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Filed pursuant to Rule 424(b)(3)
Registration No. 333-01997
LOGO
May 13, 1996
Dear Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend a
Special Meeting of Shareholders (the "Special Meeting") of Southwest Banks, Inc.
("Southwest") on Monday, June 17, 1996, at 5:00 p.m., local time at Naples Beach
Hotel & Golf Club, Naples, Florida. The formal notice of the Special Meeting is
set forth on the next page. At this important meeting you will be asked to
consider and vote upon a proposal to approve the Agreement and Plan of Merger
dated as of February 2, 1996 (the "Merger Agreement") among Southwest, F.N.B.
Corporation ("FNB") and Southwest Affiliation Corporation, a wholly-owned
subsidiary of FNB ("SWAC"), providing for the merger (the "Merger") of SWAC with
and into Southwest, with Southwest being the corporation surviving the Merger.
After the Merger, Southwest would be a wholly-owned subsidiary of FNB.
PLEASE REVIEW CAREFULLY THE ACCOMPANYING PROXY STATEMENT-PROSPECTUS. This
document contains a detailed description of the Merger Agreement, its terms and
conditions and the transactions contemplated by the Merger Agreement.
THE SOUTHWEST BOARD OF DIRECTORS BELIEVES THE MERGER IS IN THE BEST
INTERESTS OF SOUTHWEST'S SHAREHOLDERS, HAS APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THE SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
YOUR VOTE IS IMPORTANT! The affirmative vote of the holders of a majority
of the outstanding shares of Southwest Common Stock (excluding those shares held
by FNB) is necessary to adopt the Merger Agreement and to approve the Merger.
Therefore, whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy and return it in the enclosed postage
prepaid envelope. If you attend the meeting, you may vote in person if you wish,
even though you previously have returned your proxy card. Your prompt
cooperation will be greatly appreciated.
Very truly yours,
LOGO
Gary L. Tice
Chairman of the Board, President
and Chief Executive Officer
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SOUTHWEST BANKS, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 17, 1996
To the Shareholders of
Southwest Banks, Inc.:
Notice is hereby given that a Special Meeting of Shareholders (the "Special
Meeting") of Southwest Banks, Inc. ("Southwest"), will be held at Naples Beach
Hotel and Golf Club, Naples, Florida on Monday, June 17, 1996, at 5:00 p.m.,
local time, for the following purposes:
(1) To consider and vote upon a proposal to adopt the Agreement and
Plan of Merger, dated as of February 2, 1996 (the "Merger Agreement"),
among Southwest, F.N.B. Corporation ("FNB") and Southwest Affiliation
Corporation, a wholly-owned subsidiary of FNB ("SWAC"), pursuant to which
SWAC will be merged with and into Southwest, with Southwest thereby
becoming a wholly-owned subsidiary of FNB, and in which each issued and
outstanding share of Southwest Common Stock will be converted into the
right to receive 0.819 of a share of FNB Common Stock; and
(2) To transact such other business incidental to the conduct of the
Special Meeting as may properly come before the Special Meeting or any
adjournments or postponements thereof.
The Merger Agreement is more completely described in the accompanying Proxy
Statement-Prospectus, and a copy of the Merger Agreement is attached as Appendix
A to the accompanying Proxy Statement-Prospectus.
Only holders of record of Southwest Common Stock at the close of business
on May 1, 1996 will be entitled to notice of, and to vote at, the Special
Meeting or any adjournments or postponements thereof. The affirmative vote of
the holders of a majority of the outstanding shares of Southwest Common Stock,
exclusive of shares owned by FNB, is required for adoption of this Merger
Agreement.
Whether or not you plan to attend the Special Meeting in person, please
complete, sign and date the enclosed proxy and return it promptly in the
enclosed postage prepaid envelope. Your proxy may be revoked at any time before
it is voted by signing and returning a later dated proxy with respect to the
same shares, by filing with the Secretary of Southwest a written revocation
bearing a later date, or by attending and voting at the Special Meeting.
By Order of the Board of Directors
/s/ GARRETT S. RICHTER
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GARRETT S. RICHTER
Secretary
Naples, Florida
May 13, 1996
WHETHER OR NOT YOU PLAN
TO ATTEND THIS MEETING,
PLEASE COMPLETE, SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD.
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LOGO LOGO
PROXY STATEMENT
OF
SOUTHWEST BANKS, INC.
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
JUNE 17, 1996
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PROSPECTUS
OF
F.N.B. CORPORATION
COMMON STOCK, $2.00 PAR VALUE
This Proxy Statement-Prospectus (this "Proxy Statement-Prospectus") is
being furnished to holders of common stock, par value $.10 per share ("Southwest
Common Stock"), of Southwest Banks, Inc., a
Florida corporation ("Southwest"), in connection with the solicitation of
proxies by the Board of Directors of Southwest (the "Southwest Board") for use
at a special meeting of such holders to be held on Monday,
June 17, 1996, commencing at 5:00 p.m., local time, and at any adjournment or
postponement thereof (the "Special Meeting"). At the Special Meeting, holders of
Southwest Common Stock will be asked to consider and act upon a proposal to
approve the Agreement and Plan of Merger, dated February 2, 1996, by and among
F.N.B. Corporation, a Pennsylvania corporation ("FNB"), Southwest Affiliation
Corporation, a Florida corporation and wholly-owned subsidiary of FNB ("SWAC"),
and Southwest (the "Merger Agreement"), and the transactions contemplated
thereby, pursuant to which, among other things, Southwest would be acquired by
FNB by means of a merger of SWAC with and into Southwest (the "Merger"). A copy
of the Merger Agreement is attached hereto as Appendix A and is incorporated
herein by reference.
Pursuant to the Merger Agreement, upon consummation of the Merger, each
issued and outstanding share of Southwest Common Stock (other than shares held
by Southwest, FNB or any of their subsidiaries, in each case, other than in a
fiduciary capacity or as a result of debts previously contracted, which shares
will be canceled and retired without consideration being paid) will be converted
into 0.819 of a share of common stock, par value $2.00 per share, of FNB ("FNB
Common Stock"), subject to certain further adjustments as described in this
Proxy Statement-Prospectus (the "Exchange Ratio"). See "THE
MERGER -- Modification, Waiver, Termination". The Exchange Ratio of 0.819 shares
has been adjusted for a 5% stock dividend declared by FNB on April 24, 1996,
which dividend is payable on May 31, 1996 to shareholders of record of FNB on
May 1, 1996 (the "FNB Stock Dividend"). See "RECENT DEVELOPMENTS" and "THE
MERGER --
(continued on next page)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF FNB COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR BANK
DEPOSITS, ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANKING
OR NONBANKING AFFILIATE OF FNB, AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
------------------------
The date of this Proxy Statement-Prospectus is May 13, 1996.
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Description of the Merger". Any options, warrants or other rights to purchase
shares of Southwest Common Stock pursuant to stock options, warrants or stock
appreciation rights (collectively, the "Southwest Options") remaining
unexercised upon consummation of the Merger will become options, warrants or
other rights to purchase an adjusted number of shares of FNB Common Stock at an
adjusted exercise price, both of which are computed in accordance with the
Exchange Ratio. See "THE MERGER -- Conversion of Southwest Options". Each holder
of Southwest Common Stock or Southwest Options who would otherwise be entitled
to receive a fraction of a share of FNB Common Stock (after taking into account
all of a shareholder's certificates) will receive, in lieu thereof, the
equivalent cash value of such fraction of a share, without interest. See "THE
MERGER -- Description of the Merger".
Consummation of the Merger is subject to several conditions, including,
among others, the affirmative vote to approve the Merger Agreement of the
holders of a majority of the outstanding shares of Southwest Common Stock
entitled to vote in elections for directors which are not beneficially owned (as
defined herein and in the Southwest Articles of Incorporation (the "Southwest
Charter")), directly or indirectly, by FNB and the approval of appropriate
regulatory authorities. See "THE MERGER -- Conditions Precedent to the Merger".
The FNB Common Stock trades on the SmallCap Market Tier of the Nasdaq Stock
Market (the "Nasdaq SmallCap Market") under the trading symbol "FBAN". The last
reported bid price of FNB Common Stock as reported by the Dow Jones News
Retrieval Service (the "Dow Jones") on February 2, 1996, the last trading day
preceding public announcement of the proposed Merger, was $19.766 per share
after adjusting to reflect the FNB Stock Dividend. The last reported bid price
of FNB Common Stock as reported by the Dow Jones on May 7, 1996 was $23.875 per
share. Based on such last reported bid price, as of May 7, 1996, the Exchange
Ratio resulted in a per share purchase price for the Southwest Common Stock of
$19.554. Since April 24, 1996, the Southwest Common Stock has traded on the
Nasdaq Stock Market as a National Market Security (the "Nasdaq National Market")
under the trading symbol "SWBA". Prior to April 24, 1996, Southwest Common Stock
was traded on the over-the-counter market under the trading symbol "SWBA". The
last reported bid price per share of Southwest Common Stock on the
over-the-counter market as reported by the Dow Jones on February 2, 1996, the
last trading day preceding public announcement of the proposed Merger, was
$14.250 per share. The last reported bid price of Southwest Common Stock on the
Nasdaq National Market as reported by the Dow Jones on May 7, 1996 was $17.000
per share. See "PRICE RANGE OF COMMON STOCK AND DIVIDENDS".
Because the Exchange Ratio is fixed, a change in the market price of FNB
Common Stock before the Merger would affect the value of the FNB Common Stock to
be received in the Merger in exchange for the Southwest Common Stock. THERE CAN
BE NO ASSURANCE AS TO THE MARKET PRICE OF THE FNB COMMON STOCK AT ANY TIME
BEFORE THE DATE ON WHICH THE MERGER BECOMES EFFECTIVE (THE "EFFECTIVE TIME") OR
AS TO THE MARKET PRICE OF THE FNB COMMON STOCK AT ANY TIME THEREAFTER.
Shareholders are urged to obtain current market quotations.
The Robinson-Humphrey Company, Inc. ("Robinson-Humphrey") has rendered its
opinion, dated May 8, 1996, to the Southwest Board that the consideration as
provided in the Merger Agreement is fair, from a financial point of view, to the
holders of Southwest Common Stock. See "THE MERGER -- Opinion of Southwest's
Financial Advisor".
THE SOUTHWEST BOARD RECOMMENDS THAT THE SHAREHOLDERS OF SOUTHWEST VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
This Proxy Statement-Prospectus also constitutes a prospectus of FNB with
respect to the shares of FNB Common Stock issuable to shareholders of Southwest
upon consummation of the Merger. FNB has supplied all information contained in
this Proxy Statement-Prospectus relating to FNB and its subsidiaries, and
Southwest has supplied all information contained in this Proxy
Statement-Prospectus relating to Southwest and its subsidiaries.
This Proxy Statement-Prospectus is included as part of a Registration
Statement on Form S-4 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") by FNB relating to the registration
under the Securities Act of 1933, as amended (the "Securities Act"), of up to
3,276,700 shares of FNB Common Stock to be issued in connection with the Merger.
This Proxy Statement-Prospectus and the accompanying form of proxy for the
Special Meeting are first being mailed to the shareholders of Southwest on or
about May 13, 1996.
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TABLE OF CONTENTS
PAGE
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AVAILABLE INFORMATION.......................... 1
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE.................................... 1
SUMMARY........................................ 3
General.................................... 3
The Companies.............................. 3
FNB.................................... 3
Southwest.............................. 3
Special Meeting and Vote Required to
Approve the Merger....................... 3
The Merger................................. 4
Effective Time of the Merger............... 5
Recommendation of the Southwest Board...... 5
Opinion of Southwest's Financial Advisor... 6
Certain Differences in the Rights of
Shareholders............................. 6
Modification, Waiver and Termination....... 6
Certain Federal Income Tax Consequences.... 6
Interests of Certain Persons in the
Merger................................... 7
Stock Option Agreement..................... 7
Dissenters' Rights......................... 7
Accounting Treatment....................... 8
Regulatory Approvals....................... 8
Resales by Affiliates...................... 8
Share Information and Market Prices........ 8
Comparative Unaudited Per Share Data....... 9
Selected Financial Data.................... 10
RECENT DEVELOPMENTS............................ 12
THE SPECIAL MEETING OF SHAREHOLDERS OF
SOUTHWEST.................................... 12
General.................................... 12
Proxies.................................... 12
Solicitation of Proxies.................... 13
Record Date and Voting Rights.............. 13
Recommendation of the Southwest Board...... 14
THE MERGER..................................... 15
Description of the Merger.................. 15
Conversion of Southwest Options............ 15
Effective Time of the Merger............... 16
Exchange of Certificates................... 17
Background of and Reasons for the Merger... 17
Background of the Merger............... 17
FNB Reasons for the Merger............. 18
Southwest Reasons for the Merger....... 19
Opinion of Southwest's Financial Advisor... 20
General................................ 20
Valuation Methodologies................ 20
Comparable Transaction Analysis.... 20
Discounted Cash Flow Analysis...... 21
Compensation of Robinson-Humphrey...... 21
Conditions Precedent to the Merger......... 22
Conduct of Business Prior to the Merger.... 23
Modification, Waiver and Termination....... 25
Expenses................................... 26
Certain Federal Income Tax Consequences.... 26
Interests of Certain Persons in the
Merger................................... 27
General................................ 27
Southwest Management Post-Merger;
Southwest Employment Agreements...... 27
Indemnification........................ 28
Southwest Options...................... 28
Other Matters Relating to Southwest
Employee Benefit Plans............... 29
Southwest Board Resolutions............ 30
Ownership of Southwest Common Stock by
FNB.................................. 30
Other FNB Relationships to Southwest... 31
Stock Option Agreement..................... 31
Dissenters' Rights of Southwest
Shareholders............................. 35
Accounting Treatment....................... 35
Bank Regulatory Matters.................... 35
Federal Reserve Board.................. 35
Florida Banking Department............. 36
Status of Regulatory Approvals and
Other Information.................... 36
Restrictions on Resales by Affiliates...... 37
Voluntary Dividend Reinvestment and Stock
Purchase Plan............................ 37
PRICE RANGE OF COMMON STOCK AND DIVIDENDS...... 38
Market Prices.............................. 38
Dividends.................................. 38
INFORMATION ABOUT FNB.......................... 39
INFORMATION ABOUT SOUTHWEST.................... 40
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS FOR THE MERGER.......... 41
DESCRIPTION OF FNB CAPITAL STOCK AND SOUTHWEST
CAPITAL STOCK................................ 46
FNB Common Stock........................... 46
General................................ 46
Voting and Other Rights................ 46
Distributions.......................... 46
FNB Preferred Stock........................ 47
General................................ 47
FNB Series A Preferred Stock........... 47
FNB Series B Preferred Stock........... 47
Southwest Common Stock..................... 47
General................................ 47
Southwest Preferred Stock.............. 47
COMPARISON OF SHAREHOLDER RIGHTS............... 48
Removal of Directors; Filling Vacancies on
the Board of Directors................... 48
Quorum of Shareholders..................... 49
Adjournment and Notice of Shareholder
Meetings................................. 49
Call of Special Shareholder Meetings....... 49
Shareholder Consent in Lieu of Meeting..... 49
Dissenters' Rights......................... 50
Derivative Actions......................... 50
Dividends and Distributions................ 50
Director Qualifications and Number......... 51
Indemnification of Officers and
Directors................................ 51
Director Liability......................... 53
Amendment of Articles of Incorporation and
By-Laws.................................. 53
Vote Required for Extraordinary Corporate
Transactions............................. 54
Interested Shareholder Transactions........ 54
Fiduciary Duty............................. 55
Provisions with Possible Anti-Takeover
Effects.................................. 56
LEGAL OPINIONS................................. 58
EXPERTS........................................ 58
SHAREHOLDER PROPOSALS.......................... 59
OTHER MATTERS.................................. 59
APPENDIX A -- Agreement and Plan of Merger..... A-1
APPENDIX B -- Stock Option Agreement........... B-1
APPENDIX C -- Opinion of The Robinson-Humphrey
Company, Inc................................. C-1
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AVAILABLE INFORMATION
FNB has filed with the Commission the Registration Statement under the
Securities Act, relating to the shares of FNB Common Stock to be issued in
connection with the Merger. For further information pertaining to the shares of
FNB Common Stock to which this Proxy Statement-Prospectus relates, reference is
made to such Registration Statement, including the exhibits and schedules filed
as a part thereof. As permitted by the rules and regulations of the Commission,
certain information included in the Registration Statement is omitted from this
Proxy Statement-Prospectus. In addition, FNB and Southwest are subject to
certain of the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and, in accordance therewith, file
certain reports, proxy statements and other information with the Commission.
Such reports, proxy statements and other information can be inspected and copied
at the public reference room of the Commission, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and copies of such materials can be obtained by
mail from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. In addition,
copies of such materials are available for inspection and reproduction at the
public reference facilities of the Commission at its New York Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048; and at its Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Reports, proxy statements and other information concerning
FNB also may be inspected at the offices of the Nasdaq Stock Market, 1735 K
Street, N.W., Washington, D.C. 20006-1500.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents previously filed by FNB with the Commission are
hereby incorporated by reference in this Proxy Statement-Prospectus: (a) the FNB
Annual Report on Form 10-K for the year ended December 31, 1995; (b) the
description of FNB Common Stock contained in the FNB registration statement
filed pursuant to Section 12 of the Exchange Act and any amendment or report
filed for the purpose of updating such description; and (c) the FNB Current
Report on Form 8-K filed February 9, 1996.
The following documents previously filed by Southwest with the Commission
are hereby incorporated by reference in this Proxy Statement-Prospectus: (a) the
Southwest Annual Report on Form 10-K for the year ended December 31, 1995 and
(b) the Southwest Current Report on Form 8-K filed March 13, 1996. A copy of the
Southwest Annual Report on Form 10-K has been enclosed for delivery with this
Proxy Statement-Prospectus.
In addition, all documents filed by FNB and Southwest with the Commission
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the
date hereof and prior to the time at which the Special Meeting has been finally
adjourned are hereby deemed to be incorporated by reference herein. Any
statements contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement-Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement-Prospectus.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE DOCUMENTS RELATING TO FNB
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON
REQUEST FROM DAVID B. MOGLE, SECRETARY AND TREASURER, F.N.B. CORPORATION,
HERMITAGE SQUARE, HERMITAGE, PA 16148, TELEPHONE (412) 981-6000. THE DOCUMENTS
RELATING TO SOUTHWEST (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS ARE
NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE
WITHOUT CHARGE UPON REQUEST FROM LEWIS S. ALBERT, SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER, SOUTHWEST BANKS, INC., 900 GOODLETTE ROAD NORTH,
NAPLES, FLORIDA 33940, TELEPHONE (941) 262-7600. IN ORDER TO ENSURE TIMELY
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DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JUNE 10, 1996.
PERSONS REQUESTING COPIES OF EXHIBITS TO SUCH DOCUMENTS THAT ARE NOT
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS WILL BE CHARGED THE
COSTS OF REPRODUCTION AND MAILING.
------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED IN THIS PROXY STATEMENT-PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRE-
SENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FNB OR
SOUTHWEST.
THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO EXCHANGE OR
SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR PURCHASE, THE SECURITIES
OFFERED BY THIS PROXY STATEMENT-PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR TO OR
FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS SPEAKS AS OF
THE DATE HEREOF UNLESS OTHERWISE SPECIFICALLY INDICATED.
THIS PROXY STATEMENT-PROSPECTUS DOES NOT COVER ANY RESALES OF THE FNB
COMMON STOCK OFFERED HEREBY TO BE RECEIVED BY SHAREHOLDERS OF SOUTHWEST DEEMED
TO BE "AFFILIATES" OF SOUTHWEST OR FNB UPON THE CONSUMMATION OF THE MERGER. NO
PERSON IS AUTHORIZED TO MAKE USE OF THIS PROXY STATEMENT-PROSPECTUS IN
CONNECTION WITH ANY SUCH RESALES.
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SUMMARY
The following is a brief summary of certain information set forth elsewhere
in this Proxy Statement-Prospectus and is not intended to be complete. It is
qualified in its entirety by reference to more detailed information contained
elsewhere in this Proxy Statement-Prospectus, the accompanying Appendices and
the documents incorporated herein by reference.
GENERAL
This Proxy Statement-Prospectus, Notice of Special Meeting of Southwest
shareholders to be held on Monday, June 17, 1996 and form of proxy solicited in
connection therewith are first being mailed to Southwest shareholders on or
about May 13, 1996. At the Special Meeting, the holders of Southwest Common
Stock will consider and vote on whether to approve the Merger Agreement and the
transactions contemplated thereby. A copy of the Merger Agreement is attached
hereto as Appendix A.
THE COMPANIES
FNB. FNB is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended (the "BHCA"). FNB was organized under the laws
of the Commonwealth of Pennsylvania in 1974 and has as its principal assets the
stock of its subsidiaries. The lead bank of FNB is First National Bank of
Pennsylvania ("First National"). FNB provides a full range of financial
services, primarily to consumers and small- to medium-sized businesses through
its subsidiaries and their network of 93 offices in Pennsylvania, eastern Ohio
and southwestern New York. On December 31, 1995, FNB had total assets of $1.7
billion. The principal executive offices of FNB are located at Hermitage Square,
Hermitage, Pennsylvania 16148, and its telephone number is (412) 981-6000. All
references herein to FNB refer to FNB Corporation and its subsidiaries, unless
the context otherwise requires.
For additional information regarding FNB and the combined company that
would result from the Merger, see "THE MERGER", "RECENT DEVELOPMENTS", and
"INFORMATION ABOUT FNB".
SOUTHWEST. Southwest is a bank holding company registered under the BHCA.
It was organized under the laws of the State of Florida in 1988, and has as its
principal assets the stock of its two subsidiary banks, First National Bank of
Naples ("First Naples") and Cape Coral National Bank ("Cape Coral"). Southwest
provides commercial banking services through a network of seven offices in
southwestern Florida. On December 31, 1995, Southwest had total assets of $386
million. Southwest's principal executive offices are located at 900 Goodlette
Road North, Naples, Florida 33940, and its telephone number is (941) 262-7600.
For additional information regarding Southwest, see "THE MERGER" and
"INFORMATION ABOUT SOUTHWEST".
SPECIAL MEETING AND VOTE REQUIRED TO APPROVE THE MERGER
The Special Meeting will be held on Monday, June 17, 1996 at 5:00 p.m.,
local time, at the Naples Beach Hotel & Golf Club, Naples, Florida, at which
time the shareholders of Southwest will be asked to approve the Merger Agreement
and the transactions contemplated thereby. The record holders of Southwest
Common Stock at the close of business on May 1, 1996 (the "Record Date") are
entitled to notice of and to vote at the Special Meeting. On the Record Date,
there were approximately 1,128 holders of record of Southwest Common Stock and
3,654,089 shares of Southwest Common Stock outstanding.
The affirmative vote of the holders of a majority of the outstanding shares
of Southwest Common Stock entitled to vote in elections for directors which are
not beneficially owned directly or indirectly by FNB is required to approve the
Merger Agreement and the transactions contemplated thereby. As of the Record
Date, FNB beneficially owned (as defined herein and in the Southwest Charter)
270,874 shares, or 7.41%, of the Southwest Common Stock entitled to vote in
elections for directors which vote will not be counted for approval of the
Merger Agreement for purposes of the voting requirements of the Southwest
Charter. As of the Record Date, directors and executive officers of Southwest
and their affiliates (excluding FNB, which may be deemed to be an affiliate of
Peter Mortensen, Chairman and President of FNB and a director of
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Southwest) beneficially owned 595,539 shares, or 16.30%, of the Southwest Common
Stock entitled to vote at the Special Meeting. The banking subsidiaries of
Southwest, in a fiduciary capacity for third parties, do not have sole or shared
voting power as to any shares of Southwest Common Stock.
The members of the Southwest Board, with the exception of Peter Mortensen,
who recused himself from all deliberations regarding (and votes on) the proposed
Merger because of his position as Chairman and President of FNB, resolved that
they will vote their shares in favor of the Merger Agreement and the
transactions contemplated thereby at the Special Meeting.
See "THE SPECIAL MEETING OF SHAREHOLDERS OF SOUTHWEST" and "THE
MERGER -- Interests of Certain Persons in the Merger".
Approval of the Merger Agreement by the shareholders of FNB is not
required.
THE MERGER
Subject to the terms and conditions of the Merger Agreement and at the
Effective Time, SWAC will merge with and into Southwest. Southwest will be the
surviving entity and will continue to be governed by the laws of the State of
Florida. At the Effective Time, each outstanding share of Southwest Common Stock
(other than shares held by Southwest or FNB, or any of their subsidiaries, in
each case, other than in a fiduciary capacity or as a result of debts previously
contracted, which shares will be canceled and retired without consideration
being paid) will be converted into and exchanged for 0.819 of a share (adjusted
for the FNB Stock Dividend and subject to certain further possible adjustment)
of FNB Common Stock, with cash to be paid in lieu of any resulting fractional
shares of FNB Common Stock, each share of FNB capital stock outstanding prior to
the Merger will continue to be outstanding after the Effective Time and each
share of SWAC Common Stock will be converted into one share of Southwest Common
Stock. As of the Record Date, there were 3,654,089 shares of Southwest Common
Stock outstanding. Southwest has represented that, as of the Effective Time,
there will be no more than 4,000,855 shares of Southwest Common Stock issued and
outstanding.
Because the Exchange Ratio is fixed and because the market price of FNB
Common Stock is subject to fluctuation, the value of the shares of FNB Common
Stock that holders of Southwest Common Stock will receive in the Merger may
increase or decrease prior to and following the Merger.
Immediately following the Effective Time and assuming that 4,000,855 shares
of Southwest Common Stock are outstanding immediately prior to the Effective
Time, the former stockholders of Southwest would own approximately 3,276,700
shares, or 26.6%, of the then outstanding FNB Common Stock (assuming 9,053,940
shares of FNB Common Stock outstanding immediately prior to the Effective Time).
The number of shares of FNB Common Stock to be issued in the Merger will change
if less than 4,000,855 shares of Southwest Common Stock are outstanding
immediately prior to the Effective Time.
As of the Record Date, there were Southwest Options outstanding with
respect to 455,430 shares of Southwest Common Stock. Except as described below,
at the Effective Time, each Southwest Option will be converted into an option,
warrant or other right to purchase the number of shares of FNB Common Stock
equal to the number of shares of Southwest Common Stock subject to such
Southwest Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, at a per share exercise price adjusted by dividing the per share
exercise price under each such Southwest Option by the Exchange Ratio and
rounding down to the nearest cent, with cash to be paid in lieu of any
fractional shares upon exercise of each converted option, warrant or other
right, upon the otherwise same terms and conditions under the relevant Southwest
Option as were applicable immediately prior to the Effective Time. In addition,
notwithstanding the foregoing, each Southwest Option that is an "incentive stock
option" shall be adjusted in accordance with the Section 424 of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder
(the "Code"), so as not to constitute a modification, extension or renewal of
the option within the meaning of Section 424(h) of the Code.
The Merger is subject to the satisfaction of certain conditions. Such
conditions include, among others, an affirmative vote to approve the Merger
Agreement by holders of a majority of the outstanding shares of Southwest Common
Stock entitled to vote in elections of directors which are not beneficially
owned directly or indirectly by FNB, the effectiveness under the Securities Act
of the Registration Statement for shares of FNB
4
10
Common Stock to be issued in the Merger and the approval of appropriate
regulatory agencies. The obligation of FNB to effect the Merger also is subject
to (i) the receipt, to the extent necessary to assure, in the reasonable
judgment of FNB, that the transactions contemplated hereby will qualify for
pooling-of-interests accounting treatment, of agreements from affiliates of
Southwest restricting their ability to sell or otherwise transfer their shares
of Southwest Common Stock or their shares of FNB Common Stock received upon
consummation of the Merger; and (ii) that as of the close of the most recent
calendar quarter (or, if the Effective Time shall occur within 20 days following
the close of a calendar quarter, then as of the next preceding calendar quarter)
cumulative earnings reported by Southwest since December 31, 1995 will be
greater than or equal to the amount calculated by multiplying (a) $500,000 by
(b) the number of full calendar quarters which have passed since December 31,
1995 and for which earnings have been reported (as described herein and in the
Merger Agreement) as of such date.
Southwest has agreed to take all steps necessary to exempt the Merger from
any applicable Florida anti-takeover laws.
For additional information relating to the Merger, see "THE MERGER".
EFFECTIVE TIME OF THE MERGER
Unless otherwise agreed by FNB and Southwest, the Effective Time is
expected to occur on the date and at the time the Articles of Merger to be
executed by Southwest and SWAC and filed with the Florida Department of State
(the "Articles of Merger") become effective with the Florida Department of
State. The parties have agreed to use their reasonable efforts to cause the
Effective Time to occur on or before the fifth business day (as designated by
FNB) following the last to occur of (i) the effective date of the last required
consent of any state or federal regulatory authority having authority over the
Merger (including the expiration of all applicable waiting periods following
such consents or the delivery of appropriate notices) or (ii) the date on which
the shareholders of Southwest approve the Merger Agreement, unless otherwise
agreed upon by FNB and Southwest; provided, however, that in no event shall the
Effective Time occur prior to January 1, 1997, unless FNB determines, in its
sole discretion, to permit the Effective Time to occur prior to January 1, 1997,
but not earlier than December 16, 1996. If approved by the Southwest
shareholders and applicable regulatory authorities, the parties expect that the
Effective Time will occur on or before January 31, 1997, although there can be
no assurance as to whether or when the Merger will occur. See "THE MERGER --
Effective Time of the Merger", "-- Conditions Precedent to the Merger" and "--
Bank Regulatory Matters -- Florida Banking Department".
RECOMMENDATION OF THE SOUTHWEST BOARD
THE SOUTHWEST BOARD, WITH THE EXCEPTION OF MR. MORTENSEN, WHO RECUSED
HIMSELF FROM ALL DELIBERATIONS REGARDING (AND VOTES ON) THE PROPOSED MERGER
BECAUSE OF HIS POSITION AS CHAIRMAN AND PRESIDENT OF FNB, HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. THE
SOUTHWEST BOARD BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF SOUTHWEST
AND ITS SHAREHOLDERS AND RECOMMENDS THAT THE SHAREHOLDERS OF SOUTHWEST VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT.
In the course of reaching its decision to approve the Merger Agreement and
the transactions contemplated thereby, the Southwest Board consulted with its
legal advisors regarding the legal terms of the Merger Agreement and with its
financial advisor, Robinson-Humphrey, as to the fairness, from a financial point
of view, of the Exchange Ratio to the holders of Southwest Common Stock. For a
discussion of the factors considered by the Southwest Board in reaching its
conclusions, see "THE MERGER -- Background of and Reasons for the Merger".
The members of the Southwest Board, with the exception of Mr. Mortensen,
who recused himself from all deliberations regarding (and votes on) the proposed
Merger, resolved that they will vote their shares in favor of the Merger
Agreement and the transactions contemplated thereby at the Special Meeting.
5
11
OPINION OF SOUTHWEST'S FINANCIAL ADVISOR
Robinson-Humphrey, which has served as financial advisor to Southwest, has
rendered its opinion to the Southwest Board that the consideration as provided
in the Merger Agreement is fair to the shareholders of Southwest from a
financial point of view. A copy of a written confirmation of such opinion, dated
May 8, 1996, is attached hereto as Appendix C and should be read in its entirety
with respect to assumptions made, matters considered and limitations of the
review undertaken by Robinson-Humphrey in rendering such opinion. See "THE
MERGER -- Opinion of Southwest's Financial Advisor".
CERTAIN DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
The rights of FNB shareholders and other corporate matters relating to FNB
Common Stock are controlled by the FNB Articles of Incorporation (the "FNB
Charter"), the FNB By-laws (the "FNB By-laws") and the Pennsylvania Business
Corporation Law (the "PBCL"). The rights of Southwest shareholders and other
corporate matters relating to Southwest Common Stock are controlled by the
Southwest Charter, the Southwest By-laws (the "Southwest By-laws") and the
Florida Business Corporation Act (the "FBCA"). Upon consummation of the Merger,
shareholders of Southwest will become shareholders of FNB whose rights will be
governed by the FNB Charter, the FNB By-laws and the provisions of the PBCL. See
"DESCRIPTION OF FNB CAPITAL STOCK AND SOUTHWEST CAPITAL STOCK" and "COMPARISON
OF SHAREHOLDERS RIGHTS".
MODIFICATION, WAIVER AND TERMINATION
The Merger Agreement provides that it may be amended by a subsequent
writing signed by each party upon the approval of each of their respective Board
of Directors. However, no amendment that reduces or, except as hereinafter
described in reference to a possible Exchange Ratio increase after a Termination
Event (as defined herein), modifies in any material respect the consideration to
be received by the holders of Southwest Common Stock in connection with the
Merger may be made after the Special Meeting without the further approval of
such shareholders. The Merger Agreement provides that each party may waive any
of the conditions precedent to its obligations to consummate the Merger, to the
extent legally permitted.
The Merger Agreement may be terminated by mutual agreement of the Board of
Directors of FNB (the "FNB Board") and the Southwest Board. The Merger Agreement
may also be terminated by either the FNB Board or the Southwest Board (i) in the
event of breach of the Merger Agreement by the other party that cannot or has
not been cured within 30 days of notice of such breach, (ii) if the required
approval of the Southwest shareholders or any applicable regulatory authority is
not obtained, (iii) if the Merger is not consummated by July 31, 1997 or (iv) if
any of the conditions precedent to the obligations of such party to consummate
the Merger cannot be satisfied or fulfilled by July 31, 1997.
In addition, the Merger Agreement may be terminated by the Southwest Board,
at its sole option, at any time during the ten-day period commencing the day
after the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") consents to the Merger if the average of the mid-point of the closing
high bid and low ask prices of FNB Common Stock for the 20 full trading days
ending on the day before the date the Federal Reserve Board consents to the
Merger is less than $19.00; provided, however, that the Merger Agreement may not
be so terminated if FNB elects, at its sole option but subject to Southwest's
written agreement, during the five-day period commencing with receipt of notice
of such termination, to increase the Exchange Ratio to equal the quotient
obtained by dividing (i) the product of $19.00 and the Exchange Ratio (as then
in effect) by (ii) the Designated Price (as defined herein).
See "THE MERGER -- Modification, Waiver and Termination".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a reorganization under Section
368(a)(1) of the Code. Wachtell, Lipton, Rosen & Katz has delivered an opinion,
based upon certain customary assumptions and representations, to the effect
that, for federal income tax purposes, no gain or loss will be recognized by the
Southwest
6
12
shareholders as a result of the Merger to the extent that they receive FNB
Common Stock solely in exchange for their Southwest Common Stock. For a more
complete description of the federal income tax consequences, see "THE
MERGER -- Certain Federal Income Tax Consequences".
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Southwest's management and of the Southwest Board may be
deemed to have interests in the Merger in addition to their interests, if any,
as shareholders of Southwest generally. These interests include, among others,
(i) certain amended employment agreements with certain officers of Southwest
that FNB agreed to assume, each of which provides for, upon the termination of
employment of such officer with Southwest for any reason other than death,
whether by such officer, Southwest or FNB, the payment in stock of the value of
such officer's options on the date of termination; (ii) the election or
appointment of three members of the Southwest Board to the FNB Board; and (iii)
agreements by FNB to indemnify present and former directors, officers, employees
and agents of Southwest and its subsidiaries from and after the Merger against
certain liabilities arising prior to the Merger to the fullest extent permitted
under Florida law, the Southwest Charter and the Southwest By-laws.
FNB and certain of its employees and directors, including Mr. Mortensen,
Chairman and President of FNB, own shares of Southwest Common Stock and warrants
to acquire shares of Southwest Common Stock. Mr. Mortensen is one of the
founders of Southwest and of its subsidiary lead bank, First Naples, and is a
member of the Southwest Board and of the First Naples Board of Directors. Mr.
Mortensen recused himself from deliberations regarding (and votes on) the Merger
by the Southwest Board.
See "THE MERGER -- Interests of Certain Persons in the Merger".
STOCK OPTION AGREEMENT
Following the execution of the Merger Agreement, Southwest granted FNB an
option (the "Stock Option") to purchase, under certain circumstances and subject
to certain adjustments, up to 727,163 shares (the "Stock Option Shares") of
Southwest Common Stock at a price, subject to certain adjustments, of $15.00 per
share pursuant to the terms of the Stock Option Agreement dated February 2,
1996, by and between FNB and Southwest (the "Stock Option Agreement"). The Stock
Option, if exercised, would equal before giving effect to the exercise of the
Stock Option, 19.9% of the total number of shares of Southwest Common Stock
outstanding as of its date of exercise. The Stock Option was granted by
Southwest to FNB as a condition and inducement to FNB's willingness to enter
into the Merger Agreement. The Stock Option is exercisable only upon the
occurrence of certain events generally indicating a change of control not
involving FNB occurring within 12 months of a termination of the Merger
Agreement, and the receipt of any required regulatory approvals, neither of
which has occurred as of the date hereof. Under certain circumstances, Southwest
may be required to repurchase the Stock Option or the Stock Option Shares
acquired pursuant to the exercise of the Stock Option. The purpose of the Stock
Option Agreement and the Stock Option is to increase the likelihood that the
Merger will occur by making it more difficult for another party to acquire
Southwest. The ability of FNB to exercise the Stock Option and to cause, subject
to certain adjustments, up to an additional 727,163 shares of Southwest Common
Stock to be issued may be considered a deterrent to other potential acquisitions
of control of Southwest, as it is likely to increase the cost of an acquisition
of all the shares of Southwest Common Stock which would then be outstanding. See
"THE MERGER -- Stock Option Agreement".
