AGREEMENT AND PLAN OF REORGANIZATION

Exhibit 2.1

 

AGREEMENT AND PLAN OF REORGANIZATION

 

BETWEEN

REPUBLIC BANCSHARES, INC.

and

BB&T CORPORATION

TABLE OF CONTENTS

 

 

 

ii

 

ANNEXES

 

 

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AGREEMENT AND PLAN OF REORGANIZATION

 

THIS AGREEMENT AND PLAN OF REORGANIZATION (“Agreement”), dated as of December 1, 2003 is among REPUBLIC BANCSHARES, INC. (“Republic”), a corporation chartered under the laws of the State of Florida having its principal office at St. Petersburg, Florida, 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 to effect a strategic business combination by merging Republic 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. For United States federal income tax purposes, the parties intend that the Merger will qualify as a reorganization under the provisions of Section 368(a) of the Code (as defined below).

 

The Boards of Directors of BB&T and Republic have each determined that the Merger will further their respective business strategies and goals and is in the best interest of their respective shareholders, and each has consequently approved the Merger, this Agreement and the Plan of Merger.

 

NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1 Definitions

 

When used herein, the capitalized terms set forth below shall have the following meanings:

 

“Affiliate” means, with respect to any person, any other person, who directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with such person and, without limiting the generality of the foregoing, includes any executive officer or director of such person and any Affiliate of such executive officer or director.

 

“Articles of Merger” shall mean the Articles of Merger required to be filed with the office of the Secretary of State of North Carolina, as provided in Section 55-11-05 of the NCBCA, and with the office of the Florida Department of State, as provided in Section 607.1105 of the FBCA.

“Bank Holding Company Act” shall mean the Federal Bank Holding Company Act of 1956, as amended, and rules and regulations promulgated thereunder.

 

“Bank Secrecy Act” shall mean the Federal Bank Secrecy Act of 1970, as amended, and rules and regulations promulgated thereunder.

 

“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 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 each employee pension or welfare benefit plan or program maintained by Republic at the Effective Time, the date determined by BB&T with respect to such plan or program which shall be not later than January 1 following the close of the calendar year in which the last of the Republic Subsidiaries which is a bank or other savings institution is merged into BB&T or one of the BB&T Subsidiaries.

 

“Business Day” shall mean all days other than Saturdays, Sundays and Federal Reserve holidays.

 

“CERCLA” shall mean the Comprehensive Environmental Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq .

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Commission” shall mean the Securities and Exchange Commission.

 

“CRA” shall mean the Community Reinvestment Act of 1977, as amended, and rules and regulations promulgated thereunder.

 

“Disclosed” shall mean disclosed in the Republic 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.

 

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“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, and rules and regulations promulgated thereunder.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“FBCA” shall mean the Florida Business Corporation Act, as amended.

 

“FDIC” shall mean the Federal Deposit Insurance Corporation.

 

“Federal Reserve Board” shall mean the Board of Governors of the Federal Reserve System.

 

“Financial Advisor” shall mean Keefe, Bruyette & Woods, 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, 2002, 2001, and 2000, 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, 2002, 2001, and 2000, 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, 2002, and (b) with respect to Republic, (i) the consolidated statements of financial condition (including related notes and schedules, if any) of Republic as of December 31, 2002, 2001 and 2000, 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, 2002, 2001 and 2000 as filed by Republic in Securities Documents and (ii) the consolidated statements of financial condition of Republic (including related notes and schedules, if any) and the related consolidated statements of

 

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income and retained earnings, and cash flows (including related notes and schedules, if any) included in Securities Documents filed by Republic with respect to periods ended subsequent to December 31, 2002.

 

“GAAP” shall mean generally accepted accounting principles applicable to financial institutions and their holding companies, as in effect at the relevant date.

 

“Hazardous Substances” means any substance or material (i) identified in CERCLA; (ii) determined to be toxic, a pollutant or a contaminant under any applicable federal, state or local statutes, law, ordinance, rule or regulation, including but not limited to petroleum products; (iii) asbestos; (iv) radon; (v) poly-chlorinated biphiphenyls and (vi) such other materials, substances or waste which are otherwise dangerous, hazardous, harmful to human health or the environment.

