SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Southwest Banks, Inc.
(Name of Issuer)
Common Stock, $.10 Par Value Per Share
(Title of Class of Securities)
844786-10-3
(CUSIP Number)
Peter Mortensen
Chairman and President
F.N.B. Corporation
Hermitage Square
Hermitage, Pennsylvania 16148-3389
(412) 981-6000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 2, 1996
(Date of Event Which Requires Filing
of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the
statement: [ X ]. (A fee is not required only if the reporting
person: (1) has a previous statement on file reporting beneficial
ownership of more than five percent of the class of securities
described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of
such class.)
The information required on the remainder of this cover
page shall not be deemed to be "filed" for the purpose of Section
18 of the Securities Exchange Act of 1934 (the "Act") or otherwise
subject to the liabilities of that section of the Act but shall be
subject to all other provisions of the Act.<PAGE>
The total number of shares reported herein is 1,009,710,
which constitutes approximately 27.63% of the total number of
shares of the issuer outstanding as of December 31, 1995. Unless
otherwise indicated, all ownership percentages set forth herein
assume that as of December 31, 1995, there were 3,654,089 shares
of the issuer issued and outstanding.
(Continued on following pages)
-2-<PAGE>
CUSIP No. 844786-10-3
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
F.N.B. Corporation
IRS Identification No.: 25-1255406
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
Not Applicable
(b)
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
Not applicable
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Pennsylvania
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,009,710(1)
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
EACH 0
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH 1,009,710(1)
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
1,009,710(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.63%
14 TYPE OF REPORTING PERSON
CO, HC
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CUSIP No. 844786-10-3
_____________________
(1) The Reporting Person disclaims beneficial ownership of
827,273 of these shares pursuant to Rule 13d-4 under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"). See Item 5 of this Schedule 13D.
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ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to the common stock, $.10
par value per share ("Southwest Common Stock," an individual
share of which, a "Share"), of Southwest Banks, Inc. ("South-
west"), a corporation organized and existing under the laws of
the State of Florida and registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended (the
"BHCA"). The principal executive offices of Southwest are lo-
cated at 900 Goodlette Road North, Naples, Florida 33940.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is filed by F.N.B. Corporation
("FNB"), a corporation organized and existing under the laws of
the Commonwealth of Pennsylvania and registered as a bank hold-
ing company under the BHCA. Through its subsidiaries, FNB pro-
vides a wide range of financial services to individuals and
businesses located in Pennsylvania, eastern Ohio, and
southwestern New York. FNB's principal offices are located at
Hermitage Square, Hermitage, Pennsylvania 16148-3389.
Each executive officer and each director of FNB is a
citizen of the United States. The name, business address, and
present principal occupation of each executive officer and di-
rector is set forth in Exhibit 1 to this Schedule 13D and is
specifically incorporated herein by reference.
During the last five years, neither FNB nor, to the
best of FNB's knowledge, any of its executive officers or di-
rectors has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or has been a party
to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which FNB or such person
was or is subject to a judgment, decree, or final order enjoin-
ing future violations of, or prohibiting or mandating activi-
ties subject to, federal or state securities laws, or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to a stock option agreement, dated as of
February 2, 1996, by and between Southwest, as issuer, and FNB,
as grantee (the "Southwest Option Agreement"), Southwest has
granted FNB an irrevocable option to purchase Shares covered by
this Schedule 13D (the "Southwest Option"). Specifically, the
Southwest Option grants FNB the right to purchase up to 727,163
Shares (approximately 19.9% of the number of Shares outstanding
on December 31, 1995, without giving effect to the issuance of
any Shares pursuant to an exercise of the Southwest Option),
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subject to certain adjustments, at a price, subject to certain
adjustments, of $15.00 per Share. The Southwest Option was
granted by Southwest as a condition of and in consideration for
FNB's entering into the Agreement and Plan of Merger, dated as
of February 2, 1996 by and among FNB, Lambda Corporation
("Lambda"), a Florida corporation and a wholly-owned subsidiary
of FNB, and Southwest (the "Merger Agreement").
The exercise of the Southwest Option for the full
number of Shares currently covered thereby would require ag-
gregate funds of $10,907,445. It is anticipated that, should
the Southwest Option become exercisable and should FNB elect to
exercise the Southwest Option, FNB would obtain the funds for
purchase from working capital.
A copy of the Southwest Option Agreement is included
as Exhibit 2 to the FNB Current Report on Form 8-K dated the
date hereof (the "FNB Form 8-K") and is incorporated herein by
reference in its entirety.
ITEM 4. PURPOSE OF TRANSACTION.
