<PAGE>
As filed with the Securities and Exchange Commission on September 4, 1998
Registration No.
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-4
Registration Statement
under the Securities Act of 1933
____________________
FIRST COMMONWEALTH FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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Pennsylvania 6711 25-1428528
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
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Old Courthouse Square
22 North Sixth Street
Indiana, PA 15701
(724) 349-7220
(Address, including zip code, and telephone number, including area code, of
Registrant's principal Executive Offices)
____________________
David R. Tomb, Jr., Esq.
Senior Vice President
First Commonwealth Financial Corporation
Old Courthouse Square
22 North Sixth Street
Indiana, PA 15701
(724) 349-7220
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
____________________
Copies to:
Henry S. Pool, Esq.
Tucker Arensberg, P.C.
1500 One PPG Place
Pittsburgh, PA 15222
Approximate Date of Commencement of Proposed Sale to the Public: As promptly
as practicable after this Registration Statement is declared effective and upon
consummation of the transactions described in the enclosed Joint Proxy
Statement/Prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company, and there is compliance with
General Instruction G, check the following box: [ ]
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===================================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate
Securities to be Registered/1/ Registered/2/ Per Unit Offering Price Amount of Registration Fee/3/
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Common Stock, Par Value
$1.00 Per Share............... 8,826,840 Shares Not Applicable Not Applicable $55,502
===================================================================================================================================
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1 This Registration Statement relates to securities of the Registrant issuable
to holders of Common Stock, par value $2.50 per share ("Southwest Common
Stock"), of Southwest National Corporation, a Pennsylvania corporation
("Southwest"), in the proposed merger of Southwest with and into the
Registrant (the "Merger").
2 The amount of Common Stock, par value $1.00 per share, of the Registrant
("First Commonwealth Common Stock") to be registered has been determined on
the basis of the exchange ratio in the Merger (2.9 shares of First
Commonwealth Common Stock for each share of Southwest Common Stock) and the
maximum aggregate number of shares of Southwest Common Stock ([3,043,738]
shares) to be exchanged in the Merger for shares of First Commonwealth Common
Stock.
3 The registration fee was calculated pursuant to Rule 457(f), as .000295 times
$61.81 (the average of the high and low sale price of Southwest Common Stock
quoted on the National Association of Securities Dealers Automated Quotation
National Market System on August 28, 1998) multiplied by 3,043,738 (the
maximum aggregate number of shares of Southwest Common Stock to be converted
and cancelled in the Merger).
____________________
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SOUTHWEST NATIONAL CORPORATION
AND
FIRST COMMONWEALTH FINANCIAL CORPORATION
JOINT PROXY STATEMENT
FIRST COMMONWEALTH FINANCIAL CORPORATION
PROSPECTUS
----------------
This Joint Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is
being furnished to shareholders of First Commonwealth Financial Corporation, a
Pennsylvania corporation ("First Commonwealth"), and Southwest National
Corporation, a Pennsylvania corporation ("Southwest"), in connection with the
solicitation of proxies by the respective Boards of Directors of such
corporations for use at the Special Meeting of Shareholders of First
Commonwealth (including any adjournments or postponements thereof, the "First
Commonwealth Special Meeting") and the Special Meeting of Shareholders of
Southwest (including any adjournments or postponements thereof, the "Southwest
Special Meeting" and, together with the First Commonwealth Special Meeting,
the "Special Meetings"), each to be held on [December 8, 1998].
This Proxy Statement/Prospectus relates to the proposed merger of Southwest
with and into First Commonwealth (the "Merger"), pursuant to the Agreement and
Plan of Merger, dated as of July 15, 1998 (the "Merger Agreement"), between
First Commonwealth and Southwest. At each of the Special Meetings, common
shareholders will consider and vote on a proposal to approve and adopt the
Merger Agreement.
This Proxy Statement/Prospectus also constitutes a prospectus of First
Commonwealth with respect to the shares of First Commonwealth Common Stock
issuable to holders of Southwest's Common Stock, par value $2.50 per share
(the "Southwest Common Stock"), pursuant to the Merger. First Commonwealth
Common Stock is listed for trading on the New York Stock Exchange, Inc. (the
"NYSE") under the symbol "FCF." At the effective time of the Merger (the
"Effective Time"), each outstanding share of Southwest Common Stock will be
converted into the right to receive 2.9 shares of First Commonwealth Common
Stock (the "Exchange Ratio"), except that cash will be paid in lieu of
fractional shares of First Commonwealth Common Stock in an amount per
fractional share equal to the relevant fraction multiplied by the average of
the closing prices for First Commonwealth Common Stock on the NYSE Composite
Transactions Tape (the "NYSE Tape") for the ten NYSE trading days immediately
preceding the Effective Time. The Exchange Ratio is subject to possible
increase in certain limited circumstances, but under no circumstances is it
subject to any decrease. See "The Merger--Merger Consideration" and "--
Conversion of Shares; Procedures for Exchange of Certificates; Fractional
Shares" and "--Termination; Possible Exchange Ratio Increase."
Based on the [3,043,738] shares of Southwest Common Stock outstanding on the
Southwest Record Date (as hereinafter defined), and the Exchange Ratio of 2.9,
up to approximately [8,826,840] shares of First Commonwealth Common Stock are
expected to be issued in the Merger. Based on the $ last reported
sale price per share of First Commonwealth Common Stock on the NYSE Tape on
[November 4,] 1998, each share of Southwest Common Stock would have been
converted into the right to receive First Commonwealth Common Stock having a
market price of $ at such time. The actual value of the First
Commonwealth Common Stock to be exchanged for Southwest Common Stock will
depend on the market price of the First Commonwealth Common Stock at the
Effective Time. Southwest Common Stock is quoted on the NASDAQ Stock Market
National Market System ("Nasdaq NMS") under the symbol "SWPA." On [November
4,] 1998, the last sale price of Southwest Common Stock as reported on the
Nasdaq NMS was $ . No assurance can be given as to the market value
of First Commonwealth Common Stock or Southwest Common Stock at the Effective
Time.
This Proxy Statement/Prospectus and the accompanying forms of proxy are
first being mailed to shareholders of First Commonwealth and Southwest on or
about [November 9, 1998].
1
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THE SHARES OF FIRST COMMONWEALTH COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF
FIRST COMMONWEALTH AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER FEDERAL OR STATE GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is [November 5, 1998].
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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AVAILABLE INFORMATION..................................................... 6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 6
SUMMARY................................................................... 8
THE COMPANIES............................................................ 8
First Commonwealth Financial Corporation................................ 8
Southwest National Corporation.......................................... 8
THE SPECIAL MEETINGS..................................................... 9
Date, Time and Place.................................................... 9
Matters to be Considered at the Special Meetings........................ 9
Record Dates............................................................ 9
Votes Required.......................................................... 9
Security Ownership of Management and Others............................. 10
THE MERGER............................................................... 11
Effect of Merger........................................................ 11
Reasons for the Merger; Recommendations of the Boards of Directors...... 11
Interests of Certain Persons in the Merger.............................. 12
Financial Advisors...................................................... 13
Conditions to the Merger................................................ 13
Termination; General.................................................... 13
Decrease in First Commonwealth's Stock Price; Possible Exchange Ratio
Increase............................................................... 14
Regulatory Approvals Required........................................... 14
Certain Federal Income Tax Consequences................................. 14
Accounting Treatment.................................................... 15
Stock Option Agreement.................................................. 15
No Appraisal Rights..................................................... 16
MANAGEMENT AND OPERATIONS AFTER THE MERGER............................... 16
Directors After the Merger.............................................. 16
Executive Management After the Merger................................... 16
Comparison of Shareholder Rights........................................ 16
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES SELECTED
HISTORICAL FINANCIAL INFORMATION......................................... 17
FIRST COMMONWEALTH FINANCIAL CORPORATION SELECTED HISTORICAL FINANCIAL
INFORMATION.............................................................. 18
SOUTHWEST NATIONAL CORPORATION AND SUBSIDIARY SELECTED HISTORICAL
FINANCIAL INFORMATION.................................................... 19
SOUTHWEST NATIONAL CORPORATION SELECTED HISTORICAL FINANCIAL INFORMATION.. 20
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION......................... 21
COMPARATIVE STOCK PRICES.................................................. 21
COMPARATIVE PER SHARE DATA................................................ 23
THE SPECIAL MEETINGS...................................................... 24
Date, Time and Place..................................................... 24
First Commonwealth...................................................... 24
Southwest............................................................... 24
Matters to Be Considered at the Special Meetings......................... 24
First Commonwealth...................................................... 24
Southwest............................................................... 24
Votes Required........................................................... 24
First Commonwealth...................................................... 24
</TABLE>
3
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Southwest............................................................... 25
Voting of Proxies........................................................ 25
Revocability of Proxies.................................................. 26
Record Dates; Stock Entitled to Vote; Quorum............................. 26
First Commonwealth...................................................... 26
Southwest............................................................... 26
Solicitation of Proxies.................................................. 26
THE COMPANIES............................................................. 27
First Commonwealth Financial Corporation................................. 27
Southwest National Corporation........................................... 27
General................................................................. 27
Business................................................................ 28
Banking Services........................................................ 28
Trust Services.......................................................... 28
THE MERGER................................................................ 28
General.................................................................. 28
Background of the Merger................................................. 28
Preliminary Considerations............................................... 29
Reasons for the Merger; Recommendations of the Boards of Directors....... 32
Financial Advisors....................................................... 34
Role of First Commonwealth's Financial Advisor.......................... 34
Opinion of Southwest's Financial Advisor................................ 34
Pro Forma Merger Analyses.............................................. 35
Comparable Companies................................................... 35
Comparable Transaction Analysis........................................ 36
Other Analysis......................................................... 36
Structure of the Merger.................................................. 37
Merger Consideration..................................................... 38
Effective Time........................................................... 38
Conversion of Shares; Procedures for Exchange of Certificates; Fractional
Shares.................................................................. 38
Conduct of Business Pending Merger and Related Matters................... 39
Representations and Warranties........................................... 40
Conditions to the Consummation of the Merger............................. 40
Dividends................................................................ 41
Regulatory Approvals Required............................................ 41
Certain Federal Income Tax Consequences.................................. 43
Tax Opinion............................................................. 43
Cash Received in Lieu of Fractional Shares.............................. 43
Tax Basis and Holding Period of First Commonwealth Common Stock......... 43
Accounting Treatment..................................................... 43
Termination; Possible Exchange Ratio Increase............................ 44
Amendment and Waiver..................................................... 46
Expenses................................................................. 46
Effect on Employee Benefit and Stock Plans............................... 46
Interests of Certain Persons in the Merger............................... 46
Indemnification and Board Membership.................................... 46
Employment Agreements................................................... 47
Stock Option Agreement................................................... 47
General................................................................. 47
Exercise of the Option.................................................. 47
Adjustment of Number of Shares.......................................... 48
</TABLE>
4
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Substitute Option........................................................ 49
Repurchase at the Option of First Commonwealth........................... 49
Registration Rights...................................................... 49
Effect of Stock Option Agreement......................................... 49
Resale of First Commonwealth Common Stock................................. 49
No Appraisal Rights....................................................... 50
MANAGEMENT AND OPERATIONS AFTER THE MERGER................................. 50
Directors After the Merger................................................ 50
Management After the Merger............................................... 50
POST MERGER OPERATIONS..................................................... 51
UNAUDITED PRO FORMA FINANCIAL INFORMATION.................................. 51
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET...................... 52
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME............... 53
REGULATION AND SUPERVISION................................................. 54
DESCRIPTION OF CAPITAL STOCK............................................... 55
First Commonwealth Capital Stock.......................................... 55
First Commonwealth Common Stock........................................... 55
Dividend Rights.......................................................... 55
Voting Rights............................................................ 55
Size and Classification of Board of Directors............................ 56
Preemptive Rights........................................................ 56
Liquidation Rights....................................................... 56
Assessment and Redemption................................................ 56
First Commonwealth Preferred Stock........................................ 56
COMPARISON OF SHAREHOLDER RIGHTS........................................... 56
General................................................................... 56
Authorized Capital........................................................ 56
Amendment of Articles of Incorporation or By-Laws......................... 57
Size and Classification of Board of Directors............................. 57
Cumulative Voting......................................................... 57
Limitation of Liability and Indemnification............................... 58
Shareholder Meetings...................................................... 58
Merger or Other Fundamental Transactions.................................. 59
State Anti-Takeover Statutes.............................................. 60
EXPERTS.................................................................... 61
First Commonwealth........................................................ 61
Southwest................................................................. 61
LEGAL MATTERS.............................................................. 62
SHAREHOLDER PROPOSALS...................................................... 62
</TABLE>
5
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
IN CONNECTION WITH THE SOLICITATIONS OF PROXIES OR THE OFFERING OF SECURITIES
MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FIRST COMMONWEALTH OR SOUTHWEST.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR
SOLICITATION OR TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF FIRST
COMMONWEALTH OR SOUTHWEST SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
IN ADDITION TO HISTORICAL INFORMATION, THIS DOCUMENT CONTAINS FORWARD-
LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE
SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS.
IMPORTANT FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED IN THIS DOCUMENT. READERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH REFLECT
MANAGEMENT'S ANALYSIS ONLY AS OF THE DATE HEREOF. FIRST COMMONWEALTH AND
SOUTHWEST UNDERTAKE NO OBLIGATION TO PUBLICLY REVISE OR UPDATE THESE FORWARD-
LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES THAT ARISE AFTER THE
DATE HEREOF.
AVAILABLE INFORMATION
First Commonwealth and Southwest are each subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
First Commonwealth has filed with the Commission a Registration Statement on
Form S-4 (together with any amendments thereto, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the First Commonwealth Common Stock to be issued to holders of
Southwest Common Stock pursuant to the Merger Agreement. The Registration
Statement and the exhibits thereto, as well as the reports, proxy statements
and other information filed by First Commonwealth and Southwest with the
Commission, can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and the Commission's Regional Offices at Suite 1300, Seven World
Trade Center, New York, New York 10048, and The Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
also can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. First
Commonwealth and Southwest currently file their documents electronically with
the Commission. The Commission also maintains a Web site at http://www.sec.gov
that contains reports, proxy and informational statements and other
information regarding registrants that file electronically with the
Commission. In addition, First Commonwealth Common Stock is listed on the
NYSE, and material filed by First Commonwealth can be inspected at the offices
of the NYSE, 20 Broad Street, New York, New York 10005. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto, a portion of which has been
omitted in accordance with the rules and regulations of the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by First Commonwealth
(File No. 0-11242) and Southwest (File No. 0-11026) pursuant to the Exchange
Act are incorporated by reference in this Proxy Statement/Prospectus:
6
<PAGE>
1. First Commonwealth's Annual Report on Form 10-K for the year ended
December 31, 1997;
2. First Commonwealth's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1998 and June 30, 1998;
3. First Commonwealth's Current Report on Form 8-K dated July 15, 1998;
4. The description of First Commonwealth Common Stock set forth in First
Commonwealth's Registration Statement filed pursuant to Section 12 of the
Exchange Act, and any amendment or report filed for the purpose of updating
any such description;
5. Southwest's Annual Report on Form 10-K for the year ended December 31,
1997;
6. Southwest's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1998 and June 30, 1998;
7. Southwest's Current Report on Form 8-K dated July 15, 1998; and
8. The descriptions of Southwest Common Stock set forth in Southwest's
Registration Statements filed pursuant to Section 12 of the Exchange Act, and
any amendment or report filed for the purpose of updating any such
descriptions.
Such incorporation by reference shall not be deemed to incorporate by
reference the information referred to in Item 402(a)(8) of Regulation S-K.
All documents and reports filed by First Commonwealth or Southwest pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Proxy Statement/Prospectus and prior to the date of the Special Meetings
shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be a part hereof from the dates of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement/Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
THEREIN BY REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING
ANY BENEFICIAL OWNER OF STOCK OF FIRST COMMONWEALTH OR SOUTHWEST, TO WHOM THIS
PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL REQUEST, IN THE
CASE OF DOCUMENTS RELATING TO FIRST COMMONWEALTH, TO DAVID R. TOMB, JR., THE
SECRETARY OF FIRST COMMONWEALTH FINANCIAL CORPORATION, OLD COURTHOUSE SQUARE,
22 NORTH SIXTH STREET, INDIANA, PENNSYLVANIA 15701 (TELEPHONE NUMBER (724)
349-7220), OR, IN THE CASE OF DOCUMENTS RELATING TO SOUTHWEST, TO SOUTHWEST
NATIONAL CORPORATION, 111 SOUTH MAIN STREET, GREENSBURG, PENNSYLVANIA 15601
(TELEPHONE NUMBER (724) 834-2310), ATTENTION: SECRETARY. IN ORDER TO ENSURE
DELIVERY OF THE DOCUMENTS PRIOR TO THE APPLICABLE SPECIAL MEETING, REQUESTS
SHOULD BE RECEIVED BY [December 1, 1998].
7
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SUMMARY
The following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus. Reference is made to, and this summary is qualified
in its entirety by, the more detailed information contained or incorporated by
reference in this Proxy Statement/Prospectus and the annexes hereto.
Shareholders are urged to read this Proxy Statement/Prospectus and the annexes
hereto in their entirety.
THE COMPANIES
First Commonwealth
Financial Corporation.. First Commonwealth is a bank holding company
incorporated under the laws of the Commonwealth of
Pennsylvania. First Commonwealth's principal bank
subsidiaries are First Commonwealth Bank, a
Pennsylvania banking corporation headquartered in
Indiana, Pennsylvania and First Commonwealth Trust
Company, a Pennsylvania trust company headquartered
in Indiana, Pennsylvania (collectively, the "First
Commonwealth Banking Subsidiaries"). Through the
First Commonwealth Banking Subsidiaries, First
Commonwealth is engaged in the business of providing
commercial banking services and consumer financial
services, including retail banking, trust and
investment management services. As of June 30, 1998,
First Commonwealth had, on a consolidated basis,
approximately $3.2 billion in assets, $2.3 billion in
deposits and $279 million in shareholders' equity.
First Commonwealth was the sixth largest bank holding
company headquartered in Pennsylvania measured by
total assets at June 30, 1998; after giving effect to
the Merger, First Commonwealth believes it would have
been the fifth largest bank holding company
headquartered in Pennsylvania as of that date.
First Commonwealth's principal executive offices are
located at Old Courthouse Square, 22 North Sixth
Street, Indiana, Pennsylvania 15701, and its
telephone number is (724) 349-7220. See "The
Companies--First Commonwealth Financial Corporation."
Southwest National
Corporation............. Southwest is a bank holding company incorporated
under the laws of the Commonwealth of Pennsylvania.
Southwest's principal subsidiary is Southwest
National Bank of Pennsylvania ("Southwest Bank"), a
national banking association. Southwest Bank provides
a wide variety of services, including secured and
unsecured financing, real estate financing, retail
banking services, as well as the offering of asset
management and fiduciary services. As of June 30,
1998, Southwest had, on a consolidated basis,
approximately $841 million in assets, $646 million in
deposits and $84 million in shareholders' equity.
Southwest was the twentieth largest bank holding
company headquartered in Pennsylvania measured by
total assets at June 30, 1998.
Southwest's principal executive offices are located
at 111 South Main Street, Greensburg, Pennsylvania
15601, and its telephone number is (724) 834-2310.
See "The Companies--Southwest National Corporation."
8
<PAGE>
THE SPECIAL MEETINGS
Date, Time and Place.... The First Commonwealth Special Meeting will be held
in the First Commonwealth training center located at
654 Philadelphia Street, Indiana, Pennsylvania, at
[10:00 A.M.], local time, on [December 8], 1998. The
Southwest Special Meeting will be held at its main
office located at 111 South Main Street, Greensburg,
Pennsylvania, at [10:00 A.M.], local time, on
[December 8], 1998.
Matters to be
Considered at the
Special Meetings....... First Commonwealth. At the First Commonwealth Special
Meeting, holders of First Commonwealth Common Stock
will be asked to consider and vote upon a proposal to
approve and adopt the Merger Agreement attached as
Annex I to this Proxy Statement/Prospectus, providing
for the Merger of Southwest with and into First
Commonwealth.
Southwest. At the Southwest Special Meeting, holders
of Southwest Common Stock will be asked to consider
and vote upon a proposal to approve and adopt the
Merger Agreement providing for the merger of
Southwest with and into First Commonwealth. See "The
Special Meetings--Matters to be Considered at the
Special Meetings."
Record Dates............ The record date for the First Commonwealth Special
Meeting is the close of business in Indiana on
[October 19], 1998 (the "First Commonwealth Record
Date"), and the record date for the Southwest Special
Meeting is the close of business in Greensburg on
[October 19], 1998 (the "Southwest Record Date"). See
"The Special Meetings--Record Dates; Stock Entitled
to Vote; Quorum."
Votes Required.......... First Commonwealth. Shareholders entitled to cast at
least a majority of the votes which all shareholders
are entitled to cast on the First Commonwealth Record
Date must be represented in person or by proxy at the
First Commonwealth Special Meeting in order for a
quorum to be present for purposes of voting on the
Merger Agreement. The approval and adoption of the
Merger Agreement will require the affirmative vote of
the holders of a majority of the First Commonwealth
Common Stock present and voting at the First
Commonwealth Special Meeting.
Holders of First Commonwealth Common Stock as of the
First Commonwealth Record Date are entitled to one
vote per share on each matter to be voted on at the
First Commonwealth Special Meeting.
Southwest. Shareholders entitled to cast at least a
majority of the votes which all shareholders are
entitled to cast on the Southwest Record Date must be
represented in person or by proxy at the Southwest
Special Meeting in order for a quorum to be present
for purposes of voting on the Merger Agreement. The
approval and adoption of the Merger Agreement will
require the affirmative vote of the holders of a
majority of the shares of Southwest Common Stock
present and voting at the Southwest Special Meeting.
9
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Holders of Southwest Common Stock as of the Southwest
Record Date are entitled to one vote per share on
each matter to be voted on at the Southwest Special
Meeting. See "The Special Meetings--Votes Required."
Security Ownership of
Management and Others.. First Commonwealth. As of August 28, 1998, directors
and executive officers of First Commonwealth and
their affiliates beneficially owned and were entitled
to vote 1,323,768 shares of First Commonwealth Common
Stock, which represented approximately 5.99% of the
shares of First Commonwealth Common Stock outstanding
on such date. Each First Commonwealth director and
executive officer has indicated his or her present
intention to vote, or cause to be voted, the First
Commonwealth Common Stock so owned by him or her for
approval and adoption of the Merger Agreement. As of
August 28, 1998, various subsidiaries of First
Commonwealth, as fiduciaries, custodians or agents,
had sole or shared voting power with respect to
1,915,693 shares of First Commonwealth Common Stock,
which represented approximately 8.66% of the shares
of First Commonwealth Common Stock outstanding on
such date. As of August 28, 1998, Southwest's
directors and executive officers beneficially owned
no shares of First Commonwealth Common Stock, and
various subsidiaries of Southwest, as fiduciaries,
custodians or agents, had sole or shared voting power
with respect to 6,824 shares of First Commonwealth
Common Stock, which together represented
approximately 0.03% of the shares of First
Commonwealth Common Stock outstanding on such date.
Each Southwest director and executive officer has
indicated his or her present intention to vote all of
the shares of First Commonwealth Common Stock so
owned by him or her for approval and adoption of the
Merger Agreement. Based on the foregoing, persons
holding an aggregate of approximately 5.99% of the
outstanding shares of First Commonwealth Common Stock
on August 28, 1998, have indicated a present
intention to vote for approval and adoption of the
Merger Agreement.
Southwest. As of August 28, 1998, directors and
executive officers of Southwest and their affiliates
beneficially owned and were entitled to vote 118,270
shares of Southwest Common Stock, which represented
approximately 3.89% of the shares of Southwest Common
Stock outstanding on such date. Each Southwest
director and executive officer has indicated his or
her present intention to vote, or cause to be voted,
the Southwest Common Stock so owned by him or her for
approval and adoption of the Merger Agreement. As of
August 28, 1998, Southwest National Bank of
Pennsylvania ("Southwest Bank"), as fiduciary,
custodian or agent, had sole or shared voting power
with respect to 291,390 shares of Southwest Common
Stock, which represented approximately 9.57% of the
shares of Southwest Common Stock outstanding on such
date. As of August 28, 1998, First Commonwealth's
directors and executive officers beneficially owned
103,357 shares of Southwest Common Stock, and various
subsidiaries of First Commonwealth, as fiduciaries,
custodians or agents, had sole or shared voting power
with respect to no shares of Southwest Common Stock,
10
<PAGE>
which together represented approximately 3.40% of the
shares of Southwest Common Stock outstanding on such
date. Each First Commonwealth director and executive
officer has indicated his or her present intention to
vote all of the shares of Southwest Common Stock so
owned by him or her for approval and adoption of the
Merger Agreement. Based on the foregoing, persons
holding an aggregate of approximately 7.28% of the
outstanding shares of Southwest Common Stock on
August 28, 1998, have indicated their present
intention to vote for approval and adoption of the
Merger Agreement.
See "The Special Meetings--Votes Required."
No compensation has been or will be paid to any
shareholder, as such, who has indicated an intention
to vote for approval and adoption of the Merger
Agreement which has not been or will not be paid to
all shareholders generally. As disclosed elsewhere
herein, certain members of the Boards of Directors
and managements of First Commonwealth and Southwest
may be deemed to have certain interests in the Merger
in addition to their interests as shareholders. See
"The Merger--Interests of Certain Persons in the
Merger."
THE MERGER
Effect of Merger........ At the Effective Time of the Merger, Southwest will
merge with and into First Commonwealth. First
Commonwealth will be the surviving corporation in the
Merger (the "Continuing Corporation") and will
continue its corporate existence under Pennsylvania
law under its present name.
On a pro forma basis after giving effect to the
Merger, the percentage of total assets, shareholders'
equity, net interest income and net income of the
Continuing Corporation at and for the six-month
period ended June 30, 1998, contributed by Southwest
would have been approximately 20.8%, 23.1%, 24.8% and
21.8%, respectively.
At the Effective Time, subject to certain exceptions
as described herein with respect to shares owned by
First Commonwealth, Southwest or their respective
subsidiaries, each outstanding share of Southwest
Common Stock will be automatically converted into 2.9
fully paid and non-assessable shares of First
Commonwealth Common Stock, subject to possible
increase in certain limited circumstances, except
that cash will be paid in lieu of fractional shares
of First Commonwealth Common Stock. See "The Merger--
Merger Consideration" and "--Conversion of Shares;
Procedures for Exchange of Certificates; Fractional
Shares", and "--Termination; Possible Exchange Ratio
Increase."
Reasons for the Merger;
Recommendations of the
Boards of Directors.... The Boards of Directors of First Commonwealth and
Southwest believe that the Merger represents a unique
opportunity to create a regional community bank
system with a meaningful market presence in Western
11
<PAGE>
and Central Pennsylvania able to provide a full range
of financial services including traditional banking,
insurance, securities brokerage and financial
planning services. In connection with the Merger, it
is currently estimated that one-time pre-tax Merger-
related and other charges of approximately $3.7
million will be incurred upon consummation of the
Merger. In determining to approve the Merger
Agreement, the Southwest Board of Directors also
considered a number of factors in addition to the
financial and other terms of the Merger, including
(i) the continuity of management, including the
representation of former Southwest directors on the
First Commonwealth Board of Directors and the
position of responsibility to be assigned to David S.
Dahlmann, which would enable Southwest's Board and
management to have input concerning the future course
of the Continuing Corporation and (ii) the impact of
the Merger on Southwest employees and on the
communities served by Southwest. See "The Merger--
Reasons for the Merger; Recommendations of the Boards
of Directors", "Management and Operations After the
Merger" and "Pro Forma Financial Information."
The Board of Directors of First Commonwealth and the
Board of Directors of Southwest each believes that
the terms of the Merger are fair to and in the best
interests of their respective shareholders. The First
Commonwealth Board of Directors (with eighteen
directors present and one director absent) and the
Southwest Board of Directors (with eleven directors
present and none absent) have each, by unanimous vote
of all directors present, approved the Merger
Agreement and the transactions contemplated thereby
and recommend that their respective shareholders vote
to approve and adopt the Merger Agreement. The First
Commonwealth director who was absent has subsequently
indicated his approval of the Merger Agreement and
the transactions contemplated thereby.
See "The Merger--Reasons for the Merger;
Recommendations of the Boards of Directors".
Interests of Certain
Persons in the Merger.. Certain members of the Boards of Directors and
managements of First Commonwealth and Southwest may
be deemed to have certain interests in the Merger in
addition to their interests generally as shareholders
of First Commonwealth or Southwest, as the case may
be. Certain executive officers and directors of each
of First Commonwealth and Southwest will be executive
officers of the Continuing Corporation. First
Commonwealth has also agreed to take certain actions
regarding the existing employment and severance
arrangements of officers of Southwest and to
indemnify, and maintain directors' and officers'
liability insurance covering the Southwest directors
and officers following the Merger. The First
Commonwealth Board of Directors and the Southwest
Board of Directors were each aware of these interests
of their respective directors and officers and
considered them, among other matters, in approving
the Merger Agreement and the transactions
contemplated thereby.
12
<PAGE>
See "The Merger--Effect on Employee Benefit and Stock
Plans", "--Interests of Certain Persons in the
Merger" and "Management and Operations After the
Merger."
Financial Advisors...... Keefe, Bruyette & Woods Inc. ("Keefe Bruyette") has
been retained by First Commonwealth to advise it
generally on corporate finance issues, including
capital markets and merger and acquisition activity,
and has advised First Commonwealth on the Merger.
Keefe Bruyette has not been asked by First
Commonwealth to issue any report or fairness opinion.
Danielson Associates, Inc. ("Danielson") rendered a
written opinion as of July 15, 1998, as reaffirmed as
of the date of this Proxy Statement/Prospectus, to
the Board of Directors of Southwest that, as of the
respective dates of such opinions, and subject to the
assumptions and considerations set forth therein, the
Merger was fair from a financial point of view to the
holders of Southwest Common Stock. Copies of the
opinion of Danielson, dated the date of this Proxy
Statement/Prospectus, is attached hereto as Annex
III.
Southwest has agreed to pay fees of approximately
$1.1 million to Danielson for its fairness opinion
and related services performed in connection with the
Merger, a substantial portion of which is contingent
upon consummation of the Merger.
For information on the assumptions made, matters
considered and limits of the reviews by Danielson,
see "The Merger--Financial Advisors."
Conditions to the
Merger.................. The obligations of First Commonwealth and Southwest
to consummate the Merger are subject to various
conditions, including obtaining requisite shareholder
approvals, obtaining requisite regulatory approvals
from the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), the Department
of Banking of the Commonwealth of Pennsylvania
("Department of Banking") and certain other federal
and state authorities, in each case without the
imposition of certain burdensome conditions in
connection with obtaining such regulatory approvals;
receipt of a letter dated the closing date of the
Merger from Deloitte & Touche LLP to the effect that
the Merger qualifies for "pooling of interests"
accounting treatment as of the closing date; receipt
of opinions of counsel at the closing of the Merger
in respect of certain federal income tax consequences
of the Merger; and approval for listing on the NYSE,
subject to official notice of issuance, of the shares
of First Commonwealth Common Stock to be issued
pursuant to the Merger. See "The Merger--Conditions
to the Consummation of the Merger" and "--Regulatory
Approvals Required." The Merger Agreement permits any
condition (other than a condition required in order
to comply with applicable law) to be waived by the
party benefited thereby.
Termination; General.... The Merger Agreement may be terminated at any time
prior to the Effective Time, whether before or after
approval by the shareholders of First Commonwealth
and Southwest, (i) by mutual written consent of First
Commonwealth and Southwest, or (ii) by either party
if (A) the Merger
13
<PAGE>
shall not have been consummated by November 30, 1999
(except to the extent that the failure of the Merger
then to be consummated arises out of or results from
the knowing action or inaction of the terminating
party), (B) the consent of the Federal Reserve Board
or the Department of Banking for consummation of the
Merger and the other transactions contemplated by the
Merger Agreement shall have been denied, or (C) any
shareholder approval required for consummation of the
Merger shall not have been obtained at the applicable
Special Meeting. The Merger Agreement may also be
terminated by either party prior to the Special
Meeting of the other party's shareholders if such
other party's Board of Directors fails to recommend
the approval of the Merger Agreement or withdraws or
changes such recommendation in a manner adverse to
the terminating party.
Decrease in First
Commonwealth's Stock
Price; Possible
Exchange Ratio
Increase............... In addition, subject to First Commonwealth's right to
increase the Exchange Ratio as summarized below, the
Southwest Board may terminate the Merger Agreement
if, on the Determination Date, (a) the Average
Closing Price of First Commonwealth Common Stock is
less than $23.59 and the Index Price is greater than
$407.50, or (b) the Average Closing Price of First
Commonwealth Common Stock is less than $20.64. The
Determination Date is the date on which approval for
the Merger from the Federal Reserve Board is
received. The Index Price is the closing price of the
market-capitalization weighted average of banks with
assets of $1,000,000,000 to $5,000,000,000 as
compiled by SNL Securities, L.P.
At the close of business on [September 30], 1998, the
Index Price was $ .
If the conditions described in the foregoing clause
exist (a "Termination Event") and the Southwest Board
elects to terminate the Merger Agreement, such
termination will not occur if First Commonwealth
elects to increase the Exchange Ratio to a number
calculated pursuant to the Merger Agreement. Under no
circumstances may the Exchange Ratio be decreased.
See "The Merger--Termination; Possible Exchange Ratio
Increase."
Regulatory Approvals
Required................ The Merger is subject to prior approval by the
Federal Reserve Board and the Department of Banking.
Certain aspects of the Merger will require
notifications to, and/or approvals from, certain
other federal and state authorities. First
Commonwealth has filed applications for such approval
with the Federal Reserve Board and the Department of
Banking. See "The Merger--Regulatory Approvals
Required."
Certain Federal Income
Tax Consequences....... The Merger is intended to be a tax-free
reorganization so that no gain or loss will be
recognized by First Commonwealth or Southwest, and no
gain or loss will be recognized by Southwest
shareholders, except in respect of cash received by
holders of Southwest Common Stock in lieu of
fractional
14
<PAGE>
shares of First Commonwealth Common Stock. First
Commonwealth and Southwest have received the opinion,
dated the date hereof, of Tucker Arensberg, P.C.,
that, among other things, based on certain customary
representations and assumptions referred to in such
opinions, the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
Consummation of the Merger is conditioned upon
delivery of an opinion of Tucker Arensberg, P.C., to
the same effect dated as of the closing date of the
Merger. See "The Merger--Certain Federal Income Tax
Consequences."
Accounting Treatment.... First Commonwealth's and Southwest's management each
expect the Merger to be accounted for under the
"pooling of interests" method of accounting. It is a
condition to the consummation of the Merger that
First Commonwealth and Southwest shall have received
a letter, dated the closing date of the Merger, from
Deloitte & Touche LLP confirming its concurrence with
First Commonwealth's management's and Southwest's
management's conclusions, respectively, as to the
appropriateness of pooling of interests accounting
for the Merger, as of the closing date, under
generally accepted accounting principles. See "The
Merger--Accounting Treatment."
Stock Option Agreement.. Concurrently with and as a condition to entering into
the Merger Agreement, First Commonwealth and
Southwest entered into a Stock Option Agreement,
dated as of July 15, 1998, between Southwest as
issuer and First Commonwealth as grantee (the "Stock
Option Agreement"), pursuant to which Southwest has
granted to First Commonwealth the option to purchase
up to 756,185 shares of Southwest Common Stock (or
such greater number of shares of Southwest Common
Stock as shall represent 19.9% of the then
outstanding Southwest Common Stock) at a price of
$50.75 per share. The option may only be exercised
upon the occurrence of certain events, which
generally relate to an acquisition of control of
Southwest, or a significant equity interest in
Southwest or significant assets of Southwest by a
third party, or certain proposals or offers with
respect thereto. None of such events has occurred as
of the date hereof. Upon the occurrence of certain
events (none of which has occurred), the Stock Option
Agreement provides First Commonwealth with the right
to require the issuer to repurchase the option and
all shares previously purchased upon exercise
thereof.
See "The Merger--Stock Option Agreement."
The Board of Directors of each of First Commonwealth
and Southwest considered the effects of the Stock
Option Agreement, and determined that entering into
the Stock Option Agreement was in the best interests
of their respective companies. Under the Pennsylvania
Business Corporation Law ("PBCL"), a board of
directors, in the exercise of its fiduciary duties,
is not required to act solely because of the effect
such action might have on a potential acquisition.
See "The Merger--Reasons for the Merger;
Recommendations of the Boards of Directors."
15
<PAGE>
No Appraisal Rights..... No holder of First Commonwealth Common Stock or of
Southwest Common Stock will have any appraisal rights
under Pennsylvania law in connection with, or as a
result of, the matters to be acted upon at the First
Commonwealth Special Meeting or the Southwest Special
Meeting. See "The Merger--No Appraisal Rights."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Directors After the
Merger.................. As of the Effective Time, the Board of Directors of
the Continuing Corporation is expected to consist of
24 directors, comprised of 19 current directors of
First Commonwealth and five directors of Southwest.
David S. Dahlmann, currently the President and Chief
Executive Officer of Southwest, will be one of the
five directors. The other four directors have not yet
been selected. See "Management and Operations After
the Merger--Directors After the Merger."
Executive Management
After the Merger....... David S. Dahlmann, while retaining his position and
duties as President and Chief Executive Officer of
Southwest Bank, will join the senior management team
of First Commonwealth, assuming the title and duties
of Vice Chairman. See "Management and Operations
After the Merger--Management After the Merger."
Comparison of
Shareholder Rights...... The rights of shareholders of Southwest currently are
determined by reference to the PBCL, Southwest's
Articles of Incorporation (the "Southwest Charter")
and Southwest's By-laws. At the Effective Time,
shareholders of Southwest will become shareholders of
the Continuing Corporation. Their rights as
shareholders will then be determined by reference to
the PBCL, the First Commonwealth Charter and First
Commonwealth's By-laws. See "Description of Capital
Stock" and "Comparison of Shareholder Rights."
16
<PAGE>
FIRST COMMONWEALTH FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table sets forth selected historical financial data for First
Commonwealth for each of the five years in the period ended December 31, 1997,
and the six-month periods ended June 30, 1998 and 1997. Such information has
been derived from and should be read in conjunction with the audited
consolidated financial statements of First Commonwealth, including the
respective notes thereto and Management's Discussions and Analyses of
Financial Condition and Results of Operations, which are incorporated by
reference in this Proxy Statement/Prospectus. The selected historical
financial data for each of the six month periods ended June 30, 1998 and 1997,
are derived from unaudited financial statements of First Commonwealth which,
in the opinion of Management, contain all adjustments, including normal
recurring items, necessary to present fairly the selected financial data for
such periods. Results of the six month period ended June 30, 1998, are not
necessarily indicative of the results to be expected for the entire year. The
1993 amounts have been restated to reflect the poolings of interests in 1994.
17
<PAGE>
FIRST COMMONWEALTH FINANCIAL CORPORATION
SELECTED HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income.......... $ 112,396 $ 96,742 $ 199,811 $ 182,329 $ 175,701 $ 159,644 $ 154,990
Interest expense......... 61,795 48,494 102,753 88,325 82,418 69,102 67,164
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income..... 50,601 48,248 97,058 94,004 93,283 90,542 87,826
Provision for possible
credit losses........... 3,750 2,631 6,929 4,501 4,125 2,896 2,920
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
possible credit
losses................. 46,851 45,617 90,129 89,503 89,158 87,646 84,906
Securities gains
(losses)................ 982 2,797 6,686 1,403 (603) 5,536 3,528
Other operating income... 7,879 6,306 13,157 12,338 11,007 10,635 10,960
Other operating expenses. 33,735 33,145 65,909 63,589 62,062 60,855 59,405
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes and cumulative
effect of change in
accounting method...... 21,977 21,575 44,063 39,655 37,500 42,962 39,989
Applicable income taxes.. 5,969 6,696 13,529 12,072 11,974 14,226 12,444
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income before
cumulative effect of
change in accounting
method................. 16,008 14,879 30,534 27,583 25,526 28,736 27,545
Cumulative effect of
change in accounting
method.................. 0 0 0 0 0 0 865
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income............... $ 16,008 $ 14,879 $ 30,534 $ 27,583 $ 25,526 $ 28,736 $ 28,410
========== ========== ========== ========== ========== ========== ==========
Basic Per Share Data:
Net income before
cumulative effect of
change in accounting
method................. $ 0.73 $ 0.68 $ 1.40 $ 1.26 $ 1.16 $ 1.28 $ 1.23
Cumulative effect of
change in accounting
method................. $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.04
Net income.............. $ 0.73 $ 0.68 $ 1.40 $ 1.26 $ 1.16 $ 1.28 $ 1.27
Dividends declared...... $ 0.44 $ 0.40 $ 0.82 $ 0.74 $ 0.66 $ 0.58 $ 0.51
Average shares
outstanding............ 21,926,263 21,910,853 21,878,945 21,954,111 22,005,427 22,432,062 22,416,360
Per Share Data Assuming
Dilution:
Net income before
cumulative effect of
change in accounting
method................. $ 0.72 $ 0.68 $ 1.39 $ 1.25 $ 1.16 $ 1.28 $ 1.22
Cumulative effect of
change in accounting
method................. $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.04
Net income.............. $ 0.72 $ 0.68 $ 1.39 $ 1.25 $ 1.16 $ 1.28 $ 1.26
Dividends declared...... $ 0.44 $ 0.40 $ 0.82 $ 0.74 $ 0.66 $ 0.58 $ 0.51
Average shares
outstanding............ 22,118,966 21,954,970 21,965,833 21,989,963 22,051,185 22,505,908 22,484,172
At End of Period:
Total assets............ $3,202,836 $2,716,105 $2,929,315 $2,584,638 $2,364,307 $2,334,921 $2,252,836
Securities.............. 1,058,458 743,693 856,694 704,161 748,702 813,687 909,166
Loans and leases, net of
unearned income........ 1,978,237 1,824,070 1,920,903 1,747,335 1,487,542 1,377,794 1,211,109
Allowance for possible
credit losses.......... 20,822 18,913 19,766 19,324 18,152 17,337 16,483
Deposits................ 2,279,456 2,226,294 2,242,478 2,104,783 1,962,760 1,881,060 1,822,085
Long-term debt.......... 373,253 51,950 193,054 40,880 5,261 7,596 7,363
Shareholders' equity.... 279,170 265,093 271,834 261,358 252,276 225,135 228,910
Key Ratios:
Return on average
assets................. 1.04%(a) 1.15%(a) 1.13% 1.12% 1.10% 1.26% 1.32%
Return on average
equity................. 11.57%(a) 11.29%(a) 11.34% 10.69% 10.55% 12.55% 12.86%
Net loan to deposit
ratio.................. 85.87% 81.08% 84.78% 82.10% 74.86% 72.32% 65.56%
Dividends per share as
percent of net income
per share.............. 60.27% 58.82% 58.57% 58.73% 56.90% 45.31% 40.16%
Average shareholders'
equity as a percentage
of average assets...... 8.98% 10.18% 9.98% 10.47% 10.39% 10.01% 10.23%
</TABLE>
- --------
(a) Annualized for comparative purposes.
18
<PAGE>
SOUTHWEST NATIONAL CORPORATION AND SUBSIDIARY
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table sets forth selected historical financial data for
Southwest for each of the five years in the period ended December 31, 1997,
and the six-month periods ended June 30, 1998 and 1997. Such information has
been derived from and should be read in conjunction with the audited
consolidated financial statements of Southwest, including the respective notes
thereto and Management's Discussions and Analyses of Financial Condition and
Results of Operations, which are incorporated by reference in this Proxy
Statement/Prospectus. The selected historical financial data for each of the
six month periods ended June 30, 1998 and 1997, are derived from unaudited
financial statements of Southwest which, in the opinion of Management, contain
all adjustments, including normal recurring items, necessary to present fairly
the selected financial data for such periods. Results of the six month period
ended June 30, 1998, are not necessarily indicative of the results to be
expected for the entire year.
