a joint
advance notice of proposed rulemaking, and have issued a revised proposal,
soliciting comments on a proposed framework for implementing the interest rate
risk component of the risk-based capital guidelines. Under the proposal, an
institution's assets, liabilities, and off-balance sheet positions would be
weighed by risk factors that approximate the instruments' price sensitivity to
a 100 basis point change in interest rates. Institutions with interest rate
risk exposure in excess of a threshold level would be required to hold
additional capital proportional to that risk. The Federal Reserve, the FDIC,
the OCC and the Office of Thrift Supervision also issued a joint notice of
proposed rulemaking soliciting comments on a proposed revision to the risk-
based capital guidelines to take account of concentration of credit risk and
the risk of non-traditional activities. The proposal would amend each agency's
risk-based capital standards by explicitly identifying concentration of credit
risk and the risk arising from non-traditional activities, as well as an
institution's ability to manage those risks, as important factors to be taken
into account by the agency in assessing an institution's overall capital
adequacy. The proposal was adopted without modification as a final rule by the
Federal Reserve on August 3, 1994, and by the FDIC on August 9, 1994.
Publication of a final interagency rule is subject to the completion of each
agency's approval process. The final rule will not become effective until 30
days after publication. BB&T Financial does not expect the final rule to have a
material impact on its capital requirements.
FDIC-Insured, Non-Member Banks. As state-chartered, FDIC-insured institutions
which are not members of the Federal Reserve System, BB&T-NC, BB&T-SC,
Lexington and Community are subject to capital requirements imposed by the
FDIC. The FDIC requires state-chartered banks to comply with risk-based capital
standards substantially similar to those required by the Federal Reserve. See
"--Capital Adequacy Guidelines--Bank Holding Companies." The FDIC also requires
state-chartered banks to maintain a minimum leverage ratio similar to that
adopted by the Federal Reserve. Under the FDIC's leverage capital requirement,
state nonmember banks such as BB&T-NC, BB&T-SC, Community and Lexington that
(i) receive the highest rating during the examination process and (ii) are not
anticipating or experiencing any significant growth are required to maintain a
minimum leverage ratio of 3% of Tier 1 capital to total assets; all other banks
are required to maintain a minimum ratio of 100 to 200 basis points above the
stated minimum, with an absolute minimum leverage ratio of not less than 4%. As
of December 31, 1993, the Tier 1 and total risk-based capital ratios of BB&T-NC
were 13.06% and 14.66%, respectively, and its leverage capital ratio was 8.56%;
the Tier 1 and total risk-based capital ratios of BB&T-SC were 11.04% and
12.29%, respectively, and its leverage capital ratio was 8.77%; the Tier 1 and
total risk-based capital ratios of Lexington were 13.65% and 14.86%,
respectively, and its leverage capital ratio was 7.95%; and the Tier 1 and
total risk-based capital ratios of Community were 13.28% and 14.53%,
respectively, and its leverage capital ratio was 7.03%.
SNC MERGER
General. BB&T Financial and SNC entered in the SNC Agreement on July 29,
1994. Pursuant to the SNC Agreement, BB&T Financial will be merged with SNC in
a "merger of equals," with the name of the continuing corporation to be
"Southern National Corporation." The effective date of the SNC Merger is
currently anticipated to be in the first half of 1995. (The surviving company
as existing on and after the effective date of the SNC Merger is hereinafter
referred to as the "Continuing Corporation.") On a pro forma basis as of June
30, 1994, the Continuing Corporation would have $18.8 billion in assets and
would have the largest deposit market share in North Carolina and the third
largest deposit market share in South Carolina. The headquarters of the
Continuing Corporation will be in Winston-Salem, North Carolina, the present
location of the administrative headquarters of SNB-NC.
46
As soon as practicable after the consummation of the SNC Merger, the SNC
Agreement provides that SNB-NC will be merged (the "North Carolina Bank
Merger") with and into BB&T-NC under the name "Branch Banking and Trust
Company" (BB&T-NC as it will exist from and after the consummation of the North
Carolina Bank Merger is referred to herein as the "NC Continuing Bank"), and
SNB-SC will be merged (the "South Carolina Bank Merger") with and into BB&T-SC
under the name "Branch Banking and Trust Company of South Carolina" (BB&T-SC as
it will exist from and after the consummation of the South Carolina Bank Merger
is referred to herein as the "SC Continuing Bank"). Each of SNB-NC and SNB-SC
is a full-service commercial bank providing a wide range of commercial and
retail banking services through 231 offices throughout North and South
Carolina.
SNC also operates a savings bank in North Carolina, SNB Savings Bank, Inc.,
S.S.B. ("SNB Savings"). SNB Savings is engaged primarily in the origination of
mortgage loans on residential real estate. SNC has two other active
subsidiaries: Unified Investors Life Insurance Company ("Unified") and Southern
International Corporation ("Southern"). Unified is a reinsurer and underwriter
of certain credit life and accident and health insurance written by a non-
affiliated insurance company in connection with certain loans made by the
banking and savings bank subsidiaries of SNC. Southern provides advice to
customers of SNC's subsidiaries who conduct international business. Through
subsidiaries of SNB-NC and SNB Savings, SNC is also engaged in selling
property, casualty and life insurance; offering investment alternatives,
including discount brokerage services, fixed rate and variable annuities,
mutual funds, government and municipal bonds; and providing lease financing of
personal and real property to retail and commercial customers, as well as to
states and municipalities.
The Board of Directors of BB&T Financial has concluded that the consummation
of the SNC Merger is in the best interest of BB&T Financial and, with the
advice of independent financial advisors, that the terms of the SNC Merger are
fair to BB&T Financial stockholders. BB&T Financial believes that the SNC
Merger is an important element in its efforts to expand its market share in the
North Carolina and South Carolina banking markets. In addition to the
opportunity to expand its business in the Carolinas by a merger with a
profitable and established bank holding company of comparable size and its
subsidiary institutions, BB&T Financial's Board of Directors, in approving the
SNC Agreement, considered, among other things, information concerning the
financial condition, results of operations and future prospects of SNC, SNB-NC
and SNB-SC; the nature of the banking business of SNC, SNB-NC and SNB-SC; and
the overall compatibility of the management of SNC, SNB-NC and SNB-SC with that
of BB&T Financial and its subsidiaries. BB&T Financial's Board of Directors
also believes that the combination of BB&T Financial's resources with those of
SNC will enable the resulting organization to realize certain economies of
scale, to provide a wider array of financial services to customers of each of
its subsidiaries and to compete more effectively in the rapidly changing
financial services industry.
Upon consummation of SNC Merger, the Continuing Corporation will operate 535
banking offices in the North and South Carolina banking market. The combined
entity, through Commerce, also will operate 21 banking offices in Virginia.
Terms of SNC Merger. Under the terms of the SNC Agreement, each share of SNC
common stock, par value $5.00 per share ("SNC Common Stock"), outstanding
immediately prior to the effective date of the SNC Merger (other than shares
held by dissenting stockholders) will remain one share of common stock of the
Continuing Corporation (after the effective date of the SNC Merger, "Continuing
Corporation Common Stock"). Each share of BB&T Financial Common Stock
outstanding immediately prior to the effective date of the SNC Merger (other
than shares held by dissenting stockholders) will be converted into 1.45 shares
of Continuing Corporation Common Stock, and cash in lieu of any fractional
shares. Additionally, each share of SNC 6 3/4% Cumulative Convertible Preferred
Stock, Series A ("SNC Series A Preferred Stock") outstanding immediately prior
to the effective date of the SNC Merger will remain one share of Continuing
Corporation Series A Preferred Stock, designated as "6 3/4% Cumulative
Convertible Preferred Stock, Series A," with the same terms, designations,
preferences, limitations, privileges and relative rights as the
47
SNC Series A Preferred Stock. Pro forma financial information giving effect to
the Acquisition and the combination of BB&T Financial and Commerce with SNC
appears herein under "PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS."
Comparative per share data that, among other things, present pro forma data in
terms of one share of Commerce common stock, appears herein under "COMPARATIVE
PER SHARE DATA." The SNC Agreement includes certain provisions affecting the
conduct of BB&T Financial's business pending consummation of the SNC Merger.
Copies of the SNC Agreement are available upon request directed to BB&T
Financial's Secretary at the address set forth under "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
Consummation of the SNC Merger is contingent upon, among other things,
obtaining various federal and state regulatory approvals and the approval of
the stockholders of BB&T Financial and SNC.
Management and Operations of Continuing Corporation. The SNC Agreement
provides for a 24 member Board of Directors of the Continuing Corporation,
comprised of 12 directors selected by the BB&T Financial Board of Directors and
12 directors selected by the SNC Board of Directors. The Board of Directors of
the NC Continuing Bank will be comprised of current BB&T Financial and SNC
directors who do not serve as directors of the Continuing Corporation and such
other persons as may be determined at the time the North Carolina Bank Merger
is effected.
After consummation of the SNC Merger, John A. Allison IV ("Allison") shall be
elected Chairman of the Board and Chief Executive Officer of the Continuing
Corporation, and L. Glenn Orr, Jr. ("Orr"), the current chairman of the SNC
Board of Directors, and Allison will be elected as members of the Executive
Committee of the Continuing Corporation's Board of Directors for as long as
they are directors of the Continuing Corporation. Each committee of the Board
of Directors of the Continuing Corporation will consist of an equal number of
directors who were BB&T Financial and SNC directors prior to the SNC Merger.
Allison and Orr will each serve on the Boards of Directors of the NC Continuing
Bank and the SC Continuing Bank.
After consummation of the SNC Merger, it is expected that Orr will retire and
that Allison will be the Chief Executive Officer of the Continuing Corporation.
Allison and four additional officers of BB&T Financial and four officers from
SNC will comprise the executive management group of the Continuing Corporation.
Stock Option Agreements. Simultaneously with the execution of the SNC
Agreement, SNC granted BB&T Financial an option (the "SNC Option") to purchase
up to 8,663,736 authorized but unissued shares of SNC Common Stock at a price
of $20.625 per share, such number of shares and exercise price being subject to
adjustment in certain circumstances. Also simultaneously with the execution of
the SNC Agreement, BB&T Financial granted SNC an option (the "BB&T Financial
Option") to purchase up to 7,217,932 authorized but unissued shares of BB&T
Financial Common Stock at a price of $30.625 per share, such number of shares
and exercise price being subject to adjustment in certain circumstances. The
purpose of the BB&T Financial Option and the SNC Option is to increase the
likelihood that the SNC Merger will be consummated by making more difficult and
more expensive a third-party attempt to acquire control of BB&T Financial,
BB&T-NC or BB&T-SC, or SNC, SNB-NC or SNB-SC. Accordingly, the BB&T Financial
Option and the SNC Option are each exercisable only upon the occurrence of
certain events that create the potential of another party acquiring control of
BB&T Financial, BB&T-NC or BB&T-SC, or SNC, SNB-NC or SNB- SC. Although the
shares issuable upon the exercise of the BB&T Financial Option and the SNC
Option represent approximately 16.6% of the BB&T Financial Common Stock and SNC
Common Stock, respectively, that would be outstanding after such exercise,
neither BB&T Financial nor SNC may acquire more than 5% of the other company's
common stock without prior approval of the Federal Reserve Board (although the
options may be transferred to other parties under certain circumstances). The
SNC Option would terminate (i) on the effective date of the SNC Merger, (ii)
upon termination of the SNC Agreement under certain circumstances or (iii) on
the date one year after termination of the SNC Agreement due to a
48
willful breach by SNC of any specified covenant in the SNC Agreement or, under
certain circumstances, the failure of SNC's stockholders to approve the SNC
Merger. The BB&T Financial Option would terminate (i) upon the effective date
of the SNC Merger, (ii) upon the termination of the SNC Agreement under certain
circumstances or (iii) on the date one year after termination of the SNC
Agreement due to a willful breach by BB&T Financial of any specified covenant
in the SNC Agreement or, under certain circumstances, the failure of BB&T
Financial's stockholders to approve the SNC Merger. Copies of the SNC
Agreement, SNC Option and BB&T Financial Option are available upon request from
the Secretary of BB&T Financial.
INFORMATION INCORPORATED BY REFERENCE
For additional information about BB&T Financial and the SNC Merger described
above contained in documents incorporated by reference in this Proxy
Statement/Prospectus, see "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS."
49
INFORMATION ABOUT COMMERCE
GENERAL
Commerce is a commercial bank chartered in 1978 under the laws of the
Commonwealth of Virginia and headquartered in Virginia Beach, Virginia.
Commerce provides a broad range of financial services through 21 banking
offices serving the cities of Virginia Beach, Portsmouth, Norfolk, Chesapeake,
Suffolk, Hampton and Newport News, Virginia, together with the Grafton area of
York County located on the western side of Newport News (commonly referred to
as the "Hampton Roads area"). At June 30, 1994, Commerce had total assets of
approximately $692.1 million, total deposits of approximately $636.4 million
and total stockholders' equity of approximately $46.6 million.
Commerce maintains a regional "Banking Group" for each of the six
geographically distinct communities within the Hampton Roads area. From a
customer perspective, each Banking Group is marketed as a separate bank
headquartered in its community, with its own president and commercial loan
officers and a regional board of directors. It is the responsibility of each
regional board, acting under delegated authority of the Board of Directors, to
direct Commerce's overall development of its respective region.
The Hampton Roads area covers the Norfolk-Virginia Beach-Newport News
metropolitan statistical area ("MSA"), which is the second largest MSA in
Virginia, with a population of 1.4 million based on 1990 census figures. This
area, which covers both the north and south sides of the James River at the
mouth of the Chesapeake Bay, contains the two largest Virginia cities in terms
of population, Virginia Beach and Norfolk, with populations of 393,000 and
261,000, respectively, based on 1990 census figures. The economy of the area is
heavily influenced by major United States military installations and extensive
port activity. Ship building and ship repair, a diversified industrial base and
tourism also contribute significantly to the local economy.
Commerce is subject to state and federal banking laws and regulations which
impose specific requirements or restrictions on and provide for general
regulatory oversight with respect to virtually all aspects of its operations.
As of June 30, 1994, Commerce employed 345 people on a full-time equivalent
basis.
INFORMATION INCORPORATED BY REFERENCE
For additional information about Commerce contained in documents incorporated
by reference in this Proxy Statement/Prospectus, see the documents referred to
in "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
50
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF COMMERCE
The following table presents summary financial information for Commerce. This
information is derived from the historical consolidated financial statements of
Commerce. The information set forth below should be read in conjunction with
such historical financial statements and the notes incorporated by reference
herein.
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------ --------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
RESULTS OF OPERATIONS:
Interest income......... $ 23,932 $ 23,402 $ 47,247 $ 44,939 $ 41,027 $ 35,273 $ 28,644
Interest expense........ 9,963 10,624 20,983 22,414 24,458 21,925 16,987
-------- -------- -------- -------- -------- -------- --------
Net interest income..... 13,969 12,778 26,264 22,525 16,569 13,348 11,657
Provision for loan
losses................. 1,200 1,525 2,825 4,225 2,925 2,695 715
-------- -------- -------- -------- -------- -------- --------
Net interest income
after provision for
loan losses............ 12,769 11,253 23,439 18,300 13,644 10,653 10,942
Noninterest income...... 4,693 4,277 9,248 7,112 4,860 3,475 2,861
Securities gains........ 69 86 1,407 1,098 900 11 --
Noninterest expense..... 12,226 10,880 23,706(1) 19,091 15,584 13,475 11,448
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes.................. 5,305 4,736 10,388 7,419 3,820 664 2,355
Income taxes............ 1,703 1,588 3,837 2,477 1,221 117 668
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 3,602 $ 3,148 $ 6,551 $ 4,942 $ 2,599 $ 547 $ 1,687
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA:
Net income:
Primary............... $ 1.29 $ 1.15 $ 2.38 $ 2.05 $ 1.36 $ .29 $ .86
Fully diluted......... 1.23 1.11 2.28 1.97 1.35 .29 .86
Book value.............. 17.10 15.91 16.22 14.90 13.63 12.79 13.07
Cash dividends declared. .30 .22 .51 .26 .05 -- --
======== ======== ======== ======== ======== ======== ========
DAILY AVERAGES:
Assets.................. $685,716 $640,941 $656,528 $571,461 $443,927 $347,634 $269,712
Earning assets.......... 633,949 592,057 606,714 526,600 406,751 318,480 247,086
Loans, net of unearned
income................. 392,227 331,154 347,585 314,338 293,190 250,719 197,567
Investment securities... 228,293 243,380 243,039 190,922 98,556 57,981 39,988
Deposits................ 626,807 590,961 604,608 529,560 410,756 319,620 245,430
Long-term debt.......... 6,808 6,450 6,650 5,649 5,685 2,376 76
Shareholders' equity.... 46,484 39,158 40,783 31,577 22,309 21,156 19,595
Primary shares
outstanding............ 2,802 2,726 2,748 2,412 1,913 1,945 1,969
Fully diluted shares
outstanding............ 3,068 2,993 3,013 2,679 2,176 1,945 1,969
======== ======== ======== ======== ======== ======== ========
AT PERIOD END:
Assets.................. $692,067 $666,397 $689,630 $644,849 $478,659 $405,437 $303,251
Earning assets.......... 638,743 619,422 638,864 590,494 437,149 368,856 276,801
Loans, net of unearned
income................. 408,433 347,084 378,258 326,265 302,900 280,231 214,428
Investment securities... 217,697 254,224 247,175 238,680 123,727 71,937 47,872
Deposits................ 636,392 616,186 634,141 597,984 445,175 374,366 278,067
Long-term debt.......... 6,790 6,866 6,828 5,626 5,671 5,697 711
Shareholders' equity.... 46,593 40,322 43,589 37,413 23,770 21,105 20,549
Allowance for loan
losses................. 7,188 6,645 6,527 5,671 3,717 3,387 2,228
Nonperforming assets.... 5,273 4,877 3,998 6,189 5,851 2,266 2,341
======== ======== ======== ======== ======== ======== ========
FINANCIAL RATIOS:
Return on average
assets................. 1.06% .99% 1.00% .86% .59% .16% .63%
Return on average
shareholders' equity... 15.62 16.21 16.06 15.65 11.65 2.59 8.61
Net interest margin..... 4.44 4.35 4.33 4.28 4.07 4.19 4.72
Net overhead ratio...... 2.40 2.25 2.23(2) 2.27 2.64 3.14 3.48
======== ======== ======== ======== ======== ======== ========
- --------
(1) 1993 included a special non-recurring noncash adjustment of $910,000 for
the write down of an intangible asset.
(2) 1993 excludes item 1 above.
51
OWNERSHIP OF COMMERCE COMMON STOCK BY CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 1994, certain information as
to each person who was known to be the beneficial owner of more than 5% of the
outstanding shares of Commerce Common Stock and as to the shares of Commerce
Common Stock beneficially owned by directors individually and by all officers
and directors of Commerce as a group. Such information is based upon certain
reports regarding such ownership required to be filed with the FDIC pursuant
to the Exchange Act and the stock ownership records of Commerce.
PERCENT OF SHARES OF
AMOUNT AND NATURE OF COMMERCE
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) COMMON STOCK OUTSTANDING(1)
------------------------ ----------------------- ---------------------------
FMR Corp. ("Fidelity In-
vestments")
Boston, Massachusetts.... 237,000 8.7%
Sally James Andrews....... 6,300(2)(3) *
G. Robert Aston, Jr. ..... 88,936(2)(4) 3.0%
Ramon W. Breeden, Jr. .... 87,317(2)(3) 2.9%
John W. Brown............. 1,512 *
Thomas C. Broyles......... 29,778 1.0%
Bradford L. Cherry........ 4,023(3) *
J.W. Whiting Chisman,
Jr. ..................... 113,621(2)(3) 3.8%
Elwood L. Edwards......... 2,545 *
Andrew S. Fine............ 114,600(2)(3) 3.8%
Ernest F. Hardee.......... 79,615(2) 2.7%
John C. Harry, III........ 2,032 *
E.L. Hudson............... 45,476(2)(3) 1.5%
William J. Jones.......... 12,663(2) *
Arthur J. Lancaster, Jr. . 11,193(2) *
W. Ashton Lewis........... 31,395(2)(3) 1.1%
J. Alan Lindauer, Jr. .... 106,687(2)(3)(5) 3.6%
R. Scott Morgan........... 20,958(2)(4) *
Donald N. Patten.......... 24,414(2)(3) *
Edward B. Snyder.......... 24,458(2)(3) *
George W. Vakos........... 28,039(2)(3) 1.0%
F. Lewis Wood............. 20,308(2)(3) *
All Directors and Execu-
tive Officers as a Group. 914,717(2)(3)(4) 30.6%
- --------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) For purposes of this table, beneficial ownership has been determined in
accordance with the provisions of Rule 13d-3 under the Securities Exchange
Act of 1934 (the "1934 Act"), as adopted by the FDIC with which Commerce
files reports, proxy statements and other information pursuant to the
informational requirements of the 1934 Act. Under this rule, in general, a
person is deemed to be the beneficial owner of a security if he has or
shares the power to vote or to direct the voting of the security or the
power to dispose or to direct the disposition of the security, or if he
has the right to acquire beneficial ownership of the security within 60
days.
(2) Includes the indicated number of shares, or shares that may be acquired
upon the conversion of the Capital Notes, held by their close relatives or
held jointly with their spouses or as custodians or trustees for the
benefit of their children or others--Mrs. Andrews, 5,200 shares; Mr.
