SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Date of Report (Date of earliest event reported): February 2,
1996
F.N.B. CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 0-8144 25-1255406
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
Hermitage Square, Hermitage, Pennsylvania 16148
(Address of principal executive offices) Zip Code
(412) 981-6000
(Registrant's telephone number, including area code)<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS.
On February 2, 1996, F.N.B. Corporation ("FNB"), a
corporation organized and existing under the laws of the Com-
monwealth of Pennsylvania and registered as a bank holding com-
pany under the Bank Holding Company Act of 1956, as amended
(the "BHCA"), Lambda Corporation ("Lambda"), a Florida corpora-
tion and wholly-owned subsidiary of FNB, and Southwest Banks,
Inc. ("Southwest"), a corporation organized and existing under
the laws of the State of Florida and registered as a bank hold-
ing company under the BHCA, entered into an Agreement and Plan
of Merger (the "Merger Agreement"), pursuant to which Lambda
will be merged with and into Southwest, with Southwest as the
surviving corporation (the "Merger"). The Board of Directors
of both FNB and Southwest approved the Merger Agreement and the
transactions contemplated thereby at their respective meetings
held on February 2, 1996.
In accordance with the terms of the Merger Agreement,
each share of Southwest common stock, par value $.10 per share
("Southwest Common Stock"), outstanding immediately prior to
the effective time of the Merger (the "Effective Time") will be
converted into the right to receive 0.78 of a share (the "Ex-
change Ratio") of FNB common stock, par value $2.00 per share
("FNB Common Stock").
The Merger is intended to constitute a tax-free reor-
ganization under the Internal Revenue Code of 1986, as amended,
and to be accounted for as a pooling of interests.
The Merger Agreement contemplates that each stock
option, warrant or other right to purchase shares of Southwest
Common Stock under Southwest's stock option and other stock
plans or agreements (each a "Southwest Plan"), will be con-
verted into and become a right to purchase shares of FNB Common
Stock in accordance with the terms of the Southwest Plan and
Southwest option, warrant or other right agreement by which it
is evidenced, except that from and after the Effective Time (i)
the number of shares of FNB Common Stock subject to each South-
west option, warrant or right shall be equal to the number of
shares of Southwest Common Stock subject to such option, war-
rant or right immediately prior to the Effective Time multi-
plied by the Exchange Ratio, and (ii) the per share exercise
price of FNB Common Stock purchasable thereunder or upon which
the amount of a cash payment is determined shall be that speci-
fied in the Southwest option, warrant or right divided by the
Exchange Ratio.
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Each holder of Southwest Common Stock or of a South-
west option, warrant or right who would otherwise be entitled
to receive a fractional share of FNB Common Stock (after taking
into account all of a shareholder's certificates) will receive,
in lieu thereof, the equivalent cash value of such fractional
share, without interest.
Consummation of the Merger is subject to various con-
ditions, including: (i) receipt of approval by the sharehold-
ers of Southwest of the Merger Agreement and the Merger, as
required to be approved under Florida law; (ii) receipt of cer-
tain regulatory approvals from the Board of Governors of the
Federal Reserve System and the Department of Banking and
Finance of the State of Florida; (iii) receipt of opinion of
counsel as to the tax-free nature of certain aspects of the
Merger; (iv) receipt of a letter from Ernst & Young, LLP, FNB's
independent public accountants relating to the pooling of
interests accounting treatment of the Merger; (v) Southwest's
cumulative earnings (subject to certain adjustments) since
December 31, 1995 through the close of the most recent calendar
quarter must be greater than or equal to the amount equal to
$500,000 multiplied by the number of calendar quarters which
have passed since December 31, 1995; and (vi) satisfaction of
certain other conditions. If the price of FNB Common Stock
falls below $19 at any time during the ten day period
commencing two days after the Board of Governors of the Federal
Reserve Bank approves the merger, Southwest may, under certain
circumstances, give notice of termination of the Agreement,
unless FNB determines, in its discretion, to increase the
Exchange Ratio pursuant to an adjustment formula specified in
the Merger Agreement and Southwest permits such a revision of
the Exchange Ratio.
The Merger Agreement and the Merger will be submitted
for approval at a meeting of the shareholders of Southwest.
Prior to such meeting, FNB will file a registration statement
with the Securities and Exchange Commission registering under
the Securities Act of 1933, as amended, the FNB Common Stock to
be issued in exchange for the outstanding shares of Southwest
Common Stock in the Merger.
The preceding description of the Merger Agreement is
qualified in its entirety by reference to the copy of the
Merger Agreement included as Exhibit 1 to this Current Report
on Form 8-K dated February 2, 1996 and filed on February 9,
1996 (the "Current Report") and which is incorporated by refer-
ence.
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Immediately after executing the Merger Agreement, FNB
and Southwest entered into a Stock Option Agreement, dated Feb-
ruary 2, 1996 (the "Stock Option Agreement"), pursuant to which
Southwest granted to FNB an option to purchase, under certain
circumstances and subject to certain adjustments, up to 727,163
shares of Southwest Common Stock at a price, subject to certain
adjustments, of $15 per share (the "FNB Option"). The FNB Op-
tion, if exercised, would equal, before giving effect to the
exercise of the FNB Option, 19.9% of the total number of shares
of Southwest Common Stock outstanding as of its date of exer-
cise. The FNB Option was granted by Southwest as a condition
and inducement to FNB's willingness to enter into the Merger
Agreement. Under certain circumstances, Southwest may be re-
quired to repurchase the FNB Option or the shares acquired pur-
suant to the exercise of the FNB Option.
The preceding description of the Stock Option Agree-
ment is qualified in its entirety by reference to the copy of
the Stock Option Agreement included as Exhibit 2 to this Cur-
rent Report and which is incorporated by reference.
On February 5, 1996, FNB announced the anticipated
Merger and the terms of the Merger Agreement with Southwest. A
copy of the FNB press release is attached hereto as Exhibit 3.
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ITEM 7. Financial Statements and Exhibits.
(c) Exhibits
Description
1 Agreement and Plan of Merger, dated as of
February 2, 1996, by and between F.N.B.
Corporation, Lambda Corporation, and
Southwest Banks, Inc.
2 Stock Option Agreement, dated February 2,
1996, between Southwest Banks, Inc., as
issuer and F.N.B. Corporation, as grantee.
3 Press release, dated February 5, 1996,
issued by F.N.B. Corporation.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly autho-
rized.
F.N.B. CORPORATION
(Registrant)
By: /s/John D. Waters
Name: John D. Waters
Title: Vice President and
Chief Financial Officer
Dated: February 9, 1996
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
1 Agreement and Plan of Merger, dated as of
February 2, 1996, by and between F.N.B.
Corporation, Lambda Corporation, and
Southwest Banks, Inc.
2 Stock Option Agreement, dated February 2,
1996, between Southwest Banks, Inc., as
issuer and F.N.B. Corporation, as grantee.
3 Press release, dated September 5, 1996,
issued by F.N.B. Corporation.
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EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
F.N.B. CORPORATION,
LAMBDA CORPORATION
AND
SOUTHWEST BANKS, INC.
Dated as of February 2, 1996<PAGE>
TABLE OF CONTENTS
PAGE
Parties................................................... 1
Preamble.................................................. 1
ARTICLE 1 - TRANSACTIONS AND TERMS OF MERGER.............. 2
1.1 Merger.......................................... 2
1.2 Time and Place of Closing....................... 2
1.3 Effective Time.................................. 2
1.4 Execution of Stock Option Agreement............. 3
ARTICLE 2 - TERMS OF MERGER............................... 3
2.1 Charter......................................... 3
2.2 Bylaws.......................................... 3
2.3 FNB Board of Directors.......................... 3
ARTICLE 3 - MANNER OF CONVERTING SHARES................... 3
3.1 Conversion of Shares............................ 3
3.2 Anti-Dilution Provisions........................ 4
3.3 Shares Held by Southwest or FNB................. 4
3.4 Fractional Shares............................... 4
3.5 Conversion of Stock Options..................... 4
ARTICLE 4 - EXCHANGE OF SHARES............................ 6
4.1 Exchange Procedures............................. 6
4.2 Rights of Former Southwest Shareholders......... 7
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF SOUTHWEST... 8
5.1 Organization, Standing, and Power............... 8
5.2 Authority; No Breach By Agreement............... 8
5.3 Capital Stock................................... 9
5.4 Southwest Subsidiaries.......................... 10
5.5 SEC Filings; Financial Statements............... 11
5.6 Absence of Certain Changes or Events............ 12
5.7 Tax Matters..................................... 12
5.8 Assets.......................................... 14
5.9 Environmental Matters........................... 14
5.10 Compliance With Laws............................ 15
5.11 Labor Relations................................. 16
5.12 Employee Benefit Plans.......................... 16
5.13 Material Contracts.............................. 19
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PAGE
5.14 Legal Proceedings............................... 20
5.15 Reports......................................... 20
5.16 Statements True and Correct..................... 20
5.17 Accounting, Tax and Regulatory Matters.......... 21
5.18 State Takeover Laws............................. 21
5.19 Charter Provisions.............................. 21
5.20 Derivatives Contracts........................... 22
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF FNB......... 22
6.1 Organization, Standing, and Power............... 22
6.2 Authority; No Breach By Agreement............... 22
6.3 Capital Stock................................... 23
6.4 SEC Filings; Financial Statements............... 24
6.5 Absence of Certain Changes or Events............ 24
6.6 Tax Matters..................................... 25
6.7 Compliance With Laws............................ 25
6.8 Legal Proceedings............................... 26
6.9 Reports......................................... 26
6.10 Statements True and Correct..................... 27
6.11 Accounting, Tax and Regulatory Matters.......... 27
6.12 Environmental Matters........................... 28
6.13 Derivatives Contracts........................... 28
ARTICLE 7 - CONDUCT OF BUSINESS PENDING CONSUMMATION...... 29
7.1 Affirmative Covenants of Southwest.............. 29
7.2 Negative Covenants of Southwest................. 29
7.3 Covenants of FNB................................ 32
7.4 Adverse Changes in Condition.................... 33
7.5 Reports......................................... 33
ARTICLE 8 - ADDITIONAL AGREEMENTS......................... 33
8.1 Registration Statement; Proxy Statement;
Shareholder Approval.......................... 33
8.2 Exchange Listing................................ 34
8.3 Applications.................................... 34
8.4 Filings with State Offices...................... 34
8.5 Agreement as to Efforts to Consummate........... 34
8.6 Investigation and Confidentiality............... 35
8.7 Press Releases.................................. 35
8.8 Certain Actions................................. 36
8.9 Accounting and Tax Treatment.................... 36
8.10 State Takeover Laws............................. 36
8.11 Charter Provisions.............................. 36
8.12 Agreement of Affiliates......................... 37
8.13 Employee Benefits and Contracts................. 37
8.14 Indemnification................................. 38
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PAGE
ARTICLE 9 - CONDITIONS PRECEDENT TO OBLIGATIONS TO
CONSUMMATE............................................. 39
9.1 Conditions to Obligations of Each Party......... 39
9.2 Conditions to Obligations of FNB................ 40
9.3 Conditions to Obligations of Southwest.......... 42
ARTICLE 10 - TERMINATION.................................. 43
10.1 Termination..................................... 43
10.2 Effect of Termination........................... 45
10.3 Non-Survival of Representations and Covenants... 46
ARTICLE 11 - MISCELLANEOUS................................ 46
11.1 Definitions..................................... 46
11.2 Expenses........................................ 57
11.3 Brokers and Finders............................. 57
11.4 Entire Agreement................................ 58
11.5 Amendments...................................... 58
11.6 Waivers......................................... 58
11.7 Assignment...................................... 59
11.8 Notices......................................... 59
11.9 Governing Law................................... 60
11.10 Counterparts.................................... 60
11.11 Captions........................................ 60
11.12 Interpretations................................. 60
11.13 Enforcement of Agreement........................ 60
11.14 Severability.................................... 61
Signatures................................................ 61
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LIST OF EXHIBITS
EXHIBIT NUMBER DESCRIPTION
1. Form of Stock Option Agreement. (Sec-
tion 1.4).
2. Form of agreement of affiliates of South-
west. (Section 8.12).
-iv-<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement")
is made and entered into as of February 2, 1996, by and among
F.N.B. CORPORATION ("FNB"), a Pennsylvania corporation having
its principal office located in Hermitage, Pennsylvania; LAMBDA
CORPORATION, a newly incorporated Florida corporation and a
wholly-owned subsidiary of FNB ("Merger Sub"); and SOUTHWEST
BANKS, INC. ("Southwest"), a Florida corporation having its
principal office located in Naples, Florida.
PREAMBLE
The Boards of Directors of Southwest and FNB are of
the opinion that the strategic affiliation described herein is
in the best interests of the parties and their respective
shareholders. This Agreement provides for the acquisition of
Southwest by FNB pursuant to the merger of Merger Sub with and
into Southwest. At the effective time of such merger, the out-
standing shares of the capital stock of Southwest shall be con-
verted into the right to receive shares of the common stock of
FNB (except as provided herein). As a result, shareholders of
Southwest shall become shareholders of FNB. Further, it is the
current intention of FNB, subsequent to the effective time of
this strategic affiliation, to retain the management team of
Southwest with the authority and responsibility for operating
Southwest and its subsidiaries in substantially same manner and
fashion as historically operated by such management team. The
transactions described in this Agreement are subject to the
approvals of the shareholders of Southwest, the Board of Gover-
nors of the Federal Reserve System, the Florida Department of
Banking and Finance, and the satisfaction of certain other con-
ditions described in this Agreement. It is the intention of
the parties to this Agreement that the Merger (as hereinafter
defined) for federal income tax purposes shall qualify as a
"reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code, and for accounting purposes shall
qualify for treatment as a pooling of interests.
Immediately after the execution and delivery of this
Agreement, as a condition and inducement to FNB's willingness
to enter into this Agreement, Southwest and FNB are entering
into a stock option agreement (the "Stock Option Agreement"),
in substantially the form of Exhibit 1, pursuant to which
Southwest is granting to FNB an option to purchase shares of
Southwest Common Stock.<PAGE>
Certain terms used in this Agreement are defined in
Section 11.1 of this Agreement.
NOW, THEREFORE, in consideration of the above and the
mutual warranties, representations, covenants, and agreements
set forth herein, the parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of
this Agreement, at the Effective Time, Merger Sub shall be
merged with and into Southwest in accordance with the provi-
sions of the FBCA (the "Merger"). Southwest shall be the Sur-
viving Corporation resulting from the Merger and shall continue
to be governed by the Laws of the State of Florida. The Merger
shall be consummated pursuant to the terms of this Agreement,
which has been approved and adopted by the respective Boards of
Directors of Southwest, Merger Sub and FNB.
1.2 TIME AND PLACE OF CLOSING. The closing will
take place at 9:00 A.M. on the date that the Effective Time
occurs (or the immediately preceding day if the Effective Time
is earlier than 9:00 A.M.), or at such other time as the Par-
ties, acting through their chief executive officers or chief
financial officers, may mutually agree. The place of closing
shall be at such location as may be mutually agreed upon by the
Parties.
1.3 EFFECTIVE TIME. The Merger and other transac-
tions contemplated by this Agreement shall become effective on
the date and at the time the Florida Certificate of Merger re-
flecting the Merger shall become effective with the Secretary
of State of the State of Florida (the "Effective Time"). Sub-
ject to the terms and conditions hereof, unless otherwise mutu-
ally agreed upon in writing by each Party, the Parties shall
use their reasonable efforts to cause the Effective Time to
occur on or before the fifth business day (as designated by
FNB) following the last to occur of (i) the effective date (in-
cluding expiration of any applicable waiting period) of the
last required Consent of any Regulatory Authority having au-
thority over and approving or exempting the Merger, and (ii)
the date on which the shareholders of Southwest approve this
Agreement to the extent such approval is required by applicable
Law; provided, however, that in no event shall the Effective
Time occur prior to January 1, 1997, unless FNB determines in
its sole discretion to permit the Effective Time to occur prior
to January 1, 1997, but not earlier than December 16, 1996.
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1.4 EXECUTION OF STOCK OPTION AGREEMENT. Immedi-
ately after the execution of this Agreement and as a condition
thereto, Southwest is executing and delivering to FNB the Stock
Option Agreement.
ARTICLE 2
TERMS OF MERGER
2.1 CHARTER. The Articles of Incorporation of
Southwest in effect immediately prior to the Effective Time
shall be the Articles of Incorporation of the Surviving Corpo-
ration until otherwise amended or repealed.
2.2 BYLAWS. The Bylaws of Southwest in effect im-
mediately prior to the Effective Time shall be the Bylaws of
the Surviving Corporation until otherwise amended or repealed.
2.3 FNB BOARD OF DIRECTORS. Following the Effective
Time, the number of members of the FNB Board of Directors shall
be increased by three, and three of the then current directors
of Southwest shall be nominated by the FNB Board of Directors
and elected to such Board.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions
of this Article 3, at the Effective Time, by virtue of the
Merger and without any action on the part of FNB, Merger Sub or
Southwest, or the shareholders of any of the foregoing, the
shares of the constituent corporations shall be converted as
follows:
(a) Each share of FNB Capital Stock issued and
outstanding immediately prior to the Effective Time shall
remain issued and outstanding from and after the Effective
Time.
(b) Each share of common stock of the Merger
Sub issued and outstanding immediately prior to the Effec-
tive Time shall become and be converted into one share of
Southwest Common Stock and shall remain issued and out-
standing.
(c) Each share of Southwest Common Stock (ex-
cluding shares held by any Southwest Company or any FNB
Company, in each case other than in a fiduciary capacity
or as a result of debts previously contracted) issued and
-3-<PAGE>
outstanding at the Effective Time shall cease to be out-
standing and shall be converted into and exchanged for
0.78 shares of FNB Common Stock (subject to possible ad-
justment pursuant to Section 10.1(g) of this Agreement,
the "Exchange Ratio").
3.2 ANTI-DILUTION PROVISIONS. In the event FNB
changes the number of shares of FNB Common Stock issued and
outstanding prior to the Effective Time as a result of a stock
split, stock dividend or similar recapitalization with respect
to such stock and the record date therefor (in the case of a
stock dividend) or the effective date thereof (in the case of a
stock split or similar recapitalization for which a record date
is not established) shall be prior to the Effective Time, the
Exchange Ratio shall be proportionately adjusted.
3.3 SHARES HELD BY SOUTHWEST OR FNB. Each of the
shares of Southwest Common Stock held by any Southwest Company
or by any FNB Company, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, shall
be canceled and retired at the Effective Time and no consider-
ation shall be issued in exchange therefor.
3.4 FRACTIONAL SHARES. Notwithstanding any other
provision of this Agreement, each holder of shares of Southwest
Common Stock exchanged pursuant to the Merger who would other-
wise have been entitled to receive a fraction of a share of FNB
Common Stock (after taking into account all certificates deliv-
ered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part
of a share of FNB Common Stock multiplied by the market value
of one share of FNB Common Stock at the Effective Time. The
market value of one share of FNB Common Stock at the Effective
Time shall be the average of the high bid and low asked prices
of such common stock in the over-the-counter market, as re-
ported by Nasdaq (or, if not reported thereby, any other au-
thoritative source selected by FNB) on the last trading day
preceding the Effective Time. No such holder will be entitled
to dividends, voting rights, or any other rights as a share-
holder in respect of any fractional shares.