19
<PAGE>
SOUTHWEST NATIONAL CORPORATION
SELECTED HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income........... $ 28,073 $ 27,267 $ 54,961 $ 52,859 $ 51,481 $ 47,724 $ 47,936
Interest expense.......... 11,429 10,663 21,673 20,864 20,601 17,031 18,112
--------- --------- --------- --------- --------- --------- ---------
Net interest income...... 16,644 16,604 33,288 31,995 30,880 30,693 29,824
Provision for possible
credit losses............ 1,350 1,095 3,223 1,800 1,450 1,560 1,597
--------- --------- --------- --------- --------- --------- ---------
Net interest income
after provision for
possible credit losses. 15,294 15,509 30,065 30,195 29,430 29,133 28,227
Securities gains.......... 0 0 139 196 0 0 0
Other operating income.... 3,060 2,632 5,559 5,021 4,989 4,833 4,566
Other operating expenses.. 12,091 11,282 22,949 21,710 21,627 21,825 21,406
--------- --------- --------- --------- --------- --------- ---------
Income before income
taxes.................. 6,263 6,859 12,814 13,702 12,792 12,141 11,387
Applicable income taxes... 1,795 2,055 3,809 4,092 3,754 3,535 3,285
--------- --------- --------- --------- --------- --------- ---------
Net income................ $ 4,468 $ 4,804 $ 9,005 $ 9,610 $ 9,038 $ 8,606 $ 8,102
========= ========= ========= ========= ========= ========= =========
Per Share Data(b):
Net income............... $ 1.46 $ 1.55 $ 2.92 $ 3.03 $ 2.84 $ 2.70 $ 2.54
Dividends declared....... $ 0.70 $ 0.64 $ 1.31 $ 1.22 $ 1.14 $ 1.08 $ 0.98
Average shares
outstanding............. 3,055,875 3,108,569 3,088,622 3,172,735 3,183,026 3,192,295 3,192,295
At End of Period:
Total assets............. $ 841,406 $ 743,634 $ 739,242 $ 755,358 $ 710,816 $ 685,283 $ 702,794
Securities............... 278,074 196,563 159,104 197,250 211,886 204,541 234,769
Loans and leases, net of
unearned income......... 489,527 496,497 515,434 489,188 448,396 412,890 371,236
Allowance for possible
credit losses........... 6,064 5,851 6,166 5,910 5,651 5,038 4,451
Deposits................. 645,636 645,729 641,865 651,328 623,785 612,075 633,248
Long-term debt........... 100,000 0 0 11,857 1,907 1,953 0
Shareholders' equity..... 84,016 80,698 82,489 80,164 77,210 68,102 65,840
Key Ratios:
Return on average assets. 1.16%(a) 1.29%(a) 1.21% 1.32% 1.30% 1.24% 1.18%
Return on average equity. 10.78%(a) 12.06%(a) 11.19% 12.31% 12.61% 12.81% 12.84%
Net loan to deposit
ratio................... 74.88% 75.98% 79.34% 74.20% 70.98% 66.63% 57.92%
Dividends per share as
percent of net income
per share............... 47.94% 41.29% 44.86% 40.26% 40.14% 40.00% 38.58%
Average shareholders'
equity as a percentage
of average assets....... 10.78% 10.69% 10.83% 10.72% 10.34% 9.69% 9.22%
</TABLE>
- --------
(a) Annualized for comparative purposes.
(b) Basic and diluted per share data.
20
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
The following table sets forth certain historical and pro forma combined
financial information for the six month period ended June 30, 1998, and for
the year ended December 31, 1997, for First Commonwealth and Southwest. This
table should be read in conjunction with the separate historical balance
sheets and statements of income of First Commonwealth and Southwest and the
pro forma combined financial statements appearing elsewhere in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
FIRST COMMONWEALTH SOUTHWEST PRO FORMA COMBINED
------------------- ---------------- -------------------
6/30/98 12/31/97 6/30/98 12/31/97 6/30/98 12/31/97
--------- --------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income (in
thousands)............. $ 16,008 $ 30,534 $4,468 $9,005 $ 20,476 $ 39,539
Net income per share.... 0.73 1.40 1.46 2.92 0.67 1.28
Pro forma net income per
2.9 First Commonwealth
shares................. -- -- -- -- 1.94 3.71
Cash dividends declared. 0.44 0.82 0.70 1.31 -- --
Pro forma cash dividends
declared per 2.9 First
Commonwealth shares.... -- -- -- -- 1.28 2.38
Book value per share.... 12.63 12.33 27.60 26.91 11.74 11.45
Pro forma book value per
2.9 First Commonwealth
shares................. -- -- -- -- 34.05 33.21
</TABLE>
COMPARATIVE STOCK PRICES
First Commonwealth Common Stock is listed on the NYSE under the symbol
"FCF", and Southwest Common Stock is quoted on the Nasdaq NMS under the symbol
"SWPA". The following table sets forth, for the periods indicated, the high
and low sale prices per share of First Commonwealth Common Stock and Southwest
Common Stock, as reported on the NYSE Tape and on the Nasdaq NMS,
respectively.
<TABLE>
<CAPTION>
FIRST COMMONWEALTH SOUTHWEST
CALENDAR QUARTER COMMON STOCK COMMON STOCK
- ---------------- ------------------- ---------------
HIGH LOW HIGH LOW
--------- --------- ------- -------
<S> <C> <C> <C> <C>
1996:
First Quarter............................. $ 19.500 $ 17.750 $35.500 $33.000
Second Quarter............................ 19.625 17.750 35.500 31.000
Third Quarter............................. 19.125 17.000 37.000 31.500
Fourth Quarter............................ 19.000 17.500 46.250 36.500
1997:
First Quarter............................. 18.875 17.125 46.000 41.500
Second Quarter............................ 23.000 17.500 44.250 41.750
Third Quarter............................. 22.000 19.563 48.500 42.750
Fourth Quarter............................ 35.063 21.625 55.750 44.500
1998:
First Quarter............................. 34.250 27.313 51.000 44.875
Second Quarter............................ 29.750 26.313 52.000 49.000
Third Quarter (through ).............
</TABLE>
On July 15, 1998, the last trading day before the public announcement of the
Merger Agreement, the closing sale prices of First Commonwealth Common Stock
and Southwest Common Stock, as reported on the NYSE Tape and Nasdaq NSM,
respectively, were $30.5625 per share and $55.00 per share, respectively. The
pro forma equivalent per share value of the Southwest Common Stock on July 15,
1998, was $88.63 per share. The pro forma equivalent per share value of
Southwest Common Stock on any date equals the closing sale price of First
Commonwealth Common Stock on such date, as reported on the NYSE Tape,
multiplied by the Exchange Ratio.
21
<PAGE>
On [November 4], 1998, the closing sale prices of First Commonwealth Common
Stock and Southwest Common Stock as reported on the NYSE Tape and Nasdaq NMS
were $ per share and $ per share ($ on a pro forma equivalent per
share basis), respectively.
Shareholders are urged to obtain current quotations for the market prices of
First Commonwealth Common Stock and Southwest Common Stock.
No assurance can be given as to the market price of First Commonwealth
Common Stock or Southwest Common Stock at the Effective Time. Because the
Exchange Ratio is fixed in the Merger Agreement (subject to possible increase
in certain limited circumstances, see "The Merger--Termination; Possible
Exchange Ratio Increase"), the market value of the shares of First
Commonwealth Common Stock that holders of Southwest Common Stock receive in
the Merger may vary significantly from the prices shown above.
22
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share information for
First Commonwealth Common Stock and Southwest Common Stock and pro forma per
share financial information for First Commonwealth and Southwest combined. The
calculations are based on the average number of shares outstanding. Net income
per common share and pro forma net income per common share do not give effect
to anticipated costs savings and revenue enhancements in connection with the
Merger. The pro forma information is presented for informational purposes
only, and should not be construed as being indicative of the actual financial
position, results of operations and dividends subsequent to the Merger. The
pro forma information does not reflect the effect of the estimated one-time
Merger-related and other charges of approximately $3.7 million expected to be
incurred upon consummation of the Merger.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, -----------------
1998 1997 1996 1995
---------- ----- ----- -----
<S> <C> <C> <C> <C>
Earnings Per Share(b):
Historical:
Net income per First Commonwealth share......... $0.73 $1.40 $1.26 $1.16
Net income per Southwest share.................. 1.46 2.92 3.03 2.84
Pro forma combined First Commonwealth and
Southwest per First Commonwealth share(a)....... 0.67 1.28 1.19 1.11
Pro forma combined First Commonwealth and
Southwest per 2.9 First Commonwealth shares(a).. 1.94 3.71 3.45 3.22
Dividends Per Share:
Historical:
Dividends per First Commonwealth share.......... 0.44 0.82 0.74 0.66
Dividends per Southwest share................... 0.70 1.31 1.22 1.14
Pro forma dividends per share(c)................. 0.44 0.82 0.74 0.66
Pro forma dividends per 2.9 First Commonwealth
shares(a)....................................... 1.28 2.38 2.15 1.91
Book Value Per Share:
Historical:
Book value per First Commonwealth share......... 12.63 12.33
Book value per Southwest share.................. 27.60 26.91
Pro forma combined First Commonwealth and
Southwest per First Commonwealth share(a)....... 11.74 11.45
Pro forma combined First Commonwealth and
Southwest per 2.9 First Commonwealth shares(a).. 34.05 33.21
</TABLE>
- --------
(a) Pro forma data is derived from the pro forma combined financial statements
which follow. Pro forma data includes the historical financial information
for First Commonwealth and Southwest.
(b) First Commonwealth's historical and pro forma earnings per share for the
six months ended June 30, 1998, and for each of the three years in the
period ended December 31, 1997, were based on weighted average common
shares outstanding as dilution from potentially dilutive common stock
equivalents was less than or equal to one cent per share.
(c) Pro forma dividends have been stated at the historical First Commonwealth
dividend per share amounts.
23
<PAGE>
THE SPECIAL MEETINGS
Date, Time and Place
First Commonwealth. The First Commonwealth Special Meeting will be held in
the First Commonwealth training center located at 654 Philadelphia Street,
Indiana, Pennsylvania, at [10:00 A.M.] local time, on [December 8], 1998.
Southwest. The Southwest Special Meeting will be held at its main office
located at 111 South Main Street, Greensburg, Pennsylvania, at [10:00 A.M.]
local time, on [December 8], 1998.
Matters to Be Considered at the Special Meetings
First Commonwealth. At the First Commonwealth Special Meeting, holders of
First Commonwealth Common Stock will be asked to consider and vote upon the
approval and adoption of the Merger Agreement and vote upon such other matters
as may properly be brought before the First Commonwealth Special Meeting.
THE BOARD OF DIRECTORS OF FIRST COMMONWEALTH HAS (WITH EIGHTEEN DIRECTORS
PRESENT AND ONE DIRECTOR ABSENT), BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT,
APPROVED THE MERGER AGREEMENT AND RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT.
Southwest. At the Southwest Special Meeting, holders of Southwest Common
Stock will be asked to consider and vote upon the approval and adoption of the
Merger Agreement and such other matters as may properly be brought before the
Southwest Special Meeting.
THE BOARD OF DIRECTORS OF SOUTHWEST HAS (WITH 11 DIRECTORS PRESENT AND NONE
ABSENT), BY UNANIMOUS VOTE OF ALL DIRECTORS, APPROVED THE MERGER AGREEMENT AND
RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Votes Required
First Commonwealth. The approval and adoption of the Merger Agreement will
require the affirmative vote of the holders of record of a majority of the
shares of First Commonwealth Common Stock present and voting at the First
Commonwealth meeting.
Holders of record of First Commonwealth Common Stock on the First
Commonwealth Record Date are each entitled to one vote per share on each
matter to be voted on at the First Commonwealth Special Meeting.
As of August 28, 1998, directors and executive officers of First
Commonwealth and their affiliates beneficially owned and were entitled to vote
1,323,768 shares of First Commonwealth Common Stock, which represented
approximately 5.99% of the shares of First Commonwealth Common Stock
outstanding on such date. Each First Commonwealth director and executive
officer has indicated his or her present intention to vote the First
Commonwealth Common Stock so owned by him or her for approval of the Merger
Agreement. As of August 28, 1998, First Commonwealth and its subsidiaries, as
fiduciaries, custodians or agents, had sole or shared voting power with
respect to 1,915,693 shares of First Commonwealth Common Stock, representing
approximately 8.66% of the shares of First Commonwealth Common Stock
outstanding on such date. As of August 28, 1998, Southwest's directors or
executive officers beneficially owned no shares of First Commonwealth Common
Stock, and various subsidiaries of Southwest, as fiduciaries, custodians or
agents, had sole or shared voting power with respect to 6,824 shares of First
Commonwealth Common Stock, representing approximately 0.03% of the shares of
First Commonwealth Common Stock outstanding on such date. Each Southwest
director and executive officer has indicated his or her present intention to
vote all of the shares of First Commonwealth Common Stock so owned by him or
her for approval and adoption of the Merger Agreement. Based on the foregoing,
persons holding an aggregate of approximately 5.99% of the shares of First
24
<PAGE>
Commonwealth Common Stock outstanding on August 28, 1998, have indicated a
present intention to vote for approval. The approval and adoption of the
Merger Agreement will require the affirmative vote of the holders of record of
a majority of the shares of Southwest Common Stock present and voting at the
Southwest Special Meeting.
Southwest. The approval and adoption of the Merger Agreement will require
the affirmative vote of the holders of record of a majority of the shares of
Southwest Common Stock present and voting at the Southwest Special Meeting.
Holders of record of Southwest Common Stock on the Southwest Record Date are
each entitled to one vote per share on each matter to be considered at the
Southwest Special Meeting.
As of August 28, 1998, directors and executive officers of Southwest and
their affiliates beneficially owned and were entitled to vote 118,270 shares
of Southwest Common Stock, which represented approximately 3.89% of the shares
of Southwest Common Stock outstanding on such date. Each Southwest director
and executive officer has indicated his or her present intention to vote the
Southwest Common Stock so owned by him or her for approval and adoption of the
Merger Agreement. As of August 28, 1998, various subsidiaries of Southwest, as
fiduciaries, custodians or agents, had sole or shared voting power with
respect to 291,390 shares of Southwest Common Stock, representing
approximately 9.57% of the shares of Southwest Common Stock outstanding on
such date. As of August 28, 1998, First Commonwealth's directors and executive
officers beneficially owned 103,357 shares of Southwest Common Stock, which
represented approximately 3.40% of the shares of Southwest Common Stock
outstanding on August 28, 1998, and various subsidiaries of First
Commonwealth, as fiduciaries, custodians or agents, had sole or shared voting
power with respect to no shares of Southwest Common Stock. Each First
Commonwealth director and executive officer has indicated his or her present
intention to vote all of the shares of Southwest Common Stock so owned by him
or her for approval and adoption of the Merger Agreement. Based on the
foregoing, persons holding an aggregate of approximately 7.28% of the
outstanding shares of Southwest Common Stock on August 28, 1998, have
indicated their present intention to vote for approval and adoption of the
Merger Agreement.
No compensation has been or will be paid to any shareholder, as such, who
has indicated an intention to vote for approval and adoption of the Merger
Agreement which has not been or will not be paid to all shareholders
generally. As disclosed elsewhere herein, certain members of the Boards of
Directors and management of First Commonwealth and Southwest may be deemed to
have certain interests in the Merger in addition to their interests as
shareholders. See "The Merger--Interests of Certain Persons in the Merger."
Voting of Proxies
Shares represented by all properly executed proxies received in time for the
Special Meetings will be voted at such Special Meetings in the manner
specified by the holders thereof. Proxies which have been signed and returned
but which do not contain voting instructions will be voted in favor of the
Merger Agreement.
First Commonwealth and Southwest each intend to count shares of First
Commonwealth Common Stock or Southwest Common Stock, as the case may be,
present in person at the Special Meetings but not voting, and shares of First
Commonwealth Common Stock or Southwest Common Stock, as the case may be, for
which they have received proxies but with respect to which holders of shares
have abstained on any matter, as present at the Special Meetings for purposes
of determining the presence or absence of a quorum for the transaction of
business.
For voting purposes at the Special Meetings, shares affirmatively voted in
favor of a proposal and properly executed proxies containing no voting
instructions and not marked as abstaining will be voted for the Merger and
counted as favorable votes for such proposal. The abstention from voting with
respect to any proposal by any shareholder who is present in person or by
proxy at a Special Meeting will not be considered as "voting" and will,
therefore, not be included in determining the amount required for a majority
of voting shares. In
25
<PAGE>
addition, under the applicable rules of the NYSE and the National Association
of Securities Dealers, Inc. ("NASD"), brokers and/or members, as the case may
be, who hold shares in street name for customers who are the beneficial owners
of such shares are prohibited from giving a proxy to vote such customers'
shares with respect to the approval and adoption of the Merger Agreement in
the absence of specific instructions from such customers ("broker non-votes").
Broker non-votes will not be counted toward a quorum and will not be treated
as for or against the proposal.
It is not expected that any matter other than those referred to herein will
be brought before either of the Special Meetings. If, however, other matters
are properly presented for a vote, the persons named as proxies will vote in
accordance with their judgment with respect to such matters.
The persons named as proxies by a Southwest or First Commonwealth
shareholder may propose and vote for one or more adjournments of the
applicable Special Meeting to permit further solicitations of proxies in favor
of any proposal; provided, however, that no proxy which is voted against the
approval of the Merger Agreement will be voted in favor of any such
adjournment.
Revocability of Proxies
The grant of a proxy on the enclosed First Commonwealth or Southwest form
does not preclude a shareholder from voting in person. A shareholder may
revoke a proxy at any time prior to its exercise by filing with the Secretary
of First Commonwealth (in the case of a First Commonwealth shareholder) or the
Secretary of Southwest (in the case of a Southwest shareholder) a duly
executed revocation of proxy, by submitting a duly executed proxy bearing a
later date or by appearing at the applicable Special Meeting and voting in
person at such Special Meeting. Attendance at the relevant Special Meeting
will not, in and of itself, constitute revocation of a proxy.
Record Dates; Stock Entitled to Vote; Quorum
First Commonwealth. Only holders of record of First Commonwealth Common
Stock on the First Commonwealth Record Date will be entitled to notice of, and
to vote at, the First Commonwealth Special Meeting. On the First Commonwealth
Record Date, [22,110,895] shares of First Commonwealth Common Stock were
issued and outstanding and held by approximately [9,500] holders of record.
Shareholders entitled to cast at least a majority of the votes which all
shareholders are entitled to cast on the First Commonwealth Record Date must
be represented in person or by proxy at the First Commonwealth Special Meeting
in order for a quorum to be present for purposes of voting on approval of the
Merger Agreement.
Southwest. Only holders of record of Southwest Common Stock on the Southwest
Record Date will be entitled to notice of, and to vote at, the Southwest
Special Meeting. On the Southwest Record Date, [3,043,738] shares of Southwest
Common Stock were issued and outstanding and held by approximately [2,100]
holders of record.
Shareholders entitled to cast at least a majority of the votes which all
shareholders are entitled to cast on the Southwest Record Date must be
represented in person or by proxy at the Southwest Special Meeting in order
for a quorum to be present for purposes of voting on approval of the Merger
Agreement.
Solicitation of Proxies
Each of First Commonwealth and Southwest will bear the cost of the
solicitation of proxies from its own shareholders, except that First
Commonwealth and Southwest will share equally the cost of printing this Proxy
Statement/Prospectus. In addition to solicitation by mail, the directors,
officers and employees of each company and its subsidiaries may solicit
proxies from shareholders of such company by telephone or telegram or in
person. Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries for the
26
<PAGE>
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and First Commonwealth and Southwest will reimburse
such custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses in connection therewith.
SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
THE COMPANIES
First Commonwealth Financial Corporation
First Commonwealth is a bank holding company organized under the laws of the
Commonwealth of Pennsylvania, and registered under the Bank Holding Company
Act of 1956, as amended (the "BHCA"). First Commonwealth conducts its regional
financial services business through various bank and non-bank subsidiaries.
First Commonwealth traces its banking origins to 1866 through First
Commonwealth Bank, its wholly-owned commercial banking subsidiary
headquartered in Indiana, Pennsylvania. First Commonwealth Bank provides a
full range of consumer and commercial loan and deposit services to customers
in 19 counties in central and western Pennsylvania. In addition to traditional
banking products, First Commonwealth Bank offers many specialty products
including consumer and commercial, insurance and annuity products which are
provided through First Commonwealth Insurance Agency, a wholly-owned
subsidiary of First Commonwealth Bank also headquartered in Indiana,
Pennsylvania.
Subsidiaries of First Commonwealth in addition to First Commonwealth Bank
include First Commonwealth Trust Company, Commonwealth Systems Corporation and
BSI Financial Services, Inc. First Commonwealth Trust Company is a non-
depository trust company formed in 1991 to provide general trust services
throughout the bank's market area. First Commonwealth Trust Company offers
both fiduciary administration and investment management services to
individuals, corporations and institutions. Commonwealth Systems Corporation
is located in Indiana, Pennsylvania, and provides First Commonwealth and its
subsidiaries with a full range of data processing services including
centralized loan, deposit and trust processing as well as general ledger
accounting and bookkeeping services. BSI Financial Services, Inc. has its
principal place of business in Titusville, Pennsylvania, and provides mortgage
banking, loan servicing and collection services to the Corporation's
subsidiary bank as well as unaffiliated organizations.
At June 30, 1998, on a consolidated basis, First Commonwealth had total
assets of approximately $3.2 billion, total deposits of approximately $2.3
billion and shareholders' equity of approximately $279 million. As of that
date, First Commonwealth ranked as the sixth largest bank holding company
headquartered in Pennsylvania in terms of total consolidated assets. As of
June 30, 1998, First Commonwealth's banking subsidiary operated from 83 full
service offices.
The principal executive offices of First Commonwealth are located at Old
Courthouse Square, 22 North Sixth Street, Indiana, Pennsylvania 15701. First
Commonwealth's telephone number is (724) 349-7220.
Southwest National Corporation
General. Southwest is a bank holding company organized under the laws of the
Commonwealth of Pennsylvania and registered under the BHCA. Southwest conducts
its regional financial services business through its bank subsidiary,
Southwest National Bank of Pennsylvania, a national banking association
headquartered in Greensburg, Pennsylvania ("Southwest Bank"). At June 30,
1998, Southwest Bank operated 16 offices in Westmoreland and Allegheny
Counties in western Pennsylvania.
At June 30, 1998, on a consolidated basis, Southwest had total assets of
approximately $841 million, total deposits of approximately $646 million and
total shareholders' equity of approximately $84 million. As of that date,
Southwest ranked as the twentieth largest bank holding company headquartered
in Pennsylvania in terms of total consolidated assets. Southwest Bank will
convert from a national banking association to a Pennsylvania
27
<PAGE>
banking corporation, and become a member bank of the Federal Reserve System.
The exact time of the conversion is uncertain, but it is anticipated that it
will occur prior to December 31, 1998. The primary reason for the conversion
is to reduce regulatory burden.
Business. Southwest is a regional financial services company that serves its
customers through two core franchises: banking services and trust services.
Banking Services. Southwest Bank provides a variety of banking services
including consumer banking, regional commercial banking, home secured lending,
and other consumer lending.
Trust Services. Southwest Bank, through its trust division, combines
traditional bank trust services with money management products and services
for individuals, corporations and institutions.
The executive office of Southwest is located at 111 South Main Street,
Greensburg, Pennsylvania 15601. Southwest's telephone number is (724) 834-
2310.
THE MERGER
General
The Boards of Directors of First Commonwealth and Southwest have approved
the Merger Agreement, which provides for the Merger at the Effective Time,
with First Commonwealth as the Continuing Corporation. This section of the
Proxy Statement/Prospectus describes the material aspects of the proposed
Merger, including the principal terms of the Merger Agreement and the Stock
Option Agreement. A copy of the Merger Agreement is attached to this Proxy
Statement/Prospectus as Annex I and is incorporated herein by reference. The
description set forth below of the terms of the Merger Agreement is qualified
in its entirety by reference thereto. All shareholders of First Commonwealth
and Southwest are urged to read the Merger Agreement in its entirety.
Background of the Merger
As the pace of change within the banking industry has accelerated over the
past decade, and as competition from banks and from non-bank financial service
providers has increased, each of First Commonwealth and Southwest has
carefully reviewed its strategic alternatives and long-term goals and has
taken steps to maintain and enhance its competitive position and meet the
rising demand for investments in technology and ancillary financial services.
As part of this process, each of First Commonwealth and Southwest has
confirmed its commitment to the central and western Pennsylvania area in which
it operates by building on existing strengths and expanding into neighboring
markets, both through internal growth as well as through identifying
appropriate acquisition opportunities.
First Commonwealth's Board of Directors has for some time recognized the
foregoing industry trends and anticipates that industry consolidation and
intensifying competition from within and outside the banking industry will
continue. First Commonwealth therefore evaluates merger and acquisition
opportunities where potential for shareholder value enhancement, strategic
growth and franchise development exist. It was in this context that, in 1996,
First Commonwealth acquired BSI Financial Services, Inc., a financial services
corporation, in 1997 created First Commonwealth Insurance Agency and entered
into a joint venture agreement with Kuzneski Agency, and in 1998 entered into
a strategic alliance with Hefren Tillotson Inc., a registered broker dealer.
Similarly, Southwest's Board of Directors has, over a number of years,
periodically reviewed strategic alternatives including (i) remaining
independent and continuing its strategy of internal growth and expansion
through acquisitions, (ii) engaging in a merger-of-equals type transaction, or
(iii) a strategic combination with a larger banking organization. In prior
years, Southwest's Board determined that Southwest should continue its
strategy of independence and to seek growth internally and through in-market
acquisitions both of banks and other financial services providers.
28
<PAGE>
The management of First Commonwealth believes that combining the resources
of Southwest with those of First Commonwealth's subsidiaries under common
holding company ownership and control will enable First Commonwealth to more
effectively meet the increased competition and to profit from the
opportunities made available by the elimination of legislative restrictions on
banking in Pennsylvania. The increased financial, managerial, technological
and other resources available to First Commonwealth will place the corporation
in a better position to offer the expanding variety of financial services that
will be necessary to meet ongoing competition from larger bank and non-bank
financial institutions. The management of First Commonwealth believes that the
merger will create a combined entity having substantially improved capacity to
offer the varied and specialized services and expertise that are available
from larger organizations, and will substantially strengthen its ability to
compete with the largest banks. The Merger will enable First Commonwealth and
Southwest to draw upon and take advantage of the other's expertise and
experience, through a combination that will provide greater strength and
stability to their customers, employees and shareholders.
Southwest's attractive market area and strong local identity will provide
First Commonwealth and its subsidiaries with opportunity for growth which can
be achieved in part by providing services to Southwest customers that
Southwest does not currently offer. These services would include competitively
priced, consumer and commercial, insurance and annuity products offered
through First Commonwealth Insurance Agency and financial planning and
brokerage services offered through First Commonwealth's strategic alliance
with Hefren Tillotson Inc. In addition to expanding First Commonwealth's array
of traditional financial products into the geographic area made available by
the Merger with Southwest, the combined entity will have greater resources
available to fund the technological research and product development costs
that will be required to deliver new and improved financial services in the
future. The combined entity will also have a larger lending limit than First
Commonwealth possesses alone, enabling First Commonwealth to compete for
larger loans which they presently must pass up and which are then often made
by larger banks from outside the local area.
Economies of scale may be achieved by combining purchases of supplies and
services, eliminating duplication of contract services, and combining certain
internal management and other functions under one holding company. First
Commonwealth's data processing subsidiary should be a great asset in
generating cost savings from data processing charges and the centralized
purchase of computer hardware and software for Southwest after the Merger is
completed. First Commonwealth believes that the formation of a substantially
larger financial institution will enable the corporation to attract qualified
personnel and to hold both new and existing personnel by offering broader
career opportunities and advancement potential. First Commonwealth plans to
draw upon the skills and experience of Southwest personnel following the
Merger.
The increased resources of the combined entity following the Merger and the
flexibility afforded by First Commonwealth's holding company structure will
also place First Commonwealth in a better position to take advantage of the
opportunities for expansion into new markets, either through expansion of
service areas of existing subsidiaries or through the acquisition of
additional financial services companies. First Commonwealth remains receptive
to and continues to evaluate potential opportunities for such expansion and
acquisitions, and is confident that the acquisition of Southwest substantially
increases its opportunity for future transactions.
While the combined holding company and its shareholders will benefit from
the increased size and strength and the diversification of assets, liabilities
and revenue sources resulting from the ownership of several banks having
different geographical markets, the separate corporate identities of the
subsidiary banks will be maintained so long as it is advantageous to do so. As
a result, each bank will be able to maintain its regional market
identification and its inherent advantage, in competing with larger financial
institutions, of greater flexibility in tailoring its services to respond to
the particular needs of the communities it serves.
Preliminary Considerations
On April 7, 1998, Joseph E. O'Dell broached to Mr. Dahlmann the possibility
of a potential merger of Southwest with and into First Commonwealth. After the
meeting, Mr. O'Dell delivered a preliminary outline for discussion.
29
<PAGE>
At the meeting of Southwest's Board of Directors on April 21, 1998, Mr.
Dahlmann reviewed the preliminary discussion outline with the Board. The Board
discussed a merger as an alternative to remaining independent. The Board
suggested that Mr. Dahlmann and the Executive Committee discuss the
possibility of a merger with First Commonwealth, and report back to the full
Board of Directors at its next regularly scheduled monthly meeting or at an
earlier special meeting, if appropriate.
The Executive Committee met on April 25, 1998, to discuss the preliminary
outline, and to determine Southwest's response. The Executive Committee
discussed the range of exchange values and the participation of Southwest's
officers and directors in the combined entity. The Executive Committee also
felt that it was advisable for its members to meet on an informal basis with
the senior management of First Commonwealth, and Mr. Dahlmann was asked to
arrange such a meeting.
The informal meeting of the members of the Southwest Executive Committee
(except for one member who was unavailable) and senior executives of First
Commonwealth occurred on April 29. At the meeting, First Commonwealth
discussed its views of creating long-term shareholder value and responded to
questions from Southwest's representatives.
The Executive Committee of Southwest next met on May 11, 1998, at which time
Mr. Dahlmann reported on his conversations with Mr. O'Dell. First Commonwealth
was willing to discuss the exchange ratio, and issues involving the
representation of the Southwest directors on the First Commonwealth Board of
Directors.
While discussions with First Commonwealth were promising, and while the
informational session between the members of the Executive Committee and the
senior executives of First Commonwealth had gone well, it was determined to
retain Danielson Associates, Inc. ("Danielson") as Southwest's financial
advisor and investment banker. Danielson's engagement would be twofold: first,
to determine if the merger of Southwest with and into any institution was in
the best interest of Southwest's shareholders; second, if it was determined
that such a merger was in the best interest of the shareholders of Southwest,
Danielson would advise Southwest regarding such a merger.
On May 15, 1998, the Executive Committee met to hear the initial
presentation by Danielson. The first portion of the Danielson report addressed
the primary basic decision of whether Southwest should remain independent or
seek a merger partner. Danielson reported that (i) given the value represented
by the First Commonwealth proposal, (ii) the competitive and pricing pressures
on traditional banking products, and (iii) the cost and time involved in
implementing Southwest's strategic plan to increase income from non-
traditional banking revenue sources, it appeared that the best way in which to
increase Southwest shareholder value was to consider a merger.
Danielson also felt that given Southwest's strong market presence in
Westmoreland County, Southwest would represent an attractive merger candidate.
Danielson then presented what, in its opinion, was the universe of potential
merger partners, some of which, in Danielson's opinion, were based on
Danielson's experience and prior discussions not related to Southwest, would
have a high probability of being interested, others of which would have a
moderate probability of being interested, and others of which would have
little or no probability of being interested. Danielson also analyzed these
candidates on their respective ability to pay fair value to Southwest
shareholders.
On the basis of this report and the ensuing discussion, the list of
potential merger partners was reduced to four institutions, including First
Commonwealth, each of which had a perceived high or at least moderate level of
interest and an ability to pay fair value. Danielson was instructed to prepare
a detailed analysis on each of the four potential merger partners.
At the meeting of Southwest's Board on May 19, 1998, Mr. Dahlmann reported
on the activities of the Executive Committee. The Executive Committee had
determined that the possibility of a merger seemed to be
30
<PAGE>
an appropriate alternative for Southwest, its shareholders and its other
constituencies, that First Commonwealth was a viable merger candidate, and
that other potential merger candidates were being assessed by Danielson.
The Executive Committee reconvened on May 21 to receive the report of
Danielson on the four prospective merger partners. The report, reviewed as to
each prospective merger partner, (i) its historical financial performance,
(ii) its ability to pay fair value, (iii) its corporate strategies based on
historical activity and, in certain cases, independent prior discussions with
management, (iv) the value that Southwest would bring to each partner, and (v)
the perceived role that Southwest, its directors, senior executives and staff
would have in a combination with each prospective partner.
On the basis of the report and the ensuing discussion, it was determined
that Danielson and senior Southwest executives would immediately prepare a
confidential information memorandum. The memorandum was to be delivered to
each of the four institutions on June 18th and June 19th with instructions
that responses were required to be delivered to Danielson not later than July
3, 1998.
The Executive Committee next met on July 7, 1998, to receive the report by
Danielson on the response to the confidential information memorandum. One
potential merger partner, the one deemed only moderately likely to respond,
declined to respond. A second potential merger partner responded with an
exchange ratio that was deemed less than warranted, but this potential merger
partner did present an unusual and interesting strategic opportunity. The
third potential merger partner presented a strong financial bid, and offered
proportional board representation, but the ongoing role outlined for Southwest
implied a negative impact on Southwest's employees. First Commonwealth's
response presented a financial bid that was equal to or incrementally better
than any other response. First Commonwealth's response also presented a good
board representation, a strategy that kept Southwest as a separate subsidiary,
and went much further in protecting the jobs of Southwest's employees.
It was determined that in order to ensure that these were the best possible
responses, each of the three potential merger partners would make, Danielson
was directed to contact each of the three institutions which had responded to
see if any would improve their respective bids. Revised responses were due at
noon on Friday, July 10.
The Executive Committee reconvened on July 10 to receive Danielson's final
report. In essence, while each ultimately unsuccessful merger partner did
modify its proposal slightly, neither proposal matched the proposal of First
Commonwealth on either financial terms or, taken as a whole, the role that
Southwest's directors, senior executives and employees would have in the
combined institution.
On the basis of this final report, the Executive Committee authorized Mr.
Dahlmann to tell Mr. O'Dell that, subject to First Commonwealth agreeing to
make available an additional seat on the First Commonwealth Executive
Committee, Southwest was willing to immediately begin to work upon a
definitive merger agreement and related stock option. In a telephone
conversation which occurred immediately after the Executive Committee meeting,
Mr. O'Dell agreed to the additional seat on the First Commonwealth Executive
Committee.
Drafts of the Merger Agreement and Stock Option Agreement were presented to
E. James Trimarchi, Chairman of the Board, and Messrs. O'Dell and Tomb of
First Commonwealth and to Donald A. Lawry and Mr. Dahlmann of Southwest in the
afternoon of Monday, July 13. Final issues were negotiated on Tuesday, July
14. The Merger Agreement and the Stock Option Agreement were approved by the
Board of First Commonwealth on the afternoon of July 14 at First
Commonwealth's regularly scheduled board meeting. The Merger Agreement and
Stock Option Agreement were approved by Southwest's Board of Directors at a
special meeting on Wednesday, July 15. Public announcement of the execution of
the Merger Agreement and the Stock Option Agreement were made after the close
of business on Wednesday, July 15.
The Exchange Ratio was the result of arms-length bargaining by
representatives of First Commonwealth and Southwest.
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Reasons for the Merger; Recommendations of the Boards of Directors
The Boards of Directors of First Commonwealth and Southwest believe that the
Merger represents a unique opportunity to create a strong regional community
bank based Pennsylvania financial services organization. Following the Merger,
the combined company will also have a substantially larger capital base
providing enhanced flexibility for future operations and a significantly
expanded retail customer base with higher customer penetration.
In addition, although no assurances can be given that any specific level of
expense savings will be achieved or as to the timing thereof, the managements
of First Commonwealth and Southwest have identified potential annual pretax
expense savings and revenue enhancements of $6.6 million expected to be
achieved by consolidating certain operations, facilities and business lines
and eliminating redundant costs. There can, however, be no assurance that the
Continuing Corporation will be able to achieve these anticipated expense
savings within the time periods contemplated or otherwise. See "Post Merger
Operations" and "Pro Forma Combined Financial Information."
In determining to approve the Merger Agreement, the Boards of Directors of
each of First Commonwealth and Southwest also considered, among others, the
following factors:
(i) The Financial and Other Terms of the Merger Agreement. The Boards of
Directors of each of First Commonwealth and Southwest considered the terms
of the Merger Agreement and the transactions contemplated thereby,
including the execution and delivery of the Stock Option Agreement. Each
Board took into account the historical trading ranges for First
Commonwealth Common Stock and Southwest Common Stock and the Exchange
Ratio. The Southwest Board noted, in particular, that the Exchange Ratio
reflected a 75.66% premium to the market price for the shareholders of
Southwest Common Stock based on the closing prices of Southwest Common
Stock and First Commonwealth Common Stock, respectively, on July 14, 1998.
Both Boards also took into account the premium to book value and the
multiple of earnings implied by the Exchange Ratio, the potential impact of
the Merger on the price of, First Commonwealth Common Stock over the short-
and medium-term and the resulting relative interests of Southwest and First
Commonwealth shareholders in the equity of the combined company. The
Southwest Board considered the increase in dividends to Southwest's
shareholders and the potential for increased earnings and book value per
share for shareholders of Southwest. The First Commonwealth Board
considered the anticipated cost savings and revenue enhancements, which
were expected to be accretive to First Commonwealth's earnings per share.
Both Boards were advised, and considered, that under the Merger Agreement,
Southwest would have the right to terminate the Merger Agreement in the
event of a specified significant decline in the price of First Commonwealth
Common Stock prior to the completion of the Merger, but that First
Commonwealth would then have the right to elect to increase the Exchange
Ratio as specified in the Merger Agreement. With respect to the Stock
Option Agreement, the Southwest Board considered the fact that First
Commonwealth was unwilling to enter into a transaction with Southwest
absent the Stock Option Agreement, as well as the fact that Southwest was
granting the Stock Option in order to increase the likelihood that the
transaction would be completed. Both Boards also took into account that the
existence of such option and certain other provisions in the Merger
Agreement might discourage third parties from seeking to acquire Southwest
prior to the Merger, and might also preclude any third party from being
able to effect a merger with Southwest which would qualify for pooling of
interests accounting treatment. After considering the foregoing factors,
both Boards determined that entering into the Stock Option Agreement was in
the best interests of their respective companies. Under the PBCL, a board
of directors, in exercising its fiduciary duties, is not required to act
solely because of the effect such action may have on a potential
acquisition. See"--Termination; Possible Exchange Ratio Increase" and "--
Stock Option Agreement."
(ii) Advice of Financial Advisors and Fairness Opinion. Each Board
considered advice received from its financial advisor at their respective
Board meetings and reviewed the detailed financial analyses, pro forma
results and other information presented either by such advisors or by
senior executives of the respective party including, in the case of the
Southwest Board, the opinion of Danielson that the Exchange
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Ratio was fair, from a financial point of view, to its shareholders. For a
discussion of the Danielson opinion, including a summary of the procedures
followed, the matters considered, the scope of the review undertaken and
the assumptions made with respect thereto by each such advisor, see "--
Opinion of Southwest's Financial Advisor" below.
(iii) Certain Financial and Other Information. Each Board analyzed
information with respect to, among other things, the historical financial
results of the other party and the projected financial results provided by
the other party's management and reviewed information with respect to the
other party's business, operations, financial condition and future
prospects. Each Board also considered, in particular, the other party's
approach to risk management and its capital position, asset quality,
management strength and strategic direction, as well as relative strengths
and weaknesses of the other party's businesses.
(iv) Due Diligence Review. Each Board considered the results of the due
diligence review conducted by its management and advisors, including, among
other things, a review of the other party's credit policies, asset quality,
the adequacy of its loan loss reserves and its interest rate risk profile.
(v) The Tax and Accounting Treatment of the Transaction. Each Board
considered that the Merger is expected to be tax-free (other than with
respect to cash paid in lieu of fractional shares) to shareholders for
federal income tax purposes and to be accounted for under the pooling of
interests method of accounting for business combinations. See "--Certain
Federal Income Tax Consequences" and "--Accounting Treatment."
(vi) Regulatory Approvals. Each Board considered the nature of, and
likelihood of obtaining, the regulatory approvals that would be required
with respect to the Merger. See "--Regulatory Approvals Required."
(vii) Operating Environment. Each Board took into account the current and
prospective economic and competitive environment facing the financial
services industry generally and each of Southwest and First Commonwealth in
particular, and considered the increasing importance of size and market
share as key indicators of shareholder value and the ability of larger
institutions to invest in technology and leverage fixed costs over larger
markets. Each Board also considered the changing legal environment for
banking and financial services.
The First Commonwealth Board also considered the impact of the proposed
Merger on First Commonwealth's depositors, employees, customers and the
communities it serves.
The Southwest Board also considered the following factors of relevance to
Southwest and its shareholders:
(i) Continuity of Management. The Southwest Board considered the facts
that (i) Mr. Dahlmann would be elected or appointed Vice Chairman of First
Commonwealth, with duties, operational authority and reporting lines
consistent with such title, (ii) Mr. Dahlmann would continue as President
and Chief Executive Officer of Southwest Bank, (iii) Mr. Dahlmann and four
other members of the Southwest Board would be elected or appointed members
of the First Commonwealth Board, and (iv) Mr. Dahlmann and one of such
other Southwest Board members would become members of the Executive
Committee of the First Commonwealth Board following completion of the
Merger. The Southwest Board believed that these continuing roles would
enable Southwest's Board and management to have input in decisions
concerning the future course of the combined company, job loss and the
impact of future decisions on Southwest's employees and customers and the
communities served by Southwest.
(ii) Impact on Southwest Constituencies. The Southwest Board considered
(a) the possible negative impact the Merger would have on the various
constituencies served by Southwest, including potential job loss and the
economic effect of the Merger on the communities served by Southwest, and
(b) the provisions of the Merger Agreement designed to mitigate these
effects, including provisions of the Merger Agreement
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concerning employee retention and the present intention of First
Commonwealth (i) to maintain a substantial and prominent presence in the
Westmoreland County and northeastern Allegheny County market and (ii) to
continue for at least two years after the Merger the separate existence of
Southwest Bank as a subsidiary. The Southwest Board took into account that
the combined entity would be able to offer a more extensive range of
products and banking services to Southwest's customers.
(iii) Alternatives to the Merger Agreement. The Southwest Board
considered the effect on Southwest's depositors, employees, customers and
the communities it serves of Southwest continuing as a stand-alone entity
or combining with other potential merger partners, compared to the effect
of its combining with First Commonwealth pursuant to the proposed Merger
Agreement, and determined that the Merger with First Commonwealth presented
the best opportunity for achieving Southwest's long-term strategic
objectives.
The foregoing discussion of the information and factors considered by each
Board of Directors is not intended to be exhaustive but includes all material
factors considered by each such Board. In making its decision, each Board
necessarily relied on estimates and other forward looking information on the
possible benefits of the Merger. There can be no assurance that such benefits
can be achieved. In reaching its determination to approve the Merger
Agreement, neither Board assigned any relative or specific weights to the
various factors considered by it nor did either Board specifically
characterize any factor as positive or negative (except as described above),
and individual directors may have given differing weights to different factors
and may have viewed certain factors more positively or negatively than others.
After considering the Merger Agreement and the transactions contemplated
thereby, and after considering, among other things, the matters discussed
above, the Board of Directors of each of First Commonwealth and Southwest, by
the unanimous vote of all directors present, approved the Merger Agreement,
the Stock Option Agreement and the transactions contemplated thereby as being
in the best interests of its respective shareholders.
FOR THE REASONS DESCRIBED ABOVE, THE BOARDS OF DIRECTORS OF EACH OF FIRST
COMMONWEALTH AND SOUTHWEST, BY THE UNANIMOUS VOTE OF ALL DIRECTORS PRESENT,
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND
RECOMMENDED THAT ITS SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
The First Commonwealth director who was absent from the meeting of the Board
of Directors of First Commonwealth at which such vote was taken has
subsequently indicated his approval of the Merger Agreement.
Financial Advisors
Role of First Commonwealth's Financial Advisor. Keefe Bruyette has been
engaged to advise First Commonwealth generally on corporate finance issues,
including capital markets and merger activities and did advise First
Commonwealth regarding the Merger; however, Keefe Bruyette was not engaged to
render, and did not render, any report or fairness or other opinion in
connection with the Merger. Pursuant to its continuing engagement as an
advisor, Keefe Bruyette provided advice to First Commonwealth's management and
board regarding financial institution mergers and recent developments in the
industry, as well as information and advice to assist in evaluating Southwest
as a potential merger partner.
