1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 10, 1998
REGISTRATION NO. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
F.N.B. Corporation
(Exact name of Registrant as specified in its charter)
---------------
PENNSYLVANIA 6711 25-1255406
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation or Code Number)
Organization)
ONE F.N.B. BOULEVARD JOHN D. WATERS
HERMITAGE, PENNSYLVANIA 16148 F.N.B. CORPORATION
(724) 981-6000 ONE F.N.B. BOULEVARD
(Address, including zip code, and HERMITAGE, PENNSYLVANIA 16148
telephone number, including area code, (724) 981-6000
of registrant's principal executive offices) (Name, address, including
zip code and telephone number,
including area code,
of agent for service)
---------------
WITH COPIES TO:
MARLON F. STARR JOHN P. GREELEY
SMITH, GAMBRELL & RUSSELL, LLP SMITH, MACKINNON, GREELEY,
1230 PEACHTREE STREET, N.E. BOWDOIN & EDWARDS, P.A.
SUITE 3100 255 SOUTH ORANGE AVENUE, SUITE 800
ATLANTA, GEORGIA 30309 ORLANDO, FLORIDA 32801
(404) 815-3500 (407) 843-7300
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of the Registration Statement and
the effective time of the merger (the "Merger") of Guaranty Bank & Trust
Company, a Florida bank corporation ("Guaranty"), with and into Southwest
Interim Bank No. 5, N.A., a national banking association ("Interim"), as
described in the Agreement and Plan of Merger between F.N.B. Corporation and
Guaranty, dated as of August 20, 1998 and amended as of October 15, 1998 (the
"Merger Agreement") attached as Appendix A to the Proxy Statement/Prospectus
forming a part of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
CALCULATION OF REGISTRATION FEE
===============================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------
Common Stock, $2.00 par value 1,251,454 (2) $11,471,666(3) $3,189
===============================================================================================================
(1) Based upon an estimate of the maximum number of shares of common stock,
$2.00 par value, of F.N.B. (the "F.N.B. Common Stock") to be issued
pursuant to the Merger Agreement. In accordance with Rule 416, this
Registration Statement shall also register any additional shares of the
Registrant's common stock which may become issuable to prevent dilution
resulting from stock splits, stock dividends, or similar transactions
as provided by the agreement relating to the merger.
(2) Not applicable.
(3) Computed in accordance with Rule 457(f)(2) based on the book value as
of September 30, 1998 of the maximum number of securities (814,749
shares of common stock of Guaranty, par value $2.00) to be received by
F.N.B. in exchange for the securities registered hereby.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
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[LETTERHEAD OF GUARANTY BANK & TRUST COMPANY]
December __, 1998
Dear Guaranty Shareholder:
The Board of Directors of Guaranty Bank & Trust Company has approved a
merger in which Guaranty will become a wholly-owned subsidiary of F.N.B.
Corporation. Following the merger, Guaranty will be combined with FNB's
subsidiary West Coast Bank, which will become a national banking association and
remain a wholly-owned subsidiary of FNB.
In the merger, each share of your Guaranty common stock will be
exchanged for a number of shares of FNB common stock that will depend upon the
average price of FNB common stock over a ten day measuring period. If this
average price is greater than $28.00 and less than $38.375, you will receive a
number of shares of FNB common stock determined by dividing $43.00 by the
average price. If such average price is $38.375 or more, however, you will
receive 1.121 shares of FNB common stock for each Guaranty share, and if the
average price is $28.00 or less, you will receive 1.536 shares of FNB common
stock for each Guaranty share.
This merger will turn your Guaranty shares into shares of a
publicly-traded, larger and more diversified financial services company. The
combined company will benefit from the complementary strengths of Guaranty and
of FNB's subsidiaries.
The merger cannot be completed without the approval of Guaranty's
shareholders. We have scheduled a special meeting for our shareholders to vote
on the merger. YOUR VOTE IS IMPORTANT!
The date, time and place of the special meeting are:
JANUARY __, 1999, 10:00 A.M.
GUARANTY BANK & TRUST COMPANY
1340 EAST VENICE AVENUE
VENICE, FLORIDA 34292
Whether or not you plan to attend the special meeting, please vote by
completing the enclosed proxy card and mailing it to us. If you fail to return
your card, you will in effect vote against the merger.
This Proxy Statement/Prospectus provides detailed information about the
proposed merger. You should read it carefully.
I strongly support the acquisition of Guaranty by FNB and join with the
other members of the Board in enthusiastically recommending that you vote in
favor of the merger.
Very truly yours,
David F. Voigt
President and Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED THE SECURITIES TO BE ISSUED UNDER THIS PROXY
STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Proxy Statement/Prospectus dated December __, 1998
was first mailed to shareholders on or about December __, 1998.
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GUARANTY BANK & TRUST COMPANY
----------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY __, 1999
----------------------------
A special meeting of the shareholders of Guaranty Bank & Trust Company,
a Florida state banking corporation ("Guaranty"), will be held at 1340 East
Venice Avenue, Venice, Florida on _______, January __, 1999, at 10:00 o'clock
a.m., local time, for the following purposes:
(1) To approve the Agreement and Plan of Merger, dated as
of August 20, 1998, and amended as of October 15, 1998 (the "Merger
Agreement"), by and between F.N.B. Corporation, a Pennsylvania
corporation ("FNB"), and Guaranty, pursuant to which Guaranty will be
merged (the "Merger") with and into Southwest Interim Bank No. 5, N.A.,
a national banking association to be chartered under the laws of the
United States and to become a wholly-owned subsidiary of F.N.B.
("Interim"), and upon consummation of the merger, except as described
in the Proxy Statement-Prospectus, each issued and outstanding Guaranty
common share will be converted into the right to receive a number of
shares of FNB common stock determined in accordance with a formula
described in the Merger Agreement and further described in the Proxy
Statement-Prospectus;
(2) To transact such other business as may properly come
before the special meeting or any adjournments or postponements
thereof.
NOTICE OF RIGHT TO DISSENT. If the merger is completed and you strictly
follow the steps required by law, you will have the right to dissent from the
merger and receive the value of your shares determined in accordance with Title
12, Chapter 2, Section 215a of the United States Code ("12 U.S.C. Section
215a"). In addition to other requirements, you will not be entitled to any
rights under 12 U.S.C. Section 215a unless you either give Guaranty notice of
your intention to dissent at or prior to the special meeting or vote your
Guaranty shares against the merger and thereafter provide the required written
notice to Guaranty within 30 days of completion of the merger. See "THE MERGER
- -- Dissenters' Rights of Guaranty Shareholders" in the accompanying Proxy
Statement/Prospectus.
Only holders of record of Guaranty common shares at the close of
business on December __, 1998 (the "Record Date") will be entitled to notice of,
and to vote at, the special meeting and any adjournments or postponements
thereof. The affirmative vote of at least two-thirds of all Guaranty common
shares outstanding on the Record Date is required for approval of the Merger
Agreement and the transactions contemplated thereby, including the Merger.
THE BOARD OF DIRECTORS OF GUARANTY UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
David F. Voigt
President
December __, 1998
----------------------------
PLEASE COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED
PROXY CARD, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
----------------------------
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TABLE OF CONTENTS
PAGE
----
SUMMARY ................................................................................................1
Share Information and Market Price..............................................................4
Comparative Unaudited Per Share Data............................................................5
Selected Financial Data.........................................................................6
THE SPECIAL MEETING OF SHAREHOLDERS OF GUARANTY BANK & TRUST COMPANY.....................................8
General.........................................................................................8
Voting and Revocation of Proxies................................................................8
Solicitation of Proxies.........................................................................8
Record Date and Voting Rights...................................................................9
Recommendation of the Guaranty Board...........................................................10
THE MERGER..............................................................................................11
Description of the Merger......................................................................11
Conversion of Guaranty Options.................................................................12
Effective Time of the Merger...................................................................13
Exchange of Certificates.......................................................................13
Background of and Reasons for the Merger.......................................................14
Background of the Merger..............................................................14
Guaranty's Reasons for the Merger.....................................................17
FNB's Reasons for the Merger..........................................................18
Opinion of Guaranty' Financial Advisor.........................................................18
Conduct of Business Prior to the Merger........................................................22
Modification, Waiver and Termination...........................................................25
Expenses ......................................................................................26
Certain Federal Income Tax Consequences........................................................26
Interests of Certain Persons in the Merger.....................................................27
General...............................................................................27
Management Post-Merger; Guaranty Employment Agreements................................27
Change in Control Payments............................................................27
Indemnification.......................................................................27
Guaranty Options......................................................................28
Other Matters Relating to Guaranty Employee Benefit Plans.............................28
Accounting Treatment...........................................................................30
Bank Regulatory Matters........................................................................30
Federal Reserve Board and Office of the Comptroller of the Currency...................30
Status of Regulatory Approvals and Other Information..................................31
Restrictions on Resales by Affiliates..........................................................31
PRICE RANGE OF COMMON STOCK AND DIVIDENDS...............................................................32
Market Prices..................................................................................32
Dividends......................................................................................33
Voluntary Dividend Reinvestment and Stock Purchase Plan........................................33
INFORMATION ABOUT FNB...................................................................................34
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5
TABLE OF CONTENTS
PAGE
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INFORMATION ABOUT GUARANTY..............................................................................36
SELECTED FINANCIAL DATA OF GUARANTY.....................................................................41
GUARANTY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..........42
Nine Months Ended September 30, 1998...........................................................42
Comparison of Fiscal 1997, 1996 and 1995.......................................................44
DESCRIPTION OF FNB CAPITAL STOCK AND GUARANTY CAPITAL STOCK.............................................64
FNB Common Stock...............................................................................64
General...............................................................................64
Voting and Other Rights...............................................................64
Distributions.........................................................................64
FNB Preferred Stock............................................................................65
General...............................................................................65
FNB Series A Preferred Stock..........................................................65
FNB Series B Preferred Stock..........................................................65
Guaranty Common Shares.........................................................................65
General...............................................................................65
COMPARISON OF SHAREHOLDER RIGHTS........................................................................66
Removal of Directors; Filling Vacancies on the Board of Directors..............................66
Quorum of Shareholders.........................................................................66
Adjournment and Notice of Shareholder Meetings.................................................67
Call of Special Shareholder Meetings...........................................................67
Shareholder Consent in Lieu of Meeting.........................................................67
Dissenters' Rights.............................................................................68
Derivative Actions.............................................................................68
Dividends and Distributions....................................................................69
Director Qualifications and Number.............................................................69
Indemnification of Officers and Directors......................................................70
Director Liability.............................................................................71
Amendment of Articles of Incorporation and Bylaws..............................................72
Vote Required for Extraordinary Corporate Transactions.........................................72
Interested Shareholder Transactions............................................................73
Fiduciary Duty.................................................................................74
Provisions with Possible Anti-Takeover Effects.................................................75
LEGAL OPINIONS..........................................................................................76
EXPERTS ...............................................................................................77
OTHER MATTERS...........................................................................................77
WHERE YOU CAN FIND ADDITIONAL INFORMATION...............................................................78
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TABLE OF CONTENTS
PAGE
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INFORMATION INCORPORATED BY REFERENCE...................................................................78
INDEX OF GUARANTY'S FINANCIAL STATEMENTS...............................................................F-1
APPENDIX A -- Agreement and Plan of Merger.............................................................A-1
APPENDIX B -- Opinion of Allen C. Ewing & Co. .........................................................B-1
APPENDIX C -- Dissenters' Rights.......................................................................C-1
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SUMMARY
This summary may not contain all the information that is important to you. For a
more complete understanding of the merger, you should read this entire document
carefully, as well as the additional documents we refer to. (The term "we"
refers to both Guaranty and FNB together.)
QUESTIONS AND ANSWERS
ABOUT THE MERGER.
WHAT IS FNB?
FNB is a bank holding company that provides a full range of financial services,
primarily to consumers and small- to medium-sized businesses, through its
subsidiary banks and finance company. FNB operates in Pennsylvania, Florida,
Ohio and New York.
FNB's headquarters are at One F.N.B. Boulevard, Hermitage, Pennsylvania
16148, telephone (724) 981-6000.
WHY SHOULD GUARANTY BECOME A SUBSIDIARY OF FNB?
Guaranty believes that the merger will create value for its shareholders.
Guaranty also believes that FNB is offering a fair price to Guaranty
shareholders for their Guaranty common shares. The merger will turn your
Guaranty shares into shares of a publicly-traded, larger and more diversified
financial services company. Guaranty believes that the merger will enable it to
serve its customers better than its competitors by offering more diverse
products and services. In addition, since FNB subsidiaries are operated as
community banks, Guaranty believes that the same commitment to customer service
now existing at Guaranty will continue following the merger.
HAS GUARANTY RECEIVED A "FAIRNESS OPINION"?
Yes. Guaranty asked its financial advisor, Allen C. Ewing & Co. ("Ewing"), for
advice on the fairness of the amount that FNB is offering to Guaranty
shareholders in the merger. Ewing performed a number of analyses in which it
compared the companies' historical stock price and other measures of
performance, compared the financial terms of the merger to those of other
publicly announced transactions and estimated the relative values of FNB and
Guaranty based on past and anticipated future performance and the benefits that
could be expected from the merger. Ewing delivered its written opinion, dated as
of August 20, 1998 that the merger consideration is fair to Guaranty
shareholders from a financial point-of-view. Ewing reconfirmed that opinion on
_______________, 1998. This opinion is attached as Appendix B to the Proxy
Statement/Prospectus.
WHAT DOES GUARANTY'S BOARD OF DIRECTORS RECOMMEND?
Guaranty's Board of Directors has unanimously approved the merger and recommends
that Guaranty shareholders vote FOR the proposal to approve the merger
agreement.
WHAT WILL I RECEIVE FOR GUARANTY COMMON SHARES?
If the Guaranty shareholders approve the merger agreement and the merger is
consummated, each of your Guaranty common shares will be exchanged for a number
of shares of FNB common stock that will depend on the average price of FNB
common stock for a ten day period ("Designated Price"). This measuring period
will end on the sixth business day before the approval of the Merger by Guaranty
shareholders, or, if later, the day FNB receives the last required regulatory
consent for the merger.
If the Designated Price is greater than $28.00 and less than $38.375,
you will receive a number of shares of FNB common stock for each Guaranty share
determined by dividing $43.00 by the Designated Price and rounding to the third
decimal place. If the Designated Price is $38.375 or higher, you will receive
1.121 shares of FNB common stock for each Guaranty common share you own. If the
Designated Price is $28.00 or lower, you will receive 1.536 shares of FNB common
stock for each Guaranty common share you own. You will receive a cash payment
for the value of any fraction of a share of FNB common stock.
For example, if you own 100 Guaranty common shares, the merger closes
on January 7, 1999, and the Designated Price is $28.50 per share, you will
receive 150 shares of FNB common stock plus $25.65 in cash.
After Guaranty shareholders approve the merger and all required
regulatory approvals have been obtained, if the Designated Price is below $30.00
per share, FNB will have four business days in which it may choose to cancel the
merger. Further, after Guaranty shareholders approve the merger and all required
regulatory approvals have been obtained, if the Designated Price is below $28.00
per share, Guaranty will have four business days in which it may choose to
cancel the merger.
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WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
We are working to complete the merger by January __, 1999. However, delays in
obtaining regulatory approvals could postpone the merger.
HOW WILL I BE TAXED IN THE MERGER?
We expect that the merger will be tax-free to Guaranty shareholders for federal
income tax purposes. However, Guaranty shareholders will have to pay taxes on
cash received for fractional shares. To review the tax consequences to
shareholders in greater detail, see page 27.
THE TAX CONSEQUENCES OF THE MERGER TO YOU WILL DEPEND ON YOUR OWN
SITUATION. YOU SHOULD CONSULT YOUR TAX ADVISORS FOR A FULL UNDERSTANDING OF THE
TAX CONSEQUENCES OF THE MERGER TO YOU.
WHAT CIRCUMSTANCES MIGHT PREVENT THE MERGER?
To complete the merger, a number of conditions must be satisfied in addition to
obtaining the vote of Guaranty shareholders, including the following:
- - no law or injunction may effectively prohibit the merger;
- - we must receive all necessary approvals of governmental authorities;
- - we must receive a legal opinion that the merger will be treated as a
tax-free reorganization under the Internal Revenue Code;
- - FNB's independent accountants must provide a letter which opines that
the merger can be accounted for as a pooling-of-interests; and
- - certain directors and executive officers of Guaranty must execute
non-compete agreements.
In addition to FNB's and Guaranty's respective rights to withdraw from
the merger if FNB's stock price falls below certain minimums, either
FNB or Guaranty can withdraw from the merger if,
- - the merger is not approved by Guaranty shareholders;
- - the merger is not cleared by regulatory authorities;
- - a court or other governmental authority permanently prohibits the
merger;
- - the merger is not completed by February 28, 1999; or
- - the other party materially breaches the merger agreement.
In addition, FNB may withdraw from the merger if Guaranty shareholders
owning more than 10% of the Guaranty common shares claim dissenters' rights of
appraisal. Further, Guaranty may withdraw from the merger if the fairness
opinion of Ewing is withdrawn or if the Guaranty Board determines in good faith
that its fiduciary duties to Guaranty's shareholders require it to accept a
third party acquisition proposal which it deems more favorable to Guaranty
shareholders.
Guaranty may also withdraw from the merger under the circumstances
described under "What happens if Guaranty receives a better offer?" below.
Withdrawal can be before or after Guaranty shareholder approval.
WHAT HAPPENS IF GUARANTY RECEIVES A BETTER OFFER?
Guaranty's Board of Directors can withdraw from the merger if it determines,
consistent with its fiduciary duties to Guaranty shareholders, that Guaranty
should enter into an acquisition agreement that the Guaranty Board deems
superior to the merger. If a different acquisition agreement is entered into and
Guaranty completes a merger with an entity other than FNB, Guaranty would be
required by the terms of the FNB merger agreement to pay FNB $1,500,000 in cash.
HOW WILL BE THE MERGER BE TREATED FOR ACCOUNTING PURPOSES?
We expect the merger to qualify as a pooling of interests, which means that for
accounting and financial reporting purposes, FNB will treat FNB and Guaranty as
if they had always been combined.
WHAT REGULATORY APPROVALS ARE REQUIRED FOR THE MERGER?
The Federal Reserve Board and the Office of the Comptroller of the Currency must
approve the merger, and we may not complete the merger until all waiting periods
following such approvals have expired.
WHEN AND WHERE IS THE GUARANTY SHAREHOLDER MEETING?
The special meeting of Guaranty shareholders to vote on the merger will be held
at 10:00 a.m. on __________, January__, 1999, at [____________________________].
WHO CAN VOTE ON THE MERGER? WHAT VOTE IS REQUIRED TO APPROVE THE MERGER?
Holders of Guaranty common shares at the close of business on December __, 1998
can vote at the special meeting. The merger must be approved by the holders of
at least two-thirds of all outstanding Guaranty
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common shares. Shareholders of FNB are not required to approve the merger.
WHAT SHOULD I DO NOW TO VOTE ON THE MERGER?
Just mail your signed proxy card in the enclosed return envelope as soon as
possible, so that your shares can be voted at the Guaranty shareholder meeting.
IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
Your broker cannot vote your shares without your instructions. You should
instruct your broker to vote your shares, following the directions your broker
provides. Shares that are not voted because you do not instruct your broker
effectively will be counted as voted against the merger.
CAN I CHANGE MY VOTE AFTER I MAIL MY PROXY CARD?
Yes, you can change your vote at any time before your proxy is voted at the
shareholder meeting. You can do this in three ways: First, you can send Guaranty
a written statement that you are revoking your proxy. Second, you can send
Guaranty a new proxy card. You should send your revocation or new proxy card to
Guaranty's Secretary at the address on the cover page. Third, you can attend the
shareholder meeting and vote in person. However, your attendance alone will not
revoke your proxy. If you instructed a broker to vote your shares, you must
follow your broker's directions for changing those instructions.
DO GUARANTY'S OFFICERS OR DIRECTORS HAVE ANY OTHER INTERESTS IN THE MERGER?
Guaranty's officers and directors may have interests in the merger that differ
from the interests of Guaranty shareholders generally. For example, if the
merger is completed, existing options to purchase Guaranty common shares will be
automatically converted into options to acquire shares by FNB common stock
adjusted to account for the exchange ratio. In addition, current officers and
directors of Guaranty will continue to serve in those capacities after the
merger and certain executive officers may enter into employment agreements.
Also, four executive officers will receive cash payments at closing from
Guaranty aggregating approximately $800,000 (and certain future payments from
FNB upon termination of their employment) under the terms of change in control
agreements in place between such officers and Guaranty. Finally, certain
existing indemnification arrangements for Guaranty directors and officers will
be continued after the merger.
HOW WILL GUARANTY'S OPERATIONS BE MANAGED AFTER THE MERGER?
After the merger, West Coast Bank will be merged into Interim, and the current
members of Guaranty's Board of Directors will become members of the Board of
Directors of Interim, which will be renamed West Coast Guaranty Bank, N.A.
DO ANY GUARANTY SHAREHOLDERS HAVE APPRAISAL RIGHTS?
Any Guaranty shareholder who does not vote in favor of the merger and who
follows certain procedures set forth under United States federal law will be
entitled to dissenters rights, which means that such shareholder may receive a
cash payment for the fair value of his or her Guaranty shares as determined by a
court.
SHOULD I SEND IN MY SHARE CERTIFICATES NOW?
No. After the merger is completed you will receive written instructions for
exchanging your Guaranty certificates for FNB certificates.
3
10
OTHER INFORMATION ABOUT THE MERGER
THE COMPANIES
F.N.B. CORPORATION
One F.N.B. Boulevard
Hermitage, Pennsylvania 16148
(724) 981-6000
FNB is a bank holding company which conducts business primarily through
its subsidiary banks and finance company. FNB provides a full range of financial
services, primarily to consumers and small- to medium-sized businesses. As of
September 30, 1998, FNB's subsidiaries had a network of 116 offices in
Pennsylvania, southwestern Florida, eastern Ohio and southwestern New York and
had, on a consolidated basis, total assets of approximately $3.1 billion and
total deposits of approximately $2.6 billion.
GUARANTY BANK & TRUST COMPANY
1340 East Venice Avenue
Venice, Florida 34292-2246
(941) 485-9000
Guaranty is a Florida state banking corporation. Guaranty provides
commercial banking services through seven offices. On September 30, 1998,
Guaranty had total assets of approximately $147.7 million and total deposits of
approximately $135.9 million.
SHARE INFORMATION AND MARKET PRICE
FNB common stock trades on the Nasdaq National Market under the symbol "FBAN."
As of December __, 1998, there were _______ shares of FNB common stock
outstanding held by approximately ______ holders of record. As of December __,
1998, the record date for voting on the merger, there were ________ Guaranty
common shares outstanding held by approximately ________ holders of record.
The last sale price reported by the Nasdaq National Market for FNB
common shares on August 20, 1998, the last trading day preceding public
announcement of the proposed merger, was $32.625. As of the record date, such
price was $___. There is currently no market for the Guaranty common shares. We
urge you to obtain current market quotations for FNB common stock.
FORWARD-LOOKING STATEMENTS MAY PROVE INADEQUATE
We have each made forward-looking statements in this document (and in documents
incorporated by reference) that are subject to risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of Guaranty or FNB. Also, when we use words
such as "believes," "expects," "anticipates" or similar expressions, we are
making forward-looking statements. Shareholders should note that many factors,
some of which are discussed elsewhere in this document and in the documents
which we incorporate by reference, could affect the future financial results of
Guaranty and FNB and could cause the results to differ materially from those
expressed in our forward-looking statements contained or incorporated by
reference in this document. These factors include the following:
- - Operating, legal and regulatory risks;
- - Economic, political and competitive forces affecting our financial
services businesses; and
- - The risk that our analyses of these risks and forces could be incorrect
and/or that the strategies developed to address them could be
unsuccessful.
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11
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth selected comparative per share data for
each of FNB and Guaranty on an historical basis, and selected unaudited pro
forma comparative per share data assuming the merger had been consummated and
FNB and Guaranty had been combined as of the beginning of the earliest period
presented for earnings per share and dividends per share and as of the end of
the period presented for book value per share. The unaudited pro forma financial
data have been prepared giving effect to the merger as a pooling-of-interests.
For a description of the effect of pooling-of-interests method of accounting on
the merger and the historical financial statements of FNB, see "THE MERGER --
Accounting Treatment."
The comparative per share data presented are based on and derived from,
and should be read in conjunction with, the consolidated financial statements
and the related notes thereto of FNB included in FNB's Current Report on Form
8-K dated October 29, 1998, incorporated herein by reference, and of the
financial statements of Guaranty, which are included herein. The pro forma
amounts are presented for comparative purposes only and, therefore, are not
necessarily indicative of the operating results and financial position that
might have been achieved had the merger occurred as of an earlier date, nor are
they necessarily indicative of operating results and financial position that may
occur in the future. All per share data has been adjusted to reflect the FNB 5%
stock dividend paid on May 24, 1998.
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------- -------------------
1997 1996 1995 1998 1997
---- ---- ---- ---- ----
EARNINGS BEFORE EXTRAORDINARY ITEMS PER
COMMON SHARE(1)
FNB
Historical (basic)...................... $1.54 $1.22 $1.37 $1.28 $1.13
Historical (diluted).................... 1.48 1.19 1.32 1.22 1.09
Pro forma combined (basic).............. 1.49 1.17 1.34 1.25 1.09
Pro forma combined (diluted)............ 1.43 1.14 1.30 1.20 1.05
GUARANTY(1)
Historical (basic)...................... $1.07 $ .69 $1.30 $1.37 $ .68
Historical (diluted).................... 1.03 .66 1.26 1.35 .67
Pro forma equivalent(2)
Basic.............................. 2.29 1.80 2.06 1.92 1.67
Diluted............................ 2.20 1.75 2.00 1.84 1.61
CASH DIVIDENDS DECLARED PER COMMON SHARE(1)
FNB ....................................... $ .60 $ .57 $ .31 $ .53 $ .45
Guaranty historical........................ .06 .05 .05 -- --
Guaranty pro forma equivalent(2)........... .92 .88 .48 .81 .69
AS OF DECEMBER 31, 1997 AS OF SEPTEMBER 30, 1998
----------------------- ------------------------
BOOK VALUE PER COMMON SHARE (PERIOD END)
FNB historical.................................... $ 14.14 $ 14.80
FNB pro forma combined............................ 13.77 14.47
Guaranty historical............................... 12.67 14.08
Guaranty pro forma equivalent(2).................. 21.15 22.23
- ---------------
(1) For purposes of this table, an assumed Exchange Ratio of 1.536 was
utilized, based upon the $27.50 closing price of FNB common stock on
October 30, 1998.
(2) Guaranty pro forma equivalent amounts are calculated by multiplying the
pro forma combined amounts for FNB by the assumed Exchange Ratio of
1.536.
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SELECTED FINANCIAL DATA
The following tables present summary selected financial data for FNB
and Guaranty on an historical basis. The FNB summary selected financial data are
derived from (i) the consolidated financial statements of FNB and the notes
thereto for the fiscal years 1993 through 1997 and (ii) the unaudited interim
financial statements of FNB for the nine-month periods ended September 30, 1998
and 1997 and the related notes thereto. The Guaranty summary selected financial
data for the fiscal years 1993 through 1997 and for the nine-month periods ended
September 30, 1998 and 1997 are derived from the financial statements of
Guaranty. Results for the nine-month period ended September 30, 1998 are
results for the interim period only and may not be indicative of the operating
results for the full year. All FNB per share data have been adjusted to reflect
the FNB 5% stock dividend paid on May 24, 1998.
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------------------------- ----------------------
1997 1996 1995 1994 1993 1998 1997
---- ---- ---- ---- ---- ---- ----
F.N.B. CORPORATION:
Earnings (In thousands, except per
share data)
Interest income..................... $216,278 $202,380 $190,743 $164,346 $157,795 $176,043 $160,348
Interest expense.................... 92,664 84,736 81,660 65,043 67,798 77,475 68,074
Net interest income................. 123,614 117,644 109,083 99,303 89,997 98,568 92,274
Provision for loan losses........... 11,100 9,773 7,174 9,369 10,342 5,278 8,408
Income before income taxes and
extraordinary items............... 40,162 32,818 36,432 26,929 22,868 34,914 29,375
Income before extraordinary items... 27,391 21,867 24,310 17,929 14,697 23,210 20,018
Extraordinary income, net of tax.... 8,809
Net income.......................... 36,200 21,867 24,310 17,929 14,697 23,210 25,245
Earnings per common share
before extraordinary items.......
Basic............................... 1.54 1.22 1.37 1.02 .90 1.28 1.44
Diluted............................. 1.48 1.19 1.32 1.01 .89 1.22 1.37
Cash dividends declared per
common share..................... .60 .57 .31 .23 .22 .53 .45
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
------------------------------------------------------------- -----------------------
1997 1996 1995 1994 1993 1998 1997
---- ---- ---- ---- ---- ---- ----
Balance sheet (period end in
thousands)
Total assets...................... $2,967,482 $2,680,096 $2,487,518 $2,318,405 $2,195,853 $3,133,463 $2,723,204
Total loans net of unearned
income and allowance for
loan losses..................... 2,064,998 1,873,050 1,685,317 1,589,684 1,345,970 2,232,949 1,910,847
Total deposits.................... 2,467,057 2,240,572 2,116,099 1,952,496 1,903,953 2,553,640 2,243,858
Long-term debt and obligation
under capital leases............ 72,246 58,179 50,784 56,614 32,528 71,747 61,135
Stockholders' equity.............. 260,251 225,649 212,514 187,516 160,673 272,303 243,811
Key Ratios
Return on average assets.......... 1.32 0.85 1.01 0.80 0.69 1.02 1.25
Return on average equity.......... 15.21 9.91 12.13 10.03 9.57 11.72 14.48
Average equity to average assets.. 8.66 8.62 8.35 7.95 7.21 8.68 8.61
6
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NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------------------------- -------------------
1997 1996 1995 1994 1993 1998 1997
---- ---- ---- ---- ---- ---- ----
GUARANTY
Earnings (In thousands, except per share data)
Interest income........................ $8,781 $7,343 $6,575 $4,809 $3,417 $7,387 $6,477
Interest expense....................... 3,963 3,219 2,643 1,549 1,224 3,408 2,923
Net interest income.................... 4,818 4,124 3,932 3,259 2,193 3,979 3,554
Provision for loan losses.............. 403 290 242 457 377 75 193
Net income............................. 802 508 871 725 370 1,032 513
Earnings per common share
Basic................................ 1.07 .69 1.30 1.27 .65 1.37 .68
Diluted.............................. 1.03 .66 1.26 1.22 .62 1.35 .67
Cash dividends declared per
common share......................... .06 .05 .05 -- -- -- --
AS OF DECEMBER 31, AS OF MARCH 31,
---------------------------------------------------- --------------------
1997 1996 1995 1994 1993 1998 1997
---- ---- ---- ---- ---- ---- ----
Balance sheet (period end in
thousands)
Total assets........................... $127,884 $113,987 $ 93,691 $ 76,949 $ 61,857 $147,683 $124,055
Total loans, net of unearned income
and allowance for loan loss........ 79,735 66,768 54,096 52,802 39,513 88,612 76,635
Total deposits......................... 117,484 104,761 84,678 71,860 57,531 135,910 113,957
Stockholders' equity.................. 9,564 8,653 8,282 4,882 4,196 10,648 9,312
Key Ratios
Return on average assets.................. .66 .50 1.01 1.03 .70 .99 .57
Return on average equity.................. 8.84 6.00 12.76 16.04 9.22 13.61 7.65
Average equity to average assets.......... 7.45 8.34 7.90 6.44 7.55 7.27 7.45
7
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THE SPECIAL MEETING OF SHAREHOLDERS OF GUARANTY BANK & TRUST COMPANY
GENERAL
This Proxy Statement-Prospectus is first being furnished to the holders
of common shares, par value $2.00 per share ("Guaranty Common Shares"), of
Guaranty Bank & Trust Company ("Guaranty") on or about December __, 1998, and is
accompanied by the Notice of Special Meeting and a form of proxy that is
solicited by the Guaranty Board of Directors ("Guaranty Board") for use at the
special meeting ("Special Meeting") of shareholders of Guaranty to be held at
_____________________, Venice, Florida 34292, on _______, January __, 1999, at
10:00 a.m., local time, and at any adjournments or postponements thereof.
MATTERS TO BE CONSIDERED
At the Special Meeting, Guaranty shareholders will be asked to consider
and vote upon a proposal to approve the Agreement and Plan of merger dated as of
August 20, 1998 and amended as of October 15, 1998 (the "Merger Agreement"), by
and between Guaranty and F.N.B. Corporation, a Pennsylvania corporation ("FNB")
pursuant to which Guaranty will be merged with and into Southwest Interim Bank
No. 5, N.A. ("Interim"), a national banking association organized under the laws
of the United States and a subsidiary of FNB. The Merger Agreement further
provides that following consummation of the Merger, West Coast Bank, another
banking subsidiary of FNB, will be merged with and into Interim.
VOTING AND REVOCATION OF PROXIES
A shareholder of Guaranty 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 Guaranty, 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 attending the Special Meeting and
voting in person at the Special Meeting. Attendance of a shareholder at the
Special Meeting will not, in and of itself, constitute a revocation of the
proxy. All written notices of revocation and other communications with respect
to the revocation of Guaranty proxies should be addressed to Guaranty Bank &
Trust Company, 1340 East Venice Avenue, Venice, Florida 34292, Attention:
Corporate Secretary. For such notice of revocation or later proxy to be valid,
however, it must actually be received by Guaranty 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
FOR approval of the Merger Agreement. The Guaranty 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.
SOLICITATION OF PROXIES
Solicitation of proxies may be made in person or by mail, telephone, or
facsimile, or other form of communication by directors, officers, and employees
of Guaranty, 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.
8
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No person is authorized to give any information or to make any
representation not contained in this Proxy Statement-Prospectus and, if given or
made, such information or representation should not be relied upon as having
been authorized by Guaranty, FNB, or any other person. The delivery of this
Proxy Statement-Prospectus shall not, under any circumstances, create any
implication that there has been no change in the business or affairs of Guaranty
or FNB since the date of the Proxy Statement-Prospectus.
All costs of solicitation of proxies from Guaranty shareholders will be
borne by Guaranty; provided, however, that FNB and Guaranty have each agreed to
pay one-half of the printing costs of this Proxy Statement-Prospectus and the
related Registration Statement.
RECORD DATE AND VOTING RIGHTS
The Guaranty Board has fixed the close of business on December __, 1998
as the record date (the "Record Date") for the determination of shareholders of
Guaranty entitled to receive notice of and to vote at the Special Meeting. At
the close of business on the Record Date, there were outstanding _______
Guaranty Common Shares held by ___ holders of record. Each Guaranty Common Share
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.
As of the Record Date, approximately _______ shares, or ____% of
Guaranty Common Shares entitled to vote at the Special Meeting were beneficially
held by directors of Guaranty. All of the directors of Guaranty have agreed to
vote all Guaranty common shares beneficially owned by them in favor of the
approval of the Merger Agreement.
As of the Record Date, the directors, executive officers and affiliates
of FNB owned no Guaranty common shares.
The affirmative vote of at least two-thirds of the Guaranty Common
Shares issued and outstanding as of the Record Date is required in order to
approve the Merger Agreement and the transactions contemplated thereby,
including the Merger. Because approval of the Merger Agreement requires the
affirmative vote of at least two-thirds of the outstanding Guaranty Common
Shares, the failure to vote the shares in favor of the Merger Agreement for any
reason whatsoever - whether by withholding the vote, by abstaining, or by
causing a broker non-vote - will have the same effect as a vote cast opposing
the Merger Agreement.
A broker non-vote generally occurs when a broker who holds shares in
street name for a customer does not have the authority to vote on certain
non-routine matters because its customer has not provided any voting
instructions with respect to the matter.
BECAUSE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE
OF AT LEAST TWO-THIRDS OF ALL THE VOTES ENTITLED TO BE CAST AT THE SPECIAL
MEETING BY HOLDERS OF THE ISSUED AND OUTSTANDING GUARANTY COMMON SHARES,
ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS NEGATIVE VOTES.
ACCORDINGLY, THE GUARANTY BOARD URGES ITS SHAREHOLDERS TO COMPLETE, DATE, AND
SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.
In order to take action on any other matter submitted to shareholders
at a meeting where a quorum is present, the votes cast in favor of the action
must exceed the votes cast opposing the action, unless the articles of
incorporation
9
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or applicable law requires a greater number of votes. All abstentions and broker
non-votes will be counted as present for purposes of determining the existence
of a quorum; but since they are neither votes cast in favor of, nor votes cast
opposing, a proposed action, abstentions and broker non-votes typically will
have no impact on the outcome of the matter and will not be counted as a vote
cast on such matters.
RECOMMENDATION OF THE GUARANTY BOARD
THE GUARANTY BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF GUARANTY AND ITS SHAREHOLDERS, AND RECOMMENDS THAT THE SHAREHOLDERS
OF GUARANTY 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 Guaranty Board, among other
things, consulted with its legal advisors regarding the legal terms of the
Merger Agreement and with its financial advisor, Ewing, as to the fairness, from
a financial point of view, of the consideration to be received by the holders of
Guaranty Common Shares in the Merger. For a discussion of the factors considered
by the Guaranty Board in reaching its conclusion, see "THE MERGER -- Background
of and Reasons for the Merger."
Guaranty shareholders should note that certain members of management
and directors of Guaranty have certain interests in, and may derive certain
benefits as a result of, the Merger that are in addition to their interests as
shareholders of Guaranty. See "THE MERGER -- Interests of Certain Persons in the
Merger."
GUARANTY SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
10
17
THE MERGER
The following summary of certain terms and provisions of the Merger
Agreement is qualified in its entirety by reference to the Merger Agreement,
which is incorporated herein by reference and, with the exception of certain
exhibits thereto, is included as Appendix A to this Proxy Statement-Prospectus.
All shareholders are urged to read the Merger Agreement and the other Appendices
hereto in their entirety.
DESCRIPTION OF THE MERGER
At the Effective Time (defined below), Guaranty will be merged with and
into Interim, which will be the surviving entity and a 100% controlled
subsidiary of FNB. The Interim Articles of Incorporation ("Interim Charter") and
the Interim Bylaws in effect at the Effective Time will continue to govern
Interim until amended or repealed in accordance with applicable law. The Merger
is subject to the approval of the Federal Reserve Board and the Office of the
Comptroller of the Currency. See "-- Bank Regulatory Matters."
At the Effective Time, each common share of Guaranty, par value $2,00
("Guaranty Common Shares") outstanding immediately prior to the Effective Time
(other than shares held by Guaranty, 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 a number
of shares (the "Exchange Ratio"), subject to possible adjustment as described
below, of FNB common stock, par value $2.00 ("FNB Common Stock"), with such
number of shares to be determined by dividing $43.00 by the Designated Price of
FNB Common Stock and rounding to the third decimal place. The Designated Price
means the average, for the 10 day period prior to the sixth business day
preceding the Determination Date, of the average of the closing bid and ask
prices of FNB Common Stock for each such trading day. The Determination Date
means the last to occur of (i) the effective date of the last required
regulatory consent, and (ii) the date on which the Guaranty shareholders approve
the Merger Agreement. However, if the Designated Price is equal to or less than
$28.00, then the Exchange Ratio shall be 1.536 shares of FNB Common Stock for
each Guaranty Common Share, and if the Designated Price is equal to or greater
than $38.375, then the Exchange Ratio shall be 1.121 shares of FNB Common Stock
for each Guaranty Common Share.
The Merger Agreement provides that the Exchange Ratio may be adjusted
to prevent dilution 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, recapitalization, reclassification, or similar
transaction. At the Effective Time, any Guaranty Common Shares held by Guaranty,
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. Guaranty has represented that, as of
the Effective Time, there will be no more than 814,749 Guaranty Common Shares
issued and outstanding (which includes shares issued upon the exercise of
options under the Guaranty Options). Following the Effective Time and assuming
that 814,749 Guaranty Common Shares are outstanding at the Effective Time at a
Designated Price of $28.00 per share and a corresponding Exchange Ratio of 1.536
(and that no dissenters' rights are exercised in the Merger), the former
shareholders of Guaranty would own approximately 1,251,454 shares, or
approximately 6.5%, of the then outstanding FNB Common Stock assuming 17,989,398
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
reduced if fewer than 814,749 Guaranty Common Shares are outstanding immediately
prior to the Effective Time. As of the Record Date, there were _______ Guaranty
Common Shares outstanding. However, if the Designated Price is less than $30.00
per share, FNB will not be required to consummate the Merger if it elects,
within four business days of the Determination Date, to terminate the Merger
Agreement. If the Designated Price is $28.00 per share or less, Guaranty will
not be required to consummate the Merger if it elects, within four business days
of the Determination Date, to terminate the Merger Agreement. Notwithstanding
the foregoing, if a change in control of FNB has occurred, then the Exchange
Ratio will be fixed at 1.536 shares of FNB Common Stock for each Guaranty Common
Share.
11
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Guaranty shareholders are advised to obtain current market quotations
for FNB Common Stock. The market price of FNB Common Stock at the Effective
Time, or on the date on which certificates representing such shares are received
by Guaranty shareholders, may be higher or lower than the Designated Price, or
the market price of FNB Common Stock as of the Record Date or at the time of the
Special Meeting.
No fractional shares of FNB Common Stock will be issued in the Merger.
Instead, each holder of Guaranty Common Shares 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 average of the closing bid and asked
prices of one share of FNB Common Stock as reported by the Nasdaq National
Market on the last trading preceding the closing of the Merger (or, if not so
reported, by any other authoritative source selected by FNB). 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
Effective Time will continue to be outstanding after the Effective Time.
CONVERSION OF GUARANTY OPTIONS
Options (the "Guaranty Options") issued by Guaranty to certain officers
and former and current directors and employees to purchase an aggregate of
58,631 Guaranty Common Shares were outstanding as of the Record Date. To the
extent that Guaranty Common Shares are issued pursuant to the exercise of
Guaranty Options in accordance with their terms prior to the Effective Time,
they will be converted into FNB Common Stock in the same manner as other
Guaranty Common Shares. At the Effective Time, each Guaranty Option that has not
expired and remains outstanding at the Effective Time, shall be converted into
and become an option to purchase whole shares of FNB Common Stock, and FNB shall
assume each such Guaranty Option in accordance with the stock option agreement
by which it is evidenced (collectively, the "Guaranty Stock Plans"), except
that, from and after the Effective Time, (i) FNB and its compensation committee
shall be substituted for Guaranty and its compensation committee (including, if
applicable, the entire Guaranty Board) administering such Guaranty Stock Plan,
(ii) each Guaranty Option assumed by FNB may be exercised solely for shares of
FNB Common Stock, (iii) the number of shares of FNB Common Stock subject to such
Guaranty Option will be equal to the number of Guaranty Common Shares subject to
such Guaranty Option immediately prior to the Effective Time multiplied by the
Exchange Ratio and rounding up to the nearest share, and (iv) the per share
exercise price under each such Guaranty Option will be adjusted by dividing it
by the Exchange Ratio and rounding up to the nearest cent.