On February 2, 1996, immediately before the execution
and delivery of the Southwest Option Agreement, Southwest, FNB
and Lambda entered into the Merger Agreement, pursuant to which
Lambda will, subject to the conditions and upon the terms
stated therein, merge with and into Southwest (the "Merger"),
with Southwest surviving the Merger as a wholly-owned subsid-
iary of FNB. The Southwest Option was granted by Southwest as
a condition of and in consideration for FNB entering into the
Merger Agreement.
In accordance with the Merger Agreement, each share
(other than shares held by FNB or any of its subsidiaries other
than in a fiduciary capacity or as a result of debts previously
contracted) of Southwest Common Stock outstanding immediately
prior to the effective time of the Merger (the "Effective
Time") will at the Effective Time be converted into the right
to receive 0.78 of a share (the "Exchange Ratio") of FNB common
stock, subject to the terms and conditions of the Merger Agree-
ment. At the Effective Time, each share of FNB common stock
issued and outstanding immediately prior to the Effective Time
will be unchanged and will remain issued and outstanding, and
each share of Lambda common stock issued and outstanding prior
to the Effective Time will be converted into one share of
Southwest Common Stock and will otherwise remain issued and
outstanding.
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The articles of incorporation and by-laws of South-
west in effect immediately prior to the effective time shall be
the articles of incorporation and by-laws of the surviving cor-
poration. Following the merger, the Shares will be delisted.
In connection with their approval of the Merger
Agreement, the members of the Board of Directors of Southwest
resolved to vote their shares in favor of the Merger and Merger
Agreement at the Southwest Shareholder's meeting which will
consider the Merger and Merger Agreement.
Prior to the execution of the Merger Agreement, cer-
tain officers of Southwest amended their employment agreements
to provide that this Merger does not constitute a change of
control as defined in such contracts. In the Merger Agreement,
FNB agreed to honor those amended contracts. Pursuant to the
terms of those amended employment contracts, Southwest employ-
ees will be entitled to receive shares of FNB common stock
equal to the value of any unexercised stock options if their
employment is terminated for any reason other than by death,
whether by the officer, Southwest or FNB, following the Merger.
The Merger is subject to customary closing condi-
tions, including, among other things, approval of the Merger
and Merger Agreement by the shareholders of Southwest, the re-
ceipt of certain regulatory approvals, the receipt from counsel
of a favorable legal opinion with respect to the tax conse-
quences of the transactions contemplated by the Merger Agree-
ment, the receipt from Ernst & Young LLP, FNB's independent
public accountants, of a favorable opinion with respect to the
pooling of interests accounting treatment of the Merger, and
the requirement that from December 31, 1995 through the close
of the then most recent calendar quarter, Southwest must report
cumulative earnings greater than or equal to an amount equal to
$500,000 multiplied by the number of calendar quarters which
have passed since December 31, 1995. In addition, the Merger
is conditioned upon the effectiveness of a registration state-
ment to be filed by FNB with the Securities and Exchange Com-
mission (the "SEC") with respect to the shares of FNB common
stock to be issued in the Merger, and the absence of any legal
restraint or injunction. None of the foregoing approvals has
yet been obtained, and there is no assurance as to if or when
such approvals will be obtained. The Merger and the transac-
tions contemplated by the Merger Agreement will be submitted
for approval of the stockholders of Southwest at a meeting that
is expected to occur in the second quarter of 1996.
The Merger Agreement contains certain covenants of
the parties regarding the conduct of their respective busi-
nesses pending the consummation of the Merger. Both parties
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agreed not to take any action which would adversely affect the
ability of any party to obtain the required consents or to per-
form its covenants and agreements under the Merger Agreement.
FNB also agreed to continue to conduct its business in a manner
designed, in its reasonable judgment, to enhance the long-term
value of its common stock and its business prospects. South-
west agreed to operate its business in the ordinary course con-
sistent with past practice, to preserve intact its business
organization and assets and to use reasonable efforts to main-
tain its current employee relationships. Southwest also agreed
that it would not amend its charter or by-laws; would not re-
purchase, redeem or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans)
any shares or any securities convertible into any shares of the
capital stock of Southwest; would not declare or pay any divi-
dends; except pursuant to the Merger Agreement, the Southwest
Stock Option Agreement, stock options and warrants then out-
standing or as otherwise disclosed, would not issue, sell,
pledge, encumber, authorize the issuance of, enter into any
such contract or to otherwise permit to become outstanding any
additional Shares or any other capital stock or any stock ap-
preciation rights, or any option, warrant, conversion or other
right to acquire any such stock, or any security convertible
into any such stock; and would not adjust, split, combine or
reclassify any capital stock of Southwest. The Merger Agree-
ment further contains certain restrictions on Southwest relat-
ing to, among other things, the incurrence of additional in-
debtedness and the imposition or continued existence of liens,
the sale or encumbrance of the capital stock of any of its sub-
sidiaries or of the assets of Southwest or any of its subsid-
iaries, the purchase of securities or the making of material
investments, the making of certain increases in employee and
director compensation, modifications to certain employee ben-
efit plans or employment contracts or the adoption or entry
into of new ones, changes in tax and accounting methods, the
commencement or settlement of litigation, the modification or
termination of material contracts, the disposition of assets
and the cancellation of indebtedness owed to Southwest.
