As Filed with the Securities and Exchange Commission on October 29, 2001
Registration No. 333-69770
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO.1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------
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. Walter G. Moeling, 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: [_]
----------------
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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[COMMUNITY FIRST BANKING COMPANY LOGO]
Special Meeting of Shareholders
MERGER PROPOSAL -- YOUR VOTE IS VERY IMPORTANT
The Board of Directors of Community First Banking Company has unanimously
approved a merger combining Community First and BB&T Corporation. In the
merger, you will receive 0.98 shares of BB&T common stock for each share of
Community First 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 Community First's strengths as a community bank
covering western Georgia 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 Community First common stock entitled to
vote approve the merger agreement and plan of merger. Community First's Board
of Directors believes the merger is in the best interests of Community First
shareholders and unanimously 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 October 26, 2001, the closing price of BB&T common stock was $33.48.
This price will, however, fluctuate between now and the merger.
The special meeting will be held at 5:00 p.m., Eastern time, on December
10, 2001 at Community First Bank's main office, located at 110 Dixie Street,
Carrollton, Georgia 30117.
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 Community First 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 December 3, 2001 from the
appropriate company at the following addresses:
BB&T Corporation Community First
Shareholder Reporting Banking Company
Post Office Box 1290 110 Dixie Street
Winston-Salem, Carrollton, Georgia 30117
North Carolina 27102 (770) 834-1071
(336) 733-3021 Attn: C. Lynn Gable
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, Community
First'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 Community First, I urge you to vote
"FOR" approval and adoption of the merger agreement.
/s/ Gary D. Dorminey
Gary D. Dorminey
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 October 29, 2001 and is expected
to be first mailed to shareholders of Community First on or about November 1,
2001.
COMMUNITY FIRST BANKING COMPANY
110 Dixie Street
Carrollton, Georgia 30117
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 10, 2001
----------------
Community First Banking Company will hold a special meeting of shareholders
on December, 10, 2001 at 5:00 p.m. Eastern time, at the main office of
Community First Bank located at 110 Dixie Street, Carrollton, Georgia 30117,
for the following purposes:
. To consider and vote upon a proposal to approve the Agreement and Plan
of Reorganization, dated as of July 9, 2001, between Community First and
BB&T Corporation, and a related plan of merger (collectively, the
"merger agreement"), providing for the merger of Community First with
and into BB&T (the "merger"). In the merger, each share of Community
First common stock will be converted into the right to receive 0.98
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. A copy of the merger agreement is attached as
Appendix A to 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.
Holders of Community First common stock as of the close of business on
October 15, 2001 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.
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
/s/ Gary D. Dorminey
Gary D. Dorminey, President and
Chief Executive Officer
Carrollton, Georgia
October 29, 2001
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
Page
----
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
Employee Stock Option Plans............................................ 10
Solicitation of Proxies................................................ 11
Recommendation of the Community First Board............................ 11
THE MERGER............................................................... 12
General................................................................ 12
Background of and Reasons for the Merger............................... 12
Opinion of Community First's Financial Advisor......................... 15
Exchange Ratio......................................................... 20
Exchange of Community First Stock Certificates......................... 20
The Merger Agreement................................................... 21
Interests of Community First's Directors and Officers in the Merger.... 27
Material Federal Income Tax Consequences of the Merger................. 31
Regulatory Considerations.............................................. 32
Accounting Treatment................................................... 34
Option Agreement....................................................... 34
Effect on Employee Benefit Plans and Stock Options..................... 37
Restrictions on Resales by Affiliates.................................. 39
No Appraisal or Dissenters' Rights..................................... 40
INFORMATION ABOUT BB&T................................................... 40
General................................................................ 40
Operating Subsidiaries................................................. 40
Acquisitions........................................................... 41
Capital................................................................ 42
Deposit Insurance Assessments.......................................... 43
Additional Information................................................. 43
INFORMATION ABOUT COMMUNITY FIRST........................................ 43
DESCRIPTION OF COMMUNITY FIRST........................................... 43
DESCRIPTION OF BB&T CAPITAL STOCK........................................ 44
General................................................................ 44
BB&T Common Stock...................................................... 44
BB&T Preferred Stock................................................... 45
Shareholder Rights Plan................................................ 45
Other Anti-takeover Provisions......................................... 47
COMPARISON OF THE RIGHTS OF BB&T SHAREHOLDERS AND COMMUNITY FIRST
SHAREHOLDERS............................................................ 48
Authorized Capital Stock............................................... 48
Special Meetings of Shareholders....................................... 49
i
Page
----
Directors.............................................................. 49
Dividends and Other Distributions...................................... 50
Shareholder Nominations and Shareholder Proposals...................... 50
Discharge of Duties; Exculpation and Indemnification................... 51
Mergers, Share Exchanges and Sales of Assets........................... 52
Anti-takeover Statutes................................................. 52
Amendments to Articles of Incorporation and Bylaws..................... 53
Consideration of Business Combinations................................. 54
Shareholders' Rights of Dissent and Appraisal.......................... 54
Liquidation Rights..................................................... 55
SHAREHOLDER PROPOSALS.................................................... 55
OTHER BUSINESS........................................................... 56
LEGAL MATTERS............................................................ 56
EXPERTS.................................................................. 56
WHERE YOU CAN FIND MORE INFORMATION...................................... 56
Appendix A--Agreement and Plan of Reorganization and Plan of Merger
(excluding certain annexes)
Appendix B--Fairness Opinion of Trident Securities, a division of
McDonald Investments, Inc.
ii
A WARNING ABOUT FORWARD-LOOKING INFORMATION
BB&T and Community First 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 Community First 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 12,
information that was available to the managements of BB&T and Community First
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 Community
First 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 Community First 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 56.
BB&T and Community First have made statements in this document and in other
documents to which this document refers regarding estimated earnings per share
of BB&T and Community First on a stand-alone basis, expected cost savings from
the merger, estimated restructuring 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 restructuring
charges, BB&T has made assumptions about, among other things, the extent of
operational overlap between BB&T and Community First, the amount of general and
administrative expense consolidation, costs relating to converting Community
First'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 reserve policies and the costs related to the merger. The
realization of cost savings and the amount of restructuring charges 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 Community First, 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 Community First 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
Community First are engaged;
. adverse changes may occur in the securities markets; and
. competitors of BB&T and Community First may have greater financial
resources and develop products that enable them to compete more
successfully than BB&T and Community First.
iii
Management of each of BB&T and Community First believes the forward-looking
statements about its company are reasonable; however, shareholders of Community
First 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 Community First'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
Community First 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 Community First 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 56.
Shareholders to Receive 0.98 Shares of BB&T Common Stock for each Share of
Community First Common Stock
If the merger is completed, you will receive 0.98 shares of BB&T common
stock for each share of Community First common stock you own, plus cash instead
of any fractional share of BB&T common stock that would otherwise be issued.
On October 26, 2001, the closing price of BB&T common stock was $33.48,
making the value of 0.98 shares of BB&T common stock equal to $32.81. 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 31)
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 certain 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 Community First 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.
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 15.5%. 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.
Community First Board of Directors Unanimously Recommends Shareholder Approval
(Page 11)
The Community First Board of Directors believes that the merger is in the
best interests of Community First shareholders and unanimously recommends that
you vote "FOR" approval of the merger agreement and related plan of merger. The
Community First Board believes that, as a result of the merger, you will be
able to achieve greater value than you would if Community First remained
independent.
Exchange Ratio Fair to Shareholders According to Community First's Financial
Advisor (Page 15)
Community First's financial advisor, Trident Securities, a division of
McDonald Investments, Inc., has given an opinion to the Community First 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
Community First common stock. The full text of this opinion is attached as
Appendix B 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 Trident Securities in rendering its
fairness opinion. Community First has paid Trident fees of $70,000 as of the
date of this proxy statement/prospectus and will pay to Trident a fee of
approximately $1.1 million at the closing of the merger. In addition, Community
First has agreed to reimburse Trident for
1
all reasonable out-of-pocket expenses, incurred by Trident on Community First's
behalf, as well as indemnify Trident against certain liabilities, including any
which may arise under the federal securities laws.
Community First Shareholders Do Not Have Dissent and Appraisal Rights (Page 40)
Under Georgia law, holders of Community First common stock do not have the
right to dissent from the merger and demand an appraisal of the value of their
shares in connection with the merger.
Meeting to be held December 10, 2001 (Page 9)
Community First will hold the special shareholders' meeting at 5:00 p.m.,
Eastern time, on December 10, 2001 at Community First Bank's main office,
located at 110 Dixie Street, Carrollton, Georgia 30117. 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 40)
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 fifth largest financial holding company in the Southeast and, through
its banking subsidiaries, operates 1,086 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,
second in North Carolina and third in South Carolina, and maintains a
significant market presence in Virginia, Maryland, Georgia and Washington, D.C.
Community First Banking Company
110 Dixie Street
Carrollton, Georgia 30117
(770) 834-1071
Community First, with approximately $548 million in assets, operates nine
banking offices in western Georgia through banking subsidiary Community First
Bank. It also operates a consumer finance company, an insurance agency and a
full service brokerage subsidiary.
The Merger (Page 12)
In the merger, Community First will merge into BB&T, and Community First's
banking and other subsidiaries, through which it operates, will become wholly
owned subsidiaries of BB&T. If the Community First shareholders approve the
merger agreement and plan of merger at the special meeting, we currently expect
to complete the merger in the fourth quarter of 2001.
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 9)
Approval of the merger agreement and plan of merger requires the affirmative
vote of the holders of a majority of the outstanding shares of Community First
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 Community First and their affiliates
together owned about 20.73% of the Community First common stock entitled to
vote at the meeting, and we expect them to vote their shares in favor of the
merger agreement and plan of merger.
Brokers who hold shares of Community First 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.
The merger does not require the approval of BB&T's shareholders.
Record Date Set at October 15, 2001; One Vote per Share of Community First
Stock (Page 9)
If you owned shares of Community First common stock at the close of business
on October 15, 2001, the record date, you are entitled to vote on the merger
agreement and plan of merger
2
and any other matters that may be properly considered at the meeting.
On the record date, there were 3,523,073 shares of Community First common
stock outstanding. At the meeting, you will have one vote for each share of
Community First common stock that you owned on the record date.
Interests of Community First Directors and Officers in the Merger that Differ
From Your Interests (Page 27)
Some of Community First's directors and officers have interests in the
merger that differ from, or are in addition to, the interests of other
Community First shareholders. These interests exist, in the case of certain
executive officers of Community First, under employment agreements to be
entered into upon completion of the merger.
Employment Agreements. Community First's President and Chief Executive
Officer, Gary D. Dorminey, and Community First's Chief Operating Officer, Lane
Poston, have entered into employment agreements with Branch Banking and Trust
Company, BB&T's North Carolina chartered bank subsidiary, which shall be
effective upon completion of the merger. The employment agreement with Mr.
Dorminey provides 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 Community First to the data services systems of Branch
Banking and Trust Company. The employment agreement with Mr. Poston provides
for an employment term until July 13, 2004. Each agreement also provides for a
consulting period following the employment term during which Mr. Dorminey and
Mr. Poston will receive additional compensation. The consulting period ends
five years after the date of the merger.
In addition, C. Lynn Gable, Community First's Chief Financial Officer, and
Anyce Fox, Community First's Management Services Officer, have entered into
adoption of employment agreements with Branch Banking and Trust Company
effective upon completion of the merger. As adopted by Branch Banking and Trust
Company, the employment agreements with Mr. Gable and Ms. Fox 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 Community
First to the data services systems of Branch Banking and Trust Company.
All of the employment agreements may provide severance payments and other
benefits if employment is terminated following the merger, including if there
is a change of control of BB&T. The material terms and financial provisions of
the employment agreements are described under the heading "Interests of
Community First's Directors and Officers in the Merger" on page 27.
Advisory Boards. Following completion of the merger, Gary D. Dorminey will
be offered a seat on the BB&T Advisory Board for the State of Georgia.
The members of the Community First Board will be offered a position on the
local advisory board to be formed by Branch Banking and Trust Company for the
Carrollton, Georgia area.
For two years after the merger, the advisory board members will receive fees
equal in amount to the retainer and schedule of attendance fees for directors
of Community First in effect on June 1, 2001. Membership on any advisory board
is conditional on execution of a noncompetition agreement with Branch Banking
and Trust Company.
The Community First 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 Community First's Directors and
Officers in the Merger" on page 27.
Other Conditions that Must be Satisfied for the Merger to Occur (Page 22)
A number of other conditions must be met for us to complete the merger,
including:
. approval of the merger agreement by the Community First shareholders;
. receipt of the opinion of BB&T's counsel concerning the tax consequences
of the merger;
3
. 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.
Termination and Amendment of the Merger Agreement (Page 26)
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 March 31, 2002;
. any condition that must be satisfied 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 such 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 Community First 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 Community First Board
determines to proceed with the merger, Community First will inform you and ask
you to vote again on the merger agreement.
Option Agreement (Page 34)
As a condition to its offer to acquire Community First, and to discourage
other companies from attempting to acquire Community First, BB&T required
Community First to grant BB&T a stock option that allows BB&T to buy up to
650,000 shares of Community First's common stock. The exercise price of the
option is $29.00 per share. Generally, BB&T can exercise the option only if
another party attempts to acquire control of Community First. As of the date of
this proxy statement/prospectus, we do not believe that has occurred.
BB&T to Use Purchase Accounting Treatment (Page 34)
BB&T expects to account for the merger using the purchase method of
accounting. Under the purchase method, BB&T will record, at fair value, the
acquired assets and assumed liabilities of Community First. To the extent the
total purchase price exceeds the fair value of tangible assets acquired,
liabilities assumed, and other identifiable intangibles, BB&T will record
goodwill. BB&T will include in its consolidated results of operations the
results of Community First's operations after the merger is completed.
Share Price Information (Page 6)
Community First common stock is traded on the Nasdaq National Market under
the symbol "CFBC", and BB&T common stock is traded on the New York Stock
Exchange under the symbol "BBT". On July 9, 2001, the last full trading day
before public announcement of the proposed merger, Community First common stock
closed at $27.91, and BB&T common stock closed at $36.42. On October 26, 2001,
Community First common stock closed at $32.60, and BB&T common stock closed at
$33.48.
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.
4
Comparative Market Prices and Dividends
BB&T common stock is listed on the New York Stock Exchange under the symbol
"BBT," and Community First common stock is included in the Nasdaq National
Market under the symbol "CFBC." The table below shows the high and low sales
prices of BB&T common stock and Community First common stock and cash dividends
paid per share for the last two fiscal years plus the interim period. The
merger agreement restricts Community First's ability to increase dividends. See
page 24.
BB&T Community First
-------------------------- ------------------------
Cash Cash
High Low Dividend High Low Dividend
-------- -------- -------- ------- ------- --------
Quarter Ended
March 31, 2001........... $37.875 $31.42 $.23 $25.00 $19.875 $.20
June 30, 2001............ 37.08 33.73 .23 26.00 22.80 .2250
September 30, 2001....... 38.48 33.57 .26 37.51 24.00 .2250
December 31, 2001
(through October 26,
2001)................... 36.99 31.80 35.69 30.55
Quarter Ended
March 31, 2000........... $29.25 $21.6875 $.20 $22.00 $16.125 $.1725
June 30, 2000............ 31.875 23.875 .20 17.160 16.188 .1725
September 30, 2000....... 30.4375 23.8125 .23 19.50 17.250 .2000
December 31, 2000........ 38.25 26.5625 .23 21.875 18.625 .2000
For year 2000............ 38.25 21.6875 .86 22.00 16.125 .7450
Quarter Ended
March 31, 1999........... $40.625 $34.5625 $.175 $22.00 $19.00 $.1100
June 30, 1999............ 40.25 33.50 .175 23.75 18.00 .1150
September 30, 1999....... 36.6875 30.1875 .20 20.375 14.625 .1150
December 31, 1999........ 37.125 27.1875 .20 18.625 15.250 .1725
For year 1999............ 40.625 27.1875 .75 23.75 15.250 .5125
The table below shows the closing prices of BB&T common stock and Community
First common stock on July 9, 2001, the last full trading day before public
announcement of the proposed merger.
BB&T historical..................................................... $36.42
Community First historical.......................................... $27.91
Community First pro forma equivalent*............................... $35.69
--------
* calculated by multiplying BB&T's per share closing price by the exchange
ratio of 0.98
5
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 Community
First's audited financial statements for 1996 through 2000 and unaudited
financial statements for the six months ended June 30, 2001. The information
provided for BB&T has been restated to include the accounts of F&M National
Corporation, which were acquired by BB&T on August 9, 2001 in a transaction
accounted for as a pooling of interests. 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 56. You should not rely on the
six-month information as being indicative of results expected for the entire
year or for any future interim period.
BB&T -- Historical Financial Information
(Dollars in thousands, except for per share amounts)
As of/For the
Six Months Ended
June 30, As of/For the Years Ended December 31,
----------------------- -----------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income..... $ 1,180,023 $ 1,153,983 $ 2,314,698 $ 2,194,709 $ 2,008,220 $ 1,856,142 $ 1,701,921
Net income.............. 473,729 394,292 698,488 778,725 720,964 565,103 527,173
Basic earnings per
share.................. 1.05 .87 1.55 1.74 1.63 1.29 1.20
Diluted earnings per
share.................. 1.03 .86 1.53 1.71 1.60 1.26 1.18
Cash dividends paid per
share.................. .46 .40 .86 .75 .66 .58 .50
Book value per share.... 12.84 10.79 11.96 10.30 10.33 9.38 8.80
Total assets............ 68,811,370 61,910,117 66,552,823 59,380,433 54,373,105 49,240,765 43,747,135
Long-term debt.......... 10,864,249 7,652,056 8,646,018 6,222,561 5,561,216 4,202,137 2,625,211
Community First -- Historical Financial Information
(Dollars in thousands, except for per share amounts)
As of/For the
Six Months Ended June
30, As of/For the Years Ended December 31,
----------------------- -----------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income..... $ 8,329 $ 8,140 $ 16,316 $ 15,121 $ 15,574 $ 16,132 $ 13,409
Net income.............. $ 1,777 $ 2,564 $ 5,359 $ 474 $ 3,003 $ 113 $ 248
Basic earnings per
share.................. $ .59 $ .93 $ 1.90 $ .18 $ .87 $ .03 $ N/A
Diluted earnings per
share.................. $ .58 $ .87 $ 1.90 $ .17 $ .82 $ .03 $ N/A
Cash dividends paid per
share.................. $ .4250 $ .3450 $ .7450 $ .5125 $ .35 $ .15 $ N/A
Book value per share.... $ 12.5143 $ 10.1552 $ 10.7635 $ 9.7505 $ 10.1331 $ 15.4118 $ N/A
Total assets............ $ 540,006 $ 401,304 $ 394,506 $ 386,048 $ 391,986 $ 394,293 $ 352,532
Long-term debt.......... $ 49,853 $ 12,964 $ 1,359 $ 51,745 $ 42,345 $ 2,945 $ 5,495
6
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 56.