As soon as practicable after the Effective Time, FNB will deliver to
the holders of each Guaranty Option an appropriate notice setting forth such
participant's rights pursuant thereto and the grants pursuant to such Guaranty
Option 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).
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 Guaranty Options assumed by it and to cause such shares to be
registered with the Securities and Exchange Commission.
All restrictions or limitations on transfer with respect to Guaranty
Common Shares subject to Guaranty Options or any other plan, program, or
arrangement of Guaranty or of any subsidiary of Guaranty, 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 "--
Interests of Certain Persons in the Merger."
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EFFECTIVE TIME OF THE MERGER
The Merger and the other transactions contemplated by the Merger
Agreement shall become effective on the date and at the time that certification
of the Merger (the "Certification of Merger") is received from the Comptroller
of the Currency (the "Effective Time"). Unless otherwise agreed by FNB and
Guaranty, the parties have agreed to use their best efforts to cause the
Certification of Merger to be issued and to become effective on the date of
closing and to use their best efforts to cause the Effective Time to occur on
the date of closing. Unless another time is mutually agreed, the parties will
use their reasonable best efforts to cause the closing to take place on, but not
prior to, the fifth business day 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 Guaranty
approve the Merger Agreement. There can be no assurance as to whether or when
the Merger will occur. See "The Merger -- Conditions Precedent to the Merger"
and "The Merger -- Bank Regulatory Matters."
EXCHANGE OF CERTIFICATES
Promptly after the Effective Time, First National Bank of Naples (the
"Exchange Agent"), a subsidiary of FNB, will mail to each holder of record of
Guaranty Common Shares as of the Effective Time a letter of transmittal and
related forms (the "Letter of Transmittal") for use in forwarding stock
certificates previously representing Guaranty Common Shares for surrender and
exchange for certificates representing FNB Common Stock. Risk of loss and title
to the certificates theretofore representing Guaranty Common Shares shall pass
only upon proper delivery of such certificates to the Exchange Agent.
GUARANTY SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
Upon surrender to the Exchange Agent of one or more certificates for
Guaranty Common Shares, duly endorsed as the Exchange Agent may require,
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 pursuant to the Merger Agreement, together with 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 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 that of 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 Guaranty Common Shares 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 Guaranty be liable to any person 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.
Until 90 days after the Effective Time (and prior to the surrender of
certificates of Guaranty Common Shares to the Exchange Agent), each certificate
that represented outstanding Guaranty Common Shares 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
13
20
shareholders. In the event that any dividend or distribution, the record date
for which is on or after the Effective Time, is declared by FNB on the FNB
Common Stock, such dividend or other distributions shall be paid with respect to
all shares issuable pursuant to the Merger Agreement. Beginning 30 days after
the Effective Time, however, no such dividend or other distribution shall be
delivered to the holder of a certificate representing shares of Guaranty Common
Stock immediately prior to the Effective Time until such holder surrenders such
certificate for exchange as set forth above.
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER.
From time to time during 1997, Guaranty received inquiries from
investment bankers and other financial institutions inquiring as to Guaranty's
interest in being acquired or merging on a "combination of equals" basis. On
April 1, 1997, representatives of a financial institution located outside of
Florida advised David F. Voigt (the President and Chief Executive Officer of
Guaranty) of such financial institution's interest in acquiring Guaranty. Mr.
Voigt advised the representatives that they should initially meet with the
Executive Committee of Guaranty and, after such meeting, the Executive Committee
will determine whether a full meeting of the Guaranty Board should be pursued.
On May 8, 1997, representatives of the financial institution met with Guaranty's
Executive Committee. After a presentation at the meeting, the chairman of
Guaranty's Executive Committee advised the representatives of the other
financial institution that, at the present time, Guaranty was not for sale but
that the Executive Committee would inform the Board of Directors of the
financial institution's interest in Guaranty. Guaranty's Board was subsequently
apprised at its May 1997 meeting that representatives of the out-of-state
financial institution had met with members of the Executive Committee in order
to express an interest in purchasing Guaranty.
On June 24, 1997, a financial advisor from an investment banking firm
inquired of Mr. Voigt as to Guaranty's availability as a merger candidate. Mr.
Voigt advised the representative that the Executive Committee had recently
determined that Guaranty was not for sale but that Guaranty, in the interest of
fulfilling its fiduciary duty to its shareholders, would consider any proposals
received. On August 1, 1997, the investment banker met with Mr. Voigt to present
a proposal for the acquisition of Guaranty by another financial institution. Mr.
Voigt advised the investment banker that the proposal would be furnished to
Guaranty's Executive Committee for consideration. On August 13, 1997, a
representative of another investment banking firm similarly approached Mr. Voigt
and inquired as to the availability of Guaranty as a merger candidate. Mr. Voigt
advised the representative that Guaranty's Executive Committee had recently
determined that Guaranty, at present time, was not for sale, but that Guaranty
would consider any proposals received. On August 19, 1997, Mr. Voigt met with
Messrs. Peter Mortensen (Chairman of the Board and Chief Executive Officer of
F.N.B.), Gary Tice (President and Chief Operating Officer of FNB) and John D.
Waters (Vice President and Chief Financial Officer of FNB). Mr. Mortensen
indicated that FNB had just acquired a financial institution in Sarasota County,
Florida and that the representatives desired to introduce FNB to Guaranty to
open communication between the two financial institutions.
On August 20, 1997, Guaranty's Executive Committee met to discuss
certain issues, including the August 1 proposal, and the discussions that Mr.
Voigt had previously had with other investment banking firms and FNB
representatives in the interim. At the conclusion of its meeting, the Executive
Committee approved a recommendation to the Guaranty Board that Guaranty should
not market itself for sale, but that Guaranty should analyze offers that are
presented in order for the directors to fulfill their fiduciary responsibilities
to Guaranty's shareholders.
On August 26, 1997, a representative from another financial institution
met with Mr. Voigt to advise him that the financial institution had an interest
in acquiring Guaranty. Mr. Voigt advised the representative that Guaranty was
not marketing itself for sale, but that Guaranty would consider any proposals
received. On September 3, 1997, Mr.
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Benjamin C. Bishop, Jr. (President and Chief Executive Officer of Ewing) met
with Mr. Voigt to inquire as to the availability of Guaranty as a merger
candidate. Mr. Voigt advised Mr. Bishop that the Executive Committee had
determined that Guaranty was not for sale but that Guaranty would consider
proposals received. On September 5, 1997, Mr. Voigt met with Mr. Tice of FNB,
who inquired as to Guaranty's interest in pursuing a merger transaction. Mr.
Voigt advised that Guaranty was not marketing itself for sale, but would
consider any proposals received. On September 11, 1997, Mr. Voigt met with the
representative from the investment banking firm that had presented the August 1,
1997 proposal to acquire Guaranty. The investment banker presented Mr. Voigt
with a revised proposal from the financial institution. Mr. Voigt advised the
investment banker that the proposal would be presented to Guaranty's Executive
Committee.
On September 17, 1997, Guaranty's Executive Committee discussed certain
issues, including the revised proposal received from the out-of-state investment
banker for an acquisition of Guaranty, as well as Mr. Voigt's discussions in the
interim with FNB and other financial institutions. The consensus of the
Executive Committee was that Guaranty had no interest in a sale of Guaranty
under the terms of the proposal received from the out-of-state investment
banker. In a subsequent meeting with the Guaranty Board, members of the
Executive Committee reported to the Board regarding the Executive Committee's
discussions in the interim. It was the consensus that Guaranty had an obligation
to Guaranty's shareholders to analyze and respond to requests for affiliation.
As such, the Executive Committee informed the Board that certain publicly
available financial information regarding Guaranty had been sent to FNB and
another financial institution that had expressed an interest in acquiring
Guaranty. The Board recognized that although Guaranty was not marketing itself
for sale, the consolidation trend in the financial institutions industry for the
acquisition of community banks would likely result in ongoing inquiries for the
acquisition of Guaranty by other parties. Accordingly, the Board wanted to
assure that any interested parties would receive the same publicly available
information regarding Guaranty.
On October 24, 1997, Mr. Voigt met with a representative of another
investment banking firm who inquired as to the availability of Guaranty as a
merger candidate. Mr. Voigt advised the representative that Guaranty was not
marketing itself for sale but that Guaranty would consider proposals received.
On November 6, 1997, Mr. Voigt met with a representative from an
out-of-state investment banking firm who inquired as to Guaranty's interest in
pursuing a "merger of equals" transaction with a bank located in Southwest
Florida. Mr. Voigt advised the representative that Guaranty would be willing to
consider any proposal received.
On November 10, 1997, Mr. Voigt met with Messrs. Mortensen and Tice of
FNB, who advised of FNB's desire to meet with the Guaranty Board to discuss the
possibility of opening negotiations for the acquisition of Guaranty by FNB. Mr.
Voigt advised the representatives that they should first meet with Guaranty's
Executive Committee.
On December 9, 1997, the Executive Committee of Guaranty met to discuss
certain issues, including various options for Guaranty including the sale of
Guaranty to another financial institution, the acquisition of other financial
institutions by Guaranty, Guaranty's pursuing a "merger of equals" combination
transaction, or continuing to remain independent and pursuing growth and
expansion of its market share. Guaranty's legal counsel participated in the
meeting with the members of the Executive Committee. The consensus of the
Executive Committee was that Guaranty should "stay the course" and not market
Guaranty for sale at that time. The Executive Committee also reaffirmed that
Guaranty would continue to review any proposals received from other interested
parties. The Executive Committee also authorized management to provide publicly
available information on Guaranty to Ewing so that Ewing could provide Guaranty
with an informal valuation of Guaranty in order that the Executive Committee and
the Board of Directors would be in a better position to assess any possible
future proposals that might be received.
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On December 10, 1997, the Executive Committee met with Messrs.
Mortensen, Tice and James S. Lindsay (a director of FNB). The purpose of the
meeting was to inform Guaranty of FNB's interest in acquiring Guaranty. At the
meeting, the FNB representatives provided a history of FNB's affiliations with
other financial institutions, discussed FNB's Southwest Florida strategies and
outlined what it perceived to be the benefits to Guaranty of an affiliation with
FNB. The Executive Committee decided not to pursue further negotiations with FNB
at that time, to continue Guaranty's strategy to "stay the course," but that
Guaranty should leave opportunities open for continued communication with FNB
and others.
On January 21, 1998, the Executive Committee met and reviewed a
proposal received from an out-of-state investment banking firm regarding a
"merger of equals" transaction with another financial institution in Florida. On
January 28, 1998, Mr. Voigt met with Mr. Bishop of Ewing to discuss Ewing's
interest in giving a presentation to the Board of Directors as to the role an
investment banking firm could provide as a part of the Board's assessment of
strategic alternatives that may be available to Guaranty.
On February 19, 1998, the Executive Committee met to discuss certain
issues, including a recommendation that the Board consider at its March meeting
a presentation from Ewing as to the role of an investment banking firm in
Guaranty's strategic process as well as a presentation from FNB for
consideration of an acquisition of Guaranty through an exclusive negotiation, as
opposed to a "bidding," process. The consensus of the Executive Committee was
that the presentations were to be informal without necessitating Guaranty to
take any action as a result of the presentations. On March 18, 1998, the Board
of Directors listened to presentations from Ewing and representatives of FNB.
On March 25, 1998, the Executive Committee met to discuss two options,
consisting of a possible sale of Guaranty either through the direct negotiation
with a financial institution or a bid process through an investment banking
firm, as well as an alternative option for raising additional capital and
continuing to grow Guaranty.
The directors discussed generally their assessment of Guaranty's
prospects, including future performance prospects. The Board also reviewed the
range of prices that had been paid for sales of financial institutions over
recent periods. The Board also discussed the desirability of providing liquidity
for holders of Guaranty Common Shares, the risk that the prices being received
for sales of financial institutions in the prevailing market could decline over
the ensuing years, the consolidation trend in the financial institutions
industry, the opportunities that bank mergers presented to Guaranty, and the
financial institutions that might have an interest in pursuing a transaction
with Guaranty. The Board also considered the increasingly competitive banking
environment in which Guaranty operates, the increased competition in both
deposit and lending activities, and the inherent risk in relying on future
internal growth and market penetration.
On April 1, 1998, the Executive Committee met to listen to a proposal
from another investment banking firm for representation of Guaranty in any
process to market Guaranty for sale.
On April 7, 1998, the Executive Committee of the Board of Guaranty met
to review a presentation by Ewing. After the presentation, the Executive
Committee voted to recommend to the Board of Directors that Guaranty retain
Ewing to represent Guaranty in soliciting indications of interest that might
warrant serious consideration and potentially result in an agreement to merge or
Guaranty otherwise being acquired. At its meeting on April 15, 1998, the Board
of Directors determined not to enter into direct negotiations with FNB for the
sale of Guaranty to FNB but, rather, to initiate a bidding process for the
possible sale of Guaranty. Guaranty also approved engaging Ewing to serve as
Guaranty's investment advisor. Subsequent to this meeting, Guaranty entered into
an agreement with Ewing on April 21, 1998.
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Ewing contacted several financial institutions during May and June,
1998 regarding their interest in pursuing a possible acquisition of Guaranty.
Several of the institutions, including FNB, requested additional information and
held discussions with representatives of Ewing. At a June 24, 1998 meeting,
Guaranty's Board of Directors discussed the results of Ewing's solicitation
process. Representatives of Ewing also were in attendance. Guaranty's Board
authorized Ewing to continue discussions regarding a possible acquisition of
Guaranty. The Board also authorized the Executive Committee to meet with
representatives of FNB and two other financial institutions to explore further
their interest in acquiring Guaranty.
On July 6, 1998, the Executive Committee met with representatives of
FNB. On July 7, 1998 and July 14, 1998, the Executive Committee met with
representatives of two other financial institutions regarding their interest in
Guaranty.
On July 15, 1998, the Board of Directors of Guaranty reviewed the
proposals received from FNB (which contemplated the same basic terms eventually
set forth in the Merger Agreement and described in detail herein), and other
financial institutions. Following the discussion, the Board of Directors of
Guaranty authorized FNB to commence conducting a due diligence review of
Guaranty. The Board also authorized Guaranty's financial and legal advisors to
commence negotiation of a definitive agreement that would be submitted to
Guaranty's Board of Directors for review and consideration.
During the last week of July 1998, FNB conducted a due diligence review
of Guaranty. During the first part of August 1998, Guaranty and FNB
representatives negotiated the terms of a definitive agreement. The agreement
was reviewed and approved by the Board of Directors of Guaranty at a meeting
held on August 20, 1998. At this meeting, legal counsel reviewed generally the
fiduciary obligations of directors in sales of financial institutions and
commented on the form of definitive agreement, the non-competition and affiliate
agreements to be entered into between Guaranty's directors and FNB, and the
change of control provisions of employment agreements previously entered into
with several Guaranty officers that would arise as a result of the Merger. See
"Interests of Certain Persons in the Merger." At the meeting, representatives of
Ewing delivered Ewing's written opinion that the consideration to be received by
the shareholders of Guaranty in the Merger is fair, from a financial point of
view. Guaranty's Board then unanimously approved the Merger Agreement and the
transactions contemplated thereby. Bank management also was authorized to
execute the Merger Agreement, which was signed by FNB and Guaranty effective
August 20, 1998.
On October 15, 1998, the parties executed an amendment to the Merger
Agreement which effected certain technical amendments.
GUARANTY'S REASONS FOR THE MERGER. Guaranty's Board of Directors
believes that the Merger is in the best interest of Guaranty shareholders. The
Board of Directors at Guaranty considered a number of factors in deciding to
approve and recommend the terms of the Merger to Guaranty shareholders,
including: the terms of the proposed transaction; the financial condition,
results of operations, and future prospects of Guaranty; the value of the
consideration to be received by Guaranty shareholders relative to the book value
and earnings per share of Guaranty Common Shares; the competitive and regulatory
environment for financial institutions generally; the fact that the Merger will
enable Guaranty shareholders to exchange their Guaranty Common Shares (for which
there is no established public trading market) for shares of common stock of a
larger and more diversified entity, the stock of which is more widely held and
more actively traded; that the Merger will enable Guaranty shareholders to hold
stock in a financial institution that has historically paid cash dividends to
its shareholders as compared to Guaranty, which only commenced paying cash
dividends in 1995; the likelihood of receiving the requisite regulatory
approval; that it is expected that the Merger will be a tax-free transaction
(except in respect of cash received for fractional Guaranty Common Shares) for
federal income tax purposes; and other information. The Board of Directors also
took into account an opinion received from Ewing that the consideration to be
received by the shareholders of Guaranty in the Merger, as described in the
Merger Agreement, is fair, from a financial point of view to them. See "-
Opinion of
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Financial Advisor." The foregoing discussion of the information and factors
considered by the Guaranty Board of Directors is not intended to be exhaustive
of the factors considered by the Board of Directors. The Guaranty Board of
Directors did not assign any relative or specific weights to the foregoing
factors, and individual directors may have given different weights to different
factors.
FNB'S REASONS FOR THE MERGER. The FNB Board recognized that the
proposed Merger with Guaranty provides an opportunity to continue to employ
FNB's growing capital on the west coast of Florida, one of the fastest growing
markets in the United States. This is in contrast to the more mature market
areas of Pennsylvania, eastern Ohio, and southwestern New York where FNB had
traditionally operated, prior to its acquisitions of seven financial
institutions in Southwest Florida over the past two years. FNB's management
believes that the proposed Merger complements FNB's acquisitions on the west
coast of Florida and will provide FNB with a greater level of market
competitiveness in such area. Following the Merger, West Coast Bank will be
merged into Interim and the combined entity will be able to draw upon the
resources and competencies of FNB's other Florida affiliates to provide a
broader range of services and product delivery channels.
OPINION OF GUARANTY' FINANCIAL ADVISOR
The Board of Directors of Guaranty retained Ewing in the summer of 1998
to assist the Guaranty Board in developing and implementing a strategy for
marketing Guaranty and for the purpose of rendering its Opinion (the "Opinion")
to the shareholders of Guaranty as to the fairness, from a financial point of
view, of the terms of any transaction resulting from the negotiations. The
Guaranty Board selected a proposal by FNB as offering the greatest value and the
most attractive terms to Guaranty's shareholders.
At the meeting of the Guaranty Board held on August 20, 1998, Ewing
delivered its Opinion that subject to certain assumptions and market conditions,
the terms of the offer by FNB were fair to Guaranty's shareholders, from a
financial point of view. Ewing subsequently updated its opinion to _______,
1998. No limitations were imposed by the Guaranty Board on the scope of Ewing's
analysis or the procedures followed by Ewing in rendering its Opinion. Ewing's
Opinion is directed to the Guaranty Board and does not constitute a
recommendation to any Guaranty shareholder as to how such shareholder should
vote on the Merger. Ewing has not been requested to opine as to and the Opinion
does not in any manner address the underlying business decision by the Guaranty
Board to enter into the merger.
In issuing its Opinion, Ewing assumed and relied upon the accuracy and
completeness of the financial and other information used by it in arriving at
its Opinion as provided by Guaranty. Ewing made no independent verification of
the supplied information, nor did Ewing conduct a physical inspection of the
properties and facilities of Guaranty, nor did Ewing make or obtain any
evaluation or appraisal of the assets or liabilities of Guaranty, nor did Ewing
review any credit or loan files from Guaranty's loan portfolio. The Opinion is
based upon market and economic conditions as they existed on the date of the
Opinion. Events occurring after the date of issuance of the Opinion including
but not limited to, changes in the market price of securities, the results of
operations, or material changes in the value of the assets or liabilities of
Guaranty could affect the assumptions used and the conclusions of the Opinion.
The full text of Ewing's Opinion is attached as Appendix B to this
Proxy Statement-Prospectus and is incorporated herein by reference. The
description of the Opinion set forth herein is qualified in its entirety by
reference to Appendix B. Guaranty's shareholders are urged to read the Opinion
in its entirety.
In arriving at its Opinion, Ewing: (i) reviewed the audited financial
statements prepared by Bobbitt Pittenger & Company, P.A., Sarasota, Florida, for
the fiscal years ended December 31, 1997, 1996 and 1995; (ii) reviewed the Call
Reports of Guaranty filed with federal and state banking regulators reflecting
the operations of Guaranty for the periods
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ended March 31, 1998, December 31, 1997, 1996 and 1995; (iii) reviewed the
Merger Agreement; (iv) reviewed the budget for Guaranty for the year 1998; (v)
reviewed the five-year financial objectives for Guaranty (1998-2002); (vi)
reviewed other financial information concerning Guaranty; (vii) compared the
values and terms of the Merger Agreement with FNB with the values and terms
offered shareholders of comparable institutions in Florida in recent
transactions; (viii) examined Guaranty's market share in the Sarasota County
market; (ix) compared Guaranty's financial performance with other comparable
banking institutions operating in Florida; (x) reviewed the financial condition
of FNB and the impact of the proposed transaction on the market price of the
shares of FNB; and (xi) reviewed the recent price performance and trading
activity in the shares of FNB.
Ewing held discussions with the management of Guaranty concerning its
historical operations and future prospects and the decision of its Board of
Directors to negotiate with FNB.
The following paragraphs summarize the most pertinent portions of the
financial and comparative analysis prepared by Ewing in arriving at its Opinion.
The following summary does not purport to be a complete description of the
analysis performed or the matters considered by Ewing in arriving at its
Opinion.
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. Therefore, such an
opinion is not readily susceptible to summary description. Furthermore, in
arriving at its Opinion, Ewing did not attribute any particular weight to any
one factor considered by it, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Ewing believes that its
analysis must be considered as a whole and that considering any portions of such
analysis and of the factors considered, without considering all analyses and
factors, could create a misleading or incomplete view of the process underlying
its Opinion. In its analysis, Ewing made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond Guaranty's control. Any estimates contained in
these analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable than
as set forth therein. Analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold. In addition, as described above, Ewing's Opinion, along with its
presentations to the Guaranty Board, was just one of many factors taken into
consideration by the Guaranty Board.
TRADING HISTORY OF GUARANTY'S SHARES. In view of the fact that the
shares of Guaranty are closely held, Ewing determined that there was no
meaningful trading market in the shares of Guaranty.
SELECTION OF VALUATION METHOD. In valuing financial institutions, Ewing
believes that there are several methods available to determine if a prospective
transaction is fair, from a financial point of view, to the shareholders of the
institution to be acquired. These methods include: (i) Comparison Method: A
comparison of the purchase price of the transaction with prices paid for similar
banks during periods of similar economic activity and bank valuations based on
ratios commonly used in the industry including price/book, price/earnings, and
price/deposits; (ii) Control Premium Method: This method only applies to selling
companies where there is a public market for their shares, and, as there is not
an active market for the shares of Guaranty, this method is not applicable;
(iii) Net Asset or Liquidating Value Method: This method does not apply to
healthy banks and is only used in periods of severely depressed markets; (iv)
Discounted Cash Flow Method: This method is often used in valuing community
banks for the primary purpose of confirming valuations determined by the
Comparison or other Methods. The method is based on management's forecast of
earnings and dividends for a period of years with an estimate of the amount of a
projected sale at the end of the period. The present value of these projected
cash flows was determined using an array of discount rates reflecting the risks
and accuracy of the projections. Earnings for small banks can be volatile
because of the expenses associated with, for example, the addition of a new
branch, a new marketing program, and the hiring of new banking officers, which
can have an adverse affect on current earnings. Earnings projections for smaller
banks tend to have less reliability, and this reduces the value of the
Discounted Cash Flow method in determining market value. Ewing
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believes that the Comparison Method provides the soundest choice for determining
the fairness of this transaction, and that the Discounted Cash Flow Method is
useful in confirming the valuation determined by the Comparison Method.
ANALYSIS OF COMPARABLE COMPANIES. Using industry information including
information prepared by SNL Securities, Ewing compared the financial performance
of Guaranty with two relevant groups of banks. In the first group, Ewing
compared performance indicators of Guaranty with the average performance of 217
independent Florida community banks. The performance indicators utilized by
Ewing for this comparison included the return on average assets for 1997 which
was .63% for Guaranty vs. 1.02% for the 217 banks; the return on average equity
for 1997 which was 8.39% for Guaranty vs. 11.00% for the 217 banks; the
equity/assets ratio which for Guaranty as of December 31, 1997 was 7.47% vs.
9.25% for the 217 Florida banks; and the ratio of non-performing assets/assets
which for Guaranty was .14% vs. .36% for the 217 banks.
In the second group, Ewing compared performance indicators of Guaranty
with the average performance indicators of 11 selected comparable banks which
were merged with larger companies in 1997 and 1998. The performance indicators
utilized by Ewing for this comparison included the return on average assets
which was .63% for Guaranty vs. 1.24% for the 11 banks; the return on average
equity which was 8.39% for Guaranty vs. 13.88% for the 11 banks; the ratio of
non-performing assets/assets which was .14% for Guaranty vs. .17% for the 11
banks; and the ratio of equity/assets which was 7.47% for Guaranty vs. 9.00% for
the 11 banks.
ANALYSIS OF COMPARABLE TRANSACTIONS. Ewing reviewed the terms and
financial characteristics of selected transactions involving the acquisition of
banks by commercial bank holding companies in 1997 and 1998. Ewing selected
transactions for comparison purposes involving similarly performing banks in
Florida. Ewing initially selected transactions that occurred in a period of
similar economic activity, and Ewing determined that the period commencing
January 1, 1997 through March 31, 1998 was the optimum period for the selection
of comparable transactions. Because of the large amount of consolidation
activity in the Florida banking market, Ewing determined that there were a
sufficient number of transactions involving comparable banks in Florida to
provide a sufficiently large universe for comparison purposes. There were 36
transactions that occurred during this period involving Florida banks, and Ewing
applied the following criteria in selecting the most comparable transactions.
Ewing eliminated all transactions involving selling banks with assets less than
$75 million and in excess of $175 million. Ewing eliminated all transactions in
which the operations of the acquired bank were unprofitable in the year of
acquisition. Ewing eliminated all transactions involving selling banks with
non-performing assets in excess of 1% of assets. Ewing eliminated all
transactions where the selling bank had a return on average assets in the year
of acquisition of less than 1.0% and/or a return on average equity of less than
8.0%. Eleven of the 36 transactions met the above criteria, and they included
the following transactions (identified by acquiree/acquiror): Citizens Holding
Corporation/FNB Corporation, Hermitage, PA; CNB Holding Corporation/Colonial
BancGroup, Montgomery, AL; Seminole Bank/FNB Corporation, Hermitage, PA; Central
Bank/BankUnited Financial, Coral Gables, FL; West Coast Bank/FNB Corporation,
Hermitage, PA; Dadeland Bancshares/Colonial BancGroup, Montgomery, AL; Bank of
Winter Park/Huntington Bancshares, Columbus, OH; Florida Gulfcoast/Provident
Bancorp, Cincinnati, OH; Indian Rocks State Bank/FNB Corporation, Hermitage, PA;
Great Southern Bancorp/Colonial BancGroup, Montgomery, AL; and Port St. Lucie
National Bank/Seacoast Banking Corporation, Stuart, FL.
Ewing utilized three ratios that are generally utilized in the industry
for comparing the relative prices paid in transactions involving banks. These
ratios are price/book value which was 3.35x for proposed Merger vs. an average
2.73x for the eleven transactions; price/earnings which was 26.41x for proposed
Merger vs. 21.61x for the eleven transactions; price as a percentage of deposits
which was 25.91% for proposed Merger vs. 28.88% for the eleven transactions.
Because the reasons for and circumstances surrounding each of the
transactions analyzed were diverse and because of the inherent differences
between the operations of Guaranty and the eleven banks in the selected
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transactions, Ewing believed that a strict reliance on the quantitative
comparable transaction analysis is not meaningful without further qualitative
considerations. Ewing believed that the proper use of a comparable transaction
analysis would involve qualitative judgments concerning differences between the
characteristics of these transactions and proposed Merger which may have
affected the acquisition value of the acquired companies and Guaranty. The
qualitative factors considered by Ewing in connection with its Opinion included
Ewing's views as to the number of potential buyers in each of these transactions
and the ability of the acquirors to implement cost savings and business
synergies as a result of each merger
DISCOUNTED CASH FLOW ANALYSIS. Ewing projected the cash flows of
Guaranty based on Guaranty's financial objectives for the five-year period ended
December 31, 2002, which assume that Guaranty would remain an independent bank.
For purposes of this analysis, Ewing assumed that the projected dividends would
be paid by Guaranty and that Guaranty would enter into a merger contract as of
December 31, 2002, at a price based on the level of current bank valuations. The
derived value as of December 31, 2002, for Guaranty was discounted to present
value utilizing a discount rate which was determined based on Ewing's estimate
of the rate that investors would require in making an investment based on the
projected sale of Guaranty. Ewing calculated the appropriate discount rate by
layering appropriate risk rates which took into consideration the basic riskless
rate of Treasury Notes for the indicated time period (five years), the general
risks of equity investment, and the volatility of small bank earnings. Ewing
used a range of 14%-16% in its calculations of present value.
Based on this analysis, Ewing determined that the present value of the
projected cash flows was less than the values represented by the FNB Merger
Agreement and that the discounted cash flow analysis supported the fairness of
the transaction to Guaranty's shareholders.
ANALYSIS OF FNB SHARES. Ewing performed an analysis as to the
profitability, quality and liquidity of the shares of FNB including a comparison
of FNB's operating performance with the average of seven other regional bank
holding companies ("BHCs") including AmSouth Corporation, Colonial Banc Group,
Compass Bank, Regions Financial Corporation, SouthTrust Corporation, Union
Planters Corp., and Huntington Bancshares. Ewing observed that FNB produced a
return on average assets in 1997 of 1.31% vs. an average of 1.21% by the seven
BHCs; a return on average equity of 15.41% vs. 15.77% for the seven BHCs;
non-performing assets to total assets of .54% vs. 4.5% for the seven BHCs; and
FNB had a stronger equity/assets ratio of 8.70% vs. an average of 7.76% for the
seven BHCs.
Ewing reviewed recent trading prices and volumes for FNB Common Stock
and compared the price performance of FNB shares during this period to those of
other regional banks. Ewing found the performance of FNB Common Stock to be
comparable to those of its peers and that FNB shares offer moderate liquidity to
its shareholders.
MARKETING OF GUARANTY. The Guaranty Board developed a marketing program
to solicit interest in Guaranty from a selected list of qualified bank holding
companies whose shares were acceptable in terms of investment value and quality.
Ewing assisted the Board of Directors in this process which resulted in specific
interest being expressed by several bank holding companies, including FNB The
proposal from FNB was selected by the Board because of the higher market value
and more advantageous terms that it represented.
COMPENSATION OF ALLEN C. EWING & CO. Ewing served as financial advisor
to Guaranty in addition to rendering its Opinion, and Guaranty has agreed to pay
Ewing a total fee equal to .75% of the value of the transaction at closing.
Guaranty agreed to indemnify Ewing against certain liabilities as delineated in
Ewing's agreement with Guaranty.
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CONDITIONS PRECEDENT TO THE MERGER
The Merger will occur only if the Merger Agreement is approved by the
requisite vote of the shareholders of Guaranty. 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 regulatory and governmental consents, approvals, authorizations,
clearances, exemptions, waivers, or similar affirmations (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 by each party of all consents, with certain exceptions, required for
consummation of the Merger and the preventing of any default under any contract
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, prohibits or makes illegal the transactions contemplated by the
Merger Agreement; (iv) the effectiveness of the Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act") and the receipt of all
necessary approvals under state securities laws, the Securities Act or the
Securities Exchange Act of 1934, as amended (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 qualifies to be accounted for as
a pooling-of-interests under Generally Accepted Accounting Principles ("GAAP");
and (vi) the receipt of the tax opinions 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 from the other party. The obligation of FNB to effect the Merger
also is subject to (i) the receipt of agreements from affiliates of Guaranty
restricting their ability to sell or otherwise transfer their Guaranty Common
Shares prior to consummation of the Merger or their shares of FNB Common Stock
received upon consummation of the Merger, to the extent necessary to assure, in
the reasonable judgment of FNB, that the transactions contemplated by the Merger
Agreement will qualify for pooling-of-interests accounting treatment, (ii) the
receipt of the opinion of Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A.,
counsel to Guaranty, as to certain matters, and (iii) the receipt from each
director and executive officer of Guaranty of certain Non-Compete Agreements.
The obligation of Guaranty to effect the Merger is further subject to (i)
Guaranty's receipt from Ewing of a letter, dated within five days of this Proxy
Statement-Prospectus, stating that in the opinion of Ewing, the consideration to
be paid in the Merger is fair, from a financial point of view, to the holders of
Guaranty Common Shares; (ii) FNB having delivered to the Exchange Agent the
consideration to be paid to holders of the Guaranty Common Shares; and (iii)
Guaranty's receipt of a written opinion of Smith, Gambrell & Russell, LLP, dated
as of the Effective Time, with respect to such matters and in such form as shall
be agreed upon between such firm and Guaranty. 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.
Either Guaranty or FNB may waive certain of the conditions imposed with
respect to its or their respective obligations to consummate the Merger, except
for the requirements that the Merger be approved by Guaranty shareholders and
that all required regulatory approvals be received.
CONDUCT OF BUSINESS PRIOR TO THE MERGER
Under the terms of the Merger Agreement, Guaranty has agreed, except as
otherwise contemplated by the Merger Agreement or otherwise with the prior
written consent of FNB, to (i) operate its business only in the usual, regular
and ordinary course, (ii) use its reasonable best efforts to preserve intact its
business organization and assets and
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maintain its rights and franchises, (iii) use its reasonable best efforts to
maintain its current employee relationships, (iv) formulate and execute a plan
which complies with the FFIEC Year 2000 Compliance guidelines as promulgated by
the Board of Governors of the Federal Reserve System, and (v) take no action
which would materially adversely affect the ability of any party to obtain any
consent or approvals required for the transactions contemplated by the Merger
Agreement without imposition of a condition or restriction which, in the
reasonable judgement 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 judgement, have
entered into the Merger Agreement.
In addition, Guaranty has agreed that it will not, without the prior
written consent of FNB, except as contemplated by or disclosed pursuant to the
Merger Agreement:
(a) amend the Guaranty Articles of Incorporation
("Guaranty Charter"), the Guaranty bylaws ("Guaranty Bylaws"), or other
governing instruments of Guaranty;
(b) make any new loan or other extension of credit to any
person (except those who have received a commitment for a loan or extension of
credit prior to the date of the Merger Agreement) in excess of $100,000 (except
loans secured by an owner occupied real property first mortgage or single or 1-4
family residential loan properly margined or secured by liquid assets each of
which is less than $500,000); provided, however, that FNB will make every
reasonable effort to respond to Guaranty's request for loan approval in a timely
manner and, under normal circumstances, make a decision within two business
days;
(c) incur any additional debt obligation or other
obligation for borrowed money in excess of an aggregate of $100,000 except in
the ordinary course of the business consistent with past practices (it being
understood and agreed that the incurrence of indebtedness in the ordinary course
of business shall include, without limitation, 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.
governmental agencies securities), or impose, or suffer the imposition of, a
lien on any asset of Guaranty (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);
(d) 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 Guaranty, or adjust, split, combine, or
reclassify any capital stock of Guaranty or issue or authorize the issuance of
any other securities in respect of or in substitution for shares of Guaranty
Common Shares, or make, declare or pay any dividend (except for a regular annual
dividend in the fourth quarter of 1998 not to exceed $0.06 per share) or make
any other distribution in respect of its capital stock;
(e) except for the Merger Agreement, or pursuant to the
exercise of the Guaranty Options, or as disclosed pursuant to the Merger
Agreement, 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 Guaranty Common Shares or
any other capital stock of Guaranty, 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;
(f) sell, lease, mortgage, or otherwise dispose of or
otherwise encumber (i) any shares of capital stock of Guaranty or (ii) any asset
other than in the ordinary course of business for reasonable and adequate
consideration;
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(g) 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
investment in an amount in excess of $100,000 for each such investment, either
by purchase of stock or securities, contributions to capital, asset transfers,
or purchase of any assets, in any person 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 Guaranty 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, in which case FNB shall object thereto within two business days, and
the failure to provide a written objection within two business days shall be
deemed approval of FNB to make such purchase or investment;
(h) except as otherwise provided in the Merger Agreement,
grant any material increase in compensation or benefits to the employees or
officers of Guaranty, except in accordance with past practice disclosed pursuant
to the Merger Agreement 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 or as otherwise disclosed; enter into
or amend any severance agreements with officers of Guaranty; grant any material
increase in fees or other increases in compensation or other benefits to
directors of Guaranty except in accordance with past practice or as disclosed
pursuant to the Merger Agreement; or voluntarily accelerate the vesting of any
Guaranty Options or other stock-based compensation or employee benefits;
(i) except as otherwise disclosed in the Merger Agreement
or that may be entered into pursuant to the Merger Agreement, enter into or
amend any employment contract (unless such amendment is required by law) between
Guaranty and any person;
(j) except as otherwise disclosed in the Merger
Agreement, adopt any new employee benefit plan of Guaranty or make any material
change in or to any existing employee benefit plans of Guaranty other than such
changes required by law or to maintain the tax qualified status of any such
plan;
(k) 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;
(l) except as otherwise disclosed in the Merger
Agreement, commence any litigation other than in accordance with past practice
or settle any litigation involving any liability of Guaranty for material money
damages or restrictions upon the operations of Guaranty;
(m) except in the ordinary course of business, modify,
amend, or terminate any material contract, other than renewals without a
material adverse change of terms, or waive, release, compromise, or assign any
material rights or claims;
(n) sell, transfer, mortgage, encumber or otherwise
dispose of any of its material properties or assets to any individual,
corporation or other entity, 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) elect or appoint any new corporate officers or
members of the Guaranty Board of Directors; or
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(p) 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 Guaranty nor its affiliates or representatives
shall, directly or indirectly, solicit any tender offer or exchange offer or any
proposal for a Merger, consolidation, acquisition of all of the stock or assets
of, or other business combination involving Guaranty or any of its subsidiaries
or any proposal or offer to acquire in any manner a substantial equity interest
in, or a substantial portion of the assets of, Guaranty or any of its
subsidiaries ("Acquisition Proposal"). Additionally, except to the extent
necessary to comply with the fiduciary duties of the Guaranty Board, determined
after consultation with counsel, neither Guaranty nor its affiliates or
representatives will provide any non-public information that it is not legally
obligated to furnish, or negotiate with respect to, any Acquisition Proposal,
although Guaranty 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 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 its
business prospects and (ii) to take no action which would materially adversely
affect the ability of any party to (A) obtain any consent or approval required
for the transactions contemplated in the Merger Agreement or (B) 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 Guaranty,
which consent shall not be unreasonably withheld, amend the FNB Charter ("FNB
Charter") or the FNB Bylaws ("FNB Bylaws") in any manner adverse to the holders
of Guaranty Common Shares.
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 consideration to be
received by the holders of Guaranty Common Shares may not be amended after the
Special Meeting in a manner to reduce or modify in any material respect the
consideration to be received by the holders of the Guaranty Common Shares
without the further approval of the holders of the issued and outstanding shares
of Guaranty Common Shares entitled to vote thereon.
The Merger Agreement provides that each party may (i) waive any default
in the performance of any term of the Merger Agreement by the other party, (ii)
waive or extend the time for compliance or fulfillment by the other party of any
of its obligations under the Merger Agreement and (iii) 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 Guaranty Board. The Merger Agreement may also be terminated by
either the FNB Board or the Guaranty 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 and which inaccuracy would provide the terminating party
the ability to refuse to consummate the Merger under the applicable standard set
forth in the Merger Agreement; provided that the terminating party is not then
in breach of any representation or warranty contained in the Merger Agreement or
in material breach of any covenant or other agreement contained in the Merger
Agreement; (ii) in the event of a material breach of any covenant, agreement or
obligation in the Merger Agreement by the other party that
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cannot or has not been cured within 30 days of written notice of such breach;
(iii) if the required approval of the Guaranty shareholders or any applicable
regulatory or governmental authority is not obtained; or (iv) if the Merger is
not consummated by February 28, 1999; 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.
The Merger Agreement may be terminated by FNB in the event that
dissenters' rights claimed pursuant to the applicable provisions of the National
Bank Act aggregate more than 10% of the issued and outstanding Guaranty Common
Shares, or if the Designated Price shall be less than $30.00 per share. In
addition, the Merger Agreement may be terminated by Guaranty if (i) at any time
prior to the Effective Time, the fairness opinion of Ewing is withdrawn; or (ii)
if the Designated Price shall be $28.00 or less; or (iii) prior to the Effective
Time, a corporation, partnership, person or other entity or group shall have
made a bona fide Acquisition Proposal that the Guaranty Board determines in its
good faith judgment and in the exercise of its fiduciary duties, with respect to
legal matters on the written opinion of legal counsel and as to financial
matters on the written opinion of an investment banking firm of national
reputation, is more favorable to the Guaranty shareholders and that the failure
to terminate the Merger Agreement and accept such alternative Acquisition
Proposal would be inconsistent with the proper exercise of such fiduciary duties
(each a "Termination Event"). There can be no assurance that the Guaranty Board
would exercise its right to terminate the Merger Agreement if a Termination
Event exists.
It may not be possible to know whether a Termination Event will occur
until after the Determination Date or the Effective Time. The Guaranty Board has
made no decision as to whether it would exercise its termination right in such
situation. The Guaranty 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 Guaranty at the
Special Meeting will confer on the Guaranty Board the power, consistent with its
fiduciary duties, to elect to consummate the Merger in the event of a
Termination Event without any further action by, or resolicitation of, the
shareholders of Guaranty.
