As Filed with the Securities and Exchange Commission on December 18, 2001
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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BB&T CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 6060 56-0939887
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification Number)
of incorporation or Classification Code
organization) Number)
200 West Second Street
Winston-Salem, North Carolina 27101
(336) 733-2000
(Address, including Zip Code, and telephone number, including
area code, of registrant's principal executive offices)
Jerone C. Herring, Esq.
200 West Second Street, 3rd Floor
Winston-Salem, North Carolina 27101
(336) 733-2180
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
The Commission is requested to send copies of
all communications to:
Christopher E. Leon, Esq. Kathryn L. Knudson, Esq.
Womble Carlyle Sandridge & Rice, PLLC Powell, Goldstein, Frazer & Murphy LLP
200 West Second Street, 17th Floor 191 Peachtree Street, N.E., 16th Floor
Winston-Salem, North Carolina 27101 Atlanta, Georgia 30303
----------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
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CALCULATION OF REGISTRATION FEE
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Proposed
Title of each class of maximum Proposed Amount of
securities to be Amount to be offering price maximum aggregate registration
registered registered per unit offering price fee
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Common Stock, par value
$5.00 per share(1).... 13,500,000 (2) $457,116,037.50(3) $109,260.00
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(1) Each share of the registrant's common stock includes one preferred share
purchase right.
(2) Not applicable.
(3) Computed in accordance with Rule 457(f) based on the average of the high
($18.95) and low ($18.55) sales price of the common stock of AREA
Bancshares Corporation on December 14, 2001 as reported on The Nasdaq
National Market.
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The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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[AREA LOGO]
[COMMUNITY FIRST BANKING COMPANY LOGO]
Special Meeting of Shareholders
MERGER PROPOSAL -- YOUR VOTE IS VERY IMPORTANT
The Board of Directors of AREA Bancshares Corporation has approved a merger
combining AREA and BB&T Corporation. In the merger, you will receive 0.55
shares of BB&T common stock for each share of AREA common stock that you own,
plus cash instead of any fractional share.
You generally will not recognize gain or loss for federal income tax
purposes on your receipt of the BB&T common stock.
The merger will join AREA's strengths as the largest independent bank
holding company in Kentucky with BB&T's position as a leading bank throughout
the Carolinas, West Virginia, Virginia, Washington D.C. and parts of Maryland,
Georgia, Alabama, Kentucky and Tennessee.
At the special meeting, you will consider and vote on the merger agreement
and related plan of merger. The merger cannot be completed unless holders of at
least a majority of the shares of AREA common stock entitled to vote approve
the merger agreement and plan of merger. AREA's Board of Directors believes the
merger is in the best interests of AREA's shareholders and recommends that the
shareholders vote to approve the merger agreement and plan of merger. No vote
of BB&T shareholders is required to approve the merger agreement and plan of
merger.
BB&T common stock is listed on the New York Stock Exchange under the symbol
"BBT." On , 2002, the closing price of BB&T common stock was $ .
This price will, however, fluctuate between now and the merger.
The special meeting will be held at : .m., Central Time, on ,
2002 at .
This proxy statement/prospectus provides you with detailed information about
the proposed merger. We encourage you to read this entire document carefully.
In addition, this proxy statement/prospectus incorporates important business
and financial information about BB&T and AREA from other documents that we have
not included in the proxy statement/prospectus. You may obtain copies of these
other documents without charge by requesting them in writing or by telephone at
any time prior to [insert date five business days prior to meeting], 2002 from
the appropriate company at the following addresses:
BB&T Corporation AREA Bancshares Corporation
Reporting Shareholder P.O. Box 786
Post Office Box 1290 Owensboro, Kentucky
Winston-Salem, 42302-0786
North Carolina 27102 (270) 688-7753
(336) 733-3021 Attn: Corporate Secretary
Whether or not you plan to attend the meeting, please take the time to vote
by completing and mailing the enclosed proxy card to us. If you fail to return
your proxy card and fail to vote in person, the effect will be the same as a
vote against the merger agreement and plan of merger. Your vote is very
important. You can revoke your proxy at any time before its exercise by filing
written revocation with, or by delivering a later-dated proxy to AREA's
Corporate Secretary before the meeting or by attending the meeting and voting
in person. If your shares are registered in street name, you will need
additional documentation from the record holder to vote in person at the
meeting.
On behalf of the Board of Directors of AREA, I urge you to vote "FOR"
approval and adoption of the merger agreement.
Thomas R. Brumley
President and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved of the BB&T common stock to be
issued in the merger or determined if this proxy statement/prospectus is
accurate or adequate. Any representation to the contrary is a criminal
offense.
The shares of BB&T common stock to be issued in the merger are not
savings or deposit accounts or other obligations of any bank or savings
association and are not insured by the Federal Deposit Insurance
Corporation or any other governmental agency.
This proxy statement/prospectus is dated , 200 and is expected to
be first mailed to shareholders of AREA on or about , 2002.
AREA BANCSHARES CORPORATION
230 Frederica Street
Owensboro, Kentucky 42301
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 2002
----------------
AREA Bancshares Corporation will hold a special meeting of shareholders on
, 2002 at : .m. Central Time, at [ ] located at
[ ], for the following purposes:
. To consider and vote upon a proposal to approve the Agreement and Plan
of Reorganization, dated as of November 7, 2001, between AREA and BB&T
Corporation, and a related plan of merger, providing for the merger of
AREA into BB&T (the "merger"). In the merger, each share of AREA common
stock will be converted into the right to receive 0.55 shares of BB&T
common stock, plus cash instead of any fractional share, all as
described in more detail in the accompanying proxy statement/prospectus.
. To transact any other business that may properly come before the meeting
or any adjournment or postponement of the meeting.
A copy of the merger agreement and related plan of merger is attached as
Appendix A to the accompanying proxy statement/prospectus.
Holders of shares of AREA common stock as of the close of business on
, 2002 are entitled to notice of the meeting and to vote at the
meeting. If your shares are not registered in your own name, you will need
additional documentation from the record holder in order to vote personally at
the meeting.
Each holder of shares of AREA common stock has the right to dissent to the
merger and to demand payment of the fair value of all of the holder's AREA
shares if the merger is completed. The right of any AREA shareholder to dissent
requires strict compliance with the provisions of Sections 271B.13-010 through
271B.13-310 of the Kentucky Business Corporation Act, the full text of which is
attached to the accompanying proxy statement/prospectus as Appendix B. Any AREA
shareholder who is considering exercising rights of dissent and appraisal under
the KBCA should consult its legal advisors.
A proxy card is enclosed. To ensure that your vote is counted, please
complete, sign, date and return the proxy card in the enclosed, postage-paid
return envelope, whether or not you plan to attend the meeting in person. You
may revoke your proxy at any time before it is voted at the meeting. If you
attend the meeting, you may revoke your proxy and vote your shares in person.
However, attendance at the meeting will not by itself revoke a proxy.
By Order of the Board of Directors
Thomas R. Brumley, President and
Chief Executive Officer
Owensboro, Kentucky
, 2002
Please complete, sign, date and return the enclosed proxy card promptly in
the envelope provided, whether or not you plan to attend the meeting.
TABLE OF CONTENTS
A WARNING ABOUT FORWARD-LOOKING INFORMATION................................. iii
SUMMARY..................................................................... 1
MEETING OF SHAREHOLDERS..................................................... 9
General................................................................... 9
Who Can Vote at the Meeting............................................... 9
Attending the Meeting..................................................... 9
Vote Required............................................................. 9
Voting and Revocation of Proxies.......................................... 10
Solicitation of Proxies................................................... 10
Recommendation of the AREA Board.......................................... 10
THE MERGER.................................................................. 11
General................................................................... 11
Background of and Reasons for the Merger.................................. 11
Opinion of AREA Financial Advisor......................................... 14
Exchange Ratio............................................................ 18
Exchange of AREA Stock Certificates....................................... 18
The Merger Agreement...................................................... 19
Interests of AREA Directors and Officers in the Merger.................... 25
Material Federal Income Tax Consequences of the Merger.................... 28
Rights of Dissenting Shareholders......................................... 29
Regulatory Considerations................................................. 31
Accounting Treatment...................................................... 34
Option Agreement.......................................................... 34
Effect on Employee Benefit Plans and Stock Options........................ 36
Restrictions on Resales by Affiliates..................................... 39
INFORMATION ABOUT BB&T...................................................... 40
General................................................................... 40
Operating Subsidiaries.................................................... 40
Completed Acquisitions.................................................... 41
Pending Acquisition....................................................... 42
Capital................................................................... 42
Deposit Insurance Assessments............................................. 43
Additional Information.................................................... 43
INFORMATION ABOUT AREA...................................................... 43
General................................................................... 43
DESCRIPTION OF BB&T CAPITAL STOCK........................................... 44
General................................................................... 44
BB&T Common Stock......................................................... 45
BB&T Preferred Stock...................................................... 45
Shareholder Rights Plan................................................... 45
Other Anti-takeover Provisions............................................ 47
COMPARISON OF THE RIGHTS OF BB&T SHAREHOLDERS AND AREA SHAREHOLDERS......... 47
Authorized Capital Stock.................................................. 48
Special Meetings of Shareholders.......................................... 48
i
Directors............................................................... 48
Dividends and Other Distributions....................................... 49
Shareholder Nominations and Shareholder Proposals....................... 49
Discharge of Duties; Exculpation and Indemnification.................... 50
Mergers, Share Exchanges and Sales of Assets............................ 51
Anti-takeover Statutes.................................................. 52
Amendments to Articles of Incorporation and Bylaws...................... 52
Consideration of Business Combinations.................................. 53
Shareholders' Rights of Dissent and Appraisal........................... 53
Liquidation Rights...................................................... 53
SHAREHOLDER PROPOSALS..................................................... 54
OTHER BUSINESS............................................................ 54
LEGAL MATTERS............................................................. 54
EXPERTS................................................................... 54
WHERE YOU CAN FIND MORE INFORMATION....................................... 55
Appendix A--Agreement and Plan of Reorganization and Plan of Merger
Appendix B--Sections 271B.13-010 through 271B.13-310 of the Kentucky
Business Corporation Act
Appendix C--Fairness Opinion of J. P. Morgan Securities, Inc. [to be
updated]
ii
A WARNING ABOUT FORWARD-LOOKING INFORMATION
BB&T and AREA have each made forward-looking statements in this document and
in other documents to which this document refers that are subject to risks and
uncertainties. These statements are based on the beliefs and assumptions of the
managements of BB&T and AREA and on information currently available to them or,
in the case of information that appears under the heading "The Merger--
Background of and Reasons for the Merger" on page , information that was
available to the managements of BB&T and AREA as of the date of the merger
agreement, and should be read in connection with the notices about forward-
looking statements made by each of BB&T and AREA in its reports filed under the
Securities Exchange Act of 1934. Forward-looking statements include the
information concerning possible or assumed future results of operations of BB&T
or AREA set forth under "Summary" and "The Merger--Background of and Reasons
for the Merger" and statements preceded by, followed by or that include the
words "believes," "expects," "assumes," "anticipates," "intends," "plans,"
"estimates" or other similar expressions. See "Where You Can Find More
Information" on page .
BB&T and AREA have made statements in this document and in other documents
to which this document refers regarding estimated earnings per share of BB&T
and AREA on a stand-alone basis, expected cost savings from the merger,
estimated charges relating to the merger, the anticipated accretive effect of
the merger and BB&T's anticipated performance in future periods. With respect
to estimated cost savings and charges, BB&T has made assumptions about, among
other things, the extent of operational overlap between BB&T and AREA, the
amount of general and administrative expense consolidation, costs relating to
converting AREA's bank operations and data processing to BB&T's systems, the
size of anticipated reductions in fixed labor costs, the amount of severance
expenses, the extent of the charges that may be necessary to align the
companies' respective accounting policies and the costs related to the merger.
The realization of cost savings and the amount of charges relating to the
merger are subject to the risk that the foregoing assumptions prove to be
incorrect, and actual results may be materially different from those expressed
or implied by the forward-looking statements.
Any statements in this document about the anticipated accretive effect of
the merger and BB&T's anticipated performance in future periods are subject to
risks relating to, among other things, the following:
. expected cost savings from the merger or other previously announced
mergers may not be fully realized or realized within the expected time-
frame;
. the loss of deposits, customers or revenues following the merger or
other previously announced mergers may be greater than expected;
. competitive pressures among financial institutions may increase
significantly;
. costs or difficulties related to the integration of the businesses of
BB&T and its merger partners, including AREA, may be greater than
expected;
. changes in the interest rate environment may reduce margins or the
volumes or values of loans made or held;
. general economic or business conditions, either nationally or in the
states or regions in which BB&T and AREA do business, may be less
favorable than expected, resulting in, among other things, a
deterioration in credit quality or a reduced demand for credit;
. legislative or regulatory changes, including changes in accounting
standards, may adversely affect the businesses in which BB&T and AREA
are engaged;
. adverse changes may occur in the securities markets; and
. competitors of BB&T and AREA may have greater financial resources and
develop products that enable such competitors to compete more
successfully than BB&T and AREA.
iii
Management of each of BB&T and AREA believes the forward-looking statements
about its company are reasonable; however, shareholders of AREA should not
place undue reliance on them. Forward-looking statements are not guarantees of
performance. They involve risks, uncertainties and assumptions. The future
results and shareholder values of BB&T following completion of the merger may
differ materially from those expressed or implied in these forward-looking
statements. Many of the factors that will determine these results and values
are beyond BB&T's and AREA's ability to control or predict.
All subsequent written and oral forward-looking statements concerning the
merger or other matters addressed in this document and attributable to BB&T or
AREA or any person acting on their behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
Neither BB&T nor AREA undertakes any obligation to release publicly any
revisions to such forward-looking statements to reflect events or circumstances
after the date of this document or to reflect the occurrence of unanticipated
events.
iv
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire document and the documents to which we refer you. See "Where You Can
Find More Information" on page .
What You Will Receive In the Merger
If the merger is completed, you will receive 0.55 shares of BB&T common
stock for each share of AREA common stock you own, plus cash instead of any
fractional share of BB&T common stock that would otherwise be issued.
On , 200 , the closing price of BB&T common stock was $ , making
the value of 0.55 shares of BB&T common stock equal to $ . Because the
market price of BB&T common stock fluctuates, you will not know when you vote
what BB&T common stock will be worth when issued in the merger.
No Federal Income Tax on Shares Received in Merger (Page )
Neither company is required to complete the merger unless it receives a
legal opinion from BB&T's counsel to the effect that, based on specified facts,
representations and assumptions, the merger will be treated as a
"reorganization" for federal income tax purposes. Therefore, we expect that,
for federal income tax purposes, you generally will not recognize any gain or
loss on the conversion of shares of AREA common stock into shares of BB&T
common stock. You will be taxed, however, if you receive any cash instead of
any fractional share of BB&T common stock that would otherwise be issued and
the cash you receive if you properly exercise your right to dissent to the
merger. Tax matters are complicated, and the tax consequences of the merger may
vary among shareholders. We urge you to contact your own tax advisor to
understand fully how the merger will affect you.
BB&T Dividend Policy Following the Merger
BB&T currently pays regular quarterly dividends of $0.26 per share of its
common stock and, over the past five years, has had a dividend payout ratio in
the range of approximately 39% to 40% of recurring earnings and a compound
annualized dividend growth rate of 14.0%. BB&T has increased its quarterly cash
dividend payments for 29 consecutive years. BB&T expects that it will continue
to pay quarterly dividends consistent with this payout ratio, but may change
that policy based on business conditions, BB&T's financial condition, earnings
and other factors.
AREA Board of Directors Recommends Shareholder Approval (Page )
The AREA Board of Directors believes that the merger is in the best
interests of AREA shareholders and recommends that you vote "FOR" approval of
the merger agreement and related plan of merger. The AREA Board believes that,
as a result of the merger, you will be able to achieve greater value on a long-
term basis than you would if AREA remained independent.
Exchange Ratio Fair to Shareholders According to AREA's Financial Advisor (Page
)
AREA's financial advisor, J.P. Morgan Securities Inc., has given an opinion
to the AREA Board that, as of the date of this proxy statement/prospectus, the
exchange ratio in the merger is fair from a financial point of view to you as
holders of AREA common stock. The full text of this opinion is attached as
Appendix C to this proxy statement/prospectus. We encourage you to read the
opinion carefully to understand the assumptions made, matters considered and
limitations of the review undertaken by JPMorgan in rendering its fairness
opinion. AREA has agreed to pay JPMorgan a fee of 0.75% of the transaction
value for JPMorgan's services. AREA has paid JPMorgan $250,000 of this fee, and
based upon the closing price of BB&T common stock on November 7, 2001, AREA
will pay JPMorgan an additional $3,129,500 upon the closing of the merger.
1
AREA Shareholders Have the Right to Dissent from the Merger (Page )
Under Kentucky law, if you do not vote for the merger and you properly
exercise rights to dissent to the merger and to demand the fair value of your
shares of AREA common stock, you may have the right to obtain a cash payment
for the fair value of your shares. To exercise these rights, you must comply
with the procedural requirements of the Kentucky Business Corporation Act, the
relevant sections of which we have attached to this proxy statement/prospectus
as Appendix B. We cannot predict what the "fair value" of AREA common stock
resulting from the required appraisal proceedings would be. Failure to take
timely and properly any of the steps required under the KBCA may result in a
loss of dissenters' rights.
Meeting to be Held , 2002 (Page )
AREA will hold the special shareholders' meeting at : .m., Central
Time, on , 2002 at [ ] located at [ ]. At the meeting, you will
vote on the merger agreement and plan of merger and conduct any other business
that properly arises.
The Companies (Page )
BB&T Corporation
200 West Second Street
Winston-Salem, North Carolina 27101
(336) 733-2000
BB&T is a multi-bank holding company with more than $70.3 billion in assets.
It is the fourth largest financial holding company in the Southeast and,
through its banking subsidiaries, operates 1,083 branch offices in the
Carolinas, Georgia, Virginia, Maryland, West Virginia, Tennessee, Kentucky,
Alabama and Washington, D.C. BB&T ranks first in deposit market share in West
Virginia, third in North Carolina and South Carolina, and maintains a
significant market presence in Virginia, Maryland, Georgia and Washington, D.C.
If the merger and BB&T's previously announced agreement to acquire Louisville,
Kentucky-based Mid-America Bancorp are both completed, BB&T would become the
fourth largest financial holding company in deposit market share in Kentucky.
AREA Bancshares Corporation
230 Frederica Street
Owensboro, Kentucky 42301
(270) 926-3232
AREA is the largest bank holding company headquartered in Kentucky. With
approximately $2.95 billion in assets, AREA operates 71 banking offices in 31
communities throughout Kentucky through its banking and trust company
subsidiaries.
The Merger (Page )
In the merger, AREA will merge into BB&T, and AREA's banking and other
subsidiaries, through which it operates, will become wholly owned subsidiaries
of BB&T. If the AREA shareholders approve the merger agreement and plan of
merger at the special meeting, we currently expect to complete the merger in
the first quarter of 2002.
We have included the merger agreement and plan of merger as Appendix A to
this proxy statement/prospectus. We encourage you to read the merger agreement
and plan of merger in full, as they are the legal documents that govern the
merger.
Majority Shareholder Vote Required (Page )
Approval of the merger agreement and plan of merger requires the affirmative
vote of the holders of at least a majority of the outstanding shares of AREA
common stock entitled to vote. If you fail to vote, it will have the effect of
a vote against the merger agreement and the merger. At the record date, the
directors and executive officers of AREA and their affiliates together owned
about % of the AREA common stock entitled to vote at the meeting, and we
anticipate that they will vote their shares in favor of the merger agreement
and plan of merger.
Brokers who hold shares of AREA stock as nominees will not have authority to
vote them on the merger unless the beneficial owners of those shares provide
voting instructions. If you hold your shares in street name, please see the
voting form provided by your broker for additional information regarding the
voting of your shares. If your shares are not registered in your name, you will
need additional documentation from your record holder to vote the shares in
person.
2
The merger does not require the approval of BB&T's shareholders.
Record Date Set at , 2002; One Vote per Share of AREA Stock (Page )
If you owned shares of AREA common stock at the close of business on
, 2002, the record date, you are entitled to vote on the merger
agreement and plan of merger and any other matters that may be properly
considered at the meeting.
On the record date, there were shares of AREA common stock
outstanding. At the meeting, you will have one vote for each share of AREA
common stock that you owned on the record date.
Interests of AREA Directors and Officers in the Merger that Differ From Your
Interests (Page )
Some of AREA's directors and officers have interests in the merger that
differ from, or are in addition to, the interests of other AREA shareholders.
These interests exist because of rights under benefit and compensation plans
maintained by AREA and, in the case of specified executive officers of AREA,
under employment agreements that may be entered into upon completion of the
merger.
Stock-Based Benefit Plans. Prior to the merger, restricted stock and stock
options awarded under the AREA Bancshares Corporation 1994 Stock Option Plan,
the AREA Bancshares Corporation 2000 Stock Option and Equity Incentive Plan,
the Cardinal 1989 Restricted Stock Option Plan and the Cardinal 1994 Restricted
Stock Option Plan will vest. As of [ ], executive officers of AREA held
unvested stock options to acquire 50,782 shares of AREA common stock.
Employment Agreements. AREA's President and Chief Executive Officer, Thomas
R. Brumley, and Branch Banking and Trust Company, BB&T's North Carolina bank
subsidiary, intend to enter into an employment agreement after the merger. The
employment agreement will provide for an employment term until the eighteenth
month after the merger is effective or, if sooner, the 61st day after
conversion of the data services systems of AREA to the data services systems of
BB&T. The agreement will also provide for consulting period following the
employment term that will end five years from the date of the merger.
In addition, Branch Bank has offered to enter into employment agreements
with AREA's Chief Operating Officer John A. Ray, and the following AREA
officers: F. Lee Hess, Kevin M. Gallagher, Darrell L. Gustafson and Richard N.
Wilson. The employment agreements with these officers would be effective upon
completion of the merger and would provide for an employment term of three
years. [update if employment agreement(s) are executed].
Subsidiary Bank Board of Directors; Advisory Board. Following completion of
the merger, C. M. Gatton, Chairman of the Board of AREA, will be elected to the
Board of Branch Bank and thereafter for a period of at least three years,
subject to the right of removal for cause. Members of the Branch Bank Board who
are neither employees of nor under contract with BB&T or an affiliate are
entitled to receive fees for services as a director in accordance with the
policies of BB&T as in effect from time to time.
Following completion of the merger, BB&T shall also establish a state
Advisory Board for Kentucky and shall offer to each of the members of the Board
of Directors of AREA a seat on this newly established Advisory Board. For at
least two years following the merger, the Advisory Board members who are
neither employees of nor under contract with BB&T or any of its affiliates and
who continue to serve will receive fees equal in amount to the retainer and
schedule of attendance fees for directors of AREA in effect on August 31, 2001.
Membership on any Advisory Board is conditional on execution of a
noncompetition agreement with BB&T.
The AREA Board was aware of these and other interests and considered them
when it approved and adopted the merger agreement.
The material terms and financial provisions of these arrangements are
described under the heading "Interests of AREA's Directors and Officers in the
Merger" on page .
3
Regulatory Approvals We Must Obtain for the Merger to Occur (Page )
We cannot complete the merger unless the Board of Governors of the Federal
Reserve System approves it. We have filed an application with the Federal
Reserve Board seeking its approval. In addition, the merger is subject to the
approval of, or notice to, various state regulatory authorities, and we [have
made or will make] the necessary filings with those authorities.
Although we do not know of any reason why we would not obtain these
regulatory approvals in a timely manner, we cannot be certain when we will
obtain them or that we will obtain them at all. [to be updated]
Other Conditions that Must be Satisfied for the Merger to Occur (Page )
A number of other conditions must be met for us to complete the merger,
including:
. approval of the merger agreement by the AREA shareholders;
. receipt of the opinion of BB&T's counsel that AREA shareholders will not
recognize gain or loss to the extent they exchange their AREA common
stock for BB&T common stock;
. the continuing accuracy of the parties' representations in the merger
agreement; and
. the continuing effectiveness of the registration statement filed with
the Securities and Exchange Commission covering the shares of BB&T
common stock to be issued in the merger.
. Thomas R. Brumley shall have continued in the employment of AREA until
the merger is effective and C. M. Gatton shall have executed and
delivered to BB&T a noncompetition agreement.
Termination and Amendment of the Merger Agreement (Page )
We can mutually agree at any time to terminate the merger agreement without
completing the merger. Either company can also unilaterally terminate the
merger agreement if:
. the merger is not completed by May 31, 2002;
. any condition to our obligation to complete the merger is not met; or
. the other company violates, in a material way, any of its
representations, warranties or obligations under the merger agreement
and the violation is not cured in a timely fashion.
Generally, the company seeking to terminate cannot itself be in violation of
the merger agreement in a way that would allow the other party to terminate.
BB&T and AREA can agree to amend the merger agreement in any way, except
that after the shareholders' meeting we cannot decrease the consideration that
you will receive in the merger. Either company can waive any of the
requirements of the other company contained in the merger agreement, except
that neither company can waive any required regulatory approval. Neither
company intends to waive the condition that it receives a tax opinion. If a tax
opinion from BB&T's counsel is not available and the AREA Board determines to
proceed with the merger, AREA will inform you and ask you to vote again on the
merger agreement.
Option Agreement (Page )
As a condition to its offer to acquire AREA, and to discourage other
companies from attempting to acquire AREA, BB&T required AREA to grant BB&T a
stock option that allows BB&T to buy up to 4,750,000 shares of AREA's common
stock. The exercise price of the option is $16.75 per share. Generally, BB&T
can exercise the option only if another party attempts to acquire control of
AREA. As of the date of this proxy statement/prospectus, we do not believe that
has occurred.
BB&T to Use Purchase Accounting Treatment (Page )
BB&T will account for the merger using the purchase method of accounting.
Under the purchase
4
method, BB&T will record, at fair value, the acquired assets and assumed
liabilities of AREA. To the extent the total purchase price exceeds the fair
value of tangible and identifiable intangible assets acquired over the
liabilities assumed, and other identifiable intangibles, BB&T will record
goodwill. BB&T will include in its consolidated results of operations the
results of AREA's operations after the merger is completed.
Share Price Information (Page )
AREA's common stock is traded on the Nasdaq National Market under the symbol
"AREA", and BB&T common stock is traded on the New York Stock Exchange under
the symbol "BBT". On November 7, 2001, the last full trading day before public
announcement of the proposed merger, AREA common stock closed at $17.20, and
BB&T common stock closed at $34.01. On , 200 , AREA common stock closed
at $ , and BB&T common stock closed at $ .
Listing of BB&T Common Stock
BB&T will list the shares of its common stock to be issued in the merger on
the New York Stock Exchange.
5
Comparative Market Prices and Dividends
BB&T common stock is listed on the New York Stock Exchange under the symbol
"BBT," and AREA common stock is included in the Nasdaq National Market under
the symbol "AREA." The table below shows the high and low sales prices of BB&T
common stock and AREA common stock and cash dividends paid per share for the
last two fiscal years plus the interim period. The merger agreement restricts
AREA's ability to increase dividends. See page .
BB&T AREA
-------------------------- ----------------------
Cash Cash
High Low Dividend High Low Dividend
-------- -------- -------- ------ ------ --------
Quarter Ended March 31, 2002
(through January , 2002)..
Quarter Ended
March 31, 2001............ $37.875 $31.42 $.23 $17.38 $14.69 $0.045
June 30, 2001............. 37.08 33.73 .23 16.75 14.50 0.045
October 31, 2001.......... 38.48 33.57 .26 17.70 14.88 0.045
December 31, 2001 (through
December , 2001)........
For year 2001.............
Quarter Ended
March 31, 2000............ $29.25 $21.6875 $.20 $16.00 $12.38 $0.037
June 30, 2000............. 31.875 23.875 .20 14.88 12.38 0.040
September 30, 2000........ 30.4375 23.8125 .23 15.00 12.71 0.040
December 31, 2000......... 38.25 26.5625 .23 17.00 12.17 0.045
For year 2000............. 38.25 21.6875 .86 17.00 12.17 0.162
Quarter Ended
March 31, 1999............ $40.625 $34.5625 $.175 $19.17 $15.59 $0.030
June 30, 1999............. 40.25 33.50 .175 18.26 15.67 0.033
September 30, 1999........ 36.6875 30.1875 .20 19.21 15.84 0.033
December 31, 1999......... 37.125 27.1875 .20 18.71 16.34 0.037
For year 1999............. 40.625 27.1875 .75 19.21 15.59 0.133
The table below shows the closing price of BB&T common stock and AREA common
stock on November 7, 2001, the last full trading day before public announcement
of the proposed merger.
BB&T historical..................................................... $34.01
AREA historical..................................................... $17.20
AREA pro forma equivalent*.......................................... $18.71
--------
* calculated by multiplying BB&T's per share closing price by the exchange
ratio of 0.55.
6
Selected Consolidated Financial Data
We are providing the following information to help you analyze the financial
aspects of the merger. We derived this information from BB&T's and AREA's
audited financial statements for 1996 through 2000 and unaudited financial
statements for the nine months ended September 30, 2001. This information is
only a summary, and you should read it in conjunction with our historical
financial statements and the related notes contained in the annual and
quarterly reports and other documents that we have filed with the Securities
and Exchange Commission. See "Where You Can Find More Information" on page .
You should not rely on the nine-month information as being indicative of
results expected for the entire year or for any future interim period. [to be
updated]
BB&T -- Historical Financial Information
(Dollars in thousands, except for per share amounts)
As of/For the Nine
Months Ended September
30, As of/For the Years Ended December 31,
----------------------- -----------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income..... $ 1,802,334 $ 1,740,080 $ 2,314,698 $ 2,194,709 $ 2,008,220 $ 1,856,142 $ 1,701,921
Net income.............. 695,695 466,766 698,488 778,725 720,964 565,103 527,173
Basic earnings per
share.................. 1.54 1.03 1.55 1.74 1.63 1.29 1.20
Diluted earnings per
share.................. 1.51 1.02 1.53 1.71 1.60 1.26 1.18
Cash dividends paid per
share.................. .72 .63 .86 .75 .66 .58 .50
Book value per share.... 13.18 11.03 11.96 10.30 10.33 9.38 8.80
Total assets............ 70,309,046 63,808,683 66,552,823 59,380,433 54,373,105 49,240,765 43,747,135
Long-term debt.......... 11,408,329 8,675,769 8,646,018 6,222,561 5,561,216 4,202,137 2,625,211
AREA -- Historical Financial Information
(Dollars in thousands, except for per share amounts)
As of/For the Nine
Months Ended September
30, As of/For the Years Ended December 31,
----------------------- -----------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income..... $ 84,042 $ 79,036 $ 106,593 $ 88,907 $ 75,686 $ 75,606 $ 72,425
Net income.............. 25,089 29,979 37,733 38,259 22,626 20,809 19,886
Basic earnings per
share.................. 1.03 1.22 1.54 1.52 0.97 0.90 0.85
Diluted earnings per
share.................. 1.03 1.21 1.53 1.50 0.95 0.89 0.84
Cash dividends paid per
share.................. .135 .117 .162 .133 .103 .083 .071
Book value per share.... 12.85 11.35 11.79 10.78 10.13 8.41 7.28
Total assets............ 2,945,953 2,746,701 2,768,470 2,340,521 2,132,365 1,901,449 1,796,290
Long-term debt.......... 255,769 132,976 82,622 130,210 41,309 84,336 49,313
7
Comparative Per Share Data
We have summarized below the per share information for our companies on a
historical, pro forma combined and equivalent basis. You should read this
information in conjunction with our historical financial statements (and
related notes) contained in the annual and quarterly reports and other
documents we have filed with the Securities and Exchange Commission. See "Where
You Can Find More Information" on page .
