EXHIBIT 2
AGREEMENT AND PLAN OF REORGANIZATION
LIFE BANCORP, INC.
BB&T FINANCIAL CORPORATION OF VIRGINIA
and
BB&T CORPORATION
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Terms Defined Elsewhere. . . . . . . . . . . . . . . . . . . . 5
ARTICLE II THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Filing; Plan of Merger . . . . . . . . . . . . . . . . . . . . 6
2.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 7
2.7 Merger Consideration . . . . . . . . . . . . . . . . . . . . . 8
2.8 Conversion of Shares; Payment of Merger Consideration. . . . . 8
2.9 Conversion of Stock Options. . . . . . . . . . . . . . . . . . 9
2.10 Merger of Subsidiary . . . . . . . . . . . . . . . . . . . . . 10
2.11 Anti-Dilution. . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF Life . . . . . . . . . . . . 11
3.1 Capital Structure. . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Organization, Standing and Authority . . . . . . . . . . . . . 11
3.3 Ownership of Subsidiaries . . . . . . . . . . . . . . . . . . 11
3.4 Organization, Standing and Authority of the Subsidiaries . . . 12
3.5 Authorized and Effective Agreement . . . . . . . . . . . . . . 12
3.6 Securities Filings; Statements True. . . . . . . . . . . . . . 13
3.7 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . 13
3.9 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . 14
3.10 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.11 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 14
3.12 Loans; Allowance for Loan Losses . . . . . . . . . . . . . . . 15
3.13 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.14 Employees; Compensation; Benefit Plans . . . . . . . . . . . . 16
3.15 Certain Contracts. . . . . . . . . . . . . . . . . . . . . . . 20
3.16 Legal Proceedings; Regulatory Approvals. . . . . . . . . . . . 21
3.17 Compliance with Laws; Filings. . . . . . . . . . . . . . . . . 21
3.18 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . 21
3.19 Repurchase Agreements; Derivatives . . . . . . . . . . . . . . 22
3.20 Deposit Accounts . . . . . . . . . . . . . . . . . . . . . . . 22
3.21 Related Party Transactions . . . . . . . . . . . . . . . . . . 22
3.22 Certain Information. . . . . . . . . . . . . . . . . . . . . . 22
3.23 Tax and Regulatory Matters . . . . . . . . . . . . . . . . . . 23
3.24 State Takeover Laws. . . . . . . . . . . . . . . . . . . . . . 23
3.25 Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . 23
3.26 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BB&T . . . . . . . . . . . . 23
4.1 Capital Structure of BB&T. . . . . . . . . . . . . . . . . . . 24
4.2 Organization, Standing and Authority of BB&T . . . . . . . . . 24
4.3 Authorized and Effective Agreement . . . . . . . . . . . . . . 24
4.4 Organization, Standing and Authority of BB&T Subsidiaries. . . 25
4.5 Securities Documents . . . . . . . . . . . . . . . . . . . . . 25
4.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . 25
4.7 Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . 25
4.8 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . 26
4.9 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 26
4.10 Certain Information. . . . . . . . . . . . . . . . . . . . . . 26
4.11 Tax and Regulatory Matters.. . . . . . . . . . . . . . . . . . 26
4.12 Share Ownership. . . . . . . . . . . . . . . . . . . . . . . . 26
4.13 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1 Life Shareholder Meeting . . . . . . . . . . . . . . . . . . . 27
5.2 Registration Statement; Proxy Statement/Prospectus . . . . . . 27
5.3 Plan of Merger; Reservation of Shares. . . . . . . . . . . . . 28
5.4 Additional Acts. . . . . . . . . . . . . . . . . . . . . . . . 28
5.5 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.6 Certain Accounting Matters . . . . . . . . . . . . . . . . . . 29
5.7 Access to Information. . . . . . . . . . . . . . . . . . . . . 29
5.8 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . 30
5.9 Forbearances of Life . . . . . . . . . . . . . . . . . . . . . 30
5.10 Employment Agreements. . . . . . . . . . . . . . . . . . . . . 32
5.11 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.12 Section 401(k) Plan; ESOP; Welfare and Other Benefits. . . . . 33
5.13 Directors and Officers Protection. . . . . . . . . . . . . . . 35
5.14 Forbearances of BB&T . . . . . . . . . . . . . . . . . . . . .. 35
5.15 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.16 Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . 36
5.17 Board of Directors of Virginia Banking Subsidiary. . . . . . . 36
ARTICLE VI CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . 37
6.1 Conditions Precedent --BB&T and Life . . . . . . . . . . . . . 37
6.2 Conditions Precedent -- Life . . . . . . . . . . . . . . . . . 38
6.3 Conditions Precedent -- BB&T . . . . . . . . . . . . . . . . . 38
ARTICLE VII TERMINATION, DEFAULT, WAIVER AND AMENDMENT . . . . . . . . . . 40
7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.3 Survival of Representations, Warranties and Covenants. . . . . 43
7.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.5 Amendment or Supplement. . . . . . . . . . . . . . . . . . . . 43
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 43
8.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 44
8.3 No Assignment. . . . . . . . . . . . . . . . . . . . . . . . . 44
8.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.5 Specific Performance . . . . . . . . . . . . . . . . . . . . . 45
8.6 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 45
Annexes
Annex A - Articles of Merger
Annex B - BB&T Option Agreement
Annex C - Employment Agreement with Edward E. Cunningham
Annex D - Employment Agreement with Tollie W. Rich, Jr.
Annex E - Form of Employment Agreement with Nelson R. Arnold, T. Frank
Clements, Ralph T. Dempsey, Emory J. Dunning and Edward M. Locke
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of
October 29, 1997, among LIFE BANCORP, INC. ("Life"), a Virginia corporation
having its principal office at Norfolk, Virginia, BB&T FINANCIAL CORPORATION OF
VIRGINIA, a Virginia corporation having its principal office at Virginia Beach,
Virginia ("BB&T Financial"), and BB&T CORPORATION ("BB&T"), a North Carolina
corporation having its principal office at Winston-Salem, North Carolina;
R E C I T A L S:
The parties desire that Life shall be merged with and into BB&T
Financial (said transaction being hereinafter referred to as the "Merger")
pursuant to a plan of merger (the "Plan of Merger") substantially in the form
set forth in Articles of Merger attached as Annex A hereto ("Articles of
Merger"), and the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby. As a condition and inducement to BB&T's
willingness to enter into this Agreement, Life is concurrently granting to BB&T
an option to acquire, under certain circumstances, Life's common stock pursuant
to a Stock Option Agreement between BB&T and Life in the form attached hereto as
Annex B (the "BB&T Option Agreement").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions
When used herein, the capitalized terms set forth below shall have the
following meanings:
"Affiliate" means, with respect to any Person, any Person who directly,
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, such Person and, without limiting the
generality of the foregoing, includes any executive officer or director of such
Person and any Affiliate of such executive officer or director.
"BB&T Common Stock" shall mean the shares of common stock, par value
$5.00 per share, of BB&T, with rights attached issued pursuant to Rights
Agreement dated December 17, 1996 between BB&T and Branch Banking and Trust
Company, Rights Agent relating to BB&T's Series B Junior Participating Preferred
Stock, $5 par value.
"BB&T Option Agreement" shall mean the Option Agreement dated as of even
date herewith under which BB&T has an option to purchase shares of Life, as
amended from time to time, which shall be executed immediately following
execution of this Agreement.
"BB&T Subsidiaries" shall mean all bank Subsidiaries of BB&T at the
Effective Time.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"CRA" shall mean the Community Reinvestment Act of 1977, as amended.
"Disclosed" shall mean disclosed in the Life Disclosure Memorandum,
referencing the Section number herein pursuant to which such disclosure is being
made.
"Environmental Claim" means any notice from any governmental authority
or third party alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup or remediation costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based upon, or resulting from a
violation of the Environmental Laws or the presence or release into the
environment of any Hazardous Substances.
"Environmental Laws" means all applicable federal, state and local laws
and regulations, as amended, relating to pollution or protection of human
health or the environment (including ambient air, surface water, ground water,
land surface, or subsurface strata) and which are administered, interpreted, or
enforced by the United States Environmental Protection Agency and state and
local agencies with jurisdiction over, and including common law in respect of,
pollution or protection of the environment, including the Comprehensive
Environmental Response Compensation and Liability Act, as amended, 42 U.S.C.
9601 et seq. ("CERCLA"), the Resource Conservation and Recovery Act, as amended,
42 U.S.C. 6901 et seq., and other laws and regulations relating to emissions,
discharges, releases, or threatened releases of any Hazardous Substances, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of any Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System.
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"Financial Statements" shall mean (a) with respect to BB&T, (i) the
consolidated balance sheets (including related notes and schedules, if any) of
BB&T as of December 31, 1996, 1995, and 1994, 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,
1996, 1995, and 1994, as filed by BB&T in Securities Documents and (ii) the
consolidated balance sheets of BB&T (including related notes and schedules, if
any) and the related consolidated statements of income, shareholders' equity and
cash flows (including related notes and schedules, if any) included in
Securities Documents filed by BB&T with respect to periods ended subsequent to
December 31, 1996, and (b) with respect to Life, (i) the consolidated balance
sheets (including related notes and schedules, if any) of Life as of December
31, 1996, 1995, and 1994, and the related consolidated statements of operations,
changes in shareholders' equity and cash flows (including related notes and
schedules, if any) for each of the three years ended December 31, 1996, 1995,
and 1994 as filed by Life in Securities Documents and (ii) the consolidated
balance sheets of Life (including related notes and schedules, if any) and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows (including related notes and schedules, if any) included in
Securities Documents filed by Life with respect to periods ended subsequent to
December 31, 1996.
"GAAP" means generally accepted accounting principles applicable to
financial institutions and their holding companies, as in effect at the relevant
date.
"Hazardous Substances" means any substance or material (i) identified in
CERCLA; (ii) determined to be toxic, a pollutant or a contaminant under any
applicable federal, state or local statutes, law, ordinance, rule or regulation,
including but not limited to petroleum products; (iii) asbestos; (iv) radon; (v)
poly-chlorinated biphiphenyls and (vi) such other materials, substances or waste
which are otherwise dangerous, hazardous, harmful to human health or the
environment.
"IRS" shall mean the Internal Revenue Service.
"Life Common Stock" shall mean the shares of common stock, par value
$.01 per share, of Life.
"Life Disclosure Memorandum" shall mean the written information in one
or more documents, each of which is entitled "Life Disclosure Memorandum" and
dated the date of this Agreement and delivered not later than the date of
execution of this Agreement by Life to BB&T, and describing in reasonable detail
the matters contained therein. Each disclosure made therein shall specifically
reference each Section of this Agreement under which such disclosure is made.
Information disclosed with respect to one Section shall not be deemed to be
disclosed for purposes of any other Section not specifically referenced.
"Life Subsidiaries" shall mean the current Subsidiaries of Life, and any
corporation, bank, savings association, or other organization acquired as a
Subsidiary of Life in the future and held as a Subsidiary by Life at the
Effective Time.
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"Material Adverse Effect" on BB&T or Life shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, (i) has a material adverse effect on the financial condition,
results of operations, business or business prospects of BB&T and the BB&T
Subsidiaries, taken as a whole, or Life and the Life Subsidiaries, taken as a
whole, or (ii) materially impairs the ability of BB&T or Life to perform its
obligations under this Agreement or to consummate the Merger and the other
transactions contemplated by this Agreement; provided that "Material Adverse
Effect" shall not be deemed to include the impact of (a) actions and omissions
of BB&T or Life taken with the prior written consent of the other in
contemplation of the transactions contemplated hereby (including any actions
taken by Life pursuant to Section 5.6 of this Agreement), (b) the direct effects
of compliance with this Agreement on the operating performance of the parties,
including expenses incurred by the parties in consummating the transactions
contemplated by this Agreement or relating to any litigation arising as a result
of the Merger, (c) any effect with respect to a party hereto caused, in whole or
in part, by the other party.
"NCBCA" shall mean the North Carolina Business Corporation Act, as
amended.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OTS" shall mean the Office of Thrift Supervision.
"Person" means any individual, corporation, partnership, joint venture,
association, trust or "group" (as that term is defined in Section 13(d)(3) of
the Exchange Act).
"Proxy Statement/Prospectus" shall mean the proxy statement and
prospectus, together with any supplements thereto, to be sent to shareholders of
Life to solicit their votes in connection with this Agreement and the Plan of
Merger.
"Registration Statement" shall mean the registration statement of BB&T
as declared effective by the Commission under the Securities Act, including any
post-effective amendments or supplements thereto, as filed with the Commission
under the Securities Act with respect to the BB&T Common Stock to be issued in
connection with the transactions contemplated by this Agreement.
"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests (other than
rights pursuant to the Rights Agreement described under the definition of "BB&T
Common Stock"), and stock appreciation rights, performance units and similar
stock-based rights whether or not they obligate the issuer thereof to issue
stock or other securities or to pay cash.
"SAIF" shall mean the Savings Association Insurance Fund.
"Securities Act" shall mean the Securities Act of 1933, as amended.
4
"Securities Documents" shall mean all reports, proxy statements,
registration statements and all similar documents filed, or required to be
filed, pursuant to the Securities Laws, including but not limited to periodic
and other reports filed pursuant to Section 13 of the Exchange Act.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
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 promulgated thereunder.
"State Board" shall mean the Virginia State Corporation Commission,
Bureau of Financial Institutions.
"Stock Option" shall mean, collectively, any option granted under the
Stock Option Plan and unexercised on the date hereof to acquire shares of Life
Common Stock, aggregating 873,702 shares.
"Stock Option Plan" shall mean Life's 1995 Stock Option Plan.
