FNB FINANCIAL CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 19, 1994
Notice is hereby given that the Annual Meeting of Shareholders of FNB
Financial Corporation (hereinafter referred to as "FNB") will be held in the
Lucille Thompson Room of the East Tennessee Historical Museum (which is next
door to the main office of the Bank) 500 Church Street, Knoxville, Tennessee
on April 19, 1994 at 10:00 a.m., for the purpose of considering and voting
upon the following:
(1) A proposal unanimously recommended by the Board of Directors of the
FNB, to approve the Agreement and Plan of Reorganization (the "Agreement")
dated November 9, 1993 between FNB, First National Bank of Knoxville, and
First Virginia Banks, Inc. ("First Virginia") and the related Plan of Merger
(the "Plan") between FNB and First Virginia, pursuant to which, among other
things, FNB will affiliate with First Virginia by means of a merger of FNB
into First Virginia, as more fully set forth in the accompanying
Prospectus/Proxy Statement and in the copy of the Agreement and Plan of
Reorganization and the Plan of Merger which is annexed thereto as Exhibit A;
(2) The election of the Board of Directors for a term of office until
the next Annual Meeting of Shareholders or, if the Merger is approved, until
the Effective Date of the Merger;
(3) The ratification of Coopers & Lybrand as independent auditors for
the calendar year 1994 or, if the Merger is approved, until the Effective
Date of the Merger; and
(4) Such other business as may properly come before the meeting and any
adjournments thereof.
The proposed merger of FNB and First Virginia, if approved by the
shareholders, will result in the exchange of all shares of FNB capital stock
for cash or stock of First Virginia or a combination of cash or stock.
Shareholders of FNB are entitled to assert dissenters' rights with regard to
this transaction pursuant to T.C.A. Sec. 48-23-101 et seq. A copy of Chapter
23 of the Tennessee Business Corporation Act (T.C.A. Secs. 48-23-101 through
T.C.A. Secs. 48-23-302) is included as Exhibit B to the Prospectus/Proxy
Statement which accompanies the notice.
Shareholders of record at the close of business on March 4, 1994 are
entitled to notice of and to vote at the Special Meeting or at any
adjournments thereof. The proposed Merger must also be approved by the
Federal Reserve Board, the Tennessee Commissioner of Financial Institutions
and the Virginia State Corporation Commission.
BY ORDER OF THE BOARD OF DIRECTORS Robert S. Marquis
Secretary
YOUR VOTE IS IMPORTANT. PLEASE DATE, SIGN AND MAIL BACK THE ENCLOSED PROXY
AT YOUR EARLIEST CONVENIENCE. THE ENCLOSED RETURN ENVELOPE MAY BE USED FOR
THAT PURPOSE. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED BY
GIVING WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF FNB, BY SUBMITTING A
SIGNED PROXY BEARING A LATER DATE TO FNB OR BY ATTENDING THE ANNUAL MEETING
AND VOTING IN PERSON.
Knoxville, Tennessee
March 18, 1994
PROSPECTUS/PROXY STATEMENT
FIRST VIRGINIA BANKS, INC.
387,977 Shares Common Stock
(Par Value $1.00 Per Share)
This Prospectus/Proxy Statement covers 387,977 shares of First Virginia
Common Stock, $1.00 par value, of First Virginia Banks, Inc. ("First Virginia
Stock"), which may be issued in connection with the proposed merger (the
"Merger") of FNB Financial Corporation ("FNB") with and into First Virginia
Banks, Inc. ("First Virginia"). Upon consummation of the Merger by FNB, the
shares of First Virginia Common Stock offered hereby will be exchanged for
shares of Common Stock of FNB, $5.00 par value ("FNB Common Stock") at the
exchange rate of .20 shares of First Virginia Common Stock for each share of
FNB Common Stock. In lieu of receiving First Virginia Common Stock, each
shareholder of FNB may exchange his shares for $7.50 per share in cash,
provided that the number of shares that may be exchanged for cash, when added
to Dissenting Shares, shall not exceed 40% of the outstanding shares of FNB
Common Stock immediately prior to the Effective Date. The Agreement and Plan
of Reorganization also provides that if the aggregate number of shares for
which shareholders of FNB Common Stock elect to receive cash, when added to
the number of Dissenting Shares, is less than 10.1% of the outstanding shares
of FNB Common Stock, First Virginia shall pay to the shareholders of FNB, in
lieu of First Virginia Common Stock, a pro rata cash payment equal to the
difference between the amount of cash paid to FNB shareholders electing cash
and the amount of cash that would have been paid if holders of 10.1% of the
outstanding shares of FNB Common Stock had elected cash.
This document serves as a Prospectus for First Virginia Common Stock
offered herein as well as a Proxy Statement for the Annual Meeting of
Shareholders of FNB.
Information concerning First Virginia Banks, Inc., 6400 Arlington
Boulevard, Falls Church, Virginia 22042-2336 (Telephone 703/241-3656) and
FNB, 620 Market Street, Knoxville, Tennessee 37901 (Telephone 615/549-5140),
and the business and operations of those companies, together with a
description of the terms of the proposed Merger, are contained in this
Prospectus.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any
representations in connection with the offer other than those contained or
incorporated by reference in this Prospectus, and, if given or made, such
information or representations must not be relied upon as having been
authorized by First Virginia or FNB.
The date of this Prospectus is March 18, 1994
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . 3
SUMMARY OF SIGNIFICANT INFORMATION. . . . . . . . . . . . . . 5
SELECTED FINANCIAL DATA AND PER SHARE DATA. . . . . . . . . . 10
BUSINESS OF THE ANNUAL MEETING. . . . . . . . . . . . . . . . 12
THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Background and Reasons for the Merger. . . . . . . . . . 14
Opinion of Financial Advisor . . . . . . . . . . . . . . 15
Procedures for Exchanging FNB Common Stock for First
Virginia Common Stock. . . . . . . . . . . . . . . . . 17
Cash Option. . . . . . . . . . . . . . . . . . . . . . . 18
Conditions to Consummation of the Merger . . . . . . . . 18
Accounting Treatment . . . . . . . . . . . . . . . . . . 20
Termination and Amendment . . . . . . . . . . . . . . . 20
Effective Date of the Merger . . . . . . . . . . . . . . 21
Operations After the Merger. . . . . . . . . . . . . . . 21
Effect On FNB Employee Benefit Plans . . . . . . . . . . 21
Interests of Certain Persons in the Transaction. . . . . 22
Regulatory Review and Approvals. . . . . . . . . . . . . 23
First Virginia Common Stock. . . . . . . . . . . . . . . 23
Certain Provisions of First Virginia's Articles of
Incorporation and First Virginia's Shareholder
Rights Plan. . . . . . . . . . . . . . . . . . . . . . 24
Certain Differences in Rights of Shareholders. . . . . . 25
Federal Income Tax Consequences. . . . . . . . . . . . . 31
Rights of Dissenting Shareholders. . . . . . . . . . . . 34
Supervision and Regulation . . . . . . . . . . . . . . . 36
FNB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Information Concerning FNB Directors . . . . . . . . . . 42
Information Regarding the FNB Board of Directors and its
Committees . . . . . . . . . . . . . . . . . . . . . . 43
Executive Officers . . . . . . . . . . . . . . . . . . . 43
Securities Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . 44
Management . . . . . . . . . . . . . . . . . . . . . . . 46
Certain Relationships and Related Transactions . . . . . 48
LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . 48
EXHIBIT A:AGREEMENT AND PLAN OF REORGANIZATION (PLAN OF MERGER
IS APPENDIX I OF THE AGREEMENT)
EXHIBIT B:SECTIONS 48-23-101 through 48-23-302, TENNESSEE CODE ANNOTATED
EXHIBIT C:FAIRNESS OPINION OF THE ROBINSON-HUMPHREY COMPANY, INC.
AVAILABLE INFORMATION
First Virginia Banks, Inc. is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and,
in accordance therewith, files reports and other information with the
Securities and Exchange Commission (the "Commission"). Proxy statements,
reports and other information concerning First Virginia can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commissioner's
Regional Offices in New York (75 Park Place, New York, New York 10007) and
Chicago (Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661.)
Copies of such material may be obtained from the Freedom of Information
Act Officer, Public Reference Section of the Commission at 450 Fifth Street,
Judiciary Plaza, Washington, D.C. 20549 at prescribed rates.
First Virginia's Common Stock is listed on the New York Stock Exchange
and the Philadelphia Stock Exchange. Reports, proxy material and other
information concerning First Virginia may be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005 and the
Philadelphia Stock Exchange, Inc., 1900 Market Street, Philadelphia,
Pennsylvania 19103.
This Prospectus/Proxy Statement incorporates documents by reference which are
not presented herein or delivered herewith. In the case of First Virginia,
these documents are available upon request from Thomas P. Jennings, Vice
President and Secretary, First Virginia Banks, Inc., 6400 Arlington
Boulevard, Falls Church, Virginia 22042-2336. Mr. Jennings' telephone number
is 703/241-3655. In the case of FNB, these documents are available upon
request from Paul Boyd, Senior Vice President and Director of Shareholder
Relations, FNB Financial Corporation, 620 Market Street, Knoxville, Tennessee
37901. In order to ensure timely delivery of the documents, any request
should be made by April 12, 1994.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by First Virginia with the Commission
under Section 13 of the Exchange Act are hereby incorporated by reference in
this Prospectus:
(1) First Virginia's Annual Report on Form 10-K for the year ended
December 31, 1992;
(2) First Virginia's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1993, June 30, 1993 and September 30, 1993;
(3) The description of First Virginia's Common Stock which is contained
in its registration statement on Form 8-A as filed on February 23, 1971 under
the Exchange Act; and
(4) All documents filed by First Virginia pursuant to Section 13(a),
13(c), 14 and 15(d) of the Exchange Act subsequent to the date hereof and
prior to the Annual Meeting.
The following documents filed by FNB with the Commission under Section
13 of the Exchange Act are hereby incorporated by reference in this
Prospectus:
(1) FNB's Annual Report on Form 10-K for the year ended December 31,
1993; and
(2) All documents filed by FNB pursuant to Section 13(a), 13(c) 14 and
15(d) of the Exchange Act subsequent to the date hereof and prior to the
Annual Meeting.
This Prospectus/Proxy Statement is accompanied by FNB's Annual Report on
Form 10-K for the year ended December 31, 1993.
Any statement contained in the foregoing documents or in any other
document deemed to be incorporated by reference herein, shall be deemed to be
modified or superseded for purposes of this Prospectus/Proxy Statement to the
extent that a statement contained herein modifies or supersedes such
statement.
SUMMARY OF SIGNIFICANT INFORMATION
The following paragraphs summarize certain significant features of the
proposed Merger. This summary should be read in conjunction with, and is
qualified in its entirety by, the remainder of this Prospectus/Proxy
Statement including the Agreement and Plan of Reorganization (the
"Agreement") and the Plan of Merger (the "Plan") and the information
incorporated herein by reference.
Annual Meeting
The Annual Meeting of FNB will be held at the East Tennessee Historical
Museum, 500 Church Street, Knoxville, Tennessee at 10 a.m., April 19, 1994.
Only holders of record of FNB Common Stock at the close of business on March
4, 1993 will be entitled to notice of and to vote at the Annual Meeting. In
addition to the election of directors and the ratification of Coopers &
Lybrand as independent auditors for 1994, shareholders will be asked to
consider and take action upon the Agreement and the related Plan which
provides for the merger of FNB into First Virginia. See "Business of the
Annual Meeting."
First Virginia
First Virginia is a registered bank holding company organized in
October, 1949. As of December 31, 1993, it had assets of approximately
$7.037 billion, deposits of $6.136 billion and loans (net of unearned
interest) of $4.087 billion, making it the sixth largest bank holding company
in Virginia.
First Virginia currently owns all of the stock of 21 commercial banks,
16 of which are domiciled in Virginia, 2 in Maryland and 3 in Tennessee.
FNB
FNB is a one-bank holding company incorporated under the laws of the
State of Tennessee in 1985 and registered under the Bank Holding Company Act
of 1956. As of December 31, 1993, it had assets on a consolidated basis of
approximately $100.8 million, deposits of $81.6 million, and loans (net of
unearned interest) of $56.3 million.
Exchange Ratio
If the Merger is approved, shareholders of FNB will be entitled to
receive for each share of Common Stock of FNB ("FNB Common Stock") held as of
the Effective Date, .20 shares of Common Stock of First Virginia, $1.00 par
value ("First Virginia Common Stock"). Cash will be distributed in lieu of
fractional shares and will be based on the closing market price of First
Virginia Common Stock as reported for New York Stock Exchange Transactions on
the Effective Date of the Merger.
Cash Election and Prorationing
At least 10.1% of the outstanding shares of FNB Common Stock must be
exchanged for cash. In order to satisfy this requirement, holders of shares
of FNB Common Stock will be given the option of exchanging their shares for
$7.50 per share in cash, provided that the number of shares that may be
exchanged for cash, when added to Dissenting Shares, shall not exceed 40% of
the outstanding shares of FNB Common Stock immediately prior to the Effective
Date. If the aggregate of (i) shares as respects which a cash elections is
made and (ii) Dissenting Shares exceed 40% of the outstanding shares of FNB
Common Stock immediately prior to the Effective Date of the Merger, First
Virginia will pay cash for shares submitted for cash exchange by each holder
of 100 or fewer FNB shares (if such holder has submitted all his shares for
cash exchange) and then will pay cash for shares submitted for cash pro rata.
Shares not exchanged for cash after proration will be exchanged for First
Virginia Common Stock at the exchange ratio noted above. If the aggregate of
(i) shares as respects which a cash election is made and (ii) Dissenting
Shares is less than 10.1% of the outstanding shares of FNB Common Stock
immediately prior to the Effective Date of the Merger, First Virginia will
pay to FNB shareholders, in lieu of shares of First Virginia Common Stock, a
pro rata cash payment, equal in amount to the difference between (i) the
amount of cash paid to FNB shareholders electing cash and (ii) the amount of
cash that would have been paid if holders of 10.1% of the outstanding shares
of FNB Common Stock (excluding treasury shares) immediately prior to the
Effective Date of the Merger had elected cash at $7.50 per share in exchange
for that number of shares of FNB Common Stock.
IF A FNB SHAREHOLDER ELECTS TO SURRENDER SHARES FOR CASH, HE MUST FILE
THE CASH OPTION FORM ACCOMPANYING THIS PROXY STATEMENT/PROSPECTUS PRIOR TO OR
AT THE ANNUAL MEETING. ANY FNB SHAREHOLDER WHO DOES NOT COMPLETE AND RETURN
A CASH OPTION FORM PRIOR TO OR AT THE ANNUAL MEETING CAN ONLY RECEIVE FIRST
VIRGINIA COMMON STOCK IN THE MERGER, PROVIDED THAT THE AGGREGATE NUMBER OF
SHARES ELECTING THE CASH OPTION TOGETHER WITH DISSENTING SHARES IS NOT LESS
THAN 10.1%. ONCE THE VOTE ON THE MERGER HAS BEEN TAKEN AT THE ANNUAL
MEETING, THE CASH ELECTION IS IRREVOCABLE. THE CASH OPTION FORM MUST BE
ACCOMPANIED BY THE STOCK CERTIFICATES TO BE EXCHANGED FOR CASH. FNB WILL
HOLD CERTIFICATES IN SAFEKEEPING PENDING THE EFFECTIVE DATE OF THE MERGER, AT
WHICH TIME THEY WILL BE EXCHANGED FOR CASH, OR IN THE EVENT OF PRORATION,
CASH AND FIRST VIRGINIA COMMON STOCK. IF THE MERGER IS NOT CONSUMMATED, FNB
WILL RETURN THE CERTIFICATES.
Dissenters' Rights
Under applicable provisions of Tennessee law, FNB shareholders who
dissent from the Merger and follow certain statutory procedures have the
right to demand payment in cash of the fair value of their shares of FNB
Common Stock, calculated immediately prior to the Effective Date. See
"Rights of Dissenting Shareholders" on page 34 and Exhibit B hereto which
sets forth the text of the applicable statute.
Conditions of the Merger
The obligations of FNB and First Virginia to consummate the Merger are
subject to certain conditions, including shareholder approval of the Merger,
the absence of material adverse changes in the financial condition of FNB or
in the consolidated financial condition of First Virginia and the
representations, warranties and covenants of First Virginia and FNB.
Consummation of the Merger is also subject to receiving regulatory approvals
from the Tennessee Commissioner of Financial Institutions, the Virginia State
Corporation Commission and the Federal Reserve Board. Applications have been
filed with all three regulatory agencies requesting approval of the Merger.
Market Prices
There is no established public market for the shares of FNB Common
Stock. FNB has two hundred and sixty shareholders of record as of January
31, 1994. FNB's Common Stock is registered pursuant to Section 15(d) of the
Securities and Exchange Act. Shares of First Virginia Common Stock are traded
on the New York and Philadelpia Stock Exchanges. On October 19, 1993, the
first business day prior to the public announcement of the Agreement, the
closing price for First Virginia Common Stock on the New York Stock Exchange
was $36.625 per share. On March 4, 1994, the closing price for First
Virginia Common Stock on the New York Stock Exchange was $37.625 per share.
Federal Tax Consequences
In the opinion of Christopher M. Cole, Vice President and Assistant
General Counsel of First Virginia, the Merger will qualify as a tax-free
reorganization under Section 368(a) of the Internal Revenue Code, but the
receipt of cash by a FNB shareholder in exchange for any shares of FNB Common
Stock or in lieu of a fractional share of First Virginia Common Stock will be
a taxable transaction. For a more complete description of the Federal income
tax consequences of the Merger, see "Federal Income Tax Consequences" on page
31.
Accounting Treatment
The Merger is expected to be accounted for as a purchase in accordance
with generally accepted accounting principles.
Required Vote
The affirmative vote of the holders of at least a majority of the
outstanding shares of FNB Common Stock is required to approve the Merger. As
of the record date, there were outstanding and entitled to vote 1,904,183
shares of FNB Common Stock, each share being entitled to one vote. Directors
of FNB beneficially held, as of the record date, 489,300 shares of FNB Common
Stock. Under the Agreement, FNB Directors have agreed to vote their shares
for the Merger.
Termination and Modification
The Agreement and the Plan may be terminated and the Merger abandoned
(without any obligation by First Virginia or FNB to renegotiate the
Agreement) at any time prior to the Effective Date: (a) by mutual consent of
the Board of Directors of First Virginia and the Board of Directors of FNB;
or (b) by the Board of Directors of either FNB or First Virginia (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant or other agreement contained in the
Agreement) in the event of a breach by the other Party of any representation
or warranty contained in the Agreement which cannot be or has not been cured
within 30 days after the giving of written notice to the breaching Party of
such breach; or (c) by the Board of Directors of either First Virginia or FNB
(provided that the terminating Party is not then in material breach of any
representation, warrant, covenant or other agreement contained in the
Agreement) in the event of a material breach by the other Party of any
covenant or agreement contained in the Agreement which cannot be or has not
been cured within 30 days after the giving of written notice to the breaching
party of such breach; or (d) by the Board of Directors of either First
Virginia or FNB if the Federal Reserve Board or the Tennessee Commissioner of
Financial Institutions deny approval of the Merger and time period for all
appeals or requests for reconsideration has run or if the Comptroller of the
Currency, the Tennessee Commissioner of Financial Institutions or the Federal
Reserve Board deny the conversion of the First National Bank of Knoxville
into a state chartered, Federal Reserve member bank; or (e) by the Board of
Directors of either FNB or First Virginia in the event the Merger should not
become effective within nine months of the Agreement in such case only if the
failure to consummate the Merger is not caused by any breach of the Agreement
by the Party electing to terminate; or (f) by the Board of Directors of
either FNB or First Virginia (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant or other
agreement contained in this Agreement), in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied of fulfilled within nine months of the Agreement;
or (g) by the Board of Directors of First Virginia, at any time prior to the
60th day after execution of the Agreement in the event that First Virginia
determines, after its audit of FNB and the First National Bank of Knoxville,
that the financial conditions of FNB or the Bank do not meet the standards
described in Section 6.3 of the Agreement or that a fact or circumstance
exists with respect to the Merger which materially and adversely impacts one
or more of the economic benefits to First Virginia of the Merger (which
condition has been satisfied); or (h) by the Board of Directors of First
Virginia if more than 25% of the holders of FNB stock file for appraisal
rights under Tennessee law or if more than 20% of the holders of FNB stock
vote against the Merger; or (i) by the Board of Directors of FNB if the price
of First Virginia Common Stock declines to $33.00 per share or less for any
period of 10 consecutive working days prior to the Effective Date.
The Agreement and the Plan may be amended at any time prior to the
Effective Date; provided that any such amendment is in writing and is
approved by the Board of Directors of each of the parties and provided,
further, that subsequent to the meeting in which the Agreement is approved by
shareholders of FNB, no amendment be made in the exchange rate which
decreases the consideration to FNB shareholders without the approval of FNB
shareholders.
Effective Date
The Effective Date of the Merger shall be the date specified in the
Articles of Merger filed with both the Tennessee Secretary of State pursuant
to the Tennessee General Corporation Act and the Articles of Merger filed
with the Virginia State Corporation Commission pursuant to the Virginia Stock
Corporation Act.
Opinion of Financial Advisor
FNB has received the opinion of The Robinson-Humphrey Company, Inc
("Robinson-Humphrey") that the consideration to be received by the holders of
FNB Common Stock pursuant to the terms of the Merger is fair to the FNB
shareholders from a financial point of view. In connection with this
opinion, FNB has agreed to (i) pay Robinson-Humphrey a fee of $65,000 payable
upon delivery of the Initial Fairness Opinion and (ii) reimburse Robinson-
Humphrey for all reasonable out-of-pocket expenses up to a maximum of $6,000
incurred during the period of its engagement in connection with its services
provided to FNB and (iii) indemnify Robinson-Humphrey against certain
liabilities. For additional information concerning Robinson-Humphrey and its
opinion, see "The Merger - Opinion of Financial Advisor" and the opinion of
such firm attached as Exhibit C to this Prospectus/Proxy Statement.
Robinson-Humphrey is a nationally-recognized investment banking firm
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and for other purposes. The FNB
Board selected Robinson-Humphrey to serve as its financial advisor in
connection with the Merger on the basis of its experience particularly with
banking transactions in the southeastern United States.
SELECTED FINANCIAL DATA AND PER SHARE DATA
The following table sets forth selected financial information and per share
data on the dates and for the periods indicated of (a) FNB Financial
Corporation, historical (b) First Virginia Banks, Inc., historical (c) First
VirginiaBanks, Inc., pro forma, giving effect to the proposed transaction,
and (d) .2 shares of First Virginia Banks, Inc. pro forma giving effect to
the proposed transaction. This table is qualified in its entirety by the
financial statements appearing herein or incorporated by reference herein.
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(In thousands, except per share data)
FNB Financial Corporation (Historical)
Operating Revenue $ 8,722 $ 7,472 $ 6,867 $ 4,898 $ 2,428
Provision for
Loan Losses 151 160 315 143 188
Net Income 616 248 32 (733) (950)
Net Income Per Share .32 .13 .02 (.38) (.49)
Book Value Per Share
(Period-end) 4.10 3.78 3.65 3.58 3.96
Dividends Declared
Per Share 0 0 0 0 0
Total Assets
(Period-end) 100,828 88,933 80,789 60,569 36,451
Total Deposits
(Period-end) 81,561 74,045 64,044 46,710 27,161
Total Long-term Debt
(Period-end) -- -- -- -- --
First Virginia Banks, Inc. (Historical) (1)
Operating Revenue $ 587,322 $ 602,357 $ 588,120 $ 569,788 $ 534,620
Provision for
Loan Losses 6,450 17,355 14,024 13,404 11,039
Net Income 116,024 97,473 69,608 65,111 67,374
Net Income Per Share 3.57 3.02 2.17 2.03 2.13
Book Value Per Share
(Period-end) 21.29 18.85 16.80 15.51 14.37
Dividends Declared
Per Share 1.13 .99 .91 .85 .80
Total Assets
(Period-end) 7,036,883 6,840,547 6,119,260 5,384,147 5,123,964
Total Deposits
(Period-end) 6,136,389 6,013,746 5,349,971 4,715,882 4,426,663
Total Long-term Debt
(Period-end) 1,008 5,227 11,467 11,836 37,480
First Virginia Banks, Inc. (Pro Forma) (Unaudited) (1)(2)(4)
Net Income Per Share 3.54
Book Value Per Share (Period-end) 21.28
Dividends Per Share 1.13
FNB Financial Corporation Equivalent Pro
Forma .2 Shares First Virginia Banks, Inc. (Unaudited) (2)(3)(4)
Net Income Per Share 0.71
Book Value Per Share 4.26
Dividends Per Share (Period-end) 0.23
(1) All per share information for First Virginia Banks, Inc., historical,
First Virginia Banks, Inc., pro forma and .2 shares of First Virginia Banks,
Inc., pro forma has been restated to reflect a three-for-two common stock
split that was paid on July 27, 1992.
(2) The First Virginia Banks, Inc. pro forma information reflects the results
of the consolidated operations of First Virginia Banks, Inc. and FNB
Financial Corporation after giving effect to Virginia Banks, Inc. and FNB
Financial Corporation after giving effect to a purchase basis to the
affiliation of FNB Financial Corporation with First Virginia Banks, Inc.
(3) This data reflects the pro forma net income, book value and dividends per
share of .2 shares of First Virginia Banks, Inc. which would be received in
the merger assuming that FNB Financial Corporation common stock was exchanged
for First Virginia Banks, Inc. common stock. The computations are based on
the exchange ratio of .2 shares of First Virginia Banks, Inc. for 1.0 shares
of FNB Financial Corporation.
(4) Pro forma combined book value per share of First Virginia Banks, Inc. and
FNB Financial Corporation do not reflect exercise of options to acquire
shares of FNB Financial Corporation Common Stock. Options to acquire 253,645
shares were outstanding at December 31, 1993. Assumed exercise of these
options does not have a significant impact upon either the combined
shareholders' equity of First Virginia Banks, Inc. or FNB Financial
Corporation or the pro forma combined net income per share.
BUSINESS OF THE ANNUAL MEETING
Election of Directors
The FNB Board of Directors has fixed the number of directors for the
ensuing year at five. Five persons, all of whom are the current directors of
FNB, have been nominated to serve as directors. If elected, they will
continue to serve as directors of FNB until the Annual Meeting of
shareholders of FNB to be held in 1995 or, if the Merger is approved, until
the Effective Date of the Merger.