The pro forma combined information gives effect to the merger accounted for
as a purchase, assuming that 0.55 shares of BB&T common stock are issued for
each outstanding share of AREA common stock and assuming that the merger
occurred as of the beginning of the periods presented. Pro forma equivalent of
one AREA common share amounts are calculated by multiplying the pro forma basic
and diluted earnings per share, BB&T's historical per share dividend and the
pro forma shareholders' equity by the exchange ratio of 0.55 shares of BB&T
common stock so that the per share amounts equate to the respective values for
one share of AREA common stock. You should not rely on the pro forma
information as being indicative of the historical results that we would have
had if we had been combined or the future results that we will experience after
the merger, nor should you rely on the nine-month information as being
indicative of results expected for the entire year or for any future interim
period. [to be updated]
As of/For the Nine
Months Ended As of/For the Year Ended
September 30, 2001 December 31, 2000
------------------ ------------------------
Earnings per common share:
Basic
BB&T historical................ $ 1.54 $ 1.55
AREA historical................ 1.03 1.54
Pro forma combined............. 1.53 1.56
AREA pro forma equivalent of
one AREA common share......... .84 .86
Diluted
BB&T historical................ 1.51 1.53
AREA historical................ 1.03 1.53
Pro forma combined............. 1.51 1.54
AREA pro forma equivalent of
one AREA common share......... .83 .85
Cash dividends declared per common
share:
BB&T historical.................. .72 .86
AREA historical.................. .135 .162
Pro forma combined............... .72 .86
AREA pro forma equivalent of one
AREA common share............... .40 .47
Shareholders' equity per common
share:
BB&T historical.................. 13.18 11.96
AREA historical.................. 12.85 11.79
Pro forma combined............... 13.47 12.23
AREA pro forma equivalent of one
AREA common share............... 7.41 6.73
8
MEETING OF SHAREHOLDERS
General
We are providing this proxy statement/prospectus to AREA's shareholders of
record as of , 200 , along with a form of proxy that the AREA Board is
soliciting for use at a special meeting of shareholders of AREA to be held on
, 2002 at : .m., Central Time, at [ ] located at [ ]. At
the meeting, the shareholders of AREA will vote upon a proposal to approve the
agreement and plan of reorganization, dated as of November 7, 2001 and the
related plan of merger pursuant to which AREA would merge into BB&T. In this
proxy statement/prospectus, we refer to the reorganization agreement and
related plan of merger as the "merger agreement." Proxies may be voted on other
matters that may properly come before the meeting, if any, at the discretion of
the proxy holders. The AREA Board knows of no such other matters except those
incidental to the conduct of the meeting. A copy of the merger agreement is
attached as Appendix A.
Who Can Vote at the Meeting
You are entitled to vote your AREA common stock if the records of AREA show
that you held your shares as of the record date, which is , 2002. On
the record date, there were shares of AREA common stock outstanding,
held by approximately holders of record. Each share of AREA common
stock is entitled to one vote on each matter submitted at the meeting.
Attending the Meeting
If you are a beneficial owner of AREA common stock held by a broker, bank or
other nominee (i.e., in "street name"), you will need proof of ownership to be
admitted to the meeting. A recent brokerage statement or letter from a bank or
broker are examples of proof of ownership. If you want to vote your shares of
AREA common stock held in street name in person at the meeting, you will have
to get a written proxy in your name from the broker, bank or other nominee who
holds your shares.
Vote Required
Approval of the merger agreement requires the affirmative vote of the
holders of at least a majority of the outstanding shares of AREA common stock
entitled to vote. If you do not vote your shares or if you abstain, it will
have the same effect as a vote "against" the merger agreement.
The proposal to adopt the merger agreement is a "non-discretionary" item,
meaning that brokerage firms cannot vote shares in their discretion on behalf
of a client if the client has not given voting instructions. Accordingly,
shares held in street name that have been designated by brokers on proxy cards
as not voted with respect to that proposal ("broker non-vote shares") will not
be counted as votes cast on it.
Action on any other matter that is properly presented at the meeting for
consideration of the shareholders will be approved if a quorum is present for
that matter and the votes cast favoring the action exceed the votes cast
opposing the action. A quorum will be present for a particular matter if a
majority of the outstanding shares of AREA common stock entitled to vote on
that matter is represented at the meeting in person or by proxy. For purposes
of determining whether a quorum is present for a particular matter, shares with
respect to which proxies have been marked as abstentions will be treated as
shares present but broker non-vote shares will not be treated as shares
present. The AREA Board is not aware of any other business to be presented at
the meeting other than matters incidental to the conduct of the meeting.
Because approval of the merger agreement requires the affirmative vote of
the holders of a majority of the outstanding shares of AREA common stock
entitled to vote, abstentions and broker non-vote shares will have the same
effect as votes against the merger. Accordingly, the AREA Board urges you to
complete, date and sign the accompanying proxy and return it promptly in the
enclosed postage-prepaid envelope.
9
You should not return your stock certificates with your proxy cards. The
procedure for surrendering your stock certificates is described under "The
Merger--Exchange of AREA Stock Certificates" on page .
As of the record date, the directors and executive officers of AREA and
their affiliates beneficially owned a total of shares, or % of the
issued and outstanding shares of AREA common stock (not including shares that
may be acquired upon the exercise of stock options). The directors and
executive officers of BB&T, their affiliates, BB&T and its subsidiaries owned
less than 1% of the outstanding shares of AREA common stock, excluding shares
subject to the stock option granted to BB&T in connection with the merger
agreement and described under the heading "Stock Option Agreement" on page .
Voting and Revocation of Proxies
The shares of AREA stock represented by properly completed proxies received
at or before the time for the meeting (or any adjournment) will be voted as
directed by the respective shareholders unless the proxies are revoked as
described below. If no instructions are given, executed proxies will be voted
"FOR" approval of the merger agreement. Proxies marked "FOR" approval of the
merger agreement and executed but unmarked proxies will be voted in the
discretion of the proxy holders named in the proxies as to any proposed
adjournment of the meeting. Proxies that are voted "AGAINST" approval of the
merger agreement will not be voted in favor of any motion to adjourn the
meeting to solicit more votes in favor of the merger. The proxies will be voted
in the discretion of the proxy holders on other matters, if any, that are
properly presented at the meeting and voted upon.
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy, you must either: notify the Corporate Secretary
of AREA in writing at AREA's principal executive offices; submit a later-dated
proxy to the Corporate Secretary of AREA; or attend the meeting and vote your
shares in person. Your attendance at the meeting will not automatically revoke
your proxy. If you hold your shares in street name, please see the voting form
provided by your broker for additional information regarding the voting of your
shares.
Your broker may allow you to deliver your voting instructions via the
telephone or the internet. Please see the voting instruction form from your
broker. If your shares are not registered in your name, you will need
additional documentation from your record holder to vote the shares in person.
Solicitation of Proxies
BB&T and AREA will each pay 50% of the cost of printing this proxy
statement/prospectus, and AREA will pay all other costs of soliciting proxies.
Directors, officers and other employees of AREA or its subsidiaries may solicit
proxies personally, by telephone or facsimile or otherwise. None of these
people will receive any special compensation for solicitation activities. AREA
will arrange with brokerage firms and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the beneficial
owners of stock held of record by such brokerage firms and other custodians,
nominees and fiduciaries, and AREA will reimburse these record holders for
their reasonable out-of-pocket expenses.
Recommendation of the AREA Board
The AREA Board has approved the merger agreement and believes that the
proposed transaction is fair to and in the best interests of AREA and its
shareholders. The AREA Board recommends that AREA shareholders vote "FOR"
approval of the merger agreement.
10
THE MERGER
The following information describes the material aspects of the merger. This
description does not purport to be complete and is qualified in its entirety by
reference to the appendices to this proxy statement/prospectus, including the
merger agreement, which is attached to this proxy statement/prospectus as
Appendix A and incorporated herein by reference. All shareholders are urged to
read the appendices in their entirety.
General
In the merger, AREA will be merged into BB&T. Shareholders of AREA will
receive common stock of BB&T in exchange for their shares of AREA stock on the
basis of 0.55 shares of BB&T common stock for each share of AREA common stock,
plus cash instead of any fractional share of BB&T common stock that would
otherwise be issued. During the third quarter of 2002, BB&T intends to merge
AREA's subsidiary banks into Branch Banking and Trust Company ("Branch Bank"),
BB&T's North Carolina-chartered bank subsidiary. Until then, AREA's subsidiary
banks will operate as separate subsidiaries of BB&T.
Background of and Reasons for the Merger
Background of the Merger
During the last several years, there has been a trend toward consolidation
in the financial services industry. This trend has been fueled by, among other
things, recent national banking legislation that has enabled participants in
business combinations to benefit from the economies of scale and greater
efficiencies available to the combined entities. Financial institutions have
increasingly sought suitable combinations as a means of obtaining these
benefits.
During the first quarter of 2001, representatives of J.P. Morgan Securities,
Inc., New York, New York, had preliminary discussions with Thomas R. Brumley,
AREA's President and Chief Executive Officer, about the possibility of a merger
with BB&T. Effective April 2, 2001, AREA engaged JPMorgan as its financial
advisor. AREA selected JPMorgan for several reasons, including its familiarity
with AREA's business and market area and JPMorgan's previous experience with
mergers and acquisitions involving financial institutions.
On May 2, 2001, Mr. Brumley and C.M. Gatton, AREA's Chairman, met with
Burney S. Warren, an Executive Vice President with BB&T, together with
representatives of JPMorgan in Louisville, Kentucky, to discuss AREA's and
BB&T's businesses. On May 3, 2001, Mr. Brumley and Mr. Warren toured several of
AREA's branch locations in Kentucky.
On July 10, 2001 Mr. Brumley and Mr. Gatton met with John A. Allison, BB&T's
Chairman and Chief Executive Officer, at BB&T's headquarters in Winston-Salem,
North Carolina, to learn more about BB&T's business and management philosophy.
On July 31, 2001, BB&T proposed a merger with an exchange ratio of 0.5173
shares of BB&T common stock for each share of AREA common stock.
On August 3, 2001, AREA's Executive Committee of the Board of Directors met
by telephone to discuss BB&T's proposal. The Executive Committee decided not to
pursue the proposal because it considered the proposed exchange ratio to be
insufficient. AREA's Board of Directors subsequently rejected the proposal at a
regular meeting of the Board held on September 17, 2001.
As a result of further negotiations between the parties, BB&T increased the
exchange ratio to 0.55 shares of BB&T common stock per share of AREA common
stock. On October 15, 2001, AREA's Board of Directors considered this new
proposal, but did not act on it at that time. The meeting included
presentations by BB&T, JPMorgan, and legal counsel, Powell, Goldstein, Frazer &
Murphy LLP, Atlanta, Georgia. From October 16 through October 31, 2001, the
parties negotiated the merger agreement and related documents.
11
On November 1, 2001, AREA's Board of Directors held a special meeting to
discuss the BB&T proposal. All of the directors were present at the meeting
with the exception of one director who was ill. The meeting included
presentations by JPMorgan concerning the terms of the merger and by Powell,
Goldstein concerning the merger agreement and related documents. Based on the
factors discussed in "--AREA's Reasons for the Merger and Recommendation of
Directors," all of the Board members present voted to approve the merger
agreement subject to final negotiation by the Executive Committee and the
receipt of an opinion from JPMorgan that the exchange ratio in the proposed
merger was fair, from a financial point of view, to AREA's shareholders.
On November 7, 2001, after obtaining the fairness opinion from JPMorgan,
AREA's Executive Committee finalized the terms of the merger agreement, and,
later that day, the parties executed the agreement. On November 8, 2001, BB&T
issued a press release announcing its proposed acquisition of AREA.
AREA's Reasons for the Merger and Recommendation of Directors
In reaching its determination that the merger agreement is fair to, and in
the best interests of, AREA and its shareholders, the AREA Board considered a
number of factors. The AREA Board did not assign any specific or relative
weight to the factors in its consideration. The material factors considered by
the AREA Board included the following:
. The current and prospective economic environment facing financial
institutions, and the competitive pressures in the financial services
industry in general and the banking industry in particular;
. The Board's review of alternatives to the merger (including potential
transactions with other merger partners, remaining independent and
growing internally, remaining independent for a period of time and then
selling or merging the company, and growing through future
acquisitions), the range of possible values to AREA's shareholders
attainable through implementation of such alternatives, and the timing
and likelihood of actually implementing such alternatives and receiving
such values;
. A review of the business, operations, earnings, and financial condition,
including the capital levels and asset quality, of BB&T on both a
historical and prospective basis;
. The geographic and business fit of AREA and BB&T;
. The strong cultural fit that had emerged through discussions with BB&T
in terms of customer service, strategic direction, and planning
processes;
. The terms of the merger agreement, including the exchange ratio and the
ability of AREA to terminate the merger agreement under specified
circumstances;
. The financial advice rendered by JPMorgan regarding the terms of the
merger, including its opinion that the exchange ratio is fair to AREA's
shareholders from a financial point of view, and the AREA Board's review
of the methodology and appropriateness of the assumptions used by
JPMorgan in its analysis of the fairness of the exchange ratio;
. The expectation that the merger will be tax-free for federal income tax
purposes for AREA's shareholders (other than with respect to cash
received in the merger, including any cash paid in lieu of fractional
shares);
. The strong likelihood that regulatory approval for the merger will be
obtained.
The Board collectively made its determination with respect to the merger
based on the conclusion reached by its members, in light of the factors that
each of them considered as appropriate, that the merger is in the best
interests of the AREA shareholders.
12
The terms of the merger, including the exchange ratio, were the result of
arms-length negotiations between representatives of AREA and representatives of
BB&T. Based upon its consideration of the foregoing factors, the AREA Board of
Directors approved the merger agreement and the merger as being in the best
interests of AREA and its shareholders.
The AREA Board recommends that you vote "FOR" the approval of the merger
agreement.
BB&T's Reasons for the Merger
One of BB&T's announced objectives is to pursue in-market and contiguous
state acquisitions of banks and thrifts in the $250 million to $10 billion
asset size range. BB&T's management believes that the acquisition of AREA is
consistent with this strategy because AREA is the largest independent bank
holding company in Kentucky and the acquisition of AREA will provide BB&T a
statewide presence and entry into economically attractive markets within
Kentucky.
In connection with BB&T's consideration of the merger, its management
analyzed selected investment criteria designed to assess the impact of the
merger on BB&T and its shareholders. For the purpose of this analysis, BB&T
made the following assumptions:
. BB&T's 2001 earnings per share ("EPS") is based on the estimates
published by First Call Corporation and subsequent years are based on
12% income statement and balance sheet growth;
. AREA's 2001 fully diluted core EPS (prior to the effects of the merger)
is based on AREA management's estimate of $1.32;
. Annual cost savings of approximately $17.1 million, or 20% of AREA's
expense base, would be fully realized in the first 12 months of
operations following conversion of AREA's data services systems to those
of BB&T;
. Income statement and balance sheet growth rates would be 10% except:
AREA's non-interest income is grown to achieve a fee income ratio of 30%
by year 7.
. Core deposit intangibles are amortized over ten years using the sum of
the years digits method;
. AREA's loan loss allowance is conformed to BB&T's loan loss allowance
policies;
. AREA's net charge-off rate for loan losses is modeled at 0.35% in all
years;
. BB&T will repurchase approximately 2.1% of the shares issued in the
transaction, thus bringing AREA's pro forma leverage ratio to 7%; and
. AREA's equity ratio is maintained between 7% and 8%.
Using the above assumptions, BB&T analyzed the merger to determine whether
it would have an accretive or dilutive effect on estimated earnings per share,
return on equity, return on assets and book value per share, as well as its
effect on BB&T's leverage capital ratio. This analysis indicated that the
merger would:
. be accretive to cash basis earnings per share in year 1 and accretive to
GAAP earnings per share in year 2;
. be accretive to cash basis return on equity in year 1;
. be accretive to cash basis return on assets in year 6;
. be accretive to book value per share immediately; and
. result in a combined leverage ratio that remains over 7%.
In conducting its analysis BB&T excluded the effect of estimated one-time
after-tax charges of $16.0 million related to completing the merger on earnings
per share, return on assets and return on equity, as well as cash basis
earnings per share, cash basis return on assets and cash basis return on
equity.
13
In addition to the analysis described above, BB&T performed an internal rate
of return analysis for the merger. The purpose of this analysis was to
determine if the projected performance of AREA, after applying the assumptions
described above, would conform to BB&T's criteria. BB&T's current minimum
internal rate of return requirement for this type of investment is 15%. The
analysis performed in connection with the AREA merger indicated that the
projected internal rate of return will be 21.36%.
None of the above information has been updated since the date of the merger
agreement. There can be no certainty that actual results will be consistent
with the results described above. For more information concerning the factors
that could affect actual results, see "A Warning About Forward-Looking
Information" on page .
Opinion of AREA's Financial Advisor
Pursuant to an engagement letter dated April 2, 2001, AREA retained J.P.
Morgan Securities Inc. as its financial advisor in connection with the proposed
merger.
At a meeting of the Executive Committee of AREA's Board of Directors on
November 7, 2001, JPMorgan rendered its oral and written opinion to the Board
of Directors of AREA that, as of the date of the meeting, the exchange ratio in
the proposed merger was fair, from a financial point of view, to AREA's common
shareholders. JPMorgan has confirmed its November 7, 2001 opinion by delivering
a written opinion to the Board of Directors of AREA, dated the date of this
proxy statement/prospectus, that, as of the date of this proxy
statement/prospectus, the exchange ratio in the proposed merger was fair, from
a financial point of view, to AREA's common shareholders. No limitations were
imposed by AREA's Board of Directors upon JPMorgan with respect to the
investigations made or procedures followed by it in rendering its opinions.
The full text of the written opinion of JPMorgan, dated the date of this
proxy statement/ prospectus, which sets forth the assumptions made, matters
considered and any limits placed on the review undertaken, is attached as
Appendix C to this proxy statement/prospectus and is incorporated herein by
reference. AREA's shareholders are urged to read the opinion in its entirety.
JPMorgan's written opinion is addressed to the Board of Directors of AREA, is
directed only to the exchange ratio in the merger and does not constitute a
recommendation to any shareholder of AREA as to how such shareholder should
vote at the special meeting of shareholders. The summary of the opinion of
JPMorgan set forth in this proxy statement/prospectus is qualified in its
entirety by reference to the full text of the opinion.
In arriving at its opinion dated the date of this proxy
statement/prospectus, JPMorgan performed the following activities:
. reviewed the merger agreement and the stock option agreement between
AREA and BB&T;
. reviewed the draft dated [ ], 2001 of this proxy statement/prospectus;
. reviewed various publicly available business and financial information
concerning AREA and BB&T and the industries in which they operate;
. compared the proposed financial terms of the merger with the publicly
available financial terms of various other transactions involving
companies JPMorgan deemed relevant and the consideration received for
such companies;
. compared the financial and operating performance of AREA and BB&T with
publicly available information concerning other companies JPMorgan
deemed relevant and reviewed the current and historical market prices of
AREA's common stock and BB&T's common stock and the relevant publicly
traded securities of such other companies;
. reviewed internal financial analyses and forecasts prepared by the
management of AREA relating to its businesses, as well as the estimated
amount and timing of the cost savings and related expenses and synergies
expected, as estimated by BB&T, to result from the merger (the
"synergies"); and
14
. performed other financial studies and analyses and considered other
information as JPMorgan deemed appropriate for the purposes of its
opinion.
In addition, JPMorgan held discussions with members of the management of
AREA and BB&T with respect to various aspects of the merger, the past and
current business operations of AREA and BB&T, the financial condition and
future prospects and operations of AREA and BB&T, the effects of the merger on
the financial condition and future prospects of AREA and BB&T, and other
matters JPMorgan believed necessary or appropriate to its inquiry.
JPMorgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or
that was furnished to it by AREA and BB&T or otherwise reviewed by JPMorgan,
and JPMorgan has not assumed any responsibility or liability for the accuracy
and completeness of the information reviewed. JPMorgan did not conduct any
valuation or appraisal of any assets or liabilities, nor were any valuations or
appraisals provided to JPMorgan. In relying on financial analyses and forecasts
provided to JPMorgan, including the synergies, JPMorgan assumed that they were
reasonably prepared based on assumptions reflecting the best currently
available estimates and judgments by management as to the expected future
results of operations and financial condition of AREA and BB&T to which such
analyses or forecasts relate. JPMorgan also assumed that the merger will
qualify as a tax-free reorganization for United States federal income tax
purposes. JPMorgan relied as to all legal matters relevant to rendering its
opinion upon the advice of counsel. JPMorgan further assumed that all material
governmental, regulatory or other consents and approvals necessary for the
consummation of the merger will be obtained without any adverse effect on AREA
or BB&T or on the contemplated benefits of the merger.
JPMorgan's opinions are based on economic, market and other conditions as in
effect on, and the information made available to JPMorgan as of, the respective
dates of such opinions. Subsequent developments may affect the written opinion
dated the date of this proxy statement/prospectus, and JPMorgan does not have
any obligation to update, revise, or reaffirm that opinion. JPMorgan's opinion
is limited to the fairness, from a financial point of view, to the holders of
AREA's common stock of the exchange ratio in the proposed merger, and JPMorgan
has expressed no opinion as to the underlying decision by AREA to engage in the
merger. JPMorgan expressed no opinion as to the price at which AREA's common
stock or BB&T's common stock will trade at any future time, whether before or
after consummation of the merger.
15
In its opinions, JPMorgan noted that it had not been authorized to and did
not solicit any expressions of interest from any other parties with respect to
the sale of all or any part of AREA or any other alternative transaction.
Consequently, JPMorgan assumed that the terms of the merger are the most
beneficial terms from AREA's perspective that could under the circumstances be
negotiated among the parties to the merger, and JPMorgan expressed no opinion
as to whether any alternative transaction might produce consideration for
AREA's shareholders in an amount in excess of that contemplated in the merger.
JPMorgan noted, however, that during the course of its work with AREA, JPMorgan
had not become aware of any interest by any third party (other than BB&T) in
engaging in any alternative transactions with AREA.
In accordance with customary investment banking practice, JPMorgan employed
generally accepted valuation methods in reaching its opinion. The following is
a summary of the material financial analyses utilized by JPMorgan in connection
with providing its opinion.
Public Trading Multiples. Using publicly available information, JPMorgan
compared selected financial data for AREA with similar data for selected
publicly traded companies engaged in businesses that JPMorgan deemed to be
relevant to AREA. The companies selected by JPMorgan were Old National Bancorp,
First Financial Bancorp, First Merchants Corporation, 1st Source Corporation,
Integra Bank Corporation, Mid-America Bancorp, Community Trust Bancorp, and
Irwin Financial Corporation. These companies were selected, among other
reasons, because they operate in markets that are both geographically close and
demographically similar to the markets of AREA and are of a similar size. For
each selected company, publicly available projected future financial
performance provided by I/B/E/S was measured. I/B/E/S is a data service that
monitors and publishes compilations of earnings estimates by selected research
analysts. JPMorgan examined the market premium over tangible book value as a
percentage of core deposits, as well as a range of multiples of AREA's trading
price to 2001 cash earnings per share, 2002 cash earnings per share, and
tangible book value per share. This range of value measures yielded an implied
trading value for AREA's common stock of approximately $14 to $19 per share.
Selected Transaction Analysis. Using publicly available information,
JPMorgan examined selected bank transactions since January 2000 with an
announced value of $300 million to $600 million. Specifically, JPMorgan
reviewed the following transactions: F.N.B. Corp./Promistar, BB&T/Century
South, Park National/Security Bancorp, Wachovia/Republic Security, Valley
National/Merchants New York, M&T Bank/Premier National, BancorpSouth/First
United, Wells Fargo/First Commerce, and Carolina First/Anchor Financial.
JPMorgan examined the premium paid over trading price 5 days prior to
announcement, the premium to core deposits, as well as a range of transaction
multiples such as deal price to the last twelve months core earnings per share,
forward GAAP earnings per share, forward cash earnings per share, and tangible
book value per share. Based upon this range of transaction premiums and
multiples, JPMorgan arrived at an estimated range of equity values for AREA's
common stock of between $18 and $21 per share.
Discounted Cash Flow Analysis. JPMorgan conducted a discounted cash flow
analysis for the purpose of determining the fully diluted equity value per
share for AREA's common stock. JPMorgan calculated the distributable capital
that AREA is expected to generate on a stand-alone basis during fiscal years
2001 through 2010 based upon financial projections prepared by I/B/E/S through
2003, and assumed that AREA's earnings were grown thereafter at an annual rate
ranging from 5% to 11%. For each growth rate, JPMorgan calculated the sum of:
(a) the estimated 2001-2010 distributable capital per share, projected so that
AREA's tangible equity to assets ratio would be maintained at 7.0%, and
discounted to present values at an assumed discount rate of 11%, and (b) the
terminal values per share of AREA common stock based on assumed multiples of
AREA's projected 2011 earnings ranging from 10.4x to 11.4x. This discounted
cash flow analysis indicated a range of equity values of between $17 and $21
per share of AREA's common stock on a stand-alone basis (i.e., without
synergies).
JPMorgan also conducted a discounted cash flow analysis for the purpose of
determining the fully diluted equity value per share for BB&T's common stock.
JPMorgan calculated the distributable capital that BB&T is expected to generate
on a stand-alone basis during fiscal years 2001 through 2010 based upon
financial
16
projections prepared by I/B/E/S through 2003, and assumed that BB&T's earnings
were grown thereafter at an annual rate ranging from 7% to 12%. For each growth
rate, JPMorgan calculated the sum of: (a) the estimated 2001-2010 distributable
capital per share, projected so that BB&T's tangible equity to assets ratio
would be maintained at 7.0%, and discounted to present values at an assumed
discount rate of 11%, and (b) the terminal values per share of BB&T common
stock based on assumed multiples of BB&T's projected 2011 earnings ranging from
11.2x to 13.2x. This discounted cash flow analysis indicated a range of equity
values of between $38 and $51 per share of BB&T's common stock on a stand-alone
basis (i.e., without synergies).
Contribution Analysis. JPMorgan reviewed and analyzed the relative
contributions to be made by AREA and BB&T to the combined entity. These
contributions were compared to the 0.55x exchange ratio in the proposed merger.
The following table illustrates the relative contribution of selected
earnings and valuation items by AREA to a combined AREA/BB&T entity, excluding
transaction synergies:
AREA Contribution basis Contribution Implied exchange ratio
----------------------- ------------ ----------------------
Projected financial performance
2002E GAAP earnings..................... 3.0% 0.588x
2003E GAAP earnings..................... 3.0 0.586
2002E cash earnings..................... 3.1 0.611
2003E cash earnings..................... 3.1 0.606
Equity value, diluted (as of November 6,
2001)
Market value............................ 2.6 0.509
Discounted cash flow value.............. NA 0.373
Pro Forma Merger Analysis. JPMorgan analyzed pro forma earnings per share
forecasts for calendar years 2002 and 2003 based upon estimates provided by
I/B/E/S. In performing this analysis, JPMorgan considered the cost savings
expected to be achieved in 2002 and 2003. The analysis showed that the merger
would be neutral to BB&T's GAAP and cash earnings per share for 2002, accretive
to BB&T's GAAP and cash earnings per share for 2003, and accretive to BB&T's
tangible book value per share in 2002 and 2003.
In connection with its opinion dated the date of this proxy
statement/prospectus, JPMorgan reviewed the analyses used to render its
November 7, 2001 opinion to the Board of Directors of AREA by performing
procedures to update these analyses and by reviewing the assumptions upon which
these analyses were based and the factors considered in connection with these
analyses.
The summary set forth above does not purport to be a complete description of
the analyses or data presented by JPMorgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. JPMorgan believes that the summary set forth
above and its analyses must be considered as a whole and that selecting
portions, without considering all, of its analyses could create an incomplete
view of the processes underlying its analyses and opinion. JPMorgan based its
analyses on assumptions that it deemed reasonable, including assumptions
concerning general business and economic conditions and industry-specific
factors. The other principal assumptions upon which JPMorgan based its analyses
are set forth above under the description of each analysis. JPMorgan's analyses
are not necessarily indicative of actual values or actual future results that
might be achieved, and the actual values may be higher or lower than those
indicated. Moreover, JPMorgan's analyses are not and do not purport to be
appraisals or otherwise reflect the prices at which businesses actually could
be bought or sold.
As a part of its investment banking business, JPMorgan and its affiliates
are continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. JPMorgan was selected to advise AREA with respect to the
merger on the basis of this experience and its familiarity with AREA.
17
For services rendered in connection with the merger, AREA has agreed to pay
JPMorgan a fee of 0.75% of the transaction value. In addition, AREA has agreed
to reimburse JPMorgan for its expenses incurred in connection with its
services, including the fees and disbursements of counsel, and will indemnify
JPMorgan against various liabilities, including liabilities arising under the
Federal securities laws.
JPMorgan and its affiliates have in the past provided, and in the future may
provide, investment banking and financial services to AREA and BB&T for which
services JPMorgan and its affiliates received, and expect to receive, customary
fees. In the ordinary course of their businesses, JPMorgan and its affiliates
may actively trade the debt and equity securities of AREA or BB&T for their own
accounts or for the accounts of customers and, accordingly, they may at any
time hold long or short positions in AREA's and BB&T's securities.
Exchange Ratio
Upon completion of the merger, each outstanding share of AREA common stock
will be converted into the right to receive 0.55 shares of BB&T common stock,
plus cash in lieu of any fractional share of BB&T common stock that would
otherwise be issued.
You should be aware that the market value of a share of BB&T common stock
will fluctuate and that neither BB&T nor AREA can give you any assurance as to
what the price of BB&T common stock will be when the merger becomes effective
or when certificates for those shares are delivered following surrender and
exchange of your certificates for shares of AREA stock. We urge you to obtain
information on the market value of BB&T common stock that is more recent than
that provided in this proxy statement/prospectus. See "Summary--Comparative
Market Prices and Dividends" on page .
No fractional shares of BB&T common stock will be issued in the merger. If
you would otherwise be entitled to a fractional share of BB&T common stock in
the merger, you will be paid an amount in cash determined by multiplying the
fractional part of the share of BB&T common stock by the closing price per
share of BB&T common stock on the NYSE at 4:00 p.m., Central Time, on the date
that the merger becomes effective as reported on NYSEnet.com.
Exchange of AREA Stock Certificates
When the merger is completed, without any action on the part of AREA or the
AREA shareholders, shares of AREA common stock will be converted into and will
represent the right to receive, upon surrender of the certificate representing
such shares as described below, whole shares of BB&T common stock and cash
instead of any fractional share interest. Promptly after the merger becomes
effective, BB&T will deliver or mail to you a form of letter of transmittal and
instructions for surrender of your AREA stock certificates. When you properly
surrender your certificates or provide other satisfactory evidence of
ownership, and return the letter of transmittal duly executed and completed in
accordance with its instructions and any other documents as may be reasonably
requested, BB&T will promptly deliver to you the shares of BB&T common stock
(and any declared and unpaid dividends on such shares) and cash, if any, to
which you are entitled.
You should not send in your stock certificates until you receive the letter
of transmittal and instructions.
After the merger is completed, and until surrendered as described above,
each outstanding AREA stock certificate will be deemed for all purposes to
represent only the right to receive the merger consideration. No interest will
be paid or accrued on any cash payable for fractional shares as part of the
merger consideration. With respect to any AREA stock certificate that has been
lost or destroyed, BB&T will pay the merger consideration attributable to the
shares represented by 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 in
question. After the merger is completed, AREA's transfer books will be closed
and no transfer of the shares of AREA stock outstanding immediately before the
time that the merger becomes effective will be made on BB&T's stock transfer
books.
18
If AREA declares a dividend on the AREA common stock as permitted by the
merger agreement with a record date before the time the merger becomes
effective, and that dividend has not been paid before the merger becomes
effective, BB&T will pay the dividend to the former AREA shareholders.
To the extent permitted by law, after the merger becomes effective, you will
be entitled to vote at any meeting of BB&T shareholders the number of whole
shares of BB&T common stock into which your shares of AREA stock are converted,
regardless of whether you have exchanged your AREA stock certificates for BB&T
stock certificates. Whenever BB&T declares a dividend or other distribution on
the BB&T common stock, which has a record date after the merger becomes
effective, the declaration will include dividends or other distributions on all
shares of BB&T common stock issuable under the merger agreement. However, no
dividend or other distribution payable to the holders of record of BB&T common
stock will be delivered to you until you surrender your AREA stock certificate
for exchange as described above. Upon surrender of your AREA stock certificate,
the certificate representing the BB&T common stock into which your shares of
AREA stock have been converted, together with cash in lieu of any fractional
share of BB&T common stock to which you would otherwise be entitled and any
undelivered dividends, will be delivered and paid to you without interest.
The Merger Agreement
Effective Date and Time of the Merger
The merger agreement provides that the closing of the merger will take place
on a business day designated by BB&T that is within 30 days following the
satisfaction of the conditions to the completion of the merger, or a later date
mutually acceptable to the parties. The merger will become effective at the
time and date specified in the articles of merger to be filed with the
Secretary of State of North Carolina and the Commonwealth of Kentucky Secretary
of State. It is currently anticipated that the filing of the articles of merger
will take place in 2002, assuming all conditions to the respective
obligations of BB&T and AREA to complete the merger have been satisfied.