Keefe Bruyette has not filed a written consent with the Commission relating
to the inclusion of the references to Keefe Bruyette in the Registration
Statement in which this Proxy Statement/Prospectus is included because Keefe
Bruyette has not acted with respect to any part of such Registration Statement
as an expert within the meaning of the term "expert" as used in the Securities
Act or the rules and regulations thereunder.
Opinion of Southwest's Financial Advisor. Southwest retained Danielson
Associates Inc. ("Danielson") to advise the Southwest Board of Directors as to
its "fair" sale value and the fairness to its shareholders of the financial
terms of the offer to acquire Southwest. Danielson is regularly engaged in the
valuation of banks, bank
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holding companies, and thrifts in the connection with mergers, acquisitions,
and other securities transactions; and has knowledge of, and experience with,
the Pennsylvania banking markets and banking organizations operating in those
markets. Danielson was selected by Southwest because of its knowledge of,
expertise with, and reputation in the financial services industry.
In such capacity, Danielson reviewed the Merger Agreement with respect to
the pricing and other terms and conditions of the Merger, but the decision as
to accepting the offer was ultimately made by the Board of Directors of
Southwest. Danielson rendered its written opinion to the Southwest Board of
Directors at the meeting of the Board of Directors on July 15, 1998, that as
of the date of such opinion, the financial terms of the First Commonwealth
offer were "fair" to Southwest and its shareholders. No limitations were
imposed by the Southwest Board of Directors upon Danielson with respect to the
investigation made or procedures followed by it in arriving at its opinion.
Danielson has confirmed its July 15, 1998, written opinion by delivery of its
written opinion dated as of the date of this Proxy Statement/Prospectus.
In arriving at its opinion, Danielson (a) reviewed certain business and
financial information relating to Southwest and First Commonwealth, including
annual reports for the fiscal year ended December 31, 1997, and call report
data from 1989 to 1997 including quarterly reports for 1998; (b) discussed the
past and current operations, financial condition and prospects of Southwest
with its senior executives; (c) analyzed the pro forma impact of the merger on
First Commonwealth's earnings per share, capitalization, and financial ratios;
(d) reviewed the reported prices and trading activity for the Southwest and
the First Commonwealth Common Stock and compared them to similar bank holding
companies; (e) reviewed and compared the financial terms, to the extent
publicly available, with comparable transactions; (f) reviewed the Merger
Agreement and certain related documents; and (g) considered such other factors
as were deemed appropriate.
Danielson did not obtain any independent appraisal of assets or liabilities
of Southwest or First Commonwealth or their respective subsidiaries. Further,
Danielson did not independently verify the information provided by Southwest
or First Commonwealth and assumed the accuracy and completeness of all such
information.
In arriving at its opinion, Danielson performed a variety of financial
analyses. Danielson believes that its analyses must be considered as a whole
and that consideration of portions of such analyses and the factors considered
therein, without considering all the factors and analyses, could create an
incomplete view of the analyses and the process underlying Danielson's
opinion. The preparation of a fairness opinion is a complex process involving
subjective judgements and is not necessarily susceptible to partial analysis
and summary description.
In its analyses, Danielson made certain assumptions with respect to industry
performance, business and economic conditions, and other matters, many of
which were beyond Southwest's or First Commonwealth's control. Any estimates
contained in Danielson's analyses are not necessarily indicative of the future
results of value, which may be significantly more or less favorable than such
estimates. Estimates of values of companies do not purport to be appraisals or
necessarily reflect the prices at which companies or their securities may
actually be sold.
The following is a summary of selected analyses considered by Danielson in
connection with its opinion letter.
Pro Forma Merger Analyses. Danielson analyzed the changes in the amount
of earnings and book value represented by the receipt of about $267.5
million at the time of the Merger Agreement for all of the outstanding
shares of Southwest Common Stock, which will be paid in First Commonwealth
common stock. The analysis evaluated, among other things, possible dilution
in earnings and capital per share for First Commonwealth Common Stock.
Comparable Companies. Danielson compared Southwest's (a) tangible capital
of 11.21% of assets as of March 31, 1998, (b) .72% of assets non-performing
as of March 31, 1998, and (c) net operating income
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of 2.13% of average assets for the trailing twelve month period ending
March 31, 1998, with the medians for selected Pennsylvania banks which
Danielson deemed comparable. These banks included BT Financial Corporation,
First Commonwealth, First Western Bancorp, Inc., and S&T Bancorp, Inc.
Their medians were (a) tangible capital of 9.18% of assets, (b) .49% of
assets non-performing, and (c) net operating income of 2.02% of average
assets.
Danielson also compared First Commonwealth's (a) stock price as of July
13, 1998 of 21.7 times earnings and 244% of book, (b) dividend yield based
on trailing four quarters as of March 31, 1998 and stock price as of July
13, 1998 of 2.90%, (c) tangible capital as of March 31, 1998 of 8.35% of
assets, (d) non-performing assets as of March 31, 1998 equal to .74% of
total assets, (e) return on average assets during the trailing four
quarters ended March 31, 1998 of 1.09% and (f) return on average equity
during the same period of 11.27%, with the medians for selected banks and
bank holding companies that Danielson deemed to be comparable to First
Commonwealth. The selected institutions included BT Financial Corporation,
F.N.B. Corporation, First Western Bancorp, Inc., Fulton Financial
Corporation, Keystone Financial, Inc., Omega Financial Corporation, S&T
Bancorp, Inc., Susquehanna Bancshares, Inc., United Bankshares, Inc.,
USBANCORP, Inc. and WesBanco, Inc. The comparable medians were (a) stock
price of 19.8 times earnings and 236% of book, (b) dividend yield of 2.36%,
(c) tangible capital of 9.05% of assets, (d) .68% of assets non-performing,
(e) return on average assets of 1.39% and (f) return on average equity of
14.26%. Danielson also compared other income, expense, and balance sheet
information of such companies with similar information about First
Commonwealth.
Comparable Transaction Analysis. Danielson compared the consideration to
be paid in the merger to the latest twelve months earnings and equity
capital of Southwest with earnings and capital multiples paid in
acquisitions of banks in Kentucky, Maryland, Ohio, Pennsylvania and West
Virginia through the opinion date. Of these, the most applicable recent
transactions included Fulton/Keystone Heritage, Citizens/Century,
WesBanco/Commercial, and One Valley/Summit. At the time Danielson made its
analysis, the consideration to be paid in the merger was 321% of
Southwest's March 31, 1998 book value and 27.4 (adjusted for nonrecurring
items and a normalized provision) times Southwest's earnings for the
trailing four quarters as of March 31, 1998. This compares to the median
multiples of 270% of book value and 26.4 times earnings for the comparable
acquisitions.
Other Analysis. In addition to performing the analyses summarized above,
Danielson also considered the general market for bank and thrift mergers,
the historical financial performance of Southwest and First Commonwealth,
the deposit market shares of both banks, and the general economic
conditions and prospects of those banks.
No company or transaction used in this composite analysis is identical to
Southwest or First Commonwealth. Accordingly, an analysis of the results of
the foregoing is not mathematical; rather it involves complex consideration
and judgements concerning differences in financial and operating
characteristics of the companies and other factors that could affect the
public trading values of the company or companies to which they are being
compared.
THE FULL TEXT OF THE WRITTEN OPINION OF DANIELSON TO THE SOUTHWEST BOARD OF
DIRECTORS, DATED AS OF THE DATE OF THIS PROXY STATEMENT/PROSPECTUS, WHICH SETS
FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS, IF ANY, ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS ANNEX
III, AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF SHARES OF SOUTHWEST
COMMON STOCK ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY. THE DANIELSON
OPINION DOES NOT CONSTITUTE RECOMMENDATIONS TO ANY HOLDER OF SOUTHWEST COMMON
STOCK AS TO HOW TO VOTE AT THE SOUTHWEST SPECIAL MEETING. THE SUMMARY OF THE
DANIELSON OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF THE OPINION ATTACHED AS ANNEX III HERETO.
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In connection with its opinion dated as of the date of this Proxy
Statement/Prospectus, Danielson confirmed the appropriateness of its reliance
on the analysis used to render its opinion on July 15, 1998, by performing
certain procedures to update certain of such analysis and by reviewing the
assumptions on which such analysis was based and the factors considered in
connection therewith.
Southwest believes (i) that the historical financial information provided by
it to Danielson in connection with Danielson's analysis was accurate and
complete in all material respects, (ii) that the financial forecasts provided
by it to Danielson in connection with Danielson's analysis were reasonably
prepared and reflected the best currently available estimates and judgments of
the management of Southwest, and (iii) that Danielson's reliance on such
financial information and financial forecasts was reasonable. However, as
discussed above, Danielson's forecasts were based on numerous variables and
assumptions that are inherently uncertain and may be beyond the control of
management, and, accordingly, actual results could vary significantly from
those set forth in such forecasts. In addition, although Southwest's Board of
Directors carefully considered and discussed the presentations made to it by
Danielson (see "--Reasons for the Merger; Recommendations of the Boards of
Directors"), the Southwest Board relied upon the professional competence of
Danielson in preparing such analysis and fairness opinion, and accordingly did
not undertake to independently review the specific methodologies or confirm
the specific assumptions utilized by Danielson in reaching its determination
as to the fairness of the Exchange Ratio.
Danielson has filed a written consent with the Commission relating to the
inclusion of its fairness opinion and the references to such opinion and to
such firm in the Registration Statement in which this Proxy
Statement/Prospectus is included. In giving such consent, Danielson did not
admit that it comes within the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations thereunder
nor did it admit that it was an expert with respect to any part of such
Registration Statement within the meaning of the term "expert" as used in the
Securities Act or the rules and regulations thereunder.
As described above (see "Background of the Merger"), the presentation of
Danielson to the Southwest Board of Directors was only one of a number of
factors taken into consideration by the Southwest Board of Directors in making
its determination to approve the Merger Agreement. In addition, the terms of
the Merger, including the Exchange Ratio, were determined through negotiations
between Southwest and First Commonwealth and were approved by the Southwest
Board of Directors. The decision to enter into the Merger Agreement and to
accept the Exchange Ratio was solely that of the Southwest Board of Directors.
Pursuant to letter agreement (the "Engagement Letter"), Southwest engaged
Danielson to provide an opinion with respect to the Merger. Pursuant to the
terms of the Engagement Letter, Southwest has agreed to pay Danielson a fee
equal to .50% of the total transaction price (i.e., approximately $1.1
million). One-half of such fee is payable at the time the Merger is completed.
In addition, Southwest has agreed to reimburse Danielson for its reasonable
out-of-pocket expenses, and to indemnify it and certain related persons
against certain liabilities, including certain liabilities under the federal
securities laws, arising out of its engagement and related matters.
Structure of the Merger
Subject to the terms and conditions of the Merger Agreement and in
accordance with the PBCL, at the Effective Time, Southwest will merge with and
into First Commonwealth. First Commonwealth will be the Continuing Corporation
in the Merger, and will continue its corporate existence under Pennsylvania
law under the name "First Commonwealth Financial Corporation." At the
Effective Time, the separate corporate existence of Southwest will terminate.
The First Commonwealth Articles of Incorporation, as in effect immediately
prior to the Effective Time, will be the Articles of Incorporation of the
Continuing Corporation, and the By-Laws of First Commonwealth, as in effect
immediately prior to the Effective Time, will be the By-Laws of the Continuing
Corporation.
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Merger Consideration
Upon consummation of the Merger, except as described below, each outstanding
share of Southwest Common Stock, other than shares held in Southwest's
treasury or held by First Commonwealth or any wholly-owned subsidiary of First
Commonwealth or Southwest (except in both cases for shares held in trust,
managed, custodial or nominee accounts and the like, or held by mutual funds
for which a subsidiary of First Commonwealth or Southwest acts as investment
advisor that, in any such case, are beneficially owned by third parties
("Trust Account Shares") and shares acquired in respect of debts previously
contracted ("DPC Shares")), will be automatically converted into 2.9 fully
paid and non-assessable shares of First Commonwealth Common Stock (except that
cash will be paid in lieu of fractional shares as described under "--
Conversion of Shares; Procedures for Exchange of Certificates; Fractional
Shares" below), subject to possible increase in certain limited circumstances.
See "--Termination; Possible Exchange Ratio Increase" below.
Any shares of Southwest Common Stock owned immediately prior to the
Effective Time by First Commonwealth, Southwest or their wholly-owned
subsidiaries (other than Trust Account Shares and DPC Shares) will be
cancelled. All shares of First Commonwealth Common Stock owned immediately
prior to the Effective Time by Southwest (other than Trust Account Shares and
DPC Shares) will become treasury stock of First Commonwealth. Southwest owns
no First Commonwealth Common Stock, and First Commonwealth owns no Southwest
Common Stock.
The Exchange Ratio was determined through arm's-length negotiations between
First Commonwealth and Southwest.
Effective Time
The Effective Time will be the time of the filing of Articles of Merger with
the Secretary of the Commonwealth of Pennsylvania or such later time as is
specified in such Articles of Merger. The closing of the Merger will occur on
the first day which is at least two business days after satisfaction or waiver
(subject to applicable law) of the conditions to consummation of the Merger
set forth in the Merger Agreement (excluding conditions that, by their terms,
cannot be satisfied until the date of closing) unless another date is agreed
to in writing by Southwest and First Commonwealth. The Merger Agreement may be
terminated by either party if, among other reasons, the Merger shall not have
been consummated on or before November 30, 1999. See "--Conditions to the
Consummation of the Merger" and "--Termination; Possible Exchange Ratio
Increase" below.
Conversion of Shares; Procedures for Exchange of Certificates; Fractional
Shares
The conversion of Southwest Common Stock into First Commonwealth Common
Stock will occur automatically at the Effective Time.
As soon as practicable after the Effective Time, The Bank of New York, or
another bank designated by First Commonwealth and reasonably acceptable to
Southwest, in its capacity as Exchange Agent (the "Exchange Agent"), will send
a transmittal form to each former Southwest shareholder. The transmittal form
will contain instructions with respect to the surrender of certificates
previously representing Southwest Common Stock to be exchanged for First
Commonwealth Common Stock.
SOUTHWEST SHAREHOLDERS SHOULD NOT FORWARD SOUTHWEST STOCK CERTIFICATES TO
THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL FORMS. SOUTHWEST
SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
After the Effective Time, each certificate that previously represented
shares of Southwest Common Stock will represent only the First Commonwealth
Common Stock into which such shares were converted in the Merger and the right
to receive cash in lieu of fractional shares of First Commonwealth Common
Stock as described below.
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Holders of certificates previously representing Southwest Common Stock will
not be paid dividends or distributions declared or made after the 30th day
following the Effective Time on the First Commonwealth Common Stock into which
such shares have been converted, and will not be paid cash in lieu of
fractional shares of First Commonwealth Common Stock, until such certificates
are surrendered to the Exchange Agent for exchange. When such certificates are
surrendered, any unpaid dividends and any cash in lieu of fractional shares of
First Commonwealth Common Stock payable as described below will be paid
without interest.
For a period of ninety (90) days after the Effective Time, holders of record
of certificates previously representing shares of Southwest Common Stock will
be entitled to vote the number of whole shares of First Commonwealth Common
Stock into which their shares of Southwest Common Stock were converted in the
Merger, notwithstanding that such certificates shall not have been exchanged
for certificates evidencing First Commonwealth Common Stock.
No fractional shares of First Commonwealth Common Stock will be issued to
any Southwest shareholder upon surrender of certificates previously
representing Southwest Common Stock. For each fractional share that would
otherwise be issued, First Commonwealth will pay by check an amount equal to
the product obtained by multiplying the fractional share interest to which
such holder would otherwise be entitled by the average of the closing prices
for a share of First Commonwealth Common Stock on the NYSE Tape for the ten
NYSE trading days immediately preceding the Effective Time.
Conduct of Business Pending Merger and Related Matters
Pursuant to the Merger Agreement, each of First Commonwealth and Southwest
has made certain covenants, with respect to itself and its subsidiaries'
relating to the conduct of business pending consummation of the Merger. Among
other things, each has agreed (except as otherwise contemplated by the Merger
Agreement or with the written consent of the other party) not to do any of the
following:
(i) conduct its business other than in the ordinary and usual course;
(ii) issue, sell or otherwise permit to become outstanding any additional
shares of capital stock or give any person the right to acquire any such
shares, other than (a) pursuant to the exercise of stock options
outstanding on July 15, 1998, (b) in connection with acquisitions of
business otherwise permitted pending the Merger, (c) in the case of First
Commonwealth, pursuant to employee benefit plans in effect on July 15,
1998, or (d) under the Stock Option Agreement;
(iii) make, declare or pay dividends on shares of its capital stock other
than regular quarterly cash dividends of $.35 per share of Southwest Common
Stock and $.22 per share of First Commonwealth Common Stock, and dividends
by a wholly-owned subsidiary, or redeem or otherwise acquire shares of its
capital stock;
(iv) in the case of Southwest, increase any salaries or employee benefits
or enter into or modify any employee agreements (other than certain
termination agreements contemplated by the Merger Agreement) or benefit
plans, except for certain increases in the ordinary course of business, as
required by law, to satisfy pre-existing contractual obligations or as
otherwise permitted by the Merger Agreement;
(v) dispose of any material assets, business or property or acquire
material business or property of any other entities except that First
Commonwealth may make acquisitions in which the aggregate purchase price
paid does not exceed $10,000,000 or the aggregate number of shares does not
exceed 10% of the number of such shares outstanding on June 30, 1998;
(vi) amend its articles of incorporation or By-laws;
(vii) change its accounting methods;
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(viii) knowingly take any action that (a) would, or is reasonably likely
to, prevent or impede the Merger from qualifying for "pooling of interests"
accounting treatment or as a reorganization within the meaning of Section
368(a) of the Code, or (b) is intended or is reasonably likely to result in
a breach of any representation or warranty, a condition not being satisfied
or a violation of the Stock Option Agreement or of the Merger Agreement; or
(ix) incur any long-term debt other than in the ordinary course.
The Merger Agreement also provides that without the prior written consent of
the other party, neither Southwest nor First Commonwealth will solicit or
encourage inquiries or proposals with respect to, or engage in negotiations
concerning, or provide any confidential information to, or have any
discussions with, any person relating to a Takeover Proposal (as defined in
the Merger Agreement).
Representations and Warranties
The Merger Agreement contains customary mutual representations and
warranties of Southwest and First Commonwealth relating to, among other
things, (a) corporate organization and similar corporate matters and capital
structures, (b) good standing and the authority to carry on business, (c)
shares of capital stock, (d) subsidiaries, (e) corporate power and authority,
(f) the authorization, execution and delivery of the Merger Agreement and the
Stock Option Agreement, (g) the absence of violations of or defaults under
applicable laws and such party's articles of incorporation or by-laws, (h)
documents filed by such party with the Commission and the accuracy of the
information included therein, (i) the absence of litigation, (j) compliance
with applicable laws and certain bank regulatory matters, (k) the absence of
defaults under various contracts and the possession of good title to various
properties, (l) brokers' and finders' fees, (m) retirement and other employee
plans and matters under the Employee Retirement Income Security Act of 1974,
as amended, (n) the absence of labor unions and the status of labor relations,
(o) directors' and officers' liability insurance, (p) the inapplicability of
certain takeover laws, including Chapter 25 of the PBCL, (q) required
shareholder votes, (r) environmental matters, (s) the filing of tax returns
and payment of taxes, (t) the absence of knowledge of any reason why the
Merger would not qualify for a "pooling of interests" accounting or as a
"reorganization" for purposes of Section 368(a) of the Code and (u) the
conduct of the business in the ordinary course and the absence of certain
changes since December 31, 1997, which would be likely to have a Material
Adverse Effect (as defined in the Merger Agreement). The Merger Agreement
provides that no representation or warranty shall be deemed to be untrue or
incorrect as a result of the existence or absence of any fact, if such fact
together with all other facts inconsistent with any such representation or
warranty, is not reasonably likely to have a Material Adverse Effect, except
that certain representations and warranties, including those concerning due
organization, capital structure and the absence of material adverse changes,
must be true and correct, and certain other representations and warranties,
including those concerning subsidiaries, corporate power and authority, the
inapplicability of certain takeover laws, the required vote and the conduct of
the business in the ordinary course, must be true and correct in all material
respects.
Conditions to the Consummation of the Merger
Each party's obligation to effect the Merger is subject to various
conditions which include, in addition to other customary closing conditions,
the following:
(i) approval of the Merger Agreement by the requisite vote of the
shareholders of First Commonwealth and Southwest;
(ii) receipt of all required regulatory approvals without the imposition
of any condition or restriction upon the Continuing Corporation which would
reasonably be expected either (x) to have a Material Adverse Effect after
the Effective Time on the present or prospective consolidated financial
condition, business or operating results of the Continuing Corporation, or
(y) to prevent the parties from realizing a major portion
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of the economic benefits of the Merger that they anticipated at the date of
entering into the Merger Agreement;
(iii) the receipt of any required third party consents;
(iv) no court or agency having taken any action, nor law or regulation
having been enacted or adopted, which prohibits the Merger;
(v) the receipt of letters from the independent accountants of Southwest
and First Commonwealth relating to "pooling of interests" accounting
treatment for the Merger (except that the requirement for a "pooling of
interests" letter at the date of the mailing of this Proxy
Statement/Prospectus, and the requirement for a separate "pooling of
interests" letter from Southwest's accountants have been waived);
(vi) in the case of Southwest, the continued accuracy of the
representations and warranties of First Commonwealth, the performance by
First Commonwealth of all covenants and the delivery by First Commonwealth
of an officers' certificate to such effect;
(vii) in the case of First Commonwealth, the continued accuracy of the
representations and warranties of Southwest, the performance by Southwest
of all covenants and the delivery of an officers' certificate to such
effect; and
(viii) the receipt by First Commonwealth and Southwest of an opinion from
Tucker Arensberg, P.C., as to certain federal income tax consequences of
the Merger; and
(ix) the shares of First Commonwealth Common Stock issuable in the Merger
having been approved for listing in the NYSE, subject to official notice of
issuance.
The Merger Agreement permits any condition (other than a condition required
in order to comply with applicable law) to be waived by the party benefited
thereby.
Dividends
Each of First Commonwealth and Southwest expects to continue to declare
until the Effective Time their respective regularly scheduled dividends. The
Merger Agreement requires each of First Commonwealth and Southwest to
coordinate with the other the payment of dividends relating to First
Commonwealth Common Stock and Southwest Common Stock with the intent that
holders of First Commonwealth Common Stock and Southwest Common Stock shall
not receive two dividends, or fail to receive one dividend, for any calendar
quarter.
Regulatory Approvals Required
The Merger is subject to the prior approval of the Federal Reserve Board and
the Department of Banking of the Commonwealth of Pennsylvania (the "Department
of Banking"). In addition, aspects of the Merger will require notifications
to, and/or approvals from, certain other federal and state authorities.
The Merger is subject to approval by the Federal Reserve Board under Section
3 of the BHCA. First Commonwealth has filed an application for such approval
with the Federal Reserve Board. Under Section 3 of the BHCA, the Federal
Reserve Board must withhold approval of the Merger if it finds that the
transaction would result in a monopoly or be in furtherance of any combination
or conspiracy to monopolize or attempt to monopolize the business of banking
in any part of the United States. In addition, the Federal Reserve Board may
not approve the Merger if it finds that the effect thereof may be
substantially to lessen competition or to tend to create a monopoly or would
in any other manner be in restraint of trade, unless it finds that any such
anti-competitive effects of the Merger are clearly outweighed in the public
interest by the probable effects of the Merger in meeting the convenience and
needs of the communities to be served. In each case, the Federal Reserve
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Board will also take into consideration the financial and managerial resources
and future prospects of the banking subsidiaries following the transactions.
The Federal Reserve Board has indicated that it will not approve a significant
acquisition unless the resulting institution has sufficient capitalization,
taking into account, among other things, asset quality.
In addition, under the Community Reinvestment Act of 1977, as amended (the
"CRA"), the Federal Reserve Board must take into account the record of
performance of each of First Commonwealth and Southwest in meeting the credit
needs of the entire community, including low and moderate income
neighborhoods, served by each company. As part of the review process, the
Federal Reserve Board frequently receives, in merger transactions, protests
from community groups and others. FCB and Southwest Bank, the subsidiaries of
First Commonwealth and Southwest subject to the CRA, have received either an
"outstanding" or a "satisfactory" CRA rating in their most recent CRA
examinations by their respective federal regulators.
The Federal Reserve Board will furnish notice and a copy of the application
for approval of the Merger to the Office of the Comptroller of the Currency
(the "OCC") and the Federal Deposit Insurance Corporation (the "FDIC"). These
agencies have 30 days to submit their views and recommendations to the Federal
Reserve Board. The Federal Reserve Board is required to hold a public hearing
in the event it receives a written recommendation of disapproval of the
application from any of these agencies within such 30-day period. Furthermore,
the BHCA and Federal Reserve Board regulations require publication of notice
of, and the opportunity for public comment on, the application submitted by
First Commonwealth for approval of the Merger and authorize the Federal
Reserve Board to hold a public hearing in connection therewith if the Federal
Reserve Board determines that such a hearing would be appropriate. Any such
hearing or comments provided by third parties could prolong the period during
which the application is subject to review by the Federal Reserve Board. Under
Section 3 of the BHCA, the Merger may not be consummated for 30 days from the
date of approval by the Federal Reserve Board, during which time the Merger
could be challenged on antitrust grounds. With the approval of the Federal
Reserve Board and the Department of Justice, however, this waiting period may
be reduced to no less than 15 days. The commencement of an antitrust action by
the Justice Department would stay the effectiveness of Federal Reserve Board
approval of the Merger unless a court specifically orders otherwise. In
reviewing the Merger, the Justice Department could analyze the Merger's effect
on competition differently than the Federal Reserve Board, and thus it is
possible that the Justice Department could reach a different conclusion than
the Federal Reserve Board regarding the Merger's competitive effects.
Using the above standards, First Commonwealth and Southwest do not expect
that the Federal Reserve Board or the Justice Department will request that
First Commonwealth and/or Southwest make any divestiture.
The Merger will be subject to the prior approval of the Department of
Banking. Simultaneously with the filing of an application with the Federal
Reserve, First Commonwealth will file a similar application with the
Department of Banking in accordance with Section 115 of the Pennsylvania
Banking Code. The Department of Banking has a period of 60 days within which
to approve or disapprove of the Merger. The factors that the Department of
Banking will consider in determining whether to grant its approval include the
competitive effects of the Merger, the principles of sound banking and the
public interest and the needs of the communities served by First Commonwealth
and Southwest. Information regarding the competitive effects of the Merger is
also being provided to the Attorney General of Pennsylvania.
First Commonwealth's right to exercise its option under the Stock Option
Agreement is also subject to the prior approval of the Federal Reserve Board,
to the extent that the exercise of such option would result in First
Commonwealth owning more than 5% of the outstanding shares of Southwest Common
Stock. In considering whether to approve First Commonwealth's right to
exercise its option, the Federal Reserve Board would generally apply the same
statutory criteria it would apply to its consideration of approval of the
Merger.
There can be no assurance as to whether or when any of the above-described
regulatory approvals required for consummation of the Merger will be obtained
or as to any conditions that may be imposed in connection with the granting of
such approvals. See "--Conditions to the Consummation of the Merger."
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Certain Federal Income Tax Consequences
The following describes the material federal income tax consequences of the
Merger under the Code, assuming that the Merger is consummated as contemplated
herein. This discussion is based on current laws and interpretations thereof,
which are subject to change. The discussion assumes that the Southwest stock
exchanged by each holder in the Merger is held as a capital asset and does not
take account of rules that may apply to holders of Southwest stock ("Southwest
Shareholders") that are subject to special treatment under the Code
(including, without limitation, insurance companies, dealers in securities,
certain retirement plans, financial institutions, tax exempt organizations,
shareholders who acquired shares pursuant to the exercise of an employee stock
option or otherwise as compensation or foreign persons). Also, the discussion
does not address state, local or foreign tax consequences. Consequently each
Southwest Shareholder should consult its own tax advisor as to the specific
tax consequences of the Merger to that shareholder.
Tax Opinion. The obligations of First Commonwealth and of Southwest to
consummate the Merger are subject to the receipt of the opinions of tax
counsel outlined below, unless waived. Neither First Commonwealth nor
Southwest has requested or will request an advance ruling from the Internal
Revenue Service (the "IRS") as to the tax consequences of the Merger.
As of the date of this Proxy Statement/Prospectus, Tucker Arensberg, P.C.,
advised First Commonwealth and Southwest, respectively, that in its opinion,
based on certain customary representations and assumptions referred to in such
opinions, (i) the Merger will be treated for federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the Code and (ii) no
income, gain or loss will be recognized for federal income tax purposes by
Southwest Shareholders upon the exchange in the Merger of shares of Southwest
for shares of First Commonwealth (except to the extent of any cash received in
lieu of fractional shares). In addition, consummation of the Merger is
conditioned upon the receipt by First Commonwealth and Southwest of the
opinion described above dated as of the Closing Date.
Cash Received in Lieu of Fractional Shares. A Southwest Shareholder who
receives cash in the Merger in lieu of a fractional share interest in First
Commonwealth Common Stock will be treated for federal income tax purposes as
receiving such fractional share interest and then redeeming it for cash. Such
a Southwest Shareholder will recognize gain or loss as of the Effective Time
in an amount equal to the difference between the amount of cash received and
the portion of the shareholder's adjusted tax basis in the shares of Southwest
Common Stock allocable to the fractional share interest. Any gain or loss will
be capital gain or loss if the shareholder holds the Southwest Common Stock as
a capital asset at the Effective Time and will be long-term capital gain or
loss if the holding period for the fractional share interest deemed to be
received and then redeemed is more than one year.
Tax Basis and Holding Period of First Commonwealth Common Stock. The tax
basis of the shares of First Commonwealth Common Stock received by the
Southwest Shareholders will be the same as the tax basis of their Southwest
Common Stock exchanged therefor (reduced by any amount allocable to a
fractional share interest for which cash is received). The holding period of
the First Commonwealth Common Stock in the hands of the Southwest Shareholders
will include the holding period of their Southwest Common Stock exchanged
therefor, provided such Southwest Common Stock is held as a capital asset at
the Effective Time.
Accounting Treatment
First Commonwealth's and Southwest's management expect the Merger to be
accounted for under the "pooling of interests" method of accounting. Under
this method of accounting, the recorded assets and liabilities of First
Commonwealth and Southwest will be carried forward to the Continuing
Corporation at their recorded amounts; income of the Continuing Corporation
will include income of First Commonwealth and Southwest for the entire fiscal
year in which the combination occurs; and the reported income of the separate
companies for prior periods will be combined and restated as income of the
Continuing Corporation.
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It is a condition to the consummation of the Merger that each of First
Commonwealth and Southwest shall have received a letter, dated the Closing
Date, from Deloitte & Touche LLP confirming its concurrence with First
Commonwealth's management's and Southwest's management's conclusions,
respectively, as to the appropriateness of pooling of interests accounting for
the Merger as of that date under Accounting Principles Board Opinion No. 16 if
the Merger is consummated in accordance with the Merger Agreement.
Termination; Possible Exchange Ratio Increase
The Merger Agreement may be terminated at any time prior to the Effective
Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, whether before or after approval and adoption of
the Merger Agreement by the shareholders of Southwest or First Commonwealth:
(a) by mutual consent of First Commonwealth and Southwest; (b) by either First
Commonwealth or Southwest if the Merger shall not have been consummated by
November 30, 1999 (except to the extent that the failure of the Merger then to
be consummated arises out of or results from the knowing action or inaction of
the terminating party); or (c) by either First Commonwealth or Southwest if
(i) the consent of the Federal Reserve Board for consummation of the Merger
and the other transactions contemplated by the Merger Agreement shall have
been denied by final action and the time for appeal shall have expired or (ii)
any approval of the shareholders of Southwest or of First Commonwealth
required for the consummation of the Merger shall not have been obtained. The
Merger Agreement may also be terminated at any time prior to (a) the Southwest
Special Meeting, by First Commonwealth, if the Board of Directors of Southwest
fails to recommend to its shareholders the approval of the Merger or withdraws
or modifies or changes such recommendation in a manner adverse to First
Commonwealth, and (b) the First Commonwealth Special Meeting, by Southwest, if
the Board of Directors of First Commonwealth fails to recommend to its
shareholders approval of the Merger or withdraws or modifies or changes such
recommendations in a manner adverse to Southwest.
In addition, the Merger Agreement may be terminated by the Southwest Board
of Directors at its sole option, after the approval of the Federal Reserve
Board is received by First Commonwealth (the "Determination Date") if the
Average Closing Price (i.e., the average closing price of First Commonwealth's
Common Stock for the ten full trading dates ending on the date the Federal
Reserve Board's approval of the Merger) is less than $23.59. This right cannot
be exercised if the Index Price is equal to or less than $407.50 on the
Determination Date unless the Average Closing Price on the Determination Date
is less than $20.64. The Merger Agreement allows First Commonwealth to avoid
termination if it elects, at its sole option, to increase the Exchange Ratio
as set forth in the Merger Agreement and as illustrated below. There can be no
assurance that the Southwest Board of Directors would exercise its right to
terminate the Merger Agreement if a Termination Event (the condition above)
exists, and if the Southwest Board of Directors does elect to so terminate the
Merger Agreement, there can be no assurance that First Commonwealth will elect
to increase the Exchange Ratio as provided in the Merger Agreement and as
illustrated below.
Certain possible effects of the above provisions of the Exchange Ratio may
be illustrated by the following four scenarios:
(i) If the Average Closing Price on the Determination Date is equal to or
greater than $23.59, there would be no Termination Event.
(ii) If the Average Closing Price on the Determination Date is less than
$23.59 and the Index Price is greater than $407.50, there would be a
Termination Event.
(iii) If the Index Price on the Determination Date is equal to or less
than $407.50, and the Average Closing Price is equal to or greater than
$20.64, there is no Termination Event.
(iv) If the Average Closing Price on the Determination Date is less than
$20.64, there would be a Termination Event regardless of the Index Price.
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If either of the scenarios set forth in (ii) or (iv) immediately above
occur, the Southwest Board of Directors could, at its sole option, elect to
terminate the Merger Agreement. If the Board of Directors of Southwest did
elect to terminate the Merger, then First Commonwealth could, at its sole
option, override such election by electing to increase the Exchange Ratio to a
fraction whose numerator is $23.59 multiplied by 2.9 and whose denominator is
the Average Closing Price.
The above scenarios are for illustrative purposes only and are not intended
to, and do not, reflect the value of the First Commonwealth Common Stock that
may actually be received by holders of Southwest Common Stock in the Merger,
nor do they reflect all possible termination/increase scenarios.
Southwest stockholders should be aware that the Average Closing Price on the
Determination Date on which the occurrence of a Termination Event and the
subsequent increase, if any, in the Exchange Ratio may be determined, will be
based on the average of the last sale prices of First Commonwealth Common
Stock during a ten-day period ending on the Determination Date. Accordingly,
because the market price of First Commonwealth Common Stock between the
Determination Date and the Effective Time, as well as on the date certificates
representing shares of First Commonwealth Common Stock are delivered in
exchange for shares of Southwest Common Stock following consummation of the
Merger, will fluctuate and possibly decline, the value of the First
Commonwealth Common Stock actually received by holders of Southwest Common
Stock may be more or less than (i) the Average Closing Price on the
Determination Date, or (ii) the value of the First Commonwealth Common Stock
on the Closing Date resulting from the Exchange Ratio or any possible
adjustment to the Exchange Ratio as illustrated above.
At the close of business on [November 4], 1998, the Index Price was $ .
The Index Price shall mean the market-capitalization weighted average of the
closing prices of the companies in the SNL Bank Index for banks with assets of
$1 billion to $5 billion on the Determination Date as calculated by SNL
Securities L.P.
It is not possible to know whether a Termination Event will occur until
after the Determination Date. The Southwest Board of Directors has made no
decision as to whether it would exercise its right to terminate the Merger
Agreement if there is a Termination Event. In considering whether to exercise
its termination right in such situation, the Southwest Board of Directors
would, consistent with its fiduciary duties, take into account all relevant
facts and circumstances that exist at such time and would consult with its
financial advisors and legal counsel. Approval of the Merger Agreement by the
shareholders of Southwest at the Southwest Special Meeting will confer on the
Southwest Board of Directors the power, consistent with its fiduciary duties,
to elect to consummate the Merger in the event of a Termination Event whether
or not there is any increase in the Exchange Ratio and without any further
action by, or resolicitation of, the shareholders of Southwest. If the
Southwest Board of Directors elects to exercise its termination right,
Southwest must give First Commonwealth prompt notice of that decision during a
ten-day period beginning two days after the Determination Date, but the
Southwest Board of Directors may withdraw such notice, at its sole option, at
any time during such ten-day period. During the five-day period commencing
with receipt of such notice, First Commonwealth has the option, in its sole
discretion, to increase the Exchange Ratio in the manner set forth in the
Merger Agreement and as illustrated above and thereby avoid such termination
of the Merger Agreement. First Commonwealth is under no obligation to increase
the Exchange Ratio, and there can be no assurance that First Commonwealth
would elect to increase the Exchange Ratio if the Southwest Board of Directors
were to exercise its right to terminate the Merger Agreement as set forth
above. Any such decision would be made by First Commonwealth in light of the
circumstances existing at the time First Commonwealth has the opportunity to
make such an election. If First Commonwealth elects to increase the Exchange
Ratio as set forth in the Merger Agreement and as illustrated above, it must
give Southwest prompt notice of that election and such increased Exchange
Ratio, in which case no termination of the Merger Agreement would occur as a
result of a Termination Event.
Although First Commonwealth has the right in the limited circumstances
described above to increase the Exchange Ratio, under no circumstances may the
Exchange Ratio be decreased.
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The foregoing discussion is qualified in its entirety by reference to the
applicable provisions in the Merger Agreement (a copy of which is set forth as
Annex I to this Joint Proxy Statement/Prospectus) relating to possible
increase of the Exchange Ratio as the result of a Termination Event.
In the event of termination of the Merger Agreement by either Southwest or
First Commonwealth, there will be no liability or obligation on the part of
First Commonwealth or Southwest other than the obligation dealing with
confidentiality, and other than any liabilities or damages incurred as a
result of the willful breach by a party of any of its representations,
warranties, covenants or agreements set forth in the Merger Agreement.
Amendment and Waiver
Prior to the Effective Time, any provision of the Merger Agreement may be:
(i) waived by the party benefited by the provision; or (ii) amended or
modified at any time by an agreement in writing among the parties thereto,
approved by their respective Boards of Directors and executed in the same
manner as the Merger Agreement, provided that, after approval by the
shareholders of Southwest, the consideration to be received by the
shareholders of Southwest Common Stock may not thereby be decreased.
Expenses
All costs and expenses incurred in connection with the Merger Agreement, the
Stock Option Agreement and the transactions contemplated thereby shall be paid
by the party incurring such expense, except that First Commonwealth and
Southwest shall share equally the expenses incurred in connection with filing,
printing and mailing this Proxy Statement/Prospectus and First Commonwealth
shall reimburse Southwest for the fees and expenses of its legal counsel.
Effect on Employee Benefit and Stock Plans
Pursuant to the Merger Agreement, First Commonwealth and Southwest have
agreed that all Southwest employees will be entitled to participate in First
Commonwealth's benefit plans on substantially the same terms and conditions as
First Commonwealth employees, and that until such time the plans of Southwest
will remain in effect.
Pursuant to the Merger Agreement, Southwest Bank is entering into employment
contracts with seven executive officers of Southwest Bank, and First
Commonwealth is entering into an employment contract with Mr. Dahlmann. See
"Interests of Certain Persons in the Merger--Employment Agreements" below.
Interests of Certain Persons in the Merger
Certain members of the Boards of Directors and management of First
Commonwealth, Southwest and Southwest Bank may be deemed to have certain
interests in the Merger in addition to their interests generally as
shareholders of First Commonwealth or Southwest, as the case may be. All of
such additional interests are described below, to the extent material, and
except as described below such persons have, to the best knowledge of First
Commonwealth and Southwest, no material interests in the Merger apart from
those of shareholders generally. The First Commonwealth Board of Directors and
the Southwest Board of Directors were each aware of these interests of their
respective directors and officers and considered them, among other matters, in
approving the Merger Agreement and the transactions contemplated thereby.
Indemnification and Board Membership. The Merger Agreement provides that the
Continuing Corporation will maintain all rights of indemnification existing in
favor of the directors, officers and employees of Southwest for six years
after the Effective Time to the full extent that Southwest would have been
permitted under Pennsylvania law and the Southwest Articles of Incorporation
(the "Southwest Charter") and By-laws to indemnify such persons and will cause
to be maintained for six years after the Effective Time directors' and
officers' liability insurance on terms no less favorable than those contained
in policies maintained by Southwest;
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provided that if the annual premium payments for such insurance exceed 250% of
the annual premiums paid as of the date of the Merger Agreement by Southwest,
the Continuing Corporation is required to maintain the maximum coverage
available at an annual premium equal to 250% of Southwest's annual premium.
The Board of Directors of the Continuing Corporation as of the Effective
Time is expected to consist of twenty-four (24) persons comprised of nineteen
(19) current directors of First Commonwealth and five (5) current directors of
Southwest, existing officers of First Commonwealth and Mr. Dahlmann will
become officers of the Continuing Corporation as of the Effective Time, and
certain senior executives of Southwest Bank will enter into employment
contracts with Southwest Bank. See "Management and Operations After the
Merger."
Employment Agreements. Prior to the consummation of the Merger, seven
executive officers of Southwest Bank will have entered into employment
contracts with Southwest Bank.
Stock Option Agreement
General. Concurrently with the execution and delivery of the Merger
Agreement, and as a condition and inducement thereto, First Commonwealth and
Southwest entered into the Stock Option Agreement pursuant to which Southwest
granted First Commonwealth an option to purchase up to 756,185 shares of
Southwest Common Stock (or such greater number of shares of Southwest Common
Stock as shall represent 19.9% of the then outstanding Southwest Common Stock)
at a price per share of $50.75.
The following is a summary of the material provisions of the Stock Option
Agreement, which is attached as Annex II to this Proxy Statement/Prospectus
and is incorporated herein by reference. The following summary is qualified in
its entirety by reference to the Stock Option Agreement.
Exercise of the Option. The option is exercisable, in whole or in part, at
any time or from time to time upon the occurrence of one of the following
events (each a "Purchase Event"), provided that First Commonwealth is not in
material breach of the Merger Agreement, and no injunctive order against the
delivery of shares covered by the relevant option is in effect:
(a) without the prior written consent of First Commonwealth, Southwest
shall have recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than First Commonwealth or any of its subsidiaries),
to effect (i) a merger, consolidation or similar transaction involving
Southwest or Southwest Bank, (ii) the disposition, by sale, lease, exchange
or otherwise, of assets or deposits of the issuer or any of its significant
subsidiaries, representing in either case 15% or more of the consolidated
assets or deposits of the issuer and its subsidiaries, or (iii) the
issuance, sale or other disposition by the issuer of (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing 15% or more of the voting power of Southwest or
Southwest Bank, other than, in each case of (i), (ii) or (iii) (each such
transaction, an "Acquisition Transaction"), any merger, consolidation or
similar transaction involving Southwest or Southwest Bank in which the
voting securities of Southwest outstanding immediately prior to such
transaction equal (by either remaining outstanding or being converted into
the voting securities of the surviving entity of any such transaction) at
least 65% of the combined voting power of the voting securities of
Southwest or surviving entity immediately after such transaction; or
(b) any person (other than First Commonwealth or any of its subsidiaries)
or "group" (as defined under the Exchange Act) shall have acquired
beneficial ownership (as defined in the Exchange Act) or the right to
acquire beneficial ownership of 15% or more of the voting power of
Southwest or Southwest Bank; or
(c) any person (other than First Commonwealth or any of its subsidiaries)
shall have commenced (as defined in the Exchange Act) or filed a
registration statement under the Securities Act with respect to a tender
offer or exchange offer for shares of the common stock of the issuer such
that, upon consummation
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of such offer, such person would have beneficial ownership (as defined
under the Exchange Act) of 15% or more of the then outstanding common stock
of Southwest; or
(d) the holders of common stock of Southwest shall not have approved the
Merger Agreement at the meeting of such shareholders held for the purpose
of voting on the Merger Agreement, such meeting shall not have been held or
shall have been cancelled prior to termination of the Merger Agreement or
the Board of Directors of Southwest shall have withdrawn or modified in a
manner adverse to the grantee the recommendation of such Board of Directors
with respect to the Merger Agreement, in each case after it shall have been
publicly announced that any person (other than First Commonwealth or any
subsidiary of First Commonwealth) shall have (A) made, or publicly
disclosed an intention to make, a proposal, to engage in an Acquisition
Transaction, (B) commenced a tender offer or filed a registration statement
under the Securities Act with respect to an exchange offer or (C) filed an
application (or given a notice), whether in draft or final form, under the
Home Owners' Loan Act, the Bank Merger Act, as amended, the BHCA or the
Change in Bank Control Act of 1978, as amended, for approval to engage in
an Acquisition Transaction.