3.5 CONVERSION OF STOCK OPTIONS.
(a) At the Effective Time, each option, warrant
or other right to purchase shares of Southwest Common Stock
pursuant to outstanding stock options, warrant agreements or
stock appreciation rights ("Southwest Options") granted by
Southwest under the Southwest Stock Plans identified in Section
3.5 of the Southwest Disclosure Memorandum, which are outstand-
ing at the Effective Time, whether or not exercisable, shall be
-4-<PAGE>
converted into and become rights with respect to FNB Common
Stock, and FNB shall assume each Southwest Option, in ac-
cordance with the terms of the Southwest Stock Plan, stock op-
tion agreement or warrant agreement by which it is evidenced,
except that from and after the Effective Time, (i) FNB and its
Compensation Committee shall be substituted for Southwest and
the Compensation Committee of Southwest's Board of Directors
(including, if applicable, the entire Board of Directors of
Southwest) administering such Southwest Stock Plan, (ii) each
Southwest Option assumed by FNB may be exercised solely for
shares of FNB Common Stock (or cash in the case of stock ap-
preciation rights), (iii) the number of shares of FNB Common
Stock subject to such Southwest Option shall be equal to the
number of shares of Southwest Common Stock subject to such
Southwest Option immediately prior to the Effective Time multi-
plied by the Exchange Ratio, and (iv) the per share exercise
price under each such Southwest Option shall be adjusted by
dividing the per share exercise price under each such Southwest
Option by the Exchange Ratio and rounding down to the nearest
cent. Notwithstanding the provisions of clause (iii) of the
preceding sentence, FNB shall not be obligated to issue any
fraction of a share of FNB Common Stock upon exercise of South-
west Options and any fraction of a share of FNB Common Stock
that otherwise would be subject to a converted Southwest Option
shall represent the right to receive a cash payment equal to
the product of such fraction and the difference between the
market value of one share of FNB Common Stock and the per share
exercise price of such Option. In addition, notwithstanding
the provisions of clauses (iii) and (iv) of the first sentence
of this Section 3.5, each Southwest Option which is an "incen-
tive stock option" shall be adjusted as required by Section 424
of the Internal Revenue Code, and the regulations promulgated
thereunder, so as not to constitute a modification, extension,
or renewal of the option within the meaning of Section 424(h)
of the Internal Revenue Code. Southwest agrees to take all
necessary steps to effectuate the foregoing provisions of this
Section 3.5.
(b) As soon as practicable after the Effective
Time, FNB shall deliver to the participants in each Southwest
Stock Plan an appropriate notice setting forth such partici-
pant's rights pursuant thereto and the grants pursuant to such
Southwest Stock Plan shall continue in effect on the same terms
and conditions (subject to the adjustments required by Section
3.5(a) after giving effect to the Merger), and FNB shall comply
with the terms of each Southwest Stock Plan to ensure, to the
extent required by, and subject to the provisions of, such
Southwest Stock Plan, that Southwest Options which qualified as
incentive stock options prior to the Effective Time continue to
qualify as incentive stock options after the Effective Time.
-5-<PAGE>
At or prior to the Effective Time, FNB shall take all corporate
action necessary to reserve for issuance sufficient shares of
FNB Common Stock for delivery upon exercise of Southwest Op-
tions assumed by it in accordance with this Section 3.5. As
soon as practicable after the Effective Time, FNB shall file a
registration statement on Form S-3 or Form S-8, as the case may
be (or any successor or other appropriate forms), with respect
to the shares of FNB Common Stock subject to such options and
shall use its reasonable efforts to maintain the effectiveness
of such registration statements (and maintain the current sta-
tus of the prospectus or prospectuses contained therein) for so
long as such options remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the
reporting requirements under Section 16(a) of the 1934 Act,
where applicable, FNB shall administer the Southwest Stock Plan
assumed pursuant to this Section 3.5 in a manner that complies
with Rule 16b-3 promulgated under the 1934 Act to the extent
the Southwest Stock Plan complied with such rule prior to the
Merger.
(c) All restrictions or limitations on transfer
with respect to Southwest Common Stock awarded under the South-
west Stock Plans or any other plan, program, or arrangement of
any Southwest Company, to the extent that such restrictions or
limitations shall not have already lapsed, and except as other-
wise expressly provided in such plan, program, or arrangement,
shall remain in full force and effect with respect to shares of
FNB Common Stock into which such restricted stock is converted
pursuant to Section 3.1 of this Agreement.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effec-
tive Time, FNB and Southwest shall cause the exchange agent se-
lected by FNB (the "Exchange Agent") to mail to the former
shareholders of Southwest appropriate transmittal materials
(which shall specify that delivery shall be effected, and risk
of loss and title to the certificates theretofore representing
shares of Southwest Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent). After
the Effective Time, each holder of shares of Southwest Common
Stock (other than shares to be canceled pursuant to Section 3.3
of this Agreement) issued and outstanding at the Effective Time
shall surrender the certificate or certificates representing
such shares to the Exchange Agent and shall upon surrender
thereof promptly receive in exchange therefor the consideration
provided in Section 3.1 of this Agreement, together with all
undelivered dividends or distributions in respect of such
-6-<PAGE>
shares (without interest thereon) pursuant to Section 4.2 of
this Agreement. To the extent required by Section 3.4 of this
Agreement, each holder of shares of Southwest Common Stock is-
sued and outstanding at the Effective Time also shall receive,
upon surrender of the certificate or certificates representing
such shares, cash in lieu of any fractional share of FNB Common
Stock to which such holder may be otherwise entitled (without
interest). FNB shall not be obligated to deliver the consider-
ation to which any former holder of Southwest Common Stock is
entitled as a result of the Merger until such holder surrenders
such holder's certificate or certificates representing the
shares of Southwest Common Stock for exchange as provided in
this Section 4.1. The certificate or certificates of Southwest
Common Stock so surrendered shall be duly endorsed as the Ex-
change Agent may require. Any other provision of this Agree-
ment notwithstanding, neither FNB nor the Exchange Agent shall
be liable to a holder of Southwest Common Stock for any amounts
paid or property delivered in good faith to a public official
pursuant to any applicable abandoned property Law.
4.2 RIGHTS OF FORMER SOUTHWEST SHAREHOLDERS. At the
Effective Time, the stock transfer books of Southwest shall be
closed as to holders of Southwest Common Stock immediately
prior to the Effective Time and no transfer of Southwest Common
Stock by any such holder shall thereafter be made or recog-
nized. Until surrendered for exchange in accordance with the
provisions of Section 4.1 of this Agreement, each certificate
theretofore representing shares of Southwest Common Stock
(other than shares to be canceled pursuant to Section 3.3 of
this Agreement) shall from and after the Effective Time repre-
sent for all purposes only the right to receive the consider-
ation provided in Sections 3.1 and 3.4 of this Agreement in
exchange therefor, subject, however, to FNB's obligation to pay
any dividends or make any other distributions with a record
date prior to the Effective Time which have been declared or
made by Southwest in respect of such shares of Southwest Common
Stock in accordance with the terms of this Agreement and which
remain unpaid at the Effective Time. Whenever a dividend or
other distribution is declared by FNB on the FNB Common Stock,
the record date for which is at or after the Effective Time,
the declaration shall include dividends or other distributions
on all shares issuable pursuant to this Agreement, but begin-
ning 30 days after the Effective Time no dividend or other dis-
tribution payable to the holders of record of FNB Common Stock
as of any time subsequent to the Effective Time shall be deliv-
ered to the holder of any certificate representing shares of
Southwest Common Stock issued and outstanding at the Effective
Time until such holder surrenders such certificate for exchange
as provided in Section 4.1 of this Agreement. However, upon
surrender of such Southwest Common Stock certificate, both the
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FNB Common Stock certificate (together with all such undeliv-
ered dividends or other distributions without interest) and any
undelivered dividends and cash payments to be paid for frac-
tional share interests (without interest) shall be delivered
and paid with respect to each share represented by such cer-
tificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SOUTHWEST
Southwest hereby represents and warrants to FNB as
follows:
5.1 ORGANIZATION, STANDING, AND POWER. Southwest is
a corporation duly organized, validly existing, and in good
standing under the Laws of the State of Florida, and has the
corporate power and authority to carry on its business as now
conducted and to own, lease, and operate its material Assets.
Southwest is duly qualified or licensed to transact business as
a foreign corporation in good standing in the States of the
United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it
to be so qualified or licensed, except for such jurisdictions
in which the failure to be so qualified or licensed is not rea-
sonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Southwest.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Southwest has the corporate power and au-
thority necessary to execute, deliver, and perform its obliga-
tions under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery, and performance
of this Agreement and the consummation of the transactions con-
templated herein, including the Merger, have been duly and val-
idly authorized by all necessary corporate action in respect
thereof on the part of Southwest, subject to the approval of
this Agreement by the holders of a majority of the outstanding
shares of Southwest Common Stock other than those shares ben-
eficially owned by FNB, which is the only shareholder vote re-
quired for approval of this Agreement and consummation of the
Merger by Southwest. Subject to such requisite shareholder
approval, this Agreement represents a legal, valid, and binding
obligation of Southwest, enforceable against Southwest in ac-
cordance with its terms (except in all cases as such enforce-
ability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the en-
forcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or
-8-<PAGE>
injunctive relief is subject to the discretion of the court
before which any proceeding may be brought). The Southwest
Board of Directors has received from The Robinson-Humphrey Com-
pany, Inc. a letter dated as of the date of this Agreement to
the effect that, in the opinion of such firm, the Exchange Ra-
tio is fair, from a financial point of view, to the holders of
Southwest Common Stock.
(b) Neither the execution and delivery of this
Agreement by Southwest, nor the consummation by Southwest of
the transactions contemplated hereby, nor compliance by South-
west with any of the provisions hereof, will (i) conflict with
or result in a breach of any provision of Southwest's Articles
of Incorporation or Bylaws, or, (ii) except as disclosed in
Section 5.2(b)(ii) of the Southwest Disclosure Memorandum, con-
stitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset
of any Southwest Company under, any Contract or Permit of any
Southwest Company, where such Default or Lien, or any failure
to obtain such Consent, is reasonably likely to have, individu-
ally or in the aggregate, a Material Adverse Effect on South-
west, or, (iii) subject to receipt of the requisite Consents
referred to in Section 9.1(b) of this Agreement, violate any
Law or Order applicable to any Southwest Company or any of
their respective material Assets.
(c) Other than in connection or compliance with
the provisions of the Securities Laws, applicable state corpo-
rate and securities Laws, and rules of the NASD, and other than
Consents required from Regulatory Authorities, and other than
notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any em-
ployee benefit plans, or under the HSR Act, and other than Con-
sents, filings, or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Southwest, no notice
to, filing with, or Consent of, any public body or authority is
necessary for the consummation by Southwest of the Merger and
the other transactions contemplated in this Agreement.
5.3 CAPITAL STOCK.
(a) The authorized capital stock of Southwest
consists of (i) 25,000,000 shares of Southwest Common Stock, of
which 3,654,089 shares are issued and outstanding as of the
date of this Agreement and not more than 4,000,855 shares will
be issued and outstanding at the Effective Time, and (ii)
100,000 shares of preferred stock, par value $0.10 per share,
none of which is issued and outstanding. All of the issued and
outstanding shares of capital stock of Southwest are duly and
-9-<PAGE>
validly issued and outstanding and are fully paid and non-
assessable under the FBCA. None of the outstanding shares of
capital stock of Southwest has been issued in violation of any
preemptive rights of the current or past shareholders of South-
west. Southwest has reserved 651,194 shares of Southwest Com-
mon Stock for issuance under the Southwest Stock Plans, pursu-
ant to which options and warrants to purchase not more than
452,930 shares of Southwest Common Stock are outstanding.
(b) Except as set forth in Section 5.3(a) of
this Agreement, or as provided pursuant to the Stock Option
Agreement, there are no shares of capital stock or other equity
securities of Southwest outstanding and no outstanding Rights
relating to the capital stock of Southwest.
5.4 SOUTHWEST SUBSIDIARIES. Southwest has disclosed
in Section 5.4 of the Southwest Disclosure Memorandum all of
the Southwest Subsidiaries as of the date of this Agreement.
Except as disclosed in Section 5.4 of the Southwest Disclosure
Memorandum, Southwest or one of its Subsidiaries owns all of
the issued and outstanding shares of capital stock of each
Southwest Subsidiary. No equity securities of any Southwest
Subsidiary are or may become required to be issued (other than
to another Southwest Company) by reason of any Rights, and
there are no Contracts by which any Southwest Subsidiary is
bound to issue (other than to another Southwest Company) ad-
ditional shares of its capital stock or Rights or by which any
Southwest Company is or may be bound to transfer any shares of
the capital stock of any Southwest Subsidiary (other than to
another Southwest Company). There are no Contracts relating to
the rights of any Southwest Company to vote or to dispose of
any shares of the capital stock of any Southwest Subsidiary.
All of the shares of capital stock of each Southwest Subsidiary
held by a Southwest Company are fully paid and nonassessable
under the applicable corporation Law of the jurisdiction in
which such Subsidiary is incorporated or organized and are
owned by the Southwest Company free and clear of any Lien.
Each Southwest Subsidiary is either a bank or a corporation,
and is duly organized, validly existing, and (as to corpora-
tions) in good standing under the Laws of the jurisdiction in
which it is incorporated or organized, and has the corporate
power and authority necessary for it to own, lease, and operate
its Assets and to carry on its business as now conducted. Each
Southwest Subsidiary is duly qualified or licensed to transact
business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its busi-
ness 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
-10-<PAGE>
the aggregate, a Material Adverse Effect on Southwest. Each
Southwest Subsidiary that is a depository institution is an
"insured institution" as defined in the Federal Deposit Insur-
ance Act and applicable regulations thereunder, and the depos-
its in which are insured by the Bank Insurance Fund.
5.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Southwest has filed and made available to
FNB all forms, reports, and documents required to be filed by
Southwest with the SEC since December 31, 1992 (collectively,
the "Southwest SEC Reports"). The Southwest SEC Reports (i) at
the time filed, complied in all material respects with the ap-
plicable requirements of the 1933 Act and the 1934 Act, as the
case may be, and (ii) did not at the time they were filed (or
if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact
required to be stated in such Southwest SEC Reports or neces-
sary in order to make the statements in such Southwest SEC Re-
ports, in light of the circumstances under which they were
made, not misleading. Except for Southwest Subsidiaries that
are registered as a broker, dealer or investment advisor, none
of Southwest's Subsidiaries is required to file any forms, re-
ports, or other documents with the SEC. Southwest has made
available to FNB a copy of the balance sheets and the related
consolidated statements of income, consolidated statement of
changes in shareholders' equity (including related notes and
schedules) of its subsidiary banks as of and for the period
ended December 31, 1995 and any draft consolidated statements
or earnings releases for Southwest and its consolidated subsid-
iaries as of and for the period ended December 31, 1995 that
have been prepared by Southwest as of the date of this Agree-
ment.
(b) Each of the Southwest Financial Statements
(including, in each case, any related notes) contained in the
Southwest SEC Reports, including any Southwest SEC Reports
filed after the date of this Agreement until the Effective
Time, complied as to form in all material respects with the
applicable published rules and regulations of the SEC with re-
spect thereto, was prepared in accordance with GAAP applied on
a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements, or,
in the case of unaudited statements, as permitted by Form
10-QSB of the SEC), and fairly presented the consolidated fi-
nancial position of Southwest and its Subsidiaries as at the
respective dates and the consolidated results of its operations
-11-<PAGE>
and cash flows for the periods indicated, except that the unau-
dited interim financial statements were or are subject to nor-
mal and recurring year-end adjustments which were not or are
not expected to be material in amount.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since
September 30, 1995, except as disclosed in Section 5.6 of the
Southwest Disclosure Memorandum, (i) there have been no events,
changes, or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on Southwest, and (ii) the Southwest Companies
have not taken any action, or failed to take any action, prior
to the date of this Agreement, which action or failure, if
taken after the date of this Agreement, would represent or re-
sult in a material breach or violation of any of the covenants
and agreements of Southwest provided in Article 7 of this
Agreement.
5.7 TAX MATTERS.
(a) All Tax Returns required to be filed by or
on behalf of any of the Southwest Companies have been timely
filed or requests for extensions have been timely filed,
granted, and have not expired for periods ended on or before
December 31, 1995, and on or before the date of the most recent
fiscal year end immediately preceding the Effective Time, ex-
cept to the extent that all such failures to file, taken to-
gether, are not reasonably likely to have a Material Adverse
Effect on Southwest, and all Tax Returns filed are complete and
accurate in all material respects to the Knowledge of South-
west. 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 ag-
gregate, a Material Adverse Effect on Southwest, except as re-
served against in the Southwest Financial Statements delivered
prior to the date of this Agreement or as disclosed in Section
5.7 of the Southwest Disclosure Memorandum. All Taxes and
other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid.
(b) Except as disclosed in Section 5.7 of the
Southwest Disclosure Memorandum, none of the Southwest Compa-
nies has executed an extension or waiver of any statute of
limitations on the assessment or collection of any Tax due that
is currently in effect.
(c) Adequate provision for any Taxes due or to
become due for any of the Southwest Companies for the period or
-12-<PAGE>
periods through and including the date of the respective South-
west Financial Statements has been made and is reflected on
such Southwest Financial Statements, except as disclosed in
Section 5.7 of the Southwest Disclosure Memorandum.
(d) Deferred Taxes of the Southwest Companies
have been adequately provided for in the Southwest Financial
Statements.
(e) Each of the Southwest Companies is in com-
pliance with, and its records contain all information and docu-
ments (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 in-
stances of noncompliance and such omissions as are not reason-
ably likely to have, individually or in the aggregate, a Mate-
rial Adverse Effect on Southwest.
(f) Except as disclosed in Section 5.7 of the
Southwest Disclosure Memorandum, none of the Southwest Compa-
nies has made any payments, is obligated to make any payments,
or is a party to any contract, agreement, or other arrangement
that could obligate it to make any payments that would be dis-
allowed as a deduction under Section 280G or 162(m) of the In-
ternal Revenue Code.
(g) There are no Liens with respect to Taxes
upon any of the assets of the Southwest Companies.
(h) There has not been an ownership change, as
defined in Internal Revenue Code Section 382(g), of the South-
west Companies that occurred during or after any Taxable Period
in which the Southwest Companies incurred a net operating loss
that carries over to any Taxable Period ending after December
31, 1994.
(i) No Southwest Company has filed any consent
under Section 341(f) of the Internal Revenue Code concerning
collapsible corporation.
(j) All material elections with respect to
Taxes affecting the Southwest Companies as of the date of this
Agreement have been or will be timely made as set forth in Sec-
tion 5.7 of the Southwest Disclosure Memorandum. After the
date hereof, other than as set forth in Section 5.7 of the
Southwest Disclosure Memorandum, no election with respect to
-13-<PAGE>
Taxes will be made without the prior written consent of FNB,
which consent will not be unreasonably withheld.
(k) No Southwest Company has or has had a per-
manent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States
and such foreign country.