Conditions to the Merger
The obligations of BB&T and AREA to carry out the merger are subject to
satisfaction (or, if permissible, waiver) of the following conditions at or
before the time the merger becomes effective:
. all corporate action necessary to authorize the performance of the
merger agreement must have been duly and validly taken, including the
approval of the shareholders of AREA of the merger agreement;
. BB&T's registration statement on Form S-4 relating to the merger
(including any post-effective amendments) must be effective under the
Securities Act of 1933, no proceedings may be pending or, to BB&T's
knowledge, threatened by the Securities and Exchange Commission to
suspend the effectiveness of the registration statement, and the BB&T
common stock to be issued in the merger must either have been registered
or exempt from registration under applicable state securities laws;
. the parties must have received all regulatory approvals required in
connection with the transactions contemplated by the merger agreement,
all notice periods and waiting periods required with respect to the
approvals must have passed and all approvals must be in effect;
. neither BB&T nor AREA nor any of their respective subsidiaries may be
subject to any order, decree or injunction of a court or agency of
competent jurisdiction that enjoins or prohibits completion of the
transactions provided in the merger agreement; and
. AREA and BB&T must have received an opinion of BB&T's legal counsel, in
form and substance satisfactory to AREA and BB&T, to the effect that the
merger will constitute one or more reorganizations under Section 368 of
the Internal Revenue Code and that the shareholders of AREA will not
recognize any gain or loss to the extent that they exchange shares of
AREA common stock for shares of BB&T common stock.
19
The obligations of AREA to carry out the transactions in the merger
agreement are subject to the satisfaction of the following additional
conditions at or before the time the merger becomes effective, unless, where
permissible, waived by AREA:
. BB&T must have performed in all material respects all obligations and
complied in all material respects with all covenants required by the
merger agreement;
. the shares of BB&T common stock to be issued in the merger must have
been approved for listing on the NYSE, subject to official notice of
issuance; and
. AREA must have received specified closing certificates from BB&T and
legal opinions from BB&T's counsel.
All representations and warranties of BB&T will be evaluated as of the date
of the merger agreement and at the time the merger becomes effective as though
made at the time the merger becomes effective (or, in the case of any
representation and warranty that specifically relates to an earlier date, on
the date designated), except as otherwise provided in the merger agreement or
consented to in writing by AREA. The representations and warranties of BB&T
concerning the following must be true and correct (except for inaccuracies
which are de minimis):
. its capitalization;
. its and its subsidiaries' organization and authority to conduct
business;
. its authorization of, and the binding nature of, the merger agreement;
and
. the absence of any conflict between the transactions in the merger
agreement and BB&T's articles of incorporation or bylaws.
Moreover, there must not be inaccuracies in the representations and warranties
of BB&T in the merger agreement that, individually or in the aggregate, have or
are reasonably likely to have a material adverse effect on BB&T and its
subsidiaries taken as a whole.
The obligations of BB&T to carry out the transactions in the merger
agreement are subject to satisfaction of the following additional conditions at
or before the time the merger becomes effective, unless, where permissible,
waived by BB&T:
. no regulatory approval may have imposed any condition or requirement
that, in the reasonable opinion of the BB&T Board, would so materially
adversely affect the business or economic benefits to BB&T of the
transactions in the merger agreement as to render the consummation of
such transactions inadvisable or unduly burdensome;
. AREA must have performed in all material respects all of its obligations
and complied in all material respects with all of its covenants required
by the merger agreement;
. BB&T must have received agreements from specified affiliates of AREA
concerning their shares of AREA common stock and the shares of BB&T
common stock to be received by them; and
. BB&T must have received specified closing certificates from AREA and
legal opinions from AREA's counsel.
. Thomas R. Brumley shall have continued in the employment of AREA until
the merger is effective, and C.M. Gatton shall have executed and
delivered to BB&T a noncompetition agreement.
All representations and warranties of AREA will be evaluated at the date of
the merger agreement and at the time the merger becomes effective as though
made at the time the merger becomes effective (or, in the case of any
representation and warranty that specifically relates to an earlier date, on
the date designated), except as otherwise provided in the merger agreement or
consented to in writing by BB&T. The representations and
20
warranties of AREA concerning the following must be true and correct (except
for inaccuracies which are de minimis):
. its capitalization;
. its and its subsidiaries' organization and authority to conduct
business;
. its ownership of its subsidiaries and other equity interests;
. its authorization of, and the binding nature of, the merger agreement;
. the absence of conflict between the transactions in the merger agreement
and AREA's articles of incorporation or bylaws;
. its forbearance from taking any actions that would negatively affect the
tax-free treatment of the merger or the receipt of necessary regulatory
approvals; and
. actions taken to exempt the merger from any applicable anti-takeover
laws.
Moreover, there must not be inaccuracies in the representations and warranties
of AREA in the merger agreement that, individually or in the aggregate, have or
are reasonably likely to have a material adverse effect on AREA and its
subsidiaries taken as a whole.
Conduct of AREA's and BB&T's Businesses Before the Merger
Except with the consent of BB&T until the merger is effective, neither AREA
nor any of its subsidiaries may:
. carry on its business except in the ordinary course and in substantially
the same manner as previously conducted, or establish or acquire any new
subsidiary or engage in any new type of activity or expand any existing
activities;
21
. declare or pay any dividend or make any distribution on its capital
stock other than regularly scheduled quarterly dividends of $.045 (as
such amount may be increased in an amount and at a time consistent with
past practices) per share of AREA common stock payable in a manner
consistent with past practices; provided that: (a) any dividend declared
or payable on AREA common stock must, unless otherwise agreed by BB&T
and AREA, be declared with a record date before the time the merger
becomes effective only if the record date for payment of the
corresponding quarterly dividend to holders of BB&T common stock is
before the time the merger becomes effective; and (b) BB&T has consented
to:
. the declaration by AREA, during the fourth quarter of the year
ending December 31, 2001, of a quarterly dividend of $.055 per share
of AREA common stock payable with a record date in the first quarter
of the year ending December 31, 2002; and
. in the event that the merger is not effective on or before the
record date for the BB&T quarterly dividend payable in the second
quarter of the year ending December 31, 2002 (the "BB&T Record
Date"), AREA may declare a quarterly dividend payable with a record
date in such quarter, in an amount that will provide AREA
shareholders (after giving effect to any and all other dividends
payable to AREA shareholders in the second quarter of the year
ending December 31, 2002) the economic equivalent of the dividend
that would have been received by AREA shareholders during such
quarter, if the merger had occurred prior to the BB&T Record Date.
. issue any shares of capital stock, except pursuant to stock options
outstanding as of the date of the merger agreement or the stock option
granted to BB&T in connection with the merger agreement;
. issue, grant or authorize any rights to acquire capital stock or effect
any recapitalization, reclassification, stock dividend, stock split or
similar change in capitalization;
. amend its articles of incorporation or bylaws;
. impose or permit the imposition or existence of any lien, charge or
encumbrance on any share of stock held by it in any AREA subsidiary or
release any material right or cancel or compromise any debt or claim, in
each case other than in the ordinary course of business;
. merge or consolidate with any other entity or acquire control over any
other entity;
. dispose of or acquire any material amount of assets, other than in the
ordinary course of its business consistent with past practices;
. fail to comply in any material respect with any legal requirements
applicable to it and to the conduct of its business;
. increase the compensation of any of its directors, officers or employees
(excluding increases resulting from the exercise of compensatory stock
options outstanding as of the date of the merger agreement), or pay or
agree to pay any bonus or provide any new employee benefit or incentive,
except for increases or payments made in the ordinary course of business
consistent with past practice pursuant to existing plans or
arrangements;
. enter into or substantially modify (except as may be required by law)
any employee benefit, incentive or welfare arrangement, or any related
trust agreement, relating to any of its directors, officers or other
employees (other than renewals consistent with past practice);
. solicit inquiries or proposals with respect to, furnish any information
relating to, or participate in any negotiations or discussions
concerning, any other business combination with AREA or any AREA
subsidiary, or fail to notify BB&T immediately if any such inquiry or
proposal is received, any such information is requested or required or
any such discussions are sought (except that this would not apply to
furnishing information to, or participating in negotiations or
discussions with, an offeror following an unsolicited offer if AREA is
advised in writing by legal counsel that, in its opinion, the
22
failure to so furnish information or negotiate would likely constitute a
breach of the fiduciary duty of AREA's Board of Directors to the AREA
shareholders);
. enter into (a) any material agreement or commitment other than in the
ordinary course, (b) any agreement, indenture or other instrument other
than in the ordinary course relating to the borrowing of money by AREA
or an AREA subsidiary or guarantee by AREA or an AREA subsidiary of any
obligation, (c) any agreement or commitment relating to the employment
or severance of a consultant or the employment, severance or retention
in office of any director, officer or employee (except for the election
of directors or the reappointment of officers in the normal course) or
(d) any contract, agreement or understanding with a labor union;
. change its lending, investment or asset liability management policies in
any material respect, except as required by applicable law, regulation
or directives or as provided for in the merger agreement;
. change its methods of accounting in effect at December 31, 2000, except
as required by changes in accounting principles to which BB&T concurs or
change any of its federal income tax reporting methods from those used
in the preparation of its tax returns for the year ended December 31,
2000, except as required by changes in law;
. incur any commitments for capital expenditures or obligations to make
capital expenditures in excess of $25,000 for any one expenditure or
$100,000 in the aggregate;
. incur any new indebtedness other than deposits from customers, advances
from the Federal Home Loan Bank or the Federal Reserve Bank and reverse
repurchase arrangements in the ordinary course of business;
. take any action that would or could reasonably be expected to (a) cause
the merger not to constitute a tax-free reorganization as determined by
BB&T, (b) result in any inaccuracy of a representation or warranty that
would permit termination of the merger agreement or (c) cause any of the
conditions to the merger to fail to be satisfied; or
. agree to do any of the foregoing.
In addition, AREA has agreed:
. to take such actions as may be reasonably necessary to modify the
structure of the merger, as long as the modification does not reduce the
consideration to be received by AREA shareholders, abrogate the
covenants contained in the merger agreement or substantially delay the
completion of the merger;
. to cooperate with BB&T concerning accounting and financial matters
necessary to facilitate the merger, including issues arising in
connection with: (1) record keeping, loan classification, valuation
adjustments, levels of loan loss reserves and other accounting
practices; and (2) AREA's lending, investment or asset/liability
management policies;
. to keep BB&T advised of all material developments relevant to its
business prior to completion of the merger; and
. to provide BB&T access to AREA's books and records.
Except with the consent of AREA until the merger is effective, neither BB&T
nor any of its subsidiaries may take any action that would or might be
expected to:
. cause the merger not to constitute a tax-free reorganization;
. result in any inaccuracy of a representation or warranty that would
allow termination of the merger agreement;
. cause any of the conditions precedent to the transactions contemplated
in the merger agreement to fail to be satisfied; or
23
. 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.
BB&T has also agreed to keep AREA advised of all material developments relevant
to its business before the completion of the merger.
Waiver; Amendment; Termination; Expenses
Except with respect to any required regulatory approval, BB&T or AREA may at
any time (whether before or after approval of the merger agreement by the AREA
shareholders) extend the time for the performance of any of the obligations or
other acts of the other party and may waive (a) any inaccuracies of the other
party in the representations or warranties contained in the merger agreement or
any document delivered pursuant thereto, (b) 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 in the merger
agreement or (c) the performance by the other party of any of its obligations
set out in the merger agreement. The parties may also mutually amend or
supplement the merger agreement in writing at any time. However, no extension,
waiver, amendment or supplement which would reduce either the exchange ratio or
the payment terms for fractional interests to be provided to holders of AREA
common stock upon completion of the merger will be made after the AREA
shareholders approve the merger agreement.
If any condition to the obligation of either party to complete the merger is
not fulfilled, that party will consider the materiality of such nonfulfillment.
In the case of the nonfulfillment of a material condition to AREA's
obligations, AREA will, if it determines it appropriate under the
circumstances, resolicit shareholder approval of the merger agreement and
provide appropriate information concerning the obligation that has not been
satisfied.
The merger agreement may be terminated, and the merger may be abandoned:
. at any time before the merger becomes effective, by the mutual consent
in writing of BB&T and AREA;
. at any time before the merger becomes effective, by either party: (a) in
the event of a material breach by the other party of any covenant or
agreement contained in the merger agreement; or (b) in the event of an
inaccuracy of any representation or warranty of the other party
contained in the merger agreement that would provide the nonbreaching
party the ability to refuse to complete the merger under the applicable
standard in the merger agreement (see "--Conditions to the Merger");
and, in either case, if the breach or inaccuracy has not been cured by
the earlier of 30 days following notice of the breach or inaccuracy to
the party committing it or the time that the merger is completed;
. at any time before the merger becomes effective, by either party in
writing, if any of the conditions precedent to the obligations of the
other party to complete the transactions contemplated by the merger
agreement cannot be satisfied or fulfilled before the time the merger
becomes effective, and the party giving the notice is not in material
breach of any of its representations, warranties, covenants or
undertakings;
. at any time, by either party in writing, if any of the applications for
prior regulatory approval are denied and the time period for appeals and
requests for reconsideration has run;
. at any time, by either party in writing, if the shareholders of AREA do
not approve the merger agreement by the required vote; or
. at any time following May 31, 2002 by either party in writing, if the
merger has not yet become effective and the party giving the notice is
not in material breach of any of its representations, warranties,
covenants or undertakings.
24
If the merger agreement is terminated under any of the provisions described
above, the merger agreement will become void and have no effect, except that
(a) provisions in the merger agreement relating to confidentiality and expenses
will survive the termination and (b) a termination for an uncured breach of a
covenant or agreement or inaccuracy in a representation or warranty will not
relieve the breaching party from liability for that breach or inaccuracy.
Each party will pay the expenses it incurs in connection with the merger
agreement and the merger, except that printing expenses and Securities and
Exchange Commission filing fees incurred in connection with the registration
statement and this proxy statement/prospectus will be paid 50% by BB&T and 50%
by AREA.
Interests of AREA's Directors and Officers in the Merger
Some members of AREA's management and the AREA Board have interests in the
merger that are in addition to or different from their interests as AREA
shareholders. The AREA Board was aware of these interests and considered them
in approving the merger agreement and the merger.
Vesting of Stock Options
Officers and employees of AREA have received grants of stock options under
AREA's option plans, with vesting to occur over a period of 4 to 10 years.
Under the terms of these plans, all unvested options will become vested upon
completion of the merger. AREA's executive officers currently hold unvested
options to acquire the following number of shares: 50,782. Upon completion of
the merger, each outstanding option to acquire AREA common stock will be
converted into an option to acquire BB&T common stock. See "Effect on Employee
Benefit Plans and Options--Stock Options" on page 38.
Employment Agreements
Thomas R. Brumley, AREA's President and Chief Executive Officer, and Branch
Bank intend to enter into an employment agreement after the merger. In
addition, Branch Bank has offered to enter into employment agreements with John
A. Ray, Darrell L. Gustafson, F. Lee Hess, Richard N. Wilson and Kevin M.
Gallagher, to become effective upon completion of the merger [to be updated].
The proposed employment agreement between Mr. Brumley and Branch Bank
provides as follows:
. Mr. Brumley will serve as an Executive Vice President of Branch Bank and
receive an annual base salary of $228,000; and
. the employment term terminates on the earlier of: (1) the 61st day after
conversion of the data services systems of AREA to the data services
systems of BB&T; or (2) eighteen months after the merger is effective.
Thereafter, Mr. Brumley will become an independent consultant for a
period beginning at the end of the employment term and ending five years
after the date of the merger.
Mr. Brumley will be eligible to participate in BB&T's Amended and Restated
Short Term Incentive Plan on the same basis as similarly situated officers of
Branch Bank. Prior to inclusion in the BB&T Incentive Plan, BB&T will continue
in effect for Mr. Brumley the cash bonus program AREA has in effect at the time
of the merger. In addition, Mr. Brumley will be granted stock options annually
under BB&T's Amended and Restated 1995 Omnibus Stock Incentive Plan or a
successor plan. Mr. Brumley will also receive, on the same basis as other
similarly situated officers of Branch Bank, employee pension and welfare
benefits. AREA plans that provide benefits of the same type or class as a
corresponding Branch Bank plan will continue in effect for Mr. Brumley until he
becomes eligible to become a participant in the corresponding Branch Bank plan.
Mr. Brumley will also be entitled to no less than four weeks of vacation per
year.
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Mr. Brumley's proposed employment agreement provides that, at the end of the
employment period, Mr. Brumley will render services as an independent
contractor in the nature of customer, employee, and community relations and
business development. During the consulting period, Mr. Brumley will receive:
. an annual amount equal to Mr. Brumley's base salary rate in effect
immediately preceding the consulting period; and
. (a) health insurance and life insurance benefits comparable to the group
employee benefits which Branch Bank may from time to time extend to its
officers; (b) payments during the consulting period having a present
value equal to the benefits, if any, that he would have otherwise earned
under Branch Bank's tax-qualified and nonqualified pension plans; and
(c) disability benefits as provided during the employment term (or
benefits economically equivalent to such disability benefits).
Under the proposed employment agreement, Mr. Brumley is generally subject to
noncompetition covenants during the employment term and the consulting period
and for up to two years thereafter.
If Mr. Brumley's employment is terminated (a) by Branch Bank for any reason
other than Just Cause, (b) Disability Notice, or (c) by Mr. Brumley due to a
material breach by Branch Bank of the employment agreement, Mr. Brumley will
receive: (a) a rate of annual compensation equal to the highest amount of the
annual cash compensation received from Branch Bank and AREA during any of the
three calendar years immediately preceding such termination, for the remainder
of the employment term described above; (b) accelerated vesting of any
nonvested benefits under any employee stock-based or other benefit plan or
arrangement, to the extent that Branch Bank and BB&T can permit based on their
best efforts and to the extent not prohibited by the terms of such plan or
arrangement; (c) continued coverage under employee welfare benefit plans for
the remainder of the employment term described above; (d) payments having a
present value equal to the benefits Mr. Brumley would have otherwise earned
under Branch Bank's tax-qualified and nonqualified pension plans for the
remainder of the employment term described above; and (e) the payments payable
during the consulting period described above. If Mr. Brumley terminates his
consulting services during the consulting period due to breach of the
employment agreement by Branch Bank, Mr. Brumley shall receive the payments and
benefits set forth above for the remainder of the consulting period. If Mr.
Brumley breaches the noncompetition covenants or fails or refuses to render
consulting services as requested by Branch Bank, the payments described in this
paragraph will cease.
If Mr. Brumley's employment is terminated by Branch Bank for Just Cause or
if Mr. Brumley voluntarily terminates his employment for any reason other than
as described above, the consulting period will not begin and Mr. Brumley will
not be entitled to receive the compensation described in the preceding
paragraph.
If any of the payments to be made under the employment agreement would
constitute a "parachute payment," as defined in Section 280G of the Internal
Revenue Code, such payments would be reduced by the smallest amount necessary
so that no portion of such payments would be a "parachute payment." A
"parachute payment" generally is a payment which is contingent on a change in
the control of the corporation and the present value of which equals or exceeds
three times the "base amount," which is generally defined as an individual's
annualized includable compensation for the "base period," which is generally
the most recent five taxable years ending before the date of the change in
control. Sections 280G and 4999 of the Internal Revenue Code generally provide
that if "parachute payments" are paid to an individual, everything above the
base amount will be subject to a 20% excise tax payable by the individual (in
addition to the payment of regular income taxes on the payments), as well as be
nondeductible by the employer for federal income tax purposes.
The proposed employment agreement with each of Messrs. Ray, Gustafson, Hess,
Wilson and Gallagher (collectively referred to in this proxy
statement/prospectus as the "Executives"), are for terms which commence upon
completion of the merger and terminate on the day next preceding the third
anniversary of the agreement. The employment agreements of the Executives
provide that each employee will receive a minimum annual salary as follows: (1)
Mr. Ray, $192,000; (2) Mr. Gustafson, $175,000; (3) Mr. Hess, $150,000;
26
(4) Mr. Wilson, $135,000; and (5) Mr. Gallagher, $115,000. These proposed
employment agreements are similar to Mr. Brumley's proposed employment
agreement, except that they do not provide for a consulting period following
conclusion of the employment term.
In Mr. Gallagher's case, the offer of the employment agreement is contingent
upon Mr. Gallagher and BB&T agreeing on a mutually satisfactory employment
position for Mr. Gallagher. If the parties do not agree on a mutually
satisfactory employment position and Mr. Gallagher works for a BB&T affiliate
until at least 60 days after conversion of the data systems of AREA to the data
systems of BB&T or Mr. Gallagher's employment is terminated by a BB&T affiliate
without cause, Mr. Gallagher will be entitled to a lump sum severance payment
upon termination of employment equal to the sum of his annual base salary at
the date of termination plus his annual bonus from AREA for 2000.
Advisory Board
After the merger becomes effective, Branch Bank will establish a state
Advisory Board for Kentucky and shall offer to each of the members of the Board
of Directors of Area a seat on this newly established Advisory Board.
Membership of any person on the Advisory Board is conditional upon Branch
Bank's receipt of a noncompetition agreement from the prospective Advisory
Board member. For two years after the merger becomes effective, the Advisory
Board members appointed who are neither employees of nor under contract with
BB&T or any of its affiliates, and who continue to serve shall receive, as
compensation for service on the Advisory Board, Advisory Board member fees
equal in amount each year to the annual retainer and schedule of attendance
fees for directors of AREA in effect on August 31, 2001. Thereafter, if they
continue to serve they will receive fees in accordance with Branch Bank's
standard schedule of advisory board service fees as in effect from time to
time. For two years after the merger becomes effective, no Advisory Board
member will be prohibited from serving because he or she has reached the
maximum age for service (currently age 70).
Board of Directors of Subsidiary Bank of BB&T
When the merger becomes effective, BB&T will offer C.M. Gatton a seat on the
BB&T Advisory Board for Kentucky, and Branch Bank will elect him to its board
of directors, to serve for a period of at least two one-year terms, subject to
removal for cause. Members of the Branch Bank board of directors receive an
annual retainer plus a fee for each meeting attended, and members of the Branch
Bank Advisory Board for Kentucky receive a fee for each meeting attended,
except that none of these fees is paid to any member of the Branch Bank board
or any member of any of its advisory boards who is also an employee of BB&T or
an affiliate of BB&T. In consideration of the merger and Mr. Gatton's
acceptance of the Branch Bank board seat, Mr. Gatton has agreed to be subject
to various noncompetition obligations for two years following the merger or
such longer period as he may be a director of Branch Bank.
Indemnification of Directors and Officers
The merger agreement provides that BB&T or one of its subsidiaries will
maintain for three years after the merger becomes effective directors' and
officers' liability insurance covering directors and officers of AREA for acts
or omissions occurring before the merger becomes effective. This insurance will
provide at least the same coverage and amounts as contained in AREA's policy on
the date of the merger agreement, unless the annual premium on the policy would
exceed 150% of the annual premium payments on AREA's policy, in which case BB&T
would maintain the most advantageous policies of directors' and officers'
liability insurance obtainable for a premium equal to that amount. BB&T has
also agreed to indemnify all individuals who are or have been officers,
directors or employees of AREA or an AREA subsidiary before the merger becomes
effective from any acts or omissions in such capacities before the merger
becomes effective to the extent such indemnification is provided under the
articles of incorporation or bylaws of AREA and permitted under the North
Carolina Business Corporation Act.
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Material Federal Income Tax Consequences of the Merger
The following is a summary of the material anticipated federal income tax
consequences of the merger generally applicable to the shareholders of AREA and
to BB&T and AREA. This summary is not intended to be a complete description of
all of the federal income tax consequences of the merger. No information is
provided with respect to the tax consequences of the merger under any other tax
laws, including applicable state, local and foreign tax laws. In addition, the
following discussion may not be applicable with respect to certain specific
categories of shareholders, including but not limited to:
. corporations, trusts, dealers in securities, financial institutions,
insurance companies or tax exempt organizations;
. persons who are not United States citizens or resident aliens or
domestic entities (partnerships or trusts);
. persons who are subject to alternative minimum tax (to the extent that
tax affects the tax consequences of the merger) or are subject to the
"golden parachute" provisions of the Internal Revenue Code (to the
extent that tax affects the tax consequences of the merger);
. persons who acquired AREA stock pursuant to employee stock options or
otherwise as compensation if such shares are subject to any restriction
related to employment;
. persons who do not hold their shares as capital assets; or
. persons who hold their shares as part of a "straddle" or "conversion
transaction."
No ruling has been or will be requested from the Internal Revenue Service with
respect to the tax effects of the merger. The federal income tax laws are
complex, and a shareholder's individual circumstances may affect the tax
consequences to the shareholder. Consequently, each AREA shareholder is urged
to consult his or her own tax advisor regarding the tax consequences, including
the applicable United States federal, state, local, and foreign tax
consequences, of the merger to him or her.
Tax Consequences of the Merger Generally. In the opinion of Womble Carlyle
Sandridge & Rice, PLLC, counsel to BB&T:
. the merger will constitute a reorganization under Section 368(a) of the
Internal Revenue Code;
. each of BB&T and AREA will be a party to that reorganization within the
meaning of Section 368(b) of the Internal Revenue Code;
. no gain or loss will be recognized by BB&T or AREA by reason of the
merger;
. the shareholders of AREA will recognize no gain or loss for federal
income tax purposes to the extent BB&T common stock is received in the
merger in exchange for AREA common stock;
. a shareholder of AREA who receives cash in lieu of a fractional share of
BB&T common stock will recognize gain or loss as if the shareholder
received the fractional share and it was then redeemed for cash in an
amount equal to the amount paid by BB&T in respect of the fractional
share;
. a shareholder of AREA who receives a cash payment pursuant to the
exercise of dissenters' rights will generally recognize capital gain or
loss in an amount equal to the difference between the amount received
and his or her basis in the AREA stock surrendered;
. the tax basis in the BB&T common stock received by a shareholder
(including any fractional share interest deemed received) will be the
same as the tax basis in the AREA common stock surrendered in exchange;
and
. the holding period for BB&T common stock received (including any
fractional share interest deemed received) in exchange for shares of
AREA common stock will include the period during which the shareholder
held the shares of AREA common stock surrendered in exchange, provided
that the AREA common stock was held as a capital asset at the time the
merger becomes effective.
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The completion of the merger is conditioned upon the receipt by BB&T and
AREA of the legal opinion of Womble Carlyle Sandridge & Rice, PLLC, counsel to
BB&T, dated as of the date the merger is completed, to the effect of the first
and fourth bulleted items described above. Neither party intends to waive this
condition. If the tax opinion is not available and the AREA Board determines to
proceed with the merger, AREA will resolicit its shareholders.
Dissenters' Rights. AREA shareholders who exercise their dissenters' rights
and who receive cash in exchange for their shares of AREA common stock will be
treated as having received that payment in redemption of their shares. In
general, the shareholder will recognize capital gain or loss measured by the
difference between the amount of cash received and the shareholder's adjusted
tax basis for the shares. If, however, the shareholder owns, either actually or
constructively, any AREA common stock that is exchanged in the merger for BB&T
common stock, the payment for dissenting shares to the shareholder could, in
certain limited circumstances, be treated as dividend income. In general, under
the constructive ownership rules of the Code, a holder may be considered to own
stock that is owned, and in some cases constructively owned, by related
individuals or entities, as well as stock that the shareholder (or related
individuals or entities) has the right to acquire by exercising an option or
converting a convertible security. Each shareholder who contemplates exercising
dissenters' rights should consult his or her own tax advisor as to the
possibility that any payment to such shareholder will be treated as dividend
income.
Cash Received in Lieu of a Fractional Share of BB&T Common Stock. A
shareholder of AREA who receives cash in lieu of a fractional share of BB&T
common stock will be treated as having received the fractional share pursuant
to the merger and then as having exchanged the fractional share for cash in a
redemption by BB&T subject to Section 302 of the Internal Revenue Code. As a
result, an AREA shareholder will generally recognize gain or loss equal to the
difference between the amount of cash received and the portion of the basis of
the shares of BB&T common stock allocable to his or her fractional interest.
This gain or loss will generally be capital gain or loss, and will be long-term
capital gain or loss if, as of the date of the exchange, the holding period for
such shares is greater than one year. Long-term capital gain of a non-corporate
holder is generally subject to tax at a maximum federal tax rate of 20%.
Backup Withholding and Information Reporting. The payment of cash in lieu of
a fractional share of BB&T common stock to a holder surrendering shares of AREA
stock will be subject to information reporting and backup withholding at a rate
of 30.5% (decreasing to 30% beginning January 1, 2002) of the cash payable to
the holder, unless the holder furnishes its taxpayer identification number in
the manner prescribed in applicable Treasury Regulations, certifies that such
number is correct, certifies as to no loss of exemption from backup withholding
and meets certain other conditions. Any amounts withheld from payments to a
holder under the backup withholding rules will be allowed as a refund or credit
against the holder's U.S. federal income tax liability, provided the required
information is furnished to the Internal Revenue Service.
Rights of Dissenting Shareholders
The following summary is not a complete statement of the provisions of
Kentucky law relating to the appraisal rights of shareholders and is qualified
in its entirety by reference to the provisions of Sections 271B.13-010 through
271B.13-310 of the Kentucky Business Corporation Act (KBCA) which are attached
in full as Appendix B to this proxy statement/prospectus. You are urged to read
Appendix B in its entirety.
Pursuant to the provisions of the KBCA, if the merger is consummated, any
shareholder of record of AREA who objects to the merger and who fully complies
with Sections 271B.13-010 through 271B.13-310 of the KBCA will be entitled to
demand and receive payment in cash of an amount equal to the fair value of all,
but not less than all, of his or her shares of AREA common stock. A shareholder
of record may assert dissenters' rights as to fewer than all of the shares
registered in his or her name only if he or she dissents with respect to all
shares beneficially owned by any one beneficial owner and notifies AREA in
writing of the name and address of each person on whose behalf he or she
asserts dissenters' rights. For the purpose of determining the amount to be
received in connection with the exercise of statutory dissenters' rights, the
fair value of a
29
dissenting shareholder's AREA common stock equals the value of the shares
immediately before the effective date of the merger, excluding any appreciation
or depreciation in anticipation of the merger.
Any AREA shareholder desiring to receive payment of the fair value of his or
her AREA common stock must:
. deliver to AREA, prior to the shareholder vote on the merger agreement
and plan of merger, a written notice of his or her intent to demand
payment for his or her shares if the merger is consummated;
. not vote his or her shares in favor of the merger agreement; and
. demand payment, certify whether the holder acquired beneficial ownership
of the shares before the date of the first announcement to news media or
to shareholders of the terms of the proposed merger and deposit his or
her stock certificates with BB&T in accordance with the terms of a
dissenters' notice to be sent to all dissenting shareholders within 10
days after the merger is consummated.
All written communications from shareholders with respect to the exercise of
dissenters' rights should be mailed before the merger is completed to AREA
Bancshares Corporation, 230 Frederica Street, Owensboro, Kentucky 42301,
Attention: General Counsel, and after the merger is completed to BB&T
Corporation, 200 West Second Street, Winston-Salem, North Carolina 27101,
Attention: General Counsel and Secretary. Voting against, abstaining from
voting or failing to vote on the proposal to approve the merger agreement and
plan of merger is not enough to satisfy the requirements of the KBCA. You must
also comply with all of the conditions relating to the separate written notice
of intent to dissent to the merger, the separate written demand for payment of
the fair value of shares of AREA common stock and the deposit of the stock
certificates.
The dissenters' notice sent to dissenting shareholders will:
. specify the dates and place for receipt of the payment demand and the
deposit of the AREA stock certificates;
. inform holders of uncertificated shares, if any, to what extent transfer
of the shares will be restricted after the payment demand is received;
. supply a form for demanding payment that includes the date of the first
public announcement of the terms of the merger as provided above and
requires that the person asserting dissenters' rights certify whether or
not he acquired beneficial ownership of the shares before that date;
. set a date by which BB&T must receive the payment demand, which date
must not be fewer than thirty (30), nor more than sixty (60) days after
the dissenters' notice is delivered; and
. be accompanied by a copy of the dissenters' rights provisions of the
KBCA.
On the later to occur of the date on which the merger is completed or the date
on which BB&T receives a payment demand from a dissenting shareholder who has
complied with the statutory requirements, BB&T will pay the dissenter the fair
value of his or her shares, plus accrued interest. BB&T's payment will be
accompanied by:
. AREA's balance sheet as of the end of a fiscal year ended not more than
16 months before the date of payment, an income statement for that year,
a statement of changes in shareholders' equity for that year and the
latest available interim financial statements, if any;
. a statement of BB&T's determination of the fair value of the shares;
. an explanation of how the interest was calculated; and
. a statement of the dissenting shareholder's right to demand payment of a
different amount under Section 271B.13-280 of the KBCA.