The right to purchase shares under the Stock Option Agreement will expire
upon the earliest to occur of (x) the Effective Time, (y) termination of the
Merger Agreement prior to the occurrence of a Purchase Event or a Preliminary
Purchase Event (as defined below) or (z) 18 months after the termination of
the Merger Agreement following the occurrence of a Purchase Event or a
Preliminary Purchase Event.
A Preliminary Purchase Event means the occurrence of any of the following
events:
(a) any person (other than First Commonwealth or any of its subsidiaries)
publicly announces a proposal to engage in an Acquisition Transaction;
(b) after any third party proposes to the issuer or its shareholders or
such third party indicates its intention to Southwest to propose an
Acquisition Transaction if the Merger Agreement terminates, Southwest shall
have breached any representation, warranty or covenant in the Merger
Agreement;
(c) any person (other than First Commonwealth or any of its subsidiaries)
files an application or notice with a regulatory authority for approval to
engage in an Acquisition Transaction without the consent of First
Commonwealth; or
(d) prior to the Special Meeting of Southwest, the Board of Directors of
Southwest fails to recommend the Merger to its shareholders or such
recommendation is withdrawn, modified or changed in a manner adverse to
First Commonwealth.
The consummation of a purchase or a repurchase pursuant to the Stock Option
Agreement may be subject to, among other things, obtaining any required
regulatory approvals. The prior approval of the Federal Reserve Board is
required for the acquisition by First Commonwealth of control of more than 5%
(or, in the case of a transferee grantee that is not a bank holding company,
10%) of Southwest's outstanding common stock. Following occurrence of a
Purchase Event, First Commonwealth will have the ability to assign its rights
under the Stock Option Agreement with respect to which it is grantee.
Adjustment of Number of Shares. The number and type of securities subject to
the options and the purchase price of the shares will be adjusted for any
change in Southwest's common stock by reason of a stock dividend, stock split,
recapitalization, combination, exchange of shares or similar transaction, such
that First Commonwealth will receive (upon exercise of the option) the same
number and type of securities as if the option had been exercised immediately
prior to the occurrence of such event (or the record date therefor). The
number of shares of common stock subject to each option will also be adjusted
in the event Southwest issues additional shares of common stock, such that the
number of shares of common stock subject to the option represents 19.9% of
Southwest's common stock then outstanding, without giving effect to shares
subject to or issued pursuant to the option.
48
<PAGE>
Substitute Option. In the event Southwest enters into any agreement to (A)
merge or consolidate with any person other than First Commonwealth or one of
its subsidiaries such that Southwest is not the surviving corporation, (B)
permit any person, other than First Commonwealth or one of its subsidiaries,
to merge or consolidate with Southwest and Southwest shall be the surviving
corporation but, in connection therewith, Southwest's common stock is
exchanged for any other securities or other property or the outstanding shares
of Southwest's common stock prior to such merger or consolidation represent
less than 50% of the outstanding shares and share equivalents of the merged
company following such merger or consolidation, or (C) sell or otherwise
transfer all or substantially all of its assets or deposits to a person other
than First Commonwealth or one of its subsidiaries, the option will be
converted into an option (the "Substitute Option") to purchase securities of
either the acquiring person, a person that controls the acquiring person or
Southwest (if Southwest is the surviving entity), in all cases at the option
of First Commonwealth. The Substitute Option would be subject to immediate
repurchase by Southwest at the request of First Commonwealth, at prices, and
subject to conditions, specified in the Stock Option Agreement.
Repurchase at the Option of First Commonwealth. First Commonwealth has the
right to require Southwest to repurchase the option and any shares acquired by
exercise of the option during the 18-month period after (a) any person (other
than First Commonwealth or any of its subsidiaries) or group (as defined in
the Exchange Act) shall have acquired beneficial ownership (as defined in the
Exchange Act) or the right to acquire beneficial ownership of at least 25% of
the outstanding common stock of Southwest, or (b) Southwest shall have entered
into an agreement entitling First Commonwealth to exercise a Substitute Option
as described above (each a "Repurchase Event"), or during the 30 business days
following the failure to obtain necessary regulatory approval of the purchase
of shares pursuant to the option. Such repurchase will be at an aggregate
price (the "Repurchase Price") equal to the sum of (i) the aggregate exercise
price paid by First Commonwealth for any shares of Southwest's common stock
acquired pursuant to the option with respect to which First Commonwealth then
has beneficial ownership; (ii) the excess, if any, of (x) the Applicable Price
(as defined below) for each share of Southwest's common stock over (y) the
purchase price (subject to adjustment), multiplied by the number of shares of
Southwest's common stock with respect to which the option has not been
exercised; and (iii) the excess, if any, of the Applicable Price over the
purchase price paid by First Commonwealth for each share of Southwest's common
stock with respect to which the option has been exercised and with respect to
which First Commonwealth then has beneficial ownership, multiplied by the
number of such shares. For purposes of the Stock Option Agreement, "Applicable
Price" means the highest of (x) the highest price per share paid or to be paid
by any person in a transaction of the type specified in clause (a) of the
definition of "Repurchase Event", (y) the price per share paid by a third
party for shares of Southwest's common stock in connection with a merger or
other business combination which entitles grantee to a Substitute Option and
(z) the highest closing sale price per share quoted on Nasdaq NMS during the
40 business days prior to First Commonwealth's exercise of its right to
require Southwest to repurchase the option or the shares acquired by exercise
thereof.
Registration Rights. First Commonwealth has certain rights to require
registration of any shares purchased pursuant to the option under the
securities laws if necessary for First Commonwealth to be able to sell such
shares.
Effect of Stock Option Agreement. The Stock Option Agreement is intended to
increase the likelihood that the Merger will be consummated on the terms set
forth in the Merger Agreement. Consequently, certain aspects of the Stock
Option Agreement may have the effect of discouraging persons who might now or
prior to the Effective Time be interested in acquiring all of or a significant
interest in Southwest from considering or proposing such an acquisition, even
if such persons were prepared to offer higher consideration per share for
Southwest Common Stock than that implicit in the Exchange Ratio.
Resale of First Commonwealth Common Stock
The First Commonwealth Common Stock issued pursuant to the Merger will not
be subject to any restrictions on transfer arising under the Securities Act,
except for shares issued to any Southwest shareholder (including any director
or executive officer of First Commonwealth who may be a Southwest shareholder)
who
49
<PAGE>
may be deemed to be an "affiliate" of First Commonwealth or Southwest for
purposes of Rule 145 under the Securities Act. It is expected that each such
affiliate will enter into an agreement with First Commonwealth providing that
such affiliate will not transfer any First Commonwealth Common Stock received
in the Merger except in compliance with the Securities Act and will make no
disposition of any First Commonwealth or Southwest Common Stock (or any
interest therein) during the period commencing 30 days prior to the Effective
Time through the date on which financial results covering at least 30 days of
combined operations of First Commonwealth and Southwest after the Merger have
been published. This Proxy Statement/Prospectus does not cover resales of
First Commonwealth Common Stock received by any person who may be deemed to be
such an affiliate of First Commonwealth or Southwest.
No Appraisal Rights
No holder of First Commonwealth Common Stock or of Southwest Common Stock
will be entitled to appraisal rights under the PBCL in connection with, or as
a result of, the matters to be acted upon at the Special Meetings.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Directors After the Merger
First Commonwealth has agreed in the Merger Agreement to fix the size of its
Board of Directors at twenty-four (24) members, comprised of nineteen (19) of
the current directors of First Commonwealth and five current directors of
Southwest. Mr. Dahlmann will be one of the five directors. The other four have
not yet been selected. First Commonwealth has agreed in the Merger Agreement
to cause the Former Southwest Directors to be elected or appointed as
directors of First Commonwealth at, or as promptly as practicable after, the
Effective Time.
The Agreement provides that (i) Mr. Dahlmann will be appointed to the class
of the Board of Directors of First Commonwealth elected by the shareholders of
First Commonwealth at the annual meeting of First Commonwealth immediately
preceding the Effective Time, (ii) three (3) of the Former Southwest Directors
will be appointed to the class of the Board of Directors of First Commonwealth
elected by the shareholders of First Commonwealth at the annual meeting of
First Commonwealth immediately preceding the annual meeting referenced in the
preceding sentence and (iii) the remaining Former Southwest Director will be
appointed to the remaining class of the First Commonwealth Board of Directors.
Management After the Merger
The Board of Directors of First Commonwealth will take appropriate action so
that as of the Effective Time of the Merger, the following persons will hold
the offices of the Continuing Corporation having the functions set forth below
E. James Trimarchi: Chairman of the Board
Joseph E. O'Dell: President and Chief Executive Officer
David S. Dahlmann: Vice Chairman
Gerard M. Thomchick: Senior Executive Vice President and Chief Operating
Officer
John J. Dolan: Senior Vice President and Chief Financial Officer
David R. Tomb, Jr.: Senior Vice President, Secretary and Treasurer
William R. Jarrett: Senior Vice President, Risk Management
R. John Previte: Senior Vice President, Investments
Rosemary Krolick: Senior Vice President, Chief Information Officer
50
<PAGE>
As of the date hereof, neither First Commonwealth nor Southwest is aware of
any material relationship between First Commonwealth or its directors or
executive officers and Southwest or its directors or executive officers,
except as contemplated by the Merger Agreement or as described herein or in
the documents incorporated by reference herein. In the ordinary course of
business and from time to time, First Commonwealth may do business with
Southwest, First Commonwealth may enter into banking transactions with certain
of Southwest's directors, executive officers and their affiliates, Southwest
may do business with First Commonwealth, and Southwest may enter into banking
transactions with certain of First Commonwealth's directors, officers and
their affiliates.
For a discussion of certain contractual arrangements being entered into by
certain persons affiliated with Southwest in connection with the Merger, see
"The Merger--Interests of Certain Persons in the Merger."
POST MERGER OPERATIONS
First Commonwealth intends to keep Southwest Bank a separate subsidiary of
First Commonwealth for at least two years after the Effective Date. First
Commonwealth intends that the Continuing Corporation will have a substantial
and prominent presence in the Westmoreland County marketplace, and intends to
operate all current 16 offices of Southwest Bank.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements
reflect the Merger under the application of the pooling of interests method of
accounting. Under the pooling of interests method of accounting, the
historical recorded values of the assets, liabilities and shareholders' equity
of Southwest as reported on its Consolidated Balance Sheet, will be carried
over onto the Consolidated Balance Sheet of First Commonwealth, and no
goodwill or other intangible assets will be created. First Commonwealth will
include in its Consolidated Statement of Income the consolidated results of
operations of Southwest for the entire fiscal year in which the Effective Date
occurs and will combine and restate its results of operations of Southwest for
prior periods. See "The Merger--Accounting Treatment."
This pro forma financial information is based on the estimates and
assumptions set forth in the notes to such statements. The pro forma
adjustments made in connection with the development of the pro forma financial
information are preliminary and have been made solely for purposes of
developing such pro forma financial information as necessary to comply with
the disclosure requirements of the Commission. The pro forma financial
information has been prepared using the historical consolidated financial
statements and notes thereto, which are incorporated herein by reference. See
"Incorporation of Certain Documents by Reference." The unaudited pro forma
condensed combined financial statements do not give effect to anticipated cost
savings and revenue enhancements in connection with the Merger, and do not
purport to be indicative of the combined financial position or results of
operations of future periods or indicative of the results that actually would
have been realized had the entities been a single entity during these periods.
Additionally, the pro forma information does not reflect the effect of the
estimated one-time Merger-related and other charges of approximately $3.7
million expected to be incurred upon consummation of the Merger.
The Merger Agreement provides for an Exchange Ratio of 2.9 shares of First
Commonwealth Common Stock for each share of Southwest Common Stock. The
Exchange Ratio of 2.9 is subject to possible increase in certain limited
circumstances. See "The Merger--Termination; Possible Exchange Ratio
Increase." The accompanying unaudited pro forma financial information reflects
an equivalent per share of Southwest Common Stock at that Exchange Ratio.
51
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JUNE 30, 1998
The following unaudited Pro Forma Combined Balance Sheet combines the
historical balance sheets of First Commonwealth and Southwest as if the Merger
had become effective on June 30, 1998. This balance sheet should be read in
conjunction with the First Commonwealth Financial Corporation Consolidated
Financial Statements and the Southwest National Corporation Consolidated
Financial Statements and the notes thereto, which are incorporated by
reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
HISTORICAL
----------------------
FIRST PRO FORMA
COMMONWEALTH SOUTHWEST ADJUSTMENTS COMBINED
------------ --------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks...... $ 66,524 $ 25,594 $ 92,118
Investment securities........ 1,058,458 278,074 1,336,532
Money market investments..... 13,317 31,457 44,774
Loans, net................... 1,957,415 483,463 2,440,878
Premises and equipment....... 33,965 9,157 43,122
Other assets................. 73,157 13,661 86,818
---------- -------- ------- ----------
Total assets................ $3,202,836 $841,406 $ 0 $4,044,242
========== ======== ======= ==========
LIABILITIES
Deposits..................... $2,279,456 $645,636 $2,925,092
Short-term borrowings........ 244,592 5,796 250,388
Other liabilities............ 26,365 5,958 32,323
Long-term debt............... 373,253 100,000 473,253
---------- -------- ------- ----------
Total liabilities........... 2,923,666 757,390 0 3,681,056
SHAREHOLDERS' EQUITY
Common stock................. 22,437 7,952 8,827(2) 31,264
(7,952)(2)
Additional paid-in capital... 75,738 31,760 30,885(2) 106,623
(31,760)(2)
Retained earnings............ 187,422 49,424 43,522(2) 230,944
(43,522)(2)
(5,902)(1)
Treasury stock............... (6,118) (5,902) 5,902(1) (6,118)
Accumulated other
comprehensive income........ 1,841 782 2,623
Unearned ESOP shares......... (2,150) 0 (2,150)
---------- -------- ------- ----------
Total shareholders' equity.. 279,170 84,016 0 363,186
---------- -------- ------- ----------
Total liabilities and
shareholders' equity....... $3,202,836 $841,406 $ 0 $4,044,242
========== ======== ======= ==========
Book value per common share.. $12.63 $27.60 $11.74
</TABLE>
- --------
(1) Reflects the cancellation of 137,049 shares of Southwest National
Corporation treasury stock.
(2) Reflects the issuance of 8,826,840 shares of First Commonwealth, $1.00 par
value, common stock for 3,043,738 shares (100% of outstanding) of
Southwest National Corporation, $2.50 par value, common stock, and
reflects the elimination of Southwest National Corporation Shareholders'
Equity accounts.
52
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following unaudited Pro Forma Combined Condensed Statements of Income
for the six months ended June 30, 1998, and the years ended December 31, 1997,
1996 and 1995 for First Commonwealth and Southwest, combine the historical
statements of income of First Commonwealth and Southwest as if the Merger had
become effective on January 1, 1995. The pro forma income statement amounts
presented below are the sum of the historical First Commonwealth and Southwest
income statement amounts, and do not reflect any other adjustments to the sum
of the historical income statement amounts. These income statements should be
read in conjunction with the First Commonwealth Financial Corporation
Consolidated Financial Statements and the Southwest National Corporation
Consolidated Financial Statements and the related notes thereto included in
the respective annual reports on Form 10-K, which are incorporated by
reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------
JUNE 30, 1998 1997 1996 1995
------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans.... $ 102,655 $ 198,357 $ 177,556 $ 165,832
Interest and dividends on
investment securities........ 36,856 55,490 56,006 58,073
Interest on money market
investments.................. 958 925 1,626 3,277
---------- ---------- ---------- ----------
Total interest income........ 140,469 254,772 235,188 227,182
---------- ---------- ---------- ----------
INTEREST EXPENSE
Interest on deposits.......... 57,180 112,599 101,186 94,156
Interest on short-term
borrowings................... 6,254 7,994 6,780 8,126
Interest on long-term debt.... 9,790 3,833 1,223 737
---------- ---------- ---------- ----------
Total interest expense....... 73,224 124,426 109,189 103,019
---------- ---------- ---------- ----------
Net interest income.......... 67,245 130,346 125,999 124,163
Provision for possible credit
losses....................... 5,100 10,152 6,301 5,575
---------- ---------- ---------- ----------
Net interest income after
provision for possible
credit losses............... 62,145 120,194 119,698 118,588
Securities gains (losses)..... 982 6,825 1,599 (603)
Other operating income........ 10,939 18,716 17,359 15,996
Other operating expenses...... 45,826 88,858 85,299 83,689
---------- ---------- ---------- ----------
Income before income taxes... 28,240 56,877 53,357 50,292
Applicable income taxes....... 7,764 17,338 16,164 15,728
---------- ---------- ---------- ----------
Net income................... $ 20,476 $ 39,539 $ 37,193 $ 34,564
========== ========== ========== ==========
Average shares outstanding..... 30,788,301 30,835,949 31,155,043 31,236,202
Average shares outstanding
assuming dilution............. 30,981,004 30,922,837 31,190,895 31,281,960
Basic earnings per share....... $0.67 $1.28 $1.19 $1.11
Diluted earnings per share..... $0.66 $1.28 $1.19 $1.10
HISTORICAL PER SHARE DATA
First Commonwealth:
Average shares outstanding... 21,926,263 21,878,945 21,954,111 22,005,427
Average shares outstanding
assuming dilution........... 22,118,966 21,965,833 21,989,963 22,051,158
Basic earnings per share..... $0.73 $1.40 $1.26 $1.16
Diluted earnings per share... $0.72 $1.39 $1.25 $1.16
Southwest:
Average shares outstanding... 3,055,875 3,088,622 3,172,735 3,183,026
Average shares outstanding
assuming dilution........... 3,055,875 3,088,622 3,172,735 3,183,026
Basic earnings per share..... $1.46 $2.92 $3.03 $2.84
Diluted earnings per share... $1.46 $2.92 $3.03 $2.84
</TABLE>
53
<PAGE>
REGULATION AND SUPERVISION
First Commonwealth and Southwest are bank holding companies registered as
such with the Federal Reserve Board under the Bank Holding Company Act of
1956, as amended (the "Bank Holding Company Act"). As bank holding companies,
First Commonwealth and Southwest are each required to file with the Federal
Reserve Board an annual report and other information. The Federal Reserve
Board is also empowered to make examinations and inspections of First
Commonwealth and Southwest and their respective subsidiaries.
The Bank Holding Company Act and Regulation Y of the Federal Reserve Board
require every bank holding company to obtain prior approval of the Federal
Reserve Board before it may acquire direct or indirect ownership or control of
more than 5% of the outstanding voting shares or substantially all of the
assets of a bank or merge or consolidate with another bank holding company.
The Federal Reserve Board may not approve acquisitions by First Commonwealth
or Southwest of such percentages of voting shares or substantially all of the
assets of any bank located in any state other than Pennsylvania unless the
laws of such state specifically authorize such an acquisition.
The Bank Holding Company Act generally prohibits a bank holding company from
engaging in a non-banking business or acquiring direct or indirect ownership
or control of more than 5% of the outstanding voting shares of any non-banking
corporation, subject to certain exceptions, the principal one of which
exceptions is applicable where the business activity in question is determined
by the Federal Reserve Board to be so closely related to banking or to
managing or controlling banks as to be a proper incident thereto. The Bank
Holding Company Act does not place territorial restrictions on the activities
of such banking related subsidiaries of bank holding companies.
Under the Federal Reserve Act, subsidiary banks of a bank holding company
are subject to certain restrictions on extensions of credit to the bank
holding company or any of its subsidiaries, investments in the stock or other
securities thereof or acceptance of such stock or securities as collateral for
loans to any one borrower. A bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in connection with the
extension of credit or the furnishing of property or services.
Under the Pennsylvania Banking Code, there is no limit on the number of
Pennsylvania banks that may be owned or controlled by a Pennsylvania bank
holding company such as First Commonwealth or Southwest.
The Federal Reserve Board has issued risk-based capital guidelines which
provide for a standard designed principally as a measure of credit risk. These
guidelines require that: (1) at least 50% of a banking organization's total
capital ("Total Capital") be common and certain other "core" equity capital
("Tier I Capital"); (2) assets and off-balance sheet items be weighted
according to risk; (3) the Total Capital to risk-weighted assets ratio be at
least 8%; and (4) the minimum leverage capital ratio, Tier I Capital to total
assets, be 3% for banking organizations that do not anticipate significant
growth and have well-diversified risk (including no undue interest rate risk
exposure), excellent asset quality, high liquidity and good earnings. The
minimum leverage capital ratio for other banking organizations is generally
expected to be 4-5%, depending on their particular condition and growth plans.
54
<PAGE>
The table below presents First Commonwealth's historical and pro forma
capital position relative to its minimum capital requirements:
<TABLE>
<CAPTION>
HISTORICAL AT JUNE 30, 1998 PRO FORMA AT JUNE 30, 1998
--------------------------------- -------------------------------
PERCENTAGE OF PERCENTAGE OF
AMOUNT ASSETS AMOUNT ASSETS
--------------- ----------------- -------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Tier I Capital.......... $ 266,466 13.90% $ 349,522 14.55%
Risk-Based Requirement.. 76,657 4.00 96,115 4.00
Total Capital........... 287,287 15.00 376,408 15.66
Risk-Based Requirement.. 153,314 8.00 192,230 8.00
Leverage Capital........ 266,466 8.40 349,522 8.80
Minimum Leverage
Requirement............ 95,218 3.00 119,114 3.00
</TABLE>
DESCRIPTION OF CAPITAL STOCK
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of the PBCL and the Articles of
Incorporation of First Commonwealth (the "First Commonwealth Charter"). The
First Commonwealth Charter is included as an exhibit to the Registration
Statement of which this Proxy Statement/Prospectus forms a part.
THE FOLLOWING DESCRIPTIONS OF THE FIRST COMMONWEALTH CAPITAL SECURITIES
SHOULD BE READ CAREFULLY BY SOUTHWEST SHAREHOLDERS SINCE, AT THE EFFECTIVE
TIME, EACH ISSUED AND OUTSTANDING SHARE OF SOUTHWEST COMMON STOCK WILL BE
CONVERTED INTO 2.9 FULLY PAID AND NON-ASSESSABLE SHARES OF FIRST COMMONWEALTH
COMMON STOCK (SUBJECT TO POSSIBLE INCREASE IN CERTAIN LIMITED CIRCUMSTANCES;
SEE "THE MERGER--TERMINATION; POSSIBLE EXCHANGE RATIO INCREASE").
First Commonwealth Capital Stock
As of September 30, 1998, the authorized capital stock of First Commonwealth
consisted of 3,000,000 shares of Preferred Stock, par value $1.00 ("Preferred
Stock"), of which none was issued or outstanding, and 100,000,000 shares of
First Commonwealth Common Stock, par value $1.00 per share, of which
22,110,895 shares were issued and outstanding.
The First Commonwealth Board of Directors is authorized to issue the shares
of Preferred Stock in series without further shareholder action with such
voting rights, designations, preferences, qualifications, privileges,
limitations, restrictions, options, conversion rights and other special or
relative rights of any series as it may determine from time to time by
resolution.
First Commonwealth Common Stock
Dividend Rights. The holders of First Commonwealth Common Stock are entitled
to share ratably in dividends out of funds legally available therefor, when
and as declared by the First Commonwealth Board, after full cumulative
dividends on all shares of Preferred Stock, if outstanding, ranking superior
as to dividends to First Commonwealth Common Stock, have been paid or declared
and funds sufficient for the payment thereof set apart.
Voting Rights. Each holder of First Commonwealth Common Stock has one vote
on matters presented for consideration by the shareholders for each share
held. There are no cumulative voting rights in the election of directors. All
issued and outstanding shares of First Commonwealth Common Stock are fully
paid and non-assessable. In certain circumstances, Preferred Stock, if
outstanding, may affect voting rights of First Commonwealth Common Stock.
There are no shares of Preferred Stock issued and outstanding.
55
<PAGE>
Size and Classification of Board of Directors. The First Commonwealth
Charter provides for a classified Board of Directors, consisting of three
substantially equal classes of directors, each serving for a three-year term,
with the term of each class of directors ending in successive years, which
number will increase to 24 at the Effective Time of the Merger. The First
Commonwealth Board of Directors currently consists of 19 members.
Classification of the First Commonwealth Board may have the effect of
decreasing the number of directors that could otherwise be elected at a given
annual meeting by anyone who obtains a controlling interest in First
Commonwealth Common Stock and thereby could impede a change in control of
First Commonwealth.
Preemptive Rights. The holders of First Commonwealth Common Stock have no
preemptive rights to acquire any new or additional unissued shares or treasury
shares of First Commonwealth capital stock.
Liquidation Rights. In the event of a liquidation, dissolution or winding up
of First Commonwealth, whether voluntary or involuntary, the holders of First
Commonwealth Common Stock will be entitled to share ratably in any of First
Commonwealth's assets or funds that are available for distribution to its
shareholders after the satisfaction of its liabilities (or after adequate
provision is made therefor) and after preferences on any outstanding preferred
stock.
Assessment and Redemption. The shares of First Commonwealth Common Stock
issuable pursuant to the Merger will be, when issued, fully paid and non-
assessable. First Commonwealth Common Stock does not have any redemption
provisions.
First Commonwealth Preferred Stock
The First Commonwealth Charter contains general terms for Preferred Stock,
par value $1.00. No shares of Preferred Stock are issued or outstanding.
See "Comparison of Shareholder Rights--Amendment of Articles of
Incorporation or By-laws," for a description of the manner in which the First
Commonwealth Charter and By-laws may be amended.
COMPARISON OF SHAREHOLDER RIGHTS
General
Each of First Commonwealth and Southwest is a Pennsylvania corporation
subject to the provisions of the PBCL. Shareholders of Southwest, whose rights
are governed by the Southwest Charter and Southwest's by-laws (the "Southwest
By-laws") and the PBCL will, upon consummation of the Merger, become
shareholders of First Commonwealth and, at the Effective Time, their rights as
shareholders will be determined by the First Commonwealth Charter, the First
Commonwealth's by-laws (the "First Commonwealth By-laws") and the PBCL.
The following is a summary of the material differences in the rights of
shareholders of Southwest under the Southwest Charter, Southwest By-laws and
the PBCL, on the one hand, and the rights of the shareholders of First
Commonwealth under the First Commonwealth Charter, the First Commonwealth By-
laws and the PBCL, on the other hand. The following discussion does not
purport to be a complete discussion of, and is qualified in its entirety by
reference to, the governing law and the articles of incorporation and by-laws
of each corporation.
Authorized Capital
The authorized capital stock of Southwest consists of 10,000,000 shares of
common stock, par value $2.50 per share ("Southwest Common Stock"). As of
September 30, 1998, there were [3,043,738] shares of Southwest Common Stock.
There are no other shares of capital stock of Southwest authorized, issued or
outstanding. Southwest has no options, warrants, or other rights authorized,
issued or outstanding.
56
<PAGE>
For a description of the authorized capital of First Commonwealth, see
"Description of Capital Stock--First Commonwealth Capital Stock."
Amendment of Articles of Incorporation or By-laws
The Southwest Charter contains various provisions that require a
supermajority vote of shareholders to amend or repeal particular sections
thereof. Amendment or repeal of the provisions of the Southwest Charter
relating to the classification of directors, the requirements for submitting
shareholder proposals and shareholder provisions, the amendment of By-laws
generally, and the consideration of non-economic factors by Southwest's Board
of Directors in making decisions, all require a 75% vote of shareholders,
absent prior approval of the Southwest Board of Directors. All other
provisions of the Southwest Charter may be amended by approval of Southwest's
Board of Directors and the votes of a majority of the shares of Southwest.
The authority to amend or repeal Southwest's By-laws is vested in
Southwest's Board of Director's, subject always to the power of the
shareholders of Southwest to change such action by the affirmative vote of
shareholders holding at least 75% of the voting power.
The First Commonwealth Charter may be amended in the manner prescribed by
the PBCL. The PBCL generally provides that an amendment of the articles of
incorporation must be proposed by the board of directors and may be adopted by
the affirmative vote of a majority of the votes cast by all shareholders
entitled to vote thereon and by a majority of the votes cast by the
shareholders of any class or series of shares entitled to vote thereon.
Notwithstanding the foregoing, without the consent of the holders of at least
75% of the shares of First Commonwealth Common Stock outstanding, First
Commonwealth cannot adopt or effect any amendment to the First Commonwealth
Charter affecting shareholder approval of mergers, consolidations,
liquidations, dissolutions or sale of assets. See "--Merger or Other
Fundamental Transactions," below. First Commonwealth's By-laws may be amended
by a majority vote of the First Commonwealth Board of Directors or by an
affirmative vote of the holders of 80% of the outstanding shares of First
Commonwealth Common Stock.
Size and Classification of Board of Directors
Southwest's Charter and By-laws provide that the Southwest Board of
Directors shall be composed of not less than five nor more than 25 directors,
the number of which may be determined by the Southwest Board of Directors.
Currently, the Southwest Board of Directors is composed of 11 members. The
Southwest Board of Directors is divided into three classes, each serving
three-year terms, so that approximately one-third of the directors of
Southwest are elected at each annual meeting of shareholders of Southwest.
Classification of the Southwest Board of Directors has the effect of
decreasing the number of directors that could be elected in a single year by
any person who seeks to elect its designees to a majority of the seats on the
Southwest Board of Directors and thereby could impede a change in control of
Southwest.
For a description of the size and classification of the First Commonwealth
Board see "Description of Capital Stock--First Commonwealth Common Stock--Size
and Classification of Board of Directors."
The classification of the First Commonwealth and Southwest Boards may have
the effect of decreasing the number of directors that could otherwise be
elected at a given annual meeting by any holder of First Commonwealth Common
Stock or Southwest Common Stock, as the case may be, who obtains a controlling
interest in First Commonwealth Common Stock or Southwest Common Stock.
Cumulative Voting
The PBCL requires directors to be elected by cumulative voting unless the
articles of the corporation provide otherwise. The Southwest Charter contains
no provision limiting cumulative voting. A shareholder with cumulative voting
rights has the right to multiply the number of shares that he or she holds
times the total number of directors being elected and may cast the entire
number of votes for one candidate or may distribute them among any two or more
candidates.
57
<PAGE>
The First Commonwealth Charter eliminated cumulative voting, therefore, each
shareholder will be entitled to cast one vote for each share held at the
election of each director, without the power to cumulate votes.
Limitation of Liability and Indemnification
As permitted by the PBCL, the First Commonwealth By-laws, the Southwest
Charter and the Southwest By-laws provide that a director or officer shall not
be personally liable, as such, for monetary damages for any action taken, or
any failure to take any action, unless the director or officer has breached or
failed to perform the duties of his or her office as set forth under
Pennsylvania law and the breach or failure to perform constitutes self-
dealing, willful misconduct or recklessness. Such limitation (i) does not
apply to the responsibility or liability of a director or officer pursuant to
any criminal statute or the liability of a director or officer for the payment
of taxes, and (ii) may, in the view of certain commentators, shield a director
from liability for certain breaches of his or her duty of loyalty as well as
his or her duty of care.
The PBCL and the First Commonwealth By-laws provide that, in respect of an
action by or in the right of a corporation, a corporation may indemnify any
person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that he is or was a
representative of the corporation or is or was serving at the request of the
corporation as a representative of another domestic or foreign corporation for
profit or not-for-profit, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of the
action if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the corporation; provided,
however, that there shall be no indemnification in respect of any claim, issue
or matter as to which the person has been adjudged to be liable to the
corporation unless and only to the extent that the court of common pleas of
the judicial district embracing the county in which the registered office of
the corporation is located or the court in which the action was brought
determines upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for the expenses that the court of common pleas or other
court deems proper.
The Southwest By-laws provide for similar rights of indemnification, except
that indemnification will not be provided only in the event that the conduct
of the indemnified party is determined by a court to involve willful
misconduct or negligence.
Shareholder Meetings
Southwest's By-laws provide that the Board of Directors may fix the date and
time of the annual meeting of shareholders, but if no such date is fixed, the
meeting for any calendar year is to be held on the third Tuesday of April in
such year. Notice of the annual or special meetings of shareholders must be
given not less than five days before the date of the meeting. The presence, in
person or by proxy, of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast constitutes a quorum for
the transaction of business at the meeting. Southwest's By-laws provide that
special meetings of shareholders may be called at any time by the President of
Southwest or a majority of the Board of Directors of Southwest.
First Commonwealth's By-laws provide that the First Commonwealth Board may
fix and designate the date and time of the annual meeting of shareholders,
which date must be no later than 150 days after December 31. The presence in
person or by proxy of shareholders entitled to cast at least a majority of the
votes that all shareholders are entitled to cast on a particular matter to be
acted upon at the meeting constitutes a quorum at that meeting. First
Commonwealth's By-laws provide that a special meeting of the shareholders may
be called at any time by the First Commonwealth Board of Directors, who may
fix the date, time and place of the meeting.
Southwest's Charter sets forth procedures pursuant to which any business,
including the nomination of directors by a shareholder, may be properly
brought by a shareholder before an annual meeting of shareholders.
58
<PAGE>
Southwest's Charter provides that nominations for the election of directors
may be made by the Board of Directors or any shareholder entitled to vote for
the election of directors. Written notice of a shareholder's intent to
nominate a director at the meeting must be given by the shareholder and
received by the Secretary of Southwest not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting of the
shareholders. The notice is required to be in writing and contain or be
accompanied by certain information about such nominee, as described in
Southwest's By-laws. The chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that any nomination was not made in
accordance with the foregoing procedures and, in such event, the nomination
will be disregarded.
First Commonwealth's By-laws provide that nominations for election of
directors may be made by any shareholder entitled to vote for the election of
directors so long as written notice of such shareholder's intent to nominate a
director at the meeting is given by the shareholder and received by the
Secretary of First Commonwealth not less than 120 days prior to the
anniversary date of the mailing date of First Commonwealth's proxy statement
for the immediately preceding annual meeting. The notice is required to be in
writing and contain or be accompanied by certain information about such
shareholder, as described in First Commonwealth's By-Laws. The chairman of the
meeting may, if the facts warrant, determine and declare to the meeting that
any nomination made at the meeting was not made in accordance with the
foregoing procedures and, in such event, the nomination will be disregarded.
Merger or Other Fundamental Transactions
Under the PBCL, a plan of merger, consolidation, share exchange, division,
conversion or asset transfer (in respect of a sale, lease, exchange or other
disposition of all, or substantially all, the assets of a corporation other
than in the usual and regular course of business) generally must be proposed
by the board of directors and approved by the affirmative vote of a majority
of the votes cast by all shareholders of any class or series of shares
entitled to vote thereon as a class, except that Section 1924 of the PBCL
provides that shareholder approval is not required under certain
circumstances. One such circumstance not requiring shareholder approval under
the PBCL is one, similar to the present Merger, in which (1) no change in
First Commonwealth's articles are required, (2) the First Commonwealth
shareholders retain their shares, and (3) the First Commonwealth shareholders
hold, after the Merger, at least a majority of the shares of the continuing
corporation.
The First Commonwealth Charter requires that a plan of merger,
consolidation, division, conversion or asset transfer (in respect of a sale or
other disposition of all, or substantially all, the assets of First
Commonwealth) must be approved by the affirmative vote of the holders of at
least 75% of the outstanding shares of its common stock. The First
Commonwealth Charter does not require such supermajority approval if
shareholder approval is not required under the PBCL. Such supermajority merger
provisions can only be amended by the vote of 75% of the outstanding common
shares of First Commonwealth.
The Southwest Charter has no provision for a supermajority vote in the event
of a merger, consolidation, sale of substantially all of its assets or
liquidation. Therefore, Southwest would be governed by the PBCL which provides
that, with certain exceptions (e.g., Section 1924 of the PBCL noted above),
any such transaction must be approved by a majority of votes cast.
The PBCL further provides that if a shareholder of a registered corporation
is a party to a sale of assets transaction, share exchange, merger or
consolidation involving the corporation or a subsidiary, or if a shareholder
is to receive a disproportionate amount of the shares or other securities of
any corporation surviving or resulting from a plan of division, or is to be
treated differently in a corporate dissolution from other shareholders of the
same class, or is to have a materially increased percentage of voting or
economic share interest in the corporation relative to substantially all other
shareholders as a result of a reclassification, then approval must be obtained
of the shareholders entitled to cast at least a majority of the votes which
all shareholders other than the interested shareholder are entitled to cast
with respect to the transaction, without counting the votes of the interested
shareholder (and certain affiliated and associated persons). Such additional
shareholder approval is not required if the consideration to be received by
the other shareholders in such transaction for shares of any class is not less
59
<PAGE>
than the highest amount paid by the interested shareholder in acquiring shares
of the same class, or if the proposed transaction is approved by a majority of
the board of directors other than certain directors affiliated or associated
with, or nominated by, the interested shareholder.
Under the PBCL, an articles amendment or plan of reclassification, merger,
consolidation, exchange, asset transfer, division or conversion that provides
mandatory special treatment for the shares of a class held by particular
shareholders or groups of shareholders that differs materially from the
treatment accorded other shareholders or groups of shareholders holding shares
of the same class must be approved by each group of holders of any outstanding
shares of a class who are to receive the same special treatment under the
amendment or plan, voting as a special class in respect of the plan,
regardless of any limitations stated in the articles or by-laws on the voting
rights of any class or series. At the option of the corporation's board of
directors, the approval of such special treatment by any such affected group
may be omitted, but in such event the holder of any outstanding shares of the
special class so denied voting rights will be entitled to the dissenters'
rights (i.e., the right to demand payment in cash by the corporation of the
fair value of the shareholder's shares).
State Anti-Takeover Statutes
First Commonwealth and Southwest are subject to various provisions of the
PBCL which are triggered, in general, if any person or group acquires, or
discloses an intent to acquire, 20% or more of the voting power of a covered
corporation, other than pursuant to a registered firm commitment underwriting
or, in certain cases, pursuant to the approving vote of the board of
directors. The relevant provisions are contained in Subchapters 25E-H of the
PBCL.
Subchapter 25E (relating to control transactions) provides that if any
person or group acquires 20% or more of the voting power of a covered
corporation, the remaining shareholders may demand from such person or group
the fair value of their shares, including a proportionate amount of any
control premium.
Subchapter 25F (relating to business combinations) delays for five years and
imposes conditions upon "business combinations" between an "interested
shareholder" and the corporation. The term "business combination" is defined
broadly to include various transactions utilizing a corporation's assets for
purchase price amortization or refinancing purposes. For this purpose, an
"interested shareholder" is defined generally as the beneficial owner of at
least 20% of a corporation's voting shares.
Subchapter 25G (relating to control-share acquisitions) prevents a person
who has acquired 20% or more of the voting power of a covered corporation from
voting such shares unless the "disinterested" shareholders approve such voting
rights. Failure to obtain such approval exposes the owner to the risk of a
forced sale of the shares to the issuer. If shareholder approval is obtained,
the corporation is also subject to Subchapters 25I and J. Subchapter 25I
provides for a minimum severance payment to certain employees terminated
within two years of the approval. Subchapter 25J prohibits the abrogation of
certain labor contracts prior to their stated date of expiration. Subchapter
25H (relating to disgorgement) applies in the event that (i) any person or
group publicly discloses that the person or group may acquire control of the
corporation or (ii) a person or group acquires (or publicly discloses an offer
or intent to acquire) 20% or more of the voting power of the corporation and,
in either case, sells shares within 18 months thereafter. Any profits from
sales of equity securities of the corporation by the person or group during
the 18-month period belong to the corporation if the securities that were sold
were acquired during the 18-month period or within 24 months prior thereto.
Subchapters 25E-H contain a wide variety of transactional and status
exemptions, exclusions and safe harbors.
In addition, the fiduciary duty standards applicable to the board of
directors of each of First Commonwealth and Southwest under the PBCL (i)
explicitly give the board of directors the authority to weigh (in addition to
consideration of employees, suppliers, customers and creditors of the
corporation, the communities in which the corporation is located and other
pertinent factors) the short and long-term interests of the corporation and
the
60
<PAGE>
possibility that they may be best served by the independence of the
corporation, and the resources, intent and past and potential conduct of the
prospective acquiror, (ii) relieve the board from any duty to regard the
shareholder interest as dominant or controlling, (iii) explicitly give the
board the discretion to refuse to redeem a shareholder rights plan or to
refuse to take certain specified actions with respect to potential
acquisitions of control of the corporation, (iv) declare actions by directors
with respect to a takeover bid to be subject to the same standard of conduct
for directors that is applicable to all other conduct and (v) establish a
presumption that actions with respect to a takeover bid by the "disinterested
directors" (a term defined to include essentially all directors except certain
officers and persons associated with the prospective acquiror) are lawful
unless it is proved under a clear and convincing evidence standard that the
director did not act in good faith after reasonable investigation.
Under a provision of the Pennsylvania Banking Code of 1965 designed to
protect shareholders of Pennsylvania banking institutions, subject to certain
exceptions, no person may offer to acquire, or acquire control of more than
10% of the outstanding shares of a Pennsylvania banking institution or 5% of
the outstanding shares of a Pennsylvania banking institution if such
institution had net operating loss carry forwards in excess of 20% of its
total shareholders' equity as reported in its most recent publicly available
annual financial statements, without the prior written approval of the
Pennsylvania Department of Banking.
EXPERTS
First Commonwealth
The consolidated financial statements for the year ended December 31, 1997,
incorporated in this Proxy Statement/Prospectus by reference from First
Commonwealth's Annual Report on Form 10-K for the year ended December 31,
1997, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
Representatives of Deloitte & Touche LLP are expected to be present at the
First Commonwealth Special Meeting, will have the opportunity to make a
statement thereat if they desire to do so, and are expected to be available to
respond to appropriate questions.
The consolidated financial statements of First Commonwealth as of December
31, 1996, and for the years ended December 31, 1996 and 1995, incorporated in
this Proxy Statement/Prospectus have been audited by Grant Thornton LLP,
independent certified public accountants, whose report thereon appears
therein, and in reliance upon such report of Grant Thornton LLP, given upon
the authority of such firm as experts in accounting and auditing.
Southwest
The financial statements and the related financial statement schedules for
the year ended December 31, 1997 and 1996 and for each of the years in the
three year period ended December 31, 1997, incorporated in this Proxy
Statement/Prospectus by reference from Southwest's Annual Report on Form 10-K
for the year ended December 31, 1997, have been audited by KPMG Peat Marwick
LLP, independent auditors, as stated in their report which is incorporated
herein by reference, and have been so incorporated in reliance upon such
report of such firm as experts in accounting and auditing.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Southwest Special Meeting, will have the opportunity to make a statement
thereat if they desire to do so, and are expected to be available to respond
to appropriate questions.
61
<PAGE>
LEGAL MATTERS
David R. Tomb, Jr., Esq., Counsel of First Commonwealth, has rendered an
opinion with respect to the validity of the First Commonwealth Common Stock to
be issued in connection with the Merger and has passed upon certain other
legal matters on behalf of First Commonwealth. At August 28, 1998, Mr. Tomb, a
director and officer of First Commonwealth, was the beneficial owner of
323,262 shares of First Commonwealth Common Stock (including total shares held
by business entities) and options covering an additional 17,361 shares of
First Commonwealth Common Stock.
Certain federal income tax matters related to the Merger will be passed upon
by Tucker Arensberg, P.C., Pittsburgh, Pennsylvania.
SHAREHOLDER PROPOSALS
Any First Commonwealth shareholder who wishes to submit a proposal for
presentation to the 1999 Annual Meeting of Shareholders must submit the
proposal to First Commonwealth, Old Courthouse Square, 22 North Sixth Street,
Indiana, Pennsylvania 15701, Attention: Secretary, not later than November 26,
1998, for inclusion, if appropriate, in First Commonwealth's proxy statement
and the form of proxy relating to the 1999 Annual Meeting.