 

“IRS” shall mean the Internal Revenue Service.

 

“Material Adverse Effect” on BB&T or Republic shall mean an event, circumstance, change, effect, occurrence or state of facts which, individually or together with any other event, change, effect, occurrence or state of facts, (i) has a material adverse effect on the financial condition, results of operations, business or stockholder’s equity of BB&T and the BB&T Subsidiaries taken as a whole, or Republic and the Republic Subsidiaries taken as a whole, or (ii) materially impairs the ability of BB&T or Republic 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) any event, change, effect, occurrence or state of facts to the extent relating to or arising from the United States or local economy or financial or securities markets in general, (b) any event, change, effect, occurrence or state of facts to the extent relating to or arising from announcement of this Agreement or the actions and omissions of BB&T or Republic taken with the prior written consent of the other in contemplation of the transactions contemplated hereby and the effects of compliance with this Agreement on 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.

 

“NASDAQ” shall mean the National Association of Securities Dealers Automated Quotations.

 

“NCBCA” shall mean the North Carolina Business Corporation Act, as amended.

 

“NYSE” shall mean the New York Stock Exchange, Inc.

 

“Person” shall mean any individual, corporation, partnership, limited liability company, joint venture, trust, association, unincorporated organization, agency, other entity or group of entities, or governmental body.

 

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“Proxy Statement/Prospectus” shall mean the proxy statement and prospectus, together with any supplements thereto, to be sent to shareholders of Republic to solicit their votes in connection with a proposal to approve this Agreement and the Plan of Merger.

 

“Registration Statement” shall mean the registration statement of BB&T as declared effective by the Commission under the Securities Act, including any post-effective amendments or supplements thereto as filed with the Commission under the Securities Act, with respect to the BB&T Common Stock to be issued in connection with the transactions contemplated by this Agreement.

 

“Republic Common Stock” shall mean the shares of voting common stock, par value $2.00 per share, of Republic.

 

“Republic Disclosure Memorandum” shall mean the written information in one or more documents, each of which is entitled “Republic 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 Republic to BB&T. Information disclosed with respect to one Section shall not be deemed to be disclosed for purposes of any other Section not specifically referenced.

 

“Republic Subsidiaries” shall mean the subsidiaries of Republic set forth in the Republic Disclosure Memorandum, and any and all other Subsidiaries of Republic as of the date hereof.

 

“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 Agreements 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.

 

“SAR” shall mean any right to receive a cash payment in respect of the value of shares of Republic Common Stock granted under the Stock Option Plans and outstanding and unexercised.

 

“Sarbanes-Oxley Act” shall mean the Sarbanes-Oxley Act of 2002, as it may be amended, and the rules and regulations promulgated thereunder.

 

“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.

 

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“Securities Laws” shall mean the Securities Act; the Exchange Act; the Sarbanes-Oxley Act; the Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940, as amended; the Trust Indenture Act of 1939 as amended; and in each case the rules and regulations of the Commission promulgated thereunder.

 

“Stock Option” shall mean any option to acquire shares of Republic Common Stock granted under the Stock Option Plans and outstanding and unexercised.

 

“Stock Option Plans” shall mean Republic’s 1995 Stock Option Plan, as amended, and the 1997 Stock Appreciation Rights 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 only by the beneficial owner).

 

“Superior Offer” shall mean a proposal or offer to acquire or purchase all or a substantial portion of the assets of or a substantial equity interest in, or to effect any recapitalization, liquidation or dissolution involving or a business combination or other similar transaction with, Republic or any Republic Subsidiary (including, without limitation, a tender offer or exchange offer to purchase Republic Common Stock) other than as contemplated by this Agreement: (i) that did not arise from or involve a breach or violation by Republic of Section 5.9(k) or any other provision of this Agreement; (ii) that the Republic Board of Directors determines in its good faith judgment, based, among other things, on advice of the Financial Advisor, to be more favorable to the Republic shareholders than the Merger; and (iii) the financing for the implementation of which, to the extent required, is then committed or in the good faith reasonable judgment of the Republic Board of Directors, based, among other things, on advice of the Financial Advisor, is capable of being obtained by the party making the proposal or offer.