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 Registration Statement; provided, however, that in the event of any
termination (with certain exceptions set forth in the Merger Agreement) of the
Merger Agreement following the occurrence of an Initial Triggering Event (as
defined in the Merger Agreement), FNB shall be entitled to a cash payment from
Guaranty in an amount equal to $1,500,000 upon the occurrence of any Subsequent
Triggering Event (as defined in the Merger Agreement) within 12 months following
the date of such termination. In the event the Merger Agreement is terminated as
a result of FNB's or Guaranty's failure to satisfy any of its representations,
warranties or covenants set forth therein, the non-terminating party shall
reimburse the terminating party for its reasonable out-of-pocket expenses
relating to the Merger in an amount not to exceed $150,000.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Smith, Gambrell & Russell, LLP has delivered to FNB and Guaranty 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) of the Code;
(b) no gain or loss will be recognized by the shareholders of Guaranty on the
exchange of their Guaranty Common Shares for 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 Guaranty Common Shares are exchanged
pursuant to the Merger will be the same as the basis of such Guaranty Common
Shares exchanged therefor (including basis allocable to any fractional interest
in any share of FNB Common
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Stock); (d) the holding period of FNB Common Stock for which Guaranty Common
Shares are exchanged will include the period that such shares of Guaranty Common
Shares were held by the holder, provided that such shares constituted 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 the
fractional share of FNB Common Stock surrendered, which gain or loss will be
capital gain or loss if the Guaranty Common Shares constituted 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 GUARANTY 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 Guaranty' management and of the Guaranty
Board have interests in the Merger that are in addition to any interests they
may have as shareholders of Guaranty generally. These interests include, among
others, provisions in the Merger Agreement relating to the management of Interim
after the Effective Time, election or appointment of all members of the Guaranty
Board to the board of directors of Interim, certain proposed employment
agreements and other employee benefits, the payment of amounts due under
existing change in control agreements and indemnification of Guaranty directors
and officers, as hereinafter described.
MANAGEMENT POST-MERGER; GUARANTY EMPLOYMENT AGREEMENTS. FNB has agreed
to cause all of the eligible Guaranty directors to be elected to the Board of
Directors of Interim (and to pay fees to non-employee directors in the same
amount as currently being paid by Guaranty) and to cause all of the officers of
Guaranty to be appointed as officers of Interim following consummation of the
Merger.
CHANGE IN CONTROL PAYMENTS. In the Merger Agreement, Guaranty has
agreed that it will pay, at the closing of the Merger, all amounts payable under
the agreements entered into by each of Messrs. Voigt ($382,500), Battaglia
($173,600) and McWhorter ($171,200) and Ms. Toundas ($72,500) with Guaranty,
dated August 20, 1997, as if each such individual had delivered a valid notice
of election thereunder, except for such obligations as cannot be satisfied or
which would be redundant due to continued employment. Those obligations
(estimated to aggregate approximately $50,000) will be satisfied by FNB upon
FNB's subsequent receipt of such individual's notice of termination of
employment.
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 Guaranty against all costs, fees or expenses
(including reasonable attorneys' fees), judgments, fines, penalties, losses,
claims, damages, liabilities and amounts paid in settlement in connection with
any litigation arising out of actions or omissions occurring at or prior to the
Effective Time to the full extent permitted under Florida law and by the
Guaranty Charter and Guaranty Bylaws as in effect on the date of the Merger
Agreement, including provisions relating to advances of expenses incurred in the
defense of any litigation.
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GUARANTY OPTIONS. Guaranty has granted Guaranty Options from time to
time to its directors and certain of its executive officers and employees. As of
the date of this Proxy Statement-Prospectus, there are outstanding Guaranty
Options to purchase up to an aggregate of 58,631 Guaranty Common Shares, of
which 53,790 Guaranty Options are held by current directors and officers of
Guaranty. All of the Guaranty Options are exercisable upon a change of control.
The following table sets forth, as of October 30, 1998 (i) the total number of
Guaranty Common Shares subject to such Guaranty Options, (ii) the weighted
average exercise price of such Guaranty Options, and (iii) the aggregate
equivalent value of such options based on the last sales price of $27.50 on
October 30, 1998 for the FNB Common Stock.
WEIGHTED AVERAGE
SHARES SUBJECT TO EXERCISE PRICE PER AGGREGATE VALUE OF
GUARANTY OPTIONS GUARANTY OPTIONS GUARANTY OPTIONS
----------------- ------------------ ------------------
58,631 $11.65 $2,521,133
All outstanding Guaranty Options not exercised before the Effective
Time will be converted into and become options to purchase whole shares of FNB
Common Stock. The exercise price and number of shares subject to such options
will be adjusted for the Exchange Ratio.
OTHER MATTERS RELATING TO GUARANTY EMPLOYEE BENEFIT PLANS. The Merger
Agreement also provides that, following the Effective Time, all Guaranty
employees shall become employees of Interim and that Interim will provide
generally to officers and employees of Guaranty 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 FNB or its
affiliated companies to their similarly situated officers and employees. After
the Effective Time, FNB or its subsidiaries will also honor in accordance with
their terms all employment, severance, consulting and other compensation
contracts disclosed pursuant to the Merger Agreement.
For purposes of participation and vesting (but not benefit accrual
under any employee benefit plans of FNB and its subsidiaries other than under
the Guaranty Benefit Plans) under such employee benefit plans, the service of
the employees of Guaranty prior to the Effective Time will be treated as service
with FNB or any of its subsidiaries participating in such employee benefit
plans. For purposes of applying any deductible limitations, out-of-pocket
minimums, or health certification requirements under any group health plan made
available to Guaranty employees and their dependents after the Merger, Guaranty
employees shall not be treated as new hires and shall be given appropriate
credit for their participation immediately prior to the Merger in any Guaranty
benefit plan that constituted a group health plan. In the Merger Agreement, FNB
has agreed that it will, and will cause its subsidiaries to, honor in accordance
with their terms all employment, severance, consulting and other compensation
contracts disclosed pursuant to the Merger Agreement between Guaranty 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 Guaranty Benefit Plans.
DISSENTERS' RIGHTS OF GUARANTY SHAREHOLDERS
When a Florida state bank merges with and into a national bank such
that the national bank is the surviving entity, the Florida state bank
shareholders' dissenters' rights are those set forth in 12 U.S.C. Section 215a
and not those outlined under the Florida Financial Institutions Code ("FFIC").
Pursuant to the FFIC and the National Bank Act, each shareholder of Guaranty
entitled to vote on the Merger who objects to the Merger shall be entitled to
the rights and remedies of dissenting shareholders provided under 12 U.S.C.
Section 215a, the text of which is included in Appendix C to this Proxy
Statement-Prospectus and is incorporated herein by reference, and any such
shareholder who follows the
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procedures specified in 12 U.S.C. Section 215a will be entitled to receive the
value of each holder's shares of Guaranty Common Stock in cash. A GUARANTY
SHAREHOLDER MUST COMPLY STRICTLY WITH THE PROCEDURES SET FORTH IN 12 U.S.C.
SECTION 215a. FAILURE TO FOLLOW ANY OF THOSE PROCEDURES MAY RESULT IN A
TERMINATION OR WAIVER OF HIS DISSENTERS' RIGHTS.
To perfect dissenters' rights, a holder of shares of Guaranty Common
Stock must (a) vote against the Merger or otherwise notify the Secretary of
Guaranty in writing at or prior to the Special Meeting that he dissents from the
Merger and (b) within 30 days after the closing of the Merger, deliver to FNB a
written request for the value of his shares of Guaranty Common Stock in cash
accompanied by the surrender of his certificates representing such shares of
Guaranty Common Stock. Such written requests should be delivered either in
person or by mail (certified mail, return receipt requested, being the
recommended form of transmittal) to F.N.B. Corporation, One F.N.B. Boulevard,
Hermitage Pennsylvania 16148, Attention: Secretary.
The value of the shares of Guaranty Common Stock held by a dissenting
shareholder will be determined, as of the Effective Date of the Merger, by an
appraisal made by a committee of three appraisers, one to be selected by the
holders of a majority of the shares of Guaranty Common Stock (the owners of
which have exercised their dissenters' rights), one to be selected by the
directors of FNB, and one to be selected by the two appraisers so selected. The
valuation agreed upon by any two of the three appraisers will govern. If the
value so fixed is not satisfactory to any dissenting shareholder who has
requested payment, that shareholder may, within five days after being notified
of the appraised value of his shares, appeal to the Comptroller of the Currency
who will cause a reappraisal to be made that will be final and binding as to the
value of the shares of such shareholder. If, within 90 days from the closing of
the Merger, for any reason one or more of the appraisers is not selected, or the
appraisers so selected fail to determine the value of the shares of Guaranty
Common Stock, the Comptroller of the Currency will cause an appraisal of such
shares to be made upon the written request of any interested party, and such
appraisal will be final and binding on all parties. FNB will pay the expenses of
the Comptroller of the Currency in making any appraisal or reappraisal described
above.
The value of the shares of Guaranty Common Stock held by dissenting
shareholders ascertained as described above will be promptly paid by FNB to the
dissenting shareholders. The shares of FNB Common Stock that would have been
delivered to the dissenting Guaranty shareholders had they not requested payment
in accordance with 12 U.S.C. Section 215a must be sold at any advertised public
auction, and FNB has the right to purchase any or all of such shares at such
auction if it is the highest bidder, for the purpose of reselling such shares
within 30 days thereafter. If the shares of FNB Common Stock are sold at the
public auction at a price greater than the amount paid to the dissenting
Guaranty shareholders, the excess in such sale price must be paid to such
dissenting shareholders.
THE FOREGOING DISCUSSION IS ONLY A SUMMARY OF THE RIGHTS AND
OBLIGATIONS OF DISSENTING SHAREHOLDER AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE PROVISIONS OF THE DISSENTERS' RIGHTS STATUTE, 12 U.S.C. SECTION
215a, WHICH IS REPRODUCED IN FULL AS APPENDIX C TO THIS PROXY STATEMENT.
Prior to the closing of the Merger, dissenting shareholders of Guaranty
should send any communications regarding their rights to Guaranty Bank & Trust
Company, 1340 East Venice Avenue, Venice, Florida 34292, Attention: President
and Chief Executive Officer. At or after the closing of the Merger, dissenting
shareholders should send any communications regarding their rights to F.N.B.
Corporation, One F.N.B. Boulevard, Hermitage, Pennsylvania 16148, Attention:
Secretary. All such communications should be signed by or on behalf of the
dissenting Guaranty shareholder in the form in which such holder's shares are
registered on the books of Guaranty.
FNB has the right to terminate the Merger Agreement prior to the
Effective Time if the number of shares of Guaranty Common Stock as to which the
holders thereof legally asserting dissenting shareholders' rights is equal to or
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greater than 10% of the issued and outstanding shares of Guaranty Common Stock.
See "THE MERGER -- Modification, Waiver and Termination."
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a
pooling-of-interests under GAAP. Guaranty and FNB have agreed to use their
reasonable best efforts to cause the Merger to qualify for pooling-of-interests
treatment, and to take no action that would cause the Merger not, to so qualify.
Under the pooling-of-interests method of accounting, the historical
basis of the assets and liabilities of FNB and Guaranty will be combined at the
Effective Time of the Merger and carried forward at their previously recorded
amounts, and the shareholders' equity accounts of Guaranty and FNB will be
combined on FNB's consolidated balance sheet such that no goodwill or other
intangible assets will be created.
BANK REGULATORY MATTERS
FEDERAL RESERVE BOARD AND OFFICE OF THE COMPTROLLER OF THE CURRENCY.
The Merger is subject to prior approval by the Federal Reserve Board and the
Office of the Comptroller of the Currency (the "OCC"). In determining whether to
approve a transaction such as the Merger, the Federal Reserve Board and the OCC
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 and the OCC
will, among other things, evaluate the adequacy of the capital levels of the
parties to a proposed transaction.
The Federal Reserve Board and the OCC are prohibited from approving a
Merger if it would result in a monopoly or would 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 and the OCC 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 nine banking subsidiaries have an
outstanding CRA rating with the appropriate federal regulator. The other six of
FNB's banking subsidiaries have a satisfactory rating with the appropriate
federal regulator.
Applicable federal law provides for the publication of notice and
public comment on applications filed with the Federal Reserve Board and the OCC
and authorizes each 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.
The Merger generally may not be consummated until after 15 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 Guaranty 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
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the Merger will not be material to the financial condition or results of
operations of FNB or Guaranty prior to the Effective Time, or FNB after the
Effective Time.
STATUS OF REGULATORY APPROVALS AND OTHER INFORMATION. FNB and Guaranty
have filed 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 has submitted an application seeking Federal
Reserve Board and OCC approval of the Merger.
The Merger Agreement provides that the obligation of each of FNB and
Guaranty to consummate the Merger is conditioned upon the receipt of all
requisite regulatory approvals, including the approvals of the Federal Reserve
Board and OCC. 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 Guaranty 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 Guaranty
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 ASSURANCE 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 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 Guaranty
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 Guaranty or FNB as that term is defined under the Securities
Act. Any subsequent transfer of such shares, however, by any person who is an
affiliate of Guaranty at the time the Merger is submitted for a vote or consent
of the shareholders of Guaranty 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 Guaranty,
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 Guaranty. In addition, under the
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
Guaranty 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 Guaranty Common Shares (and to certain relatives or the spouse of any
such person and any trusts, estates, corporations, or other entities in which
any such
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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. Guaranty has agreed that it will use its reasonable best efforts to
obtain from each of those persons identified by Guaranty as affiliates, not
later than 10 days prior to the Effective Time, 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.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
FNB. Since June 16, 1997, FNB Common Stock has traded on the Nasdaq
National Market under the trading symbol "FBAN." Prior to June 16, 1997, the FNB
Common Stock traded on the Nasdaq SmallCap Market under the same symbol. Stock
prices have been adjusted to reflect a 5% stock dividend paid on May 24, 1998.
As of September 30, 1998, FNB Common Stock was held of record by approximately
6,400 persons. The following table sets forth the high and low sales prices of
the FNB Common Stock as reported by the Nasdaq Stock Market for the periods
indicated.
HIGH LOW
---- ---
YEAR ENDED DECEMBER 31, 1996:
First Quarter................................. $19 7/8 $17 1/2
Second Quarter................................ 22 19 7/8
Third Quarter................................. 22 21 3/32
Fourth Quarter................................ 21 5/16 20 41/64
YEAR ENDED DECEMBER 31, 1997:
First Quarter................................. $24 5/32 $20 55/64
Second Quarter................................ 30 15/32 21 49/64
Third Quarter................................. 30 19/64 28 7/64
Fourth Quarter................................ 36 31/64 29 49/64
YEAR ENDING DECEMBER 31, 1998:
First Quarter.................................. $36 3/4 $30 15/64
Second Quarter................................. 37 9/64 31 3/4
Third Quarter.................................. 36 13/16 27
Fourth Quarter (through October 30, 1998)...... 28 5/8 24 1/2
Guaranty. There is no established public trading market for the
Guaranty Common Shares. As of the Record Date, there were __________ shares of
Guaranty Common Shares issued and outstanding held by ___ holders of record.
According to records kept by management, since January 1, 1997, there have been
only approximately eight trades in the Guaranty Common Shares involving an
aggregate of 1,734 shares. To the best of management's knowledge, which is based
on limited and incomplete information, Guaranty believes that recently
negotiated sales of Guaranty Common Shares have ranged between $23.00 And $27.00
Per share. In view of the extremely limited volume of transactions and the lack
of reliable pricing information (because such information is not required to be
forwarded to Guaranty), there is no assurance that the stated prices paid for
the Guaranty Common Shares provide a reliable or relevant indication of the
value of Guaranty Common Shares.
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DIVIDENDS
The following table sets forth the per share cash dividends declared on
FNB Common Stock and Guaranty Common Shares for the periods indicated. The FNB
dividends have been adjusted to reflect the 5% FNB Stock Dividend. The ability
of either FNB or Guaranty to pay dividends to its shareholders is subject to
certain restrictions. See "INFORMATION ABOUT FNB" and "INFORMATION ABOUT
GUARANTY."
FNB GUARANTY
DIVIDENDS DIVIDENDS
--------- ---------
YEAR ENDED DECEMBER 31, 1996:
First Quarter...................... $0.14 $ --
Second Quarter..................... 0.15 --
Third Quarter...................... 0.15 --
Fourth Quarter..................... 0.15 0.05
YEAR ENDED DECEMBER 31, 1997:
First Quarter...................... $0.15 $ --
Second Quarter..................... 0.15 --
Third Quarter...................... 0.15 --
Fourth Quarter..................... 0.15 0.06
YEAR ENDING DECEMBER 31, 1998:
First Quarter...................... $0.17 $ --
Second Quarter..................... 0.18 --
Third Quarter...................... 0.18 --
VOLUNTARY DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
FNB approved a dividend reinvestment and direct stock purchase plan
(the "1998 DRP") which became effective in April 1998 and replaced the existing
dividend reinvestment plan. The 1998 DRP is available to existing FNB
shareholders and shareholders of Guaranty who receive shares of FNB Common Stock
in the Merger, as well as persons who are not already shareholders, and permits
participants to purchase shares of FNB Common Stock through reinvestment of
dividends on their shares of FNB Common Stock and/or optional cash payments and
permits participants to have their shares enrolled in the 1998 DRP held in
book-entry form by the plan administrator.
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INFORMATION ABOUT FNB
FNB is a financial services holding company organized under the laws of
the Commonwealth of Pennsylvania and headquartered in Hermitage, Pennsylvania.
It provides a broad range of financial services to its customers through its
bank and consumer finance subsidiaries in Pennsylvania, southwestern Florida,
eastern Ohio and southwestern New York. FNB's main office is located at One
F.N.B. Boulevard, Hermitage, Pennsylvania 16148 and its telephone number is
(724) 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 eight other bank
subsidiaries and one consumer finance company in Pennsylvania, southwestern
Florida, eastern Ohio and southwestern New York. On January 21, 1997, FNB
acquired Southwest, a Florida corporation and registered bank holding company
under the Bank Holding Company Act ("BHCA"), with banking subsidiaries located
in Naples and Cape Coral, Florida. On April 18, 1997, FNB acquired West Coast
Bancorp, Inc. ("WCBI"), a Florida corporation and registered bank holding
company under the BHCA, located in Cape Coral, Florida. On June 30, 1997, FNB
sold its wholly owned subsidiary, Bucktail Bank and Trust Company, a
Pennsylvania state-chartered bank to Sun Bancorp, Inc. ("Sun") in exchange for
13.8% of the outstanding stock of Sun. On October 17, 1997, FNB acquired Indian
Rocks State Bank (which was subsequently converted to a national bank and
renamed First National Bank of Florida), a Florida state bank located in Largo,
Florida with assets of approximately $81 million. On November 20, 1997, FNB
acquired Mercantile Bank of Southwest Florida, a Florida state bank located in
Naples, Florida with assets of approximately $122 million. On January 20, 1998,
FNB acquired West Coast Bank, a Florida state bank located in Sarasota, Florida
with assets of approximately $107 million. On May 29, 1998, FNB acquired
Seminole Bank, a Florida state bank, located in Seminole, Florida with assets of
approximately $92 million. On August 31, 1998, FNB acquired Citizens Holding
Corporation, a Florida corporation and registered bank holding company located
in Clearwater, Florida with assets of approximately $135 million. After
considering the acquisition of Citizens, on a consolidated basis, FNB had
approximately $3.1 billion in consolidated assets, approximately $2.6 billion in
deposits and 116 offices.
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 generally
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 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.
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41
FNB has four other operating subsidiaries, Penn-Ohio Life Insurance
Company ("Penn-Ohio"), Mortgage Service Corporation, F.N.B. Building Corporation
and F.N.B. Investment 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's banking business. Mortgage Service
Corporation services mortgage loans for unaffiliated financial institutions and
F.N.B. Building Corporation owns real estate that is leased to certain of its
affiliates. FNB Investment Corporation holds equity securities and other
miscellaneous assets on behalf of FNB.
As of September 30, 1998, FNB and its subsidiaries had approximately
1,400 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, 1997, Quarterly Reports on
Form 10-Q for each of the three month periods ended March 31, June 30 and
September 30, 1998 and the Current Reports on Form 8-K filed on February 13,
1998, April 3, 1998, July 6, 1998 and October 29, 1998, all of which are
incorporated herein by reference. Shareholders of Guaranty desiring copies of
such documents may (i) contact FNB at its address or telephone number indicated
under "INFORMATION INCORPORATED BY REFERENCE" or (ii) access the SEC's website
at "http://www.sec.gov."
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INFORMATION ABOUT GUARANTY
GENERAL
Guaranty, a Florida banking corporation headquartered in Venice,
Florida, was incorporated under the laws of the State of Florida as a
state-chartered bank, commencing operations on August 19, 1987.
Guaranty provides a range of consumer and commercial banking services
to individuals, businesses and industries. The basic services offered by
Guaranty include: demand interest bearing and non-interest bearing accounts,
money market deposit accounts, NOW accounts, time deposits, safe deposit
services, credit cards, cash management, direct deposits, notary services, money
orders, night depository, travelers' checks, cashier's checks, domestic
collections, savings bonds, bank drafts, automated teller services, drive-in
tellers, and banking by mail. In addition, Guaranty makes secured and unsecured
commercial and real estate loans and issues stand-by letters of credit. Guaranty
provides automated teller machine (ATM) cards, as a part of the HONOR ATM
network, thereby permitting customers to utilize the convenience of larger ATM
networks. In addition to the foregoing services, the offices of Guaranty provide
customers with extended banking hours. Guaranty also has trust powers and,
accordingly, trust services are provided.
The revenues of Guaranty are primarily derived from interest on, and
fees received in connection with, real estate and other loans, and from interest
and dividends from investment and mortgage-backed securities, short-term
investments and trust fees. The principal sources of funds for Guaranty's
lending activities are its deposits, repayment of loans, and the sale and
maturity of investment securities. The principal expenses of Guaranty are the
interest paid on deposits, and operating and general administrative expenses.
As is the case with banking institutions generally, Guaranty's
operations are materially and significantly influenced by general economic
conditions and by related monetary and fiscal policies of financial institution
regulatory agencies, including the Federal Reserve Board, the Federal Deposit
Insurance Corporation (the "FDIC"), and the Florida Department of Banking and
Finance (the "Department"). Deposit flows and costs of funds are influenced by
interest rates on competing investments and general market rates of interest.
Lending activities are affected by the demand for financing of real estate and
other types of loans, which in turn is affected by the interest rates at which
such financing may be offered and other factors affecting local demand and
availability of funds. Guaranty faces strong competition in the attraction of
deposits (its primary source of lendable funds) and in the origination of loans.
See "- Competition."
As of September 30, 1998, Guaranty had total assets of $147.7 million,
total deposits of $135.9 million, and total shareholders' equity of $10.6
million. The principal executive offices of Guaranty are located at 1340 East
Venice Avenue, Venice, Florida 34292. The telephone number at such office is
(941) 485-9000.
LENDING ACTIVITIES
Guaranty offers a range of lending services, including real estate,
consumer and commercial loans, to individuals and small businesses and other
organizations that are located in or conduct a substantial portion of their
business in Guaranty's market area. Guaranty's total loans at September 30,
1998, were $89.8 million, or 60.8% of total assets. The interest rates charged
on loans vary with the degree of risk, maturity and amount of the loan, and are
further subject to competitive pressures, money market rates, availability of
funds and government regulations. Guaranty has no foreign loans or loans for
highly leveraged transactions.
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Guaranty's primary market area consists of the central and southern
portions of Sarasota County, Florida. This area includes the communities of
Osprey, Laurel, Nokomis, Venice, South Venice and portions of Englewood in both
Sarasota and Charlotte Counties. Also included is a section in the northwestern
portion of Charlotte County which is contiguous with the communities of
Englewood and North Port. There is no assurance that this area will experience
economic growth. Adverse conditions in any one or more of the industries
operating in Sarasota County or a slow down in general economic conditions could
have an adverse effect on Guaranty.
Guaranty's loans are concentrated in three major areas: commercial
loans, real estate loans and consumer loans. Approximately 10.1% of Guaranty's
loan portfolio at September 30, 1998, consisted of commercial loans. A majority
of Guaranty's loans are made on a secured basis. As of September 30, 1998,
approximately 83.0% of the loan portfolio consisted of loans secured by
mortgages on real estate.
Guaranty's commercial loans include loans to individuals and
small-to-medium sized businesses located primarily in Sarasota County for
working capital, equipment purchases and various other business purposes. A
majority of Guaranty's commercial loans are secured by equipment or similar
assets, but these loans may also be made on an unsecured basis. Commercial loans
may be made at variable or fixed rates of interest. Commercial lines of credit
are typically granted on a one-year basis, with loan covenants and monetary
thresholds. Other commercial loans with terms or amortization schedules of
longer than one year will normally carry interest rates which vary with the
prime lending rate and will become payable in full and are generally refinanced
in three to five years.
Guaranty's real estate loans are secured by mortgages and consist
primarily of loans to individuals and businesses for the purchase, improvement
of or investment in real estate and for the construction of single-family
residential units or the development of single-family residential building lots.
These real estate loans may be made at fixed or variable interest rates.
Guaranty generally does not make fixed-rate commercial real estate loans for
terms exceeding five years. Loans in excess of three years are generally
adjustable. Guaranty's residential real estate loans generally are repayable in
monthly installments based on up to a 30-year amortization schedule with
variable and fixed interest rates.
Guaranty's consumer loan portfolio consists primarily of loans to
individuals for various consumer purposes, but includes some business purpose
loans which are payable on an installment basis. The majority of these loans are
for terms of less than five years and are secured by liens on various personal
assets of the borrowers, but consumer loans may also be made on an unsecured
basis. Consumer loans are made at fixed and variable interest rates, and are
often based on up to a five-year amortization schedule.
Loan originations are derived from a number of sources, including
direct solicitation by Guaranty's loan officers, existing customers and
borrowers, advertising, walk-in customers and, in some instances, referrals from
brokers.
Certain credit risks are inherent in making loans. These include
prepayment risks, risks resulting from uncertainties in the future value of
collateral, risks resulting from changes in economic and industry conditions,
and risks inherent in dealing with individual borrowers. In particular, longer
maturities increase the risk that economic conditions will change and adversely
affect collectibility. Guaranty attempts to minimize loan losses through various
means. In particular, on larger credits, Guaranty generally relies on the cash
flow of a debtor as the source of repayment and secondarily on the value of the
underlying collateral. In addition, Guaranty attempts to utilize shorter loan
terms in order to reduce the risk of a decline in the value of such collateral.
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DEPOSITS
Deposits are the major source of Guaranty's funds for lending and other
investment activities. Guaranty considers the majority of its regular savings,
demand, NOW and money market deposit accounts to be core deposits. These
accounts comprised approximately 48.5% of Guaranty's total deposits at September
30, 1998. Approximately 51.5% of Guaranty's deposits at September 30, 1998 were
certificates of deposit. Generally, Guaranty attempts to maintain the rates paid
on its deposits at a competitive level. Time deposits of $100,000 and over made
up approximately 12.7% of Guaranty's total deposits at September 30, 1998. The
majority of the deposits of Guaranty are generated from Sarasota County.
Guaranty does not accept brokered deposits.
INVESTMENTS
Guaranty invests a portion of its assets in U.S. Treasury and U.S.
Government agency obligations, FHLMC and FNMA mortgage-backed securities, state,
county and municipal obligations, certificates of deposit, collateralized
mortgage obligations ("CMOs"), and federal funds sold. Guaranty's investments
are managed in relation to loan demand and deposit growth, and are generally
used to provide for the investment of excess funds at reduced yields and risks
relative to yields and risks of the loan portfolio, while providing liquidity to
fund increases in loan demand or to offset fluctuations in deposits.
COMPETITION
Intense competition exists in all areas where Guaranty presently
engages in business. Guaranty faces vigorous competition from major banking and
financial institutions, including many which have substantially greater
resources, name recognition and market presence than Guaranty as well as
competition from other entities (many of which are not subject to the same
extensive regulations as Guaranty). Particularly intense competition exists for
sources of funds, including savings and time deposits. Other financial
institutions, many of which have higher legal lending limits, actively compete
for loans, deposits and other services which Guaranty offers. Competitors of
Guaranty include commercial banks, savings banks, savings and loan
associations, insurance companies, finance companies, credit unions and
mortgage companies. In addition, recent legislation has increased competition
further by allowing additional out-of-state bank holding companies to conduct
business in Florida.
EMPLOYEES
As of September 30, 1998, Guaranty employed 54 full-time employees and
6 part-time employees. The employees are not represented by a collective
bargaining unit. Guaranty considers relations with employees to be good.
PROPERTIES
Guaranty's main office is located at 1340 East Venice Avenue, in
Venice, Florida. The property consists of a two-story building of approximately
8,100 square feet, which is owned by Guaranty. Guaranty has a branch office
located at 12767 South Tamiami Trail in North Port, Florida. The facility
consists of a one-story building of approximately 4,500 square feet. Guaranty
leases the land from a director of Guaranty. The term of the lease, taking into
account renewal options, expires in 2021. Guaranty has a branch office located
at 273 South Tamiami Trail, in downtown Venice. The facility consists of a
one-story building of approximately 4,684 square feet, which is leased by
Guaranty. The term of the lease, taking into account renewal options, expires in
2018. Guaranty has a branch office located at 1641 Jacaranda Boulevard in
Venice, Florida. The facility consists of a one-story building of approximately
4,400 square feet. Guaranty leases the land. The term of the lease, taking into
account renewal options, expires in 2020. Guaranty has a branch office located
at 8660 South Tamiami Trail, Sarasota, Florida. The facility consists of a
one-story building of approximately 6,800 square feet. Guaranty leases the land.
The term of the lease, taking into account renewal options, expires in 2015.
Guaranty also leases a facility of approximately 4,000 square feet to conduct
its banking operations. The term of the lease expires in 2001.
Guaranty does not own or operate any ATM machines, but does issue ATM
bank cards to its customers and is a member of the HONOR network.
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YEAR 2000 ISSUES
In the next two years, many companies, including financial institutions
such as Guaranty will face potentially serious issues associated with the
inability of existing data processing hardware and software to appropriately
recognize the calendar dates beginning in the year 2000. Many computer programs
that can only distinguish the final two digits of the year entered may read
entries for the year 2000 as the year 1900 and compute payment, interest, or
delinquency based on the wrong date, or are expected to be unable to compute
payment, interest, or delinquency. In August 1997, Guaranty began the process of
identifying the many software applications and hardware devices expected to be
impacted by this issue. Guaranty has also formatted and begun implementation of
a plan to address issues related to its "Mission Critical" computer hardware,
software and applications which complies with Federal Financial Institutions
Examination Council Year 2000 compliance guidelines as promulgated by Guaranty's
principal regulatory agency. Guaranty outsources its principal data processing
activities to one or more third parties and purchases most of its software
applications from third party vendors. Guaranty believes that its vendors and
its significant customers are actively addressing the problems associated with
the "Year 2000" issues. Guaranty, in cooperation with its service providers and
vendors, has met all applicable regulatory deadlines and intends to meet the
remaining regulatory deadlines promulgated by Guaranty's principal regulatory
agency. However, there can be no assurance that Guaranty will not be adversely
affected by the failure of such third party vendors or significant customers of
Guaranty to become Year 2000 compliant.
LEGAL PROCEEDINGS
Guaranty is periodically a party to or otherwise involved in legal
proceedings arising in the normal course of business, such as claims to enforce
liens, claims involving the making and servicing of real property loans, and
other issues incident to its businesses. Management does not believe that there
is any pending or threatened proceeding against Guaranty which, if determined
adversely, would have a material adverse effect on Guaranty's financial
position.
EXECUTIVE OFFICERS
The following table lists the executive officers of Guaranty. Executive
officers are appointed annually by the Guaranty Board, to serve until a
successor has been duly elected and qualified or until his or her death,
resignation or removal from office.
Name (Age) Position
- ---------- --------
Warren S. Henderson (70)............. Chairman of the Board
David F. Voigt (57).................. President and Director
Charles J. Battaglia (56)............ Executive Vice President and Director
Jerry P. McWhorter (54).............. Executive Vice President, Cashier and Director
Frank R. Guididas (51)............... Senior Vice President
Robert E. Koson (54)................. Senior Vice President
Grant N. Lawrence (48)............... Senior Vice President
Terry L. Miller (56)................. Senior Vice President
Mary G. Toundas (44)................. Senior Vice President and Senior Trust Officer
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the outstanding Guaranty Common Shares as of September
30, 1998, by (i) each director and certain executive officers of Guaranty, (ii)
all directors and executive officers of Guaranty as a group, and (iii) each
person known to Guaranty to own beneficially more than 5% of the outstanding
Guaranty Common Shares. Except as otherwise indicated, the persons named in the
table have sole voting and investment power with respect to all Guaranty Common
Shares owned by them.
CURRENT BENEFICIAL OWNERSHIP
------------------------------
NUMBER PERCENT
NAME OF BENEFICIAL OWNER OF SHARES(1) OF CLASS
- ------------------------ ------------ --------
DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
Charles J. Battaglia....................................... 1,424 *
James H. Brandt, D.V.M..................................... 13,437(2) 1.78%
M.M. "Babe" Dalton......................................... 14,778 1.95
Mary M. Eddy............................................... 4,112 *
H. Harrison Greer.......................................... 2,462 *
Warren S. Henderson........................................ 54,961(3) 7.27
Sam H. Herron, Jr.......................................... 2,818 *
Charles E. Johnson, Jr., MD................................ 10,937(4) 1.45
James M. Lombard........................................... 112,612(5) 14.89
Jerry P. McWhorter......................................... 1,187 *
Richard M. Morrison, M.D. ................................. 23,924(6) 3.16
Edwin D. Taylor............................................ 4,312 *
David F. Voigt............................................. 22,000(7) 2.91
All Directors and Officers as a group (19 persons)......... 282,401 37.36%
OTHER PRINCIPAL SHAREHOLDERS
James M. Curtis............................................ 40,096(8) 5.30%
12767 South Tamiami Trail
North Port, Florida 34287
- ---------------------------
*Less than 1%
(1) Information relating to beneficial ownership is based upon information
available to Guaranty and uses "beneficial ownership" concepts set
forth in the rules of the Securities and Exchange Commission under the
Securities Act of 1934, as amended. Under such rules, more than one
person may be deemed to be the beneficial owner of the same securities,
and a person may be deemed to be the beneficial owner of securities as
to which he or she may disclaim any beneficial interest. Accordingly,
directors may be named as beneficial owners of shares as to which they
may disclaim any beneficial interest. The number of shares also
includes, as to individuals listed, the following number of shares
which the individual has the right to acquire pursuant to presently
exercisable stock options: Messrs. Brandt - 3,562 shares, Dalton -
4,187 shares, Greer - 1,462 shares, Herron - 625 shares, Johnson -
2,687 shares, Morrison - 4,237 shares, Taylor - 1,812 shares, Battaglia
- 1,062 shares, McWhorter - 1,062 shares, and Voigt - 18,750 shares.
(2) Includes 375 shares owned by spouse.
(3) Includes 4,125 shares owned by spouse. Mr. Henderson's address is P.O.
Box 1649, Nokomis, Florida 34275.
(4) Includes 2,000 shares owned by spouse.
(5) Mr. Lombard's address is P.O. Box 280, Osprey, Florida 34229
(6) Includes 2,250 shares owned by spouse.
(7) Includes 125 shares owned by spouse.
(8) Includes 14,313 shares held in trust for minor children. Mr. Curtis is
an advisory Board Member at Guaranty's North Point branch.
40
47
SELECTED FINANCIAL DATA OF GUARANTY
1997 1996 1995 1994 1993
------------- ------------- ------------ ------------ ------------
Statements of Income:
Total interest income ............. $ 8,780,663 $ 7,342,947 $ 6,574,698 $ 4,808,598 $ 3,417,381
Total interest expense ............ (3,962,695) (3,218,516) (2,643,106) (1,549,403) (1,223,873)
------------- ------------- ------------ ------------ ------------
Net interest income ............... 4,817,968 4,124,431 3,931,592 3,259,195 2,193,508
Provision for loan losses ......... (403,000) (290,000) (242,000) (457,000) (377,000)
Non-interest income ............... 1,500,955 1,075,826 852,118 715,596 454,721
Non-interest expense .............. (4,798,253) (4,087,913) (3,142,128) (2,727,573) (1,991,179)
------------- ------------- ------------ ------------ ------------
Income before income taxes ........ 1,117,670 822,344 1,399,582 790,218 280,050
Provision for income taxes ........ (315,600) (314,800) (528,628) (65,000) __
------------- ------------- ------------ ------------ ------------
Cumulative effect of a change
in an accruing principle for
income taxes ................. __ __ __ __ 90,000
------------- ------------- ------------ ------------ ------------
Net income ........................ $ 802,070 $ 507,544 $ 870,954 $ 725,218 $ 370,050
============= ============= ============ ============ ============
Net income per share - basic ...... $ 1.07 $ 0.69 $ 1.30 $ 1.27 $ 0.65
============= ============= ============ ============ ============
Return on average assets .......... 0.66% 0.50% 1.01% 1.03% 0.70%
Return on average equity .......... 8.84% 6.00% 12.76% 16.04% 9.22%
Loans charged off ................. $ (246,318) $ (456,257) $ (141,364) $ (228,720) $ (221,733)
Loan recoveries ................... 24,507 35,726 165,964 27,654 7,890
------------- ------------- ------------ ------------ ------------
Net recoveries (charge-offs) ...... $ (221,811) $ (420,531) $ 24,600 $ (201,066) $ (213,843)
============= ============= ============ ============ ============
Statements of Financial Condition:
Total loans ....................... $ 80,884,593 $ 67,736,428 $ 55,194,349 $ 53,633,368 $ 40,088,546
Allowance for loan loss ........... (1,148,876) (967,687) (1,098,218) (831,618) (575,684)
------------- ------------- ------------ ------------ ------------
Loans, net ........................ 79,735,717 66,768,741 54,096,131 52,801,750 39,512,862
Investments ....................... 26,849,881 23,889,089 21,557,914 11,858,528 10,328,054
Federal funds sold ................ 9,657,981 12,722,643 8,213,747 4,968,502 7,180,259
Total loan delinquencies
30 days and over ............. 1,069,000 1,582,000 1,539,000 290,000 1,163,000
Other real estate owned ........... 180,303 48,160 84,084 -- --
------------- ------------- ------------ ------------ ------------
Total loan delinquencies 30 days
and over and real estate owned 1,249,303 1,630,160 1,623,084 290,000 1,163,000
Total assets ...................... 127,883,623 113,987,445 93,691,224 76,948,582 61,856,963
Total deposits .................... 117,484,418 104,760,991 84,678,240 71,859,758 57,530,749
Total shareholders' equity ........ 9,563,808 8,653,466 8,252,342 4,881,743 4,196,455
Book value per share .............. $ 12.67 $ 11.69 $ 11.15 $ 8.53 $ 7.33
Number of banking locations ....... 5 5 4 3 3
Average equity to average assets .. 7.45% 8.34% 7.90% 6.44% 7.55%
Total risk-based capital ratio .... 14.38% 14.93% 16.48% 11.45% 12.42%
Bank Tier 1 Capital ratio ......... 13.13% 13.68% 15.23% 10.20% 11.18%
41
48
GUARANTY MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Guaranty commenced operations on August 19, 1987. Since its inception
and as Guaranty has continued to gain community acceptance, it has realized an
ongoing increase in net loans, total assets and total deposits. The following
discussion provides a more in-depth analysis of Guaranty's financial condition
and results of operations. The financial statements and accompanying notes
included elsewhere herein are an integral part of this discussion and should be
read in conjunction with it. Throughout this section, Guaranty is referred to as
the "Bank."
NINE MONTHS ENDED SEPTEMBER 30, 1998
Financial Condition
The Bank's total assets increased 15.5% to $147.7 million during the
nine months ended September 30, 1998, compared to an increase of 8.8% to $124.1
million during the same period in 1997. Earning assets, comprised of net loans,
investment securities, and Federal funds comprised 92.7% of total assets at
September 30, 1998, compared to 90.9% at December 31, 1997. Net loans (the
largest component of earning assets) increased $8.9 million (or 11.1%) in the
first nine months of 1998, compared to an increase of $9.9 million (or 14.8%)
for the same period in 1997. Real estate lending has been primarily responsible
for the increase in outstanding loans as management's strategy continues to
focus on lending to small-to-medium sized businesses, many of which
collateralize their borrowings by real property. Non performing assets
consisting of nonaccrual loans and other real estate owned totalled $103,000 at
September 30, 1998. The allowance for loan losses totalled $1.2 million or 1.29%
of total loans. Deposit growth has provided the funds for increases in loans
and investment securities.
During the first nine months of 1998, total deposits increased $18.4
million (or 15.7%) compared to an increase of $9.2 million (or 8.8%) for the
same period in 1997.
Lower cost interest-bearing deposits, which exclude the $100,000 and
over certificates of deposit category, increased from $81.3 million at the end
of 1997 to $99.1 million at September 30, 1998. During the first nine months of
1997, lower cost deposits increased $5.1 million to $79.3 million.
Total non-earning assets made up of cash, fixed assets and other
assets, decreased $907,000 or 7.8% during the first nine months of 1998,
compared to an increase of $713,000 or 6.3% during the same period in 1997. The
decrease in 1998 was primarily from a decrease in cash and due from banks of
$486,000. The increase in 1997 resulted primarily from an increase of $766,000
in cash and due from banks.
Stockholders' equity at September 30, 1998 was $10,648,000 compared to
$9,564,000 at December 31, 1997 and $9,312,000 at September 30, 1997. The
increase of $1,084,000 during 1998 was primarily the result of comprehensive net
income of $1,068,000 for the nine months ended September 30, 1998. Shareholders'
equity increased $659,000 from December 31, 1996 to September 30, 1997,
primarily as a result of comprehensive net income of $518,000 for the nine
months ended September 30, 1997. During the nine months ended September 30,
1998, the Bank had stock options of 1,424 shares of common stock exercised which
increased shareholders' equity by $16,000. During the same period in 1997,
stockholders' equity was increased by $141,000 from the exercise of 14,686 stock
options.
42
49
Results of Operations
Net Interest Income
The Bank's earnings are dependent primarily on its net interest income
which is the difference between interest earned on earning assets (primarily
loans, investment securities and federal funds sold) and interest paid on
deposits. Changes in net interest income are caused by changes in the interest
rates earned or paid and by volume changes in loans, investment securities,
federal funds sold and deposits.
The Bank reported net interest income of $3,979,000 for the first nine
months of 1998, compared to $3,554,000 for the same period in 1997. Growth in
the volume of interest-earning assets was the primary contributor to the
increases in net interest income.
The Bank's average yield on interest-earning assets was 7.77% for the
first nine months of 1998, compared to 7.85% for the same period in 1997.
Investment securities, excluding federal funds sold, yielded 6.41% for the first
nine months of 1998, compared to 6.51% during the same period in 1997.