Aston, 1,859 shares; Mr. Breeden, 22,178 shares; Mr. Chisman, 11,757
shares; Mr. Fine, 4,506 shares; Mr. Hardee, 56,359 shares; Mr. Hudson,
1,211 shares; Mr. Lancaster, 7,906 shares; Mr. Lewis, 8,704 shares; Mr.
Lindauer, 1,770 shares; Mr. Morgan, 75 shares; Mr. Patten, 3,384 shares;
Mr. Snyder, 11,655 shares; Mr. Vakos, 7,808 shares; and Mr. Wood, 5,892
shares; and all executive officers (exclusive of Messrs. Aston and Morgan)
as a group, 1,204 shares. The amounts shown in the table also include the
indicated number of shares, and shares that may be acquired upon the
conversion of the Capital Notes, held by certain corporations and
partnerships under the control of--Mr. Fine, 93,523 shares; Mr. Hardee,
1,839 shares; Mr. Hudson, 34,298 shares; Mr. Jones, 10,688 shares; Mr.
Lewis, 16,194 shares; and Mr. Patten, 4,736 shares.
52
(3) Includes the indicated number of shares that may be acquired upon the
conversion of the Capital Notes held in their own names or for their
benefit--Mrs. Andrews, 263 shares; Mr. Breeden, 13,158 shares; Mr. Cherry,
1,316 shares; Mr. Chisman, 46,895 shares; Mr. Fine, 2,790 shares; Mr.
Hudson, 1,421 shares; Mr. Lewis, 1,737 shares; Mr. Lindauer, 8,369 shares;
Mr. Patten, 2,894 shares; Mr. Snyder, 1,053 shares; Mr. Vakos, 6,421
shares; and Mr. Wood, 2,737 shares.
(4) Includes the indicated number of shares that may be acquired within 60 days
pursuant to the exercise of stock options granted under the Commerce Stock
Option Plans--Mr. Aston, 79,732 shares; Mr. Morgan, 13,040 shares; and all
other executive officers as a group, 149,011 shares.
(5) Includes 34,786 shares held by Commerce's Trust Department as trustee for
Mr. Lindauer, and as to which shares Mr. Lindauer has the power to direct
the voting.
53
MARKET PRICES AND DIVIDENDS
BB&T Financial Common Stock is actively traded in the NASDAQ Stock Market
under the symbol "BBTF," and is quoted on the Nasdaq/NMS. Commerce Common Stock
is traded in the NASDAQ Stock Market under the symbol "CBVA" and the shares are
quoted on the Nasdaq/NMS.
The following tables reflect the high and low closing sales prices for BB&T
Financial Common Stock and Commerce Common Stock as quoted on the Nasdaq/NMS
for the periods indicated. Prices shown represent interdealer prices without
retail mark-up, mark-down or commissions, and may not represent actual
transactions.
BB&T Financial
TABLE OF CLOSING PRICES
-----------------------------------------
1994 1993 1992
------------- ------------- -------------
HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ ------
1st Quarter........................... $33.63 $29.13 $35.38 $31.00 $27.75 $21.88
2nd Quarter........................... 31.50 28.13 35.88 30.25 30.13 25.50
3rd Quarter........................... 34.63 32.25 29.88 27.38
4th Quarter........................... -- -- 35.88 29.13 32.25 28.75
Commerce
TABLE OF CLOSING PRICES
-----------------------------------------
1994 1993 1992
------------- ------------- -------------
HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ ------
1st Quarter........................... $27.50 $25.50 $24.50 $19.12 $19.00 $13.50
2nd Quarter........................... 39.00 24.50 24.75 21.00 19.50 15.75
3rd Quarter........................... 25.50 22.75 17.50 15.75
4th Quarter........................... -- -- 25.50 23.00 21.50 17.00
Cash Dividends Paid Per Share
The following table reflects the cash dividends per share paid or declared on
the BB&T Financial Common Stock for the periods indicated:
1994 1993 1992
---- ---- ----
1st Quarter...................................................... $.27 $.25 $.22
2nd Quarter...................................................... .27 .25 .22
3rd Quarter...................................................... .29 .25 .22
4th Quarter...................................................... -- .27 .25
The holders of BB&T Financial Common Stock are entitled to receive dividends
when and if declared by the BB&T Financial Board of Directors out of funds
legally available therefor. BB&T Financial has paid regular quarterly cash
dividends since 1921. Although BB&T Financial currently intends to continue to
pay quarterly cash dividends on the BB&T Financial Common Stock, there can be
no assurance that BB&T Financial's dividend policy will remain unchanged after
completion of the Acquisition. The declaration and payment of dividends
thereafter will depend upon business conditions, operating results, capital and
reserve requirements and the BB&T Financial Board of Directors' consideration
of other relevant factors.
BB&T Financial is a legal entity separate and distinct from its subsidiaries
and its revenues depend in significant part on the payment of dividends from
its subsidiary financial institutions, particularly BB&T-NC. BB&T Financial's
bank subsidiaries are subject to certain legal restrictions on the amount of
dividends they
54
are permitted to pay. For example, North Carolina chartered banks, such as
BB&T-NC, are subject to legal limitations on the amount of dividends they are
permitted to pay. Prior approval of the Commissioner is required if the total
of all dividends declared by BB&T-NC in any calendar year exceeds its net
profits (as defined by statute) for that year combined with its retained net
profits (as defined by statute) for the preceding two calendar years, less any
required transfers to surplus. South Carolina chartered banks, such as BB&T-SC,
Lexington and Community are required by regulation to obtain the prior written
approval of the South Carolina State Board of Financial Institutions to pay any
cash dividend. A Virginia chartered bank, such as Commerce, is prohibited from
paying a dividend that would impair its paid-in capital. In addition, the
Bureau may limit the payment of dividends by any Virginia chartered bank if it
determines that the limitation is in the public interest and is necessary to
ensure the bank's financial soundness.
Under current federal law, insured depository institutions, such as BB&T-NC,
BB&T-SC, Lexington, Community and Commerce are prohibited from making capital
distributions, including the payment of dividends, if, after making such
distribution, the institution would become "undercapitalized" (as such term is
defined in federal law). Based on its subsidiaries' current financial
condition, BB&T Financial does not expect that this provision will have any
impact on its ability to obtain dividends from its insured depository
institution subsidiaries.
As a result of these legal restrictions, there can be no assurance that
dividends would be paid in the future by BB&T Financial's bank subsidiaries.
The declaration, payment and amount of any such future dividends would depend
upon business conditions, operating results, capital, reserve requirements,
regulatory authorizations and the consideration of other relevant factors by
the BB&T Financial Board of Directors.
The following table reflects the cash dividends paid per share on the
Commerce Common Stock for the periods indicated:
1994 1993 1992
---- ---- ----
1st Quarter................................................... $.15 $.08 $.05
2nd Quarter................................................... .15 .10 .05
3rd Quarter................................................... .15 .12 .05
4th Quarter................................................... -- .14 .08
The holders of Commerce Common Stock are entitled to receive dividends when
and if declared by the Commerce Board of Directors out of funds legally
available therefor. The declaration, payment and amount of any future dividends
would depend upon business conditions, operating results, capital, reserve
requirements, regulatory authorizations and the consideration of other relevant
factors by the Commerce Board of Directors. There can, therefore, be no
assurance that any dividends would be paid in the future.
DESCRIPTION OF BB&T FINANCIAL COMMON STOCK TO BE ISSUED
IN THE ACQUISITION AND COMPARISON OF STOCKHOLDERS' RIGHTS
GENERAL
BB&T Financial's authorized capital stock consists of two classes,
represented by 100,000,000 shares of BB&T Financial Common Stock, $2.50 par
value, of which 36,271,016 shares were issued and outstanding and 6,479,309
shares were reserved for issuance as of June 30, 1994 and 4,000,000 shares of
nonvoting preferred stock, $2.50 par value, no shares of which are issued or
outstanding. BB&T Financial's Amended Articles of Incorporation authorize the
BB&T Financial Board of Directors, without stockholder approval, to fix the
preferences, limitations and relative rights of the preferred stock and to
establish series of such preferred stock and determine the variations between
each series. If any shares of preferred stock are issued, the rights of holders
of BB&T Financial Common Stock will be subject to the rights and preferences
conferred to holders of such preferred stock.
55
Commerce's authorized capital stock consists of two classes represented by
5,000,000 shares of Commerce Common Stock, $2.50 par value, of which 2,725,163
shares were issued and outstanding and 1,396,809 shares were reserved for
issuance as of June 30, 1994, and 1,000,000 shares of preferred stock, $5.00
par value, no shares of which are issued or outstanding. Commerce's Amended
Articles of Incorporation authorize the Commerce Board of Directors, without
stockholder approval, to fix the preferences, limitations and relative rights
of the preferred stock and to establish series of such preferred stock and
determine the variations between each series. If any shares of preferred stock
are issued, the rights of the holders of Commerce Common Stock will be subject
to the rights and preferences conferred to the holders of such preferred stock.
DIVIDEND RIGHTS
The holders of BB&T Financial Common Stock are entitled to share ratably in
dividends when and as declared by the BB&T Financial Board of Directors out of
funds legally available therefor. One of the principal sources of income to
BB&T Financial is dividends from its subsidiaries. For a description of certain
restrictions on the payment of dividends by banks, see "MARKET PRICES AND
DIVIDENDS." BB&T Financial's Amended Articles of Incorporation permit the BB&T
Financial Board of Directors to issue non-voting preferred stock with terms set
by the BB&T Financial Board of Directors, which terms may include the right to
receive dividends ahead of the holders of BB&T Financial Common Stock. No
shares of such preferred stock are presently outstanding.
The holders of Commerce Common Stock also are entitled to share ratably in
dividends when and as declared by the Commerce Board of Directors out of funds
legally available therefor. For a description of certain restrictions on the
payment of dividends of banks, see "MARKET PRICES AND DIVIDENDS." Commerce's
Amended Articles of Incorporation permit the Commerce Board of Directors to
issue preferred stock with terms set by the Commerce Board of Directors, which
terms may include the right to receive dividends ahead of the holders of
Commerce Common Stock. No shares of such preferred stock are presently
outstanding.
VOTING RIGHTS
The holders of BB&T Financial Common Stock and Commerce Common Stock have one
vote for each share held on any matter presented for consideration by the
stockholders. Under North Carolina law, the right of cumulative voting in the
election of directors is denied to stockholders of publicly held corporations
such as BB&T Financial.
Under Virginia law, the right of cumulative voting in the election of
directors does not exist unless it is expressly provided for in the
corporation's articles of incorporation. Commerce's Amended Articles of
Incorporation do not provide for cumulative voting.
PREEMPTIVE RIGHTS
Neither the holders of BB&T Financial Common Stock nor the holders of
Commerce Common Stock have any preemptive or preferential rights to purchase or
to subscribe for additional shares of BB&T Financial Common Stock or Commerce
Common Stock, respectively, or any other securities that BB&T Financial or
Commerce may issue.
ASSESSMENT AND REDEMPTION
The shares of BB&T Financial Common Stock presently outstanding are, and
those shares of BB&T Financial Common Stock issuable upon consummation of the
Acquisition will be, when issued, fully paid and nonassessable. Such shares are
not convertible and do not have any redemption provisions.
56
The shares of Commerce Common Stock presently outstanding are fully paid and
nonassessable and such shares do not have any redemption provisions.
LIQUIDATION RIGHTS
In the event of liquidation, dissolution or winding up of BB&T Financial or
Commerce, whether voluntary or involuntary, the holders of BB&T Financial
Common Stock or Commerce Common Stock, as applicable, will be entitled to share
ratably in any of the net assets or funds of BB&T Financial or Commerce,
respectively, which are available for distribution to their stockholders after
the satisfaction of their liabilities or after adequate provision is made
therefor, subject to the rights of the holders of any preferred stock
outstanding at the time.
TRANSFER AGENT
The Transfer Agent and Registrar for BB&T Financial Common Stock is BB&T-NC.
Commerce serves as the Transfer Agent and Registrar for Commerce Common Stock.
CERTAIN PROVISIONS WHICH MAY HAVE AN ANTI-TAKEOVER EFFECT
Certain provisions of the By-laws and Amended Articles of Incorporation of
BB&T Financial, the Amended Articles of Incorporation of Commerce and North
Carolina and Virginia law, and certain other arrangements, some of which are
described below, may discourage an attempt to acquire control of BB&T Financial
or Commerce which a majority of the stockholders of BB&T Financial or Commerce
might determine to be in their best interest or in which stockholders might
receive a premium over the current market price for their shares. These
provisions also may render the removal of a director or of the entire Board of
Directors of BB&T Financial or Commerce, as applicable, more difficult and may
deter or delay corporate changes of control which have not received the
requisite approval of the Board of Directors of BB&T Financial or Commerce, as
applicable.
Election and Removal of Directors. All of BB&T Financial's directors are
elected each year. Under BB&T Financial's Amended Articles of Incorporation,
approval by the vote of at least two-thirds of the outstanding shares of BB&T
Financial Common Stock is required for the removal of any director or the
entire BB&T Financial Board of Directors. Under North Carolina law, a director
may be removed by stockholder vote only if the number of votes cast to remove
him exceeds the number of votes cast not to remove him.
All of Commerce's directors are elected each year. Under Virginia law, a
director of Commerce may be removed with or without cause by stockholder vote
if the number of votes cast to remove him constitutes a majority of the votes
entitled to be cast at a meeting called for such purpose.
Authorized Preferred Stock. BB&T Financial's Amended Articles of
Incorporation authorize 4,000,000 shares of nonvoting preferred stock. The BB&T
Financial Board of Directors may, subject to applicable law and the rules of
the National Association of Securities Dealers for Nasdaq/NMS companies,
authorize the issuance of preferred stock at such times, for such purposes and
for such consideration as it may deem advisable without further stockholder
approval. The issuance of preferred stock under certain circumstances may have
the effect of discouraging an attempt by a third party to acquire control of
BB&T Financial by, for example, authorizing the issuance of a series of
preferred stock with rights and preferences designed to impede the proposed
transaction. A series of preferred stock also could be used for a stockholder
rights plan, which may be adopted without stockholder approval. Such a plan, if
adopted, could deter attempts by third parties to acquire a significant number
of shares of BB&T Financial Common Stock without the prior approval of the BB&T
Financial Board of Directors.
57
Commerce's Amended Articles of Incorporation authorize the issuance of up to
1,000,000 shares of preferred stock. The Commerce Board of Directors could,
subject to applicable law and the rules of the National Association of
Securities Dealers for Nasdaq/NMS companies, issue this preferred stock with
such rights and preferences as the Board of Directors deems desirable without
stockholder approval for purposes similar to those described above. Therefore,
the existence of such authorized preferred stock could deter attempts of third
parties to acquire a significant number of shares of Commerce Common Stock
without prior approval of the Board of Directors of Commerce.
North Carolina and Virginia Stockholder Protection Legislation. The North
Carolina Shareholder Protection Act and the North Carolina Control Share
Acquisition Act both apply to BB&T Financial. These Acts are designed to
protect stockholders against certain changes in control and to provide
stockholders with the opportunity to vote on whether to accord voting rights to
certain stockholders.
The North Carolina Shareholder Protection Act ("N.C. Shareholder Protection
Act") is a "fair price" statute that requires the affirmative vote of 95% of
the voting shares of a corporation for the adoption of a business combination
(including a merger) with another entity if the other entity beneficially owns
more than 20% of the voting shares of the corporation. This vote is not
required if the stockholders of the corporation receive a specified minimum
price for their shares as part of the business combination and the stockholders
receive a proxy statement for the purpose of soliciting their approval for the
business combination. The proxy statement must contain the opinion of those
directors not elected by the other entity as to the advisability of the
business combination and may include an opinion from an outside investment firm
as to the fairness of the transaction. A North Carolina corporation may opt out
of the provisions of the N.C. Shareholder Protection Act in its articles of
incorporation or by-laws.
The North Carolina Control Share Acquisition Act ("Share Acquisition Act")
requires the approval of a majority of a corporation's disinterested
stockholders before an acquiror of the corporation's shares who crosses one of
three voting thresholds (20%, 33 1/3% or 50%) may obtain voting control with
respect to those shares that exceed the threshold. The Share Acquisition Act
also provides disinterested stockholders with certain redemption rights if the
acquiror gains majority voting power for the election of the corporation's
directors as a result of the affirmative vote of the disinterested
stockholders. A merger pursuant to an agreement of merger with the corporation
does not fall under the purview of the Share Acquisition Act. A North Carolina
corporation may opt out of the provisions of the Share Acquisition Act in its
articles of incorporation or by-laws.
BB&T Financial has chosen not to opt out of the N.C. Shareholder Protection
Act or the Share Acquisition Act. BB&T Financial's Amended Articles of
Incorporation and By-laws do not contain any provision that would prevent the
application of either of the Acts to BB&T Financial. As a result, the effect of
these Acts may be to deter or delay changes in control which are opposed by the
BB&T Financial Board of Directors or stockholders.
The Virginia Stock Corporation Act ("VSCA") also provides similar
restrictions on "affiliated transactions" (including, among other various
transactions, mergers, share exchanges, sales, leases, or other dispositions of
material assets, issuances of securities, dissolutions, and similar
transactions) with an "interested stockholder" (generally the beneficial owner
of more than 10% of any class of the corporation's outstanding voting shares).
During the three years following the date a stockholder becomes an interested
stockholder, any affiliated transaction with the interested stockholder must be
approved by both a majority of the "disinterested directors" (those directors
who were directors before the interested stockholder became an interested
stockholder or who were recommended for election by a majority of disinterested
directors) and by the affirmative vote of the holders of two-thirds of the
corporation's voting shares other than shares beneficially owned by the
interested stockholder. The foregoing requirements do not apply to affiliated
transactions if, among other things, a majority of the disinterested directors
approve the interested stockholder's acquisition of voting shares making such a
person an interested stockholder prior to such
58
acquisition. Beginning three years after the stockholder becomes an interested
stockholder, the corporation may engage in an affiliated transaction with the
interested stockholder if (i) the affiliated transaction is approved by the
holders of two-thirds of the corporation's voting shares, other than shares
beneficially owned by the interested stockholder, (ii) the affiliated
transaction has been approved by a majority of the disinterested directors or
(iii) subject to certain additional requirements, in the affiliated transaction
the holders of each class or series of voting shares will receive consideration
meeting specified fair price and other requirements designed to insure that all
stockholders receive fair and equivalent consideration, regardless of when they
tendered their shares.
On June 23, 1994, the directors of Commerce by the requisite vote adopted a
resolution that exempts BB&T Financial from the restrictions of the affiliated
transactions provisions of the VSCA.
Prior to the enactment of the foregoing legislation, the stockholders of
Commerce approved the adoption of a so-called "fair-price amendment" to the
Amended Articles of Incorporation. The fair-price amendment generally provides
that certain business combinations (including mergers, consolidations,
dispositions of assets and similar corporate transactions) involving Commerce
and a person or entity owning 5% or more of Commerce Common Stock (an
"Acquiring Person") must be approved by the holders of at least 80% of the
outstanding shares of Commerce Common Stock, unless such business combination
either:
(i) has been approved by at least 80% of those directors who are not
affiliated or associated with the Acquiring Person, or
(ii) will result in the receipt by all stockholders of a specified
minimum amount and form of payment for their shares and will satisfy
certain other conditions.
The fair-price amendment does not apply to the Acquisition.
Under the VSCA's control share acquisitions law, voting rights of shares of
stock of a Virginia corporation acquired by an acquiring person at ownership
levels of 20%, 33 1/3% and 50% of the outstanding shares may, under certain
circumstances, be denied unless conferred by a special stockholder vote of a
majority of the outstanding shares entitled to vote for directors, other than
shares held by the acquiring person and officers and directors of the
corporation or, among other exceptions, such acquisition of shares is made
pursuant to a merger agreement with the corporation or the corporation's
articles of incorporation or by-laws permit the acquisition of such shares
prior to the acquiring person's acquisition thereof. If authorized in the
corporation's articles of incorporation or by-laws, the statute also permits
the corporation to redeem the acquired shares at the average per share price
paid for them if the voting rights are not approved or if the acquiring person
does not file a "control share acquisition statement" with the corporation
within sixty days of the last acquisition of such shares. If voting rights are
approved for control shares comprising more than fifty percent of the
corporation's outstanding stock, objecting stockholders may have the right to
have their shares repurchased by the corporation for "fair value."
The VSCA's control share acquisitions law does not apply to the Acquisition.
Supermajority Voting Provisions. BB&T Financial's Amended Articles of
Incorporation require the affirmative vote of two-thirds of the outstanding
shares entitled to vote to approve a merger, consolidation, or other business
combination, unless the transaction is approved, prior to consummation, by two-
thirds of the members of the BB&T Financial Board of Directors. This provision
could tend to make the acquisition of BB&T Financial more difficult to
accomplish without the cooperation or favorable recommendation of the BB&T
Financial Board of Directors.
The VSCA provides that, unless a corporation's articles of incorporation
provide for a higher or lower vote, certain significant corporate actions must
be approved by the affirmative vote of the holders of more than two-thirds of
the votes entitled to be cast on the matter. Corporate actions requiring a two-
thirds vote include amendments to a corporation's articles of incorporation,
adoption of plans of merger or exchange, sales of all or substantially all of a
corporation's assets other than in the ordinary course of business and adoption
of plans of dissolution ("Fundamental Actions"). The VSCA provides that a
corporation's articles of incorporation may either increase the vote required
to approve Fundamental Actions or may decrease the required vote to not less
than a majority of the votes entitled to be cast.