The Merger Agreement further restricts Southwest from
soliciting or encouraging any inquiries or proposals, or par-
ticipating in any negotiations or discussions or providing any
non-public information with respect to or concerning any acqui-
sition proposal, including any proposal for a tender offer,
merger, acquisition of a substantial equity interest in, or a
substantial portion of the assets of Southwest or its subsid-
iaries, unless otherwise required by the fiduciary duties of
Southwest's respective boards of directors.
-8-<PAGE>
The Merger Agreement provides that Southwest will use
its reasonable best efforts to list its Shares on the Nasdaq
Stock Market as national market securities prior to the record
date for determining shareholders entitled to vote at the
shareholders' meeting which will consider approving the Merger
and Merger Agreement.
The Merger Agreement provides that the Board of Di-
rectors of FNB after the Effective Time will include three mem-
bers of the Southwest Board of Directors. It is expected that
the Board of Directors of Southwest will continue with its cur-
rent members. It is the current intention of FNB, subsequent
to the effective time of this strategic Merger, to retain the
management team of Southwest with the authority and responsi-
bility for operation Southwest and its subsidiaries in sub-
stantially the same manner and fashion as historically operated
by such management team.
The Merger Agreement may be terminated (i) by mutual
consent of the parties; (ii) by a non-breaching party if the
other party (a) provided that the terminating party is also not
in material breach of its Merger Agreement, materially breaches
any of the representations or warranties contained in the
Merger Agreement, or (b) breaches any material covenant or
agreement contained in the Merger Agreement, in each case if
such breach has not been or cannot be cured within thirty days
after notice; (iii) by any party if certain required regulatory
approvals or consents are not obtained; (iv) by any party if
Southwest's shareholders do not approve the Merger Agreement at
the shareholders' meeting where the transactions are presented
to such shareholders for approval and voted upon; (v) by either
FNB or Southwest if the Merger is not consummated by July 31,
1997, unless the failure to consummate the Merger is due to a
breach by the party seeking to terminate its obligations under
the Merger Agreement; (v) by either party, provided that the
terminating party is also not in material breach of the Merger
Agreement, if any of the conditions precedent to the obligation
of such party to consummate the Merger cannot be satisfied or
fulfilled by July 31, 1997; or (vii) by Southwest, at any time
during the 10-day period commencing two days after the date on
which Federal Reserve Board approval for consummation of the
Merger is received, if the average of the midpoint closing high
bid and low asked prices of a share of FNB common stock during
the 20 trading days preceding and ending on such date (the
"Average Closing Price") is less than $19.00 per share,
provided that in the event Southwest elects to exercise this
termination right and upon notice, FNB will have the right to
adjust the Exchange Ratio by dividing the product of $19 and
the Exchange Ratio (as then in effect) by the Average Closing
Price, in which case the Merger Agreement will not be termi-
nated if Southwest permits such an election.
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In the event of the termination and abandonment of
the Merger Agreement following the occurrence of an Initial
Triggering Event (as defined hereinafter and in the Southwest
Option Agreement), the Merger Agreement provides that FNB shall
be entitled to a cash payment from Southwest in an amount equal
to $1 million upon the occurrence of any Subsequent Triggering
Event (as defined hereinafter and in the Stock Option Agree-
ment) prior to an Exercise Termination Date (as defined herein-
after and in the Stock Option Agreement). In the event the
Merger Agreement is terminated as a result of FNB's failure to
satisfy any of its representations, warranties or covenants set
forth therein, the Merger Agreement provides that FNB shall re-
imburse Southwest for its reasonable out-of-pocket expenses
relating to the Merger in an amount not to exceed $250,000.
The Southwest Option Agreement provides for the pur-
chase by FNB of up to 727,163 Shares, subject to certain ad-
justments (the "Southwest Option Shares") at an exercise price,
subject to certain adjustments, of $15 per share, payable in
cash. The Southwest Option Shares, if issued pursuant to the
Southwest Option Agreement, would represent approximately 19.9%
of the Southwest Common Stock issued and outstanding without
giving effect to the issuance of any Shares pursuant to an ex-
ercise of the Southwest Option.