30
Upon payment of the agreed upon value, the dissenting shareholder will cease to
have any interest in its shares of AREA stock.
After the merger, BB&T may elect to withhold payment from a dissenter unless
such dissenter was the beneficial owner of the shares before the date of the
first public announcement of the terms of the merger. If BB&T makes such an
election, it shall estimate the fair value of the shares, plus accrued
interest, and send an offer to such shareholder that includes the estimate of
the fair value, an explanation of how the interest was calculated, and a
statement of the dissenters' right to demand payment of a different amount
under Section 271B.13-280. BB&T shall pay the offer amount to each such
dissenting shareholder who agrees to accept it in full satisfaction of his
demand.
If the dissenting shareholder believes the amount BB&T paid or offered is
less than the fair value of the shares or that the interest due is incorrectly
calculated, within 30 days after BB&T makes or offers payment for the shares of
a dissenting shareholder, such dissenting shareholder must demand payment of
its own estimate of the fair value of the shares and interest due. If the
demand for payment of the different amount under Section 271B.13-280 remains
unsettled, then BB&T, within 60 days after receiving the payment demand of a
different amount from the dissenting shareholder, must file an action in the
Daviess County, Kentucky circuit court, requesting that the fair value of the
dissenting shareholder's shares be determined. BB&T must make all dissenting
shareholders whose demands remain unsettled parties to the proceeding. If BB&T
does not begin the proceeding within the 60-day period, it shall be required to
pay the amount demanded by each dissenting shareholder whose demand remains
unsettled.
AREA shareholders should note that cash paid to dissenting shareholders in
satisfaction of the fair value of their shares will be recognized as gain or
loss for federal income tax purposes. See "--Federal Income Tax Consequences of
the Merger" on page .
Failure by an AREA shareholder to follow the steps required by the KBCA for
perfecting dissenters' rights may result in the loss of such rights. In view of
the complexity of these provisions and the requirement that they be strictly
followed, if you are considering dissenting from the approval and adoption of
the merger agreement and exercising your dissenters' rights under the KBCA, you
should consult your legal advisor.
Regulatory Considerations
Financial holding companies and bank holding companies (such as BB&T and
AREA, respectively) and their depository institution subsidiaries are highly
regulated institutions, with numerous federal and state laws and regulations
governing their activities. These institutions are subject to ongoing
supervision, regulation and periodic examination by various federal and state
financial institution regulatory agencies. Financial holding companies that own
one or more commercial banks are considered bank holding companies under state
and federal law for specified transactions, including the merger. Detailed
discussions of this ongoing regulatory oversight and the laws and regulations
under which it is carried out can be found in the Annual Reports on Form 10-K
of BB&T and of AREA which are incorporated by reference in this proxy
statement/prospectus. Those discussions are qualified in their entirety by the
actual language of the laws and regulations, which are subject to change based
on possible future legislation and action by regulatory agencies. See "Where
You Can Find More Information" on page .
The merger and the subsidiary mergers are subject to regulatory approvals,
as set forth below. To the extent that the following information describes
statutes and regulations, it is qualified in its entirety by reference to those
particular statutes and regulations.
The Merger
The merger is subject to approval by the Federal Reserve under the Bank
Holding Company Act. In considering the approval of the merger, this Act
requires the Federal Reserve to review the financial and
31
managerial resources and future prospects of BB&T and AREA and their respective
subsidiary banks, and the convenience and needs of the communities to be
served. The Federal Reserve is also required to evaluate whether the merger
would result in a monopoly or would be in furtherance of any combination or
conspiracy or attempt to monopolize the business of banking in any part of the
United States or otherwise would substantially lessen competition or tend to
create a monopoly or which in any manner would be in restraint of trade. If the
Federal Reserve determines that there are anti-competitive consequences to the
merger, it will not approve the transaction unless it finds that the anti-
competitive effects of the proposed transaction are clearly outweighed in the
public interest by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served.
Where a transaction, such as the merger, is the acquisition by a bank
holding company of a bank located in a state other than the home state of the
bank holding company (in this case North Carolina), the Act authorizes the
Federal Reserve to approve the transaction without regard to whether such
transaction is prohibited under state law, as long as the bank holding company
is adequately capitalized and adequately managed and certain other limitations
are not exceeded. BB&T is considered well-capitalized and well-managed under
the Federal Reserve's Regulation Y, and the transaction does not exceed the
other limitations.
The Federal Reserve also must review the nonbanking activities being
acquired in the merger (such as operating a nondepository trust company and
securities brokerage activities) to determine whether the acquisition of such
activities reasonably can be expected to produce benefits to the public (such
as greater convenience, increased competition or gains in efficiency) that
outweigh possible adverse effects (such as undue concentration of resources,
decreased or unfair competition, conflicts of interest or unsound banking
practices). This consideration also includes an evaluation by the Federal
Reserve of the financial and managerial resources of BB&T and its subsidiaries
and the nonbank subsidiaries of AREA, and the effect of the proposed
transaction on those resources, as well as whether the merger would result in a
monopoly or otherwise would substantially lessen competition.
32
BB&T also must obtain the prior approval of the merger from the Kentucky
Department of Financial Institutions under the applicable provisions of the
Kentucky Revised Statutes. In evaluating the transaction, the Kentucky
Department will consider whether:
. the terms of the transaction are in accordance with the laws of
Kentucky;
. the financial condition of BB&T and the competence, experience, and
integrity of BB&T or its principals are such as will not jeopardize the
financial stability of AREA or its subsidiaries;
. the public convenience and advantage will be served by the merger of
BB&T and AREA; and
. a federal regulatory authority has disapproved the transaction because
it would result in a monopoly or substantially lessen competition.
BB&T also is required to provide notice to the Virginia Bureau of Financial
Institutions under the bank holding company act provisions of the Virginia
Code, which permit an out-of-state bank holding company that controls a
Virginia bank, such as BB&T, to acquire banks outside of Virginia, such as AREA
Bank and Vine Street Trust Company, if the Bureau approves the transaction. The
Bureau is required to approve the transaction if it determines that the
transaction would not be detrimental to the safety and soundness of the
Virginia bank.
BB&T also must provide notice of the merger to the Georgia Department of
Banking and Finance at least thirty days prior to consummation of the merger.
BB&T has filed the required applications and notices with the Federal
Reserve and the appropriate state banking regulators of Kentucky and Virginia,
and will file the required notice with the appropriate state banking regulator
of Georgia. Although BB&T does not know of any reason why it will not obtain
approval from these regulators in a timely manner, BB&T cannot be certain when
it will obtain them or that it will obtain them at all.
The Subsidiary Bank Mergers
Although not required by the terms of the merger agreement or the plan of
merger, BB&T expects to effect the subsidiary bank mergers during the third
quarter of 2002. The subsidiary bank mergers are subject to approval of the
Federal Deposit Insurance Corporation under the Bank Merger Act. In granting
its approval under the Bank Merger Act for the merger of affiliated
institutions, the FDIC must consider the financial and managerial resources and
future prospects of the merging banks and the convenience and needs of the
communities to be served. In addition, the FDIC must take into account the
record of performance of the existing and proposed institution under the
Community Reinvestment Act in meeting the credit needs of the community,
including low- and moderate-income neighborhoods, served by such institution.
Applicable regulations also require publication of notice of the application
for approval of the subsidiary bank mergers and an opportunity for the public
to comment on the applications in writing and to request a hearing.
The North Carolina Commissioner of Banks also must approve the subsidiary
bank mergers under the bank merger act provisions of the North Carolina General
Statutes. In its review of the subsidiary bank mergers, the Commissioner is
required to consider whether the interests of the depositors, creditors and
shareholders of each institution are protected, whether the merger is in the
public interest and whether the merger is for legitimate purposes.
Branch Bank also is required under applicable Kentucky law to provide prior
notice of the subsidiary bank mergers to the Kentucky state bank regulator.
Branch Bank expects to file these required applications and notices closer
to the expected consummation date of the subsidiary bank mergers.
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Accounting Treatment
BB&T will account for the merger using the purchase method of accounting.
Under this accounting method, BB&T would record the acquired identifiable
assets and liabilities assumed at their fair market value at the time the
merger is completed. Any excess of the cost of AREA over the sum of the fair
values of tangible and identifiable intangible assets less liabilities assumed
would be recorded as goodwill. BB&T's reported income would include the
operations of AREA after the merger. Financial statements of BB&T issued after
completion of the merger would reflect the impact of the merger with AREA.
Financial statements of BB&T issued before completion of the merger would not
be restated retroactively to reflect AREA's historical financial position or
results of operations. The unaudited pro forma financial information contained
in this proxy statement/prospectus has been prepared using the purchase method
of accounting. See "Summary--Comparative Per Share Data" on page .
Option Agreement
General
As a condition to BB&T entering into the merger agreement, AREA granted BB&T
an option to purchase up to 4,750,000 shares of AREA common stock (subject to
adjustment in specified circumstances) at a price of $16.75 per share (also
subject to adjustment under specified circumstances). The purchase of any
shares of AREA common stock pursuant to the option is subject to compliance
with applicable law, including the receipt of necessary approvals under the
Bank Holding Company Act of 1956, and to BB&T's compliance with its covenants
in the merger agreement.
The option agreement may have the effect of discouraging persons who, before
the merger becomes effective, might be interested in acquiring all of, or a
significant interest in, AREA's common stock from considering or proposing such
an acquisition, even if they were prepared to offer to pay consideration to
shareholders of AREA with a higher current market price than the BB&T common
stock to be received for AREA common stock pursuant to the merger agreement.
Consequently, the option agreement is intended to increase the likelihood that
the merger will be completed in accordance with the terms set forth in the
merger agreement.
The option agreement is filed as an exhibit to the registration statement,
of which this proxy statement/prospectus is a part, and the following
discussion is qualified in its entirety by reference to the option agreement.
See "Where You Can Find More Information" on page .
Exercisability
If BB&T is not in material breach of the option agreement or its covenants
and agreements contained in the merger agreement and if no injunction or other
court order against delivery of the shares covered by the option is in effect,
BB&T may generally exercise the option, in whole or in part, at any time and
from time to time before its termination, as described below, following the
happening of either of the following events (each a "Purchase Event"):
. without BB&T's consent, AREA authorizes, recommends, publicly proposes
(or publicly announces an intention to authorize, recommend or propose)
or enters into an agreement with any third party to effect any of the
following (each an "Acquisition Transaction"): (a) a merger,
consolidation or similar transaction involving AREA or any of its
significant subsidiaries, (b) the sale, lease, exchange or other
disposition of 15% or more of the consolidated assets or deposits of
AREA and its subsidiaries or (c) the issuance, sale or other disposition
of securities representing 15% or more of the voting power of AREA or
any of its significant subsidiaries; or
. any third party or group of third parties acquires or has the right to
acquire beneficial ownership of securities representing 15% or more of
the outstanding shares of AREA common stock.
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The obligation of AREA to issue shares of AREA common stock upon exercise of
the option will be deferred (but will not terminate) (a) until the receipt of
all required governmental or regulatory approvals or consents, or until the
expiration or termination of any waiting period required by law, or (b) so long
as any injunction or other order, decree or ruling issued by any federal or
state court of competent jurisdiction is in effect that prohibits the sale or
delivery of the shares.
Termination
The option will terminate upon the earliest to occur of the following
events: (a) the time the merger becomes effective; (b) the termination of the
merger agreement before the occurrence of a Purchase Event or a Preliminary
Purchase Event (as defined below) (other than a termination by BB&T based on
either a material breach by AREA of a covenant or agreement in the merger
agreement or an inaccuracy in AREA's representations or warranties in the
merger agreement of a nature entitling BB&T to terminate (a "Default
Termination"); (c) 12 months after a Default Termination; (d) 12 months after
termination of the merger agreement (other than a Default Termination)
following the occurrence of a Purchase Event or a Preliminary Purchase Event;
or (e) 12 months after a termination of the merger agreement based on the
failure of the shareholders of AREA to approve the merger agreement.
A "Preliminary Purchase Event" is defined as either of the following:
. the commencement by any third party of a tender or exchange offer such
that it would thereafter own 15% or more of the outstanding shares of
AREA common stock or the filing of a registration statement with respect
to such an offer; or
. the failure of the shareholders of AREA to approve the merger agreement,
the failure of the meeting to have been held, the cancellation of the
meeting before the termination of the merger agreement or the AREA Board
having withdrawn or modified in any manner adverse to BB&T its
recommendations with respect to the merger agreement, in any case after
a third party: (a) proposes to engage in an Acquisition Transaction, (b)
commences a tender offer or files a registration statement under the
Securities Act of 1933 with respect to an exchange offer such that it
would thereafter own 15% or more of the outstanding shares of AREA
common stock or (c) files an application or notice under federal or
state statutes relating to the regulation of financial institutions or
their holding companies to engage in an Acquisition Transaction.
To the knowledge of BB&T and AREA, no Purchase Event or Preliminary Purchase
Event has occurred as of the date of this proxy statement/prospectus.
Adjustments
The option agreement provides for adjustments in the option in the event of
any change in AREA common stock by reason of a stock dividend, stock split,
split-up, recapitalization, combination, exchange of shares or similar
transaction or in the event of the issuance of any additional shares of AREA
common stock before termination of the option.
Repurchase Rights
At the request of the holder of the option any time during the 12 months
after the first occurrence of a Repurchase Event (as defined below), AREA must,
if the option has not terminated, and subject to any required regulatory
approval, repurchase from the holder (a) the option and (b) all shares of AREA
common stock purchased by the holder pursuant to the option with respect to
which the holder then has beneficial ownership. The repurchase will be at an
aggregate price equal to the sum of:
. the aggregate purchase price paid by the holder for any shares of AREA
common stock acquired pursuant to the option with respect to which the
holder then has beneficial ownership, plus
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. the excess, if any, of (a) the Applicable Price (as defined in the
option agreement) for each share of AREA common stock over the purchase
price, multiplied by (b) the number of shares of AREA common stock with
respect to which the option has not been exercised, plus
. the product of (a) the excess, if any, of the Applicable Price over the
purchase price paid (or payable in the case of the exercise of the
option for which the closing date has not occurred) by the holder for
each share of AREA common stock with respect to which the option has
been exercised and with respect to which the holder then has beneficial
ownership (or the right to beneficial ownership if the option is
exercised but the closing date has not occurred) multiplied by (b) the
number of such shares.
A "Repurchase Event" occurs if: (a) any third party or "group" (as defined
under the Securities Exchange Act of 1934) acquires beneficial ownership of 50%
or more of the then outstanding shares of AREA common stock, or (b) any of the
merger or other business combination transactions set forth in the paragraph
below describing substitute options is completed.
Substitute Options
If, before the termination of the option agreement, AREA enters into an
agreement:
. to consolidate with or merge into any third party and AREA will not be
the continuing or surviving corporation of the consolidation or merger;
. to permit any third party to merge into AREA with AREA as the continuing
or surviving corporation, but, in connection therewith, the then
outstanding shares of AREA common stock are changed into or exchanged
for stock or other securities of AREA or any other person or cash or any
other property, or the outstanding shares of AREA common stock after the
merger represent less than 50% of the outstanding shares and share
equivalents of the merged company;
. to permit any third party to acquire all of the outstanding shares of
AREA common stock pursuant to a statutory share exchange; or
. to sell or otherwise transfer all or substantially all of its assets or
deposits to any third party,
then the agreement must provide that the option will be converted or exchanged
for an option to purchase shares of common stock of, at the holder's option,
either (x) the continuing or surviving corporation of a merger or consolidation
or the transferee of all or substantially all of AREA's assets or (y) any
person controlling the continuing or surviving corporation or transferee. The
number of shares subject to the substitute option and the exercise price per
share will be determined in accordance with a formula in the option agreement.
To the extent possible, the substitute option will contain terms and conditions
that are the same as those in the option agreement.
Registration Rights
The option agreement grants to BB&T and any permitted transferee of the
option specified rights to require AREA to prepare and file a registration
statement under the Securities Act of 1933 for a period of 24 months following
termination of the merger agreement if registration is necessary in order to
permit the sale or other disposition of any or all shares of AREA common stock
or other securities that have been acquired by or are issuable upon exercise of
the option.
Effect on Employee Benefit Plans and Stock Options
Employee Benefit Plans
As of a date (the "benefit plan date") determined by BB&T to be not later
than January 1 following the calendar year during which the last of AREA's bank
subsidiaries is merged into BB&T or one of its
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subsidiaries, BB&T will cause AREA's 401(k) plan to be merged with BB&T's
401(k) plan or to be frozen or to be terminated in each case as determined by
BB&T, subject to receipt of applicable regulatory approvals. Each employee of
AREA at the time the merger becomes effective who: (a) is a participant in the
401(k) plan of AREA, (b) becomes an employee of BB&T or any subsidiary of BB&T,
and (b) continues in the employment of a BB&T employer until the benefit plan
date for the 401(k) plan, will be eligible to participate in BB&T's 401(k) plan
as of the benefit plan date. Any other former employee of AREA who is employed
by a BB&T employer on or after the benefit plan date shall be eligible to
participate in the BB&T 401(k) plan upon complying with its eligibility
requirements. All rights to participate in BB&T's 401(k) plan are subject to
BB&T's right to amend or terminate the plan. BB&T will maintain AREA's 401(k)
plan for the benefit of participating employees until the benefit plan date. In
administering BB&T's 401(k) plan, service with AREA and its subsidiaries will
be deemed service with BB&T for participation and vesting purposes, but not for
benefit accrual purposes.
Each employee of AREA or an AREA subsidiary at the time the merger becomes
effective who becomes an employee of a BB&T employer immediately after the
merger becomes effective (a "transferred employee") will be eligible to
participate in group hospitalization, medical, dental, life, disability and
other welfare benefit plans and programs available to employees of the BB&T
employer, subject to the terms of the plans and programs and complying with
their eligibility requirements, as of the benefit plan date with respect to
each such plan or program, conditional upon the transferred employee's being
employed by the BB&T employer as of the benefit plan date. With respect to
health care coverages, participation in BB&T's plans may be subject to
availability of HMO options. In any case in which HMO coverage is not
available, substitute coverage will be provided which may not be fully
comparable to the HMO coverage. With respect to any benefit plan or program of
AREA that a BB&T employer determines, in its sole discretion, provides benefits
of the same type or class as a corresponding plan or program maintained by the
BB&T employer, the BB&T employer will continue the AREA plan or program in
effect for the benefit of the transferred employees so long as they remain
eligible to participate until they become eligible to participate in the
corresponding plan or program maintained by the BB&T employer (and, with
respect to any such corresponding plan or program, subject to complying with
eligibility requirements and subject to the right of the BB&T employer to
terminate the plan or program). If the first plan year of participation in any
group health plan of a BB&T employer by a transferred employee is a partial
year, the BB&T employer will give such transferred employee and his or her
dependents credit toward deductible and out-of-pocket limitations for and
eligible expenses incurred by such persons under the AREA group health plan
during that portion of that plan year that precedes entry into the group health
plans of the BB&T employer. For purposes of administering these plans and
programs, service with AREA will be deemed to be service with the BB&T employer
for the purpose of determining eligibility to participate and vesting (if
applicable) in such plans and programs, but not for the purpose of computing
benefits, if any, determined in whole or in part with reference to service.
Except as set forth in the merger agreement and contractual commitments
specifically assumed by BB&T, no BB&T employer shall have any obligation to
continue any transferred employee in its employ or in any specific job or to
provide to any transferred employee any specified level of compensation or any
incentive payments, benefits or perquisites.
Each transferred employee who is terminated by a BB&T employer after the
merger becomes effective, excluding any employee who has a then existing
contract providing for severance will be entitled to severance pay in
accordance with the general severance policy maintained by BB&T, if and to the
extent that the employee is entitled to severance pay under that policy. Such
an employee's service with AREA or an AREA subsidiary will be treated as
service with BB&T for purposes of determining the amount of severance pay, if
any, under BB&T's severance policy.
BB&T has agreed to honor all employment agreements, severance agreements and
deferred compensation agreements that AREA and its subsidiaries have with their
current and former employees and directors and which have been disclosed to
BB&T pursuant to the merger agreement, except to the extent any agreements are
superseded or terminated when the merger becomes effective or thereafter.
Except for these agreements and except as otherwise described in the merger
agreement, all other employee benefit plans of AREA will, in the
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sole discretion of BB&T, be frozen, terminated, or merged into comparable plans
of BB&T, as BB&T may determine in its sole discretion.
Effective on the benefit plan date with respect to the defined benefit
pension plan of AREA (the "AREA Pension Plan"), BB&T shall cause such plan to
be merged with the defined benefit pension plan maintained by BB&T and the
subsidiaries of BB&T, or to be frozen or terminated, in each case as determined
by BB&T and subject to receipt of all applicable regulatory or governmental
approvals. Each transferred employee who is a participant in the AREA Pension
Plan at the time the merger becomes effective and who continues in the
employment of a BB&T employer until the benefit plan date with respect to the
AREA Pension Plan, shall be eligible to participate in BB&T's pension plan as
of the benefit plan date for the AREA Pension Plan. Any other former employee
of AREA who is employed by a BB&T employer on or after the benefit plan date
shall be eligible to be a participant in the BB&T pension plan upon complying
with eligibility requirements. All rights to participate in BB&T's pension plan
are subject to BB&T's right to amend or terminate the plan. As of the close of
business immediately preceding the benefit plan date, BB&T shall determine the
accrued benefit under the AREA Pension Plan with respect to participants
continuing in the service of BB&T. Such accrued benefit shall be determined by
taking into account service and compensation following the effective date of
the merger and preceding the benefit plan date, and the accrued benefit as so
determined shall be the accrued benefit under the BB&T pension plan for service
prior to the benefit plan date (and shall be added to the benefit accrued under
the BB&T pension plan for service and compensation beginning with the benefit
plan date). For purposes of administering BB&T's pension plan, service with
AREA and the AREA subsidiaries shall be deemed to be service with BB&T for
participation and vesting purposes and for purposes of eligibility for early
retirement and early retirement subsidies, but not for purposes of benefit
accrual.
Stock Options
At the time the merger becomes effective, each then outstanding stock option
granted under AREA's various stock option plans will be converted into rights
with respect to BB&T common stock. Unless it elects to substitute options as
described below, BB&T will assume each of these stock options in accordance
with the terms of the AREA plan, except that:
. BB&T and the compensation committee of the BB&T Board will be
substituted for AREA and the Compensation Committee of AREA's Board of
Directors with respect to administering its stock option plan;
. each stock option may be exercised solely for shares of BB&T common
stock;
. the number of shares of BB&T common stock subject to each stock option
will be the number of whole shares (omitting any fractional share)
determined by multiplying the number of shares of AREA common stock
subject to the stock option by the exchange ratio in the merger; and
. the per share exercise price for each stock option will be adjusted by
dividing the per share exercise price for the stock option by the
exchange ratio in the merger and rounding up to the nearest cent.
As an alternative to assuming the stock options, BB&T may choose to
substitute options under the BB&T Corporation 1995 Omnibus Stock Incentive Plan
or any other comparable plan for all or a part of the AREA stock options,
subject to the adjustments described in (c) and (d) in the preceding paragraph
and the conditions that such substitution will not constitute a modification,
extension or renewal of any such stock options, and that the substituted
options continue in effect on the same terms and conditions provided in AREA's
stock option agreements and the stock option plans relating to the options.
BB&T will deliver to each participant in the stock option plans who receives
converted or substitute options an appropriate notice setting forth the
participant's rights with respect to the converted or substitute options.
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BB&T has reserved and will continue to reserve adequate shares of BB&T
common stock for the exercise of any converted or substitute options. As soon
as practicable after the effective time of the merger, if it has not already
done so, BB&T will file a registration statement under the Securities Act of
1933 with respect to the shares of BB&T common stock subject to converted or
substitute options and will use its reasonable efforts to maintain the
effectiveness of the registration statement (and maintain the current status of
the related prospectus or prospectuses) for so long as the converted or
substitute options remain outstanding.
Based on stock options outstanding as of the date of the merger agreement
and subsequent exercises, options to purchase an aggregate of approximately
486,934 shares of AREA common stock may be outstanding at the effective time of
the merger. Any shares of AREA common stock issued pursuant to the exercise of
stock options under the stock option plans before the effective time of the
merger will be converted into shares of BB&T common stock and cash instead of
any fractional share interest in the same manner as other outstanding shares of
AREA common stock.
Eligibility to receive stock option grants after the effective time of the
merger will be determined by BB&T in accordance with its plans and procedures
and subject to any contractual obligations.
Restrictions on Resales by Affiliates
The shares of BB&T common stock to be issued in the merger will be
registered under the Securities Act of 1933 and will be freely transferable,
except any shares received by any shareholder who may be deemed to be an
"affiliate" of AREA at the effective time of the merger for purposes of Rule
145 under the Securities Act. Affiliates of AREA may sell their shares of BB&T
common stock acquired in the merger only in transactions registered under the
Securities Act or permitted by the resale provisions of Rule 145 under the
Securities Act or as otherwise permitted by the Securities Act. Persons who may
be deemed affiliates of AREA generally include individuals or entities that
directly, or indirectly through one or more intermediaries, control, are
controlled by or are under common control with AREA and include directors and
certain executive officers of AREA. The restrictions on resales by an affiliate
extend also to related parties of the affiliate, including parties related by
marriage who live in the same home as the affiliate.
AREA has agreed to use its reasonable best efforts to cause each of its
affiliates to deliver to BB&T a written agreement to the effect generally that
he or she will not offer to sell, transfer or otherwise dispose of any shares
of BB&T common stock issued to that person in the merger, except in compliance
with the restrictions described in the preceding paragraph.
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INFORMATION ABOUT BB&T
General
BB&T is a financial holding company headquartered in Winston-Salem, North
Carolina. BB&T conducts operations in North Carolina, South Carolina, Virginia,
Maryland, Washington D.C., Georgia, West Virginia, Kentucky, Alabama and
Tennessee primarily through its commercial banking subsidiaries and, to a
lesser extent, through its other subsidiaries. Substantially all of BB&T's
loans are to businesses and individuals in the Carolinas, Virginia, Maryland,
Washington D.C., West Virginia, Georgia, Kentucky, Alabama and Tennessee.
BB&T's principal commercial bank subsidiaries are Branch Banking and Trust
Company ("Branch Bank"), Branch Banking and Trust Company of South Carolina
("Branch Bank-SC") and Branch Banking and Trust Company of Virginia ("Branch
Bank-VA"), excluding bank subsidiaries of recently acquired bank holding
companies that are expected to be merged into one of BB&T's subsidiaries. The
principal assets of BB&T are all of the issued and outstanding shares of common
stock of Branch Bank, Branch Bank-SC and Branch Bank-VA.
Operating Subsidiaries
Branch Bank, BB&T's largest subsidiary, is the oldest bank in North Carolina
and currently operates through 336 banking offices throughout North Carolina,
98 offices in metropolitan Washington, D.C. and Maryland, 161 offices in
Georgia, Alabama and Tennessee, and 108 offices in West Virginia and Kentucky.
Branch Bank provides a wide range of banking and trust services in its local
market for retail and commercial customers, including small and mid-size
businesses, public agencies and local governments and individuals. Operating
subsidiaries of Branch Bank include: Raleigh, North Carolina-based BB&T
Insurance Services, Inc., which offers life, property and casualty and title
insurance on an agency basis; Florence, South Carolina-based Prime Rate Premium
Finance Corporation, Inc., which provides insurance premium financing and
services to customers in Virginia and the Carolinas; Charlotte, North Carolina-
based BB&T Leasing Corporation, which offers lease financing to commercial
businesses and municipal governments; and Charlotte, North Carolina-based BB&T
Investment Services, Inc., which offers customers investment alternatives,
including discount brokerage services, fixed-rate and variable-rate annuities,
mutual funds, and government and municipal bonds.
Branch Bank-SC serves South Carolina through 93 banking offices. Branch
Bank-SC provides a wide range of banking and trust services in its local market
for retail and commercial customers, including small and mid-size businesses,
public agencies, local governments and individuals.
Branch Bank-VA offers a full range of commercial and retail banking services
through 278 banking offices throughout Virginia.
BB&T also has a number of other operating subsidiaries. Scott &
Stringfellow, Inc. provides services in retail brokerage, institutional equity
and debt underwriting, investment advice, corporate finance, equity trading,
equity research and in the origination, trading and distribution of fixed
income securities and equity products in both the public and private capital
markets. Regional Acceptance Corporation specializes in indirect financing for
consumer purchases of mid-model and late-model used automobiles. BB&T Factors
Corporation buys and manages account receivables primarily in the furniture,
textile and home furnishings-related industries. W.E. Stanley & Company, Inc.
is primarily engaged in actuarial and employee group, health and welfare
benefit plan consulting, plan administration, and the design, communication and
administration of all types of corporate retirement plans. Sheffield Financial
Corp. specializes in loans to small commercial lawn care businesses across the
country. BB&T Bankcard Corporation is a special purpose credit card bank.
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Completed Acquisitions
BB&T's profitability and market share have been enhanced through internal
growth and acquisitions of both financial and nonfinancial institutions during
recent years. BB&T's most recent acquisitions include the following:
On December 27, 2000, BB&T acquired BankFirst Corporation in a tax-free
transaction accounted for as a purchase. BankFirst Corporation operated 32
offices in Knox, Sevier, Blount, Loudon, McMinn and Jefferson Counties of
Tennessee through its banking subsidiaries. The acquisition gave BB&T its first
entry into Tennessee and expanded its presence along Interstate 75 and
Interstate 81. BankFirst and First National Bank and Trust Company, subsidiary
banks of BB&T (as the successor to BankFirst Corporation), were merged into
Branch Bank in July 2001.
On January 8, 2001, BB&T acquired FCNB Corp of Frederick, Maryland in a tax-
free transaction accounted for as a pooling of interests. FCNB operated 34
banking offices, primarily in Frederick and Montgomery counties of central
Maryland, through its banking subsidiary, FCNB Bank. The acquisition expanded
BB&T's presence in economically strong central Maryland and the fast-growing
Washington, D.C. corridor. FCNB Bank, a subsidiary bank of BB&T (as the
successor to FCNB), was merged into Branch Bank in March 2001.
On March 2, 2001, BB&T acquired FirstSpartan Financial Corp. of Spartanburg,
South Carolina in a tax-free transaction accounted for as a purchase.
FirstSpartan operated 11 banking offices in South Carolina's Spartanburg and
Greenville counties through its banking subsidiaries. The acquisition increased
BB&T's South Carolina assets to $5.8 billion. First Federal Bank, a subsidiary
bank of BB&T (as successor to First Spartan), was merged into Branch Bank-SC in
September 2001.
On June 7, 2001, BB&T acquired Century South Banks, Inc. of Alpharetta,
Georgia in a tax-free transaction accounted for as a pooling of interests.
Century South operated 40 banking offices through 12 community banking
subsidiaries in the metropolitan Atlanta, Savannah, Macon and north Georgia
areas. The former banking subsidiaries of Century South were merged into Branch
Bank in November 2001.
On June 27, 2001, BB&T acquired Virginia Capital Bancshares, Inc. of
Fredericksburg, Virginia in a tax-free transaction accounted for as a purchase.
Through its subsidiary, Fredericksburg State Bank, Virginia Capital operated
one banking office in each of Fredericksburg and Stafford County, Virginia and
two banking offices in Spotsylvania County, Virginia. Fredericksburg State Bank
was merged into Branch Bank-VA in September 2001.
On August 9, 2001, BB&T acquired F&M National Corporation of Winchester,
Virginia in a tax-free transaction accounted for as a pooling of interests. F&M
operated 163 banking offices, 13 mortgage banking offices, three trust offices
and six insurance offices through its 12 community banking subsidiaries. The
acquisition increased BB&T's market share in Washington D.C., gave BB&T the
number one market share in the Tidewater, Virginia area and strengthened BB&T's
position in Richmond, Virginia, a growing technology center. BB&T expects to
merge the former banking subsidiaries of F&M into Branch Bank during the first
quarter of 2002.
On December 12, 2001, BB&T acquired Community First Banking Company of
Carrollton, Georgia in a tax-free transaction accounted for as a purchase.
Community First operated nine banking offices in western Georgia through its
subsidiary, Community Bank, and also operated a consumer finance company, an
insurance agency and a full-service brokerage subsidiary. The acquisition
expanded BB&T's franchise further into metropolitan Atlanta and western
Georgia. BB&T expects to merge Community Bank, a subsidiary bank of BB&T (as
successor to Community First), into Branch Bank in the second quarter of 2002.