 

“TILA” shall mean the Truth in Lending Act, as amended, and rules and regulations promulgated thereunder.

 

“USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended, and rules and regulations promulgated thereunder.

 

1.2 Terms Defined Elsewhere

 

The capitalized terms set forth below are defined in the following sections:

 

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ARTICLE II

THE MERGER

 

2.1 Merger

 

BB&T and Republic are constituent corporations (the “Constituent Corporations”) to the Merger as contemplated by the NCBCA and the FBCA. At the Effective Time:

 

(a) Republic shall be merged into BB&T in accordance with the applicable provisions of the NCBCA and the FBCA, with BB&T being the surviving corporate entity (hereinafter sometimes referred to as the “Surviving Corporation”).

 

(b) The separate existence of Republic shall cease and the Merger shall in all respects have the effects provided in Section 2.5.

 

(c) The Articles of Incorporation of BB&T at the Effective Time shall be the Articles of Incorporation of the Surviving Corporation.

 

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(d) The Bylaws of BB&T at the Effective Time shall be the Bylaws of the Surviving Corporation.

 

2.2 Filing; Plan of Merger

 

The Merger shall not become effective unless this Agreement and the Plan of Merger are duly approved by shareholders holding at least a majority of the shares of Republic 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 Florida Department of State, as provided in Section 55-11-05 of the NCBCA and Section 607.1105 of the FBCA, respectively. The Plan of Merger is incorporated herein by reference, and adoption of this Agreement by the Boards of Directors of the Constituent Corporations and approval by the shareholders of Republic 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 a date selected by BB&T, which date shall be no later than: (i) the fifth Business Day of the calendar month immediately following the calendar month in which the shareholders approve this Agreement and the Plan of Merger; (ii) if 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) are not satisfied on the date set forth in 2.4(i), the date of Closing shall be no less than five (5) Business Days after the conditions to Closing set forth in Article VI are satisfied (other than the delivery of certificates, opinions and other instruments and documents to be delivered at the Closing); or (iii) 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 Republic 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

 

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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” per share of Republic Common Stock shall mean the consideration described in (i) or (ii) below, as elected as provided in Section 2.8 by each Republic shareholder, and subject to adjustment as provided in paragraph (b) of this Section 2.7:

 

(i) .81 (the “Exchange Ratio”) shares of BB&T Common Stock (to the nearest ten thousandth of a share) to be exchanged for each share of Republic Common Stock subject to this election and owned by the shareholder as of the Effective Time (the “Stock Election”); or

 

(ii) $31.79 in cash for each share of Republic Common Stock subject to this election and owned by the shareholder as of the Effective Time (the “Cash Election”).

 

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Each Republic shareholder shall be permitted to make any combination of the Stock Election and the Cash Election in whole share increments with respect to the shareholder’s shares of Republic Common Stock.

 

(b) Notwithstanding paragraph (a) preceding, in no event shall the amount of cash payable pursuant to the aggregate of the Cash Elections and pursuant to Section 2.7(c) (the “Aggregate Cash Amount”) exceed the lesser of (i) 55% of the value of the aggregate Merger Consideration (including cash payable pursuant to Section 2.7(c)), determined by valuing shares of BB&T Common Stock at the Closing Value, or (ii) the product of $12.72 multiplied by the number of shares of Republic Common Stock outstanding at the close of business on the Closing Date (the lesser of such amounts being referred to herein as the “Maximum Cash Amount”). In the event that the Aggregate Cash Amount shall exceed the Maximum Cash Amount, the Merger Consideration distributable to each Republic shareholder shall be adjusted by taking the following steps: (1) determine the amount by which the Aggregate Cash Amount exceeds the Maximum Cash Amount; (2) allocate the excess amount in (1) among all Republic shareholders making the Cash Election in the proportion that the amount of cash payable to each Republic shareholder pursuant to the election under Section 2.8 (without giving effect to any reduction pursuant to this Section 2.7(b)) bears to the Aggregate Cash Amount (the amount allocated to each shareholder is referred to herein as the “Shareholder Cash Excess”); (3) determine the number of whole shares of BB&T Common Stock having a value (valued at $39.25 per share) equal to the Shareholder Cash Excess (if the Shareholder Cash Excess is not evenly divisible by $39.25, the number of shares determined by dividing the Shareholder Cash Excess by $39.25 shall be rounded up to the next whole share), and (4) add the number of shares of BB&T Common Stock in (3) to the shares, if any, of BB&T Common Stock that the Republic shareholder will receive pursuant to the Stock Election of such Republic shareholder and reduce the amount of cash subject to the Cash Election of the shareholder by the value (at $39.25 per share) of such number of shares of BB&T Common Stock in (3).