59
The supermajority provision contained in Commerce's Amended Articles of
Incorporation decreases the stockholder vote required to approve Fundamental
Actions to the affirmative vote of the holders of a majority of the shares
entitled to vote, provided that two-thirds of the members of the Board of
Directors then in office have approved and recommended the approval of the
Fundamental Action. In the absence of such approval and recommendation by the
Board, the stockholder vote required for approval of Fundamental Actions is
increased to 80% of the shares entitled to vote on the matter.
The Acquisition was approved by two-thirds of the members of the Board of
Directors of Commerce and thus requires the affirmative vote of only a majority
of the shares entitled to vote on the Acquisition.
Amendments to Articles of Incorporation. BB&T Financial's Amended Articles of
Incorporation require approval by holders of at least two-thirds of the
outstanding shares entitled to vote in order to amend certain provisions of
BB&T Financial's Amended Articles of Incorporation. Those provisions require
holders of at least two-thirds of its outstanding shares to approve (i) the
removal of a director or the entire BB&T Financial Board of Directors, (ii) a
merger, consolidation or other business combination not approved by two-thirds
of the BB&T Financial Board of Directors and (iii) an amendment or repeal of
the By-laws. Any other amendment of the Amended Articles of Incorporation
requires the affirmative vote of the holders of a majority of the shares
entitled to vote on such amendment.
See the discussion above concerning "Supermajority Voting Provisions" with
respect to the stockholder vote requirements to amend Commerce's Amended
Articles of Incorporation.
Amendments to By-laws. BB&T Financial's By-laws may be amended by either the
vote of a majority of the BB&T Financial Board of Directors or by the
affirmative vote of the holders of at least two-thirds of the outstanding BB&T
Financial Common Stock.
Commerce's By-laws may be amended at any time by either the vote of a
majority of the Commerce Board of Directors or of the Commerce stockholders if
the votes cast in support of an amendment to the By-laws exceed the votes cast
opposing such amendment.
Employee Stock Plans. BB&T Financial established employee stock ownership
plans for the benefit of the employees of certain savings institutions upon
their acquisitions by BB&T Financial. These plans, which hold 255,906 shares of
BB&T Financial Common Stock as of June 30, 1994, are subparts of BB&T
Financial's Savings and Thrift Plan, which holds an additional 1,639,839 shares
of BB&T Financial Common Stock as of June 30, 1994. Under plan terms,
participants in BB&T Financial's Savings and Thrift Plan have the right to
direct the trustee as to the voting of the shares held in their accounts on all
matters, including the election of directors. Under these plans, including each
employee stock ownership plan, the trustee is required, subject to applicable
law, to vote the shares as to which participant directions are not received and
as to shares not allocated to participant accounts in the same proportion as
the allocated shares as to which directions are received. Plan terms also would
require the trustee of each plan to follow participant instructions as to the
tendering of any shares held in participant accounts in the event of a tender
offer. Shares allocated to participant accounts as to which instructions are
not received and unallocated shares are, again subject to applicable law,
tendered pursuant to the same procedures as to which shares would be voted. As
a result of these so-called "pass-through" provisions, any third-party attempt
to acquire control of BB&T Financial by means of a proxy contest or tender
offer may require the support of the plan participants. The BB&T Financial
employee stock plans established thus may tend to discourage such attempts to
the extent that participants oppose third-party attempts to acquire control and
stockholder approval or support is required for such attempts.
Commerce has not established an employee stock ownership or similar plan.
THE SHARES OF BB&T FINANCIAL COMMON STOCK TO BE ISSUED IN THE ACQUISITION ARE
NOT DEPOSITS AND ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
60
DESCRIPTION OF STOCKHOLDERS' RIGHTS OF SNC
Under the terms of the SNC Agreement, SNC will be merged with and into BB&T
Financial, which will then continue as the Continuing Corporation under its
existing Amended Articles of Incorporation. In such event, the SNC Merger would
not have a material effect on the rights of Commerce stockholders once they
become stockholders of BB&T Financial. Under certain circumstances, however,
BB&T Financial and SNC may agree that BB&T Financial will be merged with and
into SNC, which will then continue as the Continuing Corporation under its
existing Amended and Restated Articles of Incorporation. In such case, the SNC
Merger would have an effect on the rights of Commerce stockholders. Therefore,
the following information describing the rights of the stockholders of SNC is
provided.
GENERAL
SNC is authorized to issue 120,000,000 shares of SNC Common Stock, $5 par
value, of which 43,385,610 shares were issued and outstanding as of June 30,
1994. SNC is also authorized to issue 5,000,000 shares of preferred stock, $5
par value ("SNC Preferred Stock"), of which 770,000 shares of SNC Series A
Preferred Stock have been issued.
The SNC Series A Preferred Stock was issued in connection with an offering of
3,080,000 Depositary Shares, each representing one-quarter interest in a share
of SNC Series A Preferred Stock. Each owner of a Depositary Share is entitled,
in proportion to the one-quarter interest in a share of SNC Series A Preferred
Stock represented by such Depositary Share, to all the rights and preferences
of the SNC Series A Preferred Stock represented thereby (including dividend,
voting, redemption, conversion and liquidation rights). The SNC Series A
Preferred Stock is convertible at any time into such number of whole shares of
SNC Common Stock as is equal to the aggregate stated value of shares
surrendered for conversion divided by $16.93 per share of SNC Common Stock,
subject to adjustment (under formulae set forth in SNC's Amended and Restated
Articles of Incorporation) in certain events.
Under SNC's Amended and Restated Articles of Incorporation, the SNC Board of
Directors, or a duly authorized committee thereof, has the power, without
further action by the SNC stockholders, to provide for the issuance of
preferred stock in one or more series and to fix the voting power,
designations, preferences and relative, participating, optional or special
rights, and qualifications, limitations or restrictions thereof, by adopting a
resolution or resolutions creating and designating such series. The rights of
the holders of SNC Common Stock are subject to the rights and preferences of
the holders of SNC Series A Preferred Stock and would be subject to any rights
and preferences of any other SNC preferred stock or series thereof that the SNC
Board of Directors may issue.
DIVIDEND RIGHTS
Unless SNC's Amended and Restated Articles of Incorporation are amended to
provide otherwise, SNC may issue to the holders of shares of SNC Common Stock
share dividends in SNC Common Stock. If certain requirements are met, share
dividends in shares of another class or series may be issued to holders of SNC
Common Stock. Additionally, the holders of shares of SNC Common Stock will be
entitled to receive such other distributions as the Board of Directors of SNC
may declare, and the requirement that no distributions may be made if, after
giving effect thereto (i) SNC would not be able to pay its debts as they become
due in the ordinary course of business or (ii) SNC's total assets would be less
than the sum of SNC's total liabilities plus the amount that would be needed,
if SNC were to be dissolved at the time of distribution, to satisfy claims of
holders of SNC Series A Preferred Stock and such stockholders which have
preferential rights superior to the rights of holders of SNC Common Stock.
61
Holders of shares of the SNC Series A Preferred Stock are entitled to
receive, when and as declared by the Board of Directors of SNC, out of assets
of SNC legally available for payment, an annual cash dividend of 6.75% per
annum (equivalent to $1.6875 per Depositary Share). Dividends on the SNC Series
A Preferred Stock are cumulative from the date of issue and payable quarterly
on February 15, May 15, August 15 and November 15 of each year commencing May
15, 1992, at such annual rate. Dividends payable on the SNC Series A Preferred
Stock for any period less than a full dividend period shall be computed on the
basis of a 360-day year consisting of twelve 30-day months. Each such dividend
will be payable to holders of record as they appear on the stock register of
SNC on such record dates, not more than 60 days nor less than 10 days preceding
the payment dates, as shall be fixed by the SNC Board of Directors. In the
event that full cumulative dividends on the SNC Series A Preferred Stock have
not been paid when due, SNC may not declare or pay any dividends or make other
distributions (other than dividends payable in shares of common stock or other
capital stock of SNC ranking junior to the SNC Series A Preferred Stock with
respect to the payment of dividends and upon liquidation, dissolution or
winding up, or options, warrants or rights to
subscribe for or purchase such shares) on its Common Stock or on any other
capital stock of SNC ranking junior to the SNC Series A Preferred Stock with
respect to the payment of dividends, or purchase, redeem or otherwise acquire
any shares of SNC Series A Preferred Stock (other than with funds previously
deposited in trust for the redemption of shares of SNC Series A Preferred Stock
pursuant to any sinking fund) or any other shares of capital stock of SNC
ranking on a parity with or junior to the SNC Series A Preferred Stock (except
by conversion into or exchange for capital stock of SNC ranking junior to the
SNC Series A Preferred Stock as to payment of dividends and upon liquidation,
dissolution or winding up).
Debt instruments to which SNC is subject contain provisions restricting its
payment of dividends. Under the most restrictive of these provisions, at June
30, 1994, approximately $ million was available for the payment of dividends
on SNC's capital stock.
While SNC is not subject to the restrictions on dividends applicable to
national banks, the ability of SNC to pay distributions to the holders of SNC
Common Stock will depend to a large extent upon the amount of dividends SNB-NC
and SNB-SC, which are subject to the restrictions imposed by the National Bank
Act, and SNB Savings, which is subject to the restrictions imposed by the
regulations of the Savings Institution Division of the North Carolina
Department of Commerce, pay to SNC.
There can be no assurance as to the payment of dividends on shares of SNC
Common Stock in the future since such payment will depend upon the earnings and
financial condition of SNC and its bank and savings bank subsidiaries, as well
as other related factors.
VOTING RIGHTS
Each holder of SNC Common Stock is entitled to one vote per share and to the
same and identical voting rights as other holders of SNC Common Stock. Holders
of SNC Common Stock do not have cumulative voting rights in the election of
directors so long as SNC has shares of any class of securities entitled to be
voted at a meeting that are held of record by more than 2,000 stockholders or
listed on a national securities exchange, unless SNC's Amended and Restated
Articles of Incorporation are amended to provide otherwise. Directors shall be
elected by a plurality of the votes cast, and at each election for directors
every shareholder entitled to vote at such election shall have the right to
vote, in person or by proxy, the number of shares outstanding of record in his
name for as many persons as there are directors to be elected.
Shares of SNC Common Stock owned by any of its subsidiaries in a non-
fiduciary capacity are not eligible to vote on any matter. Shares of SNC Common
Stock held by SNC or any of its subsidiaries either as a sole- or co-fiduciary
may be voted in the election of directors and in all other matters by the
registered owners, unless otherwise limited by the terms of the individual
trust agreements.
In general, unless SNC's Amended and Restated Articles of Incorporation are
amended to provide otherwise or a bylaw is adopted by the stockholders, action
on a matter is approved if the votes cast favoring the action exceed the votes
cast opposing the action. However, generally (i) the affirmative vote of a
majority
62
of the shares entitled to be cast of each voting group entitled to vote
separately is required to approve a merger or share exchange, (ii) the
affirmative vote of a majority of the shares of each voting group entitled to
vote thereon is required to amend SNC's Amended and Restated Articles of
Incorporation, if the amendment would give rise to dissenters' rights and (iii)
the affirmative vote of a majority of the shares of capital stock of SNC
entitled to be cast is required to approve the dissolution of SNC or to approve
the sale of all or substantially all the property of SNC other than in the
regular course of business. With respect to sales of assets in the regular
course of business, the SNC Board of Directors may approve the sale of all or
substantially all the property of SNC without shareholder approval.
Holders of SNC Common Stock have dissenters' rights of appraisal with respect
to their shares of SNC Common Stock as provided by statute in connection with
certain types of merger or share exchange transactions. Dissenters' rights are
also available with respect to certain sales of all or substantially all the
property of SNC and amendments to SNC's Amended and Restated Articles of
Incorporation that materially and adversely affect certain enumerated rights of
the dissenters' shares.
The SNC Board of Directors, without stockholder approval, may issue shares of
SNC Preferred Stock with voting and conversion rights that could adversely
affect the voting power of the holders of SNC Common Stock.
Holders of SNC Series A Preferred Stock do not have any voting rights except
as set forth below or as otherwise from time to time expressly required by law.
Whenever dividends on any shares of SNC Series A Preferred Stock are in arrears
for six full quarterly periods, whether or not consecutive, the holders of such
shares of SNC Series A Preferred Stock (voting separately as a class with all
other series of cumulative preferred stock upon which like voting rights have
been conferred and are exercisable) will be entitled to vote for the election
of two additional directors (on the terms set forth below) of SNC at the next
annual meeting of stockholders and at each subsequent meeting until all
dividends accumulated on such shares of SNC Series A Preferred Stock have been
fully paid or set aside for payment. In such case, the entire SNC Board of
Directors will be increased by two directors. Each director so elected will
continue to serve for the full term for which he has been elected,
notwithstanding that prior to the end of such term such default ceases to
exist.
So long as any shares of SNC Series A Preferred Stock remain outstanding, SNC
will not, without the affirmative vote of the holders of at least two-thirds of
the shares of SNC Series A Preferred Stock outstanding at the time, given in
person or by proxy, at a meeting (voting separately as one class): (i)
authorize, create or issue, or increase the authorized or issued amount of, any
class of series of stock ranking prior to the SNC Series A Preferred Stock with
respect to payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up, (ii) authorize, create or issue, or increase the
authorized or issued amount of, any class or series of stock (including any
class or series of preferred stock) which ranks on a parity with the SNC Series
A Preferred Stock as to dividends and upon liquidation, dissolution or winding
up ("Parity Stock") unless SNC's Amended and Restated Articles of Incorporation
or other provisions of the charter creating or authorizing such class or series
provide that if in any case the stated dividends or amounts payable upon
liquidation, dissolution or winding up are not paid in full on the SNC Series A
Preferred Stock and all outstanding shares of Parity Stock, the shares of all
Parity Stock will share ratably in the payment of dividends, including
accumulations (if any) in accordance with the sums which would be payable on
all Parity Stock if all dividends in respect of all shares of Parity Stock were
paid in full, and on any distribution of assets upon liquidation, dissolution
or winding up ratably in accordance with the sums which would be payable in
respect of all shares of Parity Stock if all sums payable were discharged in
full or (iii) amend, alter or repeal the provisions of SNC's Amended and
Restated Articles of Incorporation, whether by merger, consolidation or
otherwise, so as to materially and adversely affect any right, preference,
privilege or voting power of such shares of SNC Series A Preferred Stock or the
holders thereof; provided, however, that any increase in the amount of the
authorized preferred stock or any outstanding series of preferred stock or any
other capital stock of SNC, or the creation and issuance of other series of
preferred stock including SNC Series A Preferred Stock, or of any other capital
stock of SNC, in each case ranking on a parity with or
63
junior to the SNC Series A Preferred Stock with respect to the payment of
dividends and the distribution of assets upon liquidation, dissolution or
winding up will not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
PREEMPTIVE RIGHTS
The stockholders of SNC do not have preemptive rights. Thus, if additional
shares of SNC Common Stock or SNC preferred stock were issued, holders of such
stock, to the extent they did not participate in such additional issuance of
shares, would own proportionately smaller interests in a larger amount of
outstanding capital stock.
ASSESSMENT AND REDEMPTION
All outstanding shares of SNC Common Stock are, and those to be issued
pursuant to the SNC Agreement will be, fully paid and nonassessable.
The SNC Common Stock is not convertible, redeemable or entitled to any
sinking fund.
LIQUIDATION RIGHTS
In the event of the liquidation, dissolution or winding up of the affairs of
SNC, holders of outstanding shares of SNC Common Stock are entitled to share,
in proportion to their respective interests, in SNC's assets and funds
remaining after payment, or provision for payment, of all debts and other
liabilities of SNC. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of SNC, the holders of shares of the SNC Series A
Preferred Stock will be entitled to receive out of the assets of SNC available
for distribution to stockholders, before any distribution is made to holders of
Common Stock, liquidating distributions in the amount of $100 per share of the
SNC Series A Preferred Stock (equivalent to $25 per Depositary Share), plus
accrued but unpaid dividends to, but excluding, the date of final distribution,
but the holders of the shares of the SNC Series A Preferred Stock will not be
entitled to receive the liquidation price of such shares until the liquidation
preference of any other shares of SNC's capital stock ranking senior to the SNC
Series A Preferred Stock with respect to rights upon liquidation, dissolution
or winding up shall have been paid (or a sum set aside therefor sufficient to
provide for payment) in full. No such senior capital stock of SNC is
outstanding, and the holders of the SNC Series A Preferred Stock have certain
voting rights with respect to the issuance of any such senior capital stock.
See "--Voting Rights." If upon any voluntary or involuntary liquidation,
dissolution or winding up of SNC, the assets of SNC shall be insufficient to
make such full payments to holders of the SNC Series A Preferred Stock and any
other preferred stock ranking with respect to rights upon liquidation,
dissolution or winding up on a parity with the SNC Series A Preferred Stock,
then such assets shall be distributed pro-rata among holders of the SNC Series
A Preferred Stock or any other such preferred stock. After payment of the full
amount of the liquidating distribution to which they are entitled, the holders
of the SNC Series A Preferred Stock will not be entitled to any further
participation in any distribution of assets by SNC. Neither a consolidation or
merger of SNC with or into another corporation nor a merger of another
corporation with or into SNC nor a sale, lease or conveyance of all or any part
of SNC's property or business shall be considered a liquidation, dissolution,
or winding up of SNC.
Because SNC is a bank and savings bank holding company, its rights, the
rights of its creditors and of its stockholders, including the holders of the
shares of the SNC Series A Preferred Stock, to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization may be subject to
the prior claims of the subsidiary's creditors except to the extent that SNC
may itself be a creditor with recognized claims against the subsidiary and any
interests in the liquidation accounts established by savings associations or
savings banks acquired by SNC for the benefit of eligible account holders in
connection with the conversion of such savings associations to stock form. The
Board of Directors of SNC, without shareholder approval, may issue SNC
preferred stock with liquidation rights that may affect the amount of assets
and funds remaining for payment to holders of SNC Common Stock upon a
liquidation of SNC.
64
CERTAIN PROVISIONS WHICH MAY HAVE AN ANTI-TAKEOVER EFFECT
The provisions of SNC's By-laws and Amended and Restated Articles of
Incorporation providing for classification of the Board of Directors into three
separate classes and removal of directors only for cause may have certain anti-
takeover effects.
The rights of holders of SNC Common Stock will be subject to, and may be
adversely affected by, the rights of holders of any preferred stock that may be
issued in the future. Any such issuance may adversely affect the interests of
holders of SNC Common Stock by limiting the control which such holders may
exert by exercise of their voting rights, by subordinating their rights in
liquidation to the rights of the holders of such preferred stock, and
otherwise. In addition, the issuance of preferred stock of SNC may, in some
circumstances, deter or discourage takeover attempts and other changes in
control of SNC, including takeovers and changes in control which some holders
of SNC Common Stock may deem to be in their best interests and in the best
interests of SNC, by making it more difficult for a person who has gained a
substantial equity interest in SNC to obtain voting control or to exercise
control effectively. SNC has no current plans or agreements with respect to the
issuance of any shares of preferred stock other than the issuance of SNC Series
A Preferred Stock.
Election and Removal of Directors. The SNC By-laws provide for a Board of
Directors having not less than three nor more than twenty-five members as
determined from time to time by vote of a majority of the members of the Board
of Directors or by resolution of the stockholders of SNC. As long as the
stockholders of SNC do not have cumulative voting rights with respect to the
election of directors, the SNC Board of Directors may increase or decrease the
number of directors not more than 30% in any twelve-month period. Vacancies,
whether arising from an increase in the number of directors or from the failure
by stockholders to elect the full authorized number of directors, may be filled
by the stockholders or by the SNC Board of Directors (by the affirmative vote
of a majority of the remaining directors if less than a quorum of the directors
remains). Pursuant to SNC's By-laws, however, less than a majority of the full
SNC Board of Directors may not increase the number of directors to a number
which: (i) exceeds by more than two the number of directors last fixed by
stockholders where such number was fifteen or less or (ii) exceeds by more than
four the number of directors last fixed by stockholders where such number was
sixteen or more. Presently, membership on the SNC Board of Directors is fixed
at twenty-three.
Pursuant to SNC's Amended and Restated Articles of Incorporation, members of
the SNC Board of Directors can be removed only for cause. In addition, the
directors may be removed only by the vote of a majority of the outstanding
shares of SNC Common Stock entitled to vote in the election of directors.
The SNC Board of Directors is divided into three classes so that each
director serves for a term ending on the date of the third annual meeting
following the annual meeting at which such director was elected. In the event
of any increase in the authorized number of directors, the newly created
directorships resulting from such increase would be apportioned among the three
classes of directors so as to maintain such classes as nearly equal as
possible. Because the classification of directors, unless the stockholders act
under North Carolina law to remove directors from office, two annual meetings
generally would be required to elect a majority of the SNC Board of Directors,
and three rather than one would be required to replace the entire board.
Amendment of the provisions of SNC's Amended and Restated Articles of
Incorporation providing for the structure of the SNC Board of Directors and
proving for the removal of directors and the selection of a director to fill a
vacancy on the SNC Board of Directors requires the affirmative vote of not less
than two-thirds of the total number of issued and outstanding shares of SNC
Common Stock entitled to vote thereon.
North Carolina Stockholder Protection Legislation. The N.C. Shareholder
Protection Act and the Share Acquisition Act both apply to SNC.
65
EXPERTS
The consolidated financial statements of BB&T Financial and its subsidiaries
included in BB&T Financial's Annual Report on Form 10-K for the year ended
December 31, 1993 incorporated herein by reference have been incorporated by
reference in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. Such financial
statements have been restated in BB&T Financial's Current Report on Form 8-K
dated August 31, 1994.