The number of Shares subject to the Southwest Option
will be increased or decreased to the extent that Southwest
issues additional Shares (otherwise than pursuant to an exer-
cise of the Southwest Option) or redeems, repurchases, retires
or otherwise causes to be no longer outstanding Shares such
that the number of Shares subject to the Southwest Option con-
tinues to equal 19.9% of the Southwest Common Stock then issued
and outstanding, without giving effect to the issuance of
Shares pursuant to an exercise of the Southwest Option. In the
event of any change in, or distributions in respect of, the
Southwest Common Stock by reasons of stock dividends, split-
ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in re-
spect of the Southwest Common Stock that would be prohibited
under the terms of the Merger Agreement, or the like, the type
and number of Shares subject to the Southwest Option, and the
applicable exercise price per Southwest Option Share, will be
appropriately adjusted in such manner as to fully preserve the
economic benefits provided under the Southwest Option Agree-
ment.
FNB or any other holder or holders of the Southwest
Option (collectively, the "Holder") may exercise the Southwest
Option, in whole or in part by sending written notice after the
occurrence of an "Initial Triggering Event" and a "Subsequent
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Triggering Event" prior to termination of the Southwest Option.
The term "Initial Triggering Event" is defined as the occur-
rence of any of the following events:
(i) Southwest or any of its subsidiaries (each of
"Southwest Subsidiary"), 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 the FNB Option Agree-
ment having the meaning assigned thereto in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and the rules and regulations thereunder)
other than FNB or any of its Subsidiaries (each an "FNB Subsid-
iary") or the Board of Directors of Southwest shall have recom-
mended that the stockholders of Southwest approve or accept any
such Acquisition Transaction. For purposes of the FNB Option
Agreement, "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction involving Southwest
or any Significant Subsidiary (as defined in Rule 1-02 of Regu-
lation S-X promulgated by the Securities and Exchange Commis-
sion (the "SEC")) of Southwest, (y) a purchase, lease, or other
acquisition of all or a substantial portion of the assets or
deposits of Southwest or any Significant Subsidiary (as defined
in the FNB Option Agreement) of Southwest, or (z) a purchase or
other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 15 per-
cent or more of the voting power of Southwest.
(ii) Any person other than FNB, any FNB Subsidiary,
or any Southwest Subsidiary acting in a fiduciary capacity in
the ordinary course of its business shall have acquired benefi-
cial ownership or the right to acquire beneficial ownership of
15 percent or more of the outstanding shares of Southwest Com-
mon Stock (the term "beneficial ownership" for purposes of the
Southwest Option Agreement having the meaning assigned thereto
in Section 13(d) of the 1934 Act, and the rules and regulations
thereunder);
(iii) The shareholders of Southwest shall not have
approved the transaction contemplated by the Merger Agreement
at the shareholder meeting held for that purpose, or such meet-
ing shall not have been held or shall have been cancelled prior
to termination of the Merger Agreement, in either case, after
the Board of Directors of Southwest shall have withdrawn or
modified, or publicly announced its interest to withdraw or
modify, its recommendation that the stockholders of Southwest
approve the transactions contemplated by the Merger Agreement,
or after Southwest or any Southwest Subsidiary, without having
received FNB's prior written consent, shall have authorized,
recommended, proposed, or publicly announced its intention to
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authorize, recommend, or propose, to engage in an Acquisition
Transaction with any person other than FNB or an FNB Subsid-
iary;
(iv) Any person other than FNB or any FNB Subsidiary
shall have made a bona fide proposal to Southwest or its stock-
holders to engage in an Acquisition Transaction;
(v) Southwest shall have willfully breached any cov-
enant or obligation contained in the Merger Agreement in an-
ticipation of engaging in an Acquisition Transaction and such
breach (x) would entitle FNB to terminate the Merger Agreement;
or
(vi) 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 applica-
tion 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.
"Subsequent Triggering Event" is defined as either
(A) the acquisition by any person of beneficial ownership of 25
percent or more of the then outstanding Southwest Common Stock,
or (B) the occurrence of the Initial Triggering Event described
in clause (i) above, except that the percentage referred to in
subclause (z) thereof shall be 25 percent.
After a Subsequent Triggering Event prior to the ter-
mination of the Southwest Option, FNB (on behalf of itself or
any subsequent Holder) may demand that the Southwest Option and
the related Southwest Option Shares be registered under the
Securities Act of 1933, as amended (the "Securities Act").