It is the intention of the proxy holders to vote FOR the five nominees
named below. The proxies cannot be voted for a greater number of persons
than the five nominees named. In the event that any nominee should be unable
to accept the office of director, which is not now anticipated, it is
anticipated that the persons named in the proxy will vote for the election of
such other persons in place of such nominee as the Board of Directors may
recommend.
The persons nominated to serve as directors of FNB are as follows:
Williams E. Arant, Jr., Gordon E. Inman, Robert S. Marquis, John H.
Schaad, and Rufus H. Smith, III
Information with respect to the nominees for election as directors
including information about their principal occupation of employment for the
last five years, their age, their period of directorship, and the beneficial
ownership of securities is set forth elsewhere herein (see "FNB -Information
Concerning FNB Directors").
Approval of FNB's Auditors
At the Annual Meeting, stockholder will also be asked to vote upon the
approval of the certified public accounting firm of Coopers & Lybrand to
audit the books of FNB for 1994, or if the Merger is approved, until the
Effective Date of the Merger. If the requisite approval of the auditors is
not obtained, the Board of Directors of FNB will consider the selection of
auditors, and the shareholders will be notified of the final decision.
Coopers & Lybrand was the independent public accounting firm for FNB during
1993. A representative of Coopers & Lybrand is expected to be present at the
Annual Meeting with the opportunity to make a statement if desired and to
respond to appropriate questions.
Proposed Merger
In addition to other routine items of business, the Annual Meeting will
consider the approval of an Agreement and Plan of Reorganization dated
November 9, 1993 and the related Plan of Merger, copies of which are included
with this Prospectus/Proxy Statement as Exhibit A. If the Merger is
approved, FNB would merge into First Virginia (for a detailed description of
the Merger see "The Merger" below).
Other Matters
In the event that the Merger is not consummated in 1994, any shareholder
proposals to be submitted at the 1995 Annual Meeting of Shareholders must be
submitted to FNB by November 18, 1994.
The Board of Directors of FNB is not aware of any matter which may
properly be presented for action at the Annual Meeting other than the matters
set forth herein, but should any other matters arise requiring a vote of
shareholders, it is intended that the enclosed proxy include discretionary
authority to vote on such other matters in accordance with the interests of
FNB in the best judgment of the person or persons voting in the proxies.
This Prospectus/Proxy Statement and the proxy are being sent to
shareholders on or about March 18, 1994. The cost of this solicitation will
be borne by FNB and by First Virginia. The solicitation is being made by
mail and may also be made by personal interview, by telephone or by
telegraph. Brokers and others will be reimbursed for their reasonable
expenses in forwarding the proxy material to their customers who have a
beneficial ownership in stock of FNB registered in the names of nominees.
Any FNB shareholder who has executed and delivered a proxy may revoke it
at any time before it is voted by attending the Annual Meeting and voting in
person or by giving written notice of revocation of the proxy or by
submitting a signed proxy bearing a later date to FNB. In order for the
notice of revocation or later signed proxy to effectively revoke the prior
proxy, such notice and later proxy must actually be received by FNB prior to
the vote of shareholders at the Annual Meeting. The shares of FNB Common
Stock represented by properly executed proxies received in time for the
Annual Meeting will be voted as directed. If instructions are not given,
proxies received will be voted FOR approval of the Agreement, FOR the
election of five directors as specified in this Prospectus/Proxy Statement,
FOR the ratification of Coopers & Lybrand as FNB's independent auditors, and
FOR in the discretion of the proxy holders, any other matters which may
properly come before the Meeting.
THE BOARD OF DIRECTORS OF FNB RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION, FOR THE ELECTION OF THE
FIVE NOMINEES, FOR THE RATIFICATION OF COOPERS & LYBRAND AS FNB'S INDEPENDENT
AUDITORS AND FOR, IN THE DISCRETION OF THE PROXY HOLDERS, ANY OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING.
The Agreement must be approved by a majority of the outstanding shares
of FNB Common Stock. For the election of the directors and the approval of
the independent auditors, the affirmative vote of a majority of FNB Common
Stock represented and entitled to vote at the Annual Meeting is required.
THE MERGER
The detailed terms and conditions of the Merger are contained in the
Agreement and the Plan. The entire Agreement including the appendices is
attached to this Prospective/Proxy statement as Exhibit A. The Plan is
attached hereto as Appendix I of the Agreement. Both are incorporated herein
by reference. The following description of such terms and conditions does
not purport to be complete and is qualified in its entirety by reference to
the Agreement and the Plan.
Background and Reasons for the Merger
Tennessee adopted the Tennessee Regional Banking Act (the "Tennessee
Act") (codified at Tenn. Code Ann. Sec. 45-12-101, et seq.) effective July 1,
1985, permitting the acquisition of banks or bank holding companies having
their principal places of business in Tennessee by out of state bank holding
companies in certain designated states within a southeastern region provided
that those states granted reciprocal rights. FNB, a regional bank holding
company, filed its charter in 1985 and its restated charter on March 21,
1988. FNB's sole subsidiary is First National Bank of Knoxville (the
"Bank"), a National Banking Association formed under the laws of the United
States.
The Bank was originally conceived as a locally owned and operated bank
which would concentrate on small and middle market businesses. The
organizers and initial directors of the Bank and FNB believed that there was
a significant demand for these types of services provided by a locally owned
and operated institution. There were no other locally owned and operated
banks in Knoxville at the time of the Bank's creation. There was one bank
that was operating in Knoxville at the time of the Bank's creation with a
local board which functioned in a relatively autonomous fashion although it
was owned by a Washington, D.C. holding company.
Subsequent to the Bank's opening, a number of mergers and acquisitions
occurred in the Knoxville market. Several of the Bank's competitors have
increased their strength significantly by merger with out-of-state
institutions. For example, the Bank of East Tennessee was acquired by Union
Planters, Incorporated, a large West Tennessee holding company. Valley
Fidelity Bank and Trust Company was acquired by First Tennessee Bank National
Association. Sovran Bank/Central South was acquired by NationsBank of
Tennessee, N.A. During this same period, First American National Bank which
had experienced significant economic problems in the middle 1980s began to
strengthen and improve its financial position. In short, the Bank's primary
competitors grew and obtained new and significant strength in the Bank's
market area. The Bank's competitors began to offer new and diversified
products and were supported by large institutions with significant financial
strength.
In light of these changes in the Bank's competitive primary market area,
the Bank and FNB's Board of Directors began to consider alternatives which
would facilitate the Bank's ability to continue to grow and compete. Members
of FNB's Board met with one potential merger candidate and discussed the
possibility of such a transactions but no ultimate agreement was ever
negotiated or achieved. In 1993, discussions commenced with First Virginia
which had expressed an interest in acquiring the Bank. After considerable
discussions and negotiations, a letter of intent was entered into on
October 20, 1993. The final Agreement was executed on November 9, 1993. The
terms of the Agreement resulted from arms-length negotiations between
representatives of First Virginia and FNB after full consideration of various
factors which would have an effect upon the determination of the fair value
of the FNB Common Stock in the context of a merger transaction. In
determining the amount and nature of consideration to be received by FNB
shareholders, numerous factors were considered by the Board of Directors of
FNB. In accepting the offer from First Virginia and in approving and
recommending the terms of the Merger, the FNB Board considered, among others,
these factors: (a) information concerning the current and projected
financial structure and results of operations of First Virginia and FNB, (b)
the capital adequacy of the resulting entities, (c) the value and liquidity
of First Virginia Common Stock being exchanged and the increased dividends to
be paid thereon, (d) the anticipated tax-free nature of the transaction for
the FNB shareholders to the extent that stock of First Virginia was received
by shareholders in the exchange, (e) the products and market areas of First
Virginia and the Bank, (f) First Virginia's traditional method of dealing
with its bank affiliates which stresses autonomy of local management so as to
service the needs of each bank's local customers, (g) the terms of comparable
acquisition transactions involving other Tennessee banks and bank holding
companies, and (h) the fairness opinion issued by Robinson-Humphrey.
The Board of Directors of FNB and the Bank believe that the coordination
of resources resulting from the Merger will enable the Bank to provide a
wider and improved array of financial services to customers, and will allow
the Bank to develop new or enhanced products and services for its customers,
especially retail products. Additionally, the Board believes that the Merger
will provide the Bank with the market position and financial resources it
needs to compete with other strong competitors in Knoxville and the
surrounding area.
The Board of Directors of FNB believe the Merger is fair to and in the
best interest of FNB and its shareholders. Accordingly, the Board of FNB
recommends that the shareholders vote for the proposed Merger.
Opinion of Financial Advisor
General
FNB Financial Corporation retained Robinson-Humphrey to act as its
financial advisor in connection with the Merger. Robinson-Humphrey has
rendered an opinion to FNB's Board of Directors that, based on the matters
set forth therein, consideration to be received pursuant to the Merger is
fair, from a financial point of view, to the FNB's shareholders. The text of
such opinion is set forth in Exhibit C to this Prospectus/Proxy Statement and
should be read in its entirety by stockholders of FNB.
The consideration to be received by FNB's shareholders in the Merger was
determined by FNB and First Virginia in their negotiations. No limitations
were imposed by the Board of Directors or management of FNB upon Robinson-
Humphrey with respect to the investigations made or the procedures followed
by Robinson-Humphrey in rendering its opinion.
In connection with rendering its opinion to FNB's Board of Directors,
Robinson-Humphrey performed a variety of financial analyses. However, the
preparation of a fairness opinion involves various determinations as to the
most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances, and, therefore,
such an opinion is not readily susceptible to summary description. Robinson-
Humphrey, in conducting its analysis and in arriving at its opinion, has not
conducted a physical inspection of any of the properties or assets of FNB and
has not made or obtained any independent valuation or appraisals of any
properties, assets or liabilities of FNB. Robinson-Humphrey has assumed and
relied upon the accuracy and completeness of the financial and other
information that was provided to it by FNB or that was publicly available.
Its opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to it as of the date of, its
analyses.
Valuation Methodologies
In connection with its opinion on the Merger and the presentation of
that opinion to FNB's Board of Directors, Robinson-Humphrey performed three
valuation analyses with respect to (i) an analysis of comparable prices and
terms of recent transactions involving banks buying banks and (ii) a
discounted cash flow analysis, and (iii) a contribution analysis. Each of
these methodologies is discussed briefly below.
Comparable Transaction Analysis. Robinson-Humphrey performed an
analysis of premiums paid for selected banks with comparable characteristics
to FNB. Although analyzing a variety of transaction multiples related to
comparable banks, Robinson-Humphrey placed significant emphasis on multiples
of book value and tangible book value paid in these transactions as compared
to the multiples implied by the proposed Merger. Comparable transactions
were considered to be transactions involving banks with similar
characteristics since January 1, 1992 or where the seller was located in the
south and has assets less than $500 million, return on average assets between
.25% and .75% and non performing assets as a percentage of assets less than
2.00%
Based on the foregoing transactions, the analysis yielded a range of
transaction values to book value of 77.01 percent to 223.46 percent, with a
mean of 139.4 percent and a median of 128.1 percent. These compare to a
transaction value for the Merger of approximately 185.0 percent of FNB's book
value as of June 30, 1993.
In addition, the analysis yielded a range of transaction values as a
percentage of tangible book value for the comparable transactions ranging
from 77.01 percent to 223.67 percent, with a mean of 139.4 percent and a
median of 134.96 percent. These compare to a transaction value to tangible
book value at June 30, 1993 of approximately 185.0 percent for the Merger.
No company or transaction used in the comparable company or comparable
transaction analyses is identical to FNB. Accordingly, an analysis of the
foregoing necessarily involves complex considerations and judgments, as well
as other factors that affect the public trading value or the acquisition
value of the company to which it is being compared.
Discounted Cash Flow Analysis. Using discounted cash flow analysis,
Robinson-Humphrey estimated the present value of the future stream of after-
tax cash flows that FNB could produce through 1997, under various
circumstances, assuming that FNB performed in accordance with the
earnings/return projections of management at the time that FNB entered into
acquisition discussions in 1993. Robinson-Humphrey estimated the terminal
value for FNB at the end of the period by applying multiples ranging from
10.0 to 12.0x earnings and then discounting the cash flow streams, dividends
paid to shareholders and terminal value using differing discount rates
(ranging from 10.0 percent to 12.0 percent) chosen to reflect different
assumptions regarding the required rates of return of FNB and the inherent
risk surrounding the underlying projections. This discounted cash flow
analysis indicated a reference range of $5.0 million to $6.5 million, or
$6.17 to $6.99 per share for FNB.
Contribution Analysis. Robinson-Humphrey analyzed the relative
contribution of each company to various pro forma combined company measures.
Based upon the exchange ratio, FNB shareholders will own approximately .73%
of the combined company. FNB shareholders will have an increase of
approximately 3% in both the book and tangible book value per share, a 217%
increase in return on assets, and a 171% increase in return on equity.
Compensation of Robinson-Humphrey
Pursuant to an engagement letter between FNB and Robinson-Humphrey, FNB
has paid Robinson-Humphrey a Fairness Opinion Fee of $65,000 and agreed to
reimburse Robinson-Humphrey for all reasonable out-of-pocket expenses up to a
maximum of $6,000 incurred during the period of its engagement. FNB has also
agreed to indemnify and hold harmless Robinson-Humphrey and its officers and
employees against certain liabilities in connection with its services under
the engagement letter, except for liabilities resulting from the negligence
of Robinson-Humphrey.
As a part of its investment banking business, Robinson-Humphrey is
regularly engaged in the valuation of securities in connection with mergers
and acquisitions, negotiated underwriting, secondary distributions of listed
and unlisted securities, private placements and valuations for estate,
corporate and other purposes. FNB's Board of Directors decided to retain
Robinson-Humphrey based on its experience as a financial advisor in mergers
and acquisitions of financial institutions, particularly transactions in the
southern region of the U.S., and its knowledge of financial institutions and
FNB in particular.
Procedures For Exchanging FNB Common Stock For First Virginia Common Stock
Following the Effective Date of the Merger, each share of FNB Common
Stock (other than shares to be exchanged for cash and treasury shares) will
be converted into .20 shares of First Virginia Common Stock, proportionately
adjusted for any stock split, stock dividends or other similar capital
adjustments between the date of the Agreement and the Effective Date of the
Merger by First Virginia. No fractional shares of First Virginia Common
Stock shall be issued to FNB shareholders. In lieu thereof, each FNB
shareholder shall receive, upon surrender of his FNB Common Stock, an amount
in cash equal to the amount of any fractional share he has multiplied by the
closing price of First Virginia Common Stock on the last trading date prior
to the Effective Date of the Mergers as reported for New York Stock Exchange
- - Composite Transactions.
Following the Effective Date of the Merger, former shareholders of FNB
will be mailed a Letter of Transmittal by the Exchange Agent which will set
forth the procedures that should be followed for exchange of FNB Common Stock
for First Virginia Common Stock and cash. Directors and executive officers
will have certain restrictions imposed by Rule 145 under the Securities Act
of 1933 on the transfer of shares of First Virginia Common Stock received by
them in the merger.
Cash Option
Holders of FNB Common Stock will be given the option of exchanging their
shares for $7.50 in cash (less all applicable withholding taxes), provided
that the number of shares that may be exchanged for cash, when added to
Dissenting Shares, shall not exceed 40% of the outstanding shares of FNB
Common Stock immediately prior to the Effective Date of the Merger. The cash
election must be made at the time the FNB shareholders vote on the Merger and
when such vote has been taken, cash elections shall be irrevocable. If the
aggregate of (i) shares as respects which a cash election is made and (ii)
Dissenting Shares exceeds 40% of the outstanding shares of FNB Common Stock
immediately prior to the Effective Date of the Merger, First Virginia will
pay cash for shares submitted for cash exchange by each holder of 100 or
fewer FNB shares (if such holder has submitted all his shares for cash
exchange) and then will pay cash for shares submitted for cash pro rata.
Shares not exchanged for cash after proration will be exchanged for First
Virginia Common Stock at the exchange ratio noted above. If the aggregate of
(i) shares as respects which a cash election is made and (ii) Dissenting
Shares is less than 10.1% of the outstanding shares of FNB Common Stock
immediately prior to the Effective Date of the Merger, First Virginia will
pay to FNB shareholders, in lieu of shares of First Virginia Common Stock, a
pro rata cash payment, equal in amount difference between (i) the amount of
cash paid to FNB shareholders electing cash and (ii) the amount of cash that
would have been paid if holders of 10.1% of the outstanding shares of FNB
Common Stock immediately prior to the Effective Date of the Merger had
elected cash at $7.50 per share in exchange for that number of shares of FNB
Common Stock.
IF A FNB SHAREHOLDER ELECTS TO SURRENDER SHARES FOR CASH, HE MUST FILE
THE CASH OPTION FORM ACCOMPANYING THIS PROXY STATEMENT/PROSPECTUS PRIOR TO OR
AT THE FNB ANNUAL MEETING. ANY FNB SHAREHOLDER WHO DOES NOT COMPLETE AND
RETURN A CASH OPTION FORM PRIOR TO OR AT THE FNB ANNUAL MEETING CAN ONLY
RECEIVE FIRST VIRGINIA COMMON STOCK IN THE MERGER, PROVIDED THAT THE
AGGREGATE NUMBER OF SHARES ELECTING THE CASH OPTION TOGETHER WITH DISSENTING
SHARES IS NOT LESS THAN 10.1% OF OUTSTANDING SHARES. ONCE THE VOTE ON THE
MERGER HAS TAKEN PLACE AT THE ANNUAL MEETING, THE CASH ELECTION IS
IRREVOCABLE. THE CASH OPTION FORM MUST BE ACCOMPANIED BY THE STOCK
CERTIFICATES TO BE EXCHANGED FOR CASH. FNB WILL HOLD THE CERTIFICATES IN
SAFEKEEPING PENDING THE EFFECTIVE DATE OF THE MERGER, AT WHICH TIME THEY WILL
BE EXCHANGED FOR CASH, OR IN THE EVENT OF PRORATION, CASH AND FIRST VIRGINIA
COMMON STOCK. IF THE MERGER IS NOT CONSUMMATED, FNB WILL RETURN THE
CERTIFICATES.
Conditions to Consummation of the Merger
Unless waived in writing by First Virginia in its sole discretion, all
obligations of First Virginia to consummate the Merger are subject to the
fulfillment prior to or at the Effective Date of the following conditions:
(i) the representations and warranties of FNB and certain of the Directors of
FNB ("the Representing Directors") shall be true as of the Effective Date and
FNB and the Bank shall have performed all of the obligations and complied
with all of the covenants required by the Agreement to be performed or
complied by it on or prior to the Effective Date and First Virginia shall
have received from FNB officers' certificates in such detail as First
Virginia may reasonably request dated the day of the Effective Date and
signed by the president, cashier or secretary to the foregoing effect; (ii)
there shall not have been any material adverse changes in the financial
position, results of operations, assets, liabilities or business of FNB or
the Bank from June 30, 1993 to the Effective Date; (iii) First Virginia's
audit of FNB and the Bank conducted pursuant to Section 4.5 of the Agreement
shall reflect shareholders' equity of FNB of not less than $7.392 million
which was FNB's shareholders' equity as of June 30, 1993; (iv) First Virginia
shall have received a written opinion, dated as of the Effective Date, from
McCampbell & Young, counsel to FNB, in form satisfactory to First Virginia,
which shall cover matters customary in transactions of this nature; (v) all
of the events set forth in Section 2 of the Agreement shall have occurred,
including all regulatory, stockholder and board approvals; (vi) no action or
proceeding against First Virginia, FNB or the Bank or the consummation of the
transactions contemplated by the Agreement shall have been instituted or
threatened or any investigations undertaken that might eventuate in any such
action or proceeding; and (vii) all requisite consents, undertakings,
agreements, exercises and terminations of any third parties which FNB and the
Bank covenant to use their best efforts to obtain shall have been obtained or
waived by First Virginia.
Unless waived in writing by either FNB or the Bank in the sole
discretion, all obligations of FNB and the Bank shall be subject to the
fulfillment prior to or at the Effective Date of the following conditions:
(i) the representations and warranties of First Virginia contained in the
Agreement will be true as of the Effective Date, shall be deemed made again
and as of the Effective Date and shall be true as if so made again and First
Virginia shall have performed all obligations and complied with all covenants
required by the Agreement to be performed or complied with it on or prior to
the Effective Date and FNB shall have received from First Virginia an
officer's certificate in such detail as FNB may reasonably request dated the
Effective Date and signed by its president, cashier or secretary to the
foregoing effect; (ii) all of the events set forth in Section 2 of the
Agreement shall have occurred, including all regulatory, stockholder and
board approvals; (iii) no action or proceeding against FNB or the Bank or
First Virginia or the consummation of the transactions contemplated by the
Agreement shall have been instituted or threatened or any investigations
undertaken that might eventuate in any such action or proceeding; (iv) there
shall not have been any significant adverse change in the financial position,
results of operations, assets, liabilities or business of First Virginia from
June 30, 1993 to the Effective Date, provided, however, that a merger or
acquisition or the announcement of a merger or acquisition involving First
Virginia or a subsidiary of First Virginia and requiring the issuance of
First Virginia Common or Preferred Stock or cash will not be considered for
purposes of this condition as an "adverse change" in the financial position,
results of operations, assets, liabilities or business of First Virginia; and
(v) FNB shall have received a written opinion, dated as of the Effective
Date, of inhouse counsel to First Virginia, in form satisfactory to FNB,
which shall cover matters customary in transactions of this nature.
Applications have been filed with the Federal Reserve Board and the
Tennessee Commissioner of Financial Institutions and the Virginia State
Corporation for approval of the Merger. As of the date of this
Prospectus\Proxy Statement, no approvals have been obtained.
Accounting Treatment
The Merger is to be accounted for as a purchase in accordance with
generally accepted accounting principles as outlined in Accounting Principles
Board Opinion No. 16.
Termination and Amendment
The Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Date:
(a) By mutual consent of the Board of Directors of First Virginia and
the Board of Directors of FNB; or
(b) By the Board of Directors of either FNB or First Virginia (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in the
Agreement) in the event of a breach by the other Party of any representation
or warranty contained in the Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the breaching
Party of such breach; or
(c) By the Board of Directors of either FNB or First Virginia (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant or other agreement contained in the
Agreement) in the event of a material breach by the other Party of any
covenant or agreement contained in the Agreement which cannot be or has not
been cured within thirty (30) days after the giving of written notice to the
breaching Party of such breach; or
(d) By the Board of Directors of either FNB or First Virginia if the
Federal Reserve Board or the Tennessee Commissioner of Financial Institutions
deny approval of the Merger and the time period for all appeals or requests
for reconsideration has run or if the Comptroller of the Currency, the
Tennessee Commissioner of Financial Institutions or the Federal Reserve Board
deny the conversion of the Bank into a state chartered, Federal Reserve
member bank; or
(e) By the Board of Directors of either FNB or First Virginia in the
event the Merger should not become effective within nine months of the
Agreement, in each case only if the failure to consummate the Merger is not
caused by any breach of the Agreement by the Party electing to terminate; or
(f) By the Board of Directors of either FNB or First Virginia (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant or other agreement contained in the
Agreement) in the event that any of the conditions precedent to the
obligations of such Party to consummate the Merger cannot be satisfied or
fulfilled within nine months of the Agreement; or
(g) By the Board of Directors of First Virginia, at any time prior to
the 60th day after execution of the Agreement in the event that First
Virginia determines, after its audit of FNB and the Bank referred to in
section 4.5 of the Agreement, that the financial conditions of FNB or the
Bank do not meet the standards described in section 6.3 of the Agreement or
that a fact or circumstance exists with respect to the Merger which
materially and adversely impacts one or more of the economic benefits to
First Virginia of the Merger; or
(h) By the Board of Directors of First Virginia if more than 25% of the
holders of FNB stock file for appraisal rights under Tennessee law or if more
than 20% of the holders of FNB stock vote against the Merger; or
(i) By the Board of Directors of FNB if the price of First Virginia
Common Stock declines to $33 per share or less for any period of ten
consecutive working days prior to the Effective Date.
The Agreement and the Plan may be amended at any time prior to the
Effective Date; provided that any such amendment is in writing and is
approved by the Board of Directors of each of the Parties, and provided,
further, that subsequent to the meeting in which the Agreement is approved by
shareholders of FNB, no amendment may be made to the exchange rate which
decreases the consideration to FNB shareholders without approval of FNB's
shareholders.
Effective Date of Merger
The Effective Date of the Merger shall be the date specified in the
Articles of Merger filed with both the Tennessee Secretary of State pursuant
to the Tennessee General Corporation Act and the Articles of Merger filed
with the Virginia State Corporation Commission pursuant to the Virginia Stock
Corporation Act.
Operations After The Merger
After consummation of the Merger, the First National Bank of Knoxville
will continue to conduct a banking business as a wholly owned First Virginia
member bank under the name "First Knoxville Bank". First Knoxville Bank will
be a Federal Reserve member bank chartered under the laws of the State of
Tennessee.
Effect on FNB Employee Benefit Plans
Following the Merger, employees of FNB and the Bank will be eligible to
participate in all of First Virginia's employee benefit programs provided
they meet the eligibility requirements of those plans. Service with FNB and
the Bank shall be considered service with First Virginia for purposes of
determining eligibility under all these programs. With respect to First
Virginia's Pension Trust Plan ("Pension Plan"), FNB and Bank employees will
be credited with years of employment with FNB and Bank prior to the Effective
Date of the Merger for purposes of determining eligibility and vesting under
the Pension Plan, but not for purposes of determining accrued benefits. With
respect to First Virginia's Employees Thrift Plan ("Thrift Plan"), for
purposes of determining eligibility under the Thrift Plan, FNB and Bank
employees will be credited with years of employment with FNB and the Bank
prior to the Effective Date of the Merger. With respect to First Virginia's
Nonqualified Profit Sharing Plan, all FNB and Bank employees as of the
Effective Date of the Merger who are eligible shall be able to immediately
participate in that Plan and benefits for plan year 1994 shall be prorated
based on the period of time during the year that they are covered by that
Plan. Any sick or vacation leave that has been accrued by a FNB or Bank
employee as of the Effective Date shall not be disturbed and the number of
days of paid vacation which an employee at FNB or the Bank has accrued as of
the Effective Date shall not be adversely affected by the Merger.
With respect to the Bank's 401(k) Profit Sharing Plan ("Bank's Plan"),
at First Virginia's discretion, it shall either be terminated, in which case
those participants in the Bank's Plan will be eligible to receive a
distribution of their vested interest in the Bank's Plan or, if it is legally
or operationally practical to do so and provided there is no adverse income
tax effect to any Bank Plan participant, it will be merged into the Thrift
Plan (which is also a qualified 401(k) plan) in which case assets would be
transferred to the Thrift Plan and Bank's Plan's participants would be
credited in Thrift Plan with their vested interests (i.e. a 100% interest)
under the Bank's Plan.