The consolidated financial statements of BB&T Financial and its subsidiaries
which are incorporated herein by reference from BB&T Financial's Current Report
on Form 8-K dated August 31, 1994, which restates the consolidated financial
statements that are incorporated by reference from BB&T Financial's Annual
Report on Form 10-K for the year ended December 31, 1993 to reflect the
acquisition of L.S.B. Bancshares, Inc. of South Carolina by BB&T Financial
during 1994, have been incorporated by reference herein in reliance upon the
reports of KPMG Peat Marwick LLP and other auditors, independent certified
public accountants, incorporated by reference herein, and upon the authority of
said firms as experts in accounting and auditing.
The financial statements of Commerce at December 31, 1993 and for the year
then ended incorporated by reference herein have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included
therein and incorporated by reference herein. Such financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The financial statements of Commerce as of December 31, 1992 and for each of
the two years in the period ended December 31, 1992 incorporated by reference
herein have been incorporated by reference in reliance on the report of Coopers
& Lybrand, independent accountants, incorporated by reference herein, and have
been incorporated by reference in reliance upon the authority of that firm as
experts in auditing and accounting.
OPINIONS
The validity of the shares of BB&T Financial Common Stock offered hereby is
being passed upon for BB&T Financial by Jerone C. Herring, Esquire, Vice
President and Secretary of BB&T Financial. As of the date of this Prospectus,
Mr. Herring beneficially owned shares of BB&T Financial Common Stock and
held options exercisable within 60 days of such date to acquire shares of
BB&T Financial Common Stock. Certain matters with regard to the federal law
will be passed upon for BB&T Financial by Arnold & Porter, Washington, D.C.,
special counsel to BB&T Financial. Certain matters with regard to the federal
and Virginia income tax consequences of the Acquisition have been passed upon
for BB&T Financial by KPMG Peat Marwick.
STOCKHOLDER PROPOSALS
It is not anticipated that Commerce will hold a 1995 Annual Meeting of
Stockholders unless the Acquisition is not consummated prior to April 1995. If
the Acquisition is not consummated prior to that time, any stockholder proposal
intended for inclusion in Commerce's proxy materials for the 1995 Annual
Meeting of Stockholders must be received at Commerce's main office at 5101
Cleveland Street, Suite 206, Virginia Beach, Virginia 23462 no later than .
Any such proposal shall be subject to the requirements of the proxy rules
adopted by the FDIC under the Exchange Act.
OTHER MATTERS
The Commerce Board of Directors does not intend to bring any matter before
the Special Meeting other than as specifically set forth in the Notice of
Special Meeting of Stockholders, nor does it know of any matter to be brought
before the Special Meeting by others. If, however, any other matters properly
come before the Special Meeting, it is the intention of each of the
proxyholders to vote such proxy in accordance with the decision of a majority
of the Commerce Board of Directors.
66
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
Agreement and Plan of Reorganization ("Reorganization Agreement" or
"Agreement"), dated as of June 24, 1994, between COMMERCE BANK ("Commerce"), a
bank chartered under the laws of the Commonwealth of Virginia, having its home
office at 5101 Cleveland Street, Virginia Beach, Virginia 23462, and BB&T
FINANCIAL CORPORATION ("BB&T Financial"), a North Carolina corporation having
its home office at 223 West Nash Street, Wilson, North Carolina 27893.
WITNESSETH
Whereas, the parties hereto desire that Branch Banking and Trust Company of
Virginia ("BB&T-VA"), a to be formed Virginia chartered bank, which will be a
wholly owned subsidiary of BB&T FINANCIAL CORPORATION OF VIRGINIA ("BB&T
Financial-Va"), a to be formed Virginia corporation and wholly owned subsidiary
of BB&T Financial, shall be merged with and into Commerce (said transaction
being hereinafter referred to as the "Merger") pursuant to a plan of merger in
the form attached hereto as Annex A ("Plan of Merger");
Whereas, 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 do hereby agree as
follows:
ARTICLE I
DEFINITIONS
"Bank Holding Company Act" shall mean the Bank Holding Company Act of 1956,
as amended.
"BB&T Financial Common Stock" shall mean the shares of common stock, par
value $2.50 per share, of BB&T Financial.
"BB&T Financial Subsidiary" shall mean each of Branch Banking and Trust
Company, a North Carolina chartered bank subsidiary of BB&T Financial, and
Branch Banking and Trust Company of South Carolina, an indirect wholly owned
subsidiary of BB&T Financial.
"Closing Date" shall mean the date specified pursuant to Section 4.11 hereof
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 Date" shall mean the date specified pursuant to Section 4.11
hereof as the effective date 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
I-1
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 BB&T Financial, (i) the
consolidated balance sheets (including related notes and schedules, if any) of
BB&T Financial as of December 31, 1993 and 1992 and the related consolidated
statements of income, shareholders' equity and cash flows (including related
notes and schedules, if any) for each of the three years ended December 31,
1993, 1992 and 1991 as filed by BB&T Financial in Securities Documents and (ii)
the consolidated balance sheets of BB&T Financial (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 BB&T Financial with respect to periods ended
subsequent to December 31, 1993, and (b) with respect to Commerce, (i) the
consolidated balance sheets (including related notes and schedules, if any) of
Commerce as of December 31, 1993 and 1992 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, 1993, 1992 and 1991 as filed by Commerce in Securities Documents and (ii)
the consolidated balance sheets of Commerce (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 Commerce with respect to periods ended
subsequent to December 31, 1993.
"Commerce Subsidiary" shall mean Commerce Financial Services, Inc.
"Joint Venture" shall mean any joint venture, partnership or similar
arrangement in which Commerce or the Commerce Subsidiary is a member, party to
or partner (whether general or limited).
"Material Adverse Effect" shall mean a material adverse effect on the
financial condition, results of operations, business or prospects of Commerce.
"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 Commerce and BB&T Financial, which shall be executed
immediately following execution of this Reorganization Agreement.
"Previously Disclosed" shall mean disclosed in (i) a Securities Document
delivered by one party to the other on or prior to the execution of this
Reorganization Agreement or (ii) in a letter from one party to the other party
delivered and dated not later than July 1, 1994 specifically referring to this
Agreement, provided that such letter is not materially inconsistent with a
draft of such letter delivered to the other party and dated on or prior to the
date of this Agreement.
I-2
"Proxy Statement" shall mean the proxy statement together with any
supplements thereto sent to shareholders of Commerce 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 BB&T Financial 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 FDIC promulgated thereunder.
"State Board" shall mean the Virginia State Corporation Commission, Bureau of
Financial Institutions.
"TILA" shall mean the Truth in Lending Act, as amended.
"VASCA" shall mean the Virginia Stock Corporation Act, as amended.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMMERCE
Commerce represents and warrants to BB&T Financial as follows:
2.1 CAPITAL STRUCTURE
The authorized capital stock of Commerce consists of (i) 5,000,000 shares of
common stock, par value $2.50 per share ("Commerce Common Stock") and (ii)
1,000,000 shares of preferred stock, par value $5.00 per share. As of the date
hereof, there were 2,725,163 shares of Commerce Common Stock issued and
outstanding and no shares of preferred stock outstanding. All outstanding
shares of Commerce Common Stock have been duly issued and are validly
outstanding, fully paid and nonassessable. No other classes of capital stock of
Commerce are authorized. No shares of Commerce Common Stock are held in the
treasury of Commerce. No shares of capital stock have been reserved for any
purpose, except for (i) 262,895 shares of Commerce Common Stock in connection
with Commerce's 10% Convertible Subordinated Capital Notes due August 31, 2002
("Convertible Notes"), (ii) 209,637 shares of Commerce Common Stock in
connection with Commerce's 1985 Stock Option Plan, (iii) 157,500 shares of
Commerce Common Stock in connection with Commerce's 1993 Incentive Stock Plan
(clauses (ii) and (iii) together are referred to herein as the "Stock Option
Plans"), (iv) 234,547 shares of Commerce Common Stock in connection with
Commerce's Dividend Reinvestment and Stock Purchase Plan, (v) 480,000 shares of
Commerce Common Stock in connection with the Preferred Stock Purchase Agreement
with BB&T Financial dated April 21, 1994 ("Preferred Stock Purchase Agreement")
and (vi) 540,000 shares of Commerce 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 Commerce. Shareholders of
Commerce do not have preemptive rights.
I-3
2.2 ORGANIZATION, STANDING AND AUTHORITY
Commerce is a bank 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 and does not do business in
any other states of the United States and foreign jurisdictions where its
ownership or leasing of property or the conduct of its business requires
qualification to do business.
2.3 OWNERSHIP OF COMMERCE SUBSIDIARY
Except as Previously Disclosed, Commerce does not own, directly or
indirectly, any outstanding capital stock or other voting securities or
ownership interests of any corporation, bank, savings association, partnership,
Joint Venture, or other organization, except for the Commerce Subsidiary. The
outstanding shares of capital stock of the Commerce Subsidiary are validly
issued and outstanding, fully paid and nonassessable and all such shares are
directly or indirectly owned by Commerce 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 Commerce
Subsidiary and there are no agreements, understandings or commitments relating
to the right of Commerce to vote or to dispose of said shares. None of the
shares of capital stock of the Commerce Subsidiary has been issued in violation
of the preemptive rights of any person.
2.4 ORGANIZATION, STANDING AND AUTHORITY OF THE COMMERCE SUBSIDIARY
The Commerce Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of Virginia. The Commerce Subsidiary: (i) has
full corporate power and authority to carry on its business as now conducted;
(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, except where failure to so qualify
would not have a Material Adverse Effect; and (iii) is not engaged in any
activities that have not been Previously Disclosed.
2.5 AUTHORIZED AND EFFECTIVE AGREEMENT
a. Commerce 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 stockholders of Commerce of the Plan of Merger) to perform all of
its obligations under this Reorganization Agreement, the Plan of Merger and the
Option Agreement. The execution and delivery of this Reorganization Agreement,
the Plan 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 Reorganization Agreement and the Plan of Merger, the approval of
Commerce shareholders pursuant to and to the extent required by applicable law.
This Reorganization Agreement, the Plan of Merger and the Option Agreement
constitute legal, valid and binding obligations of Commerce, each of which is
enforceable against Commerce in accordance with its respective 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) laws relating to the safety and soundness of
depository institutions and their holding companies, and (iii) general
principles of equity, and except that the availability of equitable remedies or
injunctive relief is within the discretion of the appropriate court.
b. Neither the execution and delivery of this Reorganization Agreement, the
Plan of Merger and the Option Agreement nor consummation of the transactions
contemplated hereby or thereby, nor compliance by Commerce 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, charter or by-laws of Commerce
or the Commerce 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 material property
or asset of Commerce or the Commerce Subsidiary pursuant to, any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation, or
I-4
(iii) subject to receipt of all required governmental approvals, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Commerce or the Commerce Subsidiary.
2.6 SECURITIES DOCUMENTS AND REPORTS
Commerce has timely filed all Securities Documents required by the Securities
Laws since December 31, 1988, and such Securities Documents complied in all
material respects with the Securities Laws as in effect at the times of such
filings. Commerce has in all material respects timely filed all reports
required to be filed with the FDIC and the State Board and such reports
complied in all material respects with applicable law and regulations as in
effect at the times of such filings.
2.7 FINANCIAL STATEMENTS; MINUTE BOOKS
The Financial Statements of Commerce fairly present or will fairly present,
as the case may be, the consolidated financial position of Commerce and the
Commerce 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 (except as stated
therein). The minute books of Commerce and the Commerce 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).
2.8 MATERIAL ADVERSE CHANGE
Commerce has not, on a consolidated basis, suffered any material adverse
change in its business, financial condition, results of operations or prospects
since December 31, 1993.
2.9 ABSENCE OF UNDISCLOSED LIABILITIES
Neither Commerce nor the Commerce Subsidiary has any liability (contingent or
otherwise) that is material to Commerce on a consolidated basis or that, when
combined with all similar liabilities, would be material to Commerce on a
consolidated basis, 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 Commerce's most recent Financial Statements.
2.10 PROPERTIES
a. Commerce and the Commerce 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 Commerce as
of December 31, 1993 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 material leases pursuant to which Commerce or the Commerce Subsidiary,
as lessee, leases real or personal property, are, with respect to Commerce or
the Commerce Subsidiary, valid and enforceable in accordance with their
respective 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) laws relating to the
safety and soundness of depository institutions and their holding companies,
and (iii) general principles of equity, and except that the availability of
equitable remedies or injunctive relief is within the discretion of the
appropriate court.
I-5
2.11 ENVIRONMENTAL MATTERS
a. Commerce and the Commerce Subsidiary are in substantial compliance with
all Environmental Laws. Neither Commerce nor the Commerce Subsidiary has
received any communication alleging that Commerce or the Commerce Subsidiary is
not in such compliance and, to the best knowledge of Commerce, there are no
present circumstances that would prevent or interfere with the continuation of
such compliance.
b. Commerce has not received notice of any pending, and is not aware of any
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)
Commerce or the Commerce Subsidiary, (ii) any person or entity whose liability
for any Environmental Claim Commerce or the Commerce Subsidiary has or may have
retained either contractually or by operation of law, (iii) any real or
personal property owned or leased by Commerce or the Commerce Subsidiary, or
any real or personal property which Commerce or the Commerce Subsidiary has
been, or is, judged to have managed or to have supervised or to have
participated in the management of, or (iv) any real or personal property in
which Commerce or the Commerce Subsidiary holds a security interest securing a
loan recorded on the books of Commerce or the Commerce Subsidiary. Neither
Commerce nor the Commerce 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. With respect to all real and personal property owned or leased by Commerce
or the Commerce Subsidiary, or all real and personal property which Commerce or
the Commerce Subsidiary has been, or is, judged to have managed or to have
supervised or to have participated in the management of, Commerce has provided
BB&T Financial with access to copies of any environmental audits, analyses and
surveys that have been prepared relating to such properties (a list of all of
which has been Previously Disclosed). To the best of Commerce's knowledge,
Commerce and the Commerce Subsidiary are in compliance in all material respects
with all recommendations contained in any such environmental audits, analyses
and surveys.
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 Commerce or the Commerce Subsidiary or against any person or
entity whose liability for any Environmental Claim Commerce or the Commerce
Subsidiary has or may have retained or assumed either contractually or by
operation of law.
2.12 ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected on the consolidated balance sheets
included in the Financial Statements of Commerce is or will be adequate in the
opinion of Commerce management in all material respects as of their respective
dates under the requirements of generally accepted accounting principles
applicable to banks to provide for reasonably anticipated losses on outstanding
loans net of recoveries.
2.13 TAX MATTERS
a. Commerce and the Commerce 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
material 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 Date, 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 Date.
Neither Commerce nor the
I-6
Commerce 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 Commerce are complete and accurate in all material respects. Neither
Commerce nor the Commerce Subsidiary is delinquent in the payment of any
material tax, assessment or governmental charge. No deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against Commerce or the Commerce Subsidiary which
have not been settled and paid. There are currently no agreements in effect
with respect to Commerce or the Commerce 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 are pending.
2.14 EMPLOYEE BENEFIT PLANS
a. Commerce has Previously Disclosed true and complete copies of all stock
option, employee stock purchase and stock bonus plans, qualified pension or
profit-sharing plans, deferred compensation, bonus or group insurance contracts
and any other incentive, welfare or employee benefit plans or agreements
maintained for the benefit of employees or former employees of Commerce or the
Commerce Subsidiary together with (i) the most recent actuarial and financial
reports prepared with respect to any qualified plans, (ii) the most recent
annual reports filed with any government agency, and (iii) all rulings and
determination letters and any open requests for rulings or letters that pertain
to any qualified plan.
b. Neither Commerce nor the Commerce Subsidiary (or any pension plan
maintained by any of them) has incurred any material liability to the Pension
Benefit Guaranty Corporation or the Internal Revenue Service with respect to
any pension plan qualified under Section 401 of the Code except liabilities to
the Pension Benefit Guaranty Corporation pursuant to Section 4007 of ERISA, all
of which have been fully paid. No reportable event under Section 4043(b) of
ERISA has occurred with respect to any such pension plan.
c. Neither Commerce nor the Commerce Subsidiary participates in, or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from, a multiemployer plan (as such term is defined in ERISA).
d. A favorable determination letter has been issued by the Internal Revenue
Service with respect to each "employee pension plan" (as defined in Section
3(2) of ERISA) of Commerce which is intended to be qualified under Section 401
of the Code to the effect that such plan is qualified under Section 401 of the
Code and tax exempt under Section 501 of the Code. No such letter has been
revoked or, to Commerce's knowledge, threatened to be revoked and Commerce does
not know of any ground on which such revocation may be based. Neither Commerce
nor the Commerce Subsidiary has a material liability under any such plan that
is not reflected on the consolidated balance sheet included in the Financial
Statements of Commerce as of December 31, 1993 or March 31, 1994.
e. 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 employee benefit plan maintained by Commerce or the
Commerce Subsidiary which would result in the imposition, directly or
indirectly, of a material excise tax under Section 4975 of the Code.
2.15 CERTAIN CONTRACTS
a. Except as Previously Disclosed, neither Commerce nor any Commerce
Subsidiary is a party to, is bound or affected by, or receives benefits under
(i) any material agreement, arrangement or commitment whether or not made in
the ordinary course of business (other than loans or loan commitments or
certificates of deposit made in the ordinary course of banking business), or
any agreement materially restricting its
I-7
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 Commerce or the Commerce
Subsidiary or the guarantee by Commerce or the Commerce Subsidiary of any such
obligation, which cannot be terminated within less than 30 days after the
Closing Date by Commerce or the Commerce Subsidiary (without payment of any
penalty or cost by Commerce or the Commerce Subsidiary), (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 Commerce or the Commerce Subsidiary (without payment of any
penalty or cost by Commerce or the Commerce Subsidiary), or (iv) any contract,
agreement or understanding with a labor union, in each case whether written or
oral.
b. Neither Commerce nor the Commerce Subsidiary is in default, which default
would have a material adverse effect on Commerce on a consolidated basis or the
transactions contemplated herein, under any material 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.
2.16 LEGAL PROCEEDINGS; REGULATORY APPROVALS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of Commerce,
threatened (or unasserted but considered by Commerce to be probable of
assertion and which, if asserted, would have at least a reasonable probability
of an unfavorable outcome) against Commerce or the Commerce Subsidiary or
against any asset, interest, or right of Commerce or the Commerce Subsidiary,
or against any officer, director or employee of either of them that in any such
case, if decided adversely, might have a Material Adverse Effect. Except as
Previously Disclosed, there are no actions, suits or proceedings instituted,
pending or, to the knowledge of Commerce and each of the directors and
executive officers of Commerce, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any present or former director
or officer of Commerce or the Commerce Subsidiary that might give rise to a
claim for indemnification, and to the best knowledge of Commerce and each of
its directors and executive officers and each of the directors and executive
officers of the Commerce Subsidiary, 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 (including but not limited to compliance with the CRA) relating to
Commerce or the Commerce Subsidiary known to Commerce exists that would prevent
Commerce or BB&T Financial from obtaining all of the federal and state
regulatory approvals contemplated herein.
2.17 COMPLIANCE WITH LAWS
Each of Commerce and the Commerce Subsidiary is in compliance in all material
respects with all statutes and regulations (including, but not limited to, the
CRA and regulations promulgated thereunder, the 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 Commerce and the Commerce
Subsidiary on a consolidated basis), and neither Commerce nor the Commerce
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
and which violation would be likely to have a Material Adverse Effect on a
consolidated basis, (ii) threatening to revoke any license, franchise, permit
or government authorization, or (iii) restricting or in any way limiting its
operations. Neither Commerce nor the Commerce Subsidiary is subject to any
regulatory or supervisory cease and desist order, agreement, directive,
memorandum of understanding or commitment, and none of them has received any
communication requesting that they enter into any of the foregoing. Without
limiting the generality of the foregoing, Commerce has timely filed all
currency transaction reports required to be filed and taken all other actions
required under the Currency and
I-8
Foreign Transactions Reporting Act, as amended, codified at 31 U.S.C. (S) 5301
et seq., and its implementing regulations.
2.18 BROKERS AND FINDERS
Neither Commerce nor the Commerce Subsidiary, nor any of their respective
officers, directors or employees has employed any broker, finder or financial
advisor or incurred any liability of Commerce or the Commerce Subsidiary 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 Alex. Brown & Sons Incorporated).
2.19 INSURANCE
Commerce and the Commerce Subsidiary each currently maintain insurance in the
amounts and for the coverages Previously Disclosed. Neither Commerce nor the
Commerce 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 Commerce nor the Commerce
Subsidiary has been refused any insurance coverage sought or applied for, and
neither Commerce nor the Commerce 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 Commerce or
the Commerce Subsidiary.
2.20 REPURCHASE AGREEMENTS
With respect to all agreements currently outstanding pursuant to which
Commerce or the Commerce Subsidiary has purchased securities subject to an
agreement to resell, Commerce and the Commerce 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 Commerce or the Commerce Subsidiary has sold
securities subject to an agreement to repurchase, Commerce and the Commerce
Subsidiary have not pledged collateral materially in excess of the amount of
the debt secured thereby. Neither Commerce nor the Commerce Subsidiary has
pledged collateral materially in excess of the amount required under any
interest rate swap or other similar agreement currently outstanding.
2.21 DEPOSIT ACCOUNTS
The deposit accounts of Commerce are insured by the Bank Insurance Fund of
the FDIC to the maximum extent permitted by federal law, and Commerce has paid
all premiums and assessments and filed all reports required to have been paid
or filed under the FDIA.