The pro forma combined information gives effect to the merger accounted for
as a purchase, assuming that 0.98 shares of BB&T common stock are issued for
each outstanding share of Community First common stock. Pro forma equivalent of
one Community First 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 0.98
shares of BB&T common stock so that the per share amounts equate to the
respective values for one share of Community First 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 six-month
information as being indicative of results expected for the entire year or for
any future interim period.
As of/For the
Six Months
Ended June As of/For the Year Ended
30, 2001 December 31, 2000
------------- ------------------------
Earnings per common share:
Basic
BB&T historical..................... $ 1.05 $ 1.55
Community First historical.......... $ .59 $ 1.90
Pro forma combined.................. $ 1.04 $ 1.55
Community First pro forma
equivalent......................... $ 1.02 $ 1.52
Diluted
BB&T historical..................... $ 1.03 $ 1.53
Community First historical.......... $ .58 $ 1.90
Pro forma combined.................. $ 1.03 $ 1.53
Community First pro forma
equivalent......................... $ 1.01 $ 1.50
Cash dividends declared per common
share:
BB&T historical....................... $ .23 $ .86
Community First historical............ $ .425 $ .745
Pro forma combined.................... $ .23 $ .86
Community First pro forma equivalent.. $ .23 $ .84
Shareholders' equity per common share:
BB&T historical....................... $12.84 $11.96
Community First historical............ $12.51 $10.76
Pro forma combined.................... $12.84 $11.95
Community First pro forma equivalent.. $12.58 $11.71
Recent Developments
On October 11, 2001, BB&T reported earnings for the third quarter of 2001.
Net income for the quarter was $222.0 million, or $.48 per diluted share. These
earnings reflected increases of 206.3% and 200.0%, respectively, compared to
prior year results. BB&T's third quarter results produced an annualized return
on average assets of 1.27% and an annualized return on average shareholders'
equity of 14.92% compared to prior year ratios of .46% and 5.73%, respectively.
For the nine months ended September 30, 2001, net income totaled $695.7
million, or $1.51 per diluted share, reflecting increases of 49.0% and 48.0%,
respectively, compared to 2000 results. These earnings generated annualized
returns on average assets and average shareholders' equity of 1.36% and 16.36%,
respectively, compared to prior year returns of 1.02% and 12.84%,
7
respectively. Both 2001 and 2000 results were significantly affected by merger-
related items, and the 2000 results also reflect losses from a restructuring of
the securities portfolio. BB&T's complete earnings announcement is included in
the Form 8-K filed by BB&T on October 11, 2001. See "Where You Can Find More
Information" on Page 56.
8
MEETING OF SHAREHOLDERS
General
We are providing this proxy statement/prospectus to Community First
shareholders of record as of October 15, 2001, along with a form of proxy that
the Community First Board is soliciting for use at a special meeting of
shareholders of Community First to be held on December 10, 2001 at 5:00 p.m.,
Eastern time, at its main office in Carrollton, Georgia, located at 110 Dixie
Street. At the meeting, the shareholders of Community First will vote upon a
proposal to approve the agreement and plan of reorganization, dated as of July
9, 2001, and the related plan of merger pursuant to which Community First 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 Community First
Board knows of no such other matters except those incidental to the conduct of
the meeting. A copy of the merger agreement (excluding certain annexes) is
attached as Appendix A.
Who Can Vote at the Meeting
You are entitled to vote your Community First common stock if the records of
Community First show that you held your shares as of the record date, which is
October 15, 2001. On the record date, there were 3,523,073 shares of Community
First common stock outstanding, held by approximately 1,087 holders of record.
Each such share of Community First common stock is entitled to one vote on each
matter submitted at the meeting.
Attending the Meeting
If you are a beneficial owner of Community First 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 Community First 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 a majority of the outstanding shares of Community First common stock
entitled to vote. If you do not vote your shares, 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 can not 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. Shares with respect to which proxies have been
marked as abstentions also will not be counted as votes cast on that proposal.
Action on other matters, if any, that are properly presented at the meeting
for consideration of the shareholders will be approved if a quorum is present
and the votes cast favoring the action exceed the votes cast opposing the
action. A quorum will be present if a majority of the outstanding shares of
Community First common stock entitled to vote is represented at the meeting in
person or by proxy. Shares with respect to which proxies have been marked as
abstentions will be treated as shares present for purposes of determining
whether a quorum is present. The Community First 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 Community First common
stock entitled to vote, abstentions and broker non-vote shares will have the
same effect as votes against the merger. Accordingly, the Community First
9
Board urges you to complete, date and sign the accompanying proxy and return it
promptly in the enclosed postage-prepaid envelope.
You should not send in your stock certificates with your proxy cards. See
"The Merger--Exchange of Community First Stock Certificates" on page 20.
As of the record date, the directors and executive officers of Community
First and their affiliates beneficially owned a total of 730,312 shares, or
20.73%, of the issued and outstanding shares of Community First common stock
(not including shares that may be acquired pursuant to 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 Community
First common stock, excluding shares subject to the stock option granted to
BB&T in connection with the merger agreement and described under the heading
"Option Agreement" on page 34.
Voting and Revocation of Proxies
The shares of Community First 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 Community First in writing at Community First's principal executive offices;
submit a later-dated proxy to the Corporate Secretary of Community First; 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.
Employee Stock Option Plans
Community First maintains the Community First Banking Company Employee Stock
Ownership Plan (the "Community First ESOP") and the Employee Stock Ownership
Plan of Douglas Federal Bank (the "Douglas ESOP"). The Community First ESOP and
the Douglas ESOP were both terminated earlier this year but distributions to
participants will not occur until after October 15, 2001. As a result,
participants whose ESOP accounts contain shares of Community First common
stock, will direct the Trustee of their respective ESOP to vote for or against
the merger agreement. If the merger agreement is approved and the transaction
is consummated prior to the time that distributions are made from the ESOPs,
participants will receive 0.98 shares of BB&T common stock in exchange for each
share of Community First common stock allocated to their participant accounts.
If the transaction is consummated after distributions are made from the ESOPs,
participants will receive shares of BB&T common stock as would any other
stockholder of Community First.
10
Solicitation of Proxies
BB&T and Community First will each pay 50% of the cost of printing this
proxy statement/prospectus, and Community First will pay all other costs of
soliciting proxies. Directors, officers and other employees of Community First
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. Community First 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 Community First will
reimburse these record holders for their reasonable out-of-pocket expenses. In
addition, Community First intends to use the services of a professional proxy
solicitation firm, to help with soliciting proxies for the meeting, at an
estimated cost of $4,500.
Recommendation of the Community First Board
The Community First Board has approved the merger agreement and believes
that the proposed transaction is fair to and in the best interests of Community
First and its shareholders. The Community First Board unanimously recommends
that Community First's shareholders vote "FOR" approval of the merger
agreement. See "The Merger--Background of and Reasons for the Merger" on page
12.
11
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, Community First will be merged into BB&T. Shareholders of
Community First will receive common stock of BB&T in exchange for their shares
of Community First stock on the basis of 0.98 shares of BB&T common stock for
each share of Community First common stock, plus cash instead of any fractional
share of BB&T common stock that would otherwise be issued. During the second
quarter of 2002, BB&T intends to merge Community First's subsidiary banks into
Branch Banking and Trust Company ("Branch Bank"), BB&T's North Carolina bank
subsidiary. Until then, Community First'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 banking and thrift industries. This trend has been fueled by, among
other things, recent national and state banking legislation and 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 such benefits.
During 2000 and early 2001, Community First had preliminary discussions with
multiple institutions regarding a possible merger transaction. Community First
had engaged The Carson Medlin Company ("CMC") in 1999 to assist it in
considering strategic alternatives and provide various other services. In April
1999, as part of its engagement with Community First, CMC advised Community
First that it should consider a possible affiliation with serveral regional
bank holding companies, including BB&T, and introduced Community First to BB&T
to explore the possibilities of a merger. On April 30, 2001, Gary Dorminey,
Community First's Chief Executive Officer, and Lane Poston, Community First's
Chief Operating Officer, along with representatives of Trident Securities, a
division of McDonald Securities Inc. ("Trident") met with BB&T representatives
in Atlanta to discuss a possible merger and to update BB&T on Community First's
acquisition of First Deposit Bancshares, Inc. Two weeks later, Messrs. Dorminey
and Poston met with John Allison, BB&T's Chief Executive Officer, at BB&T's
headquarters in Winston-Salem, North Carolina to learn more about BB&T's
management philosophy.
On June 13, 2001, BB&T proposed an exchange ratio of 0.9293 shares of BB&T
common stock for each share of Community First common stock. As a result of
negotiation between the parties, the exchange ratio was subsequently increased
to 0.98 shares of BB&T stock per share of Community First stock. On June 18,
2001, Community First selected Trident as its financial adviser in connection
with a possible merger with BB&T. Community First selected Trident for several
reasons, including its familiarity with Community First's business and market
area, as well as its knowledge of southeastern financial institutions and its
previous experience with mergers and acquisitions involving financial
institutions.
On June 21, 2001, Community First's Board of Directors met to discuss the
BB&T offer, as well as competitive offers Trident had obtained from a local
bank holding company and a regional bank holding company. At that meeting,
Community First's Board discussed the terms of all of the offers presented and
determined that based on the factors discussed in "--Community First's Reasons
for the Merger and Recommendation of Directors," the BB&T offer provided the
greatest value to Community First's shareholders. As a result, the Community
First Board authorized management to negotiate a merger agreement with BB&T.
12
From June 26 through June 29, 2001, representatives of BB&T conducted a due
diligence review of Community First while the merger agreement was being
negotiated. After obtaining the opinion of Trident that the terms of the merger
agreement were fair from a financial standpoint to Community First
shareholders, Community First held a special meeting of the Board of Directors
on July 9, 2001 to adopt the merger agreement. On July 10, 2001, BB&T issued a
press release announcing its pending acquisition of Community First.
Community First'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, Community First and its shareholders, the Community
First Board considered a number of factors. The Community First Board did not
assign any specific or relative weight to the factors in its consideration. The
material factors considered by the Community First 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 the
alternatives of 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 Community
First'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 Community First and BB&T;
. The strong cultural fit that had emerged through discussions with BB&T
in terms of customer service, strategic direction, planning processes
and personal compatibility among the members of the Board and the senior
management team of BB&T;
. The terms of the merger agreement, including the exchange ratio and the
ability of Community First to terminate the merger agreement under
certain circumstances;
. The financial advice rendered by Trident Securities, Inc. regarding the
terms of the merger, including its opinion that the exchange ratio is
fair to Community First's shareholders from a financial point of view,
and the Community First Board's review of the methodology and
appropriateness of the assumptions used by Trident Securities, Inc. in
its analysis of the fairness of the exchange ratio;
. The expectation that the merger would generally be tax-free for federal
income tax purposes for Community First'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 unanimous 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 Community First shareholders.
The terms of the merger, including the exchange ratio, were the result of
arms-length negotiations between representatives of Community First and
representatives of BB&T. Based upon its consideration of the foregoing factors,
the Community First Board of Directors approved the merger agreement and the
merger as being in the best interests of Community First and its shareholders.
The Community First Board unanimously recommends that you vote "FOR" the
approval of the merger agreement.
13
BB&T's Reasons for the Merger
One of BB&T's 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 Community First is a successful
community bank, the acquisition of which will give BB&T the top market share in
Carrollton, Georgia and increased market share in western Georgia.
In connection with BB&T's consideration of the merger, its management
analyzed certain 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 earnings per share on a stand-alone basis for 2001 would be in
line with the estimates published by First Call Corporation;
. Community First's fully diluted core earnings per share (prior to the
effects of the merger) on a stand-alone basis for 2001 would be in line
with the estimates of Community First's management;
. BB&T's earnings per share on a stand-alone basis for subsequent years
would increase at an assumed annual rate, determined solely for the
purpose of assessing the impact of the merger as described above, based
on 12% income statement and balance sheet growth;
. Annual cost savings of approximately $3.5 million, or 25% of Community
First's expense base would be fully realized in the first 12 months of
operations following conversion of Community First's data services
systems to those of BB&T;
. Income statement and balance sheet growth rates would be 12%, except:
. Community First's non interest income would increase at
approximately 20% in years 1 through 5 so as to achieve a fee income
ratio of 25% by year 5 and would thereafter grow at 12%;
. Core deposit intangibles would be amortized over ten years using the sum
of the years digit method;
. Community First's loan loss allowance would conform to BB&T's allowance
level of 1.30%;
. Community First's net charge-off rate for loan losses would be raised to
0.35% in year 1 and held constant thereafter; and
. BB&T would purchase on the open market substantially all of the shares
of common stock to be issued in the merger.
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 earnings per share and cash basis earnings per share in
2002;
. be accretive to cash basis return on assets in year 9 and dilutive to
return on assets in all years;
. be accretive to book value per share, return on equity and cash basis
return on equity 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 $2.9 million, related to completing the merger.
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 Community First, after applying the
assumptions described above, would conform to BB&T's criteria. BB&T's current
minimum
14
internal rate of return requirement for this type of investment is 15%. The
analysis performed in connection with the Community First merger indicated that
the projected internal rate of return is 17.66%.
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 iii.
Opinion of Community First's Financial Advisor
Merger--General. Pursuant to an engagement letter dated June 18, 2001
between Community First and Trident, Community First retained Trident to act as
its sole financial advisor in connection with a possible merger and related
matters. As part of its engagement, Trident agreed, if requested by Community
First, to render an opinion with respect to the fairness, from a financial
point of view, to the holders of Community First common stock, of the
consideration as set forth in the Agreement. Trident is a nationally recognized
specialist in the financial services industry, in general, and in Southeastern
banks in particular. Trident is regularly engaged in evaluations of similar
businesses and in advising institutions with regard to mergers and
acquisitions, as well as raising debt and equity capital for such institutions.
Community First selected Trident as its financial advisor based upon Trident's
qualifications, expertise and reputation in such capacity.
On July 9, 2001, Trident delivered its oral opinion that the consideration
provided for in the merger agreement was fair to Community First shareholders,
from a financial point of view, as of the date of such opinion. Trident also
delivered to the Community First Board a written opinion dated as of July 9,
2001, confirming its oral opinion. No limitations were imposed by Community
First on Trident with respect to the investigations made or the procedures
followed in rendering its opinion. Trident subsequently updated its opinion to
the date of this proxy statement/prospectus.
The full text of Trident's written opinion to the Community First Board,
dated as of the date of this proxy statement/prospectus, which sets forth the
assumptions made, matters considered and extent of review by Trident, is
attached as Appendix B and is incorporated herein by reference. It should be
read carefully and in its entirety in conjunction with this proxy
statement/prospectus. The following summary of Trident's opinion is qualified
in its entirety by reference to the full text of the opinion. Trident's opinion
is addressed to the Community First Board and does not constitute a
recommendation to any shareholder of Community First as to how such shareholder
should vote at the Community First special meeting described in this document.
Trident, in connection with rendering its July 9, 2001 opinion:
. reviewed Community First's audited financial statements for each of the
years ended December 31, 2000, December 31, 1999, and December 31, 1998;
Community First's Annual Report on Form 10-K for the year ended December
31, 2000; and Community First's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001;
. reviewed BB&T's Annual Report to Shareholders and Annual Report on Form
10-K for each of the years ended December 31, 2000, 1999 and 1998,
including the audited financial statements contained therein; and BB&T's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;
. reviewed certain other public and non-public information, primarily
financial in nature, relating to the respective businesses, earnings,
assets and prospects of Community First and BB&T provided to Trident or
publicly available;
. participated in meetings and telephone conferences with members of
senior management of Community First and BB&T concerning the financial
condition, business, assets, financial forecasts and prospects of the
respective companies, as well as other matters Trident believed relevant
to its inquiry;
15
. reviewed certain stock market information for Community First and BB&T
common stock and compared it with similar information for certain
companies, the securities of which are publicly traded;
. compared the results of operations and financial condition of Community
First and BB&T with that of certain companies which Trident deemed to be
relevant for purposes of this opinion;
. reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions which Trident deemed to be relevant for
purposes of this opinion;
. reviewed the merger agreement; and
. performed such other reviews and analyses as Trident deemed appropriate.
The oral and written opinions provided by Trident to Community First were
necessarily based upon economic, monetary, financial market and other relevant
conditions as of the dates thereof.
In connection with its review and arriving at its opinion, Trident relied
upon the accuracy and completeness of the financial information and other
pertinent information provided by Community First and BB&T to Trident for
purposes of rendering its opinion. Trident did not assume any obligation to
independently verify any of the provided information as being complete and
accurate in all material respects. With regard to the financial forecasts
established and developed for Community First and BB&T with the input of the
respective managements, as well as projections of cost savings, revenue
enhancements and operating synergies, Trident assumed that these forecasts
reflected the most reasonable estimates and judgments of Community First and
BB&T as to the future performance of the separate and combined entities and
that the projections provided a reasonable basis upon which Trident could
formulate its opinion. Community First does not publicly disclose such internal
management projections of the type utilized by Trident in connection with
Trident's role as financial advisor to Community First with respect to the
review of the merger. Therefore, such projections cannot be assumed to have
been prepared with a view towards public disclosure. The projections were based
upon numerous variables and assumptions that are inherently uncertain,
including, among others, factors relative to the general economic and
competitive conditions facing Community First and BB&T. Accordingly, actual
results could vary significantly from those set forth in the respective
projections.
Trident does not claim to be an expert in the evaluation of loan portfolios
or the allowance for loan losses with respect thereto and therefore assumes
that such allowances for Community First and BB&T are adequate to cover such
losses. In addition, Trident does not assume responsibility for the review of
individual credit files and did not make an independent evaluation, appraisal
or physical inspection of the assets or individual properties of Community
First or BB&T, nor was Trident provided with such appraisals. Furthermore,
Trident assumes that the merger will be consummated in accordance with the
terms set forth in the merger agreement, without any waiver of any material
terms or conditions by Community First, and that obtaining the necessary
regulatory approvals for the merger will not have an adverse effect on either
separate institution or the combined entity. Trident assumes that the merger
will be recorded as a "purchase" in accordance with generally accepted
accounting principles.