5.8 ASSETS. Except as disclosed in Section 5.8 of
the Southwest Disclosure Memorandum, the Southwest Companies
have good and marketable title, free and clear of all Liens, to
all of their respective Assets. All tangible properties used
in the businesses of the Southwest Companies are in good condi-
tion, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with Southwest's past
practices. All Assets which are material to Southwest's busi-
ness on a consolidated basis, held under leases or subleases by
any of the Southwest Companies, are held under valid Contracts
enforceable in accordance with their respective terms (except
as enforceability may be limited by applicable bankruptcy, in-
solvency, reorganization, moratorium, or other Laws affecting
the enforcement of creditors' rights generally and except that
the availability of the equitable remedy of specific perfor-
mance or injunctive relief is subject to the discretion of the
court before which any proceedings may be brought), and each
such Contract is in full force and effect. The Southwest Com-
panies currently maintain insurance in amounts, scope, and cov-
erage as disclosed in Section 5.8 of the Southwest Disclosure
Memorandum. None of the Southwest Companies has received writ-
ten 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 dis-
closed in Section 5.8 of the Southwest Disclosure Memorandum,
there are presently no claims pending under such policies of
insurance and no notices have been given by any Southwest Com-
pany under such policies. The Assets of the Southwest Compa-
nies include all Assets required to operate the business of the
Southwest Companies as presently conducted.
5.9 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of Southwest, except as
disclosed in Section 5.9 of the Southwest Disclosure Memoran-
dum, each Southwest Company, its Participation Facilities, and
its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations which are not reason-
ably likely to have, individually or in the aggregate, a Mate-
rial Adverse Effect on Southwest.
-14-<PAGE>
(b) Except as disclosed in Section 5.9 of the
Southwest Disclosure Memorandum, to the Knowledge of Southwest,
there is no Litigation pending or threatened before any court,
governmental agency, or authority or other forum in which any
Southwest Company or any of its Loan Properties or Participa-
tion Facilities (or any Southwest Company in respect of any
such Loan Property or Participation Facility) has been or, with
respect to threatened Litigation, may be named as a defendant
or potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or
(ii) relating to the release into the environment of any Haz-
ardous Material, whether or not occurring at, on, under, or
involving any of its Loan Properties or Participation Facili-
ties, except for such Litigation pending or threatened that is
not reasonably likely to have, individually or in the ag-
gregate, a Material Adverse Effect on Southwest.
(c) To the Knowledge of Southwest, except as
disclosed in Section 5.9 of the Southwest Disclosure Memoran-
dum, there is no reasonable basis for any Litigation of a type
described above in subsection (b), except such as is not rea-
sonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Southwest.
(d) To the Knowledge of Southwest, except as
disclosed in Section 5.9 of the Southwest Disclosure Memoran-
dum, there have been no releases of Hazardous Material in, on,
under, or affecting any Participation Facility or Loan Property
of a Southwest Company, except such as are not reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on Southwest.
5.10 COMPLIANCE WITH LAWS. Southwest is duly regis-
tered as a bank holding company under the BHC Act. Each South-
west Company has in effect all Permits necessary for it to own,
lease, or operate its material Assets and to carry on its busi-
ness as now conducted, except for those Permits the absence of
which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Southwest, and there
has occurred no Default under any such Permit, other than De-
faults which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Southwest. None
of the Southwest Companies:
(a) is in violation of any Laws, Orders, or
Permits applicable to its business or employees conducting
its business, except for violations which are not reason-
ably likely to have, individually or in the aggregate, a
Material Adverse Effect on Southwest; and
-15-<PAGE>
(b) has received any notification or communica-
tion from any agency or department of federal, state, or
local government or any Regulatory Authority or the staff
thereof (i) asserting that any Southwest Company is not in
compliance with any of the Laws or Orders which such gov-
ernmental authority or Regulatory Authority enforces,
where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Ef-
fect on Southwest, (ii) threatening to revoke any Permits,
the revocation of which is reasonably likely to have, in-
dividually or in the aggregate, a Material Adverse Effect
on Southwest, or (iii) requiring any Southwest Company to
enter into or consent to the issuance of a cease and de-
sist order, formal agreement, directive, commitment, or
memorandum of understanding, or to adopt any Board resolu-
tion or similar undertaking, which restricts materially
the conduct of its business, or in any manner relates to
its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
5.11 LABOR RELATIONS. No Southwest Company is the
subject of any Litigation asserting that it or any other South-
west Company has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or comparable state
law) or seeking to compel it or any other Southwest Company to
bargain with any labor organization as to wages or conditions
of employment, nor is there any strike or other labor dispute
involving any Southwest Company, pending or threatened, or to
the Knowledge of Southwest, is there any activity involving any
Southwest Company's employees seeking to certify a collective
bargaining unit or engaging in any other organization activity.
5.12 EMPLOYEE BENEFIT PLANS.
(a) Southwest has disclosed in Section 5.12 of
the Southwest Disclosure Memorandum, and has delivered or made
available to FNB prior to the execution of this Agreement cop-
ies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all
other written employee programs, arrangements, or agreements,
all medical, vision, dental, or other health plans, all life
insurance plans, and all other employee benefit plans or fringe
benefit plans, including "employee benefit plans" (as that term
is defined in Section 3(3) of ERISA), currently adopted, main-
tained by, sponsored in whole or in part by, or contributed to
by any Southwest Company or ERISA Affiliate (as defined below)
thereof for the benefit of employees, retirees, dependents,
spouses, directors, independent contractors, or other benefi-
ciaries and under which employees, retirees, dependents,
-16-<PAGE>
spouses, directors, independent contractors, or other benefi-
ciaries are eligible to participate (collectively, the "South-
west Benefit Plans"). Any of the Southwest Benefit Plans which
is an "employee pension benefit plan" (as that term is defined
in Section 3(2) of ERISA), is referred to herein as a "South-
west ERISA Plan." Each Southwest ERISA Plan which is also a
"defined benefit plan" (as defined in Section 4140) of the In-
ternal Revenue Code) is referred to herein as a "Southwest Pen-
sion Plan." No Southwest Pension Plan is or has been a multi-
employer plan within the meaning of Section 3(37) of ERISA.
(b) Except as disclosed in Section 5.12 of the
Southwest Disclosure Memorandum, all Southwest Benefit Plans
are in compliance with the applicable terms of ERISA, the In-
ternal Revenue Code, and any other applicable Laws the breach
or violation of which are reasonably likely to have, individu-
ally or in the aggregate, a Material Adverse Effect on South-
west, and each Southwest ERISA Plan which is intended to be
qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal
Revenue Service, and Southwest is not aware of any circum-
stances likely to result in revocation of any such favorable
determination letter. Except as disclosed in Section 5.12 of
the Southwest Disclosure Memorandum, to the Knowledge of South-
west, no Southwest Company has engaged in a transaction with
respect to any Southwest Benefit Plan that, assuming the tax-
able period of such transaction expired as of the date hereof,
would subject any Southwest Company to a Tax imposed by either
Section 4975 of the Internal Revenue Code or Section 502(i) of
ERISA in amounts which are reasonably likely to have, individu-
ally or in the aggregate, a Material Adverse Effect on South-
west.
(c) Except as disclosed in Section 5.12 of the
Southwest Disclosure Memorandum, no Southwest Pension Plan has
any "unfunded current liability" (as that term is defined in
Section 302(d)(8)(A) of ERISA) and the fair market value of the
assets of any such plan exceeds the plan's "benefit liabili-
ties," as that term is defined in Section 4001(a)(16) of ERISA,
when determined under actuarial factors that would apply if the
plan terminated in accordance with all applicable legal re-
quirements. Except as disclosed in Section 5.12 of the South-
west Disclosure Memorandum, since the date of the most recent
actuarial valuation, there has been (i) no material change in
the financial position of any Southwest Pension Plan, (ii) no
change in the actuarial assumptions with respect to any South-
west Pension Plan, and (iii) no increase in benefits under any
Southwest Pension Plan as a result of plan amendments or
changes in applicable Law which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
-17-<PAGE>
Southwest or materially adversely affect the funding status of
any such plan. Neither any Southwest Pension Plan nor any
"single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any
Southwest Company, or the single-employer plan of any entity
which is considered one employer with Southwest under Section
4001 of ERISA or Section 414 of the Internal Revenue Code or
Section 302 of ERISA (whether or not waived) (an "ERISA Affili-
ate") has an "accumulated funding deficiency" within the mean-
ing of Section 412 of the Internal Revenue Code or Section 302
of ERISA, which is reasonably likely to have a Material Adverse
Effect on Southwest. No Southwest Company has provided, or is
required to provide, security to a Southwest Pension Plan or to
any single-employer plan of an ERISA Affiliate pursuant to Sec-
tion 401(a)(29) of the Internal Revenue Code.
(d) Within the six-year period preceding the
Effective Time, no Liability under Subtitle C or D of Title IV
of ERISA has been or is expected to be incurred by any South-
west Company with respect to any ongoing, frozen, or terminated
single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a Mate-
rial Adverse Effect on Southwest. No Southwest Company has
incurred any withdrawal Liability with respect to a multiem-
ployer plan under Subtitle B of Title IV of ERISA (regardless
of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a Material Adverse Ef-
fect on Southwest. No notice of a "reportable event," within
the meaning of Section 4043 of ERISA for which the 30-day re-
porting requirement has not been waived, has been required to
be filed for any Southwest Pension Plan or by any ERISA Affili-
ate within the 12-month period ending on the date hereof
(e) Except as disclosed in Section 5.12 of the
Southwest Disclosure Memorandum, no Southwest Company has any
Liability for retiree health and life benefits under any of the
Southwest Benefit Plans and there are no restrictions on the
rights of such Southwest Company to amend or terminate any such
plan without incurring any Liability thereunder, which Li-
ability is reasonably likely to have a Material Adverse Effect
on Southwest.
(f) Except as disclosed in Section 5.12 of the
Southwest Disclosure Memorandum, neither the execution and de-
livery of this Agreement nor the consummation of the transac-
tions contemplated hereby will (i) result in any payment (in-
cluding severance, unemployment compensation, golden parachute,
or otherwise) becoming due to any director or any employee of
any Southwest Company from any Southwest Company under any
Southwest Benefit Plan or otherwise, (ii) increase any benefits
-18-<PAGE>
otherwise payable under any Southwest Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of
any such benefit, where such payment, increase, or acceleration
is reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Southwest.
(g) The actuarial present values of all accrued
deferred compensation entitlements (including entitlements un-
der any executive compensation, supplemental retirement, or
employment agreement) of employees and former employees of any
Southwest Company and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans
subject to the provisions of Section 412 of the Internal Rev-
enue Code or Section 302 of ERISA, have been fully reflected on
the Southwest Financial Statements to the extent required by
and in accordance with GAAP.
5.13 MATERIAL CONTRACTS. Except as disclosed in
Section 5.13 of the Southwest Disclosure Memorandum, none of
the Southwest Companies, nor any of their respective Assets,
businesses, or operations, is a party to, or is bound or af-
fected by, or receives benefits under, (i) any employment, sev-
erance, termination, consulting, or retirement Contract provid-
ing for aggregate payments to any Person in any calendar year
in excess of $100,000, (ii) any Contract relating to the bor-
rowing of money by any Southwest Company or the guarantee by
any Southwest Company of any such obligation (other than Con-
tracts evidencing deposit liabilities, purchases of federal
funds, fully-secured repurchase agreements, and Federal Home
Loan Bank advances of depository institution Subsidiaries,
trade payables, and Contracts relating to borrowings or guaran-
tees made in the ordinary course of business), and (iii) any
other Contract or amendment thereto that would be required to
be filed as an exhibit to a Form 10-KSB filed by Southwest with
the SEC as of the date of this Agreement that has not been
filed as an exhibit to Southwest's Form 10-KSB filed for the
fiscal year ended December 31, 1994, or in another SEC Document
and identified to FNB (together with all Contracts referred to
in Sections 5.8 and 5.12(a) of this Agreement, the "Southwest
Contracts"). With respect to each Southwest Contract and ex-
cept as disclosed in Section 5.13 of the Southwest Disclosure
Memorandum: (i) the Contract is in full force and effect; (ii)
no Southwest Company is in Default thereunder, other than De-
faults which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Southwest; (iii)
no Southwest Company has repudiated or waived any material pro-
vision of any such Contract; and (iv) no other party to any
such Contract is, to the Knowledge of Southwest, in Default in
any respect, other than Defaults which are not reasonably
likely to have, individually or in the aggregate, a Material
-19-<PAGE>
Adverse Effect on Southwest, or has repudiated or waived any
material provision thereunder. Except for Federal Home Loan
Bank advances, all of the indebtedness of any Southwest Company
for money borrowed is prepayable at any time by such Southwest
Company without penalty or premium.
5.14 LEGAL PROCEEDINGS. Except as disclosed in Sec-
tion 5.14 of the Southwest Disclosure Memorandum, there is no
Litigation instituted or pending, or, to the Knowledge of
Southwest, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reason-
able probability of an unfavorable outcome) against any South-
west Company, or against any Asset, employee benefit plan, in-
terest, or right of any of them, that is reasonably likely to
have, individually or in the aggregate, a Material Adverse Ef-
fect on Southwest, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators
outstanding against any Southwest Company, that are reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on Southwest. Section 5.14 of the Southwest
Disclosure Memorandum includes a summary report of all Litiga-
tion as of the date of this Agreement to which any Southwest
Company is a party and which names a Southwest Company as a
defendant or cross-defendant and where the estimated maximum
exposure to be $100,000 or more.
5.15 REPORTS. Since January 1, 1992, or the date of
organization if later, each Southwest Company has timely filed
all reports and statements, together with any amendments re-
quired to be made with respect thereto, that it was required to
file with any Regulatory Authorities (except, in the case of
state securities authorities, failures to file which are not
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Southwest). As of their respective
dates, each of such reports and documents, including the finan-
cial statements, exhibits, and schedules thereto, complied in
all material respects with all applicable Laws. As of its re-
spective 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 mis-
leading.
5.16 STATEMENTS TRUE AND CORRECT. None of the in-
formation supplied or to be supplied by any Southwest Company
or any Affiliate thereof for inclusion in the Registration
Statement to be filed by FNB with the SEC will, when the Regis-
tration Statement becomes effective, be false or misleading
-20-<PAGE>
with respect to any material fact, or omit to state any mate-
rial fact necessary to make the statements therein not mislead-
ing. None of the information supplied or to be supplied by any
Southwest Company or any Affiliate thereof for inclusion in the
Proxy Statement to be mailed to Southwest's shareholders in
connection with the Shareholders' Meeting, and any other docu-
ments to be filed by a Southwest Company or any Affiliate
thereof with the SEC or any other Regulatory Authority in con-
nection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to
the Proxy Statement, when first mailed to the shareholders of
Southwest, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at
the time of the Shareholders' Meeting, be false or misleading
with respect to any material fact, or omit to state any mate-
rial fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for
the Shareholders' Meeting. All documents that any Southwest
Company or any Affiliate thereof is responsible for filing with
any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material re-
spects with the provisions of applicable Law.
5.17 ACCOUNTING, TAX AND REGULATORY MATTERS. No
Southwest Company or any Affiliate thereof has taken or agreed
to take any action or has any Knowledge of any fact or circum-
stance that is reasonably likely to (i) prevent the transac-
tions contemplated hereby, including the Merger, from qualify-
ing for pooling-of-interests accounting treatment or as a reor-
ganization 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 con-
dition or restriction of the type referred to in the last sen-
tence of such Section.
5.18 STATE TAKEOVER LAWS. Each Southwest Company
has taken all necessary action to exempt the transactions con-
templated by this Agreement from any applicable "moratorium,"
"control share," "fair price," "business combination," or other
anti-takeover laws and regulations of the State of Florida
(collectively, "Takeover Laws").
5.19 CHARTER PROVISIONS. Each Southwest Company has
taken all action so that the entering into of this Agreement
and the consummation of the Merger and the other transactions
contemplated by this Agreement do not and will not result in
-21-<PAGE>
any super-majority voting requirement or the grant of any
rights to any Person under the Articles of Incorporation, By-
laws, or other governing instruments of any Southwest Company
or restrict or impair the ability of FNB or any of its Subsid-
iaries to vote, or otherwise to exercise the rights of a share-
holder with respect to, shares of any Southwest Company that
may be directly or indirectly acquired or controlled by it.
5.20 DERIVATIVES CONTRACTS. Except as disclosed in
Section 5.20 of the Southwest Disclosure Memorandum, neither
Southwest nor any of its Subsidiaries is a party to or has
agreed to enter into an exchange-traded or over-the-counter
swap, forward, future, option, cap, floor, or collar financial
contract, or any other interest rate or foreign currency pro-
tection contract not included on its balance sheet which is a
financial derivative contract (including various combinations
thereof) (each a "Derivatives Contract"), except for those De-
rivatives Contracts set forth in Section 5.20 of the Southwest
Disclosure Memorandum.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF FNB
FNB hereby represents and warrants to Southwest as
follows:
6.1 ORGANIZATION, STANDING, AND POWER. FNB is a
corporation duly organized, validly existing, and in good
standing under the Laws of the Commonwealth of Pennsylvania,
and has the corporate power and authority to carry on its busi-
ness as now conducted and to own, lease, and operate its mate-
rial 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 busi-
ness requires it to be so qualified or licensed, except for
such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on FNB.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) FNB has the corporate power and authority
necessary to execute, deliver, and perform its obligations un-
der this Agreement and to consummate the transactions contem-
plated hereby. The execution, delivery, and performance of
this Agreement and the consummation of the transactions con-
templated herein, including the Merger, have been duly and val-
idly authorized by all necessary corporate action in respect
-22-<PAGE>
thereof on the part of FNB. This Agreement represents a legal,
valid, and binding obligation of FNB, enforceable against FNB
in accordance with its terms (except in all cases as such en-
forceability may be limited by applicable bankruptcy, insol-
vency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that
the availability of the equitable remedy of specific perfor-
mance or injunctive relief is subject to the discretion of the
court before which any proceeding may be brought).
(b) Neither the execution and delivery of this
Agreement by FNB, nor the consummation by FNB of the transac-
tions contemplated hereby, nor compliance by FNB with any of
the provisions hereof, will (i) conflict with or result in a
breach of any provision of FNB's Articles of Incorporation or
Bylaws, or (ii) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of
any Lien on any Asset of any FNB Company under, any Contract or
Permit of any FNB Company, where such Default or Lien, or any
failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on
FNB, or, (iii) subject to receipt of the requisite Consents
referred to in Section 9.1(b) of this Agreement, violate any
Law or Order applicable to any FNB Company or any of their re-
spective material Assets.
(c) Other than in connection or compliance with
the provisions of the Securities Laws, applicable state corpo-
rate and securities Laws, and rules of the Nasdaq, and other
than Consents required from Regulatory Authorities, and other
than notices to or filings with the Internal Revenue Service or
the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, or under the HSR Act, and other than
Consents, filings, or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FNB, no notice to, fil-
ing with, or Consent of, any public body or authority is neces-
sary for the consummation by FNB of the Merger and the other
transactions contemplated in this Agreement.
6.3 CAPITAL STOCK. The authorized capital stock of
FNB consists of 20,000,000 shares of FNB Common Stock, of which
8,611,814 shares were issued and outstanding as of December 31,
1995 and (ii) 20,000,000 shares of FNB Preferred Stock, of
which 451,638 shares were issued and outstanding as of December
31, 1995. All of the issued and outstanding shares of FNB
Capital Stock are, and all of the shares of FNB Common Stock to
be issued in exchange for shares of Southwest Common Stock upon
consummation of the Merger, when issued in accordance with the
terms of this Agreement, will be, duly and validly issued and
-23-<PAGE>
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 ex-
change for shares of Southwest Common Stock upon consummation
of the Merger will be, issued in violation of any preemptive
rights of the current or past shareholders of FNB.