"Subsidiaries" shall mean all those corporations, associations, or other
business entities of which the entity in question either owns or controls 50% or
more of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 50% or more of the outstanding equity
securities is owned directly or indirectly by its parent (in determining whether
one entity owns or controls 50% or more of the outstanding equity securities of
another, equity securities owned or controlled in a fiduciary capacity shall be
deemed owned and controlled by the beneficial owner).
"TILA" shall mean the Truth in Lending Act, as amended.
"VSCA" shall mean the Virginia Stock Corporation Act, as amended.
5
1.2 Terms Defined Elsewhere
The capitalized terms set forth below are defined in the following
sections:
Agreement Introduction
Articles of Merger Recitals
BB&T Introduction
BB&T Financial Introduction
BB&T Option Agreement Recitals
BB&T Option Plan Section 2.9
BB&T Ratio Section 7.1(g)
BB&T-Virginia Section 5.17
Closing Section 2.4
Closing Date Section 2.4
Closing Value Section 2.7(b)
Constituent Corporations Section 2.1
Determination Date Section 7.1(g)
Effective Time Section 2.3
Exchange Ratio Section 2.7
Index Group Section 7.1(g)
Index Price Section 7.1(g)
Life Introduction
Merger Recitals
Merger Consideration Section 2.7
Plan Section 3.14(b)(i)
Plan of Merger Recitals
RRP 5.12(d)
Starting Date Section 7.1(g)
Surviving Corporation Section 2.1(a)
ARTICLE II
THE MERGER
2.1 Merger
BB&T Financial and Life are constituent corporations (the "Constituent
Corporations") to the Merger as contemplated by the VSCA. At the Effective
Time:
(a) Life shall be merged with and into BB&T Financial in accordance
with the applicable provisions of the VSCA, with BB&T Financial being the
surviving corporate entity (hereinafter sometimes referred to as the "Surviving
Corporation").
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(b) The separate existence of Life shall cease and the Merger shall
in all respects have the effect provided in Section 2.5.
(c) The Articles of Incorporation of BB&T Financial at the Effective
Time shall become the Articles of Incorporation of the Surviving Corporation.
(d) The Bylaws of BB&T Financial at the Effective Time shall become
the Bylaws of the Surviving Corporation.
2.2 Filing; Plan of Merger
The Merger shall not become effective unless this Agreement and the Plan
of Merger are duly approved by shareholders holding the requisite number of
shares of each of Life and BB&T Financial. Upon fulfillment or waiver of the
conditions specified in Article VI and provided that this Agreement has not been
terminated pursuant to Article VII, the Constituent Corporations will cause the
Articles of Merger to be executed and filed with the Virginia State Corporation
Commission, as provided in Section 13.1-720 of the VSCA. The Plan of Merger is
incorporated herein by reference, and adoption of this Agreement by the Boards
of Directors of the Constituent Corporations and approval by the shareholders of
the Constituent Corporations shall constitute adoption and approval of the Plan
of Merger.
2.3 Effective Time
The Merger shall be effective at the day and hour specified in the
Articles of Merger filed with the Virginia State Corporation Commission (herein
sometimes referred to as the "Effective Time").
2.4 Closing
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Womble Carlyle Sandridge & Rice,
PLLC, Winston-Salem, North Carolina, at 10:00 a.m. on the date designated by
BB&T which is within thirty days following the satisfaction of the conditions to
Closing set forth in Article VI (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing), or
such later date as the parties may otherwise agree (the "Closing Date").
2.5 Effect of Merger
From and after the Effective Time, the separate existence of Life shall
cease, and the Surviving Corporation shall thereupon and thereafter, to the
extent consistent with its Articles of Incorporation, possess all the rights,
privileges, immunities, and franchises, of a public as well as of a private
nature, of each of the Constituent Corporations; and all property, real,
personal and mixed, and all debts due on whatever account, and all other choses
in action, and all and every other interest of or belonging to or due to each of
the Constituent Corporations shall be
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taken and deemed to be transferred to and vested in the Surviving Corporation
without further act or deed; and the title to any real estate or any interest
therein vested in either of the Constituent Corporations shall not revert or be
in any way impaired by reason of the Merger. The Surviving Corporation shall
thenceforth be responsible and liable for all the liabilities, obligations and
penalties of each of the Constituent Corporations; and any claim existing or
action or proceeding, civil or criminal, pending by or against either of the
Constituent Corporations may be prosecuted as if the Merger had not taken place,
or the Surviving Corporation may be substituted in its place; and any judgment
rendered against either of the Constituent Corporations may be enforced against
the Surviving Corporation. Neither the rights of creditors nor any liens upon
the property of either of the Constituent Corporations shall be impaired by
reason of the Merger.
2.6 Further Assurances
If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any further deeds, assignments or assurances
in law or any other actions are necessary, desirable or proper to vest, perfect
or confirm of record or otherwise, in the Surviving Corporation, the title to
any property or rights of the Constituent Corporations acquired or to be
acquired by reason of, or as a result of, the Merger, the Constituent
Corporations agree that such Constituent Corporations and their proper officers
and directors shall and will execute and deliver all such proper deeds,
assignments and assurances in law and do all things necessary, desirable or
proper to vest, perfect or confirm title to such property or rights in the
Surviving Corporation and otherwise to carry out the purpose of this Agreement,
and that the proper officers and directors of the Surviving Corporation are
fully authorized and directed in the name of the Constituent Corporations or
otherwise to take any and all such actions.
2.7 Merger Consideration
As used herein, the term "Merger Consideration" shall mean the portion
of a whole share of BB&T Common Stock to be exchanged for each share of Life
Common Stock issued and outstanding as of the Effective Time and cash (without
interest) to be payable in exchange for any fractional share of BB&T Common
Stock which would otherwise be exchanged for a share of Life Common Stock,
determined as follows:
(a) The number of shares of BB&T Common Stock to be issued in
exchange for each issued and outstanding share of Life Common Stock shall be in
the ratio of .58 shares of BB&T Common Stock for each such share of Life Common
Stock (the "Exchange Ratio"); provided, that if the product of the Exchange
Ratio multiplied by the Closing Value (defined below) is less than $33.00, the
Exchange Ratio shall be increased by an amount necessary to increase such
product to $33.00, but in no event shall the Exchange Ratio exceed .60.
(b) For purposes of this Section 2.7, the "Closing Value" of BB&T
Common Stock shall mean the average closing price per share on the NYSE
Composite Transactions List (as reported by The Wall Street Journal) for the ten
trading days (determined by excluding days on
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which the NYSE is closed) immediately preceding the tenth calendar day preceding
the Effective Time (the tenth day to be determined by counting the day preceding
the Effective Time as the first day).
(c) The amount of cash payable with respect to any fractional share
of BB&T Common Stock shall be determined by multiplying the fractional part of
such share by the Closing Value. No person will be entitled to dividends,
voting rights, or any other rights as a BB&T shareholder in respect of any
fractional share.
2.8 Conversion of Shares; Payment of Merger Consideration
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Life or the holders of record of Life Common Stock, each
share of Life Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into and shall represent the right to receive,
upon surrender of the certificate representing such share of Life Common Stock
(as provided in paragraph (d) below), the Merger Consideration.
(b) Each share of BB&T Financial Common Stock issued and outstanding
immediately prior to the Effective Time shall continue to be issued and
outstanding.
(c) Until surrendered, each outstanding certificate which prior to
the Effective Time represented one or more shares of Life Common Stock shall be
deemed upon the Effective Time for all purposes to represent only the right to
receive the Merger Consideration. No interest will be paid or accrued on the
Merger Consideration upon the surrender of the certificate or certificates
representing shares of Life Common Stock. With respect to any certificate for
Life Common Stock that has been lost or destroyed, BB&T shall pay the Merger
Consideration attributable to such certificate upon receipt of a surety bond or
other adequate indemnity as required in accordance with BB&T's standard policy,
and evidence reasonably satisfactory to BB&T of ownership of the shares
represented thereby. After the Effective Time, no transfer of the shares of
Life Common Stock outstanding immediately prior to the Effective Time shall be
made on the stock transfer books of the Surviving Corporation.
(d) Promptly after the Effective Time, BB&T shall cause to be
delivered or mailed to each Life shareholder a form of letter of transmittal and
instructions for use in effecting the surrender, in exchange for the Merger
Consideration, of the certificates which, immediately prior to the Effective
Time, represented any shares of Life Common Stock. Upon surrender of such
certificates, together with such letter of transmittal duly executed and
completed in accordance with the instructions thereto, and such other documents
as may be reasonably requested, BB&T shall promptly cause the transfer to the
persons entitled thereto of the Merger Consideration.
(e) The Surviving Corporation shall pay any dividends or other
distributions with a record date prior to the Effective Time which have been
declared or made by Life in respect of shares of Life Common Stock in accordance
with the terms of this Agreement and which remain unpaid at the Effective Time.
To the extent permitted by law, former shareholders of record of
9
Life shall be entitled to vote after the Effective Time at any meeting of BB&T
shareholders the number of whole shares of BB&T Common Stock into which their
respective shares of Life Common Stock are converted, regardless of whether such
holders have exchanged their certificates representing Life Common Stock for
certificates representing BB&T Common Stock in accordance with the provisions of
this Agreement. Whenever a dividend or other distribution is declared by BB&T
on the BB&T Common Stock, the record date for which is at or after the Effective
Time, the declaration shall include dividends or other distributions on all
shares of BB&T Common Stock issuable pursuant to this Agreement, but after the
Effective Time no dividend or other distribution payable to the holders of
record of BB&T Common Stock as of any time subsequent to the Effective Time
shall be delivered to the holder of any certificate representing Life Common
Stock until such holder surrenders such certificate for exchange as provided in
this Section 2.8. Upon surrender of such certificate, both the BB&T Common
Stock certificate and any undelivered dividends and cash payments payable
hereunder (without interest) shall be delivered and paid with respect to each
share of Life Common Stock represented by such certificate.
2.9 Conversion of Stock Options
(a) At the Effective Time, each Stock Option then outstanding (and
which by its terms does not lapse on or before the Effective Time), whether
or not then exercisable, shall be converted automatically into and become an
option under the BB&T 1995 Omnibus Stock Incentive Plan (the "BB&T Option
Plan"), and shall be governed by the terms and conditions of the BB&T Option
Plan; provided, that in no event shall the vesting, exercise and duration
provisions of any Stock Option following conversion to an option under the
BB&T Option Plan be less favorable to the optionee than provided under the
individual stock option agreements as in effect under the Stock Option Plan
immediately preceding the Effective Time. In making such conversion, (i) the
number of shares of BB&T Common Stock subject to each such Stock Option shall
be the number of whole shares of BB&T (omitting any fractional share)
determined by multiplying the number of shares of Life Common Stock subject
to such Stock Option immediately prior to the Effective Time by the Exchange
Ratio, (ii) the per share exercise price under each such Stock Option shall
be adjusted by dividing the per share exercise price under each such Stock
Option by the Exchange Ratio and rounding up to the nearest cent, and (iii)
no restrictions on transfers shall be placed on shares of BB&T Common Stock
received through the exercise of the option except to the extent such
restrictions would have been placed on such shares under such Life plan or
are required by the Securities Laws. In addition, each such Stock Option
which is an "incentive stock option" shall be adjusted as required by Section
424 of the Code, and the regulations promulgated thereunder, so as to
continue as an incentive stock option under Section 424(a) of the Code, and
so as not to constitute a modification, extension, or renewal of the option,
within the meaning of Section 424(h) of the Code. BB&T and Life agree to
take all necessary steps to effectuate the foregoing provisions of this
Section 2.9. Each grant of a converted option to any individual who
subsequent to the Merger will be a director or officer of BB&T as construed
under Rule 16b-3 shall, as a condition to such conversion, be approved in
accordance with the provisions of Rule 16b-3.
10
(b) As soon as practicable following the Effective Time, BB&T shall
deliver to the participants receiving converted options under the BB&T Option
Plan an appropriate notice setting forth such participant's rights pursuant
thereto. BB&T has reserved under the BB&T Option Plan adequate shares of BB&T
Common Stock for delivery upon exercise of any such converted options.
2.10 Merger of Subsidiary
In the event that BB&T shall request, Life shall take such actions, and
shall cause the Life Subsidiaries to take such actions, as may be required in
order to effect, at the Effective Time, the merger of one or more of the Life
Subsidiaries with and into, in each case, one of the BB&T Subsidiaries, provided
that such actions will not substantially delay or impair the prospects of
completing the Merger pursuant to this Agreement and the Plan of Merger.
2.11 Anti-Dilution
In the event BB&T changes the number of shares of BB&T Common Stock
issued and outstanding prior to the Effective Time as a result of a stock split,
stock dividend or other similar recapitalization, and the record date thereof
(in the case of a stock dividend) or the effective date thereof (in the case of
a stock split or similar recapitalization for which a record date is not
established) shall be prior to the Effective Time, the Merger Consideration and
the Exchange Ratio shall be proportionately adjusted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF Life
Except as Disclosed, Life represents and warrants to BB&T as follows (no
representation or warranty herein of Life shall be deemed to be inaccurate
unless the inaccuracy would permit BB&T to refuse to consummate the Merger under
the applicable standard set forth in Section 6.3(a)):
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3.1 Capital Structure
The authorized capital stock of Life consists of 30,000,000 shares of
Life Common Stock, par value $.01 per share and 5,000,000 shares of preferred
stock, par value $.01 per share. No other classes of capital stock of Life are
authorized. As of the date hereof, 9,847,581 shares of Life Common Stock are
issued and outstanding, and no other shares of capital stock of Life, common or
preferred, are issued and outstanding. All outstanding shares of Life Common
Stock have been duly authorized and are validly issued, fully paid and
nonassessable. No shares of capital stock have been reserved for any purpose,
except for (i) shares of Life Common Stock reserved in connection with the Stock
Option Plan, (ii) 1,959,668 shares of Life Common Stock reserved in connection
with the BB&T Option Agreement, and (iii) 218,869 shares of outstanding Life
Common Stock held by Life's Recognition and Retention Plan as of the date of
this Agreement, of which 218,449 shares are subject to plan share awards as of
the date of this Agreement. Life has granted options to acquire 873,702 shares
of Life Common Stock under the Stock Option Plan, which options are outstanding
as of the date hereof. Except as set forth in this Section 3.1, there are no
Rights authorized, issued or outstanding with respect to the capital stock of
Life. Holders of Life Common Stock do not have preemptive rights.