In connection with rendering its opinion to the Community First Board,
Trident performed a variety of financial and comparative analyses, which are
briefly summarized below. Such summary of analyses does not purport to be a
complete description of the analyses performed by Trident. Moreover, Trident
believes that these analyses must be considered as a whole and that selecting
portions of such analyses and the factors considered by it, without considering
all such analyses and factors, could create an incomplete understanding of the
scope of the process underlying the analyses and, more importantly, the opinion
derived from them. The preparation of a financial advisor's opinion is a
complex process involving subjective judgments and is not necessarily
susceptible to partial analyses or a summary description of such analyses. In
its full analysis, Trident also included assumptions with respect to general
economic, financial market and other financial conditions. Furthermore, Trident
drew from its past experience in similar transactions, as well as its
experience in the valuation of securities and its general knowledge of the
banking industry as a whole. Any estimates in
16
Trident's analyses were not necessarily indicative of actual future results or
values, which may significantly diverge more or less favorably from such
estimates. Estimates of company valuations do not purport to be appraisals nor
to necessarily reflect the prices at which companies or their respective
securities actually may be sold. None of the analyses performed by Trident were
assigned a greater significance by Trident than any other in deriving its
opinion.
Comparable Company Analysis:
Trident reviewed and compared actual stock market data and selected
financial information for Community First with corresponding information for
six publicly traded southeastern banks (primarily Georgia Banks) with assets
between $320 million and $1.0 billion and a return on average assets greater
than 1.0% and an equity to assets ratio less than 12.0%, (the "Community First
Peer Group"). The Community First Peer Group is listed below:
1. Colony Bancorp, Inc. Fitzgerald, GA
2. GB&T Bancshares, Inc. Gainesville, GA
3. Georgia Bank Financial Corp. Augusta, GA
4. Main Street Banks, Inc. Kennesaw, GA
5. Savannah Bancorp, Inc. Savannah, GA
6. Yadkin Valley Bank & Trust Company Elkin, NC
The table below represents a summary analysis of the Community First Peer
Group based on market prices as of July 6, 2001 and the latest publicly
available financial data as of or for the last twelve months ended March 31,
2001:
Community
Mean Median First(1)
----- ------ ---------
Price to last twelve months earnings..................... 15.2x 13.4x 12.9x
Price to book value...................................... 196% 196% 189%
Price to tangible book value............................. 196% 197% 210%
Dividend yield........................................... 2.1% 2.1% 3.7%
Return on average assets................................. 1.23% 1.16% 1.43%
Return on average equity................................. 14.0% 14.7% 17.8%
Capital to assets ratio.................................. 8.8% 8.2% 7.4%
Non-performing assets ratio.............................. 0.66% 0.43% 0.35%
--------
(1) Community First earnings based on the last twelve months ended March 31,
2001
Trident reviewed and compared actual stock market data and actual and
estimated selected financial information for BB&T with corresponding
information for eight publicly traded regional banks with assets between $25
billion and $75 billion and a return on average assets greater than 1.0% and a
return on average equity greater than 12.0%, (the "BB&T Peer Group"). The BB&T
Peer Group is listed below:
1. Comerica Incorporated Detroit, Michigan
2. Fifth Third Bancorp Cincinnati, Ohio
3. Huntington Bancshares, Incorporated Columbus, Ohio
4. Marshall & Ilsley Corporation Milwaukee, Wisconsin
5. Mellon Financial Corporation Pittsburgh, Pennsylvania
6. PNC Financial Services Group Pittsburgh, Pennsylvania
7. Regions Financial Corporation Birmingham, Alabama
8. SouthTrust Corporation Birmingham, Alabama
17
The following table below represents a summary analysis of the BB&T Peer
Group based on market prices as of June 29, 2001 and the latest publicly
available financial data as of or for the last twelve months ended March 31,
2001:
BB&T
Mean Median Corporation
----- ------ -----------
Price to last twelve months earnings................... 18.3x 16.6x 16.6x
Price to book value.................................... 304% 249% 298%
Price to tangible book value........................... 340% 288% 354%
Dividend yield......................................... 2.8% 2.5% 2.8%
Return on average assets............................... 1.46% 1.34% 1.57%
Return on average equity............................... 17.5% 15.8% 20.1%
Capital to assets ratio................................ 8.8% 8.7% 8.1%
Non-performing assets ratio............................ 0.71% 0.66% 0.50%
Comparable Transaction Analysis: Trident reviewed and compared actual
information for groups of comparable recent (announced in preceding 12 months)
transactions it deemed pertinent to an analysis of the merger. The implied
acquisition price was compared to the median ratios of (i) price to last twelve
months earnings, (ii) price to tangible book value, and (iii) core deposit
premium for each of the following five pending and recently completed
transaction comparable groups:
. all bank acquisitions with the selling bank headquartered in Alabama,
North Carolina, Georgia, South Carolina, Tennessee, Virginia and West
Virginia ("Comparable Regional Deals");
. all bank acquisitions with the selling bank having assets between $300
million and $500 million ("Comparable Asset Size");
. all bank acquisitions with the selling bank having an equity to assets
ratio between 7.0% and 8.0% ("Comparable Capitalization");
. all bank acquisitions with the selling bank having a return on average
equity between 1.30% and 1.40% ("Comparable Profitability");
. nine recently announced transactions with multiple similar
characteristics to Community First ("Guideline Companies").
The following table represents a summary analysis of the comparable
transactions analyzed by Trident based on the announced transaction values:
Median Price Median Price
to Tangible Book Median Price as a premium
Number Value to LTM EPS to core deposits
------ ---------------- ------------ ----------------
Comparable Regional
Deals.................. 30 183% 19.0x 11.3%
Comparable Asset Size... 15 202% 17.6x 9.8%
Comparable
Capitalization......... 31 204% 17.7x 11.1%
Comparable
Profitability.......... 10 238% 15.9x 14.5%
Guideline Companies..... 9 172% 19.0x 8.4%
Community First(1)...... 312% 19.2x 27.0%
--------
(1) Community First pricing data based on the closing price of BB&T common
stock on July 6, 2001 of $36.11.
Based on the above information, Trident concluded that this analysis showed
an imputed reference range of $19.00 to $35.34 per share of Community First
common stock.
Contribution Analysis: Trident analyzed the contribution of each company to
the pro forma combined company relative to the approximate ownership of the pro
forma company. The analysis indicated that
18
Community First shareholders would hold approximately 0.8% of the pro forma
diluted shares. Community First's approximate contributions are listed below by
category:
Community
First
Contribution
------------
Assets............................................................. 0.9%
Loans.............................................................. 1.0%
Deposits........................................................... 1.1%
Equity............................................................. 0.9%
Last twelve month earnings......................................... 0.8%
2001 estimated earnings............................................ 0.8%
Accretion/Dilution Analysis: On the basis of financial projections and
estimates of on-going cost savings accruing to the pro forma company provided
to Trident by management, as well as estimated one-time costs related to the
transaction, Trident compared pro forma per share equivalent earnings, book
value and dividends to the stand-alone projections for Community First and
BB&T.
The accretion/dilution analysis demonstrated, among other things, that for
each share of Community First common stock exchanged for a share of BB&T common
stock the merger would result in:
. 13% accretion to earnings per share for Community First shareholders in
the first full year of combined operations, increasing over the 5 year
period included in the analysis;
. No accretion or dilution to earnings per share for BB&T shareholders in
the first full year of combined operations, and accretion thereafter;
. 13% higher cash dividends for Community First, assuming the Community
First Board maintained its current dividend policy;
. no change in cash dividends for BB&T shareholders;
. 7% dilution to book value per share for Community First shareholders;
and
. No accretion or dilution to book value per share for BB&T shareholders.
Discounted Earnings Analysis: Trident performed a discounted earnings
analysis with regard to Community First on a stand alone basis. This analysis
utilized a range of discount rates of 11.0% to 13.0% and a range of terminal
earnings multiples of 11.0x to 14.0x. The analysis resulted in a range of
present values of $27.25 per share to $35.00 per share for Community First. As
indicated above, this analysis was based on estimates and is not necessarily
indicative of actual values or actual future results and does not purport to
reflect the prices at which any securities may trade at the present or at any
time in the future. Trident included the discounted earnings analysis because
it is a widely used valuation methodology, but noted that the results of such
methodology are highly dependent upon the numerous assumptions that must be
made, including earnings growth rates, discount rates, and terminal values.
Other Analyses: Trident also reviewed certain other information including
pro forma estimated balance sheet composition, pro forma financial performance
and pro forma deposit market share.
Based on the analyses described above and updated as Trident deemed
necessary, Trident has given an opinion to the Community First 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 Community First
common stock. The full text of Trident's opinion is attached as Appendix B 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 Trident in rendering its fairness opinion.
19
No company used as a comparison in the above analyses is identical to
Community First, BB&T or the combined entity and no other transaction is
identical to the merger. Accordingly, an analysis of the results of the
foregoing is not purely mathematical; rather, such analyses involve complex
considerations and judgments concerning differences in financial market and
operating characteristics of the companies and other factors that could affect
the public trading volume of the companies to which Community First, BB&T and
the combined entity are being compared.
In connection with the delivery of its opinion dated as of the date of this
proxy statement/prospectus, Trident performed procedures to update, as
necessary, certain of the analyses described above and reviewed the assumptions
on which such analyses described above were based and the factors considered in
connection therewith. Trident did not perform any analyses in addition to those
described above in updating the opinion.
For its financial advisory services provided to Community First, Trident has
been paid fees of $70,000 to date and will be paid an approximate fee of $1.1
million at the time of closing of the merger. In addition, Community First has
agreed to reimburse Trident for all reasonable out-of-pocket expenses incurred
by it on Community First's behalf, as well as indemnify Trident against certain
liabilities, including any which may arise under the federal securities laws.
Trident is a member of all principal securities exchanges in the United
States and in the conduct of its broker-dealer activities has from time to time
purchased securities from, and sold securities to, Community First and/or BB&T.
As a market maker Trident may also have purchased and sold the securities of
Community First for Trident's own account and for the accounts of its
customers. In the past, Trident has also provided certain investment banking
services for Community First and has received customary compensation for such
services.
Exchange Ratio
Upon completion of the merger, each outstanding share of Community First
common stock will be converted into the right to receive 0.98 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 Community First 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 Community First
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 5.
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., Eastern time, on the date
that the merger becomes effective as reported on NYSEnet.com.
Exchange of Community First Stock Certificates
When the merger becomes effective, without any action on the part of
Community First or the Community First shareholders, shares of Community First
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 any declared and unpaid dividends on
such shares) 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 Community First stock
certificates. When you
20
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 becomes effective, and until surrendered as described
above, each outstanding Community First 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 Community First 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 becomes effective,
Community First's transfer books will be closed and no transfer of the shares
of Community First stock outstanding immediately before the time that the
merger becomes effective will be made on BB&T's stock transfer books.
If Community First declares a dividend on the Community First 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 Community First
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 Community First stock are
converted, regardless of whether you have exchanged your Community First 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 pursuant to 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 Community First stock certificate for exchange as described
above. Upon surrender of your Community First stock certificate, the
certificate representing the BB&T common stock into which your shares of
Community First 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 Secretary of State of Georgia. It
is currently anticipated that the filing of the articles of merger will take
place in December 2001, assuming all conditions to the respective obligations
of BB&T and Community First to complete the merger have been satisfied.
21
Conditions to the Merger
The obligations of BB&T and Community First 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 Community First 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 Community First 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
. Community First and BB&T must have received an opinion of BB&T's legal
counsel, in form and substance satisfactory to Community First 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 Community First will not recognize any gain or loss
to the extent that they exchange shares of Community First common stock
for shares of BB&T common stock.
The obligations of Community First 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 Community First:
. 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
. Community First must have received certain 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 Community First. The representations and warranties
of BB&T concerning the following must be true and correct (except for
inaccuracies which are de minimus in amount):
. 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.
22
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;
. Community First 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 certain affiliates of Community
First concerning their shares of Community First common stock and the
shares of BB&T common stock to be received by them; and
. BB&T must have received certain closing certificates from Community
First and legal opinions from Community First's counsel.
All representations and warranties of Community First 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 warranties of
Community First concerning the following must be true and correct (except for
inaccuracies which are de minimis in amount):
. 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 Community First'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;
. the vote of a majority of the shares of Community First common stock
issued and outstanding is legally sufficient to constitute adoption and
approval of the merger by the Community First shareholders; 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 Community First in the merger agreement that, individually or in the
aggregate, have or are reasonably likely to have a material adverse effect on
Community First and its subsidiaries taken as a whole.
Conduct of Community First's and BB&T's Businesses Before the Merger
Except with the consent of BB&T, before the merger is effective neither
Community First nor any of its subsidiaries may:
23
. 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;
. declare or pay any dividend or make any distribution on its capital
stock other than regularly scheduled quarterly dividends of $0.225 per
share of Community First common stock payable in a manner consistent
with past practices; provided that any dividend declared or payable on
Community First common stock for the quarter in which the merger occurs
may, unless otherwise agreed by BB&T and Community First, have a record
date preceding the merger only if the record date for payment of the
corresponding quarterly dividend to holders of BB&T common stock
precedes the merger;
. 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 Community First
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 Community First or any
Community First 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
Community First 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 Community First's Board of
Directors to the Community First 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
Community First or a Community First subsidiary or guarantee by
Community First or a Community First 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;
24
. 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 concurred in by BB&T
(which may not unreasonably withhold its concurrence) 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, Community First 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 Community First shareholders, abrogate
the covenants contained in the merger agreement or substantially delay
the completion of the merger;
. to cooperate with BB&T in certain respects concerning accounting and
financial matters necessary to facilitate the merger, including issues
arising in connection with record keeping, loan classification,
valuation adjustments, levels of loan loss reserves and other accounting
practices;
. 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 Community First's books and records.
Except with the consent of Community First, not to be arbitrarily withheld
or delayed, before 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;
. exercise the stock option granted to BB&T by Community First in
conjunction with the merger agreement other than in accordance with its
terms, or dispose of the shares of Community First common stock that it
acquires upon exercise of the option other than in accordance with the
terms of the option; or
. 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 Community First advised of all material
developments relevant to its business before the completion of the merger.
25
Waiver; Amendment; Termination; Expenses
Except with respect to any required regulatory approval, BB&T or Community
First may at any time (whether before or after approval of the merger agreement
by the Community First 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 Community First common stock upon completion of the
merger may be made after the Community First 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 Community First's
obligations, Community First 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 Community First;
. 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" on
page 22); 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
becomes effective;
. 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
Community First do not approve the merger agreement by the required
vote; or
. at any time following March 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.
If the merger agreement is terminated pursuant to 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.
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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 Community First.
Interests of Community First's Directors and Officers in the Merger
Some members of Community First's management and the Community First Board
have interests in the merger that are in addition to or different from their
interests as Community First shareholders. The Community First Board was aware
of these interests and considered them in approving the merger agreement and
the merger.
Employment Agreements
In connection with the merger, Branch Banking and Trust Company ("Branch
Bank") has entered into employment agreements with each of Gary D. Dorminey,
Community First's President and Chief Executive Officer, and Lane Poston,
Community First's Chief Operating Officer. In addition, Branch Bank has agreed
to adopt the employment agreements of C. Lynn Gable, Community First's Chief
Financial Officer, and Anyce Fox, Community First's Management Services
Officer. The employment agreements and the adoption of employment agreements
will become effective only when the merger is effective.
The employment agreements which Messrs. Dorminey and Poston have entered
into with Branch Bank supersede their current employment agreements with
Community First. The employment agreements with Messrs. Dorminey and Poston
with Branch Bank provide that:
. each employee will be a Senior Vice President of Branch Bank and will
receive an annual base salary of $281,700 in the case of Mr. Dorminey
and $244,600 in the case of Mr. Poston, payable in accordance with the
payroll practices of Branch Bank applicable to officers; and
. the employment term will begin when the merger is completed and will
terminate on: (A) in the case of Mr. Dorminey, the earlier of: (1) the
61st day after conversion of the data services systems of Community
First to the data services systems of BB&T; and (2) eighteen months
after the merger is effective; and (B) in the case of Mr. Poston, July
13, 2004. At the conclusion of the employment term, the employee will
become an independent consultant for the period beginning at the end of
the employment term and ending five years after the merger is effective.
The employment agreements with Messrs. Dorminey and Poston each provide that
Branch Bank will transfer to the employee one share in Sunset Hill Country
Club, at no cost, and the automobile provided to employee by Community First at
the time the merger is effective, at a purchase price determined in accordance
with BB&T's standard policy. Each agreement also provides that the employee
will be entitled to no less than five weeks of vacation per year. The
employment agreements further provide that the employee will receive, on the
same basis as other similarly situated officers of Branch Bank, employee
pension and welfare benefits and group employee benefits such as sick leave,
vacation, group disability and health, life and accident insurance and similar
indirect compensation that may be extended to similarly situated officers, such
benefits will begin on a date determined by Branch Bank, which will be no later
than January 1 following the date when the last Community First bank subsidiary
is merged into BB&T or one of its subsidiaries. Community First plans that
provide benefits of the same type or class as a corresponding BB&T plan will
continue in effect for the employees until the employees become eligible to
become a participant in the corresponding BB&T plan. Except as described below,
the employees will not be eligible to participate in or earn benefits under any
of these employee pension and welfare benefit plans or programs during the
consulting period.
The employment agreements for Messrs. Dorminey and Poston provide that, at
the end of the employment period the employee will relinquish his
responsibilities as Senior Vice President of Branch Bank and become an
independent consultant to Branch Bank. As an independent consultant, the
employee will render services as
27
an independent contractor (and not as an employee) in the nature of customer
and community relations, business development, employee relations and general
advice and assistance relating to Branch Bank's customers and employees and to
the growth and development in the Carrollton, Georgia area of the business of
Branch Bank. These services will be rendered at times and on a schedule
determined by the employee, and reasonably convenient to both Branch Bank and
the employee. The employee will not be required to maintain records of hours
worked or to work in accordance with any fixed schedule during the period that
he is a consultant.
During the consulting period, the employment agreements with Messrs.
Dorminey and Poston will in each case continue in full force and effect in
accordance with their terms, except that the employee will not be entitled
during the consulting period to receive base salary or employee benefits on the
same basis as he would as an employee of Branch Bank. Instead, he will receive
during the consulting period:
. in consideration of covenants not to compete made in the employment
agreements, and as compensation for consulting services, an annual
amount equal to the employee's base salary rate in effect immediately
preceding the consulting period, payable in substantially equal monthly
installments; and
. health insurance and life insurance benefits comparable to the group
employee benefits which Branch Bank may from time to time extend to its
officers, at a cost to employee no greater than the cost to such
officers, payments during the consulting period (and with each monthly
installment of compensation) having a present value (as determined in
good faith by BB&T) economically equivalent to benefits that he would
have otherwise earned under Branch Bank's defined benefit pension plan
and 401(k) plan (both qualified and nonqualified) had he been a
participant in such plans during the consulting period, and disability
benefits as provided during the employment term (or benefits
economically equivalent to such disability benefits).