Any Southwest shareholder who wishes to submit a proposal for presentation
to the 1999 Annual Meeting of Shareholders, if the Merger has not been
consummated prior to the date the meeting is to be held, must submit the
proposal to Southwest, 111 South Main Street, Greensburg, Pennsylvania 15601,
Attention: Secretary, not later than November 30, 1998, for inclusion, if
appropriate, in Southwest's proxy statement and the form of proxy relating to
the 1999 Annual Meeting.
62
<PAGE>
SOUTHWEST NATIONAL CORPORATION
and
FIRST COMMONWEALTH FINANCIAL CORPORATION
ANNEXES TO THE JOINT PROXY STATEMENT/PROSPECTUS
I. Agreement and Plan of Merger
II. Stock Option Agreement
III. Opinion of Danielson Associates, Inc.
A-1
<PAGE>
AGREEMENT AND PLAN OF MERGER
dated as of July 15, 1998
by and between
SOUTHWEST NATIONAL CORPORATION
and
FIRST COMMONWEALTH FINANCIAL CORPORATION
ANNEX I-1
<PAGE>
TABLE OF CONTENTS
Page
----
I. THE MERGER; EFFECTS OF THE MERGER.............................. 5
1.01. The Merger.............................................. 5
II. CONSIDERATION.................................................. 5
2.01. Merger Consideration.................................... 5
2.02. Shareholder Rights; Stock Transfers..................... 6
2.03. Fractional Shares....................................... 6
2.04. Exchange Procedures..................................... 6
2.05. Anti-Dilution Provisions................................ 8
2.06. Treasury Shares......................................... 8
III. ACTIONS PENDING MERGER......................................... 8
3.01. Ordinary Course......................................... 9
3.02. Capital Stock........................................... 9
3.03. Dividends; Changes in Stock............................. 9
3.04. Compensation: Employment Agreements; Etc................ 9
3.05. Benefit Plans........................................... 10
3.06. Acquisitions and Dispositions........................... 10
3.07. Amendment............................................... 10
3.08. Accounting Methods...................................... 10
3.09. Adverse Actions......................................... 10
3.10. Indebtedness............................................ 11
3.11. Agreements.............................................. 11
IV. REPRESENTATIONS AND WARRANTIES................................. 11
4.01. Disclosure Letters...................................... 11
4.02. Standard................................................ 11
4.03. Representations and Warranties.......................... 11
V. COVENANTS...................................................... 20
5.01. Best Efforts............................................ 20
5.02. Shareholder Approvals................................... 20
5.03. Registration Statement.................................. 21
5.04. Press Releases.......................................... 22
5.05. Access; Information..................................... 22
5.06. Acquisition Proposals................................... 22
5.07. Affiliate Agreements.................................... 23
5.08. Takeover Laws........................................... 23
5.09. Shares Listed........................................... 24
ANNEX I-2
<PAGE>
5.10. Regulatory Applications................................. 24
5.11. Indemnification......................................... 25
5.12. Benefit Plans; Employment Contracts..................... 26
5.13. Certain Director and Officer Positions.................. 27
5.14. Notification of Certain Matters......................... 27
5.15. Dividend Adjustment..................................... 27
5.16. Post-Merger Operations.................................. 28
VI. CONDITIONS TO CONSUMMATION OF THE MERGER....................... 28
6.01. Shareholder Vote........................................ 28
6.02. Regulatory Approvals.................................... 28
6.03. Third Party Consents.................................... 28
6.04. No Injunction, Etc...................................... 29
6.05. Pooling Letters......................................... 29
6.06. Representations, Warranties and Covenants of FCFC....... 29
6.07. Representations, Warranties and Covenants of Southwest.. 29
6.08. Effective Registration Statement........................ 29
6.09. Blue-Sky Permits........................................ 29
6.10. Tax Opinion............................................. 29
6.11. NYSE Listing............................................ 30
VII. TERMINATION.................................................... 30
7.01. Termination............................................. 30
7.02. Effect of Termination and Abandonment................... 32
VIII. OTHER MATTERS.................................................. 32
8.01. Survival................................................ 32
8.02. Waiver; Amendment....................................... 32
8.03. Counterparts............................................ 32
8.04. Governing Law........................................... 32
8.05. Expenses................................................ 32
8.06. Confidentiality......................................... 32
8.07. Notices................................................. 33
8.08. Definitions............................................. 33
8.09. Entire Understanding; No Third Party Beneficiaries...... 34
8.10. Headings................................................ 34
ANNEX I-3
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 15th day of July, 1998 (this
"Plan"), by and between SOUTHWEST NATIONAL CORPORATION ("Southwest"), and FIRST
COMMONWEALTH FINANCIAL CORPORATION ("FCFC").
RECITALS:
A. Southwest. Southwest is a corporation duly organized and existing in good
---------
standing under the laws of the Commonwealth of Pennsylvania, with its principal
executive offices located in Greensburg, Pennsylvania. Southwest has 10,000,000
authorized shares of common stock, each of $2.50 par value ("Southwest Common
Stock"), of which as of June 30, 1998, 137,049 shares of Southwest Common Stock
were issued and held by Southwest as treasury stock and 3,043,738 shares of
Southwest Common Stock were issued and outstanding.
B. FCFC. FCFC is a corporation duly organized and existing in good
----
standing under the laws of the Commonwealth of Pennsylvania, with its principal
executive offices located in Indiana, Pennsylvania. FCFC has 100,000,000
authorized shares of common stock, each of $1.00 par value ("FCFC Common
Stock"), of which, as of June 30, 1998, 22,100,633 shares of FCFC Common Stock
were issued and outstanding.
C. Stock Option Agreement. As a condition and inducement to FCFC's
----------------------
willingness to enter into this Plan, concurrently with the execution and
delivery of this Plan, Southwest has executed and delivered a Stock Option
Agreement with FCFC (the "Stock Option Agreement") in substantially the form
attached hereto as Exhibit A, pursuant to which Southwest is granting to FCFC an
option to purchase, under certain circumstances, shares of Southwest Common
Stock.
D. Intention of the Parties. It is the intention of the parties to
------------------------
this Plan that the Merger (as defined in Section 1.01) shall (i) be accounted
for as a "pooling of interests" under generally accepted accounting principles
and (ii) qualify as a reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code" ).
E. Approvals. The Board of Directors of each of Southwest and FCFC
---------
(i) has determined that this Plan and the transactions contemplated hereby are
consistent with, and in furtherance of, its respective business strategies and
(ii) has approved, at meetings of each of such Boards of Directors, this Plan.
NOW, THEREFORE, in consideration of their mutual promises and obligations, the
parties hereto approve, adopt and make this Plan and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
ANNEX I-4
<PAGE>
I. THE MERGER; EFFECTS OF THE MERGER.
1.01. The Merger. At the Effective Time (as defined in Section 1.01):
----------
(A) The Continuing Corporation. Southwest shall merge with and
--------------------------
into FCFC (the "Merger"), the separate existence of Southwest shall cease and
FCFC shall survive and continue to exist as a Pennsylvania corporation (FCFC
sometimes being referred to herein as the "Continuing Corporation" after the
Effective Time).
(B) Effective Time of the Merger. Subject to the provisions of
----------------------------
this Plan, articles of merger (the "Articles of Merger") shall be duly prepared,
executed and acknowledged by FCFC and Southwest, and thereafter filed with the
office of the Secretary of the Commonwealth of Pennsylvania, as provided in the
Pennsylvania Business Corporation Law (the "BCL"), on the Closing Date (as
defined in Section 1.01(C)). The Merger shall become effective upon the filing
of the Articles of Merger with the Secretary of the Commonwealth of Pennsylvania
or at such time thereafter as is provided in the Articles of Merger (the
"Effective Time"), in accordance with ((S))1928 of the Pennsylvania Business
Corporation Law (the "BCL"). The Merger shall have the effects prescribed in
((S))1929 of the BCL.
(C) Closing. The closing of the Merger (the "Closing") will take
-------
place at 10:00 a.m. on a date to be specified by the parties, which shall be the
first day which is at least two business days after satisfaction or waiver
(subject to applicable law) of the conditions (excluding conditions that, by
their terms, cannot be satisfied until the Closing Date) set forth in Article VI
(the "Closing Date"), unless another time or date is agreed to in writing by the
parties hereto. The Closing shall be held at such location as is agreed to in
writing by the parties hereto.
(D) Articles of Incorporation and By-laws. The articles of
-------------------------------------
incorporation and by-laws of the Continuing Corporation shall be those of FCFC,
as in effect immediately prior to the Effective Time [and as further amended as
of the Effective Time as contemplated by this Plan].
II. CONSIDERATION.
2.01. Merger Consideration . Subject to the provisions of this Plan, at
--------------------
the Effective Time, automatically by virtue of the Merger and without any
action on the part of any shareholder
(A) Outstanding FCFC Common Stock. Each share of FCFC Common Stock
-----------------------------
issued and outstanding immediately prior to the Effective Time shall be
unchanged and shall remain issued and outstanding common stock of the Continuing
Corporation. Shares of FCFC
ANNEX I-5
<PAGE>
Common Stock owned by Southwest or its wholly-owned subsidiaries (other than
shares held in trust, managed, custodial or nominee accounts and the like, that
in any such case are beneficially owned by third parties (any such shares,
"Trust Account shares") and shares acquired in respect of debts previously
contracted (any such shares, "DPC shares")) shall become treasury stock of FCFC.
(B) Outstanding Southwest Common Stock. Each share (excluding
----------------------------------
shares held by Southwest or any of its wholly-owned subsidiaries (as defined in
Section 8.08) ("Treasury Shares") or by FCFC or any of its wholly-owned
subsidiaries, in each case other than Trust Account shares or DPC shares) of
Southwest Common Stock issued and outstanding immediately prior to the Effective
Time shall become and be converted into the right to receive 2.9 shares (subject
to possible adjustment as set forth in Sections 2.05 and 7.01(D), the "Exchange
Ratio") of FCFC Common Stock. All shares of Southwest Common Stock owned by
Southwest as Treasury Shares and all shares of Southwest Common Stock owned by
FCFC or a wholly-owned subsidiary of FCFC or of Southwest (other than Trust
Account shares or DPC shares) shall be cancelled and retired and shall cease to
exist and no shares of FCFC or other consideration shall be deliverable in
exchange therefor.
2.02. Shareholder Rights; Stock Transfers. At the Effective Time, holders
-----------------------------------
of Southwest Common Stock shall cease to be, and shall have no rights as,
shareholders of Southwest, other than to receive the consideration provided
under this Article II. After the Effective Time, there shall be no transfers on
the stock transfer books of Southwest or the Continuing Corporation of shares of
Southwest Common Stock.
2.03. Fractional Shares. Notwithstanding any other provision hereof, no
-----------------
fractional shares of FCFC Common Stock and no certificates or scrip therefor, or
other evidence of ownership thereof, will be issued in the Merger; instead, FCFC
shall pay to each holder of Southwest Common Stock who would otherwise be
entitled to a fractional share an amount in cash determined by multiplying such
fraction by the average of the last sale prices of FCFC Common Stock, (as
reported in The Wall Street Journal or, if not reported therein, in another
authoritative source), for the ten trading days immediately preceding the
Effective Date.
2.04. Exchange Procedures.
-------------------
(A) As of the Effective Time, FCFC shall, or shall cause to be
deposited, with The Bank of New York (or another bank selected by FCFC and
reasonably acceptable to Southwest) (the "Exchange Agent"), for the benefit of
the holders of shares of Southwest Common Stock, for exchange in accordance with
Sections 2.01 and 2.03, certificates representing the shares of FCFC Common
Stock and the cash in lieu of fractional shares (such cash and certificates for
shares of FCFC Common Stock, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund") to be
issued in exchange for outstanding shares of Southwest Common Stock.
(B) Promptly after the Effective Time, FCFC shall cause the
Exchange Agent to mail to each holder of record of a certificate or certificates
previously representing shares of
ANNEX I-6
<PAGE>
Southwest Common Stock (each a "Certificate") the following: (i) a letter of
transmittal specifying that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent, which shall be in a form and contain any other provisions as
are mutually agreeable to FCFC and Southwest; and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of FCFC Common Stock and cash in lieu of fractional shares.
Upon the proper surrender of a Certificate to the Exchange Agent, together with
a properly completed and duly executed letter of transmittal, the holder of such
Certificate shall be entitled to receive in exchange therefor (x) a certificate
representing that number of whole shares of FCFC Common Stock and (y) a check
representing the amount of cash in lieu of any fractional shares and unpaid
dividends and distributions, if any, which such holder has the right to receive
in respect of the Certificate surrendered pursuant to the provisions of Sections
2.01 and 2.03, and the Certificate so surrendered shall forthwith be canceled.
No interest will be paid or accrued on the cash in lieu of fractional shares and
unpaid dividends and distributions, if any, payable to holders of Certificates.
In the event of a transfer of ownership of any shares of Southwest Common Stock
not registered in the transfer records of Southwest, a certificate representing
the proper number of shares of FCFC Common Stock, together with a check for the
cash to be paid in lieu of fractional shares, may be issued to the transferee if
the Certificate representing such Southwest Common Stock is presented to the
Exchange Agent, accompanied by documents sufficient (1) to evidence and effect
such transfer and (2) to evidence that all applicable stock transfer taxes have
been paid.
(C) Whenever a dividend or other distribution is declared by FCFC
on the FCFC 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 Plan; provided that after the 30th day
following the Effective Date no dividend or other distribution declared or made
on the FCFC Common Stock shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of FCFC Common Stock represented thereby
until the holder of such Certificate shall duly surrender such Certificate in
accordance with this Section 2.04. Following such surrender of any such
Certificate, there shall be paid to the holder of the certificates representing
whole shares of FCFC Common Stock issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of dividends or other
distributions having a record date after the Effective Time theretofore payable
with respect to such whole shares of FCFC Common Stock and not yet paid and (ii)
at the appropriate payment date, the amount of dividends or other distributions
having (x) a record date after the Effective Time but prior to surrender and (y)
a payment date subsequent to surrender payable with respect to such whole shares
of FCFC Common Stock.
(D) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any FCFC Common Stock) that remains unclaimed by the
shareholders of Southwest for six months after the Effective Time shall be
repaid to FCFC. Any shareholders of Southwest who have not theretofore complied
with this Section 2.04 shall thereafter look only to FCFC for payment of their
shares of FCFC Common Stock, cash in lieu of fractional shares and any unpaid
dividends and distributions on the FCFC Common Stock deliverable in respect of
each share of Southwest Common Stock such shareholder holds as
ANNEX I-7
<PAGE>
determined pursuant to this Plan, in each case, without any interest thereon. If
outstanding certificates for shares of the Southwest Common Stock are not
surrendered or the payment for them not claimed prior to the date on which such
payments would otherwise escheat to or become the property of any governmental
unit or agency, the unclaimed items shall, to the extent permitted by abandoned
property and any other applicable law, become the property of FCFC (and to the
extent not in its possession shall be paid over to it), free and clear of all
claims or interest of any person previously entitled to such claims.
Notwithstanding the foregoing, none of FCFC, the Exchange Agent or any other
person shall be liable to any former holder of the Southwest Common Stock for
any amount delivered to a public body or official pursuant to applicable
abandoned property, escheat or similar laws.
(E) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by FCFC, the
posting by such person of a bond in such amount as FCFC may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of FCFC Common Stock and cash in lieu of fractional
shares (and unpaid dividends and distributions thereon) deliverable in respect
thereof pursuant to this Plan.
(F) Notwithstanding anything in this Plan to the contrary, for a
period of 90 days after the Effective Date holders of Certificates shall be
entitled to vote the number of whole shares of FCFC Common Stock into which
their Southwest Common Stock was converted in the Merger as holders of such
shares of FCFC Common Stock notwithstanding that such Certificates shall not
have been exchanged.
2.05. Anti-Dilution Provisions. In the event FCFC changes (or establishes
------------------------
a record date for changing) the number of shares of FCFC Common Stock issued and
outstanding prior to the Effective Date as a result of a stock split, stock
dividend, recapitalization or similar transaction with respect to the
outstanding FCFC Common Stock and the record date therefor shall be prior to the
Effective Date, the Exchange Ratio shall be proportionately adjusted.
2.06. Treasury Shares. Each of the shares of Southwest Common Stock held
---------------
as Treasury Shares immediately prior to the Effective Time shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
III. ACTIONS PENDING MERGER.
From the date hereof until the Effective Time, except as expressly
contemplated in this Plan. (i) without the prior written consent of FCFC (which
consent shall not be unreasonably withheld or delayed) Southwest will not, and
will cause each of its subsidiaries not to, and (ii) without the prior written
consent of Southwest (which consent shall not be unreasonably withheld or
delayed) FCFC will not, and will cause each of its subsidiaries not to:
ANNEX I-8
<PAGE>
3.01. Ordinary Course. Conduct the business of it and its subsidiaries
---------------
other than in the ordinary and usual course or, to the extent consistent
therewith, fail to use reasonable efforts to preserve intact their business
organizations and assets and maintain their rights, franchises and existing
relations with customers, suppliers, employees and business associates, or
knowingly take any action that would, or might reasonably be expected to (unless
such action is required by law or sound banking practice) (i) adversely affect
the ability of any party to obtain any necessary approvals of any Regulatory
Authorities (as defined in Section 4.03(1)) required for the transactions
contemplated hereby without the imposition of any burdensome condition of the
type referred to in Section 6.02 or (ii) adversely affect its ability to perform
any of its material obligations under this Plan, provided that nothing in this
Plan shall be deemed to restrict the ability of a party to exercise its rights
under the applicable Stock Option Agreement.
3.02. Capital Stock. Other than (i) as Previously Disclosed in Section
-------------
4.03(C) of its Disclosure Letter (as defined in Section 4.01), (ii) pursuant to
the exercise of stock options outstanding on the date hereof or thereafter
issued as permitted by this Section 3.02, (iii) in connection with acquisitions
of businesses permitted in Section 3.06, (iv) in the case of FCFC, pursuant to
employee benefit plans or programs in effect on the date of this Plan, or (v)
under the Stock Option Agreement, (x) issue, sell or otherwise permit to become
outstanding any additional shares of capital stock, any stock appreciation
rights, or any Rights (as defined in Section 8.08), (y) enter into any agreement
with respect to the foregoing, or (z) permit additional shares of capital stock
to become subject to new grants of employee stock options, stock appreciation
rights, or similar stock-based employee rights prior to the Effective Time.
3.03. Dividends; Changes in Stock. Unless action is required pursuant to
---------------------------
Section 5.15, (1) make, declare or pay any dividend on or in respect of, or
declare or make any distribution on any shares of its capital stock, except (A)
Southwest may continue the declaration and payment of regular quarterly cash
dividends of $0.35 per share of Southwest Common Stock and FCFC may continue the
declaration and payment of regular quarterly cash dividends of $0.22 per share
of FCFC Common Stock, in each case with usual record and payment dates for such
dividends in accordance with such parties' past dividend practice, and (B) for
dividends by a wholly-owned subsidiary of such party, and (2) except as
Previously Disclosed in Section 3.03 of its Disclosure Letter, directly or
indirectly combine, redeem, reclassify, purchase or otherwise acquire, any
shares of its capital stock (other than acquisition of Trust Account shares or
DPC shares in the ordinary course of business).
3.04. Compensation: Employment Agreements; Etc. In the case of Southwest
-----------------------------------------
and its subsidiaries, except as permitted by Section 5.12, enter into or amend
any written employment, severance or similar agreements or arrangements with any
of its directors, officers or employees, or grant any salary or wage increase or
increase any employee benefit (including incentive or bonus payments), except
for (i) normal individual increases in compensation to employees in the ordinary
course of business consistent with past practice (including taking into account
deferred increases) or (ii) other changes as may be required by law or to
satisfy contractual obligations existing as of the date hereof consistent with
past practice, which to the extent practicable have been Previously Disclosed in
Section 3.04 of its Disclosure Letter.
ANNEX I-9
<PAGE>
3.05. Benefit Plans. In the case of Southwest and its subsidiaries, enter
-------------
into or modify (except as may be required by applicable law or to satisfy
contractual obligations existing as of the date hereof, which have been
Previously Disclosed in Section 3.05 of its Disclosure Letter) any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees, including without limitation taking any action that accelerates the
vesting or exercise of any benefits payable thereunder.
3.06. Acquisitions and Dispositions. Except as Previously Disclosed in
-----------------------------
Section 3.06 of its Disclosure Letter and except for dispositions and
acquisitions of assets in the ordinary and usual course of business consistent
with past practice, dispose of or discontinue any portion of its assets,
business or properties, which is material to it and its subsidiaries taken as a
whole, or merge or consolidate with, or acquire (other than by way of
foreclosures or acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each case in the
ordinary and usual course of business consistent with past practice) all or any
portion of, the business or property of any other entity (any of the foregoing,
a "Business Combination Transaction"), except that FCFC may enter into an
agreement or agreements for, and may consummate, Business Combination
Transactions in which the aggregate purchase price or prices paid by FCFC and/or
its subsidiaries does not exceed $10,000,000 or the aggregate number of shares
of FCFC Common Stock issuable does not exceed 10% of the number of such shares
outstanding on June 30, 1998 (the "10% Limit"). Notwithstanding the foregoing,
with the prior consent of a majority of the Southwest Board of Directors, FCFC
may enter into an agreement or agreements for Business Combination Transactions
in which the aggregate purchase price or prices paid exceeds $10,000,000 or
includes shares of FCFC Common Stock in excess of the 10% Limit.
3.07. Amendment. Amend its articles of incorporation or by-laws.
---------
3.08. Accounting Methods. Implement or adopt any change in its
------------------
accounting principles, practices or methods, other than as may be required by
generally accepted accounting principles.
3.09. Adverse Actions. (1) Knowingly take any action that would, or is
---------------
reasonably likely to, prevent or impede the Merger from qualifying (i) for
pooling-of-interests accounting treatment or (ii) as a reorganization within the
meaning of Section 368(a) of the Code; or (2) knowingly take any action that is
intended or is reasonably likely to result in (w) any of its representations and
warranties set forth in this Plan being or becoming untrue in any material
respect at any time prior to the Effective Time, (x) any of the conditions to
the Merger set forth in Article VI not being satisfied, (y) a material violation
of any provision of either Stock Option Agreement, or (z) a material violation
of any provision of this Plan except, in every case, as may be required by
applicable law; provided, however, that nothing contained in this Agreement
shall limit the ability of FCFC to exercise its rights under the Stock Option
Agreement.
ANNEX I-10
<PAGE>
3.10. Indebtedness. No party shall, or shall permit any of its
------------
subsidiaries to, incur any long-term indebtedness for borrowed money or
guarantee any such long-term indebtedness or issue or sell any long-term debt
securities or warrants or rights to acquire any long-term debt securities of
such party or any of its subsidiaries or guarantee any long-term debt securities
of such party or any of its subsidiaries or guarantee any long-term debt
securities of others other than (i) in replacement for existing or maturing
debt, (ii) indebtedness of any subsidiary of a party to such party or another
subsidiary of such party or (iii) in the ordinary course of business consistent
with prior practice.
3.11. Agreements. Agree or commit to do anything prohibited by Sections
----------
3.01 through 3.10.
IV. REPRESENTATIONS AND WARRANTIES.
4.01. Disclosure Letters. Concurrently herewith, FCFC has delivered
------------------
to Southwest and Southwest has delivered to FCFC a letter (as the case may be,
its "Disclosure Letter") setting forth certain items of disclosure with respect
to the representations and warranties set forth below. The mere inclusion of an
item in a Disclosure Letter shall not be deemed an admission by a party that
such item represents a material exception or fact, event or circumstance or that
such item is reasonably likely to result in a Material Adverse Effect (as
defined in Section 8.08).
4.02. Standard. No representation or warranty of FCFC or Southwest
--------
contained in Section 4.03 (other than the representations and warranties
contained in (i) Sections 4.03(A) (with respect to the facts set forth in
Recitals A and B), (C), (U) and (V)(ii), which shall be true and correct (except
for inaccuracies which are de minimis in amount) and (ii) Sections
4.03(D)(l)(i)-(iv), (E), (F), M(1)-(2), (P), (Q) and (V)(i) which shall be true
and correct in all material respects) shall be deemed untrue or incorrect, and
no party hereto shall be deemed to have breached a representation or warranty,
as a consequence of the existence or absence of any fact, circumstance or event
if such fact, circumstance or event, individually or taken together with all
other facts, circumstances or events inconsistent with any paragraph of Section
4.03 is not reasonably likely to have a Material Adverse Effect.
4.03. Representations and Warranties. Subject to Sections 4.01 and 402,
------------------------------
Southwest hereby represents and warrants to FCFC, and FCFC hereby represents
and warrants to Southwest, as follows:
(A) Recitals. In the case of the representations and warranties of
--------
Southwest, the facts set forth in Recitals A, C, D and E of this Plan with
respect to it are true and correct. In the case of the representations and
warranties of FCFC, the facts set forth in Recitals B, C, D and E of this Plan
with respect to it are true and correct.
(B) Organization, Standing, and Authority. It is duly qualified to
-------------------------------------
do business and is in good standing in the states of the United States and
foreign jurisdictions where its
ANNEX I-11
<PAGE>
ownership or leasing of property or the conduct of its business requires it to
be so qualified. It has in effect all federal, state, local, and foreign
governmental authorizations, licenses and approvals necessary for it to own or
lease its properties and assets and to carry on its business as it is now
conducted. The Articles of Incorporation and by-laws of it, copies of which were
furnished to (i) FCFC, in the case of Southwest, and (ii) Southwest, in the case
of FCFC, are true, correct and complete copies of such documents as in effect on
the date of this Agreement.
(C) Shares.
------
(1) The outstanding shares of its capital stock have been duly
authorized and are validly issued and outstanding, fully paid and non-
assessable, and subject to no preemptive rights (and were not issued
in violation of any preemptive rights). Except as Previously
Disclosed in Section 4.03(C) of its Disclosure Letter or, in the case
of FCFC, as may be permitted by Sections 3.06, there are no shares of
its capital stock authorized and reserved for issuance, it does not
have any Rights issued or outstanding with respect to its capital
stock, and it does not have any commitment to authorize, issue, sell,
repurchase or redeem any such shares or Rights, except pursuant to
this Plan and the relevant Stock Option Agreement. Between June 30,
1998 and the date of this Plan, it has issued no shares of its capital
stock or Rights except pursuant to commitments Previously Disclosed in
Section 4.03(C) of its Disclosure Letter.
(2) In the case of the representations and warranties of FCFC,
the shares of FCFC Common Stock to be issued in exchange for shares of
Southwest Common Stock in the Merger, when issued in accordance with
the terms of this Plan will be duly authorized, validly issued, fully
paid and non-assessable.
(D) Subsidiaries.
------------
(1) (i) It has Previously Disclosed in Section 4.03(D) of its
Disclosure Letter a list of all its subsidiaries as of the date of
this Plan together with the state or other jurisdiction of
incorporation for each such subsidiary and the percentage of the
issued and outstanding voting securities owned by it, (ii) no equity
securities of any of its significant subsidiaries (as defined in
Section 8.08) are or may become required to be issued (other than to
it or a subsidiary of it) by reason of any Rights, (iii) it owns 100%
of the issued and outstanding voting securities of each significant
subsidiary (except for directors' qualifying shares, if any), (iv)
there are no contracts, commitments, understandings or arrangements by
which any of its significant subsidiaries is or may be bound to sell
or otherwise transfer any shares of the capital stock of any such
significant subsidiary (other than to it or a subsidiary of it), (v)
there are no contracts, commitments, understandings or arrangements
relating to its rights to vote or to dispose of shares of any
significant subsidiary (other than to it or a subsidiary of it), and
(vi) all of the shares of capital stock of each such significant
subsidiary held by it or its subsidiaries are fully paid and (except
pursuant to 12 U.S.C. Section 55 or
ANNEX I-12
<PAGE>
equivalent state statutes in the case of banking subsidiaries) non-
assessable and are owned by it or its subsidiaries free and clear of
any charge, mortgage, pledge, security interest, restriction, claim,
lien or encumbrance ("Liens").
(2) Except as Previously Disclosed in Section 4.03(D) of its
Disclosure Letter, it does not own (other than Trust Account shares
and DPC shares) beneficially, directly or indirectly, any shares of
any equity securities or similar interests of any person, or any
interest in a partnership or joint venture of any kind.
(3) Each of its significant subsidiaries has been duly organized
and is validly existing in good standing under the laws of the
jurisdiction in which it is incorporated or organized, is duly
qualified to do business and in good standing in the jurisdictions
where its ownership or leasing of property or the conduct of its
business requires it to be so qualified, and has in effect all
federal, state, local and foreign governmental authorizations,
licenses and approvals necessary for it to own or lease its properties
and assets and to carry out its business as it is now conducted.
(E) Corporate Power. It and each of its significant subsidiaries
---------------
has the corporate power and authority to carry on its business as it is now
being conducted and to own all its properties and assets; and it has the
corporate power and authority to execute, deliver and perform its obligations
under this Plan and the Stock Option Agreement.
(F) Corporate Authority. Subject, in the case of this Plan, to
-------------------
receipt of the requisite approval of its shareholders referred to in Section
6.01, the execution and delivery of this Plan and the Stock Option Agreement and
the consummation of the transactions contemplated hereby and thereby have been
authorized by all necessary corporate action on its part, and this Plan and, as
to Southwest, the Stock Option Agreement have been duly executed and delivered
by it, and each is a valid and binding agreement of it, enforceable in
accordance with its terms (except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors rights or by general
equity principles).
(G) No Defaults. Except as Previously Disclosed in Section 4.03(G)
-----------
of its Disclosure Letter, subject to receipt of the Regulatory Approvals, and
expiration of the waiting periods, referred to in Section 6.02 and the required
filings under federal and state securities laws, the execution, delivery and
performance of this Plan and the Stock Option Agreement and the completion of
the transactions contemplated hereby and thereby by it, do not and will not (i)
constitute a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of it or of any of its significant
subsidiaries or to which it or any of its significant subsidiaries or properties
is subject or bound, (ii) constitute a breach or violation of, or a default
under, its Articles of Incorporation or by-laws, or (iii) require any consent or
approval under any such law,
ANNEX I-13
<PAGE>
rule, regulation, judgment, decree, order, governmental permit or license
agreement, indenture or instrument.
(H) Financial Reports and SEC Documents. Its Annual Report on Form
-----------------------------------
10-K for the fiscal year ended December 31, 1997, and all other reports,
registration statements, definitive proxy statements or information statements
filed or to be filed by it or any of its subsidiaries subsequent to December 31,
1997 under the Securities Act of 1933, as amended (together with the rules and
regulations thereunder, the "Securities Act"), or under Sections 13(a), 13(c),
14 and 15(d) of the Securities Exchange Act of 1934, as amended (together with
the rules and regulations thereunder, the "Exchange Act"), in the form filed, or
to be filed (collectively, its "SEC Documents"), with the Securities and
Exchange Commission (the "SEC") (i) complied or will comply as of the date of
filing thereof in all material respects as to form with the applicable
requirements under the Exchange Act and (ii) did not and will not contain as of
the date of filing thereof any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; and each of the balance sheets in or incorporated by
reference into any such SEC Document (including the related notes and schedules
thereto) fairly presents and will fairly present the financial position of the
entity or entities to which it relates as of its date and each of the statements
of income and changes in shareholders' equity and cash flows or equivalent
statements in such report and documents (including any related notes and
schedules thereto) fairly presents and will fairly present the results of
operations, changes in shareholders' equity and changes in cash flows, as the
case may be, of the entity or entities to which it relates for the periods set
forth therein, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except in each case
as may be noted therein, subject to normal and recurring year-end audit
adjustments in the case of unaudited statements. All material agreements,
contracts and other documents required to be filed by it as exhibits to any SEC
Document have been so filed.
(I) Litigation; Regulatory Action. Except as Previously Disclosed
-----------------------------
in Section 4.03(I) of its Disclosure Letter:
(1) no material litigation or proceeding before any court or
governmental agency is pending against it or any of its subsidiaries
and, to the best of its knowledge, no such litigation, proceeding or
controversy has been threatened;
(2) neither it nor any of its subsidiaries or properties is a
party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or
similar submission to, or has adopted any board resolution at the
request of, any federal or state governmental agency or authority
charged with the supervision or regulation of financial institutions
or their holding companies or the issuance of securities or engaged in
the insurance of deposits (including, without limitation, the Office
of the Comptroller of the Currency, the Board of Governors of the
Federal Reserve System and the Federal Deposit Insurance Corporation)
or the supervision or
ANNEX I-14
<PAGE>
regulation of it or any of its subsidiaries (collectively, the
"Regulatory Authorities"); and
(3) neither it nor any of its subsidiaries has been advised by
any Regulatory Authority that such Regulatory Authority is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree,
agreement, memorandum of understanding, commitment letter or similar
submission or any such resolutions.
(J) Compliance with Laws. Except as Previously Disclosed in Section
--------------------
4.03(J) of its Disclosure Letter, it and each of its subsidiaries:
(1) is in compliance, in the conduct of its business, with all
applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees
applicable thereto or to the employees conducting such businesses,
including, without limitation, the Equal Credit Opportunity Act, the
Fair Housing Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act and all other applicable fair lending laws and other
laws relating to discriminatory business practices;
(2) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Regulatory Authorities that are required in order to permit
them to conduct their businesses substantially as presently conducted;
all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the best of its
knowledge, no suspension or cancellation of any of them is threatened;
and
(3) has received, since December 31, 1997, no notification or
communication from any Regulatory Authority (i) asserting that it or
any of its subsidiaries is not in compliance with any of the statutes,
regulations, or ordinances which such Regulatory Authority enforces or
(ii) threatening to revoke any license, franchise, permit, or
governmental authorization or (iii) threatening or contemplating
revocation or limitation of, or which would have the effect of
revoking or limiting, federal deposit insurance (nor, to its
knowledge, do any grounds for any of the foregoing exist).
(K) Defaults; Properties.
--------------------
(1) Except as Previously Disclosed in Section 4.03(K) of its
Disclosure Letter, neither it nor any of its subsidiaries is in
default under any contract, agreement, commitment arrangement, lease,
insurance policy, or other instrument to which it is a party, by which
its respective assets, business, or operations may be bound or
affected, or under which it or its respective assets, business, or
operations receives benefits, and there has not occurred any event
ANNEX I-15
<PAGE>
that, with the lapse of time or the giving of notice or both, would
constitute such a default.
(2) Except as disclosed or reserved against in its SEC Documents,
it and its subsidiaries have good and marketable title, free and clear
of all Liens (other than Liens for current taxes not yet delinquent or
pledges to secure deposits) to all of the properties and assets,
tangible or intangible, reflected in its SEC Documents as being owned
by it or its subsidiaries as of the dates thereof. To its knowledge,
all buildings and all fixtures, equipment and other property and
assets are held under valid leases or subleases by it or its
subsidiaries enforceable in accordance with their respective terms
(except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of
general applicability affecting creditors' rights or by general equity
principles).
(L) No Brokers. Except as set forth in Section 4.03(L) of its
----------
Disclosure Letter, all negotiations relative to this Plan and the transactions
contemplated hereby have been carried on by it directly with the other party
hereto and no action has been taken by it that would give rise to any valid
claim against the other party hereto for a brokerage commission, finder's fee or
other like payment.
(M) Employee Benefit Plans.
----------------------
(1) Section 4.03(M) of its Disclosure Letter contains a complete
list of all bonus, vacation, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock and stock option plans,
all employment or severance contracts, all medical, dental,
disability, health and life insurance plans, all other employee
benefit and fringe benefit plans, contracts or arrangements and any
applicable "change of control" or similar provisions in any plan,
contract or arrangement maintained or contributed to by it or any of
its subsidiaries for the benefit of officers, former officers,
employees, former employees, directors, former directors, or the
beneficiaries of any of the foregoing ("Compensation and Benefit
Plans").
(2) True and complete copies of its Compensation and Benefit
Plans, including, but not limited to, any trust instruments and/or
insurance contracts, if any, forming a part thereof, and all
amendments thereto have been supplied to the other party.
(3) Each of its Compensation and Benefit Plans has been
administered in compliance with the terms thereof. All "employee
benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), other
than "multiemployer plans" within the meaning of Section 3(37) of
ERISA ("Multiemployer Plans"), covering
ANNEX I-16
<PAGE>
employees or former employees of it and its subsidiaries
(its "Plans"), to the extent subject to ERISA, are in compliance in
all material respects with ERISA, the Code, the Age Discrimination in
Employment Act and other applicable laws. Each Plan of it or its
subsidiaries which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA ("Pension Plan") and which is
intended to be qualified under Section 401(a) of the Code has received
(or has applied for) a favorable determination letter from the
Internal Revenue Service, and it is not aware of any circumstances
reasonably likely to result in the revocation or denial of any such
favorable determination letter. Except as Previously Disclosed in
Section 4.03(M) of its Disclosure Letter, there is no pending or, to
its knowledge, threatened litigation or governmental audit,
examination or investigation relating to the Plans. Neither it nor any
of its subsidiaries has engaged in a transaction with respect to any
Plan that, assuming the taxable period of such transaction expired as
of the date hereof, could subject it or any of its subsidiaries to a
tax or penalty imposed by either Section 4975 of the Code or Section
502(i) of ERISA.
(4) No liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by it or any of its
subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan" within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or the single-
employer plan of any entity which is considered one employer with it
under Section 4001(a)(15) of ERISA or Section 414 of the Code (an
"ERISA Affiliate"). Neither it nor any of its subsidiaries presently
contributes to a Multiemployer Plan, nor have they contributed to such
a plan within the past five calendar years. No notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which the 30-
day reporting requirement has not been waived, has been required to be
filed for any Pension Plan of it or any of its subsidiaries or by any
ERISA Affiliate within the past 12 months.
(5) All contributions, premiums and payments required to be made
under the terms of any Plan of it or any of its subsidiaries have been
made. Neither any Pension Plan of it or any of its subsidiaries nor
any single employer plan of an ERISA Affiliate of it or any of its
subsidiaries has an accumulated funding deficiency (whether or not
waived) within the meaning of Section 412 of the Code or Section 302
of ERISA. Neither it nor any of its subsidiaries has provided, or is
required to provide, security to any Pension Plan or to any single-
employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of
the Code.
(6) Under each Pension Plan of it or any of its subsidiaries
which is a single-employer plan, as of the last day of the most recent
plan year ended prior to the date hereof, the actuarially determined
present value of all benefit liabilities, within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Plan's most recent
ANNEX I-17
<PAGE>
actuarial valuation), did not exceed the then current value of the
assets of such Plan, and there has been no adverse change in the
financial condition of such Plan (with respect to either assets or
benefits) since the last day of the most recent Plan year.
(7) Neither it nor any of its subsidiaries has any obligations
for retiree health and life benefits under any plan, except as
Previously Disclosed in Section 4.03(M) of its Disclosure Letter.
(8) Each Compensation and Benefit Plan which is a group health
plan provides continuation coverage for separating employees and
"qualified beneficiaries" in accordance with the provisions of Section
4980B(f) of the Code. Such group health plans are in compliance with
Section 1862(b)(1) of the Social Security Act.
(9) In the case of the representations and warranties of
Southwest, except as Previously Disclosed in Section 4.03(M) of
Southwest's Disclosure Letter, neither the execution and delivery of
this Plan nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute or otherwise)
becoming due to any director or any employee of Southwest or any of
its subsidiaries under any Compensation and Benefit Plan or otherwise
from Southwest or any of its subsidiaries, (ii) increase any benefits
otherwise payable under any Compensation and Benefit Plan or (iii)
result in any acceleration of the time of payment or vesting of any
such benefit.
(N) Labor Matters. Neither it nor any of its subsidiaries is a
-------------
party to, or is bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is it
or any of its subsidiaries the subject of a proceeding asserting that it or any
such subsidiary has committed an unfair labor practice (within the meaning of
the National Labor Relations Act) or seeking to compel it or such subsidiary to
bargain with any labor organization as to wages and conditions of employment,
nor is there any strike or other labor dispute involving it or any of its
subsidiaries, pending or, to the best of its knowledge, threatened, nor is it
aware of any activity involving it or any of its subsidiaries' employees seeking
to certify a collective bargaining unit or engaging in any other organization
activity.
(O) Insurance. It and its subsidiaries have taken all requisite
---------
action (including without limitation the making of claims and the giving of
notices) pursuant to its directors' and officers' liability insurance policy or
policies in order to preserve all rights thereunder with respect to all matters
(other than matters arising in connection with this Plan and the transactions
contemplated hereby) that are known to it.
(P) Takeover Laws. It has taken all action required to be taken by
-------------
it in order to opt out or exempt this Plan and the Stock Option Agreement, and
the transactions
ANNEX I-18
<PAGE>
contemplated hereby and thereby, from, and this Plan and the Stock Option
Agreement and the transactions contemplated hereby and thereby are exempt from,
the requirements of any "business combination," "moratorium," "disgorgement,"
"control share," or other applicable antitakeover laws and regulations
(collectively, "Takeover Laws") of the Commonwealth of Pennsylvania, including
Chapter 25 of the BCL.
(Q) Vote Required. The affirmative vote of the holders of a majority
-------------
of the shares of its Common Stock present and voting at the meeting referred to
in Section 5.02 is the only vote of the holders of any class or series of its
capital stock necessary to approve this Plan and the transactions contemplated
hereby.
(R) Environmental Matters. Other than as previously disclosed in
---------------------
Section 4.03(R) of its Disclosure Letter, there are no proceedings, claims,
actions, or investigations of any kind, pending or threatened, in any court,
agency, or other government authority or in any arbitral body, arising under any
Environmental Law; there is no reasonable basis for any such proceeding, claim,
action or investigation; there are no agreements, orders, judgments, decrees,
letters or memoranda by or with any court, regulatory agency or other
governmental authority, or with any other entity, imposing any liability or
obligation; there are and have been no Materials of Environmental Concern or
other conditions at any property (whether or not owned, operated, or otherwise
used by, or the subject of a security interest on behalf of, it or any of its
subsidiaries): and there are no reasonably anticipated future events,
conditions, circumstances, practices, plans, or legal requirements that could
give rise to obligations under any Environmental Law. "Environmental Laws" means
the statutes, rules, regulations, ordinances, codes, orders, decrees, and any
other laws (including common law) of any foreign, federal, state, local, and any
other governmental authority, regulating, relating to or imposing liability or
standards of conduct concerning pollution, or protection of human health-and-
safety or of the environment, as in effect on or prior to the date of this
Agreement. "Materials of Environmental Concern" means any hazardous or toxic
substances, materials, wastes, pollutants, or contaminants, including without
limitation those defined or regulated as such under any Environmental Law, and
any other substance the presence of which may give rise to liability under any
Environmental Law.
(S) Tax Reports. Except as Previously Disclosed in Section 4.03(S)
-----------
of its Disclosure Letter: (i) all reports and returns with respect to Taxes (as
defined below) that are required to be filed by or with respect to it or its
subsidiaries, including without limitation consolidated federal income tax
returns of it and its subsidiaries (collectively, the "Tax Returns"), have been
timely filed, or requests for extensions have been timely filed and have not
expired, and such Tax Returns were true, complete and accurate; (ii) all taxes
(which shall include federal, state, local or foreign income, gross receipts,
windfall profits, severance, property, production, sales, use, license, excise,
franchise, employment, withholding or similar taxes imposed on the income,
properties or operations of it or its subsidiaries, together with any interest,
additions, or penalties with respect thereto and any interest in respect of such
additions or penalties, collectively the "Taxes") shown to be due on such Tax
Returns have been paid in full; (iii) all Taxes due with respect to completed
and settled examinations have been paid in full; (iv) no issues have been raised
by the relevant taxing authority in connection with the
ANNEX I-19
<PAGE>
examination of any of such Tax Returns; and (v) no waivers of statutes of
limitations (excluding such statutes that relate to years currently under
examination by the Internal Revenue Service) have been given by or requested
with respect to any Taxes of it or any of its subsidiaries.
(T) Pooling; Reorganization. As of the date hereof, it is aware of
-----------------------
no reason why the Merger will fail to qualify (i) for pooling-of-interests
accounting treatment or (ii) as a reorganization under Section 368(a) of the
Code.
(U) Year 2000. It and each of its subsidiaries has reviewed the
---------
areas within their business and operations which could be adversely affected by
and have developed or are developing a program to address on a timely basis, the
risk that certain computer applications used by it or its subsidiaries may be
unable to recognize and perform properly date sensitive functions involving
dates prior to and after December 31, 1999 (the "Year 2000 Problem"). The Year
2000 Problem will not result in a Material Adverse Effect. It has received from
the Regulatory Authorities a current rating of "satisfactory" in regards to its
Year 2000 preparedness.