3.2 Organization, Standing and Authority
Life is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia, with full corporate
power and authority to carry on its business as now conducted and to own, lease
and operate its assets. Life is not required to be qualified to do business in
any other state of the United States or foreign jurisdiction.
3.3 Ownership of Subsidiaries
Section 3.3 of the Life Disclosure Memorandum lists all of the Life
Subsidiaries and, with respect to each, its jurisdiction of organization,
jurisdictions in which it is qualified or otherwise licensed to conduct
business, the number of shares or ownership interests owned by Life (directly or
indirectly), the percentage ownership interest so owned by Life, and its
business activities. The outstanding shares of capital stock or other equity
interests of the Life Subsidiaries are validly issued and outstanding, fully
paid and nonassessable, and all such shares are directly or indirectly owned by
Life free and clear of all liens, claims and encumbrances or preemptive rights
of any person. No Rights are authorized, issued or outstanding with respect to
the capital stock or other equity interests of the Life Subsidiaries, and there
are no agreements, understandings or commitments relating to the right of Life
to own, to vote or to dispose of said interests. None of the shares of capital
stock or other equity interests of the Life Subsidiaries have been issued in
violation of the preemptive rights of any person. Section 3.3 of the Life
Disclosure Memorandum also lists all shares of capital stock or other securities
or ownership interests of any corporation, partnership, joint venture, or other
organization (other than Life's Subsidiaries) owned by Life, directly or
indirectly.
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3.4 Organization, Standing and Authority of the Subsidiaries
Each Life Subsidiary which is a depository institution is a federally
chartered capital stock savings bank and its deposits are insured by SAIF. Each
of the Life Subsidiaries is validly existing and in good standing under the laws
of its jurisdiction of organization. Each of the Life Subsidiaries has full
power and authority to carry on its business as now conducted, and is duly
qualified to do business in each jurisdiction as Disclosed. No Life Subsidiary
is required to be qualified to do business in any other state of the United
States or foreign jurisdiction or is engaged in any type of activities that have
not been Disclosed.
3.5 Authorized and Effective Agreement
(a) Life 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 the Life shareholders of this Agreement and the Plan of
Merger) to perform all of its obligations under this Agreement, the Articles of
Merger and the BB&T Option Agreement. The execution and delivery of this
Agreement, the Articles of Merger and the BB&T Option Agreement, and
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary corporate action except, in the case of
this Agreement and the Plan of Merger, the approval of Life shareholders. This
Agreement, the Plan of Merger and the BB&T Option Agreement constitute legal,
valid and binding obligations of Life, and each is enforceable against Life in
accordance with its terms, in each such case subject to (i) bankruptcy,
fraudulent transfer, insolvency, moratorium, reorganization, conservatorship,
receivership, or other similar laws from time to time in effect relating to or
affecting the enforcement of the rights of creditors of FDIC insured
institutions or the enforcement of creditors' rights generally; and (ii) general
principles of equity, and except that the availability of equitable remedies or
injunctive relief is within the discretion of the appropriate court.
(b) Neither the execution and delivery of this Agreement, the
Articles of Merger or the BB&T Option Agreement, nor consummation of the
transactions contemplated hereby or thereby, nor compliance by Life with any of
the provisions hereof or thereof, shall (i) conflict with or result in a breach
of any provision of the articles of incorporation or bylaws of Life or any Life
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 Life
or any Life Subsidiary pursuant to, any note, bond, mortgage, indenture,
license, permit, contract, agreement or other instrument or obligation, or (iii)
subject to receipt of all required governmental approvals, violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Life or any
Life Subsidiary.
(c) Other than consents or approvals required from, or notices to,
regulatory authorities as provided in Section 5.4(b), no notice to, filing with,
or consent of, any public body or authority is necessary for the consummation by
Life of the Merger and the other transactions contemplated in this Agreement.
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3.6 Securities Filings; Statements True
(a) Life has timely filed all Securities Documents required by the
Securities Laws since December 31, 1994. Life has Disclosed or made available
to BB&T a true and complete copy of each Securities Document filed by Life with
the Commission after December 31, 1994 and prior to the date hereof, which are
all of the Securities Documents that Life was required to file during such
period. As of their respective dates of filing, such Securities Documents
complied with the Securities Laws as then in effect, and did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The Financial Statements of Life fairly present or will fairly
present, as the case may be, the consolidated financial position of Life and the
Life Subsidiaries 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 GAAP applied on a consistent basis.
(c) No statement, certificate, instrument or other writing furnished
or to be furnished hereunder by Life or any Life Subsidiary to BB&T contains or
will contain any untrue statement of a material fact or will omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.7 Minute Books
The minute books of Life and each of the Life Subsidiaries contain or
will contain at Closing accurate records of all meetings and other corporate
actions of its shareholders and Board of Directors (including committees of its
Board of Directors).
3.8 Adverse Change
Since December 31, 1996, Life and the Life Subsidiaries have not
incurred any liability except as disclosed in the most recent Life Financial
Statements, or entered into any transactions with Affiliates, other than in the
ordinary course of business consistent with past practices, nor has there been
any adverse change or any event involving a prospective adverse change in the
business, financial condition or results of operations of Life and the Life
Subsidiaries, taken as a whole.
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3.9 Absence of Undisclosed Liabilities
All liabilities (including contingent liabilities) of Life and the Life
Subsidiaries are disclosed in the most recent Financial Statements of Life or
incurred in the ordinary course of its business since the date of Life's most
recent Financial Statements.
3.10 Properties
(a) Life and the Life Subsidiaries have good and marketable title,
free and clear of all liens, encumbrances, charges, defaults or equitable
interests, to all of the properties and assets, real and personal, reflected on
the consolidated balance sheet included in the Financial Statements of Life as
of December 31, 1996, or acquired after such date, except (i) liens for current
taxes not yet due and payable, (ii) pledges to secure deposits and other liens
incurred in the ordinary course of banking business, (iii) such imperfections of
title, easements and encumbrances, if any, as are not material in character,
amount or extent, or (iv) dispositions and encumbrances for adequate
consideration in the ordinary course of business.
(b) All leases and licenses pursuant to which Life or any Life
Subsidiary, as lessee or licensee, leases or licenses rights to real or personal
property, are valid and enforceable in accordance with their respective terms.
3.11 Environmental Matters
(a) Life and the Life Subsidiaries are and at all times have been in
compliance with all Environmental Laws, and there are no present circumstances
that would prevent or interfere with the continuation of such compliance.
(b) There are no pending Environmental Claims, and neither Life nor
any Life Subsidiary has received notice of any pending Environmental Claims, and
to the best knowledge of Life there are no conditions or facts existing which
might reasonably be expected to result in 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) Life or any Life Subsidiary, (ii) any person or entity whose
liability for any Environmental Claim Life or any Life Subsidiary has or may
have retained or assumed, either contractually or by operation of law, (iii) any
real or personal property owned or leased by Life or any Life Subsidiary, or any
real or personal property which Life or any Life Subsidiary has or is judged to
have managed or supervised or participated in the management of, or (iv) any
real or personal property in which Life or any Life Subsidiary holds a security
interest securing a loan recorded on the books of Life or any Life Subsidiary.
Neither Life nor any Life Subsidiary is subject to any agreement, order,
judgment, decree or memorandum by or with any court, governmental authority,
regulatory agency or third party imposing liability under any Environmental
Laws.
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(c) Life and the Life Subsidiaries are in compliance with all
recommendations contained in any environmental audits, analyses and surveys
received by Life relating to all real and personal property owned or leased by
Life or any Life Subsidiary and all real and personal property which Life or any
Life Subsidiary has or is judged to have managed or supervised or participated
in the management of.
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim, or other claim or action or governmental investigation that
could result in the imposition of any liability arising under any Environmental
Laws, against Life or any Life Subsidiary or against any person or entity whose
liability for any Environmental Claim Life or any Life Subsidiary has or may
have retained or assumed, either contractually or by operation of law.
3.12 Loans; Allowance for Loan Losses
(a) All of the loans on the books of Life and the Life Subsidiaries
are valid and properly documented, and were made in the ordinary course of
business. 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, the TILA, Regulations O and Z of the
Federal Reserve Board, the CRA, the Equal Credit Opportunity Act, as amended,
and state laws, rules and regulations relating to consumer protection,
installment sales and usury.
(b) The allowances for loan losses reflected on the consolidated
balance sheets included in the Financial Statements of Life are adequate as of
their respective dates, under the requirements of GAAP and applicable regulatory
requirements and guidelines.
3.13 Tax Matters
(a) Life and the Life Subsidiaries and each of their predecessors
have timely filed (or requests for extensions have been timely filed and any
such extensions either are pending or have been granted and have not expired)
all federal, state and local (and, if applicable, foreign) tax 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.
Neither Life nor any Life Subsidiary has any liability for any such taxes in
excess of the amounts so paid or reserves or accruals so established. Life and
the Life Subsidiaries have paid, or where payment is not required to have been
made have set up an adequate reserve or accrual for payment of, all taxes
required to be paid or accrued for the preceding or current fiscal year for
which a return is not yet due.
(b) All federal, state and local (and, if applicable, foreign) tax
returns filed by Life and the Life Subsidiaries are complete and accurate.
Neither Life nor any Life Subsidiary is
16
delinquent in the payment of any tax, assessment or governmental charge. No
deficiencies for any tax, assessment or governmental charge have been proposed,
asserted or assessed (tentatively or otherwise) against Life or any Life
Subsidiary which have not been settled and paid. There are currently no
agreements in effect with respect to Life or any Life Subsidiary to extend the
period of limitations for the assessment or collection of any tax. No audit
examination or deficiency or refund litigation with respect to such returns is
pending.
(c) Deferred taxes have been provided for in accordance with GAAP
consistently applied.
(d) Neither Life nor any of the Life Subsidiaries is a party to any
tax allocation or sharing agreement and none has been a member of an affiliated
group filing a consolidated federal income tax return (other than a group the
common parent of which was Life or a Life Subsidiary) or has any liability for
taxes of any person (other than Life and the Life Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law) as a transferee or successor or by contract or otherwise.
(e) Each of Life and the Life Subsidiaries is in compliance with, and
its records contain all information and documents (including properly completed
IRS Forms W-9) necessary to comply with, all applicable information reporting
and tax withholding requirements under federal, state, and local tax laws, and
such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Code.
(f) Neither Life nor any of the Life Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any contract that
could obligate it to make any payments that would be disallowed as a deduction
under Section 280G or 162(m) of the Code.
3.14 Employees; Compensation; Benefit Plans
(a) Compensation. Life has Disclosed a complete and correct list of
the name, age, position, rate of compensation and any incentive compensation
arrangements, bonuses or commissions or fringe or other benefits, whether
payable in cash or in kind, of each director, shareholder, independent
contractor, consultant and agent of Life and of each Life Subsidiary and each
other person (in each case other than an employee of such companies) to whom
Life or any Life Subsidiary pays or provides, or has an obligation, agreement
(written or unwritten), policy or practice of paying or providing, retirement,
health, welfare or other benefits of any kind or description whatsoever.
(b) Employee Benefit Plans.
(i) Life has Disclosed an accurate and complete list
of all Plans, as defined below, contributed to, maintained or
sponsored by Life or any Life Subsidiary, to which Life or any
Life Subsidiary is obligated to contribute or has any
liability or potential liability, whether direct or
17
indirect, including all Plans contributed to, maintained or sponsored
by each member of the controlled group of corporations, within the
meaning of Sections 414(b), 414(c), 414(m) and 414(o) of the Code, of
which Life or any Life Subsidiary is a member. For purposes of this
Agreement, the term "Plan" shall mean a plan, arrangement, agreement
or program described in the foregoing provisions of this Section
3.14(b)(i) and which is: (A) a profit-sharing, deferred compensation,
bonus, stock option, stock purchase, pension, retainer, consulting,
retirement, severance, welfare or incentive plan, agreement or
arrangement, whether or not funded and whether or not terminated, (B)
an employment agreement, (C) a personnel policy or fringe benefit
plan, policy, program or arrangement providing for benefits or
perquisites to current or former employees, officers, directors or
agents, whether or not funded, and whether or not terminated,
including without limitation benefits relating to automobiles, clubs,
vacation, child care, parenting, sabbatical, sick leave, severance,
medical, dental, hospitalization, life insurance and other types of
insurance, or (D) any other employee benefit plan as defined in
Section 3(3) of ERISA, whether or not funded and whether or not
terminated.
(ii) Neither Life nor any Life Subsidiary contributes to,
has an obligation to contribute to or otherwise has any liability
or potential liability with respect to (A) any multiemployer plan
as defined in Section 3(37) of ERISA, (B) any plan of the type
described in Sections 4063 and 4064 of ERISA or in Section 413 of
the Code (and regulations promulgated thereunder), or (C) any plan
which provides health, life insurance, accident or other
"welfare-type" benefits to current or future retirees or former
employees or directors, their spouses or dependents, other than in
accordance with Section 4980B of the Code or applicable state
continuation coverage law.