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Pending Acquisition
On November 8, BB&T announced that it had agreed to acquire Mid-America
Bancorp of Louisville, Kentucky in a transaction in which shareholders of would
receive for each share of Mid-America common stock: (a) .7187 of a share of
BB&T common stock; and (b) $8.13 in cash, with the amount of cash subject to
adjustment and to a potential escrow depending on the result of certain pending
litigation. Mid-America, a $1.8 billion holding company, operates 30 banking
offices in the Metropolitan-Louisville area through Bank of Louisville, its
primary subsidiary. Bank of Louisville is engaged in a wide range of
commercial, trust, and personal banking activities. Mid-America also operates
MAB Gift Certificate Company, which is engaged in the issuance and sale of gift
certificates throughout the United States. The acquisition of Mid-America,
which is expected to be completed in the first quarter of 2002, would provide
BB&T with an increased statewide presence in economically strong Kentucky
markets. Upon completion of the AREA merger and the acquisition of Mid-America
Bancorp, BB&T would have 102 banking offices in Kentucky and become the fourth
largest financial holding company in deposit market share in Kentucky.
BB&T expects to continue to take advantage of the consolidation of the
financial services industry by developing its franchise through the acquisition
of financial institutions. Such acquisitions may entail the payment by BB&T of
consideration in excess of the book value of the underlying net assets
acquired, may result in the issuance of additional shares of BB&T capital stock
or the incurring of additional indebtedness by BB&T, and could have a dilutive
effect on the per share earnings or book value of BB&T common stock. Moreover,
acquisitions sometimes result in significant front-end charges against
earnings, although cost savings, especially incident to in-market acquisitions,
are frequently anticipated.
Capital
The Federal Reserve has established a minimum requirement for a bank holding
company's ratio of capital to risk-weighted assets (including on-balance sheet
activities and specified off-balance sheet activities, such as standby letters
of credit) of 8%. At least half of a bank holding company's total capital is
required to be composed of common equity, retained earnings, and qualifying
perpetual preferred stock, less specified intangibles. This is called Tier 1
capital. The remainder may consist of specified subordinated debt, specified
hybrid capital instruments and other qualifying preferred stock, and a limited
amount of the loan loss allowance. This is called Tier 2 capital. Tier 1
capital and Tier 2 capital combined are referred to as total capital. At
September 30, 2001, BB&T's Tier 1 and total capital ratios were 9.6% and 13.2%,
respectively. Since January 1, 1998, the Federal Reserve has required bank
holding companies that engage in trading activities to adjust their risk-based
capital to take into consideration market risk that may result from movements
in market prices of covered trading positions in trading accounts, or from
foreign exchange or commodity positions, whether or not in trading accounts,
including changes in interest rates, equity prices, foreign exchange rates or
commodity prices. Any capital required to be maintained pursuant to these
provisions may consist of new "Tier 3 capital" consisting of forms of short-
term subordinated debt. In addition, the Federal Reserve has issued a policy
statement, pursuant to which a bank holding company that is determined to have
weaknesses in its risk management processes or a high level of interest rate
risk exposure may be required to hold additional capital.
The Federal Reserve also has established minimum leverage ratio requirements
for bank holding companies. These requirements provide for a minimum leverage
ratio of Tier 1 capital to adjusted average quarterly assets equal to 3% for
bank holding companies that meet specified criteria, including having the
highest regulatory rating. Bank holding companies that do not meet the
specified criteria generally are required to maintain a leverage ratio of at
least 100 to 200 basis points above the stated minimum. BB&T's leverage ratio
at September 30, 2001 was 7.1%. Bank holding companies experiencing internal
growth or making acquisitions are expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant reliance
on intangible assets. Furthermore, these capital requirements indicate that the
Federal Reserve will continue to consider a "tangible Tier 1 leverage ratio"
(deducting all intangibles) in evaluating proposals for expansion or new
activity.
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The FDIC has adopted minimum risk-based and leverage ratio regulations to
which BB&T's state bank subsidiaries are subject that are substantially similar
to those requirements established by the Federal Reserve. The Office of the
Comptroller of the Currency also has similar regulations that would apply to
BB&T's national bank subsidiaries. Under federal banking laws, failure to meet
the minimum regulatory capital requirements could subject a banking institution
to a variety of enforcement remedies available to federal regulatory
authorities, including, in the most severe cases, the termination of deposit
insurance by the FDIC and placing the institution into conservatorship or
receivership. The capital ratios of each of BB&T's bank subsidiaries exceeded
all minimum regulatory capital requirements as of September 30, 2001.
Deposit Insurance Assessments
The deposits of each of BB&T's bank subsidiaries are insured by the FDIC up
to the limits required by law. A majority of the deposits of the banks is
subject to the deposit insurance assessments of the Bank Insurance Fund of the
FDIC. However, approximately 23% of the deposits of Branch Bank, 45% of the
deposits of Branch Bank-SC and 51% of the deposits of Branch Bank-VA (related
to the banks' acquisition of various savings associations) are subject to
assessments imposed by the Savings Association Insurance Fund of the FDIC.
For the semi-annual period beginning January 1, 2001, the effective rate of
assessments imposed on all FDIC deposits for deposit insurance ranges from 0 to
27 basis points per $100 of insured deposits, depending on the institution's
capital position and other supervisory factors. However, because legislation
enacted in 1996 requires that both SAIF-insured and BIF-insured deposits pay a
pro rata portion of the interest due on the obligations issued by the Financing
Corporation, the FDIC is currently assessing both BIF-insured deposits and
SAIF-insured deposits an additional 1.88 basis points per $100 of deposits on
an annualized basis to cover those obligations. [to be updated]
Additional Information
You can find additional information about BB&T in BB&T's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000, Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 2001, June 30, 2001 and
September 30, 2001, and Current Reports on Form 8-K filed January 12, 2001,
January 24, 2001 (two filings), February 8, 2001, April 11, 2001, April 27,
2001, July 10, 2001, July 12, 2001, July 25, 2001, July 27, 2001, July 31,
2001, October 5, 2001, October 11, 2001, November 8, 2001 (two filings),
November 13, 2001 and [ ] all of which are incorporated by reference in
this proxy statement/prospectus. See "Where You Can Find More Information" on
page . [to be updated]
INFORMATION ABOUT AREA
General
AREA, the largest bank holding company headquartered in Kentucky, is a $2.95
billion multi-bank holding company with its principal offices in Owensboro,
Kentucky. AREA's two subsidiary banks provide a wide range of financial
services, including accepting demand and time deposits; providing checking and
money market accounts; making commercial, consumer and mortgage loans; issuing
and servicing credit cards; leasing; providing safe deposit facilities; and
offering alternative investments and brokerage services. AREA Trust Company, a
state chartered non-depository trust company, offers comprehensive trust and
investment services to a broad range of companies and individuals. AREA also
has seven active non-bank affiliates that provide services incidental to AREA's
operations. AREA has established an internet website (http://www.abcbank.com)
which provides additional information about the products and services offered
by its affiliates.
43
AREA also furnishes specialized services to its subsidiary banks and
affiliates in the areas of supervision, administration and review of loan
portfolios; administration of investment portfolios, insurance programs and
employee benefit plans; and assistance with respect to accounting and operating
systems and procedures, personnel, marketing, cash management services and
equipment management.
Subsidiary Banks and Trust Company
As of September 30, 2001, AREA's subsidiary banks operated throughout
Kentucky in 31 cities with 71 banking locations. These banks serve both rural
and metropolitan areas. As of September 30, 2001, AREA Bank had total assets of
$2.63 billion, and The Vine Street Trust Company had total assets of $298.49
million. AREA Trust had $1.02 billion of assets under management, and The Vine
Street Trust Company had $256.5 million of assets under management.
Name Change and Consolidation of Operations
Prior to the third quarter of 2000, each of AREA's 17 banks were operated
separately under individual charters and names. AREA made the decision to
consolidate the individual charters (with the exception of The Vine Street
Trust Company) and to adopt a common name, AREA Bank, for a number of reasons--
to achieve better name recognition, to optimize its technology investment, to
reduce redundancies resulting from the numerous charters, and to provide
customers with better service as a result of a wider range of products.
During the third and fourth quarters of 2000, AREA completed the
consolidation of the individual bank charters. At the time of the charter
consolidation, AREA also transferred the trust operations of those banks with
trust departments to AREA Trust Company.
Following the consolidation, lending and deposit decisions have continued to
be made on a local level, thus maintaining the quality of service of separately
chartered community banks. In matters affecting their customers, the local
banking centers have continued to have broad discretion. The merged banks have
also maintained their local boards which enables AREA Bank to be sensitive to
local needs and customer preferences.
You can find additional information about AREA in AREA's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000, Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 2001, June 30, 2001 and
September 30, 2001, and Current Reports on Form 8-K filed January 26, 2001,
June 14, 2001, July 23, 2001, July 24, 2001, August 21, 2001, October 30, 2001
and November 14, 2001, all of which are incorporated by reference in this proxy
statement/prospectus. See "Where You Can Find More Information" on page .
[to be updated]
DESCRIPTION OF BB&T CAPITAL STOCK
General
The authorized capital stock of BB&T consists of 1,000,000,000 shares of
BB&T common stock, par value $5.00 per share, and 5,000,000 shares of preferred
stock, par value $5.00 per share. [to be updated] As of , 200 ,
there were [ ] shares of BB&T common stock issued and outstanding,
which excludes shares expected to be issued in pending acquisitions. [to be
updated] There were no shares of BB&T preferred stock issued and outstanding as
of such date, although 2,000,000 shares of BB&T preferred stock have been
designated as Series B Junior Participating Preferred Stock and are reserved
for issuance in connection with BB&T's shareholder rights plan. See "--
Shareholder Rights Plan" on page . Based on the number of shares of AREA
common stock outstanding at the record date, it is estimated that approximately
shares of BB&T common stock would be issued in the merger. [to be
updated]
44
BB&T Common Stock
Each share of BB&T common stock is entitled to one vote on all matters
submitted to a vote at any meeting of shareholders. Holders of BB&T common
stock are entitled to receive dividends when, as, and if declared by the BB&T
Board out of funds legally available for the payment of dividends and, upon
liquidation, to receive pro rata all assets, if any, of BB&T available for
distribution after the payment of necessary expenses and all prior claims.
Holders of BB&T common stock have no preemptive rights to subscribe for any
additional securities of any class that BB&T may issue, nor any conversion,
redemption or sinking fund rights. Holders of BB&T common stock have no right
to cumulate votes in the election of directors. The rights and privileges of
holders of BB&T common stock are subject to any preferences that the BB&T Board
may set for any series of BB&T preferred stock that BB&T may issue in the
future. The terms of the BB&T Junior Preferred Stock reserved for issuance in
connection with BB&T's shareholder rights plan provide that the holders will
have rights and privileges that are substantially identical to those of holders
of BB&T common stock.
The transfer agent and registrar for BB&T common stock is Branch Bank. BB&T
intends to apply for the listing on the NYSE, subject to official notice of
issuance, of the shares of BB&T common stock to be issued in the merger.
BB&T Preferred Stock
Under BB&T's articles of incorporation, BB&T may issue shares of BB&T
preferred stock in one or more series as may be determined by the BB&T Board or
a duly authorized committee. The BB&T Board or committee may also establish,
from time to time, the number of shares to be included in each series and may
fix the designation, powers, preferences and rights of the shares of each such
series and any qualifications, limitations or restrictions thereof, and may
increase or decrease the number of shares of any series without any further
vote or action by the shareholders. Any BB&T preferred stock issued may rank
senior to BB&T common stock with respect to the payment of dividends or amounts
paid upon liquidation, dissolution or winding up of BB&T, or both. In addition,
any shares of BB&T preferred stock may have class or series voting rights.
Under certain circumstances, the issuance of shares of BB&T preferred stock, or
merely the existing authorization of the BB&T Board to issue shares of BB&T
preferred stock, may tend to discourage or impede a merger or other change in
control of BB&T. See "--Shareholder Rights Plan" below.
Shareholder Rights Plan
BB&T has adopted a shareholder rights plan that grants BB&T's shareholders
the right to purchase securities or other property of BB&T upon the occurrence
of various triggering events involving a potentially hostile takeover of BB&T.
Like other shareholder rights plans, BB&T's plan is intended to give the BB&T
Board the opportunity to assess the fairness and appropriateness of a proposed
transaction in order to determine whether it is in the best interests of BB&T
and its shareholders and to encourage potential hostile acquirors to negotiate
with the BB&T Board. BB&T's plan, also like other shareholder rights plans,
could also have the unintended effect of discouraging a business combination
that shareholders believe to be in their best interests.
The terms of the rights are set forth in the Rights Agreement, dated as of
December 17, 1996, between BB&T and Branch Bank, as Rights Agent and are
summarized below:
On December 17, 1996, the BB&T Board declared a dividend to holders of BB&T
common stock at a rate of one right for each share of common stock held of
record as of January 17, 1997 and for each share of common stock issued
thereafter. Each right entitles the holder to purchase from BB&T 1/100th of a
share of BB&T Series B Junior Participating Preferred Stock (which is
substantially equivalent to one share of BB&T's common stock) at a price of
$145.00, subject to anti-dilution adjustments, or, under various circumstances,
other securities or property.
45
The rights plan is designed to enhance the ability of the BB&T Board to
prevent an acquiror from depriving shareholders of the long-term value of their
investment and to protect shareholders against attempts to acquire BB&T by
means of unfair or abusive takeover tactics that have been prevalent in many
unsolicited takeover attempts.
Under the rights plan, the rights will become exercisable only if a person
or a group acquires or commences a tender offer for 20% or more of BB&T's
outstanding common stock or the BB&T Board declares any person to be an
"adverse person." The BB&T Board will declare a person to be an adverse person
if it determines that:
. the person, alone or together with its affiliates and associates, has or
will become the beneficial owner of 10% or more of BB&T's common stock;
and
. the beneficial ownership by the person is:
. intended or reasonably likely to cause BB&T to repurchase the common
stock beneficially owned by the person or otherwise provide the
person with short-term financial gain contrary to BB&T's best long-
term interests;
. reasonably likely to have a material adverse effect on BB&T's
business or prospects; or
. otherwise not in the best interests of BB&T and its shareholders,
employees, customers and communities in which BB&T and its
subsidiaries do business.
Until they become exercisable, the rights attach to and trade with BB&T's
common stock. The rights will expire December 31, 2006. The rights may be
redeemed by the Board at $0.01 per right until 10 days after a person or group
has accumulated 20% or more of the common stock or, if earlier, the effective
date of the Board's declaration that a person has become an adverse person. All
rights held or acquired by a person or group holding 20% or more of BB&T's
shares or by an adverse person are void.
If a person or group acquired 25% or more of BB&T's common stock or the
Board declared a person to be an adverse person, the rights would then be
modified to represent the right to receive, for the exercise price, common
stock having a value worth twice the exercise price.
If BB&T were acquired in a merger or other business combination at any time
after a person or group has acquired 20% or more of BB&T's common stock, the
rights would be modified so as to entitle a holder to buy a number of shares of
common stock of the acquiring entity having a market value of twice the
exercise price of each right.
Until a right is exercised, the holder will have no rights as a shareholder
of BB&T, including, without limitation, the right to vote or to receive
dividends. While the distribution of the rights will not be taxable to
shareholders or to BB&T, shareholders may, depending upon the circumstances,
recognize taxable income if the rights become exercisable for stock (or other
consideration) of BB&T or for common stock of the acquiring company.
Any provision of the rights agreement, other than provisions relating to the
principal economic terms of the rights, may be amended by the BB&T Board before
the date the rights are distributed. After that distribution date, the
provisions of the rights agreement may be amended by the BB&T Board in order to
cure any ambiguity, to make changes that do not adversely affect the interests
of holders of rights (excluding the interests of any acquiring person or
adverse person) or to shorten or lengthen any time period under the rights
agreement; provided, however, that no amendment to adjust the time period
governing redemption may be made when the rights are not redeemable.
The rights agreement is filed as an exhibit to a registration statement on
Form 8-A dated January 10, 1997 that has been filed by BB&T with the Securities
and Exchange Commission. This registration statement and the rights agreement
are incorporated by reference in this proxy statement/prospectus, and we refer
you to them for the complete terms of the rights agreement and the rights. The
foregoing discussion is qualified in its entirety by reference to the rights
agreement. See "Where You Can Find More Information" on page .
46
Other Anti-takeover Provisions
Provisions of the North Carolina Business Corporation Act, or NCBCA, and
BB&T's articles of incorporation and bylaws described below may be deemed to
have an anti-takeover effect and, together with the ability of the BB&T Board
to issue shares of BB&T preferred stock and to set the voting rights,
preferences and other terms of BB&T preferred stock, may delay or prevent
takeover attempts not first approved by the BB&T Board. These provisions also
could delay or deter the removal of incumbent directors or the assumption of
control by shareholders. BB&T believes that these provisions are appropriate to
protect the interests of BB&T and its shareholders.
Control Share Acquisition Act
The Control Share Acquisition Act of the NCBCA may make an unsolicited
attempt to gain control of BB&T more difficult by restricting the right of
specified shareholders to vote newly acquired large blocks of stock. For a
description of this statute, see "Comparison of the Rights of BB&T Shareholders
and AREA Shareholders--Anti-takeover Statutes" on page .
Provisions Regarding the BB&T Board
BB&T's articles of incorporation and bylaws separate the BB&T Board into
classes and permit the removal of directors only for cause. This could make it
more difficult for a third party to acquire, or discourage a third party from
acquiring, control of BB&T. For a description of these provisions, see
"Comparison of the Rights of BB&T Shareholders and AREA Shareholders--
Directors" on page .
Meeting of Shareholders; Shareholders' Nominations and Proposals
Under BB&T's bylaws, meetings of the shareholders may be called only by the
Chief Executive Officer, President, Secretary or the BB&T Board. Shareholders
of BB&T may not request that a special meeting of shareholders be called. This
provision could delay until the next annual shareholders' meeting shareholder
actions that are favored by the holders of a majority of the outstanding voting
securities of BB&T.
The procedures governing the submission of nominations for directors and
other proposals by shareholders may also have a deterrent effect on shareholder
actions designed to result in change of control in BB&T. See "Comparison of the
Rights of BB&T Shareholders and AREA Shareholders--Shareholder Nominations and
Shareholder Proposals" on page .
COMPARISON OF THE RIGHTS OF BB&T SHAREHOLDERS
AND AREA SHAREHOLDERS
When the merger becomes effective, holders of AREA common stock will become
shareholders of BB&T. The following is a summary of material differences
between the rights of holders of BB&T common stock and holders of AREA common
stock. Since BB&T is organized under the laws of the State of North Carolina
and AREA is organized under the laws of the Commonwealth of Kentucky,
differences in the rights of holders of BB&T common stock and those of holders
of AREA common stock arise from differing provisions of the NCBCA and the
Kentucky Business Corporation Act, or the KBCA, in addition to differing
provisions of their respective incorporation documents and bylaws.
The following summary does not purport to be a complete statement of the
provisions affecting, and differences between, the rights of holders of BB&T
common stock and holders of AREA common stock. The identification of specific
provisions or differences is not meant to indicate that other equally or more
significant differences do not exist. This summary is qualified in its entirety
by reference to the NCBCA and the KBCA and the governing corporate instruments
of BB&T and AREA, to which the shareholders of AREA are referred.
47
Authorized Capital Stock
BB&T
BB&T's authorized capital stock consists of 1,000,000,000 shares of BB&T
common stock and 5,000,000 shares of BB&T preferred stock. BB&T's articles of
incorporation authorize the BB&T Board to issue shares of BB&T preferred stock
in one or more series and to fix the designation, powers, preferences, and
rights of the shares of BB&T preferred stock in each series. As of ,
200 , there were shares of BB&T common stock outstanding, which
excludes shares expected to be issued in pending acquisitions. No shares of
BB&T preferred stock were issued and outstanding as of that date, although
2,000,000 shares of BB&T preferred stock have been designated as BB&T Junior
Preferred Stock and are reserved for issuance in connection with BB&T's
shareholder rights plan. See "Description of BB&T Capital Stock--Shareholder
Rights Plan" on page . [to be updated]
AREA
AREA's authorized capital stock consists of 50,000,000 shares of AREA common
stock, no par value, and 500,000 shares of AREA preferred stock, no par value.
AREA's articles of incorporation authorize the AREA Board to issue shares of
AREA preferred stock in one or more series and to fix the designation, powers,
preferences, and rights of the shares of AREA preferred stock in each series.
As of , 2001, there were shares of AREA common stock
outstanding and no shares of AREA preferred stock outstanding.
Special Meetings of Shareholders
BB&T
Special meetings of the shareholders of BB&T may be called at any time by
BB&T's Chief Executive Officer, President or Secretary or by the BB&T Board.
AREA
AREA's bylaws state that special meetings of the shareholders may be called
at any time by the Board of Directors or the holders of not less than one-fifth
of all shares entitled to vote at the meeting. Notice must be given in writing
not less than 10 nor more than 50 days before the date of the meeting and must
state the purpose for which the meeting is called.
Directors
BB&T
BB&T's articles of incorporation and bylaws provide for a board of directors
having not less than three nor more than 30 members as determined from time to
time by vote of a majority of the members of the BB&T Board or by resolution of
the shareholders of BB&T. Currently, the BB&T Board consists of 20 directors.
The BB&T Board is divided into three classes, with directors serving staggered
three-year terms. Under BB&T's articles of incorporation and bylaws, BB&T
directors may be removed only for cause and only by the vote of a majority of
the outstanding shares entitled to vote in the election of directors.
AREA
AREA's articles of incorporation provide that AREA shall be managed by a
Board of not less than five directors and that the number and qualifications of
directors shall be fixed in the bylaws. AREA's bylaws state that the Board of
Directors shall consist of not less than five nor more than thirteen directors.
Pursuant to Section 271B.8-030 of the KBCA, the number of directors may be
fixed or changed from time to time within this range by the shareholders or the
Board of Directors. AREA's Board of Directors presently consists of 13 members.
48
AREA's articles of incorporation provide that shareholders desiring to vote
shares cumulatively for the election of directors, as provided in Section 207
of the Kentucky Constitution, are required to give written notice to the
President or Secretary of AREA not less than 72 hours prior to the scheduled
time of the election. AREA's articles of incorporation further provide that if
one or more shareholders gives notice of the intent to vote cumulatively, all
shareholders may vote cumulatively, regardless of whether they gave timely
notice. Section 207 of the Kentucky Constitution provides that in all elections
of directors of any corporation, each shareholder shall have the right to cast
as many votes in the aggregate as he or she shall be entitled to vote
multiplied by the number of directors to be elected at the meeting, and the
shareholder may vote the whole number of shares for a single candidate or
distribute the votes among two or more candidates. Section 207 of the Kentucky
Constitution further provides that directors may not be elected in any other
manner.
Dividends and Other Distributions
BB&T
The NCBCA prohibits a North Carolina corporation from making any
distributions to shareholders, including the payment of cash dividends, that
would render it insolvent or unable to meet its obligations as they become due
in the ordinary course of business or that would result in its total assets
being less than the sum of its total liabilities plus the amount that would be
needed, if it were to be dissolved at the time of the dividend payment, to
satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. BB&T is
not subject to any other express regulatory restrictions on payments of
dividends and other distributions. The ability of BB&T to pay distributions to
the holders of BB&T common stock will depend, however, to a large extent upon
the amount of dividends its bank subsidiaries, which are subject to
restrictions imposed by regulatory authorities, pay to BB&T. In addition, the
Federal Reserve could oppose a distribution by BB&T if it determined that such
a distribution would harm BB&T's ability to support its bank subsidiaries.
There can be no assurances that dividends will be paid in the future. The
declaration, payment and amount of any such future dividends would depend on
business conditions, operating results, capital, reserve requirements and the
consideration of other relevant factors by the BB&T Board.
AREA
AREA is a legal entity separate and distinct from its subsidiaries and its
revenues depend in significant part on the payment of dividends from its
subsidiary banks. AREA's subsidiary banks are subject to legal restrictions on
the amount of dividends they are permitted to pay. AREA's subsidiary banks may
pay dividends in any year in an amount up to 100% of that year's net profits
combined with their retained net profits of the two previous years, without the
approval of the Commissioner of the Kentucky Department of Financial
Institutions. The holders of AREA common stock are entitled to receive
dividends when and if declared by the Board of Directors out of funds legally
available for the payment of dividends. As is the case with BB&T, the Federal
Reserve could oppose a distribution by AREA if it determined that the
distribution would harm AREA's ability to support its bank subsidiaries. There
can be no assurances that AREA will pay dividends in the future if it were to
remain independent. The declaration, payment, and amount of any future
dividends would depend on business conditions, operating results, capital,
reserve requirements, and the consideration of other relevant factors by the
AREA Board.
Shareholder Nominations and Shareholder Proposals
BB&T
BB&T's bylaws establish advance notice procedures for shareholder proposals
and the nomination, other than by or at the direction of the BB&T Board or one
of its committees, of candidates for election as directors. BB&T's bylaws
provide that a shareholder wishing to nominate a person as a candidate for
election to the BB&T Board must submit the nomination in writing to the
Secretary of BB&T at least 60 days before the one
49
year anniversary of the most recent annual meeting of shareholders, together
with biographical information about the candidate and the shareholder's name
and shareholdings. Nominations that are not made in accordance with the
foregoing provisions may be ruled out of order by the presiding officer or the
Chairman of the meeting. In addition, a shareholder intending to make a
proposal for consideration at a regularly scheduled annual meeting of
shareholders that is not intended to be included in the proxy statement for
such meeting must notify the Secretary of BB&T in writing at least 60 days
before the one year anniversary of the most recent annual meeting of
shareholders of the shareholder's intention. The notice must contain: (a) a
brief description of the proposal, (b) the name and shareholdings of the
shareholder submitting the proposal and (c) any material interest of the
shareholder in the proposal.
In accordance with Securities and Exchange Commission Rule 14a-8 under the
Securities Exchange Act of 1934, shareholder proposals intended to be included
in the proxy statement and presented at a regularly scheduled annual meeting
must be received by BB&T at least 120 days before the anniversary of the date
that the previous year's proxy statement was first mailed to shareholders. As
provided in the Securities and Exchange Commission rules, if the annual meeting
date has been changed by more than 30 days from the date of the prior year's
meeting, or for special meetings, the proposal must be submitted within a
reasonable time before BB&T begins to print and mail its proxy materials.
AREA
AREA's bylaws establish advance notice procedures for the nomination of
candidates, other than by or at the direction of the AREA Board, for election
as directors. AREA's bylaws provide that a shareholder wishing to nominate a
person as a candidate for election to the AREA Board must submit the nomination
in writing to the President or Secretary of AREA at least 72 hours prior to the
scheduled time of any meeting of shareholders called for the election of
directors.
Discharge of Duties; Exculpation and Indemnification
BB&T
The NCBCA requires that a director of a North Carolina corporation discharge
his or her duties as a director (a) in good faith, (b) with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances and (c) in a manner the director reasonably believes to be in the
best interests of the corporation. The NCBCA expressly provides that a director
facing a change of control situation is not subject to any different duties or
to a higher standard of care. BB&T's articles of incorporation provide that, to
the fullest extent permitted by applicable law, no director of BB&T will have
any personal liability for monetary damage for breach of a duty as a director.
BB&T's bylaws require BB&T to indemnify its directors and officers, to the
fullest extent permitted by applicable law, against liabilities arising out of
his or her status as a director or officer, excluding any liability relating to
activities that were at the time taken known or believed by such person to be
clearly in conflict with the best interests of BB&T.
50
AREA
The KBCA similarly requires that a director of a Kentucky corporation
discharge his or her duties as a director (a) in good faith, (b) on an informed
basis and (c) in a manner he or she honestly believes in good faith to be in
the best interests of the corporation.
The KBCA further provides that, in addition to any other limitation on a
director's liability for monetary damages contained in the corporation's
articles of incorporation, any action taken as a director, or any failure to
take any action as a director, shall not be the basis for monetary damages or
injunctive relief unless (a) the director has breached or failed to perform the
duties of the director's office and (b) in the case of an action for monetary
damages, the breach or failure to perform constitutes willful misconduct or
wanton or reckless disregard for the best interests of the corporation and its
shareholders.
AREA's articles of incorporation state that AREA shall indemnify its
officers and directors as provided by Section 271B.8-510 of the KBCA. Section
271B.8-510 provides that a corporation may indemnify its officers and directors
against reasonable expenses (including attorneys' fees) incurred by them in the
defense of any action, suit or proceeding to which they were made a party by
reason of the fact that they are or were officers or directors of the
corporation, if they acted, while in an official capacity, in a manner they
believed in good faith to be in the best interests of AREA or, if acting in any
other capacity, in a manner they believed in good faith to be not opposed to
the best interests of AREA or, in the case of a criminal proceeding, they had
no reasonable cause to believe their conduct was unlawful.
The KBCA provides that a corporation shall indemnify its officers or
directors who were wholly successful, on the merits or otherwise, in the
defense of any proceeding to which they were a party because they are or were
an officer or director of the corporation against reasonable expenses incurred
in connection with the proceeding.
AREA can also provide for greater indemnification than that set forth in the
articles of incorporation if it chooses to do so. AREA may not, however,
indemnify a director for liability arising out of circumstances that constitute
exceptions to the limitation of a director's liability for monetary damages, as
described above. AREA may purchase and maintain insurance on behalf of any
officer or director against any liability asserted against or incurred by him
or her in his or her capacity as an officer or director, whether or not AREA
would have had the power to indemnify him or her against liability.
Mergers, Share Exchanges and Sales of Assets
BB&T
The NCBCA generally requires that any merger, share exchange or sale of all
or substantially all the assets of a corporation other than in the ordinary
course of business must be approved by the affirmative vote of the majority of
the issued and outstanding shares of each voting group entitled to vote.
Approval of a merger by the shareholders of the surviving corporation is not
required in certain instances, however, including (as in the case of the merger
with AREA) a merger in which the number of voting shares outstanding
immediately after the merger, plus the number of voting shares issuable as a
result of the merger, does not exceed by more than 20% the number of voting
shares outstanding immediately before the merger. BB&T is also subject to
certain statutory anti-takeover provisions. See "--Anti-takeover Statutes"
below.
AREA
The KBCA generally requires that any merger, share exchange, or sale of all
or substantially all the assets of a corporation other than in the ordinary
course of business requires the adoption of a plan of merger or share exchange
by the board of directors of each corporation and approval by the affirmative
vote of the holders of the majority of the issued and outstanding shares of
each voting group of the non-surviving corporation entitled
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to vote. Approval of a merger by the shareholders of the surviving corporation
is not required by the KBCA in specified instances, including a merger in which
the number of voting shares outstanding immediately after the merger, plus the
number of voting shares issuable as a result of the merger, does not exceed by
more than 20% the number of voting shares outstanding immediately before the
merger. AREA is also potentially subject to certain statutory anti-takeover
provisions. See "Anti-takeover Statutes" below.
Anti-takeover Statutes
BB&T
The North Carolina Control Share Acquisition Act applies to BB&T. This Act
is designed to protect shareholders of publicly owned North Carolina
corporations based within the state against certain changes in control and to
provide shareholders with the opportunity to vote on whether to afford voting
rights to certain types of shareholders. The Act is triggered upon the
acquisition by a person of shares of voting stock of a covered corporation
that, when added to all other shares beneficially owned by the person, would
result in that person holding one-fifth, one-third or a majority of the voting
power in the election of directors. Under the Act, the shares acquired that
result in the crossing of any of these thresholds have no voting rights until
they are conferred by the affirmative vote of the holders of a majority of all
outstanding voting shares, excluding those shares held by any person involved
or proposing to be involved in the acquisition of shares in excess of the
thresholds, any officer of the corporation and any employee of the corporation
who is also a director of the corporation. If voting rights are conferred on
the acquired shares, all shareholders of the corporation have the right to
require that their shares be redeemed at the highest price paid per share by
the acquiror for any of the acquired shares.
The North Carolina Shareholder Protection Act requires that certain business
combinations with existing shareholders either be approved by a supermajority
of the other shareholders or meet certain "fair price" requirements. BB&T has
elected to opt out of the North Carolina Shareholder Protection Act, as
permitted by that Act.
AREA
The KBCA generally prohibits a business combination between a Kentucky
corporation and an "interested shareholder" (generally the beneficial owner of
10% or more of the corporation's voting stock) within five years after the
person or entity becomes an interested shareholder unless, prior to the person
or entity becoming an interested shareholder, the business combination or the
transaction shall have been approved by the corporation's board of directors.