Upon such demand, Southwest must effect such registration
promptly, subject to certain exceptions. FNB is entitled to
two such registrations.
The Southwest Option terminates at or upon, and each
of the following constitutes an Exercise Termination Event, (i)
the Effective Time, (ii) termination of the Merger Agreement in
accordance with the terms thereof prior to the occurrence of an
Initial Triggering Event, or (iii) twelve months (subject to
extension to obtain regulatory approvals, allow statutory wait-
ing periods to expire, and to avoid liability under Section
16(h) of the 1934 Act) after termination of the Merger Agree-
ment following the occurrence of an Initial Triggering Event.
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Upon the occurrence of a Repurchase Event (as herein-
after defined) that occurs prior to an Exercise Termination
Event, (i) at the request of the Holder delivered prior to the
Exercise Termination Event, Southwest shall repurchase the
Southwest Option from the Holder at a price ("Southwest Option
Repurchase Price") equal to the amount by which (x) the
"Market/Offer Price" (as hereinafter defined) exceeds (y) the
then applicable Southwest Option exercise price, multiplied by
the number of shares for which the Southwest Option may than be
exercised; and (ii) at the request of the owner of Southwest
Option Shares from time to time (the "Owner") delivered prior
to the Exercise Termination Event, Southwest shall repurchase
such number of Southwest Option Shares from the Owner as the
Owner designates at a price per share (the "Southwest Option
Share Repurchase Price") equal to the "Market/Offer Price."
"Market/Offer Price" means the highest of (A) the price per
share of Southwest Common Stock at which a tender offer or ex-
change offer therefor has been made, (B) the price per share of
Southwest Common Stock to be paid by any third party pursuant
to an agreement with Southwest, (C) the highest closing price
for shares of Southwest Common Stock within the three-month
period immediately preceding the date the Holder gives notice
of the required repurchase of the Southwest Option or the Owner
gives notice of the required repurchase of Southwest Option
Shares, as the case may be, and (D) in the event of the sales
of all or a substantial portion of Southwest's assets, the sum
of the net price paid in such sale for such assets and the cur-
rent market value of the remaining assets of Southwest divided
by the number of shares of Southwest Common Stock then out-
standing. "Repurchase Event" means (i) the consummation of
certain mergers, consolidations or similar transactions involv-
ing Southwest or any purchase, transfer or other acquisition of
all or a substantial portion of the assets of Southwest by any
person other than FNB or a FNB subsidiary, other than any such
transaction which would not constitute an Acquisition Transac-
tion (as defined above) or (ii) the acquisition by any person
of beneficial ownership of 50% or more of the then outstanding
shares of Southwest Common Stock.
In the event that prior to termination of the South-
west Option, Southwest enters into an agreement (i) to consoli-
date with or merge into any person other than FNB or one of its
subsidiaries and shall not be the continuing or surviving cor-
poration of such consolidation or merger, (ii) to permit any
person other than FNB or one of its subsidiaries to merge into
Southwest with Southwest as the continuing or surviving corpo-
ration, but in connection therewith the then outstanding shares
of Southwest Common Stock are changed into or exchanged for
securities of any other person or cash or any other property,
or the then outstanding shares of Southwest Common Stock after
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such merger represent less than 50% of the outstanding voting
shares and voting share equivalents of the merged company, or
(iii) to sell or transfer all or substantially all of its as-
sets to any entity other than FNB or one of its subsidiaries,
then such agreement shall provide that the Southwest Option be
converted into or exchanged for an option (a "Substitute Op-
tion") to purchase shares of common stock of, at the Holder's
option, either (x) the continuing or surviving corporation of a
merger or consolidation or the transferee of all or substan-
tially all of Southwest's assets, or (y) the person controlling
such continuing or surviving corporation or transferee. The
number of shares subject to the Substitute Option and the exer-
cise price per share will be determined in accordance with a
formula in the Southwest Option Agreement. To the extent pos-
sible, the Substitute Option will contain terms and conditions
that are the same as those in the Southwest Option.
The issuer of the Substitute Option will be required
to repurchase the Substitute Option at the request of the
holder thereof and to repurchase any shares of such issuer's
common stock ("Substitute Common Stock") issued upon exercise
of a Substitute Option ("Substitute Shares") at the request of
the owner thereof. The repurchase price for a Substitute Op-
tion will equal the amount by which (A) the "Highest Closing
Price" (as defined below) exceeds (B) the exercise price of the
Substitute Option, multiplied by the number of shares of Sub-
stitute Common Stock for which the Substitute Option may then
be exercised. The repurchase price for the Substitute Shares
shall equal the "Highest Closing Price" multiplied by the num-
ber of Substitute Shares to be repurchased. As used herein,
"Highest Closing Price" means the highest closing price for
shares of Substitute Common Stock within the three-month period
immediately preceding the date the holder gives notice of the
required repurchase of the Substitute Option or the owner gives
notice of the required repurchase of Substitute Shares, as the
case may be.