6.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) FNB has filed and made available to South-
west all forms, reports, and documents required to be filed by
FNB with the SEC since December 31, 1992, other than registra-
tion statements on Forms S-4 and S-8 (collectively, the "FNB
SEC Reports"). The FNB SEC Reports (i) at the time filed, com-
plied 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 super-
seded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a ma-
terial 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 cir-
cumstances under which they were made, not misleading.
(b) Each of the FNB Financial Statements (in-
cluding, in each case, any related notes) contained in the FNB
SEC Reports, including any FNB SEC Reports filed after the date
of this Agreement until the Effective Time, complied as to form
in all material respects with the applicable published rules
and regulations of the SEC with respect thereto, was prepared
in accordance with GAAP applied on a consistent basis through-
out the periods involved (except as may be indicated in the
notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC), and fairly
presented the consolidated financial position of FNB and its
Subsidiaries as at the respective dates and the consolidated
results of its operations and cash flows for the periods indi-
cated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjust-
ments which were not or are not expected to be material in
amount.
6.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since
September 30, 1995, except as disclosed in the FNB Financial
Statements delivered prior to the date of this Agreement, (i)
there have been no events, changes or occurrences which have
had, or are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FNB, and (ii) the FNB
Companies have not taken any action, or failed to take any ac-
tion, prior to the date of this Agreement, which action or
-24-<PAGE>
failure, if taken after the date of this Agreement, would rep-
resent or result in a material breach or violation of any of
the covenants and agreements of FNB provided in Article 7 of
this Agreement.
6.6 TAX MATTERS.
(a) All Tax Returns required to be filed by or
on behalf of any of the FNB Companies have been timely filed or
requests for extensions have been timely filed, granted, and
have not expired for periods ended on or before December 31,
1995, and on or before the date of the most recent fiscal year
end immediately preceding the Effective Time, except to the
extent that all such failures to file, taken together, are not
reasonably likely to have a Material Adverse Effect on FNB, and
all Tax Returns filed are complete and accurate in all material
respects. All Taxes shown on filed Tax Returns have been paid.
There is no audit examination, deficiency, or refund Litigation
with respect to any Taxes that is reasonably likely to result
in a determination that would have, individually or in the ag-
gregate, 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 pe-
riods through and including the date of the respective FNB Fi-
nancial Statements has been made and is reflected on such FNB
Financial Statements.
(c) Deferred Taxes of the FNB Companies have
been adequately provided for in the FNB Financial Statements.
6.7 COMPLIANCE WITH LAWS. FNB is duly registered as
a bank holding company under the BHC Act. Each FNB Company has
in effect all Permits necessary for it to own, lease, or oper-
ate 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 ag-
gregate, a Material Adverse Effect on FNB, and there has oc-
curred no Default under any such Permit, other than Defaults
which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FNB. No FNB Company:
(a) is in violation of any Laws, Orders, or
Permits applicable to its business or employees conducting
-25-<PAGE>
its business, except for violations which are not reason-
ably likely to have, individually or in the aggregate, a
Material Adverse Effect on FNB; and
(b) has received any notification or communica-
tion 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 com-
pliance with any of the Laws or Orders which such govern-
mental authority or Regulatory Authority enforces, where
such noncompliance is reasonably likely to have, individu-
ally or in the aggregate, a Material Adverse Effect on
FNB, (ii) threatening to revoke any Permits, the revoca-
tion 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 agree-
ment, directive, commitment, or memorandum of understand-
ing, or to adopt any board resolution or similar undertak-
ing, which restricts materially the conduct of its busi-
ness, or in any manner relates to its capital adequacy,
its credit or reserve policies, its management or the pay-
ment of dividends.
6.8 LEGAL PROCEEDINGS. There is no Litigation in-
stituted or pending, or, to the Knowledge of FNB, threatened
(or unasserted but considered probable of assertion and which
if asserted would have at least a reasonable probability of an
unfavorable outcome) against any FNB Company, or against any
Asset, interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on FNB, nor are there any Orders of any Regula-
tory Authorities, other governmental authorities, or arbitra-
tors outstanding against any FNB Company, that are reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on FNB.
6.9 REPORTS. Since January 1, 1992, or the date of
organization if later, each FNB Company has filed all reports
and statements, together with any amendments required to be
made with respect thereto, that it was required to file with
Regulatory Authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely
to have, individually or in the aggregate, a Material Adverse
Effect on FNB). As of their respective dates, each of such
reports and documents, including the financial statements, ex-
hibits, and schedules thereto, complied in all material re-
spects with all applicable Laws. As of its respective date,
each such report and document did not, in all material re-
spects, contain any untrue statement of a material fact or omit
-26-<PAGE>
to state a material fact required to be stated therein or nec-
essary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
6.10 STATEMENTS TRUE AND CORRECT. None of the in-
formation 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 re-
spect 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 Com-
pany or any Affiliate thereof for inclusion in the Proxy State-
ment to be mailed to Southwest's shareholders in connection
with the Shareholders' Meeting, and any other documents to be
filed by any FNB Company or any Affiliate thereof with the SEC
or any other Regulatory Authority in connection with the trans-
actions contemplated hereby, will, at the respective time such
documents are filed, and with respect to the Proxy Statement,
when first mailed to the shareholders of Southwest, be false or
misleading with respect to any material fact, or omit to state
any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not mis-
leading, or, in the case of the Proxy Statement or any amend-
ment thereof or supplement thereto, at the time of the Share-
holders' 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 connec-
tion with the transactions contemplated hereby will comply as
to form in all material respects with the provisions of ap-
plicable Law.
6.11 ACCOUNTING, TAX AND REGULATORY MATTERS. No FNB
Company or any Affiliate thereof has taken or agreed to take
any action or has any Knowledge of any fact or circumstance
that is reasonably likely to (i) prevent the transactions con-
templated hereby, including the Merger, from qualifying as a
reorganization within the meaning of Section 368(a) of the In-
ternal Revenue Code, or (ii) materially impede or delay receipt
of any Consents of Regulatory Authorities referred to in Sec-
tion 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.
-27-<PAGE>
6.12 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of FNB, except as dis-
closed in Section 6.12 of the FNB Disclosure Memorandum, each
FNB Company, its Participation Facilities, and its Loan Proper-
ties 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 Ef-
fect on FNB.
(b) Except as disclosed in Section 6.12 of the
FNB Disclosure Memorandum, there is no Litigation pending, or,
to the Knowledge of FNB, threatened before any court, govern-
mental agency, or authority or other forum in which any FNB
Company or any of its Loan Properties or Participation Facili-
ties (or any FNB Company in respect of any such Loan Property
or Participation Facility) has been or, with respect to threat-
ened 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 dis-
closed in Section 6.12 of the FNB Disclosure Memorandum, there
is no reasonable basis for any Litigation of a type described
above in subsection (b), except such as is not reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on FNB.
(d) To the Knowledge of FNB, except as dis-
closed in Section 6.12 of the FNB Disclosure Memorandum, there
have been no releases of Hazardous Material in, on, under, or
affecting any Participation Facility or Loan Property of a FNB
Company, except such as are not reasonably likely to have, in-
dividually or in the aggregate, a Material Adverse Effect on
FNB.
6.13 DERIVATIVES CONTRACTS. Neither FNB nor any of
its Subsidiaries is a party to or has agreed to enter into a
Derivatives Contract, except for those Derivatives Contracts
set forth in Section 6.13 of the FNB Disclosure Memorandum.
-28-<PAGE>
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF SOUTHWEST. Unless the
prior written consent of FNB shall have been obtained, and ex-
cept as otherwise expressly contemplated herein, Southwest
shall and shall cause each of its Subsidiaries to (i) operate
its business only in the usual, regular, and ordinary course,
(ii) preserve intact its business organization and Assets and
maintain its rights and franchises, (iii) use its reasonable
efforts to maintain its current employee relationships, and
(iv) take no action which would (a) adversely affect the abil-
ity of any Party to obtain any Consents required for the trans-
actions contemplated hereby without imposition of a condition
or restriction of the type referred to in the last sentence of
Section 9.1(b) of this Agreement, or (b) adversely affect the
ability of any Party to perform its covenants and agreements
under this Agreement.
7.2 NEGATIVE COVENANTS OF SOUTHWEST. From the date
of this Agreement until the earlier of the Effective Time or
the termination of this Agreement, Southwest covenants and
agrees that it will not do or agree or commit to do, or permit
any of its Subsidiaries to do or agree or commit to do, any of
the following without the prior written consent of the chief
executive officer, president, chief financial officer, or any
executive vice president of FNB:
(a) amend the Articles of Incorporation, By-
laws, or other governing instruments of any Southwest Com-
pany or, except as expressly contemplated by this Agree-
ment; or
(b) incur any additional debt obligation or
other obligation for borrowed money (other than indebted-
ness of a Southwest Company to another Southwest Company)
in excess of an aggregate of $100,000 (for the Southwest
Companies on a consolidated basis) except in the ordinary
course of the business of Southwest Subsidiaries consis-
tent with past practices (which shall include, for South-
west Subsidiaries that are depository institutions, cre-
ation of deposit liabilities, purchases of federal funds,
advances from the Federal Reserve Bank or Federal Home
Loan Bank, and entry into repurchase agreements fully se-
cured by U.S. government or agency securities), or impose,
or suffer the imposition, on any Asset of any Southwest
Company of any Lien or permit any such Lien to exist
(other than in connection with deposits, repurchase agree-
ments, bankers acceptances, "treasury tax and loan" ac-
counts established in the ordinary course of business, the
-29-<PAGE>
satisfaction of legal requirements in the exercise of
trust powers, and Liens in effect as of the date hereof
that are disclosed in the Southwest Disclosure Memoran-
dum); or
(c) repurchase, redeem, or otherwise acquire or
exchange (other than exchanges in the ordinary course un-
der employee benefit plans), directly or indirectly, any
shares, or any securities convertible into any shares, of
the capital stock of any Southwest Company, or declare or
pay any dividend or make any other distribution in respect
of Southwest's capital stock; or
(d) except for this Agreement, or pursuant to
the Stock Option Agreement or pursuant to the exercise of
stock options outstanding as of the date hereof and pursu-
ant to the terms thereof in existence on the date hereof,
or as disclosed in Section 7.2(d) of the Southwest Disclo-
sure Memorandum, issue, sell, pledge, encumber, authorize
the issuance of, enter into any Contract to issue, sell,
pledge, encumber, or authorize the issuance of, or other-
wise permit to become outstanding, any additional shares
of Southwest Common Stock or any other capital stock of
any Southwest Company, or any stock appreciation rights,
or any option, warrant, conversion, or other right to ac-
quire any such stock, or any security convertible into any
such stock; or
(e) adjust, split, combine, or reclassify any
capital stock of any Southwest Company or issue or autho-
rize the issuance of any other securities in respect of or
in substitution for shares of Southwest Common Stock, or
sell, lease, mortgage, or otherwise dispose of or other-
wise encumber (x) any shares of capital stock of any
Southwest Subsidiary (unless any such shares of stock are
sold or otherwise transferred to another Southwest Com-
pany) or (y) any Asset other than in the ordinary course
of business for reasonable and adequate consideration; or
(f) except for purchases of United States Trea-
sury securities or United States Government agency securi-
ties, which in either case have maturities of five years
or less, purchase any securities or make any material in-
vestment, either by purchase of stock or securities, con-
tributions to capital, Asset transfers, or purchase of any
Assets, in any Person other than a wholly owned Southwest
Subsidiary, or otherwise acquire direct or indirect con-
trol over any Person, other than in connection with (i)
-30-<PAGE>
foreclosures in the ordinary course of business, (ii) ac-
quisitions of control by a depository institution Subsid-
iary in its fiduciary capacity, or (iii) the creation of
new wholly-owned Subsidiaries organized to conduct or con-
tinue activities otherwise permitted by this Agreement; or
(g) grant any increase in compensation or ben-
efits to the employees or officers of any Southwest Com-
pany, except in accordance with past practice disclosed in
Section 7.2(g) of the Southwest Disclosure Memorandum or
as required by Law; pay any severance or termination pay
or any bonus other than pursuant to written policies or
written Contracts in effect on the date of this Agreement
or as otherwise disclosed in Section 7.2(g) of the South-
west Disclosure Memorandum; enter into or amend any sever-
ance agreements with officers of any Southwest Company;
grant any material increase in fees or other increases in
compensation or other benefits to directors of any South-
west Company except in accordance with past practice dis-
closed in Section 7.2(g) of the Southwest Disclosure Memo-
randum; or voluntarily accelerate the vesting of any stock
options or other stock-based compensation or employee ben-
efits; or
(h) enter into or amend any employment Contract
between any Southwest Company and any Person (unless such
amendment is required by Law) that the Southwest Company
does not have the unconditional right to terminate without
Liability (other than Liability for services already ren-
dered), at any time on or after the Effective Time; or
(i) except as disclosed in Section 7.2(i) of
the Southwest Disclosure Memorandum, adopt any new em-
ployee benefit plan of any Southwest Company or make any
material change in or to any existing employee benefit
plans of any Southwest Company other than any such change
that is required by Law or that, in the opinion of coun-
sel, is necessary or advisable to maintain the tax quali-
fied status of any such plan; or
(j) make any significant change in any Tax or
accounting methods or systems of internal accounting con-
trols, except as may be appropriate to conform to changes
in Tax Laws or regulatory accounting requirements or GAAP;
or
(k) except as disclosed in Section 7.2(k) of
the Southwest Disclosure Memorandum, commence any Litiga-
tion other than in accordance with past practice or settle
any Litigation involving any Liability of any Southwest
-31-<PAGE>
Company for material money damages or restrictions upon
the operations of any Southwest Company; or
(l) except in the ordinary course of business,
modify, amend, or terminate any material Contract or
waive, release, compromise, or assign any material rights
or claims; or
(m) except for transactions in the ordinary
course of business consistent with past practice, make any
investment in excess of $100,000 either by purchase of
stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any
other individual, corporation or other entity other than a
wholly-owned Subsidiary thereof; or
(n) sell, transfer, mortgage, encumber or oth-
erwise dispose of any of its properties or assets to any
individual, corporation or other entity other than a di-
rect or indirect wholly owned Subsidiary, or cancel, re-
lease 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 pursu-
ant to contracts or agreements in force at the date of
this Agreement; or
(o) agree to, or make any commitment to, take
any of the actions prohibited by this Section 7.2.
7.3 COVENANTS OF FNB. From the date of this Agree-
ment until the earlier of the Effective Time or the termination
of this Agreement, FNB covenants and agrees that it shall (i)
continue to conduct its business and the business of its Sub-
sidiaries 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 ac-
tion which would (a) materially adversely affect the ability of
any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or re-
striction of the type referred to in the last sentence of Sec-
tion 9.1(b) of this Agreement, or (b) materially adversely af-
fect 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 dis-
posing of any of its Assets or business if such action is, in
the judgment of FNB, desirable in the conduct of the business
of FNB and its Subsidiaries. FNB further covenants and agrees
that it will not, without the prior written consent of the
Chairman and Chief Executive Officer of Southwest, which con-
sent shall not be unreasonably withheld, amend the Articles of
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Incorporation or Bylaws of FNB, in each case in any manner ad-
verse to the holders of Southwest Common Stock.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees
to give written notice promptly to the other Party upon becom-
ing 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 rea-
sonable efforts to prevent or promptly to remedy the same.
7.5 REPORTS. Each Party and its Subsidiaries shall
file all reports required to be filed by it with Regulatory
Authorities between the date of this Agreement and the Effec-
tive Time and shall deliver to the other Party copies of all
such reports promptly after the same are filed. If financial
statements are contained in any such reports filed with the
SEC, such financial statements will fairly present the consoli-
dated financial position of the entity filing such statements
as of the dates indicated and the consolidated results of op-
erations, changes in shareholders' equity, and cash flows for
the periods then ended in accordance with GAAP (subject in the
case of interim financial statements to normal recurring year-
end adjustments that are not material). As of their respective
dates, such reports filed with the SEC will comply in all mate-
rial 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 un-
der which they were made, not misleading. Any financial state-
ments contained in any other reports to another Regulatory Au-
thority shall be prepared in accordance with Laws applicable to
such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHARE-
HOLDER APPROVAL. As soon as practicable after execution of
this Agreement, FNB shall file the Registration Statement with
the SEC, and shall use its reasonable efforts to cause the Reg-
istration Statement to become effective under the 1933 Act and
take any action required to be taken under the applicable state
blue sky or securities Laws in connection with the issuance of
the shares of FNB Common Stock upon consummation of the Merger.
Southwest shall furnish all information concerning it and the
holders of its capital stock as FNB may reasonably request in
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connection with such action. Southwest shall call a Sharehold-
ers' Meeting, to be held on a date that is determined by the
Parties to be a mutually desirable date, which date shall be
after the Registration Statement is declared effective by the
SEC, for the purpose of voting upon approval of this Agreement
and such other related matters as it deems appropriate. In
connection with the Shareholders' Meeting, (i) Southwest shall
prepare and file with the SEC a Proxy Statement and mail such
Proxy Statement to its shareholders, (ii) the Parties shall
furnish to each other all information concerning them that they
may reasonably request in connection with such Proxy Statement,
(iii) the Board of Directors of Southwest shall recommend (sub-
ject to compliance with their fiduciary duties as advised by
counsel) to its shareholders the approval of this Agreement,
and (iv) the Board of Directors and officers of Southwest shall
(subject to compliance with their fiduciary duties as advised
by counsel) use their reasonable efforts to obtain such share-
holders' approval.
8.2 EXCHANGE LISTING. Southwest shall use its rea-
sonable best efforts to list, prior to the record date for de-
termining shareholders entitled to vote at the Shareholders'
Meeting, for trading on the Nasdaq as national market securi-
ties, the shares of Southwest Common Stock.
8.3 APPLICATIONS. FNB shall promptly prepare and
file, and Southwest shall cooperate in the preparation and,
where appropriate, filing of, applications with all Regulatory
Authorities having jurisdiction over the transactions contem-
plated by this Agreement seeking the requisite Consents neces-
sary to consummate the transactions contemplated by this Agree-
ment.
8.4 FILINGS WITH STATE OFFICES. Upon the terms and
subject to the conditions of this Agreement, FNB shall execute
and file the Florida Certificate of Merger with the Secretary
of State of the State of Florida in connection with the Clos-
ing.
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject
to the terms and conditions of this Agreement, each Party
agrees to use, and to cause its Subsidiaries to use, its rea-
sonable 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 effec-
tive, as soon as practicable after the date of this Agreement,
the transactions contemplated by this Agreement, including us-
ing its reasonable efforts to lift or rescind any Order ad-
versely affecting its ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions
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referred to in Article 9 of this Agreement; provided, that
nothing herein shall preclude either Party from exercising its
rights under this Agreement. Each Party shall use, and shall
cause each of its Subsidiaries to use, its reasonable efforts
to obtain all Consents necessary or desirable for the consumma-
tion of the transactions contemplated by this Agreement.