(V) No Material Adverse Effect. Since December 31, 1997, except as
--------------------------
previously disclosed in its SEC Documents filed with the SEC on or before the
date hereof or in any Section of its Disclosure Letter, (i) it and its
subsidiaries have conducted their respective businesses in the ordinary and
usual course (excluding the incurrence of expenses related to this Plan and the
transactions contemplated hereby) and (ii) no event has occurred or circumstance
arisen that, individually or taken together with all other facts, circumstances
and events (described in any paragraph of Section 4.03 or otherwise), is
reasonably likely to have a Material Adverse Effect with respect to it.
V. COVENANTS.
Southwest hereby covenants to and agrees with FCFC, and FCFC hereby
covenants to and agrees with Southwest, that:
5.01. Best Efforts. Subject to the terms and conditions of this Plan,
------------
it shall use its best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Merger as promptly as reasonably practicable and to otherwise enable
consummation of the transactions contemplated hereby and shall cooperate fully
with the other party hereto to that end. Southwest shall, and shall cause its
officers, directors and employees to cooperate with and assist FCFC in the
formulation of a plan or plans of integration of the operation of Southwest with
those of FCFC.
5.02. Shareholder Approvals. Each of them shall take, in accordance with
---------------------
applicable law, National Association of Securities Dealers Automated Quotation
("NASDAQ") National Market System ("NMS") rules, in the case of Southwest, and
New York Stock Exchange ("NYSE") rules, in the case of FCFC, and its respective
articles of incorporation and by-laws, all
ANNEX I-20
<PAGE>
action necessary to convene, respectively, (i) an appropriate meeting of
shareholders of FCFC to consider and vote upon the approval of this Plan (the
"FCFC Meeting"), and (ii) an appropriate meeting of shareholders of Southwest to
consider and vote upon the approval of this Plan (the "Southwest Meeting"); each
of the FCFC Meeting and the Southwest meeting, a "Meeting"), respectively, as
promptly as practicable after the Registration Statement (as defined in Section
5.03) is declared effective. The Board of Directors of each of FCFC and
Southwest will recommend approval of such matters, and each of FCFC and
Southwest will take all reasonable lawful action to solicit such approval by its
respective shareholders. Notwithstanding the foregoing, the Board of Directors
of Southwest may determine not to recommend or solicit approval of the Merger or
may withdraw its recommendation in favor of the Merger if it receives a written
opinion of counsel that recommending or soliciting approval of the Merger, or
failing to withdraw its recommendation, would constitute a breach or failure on
the part of the Southwest Board of Directors to perform the duties of their
office and any liability for such breach or failure would not be covered under
Southwest's directors' and officers' liability insurance policy. Southwest and
FCFC shall coordinate and cooperate with respect to the timing of such meetings
and shall use their best efforts to hold such meetings on the same day.
5.03. Registration Statement.
----------------------
(A) Each of FCFC and Southwest agrees to cooperate in the
preparation of a registration statement on Form S-4 (the "Registration
Statement") to be filed by FCFC with the SEC in connection with the issuance of
FCFC Common Stock in the Merger (including the joint proxy statement and
prospectus and other proxy solicitation materials of FCFC and Southwest
constituting a part thereof (the "Joint Proxy Statement")). Each of Southwest
and FCFC agrees to use all reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
reasonably practicable after filing thereof. FCFC also agrees to use all
reasonable efforts to obtain all necessary state securities law or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by
this Agreement. Southwest agrees to furnish to FCFC all information concerning
Southwest, its subsidiaries, officers, directors and shareholders as may be
reasonably requested in connection with the foregoing.
(B) Each of Southwest and FCFC agrees, as to itself and its
subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement and each amendment thereto, if any,
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the Joint
Proxy Statement and any amendment or supplement thereto will, at the date of
mailing to shareholders and at the times of the FCFC Meeting and the Southwest
Meeting, contain any statement which, in the light of the circumstances under
which such statement is made, is false or misleading with respect to any
material fact, or which will omit to state any material fact necessary in order
to make the statements therein not false or misleading or necessary to correct
any statement in any earlier communication with respect to the solicitation of
any proxy for the same meeting in
ANNEX I-21
<PAGE>
the Joint Proxy Statement or any amendment or supplement thereto. Each of
Southwest and FCFC agrees that the Joint Proxy Statement (except, in the case of
Southwest, with respect to portions thereof prepared by FCFC, and except, in the
case of FCFC, with respect to portions thereof prepared by Southwest) will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations of the SEC thereunder, and the Registration
Statement (except, in the case of Southwest, with respect to portions thereof
prepared by FCFC, and except, in the case of FCFC, with respect to portions
thereof prepared by Southwest) will comply as to form in all material respects
with the requirements of the Securities Act and the rules and regulations of the
SEC thereunder.
(C) In the case of FCFC, FCFC will advise Southwest, promptly after
FCFC receives notice thereof, of the time when the Registration Statement has
become effective or any supplement or amendment has been filed, of the issuance
of any stop order or the suspension of the qualification of the FCFC Common
Stock for offering or sale in any jurisdiction, of the initiation or threat of
any proceeding for any such purpose, or of any request by the SEC for the
amendment or supplement of the Registration Statement or for additional
information.
5.04. Press Releases. Except as otherwise required by applicable law or
--------------
the rules of the NASDAQ NMS or NYSE, neither FCFC nor Southwest shall, or shall
permit any of its subsidiaries to, issue or cause the publication of any press
release or other public announcement with respect to, or otherwise make any
public statement concerning, the transactions contemplated by this Plan or the
Stock Option Agreement without the consent of the other party, which consent
shall not be unreasonably withheld.
5.05. Access; Information. Upon reasonable notice, it shall afford the
-------------------
other party and its officers, employees, counsel, accountants and other
authorized representatives, access, during normal business hours throughout the
period prior to the Effective Date, to all of its properties, books, contracts,
commitments and records and, during such period, it shall furnish promptly to it
(i) a copy of each material report, schedule and other document filed by it
pursuant to the requirements of federal or state securities or banking laws, and
(ii) all other information concerning the business, properties and personnel of
it as the other may reasonably request; and it will not use any information
obtained pursuant to this Section 5.05 for any purpose unrelated to the
consummation of the transactions contemplated by this Plan and, if this Plan is
terminated, will hold all information and documents obtained pursuant to this
paragraph in confidence (as provided in Section 8.06) unless and until such time
as such information or documents become publicly available other than by reason
of any action or failure to act by it or as it is advised by counsel that any
such information or document is required by law or applicable NASDAQ or NYSE
rules to be disclosed. No investigation by either party of the business and
affairs of another shall affect or be deemed to modify or waive any
representation, warranty, covenant or agreement in this Plan, or the conditions
to either party's obligation to complete the transactions contemplated by this
Plan.
5.06. Acquisition Proposals. Without the prior written consent of the
---------------------
other, neither Southwest nor FCFC shall, and each of them shall cause its
respective subsidiaries not to, and
ANNEX I-22
<PAGE>
each of them shall direct its officers, directors and employees and bankers,
financial advisors, attorneys, accountants and other representatives
("Representatives") not to, solicit or encourage inquiries or proposals with
respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, any person (other
than the other party hereto) relating to a Takeover Proposal, or enter into any
agreement with respect to or take any action to endorse or recommend a Takeover
Proposal. As used herein, the term "Takeover Proposal" shall mean any proposal
for a merger, consolidation or other business combination involving such party
or such subsidiary or any of its significant subsidiaries (other than a merger,
consolidation or other business combination in which such party is the surviving
corporation), or any tender or exchange offer or other plan, proposal or offer
by any person (other than the other party hereto) to acquire in any manner 10%
or more of the shares of any class of voting securities of, or 20% or more of
the assets of, such party or any of its significant subsidiaries. Other than
pursuant to the transactions contemplated by this Plan. Each of FCFC and
Southwest shall advise the other orally (within one business day) and in writing
(as promptly as practicable), in reasonable detail, of any such inquiry or
proposal which it or any of its subsidiaries or any Representative may receive
and if such inquiry or proposal is in writing, then FCFC or Southwest, as the
case may be, shall deliver to the other a copy of such inquiry or proposal as
promptly as practicable after the receipt thereof.
5.07. Affiliate Agreements.
--------------------
(A) Not later than the 15th day prior to the mailing of the Joint
Proxy Statement, FCFC shall deliver to Southwest, and Southwest shall deliver to
FCFC, a schedule of each person that, to the best of its knowledge, is or is
reasonably likely to be, as of the date of the relevant Meeting, deemed to be an
"affiliate" of it (each, an "Affiliate") as that term is used in Rule 145 under
the Securities Act or SEC Accounting Series Releases 130 and 135.
(B) Each of Southwest and FCFC shall use its respective reasonable
best efforts to cause each person who may be deemed to be an Affiliate of
Southwest or FCFC, as the case may be, to execute and deliver to Southwest and
FCFC on a date at least 40 days prior to the Merger an agreement in the form
attached hereto as Exhibit B or Exhibit C, respectively.
5.08. Takeover Laws. No party shall take any action that would cause the
-------------
transactions contemplated by this Plan and/or the Stock Option Agreement to be
subject to requirements imposed by any Takeover Law and each of them shall take
all necessary steps within its control to exempt (or ensure the continued
exemption of) the transactions contemplated by this Plan and the Stock Option
Agreements from, or if necessary challenge the validity or applicability of, any
applicable Takeover Law, as now or hereafter in effect, including, without
limitation, applicable provisions of Chapter 25 of the BCL, other Takeover Laws
of the Commonwealth of Pennsylvania or Takeover Laws of any other State that
purport to apply to this Plan, the Stock Option Agreements or the transactions
contemplated hereby or thereby.
ANNEX I-23
<PAGE>
5.09. Shares Listed. In the case of FCFC, FCFC shall cause to be approved
-------------
for listing, prior to the Effective Date, on the NYSE, upon official notice of
issuance, the shares of FCFC Common Stock to be issued to the holders of
Southwest Common Stock in the Merger.
5.10. Regulatory Applications.
-----------------------
(A) Each party shall promptly (i) prepare and submit applications
to the appropriate Regulatory Authorities and (ii) make all other appropriate
filings to secure all other approvals, consents and rulings, which are necessary
for it to complete the Merger.
(B) Each of FCFC and Southwest agrees to cooperate with the other
and, subject to the terms and conditions set forth in this Plan, use its best
efforts to prepare and file all necessary documentation, to effect all necessary
applications, notices, petitions, filings and other documents, and to obtain all
necessary permits, consents, orders, approvals and authorizations of, or any
exemption by, all third parties and Regulatory Authorities necessary or
advisable to complete the transactions contemplated by this Plan, including
without limitation the regulatory approvals referred to in Section 6.02. Each of
FCFC and Southwest shall have the right to review in advance, and to the extent
practicable each will consult with the other, in each case subject to applicable
laws relating to the exchange of information, with respect to all material
written information submitted to, any third party or any Regulatory Authorities
in connection with the transactions contemplated by this Plan. In exercising the
foregoing right, each of the parties hereto agrees to act reasonably and as
promptly as practicable. Each party hereto agrees that it will consult with the
other party hereto with respect to the obtaining of all material permits,
consents, approvals and authorizations of all third parties and Regulatory
Authorities necessary or advisable to complete the transactions contemplated by
this Plan and each party will keep the other party apprised of the status of
material matters relating to completion of the transactions contemplated hereby.
(C) Each party agrees, upon request, to furnish the other party
with all information concerning itself, its subsidiaries, directors, officers
and shareholders and such other matters as may be reasonably necessary or
advisable in connection with any filing, notice or application made by or on
behalf of such other party or any of its subsidiaries to any Regulatory
Authority.
ANNEX I-24
<PAGE>
5.11. Indemnification.
---------------
(A) For six years after the Effective Date (except as such time
period is inapplicable as described below), FCFC shall indemnity defend and hold
harmless the present and former directors, officers and employees of Southwest
and its subsidiaries (each, an "Indemnified Party") against all costs or
expenses (including reasonable attorneys fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of actions or omissions
occurring at or prior to the Effective Time (including, without limitation and
without regard to the six year time limit otherwise imposed by this Section
5.11(A), the transactions contemplated by this Plan) to the fullest extent that
such persons are indemnified under Southwest's articles of incorporation and by-
laws as in effect on the date hereof (and during such period FCFC shall also
advance expenses (including expenses described in Section 5.11(E)) as incurred
to the fullest extent permitted under Southwest's articles of incorporation and
by-laws as in effect on the date hereof, provided that the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification with
no bond or security to be required). Notwithstanding the foregoing or anything
to the contrary contained elsewhere herein, FCFC's indemnity agreement set forth
above shall be limited to cover claims only to the extent that such claims are
not paid under Southwest's directors' and officers' liability insurance policies
referred to in Section 5.11(B) (or any substitute policy permitted by such
section).
(B) FCFC shall maintain Southwest's existing directors' and
officers' liability insurance policy (or a policy providing comparable coverage
amounts on terms no less favorable, including FCFC's existing policy if it meets
the foregoing standard) covering persons who are currently covered by such
insurance for a period of six years after the Effective Date; provided, however,
that in no event shall FCFC be obligated to expend, in order to maintain or
provide insurance coverage pursuant to this Section 5.11(B), any amount per
annum in excess of 250% of the amount of the annual premiums paid as of the date
hereof by Southwest for such insurance (the "Maximum Amount"). If the amount of
the annual premiums necessary to maintain or procure such insurance coverage
exceeds the Maximum Amount, FCFC shall use all reasonable efforts to maintain
the most advantageous policies of directors' and officers' insurance obtainable
for an annual premium equal to the Maximum Amount.
(C) Any Indemnified Party wishing to claim indemnification under
Section 5.11(A), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify FCFC thereof; provided that
the failure so to notify shall not affect the obligations of FCFC under Section
5.11(A) unless and to the extent FCFC has no actual knowledge of such claim,
action, suit, proceeding or investigation and such failure so to notify
materially increases FCFC's liability under such Section 5.11(A).
(D) If FCFC or any of its successors or assigns shall consolidate
with or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of its assets to any entity, then
ANNEX I-25
<PAGE>
and in each case, proper provision shall be made so that the successors and
assigns of FCFC shall assume the obligations set forth in this Section 5.11.
(E) FCFC shall pay all reasonable costs, including attorneys fees,
that may be incurred by any Indemnified Party in enforcing the indemnity and
other obligations provided for in this Section 5.11. The rights of each
Indemnified Party hereunder shall be in addition to any other rights such
Indemnified Party may have under applicable law.
5.12. Benefit Plans; Employment Contracts.
-----------------------------------
(A) As soon as practicable after the Effective Date, FCFC shall
take all reasonable action so that employees of Southwest and its subsidiaries
shall be generally entitled to participate in the pension, severance, benefit,
vacation, sick pay and similar plans on substantially the same terms and
conditions as employees of FCFC and its subsidiaries, and until such time, the
plans of Southwest shall remain in effect; provided, that no employee of
Southwest who becomes an employee of FCFC and who elects coverage by FCFC's
medical insurance plans shall be excluded from coverage thereunder (for such
employee or any other covered person) on the basis of a preexisting condition
that was not also excluded under Southwest's medical insurance plans, but to the
extent such preexisting condition was excluded from coverage under Southwest's
medical insurance plans, this proviso shall not require coverage for such
preexisting condition. For the purpose of determining eligibility to participate
in such plans, eligibility for benefit forms and subsidies, the vesting of
benefits under such plans and the accrual of benefits under such plans
(including, but not limited to, any pension, severance, 401(k), employee stock
ownership, vacation and sick pay), without duplicating any benefits, FCFC shall
give effect to years of service (and for purposes of qualified and nonqualified
pension plans, prior earnings) with Southwest or its subsidiaries (and to the
extent required by such plan, service with other corporations), as the case may
be, as if they were with FCFC or its subsidiaries. FCFC also shall, and shall
cause its subsidiaries to, continue to honor, to the extent required by law, in
accordance with their terms all employment, severance, consulting and other
compensation contracts, disclosed in Section 4.03(M) of the Southwest Disclosure
Letter, between Southwest or any of its subsidiaries and any current or former
director, officer or employee thereof. FCFC will enter into an agreement with
David S. Dahlmann, which shall be generally consistent with the summary term
sheet, attached as Schedule 5.12(a) to FCFC's Disclosure Letter, and shall
supersede the employment agreement currently in effect. The parties will work in
good faith to treat affected employee in an equitable manner under all
supplemental plans, policies or arrangements. To the extent permitted by law,
once the employees of Southwest and its subsidiaries are covered by the FCFC
plans, the parties shall take such action as is required to eliminate duplicate
or overlapping plans and eliminate or freeze the remaining Southwest plans.
(B) As soon as practicable, but no more than 60 days after the date
hereof, Southwest shall enter into agreements with those individuals listed on
Schedule 5.12(b) to Southwest's Disclosure Letter. Such agreements shall be in a
form acceptable to Southwest in its sole but reasonable discretion. Upon
execution of each such agreement, any prior employment, salary continuation,
termination, severance or other similar agreement between
ANNEX I-26
<PAGE>
such individual and Southwest or any of its subsidiaries shall be cancelled and
shall be of no further force or effect.
5.13. Certain Director and Officer Positions.
--------------------------------------
(A) FCFC agrees to fix the size of its Board at 24 members and to
cause five members of Southwest's Board of Directors consisting of David S.
Dahlmann and four other current directors of Southwest selected by FCFC from a
list nominated by Southwest and willing so to serve subject to any applicable
legal restrictions ("Former Southwest Directors") to be elected or appointed as
directors of FCFC at, or as promptly as practicable after, the Effective Time.
David S. Dahlmann, shall be appointed to the class of the Board of Directors of
FCFC elected by the shareholders of FCFC at the annual meeting of FCFC
immediately preceding the Effective Date. Three of the Former Southwest
Directors shall be appointed to the class of the Board of Directors of FCFC
elected by the shareholders of FCFC at the annual meeting of FCFC immediately
preceding the annual meeting referenced in the preceding sentence. The remaining
Former Southwest Director shall be appointed to the remaining class of the FCFC
Board of Directors.
(B) FCFC agrees to cause David S. Dahlmann and one additional
Former Southwest Director to be elected or appointed as members of the Executive
Committee of the Board of Directors of FCFC at, or as promptly as practicable
after, the Effective Time. The other Former Southwest Director shall be agreed
upon by the Chief Executive Officers of Southwest and FCFC prior to the
Effective Time. In the event Southwest National Bank of Pennsylvania or any
successor ("Southwest Bank") is merged into First Commonwealth Bank ("FCB"), the
Board of Directors of FCB Bank immediately following the Merger shall consist of
that number of former Southwest Bank directors as bears the same proportion to
the total number of directors of FCB as the number of Former Southwest Directors
bears to the total number of directors of FCFC.
5.14. Notification of Certain Matters. Each of Southwest and FCFC shall
-------------------------------
give prompt notice to the other of any fact, event or circumstance known to it
that (i) is reasonably likely, individually or taken together with all other
facts, events and circumstances known to it, to result in any Material Adverse
Effect with respect to it or (ii) would cause or constitute a material breach of
any of its representations, warranties, covenants or agreements contained
herein.
5.15. Dividend Adjustment. After the date of this Agreement, each of FCFC
-------------------
and Southwest shall coordinate with the other the payment of dividends with
respect to the FCFC Common Stock and Southwest Common Stock and the record dates
and payment dates relating thereto, it being the intention of the parties hereto
that holders of FCFC Common Stock and Southwest Common Stock shall not receive
two dividends or fail to receive one dividend, for any single calendar quarter
with respect to their shares of FCFC Common Stock and/or Southwest Common Stock
or any shares of FCFC Common Stock that any such holder receives in exchange for
such shares of Southwest Common Stock in the Merger.
ANNEX I-27
<PAGE>
5.16. Post-Merger Operations. It is the present intention of FCFC that the
----------------------
Continuing Corporation maintain a substantial and prominent presence in the
Westmoreland and Allegheny County market and, in connection therewith through
Southwest Bank, shall continue to use and occupy Southwest Bank's existing
branch system and personnel, subject to such changes in business plans as the
Board of Directors of the Continuing Corporation may determine to be in the best
interests of the Continuing Corporation and its shareholders, employees,
customers and the communities it serves. The foregoing notwithstanding, no
employee of Southwest Bank who was an employee both as of the Date of the Plan
and as of the Effective Date, shall be terminated, except for cause, or laid-off
as a direct and proximate result of the Merger. FCFC does, however, reserve the
right to reassign Southwest Bank employees within FCFC and its affiliates.
Further, until at least two years from the Effective Date, Southwest Bank shall
remain a separate wholly-owned subsidiary of FCFC. At the request of FCFC after
the Effective Date, Southwest Bank may convert from a national bank to a banking
organization organized under the laws of the Commonwealth of Pennsylvania. The
existing Board of Directors of Southwest Bank shall remain in place at least for
two years from the Effective Date with the exception that the number of
directors shall be increased by one and the vacancy created shall be filled by
Joseph E. O'Dell or a successor designated by FCFC.
VI. CONDITIONS TO CONSUMMATION OF THE MERGER.
The obligations of each of the parties to consummate the Merger is
conditioned upon the satisfaction at or prior to the Effective Time of each of
the following (except that only Southwest's obligations are conditioned upon
satisfaction of Section 6.06 and only FCFC's obligations are conditioned upon
satisfaction of Sections 6.07 and 6.12):
6.01. Shareholder Vote. Approval of this Plan by the requisite votes of
----------------
the shareholders of Southwest and FCFC;
6.02. Regulatory Approvals. Procurement by FCFC and Southwest of all
--------------------
requisite approvals and consents of Regulatory Authorities and the expiration of
the statutory waiting period or periods relating thereto and such approvals and
consents shall not impose any condition or restriction upon the Continuing
Corporation or its subsidiaries which would be reasonably expected either (i) to
have a Material Adverse Effect after the Effective Time on the present or
prospective consolidated financial condition, business or operating results of
the Continuing Corporation, or (ii) to prevent the parties from realizing the
major portion of the economic benefits of the Merger and the transactions
contemplated thereby that they currently anticipate obtaining therefrom;
6.03. Third Party Consents. All consents or approvals of all persons
--------------------
(other than Regulatory Authorities) required for the completion of the Merger
shall have been obtained and shall be in full force and effect, unless the
failure to obtain any such consent or approval is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Southwest or
FCFC;
ANNEX I-28
<PAGE>
6.04. No Injunction, Etc. No order, decree or injunction of any court
-------------------
or agency of competent jurisdiction shall be in effect, and no law, statute or
regulation shall have been enacted or adopted, that enjoins, prohibits or makes
illegal consummation of the Merger or any of the other transactions contemplated
hereby;
6.05. Pooling Letters. Southwest shall have received from KPMG Peat
---------------
Marwick LLP, independent auditors for Southwest, and FCFC shall have received
from Deloitte & Touche LLP, independent auditors for FCFC, letters, dated the
date of or shortly prior to each of the mailing dates of the Joint Proxy
Statement and the Effective Date, to the effect that the Merger, if consummated
in accordance with this Plan, qualifies for pooling of interests accounting
treatment;
6.06. Representations, Warranties and Covenants of FCFC. (i) Each of the
-------------------------------------------------
representations and warranties contained herein of FCFC shall be true and
correct as of the date of this Plan and upon the Effective Date with the same
effect as though all such representations and warranties had been made on the
Effective Date, except for any such representations and warranties made as of a
specified date, which shall be true and correct as of such date in any case
subject to the standards established by Section 4.02, (ii) each and all of the
agreements and covenants of FCFC to be performed and complied with pursuant to
this Plan on or prior to the Effective Date shall have been duly performed and
complied with in all material respects, and (iii) Southwest shall have received
a certificate signed by the Chief Financial Officer of FCFC, dated the Effective
Date, to the effect set forth in clauses (i) and (ii);
6.07. Representations, Warranties and Covenants of Southwest. (i) Each of
------------------------------------------------------
the representations and warranties contained herein of Southwest shall be true
and correct as of the date of this Plan and upon the Effective Date with the
same effect as though all such representations and warranties had been made on
the Effective Date, except for any such representations and warranties made as
of a specified date, which shall be true and correct as of such date, in any
case subject to the standards established by Section 4.02, (ii) each and all of
the agreements and covenants of Southwest to be performed and complied with
pursuant to this Plan on or prior to the Effective Date shall have been duly
performed and complied with in all material respects, and (iii) FCFC shall have
received a certificate signed by the Chief Financial Officer of Southwest, dated
the Effective Date, to the effect set forth in clauses (i) and (ii);
6.08. Effective Registration Statement. The Registration Statement shall
--------------------------------
have become effective and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC or any other
Regulatory Authority;
6.09. Blue-Sky Permits. FCFC shall have received all state securities laws
----------------
and "blue sky" permits necessary to consummate the Merger;
6.10. Tax Opinion. FCFC and Southwest shall have received an opinion from
-----------
Tucker Arensberg, P.C., to the effect that (i) the Merger constitutes a
reorganization under Section 368
ANNEX I-29
<PAGE>
of the Code, and (ii) no gain or loss will be recognized by shareholders of
Southwest who receive shares of FCFC Common Stock, in exchange for their shares
of Southwest Common Stock, except that gain or loss may be recognized as to cash
received in lieu of fractional share interests; in rendering their opinion, such
counsel may require and rely upon representations and agreements contained in
certificates of officers of FCFC, Southwest, and others; and
6.11. NYSE Listing. The shares of FCFC Common Stock issuable pursuant to
------------
this Plan shall have been approved for listing on the NYSE, subject to official
notice of issuance.
VII. TERMINATION.
7.01. Termination. This Plan may be terminated, and the Merger may be
-----------
abandoned:
(A) Mutual Consent. At any time prior to the Effective Time, by
--------------
the mutual consent of FCFC and Southwest, if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.
(B) Delay. At any time prior to the Effective Time, by FCFC or
-----
Southwest, if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event that the Merger is not consummated by
November 30, 1999, except to the extent that the failure of the Merger then to
be consummated arises out of or results from the knowing action or inaction of
the party seeking to terminate pursuant to this Section 7.01(B).
(C) No Approval. By Southwest or FCFC, if its Board of Directors
-----------
so determines by a vote of a majority of the members of its entire Board, in the
event that (i) the consent of the Board of Governors of the Federal Reserve
System for consummation of the Merger and the other transactions contemplated by
this Plan shall have been denied by final action of the Board and the time for
appeal shall have expired, or (ii) any shareholder approval required by Section
6.01 herein is not obtained at the Southwest Meeting or the FCFC Meeting.
(D) Possible Adjustment. By Southwest, if its Board of Directors so
-------------------
determines by a vote of a majority of the members of its entire Board, at any
time during the ten-day period commencing two days after the Determination Date,
if the Average Closing Price on the Determination Date of shares of FCFC Common
Stock shall be less than the product of 0.80 and the Starting Price; provided
--------
however, the Board of Directors of Southwest cannot exercise the right of
- -------
termination set forth immediately above if on the Date of Determination (i) the
Index Price on the Date of Determination is equal to or less than the product of
0.80 and the Index Price on the Starting Date and (ii) the Average Closing Price
of the FCFC Common Stock is equal to or greater than the product of 0.70 and the
Starting Price. If Southwest elects to exercise its termination right pursuant
to the immediately preceding sentence, it shall give prompt written notice to
FCFC; provided that such notice of election to terminate may be withdrawn at any
time within the aforementioned ten-day period. During the five-day period
commencing with its receipt of such notice, FCFC shall have the option to elect
to increase the Exchange Ratio to equal a number equal to a quotient (rounded to
the nearest
ANNEX I-30
<PAGE>
one-thousandth), the numerator of which is the product of 0.80, the Starting
Price and the Exchange Ratio (as then in effect) and the denominator of which is
the Average Closing Price. If FCFC makes an election contemplated by the
preceding sentence, within such five-day period, it shall give prompt written
notice to Southwest of such election and the revised Exchange Ratio, whereupon
no termination shall have occurred pursuant to this Section 7.01(D) and this
Plan 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 7.01(D).
For purposes of this Section 7.01(D), the following terms shall have the
meanings indicated:
"Average Closing Price" means the average of the daily last sale prices of
FCFC Common Stock as reported on the NYSE Composite Transactions reporting
system (as reported in The Wall Street Journal or, if not reported therein, in
another mutually agreed upon authoritative source) for the ten consecutive full
trading days in which such shares are traded on the NYSE ending at the close of
trading on the Determination Date.
"Determination Date" means the date on which the approval of the Federal
Reserve Board required for completion of the Merger shall be received.
"Index Group" shall mean the group of bank holding companies listed in the
SNL Bank Index (banks with assets of $1,000,000,000 to $5,000,000,000), the
common stock of all of which shall be publicly traded since the Starting Date.
"Index Price" on a given date shall mean the market-capitalization-weighted
average (weighted pursuant to the SNL Bank Index (banks with assets of
$1,000,000,000 to $5,000,000,000)) of the closing prices of the companies
composing the Index Group.
"Starting Date" means July 14, 1998.
"Starting Price" shall mean the average of the last sales prices of FCFC
Common Stock (as reported in the Wall Street Journal, or if not reported
therein, in another authoritative source) for the Starting Date and the nine
trading dates immediately preceding the Starting Date.
If FCFC declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or similar
transaction between the Starting Date and the Determination Date, the price for
the common stock of FCFC shall be appropriately adjusted for the purposes of
applying this Section 7.01 (D).
(E) Failure to Recommend, Etc. At any time prior to the Southwest
--------------------------
Meeting, by FCFC if the Board of Directors of Southwest shall have failed to
make its recommendation referred to in Section 5.02, withdrawn such
recommendation or modified or changed such recommendation in a manner adverse to
the interests of FCFC; or at any time prior to the
ANNEX I-31
<PAGE>
FCFC Meeting, by Southwest if the Board of Directors of FCFC shall have failed
to make its recommendation referred to in Section 5.02, withdrawn such
recommendation or modified or changed such recommendation in a manner adverse to
the interests of Southwest.
7.02. Effect of Termination and Abandonment. In the event of termination
-------------------------------------
of this Plan and the abandonment of the Merger pursuant to this Article VII, no
party to this Plan shall have any liability or further obligation to any other
party hereunder except (i) as set forth in Section 8.01, (ii) that the Stock
Option Agreement shall be governed by its own terms as to termination and (iii)
that termination will not relieve a breaching party from liability for any
willful breach of this Plan giving rise to such termination.
VIII. OTHER MATTERS.
8.01. Survival. All representations, warranties, agreements and covenants
--------
contained in this Plan shall not survive the Effective Time or termination of
this Plan if this Plan is terminated prior to the Effective Time; provided,
however, if the Effective Time occurs, the agreements of the parties in Sections
5.11, 5.12, 5.13, 8.01, 8.04, 8.06 and 8.09 shall survive the Effective Time,
and if this Plan is terminated prior to the Effective Time, the agreements of
the parties in Sections 5.05(B), 7.02, 8.01, 8.04, 8.05, 8.06, 8.07 and 8.09,
shall survive such termination.
8.02. Waiver; Amendment. Prior to the Effective Time, any provision of
-----------------
this Plan may be (i) waived by the party benefited by the provision, or (ii)
amended or modified at any time, by an agreement in writing among the parties
hereto approved by their respective Boards of Directors and executed in the same
manner as this Plan, except that, after the Southwest Meeting the consideration
to be received by the shareholders of Southwest for each share of Southwest
Common Stock shall not thereby be decreased.
8.03. Counterparts. This Plan may be executed in one or more
------------
counterparts, each of which shall be deemed to constitute an original.
8.04. Governing Law. This Plan shall be governed by, and interpreted
-------------
in accordance with, the laws of the Commonwealth of Pennsylvania, without
regard to the conflict of law principles thereof.
8.05. Expenses Each party hereto will bear all expenses incurred
--------
by it in connection with this Plan and the transactions contemplated hereby,
except that printing expenses and SEC registration fees shall be shared equally
between Southwest and FCFC and FCFC shall reimburse Southwest for the fees and
expenses of its counsel.
8.06. Confidentiality. Except as otherwise provided in Section 5.05(B),
---------------
each of the parties hereto and their respective agents, attorneys and
accountants will maintain the confidentiality of all information provided in
connection herewith which has not been publicly disclosed or as it is advised by
counsel that any such information or document is required by
ANNEX I-32
<PAGE>
law or applicable NASDAQ or NYSE rule to be disclosed. For purposes of this
Agreement, the term "major portion" of the economic benefits of the Merger means
two-thirds of such economic benefits.
8.07. Notices. All notices, requests and other communications hereunder
-------
to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
If to FCFC, to:
Joseph E. O'Dell
President and Chief Executive Officer
First Commonwealth Financial Corporation
22 North Sixth Street
Indiana, Pennsylvania 15701
With copy to:
David R. Tomb, Jr., Esquire
Tomb & Tomb
402 Indiana Theater Building
Indiana, Pennsylvania 15701
If to Southwest, to:
David S. Dahlmann
President and Chief Executive Officer
Southwest National Corporation
111 South Main Street
Greensburg, Pennsylvania 15601
With a copy to:
Henry S. Pool, Esquire
Tucker Arensberg, P.C.
1500 One PPG Place
Pittsburgh, Pennsylvania 15222
8.08. Definitions. Any term defined anywhere in this Plan shall have the
-----------
meaning ascribed to it for all purposes of this Plan (unless expressly noted to
the contrary). In addition:
(A) the term "Material Adverse Effect" shall mean, with respect to
Southwest or FCFC, respectively, any effect that (i) is material and adverse to
the financial
ANNEX I-33
<PAGE>
position, results of operations or business of Southwest and its subsidiaries
taken as a whole, or FCFC and its subsidiaries taken as a whole, respectively,
or (ii) materially impairs the ability of Southwest or FCFC, respectively, to
perform its obligations under this Plan or the consummation of the Merger and
the other transactions contemplated by this Plan; provided, however, that
Material Adverse Effect shall not be deemed to include the impact of actions or
omissions of Southwest, or FCFC taken with the prior informed consent of
Southwest or FCFC, as applicable, in contemplation of the transactions
contemplated hereby;
(B) the term "person" shall mean any individual, bank, savings
association, corporation, partnership, association, joint-stock company,
business trust or unincorporated organization;
(C) the term "Previously Disclosed" by a party shall mean
information set forth in its Disclosure Letter or a schedule that is delivered
by that party to the other party prior to the execution of this Plan and
specifically designated as information "Previously Disclosed" pursuant to this
Plan;
(D) the term "Rights" means, with respect to any person, securities
or obligations convertible into or exchangeable for, or giving any person any
right to subscribe for or acquire, or any options, calls or commitments relating
to, shares of capital stock of such person; and
(E) the terms "subsidiary" and "significant subsidiary" shall have
the meanings set forth in Rule 1-02 of Regulation S-X of the SEC.
8.09. Entire Understanding; No Third Party Beneficiaries. This Plan and
--------------------------------------------------
the Stock Option Agreements together represent the entire understanding of the
parties hereto with reference to the transactions contemplated hereby and
thereby and supersede any and all other oral or written agreements heretofore
made. Except for Sections 5.11, 5.12 and 5.13, nothing in this Plan, expressed
or implied, is intended to confer upon any person, other than the parties hereto
or their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Plan.
8.10. Headings. The headings contained in this Plan are for reference
--------
purposes only and are not part of this Plan.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
ANNEX I-34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
SOUTHWEST NATIONAL CORPORATION
By /s/ Davis S. Dahlmann
------------------------
Name: David S. Dahlmann
Title: President and Chief Executive Officer
FIRST COMMONWEALTH FINANCIAL CORPORATION
By /s/ Joseph E. O'Dell
-----------------------
Name: Joseph E. O'Dell
Title: President and Chief Executive Officer
ANNEX I-35
<PAGE>
Exhibit B
FORM OF SOUTHWEST AFFILIATE'S LETTER
________________ , 1998
First Commonwealth Financial Corporation
Old Courthouse Square
22 North Sixth Street
Indiana, PA 15701
Southwest National Corporation
111 South Main Street
Greensburg, PA 15601
Gentlemen:
Pursuant to the terms of the Agreement and Plan of Merger, dated as of
July 15, 1998 (the "Plan"), by and between First Commonwealth Financial
Corporation ("FCFC") and Southwest National Corporation ("Southwest"), Southwest
plans to merge with and into FCFC (the "Merger"). As a result of the Merger,
the undersigned may receive shares of FCFC common stock par value $1.00 per
share (the "FCFC Common Stock") in exchange for shares of Southwest common
stock, par value $2.50 per share (the "Southwest Common Stock").
The undersigned hereby represents, warrants and covenants with and to
FCFC that in the event the undersigned receives any FCFC Common Stock as a
result of the Merger:
(A) The undersigned will not sell, transfer or otherwise dispose of
such FCFC Common Stock unless (I) such sale, transfer or other disposition has
been registered under the Securities Act of 1933, as amended (the "Act"), (ii)
such sale, transfer or other disposition is made in conformity with the
provisions of Rule 145 under the Act (as such rule may be hereafter from time to
time be amended), or (iii) in the opinion of counsel in form and substance
B-1
ANNEX I-36
<PAGE>
reasonably satisfactory to FCFC, or under a "no-action" letter obtained by the
undersigned from the staff of the Securities and Exchange Commission (the
"SEC"), such sale, transfer of other disposition will not violate or is
otherwise exempt from registration under the Act.
(B) The undersigned understands that FCFC is under no obligation to
register the sale, transfer or other disposition of shares of FCFC Common Stock
by the undersigned or on the undersigned's behalf under the Act or to take any
other action necessary in order to make compliance with an exemption from such
registration available.
(C) The undersigned also understand that stop transfer instructions
will be given to FCFC's transfer agent with respect to the shares of FCFC Common
Stock issued to the undersigned as a result of the Merger
It is understood and agreed that the restriction set forth in paragraph (C)
above shall be removed if the undersigned shall have delivered to FCFC (I) a
copy of a "no action" letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to FCFC, to the effect that such
legend is not required for purposes of the Act, or (ii) evidence of
representations satisfactory to FCFC that the FCFC Common Stock represented by
such certificates is being or has been sold in a transaction made in conformity
with the provisions of Rule 145(d).
(D) The undersigned further represents, warrants and covenants with
and to, FCFC that the undersigned will not sell, transfer or otherwise dispose
of his or her interests in, or reduce his or her risk relative to, any shares of
FCFC Common Stock or Southwest Common Stock beneficially owned by the
undersigned during the period commencing 30 days prior to the effective date of
the Merger and ending at such time as FCFC notifies the undersigned that results
covering at least 30 days of combined operations of FCFC after the Merger have
been
B-2
ANNEX I-37
<PAGE>
published by FCFC, which FCFC agrees to publish consistent with its normal
financial reporting practice.
(E) The undersigned further represents, warrants and covenants with
and to FCFC that the undersigned will, and will cause each of the other parties
whose shares are deemed to be beneficially owned by the undersigned pursuant to
paragraph (G) below to, have all shares of Southwest Common Stock owned by the
undersigned or such parties, as applicable, registered in the name of the
undersigned or such parties, as applicable, prior to the effective date of the
Merger and not in the name of any bank, broker-dealer, nominee or clearing
house.
(F) The undersigned understands and agrees that this letter agreement
shall apply to all shares of the capital stock of Southwest and FCFC that are
deemed to be beneficially owned by the undersigned pursuant to applicable
federal securities laws.
(G) The undersigned has carefully read this letter and discussed its
requirements and other applicable limitations upon the undersigned's ability to
sell, transfer or otherwise dispose of the capital stock of Southwest or FCFC,
to the extent the undersigned felt necessary, with the undersigned's counsel or
counsel for Southwest.
Very truly yours,
_______________________________________
Name:
add below the signatures of all
registered owners of shares deemed
beneficially owned by the affiliate
B-3
ANNEX I-38
<PAGE>
_______________________________________
Name:
_______________________________________
Name:
_______________________________________
Name:
Acknowledged this day of , 1998.
FIRST COMMONWEALTH FINANCIAL
CORPORATION
By:
_____________________________________
Name: Joseph E. O'Dell
Title: President and Chief Executive
Officer
SOUTHWEST NATIONAL CORPORATION
By:
_____________________________________
Name: David S. Dahlman
Title: President and Chief Executive
Officer
B-4
ANNEX I-39
<PAGE>
Exhibit C
FORM OF FCFC'S AFFILIATE LETTER
__________________ , 1998
First Commonwealth Financial Corporation
Old Courthouse Square
22 North Sixth Street
Indiana, PA 15601
Gentlemen:
Pursuant to the terms of the Agreement and Plan of Merger, dated as of
July 15, 1998 (the "Plan"), by and between First Commonwealth Financial
Corporation ("FCFC") and Southwest National Corporation ("Southwest"), Southwest
plans to merge with and into FCFC (the "Merger").
The undersigned hereby represents, warrants and covenants with and to FCFC
that:
(A) The undersigned will not sell, transfer or otherwise dispose of
his or her interests in, or reduce his or her risk relative to, any shares of
common stock of either FCFC or Southwest beneficially owned by the undersigned,
during the period commencing 30 days prior to the effective date of the Merger
and ending at such time as FCFC notifies the undersigned that results covering
at least 30 days of combined operations of FCFC after the Merger published by
FCFC.
C-1
ANNEX I-40
<PAGE>
(B) The undersigned understands and agrees that this letter agreement
shall apply to all shares of the capital stock of FCFC and Southwest that are
deemed to be beneficially owned by the undersigned under applicable federal
securities laws.
Very truly yours,
Name:
______________________________________
add below the signatures of all
registered owners of shares deemed
beneficially owned by the affiliate
_______________________________________
Name:
_______________________________________
Name:
_______________________________________
Name:
Acknowledged this day of , 1998.
FIRST COMMONWEALTH FINANCIAL
CORPORATION
By:
_____________________________________
Name:
Title:
C-2
ANNEX I-41
<PAGE>
There are no schedules to this document.
ANNEX I-42
<PAGE>
FORM OF SOUTHWEST STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 15, 1998 (the "Agreement"), by and
between SOUTHWEST NATIONAL CORPORATION, a Pennsylvania corporation ("Issuer"),
and FIRST COMMONWEALTH FINANCIAL CORPORATION, a Pennsylvania corporation
("Grantee").
RECITALS
A. The Plan. Grantee and Issuer are concurrently herewith entering into an
--------
Agreement and Plan of Merger, dated as of the date hereof (the "Plan"),
providing for, among other things, the merger of Issuer with and into Grantee,
with Grantee being the surviving corporation.
B. Inducement. As an inducement to Grantee's execution of the Plan and
----------
Grantee's agreement referred to in the next sentence, Issuer has offered to
grant Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined herein
-------------
shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth herein,
---------------
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
a number of shares of common stock, par value $2.50 per share ("Issuer Common
Stock"), of Issuer up to 756,185 of such shares (as adjusted as set forth
herein, the "Option Shares," which shall include the Option Shares before and
after any transfer of such Option Shares, but in no event shall the number of
Option Shares for which this Option is exercisable exceed 19.9% of the then
issued and outstanding shares of Issuer Common Stock) at a purchase price per
Option Share (as adjusted as set forth herein, the "Purchase Price") equal to
$50.75.
3. Exercise of Option.
------------------
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or, in the case of Grantee or the Plan, and
(ii) no preliminary or permanent injunction or other order against the
delivery of shares covered by the Option issued by any court of competent
jurisdiction in the United States shall be in effect, the Holder may
exercise the Option, in whole or in part, at any time and from time to time
following the occurrence of a Purchase Event (as hereinafter defined);
provided that the Option shall terminate and be of no further force or
effect upon the earliest to occur of (A) the Effective Time, (B)
termination of the Plan in accordance
ANNEX II-1
<PAGE>
with the terms thereof prior to the occurrence of a Purchase Event or a
Preliminary Purchase Event (as hereinafter defined) or (C) 18 months after
termination of the Plan following the occurrence of a Purchase Event or a
Preliminary Purchase Event; provided, however, that any purchase of shares
upon exercise of the Option shall be subject to compliance with applicable
law. Notwithstanding the termination of the Option, Grantee or Holder as
the case may be, shall be entitled to purchase those Option Shares with
respect to which it has exercised the Option in accordance herewith prior
to the termination of the Option. The term "Holder" shall mean the holder
or holders of the Option from time to time, and which initially is Grantee.