 

(c) Cash (without interest) will be payable in exchange for any fractional share of BB&T Common Stock which would otherwise be distributable to a Republic shareholder, as determined following application of (a) and (b) of this Section 2.7. 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 of the high and low price per share of BB&T Common Stock on the NYSE as reported on NYSEnet.com on the date of the Effective Time (as of 4:00 p.m. eastern time).

 

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 Republic or the holders of record of Republic Common Stock, each share of Republic 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 Republic Common Stock (as provided in subsection (d) below), the Merger Consideration.

 

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(b) Each share of BB&T Common Stock issued and outstanding immediately prior to the Effective Time shall continue to be issued and outstanding.

 

(c) Until surrendered, each outstanding certificate which prior to the Effective Time represented one or more shares of Republic 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 Republic Common Stock. No interest will be paid or accrued on the Merger Consideration upon the surrender of the certificate or certificates representing shares of Republic Common Stock. With respect to any certificate for Republic 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, Republic’s transfer books shall be closed and no transfer of the shares of Republic 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 Republic 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 Republic Common Stock. Upon proper surrender of such certificates or other evidence of ownership meeting the requirements of Section 2.8(c), together with such letter of transmittal duly executed and completed in accordance with the instructions thereto, and such other documents as may be reasonably requested, BB&T shall promptly cause the transfer to the persons entitled thereto of the Merger Consideration in the form elected or deemed elected.

 

(e) The Surviving Corporation shall pay any dividends or other distributions with a record date prior to the Effective Time that have been declared or made by Republic in respect of shares of Republic Common Stock in accordance with the terms of this Agreement and that remain unpaid at the Effective Time, subject to compliance by Republic with Section 5.9(b). 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 Republic Common Stock until such holder surrenders such certificate for exchange as provided in this Section 2.8. Upon surrender of such certificate, both the Merger Consideration (without interest) and any undelivered dividends payable hereunder (without interest) shall be delivered and paid with respect to the shares of Republic Common Stock represented by such certificate.

 

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(f) Subject to the election and allocation procedures set forth in Sections 2.7 and 2.8, each record holder of Republic Common Stock as of the Election Deadline will be entitled to elect the form of Merger Consideration in Section 2.7(a)(i) and (ii). All such elections shall be made on a form provided by BB&T for that purpose (“Form of Election”). BB&T and Republic will mail the Form of Election on or shortly after the date the Proxy Statement/Prospectus is mailed to the shareholders of Republic.

 

(g) Any election for the purposes of Sections 2.7 and 2.8 will be effective only if BB&T has received a properly completed and signed Form of Election by the Election Deadline. The “Election Deadline” means 5:00 p.m., Winston-Salem, North Carolina Time, on the date of Republic’s shareholders’ meeting to vote on this Agreement and the Plan of Merger. A Form of Election may be revoked or changed by the person submitting such Form of Election or any other person to whom the subject shares are subsequently transferred by written notice by such person to BB&T at or prior to the Election Deadline. All Forms of Election will be deemed to be revoked if this Agreement has been terminated in accordance with its terms.