8.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party
shall keep the other Party advised of all material developments
relevant to its business and to consummation of the Merger and
shall permit the other Party to make or cause to be made such
investigation of the business and properties of it and its Sub-
sidiaries and of their respective financial and legal condi-
tions as the other Party reasonably requests, provided that
such investigation shall be reasonably related to the transac-
tions contemplated hereby and shall not interfere unnecessarily
with normal operations. No investigation by a Party shall af-
fect the representations and warranties of the other Party.
(b) In addition to the Parties' respective ob-
ligations under the Confidentiality Agreements, each Party
shall, and shall cause its advisers and agents to, maintain the
confidentiality of all confidential information furnished to it
by the other Party concerning its and its Subsidiaries' busi-
nesses, operations, and financial positions and shall not use
such information for any purpose except in furtherance of the
transactions contemplated by this Agreement. If this Agreement
is terminated prior to the Effective Time, each Party shall
promptly return or certify the destruction of all documents and
copies thereof, and all work papers containing confidential
information received from the other Party.
(c) Each Party agrees to give the other Party
notice as soon as practicable after any determination by it of
any fact or occurrence relating to the other Party which it has
discovered through the course of its investigation and which
represents, or is reasonably likely to represent, either a ma-
terial breach of any representation, warranty, covenant, or
agreement of the other Party or which has had or is reasonably
likely to have a Material Adverse Effect on the other Party.
8.7 PRESS RELEASES. Prior to the Effective Time,
Southwest and FNB shall consult with each other as to the form
and substance of any press release or other public disclosure
materially related to this Agreement or any other transaction
contemplated hereby; provided, that nothing in this Section 8.7
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shall be deemed to prohibit any Party from making any disclo-
sure which its counsel deems necessary or advisable in order to
satisfy such Party's disclosure obligations imposed by Law.
8.8 CERTAIN ACTIONS. Except with respect to this
Agreement and the transactions contemplated hereby, no South-
west Company nor any Affiliate thereof nor any Representatives
thereof retained by any Southwest Company shall directly or
indirectly solicit any Acquisition Proposal by any Person. Ex-
cept to the extent necessary to comply with the fiduciary du-
ties of Southwest's Board of Directors as advised by Smith,
Gambrell & Russell or other outside counsel reasonably accept-
able to FNB, no Southwest Company or any Affiliate or Represen-
tative thereof shall furnish any nonpublic information that it
is not legally obligated to furnish or negotiate with respect
to, any Acquisition Proposal, but Southwest may communicate
information about such an Acquisition Proposal to its share-
holders if and to the extent that it is required to do so in
order to comply with its legal obligations as advised by coun-
sel. Southwest shall promptly notify FNB orally and in writing
in the event that it receives any inquiry or proposal relating
to any such transaction. Southwest shall (i) immediately cease
and cause to be terminated any existing activities, discus-
sions, or negotiations with any Persons conducted heretofore
with respect to any of the foregoing, and (ii) direct and use
its reasonable efforts to cause of all its Representatives not
to engage in any of the foregoing.
8.9 ACCOUNTING AND TAX TREATMENT. Each of the Par-
ties undertakes and agrees to use its reasonable efforts to
cause the Merger, and to take no action which would cause the
Merger not, to qualify for treatment as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue
Code for federal income tax purposes. Southwest undertakes and
agrees to use its reasonable efforts to cause the Merger, and
to take no action that would cause the Merger not, to qualify
for pooling-of-interests accounting treatment.
8.10 STATE TAKEOVER LAWS. Each Southwest Company
shall take all necessary steps to exempt the transactions con-
templated by this Agreement from, or if necessary challenge the
validity or applicability of, any applicable Takeover Laws.
8.11 CHARTER PROVISIONS. Each Southwest Company
shall take all necessary action to ensure that the entering
into of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby do not and will not
result in any super-majority voting requirements or the grant
of any rights to any Person under the Articles of Incorpora-
tion, Bylaws, or other governing instruments of any Southwest
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Company or restrict or impair the ability of FNB or any of its
Subsidiaries to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of any Southwest Company
that may be directly or indirectly acquired or controlled by
it.
8.12 AGREEMENT OF AFFILIATES. Southwest has dis-
closed in Section 8.12 of the Southwest Disclosure Memorandum
all Persons whom it reasonably believes are "affiliates" of
Southwest for purposes of Rule 145 under the 1933 Act. South-
west shall use its reasonable efforts to cause each such Person
to deliver to FNB not later than 30 days prior to the Effective
Time, a written agreement, substantially in the form of Exhibit
2, providing that such Person will not sell, pledge, transfer,
or otherwise dispose of the shares of Southwest Common Stock
held by such Person except as contemplated by such agreement or
by this Agreement and will not sell, pledge, transfer, or oth-
erwise dispose of the shares of FNB Common Stock to be received
by such Person upon consummation of the Merger except in com-
pliance with applicable provisions of the 1933 Act and the
rules and regulations thereunder and until such time as finan-
cial results covering at least 30 days of combined operations
of FNB and Southwest have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting
Policies. Shares of FNB Common Stock issued to such affiliates
of Southwest in exchange for shares of Southwest Common Stock
shall not be transferable until such time as financial results
covering at least 30 days of combined operations of FNB and
Southwest have been published within the meaning of Section
201.01 of the SEC's Codification of Financial Reporting Poli-
cies, regardless of whether each such affiliate has provided
the written agreement referred to in this Section 8.12 (and FNB
shall be entitled to place restrictive legends upon certifi-
cates for shares of FNB Common Stock issued to affiliates of
Southwest pursuant to this Agreement to enforce the provisions
of this Section 8.12). FNB shall not be required to maintain
the effectiveness of the Registration Statement under the 1933
Act for the purposes of resale of FNB Common Stock by such af-
filiates.
8.13 EMPLOYEE BENEFITS AND CONTRACTS. Following the
Effective Time, FNB shall provide generally to officers and
employees of the Southwest Companies employee benefits under
employee benefit plans (other than stock option or other plans
involving the potential issuance of FNB Common Stock), on terms
and conditions which when taken as a whole are no less favor-
able than those currently provided by Southwest or those cur-
rently provided by the FNB Companies to their similarly situ-
ated officers and employees; provided, that, for a period of 12
months after the Effective Time, FNB shall provide generally to
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officers and employees of Southwest Companies severance ben-
efits in accordance with the policies of Southwest as disclosed
in Section 8.13 of the Southwest Disclosure Memorandum. For
purposes of participation and vesting (but not benefit accrual
under any employee benefit plans of FNB and its subsidiaries
other than the Southwest Benefit Plans) under such employee
benefit plans, the service of the employees of the Southwest
Companies prior to the Effective Time shall be treated as ser-
vice with a FNB Company participating in such employee benefit
plans. FNB shall, and shall cause its Subsidiaries to, honor
in accordance with their terms all employment, severance, con-
sulting, and other compensation Contracts disclosed in Section
8.13 of the Southwest Disclosure Memorandum between any South-
west Company and any current or former director, officer, or
employee thereof, and all provisions for vested benefits or
other vested amounts earned or accrued through the Effective
Time under the Southwest Benefit Plans; provided, however, that
all such Contracts shall have been amended prior to the signing
of this Agreement to provide that the Merger and the other
transactions contemplated by the Agreement shall not constitute
a "change of control" or otherwise give rise to any rights of
acceleration, payment or other special rights under any such
Contracts.
8.14 INDEMNIFICATION.
(a) FNB shall indemnify, defend, and hold harm-
less the present and former directors, officers, employees, and
agents of the Southwest Companies (each, an "Indemnified
Party") against all Liabilities arising out of actions or omis-
sions occurring at or prior to the Effective Time (including
the transactions contemplated by this Agreement) to the full
extent permitted under Florida Law and by Southwest's Articles
of Incorporation and Bylaws as in effect on the date hereof,
including provisions relating to advances of expenses incurred
in the defense of any Litigation. Without limiting the forego-
ing, in any case in which approval by FNB is required to ef-
fectuate any indemnification, FNB shall direct, at the election
of the Indemnified Party, that the determination of any such
approval shall be made by independent counsel mutually agreed
upon between FNB and the Indemnified Party.
(b) If FNB or any of its successors or assigns
shall consolidate with or merge into any other Person and shall
not be the continuing or surviving Person of such consolidation
or merger or shall transfer all or substantially all of its
assets to any Person, then and in each case, proper provision
shall be made so that the successors and assigns of FNB shall
assume the obligations set forth in this Section 8.14.
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(c) The provisions of this Section 8.14 are
intended to be for the benefit of and shall be enforceable by,
each Indemnified Party, his or her heirs and representatives.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The
respective obligations of each Party to perform this Agreement
and consummate the Merger and the other transactions contem-
plated hereby are subject to the satisfaction of the following
conditions, unless waived by both Parties pursuant to Section
11.6 of this Agreement:
(a) SHAREHOLDER APPROVAL. The shareholders of
Southwest shall have approved this Agreement, and the consumma-
tion 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 Regu-
latory 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 ex-
pired. No Consent obtained from any Regulatory Authority which
is necessary to consummate the transactions contemplated hereby
shall be conditioned or restricted in a manner (including re-
quirements 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 ad-
versely impact the economic or business benefits of the trans-
actions contemplated by this Agreement that, had such condition
or requirement been known, such Party would not, in its reason-
able judgment, have entered into this Agreement.
(c) CONSENTS AND APPROVALS. Each Party shall
have obtained any and all Consents required for consummation of
the Merger (other than those referred to in Section 9.1(b) of
this Agreement or listed in Section 9.1(c) of the Southwest
Disclosure Memorandum) or for the preventing of any Default
under any Contract or Permit of such Party which, if not ob-
tained 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 governmen-
tal 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
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illegal consummation of the transactions contemplated by this
Agreement.
(e) REGISTRATION STATEMENT. The Registration
Statement shall be effective under the 1933 Act, no stop orders
suspending the effectiveness of the Registration Statement
shall have been issued, no action, suit, proceeding, or inves-
tigation by the SEC to suspend the effectiveness thereof shall
have been initiated and be continuing, and all necessary ap-
provals under state securities Laws or the 1933 Act or 1934 Act
relating to the issuance or trading of the shares of FNB Common
Stock issuable pursuant to the Merger shall have been received.
(f) POOLING OF INTERESTS. Ernst & Young LLP,
FNB's independent public accountants, shall have issued a let-
ter dated as of the Effective Time, to Southwest and FNB, re-
spectively, to the effect that the Merger shall be accounted
for as a pooling-of-interests under GAAP.
(g) TAX MATTERS. Each Party shall have re-
ceived a written opinion or opinions from counsel and in a form
reasonably satisfactory to such Parties (the "Tax Opinion"), to
the effect that (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue
Code and (ii) the exchange in the Merger of Southwest Common
Stock for FNB Common Stock will not give rise to gain or loss
to the shareholders of Southwest with respect to such exchange
(except to the extent of any cash received). In rendering such
Tax Opinion, such counsel shall be entitled to rely upon repre-
sentations of officers of Southwest and FNB reasonably satis-
factory in form and substance to such counsel.
9.2 CONDITIONS TO OBLIGATIONS OF FNB. The obliga-
tions of FNB to perform this Agreement and consummate the
Merger and the other transactions contemplated hereby are sub-
ject to the satisfaction of the following conditions, unless
waived by FNB pursuant to Section 11.6(a) of this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. For pur-
poses of this Section 9.2(a), the accuracy of the repre-
sentations and warranties of Southwest set forth in this
Agreement shall be assessed as of the date of this Agree-
ment 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 repre-
sentations and warranties which are confined to a speci-
fied date shall speak only as of such date). The repre-
sentations and warranties of Southwest set forth in Sec-
tion 5.3 of this Agreement shall be true and correct (ex-
cept for inaccuracies which are de minimus in amount).
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The representations and warranties of Southwest set forth
in Sections 5.17, 5.18, 5.19, and 5.20 of this Agreement
shall be true and correct in all material respects. There
shall not exist inaccuracies in the representations and
warranties of Southwest set forth in this Agreement (in-
cluding 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 reason-
ably likely to have, a Material Adverse Effect on South-
west; provided that, for purposes of this sentence only,
those representations and warranties which are qualified
by references to Immaterial" or "Material Adverse Effect"
shall be deemed not to include such qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS.
Each and all of the agreements and covenants of Southwest
to be performed and complied with pursuant to this Agree-
ment and the other agreements contemplated hereby prior to
the Effective Time shall have been duly performed and com-
plied with in all material respects.
(c) CERTIFICATES. Southwest shall have deliv-
ered to FNB (i) a certificate, dated as of the Effective
Time and signed on its behalf by its chief executive of-
ficer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Section
9.2(a) and 9.2(b) of this Agreement have been satisfied,
and (ii) certified copies of resolutions duly adopted by
Southwest's Board of Directors and shareholders evidencing
the taking of all corporate action necessary to authorize
the execution, delivery, and performance of this Agree-
ment, and the consummation of the transactions contem-
plated hereby, all in such reasonable detail as FNB and
its counsel shall request.
(d) AFFILIATES AGREEMENTS. FNB shall have re-
ceived from each affiliate of Southwest the affiliates
letter referred to in Section 8.12 of this Agreement, to
the extent necessary to assure in the reasonable judgment
of FNB that the transactions contemplated hereby will
qualify for pooling-of-interests accounting treatment.
(e) CUMULATIVE EARNINGS. As of the close of
the most recent calendar quarter (or if the Effective Time
shall occur within 20 days following the close of a calen-
dar quarter, then as of the next preceding calendar quar-
ter) cumulative earnings reported by Southwest since De-
cember 31, 1995 shall be greater than or equal to the
amount calculated by multiplying (a) $500,000 by (b) the
number of full calendar quarters which have passed since
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December 31, 1995 and for which earnings have been re-
ported as of such date. As used in this Section "re-
ported" means reported on Southwest's financial statements
prepared in accordance with GAAP applied on a basis con-
sistent with Southwest's financial statements for the
years ended December 31, 1995 and 1994, as included in
Southwest's reports to the Securities and Exchange Commis-
sion on Forms 10-K-SB or Southwest's annual reports to
shareholders subject to any subsequent adjustments re-
quired to be reported whether or not such adjustments
have, as yet, been reported with the following adjust-
ments, if any, net of related income tax savings and
costs, which were reflected in net income for the relevant
period(s) added back into or deducted from net income for
the applicable period: (i) investment banking expenses,
outside legal and accounting fees, or other costs (includ-
ing severance and extraordinary restructuring costs) and
expenses associated with or resulting from the Merger,
(ii) gains or losses on sales of assets outside of the
ordinary course of business, (iii) any expense related to
the exercise of options or the lapses of restrictions on
restricted stock; and (iv) any other expenses which are
incurred in connection with the transactions contemplated
by this Agreement upon which FNB and Southwest shall mutu-
ally agree.
9.3 CONDITIONS TO OBLIGATIONS OF SOUTHWEST. The
obligations of Southwest to perform this Agreement and consum-
mate the Merger and the other transactions contemplated hereby
are subject to the satisfaction of the following conditions,
unless waived by Southwest pursuant to Section 11.6(b) of this
Agreement:
(a) REPRESENTATIONS AND WARRANTIES. For pur-
poses of this Section 9.3(a), the accuracy of the repre-
sentations and warranties of FNB set forth in this Agree-
ment 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 repre-
sentations and warranties which are confined to a speci-
fied date shall speak only as of such date). The repre-
sentations and warranties of FNB set forth in Section 6.3
of this Agreement shall be true and correct (except for
inaccuracies which are de minimus in amount). The repre-
sentations and warranties of FNB set forth in Section 6.11
of this Agreement shall be true and correct in all mate-
rial respects. There shall not exist inaccuracies in the
representations and warranties of FNB set forth in this
Agreement (including the representations and warranties
-42-<PAGE>
set forth in Sections 6.3 and 6.11) such that the ag-
gregate 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 represen-
tations 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 Ef-
fective Time shall have been duly performed and complied
with in all material respects.
(c) CERTIFICATES. FNB shall have delivered to
Southwest (i) a certificate, dated as of the Effective
Time and signed on its behalf by its chief executive of-
ficer 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 cor-
porate action necessary to authorize the execution, deliv-
ery, and performance of this Agreement, and the consumma-
tion of the transactions contemplated hereby, all in such
reasonable detail as Southwest and its counsel shall re-
quest.
(d) FAIRNESS OPINION. Southwest shall have re-
ceived from The Robinson-Humphrey Company, Inc. a letter,
dated not more than five business days prior to the date
of the Proxy Statement, to the effect that, in the opinion
of such firm, the Exchange Ratio is fair, from a financial
point of view, to the holders of Southwest Common Stock.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provi-
sion of this Agreement, and notwithstanding the approval of
this Agreement by the shareholders of Southwest, this Agreement
may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(a) By mutual consent of the Board of Directors
of FNB and the Board of Directors of Southwest; or
(b) By the Board of Directors of either Party
(provided that the terminating Party is not then in breach
-43-<PAGE>
of any representation or warranty contained in this Agree-
ment under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Southwest and Sec-
tion 9.3(a) in the case of FNB or in material breach of
any covenant or other agreement contained in this Agree-
ment) in the event of an inaccuracy of any representation
or warranty of the other Party contained in this Agreement
which cannot be or has not been cured within 30 days after
the giving of written notice to the breaching Party of
such inaccuracy and which inaccuracy would provide the
terminating Party the ability to refuse to consummate the
Merger under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Southwest and Sec-
tion 9.3(a) of this Agreement in the case of FNB; or
(c) By the Board of Directors of either Party
in the event of a material breach by the other Party of
any covenant or agreement contained in this Agreement
which cannot be or has not been cured within 30 days after
the giving of written notice to the breaching Party of
such breach; or
(d) By the Board of Directors of either Party
in the event (i) any Consent of any Regulatory Authority
required for consummation of the Merger and the other
transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any
action taken by such authority is not appealed within the
time limit for appeal, or (ii) the shareholders of South-
west fail to vote their approval of this Agreement and the
transactions contemplated hereby as required by the FBCA
at the Shareholders' Meeting where the transactions were
presented to such shareholders for approval and voted
upon; or
(e) By the Board of Directors of either Party
in the event that the Merger shall not have been consum-
mated by July 31, 1997, if the failure to consummate the
transactions contemplated hereby on or before such date is
not caused by any breach of this Agreement by the Party
electing to terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of either Party
(provided that the terminating Party is not then in breach
of any representation or warranty contained in this Agree-
ment under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Southwest and Sec-
tion 9.3(a) in the case of FNB or in material breach of
any covenant or other agreement contained in this Agree-
ment) in the event that any of the conditions precedent to
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the obligations of such Party to consummate the Merger
cannot be satisfied or fulfilled by the date specified in
Section 10.1(e) of this Agreement; or
(g) By Southwest, if its Board of Directors
determines by a vote of a majority of the members of its
entire Board of Directors, at any time during the ten-day
period commencing two days after the Determination Date,
if the Designated Price on the Determination Date of
shares of FNB Common Stock shall be less than $19.00; sub-
ject, however, to the following four sentences. If South-
west refuses to consummate the Merger pursuant to this
Section 10.1(g), it shall give prompt written notice
thereof to FNB; provided, that such notice of election to
terminate may be withdrawn at any time within the afore-
mentioned ten-day period. During the five-day period com-
mencing with its receipt of such notice, FNB shall have
the option, subject to Southwest's written agreement, to
elect to increase the Exchange Ratio to equal the quotient
obtained by dividing (1) the product of $19.00 and the
Exchange Ratio (as then in effect) by (2) the Designated
Price. If FNB makes an election contemplated by the pre-
ceding sentence, within such five-day period, it shall
give prompt written notice to Southwest of such election
and the revised Exchange Ratio, whereupon, provided that
Southwest agrees to permit such an election by executing a
written acceptance thereof, no termination shall occur
pursuant to this Section 10.1(g) and this Agreement shall
remain in effect in accordance with its terms (except as
the Exchange Ratio shall have been so modified), and any
references in this Agreement to "Exchange Ratio" shall
thereafter be deemed to refer to the Exchange Ratio as
adjusted pursuant to this Section 10.1(g).