With respect to those officers of FNB who have options to acquire FNB
Common Stock, those options shall not be converted into options to acquire
First Virginia Common Stock. On the Effective Date, all such options to
purchase FNB Common Stock, whether exercisable or non-exercisable, shall be
cancelled in exchange for a cash payment (less all applicable withholding
taxes) equal to (a) the number of FNB shares subject to option times (b) the
difference between (i) .20 times the average of the closing prices of First
Virginia Common Stock for each of the 10 trading days prior to the Closing
Date provided, however, that if that average price is below $37.50 per share,
then the average shall be deemed to be $37.50 for purposes of this
calculation and (ii) $5.00 which is the exercise price. Each FNB option
holder will have the choice of either (a) exercising his option prior to the
Effective Date or (b) waiting until the Effective Date, at which time the
option will automatically convert into the nontransferable right to receive
cash from First Virginia in the amount described above. See "FNB-Management-
Executive Compensation".
Interests of Certain Persons in the Transaction
First Virginia has entered into an Addendum to the Restated Employment
Agreement of Williams E. Arant, Jr., President and Chief Executive Officer of
FNB which provides that First Virginia will honor the terms of the Restated
Employment Agreement for the rest of its term. The Addendum also provides
that if Williams E. Arant, Jr. terminates his employment (other than because
of death or permanent disability) with FNB prior to the Effective Date of the
Merger or terminates his employment (other than because of death or permanent
disability) with First Knoxville Bank at any time during the three month
period following the Effective Date of the Merger, then any cash payment
payable to him from the cancellation of his stock options, as described in
the immediately preceding paragraph, would be forfeited. Harold Pierce, who
was one of the original organizers of FNB, will receive a fee from First
Virginia of $100,000 (provided the Merger is consummated) in connection with
his services with respect to bringing the parties together. Mr. Pierce also
now has an oral agreement with John H. Schaad, Chairman of the Board of FNB,
Rufus H. Smith III, a director of FNB, and Gordon E. Inman, a director of
FNB, which provides for those three individuals to make paymants to Mr.
Pierce in the amounts of $25,000, $25,000, and $12,500, respectively
(provided the merger is consumated), in connection with Mr. Pierce's
assistance in bringing First Virginia and FNB together.
Regulatory Review and Approvals
The Merger is subject to approval by the Federal Reserve Board (the
"Federal Reserve") under the Bank Merger Act and under Section 3(a) of the
Bank Holding Company Act (the "BHCA"). Under the BHCA, the Federal Reserve
must withhold approval of the acquisition if it finds that the acquisition
would result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or attempt to monopolize the business of banking in
any part of the United States. In addition, the Federal Reserve may not
approve the acquisition if it finds that the effect of the acquisition may be
substantially to lessen competition or tend to create a monopoly, or if the
acquisition would in any other manner be in restraint of trade unless it
finds that the anticompetitive effects of the acquisition are clearly
outweighed in the public interests by the probable effect of the transactions
in meeting the convenienceand needs of the communities to be served. In
ruling upon the application, the Federal Reserve must also take into
consideration the financial and managerial resources and future prospects of
the existing and proposed institutions and the convenience and needs of the
communities to be served.
First Virginia has filed an application with the Federal Reserve Bank of
Richmond for approval under the BHCA. In addition, it has also filed an
application on behalf of the Bank with the Federal Reserve Bank of Atlanta to
become a member of the Federal Reserve.
The Merger is also subject to the requirements of the Tennessee Regional
Reciprocal Banking Act, Chapter 12 of Title 45 of the Tennessee Code,
Annotated. The Tennessee Commissioner of Financial Institutions may
disapprove the Merger if it finds the effect of the Merger would be
substantially to lessen competition in Tennessee and is not clearly
outweighed by other factors that advance the public interest of the State of
Tennessee. First Virginia and FNB have filed an application with the
Tennessee Department of Financial Institutions for approval of the Merger
under the Tennessee Regional Reciprocal Banking Act. The Bank has also filed
an application with the Tennessee Department of Financial Institutions to
convert to a state-chartered bank from a national bank.
First Virginia Common Stock
First Virginia is authorized to issue 60,000,000 shares of common stock
of a par value of $1 per share and 3,000,000 shares of preferred stock of a
par value of $10 per share. As of December 31, 1993, there were
approximately 32,444,000 shares of common stock and 80,000 shares of
convertible preferred stock outstanding.
Holders of the common stock are entitled to one vote per share on all
matters presented to the shareholders. There is no provision for cumulative
voting. Subject to the preferential rights of the holders of the preferred
stock of First Virginia, each stockholder is entitled to receive a pro rata
share of such dividends as may be declared by the Board of Directors out of
the funds available therefor, and to share ratably in the net assets in event
of liquidations. All of the shares which are issued and outstanding are
fully paid and nonassessable. No holder of any share of common stock has any
preemptive right to purchase any security which First Virginia may hereafter
issue and the common stock is not subject to any conversion rights,
redemption provisions, or sinking fund provisions. First Virginia is
prohibited from redeeming any of its common stock if any preferred stock
dividends are in arrears.
Certain Provisions of First Virginia's Articles of Incorporation and First
Virginia's Shareholder Rights Plan
First Virginia's Articles of Incorporation contain certain provisions
which sometimes have been characterized, and under certain circumstances
could operate as anti-takeover provisions. These measures include staggered
terms for directors and 80% vote requirements for shareholder approval of
certain actions as described below. These provisions may have the effect of
strengthening the position of incumbent management by making it more
difficult to change the composition of the Board of Directors. In addition,
with respect to a merger or other business combination, the 80% shareholder
approval requirement may make it more difficult for shareholders who might
wish to participate in a tender offer to do so.
First Virginia's Articles of Incorporation (i) classify the Board into
three classes, as nearly equal in number as possible, each of which will
serve for three years, with one class being elected each year; (ii) increase
to 80% the shareholder vote required to vote certain mergers, sale of assets,
liquidations and other significant transactions involving First Virginia and
any beneficial holder of five percent or more of First Virginia's voting
stock unless the transaction is either (a) approved by at least a majority of
the Continuing Directors (as that term is defined in the Articles), or (b)
certain minimum price and procedural requirements are met; (iii) increase to
80% the shareholder vote required to remove directors, and (iv) prevent the
circumvention of the foregoing provisions by increasing to 80% the
shareholder vote required to repeal or amend the foregoing provisions of the
Articles.
First Virginia's Bylaws include a provision which requires that, in
order to adopt, amend or repeal the Bylaws, an affirmativevote of a majority
of First Virginia's Board of Directors or an affirmative vote of the
shareholders holding 80% of the voting power of First Virginia Common Stock
would be necessary. Under Virginia law, unless other provision is made in
the Articles of Incorporation or Bylaws, a majority of the directors or a
majority of the shareholders present entitled to vote may adopt, amend or
repeal the Bylaws. First Virginia's Bylaws also provide that special
meetings of shareholders may be called at the written request of the holders
of 80% of the voting stock of First Virginia, or a majority of the Continuing
Directors.
On July 27, 1988 the Board of Directors of First Virginia adopted a
Shareholder Rights Plan and declared a distribution of one right for each
outstanding share of First Virginia Common Stock. The Shareholder Rights
Plan is designed to protect shareholders against unsolicited attempts to
acquire control of First Virginia whether through accumulation of shares in
the open market or tender offers that do not offer what the Board believes to
be an adequate price to all shareholders.
The Shareholder Rights Plan provides for the distribution of one Stock
Purchase Right as a dividend for each outstanding share of First Virginia
Common Stock. Initially, the Rights are represented by and trade with the
common stock certificates and the Rights are not exercisable. Each Right,
when triggered, will entitle shareholders to buy $180 worth of stock for $90.
Purchased stock may be in the form of preferred stock or, at the election of
First Virginia's Board of Directors, common stock or a combination of
preferred and common stock. The Rights may be exercised only if a person or
group acquires 20% or more of First Virginia's Common Stock or announces a
tender offer that would result in the ownership of 20% or more of First
Virginia Common Stock. At such time, the Rights will begin to trade
independently from the Common Stock. At no time do the Rights have any
voting power.
Under certain circumstances involving the acquisition of 20% of First
Virginia's Common Stock, all Right holders except the acquiror may purchase
stock of First Virginia at a discounted price. If First Virginia merges with
an acquiror that has acquired 20% of First Virginia's stock without Board
approval, all Rights holders except the acquiror may purchase the acquiror's
shares at a similar discount.
The Rights will expire on August 8, 1998. First Virginia Common Stock
certificates issued after August 8, 1988 (as well as those issued as a result
of the Merger) contain or will contain a legend evidencing the existence of
the Rights applicable to those shares.
The Rights have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire First
Virginia (other than pursuant to a "permitted offer" or with First Virginia's
prior approval) without conditioning the offer on the Rights being deemed or
substantially all the Rights being acquired. However, the Rights should not
interfere with any merger or other business combination approved by First
Virginia (other than with an Acquiring Person as that term is defined under
the Plan) because the Rights are redeemable under those circumstances.
Certain Differences in Rights of Shareholders
If the Merger is consummated, the shareholders of FNB, a Tennessee
corporation registered as a bank holding company under the BHCA will become
shareholders of First Virginia, a Virginia corporation registered as a bank
holding company under the BHCA. The following is a summary of some of the
significant provisions pertaining to shareholders' rights under the laws of
Tennessee and Virginia, and the Articles of Incorporation of First Virginia
and the charter of FNB. This summary is not intended to be relied upon as an
exhaustive list or a detailed description of the provisions discussed and is
qualified in its entirety by the documents referred to herein and by the
corporation and banking laws of Tennessee and Virginia to which the FNB
shareholders are referred to. It should be noted that effective January 1,
1988, Tennessee corporations are governed by a new corporate statute, the
Tennessee Business Corporation Act (the "TBCA"). The effect of the TBCA is
discussed below.
Right of Inspection
Under Tennessee law a shareholder of FNB has the right, upon five (5)
days written notice of demand, to inspect and copy certain records of FNB
including its charter, bylaws, minutes of shareholders' meetings, records of
all actions taken by shareholders within the past three years, resolutions of
the Board of Directors relating to the creation of the rights, preferences
and limitations of any class or series of outstanding stock and all written
communications to and certain financial statements meeting certain
requirements prepared for shareholders within the past three years and a list
of shareholders containing an alphabetical listing of the name and address of
each shareholder and the number and class of shares held by said
shareholders. Upon five (5) days' written notice of demand, a shareholder of
FNB also has the right to inspect and copy excerpts from the meetings of
FNB's Board of Directors, FNB's accounting records and the record of
shareholders. A demand by a shareholder to inspect corporate records must be
made in good faith and for a proper purpose, a shareholder must describe with
reasonable particularity his purpose and the records to be inspected, and the
records must be directly related to that purpose.
The Virginia corporate statutes permit any First Virginia shareholder,
upon written request submitted at least five (5) days in advance to inspect
certain lists of materials including articles of incorporation, bylaws and
certain minutes and permit First Virginia shareholders who have held their
shares for six months or more or who own five percent (5%) or more of the
outstanding stock of First Virginia to inspect records of account, minutes,
and records of actions taken by shareholders upon written demand submitted at
least five (5) days in advance stating the purpose of such inspection and
meeting certain other statutory requirements.
Amendment of Charter; Merger, Consolidation or Sale of Substantially All of
the Assets; Dissolution
Under Tennessee law, most amendments to FNB's charter and sale of all or
substantially all of its assets (other than in the usual or regular course of
business), or dissolution may be proposed by the Board of Directors for the
submission to a vote of the shareholders. Approval by holders of a majority
of all votes entitled to be cast shall be required for such actions to take
effect, unless the charter of FNB or a specific statute provides for a
greater vote or a voting group. In some circumstances, the directors may
require a greater vote. FNB's charter does not require a greater vote to
amend the charter. Certain charter amendments do not require shareholder
approval. If shareholder approval is required and voting groups are
involved, a majority of the group with respect to which the amendment would
create dissenters' rights and certain general voting and quorum requirements
for other voting groups are required. In the case of a plan or merger or
share exchange, shareholder approval by both corporations is usually, but not
always required. Actions by the shareholders of the surviving corporation is
not required if certain conditions are met. Authorization of a plan of
merger or share exchange requires majority approval by each voting group
entitled to vote separately on the plan by a majority of all the votes
entitled to be cast on the plan by that voting group. Separate voting by
voting groups is required under certain circumstances. Tennessee law makes
provisions for the rights of dissenters in cases of certain mergers, share
exchanges or sales of all or substantially all of the assets of FNB (other
than in the usual or regular course of business), certain dissolutions and in
the case of certain charter amendments.
Under Tennessee banking law, in order for the Bank (i) to amend its
charter to change its authorized capital, to change the number and par value
of its shares, to issue and sell capital notes or debentures, to acquire or
abandon trust powers, (ii) to consummate a merger, or (iii) to liquidate, the
corporation must apply to and obtain the approval of the Tennessee
Commissioner of Financial Institutions. In addition, such actions must be
approved by a two-thirds vote of the holders of shares entitled to vote on
the issue. The Tennessee Commissioner of Financial Institutions can waive
certain statutory requirements in specified emergency situations. Any
amendment to the charter other than those mentioned above may be approved by
a majority vote of the holders of the outstanding voting shares of the
corporation. Preservation of the rights of the Bank's dissenters in merger
consolidation and sales situations is provided by statute.
Under Virginia law, an amendment to First Virginia's Articles of
Incorporation, a merger, share exchange, sale of all or substantially all of
its assets (other than in the regular course of business), or dissolution may
be authorized by resolution of its Board of Directors setting forth the
action and directing that it be presented to the shareholders of First
Virginia. Approval by holders of more than two-thirds of the shares of First
Virginia outstanding, or if there is a number of classes outstanding by
holders of more than two-thirds of each class of First Virginia shares
outstanding shall be required for such actions to take effect, unless the
Articles of Incorporation of First Virginia provide for a greater or lesser
vote which can in no event be less than a majority of all votes cast, either
in total or by each class if different classes are present. First Virginia's
Articles of Incorporation require an affirmative vote of the holders of at
least 80% of the shares of each class of First Virginia Common Stock
outstanding in certain situations described herein. Article XVIII of First
Virginia's Articles of Incorporation provide that except as otherwise
provided in the Articles, the Articles may be amended by the affirmative vote
of a majority of all votes entitled to be cast by each voting group of First
Virginia entitled to vote on the amendment at a meeting at which a quorum of
each voting group exists. Virginia law makes provisions for the rights of
dissenters in cases of merger, share exchange or sale of all or substantially
all of the assets of First Virginia (other than in the regular course of
business).
Provisions of First Virginia's Articles of Incorporation
First Virginia's Articles of Incorporation contain provisions setting
forth the name and purpose of the corporation, denying preemptive rights to
shareholders, naming the initial registered office and agent and providing
for indemnification of directors. Under First Virginia's Articles of
Incorporation, First Virginia has the authority to issue 60 million shares of
common stock, $1.00 par value and 3 million shares of preferred stock, $10.00
par value. The Articles state that preferred shares may be issued in series
with the relative rights of each series being designated by the Board of
Directors at the time of the issuance. The preferred stock votes equally
with the common stock. Preferred stock is preferred over common stock as to
dividends and as to the amount to be received on voluntary or involuntary
liquidation. Common shares receive dividends and an allocation of assets in
the event of liquidation following the satisfaction of all debts of the
corporation, including the satisfaction of the rights of the preferred
shareholders.
First Virginia's Articles of Incorporation also contain certain
provisions which have sometimes been characterized, and under certain
circumstances could operate as antitakeover provisions. These measures
include staggered terms for directors and 80% vote requirements for
shareholder approval of certain actions as described below. These provisions
may have the effect of strengthening the position of incumbent management by
making it more difficult to change the composition of the Board of Directors.
In addition, with respect to a merger or other business combination, the 80%
shareholder approval requirement may make it more difficult for shareholders
who might wish to participate in a tender offer to do so.
First Virginia's Articles of Incorporation (i) classifies the Board into
three classes, as nearly equal in number as possible, each of which will
serve for three years, with one class being elected each year, (ii) increases
to 80% the shareholder vote required to vote certain mergers, sale of assets,
liquidations and other significant transactions involving First Virginia and
any beneficial holder of five percent or more of First Virginia's voting
stock unless the transaction is either (a) approved by at least a majority of
the Continuing Directors (as that term is defined in the Articles), or (b)
certain minimum price and procedural requirements are met; (iii) increases to
80% the shareholder vote required to remove directors, and (iv) prevent the
circumvention of the foregoing provisions by increasing to 80% the
shareholder vote required to repeal or amend the foregoing provisions of the
Articles.
First Virginia's Bylaws include a provision which requires that, in
order to adopt, amend or repeal the Bylaws, an affirmative vote of a majority
of First Virginia's Board of Directors or an affirmative vote of the
shareholders holding 80% of the voting power of First Virginia Common Stock
would be necessary. Under Virginia law, unless other provision is made in
the Articles of Incorporation or Bylaws, a majority of the directors or a
majority of the shareholders present entitled to vote may adopt, amend or
repeal the Bylaws. First Virginia's Bylaws also provide that special
meetings of shareholders may be called at the written request of the holders
of 80% of the voting stock of First Virginia, or a majority of the Continuing
Directors.
Provisions of FNB Charter
FNB's charter contains provisions setting forth the name, duration,
address and purpose of the corporation. The charter authorizes the issuance
of 5,000,000 shares of FNB Stock. This includes 4,000,000 common shares and
1,000,000 preferred shares. FNB's charter calls for the election of its
directors to be done at the annual meeting of the shareholders and each
director shall be elected for a term of one year or until his successor shall
be elected and shall qualify.
Election of and Vacancies of the Board of Directors
Both Tennessee and Virginia law provide for election of directors
annually by shareholders, but permit staggered longer terms only if provided
for in the articles of incorporation under Virginia law or in the charter
under Tennessee law. First Virginia's Articles of Incorporation provide for
three year terms for directors with approximately one-third of the total
number of directors being elected each year. Also, cumulative voting for
directors is not permitted under Tennessee law unless provided for in the
charter. First Virginia's Articles of Incorporation do not permit cumulative
voting for the election of directors. Tennessee permits the shareholders or
the board to fill the vacancy unless the vacancy was filled by a director
elected by a voting group. Also, if the board constitutes less than a
quorum, a majority vote of the remaining board is required to fill a vacancy.
First Virginia's Articles provide that newly created directorships resulting
from an increase by not more than two in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be
filled by the affirmative vote of a majority of the directors then in office,
whether or not a quorum exists. Any director or the entire Board of
Directors may be removed from office at any time, but only with the
affirmative vote of the holders of at least four-fifths of the stock entitled
to vote generally in the election of directors at a meeting called for that
purpose. Under FNB's Bylaws, the shareholders elect the Board of Directors.
Any vacancy, including a vacancy resulting from an increase in the number of
directors, may be filled by a vote of a majority of the directors then in
office and the director shall serve until the shareholders elect a successor.
Vacancies occurring by reason of the removal of directors without cause shall
be by an affirmative vote of a majority in voting power of the shareholders
entitled to vote.
Sources of Dividends
The Board of Directors of FNB may authorize the payment of dividends,
provided that after giving effect to the payment of any such dividends (i)
FNB will be able to pay its debts as they become due in the usual course of
business and (ii) FNB's total assets will not be less than the sum of its
total liabilities plus the amount necessary to satisfy upon dissolution the
rights of shareholders whose preferential rights are superior to those
receiving the distribution if the corporation were dissolved at the time of
the distribution.
Virginia law provides for the declaration of dividends by the Board of
Directors of First Virginia. Dividends may not be paid if First Virginia,
after making such distribution, would be unable to pay it debts as they
become due in the usual course of business or would have total assets of 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 distribution, to satisfy the
preferential rights upon dissolution of shareholders whose preferential
rights are superior to those receiving the distribution. First Virginia's
principal source of funds for dividend payments is dividends it receives from
its member banks. However, under Federal law, the Federal Reserve restricts
the total dividend payments of a member bank in any calendar year to the net
profits of that year as defined combined with retained profits for the two
preceding years.
Dissenters' Rights
A detailed discussion of FNB's dissenters' rights with respect to the
Merger is set forth under "Rights of Dissenting Shareholders". Similar
rights are provided by statute in Virginia. Under Virginia law, holders of
shares of stock listed on the New York Stock Exchange are not entitled to
dissenters' rights if such shareholders will receive for their shares stock
which is listed on a national securities exchange, unless the Articles of
Incorporation provide for dissenters' rights or the transaction is an
"affiliated transaction". An affiliated transaction is defined by Virginia
statute and generally covers transactions between First Virginia and its
subsidiaries. First Virginia's Common Stock is listed on the New York and
Philadelphia Stock Exchanges and First Virginia's Articles of Incorporation
do not require the granting of dissenters' rights to shareholders. In
addition, First Virginia's shareholders will not be voting on the Merger.
Therefore, under the circumstances listed above, shareholders of First
Virginia will not be entitled to dissenters' rights. If dissenters' rights
apply under Virginia law to a transaction involving First Virginia, notice of
those rights must be provided with the notice to First Virginia shareholders
of the meeting at which a vote is to be taken on the action. Such notice
must be sent within ten days of the taking of such action if a vote is not
required by statute. To be entitled to payment under the statute, a
dissenter must notify First Virginia in writing prior to the meeting of his
intent to demand payment and he must not vote in favor of the action. Within
ten days following effectuation of such an action, a notice must be sent by
First Virginia to the dissenter notifying him of his rights under the statute
and the method of exercising such rights. The procedure for exercising such
rights must include a deposit of the affected certificates of stock and a
demand or payment which must not be made less than 30 days nor more than 60
days from the delivery of First Virginia's notice. Within 30 days of
receiving a dissenter's demand, First Virginia must send him cash in the
amount of its estimate of the fair value of the shares plus interest from the
date when the action became effective. Also, First Virginia must explain how
it arrived at its fair value, provide certain financial data and provide an
additional notice of the dissenter's rights contained in the statute. If the
dissenter disagrees with the estimate of value or the amount of interest, he
must notify First Virginia in writing providing his own estimate or
calculation. If First Virginia and the dissenter do not reach agreement, the
statute provides for a judicial determination of value. In such a
circumstance, the court has the power to award costs and attorney's fees to
either party if the party is found to have acted in bad faith.
Indemnification
Tennessee law requires under certain circumstances that a corporation
indemnify its directors unless limited by charter. Similarly, a corporation
must indemnify officers and may indemnify employees ("Indemnitees") in
actions brought against them by reason of the fact that the Indemnitee was or
is an officer, director or employee of the corporation provided such
Indemnitee satisfies certain standards of conduct. Such indemnification of a
director is not permitted in connection with a suit in which the director is
judged liable to the corporation for a breach of duty of loyalty, acts or
omissions made in bad faith or unlawful distributions. A court shall award
indemnification on application of Indemnitee, even if denied by the
corporation, if the Indemnitee is wholly successful in the defense of any
proceeding to which he was a party because he was an officer, director or
employee of the corporation or if it is determined that the Indemnitee is
fairly and reasonably entitled to indemnification in view of all the
circumstances. FNB's charter contains specific indemnification provisions
establishing the rights of directors and officers to indemnification.
Virginia law permits indemnification of First Virginia directors,
officers or employees ("Indemnitees") who become parties to or are threatened
to be made parties to any threatened, pending or completed action or
proceeding against the Indemnitee by reason of the fact that he is or was a
director, officer, employee or agent of First Virginia or was serving at its
request as a director, officer, employee or agent of another corporation,
partnership, joint venture or other enterprise against expenses, including
attorney's fees, judgment, fines, taxes and penalties. The indemnitee
involved must have acted in good faith and in a manner he reasonably believed
to be in, or in certain circumstances not opposed to, the best interests of
First Virginia, and in a criminal proceeding the Indemnitee must have no
reasonable cause to believe that his conduct was unlawful. Virginia law
contains restrictions on indemnification of Indemnitees of First Virginia in
listed situations and requires indemnification in other listed situations. A
court can order indemnification in certain specified circumstances.
Indemnification, other than mandatory or court ordered, must be authorized in
each specific case pursuant to Virginia law.
First Virginia's Articles of Incorporation mandate indemnification of
directors against liability and reasonable expenses incurred in proceedings
against them relating to the manner in which they perform their duties unless
they have been guilty of willful misconduct or a knowing violation of
criminal law. The Articles of Incorporation provide that in any proceeding
by a shareholder in the right of First Virginia or on behalf of shareholders
of First Virginia, no damages may be assessed against the director arising
out of a single transaction, occurrence or course of conduct. This
elimination of liability is not applicable if the director engages in willful
misconduct or in knowing violation of criminal law or any federal or state
securities law.
Shareholders' Meetings
Tennessee law permits special meetings of shareholders to be called by
the corporation's Board of Directors, holders of not less than 10% of all the
shares entitled to vote at the meeting (unless the charter states otherwise),
or any other person authorized by the corporation's charter or bylaws. FNB's
bylaws provide that a special meeting of FNB shareholders may be called by
the chairman of the Board or by the directors or can be called by the
president or the holders of at least ten percent (10%) of all votes entitled
to be cast on the issue.
Virginia law provides that special meetings shall be held on call of the
chairman of the board, the president or the board of directors. Under First
Virginia's bylaws, special meetings may be called by the president or
secretary only at the written request of a majority of the directors,
provided that, if as of the date of the request for such special meeting
there is a Related Person (as defined in First Virginia's articles of
incorporation) such a majority shall include a majority of the Continuing
Directors. In addition, First Virginia's bylaws provide that a special
meeting may be called by holders of not less than 80% of the voting stock of
First Virginia.
Federal Income Tax Consequences
The Merger is intended to be a reorganization pursuant to Sec. 368(a) of
the Internal Revenue Code of 1986 as amended (the "Code") and in accordance
with the Agreement, both First Virginia and FNB will receive an opinion to
that effect from Christopher M. Cole, Vice President and Assistant General
Counsel of First Virginia. The federal income tax consequences summarized
below are based on the assumption that the Merger will qualify as a
reorganization. Federal income tax consequences to the FNB shareholder will
depend on whether the shareholder exchanges FNB stock for First Virginia
Common Stock, cash or a combination of First Virginia Common Stock and cash.
If a FNB shareholders exchanges FNB stock for cash, the federal income tax
consequences will also depend on whether certain related shareholders receive
First Virginia stock or cash.