 

(h) Any holder of Republic Common Stock as of the Effective Time who does not submit a properly completed and signed Form of Election that is received by BB&T at or prior to the Election Deadline, will be deemed to have made the Stock Election in Section 2.7(a)(i) for all purposes herein. BB&T will have the discretion to disregard immaterial defects in Forms of Election. If BB&T or its designee reasonably determines that any purported Stock Election or Cash Election was not properly made, such purported election will be deemed to be of no force and effect and the holder making such election will be deemed to have made the Stock Election in Section 2.7(a)(i) for all purposes herein.

 

2.9 Conversion of Stock Options and Stock Appreciation Rights

 

(a) At the Effective Time, each Stock Option and SAR 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 and SAR in accordance with the terms of the Stock Option Plans, except that from and after the Effective Time (i) BB&T and its Compensation Committee shall be substituted for Republic and the Committee of Republic’s Board of Directors with respect to administering the Stock Option Plans, (ii) each Stock Option and SAR assumed by BB&T may be exercised solely for shares of BB&T Common Stock, or in the case of an SAR, a cash payment in respect of the value of shares of BB&T Common Stock, (iii) the number of shares of BB&T Common Stock subject to each such Stock Option and with respect to each SAR shall be the number of whole shares of BB&T Common Stock (omitting any fractional share) determined by multiplying the number of shares of Republic Common Stock subject to such Stock

 

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Option or SAR immediately prior to the Effective Time by the Exchange Ratio, and (iv) the per share exercise price under each such Stock Option and SAR shall be adjusted by dividing the per share exercise price under each such Stock Option and SAR 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 or stock appreciation rights 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 or SARs, 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 or SARs and shall be tax neutral to the option holder; and (C) the substituted options or stock appreciation rights shall continue in effect on the same terms and conditions as provided in the Stock Option or SAR agreements and the Stock Option Plans governing each Stock Option and SAR. BB&T shall cause each grant of a converted or substitute option or stock appreciation right to any individual who subsequent to the Merger will be a director or officer of BB&T as construed under Commission Rule 16b-3 (a “Continuing Insider”) to be duly approved in accordance with the provisions of Rule 16b-3 such that the receipt thereof shall be exempt from Section 16(b) of the Exchange Act (BB&T and Republic agreeing that, in order to most effectively compensate and retain Continuing Insiders in connection with the Merger, both prior to and after the Effective Time, it is desirable that Continuing Insiders not be subject to a risk of liability under Section 16(b) of the Exchange Act to the fullest extent permitted by applicable law as a result of any deemed purchase or sale for purposes of Section 16(b) arising in connection with the exchange and/or conversion of shares of Republic Common Stock and Stock Options and SARs in the Merger). 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 Republic 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. Within fifteen days 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 maintain the effectiveness of such registration statement (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such converted or substitute options remain outstanding. With respect to those individuals, if any, who subsequent to the Merger may be subject to the reporting requirements under Section 16(a) of the Exchange Act, BB&T shall administer the Stock Option Plans assumed pursuant to this Section 2.9 (or the BB&T Option Plan, if applicable) in a manner that complies with Rule 16b-3 promulgated under the Exchange Act to the extent necessary to preserve for such individuals the benefits of Rule 16b-3 to the extent such benefits were available to them prior to the Effective Time. Republic hereby represents that the Stock Option Plans in their current forms have been administered in compliance with Rule 16b-3 to the extent, if any, required as of the date hereof.

 

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(b) As soon as practicable following the Effective Time, BB&T shall deliver to the participants receiving converted options or stock appreciation rights under the BB&T Option Plan an appropriate notice setting forth such participant’s rights pursuant thereto.

 

(c) Eligibility to receive new stock option grants following the Effective Time with respect to BB&T Common Stock shall be determined by BB&T in accordance with its plans and procedures as in effect from time to time, and subject to any contractual obligations.