DISSENTERS' RIGHTS
Under the provisions of Section 607.1302 of the FBCA, holders of Southwest
Common Stock are not entitled to dissenters' rights with respect to payment for
the value of their shares of Southwest Common Stock. See "THE
MERGER -- Dissenters' Rights of Southwest Shareholders".
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13
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a
pooling-of-interests under generally accepted accounting principles ("GAAP").
See "THE MERGER -- Accounting Treatment".
REGULATORY APPROVALS
The Merger is subject to the approval of the Federal Reserve Board and of
the Florida Department of Banking and Finance (the "Florida Banking
Department"). The Merger may not be consummated until expiration of all
applicable waiting periods.
FNB and Southwest will file all required applications for regulatory review
and approval or notice with the Federal Reserve Board and the Florida Banking
Department in connection with the Merger. There can be no assurance that such
approvals will be obtained or as to the date of any such approvals.
See "THE MERGER -- Conditions Precedent to the Merger" and "-- Bank
Regulatory Matters".
RESALES BY AFFILIATES
Southwest has agreed to use its reasonable efforts to obtain from each of
those individuals identified by it as an affiliate an appropriate agreement that
such individual will not transfer any shares of FNB Common Stock received by it
as a result of the Merger, except in compliance with the applicable provisions
of the Securities Act and as required by pooling-of-interests accounting
treatment. See "THE MERGER -- Restrictions on Resales by Affiliates".
SHARE INFORMATION AND MARKET PRICES
The FNB Common Stock trades on the Nasdaq SmallCap Market under the trading
symbol "FBAN". As of December 31, 1995, there were 8,611,814 shares of FNB
Common Stock outstanding held by approximately 3,735 holders of record. Since
April 24, 1996, the Southwest Common Stock has traded on the Nasdaq National
Market under the trading symbol "SWBA". Prior to April 24, 1996, the Southwest
Common Stock was traded on the over-the-counter market under the trading symbol
"SWBA". As of the Record Date, there were 3,654,089 shares of Southwest Common
Stock outstanding held by approximately 1,128 holders of record.
The following table sets forth the last bid price reported by the Dow Jones
for shares of FNB Common Stock on February 2, 1996, the last trading day
preceding public announcement of the proposed Merger, and on May 7, 1996, after
adjusting to reflect the FNB Stock Dividend. The table also sets forth the last
reported sales price per share reported by the Dow Jones for shares of Southwest
Common Stock on February 2, 1996 and on May 7, 1996. The "Southwest Equivalent"
represents the last sales price of a share of FNB Common Stock on such date
multiplied by the Exchange Ratio.
SOUTHWEST
FNB SOUTHWEST EQUIVALENT(1)
-------- --------- -------------
February 2, 1996............................................. $19.766 $14.250 $16.188
May 7, 1996.................................................. $23.875 $17.000 $19.554
- ---------------
(1) Based on the Exchange Ratio of 0.819, adjusted for the FNB Stock Dividend.
For additional information regarding the market prices of the FNB Common
Stock and Southwest Common Stock during the previous two years, see "PRICE RANGE
OF COMMON STOCK AND DIVIDENDS -- Market Prices".
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COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth (a) selected comparative per share data for
each of FNB and Southwest on an historical basis and (b) selected unaudited pro
forma comparative per share data assuming the Merger had been effective during
the periods presented for FNB and Southwest combined. The unaudited pro forma
data have been prepared giving effect to the Merger as a pooling-of-interests.
For a description of the effect of pooling-of-interests accounting on the Merger
and the historical financial statements of FNB, see "THE MERGER -- Accounting
Treatment". The Southwest pro forma equivalent amounts are presented with
respect to each set of pro forma information.
The comparative per share data presented are based on and derived from, and
should be read in conjunction with, the historical consolidated financial
statements and the related notes thereto of each of FNB and Southwest
incorporated by reference herein. The pro forma amounts are not necessarily
indicative of results of operations or combined financial position that would
have resulted had the Merger been consummated at the beginning of the period
indicated or which will be attained in the future.
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994 1993
----- ----- -----
EARNINGS PER COMMON SHARE
FNB COMMON STOCK (1)
Historical (primary)................................ $1.90 $1.41 $1.07
Historical (fully diluted).......................... 1.82 1.37 1.06
Pro forma combined (primary)........................ 1.59 1.12 .99
Pro forma combined (fully diluted).................. 1.55 1.11 .99
SOUTHWEST COMMON STOCK
Historical.......................................... .44 .19 .47
Pro forma equivalent (2)
Primary........................................ 1.30 .92 .81
Fully Diluted.................................. 1.27 .91 .81
CASH DIVIDENDS DECLARED PER COMMON SHARE
FNB historical (1)..................................... .35 .25 .24
Southwest historical................................... 0 0 0
Southwest pro forma equivalent (3)..................... .29 .20 .20
AT
DECEMBER 31,
1995
------------
BOOK VALUE PER COMMON SHARE (PERIOD END)
FNB historical (1)............................................. $14.67
FNB pro forma combined (1)..................................... 13.50
Southwest historical........................................... 8.19
Southwest pro forma equivalent (2)............................. 11.05
- ---------------
(1) Adjusted to reflect the FNB Stock Dividend.
(2) Southwest pro forma equivalent amounts are calculated by multiplying the pro
forma combined amounts for FNB by the Exchange Ratio of 0.819 of a share of
FNB Common Stock for each share of Southwest Common Stock. The Exchange
Ratio is subject to adjustment in certain circumstances. See "THE
MERGER -- Modification, Waiver and Termination".
(3) The Southwest pro forma equivalent amounts are calculated by multiplying the
historical amounts for FNB by the Exchange Ratio of 0.819 of a share of FNB
Common Stock for each share of Southwest Common Stock. The Exchange Ratio is
subject to adjustment in certain circumstances. See "THE
MERGER -- Modification, Waiver and Termination".
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SELECTED FINANCIAL DATA
The following tables present (a) summary selected financial data for each
of FNB and Southwest on an historical basis and (b) summary unaudited pro forma
selected financial data for FNB and Southwest giving effect to the Merger as a
pooling-of-interests. For a description of the effect of pooling-of-interests
accounting on the Merger and the historical financial statements of FNB, see
"THE MERGER -- Accounting Treatment".
The summary selected financial data are based on and derived from, and
should be read in conjunction with, the historical consolidated financial
statements and the related notes thereto of each of FNB and Southwest
incorporated by reference herein. The pro forma amounts are not necessarily
indicative of results of operations or combined financial position that would
have resulted had the Merger been consummated at the beginning of the period
indicated or which will be attained in the future.
YEAR ENDED DECEMBER 31, 1995 1994 1993 1992 1991
- ------------------------------------- --------- --------- --------- --------- ---------
F.N.B. CORPORATION:
Earnings (In thousands, except per
share data)
Interest income................. $ 135,356 $ 124,879 $ 125,512 $ 125,825 $ 124,118
Interest expense................ 58,056 50,228 55,339 62,533 72,752
Net interest income............. 77,300 74,651 70,173 63,292 51,366
Provision for loan losses....... 5,652 8,450 9,498 15,107 5,399
Net income (loss) before
extraordinary items........... 18,083 13,445 10,472 6,770 10,005
Earnings per common share(1)
Primary.................... 1.90 1.41 1.07 0.70 1.11
Fully diluted.............. 1.82 1.37 1.06 0.70 1.11
Cash dividends declared per
common share(1)............... 0.35 0.25 0.24 0.23 0.21
Balance sheet (period end in
thousands)
Total assets.................... 1,706,993 1,686,519 1,690,150 1,698,608 1,378,740
Total loans and leases net of
unearned income............... 1,201,345 1,174,008 1,105,876 1,041,979 988,672
Total deposits 1,442,109 1,425,405 1,458,739 1,479,947 1,178,226
Other borrowings................ 55,224 69,365 65,501 57,153 67,813
Long-term debt and obligations
under capital leases.......... 39,755 39,017 31,297 32,823 18,520
Stockholders' equity............ 143,917 126,050 115,092 107,679 93,280
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YEAR ENDED DECEMBER 31, 1995 1994 1993 1992 1991
- ------------------------------------- --------- --------- --------- --------- ---------
SOUTHWEST BANKS, INC.:
Earnings (In thousands, except per
share data)
Interest income................. $ 25,384 $ 15,415 $ 11,186 $ 9,032 $ 6,982
Interest expense................ 11,756 6,306 4,659 4,193 3,947
Net interest income............. 13,628 9,109 6,527 4,839 3,035
Provision for loan losses....... 835 605 240 336 209
Net income (loss) before
extraordinary items........... 1,707 650 1,005 453 207
Earnings per common share
Primary.................... 0.44 0.19 0.47 0.27 0.16
Fully diluted.............. 0.44 0.19 0.47 0.27 0.16
Cash dividends declared per
common share.................. 0.00 0.00 0.00 0.00 0.00
Balance sheet (period end in
thousands)
Total assets.................... 386,462 264,614 178,454 146,108 87,382
Total loans, net of unearned
discount...................... 236,666 184,507 125,729 94,247 62,550
Total deposits.................. 324,831 201,245 157,370 132,037 79,196
Other borrowings................ 28,277 29,073 6,903 2,185 792
Long-term debt and obligations
under capital leases.......... 0 5,000 2,000 0 0
Stockholders' equity............ 29,944 27,710 12,982 10,995 6,703
PRO FORMA COMBINED:
Earnings (In thousands, except per
share data)
Interest income................. $ 160,740 $ 140,294 $ 136,698 $ 134,857 $ 131,100
Interest expense................ 69,812 56,534 59,998 66,726 76,699
Net interest income............. 90,928 83,760 76,700 68,131 54,401
Provision for loan losses....... 6,487 9,055 9,738 15,443 5,608
Net income (loss) before
extraordinary items........... 19,790 14,195 11,477 7,223 10,212
Earnings per common share(1)
Primary.................... 1.59 1.12 0.99 0.63 1.00
Fully diluted.............. 1.55 1.11 0.99 0.63 0.99
Balance sheet (period end in
thousands)
Total assets.................... 2,091,417 1,949,393 1,867,785 1,844,123 1,465,747
Total loans, net of unearned
discount...................... 1,438,011 1,358,515 1,231,605 1,136,226 1,051,222
Total deposits.................. 1,766,939 1,626,650 1,616,109 1,611,984 1,257,422
Other borrowings................ 83,501 98,438 72,404 59,338 68,605
Long-term debt and obligations
under capital leases.......... 39,755 44,017 31,297 32,823 18,520
Stockholders' equity............ 171,823 152,020 127,255 118,081 99,608
- ---------------
(1) Adjusted to reflect the FNB Stock Dividend.
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RECENT DEVELOPMENTS
FNB has reported that net income for the first quarter of 1996 was $4.9
million or $0.51 per primary share, $0.49 per share fully diluted, after giving
effect to the FNB Stock Dividend. These results represent a 22% increase over
the same period of 1995. Highlights of FNB's performance improvement include a
4% increase in net interest income; an 11% increase in non-interest income,
excluding securities gains; and only a 2% increase in non-interest expenses.
The ratio of non-performing loans to total loans declined to 0.71% from
1.00% a year ago. The allowance for loan losses remained at 1.75% of total loans
and showed improved coverage to 245% of non-performing loans.
Capital remained strong with the leverage ratio at 8.21% and total
risk-based at 13.96%.
At the FNB Annual Meeting of Shareholders held on April 24, 1996, the FNB
shareholders approved a proposal to amend the FNB Charter of Incorporation to
increase the number of authorized shares of FNB Common Stock from 20,000,000
shares of FNB Common Stock to 100,000,000 shares of FNB Common Stock. The
increase will enable FNB to issue FNB Common Stock in connection with any
potential acquisitions FNB might make using FNB Common Stock as consideration
and to further other corporate purposes such as declaring stock dividends.
On April 24, 1996, the FNB Board declared the FNB Stock Dividend, a 5%
common stock dividend payable May 31, 1996 to shareholders of record on May 1,
1996. This action represents the 24th consecutive year that FNB has provided a
stock dividend to its common shareholders.
Southwest's net income for first quarter of 1996 was $800,743 or $0.20 per
share, compared to $154,323 or $0.05 per share for the first quarter of 1995.
Highlights of Southwest's improved performance include a 47.5% increase in net
interest income and a 59.2% increase in non-interest income. At March 31, 1996,
Southwest's total risk-based capital ratio was 12.46% compared to 13.66% at
March 31, 1995.
THE SPECIAL MEETING OF SHAREHOLDERS OF SOUTHWEST
GENERAL
This Proxy Statement-Prospectus is first being mailed to the holders of
Southwest Common Stock on or about May 13, 1996, and is accompanied by the
notice of Special Meeting and a form of proxy that is solicited by the Southwest
Board for use at the Special Meeting of Shareholders of Southwest to be held on
Monday, June 17, 1996, at 5:00 p.m., local time, at the Naples Beach Hotel &
Golf Club, Naples, Florida and at any adjournments or postponements thereof. The
purpose of the Special Meeting is to take action with respect to the approval of
the Merger Agreement and the transactions contemplated thereby.
PROXIES
A shareholder of Southwest may use the accompanying proxy if such
shareholder is unable to attend the Special Meeting in person or wishes to have
his or her shares voted by proxy even if such shareholder does attend the
meeting. A shareholder may revoke any proxy given pursuant to this solicitation
by delivering to the Corporate Secretary of Southwest, prior to or at the
Special Meeting, a written notice revoking the proxy or a duly executed proxy
relating to the same shares bearing a later date, or by voting in person at the
Special Meeting. All written notices of revocation and other communications with
respect to the revocation of Southwest proxies should be addressed to Southwest
Banks, Inc., 900 Goodlette Road North, Naples, Florida 33940 Attention:
Corporate Secretary. For such notice of revocation or later proxy to be valid,
however, it must actually be received by Southwest prior to the vote of the
shareholders. All shares represented by valid proxies received pursuant to this
solicitation, and not revoked before they are exercised, will be voted in the
manner specified therein. If no specification is made, the proxies will be voted
in favor of approval of the Merger Agreement. The Southwest Board is unaware of
any other matters that may be presented for action at the Special Meeting. If
other matters do properly come before the Special Meeting, however, it is
intended that shares represented by proxies in the accompanying form will be
voted or not voted by the persons named in the proxies in their discretion.
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18
SOLICITATION OF PROXIES
Solicitation of proxies may be made in person or by mail, telephone or
facsimile, by directors, officers and employees of Southwest, who will not be
specially compensated for such solicitation. Nominees, fiduciaries and other
custodians will be requested to forward solicitation materials to beneficial
owners and to secure their voting instructions, if necessary, and will be
reimbursed for the expenses incurred in sending proxy materials to beneficial
owners.
All costs of solicitation of proxies from Southwest shareholders will be
borne by Southwest; provided, however, that FNB and Southwest have each agreed
to pay one-half of the printing costs of this Proxy Statement-Prospectus and
related materials.
RECORD DATE AND VOTING RIGHTS
The Southwest Board has fixed May 1, 1996 as the Record Date for the
determination of shareholders of Southwest entitled to receive notice of and to
vote at the Special Meeting. At the close of business on the Record Date, there
were outstanding 3,654,089 shares of Southwest Common Stock held by
approximately 1,128 holders of record. Each share of Southwest Common Stock
outstanding on the Record Date is entitled to one vote as to (i) the approval of
the Merger Agreement and the transactions contemplated thereby and (ii) any
other proposal that may properly come before the Special Meeting.
Under the terms of the FBCA, approval of the Merger Agreement will require
the affirmative vote of the holders of a majority of the outstanding shares of
Southwest Common Stock. However, the Southwest Charter has voting requirements
that are more stringent than those in the FBCA. Pursuant to the Southwest
Charter, approval of the Merger Agreement will require the affirmative vote of
the holders of a majority of the outstanding shares of Southwest Common Stock
entitled to vote in elections of directors which are not beneficially owned,
directly or indirectly, by FNB, because FNB owns, directly or indirectly, more
than 5% of the shares of Southwest Common Stock entitled to otherwise vote in
elections of directors. Pursuant to the Southwest Charter, FNB is the beneficial
owner and beneficially owns shares of Southwest Common Stock (other than shares
of Southwest Common Stock held in its treasury) (a) which FNB and its affiliates
and associates beneficially own, directly or indirectly, whether of record or
not, (b) which FNB or any of its affiliates or associates has the right to
acquire, pursuant to any agreement upon the exercise of conversion rights,
warrants, or options, or otherwise, (c) which FNB or any of its affiliates or
associates has the right to sell or vote pursuant to any agreement, or (d) which
are beneficially owned, directly or indirectly, by any other person with which
FNB or any of its affiliates or associates has any agreement, arrangement or
understanding for the purposes of acquiring, holding, voting or disposing of
securities of Southwest. As of the Record Date, FNB beneficially owned (as
defined herein and in the Southwest Charter) 270,874 shares, or 7.41%, of the
Southwest Common Stock entitled to vote in elections for directors but which
vote will not be counted for approval of the Merger Agreement for purposes of
the voting requirements of the Southwest Charter. See "THE MERGER -- Interest of
Certain Persons in the Merger".
As of the Record Date, the directors and executive officers of Southwest
and their affiliates (excluding FNB, which may be deemed to be an affiliate of
Mr. Mortensen, the Chairman and President of FNB and a director of Southwest)
beneficially owned an aggregate of 595,539 shares, or 16.30%, of Southwest
Common Stock. The banking subsidiaries of Southwest, in a fiduciary capacity for
third parties, do not have sole or shared voting power as to any shares of
Southwest Common Stock.
BECAUSE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF SOUTHWEST COMMON STOCK
ENTITLED TO VOTE IN ELECTIONS OF DIRECTORS WHICH ARE NOT BENEFICIALLY OWNED BY
FNB, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS NEGATIVE
VOTES. ACCORDINGLY, THE SOUTHWEST BOARD URGES ITS SHAREHOLDERS TO COMPLETE, DATE
AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
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RECOMMENDATION OF THE SOUTHWEST BOARD
THE SOUTHWEST BOARD, WITH THE EXCEPTION OF MR. MORTENSEN, WHO RECUSED
HIMSELF FROM ALL DELIBERATIONS REGARDING (AND VOTES ON) THE PROPOSED MERGER
BECAUSE OF HIS POSITION AS CHAIRMAN AND PRESIDENT OF FNB, UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, BELIEVES THAT
THE MERGER IS IN THE BEST INTERESTS OF SOUTHWEST AND ITS SHAREHOLDERS, AND
RECOMMENDS THAT THE SHAREHOLDERS OF SOUTHWEST VOTE "FOR" APPROVAL OF THE MERGER
AGREEMENT.
In the course of reaching its respective decisions to approve the Merger
Agreement and the transactions contemplated thereby, the Southwest Board
consulted with its legal advisors regarding the legal terms of the Merger
Agreement and with its financial advisor, Robinson-Humphrey, as to the fairness,
from a financial point of view, of the Exchange Ratio to the holders of
Southwest Common Stock. For a discussion of the factors considered by the
Southwest Board in reaching its conclusion, see "THE MERGER -- Background of and
Reasons for the Merger".
The members of the Southwest Board, with the exception of Mr. Mortensen,
who recused himself from all deliberations regarding (and votes on) the proposed
Merger, resolved that they will vote their shares in favor of the Merger
Agreement and the transactions thereby at the Special Meeting.
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THE MERGER
The following summary of certain terms and provisions of the Merger
Agreement and Stock Option Agreement is qualified in its entirety by reference
to the Merger Agreement and Stock Option Agreement, which are incorporated
herein by reference and, with the exception of certain exhibits thereto, are
included as Appendix A and Appendix B, respectively, to this Proxy
Statement-Prospectus. All shareholders are urged to read the Merger Agreement,
Stock Option Agreement and the other Appendix hereto in their entirety.
DESCRIPTION OF THE MERGER
At the Effective Time, SWAC will be merged with and into Southwest, which
will be the surviving entity. The Southwest Charter and the Southwest By-laws in
effect at the Effective Time will continue to govern Southwest until amended or
repealed in accordance with applicable law. The Merger is subject to the
approvals of the Federal Reserve Board and the Florida Banking Department. See
"-- Bank Regulatory Matters".
At the Effective Time, each share of Southwest Common Stock outstanding
immediately prior to the Effective Time (other than shares held by Southwest,
FNB or any of their subsidiaries, in each case, other than in a fiduciary
capacity or as a result of debts previously contracted) will be converted
automatically into the right to receive 0.819 of a share (adjusted for the FNB
Stock Dividend and subject to certain further possible adjustment) of FNB Common
Stock. Prior to the anti-dilution adjustment to the Exchange Ratio to reflect
the FNB Stock Dividend, the Exchange Ratio was 0.78 of a share of FNB Common
Stock. At the Effective Time, any shares of Southwest Common Stock held by
Southwest, FNB, or any of their subsidiaries, in each case, other than in a
fiduciary capacity or as a result of debts previously contracted, will be
canceled and retired without consideration being paid. Southwest has represented
that, as of the Effective Time, there will be no more than 4,000,855 shares of
Southwest Common Stock issued and outstanding. Following the Effective Time and
assuming that 4,000,855 shares of Common Stock are outstanding at the Effective
Time, the former shareholders of Southwest would own approximately 3,276,700
shares, or 26.6%, of the then outstanding FNB Common Stock (assuming 9,053,940
shares of FNB Common Stock outstanding immediately prior to the Effective Time).
The number of shares of FNB Common Stock to be issued in the Merger will be less
if fewer than 4,000,855 shares of Southwest Common Stock are outstanding
immediately prior to the Effective Time.
No fractional shares of FNB Common Stock will be issued in the Merger.
Instead, each holder of shares of Southwest Common Stock who would otherwise
have been entitled to receive a fraction of a share of FNB Common Stock (after
taking into account all certificates delivered by such holder) will receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of FNB Common Stock multiplied by the market value of one share of
FNB Common Stock at the Effective Time, which is defined in the Merger Agreement
as the average of the high bid and low asked prices of one share of FNB Common
Stock in the over the counter market as reported by the Nasdaq SmallCap Market
(or, if not reported thereby, by any other authoritative source selected by FNB)
on the last trading day preceding the Effective Time. No such holder will be
entitled to dividends, voting rights or any other rights as a shareholder in
respect of any fractional shares. See "-- Exchange of Certificates".
The shares of FNB capital stock outstanding immediately prior to the Merger
will continue to be outstanding after the Effective Time.
CONVERSION OF SOUTHWEST OPTIONS
Southwest Options to purchase an aggregate of 455,430 shares of Southwest
Common Stock were outstanding as of the Record Date. To the extent that shares
of Southwest Common Stock are issued pursuant to the exercise of Southwest
Options in accordance with their terms prior to the Effective Time, they will be
converted into shares of FNB Common Stock in the same manner as other shares of
Southwest Common Stock. At the Effective Time, each Southwest Option to purchase
shares of Southwest Common Stock that has not expired and remains outstanding at
the Effective Time shall be converted into and become an option, warrant or
other right to purchase shares of FNB Common Stock, and FNB shall assume each
such Southwest Option in accordance with the terms of the stock option plan
under which it was issued and the
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stock option agreement by which it is evidenced or the warrant agreement
pursuant to which it was granted and evidenced (collectively, the "Southwest
Stock Plans"), except that, from and after the Effective Time, (i) FNB and its
compensation committee shall be substituted for Southwest and its compensation
committee (including, if applicable, the entire Southwest Board) administering
such Southwest Stock Plan, (ii) each Southwest Option assumed by FNB may be
exercised solely for shares of FNB Common Stock (or cash in the case of stock
appreciation rights), (iii) the number of shares of FNB Common Stock subject to
such Southwest Option will be equal to the number of shares of Southwest Common
Stock subject to such Southwest Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, with cash being paid in lieu of any resulting
fraction of a share of FNB Common Stock equal to the product of such fraction
and the difference between the market value of one share of FNB Common Stock and
the per share exercise price of such option, warrant or other right to purchase
shares of FNB Common Stock, and (iv) the per share exercise price under each
such Southwest Option will be adjusted by dividing the per share exercise price
under each such Southwest Option by the Exchange Ratio and rounding down to the
nearest cent. Notwithstanding the provisions of clauses (iii) and (iv) of the
preceding sentence, each Southwest Option which is an incentive stock option
shall be adjusted as required by Section 424 of the Code, so as not to
constitute a modification, extension, or renewal of the option within the
meaning of Section 424(h) of the Code. Southwest has agreed to take all
necessary steps to effectuate the foregoing provisions.
As soon as practicable after the Effective Time, FNB will deliver to the
participants in each Southwest Stock Plan an appropriate notice setting forth
such participant's rights pursuant thereto and the grants pursuant to such
Southwest Stock Plan shall continue in effect on the same terms and conditions
(subject to the adjustments described in the above paragraph after giving effect
to the Merger), and FNB will comply with the terms of each Southwest Stock Plan
to ensure, to the extent required by, and subject to the provisions of, such
Southwest Stock Plan, that Southwest Options which qualified as incentive stock
options prior to the Effective Time continue to qualify as incentive stock
options after the Effective Time. At or prior to the Effective Time, FNB will
take all corporate action necessary to reserve for issuance sufficient shares of
FNB Common Stock for delivery upon exercise of Southwest Options assumed by it.
As soon as practicable after the Effective Time, FNB will file a registration
statement on Form S-3 or Form S-8, as the case may be (or any successor or other
appropriate forms), with respect to the shares of FNB Common Stock subject to
such options and will use its reasonable efforts to maintain the effectiveness
of such registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such options remain
outstanding. With respect to those individuals who subsequent to the Merger will
be subject to the reporting requirements under Section 16(a) of the Exchange
Act, where applicable, FNB will administer the Southwest Stock Plan assumed
pursuant to the Merger Agreement in a manner that complies with Rule 16b-3
promulgated under the Exchange Act to the extent the Southwest Stock Plan
complied with such rule prior to the Merger.
All restrictions or limitations on transfer with respect to Southwest
Common Stock awarded under the Southwest Stock Plans or any other plan, program,
or arrangement of Southwest or of any subsidiary of Southwest, to the extent
that such restrictions or limitations will not have already lapsed, and except
as otherwise expressly provided in such plan, program, or arrangement, will
remain in full force and effect with respect to shares of FNB Common Stock into
which such restricted stock is converted pursuant to the Merger Agreement.
See "-- Interest of Certain Persons in the Merger".
EFFECTIVE TIME OF THE MERGER
The Effective Time will occur on the date and at the time the Articles of
Merger become effective with the Florida Department of State. Unless otherwise
agreed by FNB and Southwest, the parties have agreed to use their reasonable
efforts to cause the Effective Time to occur on or before the fifth business day
(as designated by FNB) following the last to occur of (i) the effective date of
the last required consent of any state or federal regulatory authority having
authority over the Merger (including the expiration of all applicable waiting
periods following such consents or the delivery of appropriate notices) or (ii)
the date on which the shareholders of Southwest approve the Merger Agreement,
provided, however, that in no event shall
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the Effective Time occur prior to January 1, 1997, unless FNB determines, in its
sole discretion, to permit the Effective Time to occur prior to January 1, 1997,
but not earlier than December 16, 1996. If approved by the Southwest
shareholders and the applicable regulatory authorities, the parties expect that
the Effective Time will occur on or before January 31, 1997, although there can
be no assurance as to whether or when the Merger will occur. See "-- Bank
Regulatory Matters -- Florida Banking Department".
EXCHANGE OF CERTIFICATES
Before or as soon as practicable after the Effective Time, Chemical Mellon
Shareholder Services ("Chemical Mellon" or the "Exchange Agent") will mail to
each holder of Southwest Common Stock of record as of the Effective Time a
letter of transmittal and related forms (the "Letter of Transmittal") for use in
forwarding stock certificates previously representing Southwest Common Stock for
surrender and exchange for certificates representing FNB Common Stock. Risk of
loss and title to the certificates theretofore representing shares of Southwest
Common Stock shall pass only upon proper delivery of such certificates to the
Exchange Agent.
SOUTHWEST SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
Upon surrender to the Exchange Agent of one or more certificates for shares
of Southwest Common Stock, together with a properly completed Letter of
Transmittal, there will be issued and mailed to the holder thereof a certificate
or certificates representing the aggregate number of whole shares of FNB Common
Stock to which such holder is entitled, together with all declared but unpaid
dividends in respect of such shares, and, where applicable, a check for the
amount (without interest) representing any fractional share. A certificate for
shares of FNB Common Stock, or any check representing cash in lieu of a
fractional share or declared but unpaid dividends, may be issued in a name other
than the name in which the surrendered certificate is registered only if (i) the
certificate surrendered is properly endorsed, accompanied by a guaranteed
signature if required by the Letter of Transmittal and otherwise in proper form
for transfer, and (ii) the person requesting the issuance of such certificate
either pays to the Exchange Agent any transfer or other taxes required by reason
of the issuance of a certificate for such shares in a name other than the
registered holder of the certificate surrendered or establishes to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. The Exchange Agent will issue stock certificates evidencing FNB
Common Stock in exchange for lost, stolen, mutilated or destroyed certificates
of Southwest Common Stock only upon receipt of a lost stock affidavit and a bond
indemnifying FNB against any claim arising out of the allegedly lost, stolen,
mutilated or destroyed certificate. In no event will the Exchange Agent, FNB or
Southwest be liable to any persons for any FNB Common Stock or dividends thereon
or cash delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar law.
On and after the Effective Time and until surrender of certificates of
Southwest Common Stock to the Exchange Agent, each certificate that represented
outstanding Southwest Common Stock immediately prior to the Effective Time will
be deemed to evidence ownership of the number of whole shares of FNB Common
Stock into which such shares have been converted, and the holders thereof shall
be entitled to vote at any meeting of FNB shareholders. Beginning 30 days after
the Effective Time, no shareholder will, however, receive dividends or other
distributions on such FNB Common Stock until the certificates representing
Southwest Common Stock are surrendered. Upon surrender of Southwest Common Stock
certificates, Southwest shareholders will be paid any dividends or other
distributions on FNB Common Stock that are payable to holders as of any dividend
record date on or following the Effective Time. No interest will be payable with
respect to withheld dividends or other distributions.
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER. In April 1995, Gary L. Tice, Chairman, President
and Chief Executive Officer of Southwest and Peter Mortensen, Chairman and
President of FNB, had their first formal discussion regarding the idea of a
strategic affiliation between FNB and Southwest. At that time it was agreed that
a meeting would be scheduled in Pittsburgh, Pennsylvania for Southwest and FNB
to discuss the concept of a
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strategic affiliation, a preliminary timetable, and any business, legal and
accounting issues that might be preliminarily identified. On May 31, 1995,
representatives of FNB and Southwest met in Pittsburgh, Pennsylvania to discuss
the concept of a strategic affiliation and agreed to explore it.
On July 24, 1995, the Southwest Board received a presentation of the
strategic affiliation concept by representatives of FNB, including Mr. Mortensen
and FNB's investment banker. At this meeting, the Southwest Board resolved to
give authority to Mr. Tice to hire an investment banker to review Southwest's
strategic alternatives, including a possible affiliation with FNB.
On August 7, 1995, Mr. Tice met in Atlanta, Georgia with representatives of
Robinson-Humphrey and representatives of Southwest's legal counsel. On August
25, 1995, Southwest engaged Robinson-Humphrey to perform an analysis of
Southwest's strategic alternatives. The term of that initial engagement was
through December 31, 1995.
On September 19, 1995, Mr. Tice and Southwest's Chief Financial Officer,
Lewis S. Albert, met in Atlanta, Georgia with representatives of
Robinson-Humphrey and Southwest's counsel to further discuss the status of
Robinson-Humphrey's analysis.
On September 22, 1995, six of Southwest's directors met with management of
FNB in Hermitage, Pennsylvania to review FNB and its subsidiary banks'
operations and to meet with the directors of FNB.
On October 16, 1995, representatives of Robinson-Humphrey made a
presentation to the Southwest Board at a Southwest Board meeting held in Naples,
Florida regarding the current commercial banking environment, a summary analysis
of a strategic affiliation with FNB, and a review of Southwest's strategic
alternatives, including remaining independent, achieving a strategic affiliation
with a specific partner or selling Southwest to a super-regional bank. After a
discussion of the Robinson-Humphrey presentation, the Southwest Board
unanimously voted to evaluate a strategic alliance with FNB, utilizing a
negotiating team comprised of Mr. Tice and two outside directors to be appointed
by Mr. Tice (the "Negotiating Committee"). On October 16, 1995, Mr. Tice
appointed James S. Lindsay and Edward J. Mace as members of the Negotiating
Committee.
On November 15, 1995, Southwest's Negotiating Committee met in Atlanta with
representatives of Robinson-Humphrey, Mr. Mortensen and FNB's investment banker
to discuss the business terms of a proposed strategic affiliation. On November
21, 1995, these parties met again in Naples, Florida to continue negotiations.
On November 29, 1995, the Southwest Board met in Naples, Florida and was
provided with a summary of the progress which had been made by the Negotiating
Committee at its November 21, 1995 meeting with Mr. Mortensen and FNB's
representatives. On January 23, 1996, a meeting was held in Naples, Florida
among representatives of Southwest and FNB to further negotiate the terms of the
proposed strategic affiliation. The parties discussed the terms of the proposed
transaction, and FNB's lawyers were directed to negotiate the final legal issues
with Southwest's lawyers with a view toward preparing final merger documents
which could be considered by the Southwest Board at a meeting scheduled for
February 2, 1996.
At a special meeting of the Southwest Board held on February 2, 1996, the
directors of Southwest reviewed and unanimously authorized the execution of a
definitive Merger Agreement with FNB regarding the Merger, and Robinson-Humphrey
delivered its opinion that the transaction was fair, from a financial point of
view, to Southwest's shareholders.
FNB REASONS FOR THE MERGER. FNB has had an affiliation with Southwest
since Southwest's inception. FNB has owned approximately 4.9% of the shares of
Southwest Common Stock since Southwest and its subsidiary lead bank, First
Naples, were organized in 1988. Mr. Tice was an officer of the lead bank of FNB,
First National, earlier in his career. Mr. Mortensen was one of the organizers
and founders of Southwest and of First Naples. He has been a member of the
Southwest Board and the First Naples Board of Directors, and a stockholder of
Southwest since its inception. Southwest has a correspondent relationship with
First National, whereby Southwest solicits the sale and purchase of loan
participations.
The FNB Board recognized that the proposed Merger with Southwest provides a
unique opportunity to employ FNB's growing capital in southwest Florida, one of
the fastest growing markets in the United States.
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This is in contrast to the more mature market areas of Pennsylvania, eastern
Ohio and southwestern New York where FNB is currently operating.
After the Effective Time of this strategic affiliation, FNB will retain the
management team of Southwest with the authority and responsibility for operating
Southwest and its subsidiaries in substantially the same manner and fashion as
they have historically operated Southwest.
With the approval of and guidance of the FNB Board, FNB conducted
discussions and negotiated a merger agreement with Southwest beginning in April
1995 and continuing through February 2, 1996, when FNB entered into the Merger
Agreement.
SOUTHWEST REASONS FOR THE MERGER. In early 1995, management of Southwest
determined that internal projections indicated Southwest would require
additional capital in 1998 to support the continued growth of Southwest and the
performance of Southwest's business plan. In connection with evaluation of
various alternate means of raising capital, Mr. Tice and Mr. Mortensen began
discussing the benefits of an affiliation between Southwest and FNB which
included, among other things, FNB as a source for capital to support Southwest's
continued pattern of growth. This discussion was a natural result of the
long-term relationship that had existed between Mr. Tice and Mr. Mortensen and
Southwest and FNB. See "-- FNB Reasons for the Merger".
In determining to approve the Merger Agreement, the Southwest Board
considered and based their opinion as to the fairness of the transactions
contemplated by the Merger Agreement on the following factors:
(i) The financial terms of the merger. In this regard, the Southwest
Board was of the view that the Exchange Ratio for each share of Southwest
Common Stock was fair in relation to the relative book values, earnings per
share and shareholders equity of FNB and Southwest.
(ii) The possible alternatives to the proposed Merger of Southwest,
including the prospects of continuing as an independent institution and
raising a substantial amount of additional capital, the range of values to
the shareholders of such alternatives, and the timing and likelihood of
actually achieving those values. Robinson-Humphrey advised the Southwest
Board that shareholder value would likely increase sooner as a result of
the proposed Merger than if Southwest remained an independent entity and
completed a public offering of equity.
(iii) The financial advice of Robinson-Humphrey and the opinion of
Robinson-Humphrey that the financial terms of the proposed Merger as
provided in the Merger Agreement were fair, from a financial point of view,
to Southwest's shareholders. The opinion of Robinson-Humphrey is set forth
in Appendix C to this Proxy Statement-Prospectus.
(iv) The general structure of the proposed transaction as a Merger
allowing for the continued independent operations of Southwest and its
subsidiary banks, and the compatibility of management and business
philosophy of Southwest and FNB.
(v) Information with respect to the financial condition, results of
operation, business and prospects of Southwest and the current industry,
economic and market conditions, as well as the risks associated with
achieving those prospects.
(vi) The non-financial terms and structure of the proposed Merger, in
particular, the fact that the Merger qualifies as a tax-free organization
to Southwest's shareholders.
(vii) The likelihood of the proposed Merger being approved by
appropriate regulatory authorities.
(viii) The limited impact of the proposed Merger on Southwest's
depositors, employees, customers and community, particularly in light of
FNB's intention that Southwest continue to operate under its present board
and management.
Each of the above factors support, directly or indirectly, the
determination of the Southwest Board as to the fairness of the proposed Merger.