The average rate paid on interest-bearing liabilities was 4.17% for the
first nine months of 1998, compared to 4.12% for the same period in 1997. The
Bank's net interest yield on earning assets was 4.21% for the first nine months
of 1998, compared to 4.32% for the same period in 1997.
Non-Interest Income
Non-interest income was $1,258,000 for the nine months ended September
30, 1998, compared to $912,000 for the same period in 1997. The primary
components of non-interest income are service charges on deposit accounts and
trust fees. In 1997, the Bank recorded gains on sales of "available for sale"
investment securities of $31,000.
Other income in 1998 included $104,000 of non-taxable insurance
proceeds due to the death of one of the Bank's executive officers in December,
1997.
Service charges on deposit accounts were $356,000 for the nine months
ended September 30, 1998, compared to $220,000 for the same period in 1997.
The Bank began trust operations in March 1993. Trust fee income was
$666,000 for the nine months ended September 30, 1998, compared to $581,000 for
the nine months ended September 30, 1997. Total assets under administration by
the trust department was $109,932,000 and $101,822,000 at September 30, 1998 and
December 31, 1997, respectively.
Non-interest Expense
For the first nine months of 1998, total non-interest expense was
$3,641,000, compared to $3,456,000 for the first nine months of 1997. The
increase was due primarily to increases of $86,000, and $95,000 in salaries and
employee benefits, and other expenses, respectively.
Non-interest expense for the nine months ended September 30, 1998
increased over the same period in 1997 due to the growth of the Bank in loans
and deposits which increased personnel requirements, supply expenses and data
processing expenses.
43
50
During the third quarter of 1998, net interest income increased
$102,000 or 8.25% over the third quarter of 1997. Total interest income
increased $311,000 or 13.77%, primarily the result of an increase in loan
volume. Total interest expense increased $209,000 or 20.45% during the third
quarter of 1998, compared to the same period of 1997. Interest expense on time
deposits and money market accounts accounted for the majority of this increase,
$190,000, due to an increase in average deposits.
The provision for loan losses totaled $18,000 for the third quarter of
1998, as compared to $41,000 for the third quarter of 1997. This decrease
reflects the continued improvement in the Bank's asset quality.
Non-interest income increased $117,000 or 37.38% during the third
quarter of 1998 compared to the same period of 1997. The increase was primarily
the result of additional income in 1997 from service charges on deposits of
$45,000 and non-taxable insurance proceeds of $36,000 paid to the Bank due to
the death of one of the Bank's executive officers in December 1997.
Total non-interest expenses increased $34,000 or 2.88% during the third
quarter of 1998 compared to the third quarter of 1997.
Income tax expense totaled $168,000 during the quarter providing an
effective tax rate of 31.40% compared to 37.92% in 1997. Net income totaled
$367,000 for the third quarter of 1998, compared to $203,000 for the third
quarter of 1997.
COMPARISON OF FISCAL 1997, 1996 AND 1995
FINANCIAL CONDITION
The Bank had net income of $802,070 ($1.07 per share) in 1997, $507,544
($.69 per share) in 1996 and $870,954 ($1.30 per share) in 1995. The decline in
net income in 1996 from 1995 was caused by a declining net interest margin and
the opening and operation of two new branch locations.
The Bank has experienced a lowering of its net interest margin from
4.95% in 1995 to 4.53% in 1996 and to 4.30% in 1997. The lowering of Federal
Funds rates and loan yields on a national level over the past two years as well
as the high competitive cost of funds on a local level has combined to adversely
affect the Bank's net interest margin.
The Bank's total assets increased 12% to $127.9 million during 1997 and
22% to $114.0 million during 1996. This compares with a $16.7 million (22%)
increase for the year ended December 31, 1995. Earning assets, comprised of
loans, investment securities and federal funds, totaled 91% of total assets at
December 31, 1997, compared to 91% at December 31, 1996 and 90% at December 31,
1995. Net loans (the largest component of earning assets) increased $13.0
million (or 19%) in 1997, $12.7 million (or 23%) in 1996 and $1.3 million (or
2%) during 1995. Real estate lending has been primarily responsible for the
increase in outstanding loans as management's strategy continues to focus on
lending to individuals and small-to-medium sized businesses, many of which
collateralize their borrowings by real property. Deposit growth has provided the
funds for increases in loans and investment securities.
During the year ended December 31, 1997, total deposits increased 12%
to $117.5 million. During 1996, total deposits increased 24% to $104.8 million
compared to an increase of $12.8 million (or 18%) during 1995.
44
51
Lower cost interest-bearing deposits, which exclude the $100,000 and
over certificates of deposit category, increased from $58.7 million at the end
of 1995 to $74.2 million at December 31, 1996. During the year of 1997, lower
cost deposits increased $7.1 million to $81.3 million.
Total non-earning assets, made up of cash and due from banks, fixed
assets and other assets, increased $1.0 million (or 10%) during 1997. Total
non-earning assets increased $783,000 (or 8%) in 1996, as compared to an
increase of $2.5 million (or 34%) during 1995. The increase in 1997 resulted
principally from a decrease in premises and equipment of approximately $375,000,
an increase in cash and due from banks of $793,000 and an increase in other
assets of $614,000. The increase in 1996 resulted from increases of
approximately $521,000 in other assets, $592,000 in premises and equipment, and
a decrease of $330,000 in cash and due from banks. The increase in 1995 resulted
primarily from increases of approximately $550,000 in cash and due from banks,
$1,488,000 in premises and equipment and $466,000 in other assets.
Shareholders' equity at December 31, 1997 was $9,563,808 compared to
$8,653,466 at December 31, 1996 and $8,252,342 at December 31, 1995.
Shareholders' equity increased by $910,000 from December 31, 1996 to December
31, 1997, primarily as a result of $802,070 of net income reported by the Bank
during 1997 and proceeds of $141,000 from the exercise of stock options during
1997. Shareholders' equity increased $401,000 from December 31, 1995 to December
31, 1996, primarily as a result of net income of $507,544 for the year 1996.
LOAN PORTFOLIO
Total loans (net of allowance for loan losses) increased $13.0 million
(or 19%) to $79.7 million during 1997, increased $12.7 million (or 23%) during
1996 to $66.8 million and increased $1.3 million (or 2%) during 1995. The
increases reflect management's deployment of additional customer deposits and
retained earnings in its highest yielding category of earning assets. The Bank's
loan portfolio is its largest category of earning assets. The Bank is a
locally-owned and operated commercial bank, serving consumers, professionals,
and small-to-medium sized businesses located in the Sarasota County area. The
majority of the Bank's loans are to customers located within this area.
At December 31, 1997, December 31, 1996 and December 31,1995,
approximately 81.0%, 77.0% and 70.1%, respectively, of the Bank's total loan
portfolio consisted of loans secured by mortgages on real estate. Over the same
periods, commercial loans as a percentage of total loans decreased from 16.3% at
December 31, 1995 to 12.7% at December 31, 1996, and to 10.9% at December 31,
1997. Installment loans as a percentage of total loans decreased from 13.6% at
December 31, 1995, to 10.3% at December 31, 1996 and to 8.1% at December 31,
1997. In addition to loans for the purchase, construction, improvement of or
investment in real estate, the Bank's real estate loans include other loans for
various other consumer or business purposes which are secured by mortgages on
real estate.
The Bank recognizes interest income from loans on the accrual basis. If
a loan is placed on non-accrual, the accrual of interest income is suspended and
any prior interest earned, but unpaid, is charged against current earnings as a
reduction in current period interest income. A loan is placed on non-accrual
when principal or interest is past due 90 days or more unless, in the
determination of management, the principal and interest on the loan are well
secured and in the process of collection. Additionally, a loan is placed on
non-accrual when, in the opinion of management, the future collectibility of
interest and principal becomes uncertain.
New loans and loan renewals are reviewed by bank management and
directors. The loan portfolio is reviewed at least monthly for potential credit
concentrations. Loan concentrations are defined as amounts loaned to a number of
borrowers engaged in similar activities, which would cause them to be similarly
impacted by economic or other conditions. As of December 31, 1995, 1996 and
1997, the Bank had determined that no material concentrations of credit existed
in the Bank's loan portfolio.
45
52
The following table sets forth the Bank's loan portfolio at the dates
indicated (dollars in thousands):
December 31, 1997 December 31, 1996 December 31, 1995
----------------- ----------------- -----------------
% of % of % of
Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ -----
Loans secured by real estate(1) $65,497 81.0% $52,174 77.0% $38,697 70.1%
Commercial loans 8,852 10.9% 8,580 12.7% 8,981 16.3%
Installment loans 6,536 8.1% 6,982 10.3% 7,516 13.6%
------- ----- ------- ----- ------- -----
Total loans 80,885 100.0% 67,736 100.0% 55,194 100.0%
===== ===== =====
Allowance for loan losses (1,149) (967) (1,098)
------- ------- -------
Net loans $79,736 $66,769 $54,096
======= ======= =======
Average net loans outstanding
for the period $73,041 $59,816 $54,308
======= ======= =======
- ---------------------------
(1) In addition to loans for the purchase, construction, improvement or
investment in real estate, the Bank's real estate loans include other loans for
various other consumer or business purposes which are secured by mortgages on
real estate.
The following table presents the scheduled maturities and repricing
opportunities of loans outstanding as of December 31, 1997, December 31, 1996
and December 31, 1995 (dollars in thousands):
December 31, 1997 December 31, 1996 December 31, 1995
----------------- ----------------- -----------------
Due in:
One year or less $ 35,851 $ 32,843 $ 29,076
After one year through five years 43,720 32,517 21,936
Over five years 1,314 2,376 4,182
-------- -------- --------
$ 80,885 $ 67,736 $ 55,194
======== ======== ========
The interest rate sensitivity of loans with scheduled maturities in
excess of one year at December 31, 1997 and at December 31, 1996 were as follows
(dollars in thousands):
December 31, 1997 December 31, 1996
----------------- -----------------
Loans having Loans having Loans having Loans having
predetermined floating predetermined floating
interest rates interest rates interest rates interest rates
-------------- -------------- -------------- --------------
Due:
After one year through five years $ 5,289 $37,382 $ 6,002 $26,515
Over five years 1,643 720 1,865 511
------- ------- ------- -------
$ 6,932 $38,102 $ 7,867 $27,026
======= ======= ======= =======
46
53
While the scheduled maturities and repricing opportunities of the
Bank's loans are presented above, actual repayment of the balances outstanding
may vary significantly due to scheduled principal reductions prior to maturity
and because borrowers have the right to repay prior to maturity without penalty.
The Bank's unfunded loan commitments as of December 31, 1997, December
31, 1996 and December 31, 1995 were approximately $10.8 million, $10.2 million
and $6.9 million, respectively. Not included in the above amounts were standby
letters of credit of approximately $286,000, $316,000 and $228,000 at December
31, 1997, December 31, 1996 and December 31, 1995, respectively.
ALLOWANCE FOR LOAN LOSSES
As a matter of policy, the Bank maintains an allowance for loan losses.
The amount provided for loan losses during any period is based on an evaluation
by management of the amount needed to maintain the allowance at a level
sufficient to cover anticipated losses and the inherent risk of losses in the
loan portfolio. In determining the amount of the allowance, management considers
the dollar amount of loans outstanding, its assessment of known or potential
problem loans, current economic conditions, the risk characteristics of the
various classifications of loans, the fair market value of underlying collateral
and other factors. Although management believes that it uses the best
information available to make determinations with respect to loan loss reserves,
subsequent adjustments to reserves may be necessary if future economic
conditions differ from the assumptions used in making the initial determinations
or if regulatory policies change.
At December 31, 1997, the allowance totalled $1,149,000, or 1.42% of
outstanding loans. At December 31, 1996, the allowance was $967,000 or 1.43% of
outstanding loans, compared to $1,098,000 or 1.99% of outstanding loans at
December 31, 1995. In 1997, loans charged-off net of recoveries totaled $221,000
or .30% of average loans outstanding. Loans charged off net of recoveries during
1996 totalled $421,000 or .70% of average loans outstanding compared to loans
recovered net of charge-offs of $25,000 in 1995 or .05% of average loans
outstanding.
47
54
The following table presents a summary of the Bank's loan loss
experience, provision for loan losses and various ratios for the stated periods
(dollars in thousands):
Year Ended Year Ended Year Ended
December 31, 1997 December 31, 1996 December 31, 1995
----------------- ----------------- -----------------
LOANS:
- ------
Average Total Loans $ 74,051 $ 59,816 $ 54,308
======== ======== ========
Loans at end of period $ 80,885 $ 67,736 $ 55,194
======== ======== ========
Allowance for loan losses at beginning
of period $ 967 $ 1,098 $ 831
-------- -------- --------
Loans charged off:
Commercial loans (136) (170) (47)
Real estate loans (8) (54) --
Installment loans (102) (232) (94)
-------- -------- --------
Total loans charged off (246) (456) (141)
Recoveries of loans previously charged off 25 35 166
-------- -------- --------
Net loans charged off (221) (421) 25
Provision charged to expense 403 290 242
-------- -------- --------
Allowance for loan losses at end of period $ 1,149 $ 967 $ 1,098
======== ======== ========
RATIOS:
Net loan charge-offs during period to
average total loans outstanding .30% .70% (.05%)
Net loan charge-offs to loans at end
of period .27% .62% (.05%)
Allowance for loan losses to average
total loans 1.55% 1.62% 2.02%
Allowance for loan losses to loans at
end of period 1.42% 1.43% 1.99%
Net loan charge-offs to allowance for
loan losses 19.2% 43.5% (.2%)
Net loan charge-offs to provision for
loan losses 54.8% 145.2% (10.3%)
48
55
Non-performing loans include loans contractually past due 90 days or
more and loans in a non-accruing status. The Bank had $25,000 of non-accruing
loans at December 31, 1997, compared to $84,000 at December 31, 1996. There were
$2,000 and $27,000 of loans contractually past due 90 days or more and still
accruing at December 31, 1997 and at December 31, 1996, respectively. There were
$65,000 of such loans at December 31, 1995. Loans contractually past due 30-89
days were $1,067,000 at December 31, 1997, $1,471,000 at December 31, 1996 and
$1,207,000 at December 31, 1995.
December 31, 1997 December 31, 1996 December 31, 1995
----------------- ----------------- -----------------
(Dollars in Thousands) % of % of % of
Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ -----
Total non-accruing loans $ 25 .03% $ 84 .12% $ 267 .48%
Loans 90 or more days
delinquent and accruing 2 -0- 27 .04 65 .12
------ ---- ------ ---- ------ ----
Total non-performing loans 27 .03 111 .16 332 .60
------ ---- ------ ---- ------ ----
Other real estate owned 180 .22 48 .07 84 .17
Other assets -- -- -- -- -- --
------ ---- ------ ---- ------ ----
Total repossessed assets 180 .22 48 .07 84 .17
------ ---- ------ ---- ------ ----
Total non-performing
assets $ 207 .25% $ 159 .23% $ 416 .77%
====== ==== ====== ==== ====== ====
Loan delinquencies 30 to
89 days and still accruing $1,067 1.32% $1,471 2.17% $1,207 2.19%
====== ==== ====== ==== ====== ====
For the years ended December 31, 1997, 1996 and 1995, interest income
that would have been recorded under the original contract terms on the above
loans on non-accrual status was approximately $9,000, $6,000, and $26,000,
respectively, in excess of actual income recorded.
49
56
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
Although the total allowance for loan losses is available to absorb
losses from all loans, management allocates the reserve among general portfolio
categories for informational and regulatory reporting purposes. The allocation
of the allowance for loan losses for the years shown was as follows (dollars in
thousands):
December 31, 1997 December 31, 1996 December 31, 1995
----------------- ----------------- -----------------
% of % of % of
Loans in Loans in Loans in
Reserve Each Reserve Each Reserve Each
Allocated Category to Allocated Category to Allocated Category to
Amount Total Loans Amount Total Loans Amount Total Loans
------ ----------- ------ ----------- ------ -----------
Commercial Loans $ 320 10.9 $ 309 12.7 $ 318 16.3
Real Estate Loans 300 81.0 225 77.0 193 70.1
Installment Loans 210 8.1 221 10.3 231 13.6
Unallocated Reserve 319 -- 212 -- 356 --
------ ------ ------ ------ ------ ------
Total allowance for loan
losses $1,149 100.0% $ 967 100.0% $1,098 100.0%
====== ====== ====== ====== ====== ======
50
57
The following table sets forth the percentage relationships of
significant components of the Bank's balance sheets as of the dates indicated
(dollars in thousands):
December 31, 1997 December 31, 1996 December 31, 1995
----------------- ----------------- -----------------
% of % of % of
Total Total Total
----- ----- -----
Amount Assets Amount Assets Amount Assets
------ ------ ------ ------ ------ ------
ASSETS
Interest-earning assets:
Net loans* $ 79,736 62.4% $ 66,769 58.5% $ 54,096 57.7%
Held to maturity securities 17,151 13.4 16,958 14.9 14,466 15.4
Available for sale securities 9,699 7.6 6,931 6.1 7,092 7.6
Federal funds sold 9,658 7.5 12,723 11.2 8,214 8.8
-------- ----- -------- ----- -------- -----
Total interest-earning assets 116,244 90.9 103,381 90.7 83,868 89.5
Non-interest earning assets:
Cash and due from banks 5,438 4.2 4,644 4.1 4,974 5.3
Premises and equipment 3,521 2.8 3,895 3.4 3,303 3.5
Other assets 2,681 2.1 2,067 1.8 1,546 1.7
-------- ----- -------- ----- -------- -----
Total assets $127,884 100.0% $113,987 100.0% $ 93,691 100.0%
======== ===== ======== ===== ======== =====
*Net of allowance for loan losses
LIABILITIES & SHAREHOLDERS'
EQUITY
Interest-bearing deposits:
Demand $ 29,785 23.3 $ 26,753 23.5 $ 22,268 23.8
Savings 9,822 7.7 10,199 8.9 10,716 11.4
Time 60,415 47.2 52,614 46.2 37,916 40.5
-------- ----- -------- ----- -------- -----
Total interest-bearing deposits 100,022 78.2 89,566 78.6 70,900 75.7
Non-interest bearing demand deposits 17,462 13.6 15,195 13.3 13,779 14.7
Other liabilities 836 .7 573 .5 760 .8
-------- ----- -------- ----- -------- -----
Total liabilities 118,320 92.5 105,334 92.4 85,439 91.2
Shareholders' equity 9,564 7.5 8,653 7.6 8,252 8.8
Total liabilities and
Shareholders' equity $127,884 100.0% $113,987 100.0% $ 93,691 100.0%
======== ===== ======== ===== ======== =====
51
58
OTHER REAL ESTATE
As of December 31, 1997, December 31, 1996 and December 31, 1995, the
Bank had other real estate acquired through foreclosure of $180,000, $48,000 and
$84,000, respectively.
INVESTMENT PORTFOLIO
The Bank invests a portion of its assets in U.S. Treasury and U.S.
Government agency obligations, obligations of states and other political
subdivisions, certificates of deposit and federal funds sold. The Bank's
investments are managed in relation to loan demand and deposit growth, and are
generally used to provide for the investment of excess funds at minimal risks
while providing liquidity to fund increases in loan demand or to offset
fluctuations in deposits.
With respect to the Bank's investment portfolio, the Bank's portfolio
is primarily invested in U.S. Treasury and general obligations of its agencies
because such securities generally represent minimal investment risks. At
December 31, 1997, U.S. Treasury and U.S. Government agency securities were
$23.2 million or 86% of the Bank's investment portfolio, compared to $23.2
million or 97% at December 31, 1996 and $20.3 million or 94% at December 31,
1995.
Federal funds sold is the excess cash the Bank has available over and
above daily cash needs that is invested on an overnight basis with approved
correspondent banks. At December 31, 1997, the Bank's federal funds sold were
$9.7 million, compared to $12.7 million at December 31, 1996 and $8.2 million at
December 31, 1995.
The carrying value of the Bank's total investment portfolio was
approximately $26.8 million at December 31, 1997, $23.9 million at December 31,
1996, and $21.6 million at December 31, 1995. The average yield on the Bank's
investment portfolio, not including federal funds sold, was 6.41% as of December
31, 1997, 6.46% as of December 31, 1996 and 6.30% as of December 31, 1995.
At December 31, 1997 and December 31, 1996, the Bank's securities due
within one year, not including federal funds sold, were $1.4 million (or 5.2%)
and $4.0 million (or 17. 7%), respectively, of the total investment portfolio
compared with $1.6 million (or 7%) of the total portfolio at December 31, 1995.
The following table presents the carrying value of the Bank's
investment securities as of the dates indicated (dollars in thousands):
December 31
-----------
1997 1996 1995
---- ---- ----
U.S. Treasury obligations and obligations of other
U.S. government agencies $23,222 $23,166 $20,318
Obligations of states and other political subdivisions 1,399 439 345
Other securities 2,149 224 724
Unrealized gains (losses) 80 60 171
------- ------- -------
Total investment securities $26,850 $23,889 $21,558
======= ======= =======
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DEPOSITS
During the year ended December 31, 1997, the Bank's interest-bearing
deposits increased from $89.6 million to $100.0 million, and total deposits
increased from $104.8 million to $117.5 million. This compares to an increase in
interest-bearing deposits of $18.7 million during 1996, and an increase in total
deposits of $20.1 million during 1996.
Non-interest bearing deposits increased during 1997 from $15.2 million
at December 31, 1996 to $17.5 million at December 31, 1997. Non-interest bearing
deposits increased $1.4 million during 1996. The increases were primarily
attributable to the development of new customer banking relationships and the
establishment of two new banking offices.
During 1995, interest-bearing deposits increased $11.6 million to $70.9
million. For the same year, total deposits increased $12.8 million while savings
deposits decreased $3.5 million and total time deposits increased $15.0 million.
The following table presents the balances of the Bank's deposit
accounts and various ratios as of the dates indicated (dollars in thousands):
December 31, 1997 December 31, 1996 December 31, 1995
----------------- ----------------- -----------------
Deposits:
Non-interest bearing $ 17,462 $ 15,195 $ 13,779
Interest bearing* 29,785 26,753 22,268
Savings deposits 9,822 10,199 10,715
Time deposits 60,415 52,614 37,916
-------- -------- --------
Total deposits $117,484 $104,761 $ 84,678
======== ======== ========
Certain ratios:
Non-interest bearing deposits
to total deposits 14.9% 14.5% 16.3%
Time deposits to total deposits 51.4% 50.2% 44.8%
*Includes Super NOW and Money Market Accounts
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At the dates indicated above, less than 6% of the Bank's total deposits
were comprised of public fund deposits. On December 31, 1997, December 31, 1996
and December 31, 1995, no single depositor excluding public funds accounted for
more than 2% of the Bank's total deposits. Management does not believe the Bank
is dependent on a single deposit customer, or a group of customers concentrated
in a particular industry, whose loss or insolvency would have a material adverse
effect on the Bank's operations.
Bank management believes that substantially all of the Bank's deposit
liabilities, excluding public fund deposits, originate from within the Bank's
service area. The Bank has had no brokered deposits at any time from its
inception to December 31, 1997.
At December 31, 1997 and December 31, 1996, approximately 15.9% and
14.7%, respectively, of the Bank's deposits consisted of certificates of deposit
in amounts of $100,000 or more.
The following table presents the maturity distribution of certificates
of deposit of $100,000 or more on the dates indicated (dollars in thousands):
December 31, 1997 December 31, 1996 December 31, 1995
----------------- ----------------- -----------------
3 months or less $ 8,011 $ 3,007 $ 5,326
Over 3 months through 1 year 6,469 7,298 3,778
Over 1 year through 5 years 4,239 5,076 3,073
------- ------- -------
Total Certificates $18,719 $15,381 $12,177
======= ======= =======
CAPITAL RESOURCES
The Bank's total shareholders' equity was approximately $9,564,000 at
December 31, 1997, $8,653,000 at December 31, 1996 and $8,252,000 at December
31, 1995. Shareholders' equity increased by $911,000 from December 31, 1996 to
December 31, 1997, primarily as a result of $802,000 of net income reported by
the Bank during 1997 and proceeds of $141,000 from the exercise of stock options
during 1997. As of December 31, 1997, the Bank had a total risk-based ratio of
14.4%, a Tier 1 risk-based capital ratio of 13.1% and a leverage ratio of 7.4%.
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The capital categories as established by the regulatory agencies, as
well as the capital ratios of the Bank at December 31, 1997 were as follows:
Category Total risk-based Tier 1 risk-based Leverage
-------- capital ratio ratio ratio
---------------- ----------------- --------
Well capitalized (minimum ratios) 10% 6% 5%
Adequately capitalized
(minimum ratios) 8% 4% 4%
Undercapitalized (less than) 8% 4% 4%
Significantly under-capitalized 6% 3% 3%
(less than)
Guaranty Bank & Trust Company 14.4% 13.1% 7.4%
LIABILITY MANAGEMENT
Bank management meets periodically to review the Bank's position with
regard to composition and volumes of assets and liabilities. Among other things,
cash needs are reviewed, along with local and national market conditions and
economic trends. As necessary, the Bank's rates are periodically adjusted.
Generally, the Bank has not found it necessary to engage in short-term borrowing
to supplement liquidity. The Bank does not participate in the securities brokers
market for deposit monies, or actively seek jumbo certificates of deposit
($100,000 and over) through any broker or media advertising.
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LIQUIDITY
Liquidity management involves the ability to meet the cash flow
requirements of customers who may be either depositors wanting to withdraw their
funds or borrowers needing assurance that sufficient funds will be available to
meet their credit needs. In the ordinary course of business, the Bank's cash
flows are generated from interest and fee income, as well as from loan
repayments and the maturity or sale of earning assets. In addition, liquidity is
continuously provided through the acquisition of new deposits and the renewal of
maturing deposits. Many factors affect the ability to accomplish liquidity
objectives successfully, including the economic environment, the asset/liability
mix within the balance sheet, as well as the Bank's overall reputation in the
community.
At December 31, 1997, December 31, 1996 and December 31, 1995, the
Bank's ratio of short-term investments to volatile liabilities was as follows
(dollars in thousands):
December 31, 1997 December 31, 1996 December 31, 1995
----------------- ----------------- -----------------
Short-term investments:
Federal funds sold $ 9,658 $ 12,723 $ 8,214
Investment securities due
within one year 1,400 3,976 1,562
-------- -------- --------
Total short-term investments 11,058 16,699 9,776
-------- -------- --------
Volatile liabilities:
Time deposits of $100,000 and over 18,719 15,381 12,177
Securities sold under
agreement to repurchase -- -- --
-------- -------- --------
Total volatile liabilities 18,719 15,381 12,177
-------- -------- --------
Short-term investments in excess of
(under) volatile liabilities $ (7,661) $ 1,318 $ (2,401)
======== ======== ========
Ratio of short-term investments
to volatile liabilities 59% 1.09% 80%
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As of December 31, 1997, December 31, 1996 and December 31, 1995, the Bank's
liquidity was as follows (dollars in thousands):
December 31, 1997 December 31, 1996 December 31, 1995
----------------- ----------------- -----------------
Cash and due from banks $ 5,438 $ 4,644 $ 4,974
Federal funds sold 9,658 12,723 8,214
Investment securities due
within one year 1,400 3,976 1,562
------- ------- -------
Total liquidity $16,496 $21,343 $14,750
======= ======= =======
Ratio of total liquidity to
total deposits 14.0% 20.4% 17.4%
======= ======= =======
RESULTS OF OPERATIONS
NET INTEREST INCOME
The Bank's earnings are dependent primarily on its net interest income
which is the difference between interest earned on earning assets (primarily
loans, investment securities and federal funds sold) and interest paid on
deposits. Changes in net interest income are caused by changes in interest rates
earned or paid and by volume changes in earning assets and deposits.
The Bank reported net interest income of $4.8 million for 1997,
compared to $4.1 million and $3.9 million for the years 1996 and 1995,
respectively. Growth in the volume of interest earning assets was the primary
contributor to the increases in net interest income.
The Bank's average yield on interest-bearing assets was 7.83% for 1997,
compared to 7.98% for 1996 and 8.27% for 1995. Investment securities, excluding
federal funds sold, yielded 6.41% for 1997, compared to 6.46% during 1996 and
6.30% for 1995.
The average rate paid on interest-bearing liabilities was 4.12% for
1997, compared to 4.15% for 1996 and 3.99% for 1995. The Bank's net interest
yield on earning assets was 4.30% for 1997, compared to 4.53% for 1996 and 4.95%
for 1995.
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The following tables present the average balance of major categories of
average earning assets and interest-bearing liabilities, the interest earned or
paid on such categories, and their respective average yields or rates paid for
the years ended December 31, 1997, 1996, and 1995.
Year Ended Year Ended Year Ended
December 31, 1997 December 31, 1996 December 31, 1995
--------------------------------- --------------------------------- ----------------------------------
(Dollars in Interest Average Interest Average Interest Average
Thousands) Average Income Yield or Average Income Yield or Average Income Yield or
Balance Expenses Rate Paid Balance Expenses Rate Paid Balance Expenses Rate Paid
-------- -------- --------- -------- -------- --------- -------- -------- ---------
Interest-bearing assets:
Commercial loans $ 8,440 $ 795 9.48 $ 8,714 $ 826 9.48 $ 8,645 $ 844 9.76
Real estate loans 58,907 4,992 8.47 45,029 3,882 8.62 40,295 3,516 8.73
Installment loans 6,704 673 10.04 7,063 715 10.12 6,392 662 10.36
Loan loss reserve (1,010) -- -- (990) -- -- (1,024) -- --
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total net loans 73,041 6,460 8.72 59,816 5,423 8.92 54,308 5,022 9.25
-------- ------- ----- -------- ------- ----- -------- ------- -----
U.S. Treasuries 6,712 417 6.21 6,415 419 6.53 6,157 402 6.53
U.S. Agencies 18,211 1,190 6.53 15,662 1,015 6.48 9,580 595 6.21
Other securities 1,280 73 5.63 941 53 5.63 593 32 5.40
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total investment sec. 26,203 1,680 6.41 23,018 1,487 6.46 16,330 1,029 6.30
Federal funds sold 11,863 641 5.40 8,152 433 5.31 8,825 523 5.93
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total earning assets 111,107 8,781 7.83 90,986 7,343 7.98 79,463 6,574 8.27
------- ------- ------- -----
Non-earning assets 10,732 9,780 6,945
-------- -------- --------
TOTAL ASSETS $121,839 $100,766 $ 86,408
======== ======== ========
Interest-bearing
liabilities:
Deposits:
NOW accounts $ 18,237 $ 325 1.78 $ 15,316 $ 317 2.07 $ 13,181 $ 267 2.03
MMA accounts 9,846 279 2.83 8,770 255 2.91 7,616 219 2.88
Savings 10,104 203 2.01 10,488 260 2.48 11,328 283 2.50
CDS under $100,000 40,263 2,189 5.44 29,794 1,656 5.56 21,278 1,197 5.63
CDS over $100,000 17,739 967 5.45 13,126 731 5.57 12,807 677 5.29
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total interest-bearing
deposits 96,189 3,963 4.12 77,494 3,219 4.15 66,210 2,643 3.99
------- ----- ------- ---- ------- -----
Non-interest bearing
deposits 15,990 14,203 12,780
Other non-interest
bearing liabilities 584 616 592
-------- -------- --------
TOTAL LIABILITIES 112,763 92,313 79,582
Shareholder's Equity 9,076 8,453 6,826
-------- -------- --------
Total liabilities &
Shareholder's equity $121,839 $100,766 $ 86,408
======== ======== ========
Incremental interest
spread 3.71% 3.83% 4.28%
===== ===== =====
Net interest income and
net interest yield on
earning assets $ 4,818 4.30% $ 4,124 4.53% $ 3,931 4.95%
======= ===== ======= ===== ======= =====
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The following table presents a summary of the changes in interest
earned and interest paid resulting from changes in volumes of and rates earned
or paid on various categories of interest-earning assets and interest-bearing
liabilities. The allocation of the rate/volume variance has been made pro rata
based on the percentage that volume and rate variances produced in each
category.
Twelve months ended December 31, 1997 Twelve months ended December 31,
1996 compared to the 12 months ended compared to the 12 months ended
December 31, 1996 December 31, 1995
----------------------------------------------- ----------------------------------------------
Due to Due to
Change in change in
Inc. volume Inc. volume
(Dollars in thousands) (dec.) Vol.(1) Rate(2) Rate(3) (dec.) Vol.(1) Rate(2) Rate(3)
------- ------- ------- ------- ------- ------- ------- -------
Interest income:
Commercial loans $ (31) $ (26) $ -- $ (5) $ (18) $ 7 $ (24) $ (1)
Real estate loans 1,110 1,196 (68) (18) 366 413 (44) (3)
Installment loans (42) (36) (6) -- 53 70 (15) (2)
------- ------- ------- ------- ------- ------- ------- -------
Total loans 1,037 1,134 (74) (23) 401 490 (83) (6)
------- ------- ------- ------- ------- ------- ------- -------
Investments:
U.S. Treasuries (2) 19 (21) -- 17 17 -- --
U.S. Agencies 175 165 8 2 420 378 26 16
Other securities 20 19 1 -- 21 19 1 1
------- ------- ------- ------- ------- ------- ------- -------
Total Investments 193 203 (12) 2 458 414 27 17
Federal funds sold 208 197 7 4 (90) (40) (55) 5
------- ------- ------- ------- ------- ------- ------- -------
Total interest income 1,438 1,534 (79) (17) 769 864 (111) 16
------- ------- ------- ------- ------- ------- ------- -------
Interest expense:
NOW accounts 8 60 (44) (8) 50 43 5 2
MMDA accounts 24 31 (7) -- 36 33 3 --
Savings (57) (9) (48) -- (23) (21) (2) --
CDS under $100,000 533 582 (36) (13) 459 479 (15) (5)
CDS greater than $100,000 236 257 (16) (5) 54 17 36 1
------- ------- ------- ------- ------- ------- ------- -------
Total interest expense 744 921 (151) (26) 576 551 27 (2)
------- ------- ------- ------- ------- ------- ------- -------
Net interest income before
allocation $ 694 $ 613 $ 72 $ 9 $ 193 $ 313 $ (138) $ 18
======= ======= ======= ======= ======= ======= ======= =======
Changes calculated as:
(1) Change in volume times old rate
(2) Change in rate times old volume
(3) Change in rate times change in volume
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NON-INTEREST INCOME
Non-interest income was $1,501,000 for the year ended December 31,
1997. For the year 1996, non-interest income was $1,076,000 compared to $852,000
for 1995. The primary components of non-interest income are service charges on
deposit accounts and trust fees. In 1997, non-interest income was increased by
executive life insurance proceeds of $240,000.
Service charges on deposit accounts were $313,000 for the year ended
December 31, 1997. Service charges on deposit accounts were $279,000 for the
year 1996 compared to $261,000 for 1995. The increases for 1997 and 1996 were
primarily due to the increased volume of deposits subject to service charges as
well as increases in overdraft fees collected.
The Bank began trust operations in March 1993. Trust fee income was
$773,000 for the year ended December 31, 1997, $709,000 for 1996 and $534,000
for 1995. Total assets under administration by the trust department were
$101,882,000, $84,944,000 and $81,317,000 at December 31, 1997, December 31,
1996 and December 31, 1995, respectively.
NON-INTEREST EXPENSE
For the year ended December 31, 1997, total non-interest expense was
$4,798,000, compared to $4,088,000 for 1996. The increase was due to increases
of $425,000, $238,000 and $47,000 in salaries and employee benefits, occupancy
and equipment expenses and other expenses, respectively.
Non-interest expense for 1997 increased over the same period in 1996
due to personnel expense, occupancy and equipment expense and other expenses
associated with the opening of a new branch office. The growth of the Bank in
loans and deposits has also increased personnel requirements, supply expenses
and data processing expenses. Also, in 1997, salaries and employee benefits were
increased $240,000 by the discounted present value of payments to be made by the
Bank pursuant to its "Death Benefit Only Salary Continuation Plan." See Note L
to the Notes to Financial Statements.
Total non-interest expense was $4,088,000 for the year ended December
31, 1996, compared to $3,142,000 for 1995. Salaries and employee benefits, the
largest component, were $2,058,000 (or 50%), occupancy and equipment expenses
were $830,000 (or 20%), and other expenses were $1,200,000 (or 30%) of total
other operating expenses for 1996.
INTEREST RATE SENSITIVITY
Management meets periodically to review general economic conditions,
interest rate trends, and the interest rate sensitivity of the Bank's various
portfolios. The Bank's objective in managing interest rate sensitivity is to
protect the Bank's interest rate margins from the negative effects of upward or
downward changes in interest rates. Legislative changes, monetary control
efforts and the effects of industry deregulation have been significant factors
affecting the task of managing interest sensitivity positions.
The Bank's rate-sensitive assets are those repriceble within one year
or less. Rate-sensitive assets thus include loans, investment securities and
federal funds sold. Rate-sensitive liabilities include interest-bearing demand
deposits (insured money market accounts and NOW accounts), savings accounts and
time deposits, which mature or are subject
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67
to rate changes in one year or less; however, industry experience indicates that
many interest-bearing demand deposits and regular savings deposits are not as
interest-sensitive as other types of interest-bearing deposits.
The profitability of the Bank is influenced significantly by
management's ability to control the relationship between rate-sensitive assets
and liabilities, especially during periods of frequent changes in interest
rates. As set forth in the table below, the difference between the amounts of
interest-earning assets and interest-bearing liabilities subject to rate changes
is known as the "interest-sensitivity gap," and is referred to as a "positive
gap" when the amount of interest-sensitive assets exceeds that of liabilities,
and as a "negative gap" when the amount of interest-sensitive liabilities
exceeds that of assets.
The following table presents an analysis of the interest rate
sensitivity of the Bank's assets and liabilities as of December 31, 1997 and
December 31, 1996 (dollars in thousands):
December 31, 1997 December 31, 1996
Adjustable in Adjustable in
------------------------------------------------ ------------------------------------------------
Over One Over One
Less Than 90 Days Year and Less Than 90 Days Year and
90 Days or To One Non-Rate 90 Days or To One Non-Rate
Immediately Year Sensitive Total Immediately Year Sensitive Total
----------- --------- --------- ----- ----------- --------- --------- -----
Interest-earning assets:
Floating rate loans $ 13,070 $ 16,866 $ 39,196 $ 69,132 $ 13,347 $ 14,517 $ 27,026 $ 54,890
Fixed rate loans 1,978 3,937 5,838 11,753 1,736 3,243 7,867 12,846
--------- --------- --------- --------- --------- --------- --------- ---------
Total loans 15,048 20,803 45,034 80,885 15,083 17,760 34,893 67,736
Investment securities 1,899 700 24,251 26,850 3,006 2,678 18,205 23,889
Federal Funds sold 9,658 9,658 12,723 12,723
--------- --------- --------- --------- --------- --------- --------- ---------
Total interest-earning
assets $ 26,605 $ 21,503 $ 69,285 $ 117,393 $ 30,812 $ 20,438 $ 53,098 $ 104,348
========= ========= ========= ========= ========= ========= ========= =========
Interest-bearing liab:
Demand deposits 14,893 7,446 7,446 29,785 13,377 6,688 6,688 26,753
Savings 4,911 4,911 9,822 5,100 2,550 2,549 10,199
Cert. of deposits 20,240 20,867 19,308 60,415 13,454 20,089 19,071 52,614
--------- --------- --------- --------- --------- --------- --------- ---------
Total interest-bearing
liabilities $ 35,133 $ 33,224 $ 31,665 $ 100,022 $ 31,931 $ 29,327 $ 28,308 $ 89,566
========= ========= ========= ========= ========= ========= ========= =========
Interest sensitivity:
Gap (int-earning assets
less int-bearing
liabilities $ (8,528) $ (11,721) $ 37,620 $ 17,371 $ (1,119) $ (8,889) $ 24,790 $ 14,782
========= ========= ========= ========= ========= ========= ========= =========
Cumulative interest
sensitivity gap $ (8,528) $ (20,249) $ 17,371 $ (1,119) $ (10,008) $ 14,782
========= ========= ========= ========= ========= =========
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As of December 31, 1997, $48.1 million (or 41.0%) of the Bank's total
interest-earning assets were subject to rate adjustment during the following 12
months, while a total of $68.4 million (or 68.3%) of the Bank's total
interest-bearing liabilities were subject to adjustment during that same period.
As reflected by the table, the Bank had a cumulative "negative" gap of $20.2
million during the 12 months following December 31, 1997.
INCOME TAXES
Provisions for income taxes are based on taxes payable or refundable
for the current year (after exclusion of non-taxable income such as interest on
state and municipal securities) and deferred taxes on temporary differences
between the amount of taxable income and pre-tax financial income and between
the tax bases of assets and liabilities and their reported amounts in the
financial statements.
At December 31, 1997, the provision for income taxes totaled
approximately $316,000 ($456,000 current income tax expense and $140,000
deferred income tax benefit) or 28% of pre-tax income. At December 31, 1996, the
provision for income taxes was approximately $315,000 ($254,000 current income
tax expense and $61,000 deferred income tax expense) or 38% of pre-tax income,
compared to $529,000 ($570,000 current income tax expense and $41,000 deferred
income tax benefit) or 38% of pre-tax income at December 31, 1995. The 1997
provision is lower than the effective rates principally due to an approximate
gain of $240,000 on executive life insurance benefits. Additional information is
provided on the Bank's income taxes in Note H to the Bank's financial
statements.
RECENT ACCOUNTING PRONOUNCEMENTS
FASB No. 130, "Reporting Comprehensive Income," establishes standards
for reporting and display of comprehensive income and its components in a full
set of general purpose financial statements. This statement requires companies
to display items of other comprehensive income either below the total for net
income, in a separate statement of comprehensive income, or in a statement of
changes in equity.
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69
The adoption of the accounting standard did not impact amounts previously
reported for net income or affect the comparability of previously issued
financial statements.
FASB No. 133, "Accounting for Derivative Instruments and Hedging
Activities," requires companies to recognize all derivatives on the balance
sheet at fair value. Additionally, derivatives that are not hedges must be
adjusted to fair value through income. This statement is effective for the
Bank's Fiscal Year ending December 31, 2000. Because the Bank has not entered
into any derivative transactions, the adoption of this statement will have no
impact on the financial statements.
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DESCRIPTION OF FNB CAPITAL STOCK AND GUARANTY CAPITAL STOCK
FNB COMMON STOCK
GENERAL. FNB is authorized to issue 100,000,000 shares of FNB Common
Stock, of which 17,967,830 shares were outstanding as of September 30, 1998. FNB
Common Stock is traded on the Nasdaq National Market under the trading symbol
"FBAN." FNB provides transfer agent and registrar services for FNB Common Stock.