(iii) None of the Plans obligates Life or any Life Subsidiary
to pay separation, severance, termination or similar-type benefits
solely as a result of any transaction contemplated by this
Agreement or solely as a result of a "change in control," as such
term is used in Section 280G of the Code (and regulations
promulgated thereunder).
(iv) Each Plan has been maintained, funded and administered
in compliance in all respects with its own terms and in compliance
in all respects with all applicable laws and regulations, including
but not limited to ERISA and the Code. No actions, suits, claims,
complaints, charges, proceedings, hearings, examinations,
investigations, audits or demands with respect to the Plans (other
than routine claims for benefits) are pending or threatened, and
there are no facts which could give rise to or be expected to give
rise to any actions, suits, claims, complaints, charges,
proceedings,
18
hearings, examinations, investigations, audits or demands. No Plan
that is subject to the funding requirements of Section 412 of the Code
or Section 302 of ERISA has incurred any "accumulated funding
deficiency" as such term is defined in such Sections of ERISA and the
Code, whether or not waived, and each Plan has always fully met the
funding standards required under Title I of ERISA and Section 412 of
the Code. No liability to the Pension Benefit Guaranty Corporation
("PBGC") (except for routine payment of premiums) has been or is
expected to be incurred with respect to any Plan that is subject to
Title IV of ERISA, no reportable event (as such term is defined in
Section 4043 of ERISA) has occurred with respect to any such Plan, and
the PBGC has not commenced or threatened the termination of any Plan.
None of the assets of Life or any Life Subsidiary is the subject of
any lien arising under Section 302(f) of ERISA or Section 412(n) of
the Code, neither Life nor any Life Subsidiary has been required to
post any security pursuant to Section 307 of ERISA or Section
401(a)(29) of the Code, and there are no facts which could be expected
to give rise to such lien or such posting of security. No event has
occurred and no condition exists that would subject Life or any Life
Subsidiary to any tax under Sections 4971, 4972, 4976, 4977 or 4979 of
the Code or to a fine or penalty under Section 502(c) of ERISA.
(v) Each Plan that is intended to be qualified under
Section 401(a) of the Code, and each trust (if any) forming a part
thereof, has received a favorable determination letter from the IRS
as to the qualification under the Code of such Plan and the tax
exempt status of such related trust, and nothing has occurred since
the date of such determination letter that could adversely affect
the qualification of such Plan or the tax exempt status of such
related trust.
(vi) No underfunded "defined benefit plan" (as such term is
defined in Section 3(35) of ERISA) has been, during the five years
preceding the Closing Date, transferred out of the controlled group
of corporations (within the meaning of Sections 414(b), (c), (m)
and (o) of the Code) of which Life or any Life Subsidiary is a
member or was a member during such five-year period.
(vii) As of the Closing Date, the fair market value of the
assets of each Plan that is a tax qualified defined benefit plan
equals or exceeds the present value of all vested and non-vested
liabilities thereunder determined in accordance with reasonable
actuarial methods, factors and assumptions applicable to a defined
benefit plan on an ongoing basis. With respect to each Plan that
is subject to the funding requirements of Section 412 of the Code
and Section 302 of ERISA, all required contributions for all
periods ending prior to or as of the Closing Date
19
(including periods from the first day of the then-current plan year to
the Closing Date and including all quarterly contributions required in
accordance with Section 412(m) of the Code) shall have been made.
With respect to each other Plan, all required payments, premiums,
contributions, reimbursements or accruals for all periods ending prior
to or as of the Closing Date shall have been made. No tax qualified
Plan has any unfunded liabilities.
(viii) No prohibited transaction (which shall mean any
transaction prohibited by Section 406 of ERISA and not exempt
under Section 408 of ERISA or Section 4975 of the Code,
whether by statutory, class or individual exemption) has
occurred with respect to any Plan which would result in the
imposition, directly or indirectly, of any excise tax, penalty
or other liability under Section 4975 of the Code or Section
409 or 502(i) of ERISA. Neither Life nor to the best
knowledge of Life, any Life Subsidiary, any trustee,
administrator or other fiduciary of any Plan, or any agent of
any of the foregoing has engaged in any transaction or acted
or failed to act in a manner which could subject Life or any
Life Subsidiary to any liability for breach of fiduciary duty
under ERISA or any other applicable law.
(ix) With respect to each Plan, all reports and
information required to be filed with any government agency or
distributed to Plan participants and their beneficiaries have
been duly and timely filed or distributed.
(x) Life and each Life Subsidiary has been and is
presently in compliance with all of the requirements of
Section 4980B of the Code.
(xi) Neither Life nor any Life Subsidiary has a
liability as of December 31, 1996, under any Plan that, to the
extent disclosure is required under GAAP, is not reflected on
the consolidated balance sheet included in the Financial
Statements of Life as of December 31, 1996 or otherwise
Disclosed.
(xii) Neither the consideration nor implementation of the
transactions contemplated under this Agreement will increase (A)
Life's or any Life Subsidiary's obligation to make contributions or
any other payments to fund benefits accrued under the Plans as of
the date of this Agreement or (B) the benefits accrued or payable
with respect to any participant under the Plans (except to the
extent benefits may be deemed increased by accelerated vesting or
by the accelerated allocation of previously unallocated Plan
assets).
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(xiii) With respect to each Plan, Life has Disclosed or made
available true, complete and correct copies of (A) all documents
pursuant to which the Plans are maintained, funded and
administered, including summary plan descriptions, (B) the three
most recent annual reports (Form 5500 series) filed with the IRS
(with attachments), (C) the three most recent actuarial reports, if
any, (D) the three most recent financial statements, (E) all
governmental filings for the last three years, including without
limitation, excise tax returns and reportable events filings, and
(F) all governmental rulings, determinations, and opinions (and
pending requests for governmental rulings, determinations, and
opinions) during the past three years.
(xiv) Each of the Plans as applied to Life and
any Life Subsidiary may be amended or terminated at any
time by action of Life's Board of Directors, committee
of the Board of Directors or duly authorized officer,
in each case subject to the terms of the Plan and
compliance with applicable laws and regulations (and
limited, in the case of multiemployer plans, to
termination of the participation of Life or a Life
Subsidiary thereunder).
3.15 Certain Contracts
(a) Neither Life nor any Life Subsidiary is a party to, is
bound or affected by, or receives benefits under (i) any agreement,
arrangement or commitment, written or oral, the default of which would
have a Material Adverse Effect, whether or not made in the ordinary
course of business (other than loans or loan commitments made or
certificates or deposits received in the ordinary course of the
banking business), or any agreement restricting its business
activities, including without limitation agreements or memoranda of
understanding with regulatory authorities, (ii) any agreement,
indenture or other instrument, written or oral, relating to the
borrowing of money by Life or any Life Subsidiary or the guarantee by
Life or any Life Subsidiary of any such obligation, which cannot be
terminated within less than 30 days after the Closing Date by Life or
any Life Subsidiary (without payment of any penalty or cost, except
with respect to Federal Home Loan Bank advances), (iii) any agreement,
arrangement or commitment, written or oral, relating to the employment
of a consultant, independent contractor or agent, 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 Life or any Life Subsidiary (without payment of any
penalty or cost), or that provides benefits which are contingent, or
the application of which is materially altered, upon the occurrence of
a transaction involving Life of the nature contemplated by this
Agreement or the BB&T Option Agreement, or (iv) any agreement or plan,
written or oral, including any stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the BB&T Option
Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions
21
contemplated by this Agreement or the BB&T Option Agreement. Each
matter Disclosed pursuant to this Section 3.15(a) is in full force and
effect.
(b) Neither Life nor any Life Subsidiary is in default
under any agreement, commitment, arrangement, lease, insurance policy,
or other instrument, whether entered into in the ordinary course of
business or otherwise and whether written or oral, and there has not
occurred any event that, with the lapse of time or giving of notice or
both, would constitute such a default.
3.16 Legal Proceedings; Regulatory Approvals
There are no actions, suits, claims, governmental
investigations or proceedings instituted, pending or, to the best
knowledge of Life, threatened against Life or any Life Subsidiary or
against any asset, interest, plan or right of Life or any Life
Subsidiary, or to the best knowledge of Life against any officer,
director or employee of any of them in their capacity as such. There
are no actions, suits or proceedings instituted, pending or, to the
best knowledge of Life, threatened against any present or former
director or officer of Life or any Life Subsidiary that would
reasonably be expected to give rise to a claim against Life or any
Life Subsidiary for indemnification. There are no actual or, to the
best knowledge of Life threatened actions, suits or proceedings which
present a claim to restrain or prohibit the transactions contemplated
herein or in the BB&T Option Agreement. To the best knowledge of
Life, no fact or condition relating to Life or any Life Subsidiary
exists (including without limitation noncompliance with the CRA) that
would prevent Life or BB&T from obtaining all of the federal and state
regulatory approvals contemplated herein.
3.17 Compliance with Laws; Filings
Each of Life and each Life Subsidiary is in compliance with
all statutes and regulations (including, but not limited to, the CRA,
TILA and regulations promulgated thereunder, and other consumer
banking laws), and has obtained and maintained all permits, licenses
and registrations applicable to the conduct of its business, and
neither Life nor any Life Subsidiary has received notification that
has not lapsed, been withdrawn or abandoned by any agency or
department of federal, state or local government (i) asserting a
violation or possible violation of any such statute or regulation,
(ii) threatening to revoke any permit, license, registration, or other
government authorization, or (iii) restricting or in any way limiting
its operations. Neither Life nor any Life Subsidiary is subject to
any regulatory or supervisory cease and desist order, agreement,
directive, memorandum of understanding or commitment, and none of them
has received any communication requesting that it enter into any of
the foregoing. Since December 31, 1994, Life and each of the Life
Subsidiaries has filed all reports, registrations, notices and
statements, and any amendments thereto, that it was required to file
with federal and state regulatory authorities, including without
limitation the Commission, OTS, FDIC, Federal Reserve Board and State
Board. Each such report, registration, notice and statement, and each
amendment thereto, complied with applicable legal requirements.
22
3.18 Brokers and Finders
Neither Life nor any Life Subsidiary, nor any of its officers,
directors or employees, has employed any broker, finder or financial
advisor or incurred any liability for any fees or commissions in
connection with the transactions contemplated herein, in the Plan of
Merger or in the BB&T Option Agreement, except for fees to accountants
and lawyers and an obligation, the amount and nature of which has been
Disclosed, to Sandler O'Neill & Partners, L.P. for investment banking
services.
3.19 Repurchase Agreements; Derivatives
(a) With respect to all agreements currently outstanding
pursuant to which Life or any Life Subsidiary has purchased securities
subject to an agreement to resell, Life or the Life Subsidiary has 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
Life or any Life Subsidiary has sold securities subject to an
agreement to repurchase, neither Life nor the Life Subsidiary has
pledged collateral materially in excess of the amount of the debt
secured thereby. Neither Life nor any Life Subsidiary has pledged
collateral materially in excess of the amount required under any
interest rate swap or other similar agreement currently outstanding.
(b) Neither Life nor any Life Subsidiary is a party to or
has agreed to enter into an exchange-traded or over-the-counter swap,
forward, future, option, cap, floor, or collar financial contract, or
any other interest rate or foreign currency protection contract not
included on its balance sheets in the Financial Statements, which is a
financial derivative contract (including various combinations
thereof), except for options and forwards entered into in the ordinary
course of its mortgage lending business consistent with past practice
and current policy.
3.20 Deposit Accounts
The deposit accounts of the Life Subsidiaries that are
depository institutions are insured by the SAIF to the maximum extent
permitted by federal law, and the Life Subsidiaries have paid all
premiums and assessments and filed all reports required to have been
paid or filed under the SAIF.
3.21 Related Party Transactions
Life has Disclosed all existing transactions, investments and
loans, including loan guarantees, to which Life or any Life Subsidiary
is a party with any director, executive officer or 5% shareholder of
Life or any person, corporation, or enterprise controlling, controlled
by or under common control with any of the foregoing. All such
transactions, investments and loans are on terms no less favorable to
Life than could be obtained from unrelated parties.
23
3.22 Certain Information
When the Proxy Statement/Prospectus is mailed, and at the time
of the meeting of shareholders of Life to vote on the Plan of Merger,
the Proxy Statement/Prospectus and all amendments or supplements
thereto, with respect to all information set forth therein provided by
Life, (i) shall comply with the applicable provisions of the
Securities Laws, and (ii) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
3.23 Tax and Regulatory Matters
Neither Life nor any Life Subsidiary has taken or agreed to
take any action which would or could reasonably be expected to (i)
cause the Merger not to be accounted for as a pooling-of-interest
(except to the extent actions taken pursuant to this Agreement could
have such an effect) or not to constitute a reorganization under
Section 368 of the Code, or (ii) materially impede or delay receipt of
any consents of regulatory authorities referred to in Section 5.4(b)
or result in failure of the condition in Section 6.3(b).
3.24 State Takeover Laws
Life and each Life Subsidiary have taken all necessary action
to exempt the transactions contemplated by this Agreement from any
applicable moratorium, fair price, business combination, control share
or other anti-takeover laws, including without limitation the
provisions of Sections 13.1-728.1 to 13.1-728.9 of the VSCA.
24
3.25 Labor Relations
Neither Life nor any Life Subsidiary is the subject of any
claim or allegation that it has committed an unfair labor practice
(within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it to bargain with any labor
organization as to wages or conditions of employment, nor is Life or
any Life Subsidiary a party to any collective bargaining agreement.