2.22 LOANS
a. With respect to each loan on the books and records of Commerce, including
unfunded portions of outstanding lines of credit and loan commitments: (i)
such loan is a valid loan; (ii) its principal balance as shown on the books and
records of Commerce 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) Commerce 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 Commerce have been originated and
administered in accordance with the terms
I-9
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 any federal, state or local law, rule,
regulation or ordinance applicable thereto, including, without limitation,
Regulation O of the Federal Reserve Board, the TILA, Regulation Z of the
Federal Reserve Board, the Equal Credit Opportunity Act, as amended, and state
laws, rules and regulations relating to consumer protection, installment sales
and usury.
b. Commerce has Previously Disclosed all investments and loans, including
loan guarantees, to which Commerce or the Commerce Subsidiary is a party with
any director, executive, officer or 5% shareholder of Commerce or any person,
corporation, or enterprise controlling, controlled by or under common control
with any of the foregoing.
2.23 CERTAIN INFORMATION
When the Proxy Statement is mailed, and at the time of the meeting of
shareholders of Commerce to vote upon the Plan of Merger, the Proxy Statement
and all amendments or supplements thereto, with respect to all information set
forth therein furnished by Commerce relating to Commerce and the Commerce
Subsidiary, (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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF BB&T FINANCIAL
BB&T Financial represents and warrants to Commerce as follows:
3.1 CAPITAL STRUCTURE OF BB&T FINANCIAL
The authorized capital stock of BB&T Financial consists of (i) 4,000,000
shares of preferred stock, par value $2.50 per share, and (ii) 100,000,000
shares of BB&T Financial Common Stock, of which 32,195,746 shares were issued
and outstanding on March 31, 1994. All outstanding shares of BB&T Financial
Common Stock have been duly issued and are validly outstanding, fully paid and
nonassessable. As of the date of this Agreement, BB&T Financial has reserved
6,504,441 shares of BB&T Financial Common Stock for issuance under its benefit
plans and Dividend Reinvestment Plan. Except as set forth herein, there are no
Rights authorized, issued or outstanding with respect to the capital stock of
BB&T Financial. None of the shares of capital stock of BB&T Financial has been
issued in violation of the preemptive rights of any person.
3.2 ORGANIZATION, STANDING AND AUTHORITY OF BB&T FINANCIAL
BB&T Financial 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 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 operation, or
business of BB&T Financial on a consolidated basis. BB&T Financial is
registered as a bank holding company under the Bank Holding Company Act.
3.3 AUTHORIZED AND EFFECTIVE AGREEMENT
a. BB&T Financial has all requisite corporate power and authority to enter
into and perform all of its obligations under this Reorganization Agreement and
the Option Agreement. The execution and delivery of
I-10
this Reorganization 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
BB&T Financial. This Reorganization Agreement and the Option Agreement
constitute legal, valid and binding obligations of BB&T Financial, in each such
case enforceable against it in accordance with their respective terms 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) laws
relating to the safety and soundness of depository institutions and their
holding companies, and (iii) 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 Reorganization Agreement nor
the Option Agreement, nor consummation of the transactions contemplated hereby
or thereby, nor compliance by BB&T Financial 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 BB&T Financial or any BB&T
Financial Subsidiary, (ii) constitute or result in a breach of any term,
condition or provision of, or constitute a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, or result
in the creation of any lien, charge or encumbrance upon any property or asset
of BB&T Financial or any BB&T Financial Subsidiary 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
conditions of BB&T Financial and the BB&T Financial Subsidiaries taken as a
whole, or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to BB&T Financial or any BB&T Financial Subsidiary.
3.4 ORGANIZATION, STANDING AND AUTHORITY OF BB&T FINANCIAL SUBSIDIARIES
Each BB&T Financial Subsidiary is a duly organized corporation, validly
existing and in good standing under applicable laws. Each BB&T Financial
Subsidiary (i) has full power and authority to carry on its business as now
conducted and (ii) is duly qualified to do business in the states of the United
States and foreign jurisdictions where its ownership or leasing of property or
the conduct of its business requires such qualification and where failure to so
qualify would have a material adverse effect on the financial condition,
results of operations, business or prospects of BB&T Financial on a
consolidated basis. BB&T Financial-Va will be registered as a bank holding
company under the Bank Holding Company Act and applicable Virginia law on or
prior to the closing.
3.5 SECURITIES DOCUMENTS
BB&T Financial has timely filed all Securities Documents required by the
Securities Laws since December 31, 1988 and such Securities Documents complied
in all material respects with the Securities Laws as in effect at the times of
such filings.
3.6 FINANCIAL STATEMENTS
The Financial Statements of BB&T Financial fairly present or will fairly
present, as the case may be, the consolidated financial position of BB&T
Financial and the BB&T Financial 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 applied on a
consistent basis.
3.7 MATERIAL ADVERSE CHANGE
BB&T Financial has not, on a consolidated basis, suffered any material
adverse change in its business, financial condition, results of operations or
prospects since December 31, 1993.
I-11
3.8 LEGAL PROCEEDINGS; REGULATORY APPROVALS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of BB&T Financial,
threatened (or unasserted but considered by BB&T Financial to be probable of
assertion and which, if asserted, would have at least a reasonable probability
of an unfavorable outcome) against BB&T Financial or any BB&T Financial
Subsidiary or against any asset, interest or right of BB&T Financial or any
BB&T Financial Subsidiary, or against any officer, director or employee of any
of them that, if decided adversely, might have a material adverse effect on the
financial condition, results of operations, business or prospects of BB&T
Financial on a consolidated basis. To the knowledge of BB&T Financial, 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 CRA compliance)
relating to BB&T Financial or any BB&T Financial Subsidiary known to BB&T
Financial exists that would prevent BB&T Financial from obtaining all of the
federal and state regulatory approvals contemplated herein.
3.9 OWNERSHIP OF BB&T FINANCIAL SUBSIDIARIES
The outstanding shares of capital stock or other ownership interests of the
BB&T Financial Subsidiaries are validly issued and outstanding, fully paid and
nonassessable, and all such shares are directly or indirectly owned by BB&T
Financial free and clear of all liens, claims and encumbrances or preemptive
rights of any person. No Rights are authorized, issued or outstanding with
respect to the capital stock or other ownership interests of any BB&T Financial
Subsidiary and there are no agreements, understandings or commitments relating
to the right of BB&T Financial to vote or to dispose of said shares or other
ownership interests.
3.10 ABSENCE OF UNDISCLOSED LIABILITIES
Neither BB&T Financial nor any BB&T Financial Subsidiary has any liability
(contingent or otherwise) that is material to BB&T Financial on a consolidated
basis or that, when combined with all similar liabilities, would be material to
BB&T Financial on a consolidated basis, except as disclosed in the Financial
Statements of BB&T Financial and except for liabilities made in the ordinary
course of its business consistent with past practices since the date of BB&T
Financial's most recent Financial Statements.
3.11 ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses reflected on the consolidated balance sheets
included in the Financial Statements of BB&T Financial is or will be in the
opinion of BB&T Financial'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.
3.12 TAX MATTERS
a. BB&T Financial and the BB&T Financial Subsidiaries, and each of their
predecessors, have timely filed 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, are contesting payment
thereof in good faith, or 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 Date, 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 Date which are not being contested in good faith. Neither BB&T
Financial nor any of the BB&T Financial Subsidiaries will to BB&T Financial's
knowledge have any material liability for any such taxes in excess of the
amounts so paid or reserves or accruals so established.
I-12
b. All federal, state and local (and, if applicable, foreign) tax returns
filed by BB&T Financial and the BB&T Financial Subsidiaries are complete and
accurate in all material respects. Neither BB&T Financial nor any of the BB&T
Subsidiaries is delinquent in the payment of any tax, assessment or
governmental charge, and none of them has requested any extension of time
within which to file any tax returns in respect of any fiscal year or portion
thereof which have not since been filed. No deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against BB&T Financial or any BB&T Financial
Subsidiary which have not been settled and paid. There currently are no
agreements in effect with respect to BB&T Financial or any BB&T Financial
Subsidiary to extend the period of limitations for the assessment or collection
of any tax.
3.13 COMPLIANCE WITH LAWS
Each of BB&T Financial and the BB&T Financial Subsidiaries is in material
compliance with all statutes and regulations (including, but not limited to,
CRA and regulations promulgated thereunder, 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 BB&T Financial and its
subsidiaries taken as a whole), and neither BB&T Financial nor any BB&T
Financial Subsidiary 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 BB&T Financial and
the BB&T Financial 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 BB&T Financial nor
any BB&T Financial Subsidiary 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. Without limiting the generality of the foregoing, each BB&T
Financial Subsidiary has timely filed all currency transaction reports required
to be filed and taken all other actions required under the Currency and Foreign
Transactions Reporting Act as amended, codified at 31 U.S.C. (S) 5301 et seq.,
and its implementing regulations.
3.14 CERTAIN INFORMATION
When the Proxy Statement is mailed, and at all times subsequent to such
mailing up to and including the time of the meeting of shareholders of Commerce
to vote on the Merger, the Proxy Statement and all amendments or supplements
thereto, with respect to all information set forth therein furnished by BB&T
Financial relating to BB&T Financial, including pro forma information insofar
as it relates to BB&T Financial and entities other than Commerce and the
Commerce Subsidiary, (i) shall comply in all material respects with the
applicable provisions of the Securities Laws, and (ii) shall not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading.
3.15 EMPLOYEE BENEFIT PLANS
a. Neither BB&T Financial nor any other BB&T Financial Subsidiary (or any
pension plan maintained by any of them) has incurred any material liability to
the Pension Benefit Guaranty Corporation or the Internal Revenue Service with
respect to any pension plan qualified under Section 401 of the Code except
liabilities to the Pension Benefit Guaranty Corporation pursuant to Section
4007 of ERISA, all of which have been fully paid. No reportable event under
Section 4043(b) of ERISA has occurred with respect to any such pension plan.
b. Neither BB&T Financial nor any BB&T Financial Subsidiary participates in,
or has incurred any liability under Section 4201 of ERISA for a complete or
partial withdrawal from, a multiemployer plan (as such term is defined in
ERISA).
I-13
c. A favorable determination letter has been issued by the Internal Revenue
Service with respect to each "employee pension plan" (as defined in Section
3(2) of ERISA) of BB&T Financial or any BB&T Financial Subsidiary to the effect
that such plan is qualified under Section 401 of the Code and tax exempt under
Section 501 of the Code. No such letter has been revoked or, to BB&T
Financial's knowledge, threatened to be revoked and BB&T Financial does not
know of any ground on which such revocation may be based. Neither BB&T
Financial nor any BB&T Financial Subsidiary has a material liability under any
such plan that is not reflected on the consolidated balance sheet included in
the Financial Statements of BB&T Financial as of December 31, 1993.
d. 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) has occurred with respect to any employee benefit plan maintained
by BB&T Financial or any BB&T Financial Subsidiary (i) which would result in
the imposition, directly or indirectly, of a material excise tax under Section
4975 of the Code, or (ii) the correction of which would have a material adverse
effect on the business, operations or financial condition of BB&T Financial and
the BB&T Financial Subsidiaries taken as a whole.
ARTICLE IV
COVENANTS
4.1 SHAREHOLDERS' MEETING
Commerce 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 the Board of Directors of Commerce shall unanimously recommend
that the shareholders vote for such approval, provided, however, that if Alex.
Brown & Sons Incorporated delivers an opinion to the Board of Directors of
Commerce that the transactions contemplated hereby are not fair to the
shareholders of Commerce from a financial point of view as of the date of the
Proxy Statement or any supplement thereto, the Board of Directors shall not be
required to so recommend approval.
4.2 PROXY STATEMENT; REGISTRATION STATEMENT
BB&T Financial and Commerce shall cooperate in the timely preparation and
filing of the Registration Statement with the Commission and the FDIC and BB&T
Financial shall use its best efforts to cause such Registration Statement to be
declared effective under the Securities Act, which Registration Statement, at
the time it becomes effective, and on the Effective Date, shall in all material
respects conform to the requirements of the Securities Act and the general
rules and regulations of the Commission under the Securities Act. The
Registration Statement shall include the form of Proxy Statement for the
meeting of Commerce's shareholders to be held for the purpose of having such
shareholders vote upon approval of this Reorganization Agreement and the Plan
of Merger. Commerce shall use its best efforts to cause the Proxy Statement to
be cleared for mailing to Commerce stockholders by the FDIC, and the Proxy
Statement shall, on the date of mailing and on the Effective Date, conform in
all material respects to the requirements of the Securities Laws and the rules
and regulations of the FDIC thereunder. Commerce shall cause the Proxy
Statement to be mailed to its shareholders. Commerce will furnish to BB&T
Financial 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 the FDIC and again before any amendments are filed, and shall have the
right to review and consult with BB&T Financial on the form of, and any
characterizations of such information included in, the Registration Statement
prior to the filing with the Commission. BB&T Financial shall take all actions
required to register or obtain exemptions from such registration for the BB&T
Financial 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.
I-14
4.3 ADDITIONAL ACTS; APPLICATIONS
a. BB&T Financial shall take all action necessary to organize BB&T Financial-
Va and BB&T-VA and shall cause BB&T Financial-Va and BB&T-VA to take such
actions as may be necessary to effect the Merger.
b. Commerce agrees to approve, execute and deliver any amendment to this
Agreement and the Plan of Merger and any additional plans and agreements
requested by BB&T Financial 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.
c. As promptly as practicable after the date hereof, BB&T Financial and
Commerce shall submit applications for prior approval of the transactions
contemplated herein to the Federal Reserve Board, the FDIC and the State Board,
and/or any other federal, state or local government agency, department or body
the approval of which is required for consummation of the Merger and the other
transactions contemplated hereby. BB&T Financial promptly shall furnish
Commerce with copies after filing of applications with these or any other
regulatory agencies filed by BB&T Financial or any BB&T Financial Subsidiary.
Commerce and BB&T Financial each represent and warrant to the other that all
information concerning it and its directors, officers and shareholders and
concerning its subsidiaries included (or submitted for inclusion) in any such
application shall be true, correct and complete in all material respects as of
the date presented.
4.4 BEST EFFORTS
BB&T Financial and Commerce shall each use its best efforts in good faith,
and each of them shall cause its subsidiaries to use their 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 4.2 and 4.3 above or elsewhere herein, and (ii) take or cause to
be taken all action necessary or desirable on its part so as to permit
consummation of the Merger at the earliest possible date, including, without
limitation, (a) obtaining the consent or approval of each individual,
partnership, corporation, association or other business or professional entity
whose consent or approval is required for consummation of the transactions
contemplated hereby, provided that neither Commerce nor the Commerce Subsidiary
shall agree to make any payments or modifications to agreements in connection
therewith without the prior written consent of BB&T Financial, and (b)
requesting the delivery of appropriate opinions, consents and letters from its
counsel, independent auditors and financial advisors. Neither BB&T Financial
nor Commerce 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 BB&T Financial from
exercising its rights under the Option Agreement.
4.5 CERTAIN ACCOUNTING MATTERS
Commerce and BB&T Financial shall consult and cooperate with each other
concerning such accounting and financial matters as may be necessary or
appropriate to facilitate the Merger (taking into account BB&T Financial'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.
4.6 INVESTIGATION AND CONFIDENTIALITY
Commerce will keep BB&T Financial advised of all material developments
relevant to its business and to consummation of the Merger, and BB&T Financial
will advise Commerce of any material adverse change in its financial condition
or operations and all material developments that are likely adversely to affect
consummation of the Merger. BB&T Financial and Commerce each may make or cause
to be made such investigation of the financial and legal condition of the other
as such party reasonably deems necessary or
I-15
advisable in connection with the transactions contemplated herein, provided,
however, that such investigation shall be reasonably related to such
transactions and shall not interfere unnecessarily with normal operations. BB&T
Financial and Commerce agree to furnish the other and the other's advisors with
such financial data and other information with respect to its business and
properties as such other party shall from time to time reasonably request. No
investigation pursuant to this Section 4.6 shall affect or be deemed to modify
any representation or warranty made by, or the conditions to the obligations
hereunder of, either party hereto. Each party hereto shall, and shall cause
each of its directors, officers, attorneys and advisors to, maintain the
confidentiality of all information obtained in such investigation 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 6.1 hereof. In the event of the termination of this Agreement, each
party shall return to the furnishing party or, at the request of the furnishing
party, destroy and certify the destruction of all confidential information
previously furnished in connection with the transactions contemplated by this
Agreement.
4.7 PRESS RELEASES
BB&T Financial and Commerce shall agree with each other as to the form and
substance of any press release related to this Reorganization 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, however, that nothing contained herein shall
prohibit either party, following notification to the other party, from making
any disclosure which its counsel deems necessary.
4.8 FORBEARANCES OF COMMERCE
Except with the prior written consent of BB&T Financial, which consent shall
not be withheld on an arbitrary basis or on a basis inconsistent with BB&T
Financial's interests as an acquiror of Commerce, between the date hereof and
the Effective Date, Commerce shall not, and shall cause the Commerce 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 any 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 that would cause the business combination
contemplated hereby not to be accounted for as a pooling of interests, as
determined by BB&T Financial;
(c) issue any shares of its capital stock other than pursuant to the
Option Agreement, the Commerce Stock Option Plans, the Convertible Notes or
the Commerce Dividend Reinvestment and Stock Purchase Plan;
(d) issue, grant or authorize any Rights other than pursuant to the
Option Agreement or effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization;
(e) amend its articles of incorporation or by-laws; impose, or suffer the
imposition, on any share of stock held by Commerce in any Commerce
Subsidiary of any material lien, charge or encumbrance or permit any such
lien to exist; or waive or release any material right or cancel or
compromise any material debt or claim other than in the ordinary course of
business;
(f) merge with any other corporation or bank or permit any other
corporation, savings institution or bank to merge into it or consolidate
with any other corporation, savings institution or bank; acquire control
over any other firm, bank, corporation, savings institution or
organization; 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 respect with any laws, regulations,
ordinances or governmental actions applicable to it and to the conduct of
its business except where Commerce [or any Commerce Subsidiary] is in good
faith contesting the validity of any of the foregoing;
I-16
(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 a manner and amount consistent with past practice;
(i) enter into or substantially modify (except as may be required by
applicable law) any pension, retirement, stock option, stock purchase,
stock appreciation right, savings, profit sharing, deferred compensation,
consulting, bonus, group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement related
thereto, in respect of any of its directors, officers or other employees;
provided, however, that this 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, Commerce or
any business combination with Commerce other than as contemplated by this
Agreement (except where the failure to furnish such information or
participate in such negotiations or discussions would, on the advice of
counsel, constitute a breach of the fiduciary or legal obligations of
Commerce's Board of Directors to its shareholders); or authorize any
officer, director, agent or affiliate of it to do any of the above; or fail
to notify BB&T Financial immediately if any such inquiries or proposals are
received by, any such information is required from, or any such
negotiations or discussions are sought to be initiated with, Commerce;
(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 Commerce or the
Commerce Subsidiary or guarantee by Commerce or the Commerce Subsidiary of
any such obligation, (iii) any agreement, arrangement or commitment not
cancellable by Commerce without penalty or cost within 30 days after the
Effective Date 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
normal election of directors by shareholders and the election of officers
by directors not pursuant to a specific agreement, arrangement or
commitment not 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 or materially change the mix (by type of security)
and average maturity of the securities portfolio, except as may be required
by applicable law, regulation, or directives, and except that after
approval of the Plan of Merger by its shareholders Commerce shall cooperate
in good faith with BB&T Financial to adopt policies, practices and
procedures consistent with those utilized by BB&T Financial, effective on
or before the Closing Date;
(m) change its methods of accounting in effect at December 31, 1993,
except as required by changes in generally accepted accounting principles
concurred in by its independent certified public accountants, 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, 1993, except as required by changes
in law or regulation; or
(n) agree to do any of the foregoing.
4.9 PLAN OF MERGER; RESERVATION OF SHARES
a. On the Effective Date, the Merger shall be effected in accordance with the
Plan of Merger attached hereto as Annex A. In this connection, BB&T Financial
undertakes and agrees (i) to adopt and to cause BB&T Financial-Va and BB&T-VA
to adopt the Plan of Merger; (ii) to vote the shares of BB&T Financial-Va and
BB&T-VA Common Stock for approval of the Plan of Merger; and (iii) to pay or
cause to be paid when
I-17
due the number of shares of BB&T Financial Common Stock to be distributed
pursuant to Article V of the Plan of Merger and any cash required to be paid
for fractional shares pursuant to Article V, Paragraph 7 of the Plan of Merger.
b. BB&T Financial shall reserve for issuance such number of shares of BB&T
Financial Common Stock as shall be necessary to pay the consideration to be
distributed to Commerce's stockholders as contemplated in Article V, Paragraph
1 of the Plan of Merger. If at any time the aggregate number of shares of BB&T
Financial Common Stock remaining unissued (or in treasury) shall not be
sufficient to effect the Merger, BB&T Financial shall take all appropriate
action to increase the amount of the authorized BB&T Financial Common Stock.
4.10 EMPLOYMENT AGREEMENTS
BB&T Financial shall enter into employment agreements with those Commerce
employees as have been Previously Disclosed on the terms Previously Disclosed.
4.11 CLOSING; ARTICLES OF MERGER
The transactions contemplated by this Agreement and the Plan of Merger shall
be consummated at a closing to be held at the executive offices of BB&T
Financial, or such other place as shall be agreed to by BB&T Financial and
Commerce, on the first business day following satisfaction of the conditions to
consummation of the Merger set forth in Article V hereof, or such later date
within 30 days thereafter as may be specified by BB&T Financial, or such later
date as the parties may otherwise agree. The Merger shall become effective upon
the Effective Date, which shall be the time and date specified in the Articles
of Merger evidencing the Merger, as filed with the State Corporation Commission
of Virginia.