As of September 30, 1998, 2,896,574 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 September 30, 1998 was 79,135,596.
Since that date, 1,251,454 additional shares have been reserved for issuance in
connection with the Merger.
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 Bylaws" 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 Guaranty 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. Under Pennsylvania law, 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, among other things, by
bank regulatory requirements and capital guidelines.
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71
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 20,718
shares of FNB Series A Preferred Stock (the "FNB Series A Preferred Stock")
issued and outstanding as of September 30, 1998 and 236,065 shares of FNB Series
B 7 1/2% Cumulative Convertible Preferred Stock (the "FNB Series B Preferred
Stock") issued and outstanding as of September 30, 1998.
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
FNB'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996.
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 Stock 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 Stock is
convertible at the option of the holder into shares of FNB Common Stock having a
market value of $25.00 at the time of conversion. FNB has the right to require
the conversion of the balance of all outstanding shares at the conversion rate.
Through September 30, 1998, 600 shares of the FNB Series A Preferred Stock were
converted to 410 shares of FNB Common Stock. At September 30, 1998, 18,095
shares of FNB Common Stock were reserved by FNB for the conversion of the
remaining 20,718 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 $11.09 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. Through September 30, 1998,
32,265 shares of FNB Series B Preferred Stock were converted to 66,383 shares of
FNB Common Stock. At September 30, 1998, 523,311 shares of FNB Common Stock were
reserved by FNB for the conversion of the remaining 236,065 outstanding shares
of FNB Series B Preferred Stock.
GUARANTY COMMON SHARES
GENERAL. Guaranty is authorized to issue 2,000,000 Guaranty Common
Shares $2.00 par value, of which ___________ shares were issued and outstanding
as of the Record Date. There is no established public trading market for the
Guaranty Common Shares. Registrar and Transfer Company, New Jersey acts as the
transfer agent and the registrar for the Guaranty Common Shares.
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COMPARISON OF SHAREHOLDER RIGHTS
At the Effective Time, the shareholders of Guaranty, a Florida state
banking corporation governed by the Florida Business Corporation Act ("FBCA")
and the Florida Financial Institutions Code ("FFIC") (the FBCA and the FFIC
collectively referred to as the "Florida Laws"), will become shareholders of
FNB, a Pennsylvania corporation, governed by the Pennsylvania Business
Corporation Law ("PBCL"). Differences between the Florida Laws and the PBCL and
between the Guaranty Charter and Bylaws and the FNB Charter and Bylaws will
result in various changes in the rights of Guaranty shareholders.
The following is a summary of the material differences between the
rights of FNB shareholders under Pennsylvania law, the FNB Charter and the FNB
Bylaws, and those of Guaranty shareholders under the Florida Laws, the Guaranty
Charter and the Guaranty Bylaws. This summary does not purport to be a complete
description of the provisions discussed and is qualified in its entirety by the
PBCL, the Florida Laws, the Guaranty Charter and Bylaws and the FNB Charter and
Bylaws, to which Guaranty shareholders are referred.
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
Under the PBCL, unless provided otherwise in a corporation's articles
or bylaws, a director may be removed without cause by a vote of the shareholders
entitled to elect the director. The FNB Charter contains a provision requiring
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 Guaranty director may be removed by the Guaranty
shareholders with or without cause at a duly convened special meeting of
shareholders called for that purpose when a quorum is present if the votes cast
in favor of removal exceed the votes cast opposing removal. Such action also may
be taken in action by written consent where a majority of the outstanding shares
consent to the removal of the director.
The PBCL and the FNB Bylaws 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, though less than a
quorum, or by a sole remaining director, and each person so selected shall serve
until the next election of the class for which such director has been chosen,
and until a successor has been selected and qualified.
The FBCA provides that vacancies on the board of directors of a Florida
corporation 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 Guaranty Bylaws provide that any vacancy among
the Guaranty directors may be filled by the remaining members of the Board at
any regular or special meeting of the Board.
QUORUM OF SHAREHOLDERS
The PBCL provides that a corporation may specify in its bylaws the
requirements necessary to constitute a quorum. The FNB bylaws 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.
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The FBCA 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
Guaranty. The FBCA further provides that in no event shall a quorum consist of
less than one-third of the shares entitled to vote. The Guaranty Bylaws provide
that a majority of the outstanding shares shall constitute a quorum at all
meetings of shareholders.
ADJOURNMENT AND NOTICE OF SHAREHOLDER MEETINGS
The FNB Bylaws and the Guaranty Bylaws provide that, if a quorum is not
present or represented at a shareholder meeting, the shareholders present and
entitled to vote may adjourn the meeting without notice other than an
announcement at the meeting. The FBCA also provides that whenever a meeting is
adjourned to another time or place, it generally shall not be necessary to give
any notice of the adjourned meeting as long as notice of the time and place of
the next meeting is given at the adjourned meeting. The FNB Bylaws 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, notice of shareholder meetings must be given at least
10 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. The Guaranty
Bylaws provide that notice of shareholder meetings must be given at least 10
days prior to any meeting.
CALL OF SPECIAL SHAREHOLDER MEETINGS
The FNB Bylaws provide that special meetings of the shareholders may be
called only by the Chairman of the Board, the President or the Secretary
pursuant to a resolution or at the written direction of at least 75% of the
members of the FNB Board. The Guaranty Bylaws provide that special meetings of
the shareholders may be called by the Board of Directors or by one or more
shareholders owning, in the aggregate, not less than 25% of the outstanding
Guaranty Common Shares.
SHAREHOLDER CONSENT IN LIEU OF MEETING
Under the PBCL, 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 written 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 provides 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. Under the Florida 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 the Florida Laws, 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 the Florida Laws
regarding the rights of dissenting shareholders.
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DISSENTERS' RIGHTS
Under the PBCL, shareholders may perfect dissenters' rights with regard
to certain corporate action such as merger, consolidation or the sale, lease or
exchange of substantially all the assets of the corporation (under limited
circumstances), or elimination of cumulative voting.
Under the Florida Laws, in the event of a merger transaction in which
the surviving entity will be a Florida state bank, shareholders of the acquired
institution shall be afforded dissenters' rights under the FFIC. If the
shareholders of the acquired institution properly perfect their rights of
dissent, they shall have the following rights with respect to those shares.
Under the FFIC, on or promptly after the effective date of the merger, the
surviving state bank may fix an amount which it will pay in cash to dissenting
shareholders of the acquired institution. If the surviving state bank fixes such
an amount (which it is not legally required to do), it shall offer to pay such
amount to the holders of all dissenting shares of the acquired institution. The
owners of dissenting shares who have accepted the offer shall be entitled to
receive the amount so offered upon surrender of their stock certificates at any
time within 30 days after the effective date of the merger. Those owners who
have not accepted such an offer for their shares shall have the value of their
dissenting shares determined as of the effective date of the merger by three
appraisers; one to be selected by the owners of at least two-thirds (2/3) of
such dissenting shares, one to be selected by the board of directors for the
surviving bank, and the third to be selected by the other two appraisers so
chosen. The value agreed upon by any two of the three appraisers shall control
and be final and binding on all parties. If, within 90 days from the effective
date of the merger, for any reason one or more of the appraisers is not selected
as required under the FFIC, or the appraisers fail to determine the value of the
dissenting shares, the Florida Department of Banking and Finance shall cause an
appraisal of the dissenting shares to be made, which appraisal shall be paid by
the surviving state bank. Upon conclusion of the appraisal process, the value
determined pursuant to the appraisal shall be paid to all dissenting
shareholders in cash upon surrender of the stock certificates representing such
shares within 30 days after the appraisal has been made.
However, when a Florida state bank merges with and into a national bank
such that the national bank is the surviving entity, the Florida state bank
shareholders' dissenters' rights are those set forth in 12 U.S.C. Section 215a
and not those outlined under the FFIC. See "THE MERGER -- Dissenter's Rights of
Guaranty Shareholders."
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 the Nasdaq National Market or held of record
by at least 2,000 persons. The FFIC does not contain any similar exemption from
the application of dissenters' rights.
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.
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DIVIDENDS AND DISTRIBUTIONS
Subject to any restrictions in a corporation's charter, the PBCL
generally provides that a corporation may make distributions to 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 total 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 payment of dividends or distributions by Guaranty is subject to the
restrictions of the FBCA and the FFIC. Under the FBCA, a corporation may not
generally authorize and make distributions if, after giving effect thereto, it
would be unable to satisfy its debts as they become due in the ordinary course
of business or if the corporation's total assets would be less than its total
liabilities plus the amount that would be needed, if it were to be dissolved at
the time of the distribution, to satisfy preferential rights of shareholders
whose preferential rights are superior to those of the class of shareholders
receiving the dividend or other distribution. Under the FFIC, before declaring
any dividend, the board of directors of a state bank such as Guaranty must
charge off bad debts, depreciation, and other worthless assets and make adequate
provision for reasonably anticipated future losses on loans and other assets.
Except with the prior approval of the Florida Department of Banking and Finance,
the board may then only declare and pay dividends from the bank's net profits
for the period with respect to which the dividend is paid together with its
retained net profits of the preceding two years. In no case, however, may a
state bank pay a dividend (i) when its net income for the current year combined
with its retained net income for the preceding two years is a loss, or (ii)
which would cause its capital accounts to fall below any required minimum.
DIRECTOR QUALIFICATIONS AND NUMBER
The articles of incorporation or bylaws 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 Bylaws provide that
the directors need not be state residents or shareholders of the corporation to
qualify to serve.
The FNB Bylaws 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 Bylaws further provide
that the FNB Board shall be divided into four classes, with each director having
a four-year term.
The FFIC requires that a bank's board must consist of at least five
elected directors. The FFIC further requires that at all times not less than a
majority of directors must be citizens of the United States and at least
three-fifths of the directors must have resided in Florida for at least one year
preceding their election and must be residents of Florida during their
continuance in office. In addition, the FFIC requires that at least one outside
director of Guaranty must have at least one year's experience as an executive
officer, regulator or director of a financial institution within the last three
years. Under the FBCA, directors must be at least 18 years of age but need not
be shareholders of the corporation unless the articles of incorporation or
bylaws of the corporation so require.
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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 bylaw 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 purchased directors' and officers' liability
insurance.
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 permitted by law.
The FBCA permits 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 in the right of 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 he or she
reasonably believed to be in or not opposed to the best interest of the
corporation and, with respect to a criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In addition, under
the FBCA, Guaranty 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 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.
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The Florida 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 Guaranty'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 Guaranty 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
Guaranty Board; or (iv) by the Guaranty 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. The
Florida 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 the Florida 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 bylaw, 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 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.
The Florida 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 and incurred in such
capacity, whether or not the corporation would have the power to indemnify the
director or officer against such liability.
DIRECTOR LIABILITY
The PBCL provides that the Bylaws 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 Bylaws contain such a provision limiting the liability of
its directors to the fullest extent permitted by law.
Under the Florida Laws, 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.
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INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING FNB PURSUANT
TO THE FOREGOING PROVISIONS OF THE PBCL AND THE FNB CHARTER AND BYLAWS, FNB HAS
BEEN INFORMED THAT IN THE OPINION OF THE COMMISSION SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT AND IS THEREFORE
UNENFORCEABLE.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
Under the PBCL, an action to amend the articles of incorporation
requires the affirmative vote of a majority of the votes cast by all
shareholders entitled to vote on the amendment, 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, a corporation's articles of incorporation or bylaws may
grant the power to adopt, amend or repeal the bylaws of the corporation to the
directors, subject to the power of shareholders to change such action; the board
of directors does not have the authority however, unless provided otherwise by
the articles of incorporation, to adopt or change a bylaw on any subject that is
committed expressly to the shareholders by statute. The FNB Charter and Bylaws
together provide that the FNB Bylaws may be amended by the affirmative vote of
at least 75% of the members 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 the Florida Laws, shareholder approval is not required
for certain non-material amendments.
Under the Florida Laws, a corporation's bylaws 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 bylaws if the articles of
incorporation reserve such power to the shareholders, or the shareholders, in
amending or repealing the bylaws, expressly provide that the board of directors
may not amend or repeal the bylaws or a particular bylaw provision.
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 bylaws of a corporation, the shareholders do not
have to approve a plan of merger approved by the board of directors 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 a share of, or is 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
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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.
Under the FBCA, 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 the
holders of a majority of the shares entitled to vote thereon unless the
corporation's articles of incorporation require a higher vote. Also, the FFIC
provides that certain mergers, consolidations and sales of substantially all of
the assets of a Florida bank must be approved by the Florida Department of
Banking and Finance. The Merger does not require such prior approval by, but
does require notification to, the Florida Department of Banking and Finance.
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
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
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business combinations does not apply under specified circumstances or if the
corporation has opted out of this provision. FNB has not opted out of this
statutory provision.
Under the FBCA, 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,
shall be approved by the affirmative vote of the holders of two-thirds of the
voting shares other than the shares beneficially owned by the Interested Person;
provided, that such approval is not required if (a) the Interested Shareholder
Transaction has been approved by a majority of the disinterested directors; (b)
the corporation has not had more than 300 shareholders of record at any time
during the three years preceding the announcement date; (c) the Interested
Person has been the beneficial owner of at least 80% of the corporation's
outstanding voting shares for at least five years preceding the announcement
date; (d) the Interested Person is the beneficial owner of at least 90% of the
outstanding voting shares of the corporation, exclusive of shares acquired
directly from the corporation in a transaction not approved by a majority of the
disinterested directors; (e) the corporation is an investment company registered
under the Investment Company Act of 1940; or (f) the consideration to be
received by holders of the stock of the corporation meets certain minimum levels
determined by a formula under Section 607.0901(4)(f) of the FBCA (generally, the
highest price paid by the Interested Person for any shares which she or he has
acquired). Guaranty has not opted out of this statutory provision.
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.
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 the Florida Laws, a director is required to discharge his or her
duties in good faith, with the care an ordinarily prudent person in a 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 prospects and interest
of the corporation and its shareholders, and the social, economic, legal, or
other effects of
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any action on the employees, suppliers and 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.
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) generally 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 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 Bylaws
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 shareholder approval, which FNB Common
Stock, among other things and in certain circumstances, may be used to dilute
the stock ownership of
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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 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 bylaws provide
otherwise, all shareholders of the corporation shall be able to exercise
dissenter's rights in accordance with the Florida Laws.
A corporation may, by amendment to its articles of incorporation or
bylaws, 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. Guaranty has not opted out of this statutory
provision.
LEGAL OPINIONS
The legality of the shares of FNB Common Stock to be issued to the
holders of Guaranty Common Shares pursuant to the 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. Certain legal matters relating to
the Merger are being passed upon for FNB by Smith, Gambrell & Russell, LLP,
Atlanta, Georgia, and for Guaranty by the law firm of Smith, Mackinnon, Greeley,
Bowdoin & Edwards, P.A., Orlando, Florida.
The Merger Agreement provides as a condition to each party's obligation
to consummate the Merger that FNB and Guaranty receive the opinion of Smith,
Gambrell & Russell, LLP, Atlanta, Georgia, special counsel to FNB, substantially
to the effect that the Merger will constitute a "reorganization" under Section
368(a) of the Code.
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EXPERTS
The consolidated financial statements of FNB at December 31, 1997 and
1996, and for each of the three years in the period ended December 31, 1997,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon which is based in part on the reports of other auditors,
included in F.N.B.'s Current Report on Form 8-K dated October 29, 1998, and
incorporated herein by reference. As to 1997, their report is based, in part, on
the report of Hacker, Johnson, Cohen & Grieb, PA, independent auditors, who
audited Seminole Bank and Citizens Holding Corporation. As to 1996 and 1995,
their report is based, in part, on the reports of Hill, Barth & King, Inc.,
independent auditors, who audited Southwest Banks, Inc., PricewaterhouseCoopers
LLP, independent auditors, who audited West Coast Bancorp, Inc., and Hacker,
Johnson, Cohen & Grieb, PA, independent auditors, who audited Seminole Bank and
Citizens Holding Corporation.
The financial statements referred to above are incorporated herein by
reference in reliance upon such reports given upon the authority of such firms
as experts in accounting and auditing.
The financial statements of Guaranty as of and for the years ended
December 31, 1997 and 1996 included in this Proxy Statement-Prospectus and in
the Registration Statement have been audited by Bobbitt, Pittenger & Company,
P.A., independent auditors, as set forth in their report thereon included herein
on such financial statements and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
OTHER MATTERS
As of the date of this Proxy Statement-Prospectus, the Guaranty 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 Board of Directors of Guaranty.
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 representation
should not be relied upon as having been authorized by FNB or Guaranty.
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, nor does it constitute
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. Neither the delivery
of this Proxy Statement-Prospectus nor any distribution of securities made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of Guaranty or FNB since the date of this Proxy
Statement-Prospectus or that the information in this Proxy Statement-Prospectus
or in the documents incorporated by reference is correct at any time subsequent
to that date.
This Proxy Statement-Prospectus does not cover any resales of the FNB
Common Stock offered hereby to be received by shareholders of Guaranty deemed to
be "affiliates" of Guaranty 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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WHERE YOU CAN FIND ADDITIONAL INFORMATION
FNB files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information filed by FNB at the SEC's public reference rooms in Washington
D.C., New York, New York, or Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. FNB's SEC
filings are also available to the public from commercial document retrieval
services and at the web site maintained by the SEC at "http://www.sec.gov."
FNB has filed a Registration Statement on Form S-4 to register with the
SEC the FNB Common Stock to be issued to the Guaranty shareholders in the
Merger. This Proxy Statement-Prospectus is a part of that Registration Statement
and constitutes a prospectus of FNB in addition to a proxy statement of Guaranty
for the Special Meeting. As allowed by the SEC rules, this Proxy
Statement-Prospectus does not contain all the information you can find in the
Registration Statement or the exhibits to the Registration Statement.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" certain information in
this Proxy Statement-Prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC by FNB. The information incorporated by reference is deemed to be part
of this Proxy Statement-Prospectus, except for any information superseded by
information in the Proxy Statement-Prospectus. This Proxy Statement-Prospectus
incorporates by reference the documents set forth below that FNB has previously
filed with the SEC. These documents contain important information about FNB and
its finances.
FNB Filings (SEC File No. 0-8144) Period
- --------------------------------- ------
Annual Report on Form 10-K the year ended December 31, 1997
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June 30,
1998 and September 30, 1998
Current Reports on Form 8-K February 8, 1998, April 3, 1998, July 6, 1998 and
October 29, 1998
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 is also incorporated
herein by reference.
We further incorporate by reference additional documents that FNB files
with the SEC between the date of this Proxy Statement-Prospectus and the date of
the Special Meeting of Guaranty shareholders.
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INDEX OF GUARANTY'S FINANCIAL STATEMENTS
Audited Financial Statements
Report of Independent Public Accountants...............................................................................F-2
Statements of Financial Condition, December 31,
1997 and 1996.....................................................................................................F-3
Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995..................................................................................F-4
Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 1997, 1996 and 1995..............................................................F-5
Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995..................................................................................F-6
Notes to Financial Statements..........................................................................................F-8
Unaudited Financial Statements
Statement of Financial Condition, September 30, 1998..................................................................F-20
Statements of Income for the Nine Months Ended
September 30, 1998 and 1997......................................................................................F-21
Statements of Shareholders' Equity for the Nine
Months Ended September 30, 1998..................................................................................F-22
Statements of Cash Flows for the Nine Months
Ended September 30, 1998 and 1997................................................................................F-23
Notes to Financial Statements.........................................................................................F-24
F-1
86
January 13, 1998
BOARD OF DIRECTORS
Guaranty Bank & Trust Company
Venice, Florida
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited the accompanying statements of financial condition of Guaranty
Bank & Trust Company as of December 31, 1997 and 1996, and the related
statements of income, changes in shareholder's equity and cash flows for the
years ended December 31, 1997, 1996 and 1995. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Guaranty Bank & Trust Company
as of December 31, 1997 and 1996 and the results of its operations and its cash
flows for the years ended December 31, 1997, 1996 and 1995 in conformity with
generally accepted accounting principles.
BOBBITT, PITTENGER & COMPANY, P.A.
Certified Public Accountants
F-2
87
GUARANTY BANK & TRUST COMPANY
STATEMENTS OF FINANCIAL CONDITION
December 31,
------------------------------
1997 1996
---- ----
ASSETS
Cash and due from banks $ 5,437,805 $ 4,644,362
Federal funds sold 9,657,981 12,722,643
Investment securities
Held to maturity, at cost 17,150,599 16,958,502
(fair value of $17,186,314 in 1997
and $16,876,906 in 1996)
Available for sale at market 9,699,282 6,930,587
Loans, net of allowance for loan
losses of $1,148,876 in 1997
and $967,687 in 1996 79,735,717 66,768,741
Premises and equipment, net 3,520,818 3,895,378
Accrued interest receivable 863,185 798,370
Other assets 1,818,236 1,268,862
------------ ------------
Total Assets $127,883,623 $113,987,445
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES
Demand deposits $ 17,462,494 $ 15,195,011
Super NOW deposits 20,379,215 16,965,637
Money market deposits 9,405,347 9,787,517
Savings deposits 9,822,164 10,199,414
Time deposits (under $100,000) 41,696,651 37,231,937
Time deposits ($100,000 and over) 18,718,547 15,381,475
------------ ------------
Total Deposits 117,484,418 104,760,991
Accounts payable and accrued expenses 835,397 572,988
------------ ------------
Total Liabilities 118,319,815 105,333,979
------------ ------------
SHAREHOLDER'S EQUITY
Common Stock, $2.00 par value;
2,000,000 shares authorized; 754,694 and
740,008 shares issued and outstanding
in 1997 and 1996, respectively 1,509,388 1,480,016
Additional paid-in capital 5,583,773 5,472,160
Retained earnings 2,421,218 1,664,430
Net unrealized appreciation
on securities available for sale, net of taxes
of $30,295 in 1997 and $22,592 in 1996 49,429 36,860
------------ ------------
Total Shareholder's Equity 9,563,808 8,653,466
------------ ------------
Total Liabilities and Shareholder's Equity $127,883,623 $113,987,445
============ ============
The accompanying notes are an integral part of these financial statements.
F-3
88
GUARANTY BANK & TRUST COMPANY
STATEMENTS OF INCOME
Year Ended December 31,
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
INTEREST INCOME
Loans, including fees $ 6,460,266 $ 5,423,428 $ 5,021,798
Investment securities 1,679,400 1,486,979 1,029,475
Federal funds sold 640,997 432,540 523,425
----------- ----------- -----------
Total Interest Income 8,780,663 7,342,947 6,574,698
----------- ----------- -----------
INTEREST EXPENSE ON DEPOSITS
Super NOW 325,191 317,400 267,470
Money market 278,535 255,146 219,470
Savings 203,491 259,885 283,463
Time 3,155,478 2,386,085 1,872,703
----------- ----------- -----------
Total Interest Expense 3,962,695 3,218,516 2,643,106
----------- ----------- -----------
Net interest income 4,817,968 4,124,431 3,931,592
PROVISION FOR LOAN LOSSES (403,000) (290,000) (242,000)
----------- ----------- -----------
Net interest income after
provision for loan losses 4,414,968 3,834,431 3,689,592
----------- ----------- -----------
NONINTEREST INCOME
Service charges and fees 313,347 278,747 261,067
Trust fees 772,801 708,788 533,789
Other income 414,807 88,291 57,262
----------- ----------- -----------
Total noninterest income 1,500,955 1,075,826 852,118
----------- ----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits 2,483,370 2,058,098 1,607,559
Occupancy expense 579,606 463,124 265,807
Furniture and equipment expense 488,614 367,069 231,091
Other operating expenses 1,246,663 1,199,622 1,037,671
----------- ----------- -----------
Total noninterest expense 4,798,253 4,087,913 3,142,128
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 1,117,670 822,344 1,399,582
PROVISION FOR INCOME TAXES 315,600 314,800 528,628
----------- ----------- -----------
NET INCOME $ 802,070 $ 507,544 $ 870,954
=========== =========== ===========
NET INCOME PER SHARE - basic $ 1.07 $ .69 $ 1.30
=========== =========== ===========
NET INCOME PER SHARE - assuming dilution $ 1.03 $ .66 $ 1.26
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-4
89
GUARANTY BANK & TRUST COMPANY
STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
Net Unrealized
(Depreciation)/
Additional Appreciation on Total
Common Paid-in Retained Securities Shareholder's
Stock Capital Earnings Available for Sale Equity
---------- ---------- ----------- ------------------ -------------
Balance,
January 1, 1995 $1,144,428 $3,416,683 $ 359,932 $ (39,300) $4,881,743
Net income for 1995 870,954 870,954
Net change in unrealized
appreciation on securities
available for sale, net of
taxes of $86,139 145,580 145,580
Sale of 167,794 shares
of common stock at
$14.25 per share 335,588 2,055,477 2,391,065
Cash dividend,
$.05 per share (37,000) (37,000)
---------- ---------- ----------- --------- ----------
Balance,
December 31, 1995 1,480,016 5,472,160 1,193,886 106,280 8,252,342
Net income for 1996 507,544 507,544
Net change in unrealized
appreciation on securities
available for sale, net of
tax benefit of $42,547 (69,420) (69,420)
Cash dividend,
$.05 per share (37,000) (37,000)
---------- ---------- ----------- --------- ----------
Balance,
December 31, 1996 1,480,016 5,472,160 1,664,430 36,860 8,653,466
Net income for 1997 802,070 802,070
Net change in unrealized
appreciation on securities
available for sale, net of
taxes of $7,703 12,569 12,569
Stock options exercised
14,686 shares issued
at $9.60 per share 29,372 111,613 140,985
Cash dividend,
$.06 per share (45,282) (45,282)
---------- ---------- ----------- --------- ----------
Balance,
December 31, 1997 $1,509,388 $5,583,773 $2,421,218 $ 49,429 $9,563,808
========== ========== ========== ========= ==========
The accompanying notes are an integral part of these financial statements.
F-5
90
GUARANTY BANK & TRUST COMPANY
STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------------------
1997 1996 1995
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 8,715,848 $ 7,237,957 $ 6,383,858
Noninterest income 1,500,955 1,075,826 852,118
Interest paid (3,951,035) (3,136,922) (2,531,373)
Salaries and benefits paid (2,483,370) (2,058,098) (1,607,559)
Other expenditures (1,833,318) (1,820,671) (1,593,871)
Taxes paid (509,000) (823,780) (115,136)
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,440,080 474,312 1,388,037
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available for sale securities (6,961,439) (1,996,251) (4,503,521)
Proceeds from sales of available for sale securities 4,070,672 1,800,578
Proceeds from maturities and calls of available
for sale securities 142,344 250,000 3,134,291
Purchases of held to maturity securities (6,926,641) (7,066,413) (9,048,437)
Proceeds from maturities and calls of held to
maturity securities 6,734,544 4,568,944 950,000
Net increase in loans (13,369,976) (12,962,610) (1,536,381)
Net purchases of premises and equipment (87,790) (970,974) (1,676,819)
(Increase) decrease in other real estate owned (132,143) 35,924 (84,084)
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (16,530,429) (16,340,802) (12,764,951)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits 2,267,483 1,416,348 1,180,343
Net increase (decrease) in Super NOW deposits 3,413,578 2,854,450 (1,072,559)
Net (decrease) increase in money market deposits (382,170) 1,630,886 1,252,008
Net decrease in savings deposits (377,250) (516,237) (3,536,980)
Net increase in time deposits 7,801,786 14,697,304 14,995,670
Sale of common stock 140,985 2,391,065
Dividends paid (45,282) (37,000) (37,000)
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,819,130 20,045,751 15,172,547
------------ ------------ ------------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (2,271,219) 4,179,261 3,795,633
CASH AND CASH EQUIVALENTS,
beginning of period 17,367,005 13,187,744 9,392,111
------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
end of period $ 15,095,786 $ 17,367,005 $ 13,187,744
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-6
91
Year Ended December 31,
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
NET INCOME $ 802,070 $ 507,544 $ 870,954
ADJUSTMENTS TO RECONCILE NET
CASH PROVIDED BY OPERATING ACTIVITIES
Provision for loan losses 403,000 290,000 242,000
Depreciation and amortization 462,350 379,231 188,936
Increase in interest receivable (64,815) (104,990) (190,840)
Increase in other assets (417,231) (416,442) (274,519)
(Decrease) increase in accounts payable
and accrued expenses 262,409 (187,654) 553,561
Other (7,703) 6,623 (2,055)
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,440,080 $ 474,312 $ 1,388,037
=========== =========== ===========
F-7
92
GUARANTY BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
Guaranty Bank & Trust Company (the "Bank") is a state chartered bank
incorporated under the laws of the State of Florida. The Bank is a member of the
Federal Reserve System and commenced banking operations on August 19, 1987. On
February 9, 1993, the Bank formally commenced operation of a Trust Department.
Investments in Securities
The Bank's investments in securities are classified in three categories and
accounted for as follows:
- -- Trading Securities. Government bonds held principally for resale in the near
term and mortgage-backed securities held for sale in conjunction with the
Bank's mortgage banking activities are classified as trading securities and
recorded at their fair values. Unrealized gains and losses on trading
securities are included in other income. The Bank presently has no such
securities.
- -- Securities to be Held to Maturity. Bonds, notes and debentures for which the
Bank has the positive intent and ability to hold to maturity are reported at
cost, adjusted for amortization of premiums and accretion of discounts which
are recognized in interest income using the interest method over the period
to maturity.
- -- Securities Available for Sale. Securities available for sale consist of
bonds, notes, debentures, and certain equity securities not classified as
trading securities nor as securities to be held to maturity.
Declines in the fair value of individual held-to-maturity and available-for-sale
securities below their costs that are other than temporary would result in
write-downs of the individual securities to their fair value. The Bank presently
has experienced no such declines.
Unrealized holding gains and losses, net of tax, on securities available for
sale are reported as a net amount in a separate component of shareholder's
equity until realized.
Gains and losses on the sale of securities available for sale are determined
using the specific-identification method.
F-8
93
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses
The financial statements include an allowance for estimated losses on loans
based on management's evaluation of the collectibility of loans outstanding at
December 31, 1997 and 1996. Management has established a policy to discontinue
accruing interest (nonaccrual status) on a loan after it has become 90 days
delinquent as to payment of principal or interest unless the loan is in the
process of collection or is adequately secured. In addition, a loan will be
placed on nonaccrual status before it becomes 90 days delinquent, if management
believes that the borrower's financial condition is such that collection of
interest or principal is doubtful. Loans which are determined to be
uncollectible are charged against the allowance and subsequent recoveries, if
any, are credited to the allowance.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation expense is computed on the straight-line basis over the estimated
useful life of each type of asset. Leasehold improvements are amortized on the
straight-line basis over the shorter of their estimated useful life or the lease
term. Additions to premises and equipment and major improvements are
capitalized. Maintenance and repairs are expensed as incurred.
Other Real Estate Owned
Real estate properties acquired through, or in lieu of, loan foreclosure are to
be sold and are initially recorded at fair value at the date of foreclosure
establishing a new cost basis. After foreclosure, valuations are periodically
performed by management and the real estate is carried at the lower of carrying
amount or fair value less cost to sell. Gains or losses on the sale or periodic
revaluation of real estate acquired are charged or credited to noninterest
income or expense.
Income Recognition
Interest income on loans is accrued on the principal amounts outstanding.
Nonrefundable fees associated with the origination of loans are deferred and
recognized over the life of the loan using a method which approximates the
interest method.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates and assumptions.
F-9
94
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates (Continued)
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans and the
valuation of foreclosed real estate. In connection with the determination of the
estimated losses on loans and foreclosed real estate, management obtains
independent appraisals for significant properties.
While management uses available information to recognize losses on loans and
foreclosed real estate, further reductions in the carrying amounts of loans and
foreclosed assets may be necessary based on changes in local economic
conditions. In addition, regulatory agencies, as an integral part of their
examination process, periodically review the estimated losses on loans and
foreclosed real estate. Such agencies may require the Bank to recognize
additional losses based on their judgments about information available to them
at the time of their examination. Because of these factors, it is possible that
the estimated losses on loans and foreclosed real estate may change materially
in the near term. However, the amount of the change cannot be estimated.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable for the
current year (after exclusion of non-taxable income such as interest on state
and municipal securities) and deferred taxes on temporary differences between
the amount of taxable income and pretax financial income and between the tax
bases of assets and liabilities and their reported amounts in the financial
statements. Deferred tax assets and liabilities are included in the financial
statements at currently enacted income tax rates applicable to the period in
which the deferred tax assets and liabilities are expected to be realized or
settled as prescribed in FASB Statement No. 109, Accounting for Income Taxes. As
changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through the provision for income taxes.
Net Income per Share of Common Stock
Net income per share of common stock (earnings per share) is computed based upon
the weighted average number of shares of common stock and common stock
equivalents outstanding during the year, after retroactive adjustment for any
stock dividends or splits. In 1997, the Financial Accounting Standard Board
issued Statement No. 128, Earnings per Share. Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where appropriate, restated to conform to
the Statement 128 requirements.
Trust Fees
Trust fees are recorded on the accrual basis.
F-10
95
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial Instruments
The Bank accounts for off balance sheet financial instruments which they have
entered into in the ordinary course of business when they are funded or related
fees are incurred or received. These instruments consist of commitments to
extend credit, commercial letters of credit and standby letters of credit.
Fair Value of Financial Instruments
The following methods and assumptions were used by the Bank in estimating fair
values of financial instruments as disclosed herein:
Cash and cash equivalents - The carrying amounts of cash and short-term
instruments approximate their fair value.
Investment securities - Fair values are based on quoted market prices.
Loans - For variable rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying values.
Fair value for certain mortgage loans and other consumer loans are based on
quoted market prices of similar loans. Fair value for commercial real estate
and commercial loans are estimated using discounted cash flow analysis,
using interest rates currently being offered for loans with similar terms.
Deposits - The fair value disclosed for demand deposits are, by definition,
equal to the amount payable on demand at the reporting date (that is, their
carrying amounts). The carrying amounts of variable rates, fixed-term money
market accounts and certificates of deposit approximate their fair values at
the reporting date. Fair values for fixed rate certificates of deposit are
estimated using a discounted cash flow calculation that applies interest
rates currently being offered on certificates to a schedule of aggregated
expected monthly maturities on time deposits.
Accrued interest - The carrying amounts of accrued interest approximate
their fair values.
Off-balance sheet instruments - The disclosed amounts for unfunded
commitments for loans and letters of credit approximate their fair value.
Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents are defined as
those amounts included in the Statement of Financial Condition caption "Cash and
Due From Banks" and "Federal Funds Sold".
Reclassifications
Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform with the 1997 financial statement presentation. Such
reclassifications had no effect on net income as previously reported.
F-11
96
NOTE B - INVESTMENT SECURITIES
The carrying amounts of investment securities as shown in the Statements of
Financial Condition of the Bank and their approximate fair values at December 31
were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
SECURITIES TO BE HELD TO MATURITY
December 31, 1997:
U.S. Government and
agency securities $14,251,301 $ 50,631 $ 30,546 $14,271,386
State and municipal securities 1,399,298 15,630 1,414,928
Time deposits 1,500,000 1,500,000
----------- ----------- ----------- -----------
$17,150,599 $ 66,261 $ 30,546 $17,186,314
=========== =========== =========== ===========
December 31, 1996:
U.S. Government and
agency securities $16,518,956 $ 24,680 $ 118,372 $16,425,264
State and municipal securities 439,546 12,096 451,642
----------- ----------- ----------- -----------
$16,958,502 $ 36,776 $ 118,372 $16,876,906
=========== =========== =========== ===========
SECURITIES AVAILABLE FOR SALE
December 31, 1997:
U.S. Government and
agency securities $ 8,970,258 $ 80,997 $ 1,273 $ 9,049,982
Federal reserve bank stock 212,800 212,800
Federal home loan bank stock 421,500 421,500
Other securities 15,000 15,000
----------- ----------- ----------- -----------
$ 9,619,558 $ 80,997 $ 1,273 $ 9,699,282
=========== =========== =========== ===========
December 31, 1996:
U.S. Treasury Securities $ 6,647,535 $ 59,791 $ 339 $ 6,706,987
Federal reserve bank stock 208,600 208,600
Other securities 15,000 15,000
----------- ----------- ----------- -----------
$ 6,871,135 $ 59,791 $ 339 $ 6,930,587
=========== =========== =========== ===========
F-12
97
NOTE B - INVESTMENT SECURITIES (CONTINUED)
Assets, principally securities, carried at approximately $2,909,039 at December
31,1997 and $2,638,000 at December 31, 1996 were pledged to secure public
deposits and for other purposes as required by statutes or agreements.
U.S. Treasury securities, held available for sale were sold with a resulting
realized net gain of $35,309 in 1997, $1,917 in 1996 and $0 in 1995.
Expected maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or prepayment
penalties.
The scheduled maturities of securities to be held to maturity and securities
available for sale at December 31, 1997 were as follows:
Securities Securities
Held to Maturity Available for Sale
-------------------------- --------------------------
Amortized Fair Fair
Cost Value Cost Value
----------- ----------- ----------- -----------
Common stock $ $ $ 649,300 $ 649,300
Due in one year or less 2,399,861 2,399,326
Due from one year to five years 6,260,148 6,285,647 8,970,258 9,049,982
Due from five years to ten years 5,918,701 5,928,678
Due after ten years 2,571,889 2,572,663
----------- ----------- ----------- -----------
$17,150,599 $17,186,314 $ 9,619,558 $ 9,699,282
=========== =========== =========== ===========
NOTE C - LOANS AND ALLOWANCE FOR LOAN LOSSES
Major classifications of loans are as follows:
December 31,
-------------------------------------
1997 1996
----------- -----------
Mortgage $61,749,518 $47,912,905
Commercial 8,852,335 8,580,411
Consumer 6,535,456 6,982,465
Construction 3,747,284 4,260,647
----------- -----------
80,884,593 67,736,428
Less - allowance for loan losses (1,148,876) (967,687)
----------- -----------
$79,735,717 $66,768,741
=========== ===========
F-13
98
NOTE C - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Mortgage loans include primarily term loans secured by real estate and payable
in periodic installments. Commercial loans include those loans to businesses and
individuals generally for the purposes of providing working capital and/or
financing the acquisition of assets and are payable on demand or within a
specified period of time. Consumer loans are installment loans made to both
businesses and individuals. Construction loans include loans to finance
construction of improvements to real property and become payable upon completion
of construction unless permanently financed.
An analysis of the allowance for loan losses follows:
December 31,
---------------------------------
1997 1996
---------- ----------
Beginning balance $ 967,687 $1,098,218
Provision for loan losses 403,000 290,000
Charge-offs (246,318) (456,257)
Recoveries 24,507 35,726
---------- ----------
Ending balance $1,148,876 $ 967,687
========== ===========
Impairment of loans having carrying values of approximately $25,000 in 1997 and
$84,000 in 1996 has been recognized in conformity with FASB Statement No. 114,
Accounting by Creditors for Impairment of a Loan. The total allowance for credit
losses related to those loans was $3,800 in 1997 and $12,600 in 1996. The Bank
acquires other real estate owned through foreclosures or in settlement of debt.
Total other real estate owned was $180,303 in 1997 and $48,160 in 1996.
NOTE D - CONCENTRATION OF CREDIT RISK
A credit risk concentration results when a Bank has a significant credit
exposure to an individual or a group engaged in similar activities or having
similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or other
conditions.
Most of the Bank's business activity is with customers located within the
Sarasota County area. The loan portfolio is diversified among individuals and
types of industries. Loans are expected to be repaid from cash flows or proceeds
from the sale of selected assets from borrowers. The amount of collateral
obtained upon extension of credit is based upon the Bank's credit evaluation of
the customer. Collateral primarily includes residential homes, income producing
commercial properties, accounts receivable, inventory, property and equipment.
NOTE E - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business to meet the financing needs of customers, the
Bank is party to financial instruments with off-balance sheet risk. These
instruments are comprised of commitments to extend credit and involve, in
varying degrees, elements of credit and interest rate risk in excess of the
amounts recognized in the financial statements.
F-14
99
NOTE E - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (CONTINUED)
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit is
represented by the contract amount of those instruments. The Bank uses the same
credit policies in making commitments as they do for on-balance sheet
instruments. The Bank may or may not require collateral or other security to
support financial instruments with credit risk.
Unfunded commitments, which generally have fixed expiration dates or termination
clauses, are legally binding agreements to lend to a customer as long as there
are no violations of any conditions established in the contract. Since many
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future liquidity requirements.
Fixed rate commitments to extend credit are subject to market risk should
interest rates rise above contracted rates during the commitment period. Total
unfunded commitments for loans and letters of credit were approximately
$11,051,000 at December 31, 1997.
The estimated fair values of the Bank's financial instruments were as follows
at:
December 31, 1997 December 31, 1996
---------------------------- ----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------ ------------
Financial assets:
Cash and due from banks,
and federal funds sold $ 15,095,786 $ 15,095,786 $ 17,367,005 $ 17,367,005
Investments 26,770,157 26,885,596 23,829,637 23,807,493
Loans receivable 79,735,717 80,481,770 66,768,741 67,964,999
Accrued interest receivable 863,185 863,185 798,370 798,370
Financial liabilities:
Deposit liabilities 117,484,418 117,574,854 104,760,991 104,872,076
NOTE F - PREMISES AND EQUIPMENT
Major classifications of premises and equipment are as follows:
Estimated December 31,
Useful life 1997 1996
----------- ----------- -----------
Land $ 419,232 $ 419,232
Land improvements 7 years 110,102 102,383
Building 15-31 years 673,922
658,427
Leasehold improvements 15 years 1,814,310 1,809,027
Furniture and equipment 3-10 years 2,039,558 2,139,018
Construction in progress 21,619
----------- -----------
5,057,124 5,149,706
Less - accumulated depreciation
and amortization (1,536,306) (1,254,328)
----------- -----------
$ 3,520,818 $ 3,895,378
=========== ===========
F-15
100
NOTE G - DEPOSITS
The aggregate amount of short-term jumbo certificates of deposit each with a
maturity of one year or less and a minimum denomination of $100,000 was
approximately $14,480,000 and $10,305,000 at December 31, 1997 and 1996,
respectively.
At December 31, 1997 the scheduled maturities of certificates of deposit are as
follows:
1998 $41,106,460
1999 and 2000 15,845,060
2001 and thereafter 3,463,678
-----------
$60,415,198
===========
NOTE H - TAXES ON INCOME
The 1997 provision for income taxes is less than computed by applying federal
statutory rates principally due to an approximate $240,000 gain on executive
life insurance benefits. The 1996 provision for income taxes is more than that
computed by applying federal statutory rates principally due to approximately
$20,000 of charges for an under accrual of prior year taxes.