10.1 EFFECT OF TERMINATION. In the event of the
termination and abandonment of this Agreement pursuant to Sec-
tion 10.1 of this Agreement, this Agreement shall become void
and have no effect, except that (i) the provisions of this Sec-
tion 10.2 and Article 11 and Section 8.6(b) of this Agreement
shall survive any such termination and abandonment, and (ii) a
termination pursuant to Sections 10.1(b), 10.1(c), or 10.1(f)
of this Agreement shall not relieve the breaching Party from
Liability for an uncured willful breach of a representation,
warranty, covenant, or agreement giving rise to such termina-
tion; provided, further, that in the event of any termination
of this Agreement following the occurrence of an Initial Trig-
gering Event (as defined in the Stock Option Agreement), FNB
shall be entitled to a cash payment from Southwest in an amount
equal to $1 million upon the occurrence of any Subsequent Trig-
gering Event (as defined in the Stock Option Agreement) within
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twelve months following the date of such termination (or such
longer period as shall exist under the Stock Option Agreement
until the occurrence of an Exercise Termination Date (as de-
fined in the Stock Option Agreement)). In the event this
Agreement is terminated as a result of FNB's failure to satisfy
any of its representations, warranties or covenants set forth
herein, FNB shall reimburse Southwest for its reasonable out-
of-pocket expenses relating to the Merger in an amount not to
exceed $250,000.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS.
The respective representations and warranties of the Parties
shall not survive the Effective Time. All agreements of the
Parties to this Agreement which by their terms are to be per-
formed 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 pro-
posal for a merger, acquisition of all of the stock or
assets of, or other business combination involving such
Party or any of its Subsidiaries or the acquisition of a
substantial equity interest in, or a substantial portion
of the assets of, such Party or any of its Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any
other Person directly, or indirectly through one or more
intermediaries, controlling, controlled by or under common
control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner
of any 10% or greater equity or voting interest of such
Person; or (iii) any other Person for which a Person de-
scribed in clause (ii) acts in any such capacity.
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"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 as-
sets, 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.
"BHC ACT" shall mean the Federal Bank Holding
Company Act of 1956, as amended.
"CONFIDENTIALITY AGREEMENTS" shall mean those
certain Confidentiality Agreements, between Southwest and
FNB entered into in connection with the discussions relat-
ing to the Merger.
"CONSENT" shall mean any consent, approval, au-
thorization, clearance, exemption, waiver, or similar af-
firmation by any Person pursuant to any Contract, Law,
Order, or Permit.
"CONTRACT" shall mean any written or oral agree-
ment, arrangement, authorization, commitment, contract,
indenture, instrument, lease, obligation, plan, practice,
restriction, understanding, or undertaking of any kind or
character, or other document to which any Person is a
party or that is binding on any Person or its capital
stock, Assets, or business.
"DEFAULT" shall mean (i) any breach or violation
of or default under any Contract, Order, or Permit, (ii)
any occurrence of any event that with the passage of time
or the giving of notice or both would constitute a breach
or violation of or default under any Contract, Order, or
Permit, or (iii) any occurrence of any event that with or
without the passage of time or the giving of notice would
give rise to a right to terminate or revoke, change the
current terms of, or renegotiate, or to accelerate, in-
crease, or impose any Liability under, any Contract, Or-
der, or Permit, where, in any such event, such Default is
reasonably likely to have, individually or in the ag-
gregate, a Material Adverse Effect on a Party.
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"DERIVATIVES CONTRACT" shall have the meaning
set forth in Section 5.20 hereof.
"DESIGNATED PRICE" shall mean the average of the
mid-point of the closing high bid and low asked prices of
FNB Common Stock in the over-the-counter market, as re-
ported by Nasdaq or such other trading system or exchange
upon which the FNB Common Stock shall then be traded for
the twenty consecutive full trading days in which such
shares are traded ending at the close of trading on the
Determination Date.
"DETERMINATION DATE" shall mean the day prior to
the date on which the Consent of the Board of Governors of
the Federal Reserve System is received.
"EFFECTIVE TIME" shall have the meaning set
forth in Section 1.3 hereof.
"ENVIRONMENTAL LAWS" shall mean all Laws relat-
ing to pollution or protection of human health or the en-
vironment (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 Compen-
sation and Liability Act, as amended, 42 U.S.C. 9601 et
seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. 6901 et seq., and other Laws relating
to emissions, discharges, releases, or threatened releases
of any Hazardous Material, or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of any Hazardous
Material.
"ERISA" shall mean the Employee Retirement In-
come Security Act of 1974, as amended.
"ERISA AFFILIATE" shall have the meaning set
forth in Section 5.12(c) hereof.
"EXCHANGE AGENT" shall have the meaning set
forth in Section 4.1 hereof.
"EXCHANGE RATIO" shall have the meaning set
forth in Section 3.1(c) hereof.
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"EXHIBITS" 1 and 2 shall mean the Exhibits so
marked, copies of which are attached to this Agreement.
Such Exhibits are hereby incorporated by reference herein
and made a part hereof, and may be referred to in this
Agreement and any other related instrument or document
without being attached hereto.
"FNB" shall have the meaning set forth in the
first paragraph hereof.
"FNB CAPITAL STOCK" shall mean, collectively,
the FNB Common Stock, the FNB Preferred Stock, and any
other class or series of capital stock of FNB.
"FNB COMMON STOCK" shall mean the $2 par value
common stock of FNB.
"FNB COMPANIES" shall mean, collectively, FNB
and all FNB Subsidiaries.
"FNB DISCLOSURE MEMORANDUM" shall mean the writ-
ten information entitled "FNB Corporation Disclosure Memo-
randum" delivered prior to the date of this Agreement to
Southwest describing in reasonable detail the matters con-
tained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this
Agreement under which such disclosure is being made.
"FNB FINANCIAL STATEMENTS" shall mean (i) the
consolidated statements of condition (including related
notes and schedules, if any) of FNB as of September 30,
1995, and as of December 31, 1994 and 1993, and the re-
lated statements of income, changes in shareholders' eq-
uity, and cash flows (including related notes and sched-
ules, if any) for the six months ended September 30, 1995,
and for each of the three years ended December 31, 1994,
1993, and 1992, as filed by FNB in SEC Documents, and (ii)
the consolidated statements of condition of FNB (including
related notes and schedules, if any) and related state-
ments of income, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) in-
cluded in SEC Documents filed with respect to periods
ended subsequent to September 30, 1995.
"FNB PREFERRED STOCK" shall mean the $10 par
value preferred stock of FNB.
"FNB SEC REPORTS" shall have the meaning set
forth in Section 6.4(a) hereof.
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"FNB SUBSIDIARIES" shall mean the Subsidiaries
of FNB, which shall include any corporation, bank, savings
association, or other organization acquired as a Subsid-
iary of FNB in the future and owned by FNB at the Effec-
tive Time.
"FBCA" shall mean the Florida Business Corpora-
tion Act.
"FLORIDA CERTIFICATE OF MERGER" shall mean the
Certificate of Merger to be executed by FNB and filed with
the Secretary of State of the State of Florida relating to
the Merger as contemplated by Section 1.1 of this Agree-
ment.
"GAAP" shall mean generally accepted accounting
principles, consistently applied during the periods in-
volved.
"HAZARDOUS MATERIAL" shall mean (i) any hazard-
ous substance, hazardous material, hazardous waste, regu-
lated 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 poly-
chlorinated biphenyls).
"INDEMNIFIED PARTY" shall have the meaning set
forth in Section 8.14 hereof.
"HSR ACT" shall mean Section 7A of the Clayton
Act, as added by Title II of the Hart-Scott-Rodino Anti-
trust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder.
"INTERNAL REVENUE CODE" shall mean the Internal
Revenue Code of 1986, as amended, and the rules and regu-
lations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person
(including references to such Person being aware of a par-
ticular matter) shall mean the personal knowledge of the
chairman, president, chief financial officer, chief ac-
counting 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 ob-
tained from a reasonable investigation.
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"LAW" shall mean any code, law, ordinance, regu-
lation, reporting or licensing requirement, rule, or stat-
ute applicable to a Person or its Assets, Liabilities, or
business, including those promulgated, interpreted, or
enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect,
primary or secondary, liability, indebtedness, obligation,
penalty, cost, or expense (including costs of investiga-
tion, collection, and defense), claim, deficiency, guar-
anty, or endorsement of or by any Person (other than en-
dorsements of notes, bills, checks, and drafts presented
for collection or deposit in the ordinary course of busi-
ness) of any type, whether accrued, absolute or contin-
gent, liquidated or unliquidated, matured or unmatured, or
otherwise.
"LIEN" shall mean any conditional sale agree-
ment, default of title, easement, encroachment, encum-
brance, 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 whatso-
ever of, on, or with respect to any property or property
interest, other than (i) Liens for current property Taxes
not yet due and payable, and (ii) for depository institu-
tion Subsidiaries of a Party, pledges to secure deposits,
and other Liens incurred in the ordinary course of the
banking business.
"LITIGATION" shall mean any action, arbitration,
cause of action, claim, complaint, criminal prosecution,
demand letter, governmental or other examination or inves-
tigation, hearing, inquiry, administrative or other pro-
ceeding, or notice (written or oral) by any Person alleg-
ing potential Liability or requesting information relating
to or affecting a Party, its business, its Assets (includ-
ing Contracts related to it), or the transactions contem-
plated by this Agreement, but shall not include regular,
periodic examinations of depository institutions and their
Affiliates by Regulatory Authorities.
"LOAN PROPERTY" shall mean any property owned,
leased, or operated by the Party in question or by any of
its Subsidiaries or in which such Party or Subsidiary
holds a security or other interest (including an interest
in a fiduciary capacity), and, where required by the con-
text, includes the owner or operator of such property, but
only with respect to such property.
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"MATERIAL" for purposes of this Agreement shall
be determined in light of the facts and circumstances of
the matter in question; provided that any specific mone-
tary amount stated in this Agreement shall determine mate-
riality in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean
an event, change, or occurrence which, individually or
together with any other event, change, or occurrence, has
a material adverse impact on (i) the financial position,
business, or results of operations of such Party and its
Subsidiaries, taken as a whole, or (ii) the ability of
such Party to perform its obligations under this Agreement
or to consummate the Merger or the other transactions con-
templated by this Agreement, provided that "Material Ad-
verse Effect" shall not be deemed to include the impact of
(a) changes in banking and similar Laws of general ap-
plicability or interpretations thereof by courts or gov-
ernmental authorities, (b) changes in GAAP or regulatory
accounting principles generally applicable to banks and
their holding companies, (c) actions and omissions of a
Party (or any of its Subsidiaries) taken with the prior
informed consent of the other Party in contemplation of
the transactions contemplated hereby, (d) circumstances
affecting regional bank holding companies generally, and
(e) the Merger and compliance with the provisions of this
Agreement on the operating performance of the Parties.
"MERGER" shall have the meaning set forth in
Section 1.1 hereof.
"MERGER SUB" shall have the meaning set forth in
the first paragraph hereof.
"NASDAQ" shall mean the Nasdaq Stock Market.
"NASD" shall mean the National Association of
Securities Dealers, Inc.
"NYSE" shall mean the New York Stock Exchange,
Inc.
"ORDER" shall mean any administrative decision
or award, decree, injunction, judgment, order, quasi-
judicial decision or award, ruling, or writ of any fed-
eral, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory
Authority.
-52-<PAGE>
"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 op-
erator of such facility or property, but only with respect
to such facility or property.
"PARTY" shall mean either Southwest or FNB, and
"Parties" shall mean both Southwest and FNB.
"PBCL" shall mean the Pennsylvania Business Cor-
poration Law.
"PERMIT" shall mean any federal, state, local,
and foreign governmental approval, authorization, certifi-
cate, easement, filing, franchise, license, notice, per-
mit, or right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person
or its securities, Assets, or business.
"PERSON" shall mean a natural person or any le-
gal, commercial, or governmental entity, such as, but not
limited to, a corporation, general partnership, joint ven-
ture, limited partnership, limited liability company,
trust, business association, group acting in concert, or
any person acting in a representative capacity.
"PROXY STATEMENT" shall mean the proxy statement
used by Southwest to solicit the approval of its share-
holders of the transactions contemplated by this Agree-
ment, which shall include the prospectus of FNB relating
to the issuance of the FNB Common Stock to holders of
Southwest Common Stock.
"REGISTRATION STATEMENT" shall mean the Regis-
tration Statement on Form S-4, or other appropriate form,
including any pre-effective or post-effective amendments
or supplements thereto, filed with the SEC by FNB under
the 1933 Act with respect to the shares of FNB Common
Stock to be issued to the shareholders of Southwest in
connection with the transactions contemplated by this
Agreement.
"REGULATORY AUTHORITIES" shall mean, collec-
tively, the Federal Trade Commission, the United States
Department of Justice, the Board of the Governors of the
Federal Reserve System, the Office of the Comptroller of
the Currency, the Federal Deposit Insurance Corporation,
all state regulatory agencies having jurisdiction over the
-53-<PAGE>
Parties and their respective Subsidiaries, the NASD, and
the SEC.
"REPRESENTATIVE" shall mean any investment
banker, financial advisor, attorney, accountant, consult-
ant or other representative of a Person.
"RIGHTS" shall mean all arrangements, calls,
commitments, Contracts, options, rights to subscribe to,
scrip, understandings, warrants, or other binding obliga-
tions of any character whatsoever relating to, or securi-
ties or rights convertible into or exchangeable for,
shares of the capital stock of a Person or by which a Per-
son is or may be bound to issue additional shares of its
capital stock or other Rights.
"SEC" shall mean the Securities and Exchange
Commission.
"SEC DOCUMENTS" shall mean all forms, proxy
statements, registration statements, reports, schedules,
and other documents filed, or required to be filed, by a
Party or any of its Subsidiaries with any Regulatory Au-
thority 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 regu-
lations of any Regulatory Authority promulgated there-
under.
"SHAREHOLDERS' MEETING" shall mean the meeting
of the shareholders of Southwest to be held pursuant to
Section 8.1 of this Agreement, including any adjournment
or adjournments thereof.
"SOUTHWEST" shall have the meaning set forth in
the first paragraph hereof.
"SOUTHWEST BENEFITS PLANS" shall have the mean-
ing set forth in Section 5.12(a) hereof.
"SOUTHWEST COMMON STOCK" shall mean the $0.10
par value common stock of Southwest.
"SOUTHWEST COMPANIES" shall mean, collectively,
Southwest and all Southwest Subsidiaries.
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"SOUTHWEST CONTRACT" shall have the meaning set
forth in Section 5.13.
"SOUTHWEST DISCLOSURE MEMORANDUM" shall mean the
written information entitled "Southwest Corporation Dis-
closure Memorandum" delivered prior to the date of this
Agreement to FNB describing in reasonable detail the mat-
ters contained therein and, with respect to each disclo-
sure made therein, specifically referencing each Section
of this Agreement under which such disclosure is being
made. Information disclosed with respect to one Section
shall not be deemed to be disclosed for purposes of any
other Section not specifically referenced with respect
thereto.
"SOUTHWEST ERISA PLAN" shall have the meaning
set forth in Section 5.12(a) hereof.
"SOUTHWEST FINANCIAL STATEMENTS" shall mean (i)
the consolidated balance sheets (including related notes
and schedules, if any) of Southwest as of September 30,
1995, and as of December 31, 1994 and 1993, and the re-
lated statements of income, changes in shareholders' eq-
uity, and cash flows (including related notes and sched-
ules, if any) for the six months ended September 30, 1995,
and for each of the three fiscal years ended December 31,
1994, 1993, and 1992, as filed by Southwest in SEC Docu-
ments, and (ii) the consolidated balance sheets of South-
west (including related notes and schedules, if any) and
related statements of income, changes in shareholders'
equity, and cash flows (including related notes and sched-
ules, if any) included in SEC Documents filed with respect
to periods ended subsequent to September 30, 1995.
"SOUTHWEST PENSION PLAN" shall have the meaning
set forth in Section 5.12(a) hereof.
"SOUTHWEST STOCK PLANS" shall mean the existing
stock option and other stock-based compensation plans and
warrant instruments of Southwest set forth in Section 3.5
of the Southwest Disclosure Memorandum.
"SOUTHWEST OPTIONS" shall have the meaning set
forth in Section 3.5(a) hereof.
"SOUTHWEST SEC REPORTS" shall have the meaning
set forth in Section 5.5(a) hereof.
"SOUTHWEST SUBSIDIARIES" shall mean the Subsid-
iaries of Southwest, which shall include the Southwest
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Subsidiaries described in Section 5.4 of this Agreement
and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of Southwest in the
future and owned by Southwest at the Effective Time.
"STOCK OPTION AGREEMENT" shall have the meaning
set forth in the Preamble hereof.
"SUBSIDIARIES" shall mean all those corpora-
tions, 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 di-
rectly or indirectly by its parent; provided, there shall
not be included any such entity acquired through foreclo-
sure or any such entity the equity securities of which are
owned or controlled in a fiduciary capacity.
"SURVIVING CORPORATION" shall mean Southwest as
the surviving corporation resulting from the Merger.
"TAKEOVER LAWS" shall have the meaning set forth
in Section 5.18 hereof.
"TAX" OR "TAXES" shall mean all federal, state,
local, and foreign taxes, charges, fees, levies, imposts,
duties, or other assessments, including income, gross re-
ceipts, 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 prop-
erty, registration, ad valorem, value added, alternative
or add-on minimum, estimated, or other tax or governmental
fee of any kind whatsoever, imposed or required to be
withheld by the United States or any state, local, foreign
government or subdivision or agency thereof, including any
interest, penalties or additions thereto.
"TAX OPINION" shall have the meaning set forth
in Section 9.1(g) hereof.
"TAXABLE PERIOD" shall mean any period pre-
scribed 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.
-56-<PAGE>
"TAX RETURN" shall mean any report, return, in-
formation return, or other information required to be sup-
plied to a taxing authority in connection with Taxes, in-
cluding 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 singu-
lar. Whenever the words "include," "includes," or "including"
are used in this Agreement, they shall be deemed followed by
the words "without limitation."
11.2 EXPENSES.
(a) Except as otherwise provided in this Sec-
tion 11.2, each of FNB and Southwest shall bear and pay all
direct costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, in-
cluding filing, registration, and application fees, printing
fees, and fees and expenses of its own financial or other con-
sultants, investment bankers, accountants, and counsel, except
that each of FNB and Southwest shall bear and pay one-half of
the printing costs incurred in connection with the printing of
the Registration Statement and the Proxy Statement.