 

2.10 Merger of Subsidiaries

 

In the event that BB&T shall request, Republic shall take such actions, and shall cause the Republic Subsidiaries to take such actions, as may be required in order to effect, immediately after the Effective Time, the merger of one or more of the Republic Subsidiaries with and into, in each case, one of the BB&T Subsidiaries; provided, however, that such actions, merger or mergers shall not (i) impose any significant additional costs on Republic or the Republic Subsidiaries or (ii) impede or materially delay consummation of the Merger.

 

2.11 Anti-Dilution

 

In the event BB&T changes the number of shares of BB&T Common Stock issued and outstanding at or prior to the Effective Time as a result of any reclassification, recapitalization, stock split, stock dividend or other similar event, 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 at or prior to the Effective Time, the Exchange Ratio shall be proportionately adjusted.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF REPUBLIC

 

Except as Disclosed, Republic represents and warrants to BB&T as follows (the representations and warranties herein of Republic 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 or incomplete unless it is inaccurate or incomplete to the extent that BB&T would be entitled to refuse to consummate the Merger pursuant to Section 7.1(b)(ii) on account of such inaccuracy):

 

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3.1 Capital Structure

 

The authorized capital stock of Republic consists of 20,000,000 shares of Republic Common Stock and 100,000 shares of Series A Preferred Stock, $20.00 par value, of Republic (“Republic Preferred Stock”). As of September 30, 2003, Republic had 13,267,294 shares of Republic Common Stock issued and outstanding and no shares of Republic Preferred Stock issued and outstanding. Except for the foregoing and as permitted by Section 5.9(c), no other classes of capital stock of Republic, common or preferred, are authorized, issued or outstanding. All outstanding shares of Republic capital 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 shares of Republic Common Stock reserved in connection with the Stock Option Plans. As of September 30, 2003, Republic had outstanding options to acquire 736,590 shares of Republic Common Stock under the Stock Option Plans or other outstanding agreements and awards. 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 with Republic or its Subsidiaries relating to the right of any Republic shareholder to own, to vote or to dispose of, the capital stock of Republic. Holders of Republic Common Stock do not have preemptive rights. As of September 30, 2003, Republic had outstanding SARs under the Stock Option Plans or other outstanding agreements and awards with respect to 11,340 shares of Republic Common Stock which SARs were exercisable solely for a cash payment.

 

3.2 Organization, Standing and Authority

 

Republic is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida, with full corporate power and authority to carry on its business as now conducted and to own, lease and operate its properties and assets. Republic is not required to be qualified to do business in any other state of the United States or foreign jurisdiction. Republic is registered as a bank holding company under the Bank Holding Company Act.

 

3.3 Ownership of Subsidiaries

 

Section 3.3 of the Republic Disclosure Memorandum lists all of the Republic 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 Republic (directly or indirectly), the percentage ownership interest so owned by Republic and its business activities. The outstanding shares of capital stock or other equity interests of the Republic Subsidiaries are validly issued and outstanding, fully paid and nonassessable, and all such shares are directly or indirectly owned by Republic 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 Republic Subsidiaries, and there are no agreements, understandings or commitments relating to the right of Republic to own, to

 

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vote or to dispose of said interests. None of the shares of capital stock or other equity interests of the Republic Subsidiaries have been issued in violation of the preemptive rights of any person. Section 3.3 of the Republic Disclosure Memorandum also sets forth a list, as of the date hereof, of all investments (including, without limitation, all shares of capital stock or other securities or ownership interests) of Republic or its Subsidiaries in any corporation, partnership, joint venture, or other organization (other than the Republic Subsidiaries and stock or other securities held in a fiduciary capacity owned directly or indirectly by Republic).

 

3.4 Organization, Standing and Authority of the Subsidiaries

 

Each Republic Subsidiary which is a depository institution is a state chartered bank with its deposits insured by the FDIC. Each of the Republic Subsidiaries is validly existing and in good standing under the laws of its jurisdiction of organization. Each of the Republic Subsidiaries has full power and authority to carry on its business as now conducted, and is duly qualified to do business and in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary.