If the employee's service as an employee is terminated during the employment
period by Branch Bank for any reason other than Just Cause (as that term is
defined in the Employment Agreement) or disability, the employee will receive
payments he would have received during the consulting period subject to the
condition that he comply with certain covenants not to compete contained in the
Agreement. If the employee's service as an employee is terminated during the
employment period for Just Cause or if employee voluntarily terminates his
employment, the consulting period will not begin and the employee will not be
entitled to receive the compensation described in this paragraph. In the event
the employee breaches the noncompetition covenants, or if he fails or refuses
to render consulting services as requested by Branch Bank and does not remedy
the failure within 20 days' notice, the payments described above will cease. If
the employee terminates his consulting services during the consulting period on
account of a breach of the employment agreement by Branch Bank which is not
remedied within 30 days' notice, the employee shall nevertheless be entitled to
receive the payments and benefits described above for the remainder of the
consulting period, subject to his continuing compliance with the noncompetition
covenants.
The employment agreements with Mr. Dorminey and Mr. Poston provide that, if
Branch Bank terminates the employee's employment other than because of
disability or for Just Cause, and if the employee complies with the
noncompetition provisions, he will be entitled to receive his base salary until
the end of the original employment term as "Termination Compensation". In
addition, during the period payments of Termination Compensation are made, the
employee will: (1) continue to receive health, retirement and other group
employee benefits from Branch Bank for which officers of Branch Bank generally
are eligible on the same terms as were in effect before the termination, either
under Branch Bank's plans or comparable coverage; and (2) receive payments
(with each installment of Termination Compensation) having a present value (as
determined in good faith by BB&T) economically equivalent to benefits that he
would have otherwise earned under Branch Bank's defined benefit pension plan
and 401(k) plan (both qualified and nonqualified) had he been a participant in
such plans during that period.
28
Each employment agreement further provides that, in the event of a "Change
of Control" (as defined below) of Branch Bank or BB&T, the employee may
voluntarily terminate employment for "Good Reason" (as defined below) until
twelve months after the Change of Control and (a) will be entitled to receive
in a lump sum (1) any compensation due but not yet paid through the date of
termination and (2) in lieu of any further salary payments from the date of
termination to the end of the employment period, an amount equal to his
Termination Compensation times 2.99, and (b) will continue for the remainder of
the employment period to receive health insurance coverage and other group
employee welfare benefits for which officers of Branch Bank generally are
eligible, or comparable plans or coverage, on the same terms as were in effect
either (1) at the date of termination or (2) if such plans and programs in
effect before the Change of Control were, considered together as a whole,
materially more generous to the officers of Branch Bank, at the date of the
Change of Control.
"Good Reason" means any of the following events occurring without the
written consent of the employee in question:
. the assignment to him of duties inconsistent with the position and
status of the offices and positions held with Branch Bank immediately
before the Change of Control;
. a reduction in his base salary as then in effect, or his exclusion from
participation in benefit plans in which he participated immediately
before the Change of Control;
. an involuntary relocation of him more than 30 miles from the location
where he worked immediately before the Change of Control, or Branch
Bank's breach of any material provision of the employment agreement; or
. any purported termination of his employment by Branch Bank not effected
in accordance with the employment agreement.
A "Change of Control" would be deemed to occur if:
. any person or group of persons (as defined in the Securities Exchange
Act of 1934) together with its affiliates, excluding employee benefit
plans of Branch Bank or BB&T, is or becomes the beneficial owner of
securities of Branch Bank or BB&T representing 20% or more of the
combined voting power of Branch Bank's or BB&T's then outstanding
securities;
. as a result of a tender offer or exchange offer for the purchase of
securities of Branch Bank or BB&T (other than an offer by BB&T for its
own securities), or as a result of a proxy contest, merger,
consolidation or sale of assets, or as a result of any combination of
the foregoing, individuals who at the beginning of any two-year period
constitute the BB&T Board, plus new directors whose election or
nomination for election by BB&T's shareholders is approved by a vote of
at least two-thirds of the directors still in office who were directors
at the beginning of the two-year period, cease for any reason during the
two-year period to constitute at least two-thirds of the members of the
BB&T Board;
. the shareholders of BB&T approve a merger or consolidation of BB&T with
any other corporation or entity, regardless of which entity is the
survivor, other than a merger or consolidation that would result in the
voting securities of BB&T outstanding immediately beforehand continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 40% of the combined
voting power of the voting securities of BB&T or the other surviving
entity outstanding immediately after the merger or consolidation;
. the shareholders of BB&T approve a plan of complete liquidation or
winding-up of BB&T or an agreement for the sale or disposition by BB&T
of all or substantially all of BB&T's assets; or
. any other event occurs that the BB&T Board determines should constitute
a Change of Control.
29
If any of the payments to be made under either of the employment agreements
would constitute a "parachute payment," as defined in Section 280G of the
Internal Revenue Code, the payments would be reduced by the smallest amount
necessary so that no portion of the 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.
Branch Bank has entered into adoption of employment agreements with C. Lynn
Gable and Anyce Fox pursuant to which Branch Bank has agreed to adopt the
existing employment agreements between Community First and the respective
individuals effective upon completion of the merger. Under the respective
adopted employment agreements, Mr. Gable and Ms. Fox will continue to receive
salary and benefits in accordance with their existing contracts as in effect
prior to the merger. The adopted employment agreements provide for a term that
automatically renews each day so that the terms of the respective agreements
remain a three-year term; however, the automatic renewal may be terminated by
either Branch Bank or the employee by giving written notice to the other, in
which event the term will end on the third anniversary of the thirtieth day
following the date written notice is received. In addition, the employment
agreements may be terminated by the respective employees within 30 days
following the earlier of: (i) 18 months following the date the merger is
effective; or (ii) the 60th day following the conversion of the data services
systems of Community First to the data services systems of Branch Bank. If the
employee terminates employment pursuant to this provision, the employee will be
entitled to receive monthly for the remaining term of the employment agreement
the greater of the employee's then current monthly base salary, or the monthly
average of base salary and incentive bonus with respect to the most recent
three consecutive twelve-month periods during which the employee was employed
immediately prior to the effective date of the merger that produced the highest
average. In addition, pursuant to the adoption of employment agreement for Ms.
Fox, Branch Bank has agreed to include Ms. Fox as a participant in Branch
Bank's group health plan prior to the earlier of the dates described in (i) and
(ii) above.
Advisory Boards
After the merger becomes effective, Branch Bank will offer to Gary D.
Dorminey a seat on the Branch Bank Advisory Board for the State of Georgia.
Members of the Branch Bank Advisory Board for the State of Georgia receive a
fee for each meeting attended, except that none of these fees are paid to any
member who is also an employee of Branch Bank or of an affiliate of Branch
Bank. After the merger becomes effective, Branch Bank will establish an
advisory board for the Carrollton, Georgia area and the members of the
Community First board of directors will be offered the opportunity to serve on
that advisory board. Membership of any person on any advisory board is
conditional upon Branch Bank's receipt of a noncompetition agreement from such
person.
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).
For two years after the merger becomes effective, these new advisory board
members will receive fees equal in amount to the annual retainer and schedule
of attendance fees for directors of Community First in effect on June 1, 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.
30
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 Community
First for acts or omissions occurring before the merger becomes effective. This
insurance will provide at least the same coverage and amounts as contained in
Community First'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
Community First'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 Community First or a Community First 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 Community First and permitted under the
North Carolina Business Corporation Act.
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
Community First and to BB&T and Community First. 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 Community First 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 Community First 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 Community First 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 Community First by reason
of the merger;
31
. the shareholders of Community First 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 Community First common stock;
. a shareholder of Community First 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;
. 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 Community First 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
Community First common stock will include the period during which the
shareholder held the shares of Community First common stock surrendered
in exchange, provided that the Community First common stock was held as
a capital asset at the time the merger becomes effective.
The completion of the merger is conditioned upon the receipt by BB&T and
Community First 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 Community
First Board determines to proceed with the merger, Community First will
resolicit its shareholders.
Cash Received in Lieu of a Fractional Share of BB&T Common Stock. A
shareholder of Community First 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, a Community First 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
Community First 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.
Regulatory Considerations
Financial holding companies (such as BB&T) 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 certain 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 Community First which are incorporated by
reference in this proxy statement/prospectus. Those discussions are qualified
in their entirety by
32
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 56.
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 managerial resources
and future prospects of BB&T and Community First 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 consumer finance company, certain
insurance agency activities, and securities brokerage services) 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
Community First, 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.
BB&T also must obtain the prior approval of the merger from the Georgia
Department of Banking and Finance under the bank holding company act provisions
of the Official Code of Georgia. In evaluating the transaction, the Georgia
Department will consider the effect of the transaction upon competition, the
convenience and needs of the community to be served, the financial history of
BB&T and Community First, the condition of BB&T and Community First, including
capital, management and earnings prospects, the existence of insider
transactions, the adequacy of disclosure of the terms of the acquisition and
the equitable treatment of minority shareholders of the bank to be acquired.
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 a bank outside of Virginia, such as
Community First Bank, 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.
33
BB&T received the approval of the Federal Reserve on October 11, 2001, the
Georgia Department of Banking and Finance on October 5, 2001 and the Virginia
Bureau of Financial Institutions on September 26, 2001.
The Subsidiary Bank Merger
Although not required by the terms of the merger agreement or the plan of
merger, BB&T expects to effect the subsidiary bank merger during the second
quarter of 2002. The subsidiary bank merger is 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 merger and an opportunity for the public to
comment on the applications in writing and to request a hearing.
The North Carolina Commissioner of Banks ("N.C. Commissioner") also must
approve the subsidiary bank merger under the bank merger act provisions of the
North Carolina General Statutes. In its review of the subsidiary bank merger,
the N.C. 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 Georgia law to provide prior
notice of the subsidiary bank merger to the Georgia state bank regulators.
Branch Bank expects to file these required applications and notices closer
to the expected consummation date of the subsidiary bank merger.
Accounting Treatment
It is anticipated that 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 Community First
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 Community First after the acquisition, based on
the cost of the transaction. Financial statements of BB&T issued after
completion of the merger would reflect the impact of Community First. Financial
statements of BB&T issued before completion of the merger would not be restated
retroactively to reflect Community First'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 7.
Option Agreement
General
As a condition to BB&T entering into the merger agreement, Community First
granted BB&T an option to purchase up to 650,000 shares of Community First
common stock (subject to adjustment in certain circumstances) at a price of
$29.00 per share (also subject to adjustment under certain circumstances). The
purchase of any shares of Community First 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.
34
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, Community First from considering or proposing such an
acquisition, even if they were prepared to offer to pay consideration to
shareholders of Community First with a higher current market price than the
BB&T common stock to be received for Community First 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 56.
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, Community First 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 Community First 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
Community First and its subsidiaries or (c) the issuance, sale or other
disposition of securities representing 15% or more of the voting power
of Community First 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 Community First common stock.
The obligation of Community First to issue shares of Community First 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 Community First of a covenant or agreement in the
merger agreement or an inaccuracy in Community First'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 Community First 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
Community First common stock or the filing of a registration statement
with respect to such an offer; or
35
. the failure of the shareholders of Community First to approve the merger
agreement, the failure of Community First to hold the meeting, the
cancellation of the meeting before the termination of the merger
agreement or the Community First 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 Community First 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 Community First, no Purchase Event or Preliminary
Purchase Event has occurred as of the date of this proxy statement/prospectus.
Adjustments
The option agreement provides for certain adjustments in the option in the
event of any change in Community First 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 Community First 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), Community
First 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 Community First 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
Community First common stock acquired pursuant to the option with
respect to which the holder then has beneficial ownership, plus
. the excess, if any, of (a) the Applicable Price (as defined in the
option agreement) for each share of Community First common stock over
the purchase price, multiplied by (b) the number of shares of Community
First 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 Community First 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 Community First 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, Community First enters
into an agreement:
. to consolidate with or merge into any third party and Community First
will not be the continuing or surviving corporation of the consolidation
or merger;
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. to permit any third party to merge into Community First with Community
First as the continuing or surviving corporation, but, in connection
therewith, the then outstanding shares of Community First common stock
are changed into or exchanged for stock or other securities of Community
First or any other person or cash or any other property, or the
outstanding shares of Community First 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
Community First 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 Community First'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 certain rights to require Community First 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 Community First 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 the first day following the calendar year during which the last of
Community First's bank subsidiaries is merged into BB&T or one of its
subsidiaries, BB&T will cause Community First's 401(k) plan either to be merged
with BB&T's 401(k) plan or to be terminated, subject to receipt of applicable
regulatory approvals. Each employee of Community First at the time the merger
becomes effective who: (a) becomes an employee of BB&T or a BB&T subsidiary (a
"BB&T employer") at the time the merger becomes effective, and (b) continues in
the employment of a BB&T employer until the benefit plan date, will be eligible
to participate in BB&T's 401(k) plan (subject to 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. BB&T will maintain Community
First'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 Community
First and its subsidiaries will be deemed service with BB&T for participation
and vesting purposes, but not for benefit accrual purposes.
Each employee of Community First or a Community First 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, 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. BB&T has agreed not to amend any such group plan effective
prior to the benefit plan date to provide for an eligibility waiting period
applicable to any transferred employee which would exceed the eligibility
waiting period under the corresponding plan of Community First as in effect on
July 9, 2001. With respect to any
37
benefit plan or program of Community First 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 Community First plan or program in effect for the
benefit of the transferred employees until they become eligible to participate
in the corresponding plan or program maintained by the BB&T employer (and, with
respect to any such 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 Community First 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 Community First 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.
Each transferred employee who is terminated by a BB&T employer after the
merger becomes effective, excluding any employee who has an existing employment
or special termination agreement which has been disclosed to BB&T pursuant to
the merger agreement, 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 Community First or a Community First 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 Community First 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 Community First will
be terminated or merged into comparable plans of BB&T, as BB&T may determine in
its sole discretion.
Community First has agreed that, before the time the merger becomes
effective, it will terminate the Community First Banking Company Employee Stock
Ownership Plan and the Employee Stock Ownership Plan of Douglas Federal Bank,
repay any outstanding indebtedness of the plans and allocate shares of
Community First common stock to the participants in the plans in accordance
with their terms. No purchase will be made of shares of Community First common
stock after the date of the merger agreement under the plans.
Effective on the benefit plan date with respect to the defined benefit
pension plan of Community First (the "Community First Pension Plan"), BB&T will
cause the plan to be merged with the defined benefit pension plan maintained by
BB&T and the subsidiaries of BB&T, or to be terminated, in either case as
determined by BB&T and subject to compliance with applicable Community First
Pension Plan documents and to the receipt of all applicable regulatory or
governmental approvals. The accrued benefits under the Community First Pension
Plan will be the sole accrued benefits of transferred employees with respect to
service with Community First prior to the merger. In applying the BB&T pension
plan following the merger, service with Community First and the subsidiaries of
Community First shall be deemed to be service with BB&T for participation and
vesting purposes, but not for purposes of benefit accrual.
Stock Options
At the time the merger becomes effective, each then outstanding stock option
granted under Community First'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 applicable Community First plan, except that:
(a) BB&T and the compensation committee
38
of the BB&T Board will be substituted for Community First and its committee
with respect to administering the plan; (b) each stock option may be exercised
solely for shares of BB&T common stock; (c) 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
Community First common stock subject to the stock option by the exchange ratio
in the merger and (d) 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 Community First 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 which are
incentive stock options, and that the substituted options continue in effect on
the same terms and conditions provided in Community First's stock option plans
and the stock option agreements relating to the options.
BB&T will deliver to each participant in the stock option plan who receives
converted or substitute options an appropriate notice setting forth the
participant's rights with respect to the converted or substitute options.
Each stock option that is an incentive stock option will be adjusted as
required by Section 424 of the Internal Revenue Code to continue as an
incentive stock option and not to constitute a modification, extension or
renewal within the meaning of Section 424(h) of the Internal Revenue Code.
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
497,260 shares of Community First common stock may be outstanding at the
effective time of the merger. Any shares of Community First 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 Community First 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 deemed to be an "affiliate" of
Community First at the effective time of the merger for purposes of Rule 145
under the Securities Act. Affiliates of Community First 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 Community First generally include
individuals or entities that directly, or indirectly through one or more
intermediaries, control, are controlled by or are under common control with
Community First and include directors and certain executive officers of
Community First. 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.
39
Community First has agreed to use its 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.
No Appraisal or Dissenters' Rights
Under Georgia law, Community First shareholders will not be entitled to
dissent from the merger and to demand a statutory appraisal of the fair value
of their shares of Community First common stock. Holders of Community First
common stock are not entitled to dissent and appraisal rights because, as of
the record date, shares of Community First common stock were listed on The
Nasdaq National Market and the shares of BB&T common stock will be listed on
the New York Stock Exchange.
INFORMATION ABOUT BB&T
General
BB&T is a financial services 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 337 banking offices throughout North Carolina,
102 offices in metropolitan Washington, D.C. and Maryland, 168 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.
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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.
BB&T also has a number of other operating subsidiaries. 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.
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. In the transaction, BankFirst
Corporation shareholders received 0.4554 shares of BB&T common stock for each
share of BankFirst Corporation common stock and 1.406 shares of BB&T common
stock for each share of BankFirst Corporation preferred stock. BankFirst
Corporation, with $848.8 million in assets, 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 during 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. In the transaction,
FCNB shareholders received 0.725 shares of BB&T common stock for each share of
FCNB common stock. FCNB, with $1.6 billion in assets, 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 during 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. In the
transaction, FirstSpartan shareholders received one share of BB&T common stock
for each share of FirstSpartan common stock. FirstSpartan, with $591 million in
assets, 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. BB&T ranks third in market share
in South Carolina and first in Greenville and Spartanburg counties. First
Federal Bank, a subsidiary bank of BB&T (as successor to First Spartan), was
merged into Branch Bank-SC during 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 will be merged into
Branch Bank during the fourth quarter of 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
41
offices in Spotsylvania County, Virginia. Fredericksburg State Bank was merged
into Branch Bank-VA during 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. The former banking
subsidiaries of F&M will be merged into Branch Bank during the first quarter of
2002.