The tax effects of temporary differences that give rise to significant
components of the Bank's deferred tax assets and liabilities are as follows, as
of December 31:
1997 1996 1995
--------- --------- ---------
Deferred tax assets
Net unrealized appreciation
on securities available for sale $ (30,295) $ (22,592) $ (65,139)
Charitable contributions 27,000 27,000 27,000
Loan loss provision 312,000 252,000 327,000
Deferred compensation 146,000 36,000 --
--------- --------- ---------
454,705 292,408 288,861
Valuation allowance -- -- --
--------- --------- ---------
Total deferred tax asset 454,705 292,408 288,861
--------- --------- ---------
Deferred tax liabilities
Depreciation 139,000 94,000 50,000
Change in method of calculating income
tax - cash to accrual 166,000 181,000 203,000
--------- --------- ---------
Total deferred tax liabilities 305,000 275,000 253,000
--------- --------- ---------
Deferred tax asset - net $ 149,705 $ 17,408 $ 35,861
========= ========= =========
For 1997, 1996, and 1995, the current and deferred income tax expense was
approximately $456,000, $254,000 and $570,000; and $(140,000), $61,000 and
$(41,000), respectively, netted to approximately $316,000, $315,000 and $529,000
income tax provision for the years. Other components of deferred income taxes
were related to depreciation, the allowance for loan losses and the timing of
receipts and deductions for tax purposes.
F-16
101
NOTE I - NET INCOME PER SHARE
The following sets forth the computation of basic and diluted earnings per
share.
Numerator 1997 1996 1995
-------- -------- --------
Net Income $802,070 $507,544 $870,954
-------- -------- --------
Denominator
Denominator for basic earnings
per share - weighted average shares 748,785 740,008 672,076
Effect of dilutive securities:
Stock options 28,261 32,825 20,599
-------- -------- --------
Denominator for dilutive earnings
per share - adjusted weighted average
shares and assumed conversion 777,046 772,833 692,675
======== ======== ========
Basic Net Income Per Share $ 1.07 $ .69 $ 1.30
======== ======== ========
Diluted Net Income Per Share $ 1.03 $ .66 $ 1.26
======== ======== ========
NOTE J - STOCK OPTION PLAN
In April 1989, the Bank established a stock option plan for its directors and a
stock option plan for its officers and employees (the "Plans"). The Board of
Directors may at any time amend or terminate the Plans.
Each of the Plans authorizes the granting of 37,500 shares of common stock
amended to account for the effect of the 25% stock split in September, 1994. The
Plans provide that the option price must be the greater of $8.00 or the fair
market value of the common stock on the date of grant. Options granted to Bank
directors may be exercised at any time during 10 years from the date of grant.
For options granted to officers and employees, 25% of the options may be
exercised commencing one year after the date of grant, and an additional 25% in
each of the following three years. After four years, employees' and officers'
options may be exercised in full up to 10 years from the date of grant.
On June 1, 1992, the Board granted options to purchase 37,500 shares of common
stock to members of the Board of Directors and 18,750 shares to an officer of
the Bank at $9.60 per share. During 1993, additional options were granted to
officers and employees of the Bank to purchase 6,875 shares of common stock at
$9.60 per share as amended to account for the effect of the 25% stock split in
September, 1994. No options were granted and no options were exercised during
1996 and 1995. In 1997, options were exercised for 14,686 shares of stock at
$9.60 per share by directors of the Bank and options for 400 shares to an
officer of the Bank were canceled. During 1997, additional options were granted
to officers and employees of the Bank to purchase 11,725 shares of common stock
at $20.00 per share.
F-17
102
NOTE J - STOCK OPTION PLAN (CONTINUED)
The Bank adopted SFAS No. 123 "Accounting for Stock-Based Compensation,"
effective January 1, 1997. This statement encourages companies to adopt a fair
value based method of accounting for compensation costs of employee stock
compensation plans. As permitted by SFAS No. 123, the Bank will continue to
apply its current accounting policy using the intrinsic value method of
accounting prescribed by Accounting Principles Board Opinion No. 25 with respect
to measuring stock-based compensation. The adoption of SFAS No. 123, therefore,
had no effect on the Bank's financial position or results of operations for
1997. If the Bank had used the fair value compensation measurement method, the
cost of stock compensation for the year ended December 31, 1997 would have been
$105,877. The resulting pro forma net income and earnings per share for the year
ended December 31, 1997 would have been $733,249 and $.98, respectively. This
computation was made assuming exercise of all of the options at the end of the
10 year option period, a present value discount rate of 6% and a dividend yield
of .30%.
NOTE K - RETIREMENT PLAN
The Bank has a defined contribution plan under Internal Revenue Code Section
401(k) which covers substantially all employees. The Plan provides for the Bank
to provide certain percentage matching contributions for employee contributions
(based on a percentage of compensation) and a discretionary contribution to the
Plan. Employer contributions to the Plan for the years ended December 31, 1997,
1996, and 1995 were approximately $36,000, $29,000, and $24,000 respectively.
NOTE L - EXECUTIVE BENEFIT PLAN
The Bank has a Death Benefit Only Salary Continuation Plan for several key
executives. Upon death, prior to retirement age, the Bank will pay an agreed
upon monthly amount to the named beneficiary for a period of 15 years. The Bank
is presently funding the plan through insurance policies, and has recorded an
asset for the cash surrender value of the funding of these policies. This plan
was amended in 1995 to provide for post-retirement salary continuation. The Bank
will pay to each key executive, upon retirement at age 65, $2,083 monthly for
fifteen years. Should an employee terminate employment before retirement, the
Bank will pay a lesser benefit as scheduled in the agreements. The Bank is
presently accruing a liability for such future costs.
NOTE M - RELATED PARTY TRANSACTIONS
Several of the Bank's directors, executive officers and related parties obtained
loans and lines of credit from the Bank. These loans and lines of credit were
granted in accordance with normal lending policies of the Bank. At December 31,
1997 and 1996, the total amount of these borrowings outstanding was
approximately $4,912,000 and $3,466,000, respectively. During 1997 new loans
were made aggregating $2,035,000 while payments on loans were $589,000. In
addition, deposits from these related parties totaling approximately $1,846,000
and $2,582,000 were on hand at December 31, 1997 and 1996, respectively.
The Bank leases the land for the North Port banking facility from a director of
the Bank under a ten year lease beginning September 1, 1991. The Bank has the
option to renew the lease upon expiration of the original term for four
additional five year periods. Monthly rental payments are currently $2,870 plus
sales tax. The payment amount may be increased based on a computation utilizing
the Consumer Price Index. Total rental expense for the North Port banking
facility was $39,000, $33,000, and $33,000 for the years ended December, 1997,
1996, and 1995, respectively.
F-18
103
NOTE N - REGULATORY RESTRICTIONS
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory--and possibly additional discretionary--actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
The Bank is required to maintain minimum amounts of capital to total "risk
weighted" assets, as defined by banking regulators. At December 31, 1997, the
Bank is required to have minimum tier 1 and total capital ratios of 4% and 8%,
respectively, to be adequately capitalized. As of June 30, 1997, the most recent
notification from the Federal Reserve Bank categorized the Bank as well
capitalized. There are no conditions or events since that notification that
management believes have changed the institution's category. The Bank's actual
ratios at December 31, 1997 were 13.13% and 14.38%, respectively.
The State of Florida banking regulations limit the amount of dividends that may
be paid without prior approval of the Bank's regulatory agency. The Bank cannot
pay dividends in any one year that exceed the sum of net income for that year
plus net income after dividends for the two preceding years.
The Bank maintains a deposit balance with the Federal Reserve Bank to pay for
treasury tax and loan services and certain other transactions. These deposits at
December 31, 1997 and 1996 aggregated approximately $78,000 and $220,000,
respectively.
NOTE O - COMMITMENTS
Certain Bank facilities are leased under various operating leases. Rental
expense was $265,713 and $178,746 in 1997 and 1996, respectively. Future minimum
rental commitments under noncancelable leases are:
1998 $191,564
1999 169,835
2000 135,137
2001 27,638
--------
$524,174
========
F-19
104
GUARANTY BANK & TRUST COMPANY
BALANCE SHEETS
(Dollars in thousands, except par values)
ASSETS September 30 December 31
1998 1997
------------ ------------
(unaudited)
Cash and due from banks $ 4,952 $ 5,438
Federal funds sold 14,675 9,658
Investment securities:
Held to maturity, at cost 24,478 17,151
Available for sale, at market 9,185 9,699
Loans, net of allowance for loan losses of $1,155 and
$1,149 88,612 79,736
Premises and equipment, net 3,225 3,521
Interest receivable 1,063 863
Other assets 1,493 1,818
------------ ------------
Total Assets $ 147,683 $ 127,884
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits $ 19,560 $ 17,462
Super NOW deposits 19,650 20,380
Money market deposits 15,937 9,405
Savings deposits 10,730 9,822
Time deposits (under $100,000) 52,823 41,697
Time deposits ($100,000 and over) 17,210 18,719
------------ ------------
Total Deposits 135,910 117,485
Accounts payable and accrued expenses 1,125 835
------------ ------------
Total Liabilities 137,035 118,320
------------ ------------
Common stock, $2.00 par value;
2,000,000 shares authorized;
756,118 and 754,694 shares issued and
outstanding in 1998 and 1997 1,512 1,509
Additional paid-in capital 5,597 5,584
Retained earnings 3,453 2,421
Other comprehensive income 86 50
------------ ------------
Total Shareholders' Equity 10,648 9,564
------------ ------------
Total Liabilities & Shareholders' Equity $ 147,683 $ 127,884
============ ============
F-20
105
GUARANTY BANK & TRUST COMPANY
STATEMENT OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- ------------------------------
1998 1997 1998 1997
Interest and fee income from earning assets
Loans, including fees $ 1,886 $ 1,683 $ 5,486 $ 4,732
Federal funds sold 199 140 556 481
Investment securities 484 435 1,345 1,264
------- ------- ------- -------
Total interest income 2,569 2,258 7,387 6,477
------- ------- ------- -------
Interest expense on deposits
Super NOW 95 81 285 237
Money market 119 71 279 209
Savings 55 50 156 155
Time 962 820 2,688 2,322
------- ------- ------- -------
Total interest expense 1,231 1,022 3,408 2,923
------- ------- ------- -------
Net interest income 1,338 1,236 3,979 3,554
Provision for loan losses (18) (41) (75) (193)
------- ------- ------- -------
Net interest income after provision for loan 1,320 1,195 3,904 3,361
------- ------- ------- -------
Service charges on deposit accounts 124 79 356 220
Trust fees 219 204 666 581
Gains on securities sales -- -- -- 31
Other income 87 30 236 80
------- ------- ------- -------
Total non-interest income 430 313 1,258 912
------- ------- ------- -------
Non-interest expense
Personal expense 589 575 1,796 1,710
Occupancy expense 159 150 456 441
Furniture and equipment expense 126 131 362 373
Other operating expenses 341 325 1,027 932
------- ------- ------- -------
Total non-interest expense 1,215 1,181 3,641 3,456
------- ------- ------- -------
Income before provision for income taxes 535 327 1,521 817
Provision for income taxes (168) (124) (489) (304)
------- ------- ------- -------
Net income 367 203 1,032 513
------- ------- ------- -------
Other comprehensive income, net of tax 35 36 36 5
------- ------- ------- -------
Comprehensive net income $ 402 $ 239 $ 1,068 $ 518
======= ======= ======= =======
Net income per share-basic $ .49 $ .26 $ 1.37 $ .68
======= ======= ======= =======
Comprehensive net income per share-basic $ .53 $ .32 $ 1.41 $ .69
======= ======= ======= =======
Net income per share-diluted $ .49 $ .27 $ 1.35 $ .67
======= ======= ======= =======
Comprehensive net income per share-diluted $ .53 $ .33 $ 1.39 $ .68
======= ======= ======= =======
F-21
106
GUARANTY BANK & TRUST COMPANY
STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months ended September 30, 1998
(Unaudited)
(Dollars in thousands)
Additional Other Total
Number of Common Paid-in Retained Comprehensive Stockholder's
Shares Stock Capital Earnings Income Equity
------ ----- ------- -------- ------ ------
Balance, December 31,
1997 754,694 $1,509 $5,584 $2,421 $50 $ 9,564
Net earnings for the
nine
months ended -- -- -- 1,032 -- 1,032
September 30, 1998
(unaudited)
Stock options of 1,249
shares of stock
exercised at $9.60 per 1,424 3 13 -- -- 16
share and stock options
of 175 shares of stock
exercised at $20 per
share
Other comprehensive
income for the nine
months ended
September 30, 1998 -- -- -- -- 36 36
(unaudited)
------- ------ ------ ------ --- -------
Balance September 30,
1998 756,118 $1,512 $5,597 $3,453 $86 $10,648
======= ====== ====== ====== === =======
F-22
107
GUARANTY BANK & TRUST COMPANY
STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months ended September 30
------------------------------
1998 1997
---- ----
Cash flows from operating activities:
Interest received $ 7,187 $ 6,393
Non-interest income 1,258 912
Interest paid (3,381) (2,915)
Salaries and benefits paid (1,767) (1,642)
Other expenditure (1,454) (1,699)
-------- --------
Net cash provided by operating activities 1,843 1,049
-------- --------
Cash flows from investing activities:
Purchases of available for sale securities (427) (6,961)
Proceeds from sales of available for sale securities ___ 3,047
Proceeds from maturities and calls of available for sale securities 1,000 142
Purchases of held to maturity securities (17,951) (2,775)
Proceeds from maturities and calls of held to maturity securities 10,624 3,481
Net increase in loans (8,951) (10,059)
Net purchases of premises and equipment (48) (46)
-------- --------
Net cash used in investing activities (15,753) (13,171)
-------- --------
Cash flows from financing activities:
Increase (decrease) in demand deposits 2,098 544
Increase (decrease) in Super NOW deposits (730) 638
Increase (decrease) in money market deposits 6,532 (191)
Increase (decrease) in savings deposits 908 (443)
Increase (decrease) in time deposits 9,617 8,613
Sale of common stock 16 141
Dividends paid -0- -0-
-------- --------
Net cash provided by financing activities 18,441 9,302
-------- --------
Net increase (decrease) in cash and cash equivalents 4,531 (2,820)
Cash and cash equivalents, beginning of period 15,096 17,367
-------- --------
Cash and equivalents, end of period $ 19,627 $ 14,547
======== ========
Reconciliation of net income to net cash provided by operating activities
Comprehensive net income $ 1,068 $ 518
Adjustments to reconcile net cash provided by operating activities:
Other comprehensive income (36) (5)
Provision for loan losses 75 193
Depreciation and amortization 344 348
(Increase) in interest receivable (200) (84)
(Increase) decrease in other assets 325 (165)
Increase in accounts payable and accrued expenses 289 213
Other (22) 31
-------- --------
Net cash provided by operating activities $ 1,843 $ 1,049
======== ========
F-23
108
GUARANTY BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
Organization and Operations
Guaranty Bank & Trust Company (the "Bank") is a state chartered bank
incorporated under the laws of the State of Florida. The Bank is a member of the
Federal Reserve System and commenced banking operations on August 19, 1987. On
February 9, 1993, the Bank formally commenced the operation of a Trust
Department.
On August 21, 1998, the Bank announced that it would be affiliating with
F.N.B. Corporation, a bank holding company headquartered in Hermitage,
Pennsylvania. The transaction is scheduled to close during the first quarter of
1999. F.N.B. Corporation had total assets of $3.1 billion at September 30, 1998,
and is the parent of nine community banks and a consumer financial subsidiary.
Basis of Presentation
The financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The preparation of financial statements in conforming with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ from those estimates.
Investments in Securities
The Bank's investments in securities are classified in three categories and
accounted for as follows:
Securities to be held to Maturity. Bonds, notes and debentures for which the
Bank has the positive intent and ability to hold to maturity are reported at
cost, adjusted for amortization of premiums and accretion of discounts which
are recognized in interest income using the interest method of over the
period of maturity.
Securities available for Sale. Securities available for sale consist of
bonds, notes, debentures, not classified as held to maturity and marketable
equity securities. Securities available for sale are carried at fair value
with net unrealized securities gains (losses) reported as a separate
component of shareholders' equity, net of tax.
Trading Securities. The Bank presently has no such securities and no
intention of establishing a trading securities classification.
Declines in the fair value of individual held-to-maturity and available-for-sale
securities below their costs that are other than temporary would result in
write-downs of the individual securities to their fair value.
The Bank presently has experienced no such declines.
Gains and losses on the sale of securities available for sale are determined
using the specific-identification method.
F-24
109
GUARANTY BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowance for Loan Losses
The financial statements include an allowance for estimated losses on loans
based on management's evaluation of the collectibility of loans outstanding.
Management has established a policy to discontinue accruing interest after a
loan has become 90 days delinquent as to payment of principal or interest,
unless the loan is in the process of collection or is adequately secured. In
addition, a loan will be placed on non-accrual status before it becomes 90 days
delinquent, if management believes that the borrower's financial condition is
such that collection of interest or principal is doubtful. Loans which are
determined to be uncollectible are charged against the allowance and subsequent
recoveries, if any, are credited to the allowance.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation expense is computed on the straight-line basis over the estimated
useful life of each type of asset. Leasehold improvements are amortized on the
straight-line basis over the shorter of their estimated useful life or the lease
term. Additions to premises and equipment and major improvements are capitalized
while maintenance and repairs are expensed as incurred.
Other Real Estate Owned
Real estate properties acquired through, or in lieu of, loan foreclosure are to
be sold and are initially recorded at the lower of fair value less cost to sell
or the carrying amount of the indebtedness. After foreclosure, valuations are
periodically performed by management and write-downs if required are recognized
in other expenses. Gains or losses on the sale of real estate acquired are
charged or credited to non-interest income.
Income Recognition
Interest income on loans is accrued on the principal amounts outstanding.
Non-refundable fees associated with the origination of loans are deferred and
recognized over the life of the loan using a method which approximates the
interest method.
F-25
110
GUARANTY BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Provisions for income taxes are based on taxes payable or refundable for the
current year (after exclusion of non-taxable income such as interest on state
and municipal securities) and deferred taxes on temporary differences between
the amount of taxable income and pretax financial income and between the tax
bases of assets and liabilities and their reported amounts in the financial
statements. Deferred tax assets and liabilities are included in the financial
statements at currently enacted income tax rates applicable to the period in
which the deferred tax assets and liabilities are expected to be realized or
settled as prescribed in FASB Statement No. 109, Accounting for Income Taxes. As
changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through the provision for income taxes.
Net Income per Share of Common Stock
Basic earnings per share is calculated by dividing net income by the weighted
average number of shares of outstanding common stock. Diluted earnings per share
is calculated by dividing net income by the weighted average number of shares
outstanding and the exercise of stock options. Net income per share has been
adjusted for any common stock dividends.
Trust Fees
Trust fees are recorded on the accrual basis.
Financial Instruments
The Bank accounts for off balance sheet financial instruments which they have
entered into in the ordinary course of business when they are funded or when
related fees are incurred or received. These instruments consist of commitments
to extend credit, commercial letters of credit and standby letters of credit.
Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks and Federal Funds sold, which are primarily
overnight investments.
F-26
111
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
F.N.B. CORPORATION
AND
GUARANTY BANK & TRUST COMPANY
DATED AS OF AUGUST 20, 1998
112
TABLE OF CONTENTS
PAGE
PREAMBLE .........................................................................................................1
ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER................................................................1
1.1 Merger..........................................................................................1
1.2 Time and Place of Closing.......................................................................1
1.3 Effective Time..................................................................................2
ARTICLE 2 TERMS OF MERGER.................................................................................2
2.1 Articles of Incorporation.......................................................................2
2.2 Bylaws..........................................................................................2
2.3 Directors. ....................................................................................2
2.4 Officers........................................................................................2
ARTICLE 3 MANNER OF CONVERTING SHARES.....................................................................2
3.1 Conversion of Shares............................................................................2
3.2 Anti-Dilution Provisions........................................................................3
3.3 Shares Held by Guaranty or FNB..................................................................4
3.4 Treatment of Options and Warrants...............................................................4
3.5 Fractional Shares...............................................................................4
ARTICLE 4 EXCHANGE OF SHARES..............................................................................4
4.1 Exchange Procedures.............................................................................4
4.2 Rights of Former Guaranty Shareholders..........................................................5
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF GUARANTY......................................................5
5.1 Organization, Standing, and Power...............................................................5
5.2 Authority; No Breach by Agreement...............................................................6
5.3 Capital Stock...................................................................................7
5.4 No Guaranty Subsidiaries........................................................................7
5.5 Regulatory Filings; Financial Statements........................................................7
5.6 Notes and Obligations. .........................................................................7
5.7 Absence of Certain Changes or Events............................................................8
5.8 Tax Matters.....................................................................................8
5.9 Assets..........................................................................................9
5.10 Environmental Matters..........................................................................10
5.11 Compliance With Laws...........................................................................10
5.12 Labor Relations................................................................................11
5.13 Employee Benefit Plans.........................................................................11
5.14 Material Contracts.............................................................................12
5.15 Legal Proceedings..............................................................................12
5.16 Reports........................................................................................12
5.17 Statements True and Correct....................................................................12
5.18 Accounting, Tax and Regulatory Matters.........................................................13
5.19 Articles of Incorporation Provisions...........................................................13
5.20 Derivatives Contracts..........................................................................13
i
113
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF FNB AND INTERIM..............................................13
6.1 Organization, Standing, and Power..............................................................13
6.2 Authority; No Breach By Agreement..............................................................14
6.3 Capital Stock..................................................................................15
6.4 FNB Subsidiaries...............................................................................15
6.5 SEC Filings; Financial Statements..............................................................15
6.6 Absence of Certain Changes or Events...........................................................16
6.7 Tax Matters....................................................................................16
6.8 Compliance With Laws...........................................................................17
6.9 Assets.........................................................................................17
6.10 Legal Proceedings..............................................................................18
6.11 Reports........................................................................................18
6.12 Statements True and Correct....................................................................18
6.13 Accounting, Tax and Regulatory Matters.........................................................18
6.14 Environmental Matters..........................................................................19
6.15 Derivatives Contracts..........................................................................19
6.16 Outstanding Guaranty Common Stock..............................................................19
6.17 Material Contracts.............................................................................19
6.18 Year 2000 Compliance...........................................................................20
ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION.......................................................20
7.1 Affirmative Covenants of Guaranty..............................................................20
7.2 Negative Covenants of Guaranty.................................................................20
7.3 Covenants of FNB...............................................................................22
7.4 Adverse Changes In Condition...................................................................23
7.5 Reports........................................................................................23
ARTICLE 8 ADDITIONAL AGREEMENTS..........................................................................23
8.1 Registration Statement; Proxy Statement; Shareholder Approval..................................23
8.2 Applications...................................................................................23
8.3 Filings With State Offices.....................................................................24
8.4 Agreement As to Efforts to Consummate..........................................................24
8.5 Access to Information; Confidentiality.........................................................24
8.6 Dividend Payment...............................................................................25
8.7 Current Information............................................................................25
8.8 Other Actions..................................................................................25
8.9 Press Releases.................................................................................25
8.10 No Solicitation................................................................................26
8.11 Accounting and Tax Treatment...................................................................26
8.12 Articles of Incorporation Provisions...........................................................26
8.13 Agreement of Affiliates........................................................................26
8.14 Employee Benefits, Contracts and Severance.....................................................27
8.15 Employment Contracts of Certain Officers.......................................................27
8.16 Indemnification................................................................................27
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE..............................................29
9.1 Conditions to Obligations of Each Party........................................................29
9.2 Conditions to Obligations of FNB...............................................................30
9.3 Conditions to Obligations of Guaranty..........................................................31
ii
114
ARTICLE 10 TERMINATION....................................................................................32
10.1 Termination...........................................................................32
10.2 Effect of Termination.................................................................33
10.3 Non-Survival of Representations and Certain Covenants.................................35
ARTICLE 11 MISCELLANEOUS..................................................................................35
11.1 Definitions...........................................................................35
11.2 Expenses..............................................................................42
11.3 Brokers and Finders...................................................................42
11.4 Entire Agreement......................................................................42
11.5 Amendments............................................................................42
11.6 Obligations of FNB....................................................................42
11.7 Waivers...............................................................................42
11.8 Assignment............................................................................43
11.9 Notices...............................................................................43
11.10 Governing Law.........................................................................44
11.11 Counterparts..........................................................................44
11.12 Captions..............................................................................44
11.13 Enforcement of Agreement..............................................................44
11.14 Severability..........................................................................44
LIST OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ ------------
1. Information and Documents of the Surviving Corporation (Section 1.1).
2. List of Holders of Guaranty Options (Section 3.4).
3. Form of Agreement of Affiliates of Guaranty (Section 8.13).
4. Form of Directors' Non-Compete Agreement (Section 9.2).
5. Form of Executive Officers' Non-Compete Agreement (Section 9.2).
iii
115
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of August 20, 1998, by and between F.N.B. CORPORATION ("FNB"), a
Pennsylvania corporation having its principal office located in Hermitage,
Pennsylvania and GUARANTY BANK & TRUST COMPANY, a Florida state banking
corporation having its principal office in Venice, Florida ("Guaranty"); to be
joined in by Southwest Interim Bank No. 5, a state banking corporation to be
chartered under the laws of the State of Florida and to become a wholly owned
subsidiary of FNB ("Interim").
PREAMBLE
The Boards of Directors of Guaranty, FNB, and once it is chartered,
Interim, are of the opinion that the acquisition described herein is in the best
interests of the parties and their respective shareholders. This Agreement
provides for the acquisition of Guaranty by FNB pursuant to the merger of
Guaranty with and into Interim (the "Merger"), which will be a new Florida state
bank chartered by FNB as soon as practicable after the execution of the
Agreement. At the effective time of such Merger, the outstanding shares of the
capital stock of Guaranty shall be converted into the right to receive shares of
the common stock of FNB (except as provided herein). As a result, shareholders
of Guaranty shall become shareholders of FNB. Following consummation of the
Merger, Interim will be merged into West Coast Bank ("West Coast"), a wholly
owned subsidiary of FNB. The transactions described in this Agreement are
subject to the approvals of the shareholders of Guaranty, 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 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.
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, Guaranty shall be merged with and into Interim in
accordance with the provisions of the FFIC. The separate existence of Guaranty
shall thereupon cease, and Interim, which will be a wholly owned subsidiary of
FNB, shall be the Surviving Corporation resulting from the Merger, shall have a
name as determined in the sole discretion of FNB and shall continue to be
governed by the FFIC. The Merger shall have the effects specified in the FFIC.
The name and location of the main office and each branch office of FNB, Interim
and Guaranty, along with the name and address of the main office of the
Surviving Corporation and each existing and proposed branch office as well as
the name and address of each director and executive officer, and a copy of the
complete articles of incorporation of the Surviving Corporation are attached as
Exhibit 1 to this Agreement. Exhibit 1 further includes the amount of the
Surviving Corporation's surplus fund and retained earnings at June 30, 1998. The
Surviving Corporation will have trust powers. 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 FNB and Guaranty and will be approved by
the Board of Directors of Interim upon its formation.
1.2 Time and Place of Closing. The closing of the transactions
contemplated by this Agreement (the "Closing"), including the Merger, shall take
place at 10:00 A.M., local time, on a date
116
specified by the Parties as they, acting through their chief executive officers
or chief financial officers, may mutually agree, provided that such Closing
shall not occur prior to the Effective Time (as defined below). Subject to the
terms and conditions hereof, unless mutually agreed upon in writing by each
Party, the Parties shall use their reasonable best efforts to cause the Closing
to occur on but not prior to the fifth business day following the Determination
Date.
1.3 Effective Time. The Merger and other transactions contemplated
by this Agreement shall become effective on the date and at the time set forth
in the certificate of merger (the "Certificate of Merger") issued by the Florida
Department of Banking and Finance (the "Effective Time"). Unless the Parties
otherwise mutually agree in writing, the Parties shall file the Certificate of
Merger on the date of Closing and shall use their best efforts to cause the
Effective Time to occur on the date of the Closing. Notwithstanding the
foregoing, in no event shall the Effective Time occur prior to January 1, 1999.
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. Pursuant to the Merger, the Articles
of Incorporation of Interim in effect at the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until otherwise amended
or repealed in accordance with applicable Law.
2.2 Bylaws. Pursuant to the Merger, the Bylaws of Interim in effect
at the Effective Time shall be the Bylaws of the Surviving Corporation until
otherwise amended or repealed in accordance with applicable Law.
2.3 Directors. Each director of Guaranty immediately prior to the
Effective Time shall become a director of the Surviving Corporation, to hold
office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation.
2.4 Officers. The officers of Guaranty immediately prior to the
Effective Time shall become officers of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation.
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, Interim or Guaranty, or the shareholders of any of the foregoing,
the shares of the constituent corporations shall be converted as follows:
(a) Each share of common stock of the Surviving Corporation
issued and outstanding immediately prior to the Effective Time shall
remain outstanding and entirely issued to FNB. Subsequent to the
Effective Time, the Surviving Corporation will be merged into West
Coast and all shares of capital stock of the Surviving Corporation will
be cancelled.
(b) 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.
A-2
117
(c) Except for Guaranty Common Stock issued and outstanding
immediately prior to the Effective Time as to which dissenters' rights
have been perfected and not withdrawn, and subject to Section 3.5 of
this Agreement relating to fractional shares, each share of Guaranty
Common Stock (excluding shares to be cancelled pursuant to Section 3.3
of this Agreement) issued and outstanding at the Effective Time shall
cease to be outstanding and shall be converted into and exchanged for
the number of shares of FNB Common Stock determined by dividing $43.00
by the Designated Price of FNB Common Stock and rounding to the third
decimal place (the "Exchange Ratio"); provided, however, that if the
Designated Price of FNB Common Stock is equal to or less than $28.00,
then the Exchange Ratio shall become fixed at 1.536 shares of FNB
Common Stock for each share of Guaranty Common Stock, and if the
Designated Price of FNB Common Stock is equal to or greater than
$38.375, then the Exchange Ratio shall become fixed at 1.121 shares of
FNB Common Stock for each share of Guaranty Common Stock.
Notwithstanding the foregoing, if a Change in Control of FNB has
occurred, then the Exchange Ratio shall not increase or decrease and
shall be fixed at 1.536 shares of FNB Common Stock for each share of
Guaranty Common Stock.
(d) If the Designated Price of FNB Common Stock shall be less
than $30.00, then FNB may, and if the Designated Price of FNB Common
Stock shall be $28.00 or less then Guaranty may, at any time during the
period commencing on the Determination Date and ending at the close of
business five (5) business days thereafter, terminate the Agreement
pursuant to Section 10.1(j) hereof.
(e) Notwithstanding Section 3.1(c) of this Agreement, Guaranty
Common Stock issued and outstanding at the Effective Time which is held
by a holder who has not voted in favor of the Merger and who has
demanded payment of the fair cash value of such shares in accordance
with ss. 658.44 of the FFIC ("Dissenting Guaranty Shares") shall not be
converted into or represent the right to receive the FNB Common Stock
payable thereon pursuant to Section 3.1(c) of this Agreement, and shall
be entitled only to such rights of appraisal as are granted by ss.
658.44 of the FFIC ("Dissent Provisions"), unless and until such holder
fails to perfect or effectively withdraws or otherwise loses his right
to appraisal. If after the Effective Time any such holder fails to
perfect or effectively withdraws or loses his right to appraisal, such
shares of Guaranty Common Stock shall be treated as if they had been
converted at the Effective Time into the right to receive the FNB
Common Stock payable thereon pursuant to Section 3.1(c) of this
Agreement. Guaranty shall give FNB prompt notice upon receipt by
Guaranty of any written objection to the Merger and such written
demands for payment of the fair value of shares of Guaranty Common
Stock, and the withdrawals of such demands, and any other instruments
provided to Guaranty pursuant to the Dissent Provisions (any
shareholder duly making such demand being hereinafter called a
"Dissenting Shareholder"). Each Dissenting Shareholder that becomes
entitled, pursuant to the Dissent Provisions, to payment for any shares
of Guaranty Common Stock held by such Dissenting Shareholder shall
receive payment therefor from FNB (but only after the amount thereof
shall have been agreed upon or at the times and in the amounts required
by the Dissent Provisions) and all of such Dissenting Shareholders
shares of Guaranty Common Stock shall be canceled. Guaranty shall not,
except with the prior written consent of FNB, voluntarily make any
payment with respect to, or settle or offer to settle, any demand for
payment by any Dissenting Shareholder.
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, recapitalization,
reclassification, or similar transaction 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
A-3
118
Exchange Ratio and the amounts set forth in Sections 3.1(c), 3.1(d) and 10.1(j)
shall be proportionately adjusted.
3.3 Shares Held by Guaranty or FNB. Each of the shares of Guaranty
Common Stock held by Guaranty or by any FNB Company, in each case other than
those shares of Guaranty Common Stock 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.
3.4 Treatment of Options and Warrants.
(a) Guaranty shall make its best reasonable effort to cause
each Holder of Guaranty Options listed on Exhibit 2 hereto to exercise, on or
before the Closing, such options.
(b) Immediately after the Effective Time of the Merger, all
rights with respect to Guaranty Common Stock issuable pursuant to the exercise
of options, warrants or other rights to purchase or acquire Guaranty Common
Stock (collectively, the "Guaranty Options") granted by Guaranty pursuant to
stock option plans or other agreements of Guaranty, which Guaranty Options and
plans as of the date hereof are listed and described in Section 3.4 of the
Guaranty Disclosure Memorandum and which Guaranty Options are outstanding at the
Effective Time of the Merger, shall be converted into options to receive whole
shares of FNB Common Stock (rounded up to the nearest share) by multiplying each
such Guaranty Option by the Exchange Ratio and by adjusting the per share
exercise price by dividing same by the Exchange Ratio and rounding up to the
nearest cent. All other terms and conditions of such Guaranty Options shall
become the terms and conditions of the new FNB options.
3.5 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of Guaranty 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 FNB Common Stock multiplied by the "market
price" of one share of FNB Common Stock at the Closing. The market price of one
share of FNB Common Stock at the Closing shall be the average of the closing bid
and asked prices of such Common Stock, as reported by Nasdaq (or, if not
reported thereby, any other authoritative source selected by FNB), on the last
trading day preceding the Closing. No such holder will be entitled to dividends,
voting rights, or any other rights as a shareholder in respect of any fractional
shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. At the Effective Time, FNB shall deposit
or shall cause to be deposited with the exchange agent selected by FNB (the
"Exchange Agent") certificates evidencing shares of FNB Common Stock in such
amount necessary to provide all consideration required to be exchanged by FNB
for Guaranty Common Stock pursuant to the terms of this Agreement. Promptly
after the Effective Time, FNB shall cause the Exchange Agent to mail to the
former shareholders of Guaranty appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Guaranty Common Stock shall
pass, only upon proper delivery of such certificates to the Exchange Agent).
After the Effective Time, each holder of shares of Guaranty 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
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exchange therefor the consideration provided in Section 3.1 of this Agreement.
FNB shall not be obligated to deliver the consideration to which any former
holder of Guaranty Common Stock is entitled as a result of the Merger until such
holder surrenders such holder's certificate or certificates representing the
shares of Guaranty Common Stock for exchange as provided in this Section 4.1.
The certificate or certificates of Guaranty 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 Guaranty 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 Guaranty Shareholders. At the Effective Time,
the stock transfer books of Guaranty shall be closed as to holders of Guaranty
Common Stock immediately prior to the Effective Time and no transfer of Guaranty
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 Guaranty
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. Until 90 days after the Effective Time,
former shareholders of Guaranty shall be entitled to vote at any meeting of FNB
stockholders the number of shares of FNB Common Stock into which shares of
Guaranty Common Stock are converted, regardless of whether such holders have
exchanged their certificates representing Guaranty Common Stock for shares
representing FNB Common Stock in accordance with the provisions of this
Agreement. 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 Guaranty 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 Guaranty Common Stock certificate, both the FNB Common
Stock certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered dividends shall be delivered
and paid with respect to each share represented by such certificate. Any portion
of the consideration (including the proceeds of any investments thereof) which
had been made payable to the Exchange Agent pursuant to Section 4.1 of this
Agreement that remain unclaimed by the shareholders of Guaranty for six (6)
months after the Effective Time shall be paid to FNB. Any shareholders of
Guaranty who have not theretofore complied with this Article 4 shall thereafter
look only to FNB for payment of their shares of FNB Common Stock and unpaid
dividends and distributions on the FNB Common Stock deliverable in respect of
each share of Guaranty Common Stock such shareholder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF GUARANTY
Guaranty hereby represents and warrants to FNB as follows:
5.1 Organization, Standing, and Power. Guaranty is a state banking
corporation duly organized, validly existing, and in active status 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. Guaranty is duly qualified or licensed to transact business as a foreign
corporation and is in good standing in each jurisdiction where the character of
its Assets or the nature or conduct of its
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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 Guaranty.
5.2 Authority; No Breach by Agreement.
(a) Guaranty has the corporate power and authority necessary to
execute and deliver this Agreement and, subject to the approval and
adoption of this Agreement by the shareholders of Guaranty, to perform
its obligations under this Agreement and consummate the transactions
contemplated hereby. The execution, delivery, and performance of this
Agreement by Guaranty and the consummation by Guaranty 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 Guaranty, subject to the approval of this
Agreement by its shareholders as contemplated by Section 8.1 of this
Agreement. Subject to such requisite shareholder approval (and assuming
due authorization, execution and delivery by FNB) and to such Consents
of Regulatory Authorities as required by applicable Law, this Agreement
represents a legal, valid, and binding obligation of Guaranty,
enforceable against Guaranty 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 Guaranty Board of Directors
has received from Allen C. Ewing & Co. 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 Guaranty Common Stock.
(b) Except as disclosed in Section 5.2 of the Guaranty
Disclosure Memorandum, neither the execution and delivery of this
Agreement by Guaranty, nor the consummation by Guaranty of the
transactions contemplated hereby, nor compliance by Guaranty with any
of the provisions hereof, will (i) conflict with or result in a breach
of any provision of Guaranty's Articles of Incorporation or Bylaws, or
(ii) constitute or result in a Default under, or result in the creation
of any Lien on any material Asset of Guaranty under, or require a
Consent pursuant to, any Contract or Permit of Guaranty, 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 Guaranty, or, (iii) subject to receipt of the requisite
approvals and Consents referred to in Sections 9.1(a), (b) and (c) of
this Agreement, violate any Order, or to its Knowledge, any Law
applicable to Guaranty or any of its material Assets which will have a
Material Adverse Effect on Guaranty.
(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 Guaranty, no notice to, filing
with, or Consent of, any public body or authority is necessary for the
consummation by Guaranty of the Merger and the other transactions
contemplated in this Agreement.
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5.3 Capital Stock.
(a) The authorized capital stock of Guaranty consists of
2,000,000 shares, $2.00 par value of Guaranty Common Stock, of which
755,943 shares are issued and outstanding as of the date of this
Agreement and not more than 755,943 shares (plus any additional shares
issued upon the exercise of options under the Guaranty Stock Plans)
will be issued and outstanding at the Effective Time. All of the issued
and outstanding shares of Guaranty Common Stock are duly and validly
issued and outstanding and are fully paid and nonassessable under the
FFIC. None of the outstanding shares of Guaranty Common Stock has been
issued in violation of any preemptive rights. Guaranty has reserved
58,806 shares of Guaranty Common Stock for issuance under the Guaranty
Stock Plans, pursuant to which options and warrants to purchase not
more than 58,806 shares of Guaranty Common Stock are outstanding.
(b) Except as set forth in Section 5.3(a) of this Agreement,
there are no shares of capital stock or other equity securities of
Guaranty outstanding and no outstanding Rights relating to the capital
stock of Guaranty.
5.4 No Guaranty Subsidiaries. Guaranty does not have any
Subsidiaries.
5.5 Regulatory Filings; Financial Statements.
(a) Guaranty has made available to FNB copies of the Guaranty
Financial Statements and all reports of any outside consultants or
advisors to Guaranty. Each of the Guaranty Financial Statements
(including, in each case, any related notes), including any Guaranty
Financial Statements filed after the date of this Agreement until the
Effective Time, was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be
indicated therein or in the notes to such financial statements), and
fairly present or will present the financial position of Guaranty at
the respective dates and the results of its operations and cash flows
at and 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, and except for the absence of certain footnote information
in the unaudited interim financial statements.
(b) Guaranty has filed and made available to FNB accurate and
complete copies of all forms, reports and documents required to be
filed by Guaranty with the Federal Reserve Bank of Atlanta pursuant to
the Securities Act of 1934 since January 1, 1995, (collectively the
"Guaranty 1934 Act Reports"). The Guaranty 1934 Act Reports (i) at the
time filed, complied in all material respects with the applicable
requirements of the 1934 Act and (ii) did not at the time they were
filed contain any untrue statement of material fact or omit to state a
material fact required to be stated or necessary in order to make such
statements in light of the circumstances under which they were made,
not misleading.
5.6 Notes and Obligations.
(a) Except as set forth in Section 5.6 of the Guaranty
Disclosure Memorandum or as provided in the loss reserve described in
subparagraph (b) below, without conducting any independent
investigation, Guaranty is not aware of any facts which would cause
management of Guaranty to believe that any notes receivable or any
other obligations owned by Guaranty or due to it shown on the Guaranty
Interim Balance Sheet or any such notes receivable and obligations on
the date hereof and as of the Effective Time have not been and will not
be genuine, legal, valid and
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collectible obligations of the respective makers thereof and are not
and will not be subject to any offset or counterclaim. Except as set
forth in subparagraph (b) below, all such notes and obligations are
evidenced by written agreements, true and correct copies of which will
be made available to FNB for examination prior to the Effective Time.
All such notes and obligations were entered into by Guaranty in the
ordinary course of its business and in compliance with all applicable
laws and regulations, except as to any non-compliance which has not and
will not have a Material Adverse Effect on Guaranty.
(b) Guaranty has established a loss reserve on the Guaranty
Interim Balance Sheet which is adequate to cover anticipated losses
which might result from such items as the insolvency or default of
borrowers or obligors on such loans or obligations, defects in the
notes or evidences of obligation (including losses of original notes or
instruments), offsets or counterclaims properly chargeable to such
reserve, or the availability of legal or equitable defenses which might
preclude or limit the ability of Guaranty to enforce the note or
obligation, and the representations set forth in subparagraph (a) above
are qualified in their entirety by the aggregate of such loss reserves.