 

3.5 Authorized and Effective Agreement

 

(a) Republic 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 Republic shareholders of this Agreement and the Plan of Merger) to perform all of its obligations under this Agreement and the Plan of Merger. The execution and delivery of this Agreement and the Articles of Merger, 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 Republic shareholders pursuant to and to the extent required by applicable law. This Agreement and the Plan of Merger constitute legal, valid and binding obligations of Republic, and each is enforceable against Republic 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 or the Articles of Merger, nor consummation of the transactions contemplated hereby or thereby, nor compliance by Republic 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 Republic or any Republic 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 Republic or any Republic

 

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Subsidiary pursuant to, any note, bond, mortgage, indenture, license, permit, contract, agreement or other instrument or obligation, or (iii) subject to receipt of all required governmental approvals, violate any order, writ, injunction, decree, statute, rule or regulation applicable to Republic or any Republic 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 Republic of the Merger and the other transactions contemplated in this Agreement.

 

3.6 Securities Filings; Financial Statements; Statements True; NASDAQ Compliance

 

(a) Republic has timely filed all Securities Documents required by the Securities Laws to be filed since December 31, 2000. Republic has Disclosed or made available to BB&T a true and complete copy of each Securities Document filed by Republic with the Commission after December 31, 2000 and prior to the date hereof, which are all of the Securities Documents that Republic 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 Republic were prepared in conformity with GAAP applied on a consistent basis (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) and fairly present or will fairly present, as the case may be, the consolidated financial position and results of operations of Republic and the Republic Subsidiaries as of the dates indicated.

 

(c) No statement, certificate, instrument or other writing furnished or to be furnished hereunder by Republic or any Republic Subsidiary to BB&T, taken as a whole, 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 Republic and each of the Republic Subsidiaries contain or will contain at Closing accurate records of all meetings and other corporate actions of their respective shareholders and Boards of Directors (including committees of the Board of Directors), and the signatures contained therein are the true signatures of the persons whose signatures they purport to be.

 

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3.8 Adverse Change

 

Since December 31, 2002, (a) Republic and the Republic Subsidiaries have not (i) incurred any liability, whether accrued, absolute or contingent, except as disclosed in the most recent Republic Financial Statements, or (ii) except as disclosed in Securities Documents filed prior to the date hereof, entered into any transactions with Affiliates, in each of (i) or (ii) other than in the ordinary course of business consistent with past practices or in connection with this Agreement or the transactions contemplated hereby, and (b) there has not been any event or circumstance which has had or is reasonably likely to have a Material Adverse Effect on Republic.

 

3.9 Absence of Undisclosed Liabilities

 

All liabilities (including without limitation contingent liabilities and any off-balance-sheet loans, financings, liabilities, obligations or indebtedness) of Republic and the Republic Subsidiaries are disclosed in the most recent Financial Statements of Republic or are normally recurring business obligations incurred in the ordinary course of its business since the date of Republic’s most recent Financial Statements or in connection with this Agreement or the transactions contemplated hereby. Without limiting the generality of the foregoing, neither Republic nor any Republic Subsidiary has any off-balance sheet obligation or liability of any nature, matured or unmatured, fixed or contingent, to any other person, or a financial interest in any other person, the purpose or effect of which is to improperly defer, postpone, reduce or otherwise avoid inclusion on the balance sheet or income statement of any obligation or liability for which Republic or any Republic Subsidiary is or may become liable.

 

3.10 Properties

 

(a) Republic and the Republic 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 Republic as of December 31, 2002 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, (iv) dispositions and encumbrances for adequate consideration in the ordinary course of business, or (v) matters otherwise reflected on such consolidated balance sheet or any other Financial Statements of Republic included in Securities Documents of Republic filed prior to the date hereof.

 

(b) All leases and licenses pursuant to which Republic or any Republic Subsidiary, as lessee or licensee, leases or licenses rights to real or personal property are valid and enforceable against Republic or such Subsidiary and, as of the date hereof and to the knowledge of Republic, against the other parties thereto, in accordance with their respective terms.