(b) Nothing contained in this Section 11.2
shall constitute or shall be deemed to constitute liquidated
damages for the willful breach by a Party of the terms of this
Agreement or otherwise limit the rights of the nonbreaching
Party.
11.3 BROKERS AND FINDERS. Except for The Robinson-
Humphrey Company, Inc. as to Southwest and except for McCon-
nell, Budd & Downes, Inc. as to FNB, each of the Parties repre-
sents and warrants that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or
finder or incurred any Liability for any financial advisory
fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transac-
tions contemplated hereby. In the event of a claim by any bro-
ker or finder based upon his or its representing or being re-
tained by or allegedly representing or being retained by South-
west or FNB, each of Southwest and FNB, as the case may be,
agrees to indemnify and hold the other Party harmless of and
from any Liability in respect of any such claim.
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11.4 ENTIRE AGREEMENT. Except as otherwise ex-
pressly provided herein, this Agreement (including the docu-
ments and instruments referred to herein) constitutes the en-
tire agreement between the Parties with respect to the trans-
actions contemplated hereunder and supersedes all prior ar-
rangements or understandings with respect thereto, written or
oral (except for the Confidentiality Agreements). Nothing in
this Agreement expressed or implied, is intended to confer upon
any Person, other than the Parties or their respective succes-
sors, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, other than as provided in Sec-
tions 8.14 of this Agreement.
11.5 AMENDMENTS. To the extent permitted by Law,
this Agreement may be amended by a subsequent writing signed by
each of the Parties upon the approval of the Boards of Direc-
tors of each of the Parties, whether before or after share-
holder approval of this Agreement has been obtained; provided,
that after any such approval by the holders of Southwest Common
Stock, there shall be made no amendment that reduces or modi-
fies in any material respect the consideration to be received
by holders of Southwest Common Stock without the further ap-
proval of such shareholders.
11.6 WAIVERS.
(a) Prior to or at the Effective Time, FNB,
acting through its Board of Directors, chief executive officer,
president or other authorized officer, shall have the right to
waive any Default in the performance of any term of this Agree-
ment by Southwest, to waive or extend the time for the compli-
ance or fulfillment by Southwest of any and all of its obliga-
tions under this Agreement, and to waive any or all of the con-
ditions precedent to the obligations of FNB under this Agree-
ment, except any condition which, if not satisfied, would re-
sult in the violation of any Law. No such waiver shall be ef-
fective unless in writing signed by a duly authorized officer
of FNB.
(b) Prior to or at the Effective Time, South-
west, 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 com-
pliance or fulfillment by FNB of any and all of its obligations
under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Southwest under this Agreement,
except any condition which, if not satisfied, would result in
the violation of any Law. No such waiver shall be effective
-58-<PAGE>
unless in writing signed by a duly authorized officer of South-
west.
(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 con-
dition or breach or a waiver of any other condition or of the
breach of any other term of this Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated
hereby, neither this Agreement nor any of the rights, inter-
ests, 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 pre-
ceding sentence, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by the Parties and their
respective successors and assigns.
11.8 NOTICES. All notices or other communications
which are required or permitted hereunder shall be in writing
and sufficient if delivered by hand, by facsimile transmission,
by registered or certified mail, postage pre-paid, or by cou-
rier or overnight carrier, to the persons at the addresses set
forth below (or at such other address as may be provided here-
under), and shall be deemed to have been delivered as of the
date so delivered:
Southwest: 900 Goodlette Road
North Naples, Florida 33940
Telecopy Number: 813-435-7658
Attention: Chairman and Chief
Executive Officer
Copy to Counsel: Smith, Gambrell & Russell
3343 Peachtree Road, NE
Suite 1800
Atlanta, Georgia 30326
Telecopy Number: 404-264-2658
Attention: Robert Schwartz
FNB: Hermitage Square
-59-<PAGE>
Hermitage, PA 16148
Telecopy Number: 412-983-3515
Attention: Chairman and Chief
Executive Officer
Copy to Counsel: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy Number: (212) 403-2000
Attention: Craig M. Wasserman
11.9 GOVERNING LAW. This Agreement shall be gov-
erned by and construed in accordance with the Laws of the Com-
monwealth of Pennsylvania, without regard to any applicable
conflicts of Laws, except to the extent that the Laws of the
State of Florida relate to the consummation of the Merger.
11.10 COUNTERPARTS. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to
be an original, but all of which together shall constitute one
and the same instrument.
11.11 CAPTIONS. The captions contained in this
Agreement are for reference purposes only and are not part of
this Agreement.
11.12 INTERPRETATIONS. Neither this Agreement nor
any uncertainty or ambiguity herein shall be construed or re-
solved against any party, whether under any rule of construc-
tion or otherwise. No Party to this Agreement shall be consid-
ered the draftsman. The parties acknowledge and agree that
this Agreement has been reviewed, negotiated, and accepted by
all Parties and their attorneys and shall be construed and in-
terpreted according to the ordinary meaning of the words used
so as fairly to accomplish the purposes and intentions of all
parties hereto.
11.13 ENFORCEMENT OF AGREEMENT. The Parties hereto
agree that irreparable damage would occur in the event that any
of the provisions of this Agreement was not performed in ac-
cordance 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 jurisdic-
tion, this being in addition to any other remedy to which they
are entitled at law or in equity.
-60-<PAGE>
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 juris-
diction. 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.
IN WITNESS WHEREOF, each of the Parties has caused
this Agreement to be executed on its behalf and its corporate
seal to be hereunto affixed and attested by officers thereunto
as of the day and year first above written.
F.N.B. CORPORATION
By: /s/ Peter Mortensen
Name: Peter Mortensen
Title: Chairman of the Board
and President
SOUTHWEST BANKS, INC.
By: /s/ Gary L. Tice
Name: Gary L. Tice
Title: Chairman of the Board,
President, and Chief
Executive Officer
LAMBDA CORPORATION
By: /s/ Peter Mortensen
Name: Peter Mortensen
Title: President
-61-
EXHIBIT 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated February 2, 1996, be-
tween F.N.B. Corporation, a Pennsylvania corporation
("Grantee"), and Southwest Banks, Inc., a Florida corporation
("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an
Agreement and Plan of Merger of even date herewith (the "Merger
Agreement"), which agreement has been executed by the parties
hereto prior to this Agreement; and
WHEREAS, as a condition and inducement to Grantee's
pursuit of the transactions contemplated by the Merger Agree-
ment and in consideration therefor, Issuer has agreed to grant
Grantee the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements set forth herein and in the
Merger Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an uncondi-
tional, irrevocable option (the "Option") to purchase, subject
to the terms hereof, up to 727,163 fully paid and nonassessable
shares of the common stock, $0.10 par value, of Issuer ("Common
Stock"), at a price per share equal to $15 (as adjusted as set
forth herein, the "Option Price"); provided, that in no event
shall the number of shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Common
Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price
are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Com-
mon Stock are issued or otherwise become outstanding after the
date of this Agreement (other than pursuant to this Agreement),
the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, it equals
19.9% of the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject or is-
sued pursuant to the Option. Nothing contained in this Section
l(b) or elsewhere in this Agreement shall be deemed to autho-
rize Issuer or Grantee to breach any provision of the Merger
Agreement.
2. (a) The Holder (as hereinafter defined) may ex-
ercise the Option, notwithstanding the provisions of the Confi-
dentiality Agreements (as defined in the Merger Agreement) in
A-1<PAGE>
whole or part, if, but only if, both an Initial Triggering
Event (as hereinafter defined) and a Subsequent Triggering
Event (as hereinafter defined) shall have occurred prior to the
occurrence of an Exercise Termination Event (as hereinafter de-
fined). Each of the following shall be an Exercise Termination
Event: (i) the Effective Time (as defined in the Merger Agree-
ment) of the Merger; (ii) termination of the Merger Agreement
in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event;
or (iii) the passage of 12 months (or such longer period as
provided in Section 10) after termination of the Merger Agree-
ment if such termination follows the occurrence of an Initial
Triggering Event. The term "Holder" shall mean the holder or
holders of the Option. The rights set forth in Sections 7 and
9 shall terminate when the right to exercise the Option termi-
nates (other than as a result of a complete exercise of the
Option) as set forth herein.
(b) The term "Initial Triggering Event" shall mean
any of the following events or transactions occurring after the
date hereof:
(i) Issuer or any of its Subsidiaries (as herein-
after defined) (each an "Issuer Subsidiary"), without hav-
ing received Grantee's prior written consent, shall have
entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the
term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3)
of the Securities Exchange Act of 1934 (the "1934 Act"),
and the rules and regulations thereunder) other than
Grantee or any of its Subsidiaries (each a "Grantee Sub-
sidiary") or the Board of Directors of Issuer shall have
recommended that the shareholders of Issuer approve or
accept any Acquisition Transaction other than as contem-
plated by the Merger Agreement or this Agreement. For
purposes of this Agreement, (a) "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar
transaction, involving Issuer or any Significant Subsid-
iary (as defined in Rule 1-02 of Regulation S-X promul-
gated by the Securities and Exchange Commission (the
"SEC")) of Issuer, (y) a purchase, lease or other acquisi-
tion of all or substantially all of the assets or deposits
of Issuer or any Significant Subsidiary of Issuer, or (z)
a purchase or other acquisition (including by way of merg-
er, consolidation, share exchange or otherwise) of securi-
ties representing 15% or more of the voting power of Is-
suer or any Significant Subsidiary of Issuer, and (b)
"Subsidiary" shall have the meaning set forth in Rule
12b-2 under the 1934 Act;
A-2<PAGE>
(ii) Any person other than Grantee, any Grantee Sub-
sidiary or any Issuer Subsidiary acting in a fiduciary
capacity shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 15% or more of
the outstanding shares of Common Stock (the term "benefi-
cial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act,
and the rules and regulations thereunder);
(iii) The shareholders of the Issuer shall not have
approved the transactions contemplated by the Merger
Agreement at the meeting held for that purpose or any ad-
justment thereof, or such meeting shall not have been held
or shall have been canceled prior to termination of the
Merger Agreement, in either case, after Issuer's Board of
Directors shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify or interest
in withdrawing or modifying) its recommendation that the
shareholders of Issuer approve the transactions contem-
plated by the Merger Agreement, or Issuer or any Issuer
Subsidiary, without having received Grantee's prior writ-
ten consent, shall have authorized, recommended, proposed
(or publicly announced its intention to authorize, recom-
mend or propose or interest in authorizing, recommending
or proposing) an agreement to engage in an Acquisition
Transaction, with any person other than Grantee or a
Grantee Subsidiary;
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer
or its shareholders to engage in an Acquisition Transac-
tion;
(v) Issuer shall have willfully breached any cov-
enant or obligation contained in the Merger Agreement in
anticipation of engaging in an Acquisition Transaction,
and such breach would entitle Grantee to terminate the
Merger Agreement; or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to
which Grantee has given its prior written consent, shall
have filed an application or notice with the Federal Re-
serve Board or other federal or state bank regulatory au-
thority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition
Transaction.
A-3<PAGE>
(c) The term "Subsequent Triggering Event" shall
mean any of the following events or transactions occurring af-
ter the date hereof:
(i) The acquisition by any person of beneficial own-
ership of 25% or more of the then outstanding Common
Stock; or
(ii) The occurrence of the Initial Triggering Event
described in clause (i) of subsection (b) of this Section
2, except that the percentage referred to in clause (z)
shall be 25%.
(d) Issuer shall notify Grantee promptly in writing
of the occurrence of any Initial Triggering Event or Subsequent
Triggering Event (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not
be a condition to the right of the Holder to exercise the Op-
tion.
(e) In the event the Holder is entitled to and
wishes to exercise the Option, it shall send to Issuer a writ-
ten notice prior to an Exercise Termination Event (the date of
which being herein referred to as the "Notice Date") specifying
(i) the total number of shares it will purchase pursuant to
such exercise and (ii) a place and date not earlier than three
business days nor later than 10 business days from the Notice
Date for the closing of such purchase (the "Closing Date");
provided that if prior notification to or approval of the Fed-
eral Reserve Board or any other regulatory agency is required
in connection with such purchase, the Holder shall promptly
file the required notice or application for approval, shall
promptly notify the Issuer of such filing, and shall expedi-
tiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the
date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any
requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
(f) At the closing referred to in subsection (e) of
this Section 2, the Holder shall pay to Issuer the aggregate
purchase price for the shares of Common Stock purchased pursu-
ant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a
bank account shall not preclude the Holder from exercising the
Option.
A-4<PAGE>
(g) At such closing, simultaneously with the deliv-
ery of immediately available funds as provided in subsection
(f) of this Section 2, Issuer shall deliver to the Holder a
certificate or certificates representing the number of shares
of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the
rights of the Holder thereof to purchase the balance of the
shares purchasable thereunder.
(h) Certificates for Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend
that shall read substantially as follows:
"The transfer of the shares represented by
this certificate is subject to certain pro-
visions of an agreement between the reg-
istered holder hereof and Issuer and to
resale restrictions arising under the Secu-
rities Act of 1933, as amended. A copy of
such agreement is on file at the principal
office of Issuer and will be provided to
the holder hereof without charge upon re-
ceipt by Issuer of a written request there-
for."
It is understood and agreed that: (1) the reference to the re-
sale restrictions of the Securities Act of 1933 (the "1933
Act") in the above legend shall be removed by delivery of sub-
stitute certificate(s) without such reference if the Holder
shall have delivered to Issuer a copy of a letter from the
staff of the SEC, or an opinion of counsel, in form and sub-
stance satisfactory to Issuer, to the effect that such legend
is not required for purposes of the 1933 Act; (ii) the refer-
ence to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) with-
out such reference if the shares have been sold or transferred
in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such refer-
ence; and (iii) the legend shall be removed in its entirety if
the conditions in the proceeding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other
legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under
subsection (e) of this Section 2 and the tender of the appli-
cable purchase price in immediately available funds the Holder
shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of Issuer shall then be closed or that
A-5<PAGE>
certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and lo-
cal taxes and other charges that may be payable in connection
with the preparation, issue and delivery of stock certificates
under this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. Issuer agrees: (i) that it shall at all times main-
tain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Common Stock so that the Option
may be exercised without additional authorization of Common
Stock after giving effect to all other options, warrants, con-
vertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorga-
nization, consolidation, merger, dissolution or sale of assets,
or by any other voluntary act, avoid or seek to avoid the ob-
servance or performance of any of the covenants, stipulations
or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be
required (including (x) complying with all premerger notifica-
tion, reporting and waiting period requirements specified in 15
U.S.C. Section 18a and regulations promulgated thereunder and (y) in
the event, under the Bank Holding Company Act of 1956, as
amended, or any state or other federal banking law, prior ap-
proval of or notice to the Federal Reserve Board or to any
state or other federal regulatory authority is necessary before
the Option may be exercised, cooperating fully with the Holder
in preparing such applications or notices and providing such
information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to
permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto;
and (iv) promptly to take all action provided herein to protect
the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder,
upon presentation and surrender of this Agreement at the prin-
cipal office of Issuer, for other Agreements providing for Op-
tions of different denominations entitling the holder thereof
to purchase, on the same terms and subject to the same condi-
tions as are set forth herein, in the aggregate the same number
of shares of Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any Agreements
and related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer of
evidence reasonably satisfactory to it of the loss, theft, de-
struction or mutilation of this Agreement, and (in the case of
A-6<PAGE>
loss, theft or destruction) of reasonably satisfactory indemni-
fication, and upon surrender and cancellation of this Agree-
ment, if mutilated, Issuer will execute and deliver a new
Agreement of like tenor and date.
5. The number of shares of Common Stock purchasable upon
the exercise of the Option shall be subject to adjustment from
time to time as provided in this Section 5.
(a) In the event of any change in Common Stock by
reason of stock dividends, splitups, mergers, recapital-
izations, combinations, subdivisions, conversions, ex-
changes of shares or the like, the type and number of
shares of Common Stock purchasable upon exercise hereof
shall be appropriately adjusted and proper provision shall
be made so that, in the event that any additional shares
of Common Stock are to be issued or otherwise become out-
standing as a result of any such change (other than pur-
suant to an exercise of the Option), the number of shares
of Common Stock that remain subject to the Option shall be
increased so that, after such issuance and together with
shares of Common Stock previously issued pursuant to the
exercise of the Option (as adjusted on account of any of
the foregoing changes in the Common Stock), it equals
19.9% of the number of shares of Common Stock then issued
and outstanding.
(b) Whenever the number of shares of Common Stock
purchasable upon exercise hereof is adjusted as provided
in this Section 5, the Option Price shall be adjusted by
multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common
Stock purchasable prior to the adjustment and the denomi-
nator of which shall be equal to the number of shares of
Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Issuer
shall, at the request of Grantee delivered prior to an Exercise
Termination Event (or such later period as provided in Section
10) (whether on its own behalf or on behalf of any subsequent
holder of this Option (or part thereof) or any of the shares of
Common Stock issued pursuant hereto), promptly prepare, file
and keep current a registration statement under the 1933 Act
covering any shares issued and issuable pursuant to this Option
and shall use its best efforts to cause such registration
statement to become effective and remain current in order to
permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of this Option
("Option Shares") in accordance with any plan of disposition
A-7<PAGE>
requested by Grantee. Issuer will use its best efforts to
cause such registration statement first to become effective and
then to remain effective for such period not in excess of 120
days from the day such registration statement first becomes
effective or such shorter time as may be reasonably necessary
to effect such sales or other dispositions. Grantee shall have
the right to demand two such registrations. The Issuer shall
bear the costs of such registrations (including, but not lim-
ited to, attorneys' fees, printing costs and filing fees). The
foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above,
Issuer is in registration with respect to an underwritten pub-
lic offering of shares of Common Stock, and if in the good
faith judgment of the managing underwriter or managing under-
writers, or, if none, the sole underwriter or underwriters, of
such offering the inclusion of the Option Shares would inter-
fere with the successful marketing of the shares of Common
Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby
may be reduced; provided, however, that after any such required
reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at
least 25% of the total number of shares to be sold by the Hold-
er and Issuer in the aggregate; and provided further, however,
that if such reduction occurs, then the Issuer shall file a
registration statement for the balance as promptly as practical
thereafter as to which no reduction pursuant to this Section 6
shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration. Each such Holder
shall provide all information reasonably requested by Issuer
for inclusion in any registration statement to be filed here-
under. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, war-
ranties, indemnities and other agreements customarily included
in such underwriting agreements for Issuer. Upon receiving any
request under this Section 6 from any Holder, Issuer agrees to
send a copy thereof to any other person known to Issuer to be
entitled to registration rights under this Section 6, in each
case by promptly mailing the same, postage prepaid, to the ad-
dress of record of the persons entitled to receive such copies.
7. (a) Upon the occurrence of a Repurchase Event
(as hereinafter defined) that occurs prior to an Exercise Ter-
mination Event, (i) at the request of the Holder, delivered
prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer shall repurchase the Option
from the Holder at a price (the "Option Repurchase Price")
equal to the amount by which (A) the Market/Offer Price (as
A-8<PAGE>
defined below) exceeds (B) the Option Price, multiplied by the
number of shares for which this Option may then be exercised
and (ii) at the request of the owner of Option Shares from time
to time (the "Owner"), delivered prior to the occurrence of an
Exercise Termination Event (or such later period as provided in
Section 10), Issuer shall repurchase such number of the Option
Shares from the Owner as the Owner shall designate at a price
(the "Option Share Repurchase Price") equal to the market/offer
price multiplied by the number of Option Shares so designated.