There is no strike or other labor dispute involving Life or any Life
Subsidiary, pending or threatened, nor to the best knowledge of Life
is there any activity involving any employees of Life or any Life
Subsidiary seeking to certify a collective bargaining unit or engaging
in any other organization activity.
3.26 Fairness Opinion
Life has received from Sandler O'Neill & Partners L.P. an
opinion that, as of the date hereof, the Merger Consideration is fair
to the shareholders of Life from a financial point of view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BB&T
BB&T represents and warrants to Life as follows (no
representation or warranty herein of BB&T shall be deemed to be
inaccurate unless the inaccuracy would permit Life to refuse to
consummate the Merger under the applicable standard set forth in
Section 6.2(a)):
4.1 Capital Structure of BB&T
The authorized capital stock of BB&T consists of (i) 5,000,000
shares of preferred stock, par value $5.00 per share, of which
2,000,000 shares have been designated as Series B Junior Participating
Preferred Stock and the remainder are undesignated, and none of which
shares are issued and outstanding, and (ii) 300,000,000 shares of BB&T
Common Stock, of which 134,308,475 shares were issued and outstanding
on September 30, 1997. All outstanding shares of BB&T Common Stock
have been duly authorized and are validly issued, fully paid and
nonassessable. The shares of BB&T Common Stock reserved as provided in
Section 5.3 are free of any Rights and have not been reserved for any
other purpose, and such shares are available for issuance as provided
pursuant to the Plan of Merger. Holders of BB&T Common Stock do not
have preemptive rights.
4.2 Organization, Standing and Authority of BB&T
BB&T is a corporation duly organized, validly existing and in
good standing under the laws of the State of North Carolina, with full
corporate power and authority to carry on its business as now
conducted and to own, lease and operate its assets, and is duly
qualified to do business in the states of the United States where its
ownership or leasing of property or the
25
conduct of its business requires such qualification. BB&T is
registered as a bank holding company under the Federal Bank Holding
Company Act of 1956, as amended.
4.3 Authorized and Effective Agreement
(a) Each of BB&T and BB&T Financial has all requisite
corporate power and authority to enter into and (subject to receipt of
all necessary government approvals) perform all of its obligations
under this Agreement. The execution and delivery of this Agreement
and consummation of the transactions contemplated hereby, have been
duly and validly authorized by all necessary corporate action in
respect thereof on the part of each of BB&T and BB&T Financial. This
Agreement and the Plan of Merger attached hereto constitute legal,
valid and binding obligations of BB&T and BB&T Financial, and each is
enforceable against BB&T and BB&T Financial in accordance with its
terms, in each case subject to (i) bankruptcy, insolvency, moratorium,
reorganization, conservatorship, receivership or other similar laws in
effect from time to time relating to or affecting the enforcement of
the rights of creditors; and (ii) general principles of equity, and
except that the availability of remedies or injunctive relief is
within the discretion of the appropriate court.
(b) Neither the execution and delivery of this Agreement or
the Articles of Merger, nor consummation of the transactions
contemplated hereby, nor compliance by BB&T or 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
bylaws of BB&T or any BB&T 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 or any BB&T
Subsidiary pursuant to, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation, or (iii) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to BB&T or any BB&T Subsidiary.
(c) Other than consents or approvals required from, or
notices to, regulatory authorities as provided in Section 5.4(b), no
notice to, filing with, or consent of, any public body or authority is
necessary for the consummation by BB&T and BB&T Financial of the
Merger and the other transactions contemplated in this Agreement.
4.4 Organization, Standing and Authority of BB&T Subsidiaries
Each of the BB&T Subsidiaries and BB&T Financial is duly
organized, validly existing and in good standing under applicable
laws. BB&T owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of each of the BB&T Subsidiaries
and BB&T Financial. Each of the BB&T Subsidiaries and BB&T Financial
(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.
26
4.5 Securities Documents
BB&T has timely filed all Securities Documents required by the
Securities Laws since December 31, 1994. As of their respective dates of
filing, such Securities Documents complied with the Securities Laws as then in
effect, and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4.6 Financial Statements
The Financial Statements of BB&T fairly present or will fairly present,
as the case may be, the consolidated financial position of BB&T and the BB&T
Subsidiaries as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity and changes in cash flows for the
periods then ended (subject, in the case of unaudited interim statements, to
normal year-end audit adjustments) in conformity with GAAP applied on a
consistent basis.
4.7 Adverse Change
Since December 31, 1996, BB&T on a consolidated basis has not incurred
any liability except as disclosed on the most recent BB&T Financial Statements,
or entered into any transactions with Affiliates other than in the ordinary
course of business consistent with past practices, nor has there been any
adverse change or any event involving a prospective adverse change in the
business, financial condition or results of operations of BB&T, on a
consolidated basis.
4.8 Absence of Undisclosed Liabilities
All liabilities (including contingent liabilities) of BB&T and the BB&T
Subsidiaries are disclosed in the most recent Financial Statements of BB&T or
incurred in the ordinary course of its business since the date of BB&T's most
recent Financial Statements.
4.9 Compliance with Laws
Each of BB&T and the BB&T Subsidiaries is in compliance with all
statutes and regulations (including, but not limited to, the CRA, TILA and
regulations promulgated thereunder and other consumer banking laws), and has
obtained and maintained all permits, licenses and registrations applicable to
the conduct of its business, and neither BB&T nor any of the BB&T Subsidiaries
has received any notification that has not lapsed, 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,
(ii) threatening to revoke any license, franchise, permit or government
authorization, or (iii) restricting or in any way limiting its operations.
Neither BB&T nor any of the BB&T Subsidiaries 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.
27
4.10 Certain Information
When the Proxy Statement/Prospectus is mailed, and at all times
subsequent to such mailing up to and including the time of the meeting of
shareholders of Life to vote on the Merger, the Proxy Statement/Prospectus and
all amendments or supplements thereto, with respect to all information set forth
therein relating to BB&T, (i) shall comply with the applicable provisions of the
Securities Laws, and (ii) shall not contain any untrue statement of a 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 under
which they were made, not misleading.
4.11 Tax and Regulatory Matters
Neither BB&T nor any BB&T Subsidiary has taken or agreed to take any
action which would or could reasonably be expected to (i) cause the Merger not
to be accounted for as a pooling-of-interest or not to constitute a
reorganization under Section 368 of the Code, or (ii) materially impede or delay
receipt of any consents of regulatory authorities referred to in Section 5.4(b)
or result in failure of the condition in Section 6.3(b).
4.12 Share Ownership
As of the date of this Agreement, BB&T does not own (except in a
fiduciary capacity) any shares of Life Common Stock.
4.13 Legal Proceedings
There are no actual or, to the best knowledge of BB&T, threatened
actions, suits or proceedings which present a claim to restrain or prohibit the
transactions contemplated herein. To the best knowledge of BB&T, no fact or
condition relating to BB&T or any BB&T Subsidiary exists (including without
limitation, noncompliance with the CRA) that would prevent BB&T or Life from
obtaining all of the federal and state regulatory approvals contemplated herein.
ARTICLE V
COVENANTS
5.1 Life Shareholder Meeting
Life shall submit this Agreement and the Plan of Merger to its
shareholders for approval at a meeting to be held as soon as practicable, and by
approving execution of this Agreement the Board of Directors of Life agrees that
it shall, at the time the Proxy Statement/Prospectus is mailed to the
shareholders of Life, recommend that Life's shareholders vote for such approval;
provided, that the Board of Directors of Life may withdraw or refuse to make
such recommendation only if the Board of Directors shall determine in good faith
that such recommendation should not be made in view of its fiduciary duty to
Life's shareholders following
28
(i) the consideration of written advice of legal counsel that making such
recommendation or the failure to withdraw or modify such recommendation would,
more likely than not, constitute a breach of the fiduciary duties of such Board
to shareholders of Life, and (ii) the withdrawal by Sandler O'Neill & Partners
L.P. in writing of its opinion referred to in Section 3.26 or the delivery to
the Life Board of Directors of written advice from Sandler O'Neill & Partners
L.P. that the Merger Consideration is not fair or is inadequate to the
shareholders of Life from a financial point of view.
5.2 Registration Statement; Proxy Statement/Prospectus
As promptly as practicable after the date hereof, BB&T shall prepare
and file the Registration Statement with the Commission. Life will furnish to
BB&T the information required to be included in the Registration Statement
with respect to its business and affairs before it is filed with the
Commission and again before any amendments are filed, and shall have the
right to review and consult with BB&T on the form of, and any
characterizations of such information included in, the Registration Statement
prior to the filing with the Commission. Such Registration Statement, at the
time it becomes effective and on the Effective Time, shall in all material
respects conform to the requirements of the Securities Act and the applicable
rules and regulations of the Commission. The Registration Statement shall
include the form of Proxy Statement/Prospectus. BB&T and Life shall use their
reasonable best efforts to cause the Proxy Statement/Prospectus to be
approved by the Commission for mailing to the Life shareholders, and such
Proxy Statement/Prospectus shall, on the date of mailing, conform in all
material respects to the requirements of the Securities Laws and the
applicable rules and regulations of the Commission thereunder. Life shall
cause the Proxy Statement/Prospectus to be mailed to shareholders in
accordance with all applicable notice requirements under the Securities Laws
and the VSCA.
5.3 Plan of Merger; Reservation of Shares
At the Effective Time, the Merger shall be effected in accordance with
the Plan of Merger. In this connection, BB&T undertakes and agrees (i) to cause
BB&T Financial to adopt the Plan of Merger; (ii) to vote the shares of BB&T
Financial common stock for approval of the Plan of Merger; and (iii) to pay or
cause to be paid when due the Merger Consideration. BB&T has reserved for
issuance such number of shares of BB&T Common Stock as shall be necessary to pay
the portion of the Consideration to be distributed in the form of BB&T Common
Stock, and agrees to not take any action that would cause the aggregate number
of shares of BB&T Common Stock available for issuance hereunder not to be
sufficient to effect the Merger.
5.4 Additional Acts
(a) Life agrees to take such actions as may be reasonably necessary
to modify the structure of, or to substitute parties to (so long as such
substitute is BB&T or a BB&T Subsidiary) the transactions contemplated hereby,
provided that such modifications do not change the Merger Consideration or
abrogate the covenants and other agreements contained in this
29
Agreement, including the covenant to not take any action that would
substantially delay or impair the prospects of completing the Merger pursuant to
this Agreement and the Plan of Merger.
(b) As promptly as practicable after the date hereof, BB&T and Life
shall submit notice or applications for prior approval of the transactions
contemplated herein to the Federal Reserve Board, the OTS, and any other
federal, state or local government agency, department or body to which notice is
required or from which approval is required for consummation of the Merger and
the other transactions contemplated hereby. Life and BB&T each represents and
warrants to the other that all information included (or submitted for inclusion)
concerning it, their respective Subsidiaries, and any of their respective
directors, officers and shareholders, shall be true, correct and complete in all
material respects as of the date presented.
(c) BB&T agrees that its Board of Directors or authorized Board
committee shall approve prior to the Effective Time each grant of a converted
option (as described in Section 2.9(a) hereof) to any individual who subsequent
to the Merger will be a director or officer of BB&T as construed under Rule
16b-3 of the Exchange Act.
5.5 Best Efforts
(a) BB&T and Life shall use, and shall cause each of their respective
Subsidiaries to use, its best efforts in good faith to (i) furnish such
information as may be required in connection with and otherwise cooperate in the
preparation and filing of the documents referred to in Sections 5.2 and 5.4 or
elsewhere herein, and (ii) take or cause to be taken all action necessary or
desirable on its part to fulfill the conditions in Article VI and to consummate
the transactions herein contemplated at the earliest practicable date. Neither
BB&T nor Life 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.
(b) Without limiting the generality of the foregoing, prior to the
Effective Time, Life shall offer and sell for fair value to individuals or
entities unaffiliated with Life or BB&T (and which are not investment banking
firms purchasing for their own accounts) such number of shares of Life Common
Stock as shall be deemed necessary or advisable, in the opinion of BB&T's
independent accountants, in order for the Merger to qualify to be accounted for
as a pooling-of-interests under GAAP. Life shall consult with BB&T with respect
to the number of shares, if any, to be sold and the timing and manner of such
sale, and the identity of the purchaser, which may involve placement agents or,
with BB&T's consent, underwriters, in order to ensure that the sale will comply
with requirements for pooling-of-interest accounting.
5.6 Certain Accounting Matters
Life shall cooperate with BB&T concerning accounting and financial
matters necessary or appropriate to facilitate the Merger (taking into account
BB&T'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;
30
provided, that any action taken pursuant to this Section 5.6 shall not be deemed
to constitute or result in the breach of any representation or warranty of Life
contained in this Agreement; and provided further, that Life shall not be
required to implement any changes in accounting or financial matters unless and
until BB&T agrees in writing that all conditions to BB&T's obligation to
consummate the Merger set forth in Sections 6.1 and 6.3 hereof (other than the
delivery of certificates, opinions and other instruments and documents to be
delivered at the Closing or otherwise to be dated at the Effective Time, the
delivery of which shall continue to be conditions to BB&T's obligation to
consummate the Merger) have been satisfied or waived.
5.7 Access to Information
Life and BB&T will each keep the other advised of all material
developments relevant to its business and the businesses of its Subsidiaries,
and to consummation of the Merger, and each shall provide to the other, upon
request, reasonable details of any such development. Upon reasonable notice,
Life shall afford to representatives of BB&T access, during normal business
hours during the period prior to the Effective Time, to all of the properties,
books, contracts, commitments and records of Life and the Life Subsidiaries and,
during such period, shall make available all information concerning their
businesses as may be reasonably requested. No investigation pursuant to this
Section 5.7 shall affect or be deemed to modify any representation or warranty
made by, or the conditions to the obligations hereunder of, either party hereto.