The Southwest Board did not quantify or attempt to assign relative weights to
the specific factors considered in reaching its determination; however, the
Southwest Board placed special emphasis on the consideration payable in the
proposed Merger and the receipt of a favorable fairness opinion from its
financial advisor. See "-- Opinion of Southwest's Financial Advisor".
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OPINION OF SOUTHWEST'S FINANCIAL ADVISOR
GENERAL. Southwest retained Robinson-Humphrey to act as its financial
adviser in connection with the Merger. Robinson-Humphrey has rendered an opinion
to the Southwest Board 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 Southwest's shareholders. The text of such opinion is set
forth in Appendix C to this Proxy Statement-Prospectus and should be read in its
entirety by shareholders of Southwest.
The consideration to be received by Southwest shareholders in the Merger
was determined by Southwest and FNB in their negotiations. No limitations were
imposed by the Southwest Board or Southwest management 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 the Southwest Board,
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 Southwest, and has not
made or obtained any independent valuation or appraisals of any properties,
assets or liabilities of Southwest. Robinson-Humphrey has assumed and relied
upon the accuracy and completeness of the financial and other information that
was provided to it by Southwest 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 the Southwest Board, Robinson-Humphrey
performed two valuation analyses with respect to Southwest: (i) an analysis of
comparable prices and terms of recent transactions involving banks purchasing
banks; and (ii) a discounted cash flow analysis. For purposes of the comparable
transaction analyses, FNB's stock was valued at $21.313 per share. Each of these
methodologies is discussed briefly below.
Comparable Transaction Analysis. Robinson-Humphrey performed three
analyses of premiums paid for selected banks with comparable characteristics to
Southwest. Comparable transactions were considered to be (i) transactions where
the seller was a bank located in Florida since January 1, 1995, (ii)
transactions since January 1, 1995, where the seller was a bank located in the
Southeast with total assets between $100 million and $500 million, and (iii)
transactions since January 1, 1996, where the seller was a bank located in the
United States with total assets between $100 and $500 million.
Based on the first of the foregoing transactions, financial institutions
purchasing banks in Florida since January 1, 1995, the analysis yielded a range
of transaction values to book value of 1.27 times to 3.49 times, with a mean of
2.03 times and a median of 1.98 times. These compare to a transaction value for
the Merger of approximately 2.13 times Southwest's book value as of December 31,
1995.
The analysis yielded a range of transaction values as a multiple of
tangible book value for the comparable transactions ranging from 1.37 times to
4.15 times, with a mean of 2.19 times and a median of 2.01 times. These compare
to a transaction value to tangible book value at December 31, 1995 of
approximately 2.13 times for the Merger.
The analysis yielded a range of transaction values as a multiple of
trailing twelve month earnings per share. These values ranged from 11.18 times
to 35.19 times, with a mean of 21.53 times and a median of 18.56 times. These
compare to a transaction value to Southwest's last twelve months earnings as of
December 31, 1995 of approximately 39.67 times for the Merger.
The analysis yielded a range of transaction values as a percent of total
assets. These values ranged from 6.19% to 25.92%, with a mean of 16.72% and a
median of 18.12%. These compare to a transaction value to the December 31, 1995
total assets of 16.50% for the Merger.
Based on transactions since January 1, 1995, where the seller was a bank
located in the Southeast with total assets between $100 and $500 million, the
analysis yielded a range of transaction values to book value of
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1.11 times to 3.49 times, with a mean of 2.12 times and a median of 2.13 times.
These compare to a transaction value for the Merger of approximately 2.13 times
Southwest's book value as of December 31, 1995.
The analysis yielded a range of transaction values as a multiple of
tangible book value for the comparable transactions ranging from 1.12 times to
4.15 times, with a mean of 2.29 times and a median of 2.21 times. These compare
to a transaction value to tangible book value at December 31, 1995 of
approximately 2.13 times for the Merger.
The analysis yielded a range of transaction values as a multiple of
trailing twelve month earnings per share. These values ranged from 9.14 times to
26.54 times, with a mean of 17.92 times and a median of 18.60 times. These
compare to a transaction value to Southwest's last twelve months earnings as of
December 31, 1995 of approximately 39.67 times for the Merger.
The analysis yielded a range of transaction values as a percent of total
assets. These values ranged from 6.19% to 31.05%, with a mean of 16.26% and a
median of 14.73%. These compare to a transaction value to the December 31, 1995
total assets of 16.50% for the Merger.
Based on transactions since January 1, 1996, where the seller was a bank
located in the United States with total assets between $100 and $500 million,
the analysis yielded a range of transaction values to book value of 1.26 times
to 2.40 times, with a mean of 1.88 times and a median of 1.92 times. These
compare to a transaction value for the Merger of approximately 2.13 times
Southwest's book value as of December 31, 1995.
The analysis yielded a range of transaction values as a multiple of
tangible book value for the comparable transactions ranging from 1.26 times to
2.43 times, with a mean of 1.88 times and a median of 1.92 times. These compare
to a transaction value to tangible book value at December 31, 1995 of
approximately 2.13 times for the Merger.
The analysis yielded a range of transaction values as a multiple of
trailing twelve month earnings per share. These values ranged from 8.57 times to
26.95 times, with a mean of 15.62 times and a median of 13.77 times. These
compare to a transaction value to Southwest's last twelve months earnings as of
December 31, 1995 of approximately 39.67 times for the Merger.
The analysis yielded a range of transaction values as a percent of total
assets. These values ranged from 14.76% to 21.85%, with a mean of 17.59% and a
median of 17.05%. These compare to a transaction value to the December 31, 1995
total assets of 16.50% for the Merger.
No company or transaction used in the comparable transaction analyses is
identical to Southwest. 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 Southwest could produce through 1999, under various
circumstances, assuming that Southwest performed in accordance with the
earnings/return projections of management at the time that Southwest entered
into acquisition discussions in April 1995. Robinson-Humphrey estimated the
terminal value for Southwest at the end of the period by applying multiples of
earnings ranging from 10 times to 12 times and then discounting the cash flow
streams, dividends paid to shareholders and terminal value using differing
discount rates ranging from 10.0% to 12.0% chosen to reflect different
assumptions regarding the required rates of return of Southwest and the inherent
risk surrounding the underlying projections. This discounted cash flow analysis
indicated a reference range of $59.6 million to $73.9 million, or $14.09 to
$17.47 per share, for Southwest.
COMPENSATION OF ROBINSON-HUMPHREY. Pursuant to an engagement letter dated
August 24, 1995 between Southwest and Robinson-Humphrey, Southwest paid
Robinson-Humphrey a fee of $10,000 for a valuation analysis and advice on its
strategic alternatives. This engagement letter expired December 31, 1995.
Additionally, pursuant to an engagement letter dated January 10, 1996 between
Southwest and Robinson-
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Humphrey, Southwest agreed to pay Robinson-Humphrey a $100,000 fairness opinion
fee and an incremental success fee (to be paid at closing) equal to,
approximately, 1.00% of the total value of the transaction less the fairness
opinion fee. Southwest 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 part of its investment banking business, Robinson-Humphrey is regularly
engaged in the valuation of securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. The Southwest Board decided to retain Robinson-Humphrey
based on its experience as a financial advisor in mergers and acquisitions of
financial institutions, particularly transactions in the Southeastern region of
the U.S., and its knowledge of financial institutions and Southwest in
particular.
CONDITIONS PRECEDENT TO THE MERGER
The Merger will occur only if the Merger Agreement is approved by the
requisite vote of the shareholders of Southwest. Consummation of the Merger is
subject to the satisfaction of certain other conditions, unless waived, to the
extent legally permitted. Such conditions include (i) the receipt of all
required governmental orders, permits, approvals or qualifications (and the
expiration of all applicable waiting periods following the receipt of such items
or the delivery of appropriate notices), provided that such approvals shall not
have imposed any condition or restriction that, in the reasonable judgment of
the Board of Directors of either party, would so materially adversely impact the
economic or business benefits of the transactions contemplated by the Merger
Agreement that, had such condition or requirement been known, such party would
not, in its reasonable judgment, have entered into the Merger Agreement; (ii)
the receipt, with certain exceptions, of all consents required for consummation
of the Merger and the preventing of any default under any contract or permit of
such party which, if not obtained or made, is reasonably likely to have,
individually or in the aggregate, a material adverse effect on such party; (iii)
the absence of any action by a court or governmental or regulatory authority
that restricts or prohibits the transactions contemplated by the Merger
Agreement; (iv) the effectiveness of the Registration Statement under the
Securities Act and the receipt of all necessary approvals under state securities
laws, the Securities Act or the Exchange Act relating to the issuance or trading
of the shares of FNB Common Stock issuable pursuant to the Merger; (v) the
receipt of a letter dated as of the Effective Time from Ernst & Young LLP to the
effect that the Merger will be accounted for as a pooling-of-interests under
GAAP; and (vi) the receipt of the tax opinion referred to in "-- Certain Federal
Income Tax Consequences".
In addition, unless waived, each party's obligation to effect the Merger is
subject to the accuracy of the other party's representations and warranties at
the Effective Time and the performance by the other party of its obligations
under the Merger Agreement and the receipt of certain closing certificates and
opinions from the other party. The obligation of FNB to effect the Merger also
is subject to (i) the receipt, to the extent necessary to assure, in the
reasonable judgment of FNB, that the transactions contemplated hereby will
qualify for pooling-of-interests accounting treatment, of agreements from
affiliates of Southwest restricting their ability to sell or otherwise transfer
their shares of Southwest Common Stock or their shares of FNB Common Stock
received upon consummation of the Merger; and (ii) that as of the close of the
most recent calendar quarter (or, if the Effective Time shall occur within 20
days following the close of a calendar quarter, then as of the next preceding
calendar quarter) cumulative earnings reported by Southwest since December 31,
1995 will be greater than or equal to the amount calculated by multiplying (a)
$500,000 by (b) the number of full calendar quarters which have passed since
December 31, 1995 and for which earnings have been reported as of such date.
"Reported" means reported on Southwest's financial statements prepared in
accordance with GAAP applied on a basis consistent with Southwest's financial
statements for the years ended December 31, 1995 and 1994, as included in
Southwest's reports to the Commission on Forms 10-K or Southwest's annual
reports to shareholders, subject to any subsequent adjustments required to be
reported whether or not such adjustments have, as yet, been reported with the
following adjustments, if any, net of related income tax savings and costs,
which were reflected in net income for the relevant period(s) added back into or
deducted from net income for the applicable period: (i) investment banking
expenses, outside legal and accounting fees, or other costs (including severance
and extraordinary restructuring costs) and expenses
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associated with or resulting from the Merger, (ii) gains or losses on sales of
assets outside of the ordinary course of business, (iii) any expense related to
the exercise of options or the lapses of restrictions on restricted stock; and
(iv) any other expenses which are incurred in connection with the transactions
contemplated by the Merger Agreement upon which FNB and Southwest shall mutually
agree. No assurances can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the party
permitted to do so.
CONDUCT OF BUSINESS PRIOR TO THE MERGER
In the Merger Agreement, Southwest has agreed, except as otherwise
contemplated by the Merger Agreement, to (i) operate its business only in the
usual, regular and ordinary course, (ii) preserve intact its business
organization and assets and maintain its rights and franchises, (iii) use its
reasonable efforts to maintain its current employee relationships, and (iv) take
no action which would materially adversely affect the ability of any party to
obtain any consent or approvals required by the Merger Agreement or to perform
its covenants and agreements under the Merger Agreement.
In addition, Southwest has agreed that it will not, without the prior
written consent of FNB:
(a) amend the Southwest Charter, the Southwest By-laws, or other
governing instruments;
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of Southwest or any of its
subsidiaries to Southwest or any of its subsidiaries) in excess of an
aggregate of $100,000 except in the ordinary course of the business
consistent with past practices, or impose, or suffer the imposition, with
certain exceptions, of a lien on any asset of Southwest or its subsidiaries
(other than in connection with deposits, repurchase agreements, bankers
acceptances, treasury tax and loan accounts established in the ordinary
course of business, the satisfaction of legal requirements in the exercise
of trust powers, and already existing liens);
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of Southwest or any subsidiary, or declare or pay any
dividend or make any other distribution in respect of its capital stock;
(d) except for the Merger Agreement, or pursuant to the Stock Option
Agreement or the exercise of the Southwest Options, issue, sell, pledge,
encumber, authorize the issuance of, enter into any contract to issue,
sell, pledge, encumber, or authorize the issuance of, or otherwise permit
to become outstanding, any additional shares of Southwest Common Stock or
any other capital stock of any Southwest subsidiary, or any stock
appreciation rights, or any option, warrant, conversion, or other right to
acquire any such stock, or any security convertible into any such stock;
(e) adjust, split, combine, or reclassify the capital stock of
Southwest or any subsidiary or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of Southwest Common
Stock or sell, lease, mortgage, or otherwise dispose of or otherwise
encumber (i) any shares of capital stock of any Southwest subsidiary
(unless any such shares of stock are sold or otherwise transferred to
Southwest or another of its subsidiaries) or (ii) any asset other than in
the ordinary course of business for reasonable and adequate consideration;
(f) except for purchases of United States Treasury securities or
United States government agency securities, which in either case have
maturities of five years or less, purchase any securities or make any
material investment, either by purchase of stock or securities,
contributions to capital, asset transfers, or purchase of any assets, in
any person other than a wholly-owned subsidiary or otherwise acquire direct
or indirect control over any person, other than in connection with (i)
foreclosures in the ordinary course of business (ii) acquisitions of
control by a depository institution subsidiary in its fiduciary capacity,
or (iii) the creation of new wholly-owned subsidiaries organized to conduct
or continue activities otherwise permitted by the Merger Agreement;
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(g) grant any increase in compensation or benefits to the employees or
officers of Southwest or its subsidiaries, except in accordance with past
practice or as required by law; pay any severance or termination pay or any
bonus other than pursuant to written policies or written contracts in
effect on the date of the Merger Agreement; enter into or amend any
severance agreements with officers of Southwest or its subsidiaries; grant
any material increase in fees or other compensation to directors of
Southwest or any of its subsidiaries; or voluntarily accelerate the vesting
of any Southwest Options or other employee benefits;
(h) enter into or amend any employment contract (unless such amendment
is required by law) that Southwest or one of its subsidiaries does not have
the unconditional right to terminate without liability (other than
liability for services already rendered) at any time on or after the
Effective Time;
(i) adopt any new employee benefit plan or make any material change in
or to any existing employee benefit plans other than such changes required
by law or to maintain the tax qualified status of any such plan;
(j) make any significant change in any tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in tax laws, regulatory accounting requirements or GAAP;
(k) commence any litigation other than in accordance with past
practice or settle any litigation for material money damages or
restrictions upon the operations of Southwest or any of its subsidiaries;
(l) except in the ordinary course of business, modify, amend, or
terminate any material contract or waive, release, compromise, or assign
any material rights or claims;
(m) except for transactions in the ordinary course of business
consistent with past practice, make any investment in excess of $100,000
either by purchase of stock or securities, contributions to capital,
property transfers, or purchase of any property or assets of any other
individual, corporation or other entity other than a wholly-owned
subsidiary of Southwest;
(n) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any individual, corporation or other entity
other than a direct or indirect wholly-owned subsidiary, or cancel, release
or assign any indebtedness to any such person or any claims held by any
such person, except in the ordinary course of business consistent with past
practice or pursuant to contracts or agreements in force at the date of the
Merger Agreement; or
(o) agree to, or make any commitment to, take any of the actions
prohibited by the above paragraphs.
The Merger Agreement also provides that, except for the transactions
contemplated thereby, neither Southwest nor its affiliates or representatives
shall, directly or indirectly, solicit the acquisition by any person of all or a
substantial portion of the equity in, or all of or a substantial portion of the
assets of, or a merger with or tender offer for Southwest. Additionally, except
to the extent necessary to comply with the fiduciary duties of the Southwest
Board, as advised by counsel, neither Southwest nor its affiliates or
representatives will provide any non-public information that it is not legally
obligated to furnish, negotiate with respect to, or enter into any contract with
respect to, any such acquisition proposal, although Southwest may communicate
information about such acquisition proposal to its shareholders if and to the
extent that it is required to do so in order to comply with its legal
obligations, as advised by counsel.
In the Merger Agreement, FNB has agreed (i) to conduct its business in a
manner designed, in its reasonable judgment, to enhance the long-term value of
the FNB Common Stock and its business prospects and (ii) to take no action which
would materially adversely affect the ability of any party to obtain any consent
or approvals required by the Merger Agreement or to perform its covenants and
agreements under the Merger Agreement; provided that FNB or any of its
subsidiaries may discontinue or dispose of any of its assets or business if FNB
determines that such action is desirable in the conduct of its business. FNB
further agreed that it will not, without the prior written consent of the
Chairman and Chief Executive Officer of Southwest,
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which consent shall not be unreasonably withheld, amend the FNB Charter or the
FNB By-laws in any manner adverse to the holders of Southwest Common Stock.
MODIFICATION, WAIVER AND TERMINATION
The Merger Agreement provides that it may be amended by a subsequent
writing signed by each party upon the approval of each of their respective Board
of Directors. However, the provision relating to the manner or basis in which
shares of Southwest Common Stock will be exchanged in the Merger may not be
amended after the Special Meeting in a manner to reduce or, except as described
below in reference to a possible Exchange Ratio increase after a Termination
Event, modify in any material respect the consideration to be received by the
holders of the Southwest Common Stock without the further approval of the
holders of the issued and outstanding shares of Southwest Common Stock entitled
to vote thereon.
The Merger Agreement provides that each party may waive any of the
conditions precedent to its obligations to consummate the Merger to the extent
legally permitted. Neither of the parties intends, however, to waive any
conditions of the Merger if such waiver would, in the judgment of the waiving
party, have a material adverse effect on its shareholders.
The Merger Agreement may be terminated by mutual agreement of the FNB Board
and the Southwest Board. The Merger Agreement may also be terminated by either
the FNB Board or the Southwest Board (i) in the event of inaccuracies of any
representation or warranty of the other Party contained in the Merger Agreement
which cannot be or has not been cured within 30 days of written notice of such
inaccuracies such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a material adverse effect on such party, provided
that such party is also not in breach of the Merger Agreement; (ii) in the event
of a material breach of any covenant or agreement in the Merger Agreement by the
other party that cannot or has not been cured within 30 days of written notice
of such breach; (iii) if the required approval of the Southwest shareholders or
any applicable regulatory authority is not obtained; (iv) if the Merger is not
consummated by July 31, 1997, provided that the failure to consummate the Merger
by such date is not caused by any breach of the Merger Agreement by the
terminating party; or (v) in the event that any of the conditions precedent to
the obligations of such party to consummate the Merger cannot be satisfied or
fulfilled by July 31, 1997, provided that the terminating party is not in breach
of the Merger Agreement.
In addition, the Merger Agreement may be terminated by the Southwest Board,
at its sole option at any time during the ten-day period commencing the day
after the Federal Reserve Board consents to the Merger, if the average of the
mid-point of the closing high bid and low ask prices of FNB Common Stock (the
"Designated Price") for the 20 full trading days ending on the day prior to the
date the Federal Reserve Board consents to the Merger (the "Determination Date")
is less than $19.00 (a "Termination Event"); provided, however, that the Merger
Agreement would not be so terminated if FNB elects, at its sole option but
subject to Southwest's written agreement, to increase the Exchange Ratio during
the five-day period commencing with its receipt of written notice of such an
election to terminate, to equal the quotient obtained by dividing (1) the
product of $19.00 and the Exchange Ratio (as then in effect) by (2) the
Designated Price. There can be no assurance that the Southwest Board would
exercise its right to terminate the Merger Agreement if a Termination Event
exists, and, if the Southwest Board does elect to so terminate the Merger
Agreement, there can be no assurance that FNB will elect to increase the
Exchange Ratio as provided above; and, if FNB so elects, there can be no
assurance that Southwest would permit such an election by FNB.
Southwest shareholders should be aware that the Designated Price on the
Determination Date on which the occurrence of a Termination Event and the
subsequent increase, if any, in the Exchange Ratio may be determined, will be
based on the average of the closing high bid and low ask prices of FNB Common
Stock during a 20-day period ending on the day prior to the date the Federal
Reserve Board consents to the Merger. Accordingly, because the market price of
FNB Common Stock between the Determination Date and the Effective Time, as well
as on the date certificates representing shares of FNB Common Stock are
delivered in exchange for shares of Southwest Common Stock following
consummation of the Merger, will fluctuate and possibly decline, the value of
the FNB Common Stock actually received by holders of Southwest Common Stock may
be more or less than (i) the Designated Price, or (ii) the value of the FNB
Common Stock at the
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Effective Time resulting from the Exchange Ratio or any possible adjustment to
the Exchange Ratio as described above.
It is not possible to know whether a Termination Event will occur until
after the Determination Date. The Southwest Board has made no decision as to
whether it would exercise its termination right in such situation. The Southwest
Board would, consistent with its fiduciary duties, take into account all
relevant facts and circumstances that exist at such time, and would consult with
its financial advisors and legal counsel.
Approval of the Merger Agreement by the shareholders of Southwest at the
Special Meeting will confer on the Southwest Board the power, consistent with
its fiduciary duties, to elect to consummate the Merger in the event of a
Termination Event whether or not there is any increase in the Exchange Ratio and
without any further action by, or resolicitation of, the shareholders of
Southwest. If the Southwest Board elects to exercise its termination right,
Southwest must give FNB prompt notice of that decision during a ten-day period
beginning the day after the Federal Reserve Board consents to the Merger, but
the Southwest Board may withdraw such notice, at its sole option, at any time
during such ten-day period. During the five-day period commencing with receipt
of such notice, FNB has the option, in its sole discretion, to increase the
Exchange Ratio as described above and thereby avoid such termination of the
Merger Agreement if Southwest agrees to permit such an election by executing a
written acceptance thereof. FNB is under no obligation to increase the Exchange
Ratio, and there can be no assurance that FNB would elect to increase the
Exchange Ratio if the Southwest Board were to exercise its right to terminate
the Merger Agreement as set forth above. Any such decision would be made by FNB
in light of the circumstances existing at the time FNB has the opportunity to
make such an election. If FNB elects to increase the Exchange Ratio as described
above, it must give Southwest prompt notice of that election and such increased
Exchange Ratio, in which case no termination of the Merger Agreement would occur
as a result of a Termination Event if Southwest decided to accept such an
election. There can be no assurance that Southwest would agree to permit such an
election by FNB if FNB elected to increase the Exchange Ratio.
EXPENSES
In the Merger Agreement, each of the parties has agreed to pay its own
expenses and one-half of the printing costs of this Proxy Statement-Prospectus
and related materials; provided, further, that in the event of any termination
of the Merger Agreement following the occurrence of an Initial Triggering Event
(as defined in the Stock Option Agreement), FNB shall be entitled to a cash
payment from Southwest in an amount equal to $1 million upon the occurrence of
any Subsequent Triggering Event (as defined in the Stock Option Agreement)
within 12 months following the date of such termination (or such longer period
as shall exist under the Stock Option Agreement until the occurrence of an
Exercise Termination Date (as defined in the Stock Option Agreement)). In the
event the Merger Agreement is terminated as a result of FNB's failure to satisfy
any of its representations, warranties or covenants set forth therein, FNB shall
reimburse Southwest for its reasonable out-of-pocket expenses relating to the
Merger in an amount not to exceed $250,000.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Wachtell, Lipton, Rosen & Katz has delivered to FNB and Southwest its
opinion that, based upon certain customary assumptions and representations,
under federal law as currently in effect, (a) the proposed Merger will
constitute a reorganization within the meaning of Section 368(a)(1) of the Code;
(b) no gain or loss will be recognized by the shareholders of Southwest on the
exchange of their shares of Southwest Common Stock for shares of FNB Common
Stock pursuant to the terms of the Merger to the extent of such exchange; (c)
the federal income tax basis of the FNB Common Stock for which shares of
Southwest Common Stock are exchanged pursuant to the Merger will be the same as
the basis of such shares of Southwest Common Stock exchanged therefor (including
basis allocable to any fractional interest in any share of FNB Common Stock);
(d) the holding period of FNB Common Stock for which shares of Southwest Common
Stock are exchanged will include the period that such shares of Southwest Common
Stock were held by the holder, provided that such shares were capital assets of
the holder; and (e) the receipt of cash in lieu of fractional shares will be
treated as if the fractional shares were distributed as part of the exchange and
then redeemed by FNB, and gain or loss will be recognized in an amount equal to
the difference between the cash received and the basis of
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the fractional share of FNB Common Stock surrendered, which gain or loss will be
capital gain or loss if the Southwest Common Stock was a capital asset in the
hands of the shareholder.
THE FOREGOING IS A SUMMARY OF THE ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE PROPOSED MERGER UNDER THE CODE AND IS FOR GENERAL
INFORMATION ONLY. IT DOES NOT INCLUDE CONSEQUENCES OF STATE, LOCAL OR OTHER TAX
LAWS OR SPECIAL CONSEQUENCES TO PARTICULAR SHAREHOLDERS HAVING SPECIAL
SITUATIONS. SHAREHOLDERS OF SOUTHWEST SHOULD CONSULT THEIR OWN TAX ADVISORS
REGARDING SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE AND LOCAL TAX LAWS AND TAX CONSEQUENCES
OF SUBSEQUENT SALES OF FNB COMMON STOCK.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
GENERAL. Certain members of Southwest's management and of the Southwest
Board have interests in the Merger that are in addition to any interests they
may have as shareholders of Southwest generally. These interests include, among
others, provisions in the Merger Agreement relating to the management of
Southwest after the Effective Time, indemnification of Southwest directors and
officers, election or appointment of three members of the Southwest Board to the
FNB Board, and certain amended employment agreements and other employee
benefits, as hereinafter described.
In addition, as hereinafter described, FNB and certain of its employees and
directors, including Mr. Mortensen, Chairman and President of FNB, own shares of
Southwest Common Stock and warrants to acquire shares of Southwest Common Stock.
Mr. Mortensen is also a member of the Southwest Board. Mr. Mortensen recused
himself from deliberations regarding (and votes on) the Merger by the Southwest
Board.
SOUTHWEST MANAGEMENT POST-MERGER; SOUTHWEST EMPLOYMENT AGREEMENTS. FNB has
agreed to cause three of the current Southwest directors to be elected to the
FNB Board following consummation of the Merger.
After the Effective Time of this strategic affiliation, FNB will retain the
management team of Southwest with the authority and responsibility for operating
Southwest and its subsidiaries in substantially the same manner and fashion as
historically operated by such management team.
Southwest has employment agreements with each of Gary L. Tice, Garrett S.
Richter, David W. Gomer, James L. Cottrell, C.C. Coghill, David H. Schaeffer and
Robert Avery (collectively, the "Named Officers") which, before they were
amended, provided for severance payments and for the payment in cash or in
Southwest Common Stock in an amount equal in value to the excess of the fair
market value of Southwest Common Stock on the date of termination over the per
share exercise price of the Southwest Options multiplied by the number of shares
of Southwest Common Stock subject to such options (whether or not then fully
exercisable) upon the termination of such officer's employment following a
change in control. Immediately before execution of the Merger Agreement, the
Named Officers amended their employment agreements to provide that the Merger
and Merger Agreement did not constitute a change of control with the intended
effect that neither the approval and execution of the Merger Agreement nor the
consummation of the transactions contemplated thereby would give rise to any
rights of acceleration or payment under the employment agreements, and to
provide that if their employment with Southwest is terminated after the
Effective Time for any reason other than death, whether by the officer,
Southwest or FNB, upon such termination the terminated officer will receive FNB
Common Stock in an amount equal in value to the excess of the fair market value
of FNB Common Stock on the date of termination over the per share exercise price
of the Southwest Options multiplied by the number of shares of FNB Common Stock
subject to such Southwest Options (whether or not then fully exercisable).
Pursuant to the Merger Agreement, FNB has agreed to honor each of the amended
employment agreements.
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INDEMNIFICATION. FNB has agreed that it will, following the Effective
Time, indemnify, defend and hold harmless the current and former directors,
officers, employees and agents of Southwest and its subsidiaries against all
losses, expenses, claims, damages or liabilities arising out of actions or
omissions occurring at or prior to the Effective Time to the full extent then
permitted under Florida law and by the Southwest Charter and Southwest By-laws
as currently in effect, including provisions relating to advances of expenses
incurred in defense of any litigation.
SOUTHWEST OPTIONS. Southwest has granted stock options to certain
Southwest officers under the Southwest 1988 Incentive Stock Option Plan (the
"1988 Option Plan"), including incentive stock options and non-qualified stock
options which vest over ten years from the date of grant unless accelerated in
accordance with the 1988 Option Plan, individual option agreement evidencing the
grant of such option, or employment agreement. The amendments to the Southwest
employment agreements had the intended effect of ensuring that the consummation
of the Merger did not constitute a change in control resulting in the
acceleration of the Southwest Options.
The following table sets forth, as of May 1, 1996, with respect to
Southwest executive officers (i) the number of shares covered by options held by
such persons, (ii) the number of shares covered by currently-exercisable options
held by such persons, (iii) the weighted average exercise price of all such
options held by such persons, and (iv) the aggregate value (i.e., stock price
less option exercise price, based on a stock price of $17.00 per share of
Southwest Common Stock) of all such options.
WEIGHTED AVERAGE
OPTIONS CURRENTLY EXERCISE PRICE AGGREGATE VALUE
OPTIONS HELD EXERCISABLE PER OPTION OF OPTIONS
------------ ----------------- ---------------- ---------------
Gary L. Tice................. 94,676 46,602 $ 7.54 $ 895,426
Garrett S. Richter........... 63,130 31,567 $ 7.48 $ 600,929
C.C. Coghill................. 42,032 18,977 $ 7.85 $ 384,688
David H. Schaeffer........... 31,420 11,548 $ 8.91 $ 254,161
Lewis S. Albert.............. 10,404 3,121 $ 9.61 $ 76,886
Sidney T. Jackson............ 10,302 2,581 $10.43 $ 67,666
David W. Gomer............... 20,808 6,242 $ 9.61 $ 153,771
Executive Officer Group
(7 persons in all)......... 272,772 120,638 $ 8.08 $ 2,203,598
In consideration of the efforts of the organizers of Southwest and of First
Naples in organizing such entities and the attendant personal financial risks
they have undertaken, Southwest granted warrants to purchase shares of Southwest
Common Stock to its sixteen organizers. The warrants are currently exercisable,
have an exercise price of $5.64 and expire on June 19, 2001.
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The following table sets forth, as of May 1, 1996, (i) the number of shares
covered by warrants held by such persons, (ii) the exercise price of all such
warrants held by such persons, and (iii) the aggregate value (i.e., stock price
less warrant exercise price, based on a stock price of $17.00 per share of
Southwest Common Stock) of all such warrants.
WARRANTS EXERCISE PRICE AGGREGATE VALUE
HELD PER WARRANT OF WARRANTS
--------- --------------- ----------------
AFFILIATES OF SOUTHWEST:
F.N.B. Corporation............................... 9,816 $5.64 $ 111,510
James S. Lindsay................................. 11,143 $5.64 $ 126,584
Edward J. Mace................................... 3,184 $5.64 $ 36,170
Peter Mortensen.................................. 1,857 $5.64 $ 21,096
Richard C. Myers................................. 11,673 $5.64 $ 132,605
Larry A. Wynn.................................... 11,673 $5.64 $ 132,605
OTHERS:
Donald W. Major.................................. 4,510 $5.64 $ 51,234
Joseph R. Pelletier.............................. 5,306 $5.64 $ 60,276
Dr. James R. Rehak, DDS.......................... 5,306 $5.64 $ 60,276
Richard L. Jaegar................................ 6,633 $5.64 $ 75,351
Arlene M. Nichols................................ 7,959 $5.64 $ 90,414
Anita M. Pittman................................. 11,673 $5.64 $ 132,605
Michael E. Watkins............................... 1,549 $5.64 $ 17,597
The William E. Barnett Trust..................... 9,949 $5.64 $ 113,021
The Robert I. Beckler Trust...................... 9,949 $5.64 $ 113,021
William Herman Elett-Trustee..................... 5,837 $5.64 $ 66,308
Dr. & Mrs. Nicholas P. Klokochar................. 5,837 $5.64 $ 66,308
AS A GROUP (17 persons in all)................... 123,854 $5.64 $1,406,981
The Merger Agreement provides for FNB to assume all outstanding Southwest
Options, on the Effective Time in accordance with the terms of the Southwest
Stock Plans under which each of them was issued or granted, provided that such
Southwest Options shall thereafter be exercisable for an adjusted number of
shares of FNB Common Stock and at an adjusted per share exercise price computed
in accordance with the Exchange Ratio. See "-- Conversion of Southwest Options".
OTHER MATTERS RELATING TO SOUTHWEST EMPLOYEE BENEFIT PLANS. The Merger
Agreement also provides that, following the Effective Time, FNB will provide
generally to officers and employees of Southwest and its subsidiaries employee
benefits under employee benefit plans (other than stock option or other plans
involving the potential issuance of FNB Common Stock), on terms and conditions
which when taken as a whole are no less favorable than those currently provided
by Southwest or those currently provided by FNB or its subsidiaries to their
similarly situated officers and employees; provided that, for a period of 12
months after the Effective Time, FNB will provide generally to officers and
employees of Southwest or its subsidiaries severance benefits in accordance with
the policies of Southwest.
For purposes of participation and vesting (but not benefit accrual under
any employee benefit plans of FNB and its subsidiaries other than under the
Southwest Stock Plans) under such employee benefit plans, the service of the
employees of Southwest or any of its subsidiaries prior to the Effective Time
will be treated as service with FNB or any of its subsidiaries participating in
such employee benefit plans. FNB will, and will cause its subsidiaries to, honor
in accordance with their terms all provisions for vested benefits or other
vested amounts earned or accrued through the Effective Time under the Southwest
benefit plans and all employment, severance, consulting, and other compensation
contracts between Southwest or any of its subsidiaries and any current or former
director, officer or employee thereof; provided, however, that all such
contracts have been amended to provide that the Merger and the other
transactions contemplated by the Merger Agreement will
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not constitute a "change of control" or otherwise give rise to any rights of
acceleration, payment or other special rights under any such contracts.
Southwest provides incentive compensation to each of its qualified
employees pursuant to an incentive compensation plan under which annual cash
bonuses are determined and paid. Under this plan, bonuses are determined based
on measured standards and predetermined performance goals. Southwest from
time-to-time revises the individual and corporate performance standards to
conform with current strategic plans.
Southwest maintains a supplemental retirement plan for its executive
officers and directors. This plan provides permanent death benefit coverage and
post retirement cash value access. These benefits are funded through "split
dollar" life insurance contracts which provide for the recovery of premiums paid
by Southwest from the accumulated cash value of the policies or from death
benefits. Participants under the plan vest under the following schedule: for
qualified executive officers, 20% of the plan's benefits vest for each year of
service; for non-officer directors, 100% of the plan's benefits vest upon
completion of five years of service. In each case, policies are funded over a
five-year period.
In addition to the plans previously discussed, Southwest provides certain
health and welfare benefit plans including a salary saving KSOP, group life and
long-term disability coverage, health and dental insurance, excess life
insurance for officers up to $200,000, supplemental long-term disability for
vice presidents and above, and a cafeteria plan covering health, dental and
flexible spending accounts under Section 125 of the Code.
SOUTHWEST BOARD RESOLUTIONS. On February 2, 1996, the Southwest Board
adopted a resolution pursuant to which each director of Southwest agreed to vote
all shares of the Southwest Common Stock beneficially owned by him in favor of
the approval of the Merger Agreement at a meeting of shareholders duly called
and convened for the purpose of considering the Merger Agreement.
OWNERSHIP OF SOUTHWEST COMMON STOCK BY FNB. As of February 2, 1996, FNB
owned 172,621 shares of Southwest Common Stock, and warrants to acquire 9,816
shares of Southwest Common Stock at an exercise price of $5.64, representing in
aggregate approximately 4.99% of the outstanding shares of Southwest Common
Stock as of December 31, 1995* after giving effect to the exercise of the
warrants. Pursuant to the Stock Option Agreement, FNB has the right to acquire
up to 727,163 additional shares, subject to adjustment, representing
approximately 19.9% of the outstanding shares of Southwest Common Stock as of
December 31, 1995 before giving effect to the exercise of the Stock Option.
Pursuant to the Southwest Charter, approval of the Merger Agreement
requires the affirmative vote of the holders of a majority of the outstanding
shares of Southwest Common Stock entitled to vote in elections of directors
which are not beneficially owned, directly or indirectly, by FNB, because FNB
owns, directly or indirectly, more than 5% of the shares of Southwest Common
Stock entitled to vote in elections of directors. Pursuant to the Southwest
Charter, FNB is the beneficial owner and beneficially owns shares of stock of
which (other than shares of Southwest Common Stock held in its treasury) (a) FNB
and its affiliates and associates beneficially own, directly or indirectly,
whether of record or not, (b) FNB or any of its affiliates or associates has the
right to acquire, pursuant to any agreement upon the exercise of conversion
rights, warrants, or options, or otherwise, (c) FNB or any of its affiliates or
associates has the right to sell or vote pursuant to any agreement, or (d) are
beneficially owned, directly or indirectly, by any other person with which FNB
or any of its affiliates or associates has any agreement, arrangement or
understanding for the purposes of acquiring, holding, voting or disposing of
securities of Southwest. The following table sets forth (i) the number of shares
of Southwest Common Stock entitled to vote in elections for directors that FNB
is deemed to beneficially own as of May 1, 1996 and whose vote will not count
towards approving the Merger for purposes of the Southwest Charter; (ii) the
percentage of shares of Southwest Common Stock outstanding as of December 31,
1995 that such beneficially owned shares represent; (iii) the number of shares
of Southwest Common Stock that FNB beneficially owned as of May 1, 1996 but
which are not entitled to vote in elections for
- ---------------
* As of December 31, 1995, there were 3,654,089 shares of Southwest Common Stock
issued and outstanding.