Exchange of FNB Common Stock For First Virginia Common Stock
No gain or loss will be recognized by a FNB shareholder who receives
only First Virginia Common Stock in exchange for FNB Common Stock. Where
cash is received by a shareholder of FNB in lieu of a fractional share of
First Virginia Common Stock, such cash will be treated as received by the
shareholder as a distribution in redemption of his fractional share interest;
gain or loss will be recognized equal to the difference between the amount of
cash received and the shareholders' tax basis in the fractional share
interests, and such gain or loss will be capital gain or loss provided that
the FNB Common Stock is held as a capital asset. The tax basis of First
Virginia Common Stock by a shareholder who exchanges all of his FNB Common
Stock for First Virginia Common Stock is equal to the tax basis of the FNB
Common Stock exchanged therefore, and, provided the stock surrendered was a
capital asset in the hands of the FNB shareholder, the holding periods of the
First Virginia Common Stock received by the shareholder of FNB will include
the holding periods for the shares of FNB Common Stock.
A FNB shareholder who does not elect to exchange any shares of FNB
Common Stock for cash may nevertheless receive cash for some shares of FNB
Common Stock if necessary for at least 10.1% of the outstanding shares of FNB
Common Stock to be exchanged for cash. See "The Merger - Cash Option." In
that case, the following discussion under "Exchange of FNB Common Stock For
Cash and First Virginia Common Stock" would be applicable.
Exchange of FNB Common Stock for Cash and First Virginia Common Stock
A FNB shareholder who receives both First Virginia Common Stock and cash
will realize a gain, but not in excess of the cash received, and the exchange
of FNB Common Stock for First Virginia Common Stock will not be subject to
federal income tax. If the Common Stock held by the FNB shareholder is a
capital asset at the time of the Merger, the gain will be treated as a
capital gain unless the receipt of the cash is treated as having the effect
of a dividend. If the receipt of the cash is treated as having the effect of
a dividend, only the portion of the recognized gain that is not in excess of
a rateable share of the accumulated earnings and profits is taxable as a
dividend.
The cash received by an FNB shareholder will not be treated as a
dividend if the requirements of Sec. 302 of the Code are satisfied,
determined in conjunction with the application of Sec. 318(a) of the Code
summarized herein (relating to constructive ownership of stock). Under a
Supreme Court decision (Clark v. Commissioner of Internal Revenue, 489 U.S.
726 (1989)), to determine whether those requirements are satisfied, a
shareholder should be treated as receiving shares of First Virginia Common
Stock in the Merger (instead of the cash actually received) and then
receiving cash from First Virginia in a hypothetical redemption of those
shares. That hypothetical redemption will satisfy the requirements under
Sec. 302 if it (i) is "not essentially equivalent to a dividend" within the
meaning of Sec. 302(b)(1) of the Code or (ii) has the effect of a
"substantially disproportionate" redemption of First Virginia Common Stock
within the meaning of Sec. 302(b)(2) of the Code. Whether the cash received
by a FNB shareholder in hypothetical redemption of shares of First Virginia
Common Stock is essentially equivalent to a dividend depends on the
individual facts and circumstances of each shareholder. However, to qualify
for treatment as a gain rather than a dividend, the hypothetical redemption
must result in a meaningful reduction of a FNB shareholder's proportionate
interest in First Virginia. The hypothetical redemption of shares of First
Virginia Common Stock will be substantially disproportionate if the ratio of
the shareholder's ownership of First Virginia Common Stock after the
hypothetical redemption is less than 80% of the ratio of First Virginia
Common Stock owned by the shareholder before the redemption.
A shareholder's tax basis in First Virginia Common Stock received will
be such shareholder's basis in FNB Common Stock, decreased by any cash
received and increased by any gain recognized (including any gain treated as
a dividend). The holding period for First Virginia Common Stock received by
the shareholder of FNB will include the holding period for the shares of FNB
Common Stock, provided the stock surrendered was a capital asset in the hands
of the FNB shareholder. If cash is received by a shareholder of FNB in lieu
of a fractional share of First Virginia Common Stock, the shareholder will
recognize gain or loss as if the fractional share had been received and then
redeemed for the cash.
Exchange of FNB Common Stock for Cash
Any FNB shareholder who exchanges all of his shares of Common Stock for
cash should consult his tax advisor to determine whether the exchange is to
be taxed as a sale of stock or whether the cash received is to be taxed as a
dividend. In addition, any shareholder who makes an election to receive cash
for all his shares should be aware that he may, in fact, receive some First
Virginia Common Stock under the proration provisions of the Agreement.
The criteria for determining the tax treatment of exchanging all of a
shareholders's shares of FNB Common Stock for cash are not certain. Based on
the principles enunciated in Clark v. Commissioner, a FNB shareholder should
be treated as having exchanged the FNB Common Stock for First Virginia Common
Stock and then receiving cash in a hypothetical redemption of those shares
(the constructive ownership rules of Sec. 318 of the Code applying). The cash
received in the hypothetical redemption should result in the recognition of a
gain or loss unless the redemption is treated as a dividend pursuant to Sec.
302(a) of the Code. See the discussion under "Exchange of FNB Common Stock
For Cash and First Virginia Common Stock" for a summary of those
requirements.
Despite the Clark decision, however, the Internal Revenue Service has
been taking the position in private letter rulings that the receipt of solely
cash in a merger should be treated as a distribution in redemption of stock
before the merger. Based on this Internal Revenue Service position, if a FNB
shareholder receiving solely cash does not constructively own (within the
meaning of Sec. 318 of the Code) shares of FNB Common Stock held by another
shareholder who exchanges such shares for First Virginia Common Stock, the
shareholder receiving solely cash generally will recognize gain or loss equal
to the difference between the amount of cash received and his tax basis in
his shares of FNB Common Stock. Such gain or loss will be capital gain or
loss if the shares of FNB Common Stock are held as a capital asset at the
time of the Merger. If the FNB shareholder does constructively own shares of
FNB Common Stock exchanged for First Virginia Common Stock, the cash received
in a hypothetical redemption of FNB Common Stock generally will be taxable as
a dividend unless the redemption meets the requirements to be (i) not
essentially equivalent to a dividend within the meaning of Sec. 302(b)(1) of
the Code or (ii) a substantially disproportionate redemption of FNB Common
Stock within the meaning of Sec. 302(b)(2) of the Code. Those requirements
would be applied to the shareholder's actual and constructive ownership of
FNB Common Stock, in contrast to the approach discussed above where they are
applied to the shareholder's actual and constructive ownership of First
Virginia Common Stock.
Section 318 of the Code
Section 318 of the Code provides that stock owned by a taxpayer includes
stock constructively owned. A shareholder is treated as owning (i) the stock
owned by his or her spouse, children, grandchildren and parents, (ii) stock
applicable to an option to acquire stock, (iii) stock owned by an estate and
certain trusts in which the shareholder is a beneficiary, (iv) stock owned by
a partnership or S corporation of which the shareholder is a partner or a
shareholder, and (v) stock owned by a corporation which is not an S
corporation of which the shareholder owns at least 50% of the value of the
stock. An individual who actually owns no First Virginia Common Stock but
pursuant to Sec. 318 of the Code, constructively owns First Virginia Common
Stock may avoid family attribution rules by filing a timely waiver agreement
with the Internal Revenue Service under Sec. 302(c)(2) of the Code and the
regulations thereunder.
Dissenting Shareholders
The receipt of cash for shares of FNB Common Stock pursuant to the
exercise of dissenters' rights will be a taxable transaction. Any
shareholder considering the exercise of dissenters' rights should consult his
tax advisor about the tax consequences of receiving cash for his shares.
The preceding discussion summarizes for general information the material
federal income tax consequences of the Merger to FNB shareholders. The tax
consequences to any particular shareholder may depend on the shareholders'
circumstances. FNB shareholders are urged to consult their own tax advisors
with regard to federal, state and local tax consequences.
Rights of Dissenting Shareholders
FNB Shareholders.
Under Tennessee law, shareholders of FNB will have the right to dissent
from the Merger and receive the fair value in cash of their shares of FNB
Common Stock if they fully comply with the provisions of Tennessee law
relating to dissenters' rights, if the Plan of Merger is approved, and the
Merger is consummated. The following summary of Tennessee law relating to
dissenters' rights is qualified in its entirety by reference to the
applicable provisions of Tennessee law including, but not limited to,
Tennessee Code Annotated, Secs. 48-23-101 through 48-23-302, a copy of which
is attached hereto as Exhibit B. Any FNB shareholder who wishes to dissent
from the Merger is advised to seek separate, independent legal counsel.
IN ORDER TO BE ELIGIBLE TO ASSERT HIS RIGHT TO DISSENT, A FNB SHAREHOLDER
MUST DELIVER TO FNB A WRITTEN NOTICE OF HIS INTENT TO DEMAND PAYMENT FOR HIS
SHARES IF THE MERGER IS EFFECTIVE. SUCH STATEMENT MUST BE FILED WITH FNB
PRIOR TO THE VOTE ON THE PROPOSED MERGER. A DISSENTING FNB SHAREHOLDER MUST
NOT VOTE EITHER IN PERSON OR BY PROXY IN FAVOR OF THE AGREEMENT. IF THE FNB
SHAREHOLDER VOTES IN FAVOR OF THE AGREEMENT OR FAILS TO DELIVER BEFORE THE
VOTE IS TAKEN WRITTEN NOTICE OF HIS INTENT TO DEMAND PAYMENT FOR HIS SHARES,
HE IS NOT ENTITLED TO RECEIVE PAYMENT FOR HIS SHARES AS A DISSENTING
SHAREHOLDER. A DISSENTING SHAREHOLDER MAY NOT DISSENT AS TO LESS THAN ALL
SHARES OF FNB COMMON STOCK WHICH HE OWNS BENEFICIALLY.
If the Agreement and the Plan are approved at the Annual Meeting, then
within ten days after the Annual Meeting, FNB must deliver a written notice
(the "Dissenter's Notice") to all FNB shareholders who delivered written
notice of their intent to demand payment for their shares and who did not
vote in favor of the Agreement or the Plan. The Dissenter's Notice must,
among other things, state (i) where the holders of FNB Common Stock must send
the demand for payment (the "Payment Demand"), (ii) where and by what date
certificates representing the share of FNB Common Stock owned by such
dissenting shareholder must be deposited, and (iii) the date by which FNB
must receive the Payment Demand.
Each dissenting FNB shareholder who files a Payment Demand also must
certify whether he acquired beneficial ownership of his shares of FNB Common
Stock prior to the date of the first announcement to the news media or to FNB
shareholders of the principal terms of the Merger, and deposit his
certificates, all in accordance with the terms of the Dissenter's Notice. A
shareholder who does not file a Payment Demand and deposit his certificates
in accordance with the terms of the Dissenter's Notice is not entitled to
receive payment for his shares pursuant to the exercise of Dissenter's
Rights.
FNB shareholders will receive no other notice of their right to dissent,
other than the notification contained in this Prospectus/Proxy Statement.
Those FNB shareholders who file a written notice of their intent to demand
payment for their shares and who do not vote in favor of the Agreement will
receive the Dissenter's Notice. Merely voting against the proposed Merger
will not satisfy the three requirements that the FNB shareholder must meet:
(i) object in writing to the Agreement prior to the vote by shareholders on
approval of the Agreement; (ii) file a Payment Demand by the date set forth
in the Dissenter's Notice; and (iii) deposit his share certificates as
required by the Dissenter's Notice. Failure of a FNB shareholder to
undertake the required action by the date set forth in the Dissenter's Notice
results in a forfeiture of the dissenter's rights of such FNB shareholder.
Upon the later of the Effective Date or the date FNB receives a Payment
Demand, First Virginia will pay each shareholder who has perfected his right
to dissent, the amount First Virginia estimates to be the fair value of such
dissenting shareholder's FNB Common Stock, plus accrued interest. The
payment shall be accompanied by (i) FNB's financial statements for the fiscal
year ending December 31, 1993, and the latest available interim financial
statements, if any, (ii) a statement of First Virginia's estimate of the fair
value of the shares, (iii) an explanation of how the interest was calculated,
and (iv) a statement of the statutory procedures to demand payment if the
shareholder is dissatisfied with the payment based on First Virginia's
estimate of the fair value of the shares. If any dissenting FNB shareholder
believes that the amount paid to him is less than the fair value of his
shares of FNB Common Stock or that the interest has been calculated
incorrectly, he may notify First Virginia of his estimate of fair value of
his shares of FNB Common Stock and interest due, and may demand payment of
such amount ("Further Demand"). Such Further Demand must be delivered to
First Virginia within one month after payment by First Virginia of the fair
value of shares of FNB Common Stock to such dissenting FNB shareholder. If
First Virginia and such dissenting shareholder have not agreed upon the fair
value of the shares of FNB Common Stock within two months after First
Virginia receives the Further Demand from such dissenting shareholder then
First Virginia shall institute a suit in the Chancery Court of Knox County,
Tennessee whereupon the court will determine the fair value of the shares of
FNB Common Stock. If First Virginia fails to bring such a suit within the
prescribed two-month period, First Virginia shall pay to each dissenting
shareholder whose demand remains unsettled the amount demanded by such
shareholder. The cost of any such proceeding will be assessed against First
Virginia unless the court finds that the action of a dissenting shareholder
who is a party to the suit to be arbitrary, vexatious or not in good faith;
provided, however, that attorney's fees may be assessed against First
Virginia in the event that First Virginia did not substantially comply with
the applicable provisions of Tennessee law, or if the court finds the actions
of First Virginia to be arbitrary, vexatious or not in good faith. The "fair
value" of shares shall be determined immediately prior to the Annual Meeting
excluding any appreciation or depreciation in anticipation of the corporate
action. Holders of shares of FNB Common Stock should recognize that any
"fair value" established pursuant to the provisions of the Tennessee Code
Annotated may be more than or less than the market price or the book value of
such shares of FNB Common Stock.
Any communications necessary under the foregoing by the holders of
shares of FNB Common Stock may be mailed or hand delivered, if to FNB, Post
Office Box 200, Knoxville, Tennessee 37901 to the attention of Williams E.
Arant, Jr., its President and CEO, and if to First Virginia, 6400 Arlington
Boulevard, Falls Church, VA 22042-2336 to the attention of Christopher M.
Cole, Vice President and Assistant General Counsel.
THE SUMMARY SET FORTH ABOVE DOES NOT PROPOSE TO BE A COMPLETE STATEMENT OF
THE PROVISIONS OF THE TENNESSEE BUSINESS CORPORATION ACT RELATING TO THE
RIGHTS OF DISSENTING HOLDERS OF FNB COMMON STOCK AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE APPLICABLE SECTIONS OF THE TENNESSEE BUSINESS
CORPORATION ACT WHICH ARE INCLUDED AS EXHIBIT B TO THIS PROSPECTUS/PROXY
STATEMENT. ANY HOLDER OF SHARES OF FNB COMMON STOCK INTENDING TO EXERCISE
DISSENTER'S RIGHTS IS URGED TO REVIEW EXHIBIT B CAREFULLY SO AS TO BE IN
STRICT COMPLIANCE WITH THE PROVISIONS OF THE TENNESSEE BUSINESS CORPORATION
ACT.
Supervision and Regulation
Bank holding companies and banks are regulated extensively under both
federal and state law. The following discussion highlights certain laws and
regulations affecting First Virginia and its subsidiary banks and should be
read in conjunction with the more detailed information incorporated by
reference herein. See "Documents Incorporated by Reference." Supervision,
regulation and examination of banks by the bank regulatory agencies are
intended primarily for the protection of depositors rather then holders of
securities.
General. First Virginia is subject to the supervision, examination and
reporting requirements contained in Bank Holding Company Act ("BHCA") and
regulations of the Federal Reserve Board. As state banks that are members of
the Federal Reserve System, the subsidiary banks of First Virginia are also
subject to the supervision, examination and reporting requirements of the
Federal Reserve, and of the state banking regulatory agencies in the states
in which the banks are chartered. First Virginia's subsidiary banks'
customer deposits are insured by the FDIC in accordance with applicable law.
The BHCA generally requires the prior approval of the Federal Reserve
where a bank holding company proposes to acquire direct or indirect ownership
or control of more than 5% of the voting shares of any bank or otherwise to
acquire control of a bank or to merge or consolidate with any other bank
holding company. The BHCA generally prohibits the Federal Reserve from
approving an application by a bank holding company to acquire a bank located
in another state, unless such an acquisition is specifically authorized by
statute of the state in which the bank to be acquired is located. Virginia
has adopted reciprocal interstate banking legislation permitting Virginia-
based bank holding companies to acquire banks and bank holding companies in
other states and allowing bank holding companies located in Virginia, the
District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland,
Mississippi, North Carolina, South Carolina, Tennessee, Virginia and West
Virginia to acquire Virginia banks and bank holding companies.
A bank holding company is generally prohibited under the BHCA from
acquiring voting shares of any company which is not a bank, and from engaging
in any activities other than those of banking or of managing or controlling
banks or furnishing services to or performing services for its subsidiaries.
An exception to those prohibitions permits a bank holding company to engage
in, or to acquire an interest in a company which engages in, activities that
the Federal Reserve has determined are so closely related to banking or
managing or controlling banks as to be a proper incident thereto.
First Virginia is a legal entity separate and distinct from its
subsidiary banks and its other subsidiaries. Various legal limitations
restrict the subsidiary banks from lending or otherwise supplying funds to
First Virginia or its nonbank subsidiaries, generally limiting such
transactions with any affiliate to 10% of the bank's capital and surplus and
limiting all such transactions to 20% of the bank's capital and surplus.
Such transactions, including extensions of credit, sales of securities or
assets and provision of services, also must be on terms and conditions
consistent with safe and sound banking practices, including credit standards,
that are substantially the same or at least as favorable to the bank as
prevailing at the time for transactions with unaffiliated companies.
Federal Reserve policy requires a bank holding company to act as a
source of financial strength to each of its bank subsidiaries and to take
measures, including possible loans to its subsidiaries in the form of capital
notes or other instruments, to preserve and protect bank subsidiaries in
situations where additional investments in a troubled bank may not otherwise
be warranted. However, any loans from the holding company to a subsidiary
depository institution likely would be unsecured and subordinated to such
institution's depositors and certain other creditors. In addition, where a
bank holding company has more than one subsidiary depository institution, the
bank holding company's other subsidiary depository institutions are
responsible under a cross-guarantee for any losses to the FDIC as a result of
the failure of a subsidiary depository institution.
Federal and state banking laws and regulations govern all areas of the
operations of First Virginia's subsidiary banks, including reserves, loans,
mortgages, capital, issuances of securities, payment of dividends and
establishment of branches. Federal and state bank regulatory agencies also
have the general authority to limit the dividends paid by insured banks and
bank holding companies if such payments may be deemed to constitute an unsafe
and unsound practice. As the primary federal regulator of the subsidiary
banks, the Federal Reserve has authority to impose penalties, initiate civil
and administrative actions and take other steps intended to prevent the banks
from engaging in unsafe or unsound practices.
Federally insured banks are subject, with certain exceptions, to certain
restrictions on extensions of credit to their parent holding companies or
other affiliates as described above, on investments in the stock or other
securities of affiliates and on the taking of such stock or securities as
collateral from any borrower. In addition, such banks are prohibited from
engaging in certain tie-in arrangements in connection with any extension of
credit or the providing of any property or service.
Banks are also subject to the provisions of the Community Reinvestment
Act of 1977, which require the appropriate federal bank regulatory agency, in
connection with its regular examination of a bank, to assess the bank's
record in meeting the credit needs of the community served by the bank,
including low-and-moderate income neighborhoods. The regulatory agency's
assessment of the bank's record is made available to the public. Further,
such assessment is required of any bank which has applied to, among other
things, establish a new branch office that will accept deposits, relocate an
existing office or merge or consolidate with or acquire the assets or assume
the liabilities of, a federally regulated financial institution.
Capital Adequacy. First Virginia and its subsidiary banks are required
to comply with the capital adequacy standards established by the Federal
Reserve. Currently, there are two basic measures of capital adequacy: a
risk-based measure and a leverage measure. All applicable capital standards
must be satisfied for an institution to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and
bank holding companies, to account for off-balance sheet exposures and to
minimize disincentives for holding liquid assets. Assets and off-balance
sheet items are assigned to broad risk categories, each with appropriate
weights. The resulting capital ratios represent capital as a percentage of
total risk-weighted assets and off-balance sheet items.
The minimum standard for the ratio of capital to risk-weighted assets
(including certain off-balance sheet obligations, such as standby letters of
credit) is 8%. At least 50% of that capital level must consist of common
equity, retained earnings and noncumulative perpetual preferred stock, less
goodwill and certain other intangibles ("Tier I capital"). The remainder
("Tier II capital") may consist of a limited amount of other preferred stock,
mandatory convertible securities, qualifying subordinated debt and a limited
amount of loan loss reserves. The sum of Tier I capital and Tier II capital
is "total risk-based capital." The Federal Reserve and the FDIC have
recently proposed to add an interest rate risk component to their existing
risk-based capital requirements. At December 31, 1993, First Virginia had
Tier I and total risk-based capital ratios of 16.84% and 18.09%,
respectively.
On August 28, 1992, the Federal Reserve issued an interpretation of its
risk-based capital guidelines to clarify the criteria for qualifying the
subordinated debt of a bank holding company as Tier II capital. The
interpretation, among other things, requires that subordinated debt which
qualifies as Tier II capital of a bank holding company must be unsecured and
subordinated in right of payment to the claims of all of the bank holding
company's general creditors, and not, as previously permitted, to the claims
of holders of senior indebtedness alone. In addition, qualifying
subordinated debt must state clearly on its face that it is not a deposit and
is not insured by a federal agency; must have a minimum average maturity of
not less than five years; must contain no provisions permitting debtholders
to accelerate payment of principal prior to maturity except in the event of
bankruptcy of the bank holding company; must contain no covenants, terms or
restrictions that are inconsistent with safe and sound banking practices
(i.e., in general, provisions that could adversely affect liquidity or unduly
restrict management's flexibility to run the organization, or that could
limit a regulator's ability to resolve problem bank situations); must include
no credit sensitive features that tie payment on the subordinated debt to the
financial condition of the bank holding company; and must not exceed 50% of
the amount of the bank holding company's Tier I capital (this includible
amount must be discounted on a straight line basis beginning five years from
maturity). Qualifying subordinated debt may be redeemed prior to stated
maturity only after consultation with the Federal Reserve.
The Federal Reserve and the FDIC also have adopted regulations which
supplement the risk-based guidelines to include aminimum leverage ratio of 3%
Tier I capital to total assets less goodwill (the "leverage ratio"). The
Federal Reserve and FDIC emphasized that the 3% leverage ratio constitutes a
minimum requirement for well-run banking organizations having diversified
risk, including no undue interest rate risk exposure, excellent asset
quality, high liquidity, good earnings and a composite regulatory rating of 1
under the regulatory rating system for banks. Banking organizations
experiencing or anticipating significant growth, as well as those
organizations which do not satisfy the criteria described above, will be
required to maintain a minimum leverage ratio ranging generally from 4% to
5%. At December 31, 1993, First Virginia had a leverage ratio of 9.68%.
Bank regulators continue to indicate their desire to raise capital
requirements applicable to the banking industry beyond current levels.
However, the First Virginia is unable to predict whether or when higher
capital requirements would be imposed.
Dividends. Dividends from its subsidiary banks constitute the major
source of funds for First Virginia. The amount of dividends payable by the
banks to First Virginia depends upon the banks' earnings and capital
position, and is limited by federal and state law, regulations and policies.
As state member banks, the subsidiary banks are subject to the respective
laws and regulations of the States of Virginia, Maryland and Tennessee and to
the regulations of the Federal Reserve. Federal law further provides that no
insured depository institution may make any capital distribution (which would
include a cash dividend) if, after making the distribution, the institution
would not satisfy one or more of its minimum capital requirements. Moreover,
the federal bank regulatory agencies also have the general authority to limit
the dividends paid by insured banks if such payments may be deemed to
constitute an unsafe and unsound practice. At December 31, 1993, the banks
had approximately $95.9 million of undivided profits legally available for
the payment of dividends.
Recent Legislation and Regulatory Developments. With the enactment of
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") and the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), Congress enacted comprehensive legislation affecting the
commercial banking and thrift industries. FIRREA, among other things,
abolished the Federal Savings and Loan Insurance Corporation and established
two new insurance funds under the jurisdiction of the FDIC: the Bank
Insurance Fund ("BIF"), which insures most commercial banks, including First
Virginia's subsidiary banks, and the Savings Association Insurance Fund,
which insures most thrift institutions. In addition to effecting far-
reaching restructuring of the thrift industry, FIRREA provided for a phased-
in increase in the rate of annual insurance assessments paid by insured
depository institutions. FDICIA provides increased funding for the BIF and
expanded regulation of depository institutions and their affiliates,including
parent holding companies. A significant portion of the additional BIF
funding will be in the form of borrowings to be repaid by insurance premiums
assessed on BIF members. These premium increases would be in addition to the
increases in deposit premiums made during 1991. FDICIA provides for an
increase in the BIF's ratio of reserves to insured deposits to 1.25% within
the next 15 years, also to be financed by insurance premiums. The result of
these provisions could be a significant increase in the assessment rate on
deposits of BIF members over the next 15 years. FDICIA provides authority
for special assessments against insured deposits and for the development of a
system of assessing deposit insurance premiums based upon the institution's
risk.
In September 1992, the FDIC adopted a new transitional risk-based
premium schedule which increases the assessment rates for depository
institutions. Under the new schedule, which took effect for the assessment
period beginning January 1, 1993, premiums initially will range from $.23 to
$.31 for every $100 of deposits. Each financial institution is assigned to
one of three capital groups: well capitalized, adequately capitalized or
undercapitalized, as defined in the regulations implementing the prompt
corrective action provisions of FDICIA - and further assigned to one of three
subgroups within a capital group, on the basis of supervisory evaluations by
the institution's primary federal and, if applicable, state supervisors and
other information relevant to the institution's financial condition and the
risk posed to the applicable insurance fund. The actual assessment rate
applicable to a particular institution will depend upon the risk assessment
classification so assigned to the institution by the FDIC. All of First
Virginia's Member Banks are well capitalized and thus should qualify for the
lowest assessment rate.