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 certain 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 certain intangibles. This is called Tier 1
capital. The remainder may consist of certain subordinated debt, certain 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.
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
42
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 are
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.
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 and June 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 and October 11,
2001, all of which are incorporated by reference in this proxy
statement/prospectus. See "Where You Can Find More Information" on page 56.
INFORMATION ABOUT COMMUNITY FIRST
DESCRIPTION OF COMMUNITY FIRST
Community First is a Georgia corporation and the holding company for
Community First Bank, a community-oriented financial institution based in
Carrollton, Georgia. As of June 30, 2001, Community First had $540 million in
assets and $423 million in deposits. It has nine branch offices in western
Georgia. These branches provide customary banking services such as customer and
commercial checking accounts, NOW accounts, savings accounts, certificates of
deposit, lines of credit and MasterCard and VISA credit cards. Lending
activities include the origination of consumer and commercial business loans on
a secured and unsecured basis, residential mortgage and home equity loans, and
commercial real estate loans.
Community First Bank has three wholly owned operating subsidiaries that
broaden the services Community First Bank offers to the community. The first,
CFB Securities, Inc., offers traditional brokerage services and products such
as mutual funds, stocks and bonds through an NASD member firm. CFB Securities,
Inc. began operations in 1996 and is located in space immediately adjacent to
the Bank's main office lobby in Carrollton, Georgia.
The second subsidiary of Community First Bank, CFB Financial Inc., began
operations in 1996 to service the loan needs of consumers traditionally
associated with consumer finance companies. CFB Financial, Inc.
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operates offices in Villa Rica, Douglasville and Hiram, Georgia. This
subsidiary offers a wide range of small loans granted in conformity with the
Georgia Industrial Loan Act.
The third subsidiary, CFB Insurance Agency, Inc., began operations in 1997.
Based in Community First Bank's main office in Carrollton, Georgia, CFB
Insurance Agency, Inc. offers a full line of insurance products to existing
bank customers as well as the general public.
On May 23, 2001, Community First consummated its acquisition of First
Deposit Bancshares, Inc. ("First Deposit"), a Georgia corporation and bank
holding company with approximately $141 million in assets, through the merger
of First Deposit and its bank subsidiary, Douglas Federal Bank, FSB, with and
into Community First Bank. Community First issued 723,675 shares of common
stock and paid $14,836,077 in cash to the First Deposit shareholders in the
merger. The banking offices of Douglas Federal Bank became branches of
Community First Bank as of the effective date of the merger.
You can find additional information about Community First in Community
First'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 and June
30, 2001, and Current Reports on Form 8-K filed February 1, 2001, June 7, 2001
and August 6, 2001, all of which are incorporated by reference in this proxy
statement/prospectus. See "Where You Can Find More Information" on page 56.
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. As of October 16, 2001, there were
453,023,024 shares of BB&T common stock issued and outstanding, which excludes
shares expected to be issued in pending acquisitions. 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 45.
Based on the number of shares of Community First common stock outstanding at
the record date, it is estimated that approximately 3,452,612 shares of BB&T
common stock would be issued in the merger.
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 therefor 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.
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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 certain 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 of one right for
each outstanding share of BB&T common stock, payable to shareholders of record
at the close of business on January 17, 1997. One right has also been
distributed, and will also be distributed in the future, for each share of BB&T
common stock issued including shares to be issued to Community First
shareholders in connection with the merger, between January 17, 1997 and the
occurrence of a "distribution date," as described in the next paragraph. Each
right entitles the holder to purchase from BB&T 1/100th of a share of BB&T
Junior Preferred Stock (which is substantially equivalent to one share of BB&T
common stock) at a price of $145.00, subject to anti-dilution adjustments, or,
under certain circumstances, other securities or property.
Initially, the rights are attached to all BB&T common stock certificates and
are not exercisable until a distribution date occurs. A "distribution date"
will occur, and the rights will separate from shares of BB&T common stock and
become exercisable, upon the earliest of (a) 10 business days following a
public announcement that a person or group of affiliated or associated persons
(an "acquiring person") has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of BB&T common
stock, (b) 10 business days following the commencement of a tender offer or
exchange offer (or the offeror's receipt of regulatory or shareholder approval
of a tender offer or exchange offer) that would, if completed, result in a
person or group beneficially owning 20% or more of such outstanding shares of
BB&T common stock or (c) 10 business days after the BB&T Board declares any
person to be an "adverse person," as described in the next paragraph.
The BB&T Board will declare a person to be an adverse person upon its
determinations (a) that the person, alone or together with its affiliates and
associates, has or will become the beneficial owner of 10% or more of the
outstanding shares of BB&T common stock (provided that any such determination
will not be effective until such person has in fact become the beneficial owner
of 10% or more of the outstanding shares of BB&T common stock) and (b)
following consultation with such persons as the BB&T Board deems appropriate,
that (1) the beneficial ownership by the person is intended to cause, is
reasonably likely to cause or
45
will cause BB&T to repurchase the BB&T common stock beneficially owned by the
person or to cause pressure on BB&T to take action or enter into a transaction
or series of transactions intended to provide the person with short-term
financial gain under circumstances where the BB&T Board determines that the
best long-term interests of BB&T and its shareholders would not be served by
taking the action or entering into such transactions or series of transactions
at that time or (2) the beneficial ownership is causing or is reasonably likely
to cause a material adverse impact (including, but not limited to, impairment
of relationships with customers or impairment of BB&T's ability to maintain its
competitive position) on the business or prospects of BB&T or (3) the
beneficial ownership otherwise is determined to be not in the best interests of
BB&T and its shareholders, employees, customers and communities in which BB&T
and its subsidiaries do business.
As soon as practicable after the distribution date, rights certificates will
be mailed to holders of record of BB&T common stock as of the close of business
on the distribution date and, thereafter, the separate rights certificates
alone will represent the rights. Except for certain issuances in connection
with outstanding options and convertible securities and as otherwise determined
by the BB&T Board, only shares of BB&T common stock issued before the
distribution date will be issued with rights.
It is expected that as long as the rights are exercisable only for 1/100th
of a share of BB&T Junior Preferred Stock at an exercise price of $145.00,
BB&T's shareholders would not find it economic to exercise the rights. However,
under the circumstances described below, the rights may be exercised for an
amount of BB&T common stock or other property (including BB&T Junior Preferred
Stock) having a value equal to two times the exercise price. The Rights
Agreement provides that if the BB&T Board determines that a person is an
adverse person or, at any time following the distribution date, a person
becomes the beneficial owner of 25% or more of then outstanding shares of BB&T
common stock, a holder of a right will thereafter have the right to receive at
the time specified in the Rights Agreement, in lieu of 1/100th of a share of
BB&T Junior Preferred Stock, (a) upon exercise and payment of the exercise
price, BB&T common stock (or, in certain circumstances, cash, property or other
securities of BB&T) having a value equal to two times the exercise price of the
right or (b) at the discretion of the BB&T Board, upon exercise and without
payment of the exercise price, BB&T common stock (or, in certain circumstances,
cash, property or other securities of BB&T) having a value equal to the
difference between the exercise price of the right and the value of the
consideration that would be payable under clause (a). Following any of the
events set forth in this paragraph, all rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any acquiring person or adverse person will be null and void. Rights will not
become exercisable, however, until such time as they are no longer redeemable
by BB&T as set forth below.
For example, at an exercise price of $145.00 per right, each right not owned
by an acquiring person or an adverse person (or by certain related parties)
following a triggering event described in the preceding paragraph would entitle
its holder to purchase $290.00 worth of BB&T common stock (or cash, securities
or other property, as noted above) for $145.00. Assuming that the BB&T common
stock was determined as provided in the Rights Agreement to have a value of
$29.00 at such time the holder of each valid right would be entitled to
purchase 10 shares of BB&T common stock for $145.00. Alternatively, at the
discretion of the BB&T Board, each right following an event set forth in the
preceding paragraph, without payment of the exercise price, would entitle its
holder to five shares of BB&T common stock (or cash, securities or other
property, as noted above).
In addition, if, at any time following the date on which there has been a
public announcement that an acquiring person has acquired, or obtained the
right to acquire, beneficial ownership of 20% or more of the outstanding shares
of BB&T common stock, (a) BB&T is acquired in a merger, statutory share
exchange or other business combination transaction in which BB&T is not the
surviving corporation or (b) 50% or more of BB&T's assets or earning power is
sold or transferred, a holder of a right (except rights that previously have
been voided as set forth above) will thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the exercise price of the right.
46
The purchase price payable, and the number of shares of BB&T Junior
Preferred Stock or other securities or property issuable, upon exercise of the
rights are subject to adjustment from time to time to prevent dilution if
certain events occur.
The rights expire at the close of business on December 31, 2006, subject to
extension by the BB&T Board, or unless earlier redeemed by BB&T as described
below.
In general, BB&T may redeem the rights in whole, but not in part, at a price
of $0.01 per right at any time until 10 business days following the public
announcement that an acquiring person has become such or, if earlier, the
effective date of any declaration by the BB&T Board that any person is an
adverse person. After the redemption period has expired, BB&T's right of
redemption may be reinstated if an acquiring person or adverse person reduces
his or her beneficial ownership to less than 10% of the outstanding shares of
BB&T common stock in a transaction or series of transactions not involving BB&T
and if there are no other acquiring persons or adverse persons.
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.
Other than those provisions relating to the principal economic terms of the
rights, any of the provisions of the Rights Agreement may be amended by the
BB&T Board before the distribution date. After the 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 56.
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 thereof, 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
certain 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 Community First Shareholders--Anti-takeover Statutes" on page 52.
47
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 such provisions, see
"Comparison of the Rights of BB&T Shareholders and Community First
Shareholders--Directors" on page 49.
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 Community First Shareholders--Shareholder
Nominations and Shareholder Proposals" on page 50.
COMPARISON OF THE RIGHTS OF BB&T SHAREHOLDERS
AND COMMUNITY FIRST SHAREHOLDERS
When the merger becomes effective, holders of Community First 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
Community First common stock. Since BB&T is organized under the laws of the
State of North Carolina and Community First is organized under the laws of the
State of Georgia, differences in the rights of holders of BB&T common stock and
those of holders of Community First common stock arise from differing
provisions of the NCBCA and the Georgia Business Corporation Code, or the GBCC,
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 Community First 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 GBCC and the governing corporate
instruments of BB&T and Community First, to which the shareholders of Community
First are referred.
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 October 16,
2001, there were 453,023,024 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 45.
48
Community First
Community First's authorized capital stock consists of 10,000,000 shares of
Community First common stock, $.01 par value, and 10,000,000 shares of
Community First preferred stock, $.01 par value. Community First's articles of
incorporation authorize the Community First Board to issue shares of Community
First preferred stock in one or more series and to fix the designation, powers,
preferences, and rights of the shares of Community First preferred stock in
each series. As of October 15, 2001, there were 3,523,073 shares of Community
First common stock outstanding and no shares of Community First 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.
Community First
Special meetings of the shareholders of Community First may be called at any
time by Community First's Board of Directors, the President of Community First,
or upon the written request of any one or more shareholders owning an aggregate
of not less than 25% of the outstanding capital stock. Notice must be given in
writing not less than 10 or more than 60 days before the date of the special
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.
Community First
Community First's Board of Directors is also divided into three classes.
Each class is to consist, as nearly as possible, of one-third of the total
number of directors. Community First's bylaws provide for a minimum of three
and a maximum of 25 board members. The Community First Board presently consists
of 10 members. At each annual meeting of shareholders, successors to the class
of directors whose term expired as of the annual meeting are elected for a
three-year term. Under Community First's bylaws and articles of incorporation,
directors may be removed for cause by the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote in the election of
directors, and without cause by the affirmative vote of the holders of 80% of
the shares entitled to vote in the election of directors. The affirmative vote
of the holders of at least 80% of the shares of Community First common stock
entitled to vote in an election of directors is required to amend or rescind
the provision of the articles of incorporation establishing a classified Board
unless two-thirds of the directors then in office approve such a change.
49
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.
Community First
Like BB&T, Community First is a legal entity separate and district from its
subsidiaries and its revenues depend in significant part on the payment of
dividends from Community First Bank. Community First Bank is subject to certain
legal restrictions on the amount of dividends it is permitted to pay. Community
First Bank may pay dividends in any year in an amount up to 50% of the previous
year's net income without the approval of the Georgia Department of Banking and
Finance. The holders of Community First common stock are entitled to receive
dividends when and if declared by the Board of Directors out of funds legally
available therefor. Community First has paid regularly quarterly cash dividends
on its common stock since October 1, 1997. Community First cannot predict with
any certainty whether and to what extent dividends would be paid to
shareholders in the future if Community First remained independent.
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 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
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
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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.
Community First
Community First's bylaws establish advance notice procedures for the
nomination of candidates, other than by or at the direction of the Community
First Board, for election as directors. Community First's bylaws provide that a
shareholder wishing to nominate a person as a candidate for election to the
Community First Board must submit the nomination in writing (together with
biographical information about the candidate and the shareholder's name,
address and shareholdings) to the President of Community First at least 60 days
prior to any meeting of shareholders called for the election of directors;
provided, however, that if less than 21 days notice of the meeting is given to
shareholders, such nominations shall be received by the President of Community
First not later than the close of business on the seventh day following the day
on which notice of the meeting was mailed.
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.
Community First
The GBCC similarly requires that a director of a Georgia corporation
discharge his or her duties as a director (a) in a manner he or she believes in
good faith to be in the best interests of the corporation and (b) with the care
an ordinarily prudent person in a like position would exercise under similar
circumstances. Community First's bylaws contain certain provisions that provide
indemnification to directors of Community First that is broader than the
protection expressly mandated in the GBCC. The indemnification provisions in
the bylaws require Community First to indemnify persons who are parties to any
civil, criminal, administrative or investigative action, suit or proceeding by
reason of the fact that the person was or is a director, officer, employee or
agent of Community First. These persons would be indemnified against expenses
(including, but not limited to, attorneys' fees) and against any judgments,
fines and amounts paid in settlement incurred by them. The bylaws provide that
Community First shall indemnify a director, officer, employee or agent if that
individual acted in a manner he or she believed in good faith to be in or not
opposed to the best interests of Community First and, in the case of a criminal
proceeding, he or she had no reasonable cause to believe his or her conduct was
unlawful.
Community First can also provide for greater indemnification than that set
forth in the bylaws if it chooses to do so, subject to approval by Community
First's shareholders. Community First may not, however, indemnify a director
for liability arising out of circumstances which constitute exceptions to
limitation of a director's liability for monetary damages.
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Community First may purchase and maintain insurance on behalf of any
director against any liability asserted against such person and incurred by him
or her in any such capacity, whether or not Community First would have had the
power to indemnify against such 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 Community First) 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.
Community First
The GBCC generally provides 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 a recommendation by the Board of Directors and
approval by the affirmative vote of the holders of the majority of the issued
and outstanding shares of each voting group entitled to vote. In addition, as
permitted by the GBCC, Community First's articles of incorporation require the
affirmative vote of at least 80% of the issued and outstanding shares entitled
to vote, if the merger, share exchange, or sale of assets was not previously
approved by two-thirds of the Board of Directors. Approval of a merger by the
shareholders of the surviving corporation is not required by the GBCC in
certain 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 the number of voting shares
outstanding immediately before the merger. Community First is also 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.
52
Community First
The GBCC generally prohibits a business combination between a Georgia
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 (i) prior to the
person or entity becoming an interested shareholder, the business combination
or the transaction pursuant to which such person or entity became an interested
shareholder shall have been approved by the corporation's Board of Directors,
(ii) upon consummation of the transaction in which the interested shareholder
became such, the interested shareholder holds at least 90% of the corporation's
voting stock (excluding "insider" shares held by persons who are both officers
and directors and shares held by certain employee benefit plans), or (iii)
after the shareholder becomes an interested shareholder, he or she acquires
additional shares resulting in ownership of at least 90% of the outstanding
voting common stock and obtains the approval of the holders of a majority of
the remaining shares, excluding "insider" shares as described above.
The GBCC also provides for certain fair price requirements concerning
business combinations with "interested shareholders." This is designed to
protect shareholders of Georgia corporations against the inequities of certain
tactics which have been utilized in hostile takeover attempts. Under the fair
price provisions, business combinations with interested shareholders must meet
one of three criteria designed to protect minority shareholders: (a) the
transaction must be unanimously approved by the "continuing directors" of the
corporation (generally, directors who served prior to the time the interested
shareholder acquired 10% ownership and who are unaffiliated with the interested
shareholder); (b) the transaction must be approved by two-thirds of the
continuing directors and a majority of shares held by shareholders other than
the interested shareholder, or (c) the terms of the transaction must meet
specified fair pricing criteria and certain other tests which are intended to
assure that all shareholders receive a fair price and equivalent consideration
for their shares regardless to which point in time they sell to the acquiring
party.
Georgia's business combination and fair price requirements are not
applicable to any corporation unless they are specifically incorporated in the
bylaws of the corporation. Community First's bylaws expressly 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
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.
Community First
The GBCC provides that a Georgia corporation's articles of incorporation and
bylaws may be amended if the amendment is approved by a majority of the shares
entitled to vote. However, as permitted by the GBCC, Community First's articles
of incorporation and bylaws require the affirmative vote of the holders of 80%
of the outstanding shares entitled to vote to amend, alter or repeal any
article or bylaw relating to classification and staggered terms of the
Community First Board, number of directors, removal of directors, liability of
directors, supermajority voting requirements for certain mergers or other
business combinations, relevant
53
factors for board consideration on such a transaction, or any requirement for a
supermajority vote on such an amendment, unless the proposed amendment is
approved by two-thirds of the Community First Board. Except for those matters
described in the preceding sentence, the affirmative vote of a majority of all
directors or a majority of the holders of all shares entitled to elect
directors is required to amend the bylaws. The bylaws of Community First
provide for amendment by the shareholders at any annual or special meeting or
by the Community First Board.
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.
Community First
Community First's articles of incorporation specify the following factors to
which the Community First Board must give consideration in evaluating a
transaction involving a potential change in control of Community First: (a) the
short-term and long-term social and economic effects on the employees,
customers, shareholders or other constituents of Community First and its
subsidiaries, and on the communities within which Community First and its
subsidiaries operate (it being understood that any subsidiary bank of Community
First is charged with providing support to and being involved in the
communities it serves); and (b) the consideration being offered by the other
party in relation to the then-current value of Community First in a freely
negotiated transaction and in relation to the Board of Directors' then-estimate
of the future value of Community First as an independent entity.
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.