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directors because the shares have not been acquired; and (iv) the percentage of
shares of Southwest Common Stock outstanding on December 31, 1995 that such
shares would represent if FNB acquired them:
SHARES BENEFICIALLY
OWNED BY FNB WHICH
ARE CURRENTLY % OF SHARES SHARES BENEFICIALLY
ENTITLED TO VOTE OUTSTANDING AT OWNED BY FNB WHICH OUTSTANDING AT
IN ELECTIONS DECEMBER 31, CURRENTLY HAVE NO DECEMBER 31,
FOR DIRECTORS 1995 VOTING POWER 1995
------------------- ---------------- ------------------- ----------------
FNB
Shares of Southwest
Common Stock...... 172,621 4.72%
Warrants............. 9,816 0.27%
Stock Option
Agreement......... 727,163 19.90%
BENEFICIAL OWNERSHIP OF
AFFILIATES AND
ASSOCIATES OF FNB*
Shares of Southwest
Common Stock...... 98,253 2.69%
Warrants............. 1,857 0.05%
---------- ------- ---------- ----------------
Total........ 270,874 7.41% 738,836 20.22%
- ---------------
* The shares of Southwest Common Stock and warrants to acquire shares of
Southwest Common Stock are held by executive officers and directors of FNB and
their associates, as that term is defined by Rule 12b-2 of the Exchange Act,
which definition includes certain relatives or the spouse of any affiliate of
FNB.
For purposes of the Exchange Act, FNB expressly disclaims beneficial
ownership of the shares held by its affiliates and associates and of any shares
which may be acquired pursuant to the Stock Option Agreement.
OTHER FNB RELATIONSHIPS TO SOUTHWEST. Mr. Mortensen is one of the founders
of Southwest as well as of its lead bank, First Naples, and has served as a
member of the Board of Directors of each entity since each of their inceptions
in 1988.
From time to time, FNB engages in transactions with Southwest and certain
of the Southwest directors and officers or their related interests in the
ordinary course of business. Southwest has a correspondent relationship with
First National, FNB's lead bank, whereby Southwest solicits the sale and
purchase of loan participations. During fiscal year 1995, Southwest sold no
participations to First National and purchased participations totalling
$2,000,000 from First National. At December 31, 1995, $14,391,377 and $1,927,467
in principal balances, respectively, were outstanding. No fees were paid or
received by Southwest in connection with such participations. All purchases and
sales of loan participations were at the market value of the loans at the date
of sale.
STOCK OPTION AGREEMENT
As an inducement and a condition to FNB to enter into the Merger Agreement,
FNB and Southwest entered into the Stock Option Agreement whereby Southwest
granted FNB the irrevocable Stock Option entitling FNB to purchase, subject to
certain adjustments, up to 727,163 shares of Southwest Common Stock, at an
exercise price, subject to certain adjustments, of $15.00 per share, payable in
cash under the circumstances described below.
The Stock Option Shares, if issued pursuant to the Stock Option Agreement,
would represent approximately 19.9% of the Southwest Common Stock issued and
outstanding without giving effect to the issuance of any shares of Southwest
Common Stock pursuant to an exercise of the Stock Option.
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The number of shares of Southwest Common Stock subject to the Stock Option
will be increased or decreased to the extent that Southwest issues additional
shares of Southwest Common Stock (otherwise than pursuant to an exercise of the
Stock Option) or redeems, repurchases, retires or otherwise causes to be no
longer outstanding shares of Southwest Common Stock such that the number of
shares of Southwest Common Stock subject to the Stock Option continues to equal
19.9% of the Southwest Common Stock then issued and outstanding, without giving
effect to the issuance of shares of Southwest Common Stock pursuant to an
exercise of the Stock Option. In the event of any change in, or distributions in
respect of, the Southwest Common Stock by reasons of stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions, conversions, exchanges
of shares, distributions on or in respect of the Southwest Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Southwest Common Stock subject to the Stock Option,
and the applicable exercise price per Stock Option Share, will be appropriately
adjusted in such manner as to fully preserve the economic benefits provided
under the Stock Option Agreement.
FNB or any other holder or holders of the Stock Option (collectively, the
"Holder") may exercise the Stock Option, in whole or in part, by sending written
notice after the occurrence of an "Initial Triggering Event" and a "Subsequent
Triggering Event" (as such terms are defined herein) prior to termination of the
Stock Option. The term "Initial Triggering Event" is defined as the occurrence
of any of the following events:
(i) Southwest or any of its subsidiaries, without having received
FNB's prior written consent, shall have entered into an agreement to engage
in an Acquisition Transaction (as hereinafter defined) with any person
other than FNB or any of its subsidiaries or the Southwest Board shall have
recommended that the stockholders of Southwest approve or accept any such
Acquisition Transaction. For purposes of the FNB Option Agreement,
"Acquisition Transaction" shall mean (x) a merger or consolidation, or any
similar transaction involving Southwest or any significant subsidiary of
Southwest, (y) a purchase, lease, or other acquisition of all or a
substantial portion of the assets or deposits of Southwest or any
significant subsidiary of Southwest, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 15% or more of the voting power of Southwest;
(ii) Any person other than FNB, one of FNB's subsidiaries, or one of
Southwest's subsidiaries acting in a fiduciary capacity in the ordinary
course of its business shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 15% or more of the outstanding
shares of Southwest Common Stock (the term "beneficial ownership" for
purposes of the Stock Option Agreement having the meaning assigned thereto
in Section 13(d) of the Exchange Act, and the rules and regulations
thereunder pursuant to which a person is the beneficial owner of all shares
that such person has direct or indirect voting power or investment power
over whether through any contract, arrangement, understanding, relationship
or otherwise);
(iii) The shareholders of Southwest shall not have approved the
transaction contemplated by the Merger Agreement at the Special Meeting, or
such Special Meeting shall not have been held or shall have been cancelled
prior to termination of the Merger Agreement, in either case, after the
Southwest Board shall have withdrawn or modified, or publicly announced its
interest to withdraw or modify, its recommendation that the stockholders of
Southwest approve the transactions contemplated by the Merger Agreement, or
after Southwest or any of its subsidiaries, without having received FNB's
prior written consent, shall have authorized, recommended, proposed, or
publicly announced its intention to authorize, recommend, or propose, to
engage in an Acquisition Transaction with any person other than FNB or one
of its subsidiaries;
(iv) Any person other than FNB or one of its subsidiaries shall have
made a bona fide proposal to Southwest or its stockholders to engage in an
Acquisition Transaction;
(v) Southwest shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction and such breach would entitle FNB to terminate the
Merger Agreement; or
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(vi) Any person other than FNB or one of its subsidiaries, other than
in connection with a transaction to which FNB has given its prior written
consent, shall have filed an application or notice with the Federal Reserve
Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
The term "Subsequent Triggering Event" is defined as either (A) the
acquisition by any person of beneficial ownership of 25% or more of the then
outstanding Southwest Common Stock, or (B) the occurrence of the Initial
Triggering Event described in clause (i) above, except that the percentage
referred to in subclause (z) thereof shall be 25%.
After a Subsequent Triggering Event prior to the termination of the Stock
Option, FNB (on behalf of itself or any subsequent Holder) may demand that the
Stock Option and the related Stock Option Shares be registered under the
Securities Act. Upon such demand, Southwest must effect such registration
promptly, subject to certain exceptions. FNB is entitled to two such
registrations.
The Stock Option terminates at or upon, and each of the following
constitutes an "Exercise Termination Event", (i) the Effective Time, (ii)
termination of the Merger Agreement in accordance with the terms thereof prior
to the occurrence of an Initial Triggering Event, or (iii) 12 months (subject to
extension to obtain regulatory approvals (for so long as the Holder is using
commercially reasonable efforts to obtain such regulatory approvals), to allow
statutory waiting periods to expire, and to avoid liability under Section 16(b)
of the Exchange Act which provides for the disgorgement to the issuer of any
profit realized by an insider as a result of a purchase and sale or sale and
purchase of certain equity securities occurring within a six-month period) after
termination of the Merger Agreement following the occurrence of an Initial
Triggering Event.
Under applicable law, FNB may not acquire 5% or more of the issued and
outstanding shares of Southwest Common Stock without the prior approval of the
Federal Reserve Board. In considering whether to approve the acquisition by FNB
of shares pursuant to the exercise of the Stock Option, the Federal Reserve
Board will generally apply the same standards as in considering whether to
approve the Merger. See "-- Bank Regulatory Matters -- Federal Reserve Board".
Certain other regulatory approvals (including approval of the Florida Banking
Department) may also be required before such an acquisition could be completed
and, under Florida law, such an acquisition could not occur until December 16,
1996, which is two years after Cape Coral (a Southwest subsidiary bank) was
formed. FNB anticipates submitting an application seeking Federal Reserve Board
approval of its acquisition of up to 19.9% of the outstanding shares of
Southwest Common Stock pursuant to a potential exercise of the Stock Option and
making a similar filing with the Florida Banking Department in April 1996. See
"-- Bank Regulatory Matters".
Upon the occurrence of a Repurchase Event (as defined herein) that occurs
prior to an Exercise Termination Event (i) at the request of the Holder
delivered prior to the Exercise Termination Event, Southwest shall repurchase
the Stock Option from the Holder at a price ("Stock Option Repurchase Price")
equal to the amount by which (x) the Market/Offer Price (as defined herein)
exceeds (y) the then applicable Stock Option exercise price, multiplied by the
number of shares for which the Stock Option may then be exercised; and (ii) at
the request of the owner of Stock Option Shares from time to time (the "Owner")
delivered prior to the Exercise Termination Event, Southwest shall repurchase
such number of Stock Option Shares from the Owner as the Owner designates at a
price per share (the "Stock Option Share Repurchase Price") equal to the
Market/Offer Price. "Market/Offer Price" means the highest of (A) the price per
share of Southwest Common Stock at which a tender offer or exchange offer
therefor has been made, (B) the price per share of Southwest Common Stock to be
paid by any third party pursuant to an agreement with Southwest, (C) the highest
closing price for shares of Southwest Common Stock within the three-month period
immediately preceding the date the Holder gives notice of the required
repurchase of the Stock Option or the Owner gives notice of the required
repurchase of Stock Option Shares, as the case may be, and (D) in the event of
the sale of all or a substantial portion of Southwest's assets, the sum of the
net price paid in such sale for such assets and the current market value of the
remaining assets of Southwest divided by the number of shares of Southwest
Common Stock then outstanding. "Repurchase Event" means (i) the consummation of
certain mergers, consolidations or similar transactions involving Southwest or
any purchase, transfer or other acquisition of all or a substantial portion of
the assets of Southwest by any person other than FNB or one
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of its subsidiaries, other than any such transaction which would not constitute
an Acquisition Transaction or (ii) the acquisition by any person of beneficial
ownership of 50% or more of the then outstanding shares of Southwest Common
Stock.
In the event that prior to termination of the Stock Option, Southwest
enters into an agreement (i) to consolidate with or merge into any person other
than FNB or one of its subsidiaries and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any person other
than FNB or one of its subsidiaries to merge into Southwest with Southwest as
the continuing or surviving corporation, but in connection therewith the then
outstanding shares of Southwest Common Stock are changed into or exchanged for
securities of any other person or cash or any other property, or the then
outstanding shares of Southwest Common Stock after such merger represent less
than 50% of the outstanding voting shares and voting share equivalents of the
merged company, or (iii) to sell or transfer all or substantially all of its
assets to any person other than FNB or one of its subsidiaries, then such
agreement shall provide that the Stock Option be converted into or exchanged for
an option (a "Substitute Option") to purchase shares of common stock of, at the
Holder's option, either (x) the continuing or surviving corporation of a merger
or consolidation or the transferee of all or substantially all of Southwest's
assets, or (y) the person controlling such continuing or surviving corporation
or transferee. The number of shares subject to the Substitute Option and the
exercise price per share will be determined in accordance with a formula in the
Stock Option Agreement. To the extent possible, the Substitute Option will
contain terms and conditions that are the same as those in the Stock Option.
The issuer of the Substitute Option will be required to repurchase the
Substitute Option at the request of the holder thereof and to repurchase any
shares of such issuer's common stock ("Substitute Common Stock") issued upon
exercise of a Substitute Option ("Substitute Shares") at the request of the
owner thereof. The repurchase price for a Substitute Option will equal the
amount by which (A) the Highest Closing Price (as defined herein) exceeds (B)
the exercise price of the Substitute Option, multiplied by the number of shares
of Substitute Common Stock for which the Substitute Option may then be
exercised. The repurchase price for the Substitute Shares shall equal the
Highest Closing Price multiplied by the number of Substitute Shares to be
repurchased. As used herein, "Highest Closing Price" means the highest closing
price for shares of Substitute Common Stock within the three-month period
immediately preceding the date the holder gives notice of the required
repurchase of the Substitute Option or the owner gives notice of the required
repurchase of Substitute Shares, as the case may be.
Neither Southwest nor FNB may assign any of its respective rights and
obligations under the Stock Option Agreement or the Stock Option to any other
person without the other party's express written consent, except that if a
Subsequent Triggering Event occurs prior to termination of the Stock Option,
FNB, subject to the express provisions thereof, may assign in whole or in part
its rights and obligations thereunder; provided, however, that until 30 days
after the Federal Reserve Board approves an application by FNB to acquire the
Stock Option Shares, FNB may not assign its rights under the Stock Option except
in (i) a widely dispersed public distribution, (ii) a private placement in which
no one party acquires the right to purchase in excess of 2% of the voting shares
of Southwest, (iii) an assignment to a single party for the purpose of
conducting a widely dispersed public distribution on FNB's behalf, or (iv) any
other manner approved by the Federal Reserve Board.
In the event that prior to the exercise or termination of the Stock Option,
Southwest enters into an agreement to engage in any of the transactions
described in clause (ii) of the definition of "Repurchase Event" above, the
agreement governing such transaction must make proper provision so that the
Stock Option will, upon the consummation of such transaction, be converted into,
or exchanged for, an option with terms similar to the Stock Option, at the
election of FNB, of either the acquiring person or any person that controls the
acquiring person.
The rights and obligations of Southwest and FNB under the Stock Option
Agreement are subject to receipt of any required regulatory approvals, and both
parties have agreed to use their best efforts in connection therewith. These
include, but are not limited to, applying to the Federal Reserve Board for
approval to acquire the Stock Option Shares.
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The purpose of the Stock Option Agreement and the Stock Option is to
increase the likelihood that the Merger will occur by making it more difficult
for another party to acquire Southwest. The ability of FNB to exercise the Stock
Option and to cause, subject to certain adjustments, up to an additional 727,163
shares of Southwest Common Stock to be issued may be considered a deterrent to
other potential acquisitions of control of Southwest, as it is likely to
increase the cost of an acquisition of all the shares of Southwest Common Stock
which would then be outstanding.
DISSENTERS' RIGHTS OF SOUTHWEST SHAREHOLDERS
Under the provisions of Section 607.1302 of the FBCA, holders of Southwest
Common Stock are not entitled to dissenters' rights with respect to payment for
the value of their shares of Southwest Common Stock.
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a
pooling-of-interests under GAAP. Southwest and FNB have agreed to use their
reasonable efforts to cause the Merger, and to take no action that would cause
the Merger not, to qualify for pooling-of-interests treatment.
Under the pooling-of-interests method of accounting, the historical basis
of the assets and liabilities of FNB and Southwest will be combined at the
Effective Time of the Merger and carried forward at their previously recorded
amounts, and the shareholders' equity accounts of Southwest and FNB will be
combined on FNB's consolidated balance sheet and no goodwill or other intangible
assets will be created.
The unaudited pro forma financial information contained in this Proxy
Statement-Prospectus has been prepared using the pooling-of-interests accounting
method to account for the Merger. See "SUMMARY -- Comparative Unaudited Per
Share Data" and "-- Selected Financial Data"; "UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS FOR THE MERGER".
BANK REGULATORY MATTERS
FEDERAL RESERVE BOARD. The Merger is subject to prior approval by the
Federal Reserve Board under the BHCA. The BHCA requires the Federal Reserve
Board, when approving a transaction such as the Merger, to take into
consideration the financial and managerial resources (including the competence,
experience and integrity of the officers, directors and principal shareholders)
and future prospects of the existing and proposed institutions and the
convenience and needs of the communities to be served. In considering financial
resources and future prospects, the Federal Reserve Board will, among other
things, evaluate the adequacy of the capital levels of the parties to a proposed
transaction.
The BHCA prohibits the Federal Reserve Board from approving a merger if it
would result in a monopoly or be in furtherance of any combination or conspiracy
to monopolize or to attempt to monopolize the business of banking in any part of
the United States, or if its effect in any section of the country would be
substantially to lessen competition or to tend to create a monopoly, or if it
would in any other manner result in a restraint of trade, unless the Federal
Reserve Board finds that the anti-competitive effects of a merger are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. In addition,
under the Community Reinvestment Act of 1977, as amended (the "CRA"), the
Federal Reserve Board must take into account the record of performance of the
existing institutions in meeting the credit needs of the entire community,
including low- and moderate-income neighborhoods, served by such institutions.
Three of FNB's five banking subsidiaries have an outstanding CRA rating with the
appropriate federal regulator. The other two of FNB's banking subsidiaries have
a satisfactory rating with the appropriate federal regulator. First Naples,
Southwest's lead banking subsidiary, has an outstanding CRA rating with the
appropriate federal regulator. Cape Coral, Southwest's other banking subsidiary,
has not yet been rated by the appropriate federal regulator, as it was formed in
1994.
Applicable federal law provides for the publication of notice and public
comment on applications filed with the Federal Reserve Board and authorizes such
agency to permit interested parties to intervene in the proceedings. If an
interested party is permitted to intervene, such intervention could delay the
regulatory approvals required for consummation of the Merger.
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The Merger generally may not be consummated until between 15 and 30 days
following the date of applicable federal regulatory approval, during which time
the United States Department of Justice may challenge the Merger on antitrust
grounds. The commencement of an antitrust action would stay the effectiveness of
the regulatory agency's approval unless a court specifically ordered otherwise.
FNB and Southwest believe that the Merger does not raise substantial antitrust
or other significant regulatory concerns and that any divestitures that may be
required in order to consummate the Merger will not be material to the financial
condition or results of operations of FNB or Southwest prior to the Effective
Time, or FNB after the Effective Time.
FNB's rights to exercise the Stock Option under the Stock Option Agreement
is also subject to the prior approval of the Federal Reserve Board, because the
exercise of the Stock Option under the Stock Option Agreement would result in
FNB owning more than 5% of the outstanding shares of Southwest Common Stock. In
considering whether to approve FNB's right to exercise the Stock Option, the
Federal Reserve Board would generally apply the same statutory criteria it would
apply to its consideration of approval of the Merger.
FLORIDA BANKING DEPARTMENT. The Merger is subject to the approval of or
other action by the Florida Banking Department because it is an interstate
banking Merger. An application will be filed with the Florida Banking
Department, which will review the application to determine whether, and under
what restrictions, conditions, requirements or limitations, if any, the law of
the state in which the out-of-state bank holding company making the acquisition
has its principal place of business permits bank holding companies with their
principal place of business in Florida and which are not controlled by an
out-of-state bank holding company (a "Florida BHC") to acquire banks and bank
holding companies in that state. In addition, the Florida Banking Department
will approve the application only if the banks being acquired with offices only
in Florida have been in existence and continuously operating for more than two
years. Because Cape Coral was not formed until December 7, 1994, the Merger
cannot be consummated prior to December 8, 1996 under this law. Because FNB and
Southwest believe that Pennsylvania law would permit a Florida BHC to acquire
banks and bank holding companies in Pennsylvania and because the Merger will not
be consummated prior to December 16, 1996, FNB and Southwest believe that the
Florida Banking Department will approve the Merger. See "THE MERGER -- Effective
Time of the Merger".
STATUS OF REGULATORY APPROVALS AND OTHER INFORMATION. FNB and Southwest
will file all applications and notices and have taken (or will take) other
appropriate action with respect to any requisite approvals or other action of
any governmental authority. FNB anticipates submitting an application seeking
Federal Reserve Board approval of the Merger and of its acquisition of up to
19.9% of the outstanding shares of Southwest Common Stock pursuant to a
potential exercise of the Stock Option and making a similar filing with the
Florida Banking Department in May 1996.
The Merger Agreement provides that the obligation of each of FNB and
Southwest to consummate the Merger is conditioned upon the receipt of all
requisite regulatory approvals, including the approvals of the Federal Reserve
Board and the Florida Banking Department. There can be no assurance that any
governmental agency will approve or take any other required action with respect
to the Merger, and, if approvals are received or action is taken, there can be
no assurance as to the date of such approvals or action, that such approvals or
action will not be conditioned upon matters that would cause the parties to
abandon the Merger, or that no action will be brought challenging such approvals
or action, including a challenge by the United States Department of Justice or,
if such a challenge is made, the result thereof.
FNB and Southwest are not aware of any governmental approvals or actions
that may be required for consummation of the Merger other than as described
above. Should any other approval or action be required, FNB and Southwest
currently contemplate that such approval or action would be sought.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCES THAT SUCH REGULATORY APPROVALS WILL BE
OBTAINED OR AS TO THE DATES OF ANY SUCH APPROVALS. THERE CAN ALSO BE NO
ASSURANCE THAT SUCH APPROVALS WILL NOT CONTAIN A CONDITION OR REQUIREMENT WHICH
CAUSES SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS
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SET FORTH IN THE MERGER AGREEMENT. SEE "-- CONDITIONS PRECEDENT TO THE MERGER".
THERE CAN LIKEWISE BE NO ASSURANCE THAT THE UNITED STATES DEPARTMENT OF JUSTICE
WILL NOT CHALLENGE THE MERGER, OR, IF SUCH A CHALLENGE IS MADE, AS TO THE RESULT
THEREOF.
See "-- Effective Time of the Merger", "-- Conditions Precedent to the
Merger" and "-- Modification, Waiver and Termination".
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of FNB Common Stock to be issued to shareholders of Southwest in
the Merger have been registered under the Securities Act. Such shares may be
traded freely and without restriction by those shareholders not deemed to be
"affiliates" of Southwest as that term is defined under the Securities Act. Any
subsequent transfer of such shares, however, by any person who is an affiliate
of Southwest at the time the Merger is submitted for vote or consent of the
shareholders of Southwest will, under existing law, require either (a) the
further registration under the Securities Act of the shares of FNB Common Stock
to be transferred, (b) compliance with Rule 145 promulgated under the Securities
Act (permitting limited sales under certain circumstances) or (c) the
availability of another exemption from registration. An "affiliate" of
Southwest, as defined by the rules promulgated pursuant to the Securities Act,
is a person who directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with Southwest. In
addition, under requirements for pooling-of-interests method of accounting, the
shares of FNB Common Stock issued to affiliates are not transferable until such
time as financial results covering at least 30 days of combined operations of
FNB and Southwest have been published. The foregoing restrictions are expected
to apply to the directors, executive officers and the beneficial holders of 10%
or more of the Southwest Common Stock (and to certain relatives or the spouse of
any such person and any trusts, estates, corporations, or other entities in
which any such person has a 10% or greater beneficial or equity interest). Stop
transfer instructions will be given by FNB to the transfer agent with respect to
the FNB Common Stock to be received by persons subject to the restrictions
described above. Southwest has agreed that, not later than 30 days prior to the
Effective Time, it will use its best efforts to obtain from each of those
persons identified by Southwest as affiliates appropriate agreements that each
such individual will not make any further sales of shares of FNB Common Stock
received upon consummation of the Merger except in compliance with the
restrictions described in this paragraph.
VOLUNTARY DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
FNB has a voluntary dividend reinvestment and stock purchase plan that
provides, for those shareholders which elect to participate, that dividends on
FNB Common Stock or FNB Preferred Stock (as defined herein) will be used to
purchase either original issue common shares or common shares in the open market
at the market value of FNB Common Stock on a quarterly basis. The plan also
permits participants to invest in additional shares of FNB Common Stock through
voluntary cash payments, within certain dollar limitations, at the then-current
market price of such stock at the time of purchase on any of 12 monthly
investment dates each year. It is anticipated that FNB will continue its
voluntary dividend reinvestment and stock purchase plan and that shareholders of
Southwest who receive shares of FNB Common Stock in the Merger will have the
right to participate therein.
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PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
FNB Common Stock is listed on the Nasdaq SmallCap Market under the trading
symbol "FBAN". As of December 31, 1995, FNB Common Stock was held of record by
approximately 3,735 persons. The following table sets forth the high ask and low
bid prices of the FNB Common Stock as reported by the Dow Jones for the periods
indicated after giving effect to the FNB Stock Dividend.
Since April 24, 1996, Southwest Common Stock has been traded on the Nasdaq
National Market under the trading symbol "SWBA". Prior to April 24, 1996,
Southwest Common Stock was traded on the over-the-counter market under the
trading symbol "SWBA". The following table sets forth the high ask and low bid
prices for Southwest Common Stock as reported by the Dow Jones for the indicated
periods. As of the Record Date, Southwest Common Stock was held of record by
approximately 1,128 persons.
FNB SOUTHWEST
SALES PRICES SALES PRICES
----------------------- -----------------------
HIGH ASK LOW BID HIGH ASK LOW BID
---------- ---------- ---------- ----------
YEAR ENDED DECEMBER 31, 1993:
First Quarter............................ 12 61/64 8 7/16 7 11/16 6 47/64
Second Quarter........................... 14 25/64 11 33/64 N/A N/A
Third Quarter............................ 14 1/32 11 21/32 N/A N/A
Fourth Quarter........................... 14 1/32 12 5/16 9 1/8 9 1/8
YEAR ENDED DECEMBER 31, 1994:
First Quarter............................ 13 53/64 11 15/64 N/A N/A
Second Quarter........................... 14 31/32 11 29/64 N/A N/A
Third Quarter............................ 16 21/64 13 53/64 11 49/64 10 19/64
Fourth Quarter........................... 15 3/16 13 3/8 12 1/4 10 19/64
YEAR ENDED DECEMBER 31, 1995:
First Quarter............................ 15 27/64 13 3/8 12 3/4 10 25/32
Second Quarter........................... 18 3/32 14 33/64 13 3/4 11 1/32
Third Quarter............................ 20 15/64 17 9/64 14 12 3/4
Fourth Quarter........................... 20 23/32 18 13/16 14 1/4 13 1/4
YEAR ENDING DECEMBER 31, 1996:
First Quarter............................ 22 5/8 19 3/64 14 3/4 14 1/4
Second Quarter (through May 7, 1996)..... 23 7/8 23 19 17
DIVIDENDS
The following table sets forth the cash dividends declared per share of FNB
Common Stock and Southwest Common Stock, respectively, for the periods
indicated. The ability of either FNB or Southwest to pay dividends to its
shareholders is subject to certain restrictions. See "INFORMATION ABOUT FNB" and
"INFORMATION ABOUT SOUTHWEST".
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FNB SOUTHWEST
DIVIDENDS DIVIDENDS
---------- ----------
YEAR ENDED DECEMBER 31, 1993:
First Quarter....................................... .06 0
Second Quarter...................................... .06 0
Third Quarter....................................... .06 0
Fourth Quarter...................................... .06 0
YEAR ENDED DECEMBER 31, 1994:
First Quarter....................................... .06 0
Second Quarter...................................... .06 0
Third Quarter....................................... .06 0
Fourth Quarter...................................... .07 0
YEAR ENDED DECEMBER 31, 1995:
First Quarter....................................... .06 0
Second Quarter...................................... .07 0
Third Quarter....................................... .10 0
Fourth Quarter...................................... .12 0
YEAR ENDING DECEMBER 31, 1996:
First Quarter....................................... .15 0
INFORMATION ABOUT FNB
FNB is a financial services holding company headquartered in Hermitage,
Pennsylvania. It provides a broad range of financial services to its customers
through its bank and consumer finance subsidiaries in Pennsylvania, eastern Ohio
and southwestern New York. The FNB main office is located at Hermitage Square,
Hermitage, Pennsylvania 16148 and its telephone number is (412) 981-6000.
FNB was formed in 1974 as the holding company of its then sole subsidiary,
First National, formerly First National Bank of Mercer County. Since its
formation, FNB has acquired and currently operates four other bank subsidiaries
and one consumer finance company in Pennsylvania, eastern Ohio and southwestern
New York. FNB is also a savings and loan holding company registered under the
Home Owners Loan Act (the "HOLA"), and has one savings and loan subsidiary. On
May 14, 1996, it is anticipated that FNB will cease to be a savings and loan
holding company because it anticipates merging its only savings and loan
subsidiary into First National. FNB has received the approval of the Office of
the Comptroller of the Currency to the merger of its savings and loan subsidiary
into First National. As of December 31, 1995, FNB's bank, thrift and consumer
finance subsidiaries, all of which are wholly-owned by FNB, had $1.7 billion in
assets, $1.4 billion in deposits and 93 branches.
FNB, through its subsidiaries, provides a full range of financial services,
principally to consumers and small- to medium-sized businesses in its market
areas. FNB's business strategy has been to focus primarily on providing quality,
community-based financial services adapted to the needs of each of the markets
it serves. FNB has emphasized its community orientation by preserving the names
and local boards of directors of its subsidiaries, by allowing its subsidiaries
autonomy in decision-making and thus enabling them to respond to customer
requests more quickly, and by concentrating on transactions within its market
areas. However, while FNB has sought to preserve the identities and autonomy of
its subsidiaries, it has established centralized credit analysis, loan review,
investment, audit and data processing functions. The centralization of these
processes has enabled FNB to maintain consistent quality of these functions and
to achieve certain economies of scale.
FNB's lending philosophy is to minimize credit losses by following uniform
credit approval standards (which include independent analysis of realizable
collateral value), diversifying its loan portfolio, maintaining a relatively
modest average loan size and conducting ongoing review and management of the
loan portfolio. FNB is an active residential mortgage lender, and its commercial
loans are generally to established local
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businesses. FNB does not have a significant amount of construction loans, and
has no highly leveraged transaction loans or loans to foreign countries.
No material portion of the deposits of FNB's bank subsidiaries has been
obtained from a single or small group of customers, and the loss of any
customer's deposits or a small group of customers' deposits would not have a
material adverse effect on the business of FNB.
FNB has three other operating subsidiaries, Penn-Ohio Life Insurance
Company ("Penn-Ohio"), Mortgage Service Corporation and F.N.B. Building
Corporation. Penn-Ohio underwrites, as a reinsurer, credit life and accident and
health insurance sold by FNB's subsidiaries. These activities are incidental to
FNB banking business. Mortgage Service Corporation services mortgage loans for
unaffiliated financial institutions. F.N.B. Building Corporation owns real
estate that is leased to certain of its affiliates. FNB has one non-operating
subsidiary, SWAC. On February 1, 1996, FNB created Lambda Corporation, a Florida
corporation, to serve as an acquisition vehicle for the Merger with Southwest.
On February 26, 1996, FNB changed the name of Lambda Corporation to SWAC.
As of December 31, 1995, FNB and its subsidiaries had 926 full-time
equivalent employees.
As part of its operations, FNB regularly evaluates the potential
acquisition of, and holds discussions with, various financial institutions and
other businesses of a type eligible for bank holding company investment. In
addition, FNB regularly analyzes the values of, and submits bids for, the
acquisition of customer-based funds and other liabilities and assets of such
financial institutions and other businesses. As a general rule, FNB publicly
announces such material acquisitions when a definitive agreement has been
reached.
For further information about FNB, reference is made to the FNB Annual
Report on Form 10-K for the year ended December 31, 1995, which is incorporated
herein by reference. Shareholders of Southwest desiring copies of such document
may contact FNB at its address or telephone number indicated under
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE". See also "RECENT
DEVELOPMENTS".
INFORMATION ABOUT SOUTHWEST
Southwest is a registered bank holding company headquartered in Naples,
Florida which owns 100% of the outstanding capital stock of First Naples and
Cape Coral (the "SW Banks"). Southwest was incorporated under the laws of the
state of Florida in 1988 as a mechanism to enhance the SW Banks' ability to
serve their customers' requirements for financial services. The SW Banks are
full service commercial banks without trust powers. The SW Banks offer a full
range of interest bearing and non-interest bearing accounts, including
commercial and retail checking accounts, individual retirement accounts,
negotiable order of withdrawal accounts, money market accounts, certificates of
deposit, commercial loans and consumer direct/indirect installment loans.
Southwest conducts its banking operations through seven banking offices,
five of which are located in the Naples, Florida metropolitan area and two in
the Cape Coral, Florida metropolitan area. According to the United States Census
Bureau, Naples is the sixth fastest growing metropolitan area in the country,
with a population growth of 16% from 1990 to 1994.
At December 31, 1995, Southwest had total assets of approximately $386
million and stockholders' equity of approximately $30 million.
On February 2, 1996, Southwest announced that it had entered into a
definitive agreement with FNB which provided for the acquisition of Southwest by
FNB. Pursuant to the agreement, at the Effective Time of the Merger, each
outstanding share of Southwest Common Stock will be exchanged for 0.819 of a
share of FNB Common Stock, after adjusting to reflect the FNB Stock Dividend and
subject to further possible adjustment under certain circumstances.
For further information concerning Southwest, reference is made to the
Southwest Annual Report on Form 10-K for the fiscal year ended December 31,
1995, a copy of which is being delivered to the Southwest shareholders with this
Proxy Statement-Prospectus and is incorporated herein by reference. See
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE".
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46
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS FOR THE MERGER
The following unaudited pro forma condensed combined financial statements
(the "Pro Forma Statements") combine the historical unaudited consolidated
financial statements of FNB and Southwest on the assumption that the Merger had
been effective December 31, 1995. Merger costs are not considered to be
material, and therefore have not been included in the pro forma adjustments. The
Merger of a wholly-owned subsidiary of FNB with and into Southwest will be
accounted for as a pooling-of-interests in accordance with GAAP. These
statements should be read in conjunction with the historical consolidated
financial statements of FNB and Southwest, including the notes thereto; the
notes to this unaudited Pro Forma Condensed Combined Balance Sheet; the
unaudited Pro Forma Condensed Combined Income Statements; and the
"SUMMARY -- Comparative Unaudited Per Share Data", including the notes thereto.
The Pro Forma Statements are intended for informational purposes and may
not be indicative of the combined financial position or results of operations
that actually would have occurred had the transaction been consummated during
the periods or as of the dates indicated, or which will be attained in the
future. The Pro Forma Statements should be read in conjunction with the 1995
Annual Reports on Form 10-K of FNB and Southwest.
Where appropriate, all amounts have been adjusted to reflect for the FNB
Stock Dividend.
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47
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1995 -- UNAUDITED
PRO FORMA PRO FORMA
FNB SOUTHWEST ADJUSTMENTS COMBINED
--------- --------- --------- ----------
(DOLLARS IN THOUSANDS)
ASSETS
Cash and due from banks....................... $ 59,795 $ 25,136 $ 84,931
Interest bearing deposits with banks.......... 2,603 2,603
Federal funds sold............................ 22,335 31,724 54,059
Securities available for sale................. 223,479 50,402 (2,460)(2) 271,421
Securities held to maturity................... 136,969 23,834 160,803
Loans available for sale...................... 10,154 10,154
Loans, net of unearned income................. 1,212,741 238,251 1,450,992
Allowance for loan losses..................... (21,550) (1,585) (23,135)
--------- --------- --------- ----------
NET LOANS................................. 1,201,345 236,666 1,438,011
--------- --------- --------- ----------
Premises and equipment........................ 22,504 14,414 36,918
Other assets.................................. 37,963 4,286 422(2) 42,671
--------- --------- --------- ----------
$1,706,993 $ 386,462 $ (2,038) $2,091,417
========== ========== ========== ============
LIABILITIES
Deposits:
Non-interest bearing...................... $ 167,700 $ 46,179 $ 213,879
Interest bearing.......................... 1,274,409 278,652 1,553,061
--------- --------- --------- ----------
Total deposits....................... 1,442,109 324,831 1,766,940
Short-term borrowings......................... 55,224 28,277 83,501
Other liabilities............................. 25,988 3,410 29,398
Long-term debt................................ 39,755 39,755
--------- --------- --------- ----------
TOTAL LIABILITIES.................... 1,563,076 356,518 1,919,594
--------- --------- --------- ----------
STOCKHOLDERS' EQUITY
Preferred stock............................... 4,516 4,516
Common stock.................................. 17,268 366 (366)(4) 22,971
5,703(3)
Additional paid-in capital.................... 58,631 28,323 (28,323)(4) 80,362
21,731(3)
Retained earnings............................. 60,034 1,462 61,496
Net unrealized securities gains............... 3,932 182 (783)(2) 3,331
Employee stock ownership plan obligation...... (389) (389)
Treasury stock................................ (464) (464)
--------- --------- --------- ----------
TOTAL STOCKHOLDERS' EQUITY........... 143,917 29,944 (2,038) 171,823
--------- --------- --------- ----------
$1,706,993 $ 386,462 $ (2,038) $2,091,417
========== ========== ========== ============
Common shares outstanding at period end....... 8,611,814 3,654,089 (172,621)(1) 11,327,359
========== ========== ========== ============
- ---------------
(1) As of December 31, 1995, FNB owned 172,621 shares of Southwest Common Stock.