Neither Southwest nor FNB may assign any of its re-
spective rights and obligations under the Southwest Option
Agreement or the Southwest Option to any other person without
the other party's express written consent, except that if a
Subsequent Triggering Event occurs prior to termination of the
Southwest Option, FNB, subject to the express provisions
hereof, may assign in whole or in part its rights and obliga-
tions thereunder; provided, however, that until 30 days after
the Federal Reserve Board approves an application by FNB to
acquire the Southwest Option Shares, FNB may not assign its
rights under the Southwest Option except in (i) a widely dis-
persed public distribution, (ii) a private placement in which
no one party acquires the right to purchase in excess of 2% of
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the voting shares of Southwest, (iii) an assignment to a single
party for the purpose of conducting a widely dispersed public
distribution on FNB's behalf, or (iv) any other manner approved
by the Federal Reserve Board.
The rights and obligations of Southwest and FNB under
the Southwest Option Agreement are subject to receipt of any
required regulatory approvals, and both parties have agreed to
use their best efforts in connection therewith. These include,
but are not limited to, applying to the Federal Reserve Board
for approval to acquire the Southwest Option Shares.
The foregoing descriptions of the Merger Agreement
and the Southwest Option Agreement are qualified in their en-
tirety by reference to copies of each of such documents which
are included as Exhibits 1 and 2, respectively, to the FNB Form
8-K filed the date hereof and are incorporated herein by ref-
erence in their entirety.
On February 5, 1996, FNB announced the anticipated
Merger and the terms of the Merger Agreement with Southwest. A
copy of the February 5th press release is attached as Exhibit 3
to the FNB Form 8-K and is incorporated herein by reference to
its entirety.
Except as set forth herein or in the Exhibits hereto,
FNB does not have any current plans or proposals that relate to
or would result in:
(a) The acquisition by any person of additional
shares of Southwest Common Stock or the disposi-
tion of shares of Southwest Common Stock;
(b) An extraordinary corporate transaction, such as
a merger, reorganization or liquidation, involv-
ing Southwest or any of its subsidiaries;
(c) A sale or transfer of a material amount of as-
sets of Southwest or any of its subsidiaries;
(d) Any change in the present Board of Directors or
management of Southwest, including any plans or
proposals to change the number or terms of di-
rectors or to fill any existing vacancies on the
board;
(e) Any material change in the present capitaliza-
tion or dividend policy of Southwest;
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(f) Any other material change in Southwest's busi-
ness or corporate structure;
(g) Any changes in Southwest's charter, bylaws or
instruments corresponding thereto or other ac-
tions which may impede the acquisition of con-
trol of Southwest by any person;
(h) Causing a class of securities of Southwest to be
delisted from a national securities exchange or
to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered
national securities association;
(i) A class of equity securities of Southwest becom-
ing eligible for termination of registration
pursuant to Section 12(g)(4) of the Exchange
Act; or
(j) Any action similar to any of those enumerated
above.
ITEM 5. INTEREST IN SECURITIES OF ISSUER.
As of December 31, 1995, to the best of FNB's knowl-
edge, there were 3,654,089 Shares issued and outstanding.
(a) As of the date hereof, FNB owns 172,621 Shares
(the "Beneficially Owned Shares"), representing approximately
4.72% of the outstanding Shares as of December 31, 1995 and
warrants (the "Warrants") to acquire 9,816 Shares (the "Warrant
Shares") at an exercise price of $5.64, representing approxi-
mately .27% of the outstanding Shares as of December 31, 1995
before giving effect to the exercise of the Warrant (the
"Beneficially Owned Shares"). Pursuant to the Southwest Op-
tion Agreement, FNB has the right to acquire up to 727,163 ad-
ditional Shares, subject to adjustment, representing approxi-
mately 19.9% of the outstanding Shares as of December 31, 1995
before giving effect to the exercise of the Southwest Option.
FNB may be deemed to be the beneficial owner of the Southwest
Option Shares, but disclaims such beneficial ownership.