Among other things, FDICIA requires the federal banking agencies to take
"prompt corrective action" in respect of banks that do not meet minimum
capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." Under the implementing
regulations recently adopted by the Federal Reserve, the FDIC and the other
federal depository institution regulatory agencies, a depository institution
is: (i) well capitalized if it has total risk-based capital of 10% or more,
Tier I capital of 6% or more and a leverage ratio of 5% or more; (ii)
adequately capitalized if it has total risk-based capital of 8% or more, Tier
I capital of 4% or more and a leverage ratio of 4% or more; (iii)
undercapitalized if it has total risk-based capital of less than 8%, Tier I
capital of less than 4% or a leverage ratio of less than 4%; (iv)
significantly undercapitalized if it has total risk-based capital of less
than 6%, Tier I capital of less than 3% or a leverage ratio of less than 3%;
and (v) critically undercapitalized if it has tangible equity of less than
2%. An institution may be deemed to be in a capitalization category that is
lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
If a depository institution fails to meet regulatory capital
requirements, regulatory agencies can require submission and funding of a
capital restoration plan by the institution, place limits on its activities,
require the raising of additional capital and ultimately, require the
appointment of a conservator or receiver for the institution. Under FDICIA,
a bank holding company must guarantee that a subsidiary bank meet its capital
restoration plan, subject to certain limitations. The obligation of a
controlling bank holding company under FDICIA to fund a capital restoration
plan is limited to the lesser of 5% of an undercapitalized subsidiary's
assets or the amount required to meet regulatory capital requirements. If
the controlling bank holding company fails to fulfill its obligations under
FDICIA and files (or has filed against it) a petition under the federal
Bankruptcy Code, the FDIC's claim may be entitled to a priority in such
bankruptcy proceeding over third-party creditors of the bank holding company.
Undercapitalized depository institutions may be subject to growth
limitations and are required to submit a capital restoration plan. The
federal banking agencies may not accept a capital plan without determining,
among other things, that the plan is based on realistic assumptions, is
likely to succeed in restoring the depository institution's capital and is
guaranteed by the parent holding company. If a depository institution fails
to submit an acceptable plan, it will be treated as if it were significantly
undercapitalized.
Significantly undercapitalized depository institutions may be subject to
a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized and requirements to
reduce total assets and to cease receiving deposits from correspondent banks.
Critically undercapitalized institutions are subject to appointment of a
receiver or conservator. An institution that is not well capitalized is
generally prohibited from accepting brokered deposits and offering interest
rates on deposits higher than the prevailing rate in its market; in addition,
"pass-through" insurance coverage may not be available for certain employee
benefit accounts.
An insured depository institution may not pay management fees to any
person having control of the institution nor may an institution, except under
certain circumstances and with prior regulatory approval, make any capital
distribution if, after making such payment or distribution, the institution
would be undercapitalized. FDICIA also restricts the acceptance of brokered
deposits by insured depository institutions and contains a number of consumer
banking provisions, including disclosure requirements and substantive
contractual limitations with respect to deposit accounts.
FDICIA contains numerous other provisions, including new reporting
requirements, termination of the "too big to fail" doctrine except in special
cases, limitations on the FDIC's payment of deposits at foreign branches and
revised regulatory standards for, among other things, real estate lending and
capital adequacy.
Many FDICIA provisions will be implemented through the adoption of
regulations that have been or will be proposed by the various federal banking
agencies and, therefore, the full effect on First Virginia and its subsidiary
banks cannot be assessed at this time.
Because of concerns relating to the competitiveness and the safety and
soundness of the industry, the Congress is considering, even after the
enactment of FIRREA and FDICIA, a number of wide-ranging proposals for
altering the structure, regulations and competitive relationships of the
nation's financial institutions. Among such bills are proposals to prohibit
banks and bank holding companies from conducting certain types of activities,
to subject banks to increased disclosure and reporting requirements, to
eliminate the present restriction on interstate branching by banks, to alter
the statutory separation of commercial and investment banking and to further
expand the powers of banks, bank holding companies and competitors of banks.
It cannot be predicted whether or in what form any of these proposals will be
adopted or the extent to which the business of First Virginia may be affected
thereby.
FNB
Information Concerning FNB Directors
This section of this combined Prospectus/Proxy Statement represents the
proxy statement of FNB Financial Corporation for its annual meeting to be
held on April 19, 1994. This information is information which could be
included in Part III to the Form 10-K filed by FNB Financial Corporation with
the SEC but which is instead included in its annual meeting proxy statement
each year.
DIRECTORS
Position with Company (in addition
Director to Director, if any) and principal
Name occupation during last five years Age Since
Williams E. Arant, Jr. Mr. Arant is President and Chief 58 1987
Executive Officer of the Company
and First National Bank of Knoxville.
Prior to being employed by the Company,
Mr. Arant was Regional President of the
Knoxville Region of First Tennessee Bank
(1984-87). He was responsible for all
regional banking functions. Mr. Arant
also serves on the Board of Directors
of the Federal Reserve Bank of Nashville,
Nashville, Tennessee.
Gordon E. Inman Vice President of the Company. Since 55 1986
1979, Mr. Inman has been the owner of
Inman Realtors in Franklin, Tennessee.
He has been involved in residential and
commercial real estate sales and
development. He is also the Chairman
of Franklin Financial Corporation, a
bank holding company in Franklin,
Tennessee.
Robert S. Marquis Secretary of the Company. Since 51 1986
1973, Mr. Marquis has been a
principal in the law firm of
McCampbell & Young. He is currently
the President of McCampbell & Young.
He is a practicing attorney.
John H. Schaad Chairman of the Company. From 1968 66 1986
to 1985, Mr. Schaad was President
of Schaad Enterprises, Inc. Since
1985, he has been a partner in Schaad
Management and Schubert-Schaad Company
which are both engaged in real
estate sales and development.
Rufus H. Smith, III Vice President of the Company. 34 1991
Mr. Smith has been a partner
in Rufus H. Smith, Jr. & Co. since
1984 and President of Hometown Realty,
Inc. since 1991. Both are real estate companies.
Information Regarding the FNB Board of Directors and its Committees
During the calendar year ended December 31, 1993 the Board of Directors
of FNB held six meetings. During 1993, all directors were present at all
meetings. All of the directors of FNB are also directors of First National
Bank of Knoxville (the "Bank"), FNB's sole subsidiary. The Board of
Directors of the Bank meets on a monthly basis.
The Board of Directors of FNB has two Committees, Executive and Audit.
At December 31, 1993, the Executive Committee consisted of Williams E. Arant,
Jr., Robert S. Marquis, and John H. Schaad. It exercises all the powers of
the Board of Directors allowed under Tennessee law, in the management of the
business and affairs of FNB during intervals between meetings of the Board of
Directors. The Executive Committee did not meet during the year ended
December 31, 1993.
The Audit Committee is a joint audit committee for FNB and the Bank and
is composed of three directors of FNB (Gordon E. Inman, Rufus H. Smith, III
and John H. Schaad) and two directors of the Bank who are not directors of
FNB. The Audit Committee acts as liaison between the Board of Directors and
the independent auditors. The Audit Committee met five times in 1993. The
Committee also reviews with the independent auditors the planning and scope
of the audits of the financial statements, the results of those audits, and
the adequacy of internal accounting controls and monitors other corporate
financial policies.
EXECUTIVE OFFICERS
Officers are elected on an annual basis by the Board of Directors and
serve at the discretion of the Board. Information is provided under the
heading "Directors" above for the following executive officers: Williams E.
Arant, Jr.; Gordon E. Inman; Robert S. Marquis; Rufus H. Smith, III; and John
H. Schaad.
Position with FNB and Principal Occupation Officer
Name during Last Five Years Age Since
Paul W. Boyd Treasurer (Chief Financial and Accounting 35 1988
Officer) of FNB; Senior Vice President and
Cashier of the Bank since early 1988. From
1987 until assuming his present position with
FNB, Mr. Boyd was Assistant Vice President
with First Interstate Bank of Texas, NA, as
Manager of planning, financial, strategic and
monthly estimates. From 1981 until 1987, he was
Assistant Vice President of NationsBank
(formerly First Republic Bank Houston) and was
responsible for planning, internal control,
payroll and management information systems.
James A. Ley Executive Vice President and Chief 49 1989
Administrative Officer of FNB and the Bank.
From 1985 until assuming his present position with
FNB, Mr. Ley was President and Chief Executive Officer
of Mortgage One Corporation in Columbia, S.C. From 1983
until 1985, Mr. Ley was President and Chief Operating
Officer of Security Mortgage Corporation and Senior
Vice President of Security Federal Savings and Loan
Association in Columbia, S.C.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table is provided to indicate beneficial ownership of
FNB's Common Stock as of January 31, 1994 as it relates to all directors and
to executive officers and directors as a group, and each person known by FNB
to own beneficially more than 5% of its outstanding stock.
Percent of
Beneficial Owner No. Shares Total (1)
Williams E. Arant, Jr. 230,351 (2) 12.10 (2)
710 Blows Ferry Road
Knoxville, TN 37919
Paul W. Boyd 1,000 (3)
717 Noragate Road
Knoxville, TN 37919
Gordon E. Inman 265,735 13.96
230 Public Square
Franklin, TN 37064
James A. Ley 8,953 (3)
5212 Riverbriar Road
Knoxville, TN 37919
Robert S. Marquis 7,000 (3)
3189 Oakhurst Drive
Knoxville, TN 37919
John H. Schaad (4) 137,525 7.22
7129 Hickory Hills Drive
Knoxville, TN 37919
Louis B. Schaad (4) 190,000 9.98
P.O. Box 50818
Knoxville, TN 37950
Rufus H. Smith, Jr. (5) 211,091 11.09
4909 Ball Road
Knoxville, TN 37931
Rufus H. Smith, III (5) 33,334 1.75
4909 Ball Road
Knoxville, TN 37931
Woodfam Investments 116,268 6.11
900 S. Gay Street
Knoxville, TN 37902
Lindsay Young 125,935 6.61
834 Bluff Drive
Knoxville, TN 37919
All executive officers 683,898 (6) 35.92 (6)
and directors of the
Company as a group
(seven persons)
(1) The percent of total is based upon 1,904,183 total shares outstanding.
FNB has a total of 1,936,451 shares issued. The difference of 32.267 shares
is held as treasury stock.
(2) Williams E. Arant, Jr. has the option to purchase an amount of common
stock of FNB equal to 10% of the common stock of FNB originally sold in FNB's
initial public offering as well as 10% of any later offerings. This option
extends for seven years after August 7, 1987. Pursuant to the option
agreement with Mr. Arant, he has the option to purchase such stock at a price
equal to the initial issue price of such stock or the issue prices if
multiple issuances are involved. The option agreement also provides that if
new shares are issued or offered for issue less than one year prior to the
end of the seven-year option term, with respect to such new offer, the seven-
year option term will be extended to a date one year after the date of such
new offering. The number of shares listed in this table and the percentage of
common stock owned by Williams B. Arant, Jr. reflects the number of shares of
common stock of FNB which he has the option to purchase at the date of this
proxy statement (184,645), as well as the shares he actually owns (45,706).
If this percentage were calculated based solely upon the number of shares
actually owned (45,706), it would equal 2.4%.
(3) Less than 1%
(4) Messrs Schaad are brothers.
(5) Mr. Smith died in 1992. These shares are beneficially owned by his
estate, although as of January 31, 1994, these shares are still in the name
of Rufus H. Smith, Jr., Rufus H. Smith, m is Rufus H. Smith, Jr.'s son.
Currently the estate of Rufus H. Smith, Jr. is being probated in the Knox
County Chancery Court, Probate Division. The personal representative of the
estate is Tommie M. Smith who is Rufus H. Smith III's mother.
(6) This includes the shares which Williams E. Arant, Jr. has an option to
purchase (see Footnote 2, above). If such shares were not included on an "as
issued" basis, the number of shares held by this group at January 31, 1994,
would be 499,253 and the percentage of total shares would be 26.22 % .
Williams E. Arant, Jr., Gordon E. Inman, John H. Schaad and the estate
of Rufus H. Smith, Jr. continue to be parties to a Stock Purchase Agreement
(the "Stock Purchase Agreement") whereby any of such individuals, except for
Williams E. Arant, Jr., desiring to sell his common stock in FNB must first
offer such other individuals, including Williams E. Arant, Jr., a first right
of refusal to purchase such stock on terms and conditions set by the selling
shareholder or by an outside third party. Other individuals who were
originally party to the Stock Purchase Agreement have sold all of their stock
of FNB and are no longer party to the Agreement.
As described in this combined Prospectus/Proxy Statement, FNB has
entered into the Agreement and Plan of Reorganization and a Plan of Merger
with First Virginia which, if approved by the shareholders at the annual
meeting on April 19, 1994, will result in the merger of FNB into First
Virginia and the transfer of control of FNB and its subsidiary, First
National Bank of Knoxville, to First Virginia. (See: THE MERGER)
Voting Securities
Only stockholders of record at the close of business on January 31, 1994
are entitled to vote at the annual meeting or any adjournment. As of that
date, there were 1,904,183 shares of no par common stock outstanding and
entitled to vote. Every holder of outstanding shares of capital stock
entitled to be voted at this meeting is entitled to one vote for each share
held.
MANAGEMENT
Executive Compensation
John H. Schaad, Gordon E. Inman and Rufus H. Smith, III are paid $416.67
per month as Directors of FNB. Each of these Directors received $5,000.00
during 1993 in such Director's fees. The remaining Directors of FNB (Messrs.
Marquis and Arant) are not compensated in their capacity as Directors of the
Company. All of the Directors of FNB also serve as Directors of the Bank,
FNB's wholly owned subsidiary. There are also other Directors of the Bank.
During 1993, all nonemployee Directors of the Bank were paid a Director's fee
of $400 for each meeting attended.
The following table sets forth for the cash compensation received by
each of the most highly compensated executive officers of the Company whose
cash compensation exceeded $100,000 for services to FNB.
Name and Other
Principal Annual All Other
Position Year Salary Bonus Compensation Compensation
(1) (2)
Williams E. Arant, Jr. 1993 $243,225 $20,000 $ -- $10,585
President and Chief 1992 $235,000 $ 0 $ -- $10,787
Executive Officer of 1991 $212,500 $ 0 $ -- $ 5,706
the Company and the Bank
James A. Ley 1993 $111,000 $18,000 $ -- $ 3,330
Executive Vice President 1992 $107,500 $ 0 $ -- $ 3,270
and Chief Administrative 1991 $ 97,000 $ 0 $ -- $ --
Officer of the Company
and the Bank
Michael L. Ayer (3) 1993 $ 92,700 $12,500 $ -- $ 2,781
Executive Vice President
of the Bank
(1) Perquisites and other personal benefits paid to or for the benefit of
these employees did not exceed the lesser of $50,000.00 or 10% of the total
annual salary and bonus of the noted employee and are therefore not
disclosed. These employees did not receive any above-market or preferential
earnings on restricted stock or options or deferred compensation paid during
the fiscal years disclosed. These employees also received no long term
incentive plan compensation, reimbursements for payment of taxes or dollar
value related to the price paid by the individuals for securities of the
registrant purchased from the registrant (to the extent that such dollar
value exceeded the fair market value of the security on the date of purchase)
during any of the years in questions.
(2) The amounts listed under this column for Williams E. Arant, Jr.
represents payments of premiums paid on the term life insurance policy and
payments made by the company to match a portion of the employees'
contributions to a Section 401(K) Internal Revenue Code plan. The
quantifiable amounts associated to each identified payment to Williams E,
Arant, Jr. reflecting payments made for life insurance/401(K) company match
from 1991 to 1993 are as follows: $5,706.00/$0.00 (1991);
$6,423.00/$4,364.00(1992); $6,085.00/$4,500.00(1993). The amounts listed
under this column for James A. Ley and Michael L. Ayer represent payments
made by FNB to match a portion of the employee's contributions to a Section
401 (K) Internal Revenue Code Plan.
(3) Michael L. Ayer is not an executive officer or director of FNB. However,
he is the Executive Vice President of the Bank which is a solely owned
subsidiary of FNB. In this position he has the ability to make significant
policy decisions which affect and impact FNB.
Mr. Arant is employed by FNB pursuant to a five-year employment
agreement which commenced on August 24, 1987. The agreement has been
extended and now terminates on August 24, 1995. In the event that Mr. Arant
is terminated by FNB without cause prior to August 24, 1995, he would receive
an amount equal to his base salary under his employment agreement through and
until August 24, 1995 (his base salary is currently $253,000.00 per annum)
On August 8, 1989, FNB and the Bank adopted a Section 401(K) Plan for
the benefit of employees of FNB and the Bank. Pursuant to the Plan, FNB and
the Bank match fifty percent of the employees' contributions to the Plan.
Employees will vest in the matching portion on a graduated schedule in years
two through five of their participation in the Plan. Matching contributions
by FNB and the Bank commenced during 1992.
FNB has previously granted stock options to certain senior officers of
FNB and the Bank. The following table sets forth the aggregate options
exercised in the fiscal year ended December 31, 1993 and option values at
December 31, 1993, for all FNB employees whose cash compensation exceeded
$100,000 for services to FNB and who have been granted stock options for the
FNB's stock.
Shares
Acquired Number of Value of Unexercised
on Value Unexercised in the money options
Name Exercise Realized Options at December 31, 1993
(1)
Exercisable/ Exercisable/
Unexercisable Unexercisable
(2)
Williams E. Arant, Jr. 0 $0 184,645 $0/
$0
James A. Ley 0 $0 32,000 $0/
$0
Michael L. Ayer 0 $0 20,000 $0/
$0
(1) The exercise price of each option is $5.00 per share. The book value of
the FNB's stock at December 31, 1993, was $4.10 per share. The FNB's stock
trades sporadically in private transactions at prices between $3.00 and $4.50
per share. Based on these values none of these options were "in the money" at
December 31, 1993.
(2) All stock options for the persons listed are exercisable.
None of the above options were technically "in the money" at December
31, 1993 based on the general (and sporadic) trading range of FNB's stock.
Nonetheless, based upon the Agreement and Plan of Reorganization between FNB
and First Virginia, each of the holders of these options can either exercise
the option prior to the effective date and receive payment in cash or stock
like any other shareholder or have the options cancelled in exchange for a
cash payment (less all applicable withholding taxes) equal to (a) the number
of FNB shares subject to option x (b) the difference between (i) .20 x the
average of the closing prices of First Virginia common stock for each of the
10 trading days prior to the Closing Date, providing, however, that if the
average price is below $37.50 per share, then the average shall be deemed to
be $37.50 for purposes of this calculation, and (ii) $5.00 which is the
exercise price of each such option. In light of these provisions, each
option is effectively "in the money" by an amount of no less than $2.50 per
share if the merger with first Virginia is approved by the shareholders and
consummated and these option holders allow their options to be cancelled and
receive the cash payment described above.
Certain Relationships and Related Transactions
Except as set forth herein, no person who acted as a director or officer
of FNB or any security holder known to FNB to own of record or beneficially
more than 5% of any class of FNB's voting securities or any members of their
immediate families had any interest, direct or indirect, in any material
transaction during the calendar year ended December 31, 1993, or any proposed
material transaction during such period or any proposed material transaction
to which FNB was or is to be a party. Robert S. Marquis, who serves as a
director and secretary of FNB is a shareholder in, and President of, the law
firm of McCampbell & Young. Lindsay Young who owns 6.61% of FNB's stock is
also a shareholder of McCampbell & Young. McCampbell & Young is a general
legal counsel for FNB and the Bank. Management believes that the terms of
the compensation agreement between FNB and McCampbell & Young are no less
favorable than could be obtained from an unaffiliated third party.
The Bank has made loans to certain of the directors and executive
officers of FNB and the Bank. Such loans were made in the ordinary course of
business, were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with other persons, and did not involve more than the normal risk of
collectability or present other unfavorable features.
LEGAL OPINION
Christopher M. Cole, Vice-President and Assistant General Counsel of
First Virginia Banks, Inc., has passed upon the legality of First Virginia
Common Stock offered hereby.
EXHIBIT A TO PROSPECTUS/PROXY STATEMENT
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated this
9th day of November, 1993 by and between FIRST VIRGINIA BANKS, INC. ("First
Virginia"), a Virginia corporation with its main office at 6400 Arlington
Boulevard, Falls Church, Virginia 22042-2336, FNB FINANCIAL CORPORATION
("FNB") a registered bank holding company, with its main office at 620 Market
Street, Knoxville, Tennessee 37901 and FIRST NATIONAL BANK OF KNOXVILLE, (the
"Bank") a national bank with its main office at 620 Market Street, Knoxville,
Tennessee 37901 (First Virginia, FNB and the Bank each being referred to
herein as a "Party" and collectively referred to herein as "Parties").
W I T N E S E T H:
WHEREAS, the Boards of Directors of First Virginia, FNB and the Bank
deem it advisable and in the best interests of the Parties and their
stockholders that FNB be acquired by First Virginia through a merger (the
"Merger") of FNB with and into First Virginia pursuant to a Plan of Merger in
the form attached hereto as Exhibit A (the "Plan of Merger") and
WHEREAS, the Parties desire to provide for certain undertakings,
conditions, warranties, representations and covenants in connection with the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations and warranties herein contained, the
Parties agree as follows:
ARTICLE 1.
THE MERGER
1.1 The Merger. Upon performance of all covenants and obligations of
the Parties contained in this Agreement and upon the terms and conditions
contained herein, on the Effective Date of the Merger, FNB shall be merged
with and into First Virginia, pursuant to the Plan of Merger, the terms of
which are incorporated herein by reference to the same extent as if fully set
forth. The Plan of Merger provides for the terms of the Merger, the mode of
carrying the same into effect and the basis and manner of converting the
outstanding shares of FNB Common Stock, no par value per share (the "FNB
Common Stock") into shares of First Virginia Common Stock, par value $1.00
per share (the "First Virginia Common Stock"). As a result of the Merger,
each share of FNB Common Stock (other than shares to be exchanged for cash
and treasury shares) will be converted into .20 shares of First Virginia
Common Stock, proportionately adjusted for any stock split, stock dividends
or other similar capital adjustments between the date of this Agreement and
the Effective Date by First Virginia. No fractional shares of First Virginia
Common Stock shall be issued to FNB stockholders. In lieu thereof, each FNB
stockholder shall receive upon surrender of his FNB Common Stock an amount in
cash equal to the amount of any fractional share he has multiplied by the
closing price of First Virginia Common Stock on the last trading day prior to
the Effective Date of the Merger as reported for New York Stock Exchange--
Composite Transactions.
Holders of shares of FNB Common Stock will be given the option of
exchanging their shares for $7.50 per share in cash, provided that the number
of shares that may be exchanged for cash, when added to Dissenting Shares (as
defined in Section 1.3), shall not exceed 40% of the outstanding shares of
FNB Common Stock immediately prior to the Effective Date. The cash election
must be made at the time FNB shareholders vote on the Merger and once such
vote has been taken, cash elections shall be irrevocable. If the aggregate
of (i) shares as respects which a cash election is made and (ii) Dissenting
Shares exceed 40% of the outstanding shares of FNB Common Stock immediately
prior to the Effective Date of the Merger, First Virginia will pay cash for
shares submitted for cash exchange by each holder of 100 or fewer FNB shares
(if such holder has submitted all his shares for cash exchange) and then will
pay cash for shares submitted for cash pro rata. Shares not exchanged for
cash after proration will be exchanged for First Virginia Common Stock at the
exchange ratio noted above. If the aggregate of (i) shares as respects which
a cash election is made and (ii) Dissenting Shares is less than 10.1% of the
outstanding shares of FNB Common Stock immediately prior to the Effective
Date of the Merger, First Virginia will pay to FNB shareholders, in lieu of
shares of First Virginia Common Stock, a pro rata cash payment, equal in
amount to the difference between (i) the amount of cash paid to FNB
shareholders electing cash and (ii) the amount of cash that would have been
paid if holders of 10.1% of the outstanding shares of FNB Common Stock
(excluding treasury shares) immediately prior to the Effective Date of the
Merger had elected cash at $7.50 per share in exchange for that number of
shares of FNB Common Stock.
Shareholders who elect to exchange some or all of their shares of FNB
Common Stock for cash must submit to FNB certificates for the shares being
exchanged for cash at or prior to the meeting of FNB shareholders referred to
in section 4.8. If the Merger is approved by FNB shareholders at this
meeting, a shareholder's election to receive cash is irrevocable and FNB will
retain certificates for shares submitted for cash purchase until either (i)
termination of the Agreement, upon which FNB will return such certificates or
(ii) the Effective Date of the Merger when the Exchange Agent will exchange
such certificates for cash to the extent required by this Agreement and the
Plan of Merger.
Options for shares of FNB Common Stock shall not be converted into
options to acquire First Virginia Common Stock. On the Effective Date, all
such options to purchase FNB Common Stock, whether exercisable or non-
exercisable, shall be cancelled in exchange for a cash payment (less all
applicable withholding taxes) equal to (a) the number of FNB shares subject
to option times (b) the difference between (i) .20 times the average of the
closing prices of First Virginia Common Stock for each of the 10 trading days
prior to the Closing Date provided, however, that if that average price is
below $37.50 per share, then the average shall be deemed to be $37.50 for
purposes of this calculation and (ii) $5.00, which is the exercise price.
Each FNB option holder will therefore have the choice of either (a)
exercising his option prior to the Effective Date or (b) waiting until the
Effective Date, at which time the option will automatically convert into the
nontransferable right to receive cash from First Virginia in the amount
described above.
1.2 Effective Date and Closing Date. The Effective Date of the Merger
shall be the date specified in the Articles of Merger filed with both the
Tennessee Secretary of State pursuant to the Tennessee General Corporation
Act and the Articles of Merger filed with the Virginia State Corporation
Commission pursuant to the Virginia Stock Corporation Act. The Closing Date
shall be the date when all documents, including officers' certificates, legal
opinions, shareholder resolutions and agreements shall be exchanged between
the parties hereto. The Closing Date shall be a date mutually agreed to by
First Virginia and FNB but in any case shall be on or after the date of FNB's
Special Meeting of Shareholders called to consider the Merger.
1.3 Dissenting FNB Stockholders. Stockholders of FNB shall have the
Dissenting Stockholders rights provided for in T.C.A. Section 48-23-101 et
seq. Notwithstanding anything in this Agreement to the contrary, shares of
FNB Common Stock which are issued and outstanding immediately prior to the
Effective Date of the Merger and which are held by a shareholder who has the
right (to the extent such right is available by law) to demand and receive
payment of the fair value of his shares of FNB Common Stock ("Dissenting
Shares") pursuant to T.C.A. Section 48-23-101 shall not be converted into or
be exchangeable for the right to receive the consideration provided in
Section 1.1 of this Agreement, unless and until such holder shall fail to
perfect his or her right to dissent or shall have effectively withdrawn or
lost such right under T.C.A. Section 48-23-101, as the case may be. If such
holder shall have so failed to perfect his right to dissent or shall have
effectively withdrawn or lost such right, each of his shares of FNB Common
Stock shall thereupon be deemed to have been converted into at the Effective
Date of the Merger, the right to receive shares of First Virginia Common
Stock as provided in Section 1.1. Prior to the Effective Date, FNB shall
comply with all notice and other provisions of the above-mentioned sections
of the Tennessee Code and shall keep First Virginia fully advised thereof and
shall give First Virginia prompt notice of any demands received from
Dissenting Stockholders and the opportunity to participate in all
negotiations and proceedings with respect to any such demands. FNB shall
not, except with the prior written consent of First Virginia, voluntarily
make any payment with respect to or settle any such demands for payment.