These business combination restrictions do not apply to AREA because they are
not applicable to any corporation that had any interested shareholders as of
July 13, 1984, unless the requirements are specifically incorporated in the
articles of incorporation or bylaws of the corporation or later adopted by a
resolution of a majority of the continuing directors. AREA did have an
interested shareholder as of July 13, 1984, and has not taken the steps to
incorporate these requirements.
Amendments to Articles of Incorporation and Bylaws
BB&T
The NCBCA provides generally that a North Carolina corporation's articles of
incorporation may be amended only upon approval by a majority of the votes cast
within each voting group entitled to vote. BB&T's articles of incorporation and
bylaws impose a greater requirement, the affirmative vote of more than two-
thirds of the outstanding shares entitled to vote, to approve an amendment that
would amend, alter or repeal the provisions of the articles of incorporation or
bylaws relating to classification and staggered terms of the BB&T Board,
removal of directors or any requirement for a supermajority vote on such an
amendment. The NCBCA provides that a North Carolina corporation's bylaws may be
amended by its board of directors or its shareholders, except that, unless the
articles of incorporation or a bylaw adopted by the shareholders provides
52
otherwise, the board of directors may not amend a bylaw approved by the
shareholders. BB&T's articles of incorporation authorize the BB&T Board to
amend BB&T's bylaws.
AREA
The KBCA provides generally that a Kentucky corporation's articles of
incorporation may only be amended if the amendment is approved by the holders
of a majority of the shares entitled to vote, except for enumerated amendments
such as a change of corporate name, duration or registered agent, which may be
amended by the approval of a majority of the board of directors. A Kentucky
corporation's bylaws may generally be amended if the amendment is approved by a
majority of the board of directors, except for the amendment of a provision
originally adopted by the shareholders which fixes a greater quorum or voting
requirement for the board of directors, which must be approved by the holders
of a majority of the shares entitled to vote.
Consideration of Business Combinations
BB&T
BB&T's articles of incorporation do not specify any factors to which the
BB&T Board must give consideration in evaluating a transaction involving a
potential change in control of BB&T.
AREA
As is the case with BB&T, AREA's articles of incorporation do not specify
any factors to which the AREA Board must give consideration in evaluating a
transaction involving a potential change in control of AREA.
Shareholders' Rights of Dissent and Appraisal
BB&T
The NCBCA provides that dissenters' rights are not available to the holders
of shares of a corporation, such as BB&T, that are either listed on a national
securities exchange or held by more than 2,000 record shareholders by reason of
a merger, share exchange or sale or exchange of property unless (a) the
articles of incorporation of the corporation that issued the shares provide
otherwise or (b) in the case of a merger or share exchange, the holders of the
shares are required to accept anything other than (1) cash, (2) shares in
another corporation that are either listed on a national securities exchange or
held by more than 2,000 record shareholders or (3) a combination of cash and
such shares. BB&T's articles of incorporation do not authorize any special
dissenters' rights.
AREA
Each holder of shares of AREA's common stock has the right to dissent to
various corporate transactions and to demand payment of the fair value of all
of the holder's AREA shares if the transaction is completed. This right to
dissent applies to AREA's proposed merger with BB&T. See "The Merger--Rights of
Dissenting Shareholders" on page .
Liquidation Rights
BB&T
In the event of the liquidation, dissolution or winding up of the affairs of
BB&T, holders of outstanding shares of BB&T common stock are entitled to share,
in proportion to their respective interests, in BB&T's assets and funds
remaining after payment, or provision for payment, of all debts and other
liabilities of BB&T.
53
Because BB&T is a bank holding company, its rights, the rights of its
creditors and of its shareholders, including the holders of the shares of any
BB&T preferred stock that may be issued, to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization may be subject to
the prior claims of (a) the subsidiary's creditors, except to the extent that
BB&T may itself be a creditor with recognized claims against the subsidiary,
and (b) any interests in the liquidation accounts established by savings
associations or savings banks acquired by BB&T for the benefit of eligible
account holders in connection with conversion of the savings associations from
mutual to stock form.
AREA
In the event of the liquidation, dissolution or winding up of the affairs of
AREA, after payment in full of debts and other liabilities, the remaining
assets would be distributed to the shareholders in proportion to their
respective interests.
Like BB&T, since AREA is a bank holding company, its rights and the rights
of its creditors and of its shareholders to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization may be subject to
the prior claims of the subsidiary's creditors, except to the extent that AREA
may itself be a creditor with recognized claims against the subsidiary.
SHAREHOLDER PROPOSALS
In the event that the merger is not completed, any proposal which a
shareholder wishes to have presented at the next annual meeting of shareholders
and included in AREA's proxy materials must be received at the main office of
AREA, 230 Frederica Street, Owensboro, Kentucky 42301, no later than ,
2002. If such proposal is in compliance with all of the requirements of Rule
14a-8 of the Securities Exchange Act, it will be included in AREA's proxy
statement and set forth on the form of proxy issued for the next annual meeting
of shareholders, if applicable. Shareholders wishing to present proposals at
such meeting (but not include them in AREA's proxy materials) must also give
notice of such proposals to AREA before , 2002. If AREA does not
receive such notice before , 2002, proxies selected by AREA management
will confer discretionary authority upon management to vote upon any such
matter. It is urged that any proposals be sent by certified mail, return
receipt requested.
OTHER BUSINESS
The AREA Board is not aware of any business to come before the meeting other
than those matters described in this proxy statement/prospectus. However, if
any other matters should properly come before the meeting, it is intended that
the proxies solicited by this proxy statement/prospectus will be voted with
respect to those other matters in accordance with the judgment of the persons
voting the proxies.
LEGAL MATTERS
The validity of the shares of BB&T common stock offered by this proxy
statement/prospectus will be passed upon by Womble Carlyle Sandridge & Rice,
PLLC, as counsel to BB&T. As of the date of this proxy statement/prospectus,
various members of Womble Carlyle Sandridge & Rice, PLLC owned an aggregate of
approximately 88,473 shares of BB&T common stock.
EXPERTS
The consolidated financial statements of BB&T Corporation and its
subsidiaries which are incorporated by reference in this proxy
statement/prospectus from BB&T's Current Report on Form 8-K dated October 5,
2001,
54
which restates the consolidated financial statements for the year ended
December 31, 2000 to reflect the acquisition by BB&T of F&M National
Corporation on August 9, 2001, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference in this proxy statement/prospectus
in reliance upon the authority of said firm as experts in giving said reports.
The consolidated financial statements of AREA Bancshares Corporation as of
December 31, 2000 and 1999, and for each of the years in the three-year period
ended December 31, 2000, have been incorporated by reference in this proxy
statement/prospectus in reliance upon the report of KPMG LLP, independent
accountants, incorporated by reference in this proxy statement/prospectus, and
upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
BB&T and AREA file annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information that the companies file
with the Securities and Exchange Commission at the SEC's Public Reference Room,
340 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. These Securities and Exchange Commission filings
are also available to the public from commercial document retrieval services
and at the Internet world wide web site maintained by the Securities and
Exchange Commission at "http://www.sec.gov." Reports, proxy statements and
other information concerning BB&T should also be available for inspection at
the offices of the NYSE.
BB&T has filed the registration statement to register with the Securities
and Exchange Commission the BB&T common stock to be issued to AREA shareholders
in the merger. This proxy statement/prospectus is a part of that registration
statement and constitutes a prospectus of BB&T. As allowed by Securities and
Exchange Commission rules, this proxy statement/prospectus does not contain all
the information you can find in BB&T's registration statement or the exhibits
to the registration statement.
The Securities and Exchange Commission allows AREA and BB&T to "incorporate
by reference" information into this proxy statement/prospectus, which means
that the companies can disclose important information to you by referring you
to another document filed separately with the Securities and Exchange
Commission. The information incorporated by reference is considered part of
this proxy statement/prospectus, except for any information superseded by
information contained directly in this proxy statement/prospectus or in later
filed documents incorporated by reference in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that AREA and BB&T have previously filed with the Securities and
Exchange Commission. These documents contain important information about AREA
and BB&T and their businesses.
55
BB&T Securities and Exchange Commission
Filings
(File No. 1-10853) [to be updated]
--------------------------------------- --------------------------------------------
Annual Report on Form 10-K................. For the fiscal year ended December 31, 2000
Quarterly Reports on Form 10-Q............. For the fiscal quarters ended March 31,
2001, June 30, 2001 and September 30, 2001
Current Reports on Form 8-K................ Filed January 12, 2001, January 24, 2001
(two filings), February 8, 2001, April 11,
2001, April 27, 2001, July 10, 2001, July
12, 2001, July 25, 2001, July 27, 2001, July
31, 2001, October 5, 2001, October 11, 2001,
November 8, 2001 (two filings), November 13,
2001 and [to be updated]
Registration Statements on Form 8-A
(describing BB&T's common stock and
concerning BB&T's shareholder rights
plan)..................................... Filed September 4, 1991 and January 10, 1997
AREA Securities and Exchange Commission
Filings
(File No. 000-26032) [to be updated]
--------------------------------------- --------------------------------------------
Annual Report on Form 10-K................. For the fiscal year ended December 31, 2000
Quarterly Reports on Form 10Q.............. For the fiscal quarters ended March 31,
2001, June 30, 2001 and September 30, 2001
Current Reports on Form 8-K................ Filed January 26, 2001, June 14, 2001, July
23, 2001, July 24, 2001, August 21, 2001,
October 30, 2001, and November 14, 2001
AREA and BB&T also incorporate by reference additional documents that may be
filed with the Securities and Exchange Commission between the date of this
proxy statement/prospectus and (a) in the case of BB&T, the completion of the
merger or the termination of the merger agreement and (b) in the case of AREA,
the date of the special meeting of shareholders or, if sooner, the termination
of the merger agreement. These include periodic reports, such as Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K,
as well as proxy statements.
BB&T has supplied all information contained or incorporated by reference in
this proxy statement/prospectus relating to BB&T, and AREA has supplied all
such information relating to AREA before the merger.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the
companies, the Securities and Exchange Commission or the Securities and
Exchange Commission's Internet web site as described above. Documents
incorporated by reference are available from the companies without charge,
excluding all exhibits except those that the companies have specifically
incorporated by reference in this proxy statement/prospectus. Shareholders may
obtain documents incorporated by reference in this proxy statement/prospectus
by requesting them in writing or by telephone from the appropriate company at
the following addresses:
BB&T Corporation AREA Bancshares Corporation
Shareholder Reporting John A. Ray
Post Office Box 1290 Executive Vice President
Winston-Salem, North Carolina 27102 P. O. Box 786
(336) 733-3021 Owensboro, Kentucky 42303-0786
(270) 688-7753
If you would like to request documents, please do so by [insert date five
business days prior to meeting], 2002 to receive them before the meeting.
56
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. BB&T and AREA have not authorized
anyone to provide you with information that is different from what is contained
in this proxy statement/prospectus or in any of the materials that have been
incorporated by reference into this document. If you are in a jurisdiction
where offers to exchange or sell, or solicitations of offers to exchange or
purchase, the securities offered by this document or the solicitation of
proxies is unlawful, or if you are a person to whom it is unlawful to direct
these types of activities, then the offer presented in this document does not
extend to you. This proxy statement/prospectus is dated , 2002. You
should not assume that the information contained in this proxy
statement/prospectus is accurate as of any date other than that date. Neither
the mailing of this proxy statement/prospectus to shareholders nor the issuance
of BB&T common stock in the merger creates any implication to the contrary.
57
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
AREA BANCSHARES CORPORATION
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.................................................... 5
2.1 Merger............................................................ 5
2.2 Filing; Plan of Merger............................................ 5
2.3 Effective Time.................................................... 6
2.4 Closing........................................................... 6
2.5 Effect of Merger.................................................. 6
2.6 Further Assurances................................................ 6
2.7 Merger Consideration.............................................. 6
2.8 Conversion of Shares; Payment of Merger Consideration............. 7
2.9 Conversion of Stock Options....................................... 8
2.10 Dissenting Shares................................................. 9
2.11 Merger of Subsidiaries............................................ 9
2.12 Anti-Dilution..................................................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF AREA....................... 9
3.1 Capital Structure................................................. 9
3.2 Organization, Standing and Authority.............................. 10
3.3 Ownership of Subsidiaries......................................... 10
3.4 Organization, Standing and Authority of the Subsidiaries.......... 10
3.5 Authorized and Effective Agreement................................ 10
3.6 Securities Filings; Financial Statements; Statements True......... 11
3.7 Minute Books...................................................... 11
3.8 Adverse Change.................................................... 12
3.9 Absence of Undisclosed Liabilities................................ 12
3.10 Properties........................................................ 12
3.11 Environmental Matters............................................. 12
3.12 Loans; Allowance for Loan Losses.................................. 13
3.13 Tax Matters....................................................... 13
3.14 Employees; Compensation; Benefit Plans............................ 14
3.15 Certain Contracts................................................. 16
3.16 Legal Proceedings; Regulatory Approvals........................... 17
3.17 Compliance with Laws; Filings..................................... 17
3.18 Brokers and Finders............................................... 17
3.19 Repurchase Agreements; Derivatives................................ 17
3.20 Deposit Accounts.................................................. 18
3.21 Related Party Transactions........................................ 18
3.22 Certain Information............................................... 18
3.23 Tax and Regulatory Matters........................................ 18
3.24 State Takeover Laws............................................... 18
3.25 Labor Relations................................................... 18
3.26 Fairness Opinion.................................................. 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BB&T........................ 19
4.1 Capital Structure of BB&T......................................... 19
4.2 Organization, Standing and Authority of BB&T...................... 19
4.3 Authorized and Effective Agreement................................ 19
4.4 Organization, Standing and Authority of BB&T Subsidiaries......... 20
i
Page
----
4.5 Securities Documents; Statements True............................. 20
4.6 Certain Information............................................... 20
4.7 Tax and Regulatory Matters........................................ 20
4.8 Share Ownership................................................... 20
4.9 Legal Proceedings; Regulatory Approvals........................... 21
ARTICLE V COVENANTS...................................................... 21
5.1 Area Shareholder Meeting.......................................... 21
5.2 Registration Statement; Proxy Statement/Prospectus................ 21
5.3 Plan of Merger; Reservation of Shares............................. 21
5.4 Additional Acts................................................... 22
5.5 Best Efforts...................................................... 22
5.6 Certain Accounting Matters........................................ 22
5.7 Access to Information............................................. 22
5.8 Press Releases.................................................... 23
5.9 Forbearances of Area.............................................. 23
5.10 Employment Agreements............................................. 25
5.11 Affiliates........................................................ 25
5.12 Employee Benefits................................................. 25
5.13 Directors and Officers Protection................................. 26
5.14 Forbearances of BB&T.............................................. 27
5.15 Reports........................................................... 27
5.16 Exchange Listing.................................................. 27
5.17 Advisory Board.................................................... 27
5.18 Board of Directors of Branch Banking and Trust Company............ 28
ARTICLE VI CONDITIONS PRECEDENT.......................................... 28
6.1 Conditions Precedent--BB&T and Area............................... 28
6.2 Conditions Precedent--Area........................................ 29
6.3 Conditions Precedent--BB&T........................................ 29
ARTICLE VII TERMINATION, DEFAULT, WAIVER AND AMENDMENT................... 30
7.1 Termination....................................................... 30
7.2 Effect of Termination............................................. 30
7.3 Survival of Representations, Warranties and Covenants............. 31
7.4 Waiver............................................................ 31
7.5 Amendment or Supplement........................................... 31
ARTICLE VIII MISCELLANEOUS............................................... 31
8.1 Expenses.......................................................... 31
8.2 Entire Agreement.................................................. 31
8.3 No Assignment..................................................... 32
8.4 Notices........................................................... 32
8.5 Specific Performance.............................................. 33
8.6 Captions.......................................................... 33
8.7 Counterparts...................................................... 33
8.8 Governing Law..................................................... 33
ANNEXES
Annex A................................. Articles of Merger
Annex B................................. Employment Agreements with three
to five additional individuals
Annex C................................. Noncompetition Agreement
Annex D................................. Employment Agreement (Section 6.3)
ii
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of
November 7, 2001 is among AREA BANCSHARES CORPORATION ("Area"), a Kentucky
corporation having its principal office at Owensboro, Kentucky, 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 Area shall be merged into BB&T (said transaction
being hereinafter referred to as the "Merger") pursuant to a plan of merger
(the "Plan of Merger") substantially in the form attached as Annex A hereto,
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 the Agreement, Area is concurrently granting to BB&T an option to
acquire, under certain circumstances, 4,750,000 shares of the common stock,
without par value, of Area.
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 other 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.
"Articles of Merger" shall mean the Articles of Merger required to be filed
with the office of the Secretary of State of North Carolina, as provided in
Section 55-11-05 of the NCBCA, and with the office of the Commonwealth of
Kentucky Secretary of State, as provided in Section 271B.11-050 of the
Kentucky Business Corporation Act (the "KBCA").
"Bank Holding Company Act" shall mean the Federal Bank Holding Company Act
of 1956, as amended.
"BB&T Common Stock" shall mean the shares of voting 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, as Rights Agent, relating to BB&T's Series B Junior Participating
Preferred Stock, $5.00 par value per share.
"BB&T Option Agreement" shall mean the Stock Option Agreement dated as of
even date herewith, as amended from time to time, under which BB&T has an
option to purchase shares of Area Common Stock, which shall be executed
immediately following execution of this Agreement.
"BB&T Subsidiaries" shall mean Branch Banking and Trust Company, Branch
Banking and Trust Company of South Carolina and Branch Banking and Trust
Company of Virginia.
A-1
"Benefit Plan Determination Date" shall mean, with respect to each employee
pension or welfare benefit plan or program maintained by Area at the Effective
Time, the date determined by BB&T with respect to such plan or program which
shall be not later than January 1 following the close of the calendar year in
which the last of the Area Subsidiaries which is a bank or other savings
institution is merged into BB&T or one of the BB&T Subsidiaries.
"Business Day" shall mean all days other than Saturdays, Sundays and Federal
Reserve holidays.
"Cardinal" shall mean Cardinal Bancshares, Inc.
"Cardinal ESOP" shall mean the Cardinal Bancshares, Inc. 401k Savings Plan
and Trust Agreement.
"CERCLA" shall mean the Comprehensive Environmental Response Compensation
and Liability Act, as amended, 42 U.S.C. 9601 et seq.
"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 Area 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 without limitation
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.
"Financial Advisor" shall mean J.P. Morgan Securities, Inc.
"Financial Statements" shall mean (a) with respect to BB&T, (i) the
consolidated balance sheet (including related notes and schedules, if any) of
BB&T as of December 31, 2000, 1999, and 1998, 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,
2000, 1999, and 1998, as filed by BB&T in
A-2
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, 2000, and (b) with
respect to Area, (i) the consolidated statements of financial condition
(including related notes and schedules, if any) of Area as of December 31,
2000, 1999 and 1998, and the related consolidated statements of income and
retained earnings, and cash flows (including related notes and schedules, if
any) for each of the three years ended December 31, 2000, 1999 and 1998, as
filed by Area in Securities Documents and (ii) the consolidated statements of
financial condition of Area (including related notes and schedules, if any) and
the related consolidated statements of income and retained earnings, and cash
flows (including related notes and schedules, if any) included in Securities
Documents filed by Area with respect to periods ended subsequent to December
31, 2000.
"GAAP" shall mean 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.
"Area Common Stock" shall mean the shares of voting common stock, without
par value, of Area.
"Area Disclosure Memorandum" shall mean the written information in one or
more documents, each of which is entitled "Area Disclosure Memorandum" and
dated on or before the date of this Agreement and delivered not later than the
date of execution of this Agreement by Area to BB&T, and describing in
reasonable detail the matters contained therein. Each disclosure made therein
shall be in existence on the date of this Agreement and 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.
"Area Subsidiaries" shall mean Area Bank, Area Trust Company, Vine Street
Trust Company, Vine Street Financial, Inc., Area Bancshares Support Sources,
Inc., ONB Investments Services, Inc., Mutual Service Corp., Mutual Insurance
Agency, Inc., Area Services, Inc., ONB Bank Services, Inc., and any and all
other Subsidiaries of Area as of the date hereof and any corporation, bank,
savings association, or other organization acquired as a Subsidiary of Area
after the date hereof and held as a Subsidiary by Area at the Effective Time.
"Material Adverse Effect" on BB&T or Area 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 Area and the Area Subsidiaries taken as a
whole, or (ii) materially impairs the ability of BB&T or Area 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 Area taken with the prior written consent of the other in
contemplation of the transactions contemplated hereby and (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; provided that with respect to Area, only if
and to the extent any such expenses payable to third parties are Disclosed by
Area or incurred by Area following the date hereof as permitted by this
Agreement.
"NCBCA" shall mean the North Carolina Business Corporation Act, as amended.
A-3
"Proxy Statement/Prospectus" shall mean the proxy statement and prospectus,
together with any supplements thereto, to be sent to shareholders of Area to
solicit their votes in connection with a proposal to approve 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.
"Restricted Stock Awards" shall mean restricted stock awards denominated in
shares of Area Common Stock issued by Area or assumed by Area in connection
with its acquisition of Cardinal.
"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.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, proxy statements,
registration statements and all similar documents filed, or required to be
filed, pursuant to the Securities Laws, 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 in each case
the rules and regulations of the Commission promulgated thereunder.
"Stock Option" shall mean, collectively, any option granted under the Stock
Option Plans, outstanding and unexercised on the date hereof to acquire shares
of Area Common Stock, aggregating 473,334 shares, plus options to be granted
under the Stock Option Plans during January 2002, aggregating 13,600 shares.
"Stock Option Plans" shall mean the Area Bancshares Corporation 1994 Stock
Option Plan, the Area Bancshares Corporation 2000 Stock Option and Equity
Incentive Plan and the Cardinal 1989 Restricted Stock Option Plan, as amended,
and the Cardinal 1994 Restricted 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.
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1.2 Terms Defined Elsewhere
The capitalized terms set forth below are defined in the following sections:
Agreement Introduction
BB&T Introduction
BB&T Option Plan Section 2.9(a)
Closing Section 2.4
Closing Date Section 2.4
Closing Value Section 2.7(b)
Area Introduction
Area Pension Plan Section 5.12(d)
Constituent Corporations Section 2.1
Dissenting Shareholder Section 2.10
Dissenting Shares Section 2.10
Effective Time Section 2.3
Employer Entity Section 5.12(a)
Exchange Ratio Section 2.7(a)
Merger Recitals
Merger Consideration Section 2.7(a)
PBGC Section 3.14(b)(iv)
Plan Section 3.14(b)(i)
Plan of Merger Recitals
Surviving Corporation Section 2.1(a)
Transferred Employee Section 5.12(a)
ARTICLE II
THE MERGER
2.1 Merger
BB&T and Area are constituent corporations (the "Constituent Corporations")
to the Merger as contemplated by the NCBCA and the KBCA. At the Effective Time:
(a) Area shall be merged into BB&T in accordance with the applicable
provisions of the NCBCA and the KBCA, with BB&T being the surviving corporate
entity (hereinafter sometimes referred to as the "Surviving Corporation").
(b) The separate existence of Area shall cease and the Merger shall in all
respects have the effects provided in Section 2.5.
(c) The Articles of Incorporation of BB&T at the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation.
(d) The Bylaws of BB&T at the Effective Time shall be 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 at least a majority of the
shares of the Area Common Stock. 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 Secretary of State of
North Carolina and the Commonwealth of Kentucky Secretary of State as
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provided in Section 55-11-05 of the NCBCA and Section 271B.11-050 of the KBCA,
respectively. 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 Area 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 as filed as provided in Section 2.2 (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 Area shall
cease, and the Surviving Corporation shall thereupon and thereafter, to the
extent consistent with its Articles of Incorporation, possess all of the
rights, privileges, immunities and franchises, of a public as well as 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 each and every other interest of or belonging to or due to each
of the Constituent Corporations shall be taken and deemed to be transferred to
and vested in the Surviving Corporation without further act or deed; and the
title to any real estate or any interest therein vested in either of the
Constituent Corporations shall not revert or be in any way impaired by reason
of the Merger. The Surviving Corporation shall thenceforth be responsible for
all the liabilities, obligations and penalties of each of the Constituent
Corporations; and any claim, existing 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
(a) As used herein, the term "Merger Consideration" shall mean the number of
shares of BB&T Common Stock (to the nearest ten thousandth of a share) to be
exchanged for each share of Area Common
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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 distributable to an Area shareholder as provided
in Section 2.7(b). The number of shares of BB&T Common Stock to be issued for
each issued and outstanding share of Area Common Stock (the "Exchange Ratio")
shall be 0.55.
(b) 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. The "Closing Value" shall mean the 4:00 p.m.
eastern time closing price per share of BB&T Common Stock on the NYSE on the
Closing Date as reported on NYSEnet.com.
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 Area or the holders of record of Area Common Stock, each share of
Area 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 Area Common Stock (as
provided in subsection (d) below), the Merger Consideration.
(b) Each share of BB&T 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 Area 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 Area Common Stock. With respect to any certificate for
Area 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, Area's transfer books shall be
closed and no transfer of the shares of Area 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 Area shareholder a form of letter of transmittal and
instructions for use in effecting the surrender of the certificates which,
immediately prior to the Effective Time, represented any shares of Area Common
Stock. Upon proper surrender of such certificates or other evidence of
ownership meeting the requirements of Section 2.8(c), 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 that have been declared or made
by Area in respect of shares of Area Common Stock in accordance with the terms
of this Agreement and that remain unpaid at the Effective Time, subject to
compliance by Area with Section 5.9(b). To the extent permitted by law, former
shareholders of record of Area 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 Area Common Stock are
converted, regardless of whether such holders have exchanged their certificates
representing Area 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 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
Area Common Stock until such holder surrenders such certificate
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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 the shares of Area 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 into and become rights with respect to BB&T
Common Stock, and BB&T shall assume each Stock Option in accordance with the
terms of the Stock Option Plans, except that from and after the Effective Time
(i) BB&T and its Compensation Committee shall be substituted for Area and the
Compensation Committee of Area's Board of Directors with respect to
administering the Stock Option Plans, (ii) each Stock Option assumed by BB&T
may be exercised solely for shares of BB&T Common Stock, (iii) 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 Area Common Stock subject to such Stock
Option immediately prior to the Effective Time by the Exchange Ratio, and (iv)
the per share exercise price under each such Stock Option shall be adjusted by
dividing the per share exercise price under each such Stock Option by the
Exchange Ratio and rounding up to the nearest cent. Notwithstanding the
foregoing, BB&T may at its election substitute as of the Effective Time options
under the BB&T Corporation 1995 Omnibus Stock Incentive Plan or any other duly
adopted comparable plan (in either case, the "BB&T Option Plan") for all or a
part of the Stock Options, subject to the following conditions: (A) the
requirements of (iii) and (iv) above shall be met; (B) such substitution shall
not constitute a modification, extension or renewal of any of the Stock
Options; and (C) the substituted options shall continue in effect on the same
terms and conditions as provided in the Stock Option Agreements and the Stock
Option Plans governing each Stock Option. Each grant of a converted or
substitute option to any individual who subsequent to the Merger will be a
director or officer of BB&T as construed under Commission Rule 16b-3 shall, as
a condition to such conversion or substitution, be approved in accordance with
the provisions of Rule 16b-3. Each Stock Option which is an incentive stock
option shall be adjusted as required by Section 424 of the Code, and the
Regulations promulgated thereunder, so as to continue as an incentive stock
option under Section 424(a) of the Code, and so as not to constitute a
modification, extension, or renewal of the option within the meaning of Section
424(h) of the Code. BB&T and Area agree to take all necessary steps to
effectuate the foregoing provisions of this Section 2.9. BB&T has reserved and
shall continue to reserve adequate shares of BB&T Common Stock for delivery
upon exercise of any converted or substitute options. As soon as practicable
after the Effective Time, if it has not already done so, BB&T shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of BB&T
Common Stock subject to converted or substitute options and shall use its
reasonable efforts to maintain the effectiveness of such registration statement
(and maintain the current status of the prospectus or prospectuses contained
therein) for so long as such converted or substitute options remain
outstanding. With respect to those individuals, if any, who subsequent to the
Merger may be subject to the reporting requirements under Section 16(a) of the
Exchange Act, BB&T shall administer the Stock Option Plans assumed pursuant to
this Section 2.9 (or the BB&T Option Plan, if applicable) in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act to the extent
necessary to preserve for such individuals the benefits of Rule 16b-3 to the
extent such benefits were available to them prior to the Effective Time. Area
hereby represents that the Stock Option Plans in their current forms comply
with Rule 16b-3 to the extent, if any, required as of the date hereof.
(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.
(c) Eligibility to receive stock option grants following the Effective Time
with respect to BB&T Common Stock shall be determined by BB&T in accordance
with its plans and procedures as in effect from time to time, and subject to
any contractual obligations.
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(d) Prior to the Effective Time, the Board of Directors of Area shall take
such corporate actions as are necessary to make each Stock Option fully vested
and exercisable and to provide that each Restricted Stock Award shall be fully
vested, with such actions to be effective as of the Effective Time; provided,
however, that: (1) the effectiveness of such actions shall be conditioned upon
the consummation of the Merger and such other conditions as the Board of
Directors of Area shall impose; and (2) the total number of stock options and
Restricted Stock Awards vested pursuant to this Section 2.9(d) shall not exceed
23,805.
2.10 Dissenting Shares
Any holder of shares of Area Common Stock who shall have exercised rights to
dissent with respect to the Merger in accordance with the KBCA and who has
properly exercised such shareholder's rights to demand payment of the "fair
value" of the shareholder's shares (the "Dissenting Shares") as provided in the
KBCA (the "Dissenting Shareholder") shall thereafter have only such rights, if
any, as are provided a Dissenting Shareholder in accordance with the KBCA and
shall have no rights to receive the Merger Consideration under Sections 2.7 and
2.8 (provided, that nothing contained herein shall limit such Dissenting
Shareholder's rights to the payment of all accrued and unpaid dividends having
a record date prior to the Effective Time); provided, however, that if a
Dissenting Shareholder shall withdraw (in accordance with the KBCA) the demand
for such appraisal or shall become ineligible for such appraisal, then such
Dissenting Shareholder's Dissenting Shares automatically shall cease to be
Dissenting Shares and shall be converted into and represent only the right to
receive from the Surviving Corporation, upon surrender of the certificate
representing the Dissenting Shares, the Merger Consideration provided for in
Section 2.7 and accrued and unpaid dividends as provided in Section 2.8(c) and
Section 2.8(e).
2.11 Merger of Subsidiaries
In the event that BB&T shall request, Area shall take such actions, and
shall cause the Area 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 Area
Subsidiaries with and into, in each case, one of the BB&T Subsidiaries.
2.12 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 Exchange Ratio shall be
proportionately adjusted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AREA
Except as Disclosed, Area represents and warrants to BB&T as follows (the
representations and warranties herein of Area are made subject to the
applicable standard set forth in Section 6.3(a), and no such representation or
warranty shall be deemed to be inaccurate unless it is inaccurate to the extent
that BB&T would be entitled to refuse to consummate the Merger pursuant to
Section 7.1(b)(ii) on account of such inaccuracy):
3.1 Capital Structure
The authorized capital stock of Area consists of 50,000,000 shares of Area
Common Stock and 500,000 shares of Area preferred stock. Area has 23,906,188
shares of Area Common Stock issued and outstanding and no shares of Area
preferred stock issued and outstanding. No other classes of capital stock of
Area, common or preferred, are authorized, issued or outstanding. All
outstanding shares of Area capital stock have been duly
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authorized and are validly issued, fully paid and nonassessable. No shares of
capital stock have been reserved for any purpose, except for shares of Area
Common Stock reserved in connection with the Stock Option Plans. Area has
granted options to acquire 473,334 shares of Area Common Stock under the Stock
Option Plans or outstanding agreements and awards, which options remain
outstanding as of the date hereof, plus options to be granted under the Stock
Option Plans during January 2002, aggregating 13,600 shares. Except as set
forth in this Section 3.1, there are no Rights authorized, issued or
outstanding with respect to, nor are there any agreements, understandings or
commitments relating to the right of any Area shareholder to own, to vote or to
dispose of, the capital stock of Area.
3.2 Organization, Standing and Authority
Area is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Kentucky, with full corporate power and
authority to carry on its business as now conducted and to own, lease and
operate its properties and assets. Area is not required to be qualified to do
business in any other state of the United States or foreign jurisdiction. Area
is registered as a bank holding company under the Bank Holding Company Act.