Community First
Holders of Community First common stock do not have appraisal rights in
connection with the merger into BB&T because, as of the record date, shares of
Community First common stock were listed on the National Market System of The
Nasdaq Stock Market, and the shares of BB&T common stock were listed on the New
York Stock Exchange.
The foregoing is an exception to the general rule under the GBCC that any
shareholder of a Georgia corporation who objects to a merger and who fully
complies with all of the dissenters' provisions (but not otherwise) shall be
entitled to demand and receive payment of the "fair value" of all (but not less
than all) of his or her shares if the proposed transaction is consummated. A
shareholder who objects to a merger and desires to receive payment of the "fair
value" of his or her stock:
. must file a written objection to the merger with the corporation either
prior to the shareholders' meeting, or at the meeting but before the
vote is taken, and the written objection must contain a
54
statement that the shareholder intends to demand payment for his or her
shares if the merger is approved,
. must either abstain from voting or vote against approval of the merger,
and
. must demand payment and deposit his or her certificate(s) in accordance
with the terms of the dissenters' notice sent to the dissenting
shareholder following approval of the merger.
If all of the above conditions are satisfied in full, the resulting
corporation is required to make a written offer within 10 days of receiving the
payment demand, or within 10 days after the consummation of the merger,
whichever is later, to each dissenting shareholder to purchase all of such
shareholder's shares at a specific price. If the resulting corporation and any
dissenting shareholder are unable to agree on the fair value of the shares
within 60 days, the resulting corporation will commence a proceeding in the
superior court of the county in which the resulting corporation is
headquartered to determine the rights of the dissenting shareholder and the
fair value of his or her shares. The court may appoint appraisers to receive
evidence and to recommend a decision on fair value.
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.
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.
Community First
In the event of the liquidation, dissolution or winding up of the affairs of
Community First, 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 Community First 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 Community First 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 Community First's proxy materials must be received at the main
office of Community First, 110 Dixie Street, Carrollton, Georgia 30117, no
later than November 22, 2001. 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 Community First'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 Community
First's proxy materials) must also give notice of such
55
proposals to Community First before January 31, 2002. If Community First does
not receive such notice before January 31, 2002, proxies solicited by Community
First management will confer discretionary authority upon management to work
upon any such matter. It is urged that any proposals be sent by certified mail,
return receipt requested.
OTHER BUSINESS
The Community First 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 hereby 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,
certain 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, 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 herein in reliance upon the
authority of said firm as experts in giving said reports.
The consolidated financial statements of Community First Banking Company
incorporated in this proxy statement/prospectus by reference to Community
First's Annual Report on Form 10-K for the year ended December 31, 2000 have
been so incorporated in reliance upon the report of Porter Keadle Moore, LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of such firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
BB&T and Community First 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 certain other information that
the companies file with the Securities and Exchange Commission at the following
Securities and Exchange Commission location:
Public Reference Room
450 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
56
and Exchange Commission at "http://www.sec.gov." Reports, proxy statements and
other information 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 Community First
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 Community First 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 Community First and BB&T have previously filed with the
Securities and Exchange Commission. These documents contain important
information about Community First and BB&T and their businesses.
BB&T Securities and Exchange Commission
Filings (File No. 1-10853)
--------------------------------------- -------------------------------------------
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 and June 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 and October
11, 2001.
Registration Statements on Form 8-A
(describing BB&T's common stock and
concerning BB&T's shareholder rights Filed September 4, 1991 and January 10,
plan)..................................... 1997
Community First Securities and Exchange
Commission Filings (File No. 0-22543)
--------------------------------------- -------------------------------------------
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 and June 30, 2001
Current Reports on Form 8-K................ Filed February 1, 2001, June 7, 2001 and
August 6, 2001
Community First 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
Community First, 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 Community First has
supplied all such information relating to Community First before the merger.
57
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 Community First Banking Company
Shareholder Reporting 110 Dixie Street
Post Office Box 1290 Carrollton, Georgia 30117
Winston-Salem, North Carolina 27102 (770) 834-1071
(336) 733-3021 Attn: C. Lynn Gable
If you would like to request documents, please do so by December 3, 2001 to
receive them before the meeting.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. BB&T and Community First 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
October 29, 2001. 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.
58
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
COMMUNITY FIRST BANKING COMPANY
and
BB&T CORPORATION
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER..................................................... A-1
ARTICLE II THE MERGER.................................................... A-5
2.1 Merger............................................................ A-5
2.2 Filing; Plan of Merger............................................ A-5
2.3 Effective Time.................................................... A-6
2.4 Closing........................................................... A-6
2.5 Effect of Merger.................................................. A-6
2.6 Further Assurances................................................ A-6
2.7 Merger Consideration.............................................. A-6
2.8 Conversion of Shares; Payment of Merger Consideration............. A-7
2.9 Conversion of Stock Options....................................... A-8
2.10 No Right to Dissent............................................... A-8
2.11 Merger of Subsidiaries............................................ A-9
2.12 Anti-Dilution..................................................... A-9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMMUNITY FIRST............ A-9
3.1 Capital Structure................................................. A-9
3.2 Organization, Standing and Authority.............................. A-9
3.3 Ownership of Subsidiaries......................................... A-10
3.4 Organization, Standing and Authority of the Subsidiaries.......... A-10
3.5 Authorized and Effective Agreement................................ A-10
3.6 Securities Filings; Financial Statements; Statements True......... A-11
3.7 Minute Books...................................................... A-11
3.8 Adverse Change.................................................... A-11
3.9 Absence of Undisclosed Liabilities................................ A-11
3.10 Properties........................................................ A-12
3.11 Environmental Matters............................................. A-12
3.12 Loans; Allowance for Loan Losses.................................. A-12
3.13 Tax Matters....................................................... A-13
3.14 Employees; Compensation; Benefit Plans............................ A-14
3.15 Certain Contracts................................................. A-16
3.16 Legal Proceedings; Regulatory Approvals........................... A-17
3.17 Compliance with Laws; Filings..................................... A-17
3.18 Brokers and Finders............................................... A-17
3.19 Repurchase Agreements; Derivatives................................ A-18
3.20 Deposit Accounts.................................................. A-18
3.21 Related Party Transactions........................................ A-18
3.22 Certain Information............................................... A-18
3.23 Tax and Regulatory Matters........................................ A-18
3.24 State Takeover Laws............................................... A-19
3.25 Labor Relations................................................... A-19
3.26 Fairness Opinion.................................................. A-19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BB&T........................ A-19
4.1 Capital Structure of BB&T......................................... A-19
4.2 Organization, Standing and Authority of BB&T...................... A-19
4.3 Authorized and Effective Agreement................................ A-20
4.4 Organization, Standing and Authority of BB&T Subsidiaries......... A-20
4.5 Securities Documents; Statements True............................. A-20
i
Page
----
4.6 Certain Information............................................... A-20
4.7 Tax and Regulatory Matters........................................ A-21
4.8 Share Ownership................................................... A-21
4.9 Legal Proceedings; Regulatory Approvals........................... A-21
ARTICLE V COVENANTS...................................................... A-21
5.1 Community First Shareholder Meeting............................... A-21
5.2 Registration Statement; Proxy Statement/Prospectus................ A-21
5.3 Plan of Merger; Reservation of Shares............................. A-22
5.4 Additional Acts................................................... A-22
5.5 Best Efforts...................................................... A-22
5.6 Certain Accounting Matters........................................ A-22
5.7 Access to Information............................................. A-23
5.8 Press Releases.................................................... A-23
5.9 Forbearances of Community First................................... A-23
5.11 Affiliates........................................................ A-25
5.12 Section 401(k) Plan; Other Employee Benefits...................... A-25
5.13 Directors and Officers Protection................................. A-26
5.14 Forbearances of BB&T.............................................. A-27
5.15 Reports........................................................... A-27
5.16 Exchange Listing.................................................. A-27
5.17 Advisory Boards................................................... A-27
ARTICLE VI CONDITIONS PRECEDENT.......................................... A-28
6.1 Conditions Precedent--BB&T and Community First.................... A-28
6.2 Conditions Precedent--Community First............................. A-28
6.3 Conditions Precedent--BB&T........................................ A-29
ARTICLE VII TERMINATION, DEFAULT, WAIVER AND AMENDMENT................... A-30
7.1 Termination....................................................... A-30
7.2 Effect of Termination............................................. A-30
7.3 Survival of Representations, Warranties and Covenants............. A-31
7.4 Waiver............................................................ A-31
7.5 Amendment or Supplement........................................... A-31
ARTICLE VIII MISCELLANEOUS............................................... A-31
8.1 Expenses.......................................................... A-31
8.2 Entire Agreement.................................................. A-31
8.3 No Assignment..................................................... A-32
8.4 Notices........................................................... A-32
8.5 Specific Performance.............................................. A-32
8.6 Captions.......................................................... A-33
8.7 Counterparts...................................................... A-33
8.8 Governing Law..................................................... A-33
ANNEXES
Annex A..................................................... Articles of Merger
ii
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of July
9, 2001, is among COMMUNITY FIRST BANKING COMPANY ("Community First"), a
Georgia corporation having its principal office at Carrollton, Georgia, 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 Community First shall be merged with and 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, Community First is concurrently
granting to BB&T an option to acquire, under certain circumstances, 650,000
shares of the common stock, par value $.01 per share, of Community First.
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
THE MERGER
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 Secretary of State
of Georgia, as provided in Section 14-2-1105 of the GBCC.
"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 Community First 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.
"Benefit Plan Determination Date" shall mean, with respect to any employee
pension or welfare benefit plan or program maintained by Community First at
the Effective Time, the date determined by BB&T with
A-1
respect to each 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 Community
First Subsidiaries which is a bank 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.
"CERCLA" means 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.
"Community First Common Stock" shall mean the shares of voting common stock,
par value $.01 per share, of Community First. The Community First Common Stock
has no Rights attached, except as provided in Section 3.1.
"Community First Disclosure Memorandum" shall mean the written information
in one or more documents, each of which is entitled "Community First Company
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 Community
First 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.
"Community First Subsidiaries" shall mean Community First Bank, CFB
Securities, Inc., CFB Financial, Inc., CFB Insurance Agency, Inc., and any and
all other Subsidiaries of Community First as of the date hereof and any
corporation, bank, savings association, or other organization acquired as a
Subsidiary of Community First after the date hereof and held as a Subsidiary by
Community First at the Effective Time.
"CRA" shall mean the Community Reinvestment Act of 1977, as amended.
"Disclosed" shall mean disclosed in the Community First 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.
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"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 Trident Securities, a division of McDonald
Investments, 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 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 Community First, (i) the
consolidated statements of financial condition (including related notes and
schedules, if any) of Community First 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 Community First
in Securities Documents and (ii) the consolidated statements of financial
condition of Community First (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 Community First 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.
"GBCC" shall mean the Georgia Business Corporation Code, as amended.
"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.
"Material Adverse Effect" on BB&T or Community First 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 Community First and the Community
First Subsidiaries taken as a whole, or (ii) materially impairs the ability of
BB&T or Community First 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 Community First
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.
"NCBCA" shall mean the North Carolina Business Corporation Act, as amended.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Proxy Statement/Prospectus" shall mean the proxy statement and prospectus,
together with any supplements thereto, to be sent to shareholders of Community
First to solicit their votes in connection with a proposal to approve this
Agreement and the Plan of Merger.
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"Registration Statement" shall mean the registration statement of BB&T as
declared effective by the Commission under the Securities Act, including any
post-effective amendments or supplements thereto as filed with the Commission
under the Securities Act, with respect to the BB&T Common Stock to be issued in
connection with the transactions contemplated by this Agreement.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests (other than rights
pursuant to the Rights Agreement described under the definition of "BB&T Common
Stock"), and stock appreciation rights, performance units and similar stock-
based rights whether or not they obligate the issuer thereof to issue stock or
other securities or to pay cash.
"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 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 Community First Common Stock, aggregating 497,260 shares.
"Stock Option Plan" shall mean Community First's 1997 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)
Community First Introduction
Closing Section 2.4
Closing Date Section 2.4
Closing Value Section 2.7(c)
Constituent Corporations Section 2.1
Effective Time Section 2.3
Employer Entity Section 5.12(a)
ESOPs Section 3.14(b)(viii)
Exchange Ratio Section 2.7(a)
Maximum Amount Section 5.13
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(b)
ARTICLE II
THE MERGER
2.1 Merger
BB&T and Community First are constituent corporations (the "Constituent
Corporations") to the Merger as contemplated by the NCBCA and the GBCC. At the
Effective Time:
(a) Community First shall be merged with and into BB&T in accordance
with the applicable provisions of the NCBCA and the GBCC, with BB&T being
the surviving corporate entity (hereinafter sometimes referred to as the
"Surviving Corporation").
(b) The separate existence of Community First shall cease and the Merger
shall in all respects have the effect provided in Section 2.5.
(c) The Articles of Incorporation of BB&T at the Effective Time shall
become the Articles of Incorporation of the Surviving Corporation.
(d) The Bylaws of BB&T at the Effective Time shall become the Bylaws of
the Surviving Corporation.
2.2 Filing; Plan of Merger
The Merger shall not become effective unless this Agreement and the Plan of
Merger are duly approved by shareholders holding at least a majority of the
shares of Community First 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 Secretary of State of Georgia, as provided in
Section 55-11-05 of the NCBCA and Section 14-2-1105 of the GBCC, respectively.
The Plan of Merger is incorporated herein by reference, and adoption of this
Agreement by the Boards of Directors of the Constituent Corporations
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and approval by the shareholders of Community First 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 Community First
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 Community First 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 a Community First shareholder as provided in Section 2.7(b).
The number of shares of BB&T Common Stock to
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be issued for each issued and outstanding share of Community First Common Stock
(the "Exchange Ratio") shall be 0.9800.
(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 average 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 Community First or the holders of record of Community First Common
Stock, each share of Community First 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 Community First Common Stock (as provided in subsection (d)
below), the Merger Consideration.
(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 Community First 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 Community First Common Stock. With respect
to any certificate for Community First Common Stock that has been lost or
destroyed, BB&T shall pay the Merger Consideration attributable to such
certificate upon receipt of a surety bond or other adequate indemnity as
required in accordance with BB&T's standard policy, and evidence reasonably
satisfactory to BB&T of ownership of the shares represented thereby. After the
Effective Time, no transfer of the shares of Community First 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 Community First 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 Community
First Common Stock. Upon 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 which have been declared or made
by Community First in respect of shares of Community First Common Stock in
accordance with the terms of this Agreement and which remain unpaid at the
Effective Time, subject to compliance by Community First with section 5.9(b).
To the extent permitted by law, former shareholders of record of Community
First 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 Community First Common Stock are converted, regardless of
whether such holders have exchanged their certificates representing Community
First 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
Community First Common Stock until such holder surrenders such certificate for
exchange as provided in this Section 2.8. Upon surrender of such certificate,
both the BB&T Common Stock
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certificate and any undelivered dividends and cash payments payable hereunder
(without interest) shall be delivered and paid with respect to the shares of
Community First 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 Plan, except that from and after the Effective Time
(i) BB&T and its Compensation Committee shall be substituted for Community
First and the Committee of Community First'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 share) determined by multiplying the
number of shares of Community First 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 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 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 Community First 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 Plan 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.
Community First hereby represents that the Stock Option Plan 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.
2.10 No Right to Dissent
Nothing in the Articles of Incorporation or the Bylaws of Community First or
any Community First Subsidiary provides or would provide to any person,
including without limitation the Community First
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shareholders, upon execution of this Agreement, the Plan of Merger or the BB&T
Option Agreement and consummation of the transactions contemplated hereby and
thereby, rights of dissent and appraisal of any kind.
2.11 Merger of Subsidiaries
In the event that BB&T shall request, Community First shall take such
actions, and shall cause the Community First 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 Community First 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 COMMUNITY FIRST
Except as Disclosed, Community First represents and warrants to BB&T as
follows (the representations and warranties herein of Community First 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 the
inaccuracy would permit BB&T to refuse to consummate the Merger under such
applicable standard):
3.1 Capital Structure
The authorized capital stock of Community First consists of 10,000,000
shares of Community First Common Stock, par value $.01 per share, and
10,000,000 shares of convertible preferred stock, $.01 par value per share. As
of the date hereof, 3,523,073 shares of Community First Common Stock are issued
and outstanding. No other classes of capital stock of Community First, common
or preferred, are authorized, issued or outstanding. All outstanding shares of
Community First Common Stock have been duly authorized and are validly issued,
fully paid and nonassessable. No shares of capital stock have been reserved for
any purpose, except for (i) shares of Community First Common Stock reserved in
connection with the Stock Option Plan, and (ii) 650,000 shares of Community
First Common Stock reserved in connection with the BB&T Option Agreement.
Community First has granted options to acquire 497,260 shares of Community
First Common Stock under the Stock Option Plan, which options remain
outstanding as of the date hereof. Except as set forth in this Section 3.1,
there are no Rights authorized, issued or outstanding with respect to, nor are
there any agreements, understandings or commitments relating to the right of
any Community First shareholder to own, to vote or to dispose of, the capital
stock of Community First. Holders of Community First Common Stock do not have
preemptive rights.
3.2 Organization, Standing and Authority
Community First is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia, with full corporate power
and authority to carry on its business as now conducted and to own, lease and
operate its properties and assets. Community First is not required to be
qualified to do business in any other state of the United States or foreign
jurisdiction. Community First is registered as a bank holding company under the
Bank Holding Company Act.
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3.3 Ownership of Subsidiaries
Section 3.3 of the Community First Disclosure Memorandum lists all of the
Community First 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
Community First (directly or indirectly), the percentage ownership interest so
owned by Community First and its business activities. The outstanding shares of
capital stock or other equity interests of the Community First Subsidiaries are
validly issued and outstanding, fully paid and nonassessable, and all such
shares are directly or indirectly owned by Community First 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 Community First Subsidiaries, and there are no
agreements, understandings or commitments relating to the right of Community
First to own, to vote or to dispose of said interests. None of the shares of
capital stock or other equity interests of the Community First Subsidiaries
have been issued in violation of the preemptive rights of any person. Section
3.3 of the Community First 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 Community
First Subsidiaries and stock or other securities held in a fiduciary capacity)
owned directly or indirectly by Community First.