1.4 Employee Benefits. Employees of the FNB and the Bank will be
eligible to participate in all of First Virginia's employee benefit programs
provided they meet the eligibility requirements of those plans. Service with
the FNB and Bank shall be considered service with First Virginia for purposes
of eligibility under all these programs.
(a) With respect to First Virginia's Pension Trust Plan ("Pension
Plan"), FNB and Bank employees will be credited with years of employment with
the FNB and Bank prior to the Effective Date of the Merger for purposes of
determining eligibility and vesting under the Pension Plan, but not for
purposes of determining accrued benefits.
(b) With respect to First Virginia's Employees Thrift Plan
("Thrift Plan") for purposes of determining eligibility under the Thrift
Plan, FNB and Bank employees will be credited with years of employment with
FNB prior to the Effective Date of the Merger.
(c) With respect to First Virginia's Nonqualified Profit Sharing
Plan, all FNB and Bank employees as of the Effective Date of the Merger who
are eligible shall be able to immediately participate in that Plan and
benefits for plan year 1994 shall be prorated based on the period of time
during the year that they are covered by that plan.
(d) Any sick or vacation leave that has been accrued by a FNB or
Bank employee as of the Effective Date shall not be disturbed and the number
of days of paid vacation which an employee at FNB or the Bank has accrued as
of the Effective Date shall not be adversely affected by the Merger.
1.5 Bank's 401(K) Profit Sharing Plan. With respect to the Bank's
401(k) Profit Sharing Plan ("Bank's Plan"), at First Virginia's discretion,
it shall either be terminated, in which case those participants in the Bank's
Plan would be eligible to receive a distribution of their vested interests in
the Bank's Plan or, if it is legally or operationally practical to do so and
provided there is no adverse income tax effect to any Bank Plan participant,
it will be merged into First Virginia's Employees Thrift Plan which is also a
qualified 401(k) plan), in which case assets would be transferred to the
Thrift Plan and Bank participants would be credited in the Thrift Plan with
their vested interests (i.e. a 100% interest) under the Bank's Plan.
1.6 Employment Agreement of Williams E. Arant, Jr. First Virginia
would agree to honor the terms and conditions of the Restated Employment
Agreement dated August 7, 1987 between FNB and Williams E. Arant, Jr.,
President and Chief Executive Officer of FNB and the Bank.
1.7 Bank Conversion. On or before the Effective Date of the Merger,
FNB and the Bank agree to convert the Bank from a national bank to a state
chartered, Federal Reserve member bank pursuant to T.C.A Section 45-2-1307
and the regulations of the Comptroller of the Currency. FNB and the Bank
shall file the Plan of Conversion and the proposed Articles of Incorporation
with the Tennessee Commissioner of Financial Institutions. The new Articles
of Incorporation shall include the new name of the Bank which will be "First
Knoxville Bank" subject to regulatory approval.
1.8 Maintenance as Separate Bank. The Bank will remain for the
immediate future as a separate bank within the group of First Virginia member
banks under its new name, "First Knoxville Bank" following the Effective Date
of the Merger.
ARTICLE II.
EVENTS PRECEDING EFFECTIVENESS.
2. Events. On or before the Effective Date the following shall have
occurred:
(a) a majority of the entire Boards of Directors of First Virginia
and FNB shall have approved this Agreement;
(b) the Comptroller of the Currency, the Board of Governors of the
Federal Reserve System and the Tennessee Secretary of State shall have
approved the conversion of the Bank from a national bank into a state
chartered, Federal Reserve member bank;
(c) the Federal Reserve shall have approved the merger of FNB into
First Virginia pursuant to the Bank Holding Company Act;
(d) the Tennessee Commissioner of Financial Institutions shall
have approved the merger of FNB into First Virginia and the acquisition by
First Virginia of the Bank;
(e) the Bureau of Financial Institutions of the Virginia State
Corporation Commission shall have approved the Merger pursuant to the
provisions of Section 6.1-406 of the Code of Virginia;
(f) a registration statement on Form S-4 containing the proxy
statement for FNB shall have been filed with the Securities and Exchange
Commission (the "SEC") pertaining to the shares of First Virginia Common
Stock to be issued in connection with this Agreement and the Plan of Merger
and such registration shall have become effective, and no stop order shall
have been entered with regard to such registration statement;
(g) this Agreement and the Plan of Merger shall have been
submitted to the stockholders of FNB and approved by an affirmative vote of
the holders of a majority of all the outstanding shares of FNB entitled to
vote; and
(h) Articles of Merger shall have been filed with the Tennessee
Secretary of State and the Virginia State Corporation Commission.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES.
3.1 Representations and Warranties of FNB and the Representing
Directors. FNB represents and warrants to First Virginia and the directors
of FNB who own at least 80% of the total shares of FNB Common Stock owned by
all members of the FNB Board (e.g. John H. Schaad, Rufus H. Smith, III and
Gordon E. Inman) represent and warrant to First Virginia, but only to the
best of their knowledge, the following:
(a) Organization and Authority. FNB is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Tennessee. Bank is a national bank duly incorporated, validly
existing and in good standing under the laws of the United States. Each has
all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. FNB and Bank have
delivered to First Virginia complete and correct copies of (1) the charter of
FNB and the Charter of Bank and all amendments thereto to the date hereof and
(2) Bylaws of FNB and Bylaws of the Bank as amended to the date hereof.
(b) Capital Structure.
(1) As of the date of this Agreement, the authorized capital
stock of FNB consists of 4,000,000 shares of Common Stock, no par value per
share. As of the date hereof, 1,936,451 shares of FNB Common Stock were
outstanding, all of which were validly issued, fully paid and nonassessable
(32,267.54 shares of which are owned by the Bank and recorded as treasury
stock of FNB). Options to purchase 253,645 shares of FNB Common Stock at
$5.00 per share have been granted, all of which will be exercisable as a
result of the Merger. FNB has authorized Preferred Stock but there are no
shares of Preferred Stock outstanding.
(2) FNB and the Bank have no commitments to issue or sell any
such shares or any securities or obligations convertible into or exchangeable
for such shares, or given any person the right to subscribe for or acquire
any such shares and no securities or obligations representing such rights are
outstanding.
(c) Corporate Authority. The execution of this Agreement and the
Plan of Merger and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by the respective Boards of Directors
of FNB and the Bank (but in the case of the Bank, only with respect to the
charter conversion). This Agreement and the Plan of Merger are valid and
binding obligations of FNB and the Bank and no further corporate
authorization on the part of FNB or the Bank is necessary to consummate the
transactions contemplated hereby or thereby except the approval of the
stockholders of FNB pursuant to applicable law. Neither the execution and
delivery of this Agreement and the Plan of Merger nor the consummation in
accordance with the terms of the transactions contemplated hereby and thereby
nor compliance by FNB or the Bank with any provision hereof or thereof will
(i) conflict with or result in a breach of any provision of their charters or
bylaws (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which FNB or the Bank is a party or by which
either FNB or the Bank or any of their properties or assets may be bound, or
(ii) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to FNB or the Bank or any of their properties or assets. No
consent is required in connection with the execution and delivery by FNB of
this Agreement or the Plan of Merger except for the consents, approvals, and
satisfaction of conditions hereinafter set forth and consummation by FNB and
the Bank of the transactions contemplated hereby.
(d) Subsidiaries. FNB owns one share (100%) of Bank Common Stock.
FNB has and on the Effective Date will have no other subsidiaries other than
the Bank. Bank has and on the Effective Date will have no subsidiaries other
than Knox One & Company.
(e) Financial Statements. FNB has delivered to First Virginia its
Second Quarter Report to Shareholders which includes (1) Condensed Unaudited
Consolidated Balance Sheets as of June 30, 1993, December 31, 1992 and June
30, 1992; (2) Condensed Unaudited Consolidated Statements of Operations for
the three months ended June 30, 1993 and 1992 and (3) Condensed Unaudited
Consolidated Statement of Operations for the six months ended June 30, 1993
and 1992 (the "Financial Statements"). Subject to required yearend
adjustments, the Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated or as more particularly set forth therein.
The Condensed Unaudited Consolidated Balance Sheets included as a part of the
Financial Statements present fairly as of June 30, 1993 the financial
condition and assets and liabilities of FNB. The Condensed Unaudited
Consolidated Statements of Operations present fairly the consolidated results
of operations of FNB for the periods indicated.
(f) Absence of Undisclosed Liabilities. Except to the extent
reflected or reserved against in the Financial Statements or as disclosed to
First Virginia, neither FNB nor the Bank as of the date of this Agreement has
any material liabilities or obligations of any nature (other than material
contingent liabilities which will be disclosed to First Virginia) or any
liabilities in the nature of employment contracts with, or agreements to pay
bonuses to any of its directors, officers or employees other than liabilities
or obligations incurred in the ordinary course of business, none of which is
materially adverse.
(g) No Materially Adverse Changes. Since June 30, 1993, there has
been no material adverse change in the assets or liabilities or in the
business or condition (financial or otherwise) of FNB or the Bank which has
not been previously disclosed to First Virginia.
(h) Tax Matters. FNB and Bank have filed all tax returns required
to be filed for each of the five years ended December 31, 1992, and have paid
or set up an adequate reserve for the payment of all taxes required to be
paid in respect to the periods covered by such returns and have set up an
adequate reserve for the payment of all income, property, sales, employment,
franchise or other taxes anticipated to be payable in respect to the period
subsequent to the last of said periods and for the payment of all other
taxes. FNB and Bank will not have any material liability for any such taxes
in excess of the amounts so paid or the reserve so established and FNB and
Bank are not delinquent in the payment of any material tax assessment or
governmental charge. No material deficiencies for any tax assessment or
governmental charge have been proposed, asserted or assessed against FNB or
the Bank which would not be covered by existing reserves and, as of the date
of this Agreement, no requests for waivers for the time to assess any such
taxes are pending. Bank has timely filed all information returns for
customers required to be filed by the IRS and to the best of its knowledge,
has complied with all IRS requirements regarding the certification of
taxpayer identification numbers of customers and backup withholding.
(i) Property.
(1) FNB and the Bank own all property reflected as owned by
them in the Financial Statements free and clear of all mortgages, liens,
pledges, charges or encumbrances of any nature whatsoever except (i) liens
for current taxes not yet due and payable, (ii) mortgages reflected in the
notes to the financial statements, and (iii) such imperfections of title and
easements as do not materially detract from or interfere with the present use
of the properties subject thereto or affected thereby.
(2) As of the date of this Agreement, all tangible real or
personal property and assets material to the business operation or financial
condition of FNB or the Bank which are owned by them or in which any of them
has an interest (other than a security interest) are in substantially good
operating condition and repair, ordinary wear and tear excepted.
(3) All leases material to FNB and the Bank pursuant to which
FNB and the Bank lease real property are valid and effective in accordance
with their respective terms, and there is not, under any such leases, any
material existing default by FNB or the Bank or any event which with notice
or lapse of time or both would constitute such a material default.
(j) Litigation. Other than as set forth to First Virginia in
writing, neither FNB nor the Bank is a party to any pending or threatened
claim, action, suit, investigation or proceeding, nor is subject to any
order, judgment or decree except for matters which in the aggregate will not
have and cannot reasonably be expected to have a material adverse effect on
the financial condition, results of operations, business or prospects of FNB
or the Bank taken as a whole. Neither FNB nor the Bank is subject to any
agreement, memorandum or understanding or similar arrangement with any
regulatory authority restricting its operations or requiring that certain
actions be taken, and, neither FNB nor the Bank has received any notification
from any governmental or regulatory authority, or the staff thereof,
asserting that it is not in compliance with any statutes, regulations or
ordinances which such authority enforces which would be material to FNB or
the Bank's operations as conducted at present or which would be applicable to
the Bank after the Merger. For the purposes of this paragraph, a threatened
claim shall mean any claim which has been actually and overtly asserted
against FNB or the Bank in a written communication delivered to an officer of
the Bank or FNB.
(k) Contracts and Commitments. Except as reflected in the
Financial Statements or as previously disclosed in writing to First Virginia,
neither FNB nor the Bank has as of the date hereof and, except to the extent
consented to in writing by First Virginia, will not have on the Effective
Date:
(1) any bonus, stock option plans, deferred compensation
plans, profit-sharing, retirement arrangements or other fringe benefit plans,
nor any outstanding calls, commitments or agreements of any character
requiring the issuance of shares of its capital stock;
(2) any debt obligations for borrowed money (including
guaranties or agreements to acquire such debt obligations of others) except
for debt obligations incurred or acquired in the ordinary course of its
banking business;
(3) any outstanding loans for any person other than those
made in the ordinary course of Bank's banking business;
(4) any outstanding loan participation with any of its
directors, officers, stockholders or employees;
(5) any agreement for services or for the purchase or
disposition of any equipment or supplies except individual purchase orders
for office supplies incurred in the ordinary course of business of $10,000 or
less;
(6) any deed to real property or lease of personal property
with annual rentals aggregating $5,000 or more;
(7) any agreement or contract with any third party for the
provision of data processing or other services to FNB or the Bank which
involves payment by FNB or the Bank of more than $500 per month and which (i)
has more than six months to run from the date of this Agreement or (ii) may
not be canceled by FNB or the Bank as appropriate on 180 days notice or less
without penalty.
(8) any outstanding loans to its officers, directors,
significant stockholders (collectively "insiders"), or to firms, partnerships
or corporations in which any insiders are partners, executive officers,
directors or significant stockholders or to any entity which would be a
"related interest" of an insider as defined in 12 C.F.R. Section 215.2(1)
made at rates of interest more favorable or involving greater risks of
collectibility than similar loans made to outsiders.
(l) Accuracy of Information Supplied. As of their respective
filing dates, FNB's Annual Reports on Form 10-K for the fiscal years ended
December 31, 1991 and 1992 and proxy statement for 1993, and any other
filings made from and after the date hereof with the SEC pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (such
filings being collectively referred to herein as the "FNB Filings") complied
in all material respects with the regulations of the SEC, and none of the FNB
Filings, as of the respective dates thereof, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements made therein not misleading. The
information which has been or will be supplied by FNB and the Bank to First
Virginia for inclusion in the Registration Statement or any amendment thereto
pertaining to the transactions contemplated hereby (the "Registration
Statement") filed with the Securities and Exchange Commission ("the "SEC") or
the Prospectus contained therein (the "Prospectus"), at the time the
Registration Statement becomes effective will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein in order to make the statements not misleading, provided
that information as of a later date shall be deemed to modify information of
an earlier date.
(m) FNB and Bank Employee Benefit Plans. FNB and the Bank have
delivered to First Virginia or its counsel and filed with the appropriate
governmental authority, as to each employee benefit plan subject to the
Employee Retirement Income Security Act of 1974 ("ERISA"), a true and correct
copy of (i) the most recent annual report (Form 5500, 5500-C or 5500-R, as
appropriate) filed with the Internal Revenue Service ("IRS"), (ii) each IRS
favorable determination letter or opinion letter for each such Plan, as
applicable, (iii) such Plan documents, (iv) each such Plan, (v) each
applicable Summary Plan Description, and (vi) the most recent actuarial
report or valuation relating to each tax-qualified Plan that was delivered to
FNB or the Bank by the actuary or recordkeeper for such Plan.
(n) Bank 401(k) Profit Sharing Plan. The Bank currently maintains
only one tax-qualified deferred compensation plan which is the Bank 401(k)
Profit Sharing Plan (the "Profit Sharing Plan"). The Bank represents with
respect to its Profit Sharing Plan that: (i) to the best knowledge of the
Bank, based on due inquiry, it complies in all material respect with all
applicable provisions of ERISA; (ii) to the best knowledge of the Bank, based
on due inquiry, all material reporting and disclosure requirements of ERISA
imposed upon the Profit Sharing Plan have been complied with, (iii) to the
best knowledge of the Bank, based upon due inquiry, the Profit Sharing Plan
has not engaged in any material transaction prohibited by Title I of ERISA or
Section 4975 of the Internal Revenue Code of 1986 (the "Code") for which an
exemption is not applicable; (iv) the minimum funding standards in Section
302 of ERISA and Section 412 of the Code, do not apply with respect to the
Profit Sharing Plan; (v) no contributions to the Profit Sharing Plan from
the Bank are currently past due; (vi) the Profit Sharing Plan is not subject
to any partial plan terminations; (vii) the Profit Sharing Plan does not
have any property which does not have a readily ascertainable value; (viii)
the Profit Sharing Plan does not own any employer security or real property
as defined in ERISA Section 407; (ix) no proceedings, investigation, filing,
or other matters are pending before the IRS, the Department of Labor, the
Pension Benefit Guaranty Corporation, or other public or quasi-public body in
connection with the Profit Sharing Plan except for such matters as may have
been instituted by the Bank by virtue of the Merger contemplated by this
Agreement; and (x) to the best knowledge of the Bank, based upon due
inquiry, the Profit Sharing Plan is qualified under Section 401(a) and other
applicable provisions of the code.
(o) Environmental Matters. For purposes of this subsection, the
following terms shall have the indicated meaning:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any
governmental entity relating to (i) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource), and/or
(ii) the use, storage, recycling, treatment, generation,transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances. The term "Environmental Law" includes without limitation (i) the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. Sec. 9601, et seq; the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. Sec. 6901, et seq; the Clean Air Act, as amended,
42 U.S.C. Sec. 7401, et seq; the Federal Water Pollution Control act, as
amended, 33 U.S.C. Sec. 1251, et seq; the Toxic Substances Control Act,
as amended, 15 U.S.C. Sec. 9601, et seq; the Emergency Planning and Community
Right to Know Act, 42 U.S.C. Sec. 11001, et seq; the Safe Drinking Water Act,
42 U.S.C. Sec. 300f, et seq; and all comparable state and local laws, and
(ii) any common law (including without limitation common law that may impose
strict liability) that may impose liability or obligations for injuries
or damages due to, or threatened as a result of, the presence of or exposure
to any Hazardous Substance.
"Hazardous Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any material containing any such substance as a
component. Hazardous Substances include without limitation petroleum or
any derivative or byproduct thereof, asbestos, radioactive material, and
polycholorinated byphenyls.
"Loan Portfolio Properties and Other Properties Owned" means those
properties owned or operated by the Bank, including those properties serving
as collateral for any loans made by the Bank.
(i) FNB or the Bank have not been or is not in violation of or liable
under any Environmental Law;
(ii) none of the Loan Portfolio Properties and Other Properties Owned
has been or is in violation of or liable under any Environmental Law; and
(iii) there are no actions, suits, demands, notices, claims,
investigations or proceedings pending or threatened relating to the liability
of the Loan Portfolio Properties and Other Properties Owned under any
Environmental Law, including without limitation any notices, demand letters
or requests for information from any federal or state environmental agency
relating to any such liabilities under or violations of Environmental Law.
(p) Loan Portfolio. Each loan outstanding on the books the Bank
is in all respects what it purports to be, was made in the ordinary course of
business, was not known to be uncollectible at the time it was made, and was
made in accordance with the Bank's standard loan policies. The records of
the Bank regarding all loans outstanding on its books are accurate in all
material respects. The reserves for possible loan losses (subject to yearend
adjustments) on the outstanding loans of the Bank and the reserves for the
real estate owned by the Bank as reflected in the Financial Statements, have
been established in accordance with generally accepted accounting principles
and with the requirements of the FDIC, and in the best judgment of the
management of the Bank, are adequate to absorb all known and anticipated loan
losses in the loan portfolio of the Bank, and any losses associated with
other real estate owned or held by the Bank. Except for those loans
disclosed to First Virginia, no loan in excess of $30,000 has been classified
as of the date hereof by the Bank or regulatory examiners as "Other Loans
Specifically Mentioned", "Substandard", "Doubtful" or "Loss". Except as has
been disclosed to First Virginia, each loan reflected as an asset on the
Bank's Financial Statements is the legal, valid and binding obligation of the
obligor and any guarantor, and no defense, offset or counterclaim has been
asserted with respect to any such loan which, if successful, would have a
material adverse effect on the financial condition, results of operations,
business or prospects of the Bank.
(q) Compliance with Laws. Except as previously disclosed to First
Virginia, neither FNB nor the Bank (i) is in violation of any law, order or
permit applicable to its business, except for violations which are not
reasonably likely to have, individually or in the aggregate, a material
adverse effect on FNB or the Bank; and (ii) has received any notification or
communication from any agency or federal, state or local government or any
regulatory authority or the staff thereof (a) asserting that either FNB or
the Bank is not in compliance with any law or order which such governmental
authority or regulatory authority enforces; (b) threatening to revoke any
permits, or (iii) requiring either FNB or the Bank (1) to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, commitment or memorandum of understanding or (2) to adopt any
Board resolution or similar undertaking which restricts materially the
conduct of its business, or in any manner relates to its capital adequacy,
its management, or the payment of dividends.
(r) Insurance. All policies or binders of property, liability,
product liability, workmen's compensation, vehicular and other insurance held
by or on behalf of FNB or the Bank are valid and enforceable in accordance
with their terms, are in full force and effect, and insure against risks and
liabilities to the extent and in the manner customary for the industry and
are deemed appropriate and sufficient by FNB and Bank. FNB and the Bank are
not in default with respect to any provision contained in any such policy or
binder and has not failed to give any notice or present any claim under any
such policy or binder in due and timely fashion, in either case where such
default or failure to give notice or present any claim would have a material
adverse effect on the financial condition, results of operations, business or
prospects of the Bank on a consolidated basis. FNB and the Bank have not
received notice of cancellation or non-renewal of any such policy or binder.
FNB and the Bank have no knowledge of any inaccuracy in any application for
such policies or binders, any failure to pay premiums when due or any similar
state of facts that might form the basis for termination of any such
insurance. FNB and the Bank have no knowledge of any state of facts or of
the occurrence of any event that is reasonably likely to form the basis for
any material claim against it not fully covered (except to the extent of any
applicable deductible) by the policies or binders referred to above. The
Bank has not received notice from any of its insurance carriers that any
insurance premiums will be materially increased in the future or that any
such insurance coverage will not be available in the future on substantially
the same terms as now in effect.
(s) Applicable Takeover Laws. FNB and the Bank have taken and
will in conjunction with First Virginia take all necessary action to exempt
the transactions contemplated by this Agreement from any applicable federal
or state takeover law.
(t) Charter Provisions. FNB and the Bank have taken all action so
that the entering into this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement do not and will not
result in the granting of any rights to any person (other than to First
Virginia) under the Charter, Bylaws, or other governing instruments of FNB or
the Bank or restrict or impair the ability of First Virginia to vote, or
otherwise to exercise the rights of a shareholder with respect to, shares of
the Bank that may be acquired or controlled by it.
3.2 Representations and Warranties of First Virginia. First Virginia
represents and warrants to FNB and the Bank as follows:
(a) Organization, Standing and Power. First Virginia is a
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Virginia, has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted, is duly registered as a bank holding company
under the Bank Holding Company Act.
(b) Capital Structure. As of June 30, 1993, and as shown by the
1993 Second Quarter Report to Shareholders, the authorized capital stock of
First Virginia consisted of 60,000,000 shares of Common Stock, par value
$1.00 per share, of which approximately 32,209,000 shares were issued and
outstanding as of such date and 3,000,000 shares of Preferred Stock, par
value $10.00 per share, of which 81,130 shares were issued and outstanding at
such date. As of June 30, 1993, 2,169,372 shares of Common Stock were
reserved: 117,505 for the conversion of Preferred Stock and 705,188 for
stock options and stock appreciation rights. As of the date hereof and as of
the Effective Date, all outstanding shares of capital stock of First Virginia
have been validly issued and are fully paid and nonassessable
(c) Authority. The execution and delivery of this Agreement and
the Plan of Merger and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of
First Virginia, no approval of the stockholders of First Virginia is required
to consummate the transaction herein and therein, and this Agreement and the
Plan of Merger are valid and binding obligations of First Virginia. Neither
the execution and delivery of this Agreement and the Plan of nor the
consummation of the transactions contemplated hereby or thereby, nor
compliance by First Virginia with any of the provisions hereof or thereof
will (i) conflict with or result in a breach of any provision of First
Virginia's Articles of Incorporation or Bylaws, or a default (or give rise to
any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any material note, bond, mortgage,
indenture, license, agreement or other instrument, or violation to which
First Virginia is a party or by which it or any of its properties or assets
may be bound, or (ii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to First Virginia or any of its properties or
assets. No consent or approval by any governmental authority is required for
the execution and delivery by First Virginia of this Agreement and the Plan
of Merger except for the approval of all the applicable regulatory agencies
and meeting of conditions hereinafter set forth, the consummation by First
Virginia of the transactions contemplated hereby and thereby.
(d) Financial Statements. The consolidated financial statements
of First Virginia contained in First Virginia's 1993 Second Quarter Report to
Shareholders and heretofore delivered by it to FNB have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated, all as more particularly
set forth in the notes to such financial statements. Each of the balance
sheets contained in such statements presents fairly as of its date the
consolidated financial condition and assets and liabilities of First
Virginia. The income statements, statements of stockholders' equity and
statements of changes in financial position contained in such statements
present fairly the consolidated results of operations of First Virginia for
the periods indicated.
(e) No Material Adverse Change. Since the date of the financial
statements described in Section 3.2(d) above, there has been no material
adverse change in the assets or liabilities or in the business or condition
(financial or otherwise), results of operations or prospects of First
Virginia.
(f) Accuracy of Information Supplied. As of their respective
filing dates, First Virginia's Annual Reports on Form 10-K for the fiscal
years ended December 31, 1991 and 1992 and proxy statement dated March 8,
1993, and any other filings made from and after the date hereof with the SEC
pursuant to the Exchange Act (such filings being collectively referred to
herein as the "First Virginia Filings") complied in all material respects
with the regulations of the SEC, and none of the First Virginia Filings, as
of the respective dates thereof, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein not misleading. The
information which has been or will be supplied by First Virginia for
inclusion in the proxy statement to be distributed to the stockholders of FNB
(the "Proxy Statement") in respect of the Merger or any amendment or
supplement thereto will not contain any untrue statement of a material fact
nor omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein not misleading;
provided, that information of a later date shall be deemed to modify
information of an earlier date.