4.12 AFFILIATES
Commerce shall identify those persons who may be deemed to be "affiliates" of
Commerce within the meaning of Rule 145 promulgated by the Commission under the
Securities Act. Commerce shall cause each person so identified to deliver to
BB&T Financial at least 30 days prior to the Effective Date a written agreement
providing that such person will not dispose of BB&T Financial Common Stock
received in the Merger except in compliance with the Securities Act and the
rules and regulations promulgated thereunder and except as consistent with
qualifying the transactions contemplated hereby for pooling of interests
accounting treatment.
4.13 DIRECTORS AND OFFICERS INSURANCE.
a. Following the Effective Date, each director and officer of Commerce who is
currently entitled to indemnification pursuant to Virginia law shall be
indemnified, in accordance with BB&T Financial's bylaw provisions, to the
maximum extent permitted under North Carolina and federal law, if applicable.
b. BB&T Financial 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 Commerce for claims made for the period commencing
with and after the Effective Date; provided, however, that such insurance will
be provided only if, and to the extent that, any similarly situated officer or
director of BB&T Financial is insured from time to time.
c. From and after the Effective Date, BB&T Financial agrees to indemnify and
hold harmless each present and former director and officer of Commerce (the
"Indemnified Parties"), against any and all costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") incurred in connection with any and all
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Date, whether asserted or
claimed prior to, at or after the Effective
I-18
Date, to the fullest extent permitted by applicable law (and also advance
expenses incurred to the fullest extent permitted by applicable law), provided,
however, that BB&T Financial will not indemnify any person against liability or
litigation expense such person may incur on account of activities that were at
the time taken known or believed by such person to be clearly in conflict with
the best interest of BB&T Financial or Commerce or, with respect to any
criminal action or proceeding, activities that the person had reasonable cause
to believe were unlawful.
d. Any Indemnified Party wishing to claim indemnification under Section
4.13(c), upon learning of any such claim, action, suit, proceeding or
investigation, shall within forty-five (45) days upon learning of such claim,
action, suit, proceeding or investigation, notify BB&T Financial thereof, but
the failure to so notify shall not relieve BB&T Financial of any liability it
may have to such Indemnified Party if such failure does not materially
prejudice the indemnifying party. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) BB&T Financial shall have the right to assume the defense thereof
and BB&T Financial shall not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other expenses subsequently incurred by
such Indemnified Parties in connection with the defense thereof, except that if
BB&T Financial elects not to assume such defense, or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between BB&T Financial and the Indemnified Parties, the Indemnified
Parties may retain counsel satisfactory to them, and BB&T Financial shall pay
the reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, however, that BB&T
Financial shall be obligated pursuant to this paragraph (b) to pay for only one
firm of counsel for all Indemnified Parties in any jurisdiction unless the use
of one counsel for such Indemnified Parties would present such counsel with a
conflict of interest, (ii) the Indemnified Parties will cooperate in the
defense of any such matter and (iii) BB&T Financial shall not be liable for any
settlement effected without its prior written consent which shall not be
unreasonably withheld; and provided further that BB&T Financial shall not have
any obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and nonappealable, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law. If such indemnity is not available with respect to any Indemnified Party,
then the Indemnified Party shall contribute to the amount payable in such
proportion as is appropriate to reflect the relative benefit received by such
Indemnified Party in any transaction which was the subject of, and the relative
fault of such Indemnified Party with respect to, such claim, action, suit,
proceeding or investigation by the Indemnified Party.
4.14 EMPLOYEES AND EMPLOYEE BENEFIT PLANS
a. (i) Upon the Effective Date, each person who is an employee of
Commerce as of such Effective Date (individually an "Employee") shall
automatically become an employee of the Surviving Corporation (as defined
in the Plan of Merger), upon substantially the same terms and conditions of
employment, including compensation and benefits, and comparable
responsibilities that each Employee had on the day before the Effective
Date.
(ii) BB&T Financial will attempt, consistent with achieving the goals
identified in Section 4.17(c), to avoid lay-offs of Commerce employees
following the Effective Date, and to meet efficiency goals for the Surviving
Corporation through attrition and reassignment.
b. Each Employee shall be eligible to receive group hospitalization, medical,
life, disability and other benefits comparable to those provided to the present
employees of BB&T Financial without the imposition of any waiting period or
limitation on pre-existing conditions; provided, however, such benefits shall
not in the aggregate to all Employees as a group be less in amount or value
than those presently provided by Commerce.
c. Commerce shall cause its 401(k) plan to be merged with the 401(k) plans
maintained by BB&T Financial and the BB&T Financial Subsidiaries or be
terminated following the Merger. The parties shall reach agreement as to the
appropriate method of accomplishing this result (either termination or merger)
as soon
I-19
as practicable. If the Commerce plan is terminated, the rights and interests of
the employees of Commerce in such plan shall become fully vested, with each
participating Employee having the right or option either to receive the
benefits to which they are entitled as a result of the termination of the plan
or to have such benefits "rolled" into the 401(k) Plan maintained by BB&T
Financial and the BB&T Financial Subsidiaries for the benefit of their
employees, and on the same basis and applying the same eligibility standards as
would apply to employees of BB&T Financial and the BB&T Financial Subsidiaries.
Following the Merger, the Employees of Commerce shall be entitled to
participate, to the same extent and on the same terms as the employees of BB&T
Financial, in any retirement, pension or similar plans in effect for the
benefit of the employees of BB&T Financial (other than any employee stock
ownership plan established for the benefit of certain of BB&T Financial's
employees) which when considered as a whole for all Employees considered as a
group shall be no less favorable in the aggregate than the benefits currently
provided to the Employees of Commerce. Notwithstanding the foregoing, the
parties shall use their best efforts to work out an arrangement with applicable
law pursuant to which the amount that any Employee is entitled to receive under
the BB&T Financial pension plan shall be offset by the amount such Employee is
entitled to receive under the Commerce Supplemental Retirement Plan ("SRP") so
that the retirement benefits any Employee is entitled to receive after the
Merger shall not exceed the retirement benefits such Employee would be entitled
to receive under the BB&T Financial pension plan or the SRP, whichever is
greater, and such arrangement will not consider employees' contributions to the
SRP made by Commerce in lieu of salary increases for 1994.
d. For purposes of participating in all plans and benefits of BB&T Financial,
such Employees shall receive credit for their period of service to Commerce for
participation and vesting purposes only.
e. To the extent that this Section 4.14 contemplates or requires the taking
of action or forbearance by any subsidiary of BB&T Financial, BB&T Financial
shall cause such subsidiary to take such action or to so forbear.
4.15 FORBEARANCES OF BB&T FINANCIAL
Except with the prior written consent of Commerce, which consent shall not be
arbitrarily or unreasonably withheld, between the date hereof and the Effective
Date, neither BB&T Financial nor any BB&T Financial Subsidiary shall:
a. exercise the Option Agreement other than in accordance with its terms,
or dispose of the shares of Commerce Common Stock issuable upon exercise of
the option rights conferred thereby other than as permitted or contemplated
by the terms thereof;
b. enter into a merger or other business combination transaction with any
other corporation or person in which BB&T Financial would not be the
surviving or continuing entity after the consummation thereof;
c. sell or lease all or substantially all of the assets and business of
BB&T Financial; or
d. declare an extraordinary or special dividend or distribution on its
common stock in an amount equal to more than 10% of BB&T Financial's
stockholders' equity as reflected on the Financial Statements of BB&T
Financial as of the three months ended prior to such payment.
4.16 MEMBERSHIP ON THE BOARD OF DIRECTORS
a. Upon consummation of the Merger, all of the members of the Board of
Directors of Commerce will become directors of the Surviving Corporation.
b. Upon consummation of the Merger, BB&T Financial shall cause seven of the
present members of the Board of Directors of Commerce, to be named by the Chief
Executive Officer of Commerce, and three other persons to become members of the
Board of Directors of BB&T Financial-Va. J. Allan Lindauer will become the
Chairman of the Board of BB&T Financial-Va.
I-20
c. Upon consummation of the Merger, BB&T Financial shall cause three members
of the Board of Directors of Commerce, designated by the Board of Directors of
Commerce immediately prior to the Merger, to become members of the Board of
Directors of BB&T Financial.
4.17 OPERATION OF COMMERCE
a. Unless the Board of Directors of BB&T Financial-Va votes otherwise, the
Surviving Corporation in the Merger will be named Commerce Bank for not less
than three years after the Effective Date. Unless the Board of Directors of
BB&T Financial-Va votes otherwise, the principal executive office of BB&T
Financial-Va will be located in the Hampton Roads area of Virginia.
b. BB&T Financial will make a reasonable effort to locate facilities and
expand employment opportunities in Commerce's current market area when doing
so would not impose an economic or operational burden on BB&T Financial.
c. The Board of Directors of the Surviving Corporation will cause the
Surviving Corporation after the Effective Date to reduce its non-interest
expenses by at least 20% from the level of non-interest expenses as reported
for the year ended December 31, 1993 in Commerce's Financial Statements within
three years from the Closing Date.
d. Commerce may make charitable and civic contributions, consistent with its
philosophy in making charitable or civic contributions, in the communities
served by Commerce in amounts of at least $500,000 over a period of five years
from the Closing Date.
ARTICLE V
CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT--BB&T FINANCIAL AND COMMERCE
The respective obligations of BB&T Financial and Commerce 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 Date:
(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 Commerce;
(b) The Registration Statement (including any post-effective amendments
thereto) shall be effective under the Securities Act, and BB&T Financial
and Commerce 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 BB&T Financial
threatened by the Commission or any state "Blue Sky" securities
administration to suspend the effectiveness of such Registration Statement;
and the BB&T Financial 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) Neither BB&T Financial, any BB&T Financial Subsidiary, Commerce nor
the Commerce 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
(d) Commerce and BB&T Financial shall have received an opinion of BB&T
Financial's counsel or tax advisor in form and substance satisfactory to
Commerce and BB&T Financial substantially to the effect that the Merger
will constitute one or more reorganizations under Section 368 of the Code
and
I-21
that the shareholders of Commerce will not recognize any gain or loss to
the extent that such shareholders exchange shares of Commerce Common Stock
for shares of BB&T Financial Common Stock.
5.2 CONDITIONS PRECEDENT -- COMMERCE
The obligations of Commerce to effect the transactions contemplated by this
Agreement shall be subject to satisfaction of the following additional
conditions at or prior to the Effective Date unless waived by Commerce
pursuant to Section 6.4 hereof:
(a) The representations and warranties of BB&T Financial set forth in
Article III hereof shall be true and correct in all material respects as of
the date of this Agreement and as of the Effective Date as though made on and
as of the Effective Date (or on the date when made 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 Commerce (which consent may not be unreasonably withheld);
(b) BB&T Financial shall have in all material respects performed all
material obligations and complied with all material covenants required by this
Agreement;
(c) BB&T Financial shall have delivered to Commerce a certificate, dated the
Effective Date and signed by its Chairman or President, to the effect that the
conditions set forth in Sections 5.1(a), 5.1(b), 5.1(c), 5.2(a), 5.2(c) and
5.2(f), to the extent applicable to BB&T Financial, have been satisfied and
that there are no actions, suits, claims, governmental investigations or
procedures instituted, pending or, to the best of his knowledge, threatened
that reasonably may be expected to have a material adverse effect on BB&T
Financial or that present a claim to restrain or prohibit the transactions
contemplated herein or in the Plan of Merger;
(d) Commerce shall have received such opinions of the General Counsel to
BB&T Financial as to matters of North Carolina law, and other counsel as to
matters of federal law, as it shall reasonably request;
(e) All approvals of the transactions contemplated herein from the
Federal Reserve Board, the FDIC, the State Board 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) Commerce shall not have reasonably determined in good faith that
there has been a material adverse change in the condition, operations or
prospects of BB&T Financial since December 31, 1993, provided that if the
impact of SFAS 115 is less than 15% of total equity on the most recent
month end balance sheet date prior to the Closing Date, such impact shall
be excluded in determining whether a material adverse change has occurred,
but if such impact is 15% or more of total equity, such impact may be taken
into account in determining whether a material adverse change has occurred.
5.3 CONDITIONS PRECEDENT--BB&T FINANCIAL
The obligations of BB&T Financial to effect the transactions contemplated by
this Agreement shall be subject to satisfaction of the following additional
conditions at or prior to the Effective Date, unless waived by BB&T Financial
pursuant to Section 6.4 hereof:
(a) The representations and warranties of Commerce set forth in Article
II hereof shall be true and correct in all material respects as of the date
of this Agreement and as of the Effective Date as though made on and as of
the Effective Date (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated by this Agreement or consented to in
writing by BB&T Financial (which consent may not be unreasonably withheld);
I-22
(b) The parties hereto 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; provided, however, that no such approval
shall have imposed any condition or requirement which, in the reasonable
opinion of the Board of Directors of BB&T Financial, would so materially
adversely affect the business or economic benefits of the transactions
contemplated by this Agreement as to render consummation of such
transactions inadvisable or unduly burdensome;
(c) Commerce shall have in all material respects performed all material
obligations and complied with all material covenants required by this
Agreement;
(d) Commerce shall have delivered to BB&T Financial a certificate, dated
the Effective Date and signed by its Chairman or President, to the effect
that the conditions set forth in Sections 5.1(a), 5.1(b), 5.3(a), 5.3(b)
and 5.3(c), to the extent applicable to Commerce, have been satisfied and
that there are no actions, suits, claims, governmental investigations or
procedures instituted, pending or, to the best of his knowledge, threatened
that reasonably may be expected to have a Material Adverse Effect on
Commerce or that present a claim to restrain or prohibit the transactions
contemplated herein or in the Plan of Merger;
(e) BB&T Financial shall have received such opinions of counsel as it
shall reasonably request;
(f) BB&T Financial shall not have reasonably determined in good faith
that there has been a material adverse change in the condition, operations
or prospects of Commerce since December 31, 1993, provided that if the
impact of SFAS 115 is less than 15% of total equity on the most recent
month end balance sheet date prior to the Closing Date, such impact shall
be excluded in determining whether a material adverse change has occurred,
but if such impact is 15% or more of total equity, such impact may be taken
into account in determining whether a material adverse change has occurred.
(g) BB&T Financial shall have received the written agreements from
affiliates as specified in Section 4.12 hereof; and
(h) BB&T Financial shall have determined that the transactions
contemplated herein qualify for accounting treatment as a pooling of
interests.
ARTICLE VI
TERMINATION, WAIVER AND AMENDMENT
6.1 TERMINATION
This Agreement may be terminated:
(a) at any time on or prior to the Effective Date, by the mutual consent
in writing of the parties hereto;
(b) at any time on or prior to the Effective Date, by BB&T Financial in
writing if Commerce has, or by Commerce in writing if BB&T Financial has,
in any material respect, breached (i) any covenant or undertaking contained
herein, in the Plan of Merger, in the Option Agreement, or (ii) any
representation or warranty contained herein, which breach has been
materially adverse, and, in the case of (i) or (ii), if such breach has not
been cured by the earlier of 30 days after the date on which written notice
of such breach is given to the party committing such breach or the
Effective Date;
(c) on the Effective Date, 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;
(d) at any time, by either party hereto in writing, if any of the
applications for prior approval referred to in Section 4.3 hereof are
denied, and the time period for appeals and requests for reconsideration
has run;
I-23
(e) at any time, by either party hereto in writing, if the shareholders
of Commerce do not approve the transactions contemplated herein;
(f) by either party hereto in writing, if the Effective Date has not
occurred by the close of business on June 30, 1995;
(g) at any time prior to August 24, 1994, by BB&T Financial in writing,
if BB&T Financial determines in its sole good faith judgment that the
financial condition, business or prospects of Commerce are materially
adversely different from what was reasonably expected by BB&T Financial
after the performance of its due diligence prior to the execution of this
Agreement; provided that BB&T Financial shall inform Commerce upon such
termination as to the reasons for BB&T Financial's determination; and,
provided further, that this Section 6.1(h) shall not limit in any way the
due diligence investigation of Commerce which BB&T Financial may perform or
otherwise affect any other rights which BB&T Financial has after the date
hereof and after August 24, 1994, under the terms of this Agreement;
(h) at any time prior to August 24, 1994, by Commerce in writing, if
Commerce determines in its sole good faith judgment that the financial
condition, business or prospects of BB&T Financial (as such condition,
business or prospects may affect the market price of BB&T Financial Common
Stock) are materially different from what was reasonably expected by
Commerce after the performance of its due diligence prior to the execution
of this Agreement; provided that Commerce shall inform BB&T Financial upon
such determination as to the reasons for Commerce's determination; and
provided, further, that this Section 6.1(i) shall not limit in any way the
due diligence investigation of BB&T Financial which Commerce may perform or
otherwise affect any other rights which Commerce has after the date hereof
and after August 24, 1994, under the terms of this Agreement; and
(i) at any time, by either party hereto in writing, if such party
determines in good faith that any condition precedent to such party's
obligations to consummate the Merger is or would be impossible to satisfy,
provided that the terminating party has given the other party notice with
respect thereto at least ten days prior to such termination and has given
the other party a reasonable opportunity to discuss the matter with a view
to achieving a mutually acceptable resolution.
6.2 EFFECT OF TERMINATION
In the event this Agreement or the Plan of Merger is terminated pursuant to
Section 6.1 hereof, 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 4.6 and 7.1, respectively,
shall survive any such termination and (ii) a termination pursuant to Section
6.1(b) hereof shall not relieve the breaching party from liability for an
uncured breach of the covenant or agreement giving rise to such termination.
6.3 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 Date other than
covenants that by their terms are to be performed after the Effective Date,
provided that no such representations, warranties or covenants shall be deemed
to be terminated or extinguished so as to deprive BB&T Financial or Commerce
(or any director, officer or controlling person thereof) of any defense at law
or in equity which otherwise would be available against the claims of any
person, including, without limitation, any shareholder or former shareholder of
either BB&T Financial or Commerce, the aforesaid representations, warranties
and covenants being material inducements to consummation by BB&T Financial and
Commerce of the transactions contemplated herein.
6.4 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
I-24
and the Plan of Merger by the shareholders of Commerce) 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 waiver or
amendment or supplement pursuant to Section 6.5 hereof executed after approval
of this Agreement and the Plan of Merger by the shareholders of Commerce shall
reduce either the number of shares of BB&T Financial Common Stock into which
each share of Commerce Common Stock shall be converted in the Merger or the
payment terms for fractional interests.
6.5 AMENDMENT OR SUPPLEMENT
This Agreement and the Plan of Merger may be amended or supplemented at any
time by mutual agreement of BB&T Financial and Commerce subject to the proviso
to Section 6.4 hereof. Any such amendment or supplement must be in writing and
approved by their respective boards of directors.
ARTICLE VII
MISCELLANEOUS
7.1 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 BB&T Financial and Commerce shall each bear and pay 50
percent for the cost of printing the Proxy Statement. Notwithstanding the
foregoing, BB&T Financial shall reimburse Commerce for all reasonable out-of-
pocket expenses incurred by Commerce in connection with the transactions
contemplated by this Agreement if this Agreement is terminated; provided,
however, that BB&T Financial's obligation to reimburse Commerce for such
expenses shall not apply if Commerce materially breaches any provision of this
Agreement, the Plan of Merger or the Option Agreement.
7.2 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 supersedes 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.
7.3 NO ASSIGNMENT
Neither of the parties hereto may assign any of its rights or obligations
under this Reorganization Agreement to any other person.
7.4 NOTICES
All notices or other communications which are required or permitted hereunder
shall be in writing and sufficient if delivered personally or sent by overnight
express or by registered or certified mail, postage prepaid, addressed as
follows:
I-25
If to Commerce:
Commerce Bank
5101 Cleveland Street
Virginia Beach, VA 23462
Attention: G. Robert Aston, Jr.
With a required copy to:
Mays & Valentine
1111 East Main Street
Richmond, VA 23208-1122
Attention: George P. Whitley
If to BB&T Financial:
BB&T Financial Corporation
223 West Nash Street
Wilson, North Carolina 27893
Attention: Scott E. Reed
With a required copy to:
Arnold & Porter
777 South Figueroa Street, 44th Floor
Los Angeles, CA 90017
Attention: Barbara E. Mathews
7.5 CAPTIONS
The captions contained in this Reorganization Agreement are for reference
purposes only and are not part of this Agreement.
7.6 COUNTERPARTS
This Reorganization 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.
7.7 GOVERNING LAW
This Reorganization Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina applicable to
agreements made and entirely to be performed within such jurisdiction except to
the extent federal law may be applicable.
I-26
In Witness Whereof, the parties hereto, intending to be legally bound hereby,
have caused this Reorganization Agreement to be executed in counterparts by
their duly authorized officers and their corporate seal to be hereunto affixed
and attested by their officers thereunto duly authorized, all as of the day and
year first above written.
Attest BB&T FINANCIAL CORPORATION
/s/ Jerone C. Herring By: /s/ John A. Allison IV
- ------------------------------------- -----------------------------------
(SEAL)
Attest COMMERCE BANK
/s/ Brenda P. Harper By: /s/ G. Robert Aston, Jr.