As of the Effective Time, the ratio of the loss reserve, as established
on such date in good faith by management of Guaranty, to total loans
outstanding at such time, shall not exceed by a material amount the
ratio of the loss reserve to the total loans outstanding as reflected
on the Guaranty Interim Balance Sheet (except as otherwise agreed to by
Guaranty and FNB), and the representations set forth in subparagraph
(a) above made as of the Effective Time shall be qualified in their
entirety by the aggregate of such loss reserve on such date.
5.7 Absence of Certain Changes or Events. Except as disclosed in
Section 5.7 of the Guaranty Disclosure Memorandum, since December 31, 1997, (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 Guaranty, and (ii) Guaranty has 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 material covenants and agreements of
Guaranty provided in Article 7 of this Agreement.
5.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of
Guaranty 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, 1997, except to the extent that all such failures
to file, taken together, are not reasonably likely to have a Material
Adverse Effect on Guaranty, and to the knowledge of Guaranty 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
Guaranty, except as reserved against in the Guaranty Financial
Statements delivered prior to the date of this Agreement or as
disclosed in Section 5.8 of the Guaranty Disclosure Memorandum. All
Taxes and other liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid, accrued, or
provided for as disclosed in Section 5.8 of the Guaranty Disclosure
Memorandum.
(b) Except as disclosed in Section 5.8 of the Guaranty
Disclosure Memorandum, Guaranty has not executed an extension or waiver
of any statute of limitations on the assessment or collection of any
material Tax due that is currently in effect.
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(c) Except as disclosed in Section 5.8 of the Guaranty
Disclosure Memorandum, adequate provision for any Taxes due or to
become due for Guaranty for the period or periods through and including
the date of the respective Guaranty Financial Statements has been made
and is reflected on such Guaranty Financial Statements.
(d) Deferred Taxes of Guaranty have been adequately provided
for in the Guaranty Financial Statements.
(e) Guaranty 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 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 Guaranty.
(f) There are no Liens with respect to Taxes upon any of the
material Assets of Guaranty, except for loans on Guaranty's books
generated in the normal course of business.
(g) Guaranty has not filed any consent under Section 341(f) of
the Internal Revenue Code concerning collapsible corporation.
(h) All material elections with respect to Taxes affecting
Guaranty as of the date of this Agreement have been or will be timely
made as set forth in Section 5.8 of the Guaranty Disclosure Memorandum.
After the date hereof, other than as set forth in Section 5.8 of the
Guaranty 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.
5.9 Assets. Except as disclosed in Section 5.9 of the Guaranty
Disclosure Memorandum, Guaranty has good and marketable title, free and clear of
all Liens (except those Liens which are not likely to have a Material Adverse
Effect on Guaranty), to all of its material Assets reflected in the Guaranty
Financial Statements as being owned by Guaranty as of the date hereof. All
material tangible properties used in the business of Guaranty are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with Guaranty's past practices. All Assets which
are material to Guaranty's business, held under leases or subleases by Guaranty,
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. Guaranty currently maintains insurance in
amounts, scope, and coverage as disclosed in Section 5.9 of the Guaranty
Disclosure Memorandum. Guaranty has not 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 5.9 of the Guaranty Disclosure Memorandum, there are presently no
claims pending under such policies of insurance and no notices have been given
by Guaranty under such policies.
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5.10 Environmental Matters.
(a) To the Knowledge of Guaranty, except as disclosed in
Section 5.10 of the Guaranty Disclosure Memorandum, Guaranty, 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 Guaranty.
(b) To the Knowledge of Guaranty, except as disclosed in
Section 5.10 of the Guaranty Disclosure Memorandum, there is no
Litigation pending or threatened before any court, governmental agency,
or authority or other forum in which Guaranty or any of its Loan
Properties or Participation Facilities 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 Guaranty.
(c) To the Knowledge of Guaranty, except as disclosed in
Section 5.10 of the Guaranty Disclosure Memorandum, during the period
of (i) Guaranty's ownership or operation of any of its properties, (ii)
Guaranty's participation in the management of any Participation
Facility, or (iii) Guaranty's holding a security interest in a Loan
Property, there have been no releases of Hazardous Material in, on,
under, or affecting any Participation Facility or Loan Property of
Guaranty, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
Guaranty.
(d) To the Knowledge of Guaranty, except as disclosed in
Section 5.10 of the Guaranty Disclosure Memorandum, there is no
reasonable basis for any Litigation of a type described above in
Section 5.10(b), except such as is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
Guaranty.
5.11 Compliance With Laws. Except as disclosed in Section 5.11 of
the Guaranty Disclosure Memorandum, Guaranty 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 Guaranty, and Guaranty is not presently in 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 Guaranty. Except
as disclosed in Section 5.11 of the Guaranty Disclosure Memorandum, Guaranty:
(a) to the Knowledge of Guaranty, is not in violation of any
Laws or Orders 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
Guaranty; and
(b) has not received any written 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
Guaranty is not in substantial 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
Guaranty, (ii) threatening to revoke any Permit, the revocation of
which is reasonably likely to have,
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individually or in the aggregate, a Material Adverse Effect on
Guaranty, or (iii) requiring Guaranty 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.
5.12 Labor Relations. Guaranty is not the subject of any Litigation
asserting that it has committed an unfair labor practice (within the meaning of
the National Labor Relations Act or comparable state law) or seeking to compel
it to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving Guaranty,
pending or threatened, nor is there any activity involving any of Guaranty's
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
5.13 Employee Benefit Plans.
(a) Guaranty has disclosed in Section 5.13 of the Guaranty
Disclosure Memorandum, and has or will deliver or make available to FNB
copies or summaries of, all material pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other material incentive
plans, all other material written employee programs, arrangements, or
agreements, and all other material employee benefit plans or fringe
benefit plans, including, without limitation, all "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 Guaranty for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors or other
beneficiaries are eligible to participate (collectively, the "Guaranty
Benefit Plans"). Any of the Guaranty 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 "Guaranty ERISA Plan". No
Guaranty Benefit Plan is or has been a multi-employer plan within the
meaning of Section 3(37) of ERISA.
(b) Except as disclosed in Section 5.13 of the Guaranty
Disclosure Memorandum, all Guaranty Benefit Plans are in compliance in
all material respects 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 a Material Adverse Effect on
Guaranty.
(c) Except as disclosed in Section 5.13 of the Guaranty
Disclosure Memorandum, no Guaranty ERISA Plan which is a "defined
benefit pension plan" (as defined in Section 4140 of the Internal
Revenue Code) has any "unfunded current liability" (as that term is
defined in Section 302(d)(8)(A) of ERISA) and the present 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).
(d) Except as disclosed in Section 5.13 of the Guaranty
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, without limitation,
severance, unemployment compensation, golden parachute, or otherwise)
becoming due to any director or any employee of Guaranty from Guaranty
under any Guaranty Benefit Plan, (ii) increase any benefits otherwise
payable under any Guaranty 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 a Material Adverse Effect on Guaranty.
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5.14 Material Contracts. Except as disclosed in Section 5.14 of the
Guaranty Disclosure Memorandum, Guaranty is not a party to or subject to the
following: (i) any employment, severance, termination, consulting, or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $50,000, (ii) any Contract relating to the borrowing of money by
Guaranty or the guarantee by Guaranty of any such obligation exceeding $50,000
(other than Contracts evidencing deposit liabilities, purchases of federal
funds, fully-secured repurchase agreements, and Federal Home Loan Bank advances,
trade payables, and Contracts relating to borrowings or guarantees made in the
ordinary course of business), and (iii) any other material Contract or amendment
thereto as of the date of this Agreement not made in the ordinary course of
business to which Guaranty is a party or by which it is bound (together with all
Contracts referred to in Sections 5.9 and 5.13(a) of this Agreement, the
"Guaranty Contracts"). With respect to each Guaranty Contract and except as
disclosed in Section 5.14 of the Guaranty Disclosure Memorandum: (i) the
Contract is in full force and effect; (ii) Guaranty is not in default
thereunder, other than defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Guaranty; (iii)
Guaranty has not repudiated or waived any material provision of any such
Guaranty Contract; and (iv) no other party to any such Guaranty Contract is in
Default in any material respect, other than defaults which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Guaranty, or has repudiated or waived any material provision thereunder. Except
for Federal Home Loan Bank advances, all of the indebtedness of Guaranty for
money borrowed is prepayable at any time by Guaranty without penalty or premium.
5.15 Legal Proceedings. Except as disclosed in Section 5.15 of the
Guaranty Disclosure Memorandum, there is no Litigation instituted or pending,
or, to the Knowledge of Guaranty, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against Guaranty, or against any material
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 Guaranty, nor to the Knowledge of Guaranty are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against Guaranty, that are reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Guaranty. Section 5.15 of the
Guaranty Disclosure Memorandum includes a summary report of all Litigation as of
the date of this Agreement to which Guaranty is a party and which names Guaranty
as a defendant or cross-defendant and where the estimated maximum exposure may
be $10,000 or more.
5.16 Reports. For the three years ended December 31, 1997, 1996 and
1995, and since January 1, 1998, Guaranty has timely filed, and to the extent
permitted by Law has made available for FNB review, 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. 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 enforced or promulgated by the Florida Department of Banking and
Finance or the Board of Governors of the Federal Reserve System, except for
those which would not have a Material Adverse Effect on Guaranty. As of its
respective date, each such report and document did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, which untrue statement
of a material fact or omission to state a material fact is likely to have,
individually or in the aggregate, a Material Adverse Effect on Guaranty.
5.17 Statements True and Correct. None of the information supplied
or to be supplied by Guaranty 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 Guaranty or any Affiliate thereof for inclusion in
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the Proxy Statement to be mailed to Guaranty's shareholders in connection with
the Shareholders' Meeting, and any other documents to be filed by Guaranty or
any Affiliate thereof with any 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 Guaranty, 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
Guaranty 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.
5.18 Accounting, Tax and Regulatory Matters. To the Knowledge of
Guaranty, neither Guaranty nor any Affiliate thereof has taken or agreed to take
any action which would, 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.
5.19 Articles of Incorporation Provisions. Guaranty has taken all
actions 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 the grant of any rights to any Person under the Articles of
Incorporation, Bylaws, or other governing instruments of Guaranty 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 Guaranty that
may be directly or indirectly acquired or controlled by it.
5.20 Derivatives Contracts. Except as disclosed in Section 5.20 of
the Guaranty Disclosure Memorandum, Guaranty is neither a party to nor has it
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 contract (including various combinations
thereof) (each a "Derivatives Contract").
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF FNB AND INTERIM
FNB hereby represents and warrants to Guaranty, and Interim, when
formed, will represent and warrant to Guaranty, as follows:
6.1 Organization, Standing, and Power.
(a) 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
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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.
(b) Interim will be a Florida state banking corporation (as a
wholly owned subsidiary of FNB) after the execution of this Agreement
and prior to the Effective Time and shall have the corporate power and
authority to carry on the business of banking including the exercise of
trust powers. Interim shall become duly qualified or licensed to
transact business as a foreign corporation and shall maintain its
corporate status in good standing in each jurisdiction where the
character of the assets or the nature or conduct of the business, to be
purchased, received or operated by Interim 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
Interim.
6.2 Authority; No Breach By Agreement.
(a) FNB has and upon its formation Interim shall have, 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 and shall be duly and validly authorized by all necessary
corporate action in respect thereof by Interim upon its formation. This
Agreement represents a legal, valid, and binding obligation of FNB and
shall become such an obligation of Interim upon its formation,
enforceable against FNB and to become enforceable against Interim upon
its formation, 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
or, upon its formation, Interim, nor the consummation by FNB or Interim
of the transactions contemplated hereby, nor compliance by FNB or
Interim with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of the Articles of Association (or
Articles of Incorporation as the case may be) or Bylaws of FNB or
Interim, 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 or Interim under, any Contract or Permit of
any FNB Company or Interim 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 Interim, 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 Interim 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 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 or Interim no notice to,
filing with, or Consent of, any public
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body or authority is necessary for the consummation by FNB or Interim
of the Merger and the other transactions contemplated in this
Agreement.
6.3 Capital Stock. The authorized capital stock of FNB consists of
(i) 100,000,000 shares of FNB Common Stock, of which 16,930,488 shares were
issued and outstanding as of the date of this Agreement and (ii) 20,000,000
shares of FNB Preferred Stock, of which 271,917 shares were issued and
outstanding as of the date of this Agreement (the "FNB Capital Stock"). All of
the issued and outstanding shares of FNB Capital Stock are, and all of the FNB
Common Stock to be issued in exchange for Guaranty Common Stock upon
consummation of the Merger will be, authorized and reserved for issuance prior
to the Effective Time and, 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
Stock has been, and none of the shares of FNB Common Stock to be issued in
exchange for shares of Guaranty 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 FNB Subsidiaries. Except as disclosed in Section 6.4 of the FNB
Disclosure Memorandum, the list of Subsidiaries of FNB filed by FNB with its
most recent FNB Report on Form 10-K for the fiscal year ended December 31, 1997
is a true and complete list of all of the FNB Subsidiaries as of the date of
this Agreement. Except as disclosed in Section 6.4 of the FNB Disclosure
Memorandum, FNB or one of its Subsidiaries owns all of the issued and
outstanding shares of capital stock of each FNB Subsidiary. No equity securities
of any FNB Subsidiary are or may become required to be issued (other than to
another FNB Company) by reason of any Rights, and there are no Contracts by
which any FNB Subsidiary is bound to issue (other than to another FNB Company)
additional shares of its capital stock or Rights or by which any FNB Company is
or may be bound to transfer any shares of the capital stock of any FNB
Subsidiary (other than to another FNB Company). There are no Contracts relating
to the rights of any FNB Company to vote or to dispose of any shares of the
capital stock of any FNB Subsidiary. All of the shares of capital stock of each
FNB Subsidiary held by a FNB Company are fully paid and nonassessable under the
applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated or organized (except, in the case of Subsidiaries that are national
banks, for the assessment contemplated by 12 U.S.C. ss. 55), and are owned by
the FNB Company free and clear of any Lien. Each FNB 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 FNB Subsidiary is duly qualified or licensed to transact
business as a foreign corporation and is in good standing in each jurisdiction
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. Each
FNB 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 each such FNB Subsidiary that is a depository
institution which are insured by the Bank Insurance Fund or the Savings
Association Insurance Fund.
6.5 SEC Filings; Financial Statements.
(a) FNB has filed and made available to Guaranty accurate and
complete copies of all forms, reports, and documents required to be
filed by FNB with the SEC since January 1, 1995, (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
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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. Except for FNB Subsidiaries that
are registered as brokers, dealers, investment advisers, or associated
persons thereof, none of the FNB Subsidiaries is required to file any
forms, reports or other documents with the SEC. None of the FNB
Subsidiaries is required to file any forms, reports, or other documents
with the SEC under the 1933 Act or Sections 12, 13, 14, or 16 of the
1934 Act.
(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, and each FNB SEC Report filed after the date
of this Agreement until the Effective Time will comply, 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 of 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.
6.6 Absence of Certain Changes or Events. Since January 1, 1998,
(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 or
Interim provided in Articles 7 or 8 of this Agreement.
6.7 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 March 31, 1998, 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 to the
Knowledge of FNB 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.
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(d) To the Knowledge of FNB, each of the FNB 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 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 FNB.
6.8 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 likely to have, individually or in the aggregate, a Material Adverse
Effect on FNB. None of the FNB Companies is presently in Default under or in
violation of 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.
6.9 Assets. Except as disclosed in Section 6.9 of the FNB
Disclosure Memorandum, the FNB Companies have good and marketable title, free
and clear of all Liens (except for those Liens which are not likely to have a
Material Adverse Effect on FNB or its Subsidiaries taken as a whole), to all of
their respective material Assets, reflected in FNB Financial Statements as being
owned by FNB as of the date hereof. All material tangible properties used in the
businesses of the FNB Companies are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent with
FNB's past practices. All Assets which are material to FNB's business on a
consolidated basis, held under leases or subleases by any of the FNB 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 FNB Companies currently maintain
insurance in amounts, scope, and coverage as disclosed in Section 6.9 of the FNB
Disclosure Memorandum. None of the FNB 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 6.9 of the FNB Disclosure Memorandum, to the Knowledge of
FNB there are presently no occurrences giving rise to a
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claim under such policies of insurance and no notices have been given by any FNB
Company under such policies.
6.10 Legal Proceedings. Except as disclosed in Section 6.10 of the
FNB Disclosure Memorandum, 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 to the Knowledge of FNB 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.
6.11 Reports. Since January 1, 1995, or the date of organization if
later, each FNB 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 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.
6.12 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 Guaranty'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 Guaranty, 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.
6.13 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)(2)(D) 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.
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6.14 Environmental Matters.
(a) To the Knowledge of FNB, except as disclosed in Section
6.14 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 6.14 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
6.14 of the FNB Disclosure Memorandum, there is no reasonable basis for
any Litigation of a type described above in Section 6.14(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
6.14 of the FNB Disclosure Memorandum, during the period of (i) FNB's
or any of its Subsidiaries' ownership or operation of any of their
respective properties, (ii) FNB's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (iii)
FNB's or any of its Subsidiaries' holding a security interest in a Loan
Property, to the Knowledge of FNB 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.
6.15 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 6.15 of the FNB Disclosure
Memorandum.
6.16 Outstanding Guaranty Common Stock. As of the date of this
Agreement, FNB Companies do not beneficially own any shares of Guaranty Common
Stock for their own accounts (not including those held in a fiduciary or trust
capacity for, or on behalf of, unaffiliated third parties). During the term of
this Agreement, no FNB Company shall purchase or otherwise acquire beneficial
ownership of any additional Guaranty Common Stock except pursuant to the terms
of this Agreement.
6.17 Material Contracts. All material Contracts to which FNB is a
party and which are required to be filed as exhibits to FNB SEC Reports have
been so filed and, except as disclosed in Section 6.17 of the FNB Disclosure
Memorandum, as of the date of this Agreement, to the Knowledge of FNB neither
FNB nor any of the FNB Companies is a party to any Contract or amendment thereto
that would be required to be filed as an exhibit to a Form 10-K filed by FNB
with the SEC except for the fact that no such Form 10-K is presently required to
be filed with the SEC as of the date hereof.
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6.18 Year 2000 Compliance. The hardware and software (working
independently or as a system) of FNB and its Subsidiaries will, by January 1,
2000, be capable of accurately processing date data as intended without
interruption (including, but not limited to, calculating, comparing and
sequencing) from, into and between the twentieth and twenty-first centuries,
including leap year calculations, when used in the normal course of business.
FNB and its Subsidiaries have formulated and begun execution of a plan that
complies with FFIEC Year Compliance guidelines as promulgated by the principal
regulatory agencies of FNB and its Subsidiaries. FNB and its Subsidiaries have
met all deadlines and are in full compliance with this plan.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Guaranty. Unless the prior written
consent of FNB shall have been obtained, and except as otherwise expressly
contemplated herein, Guaranty shall (i) operate its business only in the usual,
regular, and ordinary course, (ii) use its reasonable best efforts to preserve
intact its business organization and Assets and maintain its rights and
franchises, (iii) use its reasonable best efforts to maintain its current
employee relationships, (iv) formulate and execute a plan which complies with
FFIEC Year Compliance guidelines as promulgated by the Board of Governors of the
Federal Reserve System and (v) take no action which would materially adversely
affect the ability of any Party to obtain any Consents of Regulatory Authorities
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.
7.2 Negative Covenants of Guaranty. Except as disclosed in Section
7.2 of the Guaranty Disclosure Memorandum, from the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, Guaranty
covenants and agrees that it will not do or agree or commit to do, any of the
following without the prior written consent (except as specifically provided in
this Section 7.2) of the chief executive officer, president, chief financial
officer, or any executive vice president or duly authorized designee of FNB:
(a) amend the Articles of Incorporation, Bylaws, or other
governing instruments of Guaranty except as expressly contemplated by
this Agreement; or
(b) make any new loan or other extension of credit to any
Person (except those who receive a commitment for a loan or extension
of credit prior to the date of this Agreement) in excess of $100,000
(except for loans secured by a owner occupied real property first
mortgage or single or 1-4 family residential loan properly margined or
secured by liquid assets each of which is less than $500,000);
provided, however, that FNB or its designate shall make every
reasonable effort to respond to Guaranty's request for loan approval in
a timely manner and, under normal circumstances, make a decision within
two business days; or
(c) incur any additional debt obligation or other obligation
for borrowed money in excess of an aggregate of $100,000 except in the
ordinary course of the business of Guaranty consistent with past
practices (it being understood and agreed that the incurrence of
indebtedness in the ordinary course of business shall include, without
limitation, 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 Guaranty of any Lien or permit any such Lien to exist
(other than in connection with deposits, repurchase agreements, bankers
acceptances,
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"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 Guaranty Disclosure Memorandum); or
(d) 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 Guaranty, or adjust, split,
combine, or reclassify any capital stock of Guaranty or issue or
authorize the issuance of any other securities in respect of or in
substitution for shares of Guaranty Common Stock, or make, declare, or
pay any dividend (except as specifically provided in Section 8.6
hereof) or make any other distribution in respect of Guaranty's capital
stock; or
(e) except for this 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(e) of the Guaranty 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
Guaranty Common Stock or any other capital stock of Guaranty, 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
(f) Sell, lease, mortgage, or otherwise dispose of or otherwise
encumber (i) any shares of capital stock of Guaranty, or (ii) any Asset
other than in the ordinary course of business for reasonable and
adequate consideration; or
(g) 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 investment in an amount in excess of $100,000 for each
such investment, either by purchase of stock or securities,
contributions to capital, Asset transfers, or purchase of any Assets,
in any Person, 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 Guaranty in its
fiduciary capacity, or (iii) the creation of new wholly-owned
Subsidiaries organized to conduct or continue activities otherwise
permitted by this Agreement (in which case FNB shall object thereto
within two business days, and the failure to provide a written
objection within two business days shall be deemed the approval of FNB
to make such purchase or investment); or
(h) except as otherwise provided herein, grant any material
increase in compensation or benefits to the employees or officers of
Guaranty, except in accordance with past practice disclosed in Section
7.2(h) of the Guaranty 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 5.13(a) of the Guaranty
Disclosure Memorandum; enter into or amend any severance agreements
with officers of Guaranty; grant any material increase in fees or other
increases in compensation or other benefits to directors of Guaranty
except in accordance with past practice or as otherwise disclosed in
Section 7.2(h) of the Guaranty Disclosure Memorandum; or voluntarily
accelerate the vesting of any stock options or other stock-based
compensation or employee benefits; or
(i) except as disclosed in Section 7.2(i) of the Guaranty
Disclosure Memorandum or that may be entered into in accordance with
Section 8.15 of this Agreement, enter into or amend any
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employment Contract between Guaranty and any Person (unless such
amendment is required by Law); or
(j) except as disclosed in Section 7.2(j) of the Guaranty
Disclosure Memorandum, adopt any new employee benefit plan of Guaranty
or make any material change in or to any existing employee benefit
plans of Guaranty 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
(k) 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
(l) except as disclosed in Section 7.2(l) of the Guaranty
Disclosure Memorandum, commence any Litigation other than in accordance
with past practice or settle any Litigation involving any Liability of
Guaranty for material money damages or restrictions upon the operations
of Guaranty; or
(m) except in the ordinary course of business, modify, amend,
or terminate any material Contract other than renewals without material
adverse change of terms, or waive, release, compromise, or assign any
material rights or claims; or
(n) sell, transfer, mortgage, encumber, or otherwise dispose of
any of its material properties or assets to any individual, corporation
or other entity, 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) elect or appoint any new corporate officers or members of
the Guaranty Board of Directors; or
(p) 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 FNB 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 in a timely manner 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 Guaranty, 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 Guaranty Common Stock.
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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, warranties, or covenants
contained herein, and to use its reasonable best efforts to prevent or promptly
to remedy the same.
7.5 Reports. Each Party and their respective Subsidiaries shall
file all reports required to be filed by each of them 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 and the Board of Governors of the Federal Reserve System, 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 and
except for the absence of certain footnote information in the unaudited
financial statements). As of their respective dates, such reports filed with the
SEC and the Board of Governors of the Federal Reserve System 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 (in no event later than
October 15, 1998), FNB shall file the Registration Statement with the SEC, and
shall use its reasonable best 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.
Guaranty shall furnish all information concerning it and the holders of its
capital stock as FNB may reasonably request in connection with such action.
Guaranty 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
as soon as practicable 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) Guaranty shall prepare a Proxy Statement relating to
the Merger 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 Guaranty shall recommend (subject to compliance with their
fiduciary duties under applicable law as advised by counsel) to its shareholders
the approval of this Agreement, (iv) each member of the Board of Directors of
Guaranty shall vote all Guaranty Common Stock beneficially owned by each in
favor of the approval of this Agreement, and (v) the Board of Directors and
officers of Guaranty shall use their reasonable best efforts to obtain such
shareholders' approval.
8.2 Applications. FNB shall promptly prepare and file, and Guaranty
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
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to consummate the transactions contemplated by this Agreement and thereafter use
its reasonable best efforts to cause the Merger to be consummated as
expeditiously as possible. Further, FNB shall, prior to the Closing, prepare and
file with the National Association of Securities Dealers the required documents
and make payment of the required fees for the listing of the shares of FNB
Common Stock to be issued to holders of Guaranty Common Stock in connection with
the Merger on Nasdaq National Stock Market.
8.3 Filings With State Offices. Upon the terms and subject to the
conditions of this Agreement, FNB shall execute and file the Application or
Notification to Merge with the Florida Department of Banking and Finance and any
applicable federal regulatory agency in connection with the Closing.
8.4 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, if any, to use, its reasonable best 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 the use of their respective reasonable
best efforts to lift or rescind any Order adversely affecting its ability to
consummate the transactions contemplated herein and to cause to be satisfied 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, if
any, to use, its reasonable best efforts to obtain all Permits and Consents of
all third parties and Regulatory Authorities necessary or desirable for the
consummation of the transactions contemplated by this Agreement.
8.5 Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time or termination
pursuant to Article 10 of this Agreement, upon reasonable notice and
subject to applicable Laws, FNB and Guaranty shall afford each other,
and each other's accountants, counsel, and other representatives,
during normal working hours for the period of time prior to the
Effective Time or termination of this Agreement pursuant to Article 10
hereof, reasonable access to all of its and its Subsidiaries'
properties, books, contracts, commitments, and records and, during such
period, each shall furnish promptly to the other party (i) a copy of
each report, schedule, and other document filed or received by it or
any of its Subsidiaries during such period pursuant to the requirements
of the Securities Laws, (ii) a copy of all filings made with any
Regulatory Authorities or other governmental entities in connection
with the transactions contemplated by this Agreement and all written
communications received from, or sent to, such Regulatory Authorities
and governmental entities related thereto, and (iii) all other
information concerning FNB or FNB's Subsidiaries' business, properties
and personnel as Guaranty may reasonably request, including reports of
condition filed with Regulatory Authorities. In this regard, without
limiting the generality of the foregoing, FNB and its Subsidiaries and
Affiliates shall notify Guaranty promptly upon the receipt by it of any
comments from the SEC, or its staff, and of any requests by the SEC for
amendments or supplements to the Registration Statement or for
additional information and will supply Guaranty with copies of all
correspondence between it and its representatives, on the one hand, and
the SEC or the members of its staff or any other government official,
on the other hand, with respect to the Registration Statement. Each
Party hereto shall, and shall cause its advisors and representatives to
(x) conduct its investigation in such a manner which will not
unreasonably interfere with the normal operations, customers or
employee relations of the other and shall be in accordance with
procedures established by the parties having the due regard for the
foregoing, and (y) refrain from using for any purposes other than as
set forth in this Agreement, and shall treat as confidential, all
information obtained by each hereunder or in connection herewith and
not otherwise known to them prior to the Effective Time.
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(b) FNB, the FNB Companies and their Affiliates will hold, and
will use their best efforts to cause their officers, directors,
employees, consultants, advisors, representatives, and agents to hold,
in confidence, unless compelled by judicial or other legal process, all
confidential documents and information concerning Guaranty furnished to
FNB, any FNB Company, or their Affiliates in connection with the
transactions contemplated by this Agreement, including information
provided in accordance with this Section 8.5, except to the extent that
such information can clearly be demonstrated by FNB to have been (i)
previously known on a nonconfidential basis by FNB, (ii) in the public
domain other than as a result of disclosure by FNB, any FNB Company, or
any of their Affiliates, or (iii) later lawfully acquired by FNB from
sources other than Guaranty; provided, however, that FNB may disclose
such information to its officers, directors, employees, consultants,
advisors, representatives, and agents in connection with the
transactions contemplated by this Agreement only to the extent that
such Persons who, in FNB's reasonable judgment, need to know such
information for the purpose of evaluating Guaranty (provided that such
Persons shall be informed of the confidential nature of such
information and shall agree to be bound by the terms of this provision)
and, in any event, such disclosures shall be made only to the extent
necessary for such purposes. If this Agreement is terminated in
accordance with Article 10 hereof, FNB, the FNB Companies and their
Affiliates shall maintain the confidence of such information and will,
and will use their best efforts to cause its officers, directors,
employees, consultants, advisors, representatives, and agents to,
return to Guaranty all documents and other materials, and all copies
made thereof, obtained by FNB, any FNB Company, or any of their
Affiliates in connection with this Agreement that are subject to this
Section 8.5.
8.6 Dividend Payment. Guaranty may declare its regular annual
dividend in the fourth quarter of 1998 not to exceed $.06 per share to holders
of Guaranty Common Stock.
8.7 Current Information. During the period from the date of this
Agreement until the Effective Time or termination of this Agreement pursuant to
Article 10 hereof, each of Guaranty and FNB shall, and shall cause its
representatives to, confer on a regular and frequent basis with representatives
of the other. Each of Guaranty and FNB shall promptly notify the other of (i)
any material change in its business or operations, (ii) any material complaints,
investigations, or hearings (or communications indicating that the same may be
contemplated) of any Regulatory Authority, (iii) the institution of threat of
material Litigation involving such party, or (iv) the occurrence or
nonoccurrence,of an event or condition, the occurrence, or nonoccurrence, of
which would be reasonably expected to cause any of such party's representations
or warranties set forth herein in any respect as of the Effective Time; and in
each case shall keep the other fully informed with respect thereto.
8.8 Other Actions. No Party shall, or shall permit any of its
Subsidiaries, if any, to, take any action, except in every case as may be
required by applicable Law, that would or is intended to result in (i) any of
its representations and warranties set forth in this Agreement that are
qualified as to materiality being or becoming untrue, (ii) any of such
representations and warranties that are not so qualified become untrue in any
material manner having a Material Adverse Effect, (iii) any of the conditions
set forth in this Agreement not being satisfied or in violation of any provision
of this Agreement, or (iv) adversely affecting the ability of any of them to
obtain any of the Consents or Permits from Regulatory Authorities (unless such
action is required by sound banking practice).
8.9 Press Releases. Prior to the Effective Time, Guaranty 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 8.9
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.
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8.10 No Solicitation. Except with respect to this Agreement and the
transactions contemplated hereby, from the date of this Agreement until the
Effective Time or termination pursuant to Article 10, neither Guaranty nor any
Affiliate thereof, or any Representatives thereof retained by Guaranty, shall
directly or indirectly solicit any Acquisition Proposal by any Person. Except to
the extent necessary to comply with the fiduciary duties of Guaranty's Board of
Directors determined after consultation with counsel, neither Guaranty nor 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 Guaranty 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. Guaranty shall promptly notify FNB orally and in writing in the event
that it receives any inquiry or proposal relating to any such transaction.
Guaranty 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
best efforts to cause of all its Representatives not to engage in any of the
foregoing.
8.11 Accounting and Tax Treatment. Each of the Parties undertakes
and agrees to use its reasonable best 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. FNB and Guaranty undertake and agree to
use their respective reasonable best efforts to cause the Merger, and to take no
action that would cause the Merger not, to qualify for pooling-of-interests
accounting treatment.
8.12 Articles of Incorporation Provisions. Guaranty 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 the grant of any rights to any Person under the Articles
of Incorporation, Bylaws, or other governing instruments of Guaranty 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 Guaranty that
may be directly or indirectly acquired or controlled by it.
8.13 Agreement of Affiliates. Guaranty has disclosed in Section
8.13 of the Guaranty Disclosure Memorandum all Persons whom it reasonably
believes are "affiliates" of Guaranty for purposes of Rule 145 under the 1933
Act. Guaranty shall use its reasonable best efforts to cause each such Person to
deliver to FNB not later than 10 days prior to the Effective Time, a written
agreement,substantially in the form of Exhibit 4 attached hereto, providing that
such Person will not sell, pledge, transfer, or otherwise dispose of the shares
of Guaranty 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
Guaranty 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 Guaranty in exchange for shares of Guaranty Common Stock
shall not be transferable until such time as financial results covering at least
30 days of combined operations of FNB and Guaranty 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 8.13 (and FNB shall be entitled to place
restrictive legends upon certificates for shares of FNB Common Stock issued to
affiliates of Guaranty pursuant to this Agreement to enforce the provisions of
this Section 8.13). 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.
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8.14 Employee Benefits, Contracts and Severance. Prior to the
Effective Time, Guaranty may pay regular year-end bonus payments and 401(k)
contributions for all employees of Guaranty in accordance with its past
practices as set forth in the Guaranty Disclosure Memorandum. All employees of
Guaranty at the Effective Time shall become employees of the Surviving
Corporation. Following the Effective Time, FNB shall provide generally to
officers and employees of Guaranty 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 the FNB Companies to their
similarly situated officers and employees. For purposes of participation and
vesting (but not benefit accrual under any employee benefit plans of FNB and its
subsidiaries other than the Guaranty Benefit Plans) under such employee benefit
plans, the service of the employees of Guaranty prior to the Effective Time
shall be treated as service with a FNB Company participating in such employee
benefit plans. For purposes of applying any deductible limitations,
out-of-pocket minimums, or health certification requirements under any health
group plan made available to Guaranty employees and their dependents after the
Merger, Guaranty employees shall not be treated as new hires and shall be given
appropriate credit for their participation immediately prior to the Merger in
any Guaranty Benefit Plan that constituted a group health plan. 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 5.14 of the Guaranty Disclosure Memorandum between Guaranty 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 Guaranty Benefit Plans.
8.15 Employment Contracts of Certain Officers. At the Closing,
Guaranty shall pay all amounts payable under the agreements entered into by each
of Messrs. Voigt, Battaglia, McWhorter and Ms. Toundas with Guaranty dated
August 20, 1997, as if each such individual had delivered a valid notice
election thereunder, except for such obligations which cannot be satisfied or
which would be redundant due to continued employment. Those obligations will be
satisfied by FNB upon FNB's receipt of such individual's notice of termination
of employment. Further, each such individual receiving such payment at the
Closing shall execute a release in favor of FNB as to the satisfaction of the
obligation to make such payments under the agreements.
8.16 Indemnification.
(a) FNB shall, and shall cause the Surviving Corporation (and
its successors and assigns) to, indemnify, defend, and hold harmless
the present and former directors, officers, employees, and agents of
Guaranty (each, an "Indemnified Party") after the Effective Time
against all costs, fees, or expenses (including reasonable attorneys'
fees), judgments, fines, penalties, losses, claims, damages,
liabilities, and amounts paid in settlement in connection with any
Litigation 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
Guaranty'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, or cause such FNB
Company to 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. FNB shall,
and shall cause the Surviving Corporation and all other relevant FNB
Companies, to apply such rights of indemnification in good faith and to
the fullest extent permitted by applicable Law.
(b) Incident to any information furnished or disclosed by FNB
or any FNB Company in connection with the Registration Statement and
Proxy Statement, and subject to applicable Law,
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FNB shall indemnify, defend, and hold harmless the Indemnified Parties
against all costs or expenses (including reasonable attorneys' fees),
judgments, fines, penalties, losses, claims, damages, liabilities, and
amounts paid in settlement in connection with any Litigation, whether
civil or criminal, administrative, or investigative, arising out of or
under the Securities Laws or any state blue sky or securities Laws
based in whole or in part on (i) any untrue statement or alleged untrue
statement of a material fact contained in such documents (including any
amendment or supplement to such document, (ii) any omission or alleged
omission to state in such documents a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or (iii) any violation by FNB or an FNB Company of the
Securities Laws or any state blue sky or securities Laws in connection
with such documents; provided, however, that neither FNB or any FNB
Company will be liable in any such case to the extent that any such
claim, action, suit, proceeding or investigation is based upon any
untrue statement or alleged untrue statement or omission or alleged
omission made in such Registration Statement and Proxy Statement or any
amendment thereto in reliance upon and in conformity with information
furnished in writing to FNB or any FNB Company by Guaranty, or any
Indemnified Party related to Guaranty, specifically for use therein.
(c) Guaranty shall indemnify and hold harmless FNB, any FNB
Company, each of its directors, officers, employees and agents, and
each person who controls FNB or any FNB Company, against all costs or
expenses (including reasonable attorneys' fees), judgments, fines,
penalties, losses, claims, damages, liabilities, and amounts paid in
settlement in connection with any Litigation, whether civil or
criminal, administrative, or investigative, arising out of or under the
Securities Laws or any state blue sky or securities Laws based in whole
or in part on (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or Proxy
Statement (including any amendment or supplement to such document); or
(ii) any omission or alleged omission to state in such documents
material facts required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that Guaranty
will not be liable in any such case unless any such claim, action,
suit, proceeding, or investigation is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in
such Registration Statement or Proxy Statement or any amendment thereto
in reliance upon and conformity with information furnished in writing
to FNB by Guaranty specifically for use therein.
(d) If FNB or the Surviving Corporation or any of their
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 8.16.
(e) The provisions of this Section 8.16 are intended to be for
the benefit of and shall be enforceable by, each Indemnified Party, his
or her heirs and representatives and shall survive the consummation of
the Merger and be binding on all successors and assigns of FNB and the
Surviving Corporation.
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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
11.7 of this Agreement:
(a) Shareholder Approval. The shareholders of Guaranty
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, notice
of effectiveness of, or comment letter 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. Other than filing the
Certificate of Merger and receipt of a certification to merge, 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 Guaranty
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 have been declared effective under the 1933 Act, and no stop
orders suspending the effectiveness of the Registration Statement shall
have been issued, and no action, suit, proceeding, or investigation by
the SEC to suspend the effectiveness thereof shall have been initiated
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. The Merger shall qualify for
pooling of interests accounting treatment under all applicable
guidelines and regulations issued by all Regulatory Authorities and
Ernst & Young LLP, FNB's independent public accountants, shall have
issued a letter dated as of the Effective Time, to FNB, to the effect
that the Merger shall be accounted for as a pooling-of-interests under
GAAP.
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(g) Tax Matters. Each Party shall have received a written
opinion or opinions from Smith, Gambrell & Russell, LLP, 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, (ii) the
exchange in the Merger of Guaranty Common Stock for FNB Common Stock
will not give rise to gain or loss to the shareholders of Guaranty
with respect to such exchange, (iii) the federal income tax basis of
shares of FNB Common Stock received in exchange for Guaranty Common
Stock will be equal to the holder's basis of the Guaranty Common Stock
surrendered in exchange therefor, and the holding period of such FNB
Common Stock will include the holding period of the Guaranty Common
Stock surrendered in exchange therefor, (iv) 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
capital gain or loss will be recognized in an amount equal to the
difference between the cash received and the basis of the fractional
share of FNB Common Stock surrendered, and (v) a holder of Guaranty
Common Stock who exercises appraisal rights will recognize capital
gain or loss equal to the difference between the cash received and
such holder's tax basis in the Guaranty Common Stock exchanged. In
rendering such Tax Opinion, such counsel shall be entitled to rely
upon representations of officers of Guaranty 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 11.7(a) of this Agreement:
(a) Representations and Warranties. For purposes of this
Section 9.2(a), the accuracy of the representations and warranties of
Guaranty 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 Guaranty set forth in
Section 5.3 of this Agreement shall be true and correct (except for
inaccuracies which are not material in amount). The representations
and warranties of Guaranty 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 Guaranty 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
Guaranty; 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 Guaranty 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 respects.
(c) Certificates. Guaranty 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 cashier, to the effect
that the conditions of its obligations set forth in Section 9.2(b) and
9.2(b) of this Agreement have been satisfied, and (ii) certified copies
of resolutions duly adopted by Guaranty's Board of Directors and
shareholders evidencing the taking of all corporate action necessary to
authorize the
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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 Guaranty the affiliates' agreement referred to in
Section 8.13 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) Opinion of Counsel. FNB shall have received a written
opinion of Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A., counsel
to Guaranty, dated as of the Effective Time, with respect to such
matters and in such form as shall be agreed upon between such firm and
FNB.
(f) Non-Competition Agreements. FNB shall have received
an executed copy of the Non-Compete Agreement in the form attached to
this Agreement as Exhibit 4 from each director of Guaranty and an
executed copy of the Non-Compete Agreement in the form attached to this
Agreement as Exhibit 5 from each Executive Officer of Guaranty.
9.3 Conditions to Obligations of Guaranty. The obligations of
Guaranty 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 Guaranty pursuant to Section 11.7(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 not material in amount). The representations
and warranties of FNB set forth in Sections 6.11, 6.12, 6.13 and 6.15
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, 6.11, 6.12,
6.13 and 6.15) 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 Guaranty
(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 Guaranty and its counsel shall request.
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(d) Fairness Opinion. Guaranty shall have received from
Allen C. Ewing & Co. a letter, dated within five (5) days of the date
of the Proxy Statement to the effect that, in the opinion of such firm,
the consideration to be paid in the Merger is fair, from a financial
point of view, to the holders of Guaranty Common Stock.
(e) Payment of Consideration. FNB shall have delivered to
the Exchange Agent the consideration to be paid to holders of the
Guaranty Common Stock pursuant to Sections 3.1 and 3.4 of this
Agreement.