3.4 Organization, Standing and Authority of the Subsidiaries
Each Community First Subsidiary which is a depository institution is a
Georgia chartered bank with its deposits insured by the FDIC. Each of the
Community First Subsidiaries is validly existing and in good standing under the
laws of its jurisdiction of organization. Each of the Community First
Subsidiaries has full power and authority to carry on its business as now
conducted, and is duly qualified to do business in each jurisdiction Disclosed
with respect to it. No Community First 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) Community First 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 Community First shareholders of this Agreement and
the Plan of Merger) to perform all of its obligations under this Agreement, the
Articles of Merger and the BB&T Option Agreement. The execution and delivery of
this Agreement, the Articles of Merger and the BB&T Option Agreement, and
consummation of the transactions contemplated hereby and thereby, have been
duly and validly authorized by all necessary corporate action, except, in the
case of this Agreement and the Plan of Merger, the approval of the Community
First shareholders pursuant to and to the extent required by applicable law.
This Agreement, the Plan of Merger and the BB&T Option Agreement constitute
legal, valid and binding obligations of Community First, and each is
enforceable against Community First 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 Articles of
Merger or the BB&T Option Agreement, nor consummation of the transactions
contemplated hereby or thereby, nor compliance by Community First 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 Community First
or any Community First 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 Community First or any Community First Subsidiary pursuant to, any
note, bond, mortgage, indenture, license, permit, contract, agreement or other
instrument or
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obligation, or (iii) subject to receipt of all required governmental approvals,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Community First or any Community First 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 Community First of the Merger and the other transactions
contemplated in this Agreement.
3.6 Securities Filings; Financial Statements; Statements True
(a) Community First has timely filed all Securities Documents required by
the Securities Laws to be filed since December 31, 1997. Community First has
Disclosed or made available to BB&T a true and complete copy of each Securities
Document filed by Community First with the Commission after December 31, 1997
and prior to the date hereof, which are all of the Securities Documents that
Community First 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 Community First fairly present or will
fairly present, as the case may be, the consolidated financial position of
Community First and the Community First 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) in conformity with GAAP applied on a consistent basis.
(c) No statement, certificate, instrument or other writing furnished or to
be furnished hereunder by Community First or any Community First 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 Community First and each of the Community First
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.
3.8 Adverse Change
Since December 31, 2000, Community First and the Community First
Subsidiaries have not incurred any liability, whether accrued, absolute or
contingent, except as disclosed in the most recent Community First 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 Community First or any of the Community First
Subsidiaries.
3.9 Absence of Undisclosed Liabilities
All liabilities (including contingent liabilities) of Community First and
the Community First Subsidiaries are disclosed in the most recent Financial
Statements of Community First or are normally recurring business obligations
incurred in the ordinary course of its business since the date of Community
First's most recent Financial Statements.
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3.10 Properties
(a) Community First and the Community First 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 Community First 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 Community First or any
Community First 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) Community First and the Community First Subsidiaries are and at all
times have been in compliance with all Environmental Laws. Neither Community
First nor any Community First Subsidiary has received any communication
alleging that Community First or the Community First 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 Community First nor
any Community First 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) Community First or any Community First Subsidiary, (ii) any person or
entity whose liability for any Environmental Claim Community First or any
Community First 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 Community First or any Community First Subsidiary, or any real or
personal property which Community First or any Community First 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 Community First or any
Community First Subsidiary holds a security interest securing a loan recorded
on the books of Community First or any Community First Subsidiary. Neither
Community First nor any Community First 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) Community First and the Community Subsidiaries are in compliance with
all recommendations contained in any environmental audits, analyses and surveys
received by Community First relating to all real and personal property owned or
leased by Community First or any Community First Subsidiary and all real and
personal property of which Community First or any Community First Subsidiary
has or is judged to have managed or supervised or participated in the
management of.
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim, or other claim or action or governmental investigation
that could result in the imposition of any liability arising under any
Environmental Laws, against Community First or any Community First Subsidiary
or against any person or entity whose liability for any Environmental Claim
Community First or any Community First 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 Community First and the Community First
Subsidiaries are valid and properly documented, were made in the ordinary
course of business, and the security therefor, if any, is valid
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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 Community First'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 Community First are adequate as
of their respective dates under the requirements of GAAP and applicable
regulatory requirements and guidelines.
3.13 Tax Matters
(a) Community First and the Community First 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 Community First nor any Community First Subsidiary
has or will have any liability for any such taxes in excess of the amounts so
paid or reserves or accruals so established. Community First and the Community
First 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 Community First and the Community First Subsidiaries are complete and
accurate. Neither Community First nor any Community First 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 Community First or any
Community First Subsidiary which have not been settled and paid. There are
currently no agreements in effect with respect to Community First or any
Community First 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 Community First nor any of the Community First 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 Community First or a Community First
subsidiary) or has any liability for taxes of any person (other than Community
First and the Community First Subsidiaries) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law) as a
transferee or successor or by contract or otherwise.
(e) Each of Community First and the Community First 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.
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(f) Neither Community First nor any of the Community First 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. Community First 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 Community First and of each Community
First's Subsidiary and each other person (in each case other than as an
employee) to whom Community First or any Community First 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) Community First has Disclosed an accurate and complete list of all
Plans, as defined below, contributed to, maintained or sponsored by
Community First or any Community First Subsidiary, to which Community First
or any Community First 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 Community First or any
Community First Subsidiary is a member. For purposes of this Agreement, the
term "Plan" shall mean a plan, arrangement, agreement or program described
in the foregoing provisions of this Section 3.14(b)(i) and which is: (A) a
profit-sharing, deferred compensation, bonus, stock option, stock purchase,
pension, retainer, consulting, retirement, severance, welfare or incentive
plan, agreement or arrangement, whether or not funded and whether or not
terminated, (B) an employment agreement, (C) a personnel policy or fringe
benefit plan, policy, program or arrangement providing for benefits or
perquisites to current or former employees, officers, directors or agents,
whether or not funded, and whether or not terminated, including, without
limitation, benefits relating to automobiles, clubs, vacation, child care,
parenting, sabbatical, sick leave, severance, medical, dental,
hospitalization, life insurance and other types of insurance, or (D) any
other employee benefit plan as defined in Section 3(3) of ERISA, whether or
not funded and whether or not terminated.
(ii) Neither Community First nor any Community First 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 Community First or any Community First
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, 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
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funding deficiency" as such term is defined in such Sections of ERISA and
the Code, whether or not waived, and each Plan has always fully met the
funding standards required under Title I of ERISA and Section 412 of the
Code. No liability to the Pension Benefit Guaranty Corporation ("PBGC")
(except for routine payment of premiums) has been or is expected to be
incurred with respect to any Plan that is subject to Title IV of ERISA, no
reportable event (as such term is defined in Section 4043 of ERISA) has
occurred with respect to any such Plan, and the PBGC has not commenced or
threatened the termination of any Plan. None of the assets of Community
First or any Community First Subsidiary is the subject of any lien arising
under Section 302(f) of ERISA or Section 412(n) of the Code, neither
Community First nor any Community First 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 Community First or any Community First
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 Community First or any Community First 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 required contributions for all periods ending prior to or
as of the Closing Date (including periods from the first day of the then-
current plan year to the Closing Date and including all quarterly
contributions required in accordance with Section 412(m) of the Code) shall
have been made. With respect to each other Plan, all required payments,
premiums, contributions, reimbursements or accruals for all periods ending
prior to or as of the Closing Date shall have been made. No tax qualified
Plan has any unfunded liabilities.
(viii) No prohibited transaction (which shall mean any transaction
prohibited by Section 406 of ERISA and not exempt under Section 408 of
ERISA or Section 4975 of the Code, whether by statutory, class or
individual exemption) has occurred with respect to any Plan which would
result in the imposition, directly or indirectly, of any excise tax,
penalty or other liability under Section 4975 of the Code or Section 409 or
502(i) of ERISA. Neither Community First nor, to the best knowledge of
Community First, any Community First Subsidiary, any trustee, administrator
or other fiduciary of any Plan (including without limitation the Community
First Banking Company Employee Stock Ownership Plan and the Employee Stock
Ownership Plan of Douglas Federal Bank (the "ESOPs")), 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 Community First or any Community First
Subsidiary to any liability for breach of fiduciary duty under ERISA or any
other applicable law.
(ix) With respect to each Plan, all reports and information required to
be filed with any government agency or distributed to Plan participants and
their beneficiaries have been duly and timely filed or distributed.
(x) Community First and each Community First Subsidiary has been and is
presently in compliance with all of the requirements of Section 4980B of
the Code.
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(xi) Neither Community First nor any Community First 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 Community First as of
December 31, 2000 or otherwise Disclosed.
(xii) Neither the consideration nor implementation of the transactions
contemplated under this Agreement will increase (A) Community First's or
any Community First 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, Community First 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 Community First and any Community
First Subsidiary may be amended or terminated at any time by action of
Community First's Board of Directors, or such Community First'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 Community First or a Community First Subsidiary
thereunder).
(xv) There are no loans (as described in Treasury Regulation Section
54.4975-7(b)(1)(ii)) outstanding payable by the ESOPs.
3.15 Certain Contracts
(a) Neither Community First nor any Community First 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
Community First or any Community First Subsidiary or the guarantee by Community
First or any Community First Subsidiary of any such obligation, which cannot be
terminated within less than 30 days after the Closing Date by Community First
or any Community First 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 Community First or any Community First 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 Community First of the nature contemplated by this
Agreement or the BB&T Option Agreement, or (iv) any agreement or plan, written
or oral, including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
BB&T Option Agreement or the value of any of the benefits of which will be
calculated on
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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 Community First nor any Community First Subsidiary is in default
under any agreement, commitment, arrangement, lease, insurance policy, or other
instrument, whether entered into in the ordinary course of business or
otherwise and whether written or oral, and there has not occurred any event
that, with the lapse of time or giving of notice or both, would constitute such
a default.
3.16 Legal Proceedings; Regulatory Approvals
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of Community First,
threatened against Community First or any Community First Subsidiary or against
any asset, interest, plan or right of Community First or any Community First
Subsidiary, or, to the best knowledge of Community First, 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
Community First, threatened against any present or former director or officer
of Community First or any Community First Subsidiary that would reasonably be
expected to give rise to a claim against Community First or any Community First
Subsidiary for indemnification. There are no actual or, to the best knowledge
of Community First, 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 Community First, no fact or
condition relating to Community First or any Community First Subsidiary exists
(including, without limitation, any claim by former shareholders of First
Deposit Bancshares, Inc., or noncompliance with the CRA) that would prevent
Community First or BB&T from obtaining all of the federal and state regulatory
approvals contemplated herein.
3.17 Compliance with Laws; Filings
Each of Community First and each Community First 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 Community First nor any
Community First 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 Community First nor any Community First 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, Community First and each of the Community First
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 Community First nor any Community First 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.
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3.19 Repurchase Agreements; Derivatives
(a) With respect to all agreements currently outstanding pursuant to which
Community First or any Community First Subsidiary has purchased securities
subject to an agreement to resell, Community First or the Community First
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 Community
First or any Community First Subsidiary has sold securities subject to an
agreement to repurchase, neither Community First nor the Community First
Subsidiary has pledged collateral in excess of the amount of the debt secured
thereby. Neither Community First nor any Community First Subsidiary has pledged
collateral in excess of the amount required under any interest rate swap or
other similar agreement currently outstanding.
(b) Neither Community First nor any Community First 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 Community First Subsidiaries that are depository
institutions are insured by the FDIC to the maximum extent permitted by federal
law, and the Community First 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
Community First has Disclosed all existing transactions, investments and
loans, including loan guarantees existing as of the date hereof, to which
Community First or any Community First Subsidiary is a party with any director,
executive officer or 5% shareholder of Community First 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 Community First 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 Community First 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 Community First, (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 Community First nor any Community First 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) 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).
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3.24 State Takeover Laws; Shareholder Action
Community First and each Community First 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. Under applicable law, the vote of a majority of the
shares of Community First Common Stock issued and outstanding is legally
sufficient to constitute adoption and approval of the Merger by the Community
First shareholders.
3.25 Labor Relations
Neither Community First nor any Community First 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 Community First or any Community First
Subsidiary party to any collective bargaining agreement. There is no strike or
other labor dispute involving Community First or any Community First
Subsidiary, pending or threatened, or to the best knowledge of Community First,
is there any activity involving any employees of Community First or any
Community First Subsidiary seeking to certify a collective bargaining unit or
engaging in any other organization activity.
3.26 Fairness Opinion
Community First has received from the Financial Advisor an opinion that, as
of the date hereof, the Merger Consideration is fair to the shareholders of
Community First from a financial point of view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BB&T
BB&T represents and warrants to Community First 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 the inaccuracy would permit
Community First to refuse to consummate the Merger under such applicable
standard):
4.1 Capital Structure of BB&T
The authorized capital stock of BB&T consists of (i) 5,000,000 shares of
preferred stock, par value $5.00 per share, of which 2,000,000 shares have been
designated as Series B Junior Participating Preferred Stock and the remainder
are undesignated, and none of which shares are issued and outstanding, and (ii)
1,000,000,000 shares of BB&T Common Stock of which 420,714,104 shares were
issued and outstanding as of June 30, 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 bank holding
company under the Bank Holding Company Act.
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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 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
Community First 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
Community First 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.
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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).
4.8 Share Ownership
As of the date of this Agreement, BB&T does not own (except in a fiduciary
capacity) any shares of Community First Common Stock.
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 Community
First from obtaining all of the federal and state regulatory approvals
contemplated herein.
ARTICLE V
COVENANTS
5.1 Community First Shareholder Meeting
Community First 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 Community
First agrees that it shall, at the time the Proxy Statement/Prospectus is
mailed to the shareholders of Community First, recommend that Community First's
shareholders vote for such approval; provided, that the Board of Directors of
Community First 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 Community First'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
Community First, and (ii) a written determination from the Financial Advisor
that the Merger Consideration is not fair or is inadequate to the Community
First 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. Community First 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 Community First shall use all reasonable efforts
to cause the Proxy Statement/Prospectus to be approved by the Commission for
mailing to the Community First 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. Community First shall cause the
Proxy Statement/Prospectus to be mailed to shareholders in accordance with all
applicable notice requirements under the Securities Laws, the GBCC and the
rules and regulations of the NYSE.
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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.
5.4 Additional Acts
(a) Community First 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 Community
First 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. Community First 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 Community First 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 Community First 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
Community First shall cooperate with BB&T concerning accounting and
financial matters necessary or appropriate to facilitate the Merger (taking
into account BB&T's policies, practices and procedures), including, without
limitation, issues arising in connection with record keeping, loan
classification, valuation adjustments, levels of loan loss reserves and other
accounting practices; provided, that any action taken pursuant to this Section
5.6 shall not be deemed to constitute or result in the breach of any
representation or warranty of Community First contained in this Agreement.
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5.7 Access to Information
Community First 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,
Community First 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 Community First and
the Community First 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 confidential information
previously furnished in connection with the transactions contemplated by this
Agreement.
5.8 Press Releases
BB&T and Community First 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 Community First
Except with the prior written consent of BB&T, between the date hereof and
the Effective Time, Community First shall not, and shall cause each of the
Community First 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 $.225 per share of Community First Common Stock payable on
record dates and in amounts consistent with past practices; provided that
any dividend declared or payable on the shares of Community First Common
Stock for the quarterly period during which the Effective Time occurs
shall, unless otherwise agreed upon in writing by BB&T and Community First,
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 Plan 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 Community First 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;
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(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;
(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, Community
First or any Community First Subsidiary or any business combination with
Community First or any Community First Subsidiary other than as
contemplated by this Agreement; or authorize any officer, director, agent
or affiliate of Community First or any Community First 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 subsection (k) shall not apply to furnishing information,
negotiations or discussions following an unsolicited offer if, as a result
of such offer, Community First 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 Community First's Board
of Directors to the Community First 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 Community First or a Community First Subsidiary
or guarantee by Community First or a Community First 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, Community First 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;
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(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.
5.10 [RESERVED]
5.11 Affiliates
Community First shall use its best efforts to cause all persons who are
Affiliates of Community First to deliver to BB&T promptly following this
Agreement a written agreement providing that such person will not dispose of
BB&T Common Stock received in the Merger except in compliance with the
Securities Act and the rules and regulations promulgated thereunder, and in any
event shall use its best efforts to cause such affiliates to deliver to BB&T
such written agreement prior to the Closing Date.
5.12 Section 401(k) Plan; Other Employee Benefits
(a) Effective on the Benefit Plan Determination Date with respect to the
401(k) plan of Community First, BB&T shall cause the 401(k) plan of Community
First either to be merged with the 401(k) plan maintained by BB&T and the BB&T
Subsidiaries or terminated, in each case subject to the receipt of all
applicable regulatory or governmental approvals. Each employee of Community
First at the Effective Time who becomes an employee immediately following the
Effective Time of BB&T or a BB&T Subsidiary ("Employer Entity") and is an
employee of an Employer Entity as of the Benefit Plan Determination Date shall
be eligible to participate in BB&T's 401(k) plan (subject to complying with
eligibility requirements and to BB&T's right to terminate such 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 Community First. For
purposes of administering BB&T's 401(k) plan, service with Community First and
the Community First Subsidiaries shall be deemed to be service with BB&T or the
BB&T Subsidiaries for participation and vesting purposes, but not for purposes
of benefit accrual.
(b) Each employee of Community First or a Community First Subsidiary at the
Effective Time who becomes an employee immediately following the Effective Time
of an Employer Entity (a "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 with respect to each such plan or program, conditional upon
the Transferred Employee's being employed by an Employer Entity as of such
Benefit Plan Determination Date. None of BB&T's group hospitalization, medical
or dental welfare benefit plans requires any eligibility waiting period, and
BB&T shall not amend any such group plan effective prior to the Benefit Plan
Determination Date to provide for an eligibility waiting period applicable to
any Transferred Employee which would exceed the eligibility waiting period
under the corresponding plan of Community First as in effect on the date
hereof. With respect to any welfare benefit plan or program of Community First
which the Employer Entity determines, in its sole discretion, provides benefits
of the same type or class as a
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corresponding plan or program maintained by the Employer Entity, the Employer
Entity shall continue such Community First plan or program in effect for the
benefit of the Transferred Employees 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 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 each
such plan or program, service with Community First shall be deemed to be
service with the 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.
(c) Each Transferred Employee who is terminated by an Employer Entity
subsequent to the Effective Time, excluding any employee who has an existing
employment or special termination agreement which is Disclosed, shall be
entitled to severance pay in accordance with the general severance policy
maintained by BB&T, if and to the extent that such employee is entitled to
severance pay under such policy. Such employee's service with Community First
or a Community First 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) BB&T agrees to honor all employment agreements, severance agreements and
deferred compensation agreements that Community First and the Community First
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 Agreement, all
other employee benefit plans of Community First shall be terminated or, in the
sole discretion of BB&T, merged into comparable plans of BB&T, effective as
BB&T shall determine in its sole discretion.