The termination of the Option shall not affect any rights hereunder which
by their terms extend beyond the date of such termination.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
recommended, publicly proposed or publicly announced an intention to
authorize, recommend or propose, or entered into an agreement with any
person (other than Grantee or any subsidiary of Grantee) to effect (A)
a merger, consolidation or similar transaction involving Issuer or any
of its significant subsidiaries (other than transactions solely between
Issuer's subsidiaries that are not violative of the Plan), (B) the
disposition, by sale, lease, exchange or otherwise, of assets or
deposits of Issuer or any of its significant subsidiaries representing
in either case 15% or more of the consolidated assets or deposits of
Issuer and its subsidiaries or (C) the issuance, sale or other
disposition by Issuer of (including by way of merger, consolidation,
share exchange or any similar transaction) securities representing 15%
or more of the voting power of Issuer or any of its significant
subsidiaries, other than, in each case of (A), (B) or (C), any merger,
consolidation, share exchange or similar transaction involving Issuer
or any of its significant subsidiaries in which the voting securities
of Issuer outstanding immediately prior thereto continue to represent
(by either remaining outstanding or being converted into the voting
securities of the surviving entity of any such transaction) at least
65% of the combined voting power of the voting securities of the Issuer
or the surviving entity outstanding immediately after the completion of
such merger, consolidation, or similar transaction (provided any such
transaction is not violative of the Plan) (each of (A), (B) or (C), an
"Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) of or the right to
acquire beneficial ownership of, or any "group" (as such term is
defined in Section 13(d)(3) of the Exchange Act), other than a group
of which Grantee or any subsidiary of Grantee is a member, shall have
been formed which beneficially owns or has the right to acquire
beneficial ownership of 15% or more of the voting power of Issuer or
any of its significant subsidiaries; or
ANNEX II-2
<PAGE>
(iii) any person (other than Grantee or any subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act) or shall have filed a registration statement
under the Securities Act, with respect to, a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control 15% or
more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" or an "Exchange
Offer," respectively); or
(iv) the shareholders shall not have approved the Plan by the
requisite vote at the Southwest Meeting, the Southwest Meeting shall
not have been held or shall have been canceled prior to termination of
the Plan, or Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to Grantee the recommendation of Issuer's
Board of Directors with respect to the Plan, in each case after it
shall have been publicly announced that any person (other than Grantee
or any subsidiary of Grantee) shall have (A) made, or disclosed an
intention to make, a bona fide proposal to engage in an Acquisition
Transaction, (B) commenced a Tender Offer or filed a registration
statement under the Securities Act with respect to an Exchange Offer or
(C) filed an application (or given a notice), whether in draft or final
form, under the Home Owners' Loan Act, as amended ("HOLA"), the BHC
Act, the Bank Merger Act, as amended (the "BMA") or the Change in Bank
Control Act of 1978, as amended (the "CBCA"), for approval to engage in
an Acquisition Transaction.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have made a bona fide proposal to Issuer or its shareholders by
public announcement, or written communication that is or becomes the
subject of public disclosure, to engage in an Acquisition Transaction;
or
(ii) after a proposal is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, or such third
party states its intention to the Issuer to make such a proposal if the
Plan terminates, Issuer shall have breached any representation,
warranty, covenant or agreement contained in the Plan; or
(iii) any person (other than Grantee or any subsidiary of
Grantee) other than in connection with a transaction to which Grantee
has given its prior written consent, shall have filed an application or
notice with any Regulatory Authority for approval to engage in an
Acquisition Transaction; or
(iv) any event entitling Grantee to terminate the Plan pursuant
to Section 7.01(E) thereof.
ANNEX II-3
<PAGE>
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event, it being understood
that the giving of such notice by Issuer shall not be a condition to the
right of Holder to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends
to purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 15 business days from the Notice
Date for the closing (the "Closing") of such purchase (the "Closing Date");
provided that if the Closing cannot be consummated by reason of any
applicable judgement, decree, order, law or regulation, the period of time
that otherwise would run pursuant to this sentence shall run instead from
the date on which such restriction on consummation has expired or been
terminated; and provided, further, without limiting the foregoing, that if
prior notification to or approval of any Regulatory Authority is required
in connection with such purchase, Issuer shall cooperate with the Holder in
the filing of the required notice of application for approval and the
obtaining of such approval and the Closing shall occur immediately
following such regulatory approvals (and any mandatory waiting periods).
Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.
(f) Notwithstanding Section 3(e), in no event shall any Closing Date be
more than 18 months after the related Notice Date, and if the Closing Date
shall not have occurred within 18 months after the related Notice Date due
to the failure to obtain any such required approval, the exercise of the
Option effected on the Notice Date shall be deemed to have expired. In the
event (i) Holder receives official notice that an approval of any other
Regulatory Authority required for the purchase of Option Shares will not be
issued or granted or (ii) a Closing Date shall not have occurred within 18
months after the related Notice Date due to the failure to obtain any such
required approval, Grantee shall be entitled to exercise its right as set
forth in Section 8 to exercise the Option in connection with the resale of
Issuer Common Stock or other securities pursuant to a registration
statement as provided in Section 9. The provisions of this Section 3 and
Section 4 shall apply with appropriate adjustments to any such exercise.
4. Payment and Delivery of Certificates.
------------------------------------
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated
by Issuer, an amount equal to the Purchase Price multiplied by the number
of Option Shares to be purchased on such Closing Date, and (ii) present and
surrender this Agreement to the Issuer at the address of the Issuer
specified in Section 12(f).
ANNEX II-4
<PAGE>
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section
4(a), (i) Issuer shall deliver to Holder (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which
Option Shares shall be free and clear of all Liens and subject to no
preemptive rights, and (B) if the Option is exercised in part only, an
executed new agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the shares of Issuer Common Stock
purchasable hereunder, and (ii) Holder shall deliver to Issuer a letter
agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF JULY
15, 1998. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that (i) the portion of the above legend
relating to the Securities Act shall be removed by delivery of substitute
certificates without such legend if Holder shall have delivered to Issuer a
copy of a letter from the staff of the SEC, or an opinion of counsel in
form and substance reasonably satisfactory to Issuer and its counsel, to
the effect that such legend is not required for purposes of the Securities
Act and (ii) the reference to restrictions pursuant to this Agreement in
the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Option Shares evidenced by certificate(s)
containing such reference have been sold or transferred in compliance with
the provisions of this Agreement under circumstances that do not require
the retention of such reference.
(d) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under Section 3(e), the tender of the
applicable Purchase Price in immediately available funds and the tender of
this Agreement to Issuer, Holder shall be deemed to be the holder of record
of the shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be
closed or that certificates representing such shares of Issuer Common Stock
shall not then be actually delivered to Holder. Issuer shall pay all
expenses, and any and all United States federal, state, and local taxes and
other charges that may be payable in connection with the preparation,
issuance and delivery of stock certificates under this Section 4(d) in the
name of Holder or its assignee, transferee, or designee.
ANNEX II-5
<PAGE>
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase
Issuer Common Stock, (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by
any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer, (iii) promptly to take all
action as may from time to time be required (including (A) complying with
all pre-merger notification, reporting and waiting period requirements and
(B) in the event prior approval of or notice to any Regulatory Authority is
necessary before the Option may be exercised, cooperating fully with Holder
in preparing such applications or notices and providing such information to
such Regulatory Authority as it may require) in order to permit Holder to
exercise the Option and Issuer duly and effectively to issue shares of the
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. Representations and Warranties of Issuer. Issuer hereby represents and
----------------------------------------
warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) Corporate Authority. Issuer has full corporate power and authority
-------------------
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby; the execution and delivery of this Agreement and,
subject to receiving any necessary Regulatory Approvals, the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer, and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated; this Agreement has been
duly and validly executed and delivered by Issuer.
(b) Beneficial Ownership. To the best knowledge of Issuer, as of the
--------------------
date of this Agreement, no person or group has beneficial ownership of more
than 10% of the issued and outstanding shares of Issuer Common Stock.
(c) Shares Reserved for Issuance; Capital Stock. Issuer has taken all
-------------------------------------------
necessary corporate action to authorize and reserve and 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 Issuer Common
Stock equal to the maximum number of shares of Issuer Common Stock at any
time and from time to time purchasable upon exercise of the Option, and all
such shares, upon issuance pursuant to the Option, will be duly authorized,
validly issued, fully paid and non-assessable, and will be delivered free
and clear of all Liens, (other than those created by this Agreement) and
not subject to any preemptive rights.
ANNEX II-6
<PAGE>
(d) No Violations. The execution, delivery and performance of this
-------------
Agreement does not and will not, and the consummation by Issuer of any of
the transactions contemplated hereby will not, constitute or result in (A)
a breach or violation of, or a default under, its articles of incorporation
or by-laws, or the comparable governing instruments of any of its
subsidiaries, or (B) a breach or violation of, or a default under, any
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation of it or any of its subsidiaries (with or without the giving of
notice, the lapse of time or both) or under any law, rule, ordinance or
regulation or judgment, decree, order, award or governmental or non-
governmental permit or license to which it or any of its subsidiaries is
subject, that would, in any case give any other person the ability to
prevent or enjoin Issuer's performance under this Agreement in any material
respect.
(e) Board Action. The Board of Directors of Issuer having approved this
------------
Agreement and the consummation of the transactions contemplated hereby by a
majority vote of the members of the Southwest Board of Directors, the
provisions of Chapter 25 of the BCL, do not and will not apply to this
Agreement or the purchase of shares of Issuer Common Stock pursuant to this
Agreement.
6. Representations and Warranties of Grantee. Grantee hereby represents and
-----------------------------------------
warrants to Issuer as follows:
(a) Corporate Authority. Grantee has full corporate power and authority
-------------------
to enter into this Agreement and, subject to obtaining the approvals
referred to in this Agreement, to consummate the transactions contemplated
by this Agreement; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Grantee; and
this Agreement has been duly executed and delivered by Grantee.
(b) Purchase Not for Distribution. Any Option Shares or other
-----------------------------
securities acquired by Grantee or Holder upon exercise of the Option will
not be taken with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act.
7. Adjustment Upon Changes in Issuer Capitalization, Etc.
-----------------------------------------------------
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination,
exchange of shares, reissuance of treasury shares or similar transaction,
the type and number of shares or securities subject to the Option, and the
Purchase Price therefor, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction so
that Holder shall receive, upon exercise of the Option, the number and
class of shares or other securities or property that Holder would have
received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as
applicable. If any additional shares of Issuer
ANNEX II-7
<PAGE>
Common Stock are issued after the date of this Agreement (other than
pursuant to an event described in the first sentence of this Section 7(a)),
upon exercise of any option to purchase Issuer Common Stock outstanding on
the date hereof, the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with
any shares of Issuer Common Stock previously issued pursuant hereto, equals
19.9% of the number of shares of Issuer Common Stock then issued and
outstanding, without giving effect to any shares subject to or issued
pursuant to the Option. No provision of this Section 7 shall be deemed to
affect or change, or constitute authorization for any violation of, any of
the covenants or representations in the Plan.
(b) In the event that Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than Grantee
or one of its subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with such merger,
the then outstanding shares of Issuer Common Stock shall be changed into or
exchanged for stock or other securities of Issuer or any other person or
cash or any other property or the outstanding shares of Issuer Common Stock
immediately prior to such merger shall after such merger represent less
than 50% of the outstanding shares and share equivalents of the merged
company, or (iii) to sell or otherwise transfer all or substantially all of
its assets or deposits to any person, other than Grantee or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions 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 Holder, of either (x) the
Acquiring Corporation (as hereinafter defined), (y) any person that
controls the Acquiring Corporation, or (z) in the case of a merger
described in clause (ii), Issuer (such person being referred to as
"Substitute Option Issuer").
(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 Holder. Substitute Option
Issuer shall also enter into an agreement with Holder in substantially the
same form as this Agreement, which shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of
shares of Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as hereinafter defined). The
exercise price of Substitute Option per share of Substitute Common Stock
(the "Substitute Option Price") shall then be equal to the Purchase Price
multiplied by a fraction in which the numerator is the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable and
the denominator
ANNEX II-8
<PAGE>
is the number of shares of the Substitute Common Stock for which the
Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (y) Issuer in a merger in which Issuer is the
continuing or surviving person, or (z) the transferee of all or
substantially all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(ii) "Substitute Common Stock" shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power in
respect of the election of directors (or persons similarly responsible
for the direction of the business and affairs) of the Substitute Option
Issuer.
(iii) "Assigned Value" shall mean the highest of (w) the price per
share of Issuer Common Stock at which a Tender Offer or an Exchange
Offer therefor has been made, (x) the price per share of Issuer Common
Stock to be paid by any third party pursuant to an agreement with
Issuer, (y) the highest closing price for shares of Issuer Common Stock
within the six-month period immediately preceding the consolidation,
merger, or sale in question and (z) in the event of a sale of all or
substantially all of Issuer's assets or deposits an amount equal to (I)
the sum of the price paid in such sale for such assets (and/or
deposits) and the current market value of the remaining assets of
Issuer, as determined by a nationally recognized investment banking
firm selected by Holder divided by (II) the number of shares of Issuer
Common Stock outstanding at such time. In the event that a Tender Offer
or an Exchange Offer is made for Issuer Common Stock or an agreement is
entered into for a merger or consolidation involving consideration
other than cash, the value of the securities or other property issuable
or deliverable in exchange for Issuer Common Stock shall be determined
by a nationally recognized investment banking firm selected by Holder.
(iv) "Average Price" shall mean the average closing price of a
share of Substitute Common Stock for the one year immediately preceding
the consolidation, merger, or sale in question, but in no event higher
than the closing price of the shares of Substitute Common Stock on the
day preceding such consolidation, merger or sale; provided that if
Issuer is the issuer of the Substitute Option, the Average Price shall
be computed with respect to a share of common stock issued by Issuer,
the person merging into Issuer or by any company which controls such
person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of
the shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the
ANNEX II-9
<PAGE>
event that the Substitute Option would be exercisable for more than 19.9%
of the aggregate of the shares of Substitute Common Stock but for the
limitation in the first sentence of this Section 7(f), Substitute Option
Issuer shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in
the first sentence of this Section 7(f) over (ii) the value of the
Substitute Option after giving effect to the limitation in the first
sentence of this Section 7(f). This difference in value shall be determined
by a nationally-recognized investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section
7(b) unless the Acquiring Corporation and any person that controls the
Acquiring Corporation assume in writing all the obligations of Issuer
hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including,
without limitation, any action that may be necessary so that the holders of
the other shares of common stock issued by Substitute Option Issuer are not
entitled to exercise any rights by reason of the issuance or exercise of
the Substitute Option and the shares of Substitute Common Stock are
otherwise in no way distinguishable from or have lesser economic value
(other than any diminution in value resulting from the fact that the
Substitute Common Stock are restricted securities, as defined in Rule 144
under the Securities Act or any successor provision) than other shares of
common stock issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
----------------------------------
(a) At the request of Holder at any time (i) commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d)) and ending 18
months immediately thereafter and (ii) for 30 business days following the
occurrence of either of the events set forth in clauses (i) and (ii) of
Section 3(f) (but solely as to shares of Issuer Common Stock with respect
to which the required approval was not received, Issuer (or any successor)
shall repurchase from Holder (x) the Option and (y) all shares of Issuer
Common Stock purchased by Holder pursuant hereto with respect to which
Holder then has beneficial ownership. The date on which Holder exercises
its rights under this Section 8 is referred to as the "Request Date". Such
repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or, in
the case of
ANNEX II-10
<PAGE>
Option Shares with respect to which the Option has been exercised but the
Closing Date has not occurred, payable) by Holder for each share of Issuer
Common Stock with respect to which the Option has been exercised and with
respect to which Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to Issuer the
Option and the certificates evidencing the shares of Issuer Common Stock
purchased hereunder with respect to which Holder then has beneficial
ownership, and Holder shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and clear of all
Liens. Notwithstanding the foregoing, to the extent that prior notification
to or approval of any Regulatory Authority is required in connection with
the payment of all or any portion of the Section 8 Repurchase
Consideration, Holder shall have the ongoing option to revoke its request
for repurchase pursuant to Section 8, in whole or in part, or to require
that Issuer deliver from time to time that portion of the Section 8
Repurchase Consideration that it is not then so prohibited from paying and
promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate with the
other in the filing of any such notice or application and the obtaining of
any such approval) and the period of time that would otherwise run pursuant
to the preceding sentence for the payment of the portion of the Section 8
Repurchase Consideration shall run instead from the date on which, as the
case may be, (i) any required notification period has expired or been
terminated or (ii) such approval has been obtained and, in either event,
any requisite waiting period shall have passed. If any Regulatory Authority
disapproves of any part of Issuer's proposed repurchase pursuant to this
Section 8, Issuer shall promptly give notice of such fact to Holder. If any
Regulatory Authority prohibits the repurchase in part but not in whole,
then Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such Regulatory Authority, determine
whether the repurchase should apply to the Option and/or Option Shares and
to what extent to each, and Holder shall thereupon have the right to
exercise the Option as to the number of Option Shares for which the Option
was exercisable at the Request Date less the sum of the number of shares
covered by the Option in respect of which payment has been made pursuant to
Section 8(a)(ii) and the number of shares covered by the portion of the
Option (if any) that has been repurchased; provided that if the Option
shall have terminated prior to the date of such notice or shall be
scheduled to terminate at any time before the expiration of a period ending
on the thirtieth business day after such date, Grantee shall nonetheless
have the right so to exercise the Option or exercise its rights under
Section 9 until the expiration of such period of 30 business days. Holder
shall notify Issuer of its determination under the preceding sentence
within five (5) business days of receipt of notice of disapproval of the
repurchase.
ANNEX II-11
<PAGE>
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 8(d)(i), (ii)
the price per share of Issuer Common Stock received by holders of Issuer
Common Stock in connection with any merger or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii)
the highest closing sales price per share of Issuer Common Stock quoted on
the Nasdaq NMS during the 40 business days preceding the Request Date;
provided, however, that in the event of a sale of less than all of Issuer's
assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets
of Issuer as determined by a nationally recognized investment banking firm
selected by Holder, divided by the number of shares of the Issuer Common
Stock outstanding at the time of such sale. If the consideration to be
offered, paid or received pursuant to either of the foregoing clauses (i)
or (ii) shall be other than in cash, the value of such consideration shall
be determined in good faith by an independent nationally recognized
investment banking firm selected by Holder and reasonably acceptable to
Issuer, which determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired
beneficial ownership of (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), or the right to acquire beneficial ownership of,
or any "group" (as such term is defined under the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then outstanding shares of Issuer Common
Stock, or (ii) Issuer has entered into an agreement pursuant to which any
of the transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii)
could or will be consummated.
9. Registration Rights.
-------------------
(a) Demand Registration Rights. Issuer shall, subject to the conditions
--------------------------
of Section 9(c) below, if requested by any Holder, including Grantee and
any permitted transferee ("Selling Shareholder"), as expeditiously as
possible prepare and file a registration statement under the Securities Act
if such registration is necessary in order to permit the sale or other
disposition of any or all shares of Issuer Common Stock or other securities
that have been acquired by or are issuable to the Selling Shareholder upon
exercise of the Option in accordance with the intended method of sale or
other disposition stated by the Selling Shareholder in such request,
including without limitation a "shelf" registration statement under Rule
415 under the Securities Act or any successor provision, and Issuer shall
use its best efforts to qualify such shares or other securities for sale
under any applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any time after the
------------------------------
exercise of the Option proposes to register any shares of Issuer Common
Stock under the Securities Act in connection with an underwritten public
offering of such Issuer Common Stock,
ANNEX II-12
<PAGE>
Issuer will promptly give written notice to the Selling Shareholders of its
intention to do so and, upon the written request of any Selling Shareholder
given within 30 days after receipt of any such notice (which request shall
specify the number of shares of Issuer Common Stock intended to be included
in such underwritten public offering by the Selling Shareholder), Issuer
will cause all such shares for which a Selling Shareholder requests
participation in such registration, to be so registered and included in
such underwritten public offering; provided, however, that Issuer may elect
to not cause any such shares to be so registered (i) if the underwriters in
good faith object for valid business reasons, or (ii) in the case of a
registration solely to implement an employee benefit plan or a registration
filed on Form S-4 of the Securities Act or any successor Form; provided,
further, however, that such election pursuant to (i) may only be made two
times. If some but not all the shares of Issuer Common Stock with respect
to which Issuer shall have received requests for registration pursuant to
this Section 9(b) shall be excluded from such registration, Issuer shall
make appropriate allocation of shares to be registered among the Selling
Shareholders desiring to register their shares pro rata in the proportion
that the number of shares requested to be registered by each such Selling
Shareholder bears to the total number of shares requested to be registered
by all such Selling Shareholders then desiring to have Issuer Common Stock
registered for sale.
(c) Conditions to Required Registration. Issuer shall use all
-----------------------------------
reasonable efforts to cause each registration statement referred to in
Section 9(a) above to become effective and to obtain all consents or
waivers of other parties which are required therefor and to keep such
registration statement effective; provided, however, that Issuer may delay
any registration of Option Shares required pursuant to Section 9(a) above
for a period not exceeding 90 days provided Issuer shall in good faith
determine that any such registration would adversely affect an offering or
contemplated offering of other securities by Issuer, and Issuer shall not
be required to register Option Shares under the Securities Act pursuant to
Section 9(a) above:
(i) prior to the earliest of (a) termination of the Plan pursuant
to Article VII thereof, (b) failure to obtain the requisite shareholder
approval pursuant to Section 6.01 of the Plan, and (c) a Purchase Event
or a Preliminary Purchase Event;
(ii) on more than one occasion during any calendar year;
(iii) within 90 days after the effective date of a registration
referred to in Section 9(b) above pursuant to which the Selling
Shareholder or Selling Shareholders concerned were afforded the
opportunity to register such shares under the Securities Act and such
shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by Selling
Shareholders that hold at least 25% or more of the aggregate number of
Option Shares (including shares of Issuer Common Stock issuable upon
exercise of the Option) then outstanding.
ANNEX II-13
<PAGE>
In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of
nine months from the effective date of such registration statement.
Issuer shall use all reasonable efforts to make any filings, and take
all steps, under all applicable state securities laws to the extent
necessary to permit the sale or other disposition of the Option Shares
so registered in accordance with the intended method of distribution
for such shares; provided, however, that Issuer shall not be required
to consent to general jurisdiction or qualify to do business in any
state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) Expenses. Except where applicable state law prohibits such
--------
payments, Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses
(including the fees and expenses of counsel), legal expenses, including the
reasonable fees and expenses of one counsel to the holders whose Option
Shares are being registered, printing expenses and the costs of special
audits or "cold comfort" letters, expenses of underwriters, excluding
discounts and commissions but including liability insurance if Issuer so
desires or the underwriters so require, and the reasonable fees and
expenses of any necessary special experts) in connection with each
registration pursuant to Section 9(a) or 9(b) above (including the related
offerings and sales by holders of Option Shares) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or
9(b) above.
(e) Indemnification. In connection with any registration under Section
---------------
9(a) or 9(b) above Issuer hereby indemnifies the Selling Shareholders, and
each underwriter thereof, including each person, if any, who controls such
holder or underwriter within the meaning of Section 15 of the Securities
Act, against all expenses, losses, claims, damages and liabilities caused
by any untrue, or alleged untrue, statement of a material fact contained in
any registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission, or alleged omission, to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party
are caused by any untrue statement or alleged untrue statement that was
included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Selling Shareholders, or by such underwriter, as the
case may be, for all such expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement, that was included by
Issuer in any such registration statement or prospectus or notification or
offering circular (including any amendments or supplements thereto) in
reliance upon, and in conformity with, information furnished in writing to
Issuer by such holder or such underwriter, as the case may be, expressly
for such use.
ANNEX II-14
<PAGE>
Promptly upon receipt by a party indemnified under this Section 9(e)
of notice of the commencement of any action against such indemnified party
in respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall
notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not
relieve it of any liability which it may otherwise have to any indemnified
party under this Section 9(e) unless the failure so to notify the
indemnified party results in substantial prejudice thereto. In case notice
of commencement of any such action shall be given to the indemnifying party
as above provided, the indemnifying party shall be entitled to participate
in and, to the extent it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense of such action at its own
expense, with counsel chosen by it and satisfactory to such indemnified
party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party either agrees to pay the same, (ii) the indemnifying
party fails to assume the defense of such action with counsel satisfactory
to the indemnified party, or (iii) the indemnified party has been advised
by counsel that one or more legal defenses may be available to the
indemnifying party that may be contrary to the interest of the indemnified
party, in which case the indemnifying party shall be entitled to assume the
defense of such action notwithstanding its obligation to bear fees and
expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this Section 9(e) is
unavailable to a party otherwise entitled to be indemnified in respect of
any expenses, losses, claims, damages or liabilities referred to herein,
then the indemnifying party, in lieu of indemnifying such party otherwise
entitled to be indemnified, shall contribute to the amount paid or payable
by such party to be indemnified as a result of such expenses, losses,
claims, damages or liabilities in such proportion as is appropriate to
reflect the relative benefits received by Issuer, the Selling Shareholders
and the underwriters from the offering of the securities and also the
relative fault of Issuer, the Selling Shareholders and the underwriters in
connection with the statements or omissions which resulted in such
expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as
a result of the expenses, losses, claims, damages and liabilities referred
to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any action or claim; provided, however, that in no case shall any
Selling Shareholder be responsible, in the aggregate, for any amount in
excess of the net offering proceeds attributable to its Option shares
included in the offering. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Any obligation by any holder to indemnify
shall be several and not joint with other holders.
ANNEX II-15
<PAGE>
In connection with any registration pursuant to Section 9(a) or 9(b)
above, Issuer and each Selling Shareholder (other than Grantee) shall enter
into an agreement containing the indemnification provisions of this Section
9(e).
(f) Miscellaneous Reporting. Issuer shall comply with all reporting
-----------------------
requirements and will do all such other things as may be necessary to
permit the expeditious sale at any time of any Option Shares by the Selling
Shareholders thereof in accordance with and to the extent permitted by any
rule or regulation promulgated by the SEC from time to time, including,
without limitation, Rule 144. Issuer shall at its expense provide the
Selling Shareholders with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them
under the Securities Act or the Exchange Act, or required pursuant to any
state securities laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
-----------
issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will save the Selling Shareholders harmless,
without limitation as to time, against any and all liabilities, with
respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities to
------------------
be acquired in connection with the exercise of the Option are then authorized
for quotation or trading or listing on the NYSE, the Nasdaq NMS or any
securities exchange, Issuer, upon the request of Holder, will promptly file an
application, if required, to authorize for quotation or trading or listing the
shares of Issuer Common Stock or other securities to be acquired upon exercise
of the Option on the NYSE, the Nasdaq NMS or such other securities exchange and
will use its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
11. Division of Option. This Agreement (and the Option granted hereby) are
------------------
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Miscellaneous.
-------------
ANNEX II-16
<PAGE>
(a) Expenses. Each of the parties hereto shall bear and pay all costs
--------
and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived
--------------------
at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiaries; Severability. This
------------------------------------------------------------
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes
the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto (other than the indemnified parties
under Section 9(e) and any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 12(h)) any
rights or remedies hereunder. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
or Regulatory Authority to be invalid, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected
impaired or invalidated. If for any reason such court or Regulatory
Authority determines that the Option does not permit Holder to acquire, or
does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in Section 2 (as may be adjusted herein), it is
the express intention of Issuer to allow Holder to acquire or to require
Issuer to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the Commonwealth of Pennsylvania without regard
to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
--------------------
for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Plan (or at
such other address for a party as shall be specified by like notice).
(g) Counterparts. This Agreement and any amendments hereto may be
------------
executed in two counterparts, each of which shall be considered one and the
same
ANNEX II-17
<PAGE>
agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations hereunder or under the Option shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Holder may assign
this Agreement to a wholly-owned subsidiary of Holder and Holder may assign
its rights hereunder in whole or in part after the occurrence of a Purchase
Event. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
------------------
the Holder, Issuer and the Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(j) Specific Performance. The parties hereto agree that this Agreement
--------------------
may be enforced by either party through specific performance, injunctive
relief and other equitable relief. Both parties further agree to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any
failure to perform this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
ANNEX II-18
<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers "hereunto duly authorized,
all as of the day and year first written above.
SOUTHWEST NATIONAL CORPORATION
By: /s/ David S. Dahlmann
---------------------------------------
David S. Dahlmann
President and Chief Executive Officer
FIRST COMMONWEALTH FINANCIAL CORP.
By: /s/ Joseph E. O'Dell
---------------------------------------
Joseph E. O'Dell
President and Chief Executive Officer
BF 91510.1
ANNEX II-19
<PAGE>
Danielson Associates Inc.
6110 Executive Boulevard
Suite 504
Rockville, Maryland 20852-3903
Tel: (301) 468-4884
Fax: (301) 468-0013
PITTSBURGH OFFICE
-------------------
Tel: (412) 262-3207
July 15, 1998
Board of Directors
Southwest National Corporation
111 South Main Street
P.O. Box 760
Greensburg, Pennsylvania 15601
Dear Members of the Board:
You have requested our opinion as to the "fairness," from a financial point
of view, of the offer by First Commonwealth Financial Corporation ("First
Commonwealth") of Indiana, Pennsylvania to acquire all of the shares of the
common stock of Southwest National Corporation ("Southwest") of Greensburg,
Pennsylvania. The First Commonwealth offer is to exchange 2.9 shares of First
Commonwealth common stock for each share of Southwest common stock. Based on
First Commonwealth's closing stock price of $30.31 on July 13, 1998, this offer
has a monetary value of approximately $267.5 million. The "fair" sale value is
defined as the price at which all of the shares of Southwest's common stock
would change hands between a willing seller and a willing buyer, each having
reasonable knowledge of the relevant facts. In opining as to the "fairness" of
the offer, it also must be determined if the First Commonwealth common stock to
be exchanged for Southwest's common stock is "fairly" valued.
Danielson Associates Inc. ("Danielson Associates"), as part of its
investment banking business, is regularly engaged in the valuation of banks,
bank holding companies and thrifts in connection with mergers, acquisitions and
other securities transactions. Danielson Associates has knowledge of, and
experience with, Pennsylvania banking markets and banking organizations
operating in those markets.
ANNEX III-1
<PAGE>
Board of Directors
July 15, 1998
Page Two
This opinion is based partly on data supplied to Danielson Associates by
Southwest, but it relies on some public information, all of which is believed to
be reliable, but neither the completeness nor accuracy of such information can
be guaranteed. In particular, the opinion assumes, based on management's
representation, that there are no significant asset quality problems beyond what
is stated in recent reports to regulatory agencies and in discussion with
Danielson Associates' representatives.
In arriving at this opinion, we reviewed (a) annual reports of Southwest
and First Commonwealth for the fiscal years ended December 31, 1996 and 1997;
(b) call report data on each from 1989 through December 31, 1997, including
quarterly reports for March 31, 1998; (c) recently reported prices and trading
activities of, and dividends paid on, the common stock of First Commonwealth;
and (d) certain other publicly available information, including data relating to
the current economic and acquisition environment generally and the banking
market in particular.
In preparing the opinion, Southwest's market has been analyzed and its
business and prospects have been reviewed. In addition, we conducted such other
financial analyses as we deemed appropriate such as comparable company analyses,
comparable transaction analyses and pro forma dilution analyses. Any unique
characteristics have been considered.
We believe that such analyses as described above must be considered as a
whole and that consideration of portions of such analyses and the factors
considered therein, without considering all factors and analyses, could create
an incomplete view of the analyses and the process underlying this opinion. The
preparation of a fairness opinion is a complex process involving subjective
judgments and is not necessarily susceptible to partial analyses and summary
description.
In this analyses, we made certain assumptions with respect to industry
performance, business and economic conditions, and other matters, many of which
are beyond First Commonwealth's or Southwest's control. Estimates contained in
our analyses are not necessarily indicative of the future results of value,
which may be significantly more or less favorable than such estimates.
ANNEX III-2
<PAGE>
Board of Directors
July 15, 1998
Page Three
Based on the foregoing, it is our opinion that, as of the date hereof, the
consideration to be given to Southwest shareholders by first Commonwealth to
acquire Southwest is fair from a financial point of view to Southwest and its
shareholders.
Respectfully submitted,
/s/ Arnold G. Danielson
Arnold G. Danielson
Chairman
Danielson Associates Inc.
AD:mf
ANNEX III-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Directors and Officers.
Pennsylvania Business Corporation Law of 1988. Section 1741 of the
Pennsylvania Business Corporation Law of 1988 (the "BCL") provides that unless
otherwise restricted in its bylaws, a business corporation shall (subject to the
limitations described below) have the power to indemnify any person who was or
is a party, or is threatened to be made a party, to any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another domestic or foreign
corporation for profit or not-for-profit, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action or proceeding, if such person acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal proceeding, had
no reasonable cause to believe his conduct was unlawful. The termination of any
action or proceeding by judgment, order, settlement or conviction or upon a plea
of nolo contendere or its equivalent shall not, of itself, create a presumption
that such person did not act in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal proceeding, had reasonable cause to believe that
his conduct was unlawful.
Section 1742 of the BCL provides that unless otherwise restricted in its
bylaws, a corporation shall (subject to the limitations described below) have
the power to indemnify any person who was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
such person is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another domestic or foreign corporation for profit or not-
for-profit, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action if such
person acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the corporation. Indemnification shall not
be made under Section 1742 in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless, and
only to the extent that, the court of common pleas of the judicial district
embracing the county in which the registered office of the corporation is
located or the court in which such action was brought determines upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court of common pleas or such other court
shall deem proper.
II-1
<PAGE>
Section 1744 of the BCL provides that unless ordered by a court, any
indemnification under Section 1741 or 1742 shall be made by the business
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because the indemnitee has met the applicable standard of conduct
set forth in the relevant section. Such determination shall be made:
(1) by the board of directors of the corporation by a majority vote of a
quorum consisting of directors who were not parties to the action or proceeding;
or
(2) if such a quorum is not obtainable, or, if obtainable and a majority vote
of a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion; or
(3) by the shareholders.
Notwithstanding the above, Section 1743 of the BCL provides that, to the
extent that a director, officer, employee or agent of a business corporation has
been successful on the merits or otherwise in defense of any action or
proceeding referred to above, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection therewith.
Section 1745 of the BCL provides that expenses (including attorneys' fees)
incurred in defending any action or proceeding may be paid by a business
corporation in advance of the final disposition of the action or proceeding upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount if it is ultimately determined that such person is
not entitled to be indemnified by the corporation.
Section 1746 of the BCL provides that the indemnification and advancement of
expenses provided by or granted pursuant to the subchapter on indemnification
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office. Section 1746 also provides that
indemnification may not be made in any case where the act or failure to act
giving rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness. The articles of incorporation
may not provide for indemnification in the case of willful misconduct or
recklessness.
Section 1747 of the BCL provides that, unless otherwise restricted in its
bylaws, a business corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another domestic or foreign
corporation for profit or not-for-profit, partnership, joint venture, trust or
other enterprise, against any liability asserted against such person and
incurred by him in any such capacity, or arising out of his status as such
whether or not the corporation would have the power to indemnify the director,
officer, employee or agent against such liability under the provisions of the
subchapter governing indemnification. Section 1747 declares such insurance to be
consistent with the public policy of the Commonwealth of Pennsylvania.
II-2
<PAGE>
Section 1750 of the BCL provides that the indemnification and advancement of
expenses provided by, or granted pursuant to, the subchapter governing
indemnification shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent of the corporation and shall inure to the benefit of the heirs and
personal representatives of such director, officer, employee or agent.
Section 1713 of the BCL states that (i) a bylaw of a business which was
adopted by the shareholders may provide that a director will not be personally
liable for monetary damages unless the director has breached or failed to
perform his duties and the breach or failure constitutes self-dealing, willful
misconduct or recklessness. Such a limitation does not apply to the violation of
criminal statutes or liability for taxes due.
First Commonwealth By-Laws. Article 23 of the By-Laws of the First
Commonwealth provides that First Commonwealth shall indemnify any director,
officer and/or employee or any former director, officer and/or employee who was
or is a party to, or is threatened to be made a party to, or is called as a
witness in connection with, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that such person is or was a director, officer and/or employee of
First Commonwealth, or is or was serving at the request of First Commonwealth as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise. In the case of an action or suit by or
in the right of the registrant, no indemnification shall be made in respect of a
claim, issue or matter as to which such person shall have been adjudged to be
liable for misconduct in the performance of his duty to the registrant. Article
23 further provides that, except as may be otherwise ordered by a court, there
shall be a presumption that any officer, director and/or employee is entitled to
indemnification in the foregoing circumstances unless either a majority of the
directors not involved in the proceedings or, if there are less than three such
directors, then the holders of one-third of the outstanding shares of First
Commonwealth, determine that the person is not entitled to such presumption. In
the event of any such determination, a written opinion as to whether or not the
parties involved are entitled to indemnification shall be requested from
independent counsel.
Section 12.3 of the By-Laws of First Commonwealth further provides that except
as specifically provided by law, a director of First Commonwealth will not be
personally liable for monetary damages with respect to any action taken, or any
failure to act, unless such director has breached or failed to perform the
duties of his office under Pennsylvania law relating to standard of care and
justifiable reliance and the breach or failure to perform constitutes self-
dealing, willful misconduct or recklessness. Any amendment or repeal of Section
12.3 which has the effect of increasing director liability shall operate
prospectively only and shall not affect any action taken, or any failure to act,
prior to the adoption of such amendment.
First Commonwealth maintains directors' and officers' liability insurance
covering its directors and officers with respect to liabilities, including
liabilities under the Securities Act of 1933, which they may incur in connection
with their serving in such capacity. Under the provisions of this insurance
policy, First Commonwealth receives reimbursement for amounts as to which the
directors and officers are indemnified by First Commonwealth under the
indemnification provisions of Article 23 of the By-Laws of First Commonwealth.
Such insurance
II-3
<PAGE>
also provides certain additional coverage for the directors and officers against
certain liabilities even though such liabilities may not be covered by the
indemnification provisions described above.
ITEM 21. Exhibits
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger dated as of July 15, 1998, between First Commonwealth
Financial Corporation and Southwest National Corporation (filed herewith as Annex I
to the Proxy Statement/Prospectus constituting part of this Registration Statement).
2.2 Stock Option Agreement between First Commonwealth Financial Corporation and Southwest
National Corporation (filed herewith as Annex II to the Proxy Statement/Prospectus
constituting part of this Registration Statement).
3.1* Articles of Incorporation of First Commonwealth Financial Corporation, as amended
(filed as Exhibit 3(i) to First Commonwealth's quarterly report on Form 10-Q for the
quarter ended March 31, 1994 and incorporated herein by reference thereto).
3.2* By-Laws of First Commonwealth Financial Corporation, as amended (filed as Exhibit 3.2
to First Commonwealth's Registration Statement on Form S-4 (Reg. No. 33-50611), filed
with the Securities and Exchange Commission on October 15, 1993 and incorporated
herein by reference thereto).
5.1 Opinion of Tomb and Tomb regarding the legality of the shares of Common Stock of
First Commonwealth Financial Corporation being registered.
8.1 Form of Opinion of Tucker Arensberg, P.C. as to certain tax matters.
10.1* [Employment Agreement between Cenwest and Ronald C. Geiser (filed as Exhibit 10.2 to
the Registrant's Form SE filed November 28, 1983 and incorporated herein by reference
thereto).]
10.2* [Employment Agreement between Central and Sumner E. Brumbaugh (filed as Exhibit 10.2
to the Registrant's Registration Statement on Form S-4 (Reg. No. 33-50611), filed
with the Securities and Exchange Commission on October 15, 1993 and incorporated
herein by reference thereto).]
10.3* Employment Agreement between Peoples and Robert F. Koslow, including Amendment No. 1
thereto (filed as Exhibit 10.3 to First Commonwealth's Registration Statement on Form
S-4 (Reg. No. 33-50611), filed with the Securities and Exchange Commission on October
15, 1993 and incorporated herein by reference thereto).
10.4 Form of Employment Agreement between First Commonwealth and David S. Dahlmann.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
21.1* List of subsidiaries of the Registrant (filed as Exhibit 21.1 to the Registrant's
annual report on Form 10-K for the year ended December 31, 1997 and incorporated
herein by reference thereto).
23.1 Consent of Grant Thornton, independent certified public accountants.
23.2 Consent of Deloitte & Touche, LLP, independent certified public accountants.
23.3 Consent of KPMG Peat Marwick, independent certified public accountants.
23.4* Consent of Tomb and Tomb (contained in their opinion filed as Exhibit 5.1 hereto).
23.5* Consent of Tucker Arensberg, P.C. (contained in their opinion filed as Exhibit 8.1
hereto).
23.6 Consent of Danielson Associates Inc.
24.1 Powers of Attorney.
99.1 Preliminary copy of letter to shareholders of Southwest National Corporation.
99.2 Preliminary copy of Notice of Special Meeting of Shareholders of Southwest National
Corporation.
99.3 Preliminary copy of form of proxy for use by shareholders of Southwest National
Corporation.
99.4 Preliminary copy of letter to shareholders of First Commonwealth Financial
Corporation.
99.5 Preliminary copy of Notice of Special Meeting of Shareholders of First Commonwealth
Financial Corporation.
99.6 Preliminary copy of form of proxy for use by shareholders of First Commonwealth
Financial Corporation.
99.7 Opinion of Danielson Associates, Inc. (included as Annex III to the Proxy Statement/
Prospectus).
</TABLE>
*Incorporated herein by reference.
ITEM 22. Undertakings.
(1) The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons
II-5
<PAGE>
who may be deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed pursuant
to paragraph (1) immediately preceding, or (ii) that purports to meet the
requirements of section l0(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415 (Section 230.415 of this chapter),
will be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(4) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, l0(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(5) The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in Indiana, Pennsylvania, on the 3rd
day of September, 1998.
FIRST COMMONWEALTH FINANCIAL
CORPORATION
By: /s/ Joseph E. O'Dell
----------------------------------
Joseph E. O'Dell
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 3rd day of September, 1998.
II-7
<PAGE>
Signature and Capacity
/s/ Joseph E. O'Dell
- ----------------------------------------------
Joseph E. O'Dell, President and
Chief Executive Officer and Director
(principal executive officer)
/s/ John J. Dolan
- ----------------------------------------------
John J. Dolan, Senior Vice President and
Chief Financial Officer
(principal financial officer and principal
accounting officer)
*
- ----------------------------------------------
Sumner E. Brumbaugh, Director
*
- ----------------------------------------------
E.H. Brubaker, Director
*
- ----------------------------------------------
Edward T. Cote, Director
*
- ----------------------------------------------
Ronald C. Geiser, Director
*
- ----------------------------------------------
Johnston A. Glass, Director
II-8
<PAGE>
*
- ----------------------------------------------
A.B. Hallstrom, Director
*
- ----------------------------------------------
H.H. Heilman, Jr., Director
*
- ----------------------------------------------
David F. Irvin, Director
*
- ----------------------------------------------
Dale P. Latimer, Director
*
- ----------------------------------------------
Joseph W. Proske, Director
*
- ----------------------------------------------
David R. Tomb, Jr.
Senior Vice President, Secretary,
Treasurer and Director
*
- ----------------------------------------------
E. James Trimarchi
*
- ----------------------------------------------
Robert C. Williams
II-9
<PAGE>
*Joseph E. O'Dell hereby signs this Registration Statement on September 3rd,
1998, on behalf of each of the above-named Directors of First Commonwealth above
whose typed names asterisks appear, pursuant to powers of attorney duly executed
by each such Director and filed with the Securities and Exchange Commission as
Exhibits to this Registration Statement
By: /s/ Joseph E. O'Dell
----------------------------------
Joseph E. O'Dell
Attorney-in-Fact
II-10
<PAGE>
EXHIBIT 5.1
OPINION OF TOMB AND TOMB
<PAGE>
FIRST COMMONWEALTH
- -------------------------------
FINANCIAL CORPORATION
Old Courthouse Square, 22 North Sixth Street, Indiana, Pennsylvania 15701
(724) 349-7220 FAX (724) 349-6427
TOMB AND TOMB
Attorneys at Law
402 Indiana Theatre Building
Indiana, Pennsylvania 15701
August 31, 1998
First Commonwealth Financial Corporation
Old Courthouse Square
22 North Sixth Street
Indiana, Pennsylvania 15701
Gentlemen:
We have acted as counsel to First Commonwealth Financial Corporation
("FCFC") in connection with the Agreement and Plan of Merger dated July 15, 1998
between FCFC and Southwest National Corporation ("Southwest") ("Agreement"). The
Agreement provides for the merger of Southwest into and with FCFC (the
"Merger"). In the Merger each issued and outstanding share of common stock, par
value $2.50 per share, of Southwest ("Southwest Common Stock") will be converted
into 2.9 shares of common stock, par value $1 per share, of FCFC ("FCFC Common
Stock").