(2) Adjust securities by Southwest Common Stock owned by FNB with a value of
$2,459,849; adjust net unrealized securities gains associated with the stock
and the related deferred taxes.
(3) Issuance of 2,851,322 shares of FNB Common Stock in exchange for all the
outstanding shares of Southwest Common Stock net of the book value of
Southwest Common Stock owned by FNB.
(4) Elimination of par value of $.10 per share of Southwest Common Stock.
42
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PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995 -- UNAUDITED
PRO FORMA PRO FORMA
FNB SOUTHWEST ADJUSTMENTS COMBINED
----------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
INTEREST INCOME
Loans, including fees........................ $ 113,768 $20,812 $134,580
Securities:
Taxable................................. 18,150 3,737 21,887
Tax exempt.............................. 1,452 1,452
Dividends............................... 612 612
Other........................................ 1,374 835 2,209
----------- --------- ---------
TOTAL INTEREST INCOME................... 135,356 25,384 160,740
----------- --------- ---------
INTEREST EXPENSE
Deposits..................................... 51,589 9,652 61,241
Short-term borrowings........................ 3,209 2,104 5,313
Long-term debt............................... 3,258 3,258
----------- --------- ---------
TOTAL INTEREST EXPENSE.................. 58,056 11,756 69,812
----------- --------- ---------
NET INTEREST INCOME..................... 77,300 13,628 90,928
Provision for loan losses.................... 5,652 835 6,487
----------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES........................... 71,648 12,793 84,441
----------- --------- ---------
NON-INTEREST INCOME
Insurance commissions and fees............... 4,284 4,284
Service charges.............................. 7,144 2,682 9,826
Trust........................................ 1,390 1,390
Gain on sale of securities................... 514 15 529
Gain on sale of loans........................ 272 272
Other........................................ 1,404 12 1,416
----------- --------- ---------
TOTAL NON-INTEREST INCOME............... 15,008 2,709 17,717
----------- --------- ---------
86,656 15,502 102,158
----------- --------- ---------
NON-INTEREST EXPENSES
Salaries and employee benefits............... 29,108 6,716 35,824
Net occupancy................................ 4,920 1,041 5,961
Amortization of intangibles.................. 1,238 8 1,246
Equipment.................................... 3,338 1,439 4,777
Deposit insurance............................ 2,527 236 2,763
Promotional.................................. 2,305 686 2,991
Insurance claims paid........................ 1,738 1,738
Other........................................ 14,776 2,814 17,590
----------- --------- ---------
TOTAL NON-INTEREST EXPENSES............. 59,950 12,940 72,890
----------- --------- ---------
INCOME BEFORE INCOME TAXES.............. 26,706 2,562 29,268
Income taxes................................. 8,623 855 9,478
----------- --------- ---------
NET INCOME.............................. $ 18,083 $ 1,707 $ 0 $ 19,790
========== ========= =========== =========
NET INCOME PER COMMON SHARE
PRIMARY................................. $ 1.90 $ .44 $ 1.59
========== ========= =========
FULLY DILUTED........................... $ 1.82 $ .44 $ 1.55
========== ========= =========
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PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994 -- UNAUDITED
PRO FORMA PRO FORMA
FNB SOUTHWEST ADJUSTMENTS COMBINED
----------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
INTEREST INCOME
Loans, including fees........................ $ 103,210 $12,705 $115,915
Securities:
Taxable................................. 18,592 2,616 21,208
Tax exempt.............................. 1,546 1,546
Dividends............................... 559 559
Other........................................ 972 94 1,066
----------- --------- ---------
TOTAL INTEREST INCOME................... 124,879 15,415 140,294
----------- --------- ---------
INTEREST EXPENSE
Deposits..................................... 44,251 5,436 49,687
Short-term borrowings........................ 3,108 870 3,978
Long-term debt............................... 2,869 2,869
----------- --------- ---------
TOTAL INTEREST EXPENSE.................. 50,228 6,306 56,534
----------- --------- ---------
NET INTEREST INCOME..................... 74,651 9,109 83,760
Provision for loan losses.................... 8,450 605 9,055
----------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES........................... 66,201 8,504 74,705
----------- --------- ---------
NON-INTEREST INCOME
Insurance commissions and fees............... 4,195 4,195
Service charges.............................. 6,457 1,440 7,897
Trust........................................ 1,504 1,504
Gain on sale of securities................... 1,281 2 1,283
Loss on sale of loans........................ (331) (331)
Other........................................ 1,276 1,276
----------- --------- ---------
TOTAL NON-INTEREST INCOME............... 14,382 1,442 15,824
----------- --------- ---------
80,583 9,946 90,529
----------- --------- ---------
NON-INTEREST EXPENSES
Salaries and employee benefits............... 27,688 4,814 32,502
Net occupancy................................ 4,536 673 5,209
Amortization of intangibles.................. 1,687 15 1,702
Equipment.................................... 3,838 824 4,662
Deposit insurance............................ 3,719 366 4,085
Promotional.................................. 2,054 446 2,500
Insurance claims paid........................ 1,820 1,820
Other........................................ 14,949 1,916 16,865
----------- --------- ---------
TOTAL NON-INTEREST EXPENSES............. 60,291 9,054 69,345
----------- --------- ---------
INCOME BEFORE INCOME TAXES.............. 20,292 892 21,184
Income taxes................................. 6,747 242 6,989
----------- --------- ---------
NET INCOME.............................. $ 13,545 $ 650 $ 0 $ 14,195
========== ========= =========== =========
NET INCOME PER COMMON SHARE
PRIMARY................................. $ 1.41 $ .19 $ 1.12
========== ========= =========
FULLY DILUTED........................... $ 1.37 $ .19 $ 1.11
========== ========= =========
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50
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1993 -- UNAUDITED
PRO FORMA PRO FORMA
FNB SOUTHWEST ADJUSTMENTS COMBINED
----------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
INTEREST INCOME
Loans, including fees........................ $ 99,514 $ 9,152 $108,666
Securities:
Taxable................................. 23,663 1,945 25,608
Tax exempt.............................. 839 839
Dividends............................... 572 572
Other........................................ 924 89 1,013
----------- --------- ---------
TOTAL INTEREST INCOME................... 125,512 11,186 136,698
----------- --------- ---------
INTEREST EXPENSE
Deposits..................................... 49,550 4,524 54,074
Short-term borrowings........................ 3,011 135 3,146
Long-term debt............................... 2,778 2,778
----------- --------- ---------
TOTAL INTEREST EXPENSE.................. 55,339 4,659 59,998
----------- --------- ---------
NET INTEREST INCOME..................... 70,173 6,527 76,700
Provision for loan losses.................... 9,498 240 9,738
----------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES........................... 60,675 6,287 66,962
----------- --------- ---------
NON-INTEREST INCOME
Insurance commissions and fees............... 4,328 4,328
Service charges.............................. 6,266 995 7,261
Trust........................................ 1,365 1,365
Gain on sale of securities................... 514 234 748
Gain on sale of loans........................ 1,851 67 1,918
Other........................................ 1,701 1,701
----------- --------- ---------
TOTAL NON-INTEREST INCOME............... 16,025 1,296 17,321
----------- --------- ---------
76,700 7,583 84,283
----------- --------- ---------
NON-INTEREST EXPENSES
Salaries and employee benefits............... 27,860 3,006 30,866
Net occupancy................................ 4,265 497 4,762
Amortization of intangibles.................. 2,020 29 2,049
Equipment.................................... 3,889 604 4,493
Deposit insurance............................ 3,575 286 3,861
Promotional.................................. 1,864 272 2,136
Insurance claims paid........................ 1,802 1,802
Other........................................ 16,454 1,284 17,738
----------- --------- ---------
TOTAL NON-INTEREST EXPENSES............. 61,729 5,978 67,707
----------- --------- ---------
INCOME BEFORE INCOME TAXES.............. 14,971 1,605 16,576
Income taxes................................. 4,499 600 5,099
----------- --------- ---------
NET INCOME.............................. $ 10,472 $ 1,005 $ 0 $ 11,477
========== ========= =========== =========
NET INCOME PER COMMON SHARE
PRIMARY................................. $ 1.07 $ .47 $ .99
========== ========= =========
FULLY DILUTED........................... $ 1.06 $ .47 $ .99
========== ========= =========
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DESCRIPTION OF FNB CAPITAL STOCK AND SOUTHWEST CAPITAL STOCK
FNB COMMON STOCK
GENERAL. FNB is authorized to issue 100,000,000 shares of FNB Common
Stock, of which 8,611,814 shares were outstanding as of December 31, 1995. FNB
Common Stock is traded on the Nasdaq SmallCap Market under the trading symbol
"FBAN". Chemical Mellon acts as the transfer agent and the registrar for FNB
Common Stock.
As of December 31, 1995, approximately 1.67 million shares of FNB Common
Stock were reserved for issuance under various employee benefit plans and the
voluntary dividend reinvestment plan of FNB. After taking into account the
shares reserved as described above, the number of authorized shares of FNB
Common Stock available for other corporate purposes as of December 31, 1995 was
approximately 9.74 million. Since that date, approximately 3.28 million
additional shares have been reserved for issuance in connection with the Merger,
after giving effect to the FNB Stock Dividend.
At the 1996 Annual Meeting of FNB shareholders on April 24, 1996, the
shareholders of FNB amended the FNB Charter to increase the number of authorized
shares of FNB Common Stock from 20,000,000 shares to 100,000,000 shares. The
increase will enable FNB to issue FNB Common Stock in connection with any
potential acquisitions FNB might make using FNB Common Stock as consideration
and to further other corporate purposes such as declaring stock dividends.
VOTING AND OTHER RIGHTS. The holders of FNB Common Stock are entitled to
one vote per share, and, in general, a majority of votes cast with respect to a
matter is sufficient to authorize action upon routine matters. Directors are
elected by a plurality of the votes cast, and each shareholder entitled to vote
in such election is entitled to vote each share of stock for as many persons as
there are directors to be elected. In elections for directors, shareholders do
not have the right to cumulate their votes. The FNB Series A Preferred Stock (as
defined herein) votes as a class with the FNB Common Stock. See "-- FNB
Preferred Stock"; "COMPARISON OF SHAREHOLDER RIGHTS -- Amendment of Articles of
Incorporation and By-laws" and "-- Vote Required for Extraordinary Corporate
Transaction".
In the event of liquidation, holders of FNB Common Stock would be entitled
to receive pro rata any assets legally available for distribution to
shareholders with respect to shares held by them, subject to any prior rights of
any FNB Preferred Stock (as defined and described below) then outstanding.
FNB Common Stock does not have any preemptive rights, redemption
privileges, sinking fund privileges or conversion rights. All the outstanding
shares of FNB Common Stock are, and upon issuance the shares of FNB Common Stock
to be issued to shareholders of Southwest will be, validly issued, fully paid
and nonassessable.
DISTRIBUTIONS. The holders of FNB Common Stock are entitled to receive
such dividends or distributions as the FNB Board may declare out of funds
legally available for such payments. The payment of distributions by FNB is
subject to the restrictions of Pennsylvania law applicable to the declaration of
distributions by a business corporation. A corporation generally may not
authorize and make distributions if, after giving effect thereto, it would be
unable to meet its debts as they become due in the usual course of business or
if the corporation's total assets would be 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 distribution, to satisfy claims upon dissolution of shareholders who
have preferential rights superior to the rights of the holders of its common
stock. In addition, the payment of distributions to shareholders is subject to
any prior rights of outstanding FNB Preferred Stock. Share dividends, if any are
declared, may be paid from authorized but unissued shares.
The ability of FNB to pay distributions is affected by the ability of its
subsidiaries to pay dividends. The ability of FNB's subsidiaries, as well as of
FNB, to pay dividends in the future is influenced by bank regulatory
requirements and capital guidelines.
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52
FNB PREFERRED STOCK
GENERAL. FNB has authorized 20,000,000 shares of preferred stock, $10.00
par value (the "FNB Preferred Stock"). The FNB Board has the authority to issue
FNB Preferred Stock in one or more series and to fix the dividend rights,
dividend rate, liquidation preference, conversion rights, voting rights, rights
and terms of redemption (including sinking fund provisions), and the number of
shares constituting any such series, without any further action by the
shareholders unless such action is required by applicable rules or regulations
or by the terms of other outstanding series of FNB Preferred Stock. Any shares
of FNB Preferred Stock which may be issued may rank prior to shares of FNB
Common Stock as to payment of dividends and upon liquidation. FNB had 24,838
shares of FNB Series A Preferred Stock (the "FNB Series A Preferred Stock")
issued and outstanding as of December 31, 1995 and 426,800 shares of FNB Series
B 7 1/2% Cumulative Convertible Preferred Stock (the "FNB Series B Preferred
Stock") issued and outstanding as of December 31, 1995.
THE FOLLOWING SUMMARY OF THE FNB SERIES A PREFERRED STOCK AND FNB SERIES B
PREFERRED STOCK IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DESCRIPTION
THEREOF CONTAINED IN THE FNB CHARTER ATTACHED AS EXHIBIT 3.1 TO THE
CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1992,
WHICH IS INCORPORATED HEREIN BY REFERENCE.
FNB SERIES A PREFERRED STOCK. The FNB Series A Preferred Stock was created
for the purpose of acquiring Reeves Bank. Holders of the FNB Series A Preferred
are entitled to 5.1 votes for each share held (as adjusted for the FNB Stock
Dividend). The holders of the FNB Series A Preferred Stock do not have
cumulative voting rights in the election of directors. Dividends on the FNB
Series A Preferred Stock are cumulative from the date of issue and are payable
at a rate of $.42 per share each quarter. The FNB Series A Preferred is
convertible at the option of the holder into shares of the FNB Common Stock
having a market value of $25.00 at time of conversion. FNB has the right to
require the conversion of the balance of all outstanding shares at the
conversion rate at any time after 50% of the 49,512 shares issued are no longer
outstanding. During 1995, 450 shares of the FNB Series A Preferred were
converted to 617 shares of FNB Common Stock. At December 31, 1995, 31,148 shares
of FNB Common Stock were reserved by FNB for the conversion of the remaining
24,838 outstanding shares.
FNB SERIES B PREFERRED STOCK. The FNB Series B Preferred Stock was issued
during 1992 for the purpose of raising capital for the acquisition of 13 banking
branches in the Erie, Pennsylvania area. Holders of the FNB Series B Preferred
Stock have no voting rights. Dividends on the FNB Series B Preferred Stock are
cumulative from the date of issue and are payable at a rate of $.46875 per share
each quarter. The FNB Series B Preferred Stock has a stated value of $25.00 per
share and is convertible at the option of the holder at any time into shares of
FNB Common Stock at a price of $12.83 per share. FNB has the right to redeem the
FNB Series B Preferred Stock for cash on or after May 15, 1996, as set forth in
the prospectus dated May 8, 1992. During 1995, 4,200 shares of FNB Series B
Preferred Stock were converted to 8,179 shares of FNB Common Stock. At December
31, 1995, 831,362 shares of FNB Common Stock were reserved by FNB for the
conversion of the remaining 426,800 outstanding shares of FNB Series B Preferred
Stock.
SOUTHWEST COMMON STOCK
GENERAL. Southwest is authorized to issue 25,000,000 shares of Southwest
Common Stock, of which 3,654,089 shares were issued and outstanding as of the
Record Date. Since April 24, 1996, Southwest Common Stock has traded on the
Nasdaq National Market under the trading symbol "SWBA". Prior to April 24, 1996,
Southwest Common Stock was traded on the over-the-counter market under the
trading symbol "SWBA". Chemical Mellon acts as the transfer agent and the
registrar for the Southwest Common Stock.
SOUTHWEST PREFERRED STOCK
Southwest is authorized to issue 100,000 shares of preferred stock, $.10
par value ("Southwest Preferred Stock"), none of which are issued and
outstanding. The Southwest Board has the authority to issue Southwest
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Preferred Stock in one or more series and to fix the dividend rights, dividend
rate, liquidation preference, conversion rights, voting rights, rights and terms
of redemption (including sinking fund provisions), redemption price or prices,
and the number of shares constituting any such series, without any further
action by the shareholders unless such action is required by applicable rules or
regulations or by the terms of other outstanding series of Southwest Preferred
Stock. Any shares of Southwest Preferred Stock which may be issued may rank
prior to shares of Southwest Common Stock as to payment of dividends and upon
liquidation.
COMPARISON OF SHAREHOLDER RIGHTS
At the Effective Time, the shareholders of Southwest, a Florida
corporation, will become shareholders of FNB, a Pennsylvania corporation, and
Pennsylvania law will govern shareholder rights after the Merger. Differences
between the FBCA and the PBCL and between the Southwest Charter and the
Southwest By-laws and the FNB Charter and the FNB By-laws will result in various
changes in the rights of shareholders of Southwest.
The following is a summary of all material differences between the rights
of FNB shareholders under Pennsylvania law, the FNB Charter and the FNB By-laws,
as compared with those of Southwest shareholders under Florida law, the
Southwest Charter and the Southwest By-laws. This summary does not purport to be
a complete description of the provisions discussed and is qualified in its
entirety by the PBCL, the FBCA, the Southwest Charter, the Southwest By-laws,
the FNB Charter and the FNB By-laws, to which Southwest shareholders are
referred.
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
Under the PBCL, an FNB director may be removed without cause by the FNB
shareholders entitled to elect the director or by the class of directors in
which such director had been chosen. The FNB Charter contains a provision that
requires the affirmative vote of at least 75% of the outstanding shares of FNB
Common Stock entitled to vote to remove the entire FNB Board, a class of
directors or any member of the FNB Board during his term without cause.
Under the FBCA, a Southwest director may be removed by the Southwest
shareholders with or without cause; provided that, if a director is elected by a
voting group, only the shareholders of that voting group may participate in the
vote to remove him. The Southwest Charter provides that a director may be
removed, with or without cause, at any regular or special meeting of
shareholders called for that purpose by the holders of 75% of the outstanding
shares of each class of stock entitled to vote in elections of directors.
The PBCL and the FNB By-laws provide that vacancies on the FNB Board,
including vacancies resulting from an increase in the number of directors, may
be filled by a majority vote of the remaining directors, although no less than a
quorum, or by a sole remaining director, and each person so selected shall serve
until the next selection of the class for which such director has been chosen,
and until a successor has been selected and qualified.
The FBCA and the Southwest By-laws provide that vacancies on the Southwest
Board, including vacancies resulting from an increase in the number of
directors, may be filled by a majority vote of the remaining directors, though
less than a quorum, or by the shareholders at any meeting held during the
existence of such vacancy. The Southwest By-laws and the Southwest Charter
further provide that vacancies on the Southwest Board resulting from removal
from office shall be filled by the vote of 75% of the outstanding shares of each
class of stock entitled to vote in the elections of directors. A director
elected to fill a vacancy, not resulting from an increase in the number of
directors, shall have the same remaining term as that of his or her predecessor
in office. If the number of directors is changed, an increase or decrease will
be proportioned among the classes so as to maintain the number of directors in
each class as equal as possible, and any additional director of any class
elected to fill a vacancy resulting from an increase in such class will hold
office for a term that shall coincide with the remaining term of that class, but
in no event will a decrease in the number of directors shorten the term of any
incumbent director.
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QUORUM OF SHAREHOLDERS
The PBCL and the FNB By-laws provide that a quorum for a meeting of
shareholders of FNB consists of the presence of shareholders, in person or
represented by proxy, entitled to cast at least a majority of the votes that all
shareholders are entitled to cast on a particular matter to be acted upon at the
meeting.
The FBCA, the Southwest By-laws and the Southwest Charter provides that the
holders of a majority of the stock issued, outstanding and entitled to vote
thereon, present in person or represented by proxy, shall constitute a quorum at
all meetings of the shareholders of Southwest and shall be requisite for the
transaction of business. The FBCA further provides that in no event shall a
quorum consist of less than one-third of the share entitled to vote.
ADJOURNMENT AND NOTICE OF SHAREHOLDER MEETINGS
Both the FNB By-laws and the Southwest By-Laws provide that, if a quorum is
not present or represented at a shareholder meeting, the shareholders entitled
to vote may adjourn the meeting without notice other than an announcement at the
meeting. Both the FNB and Southwest By-laws further provide that the
determination of shareholders of record entitled to notice of or to vote at any
meeting of shareholders will apply to any adjournment thereof.
Under the PBCL and the FNB By-laws, notice of shareholder meetings must be
given at least ten days prior to any meeting called to consider a fundamental
corporate change or at least five days prior to the meeting in any other case.
Under the FBCA and the Southwest By-laws, notice of shareholder meetings must be
provided to each shareholder of record entitled to vote at such meeting not less
than ten nor more than 60 days prior to the meeting.
CALL OF SPECIAL SHAREHOLDER MEETINGS
The FNB By-laws provide that special meetings of the shareholders may be
called only by the Chairman of the Board, the President or the Secretary of FNB
pursuant to a resolution or at the written direction of at least 75% of the
members of the FNB Board. The Southwest By-laws provide that special meetings of
the shareholders may be called by the President or the Chairman of the Southwest
Board. In addition, a special meeting of the Southwest shareholders may be
called by the President or Secretary upon written request by a majority of all
directors of Southwest or by Southwest shareholders owning not less than
one-tenth of all shares entitled to vote.
SHAREHOLDER CONSENT IN LIEU OF MEETING
The PBCL permits any action which may be taken at a meeting of the
shareholders may be taken without a meeting, if, prior or subsequent to the
action, a consent thereto of all the shareholders who would be entitled to vote
at a meeting for such purpose is filed with the Secretary of FNB.
The FBCA and the Southwest By-laws provide that any action required to be
taken at any annual or special meeting of shareholders, or any action which may
be taken at any annual or special meeting of such shareholders, may be taken
without a meeting, without prior notice, and without a vote if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. The Southwest By-laws further
provide that, if any class of shares is entitled to vote thereon as a class,
such written consent shall be required of the holders of a majority of the
shares of each class of shares entitled to vote as a class thereon and of the
total shares entitled to vote thereon. Under Florida law and the Southwest
By-laws, within ten days after obtaining such authorization by written consent,
notice must be given to those shareholders who have not consented in writing.
The notice must summarize the material features of the authorized action, and,
if the action voted on was a merger, consolidation, or sale or exchange of
assets for which dissenters' rights are provided under Florida law, the notice
shall contain a clear statement of the right of shareholders dissenting
therefrom to be paid the fair value of their shares upon compliance with further
provisions of Florida law regarding the rights of dissenting shareholders.
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DISSENTERS' RIGHTS
Under the PBCL, shareholders may perfect dissenters' rights with regard to
corporate actions involving certain mergers; consolidations; sale, lease or
exchange of substantially all the assets of the corporation (under limited
circumstances); or elimination of cumulative voting.
Under the FBCA, dissenters' appraisal rights are available in connection
with corporate actions involving certain mergers, share exchanges,
consolidations, sales or other dispositions of all or substantially all of the
property of the corporation (other than in the ordinary course of business, the
approval of certain control-share acquisitions, and amendments of the articles
of incorporation where such amendment would adversely affect the shareholder by:
(i) altering or abolishing any preemptive rights attached to such shareholder's
shares; (ii) altering or abolishing the voting rights pertaining to such
shareholder's shares, except as such rights may be affected by the voting rights
of new shares then being authorized of any existing or new class or series of
shares; (iii) effecting an exchange, cancellation, or reclassification of any of
such shareholder's shares, when such amendment would alter or abolish the
shareholder's voting rights or alter his or her percentage of equity in the
corporation, or effecting a reduction or cancellation of accrued dividends or
other arrearages; (iv) reducing the stated redemption price of any of the
shareholder's redeemable shares, altering or abolishing any provision relating
to any sinking fund for the redemption or purchase of any of his or her shares,
or making any of the shareholder's shares subject to redemption when they are
not otherwise redeemable; (v) making non-cumulative, in whole or in part,
dividends on any of his or her preferred shares which had theretofore been
cumulative; (vi) reducing the dividend preference of any of his or her preferred
shares; or (vii) reducing any stated preferential amount payable on the
shareholder's preferred shares upon voluntary or involuntary liquidation.
Under the corporate laws of Florida and Pennsylvania, dissenters' rights
generally are denied in the case of a merger or share exchange or a proposed
sale or exchange of property when a corporation's shares are listed on a
national securities exchange or held of record by more than 2,000 persons.
DERIVATIVE ACTIONS
Derivative actions to enforce a secondary right against any present or
former officer or director of the corporation because the corporation refuses to
enforce rights that may properly be asserted by it may be brought under the PBCL
by a shareholder, even if the shareholder was not a shareholder at the time of
the alleged wrongdoing, if there is a strong prima facie case in favor of the
claim asserted and if the court determines in its discretion that serious
injustice will result without such action.
Under the FBCA, a derivative action may be brought only by a person who was
a shareholder of the corporation at the time of the alleged wrongdoing unless
the person became a shareholder through transfer by operation of law from one
who was a shareholder at that time.
DIVIDENDS AND DISTRIBUTIONS
Subject to any restrictions in a corporation's charter, the PBCL and the
FBCA generally provide that a corporation may make distributions to its
shareholders unless after giving effect thereto (1) the corporation would not be
able to pay its debts as they become due in the usual course of business, or (2)
the corporation's assets would be less than the sum of its total liabilities
plus the amount that would be needed upon the dissolution of the corporation to
satisfy the preferential rights of shareholders having superior preferential
rights to those shareholders receiving the distribution. The FNB Charter does
not contain any restrictions on the payment of dividends or the making of
distributions to shareholders. The Southwest Charter provides that the Southwest
Board may distribute a portion of the assets of the corporation to its
shareholders out of the corporation's capital surplus.
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DIRECTOR QUALIFICATIONS AND NUMBER
The articles of incorporation or by-laws of a Pennsylvania corporation
specify the number of directors. If not otherwise fixed, a Pennsylvania
corporation shall have three directors. The PBCL and the FNB By-laws provide
that the directors need not be state residents or shareholders of the
corporation to qualify to serve.
The FNB By-laws also provide that the FNB Board shall consist of such
number of directors as may be determined by the FNB Board, which number shall be
not less than five nor more than 25. By resolution, the FNB Board has set the
present size of the FNB Board at 22 directors. The FNB By-laws further provide
that the FNB Board shall be divided into four classes, with each director having
a four-year term.
The board of directors of a Florida corporation must consist of one or more
individuals, the precise number to be specified or fixed in accordance with the
articles of incorporation or by-laws. Under the FBCA, directors must be at least
18 years of age but need not be shareholders of the corporation or state
residents to qualify to serve on the board. The Southwest Charter and the
Southwest By-laws provide that the Southwest Board shall consist of not less
than six nor more than eighteen persons, the exact number of directors to be
determined from time to time by the affirmative vote of a majority of the entire
Southwest Board. By resolution, the Southwest Board has set the present size at
eight directors. The Southwest shareholders are entitled to elect all of the
members of the Southwest Board. The Southwest By-laws and the Southwest Charter
further provide that the Southwest Board shall be divided into three classes,
with each director having a three-year term.
After the Merger, three members of the Southwest Board will be elected
members of the FNB Board.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The PBCL permits a corporation to indemnify its directors and officers
against expenses, judgments, fines and amounts paid in settlement incurred by
them in connection with any pending, threatened or completed action or
proceeding, and permits such indemnification against expenses incurred in
connection with any pending, threatened or completed derivative action, if the
director or officer has acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal proceeding, had no reasonable cause to believe his
or her conduct was unlawful. Furthermore, Pennsylvania law provides that
expenses incurred in defending any action or proceeding may be paid by the
corporation in advance of the final disposition upon receipt of an undertaking
by or on behalf of the director or officer to repay the amount if it is
ultimately determined that the director or officer is not entitled to be
indemnified by the corporation.
In Pennsylvania, the statutory provisions for indemnification and
advancement of expenses are non-exclusive with respect to any other rights, such
as contractual rights (or under a by-law or vote of shareholders or
disinterested directors), to which a person seeking indemnification or
advancement of expenses may be entitled. Such contractual or other rights may,
for example, provide for indemnification against judgments, fines and amounts
paid in settlement incurred by the indemnified person in connection with
derivative actions. The PBCL permits such derivative action indemnification in
any case except where the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted willful misconduct
or recklessness.
The PBCL permits a corporation to purchase and maintain insurance on behalf
of any director or officer of the corporation against any liability asserted
against the director or officer and incurred in such capacity, whether or not
the corporation would have the power to indemnify the director or officer
against such liability. FNB has directors' and officers' liability insurance
underwritten by Reliance Insurance Company.
The FNB Charter provides that its directors, officers and any other person
designated by the FNB Board are entitled to be indemnified to the fullest extent
now permitted by law.
The FBCA and the Southwest By-laws permit a corporation to indemnify a
director and officer who was or is a party to any threatened, pending or
completed action, suit or other type of proceeding, whether civil, criminal,
administrative or investigative, whether formal or informal (other than an
action by or any right of
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the corporation) by reason of the fact that he or she is or was a director or
officer or is now serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines,
penalties and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding. These indemnification rights
apply if the director or officer acted in good faith and in a manner in which he
or she reasonably believed to be in or not opposed to the best interest of the
corporation and, with respect to criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In addition, under
the FBCA and the Southwest By-laws, Southwest may indemnify and hold harmless an
officer or director who is a party in an action by or in the right of the
corporation against expenses (including attorneys' fees) and amounts paid in
settlement not exceeding estimated expenses of litigating the action to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding, including any appeal thereof. Such
indemnification shall be authorized if the director or officer has acted in good
faith and in a manner in which he or she reasonably believed to be in or not
opposed to the best interest of the corporation, except indemnification is not
authorized where there is an adjudication of liability, unless the court in
which such proceeding was brought, or any other court of competent jurisdiction,
shall determine, in view of all the circumstances, that such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper.
Both Florida law and the Southwest By-laws provide that indemnification of
the costs and expenses of defending any action is required to be made to any
officer or director who is successful (on the merits or otherwise) in defending
an action of the type referred to in the immediately preceding paragraph. Except
with regard to the costs and expenses of successfully defending an action as may
be ordered by a court, indemnification as described in the previous paragraph is
only required to be made to a director or officer if a determination is made
that indemnification is proper under the circumstances. Such determination shall
be made: (i) by Southwest's Board by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding; (ii) by a
majority vote of a committee duly designated by the Southwest Board consisting
of two or more directors not at the time parties to the action, suit or
proceeding; (iii) by independent legal counsel selected by specified groupings
of the Southwest Board; or (iv) by the Southwest shareholders by a majority vote
of a quorum consisting of shareholders who were not parties to such action, suit
or proceeding, or, if no such quorum is obtainable, by a majority vote of
shareholders who were not parties to such action, suit or proceeding. The
reasonableness of the expenses to be indemnified is determined in the same
manner as the determination of whether the indemnification is permissible.
Florida law and the Southwest By-laws further provide that expenses incurred in
defending any action or proceeding may be paid by the corporation in advance of
the final disposition upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined that the
director or officer is not entitled to be indemnified by the corporation.
Under Florida law and the Southwest By-laws, the provisions for
indemnification and advancement of expenses are not exclusive. Accordingly, a
corporation may make any other or further indemnification or advancement of
expenses of any of its officers or directors under any by-law, agreement, vote
of shareholders or disinterested directors, or otherwise, both as to action in
his or her official capacity and as to action in another capacity while holding
such office. Under the FBCA, indemnification or advancement of expenses,
however, shall not be made to or on behalf of any officer or director if a
judgment or other final adjudication establishes that his or her actions or
omissions were material to the cause of action so adjudicated and constitute:
(i) a violation of the criminal law, unless the officer or director had
reasonable cause to believe that his or her conduct was lawful or had no
reasonable cause to believe that his or her conduct was unlawful; (ii) a
transaction from which the officer or director derived an improper personal
benefit; (iii) in the case of a director, a circumstance under which the
liability provisions of the FBCA Section 607.0834 (relating to unlawful
distributions) are applicable; or (iv) willful misconduct or a conscious
disregard for the best interest of the corporation in a proceeding by or in the
right of the corporation to procure a judgment in its favor or in a proceeding
by or in the right of a shareholder.
Florida law and the Southwest By-laws permit a corporation to purchase and
maintain insurance on behalf of any director or officer of the corporation
against any liability asserted against the director or officer
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and incurred in such capacity, whether or not the corporation would have the
power to indemnify the director or officer against such liability.
Pursuant to Southwest's By-laws, if Southwest pays any expenses or other
amounts by way of indemnification, otherwise than by court order or action by
the shareholders or by an insurance carrier pursuant to insurance maintained by
Southwest, Southwest shall report the indemnification or advance in writing to
the shareholders with or before the notice of the next shareholders meeting, or
prior to such meeting if the indemnification or advance occurs after the giving
of such notice but prior to the time such meeting is held. The report shall
include a statement specifying the persons paid, the amount paid, and the nature
and status at the time of such payment of the litigation or threatened
litigation.
DIRECTOR LIABILITY
The by-laws of a Pennsylvania corporation may include a provision limiting
the personal liability of directors for monetary damages for actions taken as a
director, except to the extent that the director has breached or failed to
perform his or her duties to the corporation and the breach or failure to
perform constitutes self-dealing, willful misconduct or recklessness. The FNB
By-laws contain such a provision limiting the liability of its directors to the
fullest extent permitted by law.
Under Florida law, a director is not liable for monetary damages for any
statement, vote, decision, or failure to act, regarding corporate management or
policy, unless the director breached or failed to perform his duties as a
director and the director's breach of, or failure to perform, those duties
constitutes a violation of criminal law, self dealing, willful misconduct or
recklessness.
AMENDMENT OF ARTICLES OF INCORPORATION AND BY-LAWS
The PBCL requires the affirmative vote of the holders entitled to cast at
least a majority of the votes actually cast on an amendment to the articles of
incorporation, provided that shareholder approval is not required for certain
non-material amendments, such as a change in the corporate name, a provision for
perpetual existence, or, if the corporation has only one class of shares
outstanding, a change in the number and par value of the authorized shares to
effect a stock split. The FNB Charter provides that the FNB Charter may be
amended by FNB as provided by the PBCL and all rights conferred upon the
shareholders therein are granted subject to such reservation. Under the PBCL,
the power to adopt, amend or repeal by-laws may be vested by the by-laws in the
directors, with certain statutory exceptions for certain actions and subject to
the power of shareholders to change such action. The PBCL provides that, unless
the articles of incorporation otherwise provide, the board of directors does not
have the authority to adopt or change a by-law on any subject that is committed
expressly to the shareholders by statute. The FNB Charter and the FNB By-laws
provide that the FNB By-laws may be amended by the affirmative vote of at least
75% of the FNB Board or by the affirmative vote of the holders of at least 75%
of the outstanding FNB Common Stock entitled to vote thereon.
The FBCA generally requires the affirmative vote of the holders of at least
a majority of the votes actually cast on an amendment to the articles of
incorporation; provided, however, a majority of the votes entitled to be cast on
the amendment is required with respect to an amendment that would create
dissenters' rights. Under Florida law, shareholder approval is not required for
certain non-material amendments. The Southwest Charter provides that the
Southwest Charter may only be amended by the affirmative vote or consent of the
holders of at least 50% of the shares of each class of stock of the corporation
entitled to vote in elections of directors; provided, however, that the
affirmative vote or consent of the holders of 75% of the outstanding shares of
each class of the stock of the corporation entitled to vote in elections of
directors is required to amend provisions relating to the number and
qualification of directors, relating to certain covered transactions, relating
to certain business combinations and relating to the factors that the Southwest
Board may consider in evaluating a tender offer.
Under Florida law, a corporation's by-laws may be amended or repealed by
the board of directors or shareholders; provided, however, that the board may
not amend or repeal the corporation's by-laws if the articles of incorporation
reserve such power to the shareholders, or the shareholders, in amending or
appealing
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the by-laws, expressly provide that the board of directors may not amend or
repeal the by-laws or a particular by-law provision. In addition, a by-law that
fixes a greater quorum or voting requirement for a board of directors may be
amended or repealed under Florida law only by the shareholders if originally
adopted by the shareholders, or either by the shareholders or by the board of
directors if originally adopted by the board of directors. The Southwest By-laws
provide that the Southwest By-laws may be altered or amended and new by-laws
adopted by the shareholders or by the Southwest Board at any regular or special
meeting of the Southwest Board; provided, however, that action by the
shareholders with respect to the by-laws shall be taken by the affirmative vote
or consent of the holders of at least 75% of the shares of each class of stock
of the corporation entitled to vote in elections of directors. Action by the
directors with respect to the Southwest By-laws requires the affirmative vote or
consent of a majority of all directors then holding office.
VOTE REQUIRED FOR EXTRAORDINARY CORPORATE TRANSACTIONS
Under the PBCL, generally, a merger, consolidation, share exchange,
dissolution or sale of substantially all of a corporation's assets other than in
the ordinary course of business must be approved by the affirmative vote of a
majority of the votes cast by all shareholders entitled to vote thereon. Except
as otherwise provided by the by-laws of a corporation, the shareholders of a
corporation do not have to approve a board of directors-approved plan of merger
if, among other situations, (i) the surviving or new corporation is a domestic
business corporation with articles of incorporation that are identical to the
articles of incorporation of the constituent corporation (except for changes
permitted by a board of directors without shareholder approval under the PBCL),
(ii) each share of the constituent corporation outstanding immediately prior to
the effective date of the merger is to continue to be or to be converted into an
identical share of the surviving or new corporation after the effective date of
the merger, and (iii) the shareholders of the constituent corporation are to
hold in the aggregate shares of the surviving or new corporation to be
outstanding immediately after effectiveness of the plan of merger entitled to
cast at least a majority of the votes entitled to be cast generally for the
election of directors.