3.3 Ownership of Subsidiaries
Section 3.3 of the Area Disclosure Memorandum lists all of the Area
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 Area (directly
or indirectly), the percentage ownership interest so owned by Area and its
business activities. The outstanding shares of capital stock or other equity
interests of the Area Subsidiaries are validly issued and outstanding, fully
paid and nonassessable, and all such shares are directly or indirectly owned by
Area 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 Area Subsidiaries, and there
are no agreements, understandings or commitments relating to the right of Area
to own, to vote or to dispose of said interests. None of the shares of capital
stock or other equity interests of the Area Subsidiaries have been issued in
violation of the preemptive rights of any person. Section 3.3 of the Area
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 the Area Subsidiaries and stock or
other securities held in a fiduciary capacity) owned directly or indirectly by
Area.
3.4 Organization, Standing and Authority of the Subsidiaries
Each Area Subsidiary which is a depository institution is a federally
chartered or state chartered bank with its deposits insured by the FDIC. Each
of the Area Subsidiaries is validly existing and in good standing under the
laws of its jurisdiction of organization. Each of the Area Subsidiaries has
full power and authority to carry on its business as now conducted, and is duly
qualified to do business and in good standing in each jurisdiction Disclosed
with respect to it. No Area 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) Area 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 Area shareholders of this Agreement and the Plan of Merger) to
perform all of its obligations under this Agreement, the Plan of Merger, 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 the Area
shareholders pursuant to and to the extent required
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by applicable law. This Agreement, the Plan of Merger and the BB&T Option
Agreement constitute legal, valid and binding obligations of Area, and each is
enforceable against Area 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 (whether applied in a court of
law or in equity).
(b) Neither the execution and delivery of this Agreement, the Plan of
Merger, the Articles of Merger or the BB&T Option Agreement, nor consummation
of the transactions contemplated hereby or thereby, nor compliance by Area 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 Area or
any Area 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 Area or any Area 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 Area or any Area 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 Area of the Merger and the other transactions contemplated in
this Agreement.
3.6 Securities Filings; Financial Statements; Statements True
(a) Area has timely filed all Securities Documents required by the
Securities Laws to be filed since December 31, 1997. Area has Disclosed or made
available to BB&T a true and complete copy of each Securities Document filed by
Area with the Commission after December 31, 1997 and prior to the date hereof,
which are all of the Securities Documents that Area 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 Area fairly present or will fairly present,
as the case may be, the consolidated financial position of Area and the Area
Subsidiaries as of the dates indicated and the consolidated statements of
income and retained earnings, changes in shareholders' equity and statements of
cash flows for the periods then ended (subject, in the case of unaudited
interim statements, to the absence of notes and to normal year-end audit
adjustments that are not material in amount or effect) are in conformity with
GAAP applied on a consistent basis.
(c) No statement, certificate, instrument or other writing furnished or to
be furnished hereunder by Area or any Area 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 Area and each of the Area Subsidiaries contain or will
contain at Closing accurate records of all meetings and other corporate actions
of their respective shareholders and Boards of Directors (including committees
of the Board of Directors), and the signatures contained therein are the true
signatures of the persons whose signatures they purport to be.
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3.8 Adverse Change
Since December 31, 2000, Area and the Area Subsidiaries have not incurred
any liability, whether accrued, absolute or contingent, except as disclosed in
the most recent Area Financial Statements, or entered into any transactions
with Affiliates, in each case 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, results of operations or business prospects of Area or any of the
Area Subsidiaries.
3.9 Absence of Undisclosed Liabilities
All liabilities (including contingent liabilities) of Area and the Area
Subsidiaries are disclosed in the most recent Financial Statements of Area or
are normally recurring business obligations incurred in the ordinary course of
its business since the date of Area's most recent Financial Statements.
3.10 Properties
(a) Area and the Area 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, tangible and intangible,
reflected on the consolidated balance sheet included in the Financial
Statements of Area as of December 31, 2000 or acquired after such date, except
for (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 Area or any Area 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) Area and the Area Subsidiaries are and at all times have been in
compliance with all Environmental Laws. Neither Area nor any Area Subsidiary
has received any communication alleging that Area or the Area Subsidiary is not
in such compliance, and there are no present circumstances that would prevent
or interfere with the continuation of such compliance.
(b) There are no pending Environmental Claims, neither Area nor any Area
Subsidiary has received notice of any pending Environmental Claims, and 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) Area
or any Area Subsidiary, (ii) any person or entity whose liability for any
Environmental Claim Area or any Area 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 Area or any Area Subsidiary, or any real
or personal property which Area or any Area 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 Area or any Area Subsidiary holds a security
interest securing a loan recorded on the books of Area or any Area Subsidiary.
Neither Area nor any Area Subsidiary is subject to any agreement, order,
judgment, decree or memorandum by or with any court, governmental authority,
regulatory agency or third party imposing any liability under any Environmental
Laws.
(c) Area and the Area Subsidiaries are in compliance with all
recommendations contained in any environmental audits, analyses and surveys
received by Area relating to all real and personal property owned or leased by
Area or any Area Subsidiary and all real and personal property of which Area or
any Area Subsidiary has or is judged to have managed or supervised or
participated in the management of.
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(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 Area or any Area Subsidiary or against any person
or entity whose liability for any Environmental Claim Area or any Area
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 Area and the Area Subsidiaries are
valid and properly documented and were made in the ordinary course of business,
and the security therefor, if any, is valid and properly perfected. Neither the
terms of such loans, nor any of the loan documentation, nor the manner in which
such loans have been administered and serviced, nor Area's procedures and
practices of approving or rejecting loan applications, 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 Area are adequate as of their
respective dates under the requirements of GAAP and applicable regulatory
requirements and guidelines.
3.13 Tax Matters
(a) Area and the Area 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
and, as of the Effective Time, will have paid, or where payment is not required
to have been made, will have set up an adequate reserve or accrual for the
payment of, all taxes for any subsequent periods ending on or prior to the
Effective Time. Neither Area nor any Area Subsidiary has or will have any
liability for any such taxes in excess of the amounts so paid or reserves or
accruals so established. Area and the Area 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 Area and the Area Subsidiaries are complete and accurate. Neither Area
nor any Area Subsidiary is delinquent in the payment of any tax, assessment or
governmental charge. No deficiencies for any tax, assessment or governmental
charge have been proposed, asserted or assessed (tentatively or otherwise)
against Area or any Area Subsidiary which have not been settled and paid. There
are currently no agreements in effect with respect to Area or any Area
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 Area nor any of the Area Subsidiaries is a party to any tax
allocation or sharing agreement or 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 Area or a Area subsidiary) or has any liability for taxes
of any person (other than Area and the Area 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.
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(e) Each of Area and the Area 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 Area nor any of the Area 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. Area 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 Area and of each Area Subsidiary and each
other person (in each case other than as an employee) to whom Area or any Area
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) Area has Disclosed an accurate and complete list of all Plans, as
defined below, contributed to, maintained or sponsored by Area or any Area
Subsidiary, to which Area or any Area Subsidiary is obligated to contribute
or has any liability or potential liability, whether direct or indirect,
including all Plans contributed to, maintained or sponsored by each member
of the controlled group of corporations, within the meaning of Sections
414(b), 414(c), 414(m) and 414(o) of the Code, of which Area or any Area
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) that 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 Area nor any Area 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 Area or any Area 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, and all related trusts, insurance contracts and funds,
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,
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claims, complaints, charges, proceedings, hearings, examinations,
investigations, audits or demands with respect to the Plans (other than
routine claims for benefits) are pending or threatened, and there are no
facts which could give rise to or be expected to give rise to any actions,
suits, claims, complaints, charges, proceedings, hearings, examinations,
investigations, audits or demands. No Plan that is subject to the funding
requirements of Section 412 of the Code or Section 302 of ERISA has
incurred any "accumulated funding deficiency" as such term is defined in
such Sections of ERISA and the Code, whether or not waived, and each Plan
has always fully met the funding standards required under Title I of ERISA
and Section 412 of the Code. No liability to the Pension Benefit Guaranty
Corporation ("PBGC") (except for routine payment of premiums) has been or
is expected to be incurred with respect to any Plan that is subject to
Title IV of ERISA, no reportable event (as such term is defined in Section
4043 of ERISA) for which the PBGC has not waived notice 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 Area or any Area Subsidiary
is the subject of any lien arising under Section 302(f) of ERISA or Section
412(n) of the Code, neither Area nor any Area 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 Area or any Area 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 Area or any Area Subsidiary is a member or was a member during such
five-year period.
(vii) As of December 31, 2000, the fair market value of the assets of
each Plan that is a tax qualified defined benefit plan equaled or exceeded,
and as of the Closing Date will equal or exceed, the present value of all
vested and nonvested 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 contributions legally required to be made by the Closing
Date for all periods ending prior to or as of the Closing Date (including
periods from the first day of the then-current plan year to the Closing
Date and including all quarterly contributions required in accordance with
Section 412(m) of the Code) shall have been made. With respect to each
other Plan, all payments, premiums, contributions, reimbursements or
accruals legally required to be made by the Closing Date 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 Area nor, to the best knowledge of Area, any Area
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 that could subject Area or any Area 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.
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(x) Area and each Area Subsidiary has been and is presently in
compliance with all of the requirements of Section 4980B of the Code.
(xi) Neither Area nor any Area Subsidiary has a liability as of December
31, 2000 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 Area as of December 31, 2000 or otherwise
Disclosed.
(xii) Neither the consideration nor implementation of the transactions
contemplated under this Agreement will increase (A) Area's or any Area
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, accelerated allocation of previously unallocated Plan assets or by
the conversion of all stock options in accordance with Section 2.9).
(xiii) With respect to each Plan, Area has Disclosed or made available
to BB&T, 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 Area and any Area Subsidiary may
be amended or terminated at any time by action of Area's Board of
Directors, or such Area's Subsidiary's Board of Directors, as the case may
be, or a committee of such 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 Area or a Area Subsidiary
thereunder).
3.15 Certain Contracts
(a) Neither Area nor any Area 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 Area
or any Area Subsidiary or the guarantee by Area or any Area Subsidiary of any
such obligation, which cannot be terminated within less than 30 days after the
Closing Date by Area or any Area Subsidiary (without payment of any penalty or
cost, except with respect to Federal Home Loan Bank or Federal Reserve 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 Area or any Area Subsidiary (without payment of any penalty
or cost), or that provides benefits which are contingent, or the application of
which is altered, upon the occurrence of a transaction involving Area 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 Plans, 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 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
as of the date hereof.
(b) Neither Area nor any Area 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
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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 Area, threatened
against Area or any Area Subsidiary or against any asset, interest, Plan or
right of Area or any Area Subsidiary, or, to the best knowledge of Area,
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 Area, threatened against any present or former director or
officer of Area or any Area Subsidiary that would reasonably be expected to
give rise to a claim against Area or any Area Subsidiary for indemnification.
There are no actual or, to the best knowledge of Area, 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 Area, no fact or condition relating to Area or any Area Subsidiary
exists (including, without limitation, noncompliance with the CRA) that would
prevent Area or BB&T from obtaining all of the federal and state regulatory
approvals contemplated herein.
3.17 Compliance with Laws; Filings
Each of Area and each Area Subsidiary is in compliance with all statutes and
regulations (including, but not limited to, the CRA, the 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 Area nor any Area 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 Area nor any
Area 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, 1997, Area and each of the Area
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, FDIC,
Federal Reserve Board and applicable state regulators. Each such report,
registration, notice and statement, and each amendment thereto, complied with
applicable legal requirements.
3.18 Brokers and Finders
Neither Area nor any Area Subsidiary, nor any of their respective officers,
directors or employees, has employed any broker, finder or financial advisor or
incurred any liability for any fees or commissions in connection with the
transactions contemplated herein, in the Plan of Merger or in the BB&T Option
Agreement, except for an obligation to the Financial Advisor for investment
banking services, the nature and extent of which has been Disclosed, and except
for fees to accountants and lawyers.
3.19 Repurchase Agreements; Derivatives
(a) With respect to all agreements currently outstanding pursuant to which
Area or any Area Subsidiary has purchased securities subject to an agreement to
resell, Area or the Area 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 Area or any Area Subsidiary has sold securities subject to an
agreement to repurchase, neither Area nor the Area Subsidiary has pledged
collateral in excess of the amount of the debt secured thereby. Neither Area
nor any Area Subsidiary has pledged collateral in excess of the amount required
under any interest rate swap or other similar agreement currently outstanding.
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(b) Neither Area nor any Area 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 Area Subsidiaries that are depository
institutions are insured by the FDIC to the maximum extent permitted by federal
law, and the Area Subsidiaries have paid all premiums and assessments and filed
all reports required to have been paid or filed under all rules and regulations
applicable to the FDIC.
3.21 Related Party Transactions
Area has Disclosed all existing transactions, investments and loans,
including loan guarantees existing as of the date hereof, to which Area or any
Area Subsidiary is a party with any director, executive officer or 5%
shareholder of Area 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 Area than
could be obtained from unrelated parties.
3.22 Certain Information
When the Proxy Statement/Prospectus is mailed, and at the time of the
meeting of shareholders of Area 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 Area, (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 in which they were made, not misleading.
3.23 Tax and Regulatory Matters
Neither Area nor any Area Subsidiary has taken or agreed to take any action
which would or could reasonably be expected to (i) cause the Merger 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
Area and each Area 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,
and no such law shall be activated or applied as a result of such transactions.
Neither the Articles of Incorporation nor the Bylaws of Area, nor any other
document of Area or to which Area is a party, contains a provision that
requires more than a majority of the shares of Area Common Stock entitled to
vote, or the vote or approval of any other class of capital stock or voting
security to approve the Merger or any other transactions contemplated in this
Agreement.
3.25 Labor Relations
Neither Area nor any Area 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 Area or any Area Subsidiary party to any collective
bargaining agreement. There is no strike or other labor
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dispute involving Area or any Area Subsidiary, pending or threatened, or to the
best knowledge of Area, is there any activity involving any employees of Area
or any Area Subsidiary seeking to certify a collective bargaining unit or
engaging in any other organization activity.
3.26 Fairness Opinion
Area has received from the Financial Advisor an opinion that, as of the date
hereof, the Exchange Ratio is fair to the shareholders of Area from a financial
point of view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BB&T
BB&T represents and warrants to Area as follows (the representations and
warranties herein of BB&T are made subject to the applicable standard set forth
in Section 6.2(a), and no such representation or warranty shall be deemed to be
inaccurate unless it is inaccurate to the extent that Area would be entitled to
refuse to consummate the Merger pursuant to Section 7.1(b)(ii) on account of
such inaccuracy):
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 is issued and outstanding, and (ii)
1,000,000,000 shares of BB&T Common Stock of which 453,109,175 shares were
issued and outstanding as of November 5, 2001. 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 conduct of its
business requires such qualification. BB&T is registered as a financial holding
company under the Bank Holding Company Act.
4.3 Authorized and Effective Agreement
(a) BB&T 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 BB&T. This Agreement and the Plan of Merger attached hereto constitute
legal, valid and binding obligations of BB&T, and each is enforceable against
BB&T 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.
(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 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
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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 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 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. Each of the BB&T Subsidiaries (i) has full power and authority to
carry on its business as now conducted and (ii) is duly qualified to do
business in the states of the United States and foreign jurisdictions where its
ownership or leasing of property or the conduct of its business requires such
qualification.
4.5 Securities Documents; Statements True
BB&T has timely filed all Securities Documents required by the Securities
Laws to be filed since December 31, 1997. 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. No statement, certificate, instrument or other writing
furnished or to be furnished hereunder by BB&T or any other BB&T Subsidiary to
Area contains or will contain any untrue statement of 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.
4.6 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
Area 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 in which they were made, not misleading.
4.7 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
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);
provided, that nothing that nothing contained herein shall limit the ability of
BB&T to exercise its rights under the BB&T Option Agreement.
4.8 Share Ownership
As of the date of this Agreement, BB&T does not own (except in a fiduciary
capacity) any shares of Area Common Stock.
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4.9 Legal Proceedings; Regulatory Approvals
There are no actual or, to the best knowledge of BB&T, threatened actions,
suits or proceedings instituted, 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 Area from
obtaining all of the federal and state regulatory approvals contemplated
herein.
ARTICLE V
COVENANTS
5.1 Area Shareholder Meeting
Area 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 Area agrees that it
shall, at the time the Proxy Statement/Prospectus is mailed to the shareholders
of Area, recommend that Area's shareholders vote for such approval; provided,
that the Board of Directors of Area 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 light of its fiduciary duty to
Area's shareholders after consideration of (i) written advice of legal counsel
that, in the opinion of such counsel, such recommendation or the failure to
withdraw or modify such recommendation could reasonably be expected to
constitute a breach of the fiduciary duty of the Board of Directors to the
shareholders of Area, and (ii) a written determination from the Financial
Advisor that the Merger Consideration is not fair or is inadequate to the Area
shareholders from a financial point of view, accompanied by a detailed analysis
of the reasons for such determination.
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. Area 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 Area shall use all reasonable efforts to cause
the Proxy Statement/Prospectus to be approved by the Commission for mailing to
the Area 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. Area shall cause the Proxy Statement/Prospectus to be mailed to
shareholders in accordance with all applicable notice requirements under the
Securities Laws, the KBCA and other applicable rules and regulations.
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 connection therewith, BB&T acknowledges that it (i) has
adopted the Plan of Merger and (ii) will 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 Merger Consideration and
agrees not to take any action that would cause the aggregate number of
authorized shares of BB&T Common Stock available for issuance hereunder not to
be sufficient to effect the Merger. If at any time the aggregate number of
shares of BB&T Common Stock reserved for issuance hereunder is not sufficient
to effect the Merger, BB&T shall take all appropriate action as may be required
to increase the number of shares of BB&T Common Stock reserved for such
purpose.
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5.4 Additional Acts
(a) Area agrees to take such actions requested by BB&T 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 Agreement,
including, without limitation, the covenant not to 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 Area shall
submit notice or applications for prior approval of the transactions
contemplated herein to the Federal Reserve Board 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. Area and BB&T each represents and warrants to
the other that all information included (or submitted for inclusion) concerning
it, its respective Subsidiaries, and any of its respective directors, officers
and shareholders, shall be true, correct and complete in all material respects
as of the date presented.
5.5 Best Efforts
Each of BB&T and Area 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, including,
without limitation, executing and delivering, or causing to be executed and
delivered, such representations, certificates and other instruments or
documents as may be reasonably requested by BB&T's legal counsel for such
counsel to issue the opinion contemplated by Section 6.1(e), and to consummate
the transactions herein contemplated at the earliest possible date. Neither
BB&T nor Area 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.
5.6 Certain Accounting Matters
Area shall cooperate with BB&T concerning (i) 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, and (ii) Area's lending, investment or asset/liability management
policies; provided, that any action taken by Area pursuant to this Section 5.6
shall not be deemed to constitute or result in the breach of any representation
or warranty of Area contained in this Agreement.
5.7 Access to Information
Area 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, Area 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 Area and the Area 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 undertakings 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
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confidential information previously furnished in connection with the
transactions contemplated by this Agreement.
5.8 Press Releases
BB&T and Area 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 Area
Except with the prior written consent of BB&T, between the date hereof and
the Effective Time, Area shall not, and shall cause each of the Area
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 or expand
any existing activities;
(b) declare, set aside, make or pay any dividend or other distribution in
respect of its capital stock, other than regularly scheduled quarterly
dividends of $.045 (as such amount may be increased in an amount and at a time
consistent with past practices) per share of Area Common Stock payable on
record dates and in amounts consistent with past practices; provided that any
dividend declared or payable on the shares of Area Common Stock in the
quarterly period during which the Effective Time occurs shall, unless otherwise
agreed upon in writing by BB&T and Area, 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 (including treasury shares),
except pursuant to the Stock Option Plans with respect to the options
outstanding on the date hereof or pursuant to the BB&T Option Agreement;
(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;
(f) impose or permit imposition, of any lien, charge or encumbrance on
any share of stock held by it in any Area 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, in each case other than in
the ordinary course of business;
(g) 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;
(h) 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;
(i) increase the rate of compensation of any of its directors, officers
or employees (excluding increases in compensation resulting from 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 for increases or payments made in the ordinary course of
business consistent with past practice pursuant to plans or arrangements in
effect on the date hereof;
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(j) enter into or substantially modify (except as may be required by
applicable law or regulation) any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees; provided, however, that this subparagraph shall not prevent
renewal of any of the foregoing consistent with past practice;
(k) 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, Area or any
Area Subsidiary or any business combination with Area or any Area
Subsidiary other than as contemplated by this Agreement; or authorize any
officer, director, agent or affiliate of Area or any Area 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 Section 5.9(k) shall not apply to furnishing
information, negotiations or discussions with the offeror following an
unsolicited offer if, as a result of such offer, Area is advised in writing
by legal counsel that in its opinion the failure to so furnish information
or negotiate would likely constitute a breach of the fiduciary duty of
Area's Board of Directors to the Area shareholders;
(l) 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 Area or a Area Subsidiary or guarantee by Area or
a Area 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 reappointment of officers in
the normal course), or (iv) any contract, agreement or understanding with a
labor union;
(m) 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, Area 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;
(n) change its methods of accounting in effect at December 31, 2000,
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, 2000, except as required by changes in law
or regulation;
(o) incur any commitments for capital expenditures or obligation to make
capital expenditures in excess of $25,000, for any one expenditure, or
$100,000, in the aggregate;
(p) incur any indebtedness other than deposits from customers, advances
from the Federal Home Loan Bank or Federal Reserve Bank and reverse
repurchase arrangements in the ordinary course of business;
(q) take any action which would or could reasonably be expected to (i)
cause the Merger 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;
(r) dispose of any material assets other than in the ordinary course of
business; or
(s) agree to do any of the foregoing.
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5.10 Employment Agreements
BB&T (or its specified BB&T Subsidiary) agrees to offer to enter into
employment agreements with John A. Ray, F. Lee Hess, Richard N. Wilson, Darrell
L. Gustafson, and Kevin M. Gallagher substantially in the form of Annex B
hereto.
5.11 Affiliates
Area shall use its reasonable best efforts to cause all persons who are
Affiliates of Area to deliver to BB&T promptly following execution of 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 in any
event shall use its reasonable best efforts to cause such affiliates to deliver
to BB&T such written agreement prior to the Closing Date.
5.12 Employee Benefits
(a) Effective on the Benefit Plan Determination Date with respect to the
401(k) plan of Area, BB&T shall cause such plan to be merged with the 401(k)
plan maintained by BB&T and the BB&T Subsidiaries, or to be frozen or to be
terminated, in each case as determined by BB&T and subject to the receipt of
all applicable regulatory or governmental approvals. Each employee of Area at
the Effective Time (i) who is a participant in the 401(k) plan of Area, (ii)
who becomes an employee immediately following the Effective Time of BB&T or of
any subsidiary of BB&T ("Employer Entity"), and (iii) who continues in the
employment of an Employer Entity until the Benefit Plan Determination Date for
the 401(k) plan, shall be eligible to participate in BB&T's 401(k) plan as of
the Benefit Plan Determination Date. Any other former employee of Area who is
employed by an Employer Entity on or after the Benefit Plan Determination Date
shall be eligible to be a participant in the BB&T 401(k) plan upon complying
with eligibility requirements. All rights to participate in BB&T's 401(k) plan
are subject to BB&T's right to amend or terminate the plan. Until the Benefit
Plan Determination Date, BB&T shall continue in effect for the benefit of
participating employees the Section 401(k) plan of Area. For purposes of
administering BB&T's 401(k) plan, service with Area and the Area Subsidiaries
shall be deemed to be service with BB&T for participation and vesting purposes,
but not for purposes of benefit accrual. Each employee of Area or a Area
Subsidiary at the Effective Time who becomes an employee immediately following
the Effective Time of an Employer Entity is referred to herein as a
"Transferred Employee."
(b) Each Transferred Employee shall be eligible to participate in 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, as of the Benefit Plan Determination Date
for each such plan or program, conditional upon the Transferred Employee's
being employed by an Employer Entity as of such Benefit Plan Determination Date
and subject to complying with eligibility requirements of the respective plans
and programs. With respect to health care coverages, participation in BB&T's
plans may be subject to availability of HMO options. In any case in which HMO
coverage is not available, substitute coverage will be provided which may not
be fully comparable to the HMO coverage. With respect to any welfare benefit
plan or program of Area that the Employer Entity determines, in its sole
discretion, provides benefits of the same type or class as a corresponding plan
or program maintained by the Employer Entity, the Employer Entity shall
continue such Area plan or program in effect for the benefit of the Transferred
Employees so long as they remain eligible to participate and until they shall
become eligible to become participants in the corresponding plan or program
maintained by the Employer Entity (and, with respect to any such corresponding
plan or program, subject to complying with eligibility requirements and subject
to the right of the Employer Entity to terminate such plan or program). If the
first plan year of participation in any group health plan of an Employer Entity
by a Transferred Employee is a partial year, the Employer Entity will give such
Transferred Employee and his or her dependents credit toward deductible and
out-of-pocket limitations for and eligible expenses incurred by such persons
under the Community First group health plan during that portion of that plan
year that precedes entry into the group health plans of the Employer Entity.
For purposes of administering the welfare plans and programs subject to this
Section 5.12(b), service with Area shall be deemed to be service with the
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Employer Entity for the purpose of determining eligibility to participate and
vesting (if applicable) in such welfare plans and programs, but not for the
purpose of computing benefits, if any, determined in whole or in part with
reference to service (except as otherwise provided in Section 5.12(c)).
(c) Except to the extent of commitments herein or other contractual
commitments, if any, specifically made or assumed hereunder by BB&T, neither
BB&T nor any Employer Entity shall have any obligation arising from the Merger
to continue any Transferred Employees in its employ or in any specific job or
to provide to any Transferred Employee any specified level of compensation or
any incentive payments, benefits or perquisites. Each Transferred Employee who
is terminated by an Employer Entity subsequent to the Effective Time, excluding
any employee who has a then existing contract providing for severance, 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 Area or a Area
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.
(d) Effective on the Benefit Plan Determination Date with respect to the
defined benefit pension plan of Area (the "Area Pension Plan"), BB&T shall
cause such plan to be merged with the defined benefit pension Plan maintained
by BB&T and the BB&T Subsidiaries, or to be frozen or terminated, in each case
as determined by BB&T and subject to the receipt of all applicable regulatory
or governmental approvals. Each Transferred Employee who is a participant in
the Area Pension Plan at the Effective Time and who continues in the employment
of an Employer Entity until the Benefit Plan Determination Date with respect to
the Area Pension Plan, shall be eligible to participate in BB&T's pension plan
as of the Benefit Plan Determination Date. Any other former employee of Area
who is employed by an Employer Entity on or after the Benefit Plan
Determination Date shall be eligible to be a participant in the BB&T pension
plan upon complying with eligibility requirements. All rights to participate in
BB&T's pension plan are subject to BB&T's right to amend or terminate the plan.
As of the close of business immediately preceding the Benefit Plan
Determination Date, BB&T shall determine the accrued benefit under the Area
Pension Plan with respect to participants continuing in the service of an
Employer Entity. Such accrued benefit shall be determined by taking into
account service and compensation following the Effective Time and preceding the
Benefit Plan Determination Date, and the accrued benefit as so determined shall
be the accrued benefit under the BB&T pension plan for service prior to the
Benefit Plan Determination Date (and shall be added to the benefit accrued
under the BB&T pension plan for service and compensation beginning with the
Benefit Plan Determination Date). For purposes of administering BB&T's pension
plan, service with Area and the Area Subsidiaries shall be deemed to be service
with BB&T for participation and vesting purposes and for purposes of
eligibility for early retirement and early retirement subsidies, but not for
purposes of benefit accrual.
(e) BB&T agrees to honor all employment agreements, severance agreements and
deferred compensation agreements that Area and the Area Subsidiaries have with
their current and former employees and directors and which have been Disclosed
to BB&T pursuant to this Agreement, except to the extent any such agreements
shall be superseded or terminated at the Closing or following the Closing Date.
Except for the agreements described in the preceding sentence and except as
otherwise provided in this Section 5.12, the employee benefit plans of Area
shall, in the sole discretion of BB&T, be frozen, terminated or merged into
comparable plans of BB&T, effective as BB&T shall determine in its sole
discretion.
(f) Prior to the Effective Time Area shall cause the Cardinal ESOP to be
terminated in accordance with applicable law and regulations.
5.13 Directors and Officers Protection
BB&T or a BB&T Subsidiary shall provide 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 Area for acts or
omissions occurring prior to the Effective Time. Such insurance shall provide
at least the same coverage and amounts as contained in Area's policy on the
date hereof; provided, that in no event shall the
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annual premium on such policy exceed 150% of the annual premium payments on
Area'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 Area or any Area Subsidiary prior to
the Effective Time from any acts or omissions in such capacities prior to the
Effective Time, to the extent that such indemnification is provided pursuant to
the Articles of Incorporation or Bylaws of Area on the date hereof and is
permitted under the NCBCA.
5.14 Forbearances of BB&T
Except with the prior written consent of Area, which consent shall not be
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
constitute a reorganization under Section 368 of the Code; (ii) result in any
inaccuracy of a representation or warranty herein that 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; or
(iv) 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.
5.15 Reports
Each of Area and BB&T shall file (and shall cause the Area 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 Area, 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 the absence of notes and 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 Area 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 Advisory Board
As of the Effective Time, BB&T shall establish a state Advisory Board for
Kentucky and shall offer to each of the members of the Board of Directors of
Area a seat on this newly established Advisory Board. For two years following
the Effective Time, the Advisory Board members appointed pursuant to this
Section 5.17 who are neither employees of BB&T or any of its Affiliates or
under contract with BB&T or any of its Affiliates, and who continue to serve
shall receive, as compensation for service on the Advisory Board,
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Advisory Board member's 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 Area in effect on August 31, 2001.
Following such two-year period, Advisory Board Members who are entitled to
receive Advisory Board Member fees, if they continue to serve in such capacity,
shall receive fees in accordance with BB&T's standard schedule of fees for
service thereon as in effect from time to time. For two years after the
Effective Time, no such Advisory Board member shall be prohibited from serving
thereon because he or she shall have attained the maximum age for service
thereon (currently age 70). Membership of any person on any Advisory Board
shall be conditional upon execution of an agreement providing that such person
will not engage in activities competitive with BB&T for two years following the
Effective Time or, if longer, the period that he or she is a member of the
Advisory Board.
5.18 Board of Directors of Branch Banking and Trust Company
As of the Effective Time, Branch Banking and Trust Company, a North Carolina
banking corporation, shall elect C.M. Gatton to its Board of Directors, to
serve until its next annual meeting (subject to the right of removal for cause)
and thereafter so long as he is elected and qualifies. For three years after
the Effective Time, C.M. Gatton shall not be prohibited from serving on such
Board because he shall have attained the maximum age for service thereon
(currently age 70). Any member of such Board of Directors who is not an
employee of BB&T or any of its Affiliates nor under contract with BB&T or any
of its Affiliates shall be entitled to receive fees for service on the Board in
accordance with BB&T's policies as in effect from time to time.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent--BB&T and Area
The respective obligations of BB&T and Area 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 Area 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 with respect to such
approvals shall have passed and all such approvals shall be in effect;
(d) None of BB&T, any of the BB&T Subsidiaries, Area or any of the Area
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; and
(e) Area and BB&T shall have received an opinion of BB&T's legal
counsel, in form and substance satisfactory to Area 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 Area will not
recognize any gain or loss to the extent that such shareholders exchange
shares of Area Common Stock for shares of BB&T Common Stock.
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6.2 Conditions Precedent--Area
The obligations of Area 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 Area 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 Area. The representations and warranties of BB&T set forth in
Sections 4.1, 4.2 (except as relates to qualification), 4.3(a), 4.3(b)(i)
and 4.4 (except as relates to qualification) shall be true and correct
(except for inaccuracies which are de minimis). There shall not exist
inaccuracies in the representations and warranties of BB&T set forth in
this Agreement 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 Area 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) Area shall have received opinions of counsel to BB&T in the form
reasonably acceptable to Area's legal counsel; and
(e) 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:
(a) All representations and warranties of Area 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 Area set forth in
Sections 3.1, 3.2 (except as it relates to qualification), 3.3, 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). There shall not
exist inaccuracies in the representations and warranties of Area set forth
in this Agreement such that the effect of such inaccuracies individually or
in the aggregate has, or is reasonably likely to have, a Material Adverse
Effect on Area and the Area Subsidiaries taken as a whole (evaluated
without regard to the Merger);
(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) Area shall have performed in all material respects all obligations
and complied in all material respects with all covenants required by this
Agreement;
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(d) Area 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 Area, 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 Area
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 Area 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 promote compliance with Rule 145 promulgated by the
Commission; and
(g) Thomas R. Brumley shall have continued in the employment of Area
until the Closing Date and C.M. Gatton shall have executed and delivered to
BB&T a noncompetition agreement substantially in the form of Annex C
hereto.