 

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3.11 Environmental Matters

 

(a) Republic and the Republic Subsidiaries are and at all times have been in compliance with all Environmental Laws. Neither Republic nor any Republic Subsidiary has received any communication alleging that Republic or the Republic 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 Republic nor any Republic 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) Republic or any Republic Subsidiary, (ii) any person or entity whose liability for any Environmental Claim Republic or any Republic 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 Republic or any Republic Subsidiary, or any real or personal property which Republic or any Republic 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 Republic or any Republic Subsidiary holds a security interest securing a loan recorded on the books of Republic or any Republic Subsidiary. Neither Republic nor any Republic 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) Republic and the Republic Subsidiaries are in compliance with all recommendations contained in any environmental audits, analyses and surveys received by Republic relating to all real and personal property owned or leased by Republic or any Republic Subsidiary and all real and personal property of which Republic or any Republic 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 Republic or any Republic Subsidiary or against any person or entity whose liability for any Environmental Claim Republic or any Republic Subsidiary has or may have retained or assumed, either contractually or by operation of law.

 

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3.12 Loans; Allowance for Loan Losses

 

(a) All of the loans, leases, installment sales contracts and other credit transactions on the books of Republic and the Republic Subsidiaries are valid and properly documented and were made in the ordinary course of business, and the security therefor, if any, is valid and properly perfected. Neither the terms of such loans, leases, installment sales contracts and other credit transactions, nor any of the documentation evidencing such transactions, nor the manner in which such loans, leases, installment sales contracts and other credit transactions have been administered and serviced, nor Republic’s procedures and practices of approving or rejecting applications for such transactions, 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 losses respecting loans, leases, installment sales contracts and other credit transactions reflected on the consolidated balance sheets included in the Financial Statements of Republic are adequate as of their respective dates under the requirements of GAAP and applicable regulatory requirements and guidelines.

 

3.13 Tax Matters

 

(a) Republic and the Republic 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 have set up a reserve or accrual that is adequate under GAAP for the payment of, all taxes shown as due in respect of the periods covered by such returns. Republic and the Republic Subsidiaries have paid, or set up a reserve or accrual that is adequate under GAAP 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 Republic and the Republic Subsidiaries are complete and accurate. No deficiencies for any tax, assessment or governmental charge have been proposed, asserted or assessed (tentatively or otherwise) against Republic or any Republic Subsidiary which have not been settled or paid. There are currently no agreements in effect with respect to Republic or any Republic 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.

 

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(c) Deferred taxes of Republic and its Subsidiaries have been provided for in accordance with GAAP consistently applied.

 

(d) Neither Republic nor any of the Republic Subsidiaries is a party to any tax allocation or sharing agreement (other than such an agreement exclusively between or among Republic and the Republic Subsidiaries) 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 Republic or a Republic subsidiary) or has any liability for taxes of any person (other than Republic and the Republic 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 Republic and the Republic Subsidiaries is in compliance with, and its records contain all information and documents (including properly completed IRS Forms W-9) necessary to comply with, all applicable information reporting and tax withholding requirements under federal, state, and local tax laws, and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Code.

 

(f) Neither Republic nor any of the Republic 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 . Republic has previously made available information relating to 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 executive officer of Republic.

 

(b) Employee Benefit Plans .

 

(i) Republic has Disclosed an accurate and complete list of all Plans, as defined below, contributed to, maintained or sponsored by Republic or any Republic Subsidiary, or to which Republic or any Republic Subsidiary is obligated to contribute for the benefit of current or former employees of Republic or any Republic Subsidiary. For purposes of this Agreement, the term “Plan” shall mean a plan, arrangement, agreement or program described in the foregoing provisions of this Section 3.14(b)(i) that is: (A) a profit-sharing, deferred compensation, bonus, stock option, stock purchase, pension, retainer, consulting, retirement, severance, welfare or incentive plan, agreement or arrangement, whether or not funded and whether or not terminated (only if such plan has assets or liabilities), (B) an employment agreement, (C) a personnel policy or fringe benefit plan, policy, program or arrangement providing for benefits or perquisites to current or

 

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former employees, officers, directors or agents, whether or not funded, and whether or not terminated (only if such plan has assets or liabilities), 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)