The FNB Charter requires the affirmative vote of at least 75% of the
outstanding shares of FNB Common Stock entitled to vote to approve a merger,
consolidation, or sale, lease, exchange or other disposition, in a single
transaction or series of related transactions, of all or substantially all or a
substantial part of the properties or assets of FNB, unless the FNB Board has
approved and recommended the transaction prior to the consummation thereof.
Except as otherwise provided by law, or by the Southwest Charter or the
Southwest By-laws with respect to an extraordinary corporate transaction with
Interested Persons (as defined herein), a majority of the votes cast is
generally required for any action by Southwest's shareholders. See
"-- Interested Shareholder Transactions".
INTERESTED SHAREHOLDER TRANSACTIONS
The PBCL provides that, if a shareholder of a corporation is a party to a
sale of assets transaction, share exchange, merger or consolidation involving
the corporation or a subsidiary, or if a shareholder is to be treated
differently in a corporate dissolution from other shareholders of the same
class, then approval must be obtained of the shareholders entitled to cast at
least a majority of the votes which all shareholders other than the interested
shareholder are entitled to cast with respect to the transaction, without
counting the votes of the interested shareholder. Such additional shareholder
approval is not required if the consideration to be received by the other
shareholders in such transaction for shares of any class is not less than the
highest amount paid by the interested shareholder in acquiring shares of the
same class, or if the proposed transaction is approved by a majority of the
board of directors other than certain directors ("disqualified directors")
affiliated or associated with, or nominated by, the interested shareholder. The
PBCL provides that a director who has held office for at least 24 months prior
to the date of vote on the proposed transaction is not a disqualified director.
Further, the PBCL prohibits certain business combinations between the
corporation and an interested shareholder except under specified circumstances.
An "interested shareholder" in this instance is one who, directly or indirectly,
is the beneficial owner of shares entitling that person to cast at least 20% of
the votes that all shareholders would be entitled to cast in an election of
directors of the corporation or is an affiliate or associate of such corporation
and at any time within the five-year period immediately prior to the date in
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question was the beneficial owner, directly or indirectly, of shares entitling
that person to cast at least 20% of the votes that all shareholders would be
entitled to cast in an election of directors of the corporation. A "business
combination" includes a merger, consolidation, share exchange or division of the
corporation or any subsidiary of the corporation with the interested shareholder
or with, involving or resulting in any other corporation which is, or, after the
merger, consolidation, share exchange or division would be, an affiliate or
associate of the interested shareholder. A "business combination" also includes
a sale or other disposition to the interested shareholder or any affiliate or
associate of the interested shareholder of assets of the corporation or any
subsidiary (i) having an aggregate market value equal to 10% or more of the
aggregate market value of the corporation's consolidated assets, (ii) having an
aggregate market value equal to 10% or more of the aggregate market value of all
the outstanding shares of such corporation, or (iii) representing 10% or more of
the consolidated earning power or net income of such corporation. A "business
combination" also includes certain transactions with an interested shareholder
involving the issuance of shares of a corporation or its subsidiary having an
aggregate market value equal to 5% or more of the aggregate market value of all
outstanding shares under certain circumstances, the adoption of a plan for the
liquidation or dissolution of the corporation pursuant to certain agreements
with an interested shareholder and certain reclassifications and loans involving
the interested shareholder. The prohibition against such business combinations
does not apply under specified circumstances and if the corporation has opted
out of this provision. FNB has not opted out of this statutory provision.
The FBCA contains a number of provisions which require supermajority
approval for certain affiliate transactions. Southwest, however, has made an
election in the Southwest Charter providing that such provisions shall not apply
to the corporation.
The Southwest Charter contains provisions requiring supermajority
shareholder approval to effect certain extraordinary corporate transactions
which are not approved by the Board of Directors. The Southwest Charter requires
the affirmative vote or consent of the holders of at least two-thirds of the
shares of each class of Southwest Common Stock entitled to vote in elections of
directors to approve any merger, consolidation, disposition of all or a
substantial part of the assets of the corporation or a subsidiary of the
corporation, exchange of securities requiring shareholder approval or
liquidation of the corporation ("Covered Transaction"), if any person who
together with his affiliates and associates beneficially owns 5% or more of any
voting stock of the corporation (an "Interested Person") is a party to the
transaction; provided that 75% of the entire Southwest Board has not approved
the transaction. In addition, the Southwest Charter requires the separate
approval of the holders of a majority of the shares of each class of stock of
the corporation entitled to vote in elections of directors which are not
beneficially owned, directly or indirectly, by an Interested Person, of any
merger, consolidation, disposition of all or a substantial part of the assets of
the corporation or a subsidiary of the corporation, or exchange of securities
requiring shareholder approval (a "Business Combination"), if an Interested
Person is a party to such transaction; provided, that such approval is not
required if (a) the consideration to be received by the holders of the stock of
the corporation meets certain minimal levels determined by a formula under the
Southwest Charter (generally, the highest price paid by the Interested Person
for any shares which he or she has acquired), (b) there has been no reduction in
the average dividend rate from that which obtained prior to the time the
Interested Person became such, and (c) the consideration to be received by
shareholders who are not Interested Persons shall be paid in cash or in the same
form as the Interested Person previously paid for shares of such class of stock.
These provisions of the Southwest Charter may be amended, altered, or repealed
only by the affirmative vote or consent of the holders of at least 75% of the
shares of each class of stock of the corporation entitled to vote in elections
of directors.
FIDUCIARY DUTY
Under the PBCL a director may, in considering the best interests of a
corporation, consider (i) the effects of any action on shareholders, employees,
suppliers, customers and creditors of the corporation, and upon communities in
which offices or other facilities of the corporation are located, (ii) the
short-term and long-term interests of the corporation, including the possibility
that the best interests of the corporation may be served by the continued
independence of the corporation, (iii) the resources, intent and conduct of any
person seeking to acquire control of the corporation, and (iv) all other
pertinent factors.
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The FNB Charter provides that the FNB Board, in evaluating a proposal for
an extraordinary corporate transaction, shall consider all relevant factors,
including the economic effect, both immediate and long-term, upon the FNB
shareholders, including shareholders, if any, who will not participate in the
transaction; the social and economic effect on the employees, depositors and
customers of, and others dealing with, FNB and its subsidiaries and on the
communities in which FNB and its subsidiaries operate or are located; whether
the proposal is acceptable based on the historical and current operating results
or financial condition of FNB; whether a more favorable price could be obtained
for FNB's securities in the future; the reputation and business practices of the
offeror and its management and affiliates as they would affect the employees,
depositors and customers of FNB and its subsidiaries; and the future value of
FNB's stock; and any antitrust or other legal and regulatory issues that are
raised by the proposal. The FNB Charter further provides that, if the FNB Board
determines that such a proposal should be rejected, it may take any lawful
action to accomplish its purposes.
Under Florida law, a director is required to discharge his or her duties in
good faith, with the care an ordinarily prudent person in the like position
would exercise under similar circumstances and in a manner reasonably believed
to be in the best interest of the corporation. In discharging his or her duties,
a director is entitled to rely on: (i) information, opinions, reports, or
statements, including financial statements and other financial data, if
presented or prepared by officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matters
presented; (ii) legal counsel, public accountants or other persons as to matters
the director reasonably believes are within the person's professional or expert
competence; or (iii) a committee of the board of which the director is not a
member if the director reasonably believes the committee merits confidence. In
addition, in discharging his or her duties, a director may consider such factors
as the director deems relevant, including the long-term prospectus and interest
of the corporation and its shareholders, and the social, economic, legal, or
other effects of any action on the employees, suppliers, customers of the
corporation or its subsidiaries, the communities and society in which the
corporation or its subsidiaries operate, and the economy of the state and the
nation.
The Southwest Charter charges the Southwest Board to consider, in
connection with the exercise of its business judgment in determining what is in
the best interest of the corporation and its shareholders, not only the
consideration being offered in any tender offer in relation to the then-current
market price of the corporation stock, but also to consider such consideration
in relation to the then-current value of the corporation in a freely negotiated
transaction and in relation to the Southwest Board's then-estimate of the future
value of the corporation as an independent entity. In addition, the Southwest
Charter charges the Southwest Board to consider such other factors it determines
to be relevant, including the social and economic effects on the employees,
customers, suppliers, and other constituents of the corporation and on the
communities in which the corporation operates or is located and the desirability
of maintaining independence from any other business or business entity.
PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECTS
FNB is subject to various statutory "anti-takeover" provisions of the PBCL,
including Subchapters 25E, 25F, 25G and 25H of the PBCL. Subchapter 25E of the
PBCL (relating to control transactions) provides that, if any person or group
acquires 20% or more of the voting power of a covered corporation, the remaining
shareholders may demand from such person or group the fair value of their
shares, including a proportionate amount of any control premium. Subchapter 25F
of the PBCL (relating to business combinations) delays for five years and
imposes conditions upon business combinations between an interested shareholder
and the corporation. As described above, the term "business combination" is
defined broadly to include various transactions utilizing a corporation's assets
for purchase price amortization or refinancing purposes, and an "interested
shareholder" is defined generally as the beneficial owner of at least 20% of a
corporation's voting shares. See "-- Interested Shareholder Transactions".
Subchapter 25G of the PBCL (relating to control-share acquisitions) prevents a
person who has acquired 20% or more of the voting power of a covered corporation
from voting such shares unless the disinterested shareholders approve such
voting rights. Failure to obtain such approval exposes the owner to the risk of
a forced sale of stock to the issuer. If shareholder approval is obtained, the
corporation is also subject to Subchapters 25I and 25J of the PBCL. Subchapter
25I
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of the PBCL provides for a minimum severance payment to certain employees
terminated within two years of the approval. Subchapter 25J of the PBCL
prohibits the abrogation of certain labor contracts prior to their stated date
of expiration. Subchapter 25H of the PBCL (relating to disgorgement) applies in
the event that (1) any person or group publicly discloses that the person or
group may acquire control of the corporation or (2) a person or group acquires
(or publicly discloses an offer or intent to acquire) 20% or more of the voting
power of the corporation and, in either case, sells shares within 18 months
thereafter. Any profits from sales of equity securities of the corporation by
the person or group during the 18-month period belong to the corporation if the
securities that were sold were acquired during the 18-month period or within 24
months prior thereto. Subchapters 25E, 25F, 25G and 25H of the PBCL contain a
wide variety of transactional and status exemptions, exclusions and safe
harbors.
In addition, the PBCL permits an amendment of the corporation's charter or
other corporation action, if approved by shareholders generally, to provide
mandatory special treatment for specified groups of nonconsenting shareholders
of the same class by providing, for example, that shares of common stock held
only by designated shareholders of record, and no other shares of common stock,
shall be cashed out at a price determined by the corporation, subject to
applicable dissenters' rights. The PBCL also provides that directors may, in
discharging their duties, consider the interests of a number of different
constituencies, including shareholders, employees, suppliers, customers,
creditors and the communities in which the corporation is located. Directors are
not required to consider the interests of shareholders to a greater degree than
other constituencies' interests. The PBCL expressly provides that directors do
not violate their fiduciary duties solely by relying on poison pills or the
anti-takeover provisions of the PBCL.
The business combination provisions of the PBCL may have the effect of
deterring merger proposals, tender offers or other attempts to effect changes in
control of FNB that are not negotiated with and approved by the FNB Board. FNB
is not aware of any effort or intent to gain control of FNB or any effort to
organize a proxy contest or to accumulate FNB's shares.
Additionally, the following provisions of the FNB Charter and the FNB
By-laws may be considered to have anti-takeover implications: (1) the ability of
the FNB Board to fill the vacancies (but only until the next selection of the
class of directors for which such director has been chosen) resulting from an
increase in the number of directors; (2) the ability of the FNB Board to issue
substantial amounts of FNB Common Stock without the need for shareholder
approval, which FNB Common Stock, among other things and in certain
circumstances, may be used to dilute the stock ownership of holders of FNB
Common Stock seeking to obtain control of FNB; (3) the ability of the FNB Board
to establish the rights of, and to issue, substantial amounts of FNB Preferred
Stock without the need for shareholder approval which FNB Preferred Stock, among
other things, may be used to create voting impediments with respect to changes
in control of FNB or, to dilute the stock ownership of holders of FNB Common
Stock seeking to obtain control of FNB; (4) the supermajority voting
requirements for certain extraordinary corporate transactions; and (5) the broad
range of factors that the FNB Board may consider in evaluating such a proposal,
and the broad range of actions it may take to reject such a proposal, if it so
decides.
Section 607.0902 of the FBCA restricts the voting rights of certain shares
of a corporation's stock when those shares are acquired by a party who, by such
acquisition, would control at least one-fifth of all voting rights of the
corporation's issued and outstanding stock. The statute provides that the
acquired shares (the "control shares") will, upon such acquisition, cease to
have any voting rights. The acquiring party may, however, petition the
corporation to have voting rights re-assigned to the control shares by way of an
"acquiring person's statement" submitted to the corporation in compliance with
the requirements of the statute. Upon receipt of such request, the corporation
must submit, for shareholder approval, the acquiring person's request to have
voting rights re-assigned to the control shares. Voting rights may be reassigned
to the control shares by a resolution of a majority of the corporation's
shareholders for each class and series of stock. If such a resolution is
approved, and the voting rights re-assigned to the control shares represent a
majority of all voting rights of the corporation's outstanding voting stock,
then, unless the corporation's articles of incorporation or by-laws provide
otherwise, all shareholders of the corporation shall be able to exercise
dissenter's rights in accordance with Florida law.
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A corporation may, by amendment to its articles of incorporation or
by-laws, provide that, if the party acquiring the control shares does not submit
an acquiring person's statement in accordance with the statute, the corporation
may redeem the control shares at any time during the period ending 60 days after
the acquisition of control shares. If the acquiring party files an acquiring
person's statement, the control shares are not subject to redemption by the
corporation unless the shareholders, acting on the acquiring party's request,
deny full voting rights to the control shares.
The statute does not alter the voting rights of any stock of the
corporation acquired in any of the following manners: (i) pursuant to the laws
of intestate succession or pursuant to a gift or testamentary transfer; (ii)
pursuant to the satisfaction of a pledge or other security interest created in
good faith and not for the purpose of circumventing the statute; (iii) pursuant
to either a merger or share exchange if the corporation is a party to the
agreement or plan of merger or share exchange; (iv) pursuant to any savings,
employee stock ownership or other benefit plan of the corporation; or (v)
pursuant to an acquisition of shares specifically approved by the board of
directors of the corporation.
Although Southwest has not done so, it has the option to preclude
application of this statute by a provision in the Southwest Charter or the
Southwest By-laws.
In addition, there are various provisions in the Southwest Charter and the
Southwest By-laws that may serve as anti-takeover protections including: (i) the
staggered Southwest Board; (ii) the ability of the Southwest Board to fill
vacancies (but only until the next selection of the class of directors for which
such director has been chosen) resulting from an increase in the number of
directors; (iii) the supermajority voting requirements for certain corporate
transactions with interested persons; and (iv) the broad range of factors that
the Southwest Board may consider in evaluating a tender offer proposal. In
addition, the Southwest Charter authorizes the Southwest Board, without further
shareholder action, to issue from time to time, up to 100,000 shares of
Southwest Preferred Stock. The Southwest Board is empowered to divide any and
all of the shares of the Southwest Preferred Stock into series and to fix and
determine the relative rights and preferences of the shares of any series so
established.
Neither FNB nor Southwest currently has a shareholders' rights plan.
Shareholders' rights plans, in a variety of forms, are common to many
corporations incorporated in the United States and serve to afford a
corporation's board of directors the opportunity to withstand an unsolicited
takeover attempt while providing the board sufficient time to evaluate the offer
and its adequacy and to consider alternative measures or transactions that may
be appropriate in responding to the offer. Both the PBCL and FBCA permit
shareholders' rights plans in general and permit the adoption of shareholders'
rights plans by a board of directors without shareholder approval.
LEGAL OPINIONS
The legality of the shares of FNB Common Stock to be issued to the holders
of Southwest Common Stock pursuant to its Merger will be passed upon by Cohen &
Grigsby, P.C., Pittsburgh, Pennsylvania. Cohen & Grigsby, P.C. has from time to
time acted as counsel in advising FNB and its affiliates with respect to certain
matters and in connection with various transactions. Cohen & Grigsby, P.C. did
not act as counsel to FNB or its affiliates with respect to the Merger or any
transaction in connection therewith.
The Merger Agreement provides as a condition to each party's obligation to
consummate the Merger that FNB and Southwest receive the opinion of Wachtell,
Lipton, Rosen & Katz, New York, New York, special counsel to FNB, substantially
to the effect that the Merger will constitute a "reorganization" under Section
368 of the Code.
EXPERTS
The consolidated financial statements of FNB incorporated by reference in
FNB's Annual Report on Form 10-K for the year ended December 31, 1995, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report, incorporated therein and incorporated herein by reference. As to 1993,
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their report is based in part on the reports of S.R. Snodgrass, A.C. independent
auditors. Such consolidated financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority of such firms
as experts in accounting and auditing.
The consolidated financial statements of Southwest incorporated in this
Proxy Statement-Prospectus by reference to the Southwest Annual Report on Form
10-K for the year ended December 31, 1995 have been so incorporated in reliance
on the report of Hill, Barth & King, Inc., independent auditors, given on the
authority of such firm as experts in accounting and auditing.
SHAREHOLDER PROPOSALS
The 1997 Annual Meeting of Southwest shareholders is tentatively scheduled
to be held in April 1997, subject to the earlier consummation of the Merger. In
the event that the 1997 Annual Meeting of Southwest shareholders is held,
proposals of shareholders intended to be presented at that meeting must be
received by December 19, 1996 for inclusion in Southwest's proxy statement and
form of proxy relating to such meeting. The submission of such proposals by
shareholders and the consideration of such proposals by Southwest for inclusion
in next year's proxy statement and form of proxy are subject to the applicable
rules and regulations of the Commission.
OTHER MATTERS
As of the date of this Proxy Statement-Prospectus, the Southwest Board
knows of no matters that will be presented for consideration at the Special
Meeting other than as described in this Proxy Statement-Prospectus. However, if
any other matters shall properly come before the Special Meeting or any
adjournments or postponements thereof and be voted upon, the enclosed proxies
shall be deemed to confer discretionary authority on the individuals named as
proxies therein to vote the shares represented by such proxies as to any such
matters. The persons named as proxies intend to vote or not to vote in
accordance with the recommendation of the management of Southwest.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
F.N.B. CORPORATION,
SOUTHWEST AFFILIATION CORPORATION
AND
SOUTHWEST BANKS, INC.
DATED AS OF FEBRUARY 2, 1996
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TABLE OF CONTENTS
PAGE
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Parties.............................................................................. A-1
Preamble............................................................................. A-1
ARTICLE 1 -- TRANSACTIONS AND TERMS OF MERGER........................................ A-1
1.1 Merger....................................................................... A-1
1.2 Time and Place of Closing.................................................... A-1
1.3 Effective Time............................................................... A-1
1.4 Execution of Stock Option Agreement.......................................... A-2
ARTICLE 2 -- TERMS OF MERGER......................................................... A-2
2.1 Charter...................................................................... A-2
2.2 Bylaws....................................................................... A-2
2.3 FNB Board of Directors....................................................... A-2
ARTICLE 3 -- MANNER OF CONVERTING SHARES............................................. A-2
3.1 Conversion of Shares......................................................... A-2
3.2 Anti-Dilution Provisions..................................................... A-2
3.3 Shares Held by Southwest or FNB.............................................. A-2
3.4 Fractional Shares............................................................ A-3
3.5 Conversion of Stock Options.................................................. A-3
ARTICLE 4 -- EXCHANGE OF SHARES...................................................... A-4
4.1 Exchange Procedures.......................................................... A-4
4.2 Rights of Former Southwest Shareholders...................................... A-4
ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF SOUTHWEST............................. A-5
5.1 Organization, Standing, and Power............................................ A-5
5.2 Authority; No Breach By Agreement............................................ A-5
5.3 Capital Stock................................................................ A-6
5.4 Southwest Subsidiaries....................................................... A-6
5.5 SEC Filings; Financial Statements............................................ A-6
5.6 Absence of Certain Changes or Events......................................... A-7
5.7 Tax Matters.................................................................. A-7
5.8 Assets....................................................................... A-8
5.9 Environmental Matters........................................................ A-8
5.10 Compliance With Laws......................................................... A-9
5.11 Labor Relations.............................................................. A-9
5.12 Employee Benefit Plans....................................................... A-9
5.13 Material Contracts........................................................... A-11
5.14 Legal Proceedings............................................................ A-11
5.15 Reports...................................................................... A-12
5.16 Statements True and Correct.................................................. A-12
5.17 Accounting, Tax and Regulatory Matters....................................... A-12
5.18 State Takeover Laws.......................................................... A-12
5.19 Charter Provisions........................................................... A-12
5.20 Derivatives Contracts........................................................ A-12
A-i
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PAGE
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ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF FNB................................... A-13
6.1 Organization, Standing, and Power............................................ A-13
6.2 Authority; No Breach By Agreement............................................ A-13
6.3 Capital Stock................................................................ A-13
6.4 SEC Filings; Financial Statements............................................ A-14
6.5 Absence of Certain Changes or Events......................................... A-14
6.6 Tax Matters.................................................................. A-14
6.7 Compliance With Laws......................................................... A-14
6.8 Legal Proceedings............................................................ A-15
6.9 Reports...................................................................... A-15
6.10 Statements True and Correct.................................................. A-15
6.11 Accounting, Tax and Regulatory Matters....................................... A-16
6.12 Environmental Matters........................................................ A-16
6.13 Derivatives Contracts........................................................ A-16
ARTICLE 7 -- CONDUCT OF BUSINESS PENDING CONSUMMATION................................ A-16
7.1 Affirmative Covenants of Southwest........................................... A-16
7.2 Negative Covenants of Southwest.............................................. A-16
7.3 Covenants of FNB............................................................. A-18
7.4 Adverse Changes in Condition................................................. A-18
7.5 Reports...................................................................... A-19
ARTICLE 8 -- ADDITIONAL AGREEMENTS................................................... A-19
8.1 Registration Statement; Proxy Statement; Shareholder Approval................ A-19
8.2 Exchange Listing............................................................. A-19
8.3 Applications................................................................. A-19
8.4 Filings with State Offices................................................... A-19
8.5 Agreement as to Efforts to Consummate........................................ A-19
8.6 Investigation and Confidentiality............................................ A-20
8.7 Press Releases............................................................... A-20
8.8 Certain Actions.............................................................. A-20
8.9 Accounting and Tax Treatment................................................. A-20
8.10 State Takeover Laws.......................................................... A-21
8.11 Charter Provisions........................................................... A-21
8.12 Agreement of Affiliates...................................................... A-21
8.13 Employee Benefits and Contracts.............................................. A-21
8.14 Indemnification.............................................................. A-22
ARTICLE 9 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE....................... A-22
9.1 Conditions to Obligations of Each Party...................................... A-22
9.2 Conditions to Obligations of FNB............................................. A-23
9.3 Conditions to Obligations of Southwest....................................... A-24
ARTICLE 10 -- TERMINATION............................................................ A-25
10.1 Termination.................................................................. A-25
10.2 Effect of Termination........................................................ A-26
10.3 Non-Survival of Representations and Covenants................................ A-26
A-ii
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PAGE
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ARTICLE 11 -- MISCELLANEOUS.......................................................... A-26
11.1 Definitions.................................................................. A-26
11.2 Expenses..................................................................... A-32
11.3 Brokers and Finders.......................................................... A-32
11.4 Entire Agreement............................................................. A-32
11.5 Amendments................................................................... A-32
11.6 Waivers...................................................................... A-32
11.7 Assignment................................................................... A-33
11.8 Notices...................................................................... A-33
11.9 Governing Law................................................................ A-34
11.10 Counterparts................................................................. A-34
11.11 Captions..................................................................... A-34
11.12 Interpretations.............................................................. A-34
11.13 Enforcement of Agreement..................................................... A-34
11.14 Severability................................................................. A-34
Signatures........................................................................... A-35
A-iii
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LIST OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -------------------------------------------------------------------------------------
1. Form of Stock Option Agreement. (Section 1.4).
2. Form of agreement of affiliates of Southwest. (Section 8.12).
A-iv
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of February 2, 1996, by and among F.N.B. CORPORATION ("FNB"), a
Pennsylvania corporation having its principal office located in Hermitage,
Pennsylvania; SOUTHWEST AFFILIATION CORPORATION, a newly incorporated Florida
corporation and a wholly-owned subsidiary of FNB ("Merger Sub"); and SOUTHWEST
BANKS, INC. ("Southwest"), a Florida corporation having its principal office
located in Naples, Florida.
PREAMBLE
The Boards of Directors of Southwest and FNB are of the opinion that the
strategic affiliation described herein is in the best interests of the parties
and their respective shareholders. This Agreement provides for the acquisition
of Southwest by FNB pursuant to the merger of Merger Sub with and into
Southwest. At the effective time of such merger, the outstanding shares of the
capital stock of Southwest shall be converted into the right to receive shares
of the common stock of FNB (except as provided herein). As a result,
shareholders of Southwest shall become shareholders of FNB. Further, it is the
current intention of FNB, subsequent to the effective time of this strategic
affiliation, to retain the management team of Southwest with the authority and
responsibility for operating Southwest and its subsidiaries in substantially
same manner and fashion as historically operated by such management team. The
transactions described in this Agreement are subject to the approvals of the
shareholders of Southwest, the Board of Governors of the Federal Reserve System,
the Florida Department of Banking and Finance, and the satisfaction of certain
other conditions described in this Agreement. It is the intention of the parties
to this Agreement that the Merger (as hereinafter defined) for federal income
tax purposes shall qualify as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code, and for accounting purposes shall qualify
for treatment as a pooling of interests.
Immediately after the execution and delivery of this Agreement, as a
condition and inducement to FNB's willingness to enter into this Agreement,
Southwest and FNB are entering into a stock option agreement (the "Stock Option
Agreement"), in substantially the form of Exhibit 1, pursuant to which Southwest
is granting to FNB an option to purchase shares of Southwest Common Stock.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, Merger Sub shall be merged with and into Southwest in accordance
with the provisions of the FBCA (the "Merger"). Southwest shall be the Surviving
Corporation resulting from the Merger and shall continue to be governed by the
Laws of the State of Florida. The Merger shall be consummated pursuant to the
terms of this Agreement, which has been approved and adopted by the respective
Boards of Directors of Southwest, Merger Sub and FNB.
1.2 Time and Place of Closing. The closing will take place at 9:00 A.M. on
the date that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their chief executive officers or chief financial officers, may
mutually agree. The place of closing shall be at such location as may be
mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time the Florida
Certificate of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Florida (the "Effective Time"). Subject to
the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by each Party, the Parties shall use their
A-1
71
reasonable efforts to cause the Effective Time to occur on or before the fifth
business day (as designated by FNB) following the last to occur of (i) the
effective date (including expiration of any applicable waiting period) of the
last required Consent of any Regulatory Authority having authority over and
approving or exempting the Merger, and (ii) the date on which the shareholders
of Southwest approve this Agreement to the extent such approval is required by
applicable Law; provided, however, that in no event shall the Effective Time
occur prior to January 1, 1997, unless FNB determines in its sole discretion to
permit the Effective Time to occur prior to January 1, 1997, but not earlier
than December 16, 1996.
1.4 Execution of Stock Option Agreement. Immediately after the execution
of this Agreement and as a condition thereto, Southwest is executing and
delivering to FNB the Stock Option Agreement.
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Articles of Incorporation of Southwest in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of Southwest in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until otherwise
amended or repealed.
2.3 FNB Board of Directors. Following the Effective Time, the number of
members of the FNB Board of Directors shall be increased by three, and three of
the then current directors of Southwest shall be nominated by the FNB Board of
Directors and elected to such Board.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of FNB, Merger Sub or Southwest, or the shareholders of any of the foregoing,
the shares of the constituent corporations shall be converted as follows:
(a) Each share of FNB Capital Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and
after the Effective Time.
(b) Each share of common stock of the Merger Sub issued and
outstanding immediately prior to the Effective Time shall become and be
converted into one share of Southwest Common Stock and shall remain issued
and outstanding.
(c) Each share of Southwest Common Stock (excluding shares held by any
Southwest Company or any FNB Company, in each case other than in a
fiduciary capacity or as a result of debts previously contracted) issued
and outstanding at the Effective Time shall cease to be outstanding and
shall be converted into and exchanged for 0.78 shares of FNB Common Stock
(subject to possible adjustment pursuant to Section 10.1(g) of this
Agreement, the "Exchange Ratio").
3.2 Anti-Dilution Provisions. In the event FNB changes the number of
shares of FNB Common Stock issued and outstanding prior to the Effective Time as
a result of a stock split, stock dividend or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted.
3.3 Shares Held by Southwest or FNB. Each of the shares of Southwest
Common Stock held by any Southwest Company or by any FNB Company, in each case
other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
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3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Southwest Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of FNB Common Stock (after taking into account all certificates delivered
by such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of FNB Common Stock multiplied
by the market value of one share of FNB Common Stock at the Effective Time. The
market value of one share of FNB Common Stock at the Effective Time shall be the
average of the high bid and low asked prices of such common stock in the
over-the-counter market, as reported by Nasdaq (or, if not reported thereby, any
other authoritative source selected by FNB) on the last trading day preceding
the Effective Time. No such holder will be entitled to dividends, voting rights,
or any other rights as a shareholder in respect of any fractional shares.
3.5 Conversion of Stock Options.
(a) At the Effective Time, each option, warrant or other right to purchase
shares of Southwest Common Stock pursuant to outstanding stock options, warrant
agreements or stock appreciation rights ("Southwest Options") granted by
Southwest under the Southwest Stock Plans identified in Section 3.5 of the
Southwest Disclosure Memorandum, which are outstanding at the Effective Time,
whether or not exercisable, shall be converted into and become rights with
respect to FNB Common Stock, and FNB shall assume each Southwest Option, in
accordance with the terms of the Southwest Stock Plan, stock option agreement or
warrant agreement by which it is evidenced, except that from and after the
Effective Time, (i) FNB and its Compensation Committee shall be substituted for
Southwest and the Compensation Committee of Southwest's Board of Directors
(including, if applicable, the entire Board of Directors of Southwest)
administering such Southwest Stock Plan, (ii) each Southwest Option assumed by
FNB may be exercised solely for shares of FNB Common Stock (or cash in the case
of stock appreciation rights), (iii) the number of shares of FNB Common Stock
subject to such Southwest Option shall be equal to the number of shares of
Southwest Common Stock subject to such Southwest Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, and (iv) the per share exercise
price under each such Southwest Option shall be adjusted by dividing the per
share exercise price under each such Southwest Option by the Exchange Ratio and
rounding down to the nearest cent. Notwithstanding the provisions of clause
(iii) of the preceding sentence, FNB shall not be obligated to issue any
fraction of a share of FNB Common Stock upon exercise of Southwest Options and
any fraction of a share of FNB Common Stock that otherwise would be subject to a
converted Southwest Option shall represent the right to receive a cash payment
equal to the product of such fraction and the difference between the market
value of one share of FNB Common Stock and the per share exercise price of such
Option. In addition, notwithstanding the provisions of clauses (iii) and (iv) of
the first sentence of this Section 3.5, each Southwest Option which is an
"incentive stock option" shall be adjusted as required by Section 424 of the
Internal Revenue Code, and the regulations promulgated thereunder, so as not to
constitute a modification, extension, or renewal of the option within the
meaning of Section 424(h) of the Internal Revenue Code. Southwest agrees to take
all necessary steps to effectuate the foregoing provisions of this Section 3.5.
(b) As soon as practicable after the Effective Time, FNB shall deliver to
the participants in each Southwest Stock Plan an appropriate notice setting
forth such participant's rights pursuant thereto and the grants pursuant to such
Southwest Stock Plan shall continue in effect on the same terms and conditions
(subject to the adjustments required by Section 3.5(a) after giving effect to
the Merger), and FNB shall comply with the terms of each Southwest Stock Plan to
ensure, to the extent required by, and subject to the provisions of, such
Southwest Stock Plan, that Southwest Options which qualified as incentive stock
options prior to the Effective Time continue to qualify as incentive stock
options after the Effective Time.
At or prior to the Effective Time, FNB shall take all corporate action
necessary to reserve for issuance sufficient shares of FNB Common Stock for
delivery upon exercise of Southwest Options assumed by it in accordance with
this Section 3.5. As soon as practicable after the Effective Time, FNB shall
file a registration statement on Form S-3 or Form S-8, as the case may be (or
any successor or other appropriate forms), with respect to the shares of FNB
Common Stock subject to such options and shall use its reasonable efforts to
maintain the effectiveness of such registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such options remain outstanding. With respect to those
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individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the 1934 Act, where applicable, FNB shall
administer the Southwest Stock Plan assumed pursuant to this Section 3.5 in a
manner that complies with Rule 16b-3 promulgated under the 1934 Act to the
extent the Southwest Stock Plan complied with such rule prior to the Merger.
(c) All restrictions or limitations on transfer with respect to Southwest
Common Stock awarded under the Southwest Stock Plans or any other plan, program,
or arrangement of any Southwest Company, to the extent that such restrictions or
limitations shall not have already lapsed, and except as otherwise expressly
provided in such plan, program, or arrangement, shall remain in full force and
effect with respect to shares of FNB Common Stock into which such restricted
stock is converted pursuant to Section 3.1 of this Agreement.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, FNB and
Southwest shall cause the exchange agent selected by FNB (the "Exchange Agent")
to mail to the former shareholders of Southwest appropriate transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to the certificates theretofore representing shares of Southwest
Common Stock shall pass, only upon proper delivery of such certificates to the
Exchange Agent). After the Effective Time, each holder of shares of Southwest
Common Stock (other than shares to be canceled pursuant to Section 3.3 of this
Agreement) issued and outstanding at the Effective Time shall surrender the
certificate or certificates representing such shares to the Exchange Agent and
shall upon surrender thereof promptly receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2 of this Agreement. To the extent
required by Section 3.4 of this Agreement, each holder of shares of Southwest
Common Stock issued and outstanding at the Effective Time also shall receive,
upon surrender of the certificate or certificates representing such shares, cash
in lieu of any fractional share of FNB Common Stock to which such holder may be
otherwise entitled (without interest). FNB shall not be obligated to deliver the
consideration to which any former holder of Southwest Common Stock is entitled
as a result of the Merger until such holder surrenders such holder's certificate
or certificates representing the shares of Southwest Common Stock for exchange
as provided in this Section 4.1. The certificate or certificates of Southwest
Common Stock so surrendered shall be duly endorsed as the Exchange Agent may
require. Any other provision of this Agreement notwithstanding, neither FNB nor
the Exchange Agent shall be liable to a holder of Southwest Common Stock for any
amounts paid or property delivered in good faith to a public official pursuant
to any applicable abandoned property Law.
4.2 Rights of Former Southwest Shareholders. At the Effective Time, the
stock transfer books of Southwest shall be closed as to holders of Southwest
Common Stock immediately prior to the Effective Time and no transfer of
Southwest Common Stock by any such holder shall thereafter be made or
recognized. Until surrendered for exchange in accordance with the provisions of
Section 4.1 of this Agreement, each certificate theretofore representing shares
of Southwest Common Stock (other than shares to be canceled pursuant to Section
3.3 of this Agreement) shall from and after the Effective Time represent for all
purposes only the right to receive the consideration provided in Sections 3.1
and 3.4 of this Agreement in exchange therefor, subject, however, to FNB's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which have been declared or made by Southwest
in respect of such shares of Southwest Common Stock in accordance with the terms
of this Agreement and which remain unpaid at the Effective Time. Whenever a
dividend or other distribution is declared by FNB on the FNB Common Stock, the
record date for which is at or after the Effective Time, the declaration shall
include dividends or other distributions on all shares issuable pursuant to this
Agreement, but beginning 30 days after the Effective Time no dividend or other
distribution payable to the holders of record of FNB Common Stock as of any time
subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of Southwest Common Stock issued and outstanding
at the Effective Time until such holder surrenders such certificate for exchange
as provided in Section 4.1 of this Agreement. However, upon surrender of such
Southwest Common Stock
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certificate, both the FNB Common Stock certificate (together with all such
undelivered dividends or other distributions without interest) and any
undelivered dividends and cash payments to be paid for fractional share
interests (without interest) shall be delivered and paid with respect to each
share represented by such certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SOUTHWEST
Southwest hereby represents and warrants to FNB as follows:
5.1 Organization, Standing, and Power. Southwest is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Florida, and has the corporate power and authority to carry on its business as
now conducted and to own, lease, and operate its material Assets. Southwest is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Southwest.
5.2 Authority; No Breach by Agreement.
(a) Southwest has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Southwest, subject to the
approval of this Agreement by the holders of a majority of the outstanding
shares of Southwest Common Stock other than those shares beneficially owned by
FNB, which is the only shareholder vote required for approval of this Agreement
and consummation of the Merger by Southwest. Subject to such requisite
shareholder approval, this Agreement represents a legal, valid, and binding
obligation of Southwest, enforceable against Southwest in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought). The
Southwest Board of Directors has received from The Robinson-Humphrey Company,
Inc. a letter dated as of the date of this Agreement to the effect that, in the
opinion of such firm, the Exchange Ratio is fair, from a financial point of
view, to the holders of Southwest Common Stock.