(e) Effective on the Benefit Plan Determination Date with respect to the
defined benefit pension plan of Community First (the "Community First 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 terminated,
in either case as determined by BB&T and subject to compliance with applicable
Community First Pension Plan documents and to the receipt of all applicable
regulatory or governmental approvals. The accrued benefits under the Community
First Pension Plan shall be the sole accrued benefits of Transferred Employees
with respect to service with Community First prior to the Merger. In applying
the BB&T pension plan following the Merger, service with Community First and
the Community First Subsidiaries shall be deemed to be service with BB&T for
participation and vesting purposes, but not for purposes of benefit accrual.
(f) Notwithstanding and without limiting the generality of Section 5.12(d),
as soon as practicable following the date hereof, but in any event prior to the
Effective Time, Community First shall take any and all action necessary to
terminate the ESOPs as of the Effective Time, to repay any outstanding
indebtedness of the ESOPs and to allocate shares of Community First Common
Stock held under the ESOPs to the participants therein in accordance with the
terms thereof. No purchases of shares of Community First Common Stock shall be
made under the ESOPs following the date hereof.
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 Community First for
acts or omissions occurring prior to the Effective Time. Such insurance shall
provide at least the same coverage and amounts as contained in Community
First's policy on the date hereof; provided, that in no event shall the annual
premium on such policy exceed 150% of the annual premium payments on
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Community First'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 Community First or any
Community First 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
By-Laws of Community First on the date hereof and is permitted under the NCBCA.
5.14 Forbearances of BB&T
Except with the prior written consent of Community First, which consent
shall not be arbitrarily or unreasonably withheld, between the date hereof and
the Effective Time, neither BB&T nor any BB&T Subsidiary shall take any action
which would or might be expected to (i) cause the business combination
contemplated hereby not to constitute a reorganization under Section 368 of the
Code; (ii) result in any inaccuracy of a representation or warranty herein
which would allow for termination of this Agreement; (iii) cause any of the
conditions precedent to the transactions contemplated by this Agreement to fail
to be satisfied; (iv) exercise the BB&T Option Agreement other than in
accordance with its terms, or dispose of the shares of Community First Common
Stock issuable upon exercise of the option rights conferred thereby other than
as permitted by the terms thereof; or (v) fail to comply in any material
respect with any laws, regulations, ordinances or governmental actions
applicable to it and to the conduct of its business.
5.15 Reports
Each of Community First and BB&T shall file (and shall cause the Community
First 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 Community First, 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 Community First 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 Boards
Following the Effective Time, BB&T shall offer to Gary D. Dorminey a seat on
the BB&T Advisory Board for the State of Georgia, and shall form an Advisory
Board for the Carrollton, Georgia area and shall offer to the members of the
Board of Directors of Community First a seat on such Board. For two years
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following the Effective Time, the Advisory Board members appointed pursuant to
this Section 5.17 and who continue to serve shall receive, as compensation for
service on the Advisory Board, 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 the
corresponding Community First Subsidiary in effect on June 1, 2001. Following
such two-year period, Advisory Board members, 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 or any Advisory
Board shall be conditional upon execution by such person of an agreement
providing that such member will not engage in activities competitive with BB&T
for two years following the Effective Time.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent--BB&T and Community First
The respective obligations of BB&T and Community First 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 Community First 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, Community First or any
of the Community First Subsidiaries shall be subject to any order, decree
or injunction of a court or agency of competent jurisdiction which enjoins
or prohibits consummation of the transactions contemplated by this
Agreement;
(e) Community First and BB&T shall have received an opinion of BB&T's
legal counsel, in form and substance satisfactory to Community First 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 Community First will not recognize any gain or loss to the
extent that such shareholders exchange shares of Community First Common
Stock for shares of BB&T Common Stock; and
6.2 Conditions Precedent--Community First
The obligations of Community First 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
Community First 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
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otherwise contemplated by this Agreement or consented to in writing by
Community First. 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 minimus in amount). There shall not
exist inaccuracies in the representations and warranties of BB&T set forth
in this Agreement (including the representations and warranties set forth
in Sections 4.1, 4.2, 4.3(a), 4.3(b)(i) and 4.4) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a
Material Adverse Effect on BB&T.
(b) BB&T shall have performed in all material respects all obligations
and complied in all material respects with all covenants required by this
Agreement.
(c) BB&T shall have delivered to Community First 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) Community First shall have received opinions of counsel to BB&T in
the form reasonably acceptable to Community First's legal counsel.
(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 Community First 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
Community First set forth in Sections 3.1, 3.2 (except the last sentence
thereof), 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 in amount). There shall not exist inaccuracies in the
representations and warranties of Community First set forth in this
Agreement (including the representations and warranties set forth in the
Sections designated in the preceding sentence) such that the effect of such
inaccuracies individually or in the aggregate has, or is reasonably likely
to have, a Material Adverse Effect on Community First and the Community
First Subsidiaries taken as a whole.
(b) No regulatory approval shall have imposed any condition or
requirement which, in the reasonable opinion of the Board of Directors of
BB&T, would so materially adversely affect the business or economic
benefits to BB&T of the transactions contemplated by this Agreement as to
render consummation of such transactions inadvisable or unduly burdensome.
(c) Community First shall have performed in all material respects all
obligations and complied in all material respects with all covenants
required by this Agreement.
(d) Community First 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 Community First, 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 Community
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First 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 Community First 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.
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 Community First 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 Community First do not approve the Agreement and the Plan of Merger.
(f) At any time following March 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 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. The BB&T Option Agreement shall be governed by its own terms.
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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 and 5.17); provided that no such representations,
warranties or covenants shall be deemed to be terminated or extinguished so as
to deprive BB&T or Community First (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 Community First, the
aforesaid representations, warranties and covenants being material inducements
to consummation by BB&T and Community First 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 Community First 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 Community First 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 Community First, 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 Community First.
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 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 Community First
to enforce rights in Sections 5.13 and 5.17.
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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 Community First:
Gary D. Dorminey
Community First Banking Company
110 Dixie Street
Carrollton, Georgia 30117-3307
Telephone: 770-838-7213
Fax: 770-838-7352
With a required copy to:
Walter G. Moeling
Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street, N.E.
16th 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.
8.5 Specific Performance
Community First acknowledges that the Community First Common Stock and the
Community First business and assets are unique, and that if Community First
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
A-32
remedy at law, BB&T shall be entitled, in addition to its other remedies at
law, to specific performance of this Agreement if Community First 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
/s/ John A. Allison, IV
By: _________________________________
John A. Allison, IV
Chairman and Chief Executive
Officer
Community First Banking Company
/s/ Gary D. Dorminey
By: _________________________________
Gary D. Dorminey
President / CEO
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ANNEX A
ARTICLES OF MERGER
OF
COMMUNITY FIRST BANKING COMPANY
INTO
BB&T CORPORATION
The undersigned corporations, pursuant to Section 14-2-1105 of the Georgia
Business Corporation Code (the "GBCC") and Section 55-11-05 of the North
Carolina Business Corporation Act (the "NCBCA"), hereby execute the following
Articles of Merger.
ONE
The merger of Community First Banking Company, a Georgia corporation
("Community First"), 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 to the shareholders of Community First by
its Board of Directors in accordance with the provisions of Section 14-2-1103
of the GBCC and Section 55-11-03 of the NCBCA and was duly approved in the
manner prescribed by law by the shareholders of Community First on the day of
, 2001. The shareholders of BB&T were not required to approve the Plan of
Merger.
THREE
BB&T undertakes to request publication of a notice of filing of these
Articles of Merger and to make payment therefor as required by Section 14-2-
1105.1(b) of the GBCC.
FOUR
These Articles of Merger shall become effective at 11:59 p.m. on ,
2001.
[Remainder of Page Intentionally Left Blank]
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The undersigned, each of BB&T and Community First, declares that the facts
herein stated are true as of , 2001.
BB&T Corporation
By: _________________________________
Name: __________________________
Title: _________________________
Community First Banking Company
By: _________________________________
Name: _______________________________
Title: ______________________________
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EXHIBIT I
PLAN OF MERGER
OF
COMMUNITY FIRST BANKING COMPANY
INTO
BB&T CORPORATION
Section 1. Corporations Proposing to Merge and Surviving
Corporation. Community First Banking Company, a Georgia corporation ("Community
First"), 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 July 9, 2001 (the "Agreement"), by and between Community First 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 Secretary of State of
Georgia and the Secretary of State of North Carolina. BB&T shall continue as
the surviving corporation (the "Surviving Corporation") in the Merger and the
separate corporate existence of Community First shall cease.
Section 2. Effects of the Merger. The Merger shall have the effects set
forth in Section 14-2-1106 of the Georgia Business Corporation Code (the
"GBCC") and 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 the Bylaws of BB&T as in effect immediately prior to the
Effective Time shall become 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.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Community First or the holders of the voting common
stock, par value $.01 per share, of Community First ("Community First
Common Stock"), each share of Community First 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 Community First 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, par value $5.00 per share
("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 Community First Common
Stock shall be deemed upon the Effective Time for all purposes to represent
only the right to receive the Merger Consideration and any declared and
unpaid dividends with respect to Community First Common Stock. No interest
will be paid or accrued on the Merger Consideration (or upon any dividend
or other distribution) upon the surrender of the certificate or
certificates representing shares of Community First Common Stock. With
respect to any certificate for Community First 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. Upon and after the Effective Time, Community First's transfer
books shall be closed and no transfer of the shares of Community First
Common Stock outstanding immediately prior to the Effective Time shall be
made.
(d) Promptly after the Effective Time, BB&T shall cause to be delivered
or mailed to each Community First 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
A-37
Community First Common Stock. Upon proper surrender of such certificates or
other evidence of ownership meeting the requirements of 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 and any declared and
unpaid dividends with respect to such Community First Common Stock.
(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 Community First in respect of shares of Community
First Common Stock in accordance with the terms of the Agreement and which
remain unpaid at the Effective Time, subject to compliance by Community
First with Section 5.9(b) of the Agreement. To the extent permitted by law,
former shareholders of record of Community First 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
Community First Common Stock are converted, regardless of whether such
holders have exchanged their certificates representing Community First
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 Community First 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
Community First Common Stock represented by such certificate.
Section 5. Merger Consideration.
(a) As used herein, the term "Merger Consideration" shall mean the
portion of a share of BB&T Common Stock (to the nearest ten thousandth of a
share) to be exchanged for each share of Community First 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 a Community First shareholder as
provided in Section 5(b). The portion of a share of BB&T Common Stock to be
issued for each issued and outstanding share of Community First Common
Stock (the "Exchange Ratio") shall be equal to 0.9800.
(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 Effective Time as reported on NYSEnet.com.
Section 6. 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 Community First 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 Community First Common Stock upon consummation of the Merger.
A-38
APPENDIX B
Fairness Opinion of Trident
Securities, a division of
McDonald Investments, Inc.
October 29, 2001
Board of Directors
Community First Banking Company
110 Dixie Street
Carrollton, Georgia 30117
Members of the Board:
You have requested our opinion with respect to the fairness, from a
financial point of view, as of the date hereof, to the holders of the common
stock, par value of $0.01 per share ("Common Stock"), of Community First
Banking Company ("Community First"), of the Exchange Ratio, as set forth in the
Agreement and Plan of Reorganization dated as of July 9, 2001 (the
"Agreement"), between Community First and BB&T Corporation ("BB&T").
The Agreement provides for the merger (the "Merger") of Community First with
and into BB&T. Pursuant to the Agreement, at the Effective Time (as defined in
the Agreement) each outstanding share of Community First Common Stock will be
converted into the right to receive shares of common stock, par value of $5.00
per share, of BB&T ("BB&T Common Stock"), at a rate of 0.98 shares of BB&T
Common Stock for each share of Common Stock (the "Exchange Ratio"). The terms
and conditions of the Merger are more fully set forth in the Agreement.
Trident Securities, a division of McDonald Investments Inc., as part of its
investment banking business, is customarily engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes.
We have acted as Community First's financial advisor in connection with, and
have participated in certain negotiations leading to, the Agreement. In
connection with rendering our opinion set forth herein, we have among other
things:
(i) Reviewed Community First's Annual Reports to Shareholders and Annual
Reports on Form 10-K for each of the years ended December 31, 2000,
December 31, 1999 and December 31, 1998, including the audited financial
statements contained therein;
(ii) Reviewed BB&T's Annual Reports to Shareholders and Annual Reports
on Form 10-K for each of the years ended December 31, 2000, December 31,
1999 and December 31, 1998, including the audited financial statements
contained therein;
(iii) Reviewed certain other information, primarily financial in nature,
relating to the respective businesses, earnings, assets and prospects of
Community First and BB&T provided to us or publicly available;
(iv) Participated in meetings and telephone conferences with members of
senior management of Community First and BB&T concerning the financial
condition, business, assets, financial forecasts and prospects of the
respective companies, as well as other matters we believed relevant to our
inquiry;
(v) Reviewed certain stock market information for Community First Common
Stock and BB&T Common Stock, and compared it with similar information for
certain companies, the securities of which are publicly traded;
(vi) Compared the results of operations and financial condition of
Community First and BB&T with that of certain companies which we deemed to
be relevant for purposes of this opinion;
(vii) Reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions which we deemed to be relevant for
purposes of this opinion;
(viii) Reviewed the Agreement and certain related documents; and
B-1
(ix) Performed such other reviews and analyses as we have deemed
appropriate.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information reviewed by us and have relied upon the accuracy and completeness
of the representations, warranties and covenants of Community First and BB&T
contained in the Agreement. We have not been engaged to undertake, and have not
assumed any responsibility for, nor have we conducted, an independent
investigation or verification of such matters. We have not been engaged to and
we have not conducted a physical inspection of any of the assets, properties or
facilities of either Community First or BB&T, nor have we made or obtained or
been furnished with any independent valuation or appraisal of any such assets,
properties or facilities or any of the liabilities of either Community First or
BB&T. With respect to financial forecasts used in our analysis, we have assumed
that such forecasts reflect the best currently available estimates and
judgements of the management of Community First and BB&T, as to the future
performance of Community First, BB&T, and Community First and BB&T combined, as
the case may be. We have not been engaged to and we have not assumed any
responsibility for, nor have we conducted any independent investigation or
verification of such matters, and we express no view as to such financial
forecasts or the assumptions on which they are based. We have also assumed that
all of the conditions to the consummation of the Merger, as set forth in the
Agreement, including the tax-free treatment of the Merger to the holders of
Community First Common Stock, would be satisfied and that the Merger would be
consummated on a timely basis in the manner contemplated by the Agreement.
We will receive a fee for our services as financial advisor to Community
First and for rendering this opinion, a substantial portion of which is
contingent upon closing of the Merger. In the past, we have also provided
certain other investment banking services for Community First and have received
compensation for such services.
In the ordinary course of business, we may actively trade securities of
Community First and BB&T for our own account and for the accounts of customers
and, accordingly, we may at any time hold a long or short position in such
securities.
This opinion is based on economic and market conditions and other
circumstances existing on, and information made available as of, the date
hereof. In addition, our opinion is, in any event, limited to the fairness, as
of the date hereof, from a financial point of view, of the Exchange Ratio to be
received by the holders of Community First Common Stock, and does not address
the underlying business decision of Community First's Board of Directors to
effect the Merger, does not compare or discuss the relative merits of any other
terms of the Merger, and does not constitute a recommendation to any Community
First shareholder as to how such shareholder should vote with respect to the
Merger. This opinion does not represent an opinion as to what the value of
Community First Common Stock or BB&T Common Stock may be at the Effective Time
of the Merger or as to the prospects of Community First's business or BB&T's
business.
This opinion is directed to the Board of Directors of Community First and
may not be reproduced, summarized, described or referred to or given to any
other person without our prior consent. Notwithstanding the foregoing, this
opinion may be included in the proxy statement/prospectus to be mailed to the
holders of Community First Common Stock in connection with the Merger, provided
that this opinion will be reproduced in such proxy statement/prospectus in
full, and any description of or reference to us or our actions, or any summary
of the opinion in such proxy statement/prospectus, will be in form reasonably
acceptable to us and our counsel.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of Community First
Common Stock from a financial point of view.
Very truly yours,
/s/ Trident Securities
Trident Securities
A Division of McDonald Investments Inc.
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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 defense of a proceeding to which he is a party because of his
status as such, unless limited by the articles of incorporation, and (ii) a
corporation may indemnify a director or officer if he 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, the corporation may not
indemnify him. 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 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)).
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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 July 9, 2001
between BB&T Corporation and Community First Banking Company
(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)
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 Opinion of Womble Carlyle Sandridge & Rice, PLLC
8 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 Porter Keadle Moore, LLP
23(e) Consent of Trident Securities, a division of McDonald Investments,
Inc.
24 Power of Attorney*
99(a) Form of Community First Banking Company Proxy Card
99(b) Form of Voting Instructions for Participants in Employee Stock
Ownership Plan of Douglas Federal Bank
99(c) Form of Voting Instructions for Participants in Community First
Banking Company Employee Stock Ownership Plan
99(d) Option Agreement dated as of July 9, 2001 between BB&T Corporation
and Community First Banking Company*
--------
*Previously filed.
(b) Financial statement schedules: Not applicable.
(c) Reports, opinion or appraisals: The opinion of Trident Securities, a
division of McDonald Investments, Inc. is included as Appendix B to the proxy
statement/prospectus.
II-2
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
II-3
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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to 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 October
29, 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
Amendment No. 1 to Registration Statement on Form S-4 has been signed by the
following persons in the capacities indicated on October 29, 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* /s/ Ronald E. Deal*
_____________________________________ _____________________________________
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, M.D.*
_____________________________________ _____________________________________
Name: Jane P. Helm Name: Richard Janeway, M.D.
Title: Director Title: Director
/s/ J. Ernest Lathem, M.D.* /s/ James H. Maynard*
_____________________________________ _____________________________________
Name: J. Ernest Lathem, M.D. Name: James H. Maynard
Title: Director Title: Director
/s/ Joseph A. McAleer, Jr.* /s/ Albert O. McCauley*
_____________________________________ _____________________________________
Name: Joseph A. McAleer, Jr. Name: Albert O. McCauley
Title: Director Title: Director
II-5
/s/ J. Holmes Morrison*
_____________________________________ _____________________________________
Name: Holmes Morrison Name: Richard L. Player, Jr.
Title: Director Title: Director
_____________________________________ /s/ Nido R. Qubein*
Name: C. Edward Pleasants, Jr. _____________________________________
Title: Director Name: Nido R. Qubein
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
II-6