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 Area 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 thirty 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 material 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 Area do not approve the Agreement and the Plan of Merger; or
(f) At any time following May 31, 2002 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 material breach of any
of its representations, warranties, covenants or undertakings herein.
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
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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 a breach of the covenant, agreement, representation or warranty giving rise
to such termination.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or the Plan
of Merger or in any instrument delivered pursuant hereto or thereto shall
expire on, and be terminated and extinguished at, the Effective Time, other
than covenants that by their terms are to be performed after the Effective Time
(including Sections 5.13, 5.17 and 5.18); provided that no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive BB&T or Area (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 Area, the
aforesaid representations, warranties and covenants being material inducements
to consummation by BB&T and Area 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 Area 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 this Section 7.4, executed after approval by the Area
shareholders of this Agreement and the Plan of Merger, shall reduce either the
Exchange Ratio 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 Area, subject to the proviso to
Section 7.4.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses
Each party hereto shall bear and pay all costs and expenses incurred by it
in connection with the transactions contemplated by this Agreement, including,
without limitation, 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 Area.
8.2 Entire Agreement
This Agreement, including the documents and other writings referenced 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
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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 the rights of directors and
officers of Area to enforce rights in Sections 5.13 and 5.17. After the Closing
Date, Thomas R. Brumley and BB&T intend to enter into an Employment Agreement
substantially in the form of Annex D hereto.
8.3 No Assignment
Except for a substitution of parties pursuant to Section 5.4(a), 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 Area:
Thomas R. Brumley
Area Bancshares Corporation
230 Frederica Street
Owensboro, Kentucky 32301
Telephone: 270-688-7700
Fax: 270-686-1519
With a required copy to:
Kathryn L. Knudson
Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street N.E., Sixteenth Floor
Atlanta, Georgia 30303
Telephone: 404-572-6600
Fax: 404-572-6999
If to BB&T:
Scott E. Reed
150 South Stratford Road
4th Floor
Winston-Salem, North Carolina 27104
Telephone: 336-733-3088
Fax: 336-733-2296
With a required copy to:
William A. Davis, II
Womble Carlyle Sandridge & Rice, PLLC
200 West Second Street
Winston-Salem, North Carolina 27102
Telephone: 336-721-3624
Fax: 336-733-8364
Any party may by notice change the address to which notice or other
communications to it are to be delivered.
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8.5 Specific Performance
Area acknowledges that the Area Common Stock and the Area business and
assets are unique, and that if Area 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 Area 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.
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, without regard to the principles of
conflicts of laws, except to the extent federal law may be applicable.
[remainder of page intentionally left blank]
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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: /s/ John A. Allison, IV
-----------------------------------
Name: John A. Allison, IV
Title: Chairman and Chief Executive
Officer
Area Bancshares Corporation
By: /s/ Thomas R. Brumley
-----------------------------------
Name: Thomas R. Brumley
Title: President and Chief
Executive Officer
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Annex A
ARTICLES OF MERGER
OF
AREA BANCSHARES CORPORATION
INTO
BB&T CORPORATION
The undersigned corporation, pursuant to Section 55-11-05 of the North
Carolina Business Corporation Act ("NCBCA") and Section 271B.11-050 of the
Kentucky Business Corporation Act ("KBCA"), as the surviving corporation hereby
executes and submits the following Articles of Merger.
ONE
The merger of AREA BANCSHARES CORPORATION, a Kentucky corporation ("AREA"),
into BB&T CORPORATION, a North Carolina corporation ("BB&T"), shall be in
accordance with the Plan of Merger attached hereto as Exhibit I (the "Plan of
Merger").
TWO
The Plan of Merger was submitted for approval to the shareholders of AREA by
its Board of Directors in accordance with the provisions of Section 271B.11-030
of the KBCA. [24,433,496] shares of AREA Common Stock were outstanding and
entitled to vote, with no other class of stock outstanding other than common. A
total of undisputed votes were cast for the Plan of Merger by the
shareholders of AREA on , 2002, being a sufficient number for approval
in the manner prescribed by law. The merger is permitted by the laws of
Kentucky, AREA's state of incorporation, and AREA has complied or shall comply
with the applicable laws of Kentucky in effecting this merger. The shareholders
of BB&T were not required to approve the Plan of Merger pursuant to Section 55-
11-03(g) of the NCBCA.
THREE
These Articles of Merger shall become effective at 11:59 p.m. on ,
2002.
[Remainder of Page Intentionally Left Blank]
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The undersigned declares the facts herein stated are true as of ,
2002.
BB&T Corporation
By: _________________________________
John A. Allison, IV
Chairman and Chief Executive
Officer
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Annex A
PLAN OF MERGER
OF
AREA BANCSHARES CORPORATION
INTO
BB&T CORPORATION
Section 1. Corporations Proposing to Merge and Surviving Corporation. AREA
BANCSHARES CORPORATION, a Kentucky corporation ("AREA"), shall be merged (the
"Merger") into BB&T CORPORATION, a North Carolina corporation ("BB&T"),
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 November
7, 2001 (the "Agreement"), by and among AREA and 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 Offices of the Secretaries of State of both North Carolina
and Kentucky. BB&T shall continue as the surviving corporation (the "Surviving
Corporation") in the Merger and the separate corporate existence of AREA shall
cease.
Section 2. Effects of the Merger. The Merger shall have the effects set
forth in Section 271B.11-060 of the Kentucky Business Corporation Act (the
"KBCA") and in Section 55-11-06 of the North Carolina Business Corporation Act
(the "NCBCA").
Section 3. Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws of BB&T 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 NCBCA.
Section 4. 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 AREA or the holders of record of the voting common
stock, no par value, of AREA ("AREA Common Stock"), each share of AREA
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 AREA Common Stock
(as provided in Section 4(d)), the Merger Consideration (as defined in
Section 5).
(b) Each share of the common stock of BB&T 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 AREA 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 AREA Common Stock. With respect to any
certificate for AREA 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 with respect to lost certificates
generally, and evidence reasonably satisfactory to BB&T of ownership of the
shares represented thereby. After the Effective Time, no transfer of the
shares of AREA 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 AREA shareholder a form of letter of transmittal and
instructions for use in effecting the surrender of the certificates which,
immediately prior to the Effective Time, represented any shares of AREA
Common Stock. Upon surrender of such certificates or other evidence of
ownership meeting the requirements of
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Section 4(c), 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 AREA in respect of shares of AREA Common Stock in
accordance with the terms of the Agreement and which remain unpaid at the
Effective Time, subject to compliance by AREA with Section 5.9(b) of the
Agreement. To the extent permitted by law, former shareholders of record of
AREA 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 (as
defined in Section 5) into which their respective shares of AREA Common
Stock are converted, regardless of whether such holders have exchanged
their certificates representing AREA Common Stock for certificates
representing BB&T Common Stock in accordance with the provisions of the
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 the
Agreement, but 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 AREA
Common Stock until such holder surrenders such certificate for exchange as
provided in this Section 4. 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 the shares of AREA Common Stock represented by such
certificate.
Section 5. Merger Consideration
As used herein, the term "Merger Consideration" shall mean the number of
shares of the voting common stock, par value $5.00 per share, of BB&T ("BB&T
Common Stock") to be exchanged for each share of AREA 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 distributable to an AREA shareholder, determined as follows:
(a) The number of shares of BB&T Common Stock to be issued for each
issued and outstanding share of AREA Common Stock shall be in the ratio of
0.55 shares of BB&T Common Stock for each share of AREA Common Stock (the
"Exchange Ratio").
(b) 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. The "Closing Value" shall mean the 4:00
p.m. closing price per share of BB&T Common Stock on the NYSE on the
Closing Date as reported by NYSEnet.com.
Section 6. Conversion of Stock Options
(a) At the Effective Time, each option to acquire shares of AREA Common
Stock which was granted under AREA's 1994 Stock Option Plan; its 2000 Stock
Option and Economic Incentive Plan; Cardinal Bancshares, Inc. 1989 Restricted
Stock Option Plan and the Cardinal Bancshares, Inc. 1994 Restricted Stock
Option Plan (the "Stock Option Plan") and which is then outstanding (and which
by its terms does not lapse on or before the Effective Time), whether or not
then exercisable (a "Stock Option"), shall be converted into and become rights
with respect to BB&T Common Stock, and BB&T shall assume each Stock Option in
accordance with the terms of the applicable Stock Option Plan, except that from
and after the Effective Time (i) BB&T and its Compensation Committee shall be
substituted for AREA and the Compensation Committee of AREA's Board of
Directors administering the Stock Option Plan, (ii) each Stock Option assumed
by BB&T may be exercised solely for shares of BB&T Common Stock, (iii) 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
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share) determined by multiplying the number of shares of AREA Common Stock
subject to such Stock Option immediately prior to the Effective Time by the
Exchange Ratio, and (iv) the per share exercise price under each such Stock
Option shall be adjusted by dividing the per share exercise price under each
such Stock Option by the Exchange Ratio and rounding up to the nearest cent.
Notwithstanding the foregoing, BB&T may at its election substitute as of the
Effective Time options under the BB&T Corporation 1995 Omnibus Stock Incentive
Plan or any other duly adopted comparable plan (in either case, the "BB&T
Option Plan") for all or a part of the Stock Options, subject to the following
conditions: (A) the requirements of (iii) and (iv) above shall be met; (B) such
substitution shall not constitute a modification, extension or renewal of any
of the Stock Options which are incentive stock options; and (C) the substituted
options shall continue in effect on the same terms and conditions as provided
in the Stock Options and the Stock Option Plan granting each Stock Option. Each
grant of a converted or substitute 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 or substitution, be approved in
accordance with the provisions of Rule 16b-3. Each Stock Option which is an
incentive stock option shall be adjusted as required by Section 424 of the
Code, and the Regulations promulgated thereunder, so as to continue as an
incentive stock option under Section 424(a) of the Code, and so as not to
constitute a modification, extension, or renewal of the option within the
meaning of Section 424(h) of the Code. BB&T and AREA shall take all necessary
steps to effectuate the foregoing provisions of this Section 6. BB&T has
reserved and shall continue to reserve adequate shares of BB&T Common Stock for
delivery upon exercise of any converted or substitute options. As soon as
practicable after the Effective Time, if it has not already done so, and to the
extent AREA shall have a registration statement in effect or an obligation to
file a registration statement, BB&T shall file a registration statement on Form
S-3 or Form S-8 in compliance with the Securities Act of 1933 (the
"Registration Statement"), as the case may be (or any successor or other
appropriate forms), with respect to the shares of BB&T Common Stock subject to
converted or substitute options and shall use its reasonable efforts to
maintain the effectiveness of such Registration Statement (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such converted or substitute options remain outstanding. With respect to
those individuals, if any, who subsequent to the Merger may be subject to the
reporting requirements under Section 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), BB&T shall administer the Stock Option
Plan assumed pursuant to this Section 6 (or the BB&T Option Plan, if
applicable) in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act to the extent necessary to preserve for such individuals the
benefits of Rule 16b-3 to the extent such benefits were available to them prior
to the Effective Time.
(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.
Section 7. Amendment. At any time before the Effective Time, this Plan of
Merger may be amended, provided that no such amendment executed after approval
by the AREA shareholders of the Agreement and this Plan of Merger shall modify
either the amount or the form of the consideration to be provided to holders of
AREA Common Stock upon consummation of the Merger.
Section 8. Dissenting Shares. Any holder of shares of AREA Common Stock who
shall have exercised rights to dissent with respect to the Merger in accordance
with the KBCA and who has properly exercised such shareholder's rights to
demand payment of the "fair value" of the shareholder's shares (the "Dissenting
Shares") as provided in the KBCA (the "Dissenting Shareholder") shall
thereafter have only such rights, if any, as are provided a Dissenting
Shareholder in accordance with the KBCA and shall have no rights to receive the
Merger Consideration under Section 4 and 5 (provided, that nothing contained in
this Plan of Merger shall limit such Dissenting Shareholder's rights to the
payment of all declared and unpaid dividends); provided, however, that if a
Dissenting Shareholder shall fail to properly demand payment (in accordance
with the KBCA) in conjunction with such appraisal or shall become ineligible
for such appraisal, then such Dissenting Shareholder's Dissenting Shares
automatically shall cease to be Dissenting Shares and shall be converted into
and represent only the right to receive from the Surviving Corporation, upon
surrender of the certificate
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representing the Dissenting Shares, the Merger Consideration provided for in
Section 5 and any declared and unpaid dividends as provided in Section 4(e).
Section 9. 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 Stock
Exchange Ratio shall be proportionately adjusted.
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APPENDIX B
Sections 271B.13-010 through 271B.13-310 of the
Kentucky Revised Statutes ("KRS")
271 B.13-010 Definitions for subtitle.
As used in this subtitle:
(1) "Corporation" means the issuer of the shares held by a dissenter,
except that in the case of a merger where the issuing corporation is
not the surviving corporation, then, after consummation of the merger,
"corporation" shall mean the surviving corporation.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under KRS 271B.13-020 and who exercises that right
when and in the manner required by KRS 271B.13-200 to 271B.13-280.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion
would be inequitable. In any transaction subject to the requirements of
KRS 271B.12-210 or exempted by KRS 271B.12-220(2), "fair value" shall
be at least an amount required to be paid under KRS 271B.12-220(2) in
order to be exempt from the requirements of KRS 271B.12-210.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by
the corporation on its principal bank loans or, if none, at a rate that
is fair and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on
file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record
shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
271B.13-020 Right to dissent.
(1) A shareholder shall be entitled to dissent from, and obtain payment of
the fair value of his shares in the event of, any of the following
corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If shareholder approval is required for the merger by KRS
271B.11-030 or the articles of incorporation and the shareholder
is entitled to vote on the merger; or
2. If the corporation is a subsidiary that is merged with its
parent under KRS 271B.11-040;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the
sale or exchange, including a sale in dissolution, but not
including a sale pursuant to court order or a sale for cash
pursuant to a plan by which all or substantially all of the net
proceeds of the sale will be distributed to the shareholders within
one (1) year after the date of sale;
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(d) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because
it:
1. Alters or abolishes a preferential right of the shares to a
distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
3. Excludes or limits the right of the shares to vote on any matter
other than a limitation by dilution through issuance of shares or
other securities with similar voting rights; or
4. Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under KRS 271B.6-040;
(e) Any transaction subject to the requirements of KRS 271B.12-210 or
exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of
the board of directors provides that voting or nonvoting
shareholders are entitled to dissent and obtain payment for their
shares.
(2) A shareholder entitled to dissent and obtain payment for his shares
under this chapter shall not challenge the corporate action creating
his entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
271B.13-030 Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he shall dissent with respect
to all shares beneficially owned by any one (1) person and notify the
corporation in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of a partial dissenter
under this subsection shall be determined as if the shares as to which
he dissents and his other shares were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(b) He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
271B.13-200 Notice of dissenters' rights.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to
assert dissenters' rights under this subtitle and the corporation shall
undertake to provide a copy of this subtitle to any shareholder
entitled to vote at the shareholders' meeting upon request of that
shareholder.
(2) If corporate action creating dissenters' rights under KRS 271B.13-020
is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that
the action was taken and send them the dissenters' notice described in
KRS 271B.13-220.
271B.13-210 Notice of intent to demand payment.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
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(a) Shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the
proposed action is effectuated; and
(b) Shall not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section shall not be entitled to payment for his shares under
this chapter.
271B.13-220 Dissenters' notice.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who
satisfied the requirements of KRS 271B.l3-210.
(2) The dissenters' notice shall be sent no later than ten (10) days after
the date the proposed corporate action was authorized by the
shareholders, or, if no shareholder authorization was obtained, by the
board of directors, and shall:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of
the proposed corporate action and requires that the person
asserting dissenters' rights certify whether or not he acquired
beneficial ownership of the shares before that date;
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30), nor more than
sixty (60) days after the date the notice provided in subsection
(1) of this section is delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230 Duty to demand payment.
(1) A shareholder who is sent a dissenters' notice described in KRS
271B.13-220 shall demand payment, certify whether he acquired
beneficial ownership of the shares before the date required to be set
forth in the dissenters' notice pursuant to subsection (2)(c) of KRS
271B.13-220, and deposit his certificates in accordance with the terms
of the notice.
(2) The shareholder who demands payment and deposits his share certificates
under subsection (1) of this section shall retain all other rights of a
shareholder until these rights are cancelled or modified by the taking
of the proposed corporate action.
(3) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters'
notice, shall not be entitled to payment for his shares under this
subtitle.
271B.13-240 Share restrictions.
(1) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under KRS
271B.13-260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares shall retain all other rights of a shareholder
until these rights are canceled or modified by the taking of the
proposed corporate action.
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271B.13-250 Payment.
(1) Except as provided in KRS 271B.l3-270, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with KRS 271B.13-230
the amount the corporation estimates to be the fair value of his
shares, plus accrued interest.
(2) The payment shall be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of
payment, an income statement for that year, a statement of changes
in shareholders' equity for that year, and the latest available
interim financial statements, if any;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment under KRS
271B.13-280.
271B.13-260 Failure to take action.
(1) If the corporation does not take the proposed action within sixty (60)
days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates
and release the transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send
a new dissenters' notice under KRS 271B.13-220 and repeat the payment
demand procedure.
271B.13-270 After-acquired shares.
(1) A corporation may elect to withhold payment required by KRS 271B.13-250
from a dissenter unless he was the beneficial owner of the shares
before the date set forth in the dissenters' notice as the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate
action, it shall estimate the fair value of the shares, plus accrued
interest, and shall pay this amount to each dissenter who agrees to
accept it in full satisfaction of his demand. The corporation shall
send with its offer a statement of its estimate of the fair value of
the shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under KRS 271B.13-
280.
271B.13-280 Procedure if shareholder dissatisfied with payment or offer.
(1) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand
payment of his estimate (less any payment under KRS 271B.13-250), or
reject the corporation's offer under KRS 271 B. 13-270 and demand
payment of the fair value of his shares and interest due, if:
(a) The dissenter believes that the amount paid under KRS 271 B. 13-250
or offered under KRS 271B.l3-270 is less than the fair value of his
shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under KRS 271B.l3-250 within
sixty (60) days after the date set for demanding payment; or
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(c) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within sixty (60)
days after the date set for demanding payment.
(2) A dissenter waives his right to demand payment under this section
unless he shall notify the corporation of his demand in writing under
subsection (1) of this section within thirty (30) days after the
corporation made or offered payment for his shares.
271B.13-300 Court action.
(1) If a demand for payment under KRS 271B.13-280 remains unsettled, the
corporation shall commence a proceeding within sixty (60) days after
receiving the payment demand and petition the court to determine the
fair value of the shares and accrued interest. If the corporation does
not commence the proceeding within the sixty (60) day period, it shall
pay each dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court of
the county where a corporation's principal office (or, if none in this
state, its registered office) is located. If the corporation is a
foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or whose
shares were acquired by the foreign corporation was located.
(3) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as
in an action against their shares and all parties shall be served with
a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section shall be plenary and exclusive.
The court may appoint one (1) or more persons as appraisers to receive
evidence and recommend decision on the question of fair value. The
appraisers have the powers described in the order appointing them, or
in any amendment to it. The dissenters shall be entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding shall be entitled to
judgment:
(a) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the
corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under
KRS 271 B. 13-270.
271B.13-310 Court costs and counsel fees.
(1) The court in an appraisal proceeding commenced under KRS 271 B. 13-300
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The
court shall assess the costs against the corporation, except that the
court may assess costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters, if
the court finds the corporation did not substantially comply with
the requirements of KRS 271B.13-200 to 271B.13-280; or
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(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or
not in good faith with respect to the rights provided by this
subtitle.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be
paid out of the amounts awarded the dissenters who were benefited.
B-6
Appendix C
[ ]
The Board of Directors
Area Bancshares Corporation
230 Frederica Street
Owensboro, KY 42301
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock, without par value (the "Company Common
Stock"), of Area Bancshares Corporation (the "Company") of the Exchange Ratio
(as defined below) in the proposed merger (the "Merger") of the Company with
BB&T Corporation (the "Merger Partner"). Pursuant to the Agreement and Plan of
Reorganization (the "Agreement"), among the Company and the Merger Partner, the
Company will merge into the Merger Partner, and each outstanding share of
Company Common Stock (other than Dissenting Shares (as defined in the
Agreement) and shares of Company Common Stock held in treasury or owned by the
Merger Partner) will be converted into the right to receive a number of shares
of the Merger Partner's common stock, par value $5.00 per share (the "Merger
Partner Common Stock"), determined pursuant to Section 2.7 of the Agreement
(the "Exchange Ratio").
In arriving at our opinion, we have (i) reviewed the Agreement and the Stock
Option Agreement between the Company and the Merger Partner (the "Stock Option
Agreement"); (ii) reviewed the draft dated December XX, 2001 of the Proxy
Statement-Prospectus; (iii) reviewed certain publicly available business and
financial information concerning the Company and the Merger Partner and the
industries in which they operate; (iv) compared the proposed financial terms of
the Merger with the publicly available financial terms of certain transactions
involving companies we deemed relevant and the consideration received for such
companies; (v) compared the financial and operating performance of the Company
and the Merger Partner with publicly available information concerning certain
other companies we deemed relevant and reviewed the current and historical
market prices of the Company Common Stock and the Merger Partner Common Stock
and certain publicly traded securities of such other companies; (vi) reviewed
certain internal financial analyses and forecasts prepared by the management of
the Company relating to its businesses, as well as the estimated amount and
timing of the cost savings and related expenses and synergies expected, as
estimated by the Merger Partner, to result from the Merger (the "Synergies");
and (vii) performed such other financial studies and analyses and considered
such other information as we deemed appropriate for the purposes of this
opinion.
In addition, we have held discussions with certain members of the management
of the Company and the Merger Partner with respect to certain aspects of the
Merger, and the past and current business operations of the Company and the
Merger Partner, the financial condition and future prospects and operations of
the Company and the Merger Partner, the effects of the Merger on the financial
condition and future prospects of the Company and the Merger Partner, and
certain other matters we believed necessary or appropriate to our inquiry.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was
publicly available or was furnished to us by the Company and the Merger Partner
or otherwise reviewed by us, and we have not assumed any responsibility or
liability therefor. We have not conducted any valuation or appraisal of any
assets or liabilities, nor have any such valuations or appraisals been provided
to us. In relying on financial analyses and forecasts provided to us, including
the Synergies, we have assumed that they have been reasonably prepared based on
assumptions reflecting the best currently available estimates and judgments by
management as to the expected future results of operations and financial
condition of the Company and the Merger Partner to which such analyses or
forecasts relate. We have also assumed that the Merger will qualify as a tax-
free reorganization for United States federal income tax
C-1
purposes. We have relied as to all legal matters relevant to rendering our
opinion upon the advice of counsel. We have assumed that all material
governmental, regulatory or other consents and approvals necessary for the
consummation of the Merger will be obtained without any adverse effect on the
Company or the Merger Partner or on the contemplated benefits of the Merger.
Our opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of, the date hereof.
It should be understood that subsequent developments may affect this opinion
and that we do not have any obligation to update, revise, or reaffirm this
opinion. Our opinion is limited to the fairness, from a financial point of
view, to the holders of the Company Common Stock of the Exchange Ratio in the
proposed Merger and we express no opinion as to the underlying decision by the
Company to engage in the Merger. We are expressing no opinion herein as to the
price at which the Company Common Stock or the Merger Partner Common Stock will
trade at any future time, whether before or after consummation of the Merger.
We note that we were not authorized to and did not solicit any expressions
of interest from any other parties with respect to the sale of all or any part
of the Company or any other alternative transaction. Consequently, we have
assumed that such terms are the most beneficial terms from the Company's
perspective that could under the circumstances be negotiated among the parties
to such transactions, and no opinion is expressed whether any alternative
transaction might produce consideration for the Company's shareholders in an
amount in excess of that contemplated in the Merger. During the course of our
work with the Company, however, we have not become aware of any interest by any
third party (other than the Merger Partner) in engaging in any alternative
transactions with the Company.
We have acted as financial advisor to the Company with respect to the
proposed Merger and will receive a fee from the Company for our services. We
will also receive an additional fee if the proposed Merger is consummated. We
have in the past provided, and in the future may provide, investment banking
and financial services to the Company and the Merger Partner for which services
we have received, and expect to receive, customary compensation. In the
ordinary course of our businesses, we and our affiliates may actively trade the
debt and equity securities of the Company or the Merger Partner for our own
account or for the accounts of customers and, accordingly, we may at any time
hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the Exchange Ratio in the proposed Merger is fair, from a
financial point of view, to the holders of the Company Common Stock.
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Merger. This
opinion does not constitute a recommendation to any shareholder of the Company
as to how such shareholder should vote with respect to the Merger or any other
matter. This opinion may not be disclosed, referred to, or communicated (in
whole or in part) to any third party for any purpose whatsoever except with our
prior written approval. This opinion may be reproduced in full in any proxy or
information statement mailed to shareholders of the Company but may not
otherwise be disclosed publicly in any manner without our prior written
approval.
Very truly yours,
J.P. Morgan Securities Inc.
C-2
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporation
Act contain specific provisions relating to indemnification of directors and
officers of North Carolina corporations. In general, such sections provide
that: (i) a corporation must indemnify a director or officer who is wholly
successful in his or her defense of a proceeding to which he or she is a party
because of his or her status as such, unless limited by the articles of
incorporation, and (ii) a corporation may indemnify a director or officer if he
or she is not wholly successful in such defense if it is determined as provided
by statute that the director or officer meets a certain standard of conduct,
except that when a director or officer is liable to the corporation or is
adjudged liable on the basis that personal benefit was improperly received by
him or her, the corporation may not indemnify him or her. A director or officer
of a corporation who is a party to a proceeding may also apply to a court for
indemnification, and the court may order indemnification under certain
circumstances set forth in the statute. A corporation may, in its articles of
incorporation or bylaws or by contract or resolution of the board of directors,
provide indemnification in addition to that provided by statute, subject to
certain conditions.
The registrant's bylaws provide for the indemnification of any director or
officer of the registrant against liabilities and litigation expenses arising
out of his or her status as such, excluding: (i) any liabilities or litigation
expenses relating to activities that were at the time taken known or believed
by such person to be clearly in conflict with the best interest of the
registrant; and (ii) that portion of any liabilities or litigation expenses
with respect to which such person is entitled to receive payment under any
insurance policy.
The registrant's articles of incorporation provide for the elimination of
the personal liability of each director of the registrant to the fullest extent
permitted by law.
The registrant maintains directors' and officers' liability insurance that,
in general, insures: (i) the registrant's directors and officers against loss
by reason of any of their wrongful acts; and (ii) the registrant against loss
arising from claims against the directors and officers by reason of their
wrongful acts, all subject to the terms and conditions contained in the policy.
Certain rules of the Federal Deposit Insurance Corporation limit the ability
of certain depository institutions, their subsidiaries and their affiliated
depository institution holding companies to indemnify affiliated parties,
including institution directors. In general, subject to the ability to purchase
directors' and officers' liability insurance and to advance professional
expenses under certain circumstances, the rules prohibit such institutions from
indemnifying a director for certain costs incurred with regard to an
administrative or enforcement action commenced by any federal banking agency
that results in a final order or settlement pursuant to which the director is
assessed a civil money penalty, removed from office, prohibited from
participating in the affairs of an insured depository institution or required
to cease and desist from or take an affirmative action described in Section
8(b) of the Federal Deposit Insurance Act (12 U.S.C. (S) 1818(b)).
Item 21. Exhibits and Financial Statement Schedules
(a) The following documents are filed as exhibits to this registration
statement on Form S-4:
Exhibit No. Description
----------- -----------
2 Agreement and Plan of Reorganization dated as of November 7, 2001
between BB&T Corporation and AREA Bancshares Corporation (included
as Appendix A to the proxy statement/prospectus)
4(a) Articles of Amendment to Amended and Restated Articles of
Incorporation of the Registrant related to Junior Participating
Preferred Stock (Incorporated herein by reference to Exhibit 3(a)
to the Registrant's Annual Report on Form 10-K filed March 17,
1997)
Exhibit No. Description
----------- -----------
4(b) Rights Agreement dated as of December 17, 1996 between the
Registrant and Branch Banking and Trust Company, Rights Agent
(Incorporated herein by reference to Exhibit 1 to the Registrant's
Form 8-A filed January 10, 1997)
4(c) Subordinated Indenture (including Form of Subordinated Debt
Security) between the Registrant and State Street Bank and Trust
Company, Trustee, dated as of May 24, 1996 (Incorporated herein by
reference to Exhibit 4(d) to Registration No. 333-02899)
4(d) Senior Indenture (including Form of Senior Debt Security) between
the Registrant and State Street Bank and Trust company, Trustee,
dated as of May 24, 1996 (Incorporated herein by reference to
Exhibit 4(c) to Registration No. 333-02899)
5 Form of Opinion of Womble Carlyle Sandridge & Rice, PLLC
8 Form of Opinion of Womble Carlyle Sandridge & Rice, PLLC
23(a) Consent of Womble Carlyle Sandridge & Rice, PLLC (included in
Exhibit 5)*
23(b) Consent of Womble Carlyle Sandridge & Rice, PLLC (included in
Exhibit 8)*
23(c) Consent of Arthur Andersen LLP
23(d) Consent of KPMG LLP
23(e) Consent of J.P. Morgan Securities, Inc.
24 Power of Attorney
99(a) Form of AREA Bancshares Corporation Proxy Card
99(b) Option Agreement dated as of November 7, 2001 between BB&T
Corporation and AREA Bancshares Corporation
--------
* to be filed by amendment
(b) Financial statement schedules: Not applicable.
(c) Reports, opinion or appraisals: The opinion of J.P. Morgan Securities,
Inc. is included as Appendix C to the proxy statement/prospectus.
Item 22. Undertakings
A. The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
D. The registrant undertakes that every prospectus (i) that is filed
pursuant to Paragraph (C) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
E. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
F. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
G. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Winston-Salem, State of North Carolina, on December 18, 2001.
BB&T CORPORATION
/s/ Jerone C. Herring
By:__________________________________
Name: Jerone C. Herring
Title: Executive Vice President and
Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on December 18, 2001.
/s/ John A. Allison* /s/ Scott E. Reed*
_____________________________________ _____________________________________
Name: John A. Allison, IV Name: Scott E. Reed
Title: Chairman of the Board and Title: Senior Executive Vice
Chief Executive Officer President and Chief
(principal executive Financial Officer
officer) (principal financial
officer)
/s/ Sherry A. Kellett* /s/ Alfred E. Cleveland*
_____________________________________ _____________________________________
Name: Sherry A. Kellett Name: Alfred E. Cleveland
Title: Senior Executive Vice Title: Director
President and Controller
(principal accounting
officer)
/s/ Nelle Ratrie Chilton*
_____________________________________ _____________________________________
Name: Nelle Ratrie Chilton Name: Ronald E. Deal
Title: Director Title: Director
/s/ Tom D. Efird* /s/ Harold B. Wells*
_____________________________________ _____________________________________
Name: Tom D. Efird Name: Harold B. Wells
Title: Director Title: Director
/s/ Paul S. Goldsmith* /s/ L. Vincent Hackley*
_____________________________________ _____________________________________
Name: Paul S. Goldsmith Name: L. Vincent Hackley
Title: Director Title: Director
/s/ Jane P. Helm* /s/ Richard Janeway*
_____________________________________ _____________________________________
Name: Jane P. Helm Name: Richard Janeway, M.D.
Title: Director Title: Director
/s/ J. Ernest Lathem* /s/ James H. Maynard*
_____________________________________ _____________________________________
Name: J. Ernest Lathem, M.D. Name: James H. Maynard
Title: Director Title: Director
/s/ Albert O. McCauley*
_____________________________________ _____________________________________
Name: Joseph A. McAleer, Jr. Name: Albert O. McCauley
Title: Director Title: Director
/s/ Holmes Morrison* /s/ Richard L. Player, Jr.*
_____________________________________ _____________________________________
Name: Holmes Morrison Name: Richard L. Player, Jr.
Title: Director Title: Director
/s/ C. Edward Pleasants, Jr.* /s/ Nido R. Qubein*
_____________________________________ _____________________________________
Name: C. Edward Pleasants, Jr. Name: Nido R. Qubein
Title: Director Title: Director
/s/ E. Rhone Sasser* /s/ Jack E. Shaw*
_____________________________________ _____________________________________
Name: E. Rhone Sasser Name: Jack E. Shaw
Title: Director Title: Director
/s/ Jerone C. Herring
*By: ________________________________
Jerone C. Herring
Attorney-in-Fact