As of the date hereof, to the best of the knowledge
of FNB, the following directors and executive officers of FNB
beneficially own shares of Southwest Common Stock (the "D&O
Shares"):
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No. of Shares
Peter Mortensen 13,435
J. T. Weller, Sr. 521
C. T. Cricks 8,003
William B. Campbell 8,608
Stephen J. Gurgovits 3,873
Paul Lynch 312
Joseph M. Walton 1,040
Donna C. Winner 52,020
Thomas Hodge 10,441
Total Number of Shares 98,253
All such amounts in the aggregate represent approximately 2.69%
of the outstanding Southwest Common Stock as of December 31,
1995. In addition, Mr. Mortensen owns warrants to purchase
1,857 Shares at an exercise price of $5.64, which is currently
exercisable and which expires on June 19, 2001.
FNB disclaims any ownership of such Shares held by
its executive officers and directors. Except as stated herein,
neither FNB nor, to the best knowledge of FNB, any executive
officer or director of FNB identified on Exhibit 1 attached
hereto, is the beneficial owner of, or has the right to ac-
quire, directly or indirectly, any shares of Common Stock.
(b) FNB has sole voting and sole dispositive power
as to the Beneficially Owned Shares. Currently, FNB has no
right to vote or dispose of the Southwest Option Shares or the
Warrant Shares. FNB will not acquire the right to vote or dis-
pose of the Southwest Option Shares or the Warrant Shares until
such time as it exercises the Southwest Option or Warrants.
The Southwest Option is not currently exercisable and will
become exercisable only upon the occurrence of certain events
described above and in Item 4 and in the Southwest Option
Agreement. FNB has sole dispositive power as to its Warrants,
and will acquire sole voting and dispositive power as to the
Warrant Shares only upon exercise of its Warrants. The
Warrants are currently exercisable. The Warrants expire
-17-<PAGE>
on June 19, 2001. All of the directors and executive
officers identified in Item 5(a) above have sole
voting and sole dispositive power with respect to the D&O
Shares. Mr. Mortensen also has sole dispositive power as to
his warrants, and will acquire sole voting and dispositive power
as to the underlying Shares only upon exercise of his warrants,
which are currently exercisable.
(c) Except for the issuance of the Southwest Option, no
transactions in Southwest Common Stock were effected during the
past sixty days by FNB or, to the best of FNB's knowledge, by
any executive officer or director of FNB.
(d) So long as FNB has not exercised the Southwest
Option or Warrants, FNB does not have the right to receive or
the power to direct the receipt of dividends from, or the pro-
ceeds from the sale of, any of the Southwest Option Shares or
Warrant Shares. FNB has, and the directors and officers iden-
tified in Item 5(a) above have, the right to receive dividends
from, and the proceeds from the sale of, the Beneficially Owned
Shares and the D&O Shares, respectively. So long as Mr.
Mortensen has not exercised his warrants, he does not have the
right to receive, or the power to direct the receipt of divi-
dends from, or the proceeds from the sale of, any Southwest
shares issued upon such exercise.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATION-
SHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
As described above, the Merger Agreement contains
certain customary restrictions on the conduct of the business
of Southwest, including certain customary restrictions relating
to the Southwest Common Stock.
Mr. Mortensen, the Chairman of the Board of Directors
and the President of FNB, is a member of the Board of Directors
of Southwest.
Except as provided in the Merger Agreement and the
Option Agreement and except as described above, neither FNB
nor, to the best of FNB's knowledge, any of the individuals
-18-<PAGE>
named in Schedule 1 hereto, has any contracts, arrangements,
understandings, or relationships (legal or otherwise), with any
person with respect to any securities of Southwest, including,
but not limited to, transfer or voting of any securities,
finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, division of profits or
losses, or the giving or withholding of proxies.
-19-<PAGE>
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed as part of this
Schedule 13D:
Exhibit 1 - Name, Business Address, and Present Principal
Occupation of Each Executive Officer and Director
of F.N.B. Corporation.
Exhibit 2 - Stock Option Agreement, dated as of February 2,
1996, by and between Southwest Banks, Inc., as
issuer, and F.N.B. Corporation, as grantee (in-
corporated by reference to Exhibit 2 to F.N.B.
Corporation's Current Report on Form 8-K dated
the date hereof).
Exhibit 3 - Agreement and Plan of Merger, dated as of Febru-
ary 2, 1996, by and among F.N.B. Corporation,
Lambda Corporation and Southwest Banks, Inc. (in-
corporated by reference to Exhibit 1 to F.N.B.
Corporation's Current Report on Form 8-K dated
the date hereof).
Exhibit 4 - Press Release, dated February 5, 1996, relating
to transactions between F.N.B. Corporation and
Southwest Banks, Inc. (incorporated by reference
to Exhibit 3 to F.N.B. Corporation's Current Re-
port on Form 8-K dated the date hereof).
-20-<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowl-
edge and belief, I certify that the information set forth in
this statement is true, complete, and correct.