(g) First Virginia Common Stock to be Issued. Each share of First
Virginia Common Stock issued in connection with theconsummation of the Merger
to stockholders of FNB will be validly issued, fully paid and nonassessable.
(i) Litigation. Except as reflected in the First Virginia
Filings, there are no actions, proceedings or investigations pending or, to
the best of First Virginia's knowledge and belief, threatened against First
Virginia or any First Virginia subsidiary which, if adversely determined,
would have a material adverse effect on the financial conditions or
operations of First Virginia and its subsidiaries, taken as a whole. Neither
First Virginia nor any of its bank subsidiaries is subject to any agreement,
memorandum of understanding or similar arrangement with any regulatory
authority restricting its operations or requiring that certain actions be
taken, and, neither First Virginia nor any of its bank subsidiaries has
received any notification from any governmental or regulatory authority, or
the staff thereof, asserting that it is not in compliance with any
statutes, regulations or ordinances which such authority enforces which would
be material to First Virginia's operations as conducted at present or which
would be applicable to the Bank after the Merger.
ARTICLE IV.
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE DATE.
4.1 Conduct of FNB's and the Bank's Business Prior to the Effective
Date. During the period from the date of this Agreement to the Effective
Date, FNB and the Bank shall conduct their operations according to the
ordinary and usual course of business consistent with current practices and
use their best efforts to maintain and preserve their business organizations,
employees and advantageous business relationships and retain the services of
their executive officers.
4.2 Forbearances.
(a) During the period from the date of this Agreement to the
Effective Date, neither FNB nor the Bank shall without the prior written
consent of First Virginia:
(i) make any changes to their Articles of Incorporation or
Bylaws;
(ii) adjust, split, combine or reclassify the FNB Common Stock
or the Bank Common Stock; make, declare or pay any dividend (except that FNB
may declare or pay its normal dividend at a rate that is no higher than the
rate it has paid in previous years and at a time no more frequently than the
time it was declared or paid in previous years) or make any other
distribution on; or directly or indirectly redeem, purchase or otherwise
acquire, any shares of their capital stock or any securities or obligations
convertible into or exchangeable for any shares of their capital stock, or
grant any stock options or stock appreciation rights or give any person any
right or warrant to acquire any shares of their capital stock;
(iii) enter any contract or commitment or incur or agree to
incur any liability or make any capital expenditures except in the normal
course of business;
(iv) increase in any manner the compensation or fringe
benefits of any of their officers or employees or pay any pension or
retirement allowance not required by any existing plan or agreement to any
such officers or employees or become a party to, amend or commit itself to
any pension, retirement, profit sharing, welfare benefit plan or agreement or
employment agreement with or for the benefit of any employee or officer or
other person other than payments consistent with past practices and current
incentive compensation plans, increases which are not material and other
increases consented to by First Virginia in writing;
(v) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the normal course of business;
(vi) merge or consolidate or agree to merge or consolidate
with or into any other corporation.
4.3 No Solicitation. Unless and until this Agreement shall have been
terminated pursuant to its terms, neither FNB, the Bank nor any of their
executive officers, directors, or agents shall, directly or indirectly,
encourage, solicit or initiate discussions or negotiations (with any person
other than First Virginia) concerning any merger, sale of substantial assets,
tender offer, sale of shares of stock or similar transaction involving FNB or
the Bank or disclose, directly or indirectly, any information not customarily
disclosed to the public concerning FNB or the Bank, afford to any other
person access to the properties, books or records of FNB or the Bank or
otherwise assist any person preparing to make or who has made such an offer,
or enter into any agreement with any third party providing for a business
combination transaction, equity investment or sale of significant amount of
assets, except in a situation in which a majority of the full Board of
Directors of FNB has determined in good faith, upon advice of counsel, that
such Board has a fiduciary duty to consider and respond to a bona fide
proposal by a third party (which proposal was not directly or indirectly
solicited by FNB or the Bank or any of their respective officers, directors,
representatives, agents or affiliates) and provides written notice of its
intention to consider such proposal and the material terms thereof to First
Virginia at least five days before responding to the proposal provided,
however, that if such proposal by its terms requires a response in a shorter
period, FNB shall provide such notice within twenty-four hours and may
thereafter respond in an appropriate fashion. FNB and the Bank will promptly
communicate to First Virginia the identity of the offeror and the terms of
any proposal which it may receive in respect to any of the foregoing
transactions.
4.4 Compliance with Tax-Free Provisions. FNB and the Representing
Directors shall not take any action prior to or after the Effective Date of
the Merger which would disqualify the Merger as a tax free reorganization
under Section 368(a) of the Internal Revenue Code of 1986.
4.5 Access and Information. FNB and the Bank will permit First
Virginia to conduct audits of their books and records within 60 days of the
date of this Agreement and First Virginia will advise FNB within 30 days of
the completion of the audits. Such audits may include an examination of loan
files, accounts receivable and accounts payable, tax returns, agreements,
schedule of assets owned, investment portfolio and all other items deemed
necessary by First Virginia. FNB and the Bank will give to the officers,
accountants, counsel and authorized representatives of First Virginia, access
to the properties, books and records of FNB and the Bank and will furnish
First Virginia with such additional financial and operating data and other
information as to the business and properties of FNB and the Bank as First
Virginia may from time to time request. FNB and the Bank and their officers
and directors will cooperate with First Virginia and its representatives and
counsel in the preparation of any documents or other materials which may be
required in connection with the applications to the Federal Reserve Bank of
Richmond and Atlanta, the Virginia State Corporation Commission and the
Tennessee Bank Commissioner and First Virginia's registration statement on
Form S-4 as filed with the SEC or in connection with any other documents or
materials required by any governmental agency, stock exchange or association
of securities dealers. First Virginia shall return the results of its audit
review to the FNB Board of Directors if First Virginia terminates this
Agreement pursuant to Section 9.2(g).
4.6 Confidentiality. First Virginia and FNB shall cause its advisers
and agents to maintain the confidentiality of all confidential information
furnished to it by the other party concerning its and its subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Date of the Merger, each party shall promptly return all documents
and copies thereof, and all work papers containing confidential information
received from the other party. In the event that either FNB or First
Virginia should violate any of the terms of this paragraph, they agree that
the party who is not in violation would have an inadequate remedy at law for
such violation and may, therefore, seek an injunction without the necessity
of bond, to prevent or halt any violation hereof and the parties hereto agree
not to raise any defense that the party who is not in violation of this
paragraph has an adequate remedy at law. FNB and First Virginia further
acknowledge and agree that in the event of a violation of the terms and
conditions of this paragraph that the party who is not in violation shall
have any and all remedies available at law or equity and shall not be limited
to the remedy of injunctive relief.
4.7 Consents. FNB and the Bank will use their best efforts to obtain
any consents, approvals or waivers from any third parties necessary to the
assignments and transfers contemplated hereby with respect to leases or other
contracts, if any, delivered to First Virginia pursuant to Paragraph 3.1(k)
or any others requiring the same.
4.8 Meeting of FNB Shareholders. The members of the Board of Directors
of FNB who have signed this Agreement believe that this Agreement is in the
best interests of FNB shareholders and that they will duly call and will
convene a meeting of their shareholders to act upon the transactions
contemplated hereby as soon as practicable, will recommend approval of this
Agreement to the shareholders, will use their best efforts to obtain a
favorable vote thereon and will vote their shares in favor thereof. The
calling and holding of such meetings and all transactions, documents and
information related thereto will be in compliance with all applicable laws.
The proxy statement for the shareholder's meeting of FNB will be contained in
the Registration Statement.
4.9 Affiliates of FNB. FNB will promptly (a) furnish to First Virginia
and its counsel such information as may be necessary to determine those
persons who may be deemed to be affiliates of FNB within the meaning of Rule
144 and Rule 145 under the Securities Act of 1933 and (b) use their best
efforts to obtain from any person who may be deemed to be such an affiliate
such undertakings and agreements as may be required in the opinion of counsel
for First Virginia.
4.10 Insurance Applications. The Bank agrees to complete and deliver
to First Virginia within 30 days from the date of this Agreement the
insurance applications necessary to include insurance coverage for the Bank's
property, casualty and fidelity risks and include liability coverage for the
Bank's directors and officers under First Virginia's directors and officers
liability insurance policy.
4.11 Bank Conversion. As provided under Section 1.8 of this Agreement,
FNB and the Bank will make the necessary filings with the Tennessee
Commission of Financial Institutions and the Comptroller of the Currency to
convert the Bank into a state chartered, Federal Reserve member bank.
4.12 Applications to the Tennessee Bank Commissioner. FNB and the Bank
will, jointly with First Virginia, prepare and file with the Tennessee
Commissioner of Financial Institutions applications requesting approval for
First Virginia to acquire both FNB and the Bank pursuant to the provisions of
the Tennessee Code and will use their best efforts to secure favorable action
by the Commissioner of Financial Institutions on such applications.
4.13 Federal Reserve Applications. FNB and the Bank will, jointly with
First Virginia, prepare and file with the Federal Reserve, applications
requesting approval for the Merger as well as an application to make the Bank
a member of the Federal Reserve System under the name "First Knoxville Bank"
and will use its best efforts to secure favorable action by the Federal
Reserve on such applications.
ARTICLE V.
COVENANTS OF FIRST VIRGINIA.
5.1 Issuance of Stock and Payment of Cash. First Virginia will issue
and deliver or cause to be delivered the shares of First Virginia Common
Stock and will pay the cash as called for by Paragraph 1.1 of this Agreement.
5.2 Stock Adjustments. Nothing in this Agreement shall limit the right
of First Virginia to issue or agree to issue any of its stock or other
securities in any manner and for any consideration permitted by law prior to
or after the Effective Date; provided, however, that if First Virginia takes
any action which establishes prior to the Effective Date a record date or an
effective date for a stock dividend on its common stock, a split-up, any
combination of its common stock, or any distribution on shares of its common
stock other than cash dividends, First Virginia will take all such action as
shall be necessary in order that the FNB Common Stock will be converted in
the Merger into additional shares of First Virginia Common Stock which would
have been delivered to the holders of FNB Bank Common Stock if the Merger had
been made effective immediately before such record or effective date;
provided, however, that there shall be no adjustment of First Virginia Common
Stock by reason of First Virginia issuing or agreeing to issue, on such terms
as it may determine, First Virginia Common Stock for cash or property, in
exchange for shares of stock of any other corporation or on account of
mergers or consolidations before, after or simultaneously with the
consummation of the Merger.
5.3 Preparation of Registration Statement. First Virginia will prepare
the registration statement and any amendments thereto, file the registration
statement with the SEC, use its best efforts to secure its effectiveness and
promptly after the Effective Date of the registration statement, mail and
deliver copies of the proxy statement contained therein to the FNB
stockholders for use by its management to solicit proxies for use at its
stockholder's meetings.
5.4 Applications to the Tennessee Commissioner of Financial
Institutions. First Virginia will, jointly with FNB, prepare and file with
the Tennessee Commissioner of Financial Institutions applications requesting
approval for First Virginia to acquire FNB and the Bank pursuant to the
provisions of the Tennessee Code and will use its best efforts to secure
favorable action by the Tennessee Commissioner of Financial Institutions on
such applications.
5.5 Application to the Bureau of Financial Institutions. First Virginia
will prepare and file with the Bureau of Financial Institutions of the
Virginia State Corporation Commission an application requesting the approval
to acquire the Bank and will use its best efforts to secure favorable action
by the Bureau of Financial Institutions on such application.
5.6 Federal Reserve Applications. First Virginia will prepare and file
with the Federal Reserve, applications requesting approval for the Merger as
well as an application to make the Bank a member of the Federal Reserve
System under the name "First Knoxville Bank" and will use its best efforts to
secure favorable action by the Federal Reserve on such applications.
ARTICLE VI.
CONDITIONS PRECEDENT TO FIRST VIRGINIA'S OBLIGATIONS HEREUNDER.
Unless waived in writing by First Virginia in its sole discretion, all
obligations of First Virginia hereunder shall be subject to the fulfillment
prior to or at the Effective Date of the following conditions:
6.1 Representations, Warranties. The representations and warranties of
FNB and the Representing Directors herein contained shall be true as of the
Effective Date, shall be deemed made again at and as of the Effective Date
and shall be true as if so made again; FNB and the Bank shall have performed
all of the obligations and complied with all of the covenants required by
this Agreement to be performed or complied by it on or prior to the Effective
Date and First Virginia shall receive from FNB officers' certificates in such
detail as First Virginia may reasonably request dated the day of the
Effective Date and signed by the president, cashier or secretary to the
foregoing effect.
6.2 No Adverse Changes. There shall not have been any material adverse
changes in the financial position, results of operations, assets, liabilities
or business of FNB or the Bank from June 30, 1993, the date of the Financial
Statements referred to in Paragraph 3.1(e) above, to the Effective Date. If
Williams E. Arant, Jr. terminates his employment as President and Chief
Executive Officer of FNB and the Bank prior to the Effective Date, this will
be considered a material adverse change in the financial position, results of
operations, assets, liabilities or business of FNB and the Bank.
6.3 Audit of FNB and the Bank. The audit of FNB and the Bank conducted
pursuant to Paragraph 4.5 shall reflect stockholders' equity of FNB of not
less than $7.392 million which was FNB's stockholders' equity as of June 30,
1993. The computation of stockholders' equity in both cases shall be made in
accordance with generally accepted accounting principles applicable to banks
and bank holding companies. Deductions shall be made for any reserve
required to reflect assets of their fair values and to provide for any
liabilities that should be reflected as of the date of the audit. The
results of the audit shall not materially adversely differ from the Financial
Statements referred to in Paragraph 3.1(e) above.
6.4 Legal Opinion. First Virginia shall have received a written
opinion, dated as of the Effective Date, from McCampbell & Young, counsel to
FNB, in form satisfactory to First Virginia, which shall cover matters
customary in transactions of this nature.
6.5 Events Preceding the Effective Date. Each of the events set forth
in Paragraphs 2(a)-2(h) shall have occurred.
6.6. No Adverse Proceedings. No action or proceeding against First
Virginia, FNB or the Bank or the consummation of the transactions
contemplated by this Agreement shall have been instituted or threatened or
any investigations undertaken that might eventuate in any such action or
proceeding.
6.7 Consents, Etc. All requisite consents, undertakings, agreements
and exercises in terminations of any third parties which FNB and the Bank
covenant to use their best efforts to obtain shall have been obtained or
waived by First Virginia.
ARTICLE VII.
CONDITIONS PRECEDENT TO FNB'S AND THE BANK'S OBLIGATIONS
HEREUNDER.
Unless waived in writing by either FNB or the Bank in their sole
discretion, all obligations of FNB and the Bank hereunder shall be subject to
the fulfillment prior to or at the Effective Date of the following
conditions:
7.1 Representations, Warranties and Covenants. The representations and
warranties of First Virginia herein contained shall be true as of the
Effective Date, shall be deemed made again and as of the Effective Date and
shall be true as if so made again. First Virginia shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with it on or prior to the Effective Date and FNB shall
have received from First Virginia an officer's certificate in such detail as
FNB may reasonably request dated the Effective Date and signed by its
president, cashier or secretary to the foregoing effect.
7.2 Events Preceding the Effective Date. Each of the events set forth
in Paragraphs 2(a)-2(h) shall have occurred.
7.3 No Adverse Proceedings or Events. No action or proceeding against
FNB or the Bank or First Virginia or the consummation of the transactions
contemplated by this Agreement shall have been instituted or threatened or
any investigations undertaken that might eventuate in any such action or
proceeding.
7.4 No Adverse Changes. There shall not have been any significant
adverse change in the financial position, results of operations, assets,
liabilities or business of First Virginia from June 30, 1993 to the Effective
Date , provided, however, that a merger or acquisition or the announcement of
a merger or acquisition involving First Virginia or a subsidiary of First
Virginia and requiring the issuance of First Virginia Common or Preferred
Stock or cash will not be considered for purposes of thissection as an
"adverse change" in the financial position, results of operations, assets,
liabilities or business of First Virginia.
7.5. Legal Opinion. FNB shall have received a written opinion, dated as
of the Effective Date, of inhouse counsel to First Virginia, in form
satisfactory to FNB, which shall cover matters customary in transactions of
this nature.
ARTICLE VIII.
TAX OPINION AND RESTRICTIONS CONCERNING THE RESALE OF FIRST
VIRGINIA COMMON STOCK BY AFFILIATES OF FNB
8.1 Tax Opinion. First Virginia and FNB agree to jointly obtain a tax
opinion from First Virginia's legal counsel (which may be First Virginia's
inhouse counsel) or First Virginia's tax adviser that:
(a) the Merger will constitute a reorganization within the meaning
of Internal Revenue Code Section 368a(1)(A);
(b) no gain or loss will be recognized by those FNB stockholders
who exchange their FNB Common Stock for shares of First Virginia Common
Stock; and
(c) in the case of those FNB shareholders who elect stock, the
basis of First Virginia Common Stock to be received by FNB stockholders will
be the same as the basis of FNB Common Stock surrendered in exchange therefor
and holding period of the First Virginia Common Stock to be received by FNB
stockholders will include the period during which FNB Common Stock
surrendered in exchange therefor was held provided the FNB Common Stock was
held as a capital asset by such FNB stockholder at the Effective Date.
8.2 Restrictions on Affiliates. Each of the executive officers and
directors of FNB shall, prior to or on the Effective Date, execute and
deliver to First Virginia a written representation substantially in the form
of Exhibit B of this Agreement to the effect that no disposition will be made
by said person of any shares of First Virginia Common Stock received after
the Effective Date except within the limits and in accordance with the
applicable provisions of Paragraph C, E, F, and G of Rule 144 under the
Securities Act of 1933.
ARTICLE IX.
TERMINATION, AMENDMENT AND SURVIVAL OF REPRESENTATIONS.
9.1 Amendment. This Agreement and the Plan of Merger attached hereto
may be amended at any time prior to the Effective Date; provided that any
such amendment is in writing and is approved by the Board of Directors of
each of the parties hereto and provided, further, that subsequent to the
meeting in which this Agreement is approved by shareholders of FNB, no
amendment shall be made in the exchange rate which decreases the
consideration to FNB's stockholders without the approval of FNB's
stockholders.
9.2 Termination. Notwithstanding any other provision to the contrary
of this Agreement, and notwithstanding the approval of this Agreement by the
shareholders of FNB, this Agreement and the Plan of Merger may be terminated
and the Merger abandoned (without any obligation by First Virginia or FNB to
renegotiate the Agreement) at any time prior to the Effective Date:
(a) By mutual consent of the Board of Directors of First Virginia and
the Board of Directors of FNB; or
(b) By the Board of Directors of either FNB or First Virginia (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant, or other agreement contained in this
Agreement) in the event of a breach by the other Party of any representation
or warranty contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the breaching
Party of such breach; or
(c) By the Board of Directors of either First Virginia or FNB (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant or other agreement contained in this
Agreement) in the event of a material breach by the other Party of any
covenant or agreement contained in this Agreement which cannot be or has not
been cured within thirty (30) days after the giving of written notice to the
breaching Party of such breach; or
(d) By the Board of Directors of either First Virginia or FNB if the
Federal Reserve Board or the Tennessee Commissioner of Financial Institutions
deny approval of the Merger and the time period for all appeals or requests
for reconsideration has run or if the Comptroller of the Currency, the
Tennessee Commissioner of Financial Institutions or the Federal Reserve Board
deny the conversion of the Bank into a state chartered, Federal Reserve
member bank; or
(e) By the Board of Directors of either FNB or First Virginia in the
event the Merger should not become effective within nine months of this
Agreement, in each case only if the failure to consummate the Merger is not
caused by any breach of the Agreement by the Party electing to terminate; or
(f) By the Board of Directors of either FNB or First Virginia (provided
that the terminating Party is not then in material breach of any
representation, warranty, covenant or other agreement contained in this
Agreement ) in the event that any of the conditions precedent to the
obligations of such Party to consummate the Merger cannot be satisfied or
fulfilled within nine months of this Agreement; or
(g) By the Board of Directors of First Virginia, at any time prior to
the 60th day after execution of the Agreement in the event that First
Virginia determines, after its audit of FNB and the Bank referred to in
Paragraph 4.5, that the financial conditions of FNB or the Bank do not meet
the standards described in Paragraph 6.3 or that a fact or circumstance
exists with respect to the Merger which materially and adversely impacts one
or more of the economic benefits to First Virginia of the Merger; or
(h) By the Board of Directors of First Virginia if more than 25% of the
holders of FNB stock file for appraisal rights under Tennessee law or if more
than 20% of the holders of FNB stock vote against the Merger; or
(i) By the Board of Directors of FNB if the price of First Virginia
Common Stock declines to $33 per share or less for any period of ten
consecutive working days prior to the Effective Date.
9.3 Survival of Representations and Covenants. The representations,
warranties and covenants of FNB and the representations and warranties of the
Representing Directors of FNB herein contained shall survive and remain in
effect for one year following the Effective Date of the Merger. The
respective obligations and agreements of the Parties hereto shall not survive
the Effective Date of the Merger except for those obligations and agreements
that continue after the Effective Date in Articles I and IX and Sections 4.4,
4.6, 5.1, 5.2, and 8.2.
9.4 Expenses. Whether or not the transactions herein are consummated,
First Virginia shall pay all expenses and fees in connection with this
Agreement and the Merger provided for herein; provided, however, that FNB and
the Bank shall pay (a) all of their legal expenses and fees including the
expenses for converting the Bank to a state chartered, Federal Reserve member
and (b) all the expenses and fees of their advisors, including their
accountant(s), in connection with the Merger. First Virginia agrees to pay
any fees to be paid for Mr. Harold Pierce in connection with the Merger.
Notwithstanding the foregoing, after the date of this Agreement and
within nine months following any termination of this Agreement (except for a
termination by First Virginia pursuant to Section 9(g) or by FNB pursuant to
Sections 9.2(a), 9.2(d), 9.2(e), 9.2((i) and, provided that FNB has not been
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement, pursuant to Sections 9.2(b), 9.2(c) or
9.2(f)), FNB covenants, acknowledges and agrees that it shall be a specific,
absolute and unconditional binding obligation to FNB or the Bank entering
into a letter of intent, agreement in principle, or definitive agreement
(whether or not considered binding, nonbinding or conditional) with respect
to, or recommending shareholder acceptance of any acquisition, merger or
combination, share exchange, sale of assets, of other business combination
("Business Combination") with any third-party (other than First Virginia),
that such third-party that is a party to the Business Combination shall have
paid to First Virginia, prior to the time the Business Combination is
announced to the public by press release or otherwise, an amount in cash
equal to the sum of (i) $680,000, which sum represents compensation for First
Virginia's loss as a result of the Merger not being consummated and (ii) an
amount not exceeding $250,000 for (x) the direct costs and expenses
(including, without limitation, fees and expenses of First Virginia's
financial consultants, printing costs, accountants and counsel) incurred by
First Virginia in negotiating and carrying out the Merger and (y) the
indirect costs and expenses incurred by First Virginia in connection with the
Merger, including First Virginia's management time devoted to negotiation and
preparation for such transaction. In the event such third-party shall refuse
to pay such amounts, the amounts shall be an obligation of FNB or the Bank
and shall be paid by FNB or the Bank promptly upon notice to FNB by First
Virginia.
9.5 Notices. All notices, requests, demands and other communications
under or connected with this Agreement shall be in writing and (a) if to
First Virginia shall be addressed to First Virginia Banks, Inc. 6400
Arlington Boulevard, Falls Church, Virginia 22042-2336, Attention: Paul H.
Geithner, Jr., President, with copies to its counsel, Christopher M. Cole,
Vice President and Assistant General Counsel and (b) if to FNB or to the Bank
shall be addressed to Williams E. Arant, Jr., President and Chief Executive
Officer, 620 Market Street, Knoxville, Tennessee 37901, with a copy to their
counsel, Robert S. Marquis, McCampbell & Young, 2021 Plaza Tower, P.O. Box
550, Knoxville, Tennessee 37929.
9.6 Entire Agreement in Effect. This Agreement, including Exhibits A
and B, is intended by the parties to and does constitute the entire agreement
of the parties with respect to the transactions contemplated hereunder. This
Agreement including the Plan of Merger attached hereto supersedes any and all
other prior understandings and agreements between the parties hereto
including the Agreement in Principle and it may not be changed, waived,
discharged or terminated orally but only in writing by a party against which
enforcement of the change, waiver, or discharge or termination is sought.
9.7 General. The paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretations of this Agreement. This Agreement and the Plan of Merger
attached hereto may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, all of which shall become one and
the same instrument. This Agreement and the Plan of Merger attached hereto
shall inure to the benefit of and be binding upon the parties hereto and
their respective successors; it shall not be assigned and shall not create
any rights in any third parties, including stockholders of either party
hereto.
9.8 Execution by Bank. The Bank is joined in this Agreement solely for
the purpose of agreeing to convert its charter pursuant to the terms and
conditions hereof.
9.9 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Tennessee.
IN WITNESS WHEREOF, First Virginia, FNB and the Bank have caused this
Agreement to be duly executed by their respective chairmen or presidents and
their respective seals to be hereunto affixed and attested by their
respective cashiers or secretaries thereunto duly authorized and the
directors of FNB have subscribed their names as of the date first above
written.
ATTEST: FIRST VIRGINIA BANKS, INC.
/s/ Thomas P. Jennings By /s/ Robert H. Zalokar
- --------------------------- ---------------------------
Thomas P. Jennings, Robert H. Zalokar, Chairman
Vice President and of the Board and Chief
Secretary Executive Officer
ATTEST: FNB FINANCIAL CORPORATION
/s/ Robert S. Marquis By /s/ Williams E. Arant, Jr.
- --------------------------- ---------------------------
Robert S. Marquis, Secretary Williams E. Arant, Jr.,
President and Chief Executive
Officer
ATTEST: FIRST NATIONAL BANK OF KNOXVILLE
/s/ Robert S. Marquis By /s/ Williams E. Arant, Jr.
- --------------------------- ---------------------------
Robert S. Marquis, Secretary Williams E. Arant, Jr,
President and Chief Executive
Officer
DIRECTORS OF BANK OF FNB FINANCIAL CORPORATION
/s/ Williams E. Arant, Jr.
- ---------------------------
Williams E. Arant, Jr.
/s/ Gordon E. Inman
- ---------------------------
Gordon E. Inman
/s/ Robert S. Marquis
- ---------------------------
Robert S. Marquis
/s/ John H. Schaad
- ---------------------------
John H. Schaad
/s/ Rufus H. Smith, III
- ---------------------------
Rufus H. Smith, III
APPENDIX I TO AGREEMENT
PLAN OF MERGER
OF
FNB FINANCIAL CORPORATION
INTO
FIRST VIRGINIA BANKS, INC.