Each party hereto shall, and shall cause each of its directors, officers,
attorneys and advisors to, maintain the confidentiality of all information
obtained hereunder which is not otherwise publicly disclosed by the other party,
said undertaking with respect to confidentiality to survive any termination of
this Agreement pursuant to Section 7.1. In the event of the termination of this
Agreement, each party shall return to the other party upon request all
confidential information previously furnished in connection with the
transactions contemplated by this Agreement.
5.8 Press Releases
BB&T and Life shall agree with each other as to the form and substance
of any press release related to this Agreement and the Plan of Merger or the
transactions contemplated hereby and thereby, and consult with each other as to
the form and substance of other public disclosures related thereto; provided,
that nothing contained herein shall prohibit either party, following
notification to the other party, from making any disclosure which in the opinion
of its counsel is required by law.
5.9 Forbearances of Life
Except with the prior written consent of BB&T, between the date hereof
and the Effective Time, Life shall not, and shall cause each of the Life
Subsidiaries 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 engage in any
new type of activity;
31
(b) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock, other than regularly
scheduled quarterly dividends of $.12 per share of Life Common Stock
payable on record dates and in amounts consistent with past practices;
provided that any dividend declared or payable on the shares of Life
Common Stock for the quarterly period during which the Effective Time
occurs shall, unless otherwise agreed upon in writing by BB&T and Life,
be declared with a record date prior to the Effective Time only if the
normal record date for payment of the corresponding quarterly dividend
to holders of BB&T Common Stock is before the Effective Time;
(c) issue any shares of its capital stock, except pursuant to the
Stock Option Plan or the BB&T Option Agreement, or as necessary to
comply with Section 5.5;
(d) issue, grant or authorize any Rights or effect any
recapitalization, reclassification, stock dividend, stock split or like
change in capitalization;
(e) amend its articles of incorporation or bylaws; impose or permit
imposition of any lien, charge or encumbrance on any share of stock
held by it in any Life Subsidiary, or permit any such lien, charge or
encumbrance to exist; or waive or release any material right or cancel
or compromise any debt or claim other than in the ordinary course of
business;
(f) merge with any other entity or permit any other entity to merge
into it, or consolidate with any other entity; acquire control over any
other entity; or liquidate, sell or otherwise dispose of any assets or
acquire any assets, other than in the ordinary course of its business
consistent with past practices;
(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;
(h) increase the rate of compensation of any of its directors,
officers or employees (excluding increases in compensation resulting
from the vesting of restricted stock awards outstanding as of the date
of this Agreement or the exercise of compensatory stock options
outstanding as of the date of this Agreement), or pay or agree to pay
any bonus to, or provide any new employee benefit or incentive to, any
of its directors, officers or employees, except with respect to officers
and employees in the ordinary course of business consistent with past
practices (it being understood that compensation of officers and other
employees is generally reviewed in December or January of each year);
(i) enter into or substantially modify (except as may be required by
applicable law or regulation) any pension, retirement, stock option,
stock purchase, stock appreciation right, savings, profit sharing,
deferred compensation, consulting, bonus, group insurance or other
employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement related thereto, in respect of any of its directors,
officers or other employees;
32
provided, that this subparagraph shall not prevent renewal 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, Life or any Life Subsidiary or any business combination with Life or
any Life Subsidiary other than as contemplated by this Agreement; or
authorize any officer, director, agent or affiliate of Life or any Life
Subsidiary to do any of the above; or fail to notify BB&T immediately if
any such inquiries or proposals are received, any such information is
requested or required, or any such negotiations or discussions are
sought to be initiated; provided, that this paragraph (j) shall not
apply to furnishing information, negotiations or discussions following
an unsolicited offer if, as a result of such offer, Life is advised in
writing by legal counsel that the failure so to furnish information or
negotiate would, more likely than not, constitute a breach of the
fiduciary duties of Life's Board of Directors to its shareholders;
(k) enter into (i) any material agreement, arrangement or commitment
not made in the ordinary course of business, (ii) any agreement,
indenture or other instrument not made in the ordinary course of
business relating to the borrowing of money by Life or a Life Subsidiary
or guarantee by Life or a Life Subsidiary of any obligation, (iii) any
agreement, arrangement or commitment relating to the employment or
severance of a consultant or the employment, severance, election or
retention in office of any present or former director, officer or
employee (this clause shall not apply to the election of directors by
shareholders or the re-appointment of officers in the normal course); or
(iv) any contract, agreement or understanding with a labor union;
(1) change its lending, investment or asset liability management
policies in any material respect, except as may be required by
applicable law, regulation, or directives, and except that after
approval of the Agreement and the Plan of Merger by its shareholders and
after receipt of the requisite regulatory approvals for the transactions
contemplated by this Agreement and the Plan of Merger, Life shall
cooperate in good faith with BB&T to adopt policies, practices and
procedures consistent with those utilized by BB&T, effective on or
before the Closing Date;
(m) change its methods of accounting in effect at December 31, 1996,
except as required by changes in GAAP concurred in by BB&T which
concurrence shall not be unreasonably withheld, or change any of its
methods of reporting income and deductions for federal income tax
purposes from those employed in the preparation of its federal income
tax returns for the year ended December 31, 1996, except as required by
changes in law or regulation;
33
(n) incur any commitment for capital expenditures or obligation to
make capital expenditures in excess of $50,000, for any one expenditure,
or $150,000, in the aggregate;
(o) incur any indebtedness other than deposits from customers,
advances from the Federal Home Loan Bank and reverse repurchase
arrangements in the ordinary course of business;
(p) take any action which would or could reasonably be expected to
(i) cause the Merger not to be accounted for as a pooling-of-interest or
not to constitute a reorganization under Section 368 of the Code as
determined by BB&T, (ii) result in any inaccuracy of a representation or
warranty herein which would allow for a termination of this Agreement,
or (iii) cause any of the conditions precedent to the transactions
contemplated by this Agreement to fail to be satisfied;
(q) dispose of any material assets other than in the ordinary course
of business; or
(r) agree to do any of the foregoing.
5.10 Employment Agreements
BB&T (or its specified banking subsidiary) agrees to enter into (a) an
employment agreement with Edward E. Cunningham substantially in the form of
Annex C hereto, (b) an employment agreement with Tollie W. Rich, Jr.
substantially in the form of Annex D hereto, and (c) employment agreements with
each of Nelson R. Arnold, T. Frank Clements, Ralph T. Dempsey, Emory J. Dunning
and Edward M. Locke substantially in the form of Annex E hereto.
5.11 Affiliates
Life shall use its best efforts to cause all persons who are Affiliates
of Life to deliver to BB&T promptly following this Agreement a written agreement
providing that such person will not dispose of BB&T Common Stock received in the
Merger except in compliance with the Securities Act and the rules and
regulations promulgated thereunder and except as consistent with qualifying the
transactions contemplated hereby for pooling-of-interests accounting treatment,
and in any event shall use its best efforts to cause such Affiliates to deliver
to BB&T such written agreement prior to the Closing Date.
5.12 Section 401(k) Plan; ESOP; Welfare and Other Benefits
(a) BB&T shall cause the 401(k) plan of Life to be merged with the
401(k) plan maintained by BB&T and the BB&T Subsidiaries, and the account
balances of former employees of Life or the Life Subsidiaries who are
participants in the Life plan shall be transferred to the accounts of such
employees under the BB&T 401(k) plan. Following such merger and transfer,
34
such accounts shall be governed and controlled by the terms of the BB&T 401(k)
plan as in effect from time to time (and subject to BB&T's right to terminate
such plan). For purposes of administering the 401(k) plan and any other pension
benefit plan of BB&T, service with Life and the Life Subsidiaries by each such
employee shall be deemed to be service with BB&T or the BB&T Subsidiaries for
participation and vesting purposes only.
(b)(i) Each participant in the Life Employee Stock Ownership Plan
("Life ESOP") not fully vested will become fully vested in his or her Life
ESOP account as of the Effective Time. As soon as practicable after the
execution of this Agreement, Life and BB&T will cooperate to cause the Life
ESOP to be amended and other action taken, in a manner reasonably acceptable
to Life and BB&T, to provide that the Life ESOP will terminate upon the
Effective Time. Between the date hereof and the Effective Time, Life or a
Life Subsidiary shall make contributions to the Life ESOP in accordance with
the provisions of the Life ESOP consistent with past practice, and the
existing Life ESOP indebtedness ("Life ESOP Indebtedness") shall be paid down
as required by the terms of the Life ESOP. Any Life ESOP Indebtedness
remaining as of the Effective Time shall be repaid from the Trust associated
with the Life ESOP through application or sale of the BB&T Common Stock
received by the Life ESOP; provided, however, that any related sale or
distribution of shares by (a) the Life ESOP shall be effected in accordance
with the requirements of federal and any applicable state securities laws and
regulations, and (b) the Life ESOP and any participant shall be effected in
such a manner (and with such safeguards as may be necessary or appropriate)
so as not to jeopardize the intended pooling of interests accounting
treatment of the Merger. Upon the repayment of the Life ESOP Indebtedness,
the remaining funds in the Life ESOP suspense account will be allocated (to
the extent permitted by Sections 401(a), 415 or 4975 of the Code and the
applicable laws and regulations including, without limitation, the applicable
provisions of ERISA) to Life ESOP participants (as determined under the terms
of the Life ESOP). Life and BB&T agree that, subject to the conditions
described herein, as soon as practicable after the Effective Time and
repayment of the Life ESOP Indebtedness, participants in the Life ESOP shall
be entitled at their election to have the amounts in their Life ESOP accounts
either distributed to them in a lump sum or rolled over to another
tax-qualified plan (including the BB&T 401(k) Savings Plan to the extent
permitted by such plan) or individual retirement account.
(ii) The actions relating to termination of the Life ESOP will
be adopted conditional upon the consummation of the Merger and upon receiving a
favorable determination letter from the IRS with regard to the continued
qualification of the Life ESOP after any required amendments. Life and BB&T
will cooperate in submitting appropriate requests for any such determination
letter to the IRS and will use their best efforts to seek the issuance of such
letter as soon as practicable following the date hereof. Life and BB&T will
adopt such additional amendments to the Life ESOP as may be reasonably required
by the IRS as a condition to granting such determination letter, provided that
such amendments do not (i) substantially change the terms outlined herein, (ii)
have a Material Adverse Effect on Life and the Life Subsidiaries taken as a
whole or (iii) result in an additional material liability to BB&T.
35
(iii) As of and following the Effective Time, BB&T shall cause
the Life ESOP to be maintained for the exclusive benefit of employees and other
persons who were participants or beneficiaries therein prior to the Effective
Time, and shall proceed with termination of the Life ESOP through distribution
of its assets in accordance with its terms subject to the amendments described
herein and as otherwise may be required to comply with applicable law or to
obtain a favorable determination from the IRS as to the continuing qualified
status of the Life ESOP; provided, however, that no such termination
distributions from the Life ESOP shall occur after the Effective Time until a
favorable determination letter has been received from the IRS.
(c) Each employee of Life at the Effective Time who becomes an
employee immediately following the Effective Time of BB&T or a BB&T Subsidiary
("Employer Entity") shall be eligible to participate in the group
hospitalization, medical, dental, life, disability and other welfare benefit
plans and programs available to employees of the Employer Entity, subject to the
terms of such plans and programs; provided, that service with Life shall be
deemed to be service with the Employer Entity for the purpose of determining
eligibility to participate in such welfare plans and programs.
(d) Life and BB&T agree that the Merger shall constitute a "Change in
Control" as defined in Section 7.01(c) of Life's Recognition and Retention Plan
(the "RRP"). As of the Effective Time, each participant in the RRP shall become
fully vested in all shares of Life Common Stock previously granted or awarded to
him under the Life RRP, and such shares shall be converted into shares of BB&T
Common Stock. As soon as practicable after the execution of this Agreement,
Life and BB&T will cooperate to cause the RRP to be amended and other action
taken, in a manner reasonably acceptable to Life and BB&T, to provide that the
RRP will terminate upon the Effective Time. As soon as practicable following
the Effective Time, and subject to any applicable federal or state securities
laws, all shares of Life Common Stock previously granted or awarded to each
participant in the RRP (but not yet distributed, and as converted to shares of
BB&T Common Stock pursuant to the Merger) shall be distributed to such
participant. Any shares of Life Common Stock outstanding under such Plan's
related trust, but not subject to a grant or award, shall be converted into BB&T
Common Stock as of the Effective Time and shall revert to BB&T.
(e) Each employee of Life or a Life Subsidiary who becomes an
employee of BB&T or a BB&T Subsidiary and is terminated by BB&T or a BB&T
Subsidiary subsequent to the Effective Time, excluding any employee who has an
existing employment or special termination agreement which is Disclosed, shall
be entitled to severance pay in accordance with the general severance policy
maintained by BB&T, if and to the extent that such employee is entitled to
severance pay under such policy. Such employee's service with Life or a Life
Subsidiary shall be treated as service with BB&T for purposes of determining the
amount of severance pay, if any, under BB&T's severance policy.
(f) Prior to the Effective Time, BB&T shall use its reasonable best
efforts to inform the employees of Life and the Life Subsidiaries of the
likelihood of such employees having continued employment with BB&T or a BB&T
Subsidiary following the Effective Time and,
36
where appropriate, shall use its reasonable best efforts to interview the
employees of Life to determine if there are mutually beneficial employment
opportunities available at BB&T or a BB&T Subsidiary.