- ------------------------------------- -----------------------------------
(SEAL)
I-27
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF REORGANIZATION
This Amendment No. 1, dated August 25, 1994, is made to the Agreement and
Plan of Reorganization ("Reorganization Agreement"), dated as of June 24, 1994,
between COMMERCE BANK ("Commerce"), a bank chartered under the laws of the
Commonwealth of Virginia, having its home office at 5101 Cleveland Street,
Virginia Beach, Virginia 23462, and BB&T FINANCIAL CORPORATION ("BB&T
Financial"), a North Carolina corporation having its home office at 223 West
Nash Street, Wilson, North Carolina 27893.
WITNESSETH
WHEREAS, the parties hereto previously have entered into the Reorganization
Agreement;
WHEREAS, the parties hereto desire to amend the Reorganization Agreement to
effect an amendment to the Plan of Merger attached as Annex A to the
Reorganization Agreement to provide that BB&T-VA will be a direct subsidiary of
BB&T Financial prior to the Effective Date of the Merger, and that immediately
after the Effective Date of the Merger, the Surviving Corporation will be a
wholly owned subsidiary of BB&T Financial-Va;
NOW, THEREFORE, in consideration of the premises and of the respective
agreements herein contained and intending to be legally bound hereby, the
parties hereto do hereby agree as follows:
1. Definitions. Unless otherwise specified herein, capitalized terms used
herein and defined in the Reorganization Agreement or the Plan of Merger shall
have the same meanings herein as set forth therein.
2. Amendment of Plan of Merger.
a. The third recital of the Plan of Merger is amended to read in its entirety
as follows:
WHEREAS, BB&T-VA is a newly formed wholly owned subsidiary of BB&T
Financial; and
b. The following recital is inserted in its entirety between the third and
fourth recitals of the Plan of Merger:
WHEREAS, after the Effective Date (as hereinafter defined), the Surviving
Corporation (as hereinafter defined) shall be a wholly owned subsidiary of
BB&T Financial Corporation of Virginia, a to be formed Virginia corporation
which will be a wholly owned subsidiary of BB&T Financial; and
3. Savings Clause. In all other respects the Reorganization Agreement and
Plan of Merger shall remain in full force and effect.
4. Counterparts. This Amendment may be executed in any number of
counterparts, which taken together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have caused this Amendment to be executed by their duly authorized officers and
their corporate seal to be hereunto affixed and attested by their officers
thereunder duly authorized, all as of the day and year first above written.
Attest BB&T Financial Corporation
________________________________ By __________________________________
(SEAL)
Commerce Bank
Attest
________________________________ By __________________________________
(SEAL)
I-28
APPENDIX II
ANNEX A
PLAN OF MERGER OF
COMMERCE BANK WITH AND INTO
BRANCH BANKING AND TRUST COMPANY
OF VIRGINIA ("BB&T-VA")
Plan of Merger ("Plan of Merger") dated as of June 24, 1994 by and between
Commerce Bank ("Commerce"), a Virginia bank having its principal office at 5101
Cleveland Street, Virginia Beach, Virginia 23462, BB&T FINANCIAL CORPORATION
("BB&T Financial"), a North Carolina corporation having its principal office at
223 West Nash Street, Wilson, North Carolina 27893 and Branch Banking and Trust
Company of Virginia ("BB&T-VA"), a Virginia bank having its principal office at
5101 Cleveland Street, Virginia Beach, Virginia 23462.
WITNESSETH
Whereas, Commerce is a bank chartered under the laws of the Commonwealth of
Virginia, the authorized capital stock of which consists of 5,000,000 shares of
common stock, par value $2.50 per share ("Commerce Common Stock"), of which, on
the date hereof, 2,725,163 shares are issued and outstanding; and 1,000,000
shares of preferred stock, $5.00 par value per share, of which no shares are
issued or outstanding; and
Whereas, BB&T Financial is a bank holding company incorporated under the laws
of the state of North Carolina, the authorized capital stock of which consists
of 100,000,000 shares of common stock, par value $2.50 per share ("BB&T
Financial Common Stock"), 32,195,746 of which were issued and outstanding at
March 31, 1994, and 4,000,000 shares of preferred stock, par value $2.50 per
share, none of which are issued or outstanding; and
Whereas, BB&T-VA is a newly formed wholly owned subsidiary of BB&T Financial
Corporation of Virginia, a Virginia corporation and wholly owned subsidiary of
BB&T Financial;
Whereas, the respective Boards of Directors of Commerce and BB&T Financial
deem the merger of BB&T-VA with and into Commerce, under and pursuant to the
terms and conditions herein set forth or referred to, desirable and in the best
interests of the respective corporations and their respective shareholders, and
the respective Boards of Directors of Commerce and BB&T Financial have adopted
resolutions approving this Plan of Merger and, in the case of BB&T Financial
and Commerce, an Agreement and Plan of Reorganization dated as of June 24, 1994
("Reorganization Agreement"); and
Whereas, the Board of Directors of Commerce has directed that this Plan of
Merger and the Reorganization Agreement be submitted to its shareholders for
approval;
Now, Therefore, in consideration of the premises and of the mutual agreements
herein contained, the parties hereto do hereby agree that the Plan of Merger
shall be as follows:
ARTICLE I
MERGER AND NAME OF SURVIVING CORPORATION
Subject to the terms and conditions of this Plan of Merger, on the Effective
Date (as hereinafter defined), BB&T-VA shall be merged with and into Commerce
pursuant to the provisions of, and with the effect provided in, Article 12 of
the Virginia Stock Corporation Act ("VASCA") (said transaction being
hereinafter
II-1
referred to as the "Merger"). On the Effective Date, the separate existence of
BB&T-VA shall cease and Commerce, as the surviving corporation, shall continue
unaffected and unimpaired by the Merger (Commerce as existing on and after the
Effective Date being hereinafter sometimes referred to as the "Surviving
Corporation"). The name of the Surviving Corporation shall remain "Commerce
Bank."
ARTICLE II
ARTICLES OF INCORPORATION AND BY-LAWS
The Articles of Incorporation and the By-laws of Commerce in effect
immediately prior to the Effective Date shall be the Articles of Incorporation
and the By-laws of the Surviving Corporation, in each case until amended in
accordance with applicable law.
ARTICLE III
BOARD OF DIRECTORS
On the Effective Date, the Board of Directors of the Surviving Corporation
shall consist of the following persons:
------------------------- -------------------------
------------------------- -------------------------
------------------------- -------------------------
------------------------- -------------------------
------------------------- -------------------------
ARTICLE IV
CAPITAL
Each share of capital stock of BB&T-VA issued and outstanding immediately
prior to the Effective Date shall, on the Effective Date, continue to be
issued and outstanding, and shall be an identical outstanding share of the
Surviving Corporation.
ARTICLE V
CONVERSION AND EXCHANGE OF COMMERCE COMMON STOCK;
FRACTIONAL SHARE INTERESTS
1. On the Effective Date, except as provided in paragraphs 3, 6 and 7 of
this Article, each share of Commerce Common Stock outstanding immediately
prior to the Effective Date shall by virtue of the Merger be converted into
and exchanged for 1.305 shares of BB&T Financial Common Stock (the "Exchange
Ratio").
In the event that BB&T Financial shall have a record date between June 24,
1994 and the Effective Date for a special distribution to stockholders, a
stock split, stock dividend or similar change in capitalization, an equitable
and appropriate adjustment shall be made to the Exchange Ratio to reflect the
effect of such distribution or change.
2. The "BB&T Financial Average Closing Price," as used herein, shall refer
to the average of the reported closing price of BB&T Financial Common Stock on
the Nasdaq/National Market System on the ten trading days ("Computation Days")
ending on the tenth business day prior to the Effective Date.
II-2
3. On the Effective Date, all shares of Commerce Common Stock owned
beneficially by Commerce or any subsidiary of Commerce other than in a
fiduciary capacity or in connection with a debt previously contracted and all
shares of Commerce Common Stock owned by BB&T Financial or owned beneficially
by any subsidiary of BB&T Financial other than in a fiduciary capacity or in
connection with a debt previously contracted shall be cancelled and no cash,
stock or other property shall be delivered in exchange therefor.
4. On and after the Effective Date, each holder of a certificate or
certificates theretofore representing outstanding shares of Commerce Common
Stock (any such certificate being hereinafter referred to as a "Certificate")
may surrender the same to BB&T Financial or its agent for cancellation and each
such holder shall be entitled upon such surrender to receive in exchange
therefor certificate(s) representing the number of whole shares of BB&T
Financial Common Stock to which such holder is entitled as provided herein and
a check in an amount equal to the amount of cash, without interest, to which
such holder is entitled for any fraction of share under paragraph 7 of this
Article. Until so surrendered, each Certificate shall be deemed for all
purposes to evidence ownership of the number of shares of BB&T Financial Common
Stock into which the shares represented by such Certificates have been changed
or converted as aforesaid. No dividend or other distribution payable with
respect to the shares of BB&T Financial Common Stock shall be paid to an
entitled former shareholder of Commerce until such shareholder surrenders his
Certificate or Certificates representing Commerce Common Stock for exchange as
provided in this paragraph 4. Certificates surrendered for exchange by any
person constituting an "affiliate" of Commerce for purposes of Rule 145(c)
under the Securities Act of 1933, as amended, shall not be exchanged for
certificates representing whole shares of BB&T Financial Common Stock until
BB&T Financial has received from such person the written agreement contemplated
by Section 4.12 of the Reorganization Agreement.
5. Upon the Effective Date, the stock transfer books of Commerce shall be
closed and no transfer of Commerce Common Stock by such holder shall thereafter
be made or recognized.
6. In the event that prior to the Effective Date the outstanding shares of
Commerce Common Stock shall have been increased, decreased, or changed into or
exchanged for a different number or kind of shares or securities by
reorganization, recapitalization, reclassification, stock dividend, stock
split, or other like change in capitalization, all without BB&T Financial
receiving consideration therefor, then an appropriate and proportionate
adjustment shall be made in the number and kind of shares of BB&T Financial
Common Stock to be thereafter delivered pursuant to this Plan of Merger and the
Reorganization Agreement.
7. Notwithstanding any other provision hereof, each holder of shares of
Commerce Common Stock who would otherwise have been entitled to receive a
fraction of a share of BB&T Financial Common Stock shall receive, in lieu
thereof, cash in an amount equal to such fractional part of a share of BB&T
Financial Common Stock multiplied by the BB&T Financial Average Closing Price.
No such holder shall be entitled to dividends, voting rights or any other
shareholder right in respect of any fractional share. All fractional share
interests of each holder shall be aggregated, and no such holder shall receive
a cash payment equal to, or greater than, the BB&T Financial Average Closing
Price.
8. Any other provision in this Plan of Merger or the Reorganization Agreement
notwithstanding, no party hereto or agent thereof shall be liable to a holder
of Commerce Common Stock for any amount paid or property delivered in good
faith to a public official pursuant to any applicable abandoned property,
escheat, or similar law.
9. On the Effective Date, BB&T Financial and the Surviving Corporation shall,
by Supplemental Indenture, assume all of the obligations of Commerce under the
outstanding 10% Convertible Subordinated Capital Notes Due 2002 ("Capital
Notes"), issued by Commerce pursuant to the Indenture dated as of September 13,
1990, between Commerce and NationsBank of Virginia, N.A., as Trustee
("Indenture"), and take all action necessary to provide for the issuance of
BB&T Financial Common Stock upon conversion of
II-3
the Capital Notes, so that, on and after the Effective Date, each holder of a
Capital Note shall have the right, during the period such Capital Note is
convertible, to convert such Capital Note only into shares of BB&T Financial
Common Stock at a conversion rate of 1.305 shares of BB&T Financial Common
Stock for each share of Commerce Common Stock into which such Capital Notes
might have been converted immediately prior to the Effective Date, subject to
payment of cash in lieu of fractional shares and to further adjustment in
accordance with Article 12 of the Indenture.
10. On the Effective Date, Commerce's obligations under its 1985 Stock Option
Plan and its 1993 Incentive Stock Plan (together, "Stock Option Plans") shall
be assumed by BB&T Financial and each stock option outstanding ("Commerce
Options") under Commerce's Stock Option Plans (except as provided in Paragraph
7 of this Article) shall be converted and exchanged, without any action on the
part of the holders thereof, into options to acquire, upon payment of the
adjusted exercise price (which shall equal the exercise price per share for the
Commerce Options immediately prior to the Merger, divided by the Exchange
Ratio), the number of shares of BB&T Financial Common Stock ("BB&T Option") the
option holder would have received pursuant to the Merger if he or she had
exercised his or her Commerce options immediately prior thereto; provided,
however, that in respect of any stock option which is an "incentive stock
option" within the meaning of Section 422A of the Internal Revenue Code of
1954, as amended ("Code"), the conversion hereinabove provided for shall comply
with the requirements of Section 425(a) of the Code, including the requirement
that such converted options shall not give to the holder thereof any benefits
additional to those which such holder had prior to such conversion under the
option as originally granted.
ARTICLE VI
EFFECTIVE DATE OF THE MERGER
Articles of Merger evidencing the transactions contemplated herein shall be
delivered for filing to the State Corporation Commission of Virginia as
provided in Section 13.1-720 of Article 12 of the VASCA. The Merger shall be
effective at the time and on the date specified in such Articles of Merger
(such date and time being herein referred to as the "Effective Date").
ARTICLE VII
FURTHER ASSURANCES
If at any time the Surviving Corporation shall consider or be advised that
any further assignments, conveyances or assurances are necessary or desirable
to vest, perfect or confirm in the Surviving Corporation title to any property
or rights of Commerce, or otherwise carry out the provisions hereof, the proper
officers and directors of Commerce, as of the Effective Date, and thereafter
the officers of the Surviving Corporation, acting on behalf of Commerce, shall
execute and deliver any and all property or assignments, conveyances and
assurances, and do all things necessary or desirable to vest, perfect or
confirm title to such property or rights in the Surviving Corporation and
otherwise carry out the provisions hereof.
ARTICLE VIII
CONDITIONS PRECEDENT
The obligations of BB&T Financial, BB&T-VA and Commerce to effect the Merger
as herein provided shall be subject to satisfaction, unless duly waived, of the
conditions set forth in the Reorganization Agreement.
II-4
ARTICLE IX
ABANDONMENT AND TERMINATION
Anything contained in this Plan of Merger to the contrary notwithstanding,
and notwithstanding adoption hereof by the shareholders of Commerce, this Plan
of Merger may be terminated and the Merger abandoned as provided in the
Reorganization Agreement.
ARTICLE X
MISCELLANEOUS
1. This Plan of Merger may be amended or supplemented at any time by mutual
agreement of BB&T Financial, BB&T-VA and Commerce. Any such amendment or
supplement must be in writing and approved by their respective Boards of
Directors and shall be subject to the proviso in Section 6.5 of the
Reorganization Agreement.
2. Any notice or other communication required or permitted under this Plan of
Merger shall be given, and shall be effective, in accordance with the
provisions of the Reorganization Agreement.
3. The headings of the several Articles herein are inserted for convenience
of reference only and are not intended to be a part of or to affect the meaning
or interpretation of this Plan of Merger.
4. This Plan of Merger shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia applicable to agreements made and
entirely to Commonwealth be performed in such jurisdiction, except to the
extent federal law may be applicable.
II-5
APPENDIX III
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN RESTRICTIONS CONTAINED
HEREIN.
OPTION AGREEMENT
This Agreement dated as of June 24, 1994, between BB&T Financial Corporation,
a North Carolina corporation ("BB&T Financial"), and Commerce Bank, a bank
chartered under the laws of the Commonwealth of Virginia ("Commerce").
WITNESSETH:
Whereas, the Boards of Directors of BB&T Financial and Commerce have approved
an Agreement and Plan of Reorganization (the "Reorganization Agreement"), dated
as of June 24, 1994 between BB&T Financial and Commerce, providing for the
merger of Commerce with and into an indirect subsidiary of BB&T Financial (the
"Merger"), which Reorganization Agreement has been executed by the parties
immediately prior to this Agreement;
Whereas, as a condition to BB&T Financial's entry into the Reorganization
Agreement and in consideration of such entry, Commerce has agreed to grant to
BB&T Financial the option set forth herein;
Now, Therefore, in consideration of the premises herein contained, the
parties agree as follows:
1. Definitions. Capitalized terms defined in the Reorganization Agreement and
used herein shall have the same meanings as in the Reorganization Agreement.
2. Grant of Option. Commerce hereby grants to BB&T Financial an option (the
"Option") to purchase up to 540,000 shares of authorized but unissued shares of
Commerce Common Stock at a price of $31.50 per share (the "Exercise Price")
payable in cash as provided in Section 4 hereof; provided, however, that such
number of shares shall be reduced if and to the extent necessary so that the
number of shares for which this Option is exercisable shall not exceed 19.9% of
the issued and outstanding Commerce Common Stock, before giving effect to the
exercise of the Option. The number of shares of Commerce Common Stock that may
be received upon the exercise of the Option are subject to adjustment as set
forth herein.
3. Exercise of Option. (a) Subject to compliance with applicable law and
regulation, BB&T Financial may exercise the Option, in whole or part, at any
time or from time to time if a Purchase Event (as defined below) shall have
occurred and be continuing.
(b) Commerce shall notify BB&T Financial promptly in writing of the
occurrence of any transaction, offer or event giving rise to a Purchase Event.
If more than one of the transactions, offers or events giving rise to a
Purchase Event is undertaken or effected by the same person or occurs at the
same time, then all such transactions, offers and events shall give rise only
to one Purchase Event, which Purchase Event shall be deemed continuing for all
purposes hereof until all such transactions are terminated or abandoned by such
person and all such events have ceased or ended.
(c) In the event BB&T Financial wishes to exercise the Option, it shall send
to Commerce a written notice (an "Exercise Notice," the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares BB&T Financial will purchase, pursuant to such exercise, and (ii) a
place and date not earlier than three business days nor later than 20 business
days from the Notice Date for the closing of such purchase with respect to such
exercise (the "Option Closing Date"); provided that if prior notification to or
approval of any federal or state regulatory agency is required in connection
with such purchase, BB&T Financial, and/or if required by applicable law,
Commerce, shall promptly file the required notice or
III-1
application for approval and shall expeditiously process the same and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which the last required notification period has
expired or been terminated or such approvals have been obtained and any
requisite waiting periods shall have passed.
(d) The Option shall expire and terminate, to the extent not previously
exercised, upon the earlier of:
(i) the Effective Date of the Merger;
(ii) the date on which the Reorganization Agreement is terminated, other
than a termination based upon, following or in connection with either (A) a
material breach by Commerce of a Specified Covenant (as hereinafter
defined) or (B) the failure of Commerce to obtain shareholder approval of
the transactions contemplated by the Reorganization Agreement by the vote
required under applicable law, in the case that either (A) or (B) follow
the occurrence of a Purchase Event; or
(iii) 18 months after the Reorganization Agreement is terminated based
upon a material breach by Commerce of a Specified Covenant or the failure
of Commerce to obtain shareholder approval of the transactions contemplated
by the Reorganization Agreement by the vote required under applicable law,
in either case following the occurrence of a Purchase Event.
(e) Notwithstanding the foregoing, if BB&T Financial provides Commerce with
an Exercise Notice relating to all or part of such Option, and Commerce tenders
performance of its obligations hereunder on the Option Closing Date specified
herein but BB&T Financial fails to tender performance of its obligations
hereunder on such Option Closing Date, then the Option shall expire and
terminate effective at 5:00 p.m., Eastern time on such Option Closing Date.
(f)(i) As used herein, "Purchase Event" shall mean when:
(A) Commerce shall have entered into an agreement with a person (other
than BB&T Financial or its affiliates) to: (a) acquire, merge or
consolidate with, or enter into any similar transaction with Commerce, (b)
purchase, lease or otherwise acquire all or substantially all of the assets
of Commerce, or (c) purchase or otherwise acquire (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing more than 10 percent of the voting power of
Commerce or any of its subsidiaries; or
(B) any person shall have acquired beneficial ownership of more than 10
percent of the outstanding shares of Commerce Common Stock; or any person
shall have merged, consolidated with or consummated a similar transaction
with Commerce or any person shall have purchased, leased or otherwise
acquired all or substantially all of Commerce's assets; or
(C) a bona fide proposal is made by any person (other than BB&T Financial
or its affiliates) by public announcement or written communication that is
or becomes the subject of public disclosure, or in an application to any
federal or state regulatory authority, to (a) acquire, merge or consolidate
with, or enter into any similar transaction with Commerce, (b) purchase,
lease or otherwise acquire all or substantially all the of the assets of
Commerce, or (c) purchase or otherwise acquire (including by way of merger,
consolidation, share exchange, tender or exchange offer or any similar
transaction) securities representing more than 25 percent of the voting
power of Commerce;
(ii) A "Specified Covenant" shall mean any of Commerce's covenants or
agreements provided in the Reorganization Agreement.
(iii) The term "person" shall have the meaning specified in Section
3(a)(9), and "beneficial ownership" shall have the meaning specified under
Section 13(d)(3), of the Exchange Act.
4. Payment and Delivery of Certificates. (a) At the closing referred to in
Section 3 hereof, BB&T Financial shall pay to Commerce the aggregate purchase
price for the shares purchased pursuant to the exercise of the Option in
immediately available funds by a wire transfer to a financial institution
designated by Commerce.
III-2
(b) At any closing relating to an exercise of the Option, simultaneously with
the delivery of cash by BB&T Financial as provided in subsection (a) with
respect to the Option, Commerce shall deliver to BB&T Financial a certificate
or certificates representing the number of shares purchased by BB&T Financial,
and BB&T Financial shall deliver to Commerce a letter agreeing that BB&T
Financial will not offer to sell or otherwise dispose of such shares in
violation of applicable law or the provisions of this Option Agreement.