1. The Parties. FNB Financial Corporation ("FNB") shall merge with
and into First Virginia Banks, Inc. (the "Merger"), a Virginia corporation
("First Virginia") (collectively referred to herein as the "Constituent
Corporations"). First Virginia shall be (as is hereinafter called when
reference is made to it at and after the consummation of the Merger) the
Surviving Corporation. The name of the Surviving Corporation shall be First
Virginia Banks, Inc. The Merger shall become effective at a time specified
in the Articles of Merger filed with both the Virginia State Corporation
Commission and the Tennessee Secretary of State (the "Effective Date").
2. Articles of Incorporation; Bylaws. At the Effective Date, the
Articles of Incorporation and Bylaws of the Surviving Corporation shall be
the Articles of Incorporation and Bylaws of First Virginia as in effect
immediately prior to the Effective Date.
3. Effect of the Merger on Capital Stock, Assets, Liabilities and
Capitalization of FNB and First Virginia.
3.1 Conversion of Stock of FNB. At the Effective Date, each
issued and outstanding share of FNB Common Stock other than treasury shares
(FNB having no other stock issued and outstanding other than Common Stock)
shall by virtue of the Merger and without any action by the holder thereof be
converted in accordance with the provisions of Section 3.2 hereof, into (x)
shares of First Virginia Common Stock which shall be validly issued, fully
paid and nonassessable, and/or (y) cash. Options on shares of FNB Common
Stock shall not be converted at the Effective Date into options to acquire
First Virginia Common Stock. Instead, all options on FNB Common Stock,
whether exercisable or non-exercisable, shall be cancelled as of the
Effective Date and shall convert into the nontransferable right to receive
cash equal to (a) the number of FNB shares subject to option times (b) the
difference between (i) .20 times the average of the closing prices of First
Virginia Common Stock for each of the 10 trading days prior to the Closing
Date provided, however, that if that average price is below $37.50 per share,
then the average shall be deemed to be $37.50 for purposes of this
calculation, and (ii) $5.00 which is the exercise price. Each share of the
Common Stock of the Surviving Corporation which shall be issued and
outstanding prior to the Merger shall continue to be issued and outstanding.
3.2 Conversion Rate. At the Effective Date of the Merger:
(a) Conversion of Stock. Each share of FNB Common Stock which is
issued and outstanding as of the Effective Date of the Merger (other than
shares exchanged for cash and Dissenting Shares) shall, and without any
action by the holder thereof, be converted into to .20 shares of First
Virginia Common Stock, proportionately adjusted for any stock split, stock
dividends or other similar capital adjustments between the date of the
Agreement and Plan of Reorganization between the Parties hereto (the
"Agreement") and the Effective Date of the Merger by First Virginia. No
fractional shares of First Virginia Common Stock shall be issued to FNB
stockholders. In lieu thereof, each FNB stockholder shall receive upon
surrender of his FNB Common Stock an amount in cash equal to the amount of
any fractional share he has multiplied by the closing price of First Virginia
Common Stock on the last trading day prior to the Effective Date of the
Merger as reported for New York Stock Exchange composite transactions.
(b) Cash Election. Holders of shares of FNB Common Stock will be given
the option of exchanging their shares for $7.50 per share in cash, provided
that the number of shares that may be exchanged for cash, when adding to
Dissenting Shares (as defined below) shall not exceed 40% of the outstanding
shares of FNB Common Stock immediately prior to the Effective Date of the
Merger. The cash election must be made at the time the FNB shareholders vote
on the Merger and once such vote has been taken, the cash election shall be
irrevocable. If the aggregate of (i) shares as respects which a cash
election is made and (ii) Dissenting Shares exceeds 40% of the outstanding
shares of FNB Common Stock immediately prior to the Effective Date of the
Merger, First Virginia will pay for shares submitted for cash exchange by
each holder of 500 or fewer FNB shares (if such holder has submitted all his
shares for cash exchange) and then will pay cash for shares submitted for
cash pro rata. Shares not exchanged for cash after proration will be
exchanged for First Virginia Common Stock at the exchange rate noted above.
If the aggregate of (i) shares as respects which a cash is election and (ii)
Dissenting Shares is less than 10.1% of the outstanding shares of FNB Common
Stock immediately prior to the Effective Date of the Merger, First Virginia
will pay to FNB shareholder in lieu of shares of First Virginia Common Stock
a pro rata cash payment equal in an amount equal to the difference between
the amount of cash paid to FNB shareholders electing cash and (ii) the amount
of cash that would have been paid if holders of 10.1% of the outstanding
shares of FNB Common Stock immediately prior to the Effective Date of the
Merger had elected cash at $7.50 per share in exchange for that number of
shares of FNB Common Stock.
FNB shareholders who elect to exchange some or all of their shares of
FNB Common Stock for cash must submit to FNB certificates for the shares
being exchanged for cash at or prior to the meeting of FNB shareholders
called to consider the Merger. If the Merger is approved by FNB shareholders
at this meeting, a shareholders election to receive cash is irrevocable and
FNB will retain certificates for shares submitted for cash purchase until
either (1) termination of the Agreement and this Plan of Merger upon which
FNB will return such certificates or (2) the Effective Date of the Merger
when the Exchange Agent will exchange such certificates for cash to the
extent required by the Agreement and this Plan of Merger.
After the Effective Date of the Merger, each holder of a certificate for
theretofore outstanding shares of FNB Common Stock, upon surrender of such
certificate to the Exchange Agent, unless previously surrendered to FNB in
connection with the exercise of the cash option, and a letter of transmittal,
which shall be mailed to each holder of a certificate for theretofore
outstanding shares of FNB Common Stock by the Exchange Agent promptly
following the Effective Date of the Merger, shall be entitled to receive in
exchange therefor a certificate or certificates representing the number of
full shares of First Virginia Common for which shares of FNB Common Stock
theretofore represented by the certificate or certificates so surrendered
shall have been exchanged as provided in the Agreement and this Plan of
Merger, or cash if the cash option provided above is properly elected, or in
the event of proration, a combination of cash and First Virginia Common
Stock. Until so surrendered, each outstanding certificate which, prior to
the Effective Date of the Merger, represented First Virginia Common Stock,
will be deemed evidence of the right to receive either (i) .20 shares of
First Virginia Common Stock or (ii) $7.50 per share multiplied by the number
of shares represented by such certificate in cash if the cash option provided
above was properly elected, or (iii) a combination thereof; and after the
Effective Date of the Merger (unless the cash option is properly elected)
will be deemed for all corporate purposes of First Virginia to evidence
ownership of the number of full shares of First Virginia Common Stock into
which the shares of FNB Common Stock represented thereby were converted.
As respect to shares of FNB Common Stock to be converted into First
Virginia Common Stock, until such outstanding certificates formerly
representing FNB Common Stock are surrendered, no dividend payable to holders
of record of First Virginia Common Stock for any period as of any date
subsequent to the Effective Date of the Merger shall be paid to the holder of
such outstanding certificates in respect thereof. After the Effective Date
of the Merger, there shall be no be no further registry transfer on the
records of FNB of shares of FNB Common Stock. If a certificate representing
such shares is presented to First Virginia, it shall be canceled and exchange
for a certificate representing shares of First Virginia Common Stock as
herein provided. Upon surrender of certificates of FNB Common Stock in
exchange for First Virginia Common Stock, there shall be paid to the record
holder of the certificates of First Virginia Common Stock issued in exchange
therefor (i) the amount of dividends theretofore paid with respect to such
full shares of First Virginia Common Stock as of any date subsequent to the
Effective Date of the Merger which have not been paid to a public official
pursuant to abandoned property laws and (ii) at the appropriate payment date
the amount of dividends with a record date after the Effective Date of the
Merger but prior to surrender and a payment date subsequent to surrender. No
interest shall be payable with respect to such dividends upon surrender of
outstanding certificates.
3.3 Dissenting FNB Shares. Notwithstanding anything in this Plan of
Merger to the contrary, shares of FNB Common Stock which are issued and
outstanding immediately prior to the Effective Date of the Merger and which
are held by a shareholder who has the right (to the extent such right is
available by law) to demand and receive payment of the fair value of his
shares of FNB Common Stock pursuant to Sec. 48-23-101 et seq of the Tennessee
Code Annotated the ("Dissenting Shares") shall be canceled and shall not be
converted into or be exchangeable for the right to receive the consideration
provided in Section 3.2 of this Plan of Merger, but the holders thereof shall
be entitled to payment of the fair market value of such shares in accordance
with T.C.A. Section 48-23-101 et seq subject to the procedures and conditions
specified in those Code Sections unless and until such holder shall fail to
perfect his right to dissent or shall have effectively withdrawn or lost such
right under those Code Sections as the case may be. If such holder shall
have failed to perfect or shall effectively withdrawn or lost such right, his
shares of FNB Common Stock shall thereupon be deemed to have been converted
into at the Effective Date of the Merger the right to receive .20 shares of
First Virginia Common Stock for each share of FNB Common Stock.
3.4 Assets. The Surviving Corporation shall possess all the
rights, interest, privileges, immunities, powers, franchises, concessions,
certificates of authority of a public as well as a private nature of each of
First Virginia and FNB; and all property, real and personal, and every
interest therein, and all debts and other obligations due on whatever
account, and all other choses in action and all and every interest of, or
belonging to, or due to each of First Virginia and FNB; and the title to all
real estate or any interest therein, vested in either of FNB or First
Virginia, shall not revert or be in any way impaired by reason of the Merger.
3.5 Liabilities. The Surviving Corporation shall be liable for
liabilities of FNB and all valid debts, liabilities, duties and obligations
of FNB shall thenceforth attach to the Surviving Corporation and may be
enforced against it to the same extent as if said debts, liabilities, duties
and obligations had been originally incurred or contracted by it and neither
the rights of creditors nor any liens upon the property of either FNB or
First Virginia shall be impaired by the Merger.
4. Board of Directors and Officers. From and after the Effective
Date, the directors of the Surviving Corporation shall be the directors of
First Virginia immediately prior to the Effective Date and the officers of
the Surviving Corporation shall be the officers of First Virginia immediately
prior to the Effective Date.
5. Conditions. Consummation of the Merger is subject to the following
conditions:
(i) approving vote of the holder of a majority of the outstanding
shares of FNB Common Stock entitled to vote; (ii) the approval of the Merger
by the Board of Directors of the Federal Reserve System, the Tennessee
Commissioner of Financial Institutions and the State Corporation Commission
of Virginia; and (iii) the satisfaction of all other conditions to the Merger
as contained in the Agreement.
6. Termination and Abandonment. This Plan of Merger may be terminated
and the Merger abandoned as provided in Section 9.2 of the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Plan of Merger
as of the 7th day of February, 1994.
ATTEST: FIRST VIRGINIA BANKS, INC.
/s/ Christopher M. Cole By /s/ Robert H. Zalokar
- -------------------------- ---------------------------
Christopher M. Cole, Vice Robert H. Zalokar, Chairman
President and Secretary of the Board and Chief
Executive Officer
ATTEST: FNB FINANCIAL CORPORATION
/s/ Robert Marquis By /s/ Williams E. Arant, Jr.
- -------------------------- ---------------------------
Secretary Williams E. Arant, Jr.
President and Chief Executive
Officer
EXHIBIT B
TO: PRINCIPAL OFFICERS, DIRECTORS, AND STOCKHOLDERS OF
FNB FINANCIAL CORPORATION
Re: Restrictions on Resale of First Virginia Common Stock
The Federal Securities Laws impose certain limitations on the resale of
securities of publicly owned companies acquired by principal officers and
directors in merger-type transactions. We are required to note these
restrictions in the proxy statement and to receive your acknowledgment and
agreement to these restrictions.
As to the acquisition of FNB Financial Corporation ("FNB") by First
Virginia, these restrictions, in summary, are as follows:
For a period of two years from the date of the acquisition, any
principal officer or director of FNB may not resell, in any three-month
period, more than approximately 300,000 shares of First Virginia Common Stock
acquired pursuant to the merger. In addition, such securities must be sold
in brokers' transactions or in a transaction with a market maker. A broker's
transaction is defined as a transaction in which a broker (i) does no more
than execute the order to sell the security, receiving no more than the
customary broker's commission and (ii) neither solicits nor arranges for the
solicitation of orders to buy the security in anticipation of or in
connection with the transaction. A more detailed description of these
restrictions is as follows:
Although the issuance of securities of First Virginia Banks, Inc. in the
proposed merger will be registered under the Securities Act and will be
issued in compliance with any applicable state laws relating to securities,
any public reoffering or sale of such securities by any person who is an
"affiliate" of FNB at the time the Agreement is submitted to a vote of FNB
shareholders and who thus could be deemed an "underwriter" will, under
current law, require either (i) the further registration under the Securities
Act of the securities of First Virginia to be sold or (ii) compliance with
Rule 145 under the Securities Act (as described below) or (iii) the
availability of another exemption from such registration. An "affiliate" is
defined as a "controlling person", which could mean, generally, a shareholder
owning 10% or more of FNB's stock or a director or principal officer of FNB.
Compliance with Rule 145 requires compliance with certain of the provisions
of Rule 144 under the Securities Act. Under such provisions,
"affiliates" are only able to sell, in any three-month period, the greater of
(i) 1% of the securities of the class outstanding as shown by First
Virginia's most recent report or statement, (ii) the average weekly reported
volume of trading in those securities on all national securities exchanges
and reported through the national quotation system of a registered securities
association (i.e., NASDAQ), or (iii) to the extent such figures are
available, the average weekly volume of trading in the securities reported
through the consolidated transaction reporting system mandated by Rule 17a-15
under the Securities Exchange Act of 1934 for the same four-week period. In
addition, if an "affiliate" acts in concert with another person for the
purpose of any such sales, the sales of all persons acting in concert would
be limited in the aggregate to such maximum number of securities in any
three-month period. Two additional requirements of Rule 144 which must be
satisfied in complying with Rule 145 are that (1) First Virginia must have
been current for a period of twelve months prior to the sale in the filing of
all reports required by the Securities and Exchange Commission (a condition
which First Virginia presently fulfills and which it will endeavor to fulfill
in the future), and (2) First Virginia securities must be sold in brokers'
transactions or in a transaction directly with a market maker in the First
Virginia security involved. A broker's transaction is defined as a
transaction in which a broker (i) does no more than execute the order to sell
the security, receiving no more than the customary broker's commission and
(ii) neither solicits nor arranges for the solicitation of orders to buy the
security in anticipation of or in connection with the transaction.
If you have any questions about these restrictions either at present or
in the future, please feel free to contact me.
Please acknowledge your receipt of and agreement to these restrictions
by signing a copy of this letter and returning it to me.
Very truly yours,
Christopher M. Cole
Vice President and Assistant
General Counsel
CMC:sw
ACKNOWLEDGED AND AGREED:
___________________________________
(Name and date)
EXHIBIT B OF PROSPECTUS/PROXY STATEMENT
Section 48-23-101
Tennessee Code Annotated
Section 48-23-101
Tennessee Code Annotated
48-23-101. Definitions.--(1)"Beneficial shareholder" means the person
who is a beneficial owner of shares held by a nominee as the record
shareholder;
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer;
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Sec. 48-23-102 and who exercises that right when and
in the manner required by Secs. 48-23-201-48-23-209;
(4) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action;
(5) "Interest" means interest from the effective date of the corporate
action that gave rise to the shareholder's right to dissent until the date of
payment, at the average auction rate paid on United States treasury bills
with a maturity of six (6) months (or the closest maturity thereto) as of the
auction date for such treasury bills closest to such effective date;
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
to the extent of the rights granted by a nominee certificate on file with a
corporation; and
(7) "Shareholder" means the record shareholder or the beneficial
shareholder. [Acts 1986, ch. 887, Sec. 13.01.]
Section 48-23-102
Tennessee Code Annotated
48-23-102. Right to dissent.--(a) A shareholder is entitled to dissent
from, and obtain payment of the fair value of his shares in the event of, any
of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If shareholder approval is required for the merger by
Sec. 48-21-103 or the charter and the shareholder is entitled to vote on the
merger; or
(B) If the corporation is a subsidiary that is merged with
its parent under Sec. 48-21-104;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired, if
the shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale pursuant
to court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to the
shareholders within one (1) Year after the date of sale:
(4) An amendment of the charter that materially and adversely
affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share is to be acquired for cash under
Sec. 48-16-104; or
(5) Any corporate action taken pursuant to a shareholder vote to
the extent the charter, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this chapter may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
(c) Notwithstanding the provisions of subsection (a), no shareholder
may dissent as to any shares of a security which, as of the date of the
effectuation of the transaction which would otherwise give rise to
dissenters' rights, is listed on an exchange registered under Sec. 6 of the
Securities Exchange Act of 1934, as amended, or is a "national market system
security," as defined in rules promulgated pursuant to the Securities
Exchange Act of 1934, as amended. [Acts 1986, ch. 887, Sec. 13.02.]
Section 48-23-103
Tennessee Code Annotated
48-23-103. Dissent by nominees and beneficial owners.--(a) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection
are determined as if the shares as to which he dissents and his other shares
were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
of any one (1) or more classes held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of the same class of
which he is the beneficial shareholder or over which he has power to direct
the vote. [Acts 1986, ch. 887, Sec. 13.03.]
Section 48-23-201
Tennessee Code Annotated
48-23-201. Notice of dissenters' rights.--(a) If proposed corporate
action creating dissenters' rights under Sec. 48-23-102 is submitted to a
vote at a shareholders' meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters' rights under this
chapter and be accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under Sec.
48-23-102 is taken without a vote of shareholders, the corporation shall
notify in writing all shareholders entitled to assert dissenters' rights that
the action was taken and send them the dissenters' notice described in Sec.
48-23-203.
(c) A corporation's failure to give notice pursuant to this section
will not invalidate the corporate action. [Acts 1986, ch. 887, Sec. 13.20.]
Section 48-23-202
Tennessee Code Annotated
48-23-202. Notice of intent to demand payment.--(a) If proposed
corporate action creating dissenters' rights under Sec. 48-23-102 is
submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken
written notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action. No
such written notice of intent to demand payment is required of any
shareholder to whom the corporation failed to provide the notice required by
Sec. 48-23-201.
(b) A shareholder who does not satisfy the requirements of subsection
(a) is not entitled to payment for his shares under this chapter. [Acts 1986,
ch. 887, Sec. 13.21.]
Section 48-23-203
Tennessee Code Annotated
48-23-203. Dissenter's notice.--(a) If proposed corporate action
creating dissenters' rights under Sec. 48-23-102 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of Sec. 48-23-202.
(b) The dissenters' notice must be sent no later than ten (10) days
after the corporate action was authorized by the shareholders or effectuated,
whichever is the first to occur, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is
received;
(3) Supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the principal
terms of the proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership of
the shares before that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than one (1) nor more than two (2) months
after the date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this chapter if the corporation
has not previously sent a copy of this chapter to the shareholder pursuant to
Sec. 48-23-201. [Acts 1986, ch. 887, Sec. 13.22.]
Section 48-23-204
Tennessee Code Annotated
48-23-204. Duty to demand payment.--(a) A shareholder sent a
dissenters' notice described in Sec. 48-23-203 must demand payment, certify
whether he acquired beneficial ownership of the shares before the date
required to be set forth in the dissenters' notice pursuant to Sec.
48-23-203(b)(3), and deposit his certificates in accordance with the terms of
the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are cancelled or modified by the effectuation of the
proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice,
is not entitled to payment for his shares under this chapter.
(d) A demand for payment filed by a shareholder may not be withdrawn
unless the corporation with which it was filed, or the surviving corporation,
consents thereto. [Acts 1986, ch. 887, Sec. 13.23.]
Section 48-23-205
Tennessee Code Annotated
48-23-205. Share restrictions.--(a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment
is received until the proposed corporate action is effectuated or the
restrictions released under Sec. 48-23-207.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the effectuation of the proposed
corporate action. [Acts 1986, ch. 887, Sec. 13.24.]
Section 48-23-206
Tennessee Code Annotated
48-23-206. Payment.--(a) Except as provided in Sec. 48-23-208, as soon
as the proposed corporate action is effectuated, or upon receipt of a payment
demand, whichever is later, the corporation shall pay each dissenter who
complied with Sec. 48-23-204 the amount the corporation estimates to be the
fair value of his shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an
income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial statements,
if any;
(2) A statement of the corporation's estimate of the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under
Sec. 48-23-209; and
(5) A copy of this chapter if the corporation has not previously
sent a copy of this chapter to the shareholder pursuant to Sec. 48-23-201 or
Sec. 48-23-203. [Acts 1986, ch. 887, Sec. 13.25.]
Section 48-23-207
Tennessee Code Annotated
48-23-207. Failure to take action.--(a) If the corporation does not
effectuate the proposed action that gave rise to the dissenters' rights
within two (2) months after the date set for demanding payment and depositing
share certificates, the corporation shall return the deposited certificates
and release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation effectuates the proposed action, it must send a
new dissenters' notice under Sec. 48-23-203 and repeat the payment demand
procedure. [Acts 1986, ch. 887, Sec. 13.26.]
Section 48-23-208
Tennessee Code Annotated
48-23-208. After-acquired shares.--(a) A corporation may elect to
withhold payment required by Sec. 48-23-206 from a dissenter unless he was
the beneficial owner of the shares before the date set forth in the
dissenters' notice as the date of the first announcement to news media or to
shareholders of the principal terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after effectuating the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall pay
this amount to each dissenter who agrees to accept it in full satisfaction of
his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest
was calculated, and a statement of the dissenter's right to demand payment
under Sec. 48-23-209. [Acts 1986, ch. 887. Sec. 13.27]
Section 48-23-209
Tennessee Code Annotated
48-23-209. Procedure if shareholder dissatisfied with payment or
offer.--(a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and
demand payment of his estimate (less any payment under Sec. 48-23-206), or
reject the corporation's offer under Sec. 48-23-208 and demand payment of the
fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under Sec.
48-23-206 or offered under Sec. 48-23-208 is less than the fair value of his
shares or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under Sec. 48-23-206
within two (2) months after the date set for demanding payment; or
(3) The corporation, having failed to effectuate the proposed
action, does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within two (2) months after the
date set for demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection
(a) within one (1) month after the corporation made or offered payment for
his shares. [Acts 1986, ch. 887, Sec. 13.28]
Section 48-23-301
Tennessee Code Annotated
48-23-301. Court action.--(a) If a demand for payment under Sec.
48-23-209 remains unsettled, the corporation shall commence a proceeding
within two (2) months after receiving the payment demand and petition the
court to determine the fair value of the shares and accrued interest. If the
corporation does not commence the proceeding within the two-month period, it
shall pay each dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in a court of record
having equity jurisdiction in the county where the corporation's principal
office (or, if none in this state, its registered office) is located. If the
corporation is a foreign corporation without a registered office in this
state, it shall commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or whose shares
were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents
of this state) whose demands remain unsettled parties to the proceeding as in
an action against their shares and all parties must be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or
by publication as provided by law.
(d) The jurisdiction of the count in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one (1)
or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled
to the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to
judgment:
(1) For the amount, if any, by which the court finds the fair
value of his shares, plus accrued interest, exceeds the amount paid by the
corporation; or
(2) For the fair value, plus accrued interest, of his after-
acquired shares for which the corporation elected to withhold payment under
Sec. 48-23-208. [Acts 1986, ch. 887, Sec. 13.30.]
Section 48-23-302
Tennessee Code Annotated
48-23-302. Court costs and counsel fees.--(a) The court in an appraisal
proceeding commenced under Sec. 48-23-301 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of
the dissenters, in amounts the court finds equitable, to the extent the court
finds the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Sec. 48-23-209.
(b) The court may also assess the fees and expenses of counsel and
experts for the respective parties, amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters
if the court finds the corporation did not substantially comply with the
requirements of Secs. 48-23-201-48-23-209; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the corporation,
the court may award to these counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited. [Acts 1986, ch. 887,
Sec. 13.31.]
EXHIBIT C OF PROSPECTUS/PROXY STATEMENT
Opinion of Financial Advisor
October 20, 1993
Board of Directors
FNB Financial Corporation
One Centre Square
620 Market Street
Knoxville, Tennessee 37901
Gentlemen:
In connection with the proposed acquisition of FNB Financial Corporation
("FNB") by First Virginia Banks, Inc. ("FVB") (the "Merger"), you have asked
us to render an opinion as to whether the financial terms of the Merger, as
provided in the Letter of Intent, dated as of October 20, 1993 among such
parties, are fair, from a financial point of view, to the shareholders of
FNB. Under the terms of the Merger, holders of all outstanding shares of FNB
stock will receive consideration per FNB share equal to one-fifth (0.2)
shares of FVB Common Stock as defined in the Letter of Intent.
Our firm, as part of its investment banking business, is frequently
involved in the valuation of securities as related to public underwritings,
private placements, mergers, acquisitions, recapitalizations and other
purposes.
In connection with our study for rendering this opinion, we have
reviewed the Letter of Intent, FNB's financial results for fiscal years ended
December 31, 1988, 1989, 1990, 1991 and 1992, and for December 31, 1992,
March 31, 1993, and June 30, 1993, and certain documents and information we
deem relevant to our analysis. We have also held discussions with senior
management of FNB for the purpose of reviewing the historical and current
operations of, and outlook for FNB, industry trends, the terms of the
proposed Merger, and related matters.
We have also studied published financial data concerning certain other
publicly traded banks which we deem comparable to FNB as well as certain
financial data relating to acquisitions of other banks that we deem relevant
or comparable. In addition, we have reviewed other published information,
performed certain financial analyses and considered other factors and
information which we deem relevant.
As the proposed Letter of Intent entails the issuance of shares of FVB
Common Stock as the consideration to be paid to FNB shareholders, we have
reviewed similar information and data relating to FVB including its
historical financial statements, from 1988 up through and including second
quarter ended June 30, 1993.
In rendering this opinion, we have relied upon the accuracy of the
Letter of Intent, the financial information listed above, and other
information furnished to us by FNB and FVB. We have not separately verified
this information nor have we made and independent evaluation of any of the
assets or liabilities of FNB and FVB.
Based upon the foregoing and upon current market and economic
conditions, we are of the opinion that, from a financial point of view, the
terms of the Merger as provided in the Letter of Intent are fair to the
stockholders of FNB.
Very truly yours,
/s/ The Robinson-Humphrey Company, Inc.
THE ROBINSON-HUMPHREY COMPANY, INC.