The term "Repurchase Event" shall occur if (i) any person (the
term "person" for purposes of this Agreement having the meaning
assigned thereto in Sections 3(a)(9) and 13(d)(3) of the 1934
Act, and the rules and regulations thereunder) other than
Grantee or any of its Subsidiaries shall have acquired benefi-
cial ownership, or the right to acquire beneficial ownership,
or any "group" (as such term is defined under the 1934 Act)
shall have been formed which beneficially owns or has the right
to acquire beneficial ownership of 50% or more of the then-
outstanding shares of Common Stock (the term "beneficial owner-
ship" for purposes of this Agreement having the meaning as-
signed thereto in Section 13(d) of the 1934 Act, and the rules
and regulations thereunder), or (ii) any of the transactions
described in Section 8(a)(i), 8(a)(ii), or 8(a)(iii) shall be
consummated. The term "Market/Offer Price" shall mean the
highest of (i) the price per share of Common Stock at which a
tender or exchange offer therefor has been made, (ii) the price
per share of Common Stock to be paid by any third party pursu-
ant to an agreement with Issuer, (iii) the highest closing
price for shares of Common Stock within the three-month period
immediately preceding the date the Holder gives notice of the
required repurchase of this Option or the Owner gives notice of
the required repurchase of Option Shares, as the case may be,
or (iv) in the event of a sale of all or substantially all of
Issuer's assets or deposits, the sum of the net price paid in
such sale for such assets or deposits, the sum of the net price
paid in such sale for such assets or deposits and the current
market value of the remaining net assets of Issuer as deter-
mined by a nationally recognized investment banking firm se-
lected by the Holder or the Owner, as the case may be, divided
by the number of shares of Common Stock of Issuer outstanding
at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be de-
termined by a nationally recognized investment banking firm
selected by the Holder or Owner, as the case may be,
(b) The Holder and the Owner, as the case may be,
may exercise its right to require Issuer to repurchase the Op-
tion and any Option Shares pursuant to this Section 7 by sur-
rendering for such purpose to Issuer, at its principal office,
a copy of this Agreement or certificates for Option Shares, as
A-9<PAGE>
applicable, accompanied by a written notice or notices stating
that the Holder or the Owner, as the case may be, elects to
require Issuer to repurchase this Option and/or the Option
Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within ten business
days after the surrender of the Option and/or certificates rep-
resenting Option Shares and the receipt of such notice or no-
tices relating thereto, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to
the Owner the Option Share Repurchase Price therefor or the
portion thereof that Issuer is not then prohibited under ap-
plicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation, or as a consequence of adminis-
trative policy, from repurchasing the Option and/or the Option
Shares in full, Issuer shall immediately so notify the Holder
and/or the Owner and thereafter deliver or cause to be deliv-
ered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no
longer prohibited from delivering, within ten business days
after the date on which Issuer is no longer so prohibited; pro-
vided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section
7 is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivery to the
Holder and/or the Owner, as appropriate, the Option Repurchase
Price and the Option Share Repurchase Price, respectively, in
full (and Issuer hereby undertakes to use its best efforts to
obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option or the Option Shares whether
in whole or to the extent of the prohibition, whereupon, in the
latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option
Purchase Price or the Option Share Repurchase Price that Issuer
is not prohibited from delivering, and (ii) deliver, as appro-
priate, either (A) to the Holder, a new Agreement evidencing
the right of the Holder to purchase that number of shares of
Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Agreement was exercis-
able at the time of delivery of the notice of repurchase by a
fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder
and the denominator of which is the Option Repurchase Price, or
(B) to the Owner, a certificate for the Option Shares it is
then so prohibited from repurchasing.
A-10<PAGE>
8. (a) In the event that, prior to an Exercise Ter-
mination Event, Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee
or a Grantee Subsidiary, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary,
to merge into Issuer and Issuer shall be the continuing or sur-
viving corporation, but, in connection with such merger, the
then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of
the outstanding shares and share equivalents of the merged com-
pany, or (iii) to sell or otherwise transfer all or substan-
tially all of its or any Significant Subsidiary's assets or
deposits to any person, other than Grantee or a Grantee Subsid-
iary, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option
shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into,
or exchanged for, an option (the "Substitute Option"), at the
election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the
Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the con-
tinuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in
a merger in which Issuer is the continuing or surviving
person, and (iii) the transferee of all or substantially
all of Issuer's assets or deposits (or the assets or de-
posits of a Significant Subsidiary of Issuer).
(ii) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer
price, as defined in Section 7.
(iv) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the
one year immediately preceding the consolidation, merger
or sale in question, but in no event higher than the clos-
ing price of the shares of substitute Common Stock on the
day preceding such consolidation, merger or sale; provided
that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of
A-11<PAGE>
common stock issued by the person merging into Issuer or
by any company which controls or is controlled by such
person, as the Holder may elect.
(c) The Substitute Option shall have the same terms
as the Option, provided, that if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option,
such terms shall be as similar as possible and in no event less
advantageous to the Holder. The issuer of the Substitute Op-
tion shall also enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form
as this Agreement (after giving effect for such purpose to the
provisions of Section 9), which agreement shall be applicable
to the Substitute Option.
(d) The Substitute Option shall be exercisable for
such number of shares of Substitute Common Stock as is equal to
the Assigned Value multiplied by the number of shares of Common
Stock for which the Option is then exercisable, divided by the
Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the
Option Price multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock for which the
Option is then exercisable and the denominator of which shall
be the number of shares of Substitute Common Stock for which
the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding
prior to exercise of the Substitute Option.
(f) Issuer shall not enter into any transaction de-
scribed in subsection (a) of this Section 8 unless the Acquir-
ing Corporation and any person that controls the Acquiring Cor-
poration assume in writing all the obligations of Issuer here-
under.
9. (a) At the request of the holder of the Substi-
tute Option (the "Substitute Option Holder"), the issuer of the
Substitute Option (the "Substitute Option Issuer") shall repur-
chase the Substitute Option from the Substitute Option Holder
at a price (the "Substitute Option Repurchase Price") equal to
the amount by which (i) the Highest Closing Price (as herein-
after defined) exceeds (ii) the exercise price of the Substi-
tute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exer-
cised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute
Shares"), the Substitute Option Issuer shall repurchase the
A-12<PAGE>
Substitute Shares at a price (the "Substitute Share Repurchase
Price") equal to the Highest Closing Price multiplied by the
number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares
of Substitute Common Stock within the three-month period imme-
diately preceding the date the Substitute Option Holder gives
notice of the required repurchase of the Substitute Option or
the Substitute Share Owner gives notice of the required repur-
chase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute
Share Owner, as the case may be, may exercise its respective
right to require the Substitute Option Issuer to repurchase the
Substitute Option and the Substitute Shares pursuant to this
Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a
copy of this Agreement) and certificates for Substitute Shares
accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Issuer to
repurchase the Substitute Option and/or the Substitute Shares
in accordance with the provisions of this Section 9. As
promptly as practicable, and in any event within ten business
days after the surrender of the Substitute Option and/or cer-
tificates representing Substitute Shares and the receipt of
such notice or notices relating thereto, the Substitute Option
Issuer shall deliver or cause to be delivered to the Substitute
Option Holder the Substitute Option Repurchase Price and/or to
the Substitute Share Owner the Substitute Share Repurchase
Price therefor or the portion thereof which the Substitute Op-
tion Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that the Substitute Option Issuer
is prohibited under applicable law or regulation, or as a con-
sequence of administrative policy, from repurchasing the Sub-
stitute Option and/or the Substitute Shares in part or in full,
the Substitute Option Issuer shall immediately so notify the
Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time,
to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the portion of the Substitute Share Re-
purchase Price, respectively, which it is no longer prohibited
from delivering, within ten business days after the date on
which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at
any time after delivery of a notice of repurchase pursuant to
subsection (b) of this Section 9 prohibited under applicable
A-13<PAGE>
law or regulation, or as a consequence of administrative pol-
icy, from delivering to the substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price,
respectively, in full (and the Substitute Option Issuer shall
use its best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accom-
plish such repurchase), the Substitute Option Holder or Sub-
stitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or
to the extent of the prohibition, whereupon, in the latter
case, the Substitute Option Issuer shall promptly (i) deliver
to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase
Price or the Substitute Share Repurchase Price that the Substi-
tute Option Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Substitute Option
Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of
the Substitute Common Stock obtained by multiplying the number
of shares of the Substitute Common Stock for which the surren-
dered Substitute Option was exercisable at the time of delivery
of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the por-
tion thereof theretofore delivered to the Substitute Option
Holder and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a cer-
tificate for the Substitute Option Shares it is then so prohib-
ited from repurchasing.
10. The periods for exercise of certain rights under Sec-
tions 2, 6, 7, 9 and 12 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise
of such rights (for so long as the Holder is using commercially
reasonable efforts to obtain such regulatory approvals), and
for the expiration of all statutory waiting periods; and (ii)
to the extent necessary to avoid liability under Section 16(b)
of the 1934 Act by reason or such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the trans-
actions contemplated hereby. The execution and delivery this
Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of
Directors of Issuer and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to
A-14<PAGE>
consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action
to authorize and reserve and to permit it to issue, and at all
times from the date hereof through the termination of this
Agreement in accordance with its terms will have reserved for
issuance upon the exercise of the Option, that number of shares
of Common Stock equal to the maximum number of shares of Common
Stock at any time and from time to time issuable hereunder, and
all such shares, upon issuance pursuant thereto, will be duly
authorized, validly issued, fully paid, nonassessable, and will
be delivered free and dear of all claims, liens, encumbrance
and security interests and not subject to any preemptive
rights.
12. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option cre-
ated hereunder to any other person, without the express written
consent of the other party, except that in the event a Subse-
quent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions
hereof, may assign in whole or in part its rights and obliga-
tions hereunder following such Subsequent Triggering Event;
provided, however that until the date 30 days following the
date on which the Federal Reserve Board has approved applica-
tions by Grantee to acquire the shares of Common Stock subject
to the Option, Grantee may not assign its rights under the Op-
tion except in (i) a widely dispersed public distribution, (ii)
a private placement in which no one party acquires the right to
purchase in excess of 2% of the voting shares of issuer, (iii)
an assignment to a single party (i.e., a broker or investment
banker) for the purpose of conducting a widely disbursed public
distribution on Grantee's behalf, or (iv) any other manner ap-
proved by the Federal Reserve Board.
13. Each of Grantee and Issuer will use its best efforts
to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consumma-
tion of the transactions contemplated by this Agreement, in-
cluding without limitation applying to the Federal Reserve
Board under the Bank Holding Company Act for approval to ac-
quire the shares issuable hereunder, but Grantee shall not be
obligated to apply to state banking authorities for approval to
acquire the shares of Common Stock issuable hereunder until
such time, if ever, as it deems appropriate to do so.
14. The parties hereto acknowledge that damages would be
an inadequate remedy for a breach of this Agreement by either
party hereto and that the obligations of the parties hereto
A-15<PAGE>
shall be enforceable by either party hereto through injunctive
or other equitable relief.
15. If any term, provision, covenant or restriction con-
tained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be in-
valid, void or unenforceable, the remainder of the terms, pro-
visions and covenants and restrictions contained in this Agree-
ment shall remain in full force and effect, and shall in no way
be affected, impaired or invalidated. If for any reason such
court or regulatory agency determines that the Holder is not
permitted to acquire, or Issuer is not permitted to repurchase
pursuant to Section 7, the full number of shares of Common
Stock provided in Section 1(a) hereof (as adjusted pursuant to
Section 5 hereof), it is the express intention of Issuer to
allow the Holder to acquire or to require Issuer to repurchase
such lesser number of shares as may be permissible, without any
amendment or modification hereof.
16. All notices, requests, claims, demands and other com-
munications hereunder shall be deemed to have been duly given
when delivered in person, by fax, telecopy, or by registered or
certified mail (postage prepaid, return receipt requested) at
the respective addresses of the parties set forth in the Merger
Agreement.
17. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania,
regardless of the laws that might otherwise govern under ap-
plicable principles of conflicts of laws thereof.
18. This Agreement may be executed in two or more coun-
terparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
19. Except as otherwise expressly provided herein, each
of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transac-
tions contemplated hereunder, including fees and expenses of
its own financial consultants, investment bankers, accountants
and counsel.
20. Except as otherwise expressly provided herein or in
the Merger Agreement, this Agreement contains the entire agree-
ment between the parties with respect to the transactions con-
templated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The
terms and conditions of this Agreement shall inure to the ben-
efit of and be binding upon the parties hereto and their re-
spective successors and permitted assignees. Nothing in this
A-16<PAGE>
Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective suc-
cessors except as assignees, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as
expressly provided herein.
21. Capitalized terms used in this Agreement and not de-
fined herein shall have the meanings assigned thereto in the
Merger Agreement.
IN WITNESS WHEREOF, each of the parties had caused this
Agreement to be executed on its behalf by their officers there-
unto duly authorized, all as the date first above written.
F.N.B. CORPORATION
By: /s/ Peter Mortensen
Name: Peter Mortensen
Title: Chairman of the Board
and President
SOUTHWEST BANKS, INC.
By: /s/ Gary L. Tice
Name: Gary L. Tice
Title: Chairman of the Board
President and Chief
Executive Officer
A-17
[F.N.B. CORPORATION LETTERHEAD]
F.N.B. CORPORATION
(NASDAQ: FBAN)
HERMITAGE, PA 16148
DATE: February 5, 1996
FOR RELEASE: Immediately
CONTACT: John D. Waters
V.P. and Chief Financial Officer
(412) 983-3440
---------------------------------------------------------------
F.N.B. CORPORATION AND SOUTHWEST BANKS, INC.
ANNOUNCE MERGER
HERMITAGE, PA -- F.N.B. Corporation and Southwest Banks, Inc.
today jointly announced the signing of a definitive agreement
to merge the two bank holding companies. Under terms of the
agreement, each share of Southwest Banks will be exchanged for
.78 share of F.N.B. Corporation common stock and the transac-
tion will be accounted for as a pooling of interests. The
exchange ratio currently represents a multiple of 2 times its
year-end book value. The actual per share value will depend
upon the price of F.N.B. stock at the closing of the transac-
tion. F.N.B. Corporation will issue 2.9 million shares in the
tax free exchange, making the total value of the transaction
approximately $61 million.
- MORE -
[F.N.B. CORPORATION LETTERHEAD CON'T]<PAGE>
F.N.B. CORPORATION February 5, 1996 Page 2
F.N.B. Corporation is a bank holding company head-
quartered in Hermitage, Pennsylvania, with $1.7 billion in
assets. It operates six banks and a consumer finance subsidiary
through 93 offices in Pennsylvania, eastern Ohio and southwest
New York. The company recently announced record earnings for
1995 of $18.1 million, $2.00 per share primary and $1.90 fully
diluted, which represents a 34% increase over 1994.
Southwest Banks, Inc., a holding company headquar-
tered in Naples, Florida, operates two banking subsidiaries,
First National Bank of Naples with five locations in Collier
County and Cape Coral National Bank in Lee County with two
locations. At December 31, 1995, its assets totaled $386 mil-
lion which represents a 46% growth rate for the year. Addi-
tionally, Southwest recently reported record earnings of $1.7
million or $.44 per share for the year 1995, an increase of
162% over last year.
Gary L. Tice, Chairman, President and Chief Executive
Officer of Southwest Banks, Inc., enthusiastically remarked,
"The transaction represents a substantial premium over current
market and book values and an exciting business opportunity,
especially considering the historical operating philosophy of
F.N.B. Corporation. F.N.B. provides its affiliates an operat-
ing environment which will allow us to continue our commitment
to superior customer service. This situation is unlike recent
mergers which have resulted in sign changes, product changes,
layoffs, branch closings and reduced customer service. Addi-
tionally, F.N.B. Corporation provides a strong source of capi-
tal which will permit our company to continue pursuing a prof-
itable growth strategy. In my opinion, there has never been a
more natural, compatible and complimentary affiliation with two
companies relative to common values, operating philosophy,
strategic needs and management personalities." Tice is a
native of Sharpsville, Pennsylvania, and was once an officer of
First National Bank of Pennsylvania, the lead bank of F.N.B.
Corporation. Tice added, "In addition to realizing a premium
on their stock ownership, shareholders will benefit from divi-
dends paid by F.N.B. Corporation."
- MORE -<PAGE>
F.N.B. CORPORATION February 5, 1996 Page 3
Southwest Banks has not paid cash dividends. F.N.B. Corporation
recently increased its regular dividend on common stock to $.64
on an annual basis, which represents a 3% yield.
Commenting on the proposed merger, Peter Mortensen,
Chairman and President of F.N.B. Corporation, said, "The
affiliation with Southwest Banks provides a unique opportunity
to employ our growing capital and greatly increases the fran-
chise value of the Company. Further, we are fortunate to have
an in-depth knowledge of Southwest Banks and its strong manage-
ment team. Finally, in contrast to our traditional stable mar-
ket areas, southwest Florida is one of the fastest growing mar-
kets in the U.S." Mortensen is one of the founders of
Southwest Banks, Inc. as well as its lead bank, First National
Bank of Naples and has served as a director of both entities
since their formation in 1988. F.N.B. Corporation has owned
approximately 5% of Southwest Banks' stock for several years.
The management of both companies have a similar credit philoso-
phy having jointly financed numerous projects over the years
both in Florida and Pennsylvania.
As a result of the merger, Southwest Banks, Inc. will
be an affiliate of F.N.B. Corporation. Its banks will retain
their individual identity and high customer service standards.
Gary L. Tice will remain Chief Executive Officer of Southwest
Banks and will become an Executive Vice President and Director
of F.N.B. Corporation. Two other directors of Southwest Banks
will be invited to join the F.N.B. Corporation's Board.
On a proforma consolidated basis, measured at
December 31, 1995, F.N.B. Corporation would have total assets
of $2.1 billion, total deposits of $1.8 billion and total
Shareholders' Equity of $174 million. F.N.B. Corporation and
Southwest Banks would each continue to be characterized as
"well capitalized" by all regulatory standards.
Mortensen added, "The transaction will create an
acceptable level of earnings dilution, about 6% in the first
year. Based on our advisors' analyses considering certain
assumptions and expectations, it is anticipated that the impact
will become accretive approximately
- MORE -<PAGE>
F.N.B. CORPORATION February 5, 1996 Page 4
eighteen months after closing. This accretion should increase
rapidly considering the favorable growth in Southwest Banks'
market compared to our more mature market area."
In connection with the merger, Southwest Banks, Inc.,
is granting an option to F.N.B. Corporation to acquire up to
19.9% of its stock exercisable at a price of $15.00 per share
only if certain conditions are met. The merger requires
approval by Southwest Banks, Inc. shareholders as well as vari-
ous regulatory authorities. Closing is expected in early 1997.
The investment banking firm of McConnell, Budd & Downes, Inc.
is advising F.N.B. Corporation and Robinson-Humphrey Company,
Inc. is advising Southwest Banks, Inc. in this transaction.
F.N.B. Corporation's common stock trades on NASDAQ
under the symbol FBAN. The average of its bid and asked price
last Friday was $21.125. Southwest Banks, Inc. trades in the
over-the-counter market using the symbol SWBA and was quoted on
Friday at $14.75 per share.
JDW\skb