(f) Opinion of Counsel. Guaranty shall have received a
written opinion of Smith, Gambrell & Russell, LLP, counsel to FNB,
dated as of the Effective Time, with respect to such matters and in
such form as shall be agreed upon between such firm and Guaranty.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Guaranty, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual written consent of the Board of Directors
of FNB and the Board of Directors of Guaranty; or
(b) By the Board of Directors of either FNB or Guaranty
(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 Guaranty 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 thirty (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 Guaranty and Section
9.3(a) of this Agreement in the case of FNB; or
(c) By the Board of Directors of either FNB or Guaranty
in the event of a material breach by the other Party of any covenant,
agreement, or obligation contained in this Agreement which breach
cannot be or has not been cured within thirty (30) days after the
giving of written notice to the breaching Party of such breach; or
(d) By the Board of Directors of either FNB or Guaranty
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 Guaranty
fail to vote their approval of this Agreement and the transactions
contemplated hereby as required by the FFIC at the Shareholders'
Meeting where the transactions were presented to such shareholders for
approval and voted upon; or
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(e) By the Board of Directors of either FNB or Guaranty
in the event that the Merger shall not have been consummated by
February 28, 1999, 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 FNB in the event dissenters' rights are claimed,
pursuant to the applicable provisions of the FFIC, by persons owning
in the aggregate more than 10% of the issued and outstanding Guaranty
Common Stock; or
(g) By the Board of Directors of either FNB or Guaranty
(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 Guaranty 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
(h) By Guaranty, if at any time prior to the Effective
Time, the fairness opinion of Allen C. Ewing & Co. is withdrawn; or
(i) By Guaranty, if prior to the Effective Time, a
corporation, partnership, person, or other entity or group shall have
made a bona fide Acquisition Proposal that the Guaranty Board
determines in its good faith judgment and in the exercise of its
fiduciary duties, with respect to legal matters based on the written
opinion of legal counsel and as to financial matters on the written
opinion of an investment banking firm of national reputation, is more
favorable to the Guaranty stockholders and that the failure to
terminate this Agreement and accept such alternative Acquisition
Proposal would be inconsistent with the proper exercise of such
fiduciary duties.
(j) By FNB, if its Board of Directors determines by a
vote of a majority of the members of its entire Board of Directors,
upon written notice to Guaranty at least 24 hours prior to the
Closing, if the Designated Price of FNB Common Stock shall be less
than $30.00 or by Guaranty if its Board of Directors determines by a
vote of a majority of the members of its entire Board of Directors,
upon written notice to FNB at least 24 hours prior to the Closing, if
the Designated Price of FNB Common Stock shall be $28.00 or less.
10.2 Effect of Termination.
(a) 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
Sections 8.5 and 11.1 of this Agreement shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 10.1(b) or 10.1(c), 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 below) other than termination due to: (A) the failure of FNB
to satisfy a condition to Closing, (B) withdrawal of the fairness opinion of
Allen C. Ewing & Co. (so long as such withdrawal is not due to materially
inaccurate or fraudulent information provided by Guaranty to Allen C. Ewing &
Co.), or (C) the failure to satisfy the conditions set forth in Section 9.1
paragraphs (a), (b), (d), (e), (f) and (g), FNB shall be entitled to a cash
payment from Guaranty in an amount equal to $1,500,000 upon the occurrence of
any Subsequent Triggering Event (as defined below) within twelve (12) months
following the date of such
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termination. In the event this Agreement is terminated as a result of FNB's or
Guaranty's failure to satisfy any of its representations, warranties or
covenants set forth herein, the non-terminating party shall reimburse the
terminating party for its reasonable out-of-pocket expenses relating to the
Merger in an amount not to exceed $150,000, which amount shall not be deemed an
exclusive remedy or liquidated damages.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date of this Agreement:
(i) Guaranty, 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 (the term "Person" for
purposes of this Section also 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 FNB or any of its
Subsidiaries (each a "FNB Subsidiary") or the Board of Directors of Guaranty
shall have recommended that the shareholders of Guaranty approve or accept any
Acquisition Transaction other than as contemplated by this Agreement. For
purposes of this Agreement, (A) "Acquisition Transaction" shall mean (x) a
merger or consolidation, or any similar transaction, involving Guaranty, (y) a
purchase, lease or other acquisition of all or substantially all of the assets
or deposits of Guaranty, 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 Guaranty, other than securities
acquired by Guaranty's officers and directors, and (B) "Subsidiary," for
purposes of this Section, also shall have the meaning set forth in Rule 12b-2
under the 1934 Act;
(ii) Any Person (excluding the officers and directors of
Guaranty), other than FNB or any FNB 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 Guaranty 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 Guaranty shall not have approved
the transactions contemplated by this Agreement at the meeting held for that
purpose or any adjournment thereof, or such meeting shall not have been held or
shall have been canceled prior to termination of this Agreement, in either
case, after Guaranty's Board of Directors shall have withdrawn or modified (or
publicly announced its intention to withdraw or modify or its interest in
withdrawing or modifying) its recommendation that the shareholders of Guaranty
approve the transactions contemplated by this Agreement, or Guaranty, without
having received FNB's prior written consent, shall have authorized,
recommended, proposed (or publicly announced its intention to authorize,
recommend or propose, or its interest in authorizing, recommending or
proposing) an agreement to engage in an Acquisition Transaction with any person
other than FNB or a FNB Subsidiary;
(iv) Guaranty shall have willfully and materially breached
any material covenant or obligation contained in this Agreement in anticipation
of engaging in an Acquisition Transaction, and such breach would entitle FNB to
terminate this Agreement and such breach is not cured; or
(v) Any Person other than FNB or any FNB Subsidiary,
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.
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(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 Guaranty Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) of subsection (b) of this Section 10.2, except that the
percentage referred to in clause (z) shall be 25%.
(d) Guaranty shall notify FNB promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event.
10.3 Non-Survival of Representations and Certain 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,
consolidation, acquisition of all of the stock or assets of, or other
business combination involving such Party or any of its Subsidiaries
or any proposal or offer to acquire in any manner a substantial equity
interest in, or a substantial portion of the assets of, such Party or
any of its Subsidiaries (other than the transactions contemplated or
permitted by this Agreement).
"Affiliate" of a Person shall mean any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled
by or under common control with such Person.
"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.
"Change in Control of FNB" shall mean that at any time between
the date of this Agreement and the Effective Time, any person,
corporation, or group of associated persons acting individually or in
concert enters into any agreement, understanding, contract, or other
arrangement to acquire, or otherwise acquires (or the right to
acquire) by merger, consolidation, the purchase of capital stock (or
Rights to purchase capital stock) of FNB, or the purchase of
substantially of the Assets of FNB, or otherwise becomes a direct or
indirect beneficial owner of, shares of Common Stock of FNB
representing an aggregate of more than 50% of the votes then entitled
to be cast at an election of directors of FNB.
"Closing" shall have the meaning set forth in Section 1.2 of this
Agreement.
"Consent" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person.
"Contract" shall mean any written agreement, commitment,
contract, note, bond, mortgage, indenture, instrument, lease,
obligation, or plan 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 or Assets.
"Default" shall mean (i) any breach or violation of or default
under any Contract, (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, 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 where, in any
such event, such default is reasonably likely to have a Material
Adverse Effect on a Party.
"Derivatives Contract" shall have the meaning set forth in
Section 5.20 of this Agreement.
"Designated Price" shall mean the average of the closing bid and
ask prices of FNB Common Stock as reported by Nasdaq (as reported in
the Wall Street Journal, or if not reported thereby, another
authoritative source selected by FNB) or such other trading system or
exchange upon which the FNB Common Stock shall then be traded for the
ten (10) consecutive full trading days in which such shares are traded
prior to the fifth business day preceding the Determination Date.
"Determination Date" shall mean the date on which the last of the
following occurs: (i) the effective date (including expiration of any
applicable waiting period required by Law) 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 Guaranty approve this Agreement to the extent that
such approval is required by applicable Law.
"Effective Time" shall have the meaning set forth in Section 1.3
of this Agreement.
"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.,
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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.
"Exchange Agent" shall have the meaning set forth in Section 4.1
of this Agreement.
"Exchange Ratio" shall have the meaning set forth in Section
3.1(c)of this Agreement.
"Exhibits" 1, 2, and 3 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.
"FFIC" shall mean the Florida Financial Institutions Code, which
includes those Florida Laws identified in Section 655.005(j) of the
Florida Statutes.
"FNB" shall have the meaning set forth in the first paragraph of
this Agreement.
"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 $2.00 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 Guaranty 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 June 30, 1998, and as of December 31, 1997 and 1996,
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 June 30, 1998, and for each of the three years ended
December 31, 1997, 1996, and 1995, 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 June 30, 1998.
"FNB Preferred Stock" shall mean the $10.00 par value preferred
stock of FNB.
"FNB SEC Reports" shall have the meaning set forth in Section
6.5(a) of this Agreement.
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"FNB Subsidiaries" shall mean the Subsidiaries of FNB, which
shall include any corporation, bank, savings association, or other
organization established or acquired as a Subsidiary of FNB in the
future and owned by FNB at the Effective Time.
"GAAP" shall mean generally accepted accounting principles in the
United States, consistently applied during the periods involved
applicable to banks or bank holding companies, as the case may be.
"Guaranty" shall have the meaning set forth in the first paragraph
of this Agreement.
"Guaranty Benefits Plans" shall have the meaning set forth in
Section 5.13(a) of this Agreement.
"Guaranty Common Stock" shall mean the $2.00 par value common
stock of Guaranty.
"Guaranty Contract" shall have the meaning set forth in Section
5.14.
"Guaranty Disclosure Memorandum" shall mean the written
information entitled "Guaranty Bank & Trust Company 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.
"Guaranty ERISA Plan" shall have the meaning set forth in Section
5.13(a) of this Agreement.
"Guaranty Financial Statements" shall mean (i) the balance sheets
(including related notes and schedules, if any) of Guaranty as of June
30, 1998, and as of December 31, 1997, 1996 and 1995, 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 June 30, 1998, and for each of the three fiscal years ended
December 31, 1997, 1996, and 1995, as filed by Guaranty with the
Federal Reserve Bank of Atlanta and the Florida Department of Banking
and Finance, and (ii) the balance sheets of Guaranty (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 Guaranty's Call Reports filed
and published in accordance with applicable federal regulation with
respect to periods ended subsequent to June 30, 1998.
"Guaranty Interim Balance Sheet" shall mean the balance sheet
(including related notes and schedules, if any) of Guaranty as of June
30, 1998.
"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).
"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.
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"Indemnified Party" shall have the meaning set forth in Section
8.16 of this Agreement.
"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.
"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.
"Lien" with respect to any Asset, 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 or being contested in good faith, (ii) for depository
institution Subsidiaries of a Party, pledges to secure deposits, and
(iii) 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 by any Person alleging potential
liability.
"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 its 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.
"market price" shall have the meaning set forth in Section 3.5 of
this Agreement.
"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, and (d) 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 the Preamble of this
Agreement.
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"Nasdaq" shall mean the Nasdaq Stock Market.
"Order" shall mean any decree, injunction, judgment, order,
decision or award, ruling, or writ of any federal, state, local, or
foreign or other court, arbitrator, mediator, tribunal, administrative
agency, or Regulatory Authority.
"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 Interim or FNB or Guaranty, and
"Parties" shall mean Interim, FNB, Guaranty.
"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.
"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 Guaranty
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
Guaranty 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 Guaranty 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 Federal Deposit
Insurance Corporation, the SEC, NASD, Nasdaq and all state regulatory
agencies having jurisdiction over the Parties and their respective
Subsidiaries.
"Rights" shall mean all arrangements, calls, commitments,
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 any contract, commitments or other
arrangements by which a Person is or may be bound to issue additional
shares of its capital stock or options, warrants, rights to purchase
or acquire any additional shares of its capital stock, or options,
warrants, or rights to purchase or acquire any additional shares of
its capital stock.
"SEC" shall mean the Securities and Exchange Commission.
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"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 Guaranty to be held pursuant to Section 8.1 of this
Agreement, including any adjournment or adjournments thereof.
"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 Interim as the surviving
corporation resulting from the Merger.
"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)
of this Agreement.
"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."
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11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2, each of
FNB and Guaranty 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 Guaranty shall each 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 Allen C. Ewing & Co., as to
Guaranty, 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 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 Guaranty or FNB, each of Guaranty 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 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 Agreement by and between FNB and Guaranty dated June 1,
1998). 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 8.1, 8.14, 8.15 and 8.16 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 Guaranty Common Stock, there shall be made
no amendment that reduces or modifies in any material respect the consideration
to be received by holders of Guaranty Common Stock without the further approval
of such shareholders.
11.6 Obligations of FNB. Whenever this Agreement requires FNB
(including the Surviving Corporation) to take any action, such requirement
shall be deemed to include an undertaking by FNB to cause the FNB Subsidiaries
to take such action.
11.7 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 Guaranty, to waive or
extend the time for the compliance or fulfillment by Guaranty 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, Guaranty, 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 Guaranty 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 Guaranty.
(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.
11.8 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.
11.9 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:
Guaranty: 1340 E. Venice Avenue
Venice, Florida 34292-2246
Telecopy Number: 941/488-8470
Attention: President
Copy to Counsel: Smith, Mackinnon, Greeley, Bowdoin & Edwards, P.A.
255 South Orange Avenue
Suite 800
Orlando, Florida 32801
Telecopy Number: 407/843-2448
Attention: John P. Greeley, Esquire
FNB or Interim: One F.N.B. Boulevard
Hermitage, Pennsylvania 16148
Telecopy Number: 724/983-3515
Attention: Chairman and Chief Executive Officer
Copy to Counsel: Smith, Gambrell & Russell, LLP
1230 Peachtree Street, NE
Suite 3100, Promenade II
Atlanta, Georgia 30309-3592
Telecopy Number: 404/685-7058
Attention: Robert C. Schwartz, Esquire
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11.10 Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws of the State of Florida, without regard to any
applicable conflicts of Laws.
11.11 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.
11.12 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
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 Chief Executive Officer
GUARANTY BANK & TRUST COMPANY
By: /s/ David F. Voigt
-------------------------------------------------------
Name: David F. Voigt
Title: President and Chief Executive Officer
Southwest Interim Bank No. 5 hereby joins in the foregoing Agreement,
undertakes that it will be bound thereby and that it will duly perform all the
acts and things therein referred to or provided to be done by it.
IN WITNESS WHEREOF, Southwest Interim Bank No. 5 has caused this
undertaking to be made in counterparts by its duly authorized officers and its
corporate seal to be hereunto affixed as of this ______ day of
_______________________, 1998.
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FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (the "First
Amendment") is made and entered into as of October 15, 1998, by and between
F.N.B. CORPORATION ("FNB"), a Pennsylvania corporation and GUARANTY BANK &
TRUST COMPANY ("Guaranty"), a Florida state banking corporation, and to be
joined in by SOUTHWEST INTERIM BANK NO. 5, N.A. ("Interim"), a national banking
association to be chartered under the laws of the United States and to become a
wholly-owned subsidiary of FNB.
PREAMBLE
WHEREAS, FNB and Guaranty entered into an Agreement and Plan of Merger
(the "Merger Agreement") dated as of August 20, 1998, whereby FNB and Guaranty
agreed to the merger of Guaranty with and into a state-chartered interim bank;
and
WHEREAS, the parties now desire to amend the Merger Agreement on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the above and the mutual covenants
and agreements set forth herein, the parties agree as follows:
1. General. The introductory paragraph of the Merger Agreement is
hereby amended by deleting the text "to be joined in by Southwest Interim Bank
No. 5, a state banking corporation to be chartered under the laws of the State
of Florida" and by substituting in lieu thereof the following: "to be joined in
by Southwest Interim Bank No. 5, N.A., a national banking association to be
chartered under the laws of the United States." The Merger Agreement is hereby
further amended by replacing all references in the Merger Agreement to Interim
as a state-chartered entity with references to Interim as a national banking
association organized under the laws of the United States and operating under
the name "Southwest Interim Bank No. 5, N.A."
2. Preamble. (a) The fifth sentence of the first paragraph of the
Preamble of the Merger Agreement is hereby amended by deleting the text thereof
in its entirety and by substituting in lieu thereof: "Following consummation of
the Merger, West Coast Bank, a wholly-owned subsidiary of FNB, will be merged
with and into Interim."
(b) The sixth sentence of the first paragraph of
the Preamble of the Merger Agreement is hereby amended by deleting the text
"the Florida Department of Banking and Finance" and by substituting in lieu
thereof: "the Comptroller of the Currency."
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3. Merger. (a) Section 1.1 of the Merger Agreement is hereby
amended by deleting the text of the second and third sentences thereof and by
substituting in lieu thereof the following:
"The separate existence of Guaranty shall thereupon cease,
and Interim, which will be a wholly-owned subsidiary of FNB,
shall be the Surviving Corporation resulting from the Merger,
shall have a name as determined in the sole discretion of FNB
and shall be governed by the National Bank Act. The Merger
shall have the effects specified in the National Bank Act and
in the FFIC."
(b) Section 1.1 of the Merger Agreement is further amended by
deleting the text of the fourth and fifth sentences thereof in their entirety.
4. Effective Time. Section 1.3 of the Merger Agreement is hereby
amended by deleting the text of the first and second sentences thereof and
substituting in lieu thereof the following:
"The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time
that certification of the Merger (the "Certification of
Merger") is received from the Comptroller of the Currency
(the "Effective Time"). Unless the Parties otherwise mutually
agree in writing, the Parties shall use their best efforts to
cause the Certification of Merger to be issued by the
Comptroller of the Currency, and to become effective, on the
date of Closing and shall use their best efforts to cause the
Effective Time to occur on the date of the Closing."
5. Conversion of Shares.
(a) Section 3.1 of the Merger Agreement is hereby amended by
deleting the text of subsection (a) thereof in its entirety and by substituting
in lieu thereof the following:
"Each share of common stock of Interim issued and outstanding
immediately prior to the Effective Time shall remain
outstanding as one share of common stock of the Surviving
Corporation."
(b) Section 3.1 of the Merger Agreement is hereby further
amended by deleting, in subsection (e) thereof, the references to "ss. 658.44
of the FFIC" and by substituting in lieu thereof: "12 U.S.C. ss. 215a."
6. Regulatory Filings; Financial Statements. Section 5.5 of the
Merger Agreement is hereby amended by deleting, in subsection (b) thereof, the
words "Securities Act of 1934" in the third line of such subsection and by
substituting in lieu thereof: "Securities Exchange Act of 1934."
7. Organization, Standing, and Power. Section 6.1 of the Merger
Agreement is hereby amended by deleting the first sentence of subsection (b)
thereof in its entirety and by substituting in lieu thereof the following:
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"Interim will be a national banking association (as a
wholly-owned subsidiary of FNB) after the execution of this
Agreement and prior to the Effective Time and shall have the
corporate power and authority to carry on the business of
banking, including the exercise of trust powers."
8. FNB Subsidiaries. Section 6.4 of the Merger Agreement is
hereby amended by adding, prior to the penultimate sentence thereof, the
following:
"Interim, when formed, will be a national banking association
formed under the laws of the United States and, through the
Effective Time, shall be a wholly-owned direct subsidiary of
FNB."
9. Compliance with Laws. Section 6.8 of the Merger Agreement is
hereby amended by deleting the second sentence thereof in its entirety and by
substituting in lieu thereof the following:
"Except for Interim, each FNB Company has in effect, and,
after its formation and prior to the Effective Time, Interim
shall have 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 is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect
on FNB."
10. Affirmative Covenants of Guaranty. Section 7.1 of the Merger
Agreement is hereby amended by adding, after the words "complies with FFIEC
Year" in the sixth line of such section, the following: "2000."
11. Registration Statement. Section 8.1 of the Merger Agreement is
hereby amended by deleting the word "October" in the parenthetical clause in
the first sentence of such section and substituting therefor the word
"November."
12. Filings with State Offices. Section 8.3 of the Merger
Agreement is hereby amended by deleting the text of such section in its
entirety and by substituting in lieu thereof the following:
"8.3 Filings with Regulatory Authorities. Upon the terms and
subject to the conditions of this Agreement, FNB shall
execute and file an application to merge with the Office of
the Comptroller of the Currency, an application to merge with
the Federal Deposit Insurance Corporation, and any other
documents required by applicable regulatory agencies in
connection with the Closing (collectively, the "Application
to Merge")."
13. Conditions to Obligations of Each Party. Section 9.1 of the
Merger Agreement is hereby amended by deleting from the first sentence of
subsection (c) thereof the words "Other than filing the Certificate of Merger
and receipt of a certification to merge," and by substituting in lieu thereof
the following:
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"Other than filing the Application to Merge and receipt of
the Certification of Merger,"
14. Termination. Section 10.1 of the Merger Agreement is hereby
amended by deleting subsection (f) thereof in its entirety and by substituting
in lieu thereof the following:
"(f) By FNB in the event dissenters' rights are claimed,
pursuant to 12 U.S.C. ss. 215a, by persons owning in the
aggregate more than 10% of the issued and outstanding
Guaranty Common Stock; or"
15. Change in Control of FNB. The definition of the term "Change
in Control of FNB" in Section 11.1 of the Merger Agreement is hereby amended by
adding subsequent to the words "or the purchase of substantially" in the fifth
line thereof, the word "all."
16. Designated Price. The definition of the term "Designated
Price" in Section 11.1 of the Merger Agreement is hereby amended by deleting
the text of such definition in its entirety and by substituting in lieu thereof
the following:
"Designated Price" shall mean the average, for the ten (10)
consecutive full trading days in which such shares are traded
prior to the fifth business day preceding the Determination
Date, of the average of the closing bid and ask prices of FNB
Common Stock for each such trading day as reported by Nasdaq
(as reported in the Wall Street Journal, or if not reported
thereby, another authoritative source selected by FNB) or
such other trading system or exchange upon which the FNB
Common Stock shall then be traded.
17. Regulatory Authorities. The definition of the term "Regulatory
Authorities" in Section 11.1 of the Merger Agreement is hereby amended by
adding, after the words "Department of Justice," in the second line thereof,
the following: "the Office of the Comptroller of the Currency."
18. Signature Page. The signature page of the Merger Agreement is
hereby amended by deleting the references to "Southwest Interim Bank No. 5" in
their entirety and by substituting in lieu thereof: "Southwest Interim Bank No.
5, N.A."
19. List of Exhibits. The List of Exhibits set forth on page (iii)
of the Merger Agreement is hereby amended to delete the document currently
denominated as Exhibit 1 and to renumber Exhibits 2 through 5 as Exhibits 1
through 4. All references to such exhibits throughout the Merger Agreement
shall hereafter be references to the exhibit numbers as amended hereby.
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20. Defined Terms. All terms which are capitalized herein, but
which are not defined herein, shall have the meanings ascribed to them in the
Merger Agreement.
21. Inconsistent Provisions. All provisions of the Merger
Agreement that have not been amended by this First Amendment shall remain in
full force and effect. Notwithstanding the foregoing, to the extent that there
is any inconsistency between the provisions of the Merger Agreement and the
provisions of this First Amendment, the provisions of this First Amendment
shall control.
22. Counterparts. This First Amendment may be executed in two or
more counterparts, all of which, when taken together, shall constitute a single
original.
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IN WITNESS WHEREOF, each of the parties has caused this First
Amendment to be executed on its behalf as of the date first above written.
F.N.B. CORPORATION
By: /s/ Peter Mortensen
----------------------------------------------
Name: Peter Mortensen
Title: Chairman of the Board and Chief
Executive Officer
GUARANTY BANK & TRUST COMPANY
By: /s/ David F. Voigt
----------------------------------------------
Name: David F. Voigt
Title: President and Chief Executive Officer
Southwest Interim Bank No. 5, N.A. hereby joins in the foregoing First
Amendment, undertakes that it will be bound thereby and that it will duly
perform all the acts and things therein referred to or provided to be done by
it.
IN WITNESS WHEREOF, Southwest Interim Bank No. 5, N.A. has caused this
undertaking to be made by its duly authorized officers and its corporate seal
to be hereunto affixed as of this ___ day of ___________, 1998.
SOUTHWEST INTERIM BANK NO. 5, N.A.
By:
-----------------------------------------------
Name:
Title:
Attest: ____________________
Secretary
[Corporate Seal]
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APPENDIX B
August 20, 1998
Board of Directors
Guaranty Bank & Trust Company
1340 East Venice Avenue
Venice, Florida 34292-2246
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of Guaranty Bank & Trust Company ("Bank") of Venice,
Florida, of the consideration to be paid to the shareholders of the Bank by
F.N.B. Corporation ("F.N.B.") of Hermitage, Pennsylvania, as provided by the
Agreement and Plan of Merger ("Merger Agreement") entered into by the parties
on August 20,1998. Pursuant to the Merger Agreement, F.N.B. will acquire all of
the outstanding shares of the Bank by exchanging F.N.B. shares for the shares
of the Bank. Outstanding options of the Bank will be assumed by F.N.B. The Bank
will be merged with and into F.N.B. and the Bank will cease to exist.
In performing our analysis of the proposed merger, we have among other things:
1. Reviewed the audited statements prepared by Bobbitt, Pittenger &
Company, P.A. of Sarasota, Florida, for the fiscal years ended
12/31/97, 12/31/96, and 12/31/95.
2. Reviewed the Call Reports of the Bank filed with the regulators
reflecting the operations of the Bank for the periods ended 3/31/98,
12/31/97, 12/31/96, and 12/31/95.
3. Compared the Bank's financial performance with other comparable
banking institutions operating in Florida.
4. Reviewed the Agreement and Plan of Merger dated August 20, 1998.
5. Compared the terms of the Agreement and Plan of Merger with F.N.B.
with the terms offered shareholders of comparable institutions in
Florida in recent transactions.
6. Reviewed the budget for the Bank for the year 1998.
7. Reviewed the five-year financial objectives for the Bank.
8. Reviewed other financial information concerning the Bank.
9. Examined the Bank's market share in the Sarasota County market.
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Board of Directors
Page Two
August 20, 1998
10. Reviewed the financial information concerning the operations of F.N.B.
11. Reviewed the financial condition of F.N.B. and the impact of the
proposed transaction on the market price of the shares of F.N.B.
12. Reviewed the price performance and trading activity in the shares of
F.N.B. over the past six months.
13. Reviewed the Board of Directors' marketing plan which was utilized in
contacting qualified bank holding companies interested in acquiring
the Bank.
In arriving at our opinion, we have relied upon the accuracy and completeness
of the information provided to us by the Bank which we have used in the
accompanying analysis. We have not conducted an independent verification of
such information or performed an independent appraisal of the Bank's assets and
liabilities.
On July 15, 1998, Ewing delivered to the Board of Directors of the Bank its
preliminary oral opinion as to the fairness, from a financial point of view, of
the terms offered by F.N.B., subject to Ewing's review of the final Merger
Agreement.
Based upon the accompanying analysis and our knowledge of and experience in the
valuation of Florida banks and their securities, it is our opinion that the
consideration to be paid by F.N.B. Corporation for the common shares of
Guaranty Bank & Trust Company is fair, from a financial point of view, to the
shareholders of the Bank.
The opinion of Allen C. Ewing & Co. ("Ewing") is directed to the Board of
Directors and does not constitute a recommendation to any shareholder as to how
such shareholder should vote at the shareholders' meeting held in connection
with the proposed transaction. Ewing has not been requested to opine as to, and
the opinion does not address, the Board's underlying business decision to
support and recommend the acquisition to the shareholders.
Very truly yours,
ALLEN C. EWING & CO.
By /s/ Benjamin C. Bishop, Jr.
--------------------------------------
Benjamin C. Bishop, Jr.
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APPENDIX C
12 U.S.C. SS.215A
MERGER OF NATIONAL BANKS OR STATE BANKS INTO NATIONAL BANKS
(A) APPROVAL OF COMPTROLLER, BOARD AND SHAREHOLDERS; MERGER AGREEMENT; NOTICE;
CAPITAL STOCK; LIABILITY OF RECEIVING ASSOCIATION
One or more national banking associations or one or more State banks, with
the approval of the Comptroller, under an agreement not inconsistent with this
subchapter, may merge into a national banking association located within the
same State, under the charter of the receiving association. The merger
agreement shall --
(1) be agreed upon in writing by a majority of the board
of directors of each association or State bank participating in the
plan of merger;
(2) be ratified and confirmed by the affirmative vote of
the shareholders of each such association or State bank owning at
least two-thirds of its capital stock outstanding, or by a greater
proportion of such capital stock in the case of a State bank if the
laws of the State where it is organized so require, at a meeting to be
held on the call of the directors, after publishing notice of the
time, place, and object of the meeting for four consecutive weeks in a
newspaper of general circulation published in the place where the
association or State bank is located, or, if there is no such
newspaper, then in the newspaper of general circulation published
nearest thereto, and after sending such notice to each shareholder of
record by certified or registered mail at least ten days prior to the
meeting, except to those shareholders who specifically waive notice,
but any additional notice shall be given to the shareholders of such
State bank which may be required by the laws of the State where it is
organized. Publication of notice may be waived, in cases where the
Comptroller determines that an emergency exists justifying such
waiver, by unanimous action of the shareholders of the association or
State banks;
(3) specify the amount of the capital stock of the
receiving association, which shall not be less than that required
under existing law for the organization of a national bank in the
place in which it is located and which will be outstanding upon
completion of the merger, the amount of stock (if any) to be
allocated, and cash (if any) to be paid, to the shareholders of the
association or State bank being merged into the receiving association;
and
(4) provide that the receiving association shall be
liable for all liabilities of the association or State bank being
merged into the receiving association.
(B) DISSENTING SHAREHOLDERS
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank to be merged into
the receiving association who
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has voted against such merger at the meeting of the association or bank of
which he is a stockholder, or has given notice in writing at or prior to such
meeting to the presiding officer that he dissents from the plan of merger,
shall be entitled to receive the value of the shares so held by him when such
merger shall be approved by the Comptroller upon written request made to the
receiving association at any time before thirty days after the date of
consummation of the merger, accompanied by the surrender of his stock
certificates.
(C) VALUATION OF SHARES
The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the merger, by an appraisal made by a
committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the receiving
association; and (3) one selected by the two so selected. The valuation agreed
upon by any two of the three appraisers shall govern. If the value so fixed
shall not be satisfactory to any dissenting shareholder who has requested
payment, that shareholder may, within five days after being notified of the
appraised value of his shares, appeal to the Comptroller, who shall cause a
reappraisal to be made which shall be final and binding as to the value of the
shares of the appellant.
(D) APPLICATION TO SHAREHOLDERS OF MERGING ASSOCIATIONS: APPRAISAL BY
COMPTROLLER; EXPENSES OF RECEIVING ASSOCIATION; SALE AND RESALE OF
SHARES; STATE APPRAISAL AND MERGER LAW
If, within ninety days from the date of consummation of the merger,
for any reason one or more of the appraisers is not selected as herein
provided, or the appraisers fail to determine the value of such shares, the
Comptroller shall upon written request of any interested party cause an
appraisal to be made which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal or the appraisal, as the
case may be, shall be paid by the receiving association. The value of the
shares ascertained shall be promptly paid to the dissenting shareholders by the
receiving association. The shares of stock of the receiving association which
would have been delivered to such dissenting shareholders had they not
requested payment shall be sold by the receiving association at an advertised
public auction, and the receiving association shall have the right to purchase
any of such shares at such public auction, if it is the highest bidder
therefor, for the purpose of reselling such shares within thirty days
thereafter to such person or persons and at such price not less than par as its
board of directors by resolution may determine. If the shares are sold at
public auction at a price greater than the amount paid to the dissenting
shareholders, the excess in such sale price shall be paid to such dissenting
shareholders. The appraisal of such shares of stock in any State bank shall be
determine in the manner prescribed by the law of the State in such cases,
rather than as provided in this section, if such provision is made in the State
law; and no such merger shall be in contravention of the law of the State under
which such bank is incorporated. The provisions of this subsection shall apply
only to shareholders of (and stock owned by them in) a bank or association
being merged into the receiving association.
(E) STATUS OF RECEIVING ASSOCIATION; PROPERTY RIGHTS AND INTERESTS VESTED
AND HELD AS FIDUCIARY
The corporate existence of each of the merging banks or banking
associations participating in such merger shall be merged into and continued in
the receiving association and such receiving association shall be deemed to be
the same corporation as each bank or banking association participating in the
merger. All rights, franchises, and interests of the individual merging banks
or banking associations in and to every type of property (real, personal, and
mixed) and chooses in action shall be transferred to and vested in the
receiving association by virtue of such merger without any deed or other
transfer. The receiving association, upon the merger and without any order or
other action on the part of any court or otherwise, shall hold and enjoy all
rights of property, franchises, and interests, including appointments,
designations, and nominations, and all other rights
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and interests as trustee, executor, administrator, registrar of stocks and
bonds, guardian of estates, assignee, receiver, and committee of estates of
lunatics, and in every other fiduciary capacity, in the same manner and to the
same extent as such rights, franchises, and interests were held or enjoyed by
any one of the merging banks or banking associations at the time of the merger,
subject to the conditions hereinafter provided.
(F) REMOVAL AS FIDUCIARY; DISCRIMINATION
Where any merging bank or banking association, at the time of the
merger, was acting under appointment of any court as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates, assignee,
receiver, or committee of estates of lunatics, or in any other fiduciary
capacity, the receiving association shall be subject to removal by a court of
competent jurisdiction in the same manner and to the same extent as was such
merging bank or banking association prior to the merger. Nothing contained in
this section shall be considered to impair in any manner the right of any court
to remove the receiving association and to appoint in lieu thereof a substitute
trustee, executor, or other fiduciary, except that such right shall not be
exercised in such a manner as to discriminate against national banking
associations, nor shall any receiving association be removed solely because of
the fact that it is a national banking association.
(G) ISSUANCE OF STOCK BY RECEIVING ASSOCIATION; PREEMPTIVE RIGHTS
Stock of the receiving association may be issued as provided by the
terms of the merger agreement, free from any preemptive rights of the
shareholders of the respective merging banks.
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PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Numbered Paragraph 6.b of the FNB Charter provides as follows:
Directors and Officers of the Corporation shall be indemnified as of
right to the fullest extent now or hereafter permitted by law in connection
with any actual or threatened action, suit or proceedings, civil, criminal,
administrative, investigative or other (whether brought by or in the right of
the Corporation or otherwise), arising out of their service to the Corporation
or to another organization at the request of the Corporation, or because of
their positions with the Corporation. Persons who are not Directors or Officers
of the Corporation may be similarly indemnified in respect of such service to
the extent authorized at any time by the Board of Directors of the Corporation.
The Corporation may purchase and maintain insurance to protect itself and any
such Director, Officer or other person against any liability, cost or expense
asserted against or incurred by him in respect of such service, whether or not
the Corporation would have the power to indemnify him against such liability by
law or under the provisions of this paragraph. The provisions of this paragraph
shall be applicable to persons who have ceased to be Directors or Officers, and
shall inure to the benefit of the heirs, executors and administrators of
persons entitled to indemnity hereunder.
Article II, Section 17 of the FNB Bylaws provides that to the fullest
extent permitted by law, no director of FNB shall be personally liable for
monetary damages for any action taken, or any failure to take any action.
Section 1741 of the PBCL provides that a corporation shall (subject to
the provisions described in the second succeeding paragraph) have the power to
indemnify any person who was or is a party, or is threatened to be made a
party, to any threatened, pending or completed action or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation), by reason of the fact that such person is or was
a representative of the corporation, or is or was serving at the request of the
corporation as a representative of another domestic or foreign corporation for
profit or not-for-profit, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such persons in
connection with the action or proceeding if such person acted in good faith and
in a manner he 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 conduct was unlawful. The termination of any
action or proceeding by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent shall not of itself create a
presumption that such person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
corporation or, with respect to any criminal proceeding, had reasonable cause
to believe that his conduct was unlawful.
Under Section 1744 of the PBCL, any such indemnification (unless
ordered by a court) shall be made by the corporation only as authorized in a
specific case upon a determination that indemnification of the representative
is proper in the circumstances because such person has met the applicable
standard of conduct. Such determination shall be made:
(1) By the board of directors by a majority vote of
a quorum consisting of directors who were not parties to the action or
proceeding; or
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(2) If such quorum is not obtainable or, even if
obtainable, a majority vote of a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion; or
(3) By the shareholders.
Notwithstanding the above, Section 1743 of the PBCL provides that to
the extent that a representative of the corporation has been successful on the
merits or otherwise in defense of any action or proceeding referred to above,
or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
Under Section 1745 of the PBCL, expenses (including attorneys' fees)
incurred in defending any action or proceeding may be paid by the corporation
in advance of the final disposition of the action or proceeding upon receipt of
an undertaking by or on behalf of the representative to repay such amount if it
is ultimately determined that such person is not entitled to be indemnified by
the corporation.
Section 1746 of the PBCL further provides that the indemnification
provided by Sections 1741, 1742 and 1743 and the advancement of expenses
provided by Section 1745 shall not be deemed exclusive of any other rights to
which a person seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of shareholders, disinterested
directors or otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding that office. A corporation may
create a fund of any nature, which may, but need not be, under the control of a
trustee, or otherwise secure or insure in any manner its indemnification
obligations, whether arising under or pursuant to Section 1746 or otherwise.
Indemnification pursuant to Section 1746 shall not be made in any case 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.
Indemnification pursuant to Section 1746 of the PBCL under any bylaw,
agreement, vote of shareholders, or directors or otherwise may be granted for
any action taken or any failure to take any action and may be made whether or
not the corporation would have the power to indemnify the person under any
other provision of law (except as provided in such Section 1746) and whether or
not the indemnified liability arises or arose from any threatened, pending or
completed action by or in the right of the corporation. Section 1746 declares
such indemnification to be consistent with the public policy of Pennsylvania.
The foregoing is only a general summary of certain aspects of
Pennsylvania law dealing with indemnification of directors and officers and
does not purport to be complete. It is qualified in its entirety by reference
to the relevant statutes which contain detailed specific provisions regarding
the circumstances under which and the person for whose benefit indemnification
shall or may be made and accordingly are incorporated herein by reference as
Exhibit 99.3 of this Registration Statement.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed with or incorporated by reference in
this Registration Statement:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ---------------------------------------------------------------
2.1 Agreement and Plan of Merger, by and between F.N.B.
Corporation and Guaranty Bank & Trust Company, dated as of
August 20, 1998, as amended on October 15, 1998 (included as
Appendix A to the Proxy Statement-Prospectus)
5.1 Opinion of Cohen & Grigsby, P.C.
8.1 Opinion of Smith, Gambrell & Russell, LLP regarding tax matters
23.1 Consent of Ernst & Young LLP
23.2 Consent of Hill, Barth & King, Inc.
23.3 Consent of PricewaterhouseCoopers LLP
23.4 Consent of Hacker, Johnson, Cohen & Grieb, PA
23.5 Consent of Bobbitt, Pittenger & Company, PA
23.6 Consent of Cohen & Grigsby, P.C. (included in Exhibit 5.1)
23.7 Consent of Smith, Gambrell & Russell, LLP (included in
Exhibit 8.1)
23.8 Consent of Allen C. Ewing & Co.
24.1 Powers of Attorney
99.1 Form of Proxy for Special Meeting of Shareholders of Guaranty
99.2 Opinion of Allen C. Ewing & Co. (included as Appendix C to
the Proxy Statement-Prospectus)
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement;
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(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change in such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) The undersigned Registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act;
and, where interim financial information required to be presented by Article 3
of Regulation S-X is not set forth in the prospectus, to deliver, or cause to
be delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(d) (1) The undersigned Registrant hereby undertakes as follows:
that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a
part of this Registration Statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable
registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that
is filed pursuant to paragraph (1) immediately preceding, or
(ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act and is used in connection with
an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and
will not be used until such amendment is effective, and that,
for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid
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by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(f) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to items 4, 10(b), 11, or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Hermitage,
Commonwealth of Pennsylvania, on November 9, 1998.
F.N.B. CORPORATION
By: /s/ Peter Mortensen
--------------------------------
Peter Mortensen
Chairman and President
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Peter Mortensen
- ----------------------------------------------------- Chairman of the Board and Chief
Peter Mortensen Executive Officer (Principal November 9, 1998
Executive Officer)
- ----------------------------------------------------- President, Chief Operating __________, 1998
Gary L. Tice Officer and Director
*
- ----------------------------------------------------- Vice Chairman November 9, 1998
Stephen J. Gurgovits
* Executive Vice President __________, 1998
- -----------------------------------------------------
William J. Rundorff
/s/ John D. Waters Vice President and Chief Financial
- ----------------------------------------------------- Officer (Principal Financial and November 9, 1998
John D. Waters Accounting Officer)
* Director November 9, 1998
- -----------------------------------------------------
W. Richard Blackwood
Director __________, 1998
- -----------------------------------------------------
William B. Campbell
* Director November 9, 1998
- -----------------------------------------------------
Charles T. Cricks
* Director November 9, 1998
- -----------------------------------------------------
Henry M. Ekker, Esq.
* Director November 9, 1998
- -----------------------------------------------------
Thomas W. Hodge
177
* Director November 9, 1998
- -----------------------------------------------------
James S. Lindsay
Director __________, 1998
- -----------------------------------------------------
Paul P. Lynch
* Director November 9, 1998
- -----------------------------------------------------
Edward J. Mace
* Director November 9, 1998
- -----------------------------------------------------
Robert S. Moss
Director __________, 1998
- -----------------------------------------------------
Richard C. Myers
Director __________, 1998
- -----------------------------------------------------
William A. Quinn
* Director November 9, 1998
- -----------------------------------------------------
George A. Seeds
* Director November 9, 1998
- -----------------------------------------------------
William J. Strimbu
* Director November 9, 1998
- -----------------------------------------------------
Archie O. Wallace
Director __________, 1998
- -----------------------------------------------------
Joseph M. Walton
Director __________, 1998
- -----------------------------------------------------
James T. Weller
* Director November 9, 1998
- -----------------------------------------------------
Eric J. Werner, Esq.
* Director November 9, 1998
- -----------------------------------------------------
Robert B. Wiley
Director __________, 1998
- -----------------------------------------------------
Donna C. Winner
* By: /s/ John D. Waters
----------------------------------------------
John D. Waters, as Attorney-in-Fact,
pursuant to Powers of Attorney filed as
Exhibit 24.1 to this Registration Statement
178
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ---------------------------------------------------------------
2.1 Agreement and Plan of Merger, by and between F.N.B.
Corporation and Guaranty Bank & Trust Company, dated as of
August 20, 1998, as amended on October 15, 1998 (included as
Appendix A to the Proxy Statement-Prospectus)
5.1 Opinion of Cohen & Grigsby, P.C.
8.1 Opinion of Smith, Gambrell & Russell, LLP regarding tax matters
23.1 Consent of Ernst & Young LLP
23.2 Consent of Hill, Barth & King, Inc.
23.3 Consent of PricewaterhouseCoopers LLP
23.4 Consent of Hacker, Johnson, Cohen & Grieb, PA
23.5 Consent of Bobbitt, Pittenger & Company, PA
23.6 Consent of Cohen & Grigsby, P.C. (included in Exhibit 5.1)
23.7 Consent of Smith, Gambrell & Russell, LLP (included in
Exhibit 8.1)
23.8 Consent of Allen C. Ewing & Co.
24.1 Powers of Attorney
99.1 Form of Proxy for Special Meeting of Shareholders of Guaranty
99.2 Opinion of Allen C. Ewing & Co. (included as Appendix C to
the Proxy Statement-Prospectus)