F.N.B. CORPORATION
By: /s/ John D. Waters
Name: John D. Waters
Title: Vice President and Chief
Financial Officer
February 9, 1996
-21-<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION SEQUENTIAL
PAGE NO.
1 Name, Business Address, and Present
Principal Occupation of Each
Executive Officer and Director of
F.N.B. Corporation
2 Stock Option Agreement, dated as of
February 2, 1996, by and between
Southwest Banks, Inc., as issuer,
and F.N.B. Corporation, as grantee
(incorporated by reference to
Exhibit 2 to F.N.B. Corporation's
Current Report on Form 8-K dated
the date hereof).
3 Agreement and Plan of Merger, dated
as of February 2, 1996, by and among
F.N.B. Corporation, Lambda Corpora-
tion and Southwest Banks, Inc.
(incorporated by reference to
Exhibit 1 to F.N.B. Corporation's
Current Report on Form 8-K dated
the date hereof).
4 Press Release, dated February 5,
1996, relating to transactions
between F.N.B. Corporation and
Southwest Banks, Inc. (incorporated
by reference to Exhibit 3
to F.N.B. Corporation's Current
Report on Form 8-K dated the
date hereof).
-22-
EXHIBIT 1
NAME, PRINCIPAL BUSINESS, AND ADDRESS
OF THE DIRECTORS AND EXECUTIVE
OFFICERS OF F.N.B. CORPORATION
DIRECTORS
The principal business address of each director and
executive officer of F.N.B. Corporation is c/o F.N.B. Corpora-
tion, Hermitage Square, Hermitage, Pennsylvania 16148-3389.
PETER MORTENSEN
Chairman and President of F.N.B. Corporation and
Chairman of First National Bank of Pennsylvania
("First National Bank"), a subsidiary
STEPHEN J. GURGOVITS
Executive Vice President of F.N.B. Corporation and
President & Chief Executive Officer of First National Bank
SAMUEL K. SOLLENBERGER
Vice President of the Corporation and
President & Chief Executive Officer of The Metropolitan Savings
Bank of Ohio ("Metropolitan"), a subsidiary
W. RICHARD BLACKWOOD
President of Harry Blackwood Inc. (insurance and real estate)
WILLIAM B. CAMPBELL
Retired President, Shenango Steel Erectors, Inc.
CHARLES T. CRICKS
President & Chief Executive Officer, Greenwood Pharmacy,
a division of Thrift Drug, Inc.
HENRY M. EKKER, ESQ.
Attorney at Law, Partner of Ekker, Kuster, & McConnell
THOMAS C. ELLIOTT
President & Treasurer, Elliott Bros. Steel Co.
(steel processor)
THOMAS W. HODGE
Retired President, W.S. Hodge Foundry
GEORGE E. LOWE, D.D.S.
Dentist<PAGE>
PAUL P. LYNCH
Attorney at Law; President & Chief Executive Officer,
Lynch Brothers Investments, Inc. (real estate)
JAMES B. MILLER
Retired School Administrator
ROBERT S. MOSS
President, Associated Contractors of Conneaut Lake, Inc. (gen-
eral contractors)
JOHN R. PERKINS
Retired Vice President of the Corporation and
Chairman of the Board of Metropolitan
WILLIAM A. QUINN
Retired Vice President of the Corporation and
Retired Executive Vice President & Cashier of
First National Bank
GEORGE A. SEEDS
President, Findley Welding Supply, Inc.
WILLIAM J. STRIMBU
President, Nick Strimbu, Inc. (common carrier)
ARCHIE O. WALLACE
Attorney at Law, Partner of Rowley, Wallace, Keck,
Karson & St. John
JOSEPH M. WALTON
Chairman of the Board, Chief Executive Officer &
Treasurer, Jamestown Paint Co.
(manufacturer of paint and varnish)
JAMES T. WELLER
Chairman of the Board & Chief Executive Officer,
Liberty Steel Products, Inc. (steel
processor)
ERIC J. WERNER, ESQ.
Chief Administrative Officer, General Counsel and
Secretary, Werner Co. (manufacturer of climbing products and
aluminum extrusions)<PAGE>
DONNA C. WINNER
Co-Owner, The Radisson Shenango, Tara - A Country Inn
The Winner (clothing store)
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
WILLIAM J. RUNDORFF
Executive Vice President of F.N.B. Corporation and
Vice President of First National Bank
JOHN D. WATERS
Vice President & Chief Financial Officer of F.N.B.
Corporation and Senior Vice President and
Chief Financial Officer of First National Bank
JOHN W. ROSE
Executive Vice President of F.N.B. Corporation