(g) BB&T agrees to honor all employment agreements, severance
agreements, deferred compensation agreements and the Non-Employee Directors'
Retirement Plan that Life and the Life Subsidiaries have with their current and
former employees and directors and which have been Disclosed to BB&T pursuant to
this Agreement.
5.13 Directors and Officers Protection
BB&T or a BB&T Subsidiary shall purchase and keep in force for a period
of three years after the Effective Time directors' and officers' liability
insurance providing coverage to directors and officers of Life for acts or
omissions occurring prior to the Effective Time. Such insurance shall provide
at least the same coverage and amounts as contained in Life's policy on the date
hereof; provided, that in no event shall the annual premium on such policy
exceed 150% of the annual premium payments on Life's policy in effect as of the
date hereof (the "Maximum Amount"). If the amount of the premiums necessary to
maintain or procure such insurance coverage exceeds the Maximum Amount, BB&T
shall use its reasonable efforts to maintain the most advantageous policies of
directors' and officers' liability insurance obtainable for a premium equal to
the Maximum Amount. Notwithstanding the foregoing, BB&T further agrees to
indemnify all individuals who are or have been officers, directors or employees
of Life prior to the Effective Time from any acts or omissions in such
capacities prior to the Effective Time, to the extent indemnification is
provided pursuant to the Articles of Incorporation of Life on the date hereof
and is permitted under the VSCA.
5.14 Forbearances of BB&T
Except with the prior written consent of Life, which consent shall not
be arbitrarily or unreasonably withheld, between the date hereof and the
Effective Time, neither BB&T nor any BB&T Subsidiary shall take any action which
would or might be expected to (i) cause the business combination contemplated
hereby not to be accounted for as a pooling-of-interest or not to constitute a
reorganization under Section 368 of the Code; (ii) result in any inaccuracy of a
representation or warranty herein which would allow for termination of this
Agreement; (iii) cause any of the conditions precedent to the transactions
contemplated by this Agreement to fail to be satisfied; (iv) exercise the BB&T
Option Agreement other than in accordance with its terms, or dispose of the
shares of Life Common Stock issuable upon exercise of the option rights
conferred thereby other than as permitted by the terms thereof; or (v) 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.
37
5.15 Reports
Each of Life and BB&T shall file (and shall cause the Life Subsidiaries
and the BB&T Subsidiaries, respectively, to file), between the date of this
Agreement and the Effective Time, all reports required to be filed by it with
the Commission and any other regulatory authorities having jurisdiction over
such party, and shall deliver to BB&T or Life, as the case may be, copies of all
such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the Commission, such financial
statements will fairly present the consolidated financial position of the entity
filing such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods then
ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with the Commission will comply in
all material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to a regulatory authority other than
the Commission shall be prepared in accordance with requirements applicable to
such reports.
5.16 Exchange Listing
BB&T shall use its reasonable best efforts to list, prior to the
Effective Time, on the NYSE, subject to official notice of issuance, the shares
of BB&T Common Stock to be issued to the holders of Life Common Stock pursuant
to the Merger, and BB&T shall give all notices and make all filings with the
NYSE required in connection with the transactions contemplated herein.
5.17 Board of Directors of Virginia Banking Subsidiary
Edward E. Cunningham, Jr. shall be elected Chairman of the Board of
Directors of Branch Banking and Trust Company of Virginia ("BB&T-Virginia") and
Tollie W. Rich, Jr., Donald I. Fentress, William T. Jonak, Jr. and Frederick V.
Martin shall be elected as members of the Board of Directors of BB&T-Virginia
as soon as practicable following the Effective Time. The remainder of the Life
Board serving immediately preceding the Effective Time shall be offered seats on
the BB&T-Virginia Advisory Board for the area including Norfolk, Virginia, as of
the Effective Time. For eighteen months following the Effective Time, all
Directors elected pursuant to this Section 5.17 shall receive, as compensation
for service on the BB&T-Virginia Boards, Directors' fees (annual retainer and
attendance fees) equal in amount each year (prorated for any partial year) to
the annual retainer and schedule of attendance fees for Directors of Life in
effect on July 1, 1997. Following such eighteen-month period, such Directors
shall receive Directors' fees in accordance with the standard schedule of fees
for service on the applicable Boards as in effect from time to time. For two
years after the Effective Time, no such Director shall be prohibited from
serving on either of the BB&T-Virginia Boards because he shall have attained the
maximum age for service on such Boards (currently age 70).
38
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent --BB&T and Life
The respective obligations of BB&T and Life to effect the transactions
contemplated by this Agreement shall be subject to satisfaction or waiver of
the following conditions at or prior to the Effective Time:
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Plan of Merger, and
consummation of the transactions contemplated hereby and thereby, shall have
been duly and validly taken, including without limitation the approval of the
shareholders of Life and of BB&T Financial of the Agreement and the Plan of
Merger;
(b) The Registration Statement (including any post-effective
amendments thereto) shall be effective under the Securities Act, no proceedings
shall be pending or to the knowledge of BB&T threatened by the Commission to
suspend the effectiveness of such Registration Statement, and the BB&T Common
Stock to be issued as contemplated in the Plan of Merger shall have either been
registered or be subject to exemption from registration under applicable state
securities laws;
(c) The parties shall have received all regulatory approvals required
in connection with the transactions contemplated by this Agreement and the Plan
of Merger, all notice periods and waiting periods required after the granting of
any such approvals shall have passed, and all such approvals shall be in effect;
(d) None of BB&T, any of the BB&T Subsidiaries, Life or any of the
Life Subsidiaries shall be subject to any order, decree or injunction of a court
or agency of competent jurisdiction which enjoins or prohibits consummation of
the transactions contemplated by this Agreement;
(e) Life and BB&T shall have received an opinion of BB&T's legal
counsel, in form and substance satisfactory to Life and BB&T, substantially to
the effect that the Merger will constitute one or more reorganizations under
Section 368 of the Code and that the shareholders of Life will not recognize any
gain or loss to the extent that such shareholders exchange shares of Life Common
Stock for shares of BB&T Common Stock; and
(f) BB&T shall have received letters, dated as of the date of filing
of the Registration Statement with the Commission and as of the Effective Time,
addressed to BB&T, in form and substance reasonably satisfactory to BB&T, from
Arthur Andersen, LLP to the effect that the Merger will qualify for
pooling-of-interest accounting treatment.
39
6.2 Conditions Precedent -- Life
The obligations of Life to effect the transactions contemplated by this
Agreement shall be subject to the satisfaction of the following additional
conditions at or prior to the Effective Time, unless waived by Life pursuant to
Section 7.4:
(a) All representations and warranties of BB&T shall be evaluated as
of the date of this Agreement and as of the Effective Time as though made on and
as of the Effective Time (or on the date designated in the case of any
representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated by this Agreement or consented to in writing by
Life. The representations and warranties of BB&T set forth in Sections 4.1,
4.2, 4.3(a), 4.3(b)(i) and 4.4 shall be true and correct (except for
inaccuracies which are de minimis in amount). There shall not exist inaccuracies
in the representations and warranties of BB&T set forth in this Agreement
(including the representations and warranties set forth in Sections 4.1, 4.2,
4.3(a), 4.3(b)(i) and 4.4) such that the aggregate effect of such inaccuracies
has, or is reasonably likely to have, a Material Adverse Effect on BB&T.
(b) BB&T shall have performed in all material respects all
obligations and complied in all material respects with all covenants required by
this Agreement.
(c) BB&T shall have delivered to Life a certificate, dated the
Closing Date and signed by its Chairman or President or an Executive Vice
President, to the effect that the conditions set forth in Sections 6.1(a),
6.1(b), 6.1(c), 6.1(d), 6.2(a) and 6.2(b), to the extent applicable to BB&T,
have been satisfied and that there are no actions, suits, claims, governmental
investigations or procedures instituted, pending or, to the best of such
officer's knowledge, threatened that reasonably may be expected to have a
Material Adverse Effect on BB&T or that present a claim to restrain or prohibit
the transactions contemplated herein or in the Plan of Merger.
(d) Life shall have received opinions of counsel to BB&T in the form
reasonably acceptable to Life's legal counsel.
(e) All approvals of the transactions contemplated herein from the
Federal Reserve 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.
(f) The shares of BB&T Common Stock issuable pursuant to the Merger
shall have been approved for listing on the NYSE, subject to official notice of
issuance.
6.3 Conditions Precedent -- BB&T
The obligations of BB&T to effect the transactions contemplated by this
Agreement shall be subject to satisfaction of the following additional
conditions at or prior to the Effective Time, unless waived by BB&T pursuant to
Section 7.4:
40
(a) All representations and warranties of Life shall be evaluated as
of the date of this Agreement and as of the Effective Time as though made on and
as of the Effective Time (or on the date designated in the case of any
representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated by this Agreement or consented to in writing by
BB&T. The representations and warranties of Life set forth in Sections 3.1, 3.2
(except the last sentence thereof), 3.3 (except the last sentence thereof), 3.4
(except the last sentence thereof), 3.5(a), 3.5(b)(i), 3.23 and 3.24 shall be
true and correct (except for inaccuracies which are de minimis in amount).
There shall not exist inaccuracies in the representations and warranties of Life
set forth in this Agreement (including the representations and warranties set
forth in the Sections designated in the preceding sentence) such that the effect
of such inaccuracies individually or in the aggregate has, or is reasonably
likely to have, a Material Adverse Effect on Life and the Life Subsidiaries
taken as a whole.
(b) No regulatory approval shall have imposed any condition or
requirement which, in the reasonable opinion of the Board of Directors of BB&T,
would so materially adversely affect the business or economic benefits to BB&T
of the transactions contemplated by this Agreement as to render consummation of
such transactions inadvisable or unduly burdensome.
(c) Life shall have performed in all material respects all
obligations and complied in all material respects with all covenants required by
this Agreement.
(d) Life shall have delivered to BB&T a certificate, dated the
Closing Date and signed by its Chairman or President, to the effect that the
conditions set forth in Sections 6.1(a), 6.1(c), 6.3(a) and 6.3(c), to the
extent applicable to Life, have been satisfied and that there are no actions,
suits, claims, governmental investigations or procedures instituted, pending or,
to the best of such officer's knowledge, threatened that reasonably may be
expected to have a Material Adverse Effect on Life or that present a claim to
restrain or prohibit the transactions contemplated herein or in the Plan of
Merger.
(e) BB&T shall have received opinions of counsel to Life in the form
reasonably acceptable to BB&T's legal counsel.
(f) BB&T shall have received the written agreements from Affiliates
as specified in Section 5.11 to the extent necessary, in the reasonable judgment
of BB&T, to ensure that the Merger will be accounted for as a
pooling-of-interests under GAAP, and to promote compliance with Rule 145
promulgated by the Commission.
41
ARTICLE VII
TERMINATION, DEFAULT, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) At any time prior to the Effective Time, by the mutual consent in
writing of the parties hereto.
(b) At any time prior to the Effective Time, by either party (i) in
the event of a material breach by the other party of any covenant or agreement
contained in this Agreement, or (ii) in the event of an inaccuracy of any
representation or warranty of the other party contained in this Agreement, which
inaccuracy would provide the nonbreaching party the ability to refuse to
consummate the Merger under the applicable standard set forth in Section 6.2(a)
in the case of Life and Section 6.3(a) in the case of BB&T; and, in the case of
(i) or (ii), if such breach or inaccuracy has not been cured by the earlier of
30 days following written notice of such breach to the party committing such
breach or the Effective Time.
(c) At any time prior to the Effective Time, by either party hereto
in writing, if any of the conditions precedent to the obligations of the other
party to consummate the transactions contemplated hereby cannot be satisfied or
fulfilled prior to the Closing Date, and the party giving the notice is not in
breach of any of its representations, warranties, covenants or undertakings
herein.
(d) At any time, by either party hereto in writing, if any of the
applications for prior approval referred to in Section 5.4 are denied, and the
time period for appeals and requests for reconsideration has run.
(e) At any time, by either party hereto in writing, if the
shareholders of Life do not approve the Agreement and the Plan of Merger.
(f) At any time following July 31, 1998, by either party hereto in
writing, if the Effective Time has not occurred by the close of business on such
date, and the party giving the notice is not in breach of any of its
representations, warranties, covenants or undertakings herein.
(g) By Life at any time during the five-day period commencing after
the Determination Date if both of the following conditions are satisfied:
(1) the Converted Value shall be less than $27.00; and
(2) (i) the quotient obtained by dividing the Closing Value by
$54.875 (such number being referred to herein as the "BB&T Ratio") shall
be less than (ii) 90% of the
42
quotient obtained by dividing the Index Price on the Determination Date
by the Index Price on the Starting Date.
subject, however, to the following three sentences. If Life determines not to
consummate the Merger pursuant to this Section 7.1(g), it shall give prompt
written notice of election to terminate to BB&T, which notice may be withdrawn
at any time prior to the close of the ten-day period commencing after the
Determination Date. During the five-day period commencing with its receipt of
such notice, BB&T shall have the option, in the case of a failure to satisfy the
condition in clause (1), to elect to increase the Exchange Ratio to a number
such that the Converted Value is no less than $27.00. The election contemplated
by the preceding sentence shall be made by giving notice to Life of such
election and the revised Exchange Ratio, whereupon no termination shall have
occurred pursuant to this Section 7.1(g) and this Agreement shall remain in
effect in accordance with its terms (except as the Exchange Ratio shall have
been so modified), and any references in this Agreement to "Exchange Ratio"
shall thereafter be deemed to refer to the Exchange Ratio as adjusted pursuant
to this Section 7.1(g). If the Closing Date shall occur during the five-day
period such option is in effect, the Closing Date shall be extended until the
fifth Business Day following the close of such five-day period.