5. Representations. Commerce hereby represents and warrants to, and covenants
with, BB&T Financial as follows:
(a) Commerce has taken all necessary corporate action to authorize and
reserve for issuance the full number of shares of Commerce Common Stock
issuable upon exercise of the Option, and shall continue to reserve such
shares until this Agreement is terminated as provided herein.
(b) The shares to be issued upon due exercise, in whole or in part, of
the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable.
6. Adjustment upon Changes in Capitalization. In the event of any change in
Commerce Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, exchanges of shares or the like, the number of
shares subject to the Option and its purchase price per share shall be adjusted
appropriately so that the economic value of the Option is unaltered. In the
event that any shares of Common Stock of Commerce are issued after the date of
this Agreement other than in a transaction described in the first sentence of
this Section 6 or pursuant to the exercise of the Option, the number of shares
subject to the Option shall be adjusted so that, immediately after such
issuance, the number of shares (together with the number of shares previously
issued under the Option) equals 19.9 percent (subject to reduction as provided
in Section 2 hereof) of the sum of (a) the then-outstanding shares of Commerce
Common Stock plus (b) the number of shares subject to the Option after the
adjustment provided in this sentence. Nothing contained in this Section 6 shall
be deemed to authorize Commerce to breach any provision of the Reorganization
Agreement or the Plan of Merger.
7. Severability. If any term, provision, covenant or restriction contained in
this Option Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Option Agreement shall remain in full force and effect, and shall in no
way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option will not permit the holder to
acquire the full number of shares of Commerce Common Stock provided in Section
2 hereof (as adjusted pursuant to Section 6 hereof), it is the express
intention of Commerce to allow the holder to acquire such lesser number of
shares as may be permissible, without any amendment or modification hereof.
8. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) Entire Agreement. Except as otherwise expressly provided herein, this
Agreement contains the entire agreement between the parties with respect to
the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors. Nothing in
this Agreement, expressed or implied, is intended to confer upon any party,
other than the parties hereto, and their respective successors and assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
III-3
(c) Assignment. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement to any other person, without the
express written consent of the other party, except that BB&T Financial may
assign in whole or in part the Option and other benefits and obligations
hereunder without limitation to any of its wholly owned subsidiaries and
BB&T Financial may assign in whole or in part the Option and other benefits
and obligations hereunder without limitation if a Purchase Event has
occurred and BB&T Financial shall have delivered to Commerce a copy of a
letter from the staff of the Commission, or an opinion of counsel, in form
and substance reasonably satisfactory to Commerce, to the effect that such
assignment will not violate the requirements of the Securities Act;
provided that prior to any such assignment, BB&T Financial shall give
written notice of the proposed assignment to Commerce, and within 24 hours
of receipt of such notice of a bona fide proposed assignment, Commerce may
purchase the Option at a price and on other terms at least as favorable to
BB&T Financial as that set forth in the notice of assignment.
(d) Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered
personally or sent by Federal Express, Express Mail, another service which
provides overnight delivery, telegram or telex or other facsimile
transmission addressed as follows:
If to Commerce:
Commerce Bank
5101 Cleveland Street
Virginia Beach, VA 23462
Attention: G. Robert Aston, Jr.
With a required copy to:
Mays & Valentine
1111 East Main Street
Richmond, VA 23208-1122
Attention: George P. Whitley
If to BB&T:
BB&T Financial Corporation
223 West Nash Street
Wilson, North Carolina 27893
Attention: Scott E. Reed
Facsimile: (919) 399-4418
With a required copy to:
Arnold & Porter
777 South Figueroa Street, 44th Floor
Los Angeles, CA 90017
Attention: Barbara E. Mathews
Facsimile: (213) 243-4153
Any notice hereunder shall be deemed delivered when received at the
address of such party set forth above (or to such other address as such
party hereto shall advise the other in writing).
(e) Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
III-4
(f) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Agreement by
Commerce and that this Agreement may be enforced by BB&T Financial through
injunctive or other equitable relief.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia without regard to
principles of conflicts of laws thereof.
In Witness Whereof, each of the parties hereto has executed this Agreement as
of the day and year first written above.
BB&T FINANCIAL CORPORATION
By: /s/ John A. Allison IV
-------------------------------
Title: Chairman and Chief Executive
Officer
------------------------------
COMMERCE BANK
By: /s/ G. Robert Aston, Jr.
-------------------------------
Title: President and CEO
----------------------------
III-5
APPENDIX IV
ALEX. BROWN LETTERHEAD
, 1994
The Board of Directors
Commerce Bank
5101 Cleveland Street
Virginia Beach, Virginia 23462
Dear Sirs:
You have requested our opinion as to the fairness, from a financial point of
view, of the consideration to be received by the holders of the common stock,
par value $2.50 per share (the "Shares"), of Commerce Bank (the "Company")
pursuant to an Agreement and Plan of Reorganization and a related Plan of
Merger (collectively, the "Acquisition Agreement"), and other related
documents, dated as of June 24, 1994, entered into by and between the Company
and BB&T Financial Corporation ("BB&T"), providing for the merger of the
Company with and into Branch Banking & Trust Company of Virginia, a wholly
owned subsidiary of BB&T Financial Corporation of Virginia (the "Merger"). The
Acquisition Agreement provides, among other things, for each share of the
Company's Shares to be converted in the Merger into 1.305 (the "Exchange
Ratio") shares of BB&T Common Stock.
Alex. Brown & Sons Incorporated, as a customary part of its investment
banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and
other purposes. We have acted as financial advisor to the Board of Directors of
the Company in connection with the transactions described above and will
receive a fee for our services which is contingent upon the consummation of the
transaction contemplated by the Agreement. Alex. Brown & Sons has, from time to
time, provided financial advice to the Company, and has most recently acted as
financial advisor to the Company in connection with the Preferred Stock
Purchase Agreement with BB&T dated April 21, 1994. Alex. Brown & Sons
Incorporated regularly publishes research reports regarding the financial
services industry and the businesses and securities of publicly owned companies
in that industry.
In connection with this opinion, we have reviewed certain publicly available
financial information concerning the Company and BB&T and certain internal
financial analyses and other information furnished to us by the Company and
BB&T. We have also held discussions with members of the senior management of
the Company and BB&T regarding the business and prospects of their respective
financial institutions. In addition, we have (i) reviewed the reported price
and trading activity for the Shares and BB&T Common Stock, (ii) compared
certain financial and stock market information for the Company and BB&T,
respectively, with similar information for certain comparable companies whose
securities are publicly traded, (iii) reviewed the Agreement and related
documents, (iv) reviewed the financial terms of certain recent business
combinations which we deemed comparable in whole or in part, (v) reviewed the
potential pro forma impact of the Merger on BB&T's financial condition,
operating results and per share figures and (vi) performed such other studies
and analyses and considered such other factors as we deemed appropriate.
We have not independently verified the information above and for purposes of
this opinion have assumed the accuracy, completeness and fairness thereof. With
respect to information relating to the prospects of the Company and BB&T, we
have assumed that such information reflects the best currently available
estimates and judgments of the respective managements of the Company and BB&T
as to the likely future financial performance of the Company and BB&T. In
addition, we have not made an independent evaluation or appraisal of the assets
or liabilities of the Company or BB&T, nor have we been furnished with any such
evaluation or appraisal. Our opinion is based on market, economic and other
conditions as they exist and can be evaluated as of the date of this letter.
IV-1
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Exchange Ratio pursuant to the Acquisition Agreement
is fair, from a financial point of view, to the holders of Shares.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
By: _________________________________
Donald W. Delson
Managing Director
IV-2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
A. The Registrant is incorporated under the laws of North Carolina. Sections
55-8-50 through 55-8-58 of the General Statutes of North Carolina provide for
indemnification of directors, officers, employees and agents of a North Carolina
corporation. The following is a summary of these provisions:
1. Subject to certain exceptions, a corporation may indemnify an
individual made a party to a proceeding because he is or was a director against
liability incurred in the proceeding if (i) he conducted himself in good faith;
(ii) he reasonably believed (a) in the case of conduct in his official capacity
with the corporation, that his conduct was in its best interests and (b) in all
other cases, that his conduct was at least not opposed to its best interests;
and (iii) in the case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful. Moreover, unless limited by its articles of
incorporation, a corporation must indemnify a director who was wholly
successful, on the merits or otherwise, in the defense of any proceeding in
which he was a party because he is or was a director of the corporation against
reasonable expenses incurred by him in connection with the proceeding. Expenses
incurred by a director in defending a proceeding may be paid by the corporation
in advance of the final disposition of such proceeding as authorized by the
board of directors in the specific case or as authorized or required under any
provision in the articles of incorporation or bylaws or by any applicable
resolution or contract upon receipt of an undertaking by or on behalf of a
director to repay such amount unless it shall ultimately be determined that he
is entitled to be so indemnified by the corporation against such expenses. A
director may also apply for court-ordered indemnification under certain
circumstances.
2. Unless a corporation's articles of incorporation provide otherwise, (i)
an officer of a corporation is entitled to mandatory indemnification and is
entitled to apply for court-ordered indemnification to the same extent as a
director; (ii) the corporation may indemnify or advance expenses to an officer,
employee, or agent of a corporation to the same extent as to a director; and
(iii) a corporation may also indemnify or advance expenses to an officer,
employee, or agent who is not a director to the extent, consistent with public
policy, that may be provided by its articles of incorporation, bylaws, general
or specific action of its board of directors, or contract.
3. In addition and separate and apart from the indemnification rights
discussed above, a corporation may, in its articles of incorporation or bylaws,
or by contract or resolution, indemnify or agree to indemnify any one of its
directors, officers, employees or agents against liability and expenses in any
proceeding (including without limitation a proceeding brought by or on behalf of
the corporation itself) arising out of their status as such or their activities
in any of the foregoing capacities; provided, however, that a corporation may
not indemnify or agree to indemnify a person against liability or expenses he
may incur on account of his activities which were at the time taken known or
believed by him to be clearly in conflict with the best interests of the
corporation. A corporation may likewise and to the same extent indemnify or
agree to indemnify any person who, at the request of the corporation, is or was
serving as a director, officer, partner, trustee, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise or as a trustee or administrator under an employee benefit plan. Any
such provision for indemnification may also include provisions for recovery from
the corporation of reasonable costs, expenses and attorneys' fees in connection
with the enforcement of rights to indemnification and may further include
provisions establishing reasonable procedures for determining and enforcing the
rights granted therein.
B. The Registrant's Articles of Incorporation provide for the indemnification
of directors to the fullest extent authorized by North Carolina law as it exists
or may hereafter be amended. A director shall not be personally liable for any
monetary damages relating to a breach of duty as a director to the Registrant,
its stockholders or otherwise.
-1-
C. Article VII of the Registrant's Bylaws provides for indemnification of
Registrant's directors, officers, employees or agents against certain expenses,
including attorneys' fees, and payments made in satisfaction of judgments, money
decrees, fines and penalties for which they may become liable in such and other
fiduciary capacities, exclusive of indemnification for certain activities
involving criminal misconduct or clearly in conflict with the best interest of
the Registrant.
D. The Registrant has purchased liability insurance for its directors and
certain of its officers covering certain liabilities which may be incurred by
such directors and officers of the Registrant in connection with the performance
of their duties.
The indemnification provisions in the Registrant's Articles of Incorporation
and Bylaws may be sufficiently broad to permit indemnification of the
Registrant's officers and directors for liabilities arising under the Securities
Act of 1933, as amended ("Securities Act").
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
The following are filed as exhibits to this Registration Statement:
Exhibit
No. Description
- ------- -----------
2.1 Agreement and Plan of Reorganization dated June 24, 1994 by and
between Commerce Bank and the Registrant. (Included as Appendix I to
Proxy Statement/Prospectus filed herewith.)
2.2 Amendment No. 1 to Agreement and Plan of Reorganization dated July 25,
1994 by and between Commerce Bank and the Registrant. (Included as
part of Appendix I to Proxy Statement/Prospectus filed herewith.)
2.3 Plan of Merger dated June 24, 1994 by and between Commerce Bank and
the Registrant. (Included as Appendix II to Proxy Statement/Prospectus
filed herewith.)
2.4 Option Agreement dated June 24, 1994 by and between Commerce Bank and
the Registrant. (Included as Appendix III to Proxy
Statement/Prospectus filed herewith.)
2.5 Preferred Stock Purchase Agreement dated April 21, 1994 by and between
Commerce Bank and Registrant.
4.1 Specimen stock certificate for the Registrant's common stock, $2.50
par value (incorporated by reference herein from the identified
exhibit to Registrant's registration statement on Form S-14 (File No.
2-68274) as filed and declared effective on August 5, 1980).
4.2 Excerpts from Registrant's Bylaws (Article II, Sections 8 and 9)
relating to rights of holders of Registrant's common stock
(incorporated by reference herein from the identified exhibit to the
Registrant's registration statement on Form S-8 (File No. 2-91779) as
filed and declared effective on July 10, 1984).
-2-
4.3 Form of Registrant's Indenture with Bankers Trust Company, Trustee,
relating to Registrant's 8 3/4% Convertible Subordinated Debentures
due 2003, including the form of Registrant's Debentures appended
hereto (incorporated by reference herein from the identified exhibit
to Registrant's registration statement on Form S-3 (File No. 2-96007)
as filed and declared effective on March 7, 1985).
4.4 Form of Registrant's Indenture with Bankers Trust Company, Trustee,
relating to Registrant's Floating Rate Subordinated Notes due 1997,
including the form of Registrant's Notes appended thereto
(incorporated by reference herein from the identified exhibit to the
Registrant's registration statement on Form S-3 (File No. 33-1965) as
filed and declared effective on December 12, 1985).
*5.1 Opinion of Jerone C. Herring, Esquire, Vice President and Secretary
to the Registrant, regarding the legality of the securities to be
registered hereby.
8.1 Opinion of KPMG Peat Marwick LLP, Tax Advisors to the Registrant,
regarding certain federal and Virginia income tax consequences of
the Acquisition.
23.1 Consent of KPMG Peat Marwick LLP dated August 30, 1994 (BB&T).
23.2 Consent of KPMG Peat Marwick LLP with regard to the opinion set forth
in Exhibit 8.1 hereto.
23.3 Consent of Ernst & Young LLP dated August 26, 1994 (Commerce).
23.4 Consent of Coopers & Lybrand dated August 30, 1994 (Commerce).
*23.5 Consent of Jerone C. Herring, Esquire, Vice President and Secretary
of the Registrant, included as part of Exhibit 5.1 hereto.
23.6 Consent of Alex. Brown & Sons Incorporated dated August, 1994.
23.7 Consent of Donald G. Jones and Company, P.A. dated August 30, 1994
(BB&T).
24.1 Powers of Attorney from certain signatory directors and officers of
BB&T Financial Corporation.
99.1 Form of Notice of Special Meeting to stockholders of Commerce Bank
(Included as a part of the Proxy Statement/Prospectus filed
herewith).
99.2 Form of Proxy solicited by Board of Directors of Commerce Bank.
99.3 Opinion of Alex. Brown & Sons Incorporated (Included as Appendix IV
to the Proxy Statement/Prospectus filed herewith).
99.4 Annual Report on Form F-2 for Commerce Bank for the Year Ended
December 31, 1993.
99.5 Quarterly Report on Form F-4 for Commerce Bank for the Quarter Ended
March 31, 1994.
99.6 Quarterly Report on Form F-4 for Commerce Bank for the Quarter Ended
June 30, 1994.
99.7 Current Report on Form F-3 for Commerce Bank dated July 5, 1994.
-3-
99.8 Proxy Statement for Commerce Bank for 1994 Annual Meeting of
Stockholders.
99.9 Amendment to Form F-2 dated August 30, 1994.
- ------------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS
a. ITEM 512 OF REGULATION S-K
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where the
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(6) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
-4-
(7) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (6) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(8) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions set forth in response to Item 20
hereof, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
b. ITEM 22(b) OF FORM S-4
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first-class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
c. ITEM 22(c) OF FORM S-4
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
-5-
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wilson and State of North
Carolina, on August 30, 1994.
BB&T FINANCIAL CORPORATION
By: /s/ Jerone C. Herring
------------------------------------
Jerone C. Herring, Secretary
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed by the following persons in the capacities indicated
on August 30, 1994.
Name Capacity
- ---- --------
John A. Allison IV Chairman of the Board of Directors and Chief
Executive Officer (Principal Executive Officer)
Scott E. Reed Treasurer (Principal Financial and Accounting
Officer)
Joseph B. Alala, Jr. Director
W. Watson Barnes Director
Paul B. Barringer Director
Robert L. Brady Director
Raymond S. Caughman Director
W. G. Clark III Director
Jesse W. Corbett, Jr. Director
W. R. Cuthbertson, Jr. Director
Fred H. Deaton, Jr. Director
Albert J. Dooley, Sr. Director
Joe L. Dudley, Sr. Director
Tom D. Efird Director
O. William Fenn, Jr. Director
-6-
James E. Heins Director
Raymond A. Jones, Jr. Director
Kelly S. King Director
J. Ernest Lathem, M.D. Director
James H. Maynard Director
A. Winniett Peters Director
Richard L. Player, Jr. Director
Larry J. Waggoner Director
Henry G. Williamson, Jr. Director
William B. Young, M.D. Director
By: /s/ Jerone C. Herring
----------------------------------------------
Jerone C. Herring, Attorney in Fact
-7-
Exhibit
No. Description
- ------- -----------
2.1 Agreement and Plan of Reorganization dated June 24, 1994 by and
between Commerce Bank and the Registrant. (Included as Appendix I to
Proxy Statement/Prospectus filed herewith.)
2.2 Amendment No. 1 to Agreement and Plan of Reorganization dated July 25,
1994 by and between Commerce Bank and the Registrant. (Included as
part of Appendix I to Proxy Statement/Prospectus filed herewith.)
2.3 Plan of Merger dated June 24, 1994 by and between Commerce Bank and
the Registrant. (Included as Appendix II to Proxy Statement/Prospectus
filed herewith.)
2.4 Option Agreement dated June 24, 1994 by and between Commerce Bank and
the Registrant. (Included as Appendix III to Proxy
Statement/Prospectus filed herewith.)
2.5 Preferred Stock Purchase Agreement dated April 21, 1994 by and between
Commerce Bank and Registrant.
4.1 Specimen stock certificate for the Registrant's common stock, $2.50
par value (incorporated by reference herein from the identified
exhibit to Registrant's registration statement on Form S-14 (File No.
2-68274) as filed and declared effective on August 5, 1980).
4.2 Excerpts from Registrant's Bylaws (Article II, Sections 8 and 9)
relating to rights of holders of Registrant's common stock
(incorporated by reference herein from the identified exhibit to the
Registrant's registration statement on Form S-8 (File No. 2-91779) as
filed and declared effective on July 10, 1984).
4.3 Form of Registrant's Indenture with Bankers Trust Company, Trustee,
relating to Registrant's 8 3/4% Convertible Subordinated Debentures
due 2003, including the form of Registrant's Debentures appended
hereto (incorporated by reference herein from the identified exhibit
to Registrant's registration statement on Form S-3 (File No. 2-96007)
as filed and declared effective on March 7, 1985).
4.4 Form of Registrant's Indenture with Bankers Trust Company, Trustee,
relating to Registrant's Floating Rate Subordinated Notes due 1997,
including the form of Registrant's Notes appended thereto
(incorporated by reference herein from the identified exhibit to the
Registrant's registration statement on Form S-3 (File No. 33-1965) as
filed and declared effective on December 12, 1985).
*5.1 Opinion of Jerone C. Herring, Esquire, Vice President and Secretary
to the Registrant, regarding the legality of the securities to be
registered hereby.
8.1 Opinion of KPMG Peat Marwick LLP, Tax Advisors to the Registrant,
regarding certain federal and Virginia income tax consequences of the
Acquisition.
23.1 Consent of KPMG Peat Marwick LLP dated August 30, 1994 (BB&T).
23.2 Consent of KPMG Peat Marwick LLP with regard to the opinion set forth
in Exhibit 8.1 hereto.
23.3 Consent of Ernst & Young LLP dated August 26, 1994 (Commerce).
23.4 Consent of Coopers & Lybrand dated August 30, 1994 (Commerce).
*23.5 Consent of Jerone C. Herring, Esquire, Vice President and Secretary
of the Registrant, included as part of Exhibit 5.1 hereto.
23.6 Consent of Alex. Brown & Sons Incorporated dated August, 1994.
23.7 Consent of Donald G. Jones and Company, P.A. dated August 30, 1994
(BB&T).
24.1 Powers of Attorney from certain signatory directors and officers of
BB&T Financial Corporation.
99.1 Form of Notice of Special Meeting to stockholders of Commerce Bank
(Included as a part of the Proxy Statement/Prospectus filed
herewith).
99.2 Form of Proxy solicited by Board of Directors of Commerce Bank.
99.3 Opinion of Alex. Brown & Sons Incorporated (Included as Appendix IV
to the Proxy Statement/Prospectus filed herewith).
99.4 Annual Report on Form F-2 for Commerce Bank for the Year Ended
December 31, 1993.
99.5 Quarterly Report on Form F-4 for Commerce Bank for the Quarter Ended
March 31, 1994.
99.6 Quarterly Report on Form F-4 for Commerce Bank for the Quarter Ended
June 30, 1994.
99.7 Current Report on Form F-3 for Commerce Bank dated July 5, 1994.
99.8 Proxy Statement for Commerce Bank for 1994 Annual Meeting of
Stockholders.
99.9 Amendment to Form F-2 dated August 30, 1994.
- ------------------
* To be filed by amendment.