(b) Neither the execution and delivery of this Agreement by Southwest, nor
the consummation by Southwest of the transactions contemplated hereby, nor
compliance by Southwest with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of Southwest's Articles of
Incorporation or Bylaws, or, (ii) except as disclosed in Section 5.2(b)(ii) of
the Southwest Disclosure Memorandum, constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any Southwest Company under, any Contract or Permit of any Southwest
Company, where such Default or Lien, or any failure to obtain such Consent, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Southwest, or, (iii) subject to receipt of the requisite Consents
referred to in Section 9.1(b) of this Agreement, violate any Law or Order
applicable to any Southwest Company or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Southwest, no notice to, filing
with, or Consent of, any public
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body or authority is necessary for the consummation by Southwest of the Merger
and the other transactions contemplated in this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of Southwest consists of (i) 25,000,000
shares of Southwest Common Stock, of which 3,654,089 shares are issued and
outstanding as of the date of this Agreement and not more than 4,000,855 shares
will be issued and outstanding at the Effective Time, and (ii) 100,000 shares of
preferred stock, par value $0.10 per share, none of which is issued and
outstanding. All of the issued and outstanding shares of capital stock of
Southwest are duly and validly issued and outstanding and are fully paid and
nonassessable under the FBCA. None of the outstanding shares of capital stock of
Southwest has been issued in violation of any preemptive rights of the current
or past shareholders of Southwest. Southwest has reserved 651,194 shares of
Southwest Common Stock for issuance under the Southwest Stock Plans, pursuant to
which options and warrants to purchase not more than 452,930 shares of Southwest
Common Stock are outstanding.
(b) Except as set forth in Section 5.3(a) of this Agreement, or as provided
pursuant to the Stock Option Agreement, there are no shares of capital stock or
other equity securities of Southwest outstanding and no outstanding Rights
relating to the capital stock of Southwest.
5.4 Southwest Subsidiaries. Southwest has disclosed in Section 5.4 of the
Southwest Disclosure Memorandum all of the Southwest Subsidiaries as of the date
of this Agreement. Except as disclosed in Section 5.4 of the Southwest
Disclosure Memorandum, Southwest or one of its Subsidiaries owns all of the
issued and outstanding shares of capital stock of each Southwest Subsidiary. No
equity securities of any Southwest Subsidiary are or may become required to be
issued (other than to another Southwest Company) by reason of any Rights, and
there are no Contracts by which any Southwest Subsidiary is bound to issue
(other than to another Southwest Company) additional shares of its capital stock
or Rights or by which any Southwest Company is or may be bound to transfer any
shares of the capital stock of any Southwest Subsidiary (other than to another
Southwest Company). There are no Contracts relating to the rights of any
Southwest Company to vote or to dispose of any shares of the capital stock of
any Southwest Subsidiary. All of the shares of capital stock of each Southwest
Subsidiary held by a Southwest Company are fully paid and nonassessable under
the applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by the Southwest Company free and clear
of any Lien. Each Southwest Subsidiary is either a bank or a corporation, and is
duly organized, validly existing, and (as to corporations) in good standing
under the Laws of the jurisdiction in which it is incorporated or organized, and
has the corporate power and authority necessary for it to own, lease, and
operate its Assets and to carry on its business as now conducted. Each Southwest
Subsidiary is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Southwest. Each Southwest Subsidiary that is a depository institution
is an "insured institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder, and the deposits in which are insured by the
Bank Insurance Fund.
5.5 SEC Filings; Financial Statements.
(a) Southwest has filed and made available to FNB all forms, reports, and
documents required to be filed by Southwest with the SEC since December 31, 1992
(collectively, the "Southwest SEC Reports"). The Southwest SEC Reports (i) at
the time filed, complied in all material respects with the applicable
requirements of the 1933 Act and the 1934 Act, as the case may be, and (ii) did
not at the time they were filed (or if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated in such Southwest SEC Reports or necessary in order to make the
statements in such Southwest SEC Reports, in light of the circumstances under
which they were made, not misleading. Except for Southwest Subsidiaries that are
registered as a broker, dealer or investment advisor, none of Southwest's
Subsidiaries is required to file any forms, reports, or other documents with the
SEC. Southwest has made available to FNB a copy of the
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balance sheets and the related consolidated statements of income, consolidated
statement of changes in shareholders' equity (including related notes and
schedules) of its subsidiary banks as of and for the period ended December 31,
1995 and any draft consolidated statements or earnings releases for Southwest
and its consolidated subsidiaries as of and for the period ended December 31,
1995 that have been prepared by Southwest as of the date of this Agreement.
(b) Each of the Southwest Financial Statements (including, in each case,
any related notes) contained in the Southwest SEC Reports, including any
Southwest SEC Reports filed after the date of this Agreement until the Effective
Time, complied as to form in all material respects with the applicable published
rules and regulations of the SEC with respect thereto, was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements,
or, in the case of unaudited statements, as permitted by Form 10-QSB of the
SEC), and fairly presented the consolidated financial position of Southwest and
its Subsidiaries as at the respective dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount.
5.6 Absence of Certain Changes or Events. Since September 30, 1995, except
as disclosed in Section 5.6 of the Southwest Disclosure Memorandum, (i) there
have been no events, changes, or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Southwest, and (ii) the Southwest Companies have not taken any action, or failed
to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a material breach or violation of any of the covenants and agreements of
Southwest provided in Article 7 of this Agreement.
5.7 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of the
Southwest Companies have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1995, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on Southwest, and all Tax Returns filed are complete and accurate
in all material respects to the Knowledge of Southwest. All Taxes shown on filed
Tax Returns have been paid. There is no audit examination, deficiency, or refund
Litigation with respect to any Taxes that is reasonably likely to result in a
determination that would have, individually or in the aggregate, a Material
Adverse Effect on Southwest, except as reserved against in the Southwest
Financial Statements delivered prior to the date of this Agreement or as
disclosed in Section 5.7 of the Southwest Disclosure Memorandum. All Taxes and
other Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid.
(b) Except as disclosed in Section 5.7 of the Southwest Disclosure
Memorandum, none of the Southwest Companies has executed an extension or waiver
of any statute of limitations on the assessment or collection of any Tax due
that is currently in effect.
(c) Adequate provision for any Taxes due or to become due for any of the
Southwest Companies for the period or periods through and including the date of
the respective Southwest Financial Statements has been made and is reflected on
such Southwest Financial Statements, except as disclosed in Section 5.7 of the
Southwest Disclosure Memorandum.
(d) Deferred Taxes of the Southwest Companies have been adequately provided
for in the Southwest Financial Statements.
(e) Each of the Southwest Companies is in compliance with, and its records
contain all information and documents (including properly completed Internal
Revenue Service Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and such records identify with specificity all accounts subject to backup
withholding under Section 3406
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of the Internal Revenue Code, except for such instances of noncompliance and
such omissions as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Southwest.
(f) Except as disclosed in Section 5.7 of the Southwest Disclosure
Memorandum, none of the Southwest Companies has made any payments, is obligated
to make any payments, or is a party to any contract, agreement, or other
arrangement that could obligate it to make any payments that would be disallowed
as a deduction under Section 280G or 162(m) of the Internal Revenue Code.
(g) There are no Liens with respect to Taxes upon any of the assets of the
Southwest Companies.
(h) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of the Southwest Companies that occurred during or after
any Taxable Period in which the Southwest Companies incurred a net operating
loss that carries over to any Taxable Period ending after December 31, 1994.
(i) No Southwest Company has filed any consent under Section 341(f) of the
Internal Revenue Code concerning collapsible corporation.
(j) All material elections with respect to Taxes affecting the Southwest
Companies as of the date of this Agreement have been or will be timely made as
set forth in Section 5.7 of the Southwest Disclosure Memorandum. After the date
hereof, other than as set forth in Section 5.7 of the Southwest Disclosure
Memorandum, no election with respect to Taxes will be made without the prior
written consent of FNB, which consent will not be unreasonably withheld.
(k) No Southwest Company has or has had a permanent establishment in any
foreign country, as defined in any applicable tax treaty or convention between
the United States and such foreign country.
5.8 Assets. Except as disclosed in Section 5.8 of the Southwest Disclosure
Memorandum, the Southwest Companies have good and marketable title, free and
clear of all Liens, to all of their respective Assets. All tangible properties
used in the businesses of the Southwest Companies are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with Southwest's past practices. All Assets which are
material to Southwest's business on a consolidated basis, held under leases or
subleases by any of the Southwest Companies, are held under valid Contracts
enforceable in accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or other Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceedings may be brought), and each such Contract is in full force and effect.
The Southwest Companies currently maintain insurance in amounts, scope, and
coverage as disclosed in Section 5.8 of the Southwest Disclosure Memorandum.
None of the Southwest Companies has received written notice from any insurance
carrier that (i) such insurance will be canceled or that coverage thereunder
will be reduced or eliminated, or (ii) premium costs with respect to such
policies of insurance will be substantially increased. Except as disclosed in
Section 5.8 of the Southwest Disclosure Memorandum, there are presently no
claims pending under such policies of insurance and no notices have been given
by any Southwest Company under such policies. The Assets of the Southwest
Companies include all Assets required to operate the business of the Southwest
Companies as presently conducted.
5.9 Environmental Matters.
(a) To the Knowledge of Southwest, except as disclosed in Section 5.9 of
the Southwest Disclosure Memorandum, each Southwest Company, its Participation
Facilities, and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Southwest.
(b) Except as disclosed in Section 5.9 of the Southwest Disclosure
Memorandum, to the Knowledge of Southwest, there is no Litigation pending or
threatened before any court, governmental agency, or authority or other forum in
which any Southwest Company or any of its Loan Properties or Participation
Facilities (or any Southwest Company in respect of any such Loan Property or
Participation Facility) has been or, with respect to threatened Litigation, may
be named as a defendant or potentially responsible party (i) for alleged
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noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release into the environment of any Hazardous Material, whether
or not occurring at, on, under, or involving any of its Loan Properties or
Participation Facilities, except for such Litigation pending or threatened that
is not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Southwest.
(c) To the Knowledge of Southwest, except as disclosed in Section 5.9 of
the Southwest Disclosure Memorandum, there is no reasonable basis for any
Litigation of a type described above in subsection (b), except such as is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Southwest.
(d) To the Knowledge of Southwest, except as disclosed in Section 5.9 of
the Southwest Disclosure Memorandum, there have been no releases of Hazardous
Material in, on, under, or affecting any Participation Facility or Loan Property
of a Southwest Company, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Southwest.
5.10 Compliance With Laws. Southwest is duly registered as a bank holding
company under the BHC Act. Each Southwest Company has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Southwest, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Southwest. None
of the Southwest Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Southwest; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any Southwest Company is
not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Southwest, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Southwest, or (iii) requiring any
Southwest Company to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment, or memorandum of
understanding, or 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 credit or reserve policies, its
management, or the payment of dividends.
5.11 Labor Relations. No Southwest Company is the subject of any
Litigation asserting that it or any other Southwest Company has committed an
unfair labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it or any other Southwest Company to
bargain with any labor organization as to wages or conditions of employment, nor
is there any strike or other labor dispute involving any Southwest Company,
pending or threatened, or to the Knowledge of Southwest, is there any activity
involving any Southwest Company's employees seeking to certify a collective
bargaining unit or engaging in any other organization activity.
5.12 Employee Benefit Plans.
(a) Southwest has disclosed in Section 5.12 of the Southwest Disclosure
Memorandum, and has delivered or made available to FNB prior to the execution of
this Agreement copies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health plans,
all life insurance plans, and all other employee benefit plans or fringe benefit
plans, including "employee benefit plans" (as that term is defined in Section
3(3) of ERISA), currently adopted, maintained by, sponsored in whole or in part
by, or contributed to by any Southwest Company or ERISA Affiliate (as defined
below) thereof for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries and under which
employees,
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retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "Southwest Benefit
Plans"). Any of the Southwest Benefit Plans which is an "employee pension
benefit plan" (as that term is defined in Section 3(2) of ERISA), is referred to
herein as a "Southwest ERISA Plan." Each Southwest ERISA Plan which is also a
"defined benefit plan" (as defined in Section 4140) of the Internal Revenue
Code) is referred to herein as a "Southwest Pension Plan." No Southwest Pension
Plan is or has been a multiemployer plan within the meaning of Section 3(37) of
ERISA.
(b) Except as disclosed in Section 5.12 of the Southwest Disclosure
Memorandum, all Southwest Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Southwest, and each Southwest ERISA
Plan which is intended to be qualified under Section 401(a) of the Internal
Revenue Code has received a favorable determination letter from the Internal
Revenue Service, and Southwest is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. Except as
disclosed in Section 5.12 of the Southwest Disclosure Memorandum, to the
Knowledge of Southwest, no Southwest Company has engaged in a transaction with
respect to any Southwest Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject any Southwest Company
to a Tax imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA in amounts which are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Southwest.
(c) Except as disclosed in Section 5.12 of the Southwest Disclosure
Memorandum, no Southwest Pension Plan has any "unfunded current liability" (as
that term is defined in Section 302(d)(8)(A) of ERISA) and the fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements. Except as disclosed in Section 5.12 of the
Southwest Disclosure Memorandum, since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any Southwest Pension Plan, (ii) no change in the actuarial assumptions with
respect to any Southwest Pension Plan, and (iii) no increase in benefits under
any Southwest Pension Plan as a result of plan amendments or changes in
applicable Law which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Southwest or materially adversely affect
the funding status of any such plan. Neither any Southwest Pension Plan nor any
"single- employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Southwest Company, or the
single-employer plan of any entity which is considered one employer with
Southwest under Section 4001 of ERISA or Section 414 of the Internal Revenue
Code or Section 302 of ERISA (whether or not waived) (an "ERISA Affiliate") has
an "accumulated funding deficiency" within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA, which is reasonably likely to
have a Material Adverse Effect on Southwest. No Southwest Company has provided,
or is required to provide, security to a Southwest Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Internal Revenue Code.
(d) Within the six-year period preceding the Effective Time, no Liability
under Subtitle C or D of Title IV of ERISA has been or is expected to be
incurred by any Southwest Company with respect to any ongoing, frozen, or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a Material Adverse
Effect on Southwest. No Southwest Company has incurred any withdrawal Liability
with respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a Material Adverse Effect on Southwest.
No notice of a "reportable event," within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived, has been
required to be filed for any Southwest Pension Plan or by any ERISA Affiliate
within the 12-month period ending on the date hereof
(e) Except as disclosed in Section 5.12 of the Southwest Disclosure
Memorandum, no Southwest Company has any Liability for retiree health and life
benefits under any of the Southwest Benefit Plans and there are no restrictions
on the rights of such Southwest Company to amend or terminate any such plan
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without incurring any Liability thereunder, which Liability is reasonably likely
to have a Material Adverse Effect on Southwest.
(f) Except as disclosed in Section 5.12 of the Southwest Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Southwest Company
from any Southwest Company under any Southwest Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Southwest Benefit Plan, or
(iii) result in any acceleration of the time of payment or vesting of any such
benefit, where such payment, increase, or acceleration is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Southwest.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any Southwest Company and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the Southwest Financial Statements to the extent
required by and in accordance with GAAP.
5.13 Material Contracts. Except as disclosed in Section 5.13 of the
Southwest Disclosure Memorandum, none of the Southwest Companies, nor any of
their respective Assets, businesses, or operations, is a party to, or is bound
or affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $100,000, (ii) any Contract
relating to the borrowing of money by any Southwest Company or the guarantee by
any Southwest Company of any such obligation (other than Contracts evidencing
deposit liabilities, purchases of federal funds, fully-secured repurchase
agreements, and Federal Home Loan Bank advances of depository institution
Subsidiaries, trade payables, and Contracts relating to borrowings or guarantees
made in the ordinary course of business), and (iii) any other Contract or
amendment thereto that would be required to be filed as an exhibit to a Form
10-KSB filed by Southwest with the SEC as of the date of this Agreement that has
not been filed as an exhibit to Southwest's Form 10-KSB filed for the fiscal
year ended December 31, 1994, or in another SEC Document and identified to FNB
(together with all Contracts referred to in Sections 5.8 and 5.12(a) of this
Agreement, the "Southwest Contracts"). With respect to each Southwest Contract
and except as disclosed in Section 5.13 of the Southwest Disclosure Memorandum:
(i) the Contract is in full force and effect; (ii) no Southwest Company is in
Default thereunder, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Southwest; (iii)
no Southwest Company has repudiated or waived any material provision of any such
Contract; and (iv) no other party to any such Contract is, to the Knowledge of
Southwest, in Default in any respect, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Southwest, or has repudiated or waived any material provision
thereunder. Except for Federal Home Loan Bank advances, all of the indebtedness
of any Southwest Company for money borrowed is prepayable at any time by such
Southwest Company without penalty or premium.
5.14 Legal Proceedings. Except as disclosed in Section 5.14 of the
Southwest Disclosure Memorandum, there is no Litigation instituted or pending,
or, to the Knowledge of Southwest, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any Southwest Company, or against
any Asset, employee benefit plan, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Southwest, nor are there any Orders of any Regulatory Authorities,
other governmental authorities, or arbitrators outstanding against any Southwest
Company, that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Southwest. Section 5.14 of the Southwest Disclosure
Memorandum includes a summary report of all Litigation as of the date of this
Agreement to which any Southwest Company is a party and which names a Southwest
Company as a defendant or cross-defendant and where the estimated maximum
exposure to be $100,000 or more.
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5.15 Reports. Since January 1, 1992, or the date of organization if later,
each Southwest Company has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with any Regulatory Authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Southwest).
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
5.16 Statements True and Correct. None of the information supplied or to
be supplied by any Southwest Company or any Affiliate thereof for inclusion in
the Registration Statement to be filed by FNB with the SEC will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any Southwest Company or any Affiliate thereof for inclusion in the
Proxy Statement to be mailed to Southwest's shareholders in connection with the
Shareholders' Meeting, and any other documents to be filed by a Southwest
Company or any Affiliate thereof with the SEC or any other Regulatory Authority
in connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the shareholders of Southwest, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Shareholders' Meeting, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Shareholders' Meeting. All
documents that any Southwest Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
5.17 Accounting, Tax and Regulatory Matters. No Southwest Company or any
Affiliate thereof has taken or agreed to take any action or has any Knowledge of
any fact or circumstance that is reasonably likely to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the last sentence of such Section.
5.18 State Takeover Laws. Each Southwest Company has taken all necessary
action to exempt the transactions contemplated by this Agreement from any
applicable "moratorium," "control share," "fair price," "business combination,"
or other anti-takeover laws and regulations of the State of Florida
(collectively, "Takeover Laws").
5.19 Charter Provisions. Each Southwest Company has taken all action so
that the entering into of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement do not and will not result
in any super-majority voting requirement or the grant of any rights to any
Person under the Articles of Incorporation, Bylaws, or other governing
instruments of any Southwest Company or restrict or impair the ability of FNB or
any of its Subsidiaries to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of any Southwest Company that may be
directly or indirectly acquired or controlled by it.
5.20 Derivatives Contracts. Except as disclosed in Section 5.20 of the
Southwest Disclosure Memorandum, neither Southwest nor any of its Subsidiaries
is a party to or has agreed to enter into an exchange-traded or over-the-counter
swap, forward, future, option, cap, floor, or collar financial contract, or any
other interest rate or foreign currency protection contract not included on its
balance sheet which is a financial derivative
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contract (including various combinations thereof) (each a "Derivatives
Contract"), except for those Derivatives Contracts set forth in Section 5.20 of
the Southwest Disclosure Memorandum.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF FNB
FNB hereby represents and warrants to Southwest as follows:
6.1 Organization, Standing, and Power. FNB is a corporation duly
organized, validly existing, and in good standing under the Laws of the
Commonwealth of Pennsylvania, and has the corporate power and authority to carry
on its business as now conducted and to own, lease, and operate its material
Assets. FNB is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FNB.
6.2 Authority; No Breach By Agreement.
(a) FNB has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of FNB. This Agreement
represents a legal, valid, and binding obligation of FNB, enforceable against
FNB in accordance with its terms (except in all cases as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by FNB, nor the
consummation by FNB of the transactions contemplated hereby, nor compliance by
FNB with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of FNB's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any FNB Company under, any
Contract or Permit of any FNB Company, where such Default or Lien, or any
failure to obtain such Consent, is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on FNB, or, (iii) subject to receipt of
the requisite Consents referred to in Section 9.1(b) of this Agreement, violate
any Law or Order applicable to any FNB Company or any of their respective
material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the Nasdaq, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on FNB, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
FNB of the Merger and the other transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of FNB consists of
20,000,000 shares of FNB Common Stock, of which 8,611,814 shares were issued and
outstanding as of December 31, 1995 and (ii) 20,000,000 shares of FNB Preferred
Stock, of which 451,638 shares were issued and outstanding as of December 31,
1995. All of the issued and outstanding shares of FNB Capital Stock are, and all
of the shares of FNB Common Stock to be issued in exchange for shares of
Southwest Common Stock upon consummation of the Merger, when issued in
accordance with the terms of this Agreement, will be, duly and validly issued
and outstanding and fully paid and nonassessable under the PBCL. None of the
outstanding shares of FNB Capital
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Stock has been, and none of the shares of FNB Common Stock to be issued in
exchange for shares of Southwest Common Stock upon consummation of the Merger
will be, issued in violation of any preemptive rights of the current or past
shareholders of FNB.
6.4 SEC Filings; Financial Statements.
(a) FNB has filed and made available to Southwest all forms, reports, and
documents required to be filed by FNB with the SEC since December 31, 1992,
other than registration statements on Forms S-4 and S-8 (collectively, the "FNB
SEC Reports"). The FNB SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the 1933 Act and the 1934
Act, as the case may be, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated in such FNB SEC Reports or
necessary in order to make the statements in such FNB SEC Reports, in light of
the circumstances under which they were made, not misleading.
(b) Each of the FNB Financial Statements (including, in each case, any
related notes) contained in the FNB SEC Reports, including any FNB SEC Reports
filed after the date of this Agreement until the Effective Time, complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC), and fairly
presented the consolidated financial position of FNB and its Subsidiaries as at
the respective dates and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount.
6.5 Absence of Certain Changes or Events. Since September 30, 1995, except
as disclosed in the FNB Financial Statements delivered prior to the date of this
Agreement, (i) there have been no events, changes or occurrences which have had,
or are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FNB, and (ii) the FNB Companies have not taken any action, or
failed to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result in
a material breach or violation of any of the covenants and agreements of FNB
provided in Article 7 of this Agreement.
6.6 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of the FNB
Companies have been timely filed or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or before December 31,
1995, and on or before the date of the most recent fiscal year end immediately
preceding the Effective Time, except to the extent that all such failures to
file, taken together, are not reasonably likely to have a Material Adverse
Effect on FNB, and all Tax Returns filed are complete and accurate in all
material respects. All Taxes shown on filed Tax Returns have been paid. There is
no audit examination, deficiency, or refund Litigation with respect to any Taxes
that is reasonably likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on FNB, except as
reserved against in the FNB Financial Statements delivered prior to the date of
this Agreement. All Taxes and other Liabilities due with respect to completed
and settled examinations or concluded Litigation have been paid.
(b) Adequate provision for any Taxes due or to become due for any of the
FNB Companies for the period or periods through and including the date of the
respective FNB Financial Statements has been made and is reflected on such FNB
Financial Statements.
(c) Deferred Taxes of the FNB Companies have been adequately provided for
in the FNB Financial Statements.
6.7 Compliance With Laws. FNB is duly registered as a bank holding company
under the BHC Act. Each FNB Company has in effect all Permits necessary for it
to own, lease, or operate its material Assets and to carry on its business as
now conducted, except for those Permits the absence of which are not reasonably
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likely to have, individually or in the aggregate, a Material Adverse Effect on
FNB, and there has occurred no Default under any such Permit, other than
Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FNB. No FNB Company:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FNB; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any FNB Company is not in
compliance with any of the Laws or Orders which such governmental authority
or Regulatory Authority enforces, where such noncompliance is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on FNB, (ii) threatening to revoke any Permits, the revocation of which is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FNB, or (iii) requiring any FNB Company to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, commitment, or memorandum of understanding, or 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 credit or reserve policies, its management or the payment of dividends.
6.8 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of FNB, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any FNB Company, or against any Asset, interest,
or right of any of them, that is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on FNB, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any FNB Company, that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FNB.
6.9 Reports. Since January 1, 1992, or the date of organization if later,
each FNB Company has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with Regulatory Authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FNB). As of their
respective dates, each of such reports and documents, including the financial
statements, exhibits, and schedules thereto, complied in all material respects
with all applicable Laws. As of its respective date, each such report and
document did not, in all material respects, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
6.10 Statements True and Correct. None of the information supplied or to
be supplied by any FNB Company or any Affiliate thereof for inclusion in the
Registration Statement to be filed by FNB with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any FNB Company or any Affiliate thereof for inclusion in the Proxy
Statement to be mailed to Southwest's shareholders in connection with the
Shareholders' Meeting, and any other documents to be filed by any FNB Company or
any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the shareholders of Southwest, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Shareholders' Meeting, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Shareholders' Meeting. All
documents that any FNB Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
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6.11 Accounting, Tax and Regulatory Matters. No FNB Company or any
Affiliate thereof has taken or agreed to take any action or has any Knowledge of
any fact or circumstance that is reasonably likely to (i) prevent the
transactions contemplated hereby, including the Merger, from qualifying as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
6.12 Environmental Matters.
(a) To the Knowledge of FNB, except as disclosed in Section 6.12 of the FNB
Disclosure Memorandum, each FNB Company, its Participation Facilities, and its
Loan Properties are, and have been, in compliance with all Environmental Laws,
except for violations which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on FNB.
(b) Except as disclosed in Section 6.12 of the FNB Disclosure Memorandum,
there is no Litigation pending, or, to the Knowledge of FNB, threatened before
any court, governmental agency, or authority or other forum in which any FNB
Company or any of its Loan Properties or Participation Facilities (or any FNB
Company in respect of any such Loan Property or Participation Facility) has been
or, with respect to threatened Litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material, whether or not occurring at, on, under,
or involving any of its Loan Properties or Participation Facilities, except for
such Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on FNB.
(c) To the Knowledge of FNB, except as disclosed in Section 6.12 of the FNB
Disclosure Memorandum, there is no reasonable basis for any Litigation of a type
described above in subsection (b), except such as is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on FNB.
(d) To the Knowledge of FNB, except as disclosed in Section 6.12 of the FNB
Disclosure Memorandum, there have been no releases of Hazardous Material in, on,
under, or affecting any Participation Facility or Loan Property of a FNB
Company, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on FNB.
6.13 Derivatives Contracts. Neither FNB nor any of its Subsidiaries is a
party to or has agreed to enter into a Derivatives Contract, except for those
Derivatives Contracts set forth in Section 6.13 of the FNB Disclosure
Memorandum.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Southwest. Unless the prior written consent
of FNB shall have been obtained, and except as otherwise expressly contemplated
herein, Southwest shall and shall cause each of its Subsidiaries to (i) operate
its business only in the usual, regular, and ordinary course, (ii) preserve
intact its business organization and Assets and maintain its rights and
franchises, (iii) use its reasonable efforts to maintain its current employee
relationships, and (iv) take no action which would (a) adversely affect the
ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentence of Section 9.1(b) of this Agreement, or (b)
adversely affect the ability of any Party to perform its covenants and
agreements under this Agreement.
7.2 Negative Covenants of Southwest. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement,
Southwest covenants and agrees that it will not do or agree or commit to do, or
permit any of its Subsidiaries to do or agree or commit to do, any of the
following without the
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prior written consent of the chief executive officer, president, chief financial
officer, or any executive vice president of FNB:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any Southwest Company or, except as expressly contemplated
by this Agreement; or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a Southwest Company to another
Southwest Company) in excess of an aggregate of $100,000 (for the Southwest
Companies on a consolidated basis) except in the ordinary course of the
business of Southwest Subsidiaries consistent with past practices (which
shall include, for Southwest Subsidiaries that are depository institutions,
creation of deposit liabilities, purchases of federal funds, advances from
the Federal Reserve Bank or Federal Home Loan Bank, and entry into
repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any Asset of any
Southwest Company of any Lien or permit any such Lien to exist (other than
in connection with deposits, repurchase agreements, bankers acceptances,
"treasury tax and loan" accounts established in the ordinary course of
business, the satisfaction of legal requirements in the exercise of trust
powers, and Liens in effect as of the date hereof that are disclosed in the
Southwest Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any Southwest Company, or declare or pay any dividend
or make any other distribution in respect of Southwest's capital stock; or
(d) except for this Agreement, or pursuant to the Stock Option
Agreement or pursuant to the exercise of stock options outstanding as of
the date hereof and pursuant to the terms thereof in existence on the date
hereof, or as disclosed in Section 7.2(d) of the Southwest Disclosure
Memorandum, issue, sell, pledge, encumber, authorize the issuance of, enter
into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any additional
shares of Southwest Common Stock or any other capital stock of any
Southwest Company, or any stock appreciation rights, or any option,
warrant, conversion, or other right to acquire any such stock, or any
security convertible into any such stock; or
(e) adjust, split, combine, or reclassify any capital stock of any
Southwest Company or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of Southwest Common
Stock, or sell, lease, mortgage, or otherwise dispose of or otherwise
encumber (x) any shares of capital stock of any Southwest Subsidiary
(unless any such shares of stock are sold or otherwise transferred to
another Southwest Company) or (y) any Asset other than in the ordinary
course of business for reasonable and adequate consideration; or
(f) except for purchases of United States Treasury securities or
United States Government agency securities, which in either case have
maturities of five years or less, purchase any securities or make any
material investment, either by purchase of stock or securities,
contributions to capital, Asset transfers, or purchase of any Assets, in
any Person other than a wholly owned Southwest Subsidiary, or otherwise
acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, (ii)
acquisitions of control by a depository institution Subsidiary in its
fiduciary capacity, or (iii) the creation of new wholly-owned Subsidiaries
organized to conduct or continue activities otherwise permitted by this
Agreement; or
(g) grant any increase in compensation or benefits to the employees or
officers of any Southwest Company, except in accordance with past practice
disclosed in Section 7.2(g) of the Southwest Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other
than pursuant to written policies or written Contracts in effect on the
date of this Agreement or as otherwise disclosed in Section 7.2(g) of the
Southwest Disclosure Memorandum; enter into or amend any severance
agreements with officers of any Southwest Company; grant any material
increase in fees or other increases in compensation or other benefits to
directors of any Southwest Company except in
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accordance with past practice disclosed in Section 7.2(g) of the Southwest
Disclosure Memorandum; or voluntarily accelerate the vesting of any stock
options or other stock-based compensation or employee benefits; or
(h) enter into or amend any employment Contract between any Southwest
Company and any Person (unless such amendment is required by Law) that the
Southwest Company does not have the unconditional right to terminate
without Liability (other than Liability for services already rendered), at
any time on or after the Effective Time; or
(i) except as disclosed in Section 7.2(i) of the Southwest Disclosure
Memorandum, adopt any new employee benefit plan of any Southwest Company or
make any material change in or to any existing employee benefit plans of
any Southwest Company other than any such change that is required by Law or
that, in the opinion of counsel, is necessary or advisable to maintain the
tax qualified status of any such plan; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(k) except as disclosed in Section 7.2(k) of the Southwest Disclosure
Memorandum, commence any Litigation other than in accordance with past
practice or settle any Litigation involving any Liability of any Southwest
Company for material money damages or restrictions upon the operations of
any Southwest Company; or
(l) except in the ordinary course of business, modify, amend, or
terminate any material Contract or waive, release, compromise, or assign
any material rights or claims; or
(m) except for transactions in the ordinary course of business
consistent with past practice, make any investment in excess of $100,000
either by purchase of stock or securities, contributions to capital,
property transfers, or purchase of any property or assets of any other
individual, corporation or other entity other than a wholly-owned
Subsidiary thereof; or
(n) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any individual, corporation or other entity
other than a direct or indirect wholly owned Subsidiary, or cancel, release
or assign any indebtedness to any such Person or any claims held by any
such Person, except in the ordinary course of business consistent with past
practice or pursuant to contracts or agreements in force at the date of
this Agreement; or
(o) agree to, or make any commitment to, take any of the actions
prohibited by this Section 7.2.
7.3 Covenants of FNB. From the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement, FNB covenants and
agrees that it shall (i) continue to conduct its business and the business of
its Subsidiaries in a manner designed in its reasonable judgment, to enhance the
long-term value of the FNB Common Stock and the business prospects of the FNB
Companies, and (ii) take no action which would (a) materially adversely affect
the ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentence of Section 9.1(b) of this Agreement, or (b)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement; provided, that the foregoing shall not
prevent any FNB Company from discontinuing or disposing of any of its Assets or
business if such action is, in the judgment of FNB, desirable in the conduct of
the business of FNB and its Subsidiaries. FNB further covenants and agrees that
it will not, without the prior written consent of the Chairman and Chief
Executive Officer of Southwest, which consent shall not be unreasonably
withheld, amend the Articles of Incorporation or Bylaws of FNB, in each case in
any manner adverse to the holders of Southwest Common Stock.
7.4 Adverse Changes In Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations,
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warranties, or covenants contained herein, and to use its reasonable efforts to
prevent or promptly to remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not material). As of their
respective dates, such reports filed with the SEC will comply in all material
respects with the Securities Laws and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder Approval. As soon
as practicable after execution of this Agreement, FNB shall file the
Registration Statement with the SEC, and shall use its reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act and take
any action required to be taken under the applicable state blue sky or
securities Laws in connection with the issuance of the shares of FNB Common
Stock upon consummation of the Merger. Southwest shall furnish all information
concerning it and the holders of its capital stock as FNB may reasonably request
in connection with such action. Southwest shall call a Shareholders' Meeting, to
be held on a date that is determined by the Parties to be a mutually desirable
date, which date shall be after the Registration Statement is declared effective
by the SEC, for the purpose of voting upon approval of this Agreement and such
other related matters as it deems appropriate. In connection with the
Shareholders' Meeting, (i) Southwest shall prepare and file with the SEC a Proxy
Statement and mail such Proxy Statement to its shareholders, (ii) the Parties
shall furnish to each other all information concerning them that they may
reasonably request in connection with such Proxy Statement, (iii) the Board of
Directors of Southwest shall recommend (subject to compliance with their
fiduciary duties as advised by counsel) to its shareholders the approval of this
Agreement, and (iv) the Board of Directors and officers of Southwest shall
(subject to compliance with their fiduciary duties as advised by counsel) use
their reasonable efforts to obtain such shareholders' approval.
8.2 Exchange Listing. Southwest shall use its reasonable best efforts to
list, prior to the record date for determining shareholders entitled to vote at
the Shareholders' Meeting, for trading on the Nasdaq as national market
securities, the shares of Southwest Common Stock.
8.3 Applications. FNB shall promptly prepare and file, and Southwest shall
cooperate in the preparation and, where appropriate, filing of, applications
with all Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents necessary to
consummate the transactions contemplated by this Agreement.
8.4 Filings With State Offices. Upon the terms and subject to the
conditions of this Agreement, FNB shall execute and file the Florida Certificate
of Merger with the Secretary of State of the State of Florida in connection with
the Closing.
8.5 Agreement As To Efforts To Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including using its reasonable efforts to lift or rescind any
Order adversely affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied
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the conditions referred to in Article 9 of this Agreement; provided, that
nothing herein shall preclude either Party from exercising its rights under this
Agreement. Each Party shall use, and shall cause each of its Subsidiaries to
use, its reasonable efforts to obtain all Consents necessary or desirable for
the consummation of the transactions contemplated by this Agreement.
8.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) In addition to the Parties' respective obligations under the
Confidentiality Agreements, each Party shall, and 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 Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and which
represents, or is reasonably likely to represent, either a material breach of
any representation, warranty, covenant, or agreement of the other Party or which
has had or is reasonably likely to have a Material Adverse Effect on the other
Party.
8.7 Press Releases. Prior to the Effective Time, Southwest and FNB shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby, no Southwest Company nor any Affiliate thereof
nor any Representatives thereof retained by any Southwest Company shall directly
or indirectly solicit any Acquisition Proposal by any Person. Except to the
extent necessary to comply with the fiduciary duties of Southwest's Board of
Directors as advised by Smith, Gambrell & Russell or other outside counsel
reasonably acceptable to FNB, no Southwest Company or any Affiliate or
Representative thereof shall furnish any nonpublic information that it is not
legally obligated to furnish or negotiate with respect to, any Acquisition
Proposal, but Southwest may communicate information about such an Acquisition
Proposal to its shareholders if and to the extent that it is required to do so
in order to comply with its legal obligations as advised by counsel. Southwest
shall promptly notify FNB orally and in writing in the event that it receives
any inquiry or proposal relating to any such transaction. Southwest shall (i)
immediately cease and cause to be terminated any existing activities,
discussions, or negotiations with any Persons conducted heretofore with respect
to any of the foregoing, and (ii) direct and use its reasonable efforts to cause
of all its Representatives not to engage in any of the foregoing.
8.9 Accounting and Tax Treatment. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for treatment as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code for federal
income tax purposes. Southwest undertakes and agrees to use its reasonable
efforts to cause the Merger, and to take no action that would cause the Merger
not, to qualify for pooling-of-interests accounting treatment.
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8.10 State Takeover Laws. Each Southwest Company shall take all necessary
steps to exempt the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of, any applicable Takeover
Laws.
8.11 Charter Provisions. Each Southwest Company shall take all necessary
action to ensure that the entering into of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby do not and will not
result in any super-majority voting requirements or the grant of any rights to
any Person under the Articles of Incorporation, Bylaws, or other governing
instruments of any Southwest Company or restrict or impair the ability of FNB or
any of its Subsidiaries to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of any Southwest Company that may be
directly or indirectly acquired or controlled by it.