For purposes of this Section 7.1(g), the following terms shall have the
meanings indicated:
"Converted Value" shall mean the product of the Closing Value
multiplied by an Exchange Ratio of .60.
"Determination Date" shall mean the tenth calendar day preceding the
date designated by BB&T as the Closing Date.
"Index Group" shall mean the 17 bank holding companies listed below,
the common stocks of all of which shall be publicly traded and as to which there
shall not have been, since the Starting Date and before the Determination Date,
any public announcement of a proposal for such company to be acquired or for
such company to acquire another company or companies in transactions with a
value exceeding 25% of the acquiror's market capitalization. In the event that
any such company or companies are removed from the Index Group, the weights
(which have been determined based upon the number of shares of outstanding
common stock) shall be redistributed proportionately for purposes of determining
the Index Price. The 17 bank holding companies and the weights attributed to
them are as follows:
43
Bank Holding Companies % Weighting
---------------------- ------------
AmSouth Bancorporation 2.40
CoreStates Financial Corp 9.21
Comerica Incorporated 5.17
Fifth Third Bancorp 6.35
First of America Bank Corp. 2.98
Firstar Corporation 3.28
Huntington Bancshares Inc. 3.93
Mellon Bank Corporation 8.34
Mercantile Bancorporation, Inc. 3.94
National City Corporation 7.99
Northern Trust Corporation 4.00
Regions Financial Corporation 3.18
SouthTrust Corporation 3.01
SunTrust Banks, Inc. 8.72
Summit Bancorp. 4.66
U.S. Bancorp 15.41
Wachovia Corporation 7.43
Total 100.00%
-------
-------
"Index Price" on a given date shall mean the weighted average
(weighted in accordance with the "% Weighting" listed above) of the
closing sales prices of the companies composing the Index Group
(determined as provided with respect to the Determination Value).
"Starting Date" shall mean the date of this Agreement.
If any company belonging to the Index Group or BB&T declares or effects
a stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares, or similar transaction between the Starting Date and the
Determination Date, the prices for the common stock of such company or BB&T
shall be appropriately adjusted for the purposes of applying this Section
7.1(g).
7.2 Effect of Termination
In the event this Agreement and the Plan of Merger is terminated
pursuant to Section 7.1, both this Agreement and the Plan of Merger shall
become void and have no effect, except that (i) the provisions hereof relating
to confidentiality and expenses set forth in Sections 5.7 and 8.1, respectively,
shall survive any such termination and (ii) a termination pursuant to Section
7.1(b) shall not relieve the breaching party from liability for an uncured
breach of the covenant,
44
agreement, representation or warranty giving rise to such termination. The BB&T
Option Agreement shall be governed by its own terms.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or the
Plan of Merger or in any instrument delivered pursuant hereto or thereto shall
expire on, and be terminated and extinguished at, the Effective Time (including
Sections 5.10, 5.12, 5.13 and 5.17 hereof), other than covenants that by their
terms are to be performed after the Effective Time; provided that no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive BB&T or Life (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 or Life, the
aforesaid representations, warranties and covenants being material inducements
to consummation by BB&T and Life of the transactions contemplated herein.
7.4 Waiver
Except with respect to any required regulatory approval, each party
hereto, by written instrument signed by an executive officer of such party, may
at any time (whether before or after approval of the Agreement and the Plan of
Merger by the Life shareholders) extend the time for the performance of any of
the obligations or other acts of the other party hereto and may waive (i) any
inaccuracies of the other party in the representations or warranties contained
in this Agreement, the Plan of Merger or any document delivered pursuant hereto
or thereto, (ii) compliance with any of the covenants, undertakings or
agreements of the other party, or satisfaction of any of the conditions
precedent to its obligations, contained herein or in the Plan of Merger, or
(iii) the performance by the other party of any of its obligations set out
herein or therein; provided that no such extension or waiver, or amendment or
supplement pursuant to Section 7.5, executed after approval by the Life
shareholders of this Agreement and the Plan of Merger shall reduce either the
number of shares of BB&T Common Stock into which each share of Life Common Stock
shall be converted in the Merger or the payment terms for fractional interests.
7.5 Amendment or Supplement
This Agreement or the Plan of Merger may be amended or supplemented at
any time in writing by mutual agreement of BB&T and Life, subject to the proviso
to Section 7.4.
ARTICLE VIII
MISCELLANEOUS
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8.1 Expenses
Each party hereto shall bear and pay all costs and expenses incurred by
it in connection with the transactions contemplated by this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel;
provided, however, that the filing fees and printing costs incurred in
connection with the Registration Statement and the Proxy Statement/Prospectus
shall be borne 50% by BB&T and 50% by Life.
8.2 Entire Agreement
This Agreement, including the documents and other writings referred to
herein or delivered pursuant hereto, contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and thereunder
and supersedes all arrangements or understandings with respect thereto, written
or oral, entered into on or before the date hereof. The terms and conditions of
this Agreement and the BB&T Option Agreement shall inure to the benefit of and
be binding upon the parties hereto and thereto and their respective successors.
Nothing in this Agreement or the BB&T Option Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto and thereto,
and their respective successors, any rights, remedies, obligations or
liabilities, except for rights of directors, officers and employees of Life to
enforce rights in Sections 5.13 and 5.17 applicable to them.
8.3 No Assignment
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person, except upon the prior written consent
of each other party.
8.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
nationally recognized overnight express courier or by facsimile transmission,
addressed or directed as follows:
If to Life:
Edward E. Cunningham
Life Bancorp, Inc.
109 East Main Street
Norfolk, Virginia 23510
Telephone: 757-858-1098
Fax: 757-858-1053
With a required copy to:
Mr. Gerald F. Heupel, Jr.
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Elias, Matz, Tiernan & Herrick
12th Floor
Washington, D.C. 20005
Telephone: 202-347-0300
Fax: 202-347-2172
If to BB&T or BB&T Financial:
Scott E. Reed
150 South Stratford Road
4th Floor
Winston-Salem, North Carolina 27104
Telephone: 910-733-3088
Fax: 910-733-2296
With a required copy to:
William A. Davis, II
Womble Carlyle Sandridge & Rice, PLLC
200 West Second Street
Winston-Salem, North Carolina 27102
Telephone: 910-721-3624
Fax: 910-733-8364
Any party may by notice change the address to which notice or other
communications to it are to be delivered.
8.5 Specific Performance.
Life acknowledges that the Life Common Stock and the Life business and
assets are unique, and that if Life fails to consummate the transactions
contemplated by this Agreement such failure will cause irreparable harm to BB&T
for which there will be no adequate remedy at law. BB&T shall be entitled, in
addition to its other remedies at law, to specific performance of this Agreement
if Life shall, without cause, refuse to consummate the transactions contemplated
by this Agreement.
8.6 Captions
The captions contained in this Agreement are for reference only and are
not part of this Agreement.
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8.7 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 Governing Law
This 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.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed in counterparts by their duly
authorized officers, all as of the day and year first above written.
BB&T CORPORATION
By
----------------------------------------
Title:
-----------------------------
BB&T FINANCIAL CORPORATION OF VIRGINIA
By
----------------------------------------
Title:
-----------------------------
LIFE BANCORP, INC.
By
----------------------------------------
Title:
-----------------------------
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Exhibit A
PLAN OF MERGER
OF
LIVELY
WITH AND INTO
BB&T FINANCIAL CORPORATION OF VIRGINIA
Section 1. Corporations Proposing to Merge and Surviving
Corporation. Lively, a Virginia corporation ("Lively") shall be merged (the
"Merger") with and into BB&T Financial Corporation of Virginia, a Virginia
corporation ("BB&T Financial"), pursuant to the terms and conditions of this
Plan of Merger (the "Plan of Merger") and of the Agreement and Plan of
Reorganization, dated as of _____________, (the "Agreement"), by and among
Lively, BB&T Financial and BB&T Corporation, a North Carolina corporation and
parent corporation of BB&T Financial ("BB&T"). The effective time for the
Merger (the "Effective Time") shall be set forth in the Articles of Merger to be
filed with the Clerk of the State Corporation Commission of Virginia. BB&T
Financial shall continue as the surviving corporation (the "Surviving
Corporation") in the Merger and the separate corporate existence of Lively shall
cease.
Section 2. Effects of the Merger. The Merger shall have the effects
set forth in Section 13.1-721 of the Virginia Stock Corporation Act (the
"VSCA").
Section 3. Articles of Incorporation and Bylaws. The Articles of
Incorporation and the Bylaws of BB&T Financial as in effect immediately prior to
the Effective Time shall remain in effect as the Articles of Incorporation and
Bylaws of the Surviving Corporation following the Effective Time until changed
in accordance with their terms and the VSCA.
Section 4. Conversion of Shares.
(a) At the Effective Time, each share of common stock, par value
$.01, of Lively ("Lively Common Stock") outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become the right to receive shares
of common stock, $5.00 par value per share, of BB&T ("BB&T Common Stock") as
described in Section 5.
(b) At the Effective Time, each share of the common stock of BB&T
Financial issued and outstanding immediately prior to the Effective Time shall
continue to be issued and outstanding.
Section 5. Merger Consideration. As used herein, the term "Merger
Consideration" shall mean the portion of a whole share of BB&T Common Stock to
be exchanged for each share of Lively Common Stock issued and outstanding as of
the Effective Time and cash (without interest) to be payable in exchange for any
fractional share of BB&T Common Stock which would otherwise be exchanged for a
share of Lively Common Stock, determined as follows:
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(a) The number of shares of BB&T Common Stock to be issued in
exchange for each issued and outstanding share of Lively Common Stock shall be
in the ratio of .58 shares of BB&T Common Stock for each such share of Lively
Common Stock (the "Exchange Ratio"); provided, that if the product of the
Exchange Ratio multiplied by the Closing Value (defined below) is less than
$33.00, the Exchange Ratio shall be increased by an amount necessary to increase
such product to $33.00, but in no event shall the Exchange Ratio exceed .60.
(b) For purposes of this Section 4, the "Closing Value" of BB&T
Common Stock shall mean the average closing price per share on the NYSE
Composite Transactions List (as reported by The Wall Street Journal) on the ten
trading days (determined by excluding days on which the NYSE is closed)
immediately preceding the tenth calendar day preceding the Effective Time (the
tenth day to be determined by counting the day preceding the Effective Time as
the first day).
(c) The amount of cash payable with respect to any fractional share
of BB&T Common Stock shall be determined by multiplying the fractional part of
such share by the Closing Value. No person will be entitled to dividends,
voting rights, or any other rights as a BB&T shareholder in respect of any
fractional share.
Section 6. Conversion of Stock Options. At the Effective Time,
each Stock Option then outstanding (and which by its terms does not lapse on
or before the Effective Time), whether or not then exercisable, shall be
converted into and become an option under the BB&T 1995 Omnibus Stock
Incentive Plan (the "BB&T Option Plan"), and shall be governed by the terms
and conditions of the BB&T Option Plan; provided, that in no event shall the
vesting, exercise and duration provisions of any Stock Option following
conversion to an option under the BB&T Option Plan be less favorable to the
optionee than provided under the individual stock option agreements as in
effect under the Stock Option Plan immediately preceding the Effective Time.
In making such conversion, (i) the number of shares of BB&T Common Stock
subject to each such Stock Option shall be the number of whole shares of BB&T
(omitting any fractional share) determined by multiplying the number of
shares of Lively Common Stock subject to such Stock Option immediately prior
to the Effective Time by the Exchange Ratio, (ii) the per share exercise
price under each such Stock Option shall be adjusted by dividing the per
share exercise price under each such Stock Option by the Exchange Ratio and
rounding up to the nearest cent, and (iii) no restrictions on transfers shall
be placed on shares of BB&T Common Stock received through the exercise of the
option except to the extent such restrictions would have been placed on such
shares under such Lively plan or are required by the Securities Laws. In
addition, each such Stock Option which is an "incentive stock option" shall
be adjusted as required by Section 424 of the Code, and the Regulations
promulgated thereunder, so as to continue as an incentive stock option under
Section 424(a) of the Code, and so as not to constitute a modification,
extension, or renewal of the option, within the meaning of Section 424(h) of
the Code. BB&T and Lively agree to take all necessary steps to effectuate
the foregoing provisions of this Section 6. Each grant of a converted option
to any individual who subsequent to the Merger will be a director or officer
of BB&T as construed under Rule 16b-3 shall, as a condition to such
conversion, be approved in accordance with the provisions of Rule 16b-3.
Section 7. No Fractional Shares. Notwithstanding any other term or
provision hereof, no fraction of a share of BB&T Common Stock, and no
certificates or script therefor or other evidence of ownership thereof, will be
issued in connection with the conversion of Lively Common Stock in the Merger,
and no right to receive cash in lieu thereof shall entitle the holder
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thereof to any voting or other rights of a holder of shares or fractional share
interests of the Surviving Corporation. In lieu of such fractional shares, any
holder of shares who would otherwise be entitled to fractional shares of BB&T
Common Stock will, upon receipt by the Surviving Corporation of the letter of
transmittal and other documents described in Section 2.8(d) of the Agreement,
be paid the cash value of each such fraction, computed in accordance with the
ratio set forth in Section 5 above.
Section 8. Amendment. At any time before the Effective Time, this
Plan of Merger may be amended, provided that: (i) any such amendment is approved
by the Boards of Directors of Lively and BB&T Financial; and (ii) no such
amendment made subsequent to the submission of this Plan of Merger to the
shareholders of Lively shall have any of the effects specified in Section
13.1-718.I of the VSCA without the approval of the shareholders affected
thereby.
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