We have also acted as council to FCFC in connection with the Registration
Statement on Form S-4 (the "Registration Statement") to be filed by FCFC with
the Securities and Exchange Commission for the purpose of registering under the
Securities Act of 1933, as amended, the 8,826,840 shares of FCFC Common Stock
which may be issued to the shareholders of Southwest in connection with the
Merger. This opinion is being furnished to you for the purpose of being filed as
an Exhibit to the Registration Statement.
In connection with this opinion, we have examined, among other things:
(1) An executed copy of the Agreement and Plan of Merger;
(2) A copy of the Articles of Incorporation and By-Laws of FCFC as in
effect on the date hereof; and
(3) Copies of resolutions adopted by the Board of Directors of FCFC,
including resolutions approving the Agreements.
<PAGE>
First Commonwealth Financial Corporation -2-
Based upon the foregoing and upon an examination of such other documents,
corporate proceedings, statutes and decisions as we have considered necessary to
enable us to furnish this opinion, and assuming that the Merger is consummated
in accordance with the terms of the Agreement, we are pleased to advise you that
in our opinion, the shares of FCFC Common Stock into which Southwest Common
Stock outstanding immediately before the Merger becomes effective will be
converted will, at the time the Merger becomes effective, be duly authorized,
validly issued, fully paid and nonassessable shares of FCFC Common Stock.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Proxy Statement/Prospectus forming a part of the Registration
Statement.
Very truly yours,
/s/ David R. Tomb, Jr.
TOMB AND TOMB
<PAGE>
EXHIBIT 8.1
FORM OF OPINION OF TUCKER ARENSBERG, P.C.
<PAGE>
[DRAFT]
_______________, l998
First Commonwealth Financial Corporation
Old Courthouse Square
22 North Sixth Street
Indiana, Pennsylvania 15701
Southwest National Corporation
111 S. Main Street
Greensburg, Pennsylvania 15601
Ladies and Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of the proposed merger of Southwest National Corporation
("Southwest") with and into First Commonwealth Financial Corporation ("First
Commonwealth").
FACTS
-----
First Commonwealth is a bank holding company incorporated under the laws of
the Commonwealth of Pennsylvania. First Commonwealth's principal bank
subsidiaries are First Commonwealth Bank, a Pennsylvania banking corporation
headquartered in Indiana, Pennsylvania and First Commonwealth Trust Company, a
Pennsylvania trust company headquartered in Indiana, Pennsylvania (collectively,
the "First Commonwealth Banking Subsidiaries"). Through the First Commonwealth
Banking Subsidiaries, First Commonwealth is engaged in the business of providing
commercial banking services and consumer financial services, including retail
banking, trust and investment management services. First Commonwealth also has
two additional subsidiaries, Commonwealth Systems Corporation and BSI Financial
Services, Inc., which provide related financial services.
Southwest is a bank holding company incorporated under the laws of the
Commonwealth of Pennsylvania. Southwest's principal subsidiary is Southwest
National Bank of Pennsylvania ("Southwest Bank"), a national banking
association. Southwest Bank provides a wide variety of services, including
secured and unsecured financing, real estate financing, retail banking services,
as well as the offering of asset management and fiduciary services.
The terms of the proposed merger (the "Merger") are contained in the
Agreement and Plan of Merger dated as of July 15, 1998 by and between Southwest
National Corporation and First Commonwealth Financial Corporation (the "Merger
Agreement"). Concurrently with and as a condition to entering into the Merger
Agreement, First Commonwealth and Southwest entered into a Stock Option
Agreement dated as of July 15, 1998 (the "Stock Option Agreement"), pursuant to
which Southwest has granted to First Commonwealth the option to purchase shares
of Southwest Common Stock. Exercise of the options is contingent upon the
occurrence of specified events described therein.
<PAGE>
First Commonwealth
Financial Corporation
Southwest National Corporation
, 1998
- -----------
Page 2
The Merger Agreement and the Stock Option Agreement are collectively
referred to as the "Agreements." Terms not otherwise defined in this letter
shall have the meanings assigned to them in the Merger Agreement.
You have directed us to assume in preparing this opinion that (1) the
Merger will be consummated in accordance with the terms, conditions and other
provisions of the Agreements, and (2) all of the factual information,
descriptions, representations and assumptions set forth or referred to in this
letter, in the letters to us from First Commonwealth dated __________, 1998, and
from Southwest dated __________, 1998 (the "Letters") and in the Joint Proxy
Statement/Prospectus dated __________, 1998 (the "Joint Proxy
Statement/Prospectus") and mailed to Southwest and First Commonwealth
shareholders in connection with the special meetings of shareholders to approve
the Merger, are accurate and complete and will be accurate and complete at the
Effective Time.
We have examined the documents referred to above and the originals, or
copies certified or otherwise identified to our satisfaction of such records,
documents, certificates or other instruments and made such other inquiries as in
our judgment are necessary or appropriate to enable us to render the opinions
set forth below. We have not independently verified any factual matters
relating to the Merger with or apart from our preparation of this opinion and,
accordingly, our opinion does not take into account any matters not set forth
herein which might have been disclosed by independent verification.
The Merger will be approved as required by law by the Southwest
shareholders at a special meeting to be held on __________, 1998, and by the
First Commonwealth shareholders at a special meeting to be held on __________,
1998. Holders of Southwest and First Commonwealth stock are not entitled to
exercise dissenters' rights with respect to the Merger.
Subject to the terms and conditions of the Merger Agreement and in
accordance with the Pennsylvania Business Corporation Law, at the Effective
Time, Southwest will merge with and into First Commonwealth. First Commonwealth
will be the surviving entity in the Merger, and will continue its corporate
existence under Pennsylvania law under the name "First Commonwealth Financial
Corporation." At the Effective Time, the separate corporate existence of
Southwest will terminate. The First Commonwealth Articles of Incorporation, as
in effect immediately prior to the Effective Time, will be the Articles of
Incorporation of the Continuing Corporation, and the By-Laws of First
Commonwealth, as in effect immediately prior to the Effective Time, will be the
By-Laws of the Continuing Corporation.
Upon consummation of the Merger, except as described below, each
outstanding share of Southwest Common Stock, other than shares held in
Southwest's treasury or held by First Commonwealth or any wholly-owned
subsidiary of First Commonwealth or Southwest (except in both cases for shares
held in trust, managed, custodial or nominee accounts and the like, or held by
mutual funds for which a subsidiary of First Commonwealth or Southwest acts as
investment advisor that, in any such case, are beneficially owned by third
parties ("Trust Account Shares") and shares acquired in respect of debts
previously contracted ("DPC Shares")), will be automatically converted into 2.9
fully paid and non-assessable shares of First
<PAGE>
First Commonwealth
Financial Corporation
Southwest National Corporation
, 1998
- -----------
Page 3
Commonwealth Common Stock (except that cash will be paid in lieu of fractional
shares as described below), subject to possible increase in the rate of exchange
in certain limited circumstances. Any shares of Southwest Common Stock owned
immediately prior to the Effective Time by First Commonwealth, Southwest or
their wholly-owned subsidiaries (other than Trust Account Shares and DPC Shares)
will be cancelled. All shares of First Commonwealth Common Stock owned
immediately prior to the Effective Time by Southwest (other than Trust Account
Shares and DPC Shares) will become treasury stock of First Commonwealth.
Southwest owns no First Commonwealth Common Stock, and First Commonwealth owns
no Southwest Common Stock. The Exchange Ratio was determined through arm's-
length negotiations between First Commonwealth and Southwest.
No fractional Shares of First Commonwealth Common Stock will be issued in
the Merger. Each holder of Southwest Common Stock who otherwise would be
entitled to receive a fraction of a share of First Commonwealth Common Stock
will receive, instead, cash equal to such fraction multiplied by the market
value of one share of First Commonwealth Common Stock at the Effective Time. The
market value of one share of First Commonwealth Common Stock at the Effective
Time will be the average of the closing prices of such stock on the New York
Stock Exchange ("NYSE") Composite Transactions Tape for the ten NYSE trading
days immediately preceding the Effective Time. Except for cash exchanged in
lieu of issuing fractional shares of First Commonwealth Common Stock, no cash
will be exchanged for shares of Southwest Common Stock or shares of First
Commonwealth Common Stock pursuant to the Merger. Except for the Stock Option
Agreement, no options to purchase Southwest Common Stock and no securities or
other instruments convertible into Southwest Common Stock will be outstanding at
the Effective Time.
We have also relied with your permission on the following additional
representations and/or assumptions and render such opinion subject to the
following limitations:
[INTENTIONALLY LEFT BLANK - TO BE COMPLETED AT A LATER DATE]
OPINION
-------
Assuming that the Merger is consummated in accordance with the terms and
conditions set forth in the Agreements and based on the facts set forth or
referred to in the Joint Proxy Statement/Prospectus, the Letters and this letter
(an advance copy of which has been provided to you), including all assumptions
and representations in any such documents, and subject to the qualifications and
other matters set forth herein, it is our opinion that for federal income tax
purposes:
1. The Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and Southwest and First Commonwealth will each be a party to that reorganization
within the meaning of Section 368(b) of the Code;
<PAGE>
First Commonwealth
Financial Corporation
Southwest National Corporation
, 1998
- -----------
Page 4
2. To the extent Southwest Common Stock is exchanged pursuant to the
Merger for First Commonwealth Common Stock, no gain or loss will be recognized
by the shareholders of Southwest; and
3. Gain or loss, if any, will be recognized by Southwest shareholders upon
the receipt of cash in lieu of fractional shares of First Commonwealth Common
Stock.
Our opinion is limited to the foregoing federal income tax consequences of
the Merger, which are the only matters as to which you have requested our
opinion, and you must judge whether the matters addressed herein are sufficient
for your purposes. We do not address any other federal income tax consequences
of the Merger or other matters of federal law and have not considered matters
(including state or local tax consequences) arising under the laws of any
jurisdiction other than matters of federal law arising under the laws of the
United States.
Our opinion is based on the understanding that the relevant facts are, and
will be as of the Effective Time, as set forth or referred to in this letter. If
this understanding is incorrect or incomplete in any respect, our opinion could
be affected.
Our opinion is also based on the Code, Treasury Regulations, case law, and
Internal Revenue Service rulings and interpretations as they now exist. These
authorities are all subject to change and such change may be made with
retroactive effect. We can give no assurance that after any such changes our
opinion would not be different. Moreover, our opinion will not be binding on the
IRS or the courts,
We undertake no responsibility to update or supplement our opinion. Only First
Commonwealth and Southwest may rely on this opinion, and only with respect to
the proposed Merger described herein. We hereby consent to the filing of this
opinion as an exhibit to the Joint Proxy Statement/Prospectus and to the use of
our name under the captions "The Merger - Certain Federal Income Tax
Consequences" and "Legal Matters" in the Proxy Statement/Prospectus.
Very truly yours,
TUCKER ARENSBERG, P.C.
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT BETWEEN FIRST COMMONWEALTH
AND DAVID S. DAHLMANN
<PAGE>
[DRAFT]
EMPLOYMENT AGREEMENT
This Agreement, made this _____ day of _________, 1998, by and between
First Commonwealth Financial Corporation, a corporation organized and existing
under the laws of the Commonwealth of Pennsylvania and whose principal place of
business is in Indiana, Pennsylvania (the "Employer"), and David S. Dahlmann, an
individual residing in __________, Pennsylvania (the "Executive").
WITNESSETH
WHEREAS, the Employer has entered into an Agreement and Plan of Merger with
Southwest National Corporation, a Pennsylvania bank holding company whose
principal place of business is in Greensburg, Pennsylvania ("Southwest
Corporation") to effect a tax-free merger (as described in Section 368 of the
Internal Revenue code of 1986, as amended) of Southwest Corporation into the
Employer (the "Merger"), and is presently in the process of seeking regulatory
approval in connection with such Merger.
WHEREAS, the Executive is presently employed by Southwest Corporation and
by Southwest National Bank of Pennsylvania, its wholly owned subsidiary
("Southwest Bank") as president and chief executive officer;
WHEREAS, the Employer regards the services of the Executive as key to the
success of the business of Southwest Bank after the Merger and accordingly
wishes to employ the Executive after the date of acquisition in accordance with
the terms and conditions hereinafter set forth.
WHEREAS, the Executive is willing to be employed by the Employer after the
Merger in accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Conditional Agreement. This Agreement, and all of its covenants, are
---------------------
conditional upon the completion of the Merger and shall be absolutely void ab
initio upon the failure of the Merger to occur.
2. Employment, Duties and Responsibilities. The Employer hereby employs the
---------------------------------------
Executive as Vice-Chairman of the Employer, with the present additional role of
President and Chief Executive Officer of Southwest Bank, and the Executive
hereby accepts employment by the Employer, in accordance with the terms and
conditions herein provided. The Executive shall have such duties as may be
assigned to him from time to time by the President of the Employer, or such
person or persons as he may designate and authorize for this purpose. The
Executive is hereby employed as a full-time employee and he shall accordingly
devote his entire working time, ability and attention to the business of the
Employer during the term of this Agreement. Accordingly, the Executive shall not
directly or indirectly engage in, or render, any
<PAGE>
services of a business, commercial or professional nature to any other person or
organization, or engage in any self-employment, during the term of this
Agreement.
3. Compensation and Benefits.
-------------------------
(a) For his services, the Executive shall be paid cash compensation by the
Employer in an amount equal to Three Hundred Thousand Dollars ($300,000)
annually, subject to such increases as the Employer may deem appropriate.
However, it is recognized that the Employer may pay cash compensation over a
different payroll frequency, and, in that event, each paycheck that the Employer
pays to the Executive may be adjusted proportionately so that it is equivalent
to the amount provided by the previous sentence when computed on an annual
basis. In addition the Executive shall be entitled to all of the same employee
benefits as the other employees of the Employer at a similar level and
classification and shall be included in, and have the same benefits under, the
Employer's health insurance, life insurance and other welfare plans and pension,
retirement, stock option and other retirement and benefit plans as the other
employees of the Employer at a similar level and classification. The Executive
shall also be entitled to such other perquisites and remuneration as may be
provided by the Employer from time to time pursuant to its policies and
procedures as applicable from time to time. The Executive's years of service
with Southwest Bank and Southwest Corporation shall be taken into account in
determining eligibility, vesting and benefit levels as if such years of service
had accrued as an employee of the Employer.
(b) The Employer has established the following compensation plans and, as
additional compensation, executive shall participate in these plans so long as
they are offered to any other executives of the Employer:
(1) An incentive bonus plan whereby the Executive shall receive a cash
bonus payment equal to a percentage of his base compensation if the earnings per
share of the Employer increase by at least 10% over the prior year. The exact
percentage of compensation shall be reasonably determined by the Employer.
(2) A supplemental executive retirement plan whereby the Executive may
contribute up to five percent (5%) of the portion of his annual compensation
which is in excess of the eligible compensation limits imposed on highly
compensated employees by the Federal Qualified Benefit Plan requirements. The
Employer shall contribute twelve dollars to such plan for every five dollars
contributed to the plan by the Executive. Future benefits shall be calculated
based on a tax free return on the contributions. Such amounts shall be deposited
in a rabbi trust established for the benefit of the Executive. The detailed
terms of such plan shall be set forth in a plan document prepared by the
Employer.
(3) $600,000 of whole life split dollar insurance coverage on his life.
(4) Options for the purchase of the Employer's common stock, which stock
shall have an aggregate market value, as of the date of th e
Page 2 of 9
<PAGE>
grant of the options, equal to 110% of the Executive's base compensation.
Options for an aggregate market price of $100,000 of the Executive's common
stock shall be in the form of Qualified Incentive Stock Options (as defined by
the Internal Revenue Code of 1986) with the remainder being in the form of non-
qualified stock options. Such options shall be issued in accordance with the
terms of the Employer's qualified and non-qualified stock option plans.
4. Books, Records and Files. It is understood and agreed that any and all
------------------------
books, records, files, diaries, schedules, client lists and so on maintained by
the Executive in connection with his employment by the Employer is the property
of the Employer and not the Executive and shall be made available to authorized
officers of the Employer upon request from time to time and shall be returned to
the Employer upon the termination of the Executive's employment with the
Employer. The books, records and other material referred to in this paragraph
shall include, but not be limited to, data maintained in any medium whatsoever,
whether paper or electronic and shall include all digitally maintained files. In
connection therewith, the Executive shall provide the Employer with all
passwords, encryption codes, encryption software and so on, to permit the
Employer to access the data maintained digitally on any electronic medium.
5. Inventions, Ideas and Discoveries. Any and all inventions, ideas and
---------------------------------
discoveries made by the Executive while employed by the Employer and in
connection with such employment shall be the sole property of the Employer and
not the Executive, whether such inventions, ideas and discoveries are patentable
or subject to copyright or not, and whether or not such inventions, ideas or
discoveries were developed by the Executive during his normal working hours or
not.
6. Confidentiality and Non-Disclosure. The Executive recognizes that any and
----------------------------------
all information acquired during the course of his employment by the Employer is
confidential and proprietary and will not be disclosed to any third party
whatsoever (whether during the period of this Agreement or thereafter) except in
the ordinary course of the Executive's employment as required by his duties and
responsibilities and in accordance with the understanding and directions of the
President of the Employer. Such information shall include, but not be limited
to, information acquired from, or about, third parties such as the Employer's
customers, including, but not limited to, account, general banking and financial
information relating thereto, trade secrets such as business plans, practices,
marketing plans, compilations of information, customer lists and all other
information, records, files and data bases owned by the Employer or to which the
Employer has access. It is further recognized that banking and account
information acquired by the Executive in the course of his employment with
respect to customers of the Employer are confidential pursuant to the laws of
the Commonwealth of Pennsylvania and the United States of America, and that the
Executive will strictly conform to all such laws and administrative regulations
and will take all action necessary or appropriate to cause all persons under the
Executive's supervisory responsibility to conform to all such laws and
regulations.
7. Removal of Bank Property or Data from Premises. Executive shall not, without
----------------------------------------------
the direction or consent of the President of the Employer, or a person who he
delegates
Page 3 of 9
<PAGE>
to act on his behalf for this purpose, remove from the Employer's premises any
files, documents, electronic storage media or other material owned by, or in the
possession of, the Employer to which the Executive has been provided access by
virtue of his employment with the Employer. In any event, all such material
shall be returned to the Employer upon the Executive ceasing to be employed by
the Employer and the Executive shall in no event retain copies or duplicates
(stored in any manner or medium whatsoever) of any such material.
8. Legal Requirements. The Executive shall exercise his duties of employment in
------------------
a manner consistent with the requirements of all applicable statutes of the
United States of America and the Commonwealth of Pennsylvania and of the
administrative rules and regulations issued thereunder and of the procedures,
rules and regulations of the applicable regulatory agencies of the United States
of America and the Commonwealth of Pennsylvania. Similarly, the Executive shall
exercise his supervision and control over the Executives that report to him in
such a manner as to cause them to exercise their duties of employment so as to
meet the standards provided by the previous sentence of this paragraph.
9 Expenses. Employer shall reimburse Executive or otherwise provide for or pay
--------
for all reasonable expenses incurred by Executive in connection with the
business of Employer, subject to such reasonable limitations as may be
established by Employer. If such expenses are paid in the first instance by
Executive, Employer will reimburse Executive in accordance with the expense
reimbursement policy in effect at that time.
10. Term of Agreement. The initial term of employment under this Agreement
-----------------
shall commence on the effective date of the Merger and shall terminate on the
fifth anniversary date of the effective date of the Merger, unless further
extended or sooner terminated in accordance with the terms of this Agreement.
After the initial term, this Agreement shall be renewed automatically for
successive one year terms, unless either party gives contrary written notice at
least thirty days in advance of the automatic renewal date. The provisions of
Sections 4, 5, and 6 hereof, and all provisions specifically requiring duties to
be performed, and describing benefits to be received, after the termination of
the Executive's employment shall survive the termination of Executive's
employment hereunder.
11. Termination.
-----------
(a) Employer shall have the right at any time to terminate Executive's
employment for just cause. For the purpose of this Agreement, "termination for
just cause" shall mean termination for personal dishonesty, willful misconduct,
breach of fiduciary duty involving personal profit, conviction of a felony,
willful violation of any law, rule or regulation (other than traffic violations
or similar offenses), willful violation of a final cease and desist order,
willful or intentional breach or neglect by Executive of his duties, negligence,
incompetence or misconduct in the performance of such duties and/or material
breach of any provision of this Agreement as determined by the Employer.
Page 4 of 9
<PAGE>
(b) In the event employment is terminated for just cause pursuant to
subparagraph (a), above, Executive shall have no right to compensation or other
benefits for any period after the date of termination.
(c) Executive shall have the right to terminate his employment at any time.
In such event, Executive shall have no right after the date of termination to
compensation or other benefits as provided in this Agreement, unless such
termination is for "good reason" which is defined as a failure by Employer to
comply with any material provision of this Agreement, which failure has not been
cured within thirty days after a notice of noncompliance has been given by
Executive to Employer's Board of Directors.
(d) Any termination of Executive's employment by Employer or by Executive
shall be communicated by written notice of termination to the other party. For
purposes of this Agreement, a "notice of termination" shall mean a dated notice
which shall (i) indicate the specific termination provisions in this Agreement
relied upon; (ii) set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated; (iii) specify a date of termination, which shall be not
---
less than thirty nor more than ninety days after such notice of termination. In
- ------------------------------------------
the case of termination by Employer of Executive's employment for just cause
pursuant to subparagraph 11 (a), the notice of termination may specify a date of
termination as of the date such notice of termination is given.
(e) If Executive provides a Notice of termination for good reason, the date
of termination shall be the date on which a notice of termination is given.
(f) Employer shall have the right to terminate Executive's employment at
any time for any reason. However, if Executive terminates his employment for
good reason as defined in subparagraph 11(c), or if Executive is terminated by
Employer for reasons other than just cause as defined in subparagraph 11(a),
then in lieu of any further salary payments to Executive for periods subsequent
to the date of termination, Employer shall pay as severance to Executive an
amount equal to 12 month's base salary, based on Executive's then current annual
base salary and payable in accordance with Employer's customary payroll
practices beginning on the first payroll payment date following the date of
termination and continuing throughout the remaining twelve months.
(1) Executive shall not be required to mitigate the amount of any
payment period provided for in this section if he obtains other employment.
-------
(2) Additionally, Employer will continue to pay Employer's share of the
health insurance premiums for Executive under the group plan in effect at the
time for a period not to exceed 18 months. Executive will be responsible to pay
any employee contributory share and COBRA administration fee.
(g) If Executive retires prior to the expiration of this Agreement, he will
be deemed to have voluntarily quit his employment and shall only be entitled to
Page 5 of 9
<PAGE>
compensation and/or benefits in accordance with Employer's retirement policy and
plan documents.
11. Change in Control of Employer.
-----------------------------
(a) For purposes of this Agreement, a "change in control of Employer" shall
mean the acquisition of sufficient shares of the employer's stock by any
"person", as such term is used in Sections 13(d) and 14(d) of the Exchange Act,
other than Employer, so as to become a "beneficial owner" as defined in Rule
13d-3 under the Exchange Act, directly or indirectly, of securities of Employer
representing 25% or more of the combined voting power of Employer's then
outstanding securities.
(b) Subsequent to a change in control of Employer, Executive has the option
to terminate his employment with Employer and any successor immediately.
Executive may also terminate his employment immediately subsequent to the change
in control of Employer if there is, within one year of the change in control:
(1) without Executive's express written consent, the assignment to
Executive of any duties inconsistent with Executive's position, duties,
responsibility, and status with Employer immediately prior to change in
control of Employer, or
(2) an adverse change in Executive's reporting responsibilities,
titles or officers in effect immediately prior to a change in control of
Employer; any removal of Executive from, or any failure to reelect
Executive to, any such positions, except in connection with a termination
of employment for just cause (as defined in subparagraph 11(a)),
disability, death and/or retirement;
(3) a reduction by Employer, in Executive's annual salary in effect
immediately prior to a change in control or as the same may be increased
from time to time;
(4) a failure to continue in effect any bonus, benefit, compensation,
life insurance, health and accident and/or disability plans in which
Executive is participating at the time of a change in control of Employer,
or the taking of any action by Employer, which would adversely affect
Executive's participation in or materially reduce Executive's benefits
under any of such plans; or
(5) a failure by Employer to obtain the assumption of and agreement to
perform this Agreement by any successor as contemplated in Section 15.
(c) If Executive terminates his Employment due to a change in control of
Employer then, in lieu of any further salary payments to Executive for periods
Page 6 of 9
<PAGE>
subsequent to the date of termination, Employer shall pay as severance to
Executive an amount equal to (a) the average aggregate annual compensation paid
to the Executive and included in the Executive's gross income for federal income
tax purposes during the five calendar years preceding the taxable year in which
the date of termination occurs (or such lesser amount of time if the Executive
has not been employed by Employer for five years at the time of termination) by
Employer and any of its subsidiaries subject to United States income tax,
multiplied by ____. Such payment shall be made in a lump sum on or before the
fifth day following the date of termination; provided, however, that the lump
sum severance payment under this section shall be subject to the excise tax
imposed by Section 4999 of the Code. The determination of any reduction in the
lump sum severance payment under this section pursuant to the foregoing
provision shall be made by independent counsel to Employer in consultation with
the independent certified public accountants of Employer Bank, subject to review
by Executive or his designated representative. Following termination pursuant
to this paragraph, Employer shall:
(1) pay 100% of the health insurance premium for Executive under the
group plan in effect at that time, for a period of 18 months; and,
(2) make available to Executive a maximum of 6 months outplacement
assistance with a provider selected by Employer and at Employer's expense.
(d) Executive shall not be required to mitigate the amount of any payment
period provided for in this section if he obtains other employment.
13. Potential tax liability. It is the intention of Employer and Executive
-----------------------
that any and all severance benefits Executive receives pursuant to this
Agreement, together with any other payments due to Executive from Employer or
its successor ("other payments"), shall not constitute "excess parachute
payments" within the meaning of Sections 280G and 4999 of the Internal Revenue
Code of 1986, as amended. If the Internal Revenue Service or the independent
accountants acting as auditors for Employer or its successor determine that the
severance benefits would either by themselves or together with other payments
constitute "excess parachute payments," the severance benefits shall be reduced
to the maximum amount which may be paid without constituting the severance
benefits and other payments as "excess parachute payments." If, regardless of
the aforesaid adjustment, the Internal Revenue Service determines that the
severance benefits, constitute "excess parachute payments" under Sections 280G
and 4999 of the Code, Employer shall assume responsibility for the loss of any
tax deductions, and Executive shall assume responsibility for payment of any
income and excise taxes attributable to the excess parachute payment.
Page 7 of 9
<PAGE>
14. Miscellaneous.
-------------
(a) This Agreement may not be amended except in writing signed by the
Executive or by his duly authorized representative, and by a duly authorized
officer of Employer.
(b) All notices given or required to be given shall be in writing, sent by
United States first-class certified or registered mail, postage prepaid, to
Executive (or to Executive's spouse or estate upon Executive's death) at
Executive's last known address and to Employer at its principal offices. All
such notices shall be effective when deposited in the mail. Either party by a
notice in writing may change or designate the place for receipt of all such
notices.
(c) Employer or Executive to exercise any right or power given under this
Agreement shall: (i) impair the subsequent exercise of any right or power, or,
(ii) be construed to be a waiver of any default or any right or power that shall
have arisen.
(d) All payments required to be made by Employer hereunder to the Executive
shall be subject to the withholding of such amounts, if any, relating to tax and
other payroll deductions as Employer may reasonably determine should be withheld
pursuant to any applicable law or regulation.
(e) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
(f) This Agreement may be executed in one or more counterparts, each of
which shall be determined to be an original but all of which together will
constitute one and the same instrument.
15. Future Rights and Obligations under the Agreement.
-------------------------------------------------
(a) Employer will attempt to obtain an express written agreement from its
successors, and assigns, including, without limitation, any person, partnership,
or corporation which may acquire all or substantially all of the Employer's
assets and business, or with or into which Employer may be consolidated or
merged, to assume the obligations set forth in this Agreement. However,
Executive understands and agrees that such an assumption and agreement to
perform the terms and conditions set forth in this Agreement may not occur.
(b) This Agreement is personal to each of the parties and neither party may
assign or delegate any of its rights or obligations under this Agreement without
the prior written consent of the other party.
Page 8 of 9
<PAGE>
(c) If Executive should die during the term of this Agreement, the
Agreement shall immediately terminate on the day of his death as if such day
were the day fixed for termination.
16. Applicable law. This Agreement shall be governed in all respects and be
--------------
interpreted by and under the laws of the Commonwealth of Pennsylvania, except to
the extent that such law may be preempted by applicable federal law.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first above written.
ATTEST: EMPLOYER:
First Commonwealth Financial Corporation
- ----------------------------- BY:
-------------------------------------
WITNESS: EXECUTIVE:
- ----------------------------- ----------------------------------------
David S. Dahlmann
Page 9 of 9
<PAGE>
EXHIBIT 23.1
CONSENT OF GRANT THORNTON, INDEPENDENT AUDITORS
<PAGE>
CONSENT OF GRANT THORNTON, INDEPENDENT AUDITORS
We have issued our report dated January 17, 1997, accompanying the
consolidated financial statements of First Commonwealth Financial Corporation
and subsidiaries, as of December 31, 1996, and for the years ended December 31,
1996 and 1995, included in the Annual Report on Form 10-K for the year ended
December 31, 1997, which is incorporated by reference in this Registration
Statement. We consent to the incorporation by reference in the Registration
Statement of the aforementioned report and to the use of our name as it appears
under the caption "Experts."
/s/ GRANT THORNTON LLP
Philadelphia, Pennsylvania
September 3, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF DELOITTE & TOUCHE, LLP, INDEPENDENT AUDITORS
<PAGE>
CONSENT OF DELOITTE & TOUCHE, LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement
of First Commonwealth Financial Corporation on Form S-4 of our report dated
January 30, 1998, appearing in the Annual Report on Form 10-K of First
Commonwealth Financial Corporation for the year ended December 31, 1997, and to
the reference to us under the heading "Experts" in the Prospectus, which is a
part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
September 3, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF KPMG PEAT MARWICK, INDEPENDENT AUDITORS
<PAGE>
CONSENT OF KPMG PEAT MARWICK, INDEPENDENT AUDITORS
The Board of Directors
Southwest National Corporation
We consent to the use of our report, incorporated herein by reference, and to
the reference to our firm under the heading "Experts" in the Joint Proxy
Statement/Prospectus, with respect to the consolidated financial statements of
Southwest National Corporation and subsidiary as of December 31, 1997 and 1996,
and for each of the years in the three-year period ended December 31, 1997.
/s/ KPMG PEAT MARWICK
Pittsburgh, Pennsylvania
September 3, 1998
<PAGE>
EXHIBIT 23.6
CONSENT OF DANIELSON ASSOCIATES INC.
<PAGE>
Danielson Associates Inc.
6110 Executive Boulevard
Suite 504
Rockville, Maryland 20852-3903
Tel: (301) 468-4884
Fax: (301) 468-0013
Pittsburgh Office
-----------------
Tel: (412) 262-3207
CONSENT OF DANIELSON ASSOCIATES INC.
We hereby consent to the inclusion in the Proxy Statement/Prospectus
forming a part of this Registration Statement of our opinion to the Board of
Directors of Southwest National Corporation, attached as Annex III to such Proxy
Statement/Prospectus, and the references to such opinion contained therein. In
giving such consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "Securities
Act"), and we do not thereby admit that we are experts with respect to any part
of this Registration Statement within the meaning of the term "expert" as used
in the Securities Act.
DANIELSON ASSOCIATES INC.
By /s/ Arnold G. Danielson
--------------------------
Arnold G. Danielson
Chairman
Rockville, Maryland
August 28, 1998
<PAGE>
EXHIBIT 24.1
POWERS OF ATTORNEY
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints E. James Trimarchi, David R. Tomb, Jr. and Joseph E.
O'Dell, and each of them, with full power to act without the others, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement and any and all amendments
(including post-effective amendments) hereto, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their substitutes,
may lawfully do or cause to be done by virtue hereof.
<PAGE>
Signature and Capacity
/s/ E. James Trimarchi
-------------------------------------------
E. James Trimarchi
(Director)
/s/ E. H. Brubaker
-------------------------------------------
E. H. Brubaker
(Director)
/s/ Sumner E. Brumbaugh
-------------------------------------------
Sumner E. Brumbaugh
(Director)
/s/ Edward T. Cote
-------------------------------------------
Edward T. Cote
(Director)
/s/ Ronald C. Geiser
-------------------------------------------
Ronald C. Geiser
(Director)
/s/ Johnston A. Glass
-------------------------------------------
Johnston A. Glass
(Director)
/s/ A.B. Hallstrom
-------------------------------------------
A.B. Hallstrom
(Director)
/s/ H. H. Heilman, Jr.
-------------------------------------------
H. H. Heilman, Jr.
(Director)
/s/ David F. Irvin
-------------------------------------------
David F. Irvin
(Director)
<PAGE>
/s/ Dale P. Latimer
-------------------------------------------
Dale P. Latimer
(Director)
/s/ Joseph E. O'Dell
-------------------------------------------
Joseph E. O'Dell
(Chief Executive Officer and Director)
/s/ Joseph W. Proske
-------------------------------------------
Joseph W. Proske
(Director)
/s/ David R. Tomb, Jr.
-------------------------------------------
David R. Tomb, Jr.
(Director)
/s/ Robert C. Williams
-------------------------------------------
Robert C. Williams
(Director)
Dated September 3, 1998.
<PAGE>
EXHIBIT 99.1
PRELIMINARY COPY OF LETTER TO SHAREHOLDERS OF
SOUTHWEST NATIONAL CORPORATION
<PAGE>
[Letterhead of Southwest National Corporation]
October __, 1998
Dear Shareholder:
A Special Meeting of the Shareholders of Southwest National Corporation
("Southwest") will be held at its main office, 111 South Main Street,
Greensburg, Pennsylvania, on Tuesday, December [8], 1998 at [10:00 A.M.]
The purpose of the Special Meeting is to consider and vote upon the Agreement
and Plan of Merger (the "Plan of Merger") providing for the merger of Southwest
with and into First Commonwealth Financial Corporation ("FCFC"). FCFC is a bank
holding company with its principal office in Indiana, Pennsylvania. Through its
bank and non-banking subsidiaries, FCFC currently offers a full range of
consumer, commercial loan and deposit services, as well as related products, in
19 Pennsylvania counties.
If the merger is approved, Southwest shareholders will receive 2.9 shares of
FCFC Common Stock for each share of Southwest Common Stock owned by them. Your
attention is directed to the attached Proxy Statement/Prospectus which contains
a more complete description of the terms of the proposed merger and provides
detailed financial, business and other information concerning Southwest and
FCFC.
The Board of Directors of Southwest has carefully considered the Plan of Merger
and believes that the proposed merger is in the best interests of Southwest and
its shareholders. ACCORDINGLY, YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR APPROVAL OF THE PLAN OF MERGER.
The affirmative vote of the holders of a majority of the shares of Southwest
Common Stock voting at the Special Meeting is necessary for approval of the Plan
of Merger. Your vote is important regardless of the number of shares you own.
We urge you to participate in this significant development by marking, signing,
dating and returning promptly the enclosed proxy card in the accompanying
postage paid, pre-addressed envelope, whether or not you plan to attend the
Special Meeting. You will retain the right to vote your shares in person at the
Special Meeting if you so desire.
Sincerely yours,
----------------------------
David S. Dahlmann, President
and Chief Executive Officer
<PAGE>
EXHIBIT 99.2
PRELIMINARY COPY OF NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS OF SOUTHWEST NATIONAL CORPORATION
<PAGE>
[Letterhead of Southwest National Corporation]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER [8], 1998
To the Shareholders of Southwest National Corporation:
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders of Southwest
National Corporation ("Southwest") will be held on Tuesday, December [8], 1998
at [10:00 A.M.], at the main office of Southwest, 111 South Main Street,
Greensburg, Pennsylvania to:
1. Consider and act upon the Agreement and Plan of Merger (the "Plan of
Merger") between Southwest and First Commonwealth Financial Corporation
("FCFC"), which is attached to and described in the accompanying Proxy
Statement/Prospectus; and
2. Transact such other business as may properly come before the Special
Meeting or any adjournment of adjournments thereof.
The Plan of Merger provides for the merger of Southwest into FCFC (the
"Merger"). As a result of the Merger, the shareholders of Southwest will
receive 2.9 shares of FCFC Common Stock for each share of Southwest Common Stock
owned by them.
The Board of Directors of Southwest has established October __, 1998 as the
record date for the Special Meeting, and only holders of record of Southwest
Common Stock at the close of business on that date will be entitled to notice of
and to vote at the Special Meeting.
Approval of the first proposal described above requires the affirmative vote of
the holders of a majority of the shares of Southwest Common Stock which are
present (in person or by proxy) and voting at the Special Meeting.
By Order of the Board of Directors
----------------------------------------
Secretary
Greensburg, Pennsylvania
October __, 1998
<PAGE>
EXHIBIT 99.3
PRELIMINARY COPY OF FORM OF PROXY FOR USE BY
SHAREHOLDERS OF SOUTHWEST NATIONAL CORPORATION
<PAGE>
SOUTHWEST NATIONAL CORPORATION
GREENSBURG, PENNSYLVANIA
Proxy for Special Meeting of Shareholders - December [8], 1998
The undersigned hereby constitutes and appoints _______________ and
_______________, or either of them, as the attorney and proxies of the
undersigned, with full power of substitution in each, to vote all shares of the
common stock of Southwest National Corporation (the "Corporation") that the
undersigned is entitled to vote at a special meeting of shareholders of
Southwest National Corporation to be held Tuesday, December [8], 1998, at [10:00
A.M.] at the main office of the Corporation, 111 South Main Street, in
Greensburg, Pennsylvania, or any adjournment thereof, notice of such
adjournments being hereby waived, as follows:
1. __ FOR To approve the Agreement and Plan of Merger between
__ AGAINST the Corporation and First Commonwealth Financial
__ ABSTAIN Corporation whereby the Corporation shall merge with
and into First Commonwealth Financial Corporation.
2. To vote according to their judgment on such other business as may
properly come before the meeting or any adjournments thereof.
(over)
Shares represented by duly executed and returned proxies will be voted in
accordance with the choices specified.
Each of the matters to be acted upon is proposed by, and this proxy is solicited
on behalf of, the Board of Directors of the Corporation. This proxy confers
authority to vote FOR proposal 1 if no direction is given. If any other
business is presented at the meeting, this proxy shall be voted in THE
DISCRETION OF THE PROXIES NAMED ABOVE.
IN WITNESS WHEREOF, the undersigned shareholder has duly executed the proxy on
October __, 1998.
_______________________(L.S.)
_______________________(L.S.)
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title. If more than one
trustee, all should sign. All joint owners
must sign.
PLEASE DATE AND SIGN PROXY ABOVE AND RETURN IMMEDIATELY
<PAGE>
EXHIBIT 99.4
PRELIMINARY COPY OF LETTER OF SHAREHOLDERS OF FIRST
COMMONWEALTH FINANCIAL CORPORATION
<PAGE>
[Letterhead of First Commonwealth Financial Corporation]
October __, 1998
Dear Shareholder:
A Special Meeting of the Shareholders of First Commonwealth Financial
Corporation ("FCFC") will be held on December [8], 1998 at [10:00 A.M.], at the
First Commonwealth Training Center at 654 Philadelphia Street, Indiana,
Pennsylvania.
The purpose of the Special Meeting is to consider and vote upon the Agreement
and Plan of Merger (the "Plan of Merger") providing for the merger of Southwest
National Corporation ("Southwest") with and into FCFC. Southwest is a bank
holding company with its principal office in Greensburg, Pennsylvania. Through
its subsidiary, Southwest Bank, it provides a variety of banking services.
If the merger is approved, Southwest shareholders will receive 2.9 shares of
FCFC Common Stock for each share of Southwest Common Stock owned by them. Your
attention is directed to the attached Proxy Statement/Prospectus which contains
a more complete description of the terms of the proposed merger and provides
detailed financial, business and other information concerning Southwest and
FCFC.
The Board of Directors of FCFC has carefully considered the Plan of Merger and
believes that the proposed merger is in the best interests of FCFC and its
shareholders. ACCORDINGLY, YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE FOR APPROVAL OF THE PLAN OF MERGER.
The affirmative vote of the holders of a majority of the shares of FCFC Common
Stock voting at the Special Meeting is necessary for approval of the Plan of
Merger. Your vote is important regardless of the number of shares you own. We
urge you to participate in this significant development by marking, signing,
dating and returning promptly the enclosed proxy card in the accompanying
postage paid, pre-addressed envelope, whether or not you plan to attend the
Special Meeting. You will retain the right to vote your shares in person at the
Special Meeting if you so desire.
Sincerely yours,
-----------------------------
Joseph E. O'Dell, President
and Chief Executive Officer
<PAGE>
EXHIBIT 99.5
PRELIMINARY COPY OF NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS OF FIRST COMMONWEALTH FINANCIAL
CORPORATION
<PAGE>
[Letterhead of First Commonwealth Financial Corporation]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER [8], 1998
To the Shareholders of First Commonwealth Financial Corporation:
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders of First
Commonwealth Financial Corporation ("FCFC") will be held on December [8], 1998
at [10:00 A.M.], at the First Commonwealth Training Center, 654 Philadelphia
Street, Indiana, Pennsylvania to:
1. Consider and act upon the Agreement and Plan of Merger (the "Plan of
Merger") between Southwest Financial Corporation ("Southwest") and FCFC, which
is attached to and described in the accompanying Proxy Statement/Prospectus; and
2. Transact such other business as may properly come before the Special
Meeting or any adjournment of adjournments thereof.
The Plan of Merger provides for the merger of Southwest into FCFC (the
"Merger"). As a result of the Merger, the shareholders of Southwest will
receive 2.9 shares of FCFC Common Stock for each share of Southwest Common Stock
owned by them.
The Board of Directors of FCFC has established October __, 1998 as the record
date for the Special Meeting, and only holders of record of FCFC Common Stock at
the close of business on that date will be entitled to notice of and to vote at
the Special Meeting.
Approval of the first proposal described above requires the affirmative vote of
the holders of a majority of the shares of FCFC Common Stock which are present
(in person or by proxy) and voting at the Special Meeting.
By Order of the Board of Directors
--------------------------------------
Secretary
Indiana, Pennsylvania
October __, 1998
<PAGE>
EXHIBIT 99.6
PRELIMINARY COPY OF FORM OF PROXY FOR USE BY
SHAREHOLDERS OF FIRST COMMONWEALTH FINANCIAL
CORPORATION
<PAGE>
FIRST COMMONWEALTH FINANCIAL CORPORATION
INDIANA, PENNSYLVANIA
Proxy for Special Meeting of Shareholders - December [8], 1998
The undersigned hereby constitutes and appoints, _______________ and
_______________, or each of them, as the attorney and proxies of the
undersigned, with full power of substitution in each, to vote all shares of the
common stock of First Commonwealth Financial Corporation (the "Corporation")
that the undersigned is entitled to vote at a special meeting of shareholders of
First Commonwealth Financial Corporation to be held Tuesday, December [8],
1998, at [10:00 A.M.] at the First Commonwealth Training Center at 654
Philadelphia Street in Indiana, Pennsylvania, or any adjournment thereof, notice
of such adjournments being hereby waived, as follows:
1. __ FOR To approve the Agreement and Plan of Merger between
__ AGAINST the Corporation and Southwest National Corporation
__ ABSTAIN whereby Southwest National Corporation shall
merge with and into the Corporation.
2. To vote according to their judgment on such other business as may
properly come before the meeting or any adjournments thereof.
(over)
Shares represented by duly executed and returned proxies will be voted in
accordance with the choices specified.
Each of the matters to be acted upon is proposed by, and this proxy is solicited
on behalf of, the Board of Directors of the Corporation. This proxy confers
authority to vote FOR proposal 1 if no direction is given. If any other
business is presented at the meeting, this proxy shall be voted in THE
DISCRETION OF THE PROXIES NAMED ABOVE.
IN WITNESS WHEREOF, the undersigned shareholder has duly executed the proxy on
October __, 1998.
_______________________(L.S.)
_______________________(L.S.)
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title. If more than one
trustee, all should sign. All joint owners
must sign.
PLEASE DATE AND SIGN PROXY ABOVE AND RETURN IMMEDIATELY