8.12 Agreement of Affiliates. Southwest has disclosed in Section 8.12 of
the Southwest Disclosure Memorandum all Persons whom it reasonably believes are
"affiliates" of Southwest for purposes of Rule 145 under the 1933 Act. Southwest
shall use its reasonable efforts to cause each such Person to deliver to FNB not
later than 30 days prior to the Effective Time, a written agreement,
substantially in the form of Exhibit 2, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of Southwest Common
Stock held by such Person except as contemplated by such agreement or by this
Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of FNB Common Stock to be received by such Person upon consummation of
the Merger except in compliance with applicable provisions of the 1933 Act and
the rules and regulations thereunder and until such time as financial results
covering at least 30 days of combined operations of FNB and Southwest have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies. Shares of FNB Common Stock issued to such
affiliates of Southwest in exchange for shares of Southwest Common Stock shall
not be transferable until such time as financial results covering at least 30
days of combined operations of FNB and Southwest have been published within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies, regardless of whether each such affiliate has provided the written
agreement referred to in this Section 8.12 (and FNB shall be entitled to place
restrictive legends upon certificates for shares of FNB Common Stock issued to
affiliates of Southwest pursuant to this Agreement to enforce the provisions of
this Section 8.12). FNB shall not be required to maintain the effectiveness of
the Registration Statement under the 1933 Act for the purposes of resale of FNB
Common Stock by such affiliates.
8.13 Employee Benefits and Contracts. Following the Effective Time, FNB
shall provide generally to officers and employees of the Southwest Companies
employee benefits under employee benefit plans (other than stock option or other
plans involving the potential issuance of FNB Common Stock), on terms and
conditions which when taken as a whole are no less favorable than those
currently provided by Southwest or those currently provided by the FNB Companies
to their similarly situated officers and employees; provided, that, for a period
of 12 months after the Effective Time, FNB shall provide generally to officers
and employees of Southwest Companies severance benefits in accordance with the
policies of Southwest as disclosed in Section 8.13 of the Southwest Disclosure
Memorandum. For purposes of participation and vesting (but not benefit accrual
under any employee benefit plans of FNB and its subsidiaries other than the
Southwest Benefit Plans) under such employee benefit plans, the service of the
employees of the Southwest Companies prior to the Effective Time shall be
treated as service with a FNB Company participating in such employee benefit
plans. FNB shall, and shall cause its Subsidiaries to, honor in accordance with
their terms all employment, severance, consulting, and other compensation
Contracts disclosed in Section 8.13 of the Southwest Disclosure Memorandum
between any Southwest Company and any current or former director, officer, or
employee thereof, and all provisions for vested benefits or other vested amounts
earned or accrued through the Effective Time under the Southwest Benefit Plans;
provided, however, that all such Contracts shall have been amended prior to the
signing of this Agreement to provide that the Merger and the other transactions
contemplated by the Agreement shall not constitute a "change of control" or
otherwise give rise to any rights of acceleration, payment or other special
rights under any such Contracts.
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8.14 Indemnification.
(a) FNB shall indemnify, defend, and hold harmless the present and former
directors, officers, employees, and agents of the Southwest Companies (each, an
"Indemnified Party") against all Liabilities arising out of actions or omissions
occurring at or prior to the Effective Time (including the transactions
contemplated by this Agreement) to the full extent permitted under Florida Law
and by Southwest's Articles of Incorporation and Bylaws as in effect on the date
hereof, including provisions relating to advances of expenses incurred in the
defense of any Litigation. Without limiting the foregoing, in any case in which
approval by FNB is required to effectuate any indemnification, FNB shall direct,
at the election of the Indemnified Party, that the determination of any such
approval shall be made by independent counsel mutually agreed upon between FNB
and the Indemnified Party.
(b) If FNB or any of its successors or assigns shall consolidate with or
merge into any other Person and shall not be the continuing or surviving Person
of such consolidation or merger or shall transfer all or substantially all of
its assets to any Person, then and in each case, proper provision shall be made
so that the successors and assigns of FNB shall assume the obligations set forth
in this Section 8.14.
(c) The provisions of this Section 8.14 are intended to be for the benefit
of and shall be enforceable by, each Indemnified Party, his or her heirs and
representatives.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(a) Shareholder Approval. The shareholders of Southwest shall have
approved this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by
Law.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including requirements relating to
the raising of additional capital or the disposition of Assets) which in
the reasonable judgment of the Board of Directors of either Party would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, such Party would not, in its reasonable judgment,
have entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any and
all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b) of this Agreement or listed in Section 9.1(c)
of the Southwest Disclosure Memorandum) or for the preventing of any
Default under any Contract or Permit of such Party which, if not obtained
or made, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on such Party.
(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order (whether temporary,
preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions contemplated
by this Agreement.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceeding, or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated
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and be continuing, and all necessary approvals under state securities Laws
or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of FNB Common Stock issuable pursuant to the Merger shall have been
received.
(f) Pooling of Interests. Ernst & Young LLP, FNB's independent public
accountants, shall have issued a letter dated as of the Effective Time, to
Southwest and FNB, respectively, to the effect that the Merger shall be
accounted for as a pooling-of-interests under GAAP.
(g) Tax Matters. Each Party shall have received a written opinion or
opinions from counsel and in a form reasonably satisfactory to such Parties
(the "Tax Opinion"), to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code and (ii) the exchange in the Merger of Southwest Common Stock for FNB
Common Stock will not give rise to gain or loss to the shareholders of
Southwest with respect to such exchange (except to the extent of any cash
received). In rendering such Tax Opinion, such counsel shall be entitled to
rely upon representations of officers of Southwest and FNB reasonably
satisfactory in form and substance to such counsel.
9.2 Conditions to Obligations of FNB. The obligations of FNB to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by FNB pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of Southwest set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of Southwest set forth in Section 5.3 of this Agreement shall be
true and correct (except for inaccuracies which are de minimus in amount).
The representations and warranties of Southwest set forth in Sections 5.17,
5.18, 5.19, and 5.20 of this Agreement shall be true and correct in all
material respects. There shall not exist inaccuracies in the
representations and warranties of Southwest set forth in this Agreement
(including the representations and warranties set forth in Sections 5.3,
5.17, 5.18, 5.19, and 5.20) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on Southwest; provided that, for purposes of this sentence only,
those representations and warranties which are qualified by references to
Immaterial" or "Material Adverse Effect" shall be deemed not to include
such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Southwest to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) Certificates. Southwest shall have delivered to FNB (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Section 9.2(a) and 9.2(b) of
this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Southwest's Board of Directors and shareholders
evidencing the taking of all corporate action necessary to authorize the
execution, delivery, and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such
reasonable detail as FNB and its counsel shall request.
(d) Affiliates Agreements. FNB shall have received from each
affiliate of Southwest the affiliates letter referred to in Section 8.12 of
this Agreement, to the extent necessary to assure in the reasonable
judgment of FNB that the transactions contemplated hereby will qualify for
pooling-of-interests accounting treatment.
(e) Cumulative Earnings. As of the close of the most recent calendar
quarter (or if the Effective Time shall occur within 20 days following the
close of a calendar quarter, then as of the next preceding calendar
quarter) cumulative earnings reported by Southwest since December 31, 1995
shall be greater
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than or equal to the amount calculated by multiplying (a) $500,000 by (b)
the number of full calendar quarters which have passed since December 31,
1995 and for which earnings have been reported as of such date. As used in
this Section "reported" means reported on Southwest's financial statements
prepared in accordance with GAAP applied on a basis consistent with
Southwest's financial statements for the years ended December 31, 1995 and
1994, as included in Southwest's reports to the Securities and Exchange
Commission on Forms 10-K-SB or Southwest's annual reports to shareholders
subject to any subsequent adjustments required to be reported whether or
not such adjustments have, as yet, been reported with the following
adjustments, if any, net of related income tax savings and costs, which
were reflected in net income for the relevant period(s) added back into or
deducted from net income for the applicable period: (i) investment banking
expenses, outside legal and accounting fees, or other costs (including
severance and extraordinary restructuring costs) and expenses associated
with or resulting from the Merger, (ii) gains or losses on sales of assets
outside of the ordinary course of business, (iii) any expense related to
the exercise of options or the lapses of restrictions on restricted stock;
and (iv) any other expenses which are incurred in connection with the
transactions contemplated by this Agreement upon which FNB and Southwest
shall mutually agree.
9.3 Conditions to Obligations of Southwest. The obligations of Southwest
to perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Southwest pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of FNB set forth
in this Agreement shall be assessed as of the date of this Agreement and as
of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of FNB set forth in Section 6.3 of this Agreement shall be true
and correct (except for inaccuracies which are de minimus in amount). The
representations and warranties of FNB set forth in Section 6.11 of this
Agreement shall be true and correct in all material respects. There shall
not exist inaccuracies in the representations and warranties of FNB set
forth in this Agreement (including the representations and warranties set
forth in Sections 6.3 and 6.11) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on FNB; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" shall be deemed not to include such
qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of FNB to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
material respects.
(c) Certificates. FNB shall have delivered to Southwest (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Section 9.3(a) and 9.3(b) of
this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by FNB's Board of Directors evidencing the taking
of all corporate action necessary to authorize the execution, delivery, and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Southwest and its
counsel shall request.
(d) Fairness Opinion. Southwest shall have received from The
Robinson-Humphrey Company, Inc. a letter, dated not more than five business
days prior to the date of the Proxy Statement, to the effect that, in the
opinion of such firm, the Exchange Ratio is fair, from a financial point of
view, to the holders of Southwest Common Stock.
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ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the shareholders of
Southwest, this Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) By mutual consent of the Board of Directors of FNB and the Board
of Directors of Southwest; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Southwest and Section
9.3(a) in the case of FNB or in material breach of any covenant or other
agreement contained in this Agreement) in the event of an inaccuracy of any
representation or warranty of the other Party contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such inaccuracy and which
inaccuracy would provide the terminating Party the ability to refuse to
consummate the Merger under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Southwest and Section 9.3(a) of
this Agreement in the case of FNB; or
(c) By the Board of Directors of either Party 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 30 days
after the giving of written notice to the breaching Party of such breach;
or
(d) By the Board of Directors of either Party in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, or (ii) the
shareholders of Southwest fail to vote their approval of this Agreement and
the transactions contemplated hereby as required by the FBCA at the
Shareholders' Meeting where the transactions were presented to such
shareholders for approval and voted upon; or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by July 31, 1997, if the failure to
consummate the transactions contemplated hereby on or before such date is
not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Southwest and Section
9.3(a) in the case of FNB or in material breach of any 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 by the date specified in Section
10.1(e) of this Agreement; or
(g) By Southwest, if its Board of Directors determines by a vote of a
majority of the members of its entire Board of Directors, at any time
during the ten-day period commencing two days after the Determination Date,
if the Designated Price on the Determination Date of shares of FNB Common
Stock shall be less than $19.00; subject, however, to the following four
sentences. If Southwest refuses to consummate the Merger pursuant to this
Section 10.1(g), it shall give prompt written notice thereof to FNB;
provided, that such notice of election to terminate may be withdrawn at any
time within the aforementioned ten-day period. During the five-day period
commencing with its receipt of such notice, FNB shall have the option,
subject to Southwest's written agreement, to elect to increase the Exchange
Ratio to equal the quotient obtained by dividing (1) the product of $19.00
and the Exchange Ratio (as then in effect) by (2) the Designated Price. If
FNB makes an election contemplated by the preceding sentence, within such
five-day period, it shall give prompt written notice to Southwest of such
election and the revised Exchange Ratio, whereupon, provided that Southwest
agrees to permit such an election
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by executing a written acceptance thereof, no termination shall occur
pursuant to this Section 10.1(g) and this Agreement shall remain in effect
in accordance with its terms (except as the Exchange Ratio shall have been
so modified), and any references in this Agreement to "Exchange Ratio"
shall thereafter be deemed to refer to the Exchange Ratio as adjusted
pursuant to this Section 10.1(g).
10.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, except that (i) the provisions
of this Section 10.2 and Article 11 and Section 8.6(b) of this Agreement shall
survive any such termination and abandonment, and (ii) a termination pursuant to
Sections 10.1(b), 10.1(c), or 10.1(f) of this Agreement shall not relieve the
breaching Party from Liability for an uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to such
termination; provided, further, that in the event of any termination of this
Agreement following the occurrence of an Initial Triggering Event (as defined in
the Stock Option Agreement), FNB shall be entitled to a cash payment from
Southwest in an amount equal to $1 million upon the occurrence of any Subsequent
Triggering Event (as defined in the Stock Option Agreement) within twelve months
following the date of such termination (or such longer period as shall exist
under the Stock Option Agreement until the occurrence of an Exercise Termination
Date (as defined in the Stock Option Agreement)). In the event this Agreement is
terminated as a result of FNB's failure to satisfy any of its representations,
warranties or covenants set forth herein, FNB shall reimburse Southwest for its
reasonable out-of-pocket expenses relating to the Merger in an amount not to
exceed $250,000.
10.3 Non-Survival of Representations and Covenants. The respective
representations and warranties of the Parties shall not survive the Effective
Time. All agreements of the Parties to this Agreement which by their terms are
to be performed following the Effective Time shall survive the Effective Time
until performed in accordance with their terms.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the assets of, such Party or any
of its Subsidiaries.
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger, including
the Exhibits delivered pursuant hereto and incorporated herein by
reference.
"Assets" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character, and
description, whether real, personal, or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
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"BHC Act" shall mean the Federal Bank Holding Company Act of 1956, as
amended.
"Confidentiality Agreements" shall mean those certain Confidentiality
Agreements, between Southwest and FNB entered into in connection with the
discussions relating to the Merger.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets, or business.
"Default" shall mean (i) any breach or violation of or default under
any Contract, Order, or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a
breach or violation of or default under any Contract, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate or revoke,
change the current terms of, or renegotiate, or to accelerate, increase, or
impose any Liability under, any Contract, Order, or Permit, where, in any
such event, such Default is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on a Party.
"Derivatives Contract" shall have the meaning set forth in Section
5.20 hereof.
"Designated Price" shall mean the average of the mid-point of the
closing high bid and low asked prices of FNB Common Stock in the
over-the-counter market, as reported by Nasdaq or such other trading system
or exchange upon which the FNB Common Stock shall then be traded for the
twenty consecutive full trading days in which such shares are traded ending
at the close of trading on the Determination Date.
"Determination Date" shall mean the day prior to the date on which the
Consent of the Board of Governors of the Federal Reserve System is
received.
"Effective Time" shall have the meaning set forth in Section 1.3
hereof.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et
seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
6901 et seq., and other Laws relating to emissions, discharges, releases,
or threatened releases of any Hazardous Material, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of any Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall have the meaning set forth in Section 5.12(c)
hereof.
"Exchange Agent" shall have the meaning set forth in Section 4.1
hereof.
"Exchange Ratio" shall have the meaning set forth in Section 3.1(c)
hereof.
"Exhibits" 1 and 2 shall mean the Exhibits so marked, copies of which
are attached to this Agreement. Such Exhibits are hereby incorporated by
reference herein and made a part hereof, and may be referred to in this
Agreement and any other related instrument or document without being
attached hereto.
"FNB" shall have the meaning set forth in the first paragraph hereof.
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"FNB Capital Stock" shall mean, collectively, the FNB Common Stock,
the FNB Preferred Stock, and any other class or series of capital stock of
FNB.
"FNB Common Stock" shall mean the $2 par value common stock of FNB.
"FNB Companies" shall mean, collectively, FNB and all FNB
Subsidiaries.
"FNB Disclosure Memorandum" shall mean the written information
entitled "FNB Corporation Disclosure Memorandum" delivered prior to the
date of this Agreement to Southwest describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made.
"FNB Financial Statements" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of FNB as of
September 30, 1995, and as of December 31, 1994 and 1993, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the six months ended
September 30, 1995, and for each of the three years ended December 31,
1994, 1993, and 1992, as filed by FNB in SEC Documents, and (ii) the
consolidated statements of condition of FNB (including related notes and
schedules, if any) and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to September 30, 1995.
"FNB Preferred Stock" shall mean the $10 par value preferred stock of
FNB.
"FNB SEC Reports" shall have the meaning set forth in Section 6.4(a)
hereof.
"FNB Subsidiaries" shall mean the Subsidiaries of FNB, which shall
include any corporation, bank, savings association, or other organization
acquired as a Subsidiary of FNB in the future and owned by FNB at the
Effective Time.
"FBCA" shall mean the Florida Business Corporation Act.
"Florida Certificate of Merger" shall mean the Certificate of Merger
to be executed by FNB and filed with the Secretary of State of the State of
Florida relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"Indemnified Party" shall have the meaning set forth in Section 8.14
hereof.
"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean the personal
knowledge of the chairman, president, chief financial officer, chief
accounting officer, chief credit officer, general counsel, any assistant or
deputy general counsel, or any senior or executive vice president of such
Person and the knowledge of any such persons obtained or which would have
been obtained from a reasonable investigation.
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"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities, or business, including those promulgated, interpreted,
or enforced by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including
costs of investigation, collection, and defense), claim, deficiency,
guaranty, or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention, or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, and (ii) for depository institution
Subsidiaries of a Party, pledges to secure deposits, and other Liens
incurred in the ordinary course of the banking business.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative or
other proceeding, or notice (written or oral) by any Person alleging
potential Liability or requesting information relating to or affecting a
Party, its business, its Assets (including Contracts related to it), or the
transactions contemplated by this Agreement, but shall not include regular,
periodic examinations of depository institutions and their Affiliates by
Regulatory Authorities.
"Loan Property" shall mean any property owned, leased, or operated by
the Party in question or by any of its Subsidiaries or in which such Party
or Subsidiary holds a security or other interest (including an interest in
a fiduciary capacity), and, where required by the context, includes the
owner or operator of such property, but only with respect to such property.
"Material" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"Material Adverse Effect" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that "Material
Adverse Effect" shall not be deemed to include the impact of (a) changes in
banking and similar Laws of general applicability or interpretations
thereof by courts or governmental authorities, (b) changes in GAAP or
regulatory accounting principles generally applicable to banks and their
holding companies, (c) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior informed consent of the other Party in
contemplation of the transactions contemplated hereby, (d) circumstances
affecting regional bank holding companies generally, and (e) the Merger and
compliance with the provisions of this Agreement on the operating
performance of the Parties.
"Merger" shall have the meaning set forth in Section 1.1 hereof.
"Merger Sub" shall have the meaning set forth in the first paragraph
hereof.
"Nasdaq" shall mean the Nasdaq Stock Market.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
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"Participation Facility" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"Party" shall mean either Southwest or FNB, and "Parties" shall mean
both Southwest and FNB.
"PBCL" shall mean the Pennsylvania Business Corporation Law.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
"Person" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"Proxy Statement" shall mean the proxy statement used by Southwest to
solicit the approval of its shareholders of the transactions contemplated
by this Agreement, which shall include the prospectus of FNB relating to
the issuance of the FNB Common Stock to holders of Southwest Common Stock.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by FNB
under the 1933 Act with respect to the shares of FNB Common Stock to be
issued to the shareholders of Southwest in connection with the transactions
contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of the Comptroller of
the Currency, the Federal Deposit Insurance Corporation, all state
regulatory agencies having jurisdiction over the Parties and their
respective Subsidiaries, the NASD, and the SEC.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant or other representative of a Person.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock
of a Person or by which a Person is or may be bound to issue additional
shares of its capital stock or other Rights.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meeting" shall mean the meeting of the shareholders of
Southwest to be held pursuant to Section 8.1 of this Agreement, including
any adjournment or adjournments thereof.
"Southwest" shall have the meaning set forth in the first paragraph
hereof.
"Southwest Benefits Plans" shall have the meaning set forth in Section
5.12(a) hereof.
"Southwest Common Stock" shall mean the $0.10 par value common stock
of Southwest.
"Southwest Companies" shall mean, collectively, Southwest and all
Southwest Subsidiaries.
"Southwest Contract" shall have the meaning set forth in Section 5.13.
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"Southwest Disclosure Memorandum" shall mean the written information
entitled "Southwest Corporation Disclosure Memorandum" delivered prior to
the date of this Agreement to FNB describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"Southwest ERISA Plan" shall have the meaning set forth in Section
5.12(a) hereof.
"Southwest Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of Southwest
as of September 30, 1995, and as of December 31, 1994 and 1993, and the
related statements of income, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) for the six months
ended September 30, 1995, and for each of the three fiscal years ended
December 31, 1994, 1993, and 1992, as filed by Southwest in SEC Documents,
and (ii) the consolidated balance sheets of Southwest (including related
notes and schedules, if any) and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to September 30, 1995.
"Southwest Pension Plan" shall have the meaning set forth in Section
5.12(a) hereof.
"Southwest Stock Plans" shall mean the existing stock option and other
stock-based compensation plans and warrant instruments of Southwest set
forth in Section 3.5 of the Southwest Disclosure Memorandum.
"Southwest Options" shall have the meaning set forth in Section 3.5(a)
hereof.
"Southwest SEC Reports" shall have the meaning set forth in Section
5.5(a) hereof.
"Southwest Subsidiaries" shall mean the Subsidiaries of Southwest,
which shall include the Southwest Subsidiaries described in Section 5.4 of
this Agreement and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of Southwest in the future and owned
by Southwest at the Effective Time.
"Stock Option Agreement" shall have the meaning set forth in the
Preamble hereof.
"Subsidiaries" shall mean all those corporations, banks, associations,
or other entities of which the entity in question owns or controls 50% or
more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its
parent; provided, there shall not be included any such entity acquired
through foreclosure or any such entity the equity securities of which are
owned or controlled in a fiduciary capacity.
"Surviving Corporation" shall mean Southwest as the surviving
corporation resulting from the Merger.
"Takeover Laws" shall have the meaning set forth in Section 5.18
hereof.
"Tax" or "Taxes" shall mean all federal, state, local, and foreign
taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs
duties, capital stock, paid-up capital, profits, withholding, Social
Security, single business and unemployment, disability, real property,
personal property, registration, ad valorem, value added, alternative or
add-on minimum, estimated, or other tax or governmental fee of any kind
whatsoever, imposed or required to be withheld by the United States or any
state, local, foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto.
"Tax Opinion" shall have the meaning set forth in Section 9.1(g)
hereof.
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"Taxable Period" shall mean any period prescribed by any governmental
authority, including the United States or any state, local, foreign
government or subdivision or agency thereof for which a Tax Return is
required to be filed or Tax is required to be paid.
"Tax Return" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
(b) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2, each of FNB and
Southwest shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration, and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel, except that each of FNB and Southwest shall bear and pay one-half of
the printing costs incurred in connection with the printing of the Registration
Statement and the Proxy Statement.
(b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
11.3 Brokers and Finders. Except for The Robinson-Humphrey Company, Inc.
as to Southwest and except for McConnell, Budd & Downes, Inc. as to FNB, each of
the Parties represents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by Southwest or FNB, each of Southwest
and FNB, as the case may be, agrees to indemnify and hold the other Party
harmless of and from any Liability in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except for the
Confidentiality Agreements). Nothing in this Agreement expressed or implied, is
intended to confer upon any Person, other than the Parties or their respective
successors, any rights, remedies, obligations, or liabilities under or by reason
of this Agreement, other than as provided in Sections 8.14 of this Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
shareholder approval of this Agreement has been obtained; provided, that after
any such approval by the holders of Southwest Common Stock, there shall be made
no amendment that reduces or modifies in any material respect the consideration
to be received by holders of Southwest Common Stock without the further approval
of such shareholders.
11.6 Waivers.
(a) Prior to or at the Effective Time, FNB, acting through its Board of
Directors, chief executive officer, president or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by Southwest, to waive or extend the time for the compliance or
fulfillment by Southwest of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of FNB
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of FNB.
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(b) Prior to or at the Effective Time, Southwest, acting through its Board
of Directors, chief executive officer, president or other authorized officer,
shall have the right to waive any Default in the performance of any term of this
Agreement by FNB, to waive or extend the time for the compliance or fulfillment
by FNB of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of Southwest under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing signed
by a duly authorized officer of Southwest.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
Southwest: 900 Goodlette Road
North Naples, Florida 33940
Telecopy Number: 813-435-7658
Attention: Chairman and Chief
Executive Officer
Copy to Counsel: Smith, Gambrell & Russell
3343 Peachtree Road, NE
Suite 1800
Atlanta, Georgia 30326
Telecopy Number: 404-264-2658
Attention: Robert Schwartz
FNB: Hermitage Square
Hermitage, PA 16148
Telecopy Number: 412-983-3515
Attention: Chairman and Chief
Executive Officer
Copy to Counsel: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy Number: (212) 403-2000
Attention: Craig M. Wasserman
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11.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the Commonwealth of Pennsylvania, without regard to
any applicable conflicts of Laws, except to the extent that the Laws of the
State of Florida relate to the consummation of the Merger.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
11.13 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
F.N.B. CORPORATION
By: /s/ PETER MORTENSEN
------------------------------------
Name: Peter Mortensen
Title: Chairman of the Board and
President
SOUTHWEST BANKS, INC.
By: /s/ GARY L. TICE
------------------------------------
Name: Gary L. Tice
Title: Chairman of the Board,
President,
and Chief Executive Officer
SOUTHWEST AFFILIATION CORPORATION
By: /s/ PETER MORTENSEN
------------------------------------
Name: Peter Mortensen
Title: President
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APPENDIX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated February 2, 1996, between F.N.B. Corporation,
a Pennsylvania corporation ("Grantee"), and Southwest Banks, Inc., a Florida
corporation ("Issuer").
W I T N E S S E T H :
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto prior to this Agreement; and
WHEREAS, as a condition and inducement to Grantee's pursuit of the
transactions contemplated by the Merger Agreement and in consideration therefor,
Issuer has agreed to grant Grantee the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 727,163 fully
paid and nonassessable shares of the common stock, $0.10 par value, of Issuer
("Common Stock"), at a price per share equal to $15 (as adjusted as set forth
herein, the "Option Price"); provided, that in no event shall the number of
shares for which this Option is exercisable exceed 19.9% of the issued and
outstanding shares of Common Stock. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, it equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option,
notwithstanding the provisions of the Confidentiality Agreements (as defined in
the Merger Agreement) in whole or part, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined). Each of the following shall be an
Exercise Termination Event: (i) the Effective Time (as defined in the Merger
Agreement) of the Merger; (ii) termination of the Merger Agreement in accordance
with the provisions thereof if such termination occurs prior to the occurrence
of an Initial Triggering Event; or (iii) the passage of 12 months (or such
longer period as provided in Section 10) after termination of the Merger
Agreement if such termination follows the occurrence of an Initial Triggering
Event. The term "Holder" shall mean the holder or holders of the Option. The
rights set forth in Sections 7 and 9 shall terminate when the right to exercise
the Option terminates (other than as a result of a complete exercise of the
Option) as set forth herein.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (as hereinafter defined) (each
an "Issuer Subsidiary"), without having received Grantee's prior written
consent, shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term "person" for
purposes of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (the "1934
Act"), and the rules and regulations thereunder) other than Grantee or any
of its Subsidiaries (each a "Grantee Subsidiary") or the Board of Directors
of Issuer shall have recommended that the shareholders of Issuer approve or
accept any Acquisition Transaction other than
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as contemplated by the Merger Agreement or this Agreement. For purposes of
this Agreement, (a) "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC")) of
Issuer, (y) a purchase, lease or other acquisition of all or substantially
all of the assets or deposits of Issuer or any Significant Subsidiary of
Issuer, or (z) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 15%
or more of the voting power of Issuer or any Significant Subsidiary of
Issuer, and (b) "Subsidiary" shall have the meaning set forth in Rule 12b-2
under the 1934 Act;
(ii) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 15% or
more of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the 1934 Act, and the rules and regulations
thereunder);
(iii) The shareholders of the Issuer shall not have approved the
transactions contemplated by the Merger Agreement at the meeting held for
that purpose or any adjustment thereof, or such meeting shall not have been
held or shall have been canceled prior to termination of the Merger
Agreement, in either case, after Issuer's Board of Directors shall have
withdrawn or modified (or publicly announced its intention to withdraw or
modify or interest in withdrawing or modifying) its recommendation that the
shareholders of Issuer approve the transactions contemplated by the Merger
Agreement, or Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed (or publicly announced its intention to authorize, recommend or
propose or interest in authorizing, recommending or proposing) an agreement
to engage in an Acquisition Transaction, with any person other than Grantee
or a Grantee Subsidiary;
(iv) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its shareholders to engage in
an Acquisition Transaction;
(v) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and such breach would entitle Grantee to terminate
the Merger Agreement; or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 25% or
more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice prior to an Exercise
Termination Event (the date of which being herein referred to as the "Notice
Date") specifying (i) the total number of shares it will purchase pursuant to
such exercise and (ii) a place and date not earlier than three business days nor
later than 10 business days from the Notice Date for the closing of such
purchase (the "Closing Date"); provided that if prior notification to or
approval of the Federal Reserve Board or any other regulatory agency is required
in connection with such purchase, the Holder shall promptly file the required
notice or application for approval, shall promptly notify the Issuer of
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such filing, and shall expeditiously process the same and the period of time
that otherwise would run pursuant to this sentence shall run instead from the
date on which any required notification periods have expired or been terminated
or such approvals have been obtained and any requisite waiting period or periods
shall have passed. Any exercise of the Option shall be deemed to occur on the
Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable thereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the Securities Act of 1933,
as amended. A copy of such agreement is on file at the principal office of
Issuer and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that: (1) the reference to the resale restrictions
of the Securities Act of 1933 (the "1933 Act") in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
Holder shall have delivered to Issuer a copy of a letter from the staff of the
SEC, or an opinion of counsel, in form and substance satisfactory to Issuer, to
the effect that such legend is not required for purposes of the 1933 Act; (ii)
the reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the proceeding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended, or any state or other federal banking law, prior approval
of or notice to the Federal Reserve Board or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such
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information to the Federal Reserve Board or such state or other federal
regulatory authority as they may require) in order to permit the Holder to
exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date.
5. The number of shares of Common Stock purchasable upon the exercise of
the Option shall be subject to adjustment from time to time as provided in this
Section 5.
(a) In the event of any change in Common Stock by reason of stock
dividends, splitups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted and proper provision shall be made so that, in the
event that any additional shares of Common Stock are to be issued or
otherwise become outstanding as a result of any such change (other than
pursuant to an exercise of the Option), the number of shares of Common
Stock that remain subject to the Option shall be increased so that, after
such issuance and together with shares of Common Stock previously issued
pursuant to the exercise of the Option (as adjusted on account of any of
the foregoing changes in the Common Stock), it equals 19.9% of the number
of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10) (whether on its own behalf or on behalf of any
subsequent holder of this Option (or part thereof) or any of the shares of
Common Stock issued pursuant hereto), promptly prepare, file and keep current a
registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its best efforts to cause such
registration statement to become effective and remain current in order to permit
the sale or other disposition of any shares of Common Stock issued upon total or
partial exercise of this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 120 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The Issuer shall bear the costs of such
registrations (including, but not limited to, attorneys' fees, printing costs
and filing fees). The foregoing notwithstanding, if, at the time of any request
by Grantee for registration of Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering of shares of Common
Stock, and if in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering the inclusion of the Option Shares would interfere with the successful
marketing of the shares of Common Stock offered by Issuer, the number of Option
Shares otherwise to be covered in the registration statement contemplated hereby
may be reduced; provided, however, that after any such required reduction the
number of Option Shares to be included in such offering for the
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account of the Holder shall constitute at least 25% of the total number of
shares to be sold by the Holder and Issuer in the aggregate; and provided
further, however, that if such reduction occurs, then the Issuer shall file a
registration statement for the balance as promptly as practical thereafter as to
which no reduction pursuant to this Section 6 shall be permitted or occur and
the Holder shall thereafter be entitled to one additional registration. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements for Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies.
7. (a) Upon the occurrence of a Repurchase Event (as hereinafter defined)
that occurs prior to an Exercise Termination Event, (i) at the request of the
Holder, delivered prior to an Exercise Termination Event (or such later period
as provided in Section 10), Issuer shall repurchase the Option from the Holder
at a price (the "Option Repurchase Price") equal to the amount by which (A) the
Market/Offer Price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to the occurrence of an Exercise Termination Event (or such
later period as provided in Section 10), Issuer shall repurchase such number of
the Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the market/offer price multiplied by
the number of Option Shares so designated. The term "Repurchase Event" shall
occur if (i) any person (the term "person" for purposes of this Agreement having
the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the 1934 Act,
and the rules and regulations thereunder) other than Grantee or any of its
Subsidiaries shall have acquired beneficial ownership, or the right to acquire
beneficial ownership, or any "group" (as such term is defined under the 1934
Act) shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of 50% or more of the then-outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder), or (ii) any of the transactions described in Section
8(a)(i), 8(a)(ii), or 8(a)(iii) shall be consummated. The term "Market/Offer
Price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the three-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or substantially all of Issuer's assets or deposits, the sum of the net
price paid in such sale for such assets or deposits, the sum of the net price
paid in such sale for such assets or deposits and the current market value of
the remaining net assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may be,
divided by the number of shares of Common Stock of Issuer outstanding at the
time of such sale. In determining the market/offer price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be,
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within ten business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
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(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within ten business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivery to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares whether in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Purchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering, and (ii) deliver, as appropriate, either (A) to the
Holder, a new Agreement evidencing the right of the Holder to purchase that
number of shares of Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
8. (a) In the event that, prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or a Grantee Subsidiary, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its or any Significant Subsidiary's assets or deposits to
any person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Issuer's assets or deposits (or the assets or deposits of a Significant
Subsidiary of Issuer).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined
in Section 7.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
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(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement (after giving effect for
such purpose to the provisions of Section 9), which agreement shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the three-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within ten business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within ten business
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days after the date on which the Substitute Option Issuer is no longer so
prohibited; provided, however, that if the Substitute Option Issuer is at any
time after delivery of a notice of repurchase pursuant to subsection (b) of this
Section 9 prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its best efforts to receive all required
regulatory and legal approvals as promptly as practicable in order to accomplish
such repurchase), the Substitute Option Holder or Substitute Share Owner may
revoke its notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of the prohibition, whereupon, in the
latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing.
10. The periods for exercise of certain rights under Sections 2, 6, 7, 9
and 12 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights (for so long as the Holder is using
commercially reasonable efforts to obtain such regulatory approvals), and for
the expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the 1934 Act by reason or
such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Issuer and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and dear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder following such
Subsequent Triggering Event; provided, however that until the date 30 days
following the date on which the Federal Reserve Board has approved applications
by Grantee to acquire the shares of Common Stock subject to the Option, Grantee
may not assign its rights under the Option except in (i) a widely dispersed
public distribution, (ii) a private placement in which no one party acquires the
right to purchase in excess of 2% of the voting shares of issuer, (iii) an
assignment to a single party (i.e., a broker or investment banker) for the
purpose of conducting a widely disbursed public distribution on Grantee's
behalf, or (iv) any other manner approved by the Federal Reserve Board.
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13. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation applying to the Federal Reserve
Board under the Bank Holding Company Act for approval to acquire the shares
issuable hereunder, but Grantee shall not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
14. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
15. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 5 hereof), it
is the express intention of Issuer to allow the Holder to acquire or to require
Issuer to repurchase such lesser number of shares as may be permissible, without
any amendment or modification hereof.
16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
17. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
18. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
19. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
20. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
21. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties had caused this Agreement to be
executed on its behalf by their officers thereunto duly authorized, all as the
date first above written.
F.N.B. CORPORATION
By: /s/ PETER MORTENSEN
------------------------------------
Name: Peter Mortensen
Title: Chairman of the Board and
President
SOUTHWEST BANKS, INC.
By: /s/ GARY L. TICE
------------------------------------
Name: Gary L. Tice
Title: Chairman of the Board,
President,
and Chief Executive Officer
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115
APPENDIX C
[THE ROBINSON-HUMPHREY COMPANY, INC. LETTERHEAD]
May 8, 1996
Board of Directors
Southwest Banks, Inc.
P.O. Box 413043
Naples, Florida 33941-3043
Gentlemen:
In connection with the proposed acquisition of Southwest Banks, Inc.
("Southwest") by FNB Corporation ("FNB") (the "Merger"), you have asked us to
render an opinion as to whether the financial terms of the Merger, as provided
in the Agreement and Plan of Merger dated as of February 2, 1996 among such
parties (the "Merger Agreement"), are fair, from a financial point of view, to
the stockholders of Southwest. Under the terms of the Merger, holders of all
outstanding shares of Southwest stock will receive consideration, including the
5.0% stock dividend paid by FNB on April 24, 1996, equal to 0.819 shares of FNB
common stock for each Southwest share held. Based on a closing price per share
for FNB of $21.3125, the implied purchase price per share as of February 1, 1996
was $17.4549 per Southwest share.
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 Merger Agreement, FNB's financial results for fiscal years 1990 through 1995
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.
We have reviewed similar information and data relating to Southwest
including its historical financial statements, for fiscal years 1990 through
1995.
In rendering this opinion, we have relied upon the accuracy of the Merger
Agreement, the financial information listed above, and other information
furnished to us by FNB and Southwest. We have not separately verified this
information nor have we made an independent evaluation of any of the assets or
liabilities of FNB and Southwest.
Based upon the foregoing and upon current market and economic conditions,
we are of the opinion that, from a financial point of view, the consideration as
provided in the Agreement and Plan of Merger is fair to the stockholders of
Southwest.
Very truly yours,
/s/ THE ROBINSON-HUMPHREY COMPANY, INC.
--------------------------------------------
THE ROBINSON-HUMPHREY COMPANY, INC.
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