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SCHEDULE 14A
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under sec.240.14a-12
F.N.B. CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2)of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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March 19, 2003
[LOGO]
Dear Shareholder:
It is a pleasure to invite you to attend the Annual Meeting of Shareholders of
F.N.B. Corporation. The meeting will be held at the Naples Beach Hotel, located
at 851 Gulf Shore Boulevard North, Naples, Florida 34102, on Monday, April 28,
2003, at 4:00 p.m.
At the meeting, you will be asked to consider and vote upon the election of
directors.
Your vote is important regardless of how many shares of stock you own. If you
hold stock in more than one account or name, you will receive a proxy card for
each. Please sign and return each card since each represents a separate number
of votes. Postage paid envelopes are provided for your convenience.
You are cordially invited to attend the Annual Meeting. Please indicate on the
proxy card whether you plan to attend the Annual Meeting.
Regardless of whether you plan to attend, please date and return the enclosed
proxy card(s) as soon as possible. This will not prevent you from voting at the
meeting, but will assure that your vote is counted if you are unable to attend.
As always, the directors, management and staff thank you for your continued
support and interest in F.N.B. Corporation.
/s/ PETER MORTENSEN /s/ GARY L. TICE
Peter Mortensen Gary L. Tice
Chairman President and Chief Executive Officer
[LOGO]
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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Notice is hereby given that the Annual Meeting of Shareholders of F.N.B.
Corporation (the "Corporation") will be held at the Naples Beach Hotel, located
at 851 Gulf Shore Boulevard North, Naples, Florida 34102, on Monday, April 28,
2003, at 4:00 p.m. Eastern Daylight Time, for the following purposes:
1. To elect five directors of the Corporation;
2. To elect one additional director, if the Corporation's proposed
acquisition of Charter Banking Corp. is consummated prior to the
Annual Meeting; and
3. To transact such other business as may properly come before the
Annual Meeting and any adjournments thereof.
Only the holders of Common Stock and Series A Preferred Stock of the Corporation
of record on the books of the Corporation at the close of business on February
18, 2003, are entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.
Enclosed with this Notice are a Proxy Statement and form of proxy. All
shareholders, whether or not they expect to be present at the meeting, are
requested to date and sign the proxy and to return it in the enclosed
self-addressed envelope. Prompt action with this request will be appreciated.
Shareholders who attend the meeting may, if they wish, vote in person even if
they have mailed their proxies.
BY ORDER OF THE BOARD OF DIRECTORS
David B. Mogle, Secretary
March 19, 2003
March 19, 2003
F.N.B. CORPORATION
F.N.B. CENTER - 2150 GOODLETTE ROAD NORTH
NAPLES, FLORIDA 34102
PROXY STATEMENT
The accompanying proxy is being solicited by F.N.B. Corporation (the
"Corporation") in connection with the Annual Meeting of Shareholders to be held
on April 28, 2003. This proxy statement and the accompanying form of proxy are
first being sent to shareholders of the Corporation on or about March 19, 2003.
If the proxy is executed and returned, it may nevertheless be revoked by written
notice to the Secretary of the Corporation at any time prior to the Annual
Meeting by submitting a later dated proxy or by voting in person at the Annual
Meeting. Unless the proxy is revoked or contains other instructions, the shares
represented thereby will be voted at the meeting in favor of the election of the
director nominees named below.
The Board of Directors has fixed February 18, 2003, as the record date for
determination of shareholders entitled to notice of and to vote at the Annual
Meeting. As of that date, the Corporation had outstanding 44,164,067 shares of
Common Stock, 19,174 shares of Series A Cumulative Convertible Preferred Stock
("Series A Preferred Stock") and 98,251 shares of Series B Cumulative
Convertible Preferred Stock ( "Series B Preferred Stock"). The holders of shares
entitled to cast a majority of all votes entitled to be cast, present in person
or represented by proxy, will constitute a quorum for the meeting. Holders of
Common Stock are entitled to one vote for each share held and holders of Series
A Preferred Stock are entitled to 6.9 votes for each share held. Shares of
Series B Preferred Stock do not carry any voting rights.
ELECTION OF DIRECTORS
The Bylaws of the Corporation provide that the Board of Directors shall consist
of not fewer than five nor more than 25 persons, the exact number to be
determined from time to time by the Board. The Bylaws also provide for
classification of the directors with respect to the time for which they shall
severally hold office. The Board of Directors is presently divided into three
classes with five directors in each class and with the directors of each class
serving staggered, three-year terms. At each annual meeting, one class of
directors is elected. Each director holds office for the term for which he or
she is elected and thereafter until his or her successor is duly elected and
qualified or until his or her earlier death, retirement, resignation or removal.
Proxies will not be voted for a greater number of persons than the number of
nominees set forth below. Directors are elected by a plurality of the votes cast
at the meeting. Abstentions and shares held in street name that are not cast at
the meeting will not be voted. Neither the holders of Common Stock nor the
holders of Series A Preferred Stock have cumulative voting rights in the
election of directors.
The following Class II directors, whose terms expire at the Annual Meeting, have
been nominated by the Board of
Directors for re-election at the Annual Meeting, to continue to serve as Class
II directors until the 2006 Annual Meeting and until their successors are
elected and qualified: G. Scott Baton, II, Alan C. Bomstein, William J. Strimbu,
Archie O. Wallace and R. Benjamin Wiley.
Under the terms of the Stock Purchase Agreement entered into among the
Corporation, Charter Banking Corp. and David A. Straz, Jr. pursuant to which the
Corporation will, subject to the satisfaction of certain customary closing
conditions, acquire all of the stock of Charter Banking Corp. from Mr. Straz,
Jr., the sole shareholder of Charter Banking Corp., the Corporation will be
obligated to elect Mr. Straz, Jr. as a director of the Corporation following the
closing of the acquisition. As of the date of this proxy statement, the parties
expect the closing to occur on March 31, 2003. If the closing occurs prior to
the Annual Meeting, the parties anticipate that the size of the Board will be
increased by one and Mr. Straz, Jr. will be elected as a Class II Director
following the closing, in which event Mr. Straz, Jr. will stand for re-election
at the Annual Meeting for a three-year term along with the other Class II
directors standing for re-election at the Annual Meeting.
All of the nominees have expressed their willingness to serve if elected. In the
event one or more of the director nominees is unable or unwilling to serve as a
director for any reason (the Corporation knows of no such reason), the persons
named in the enclosed proxy will vote for the other nominees named and such
substituted nominees as may be nominated by the Board of Directors.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of February 18, 2003, concerning
the age, principal occupation for the last five years, and ownership of common
stock of each of the directors and five most highly compensated executive
officers of the Corporation. No director or executive officer of the Corporation
is the beneficial owner of any shares of Series A Preferred Stock or Series B
Preferred Stock.
Amount and
Nature of
Expiration Beneficial
of Term of Ownership of Percent
Name and Director Office as Common Stock of
Principal Occupation Age Since Director (a) (b)(c) Class (d)
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GARY L. TICE* 55 1997 2005 249,784(e)
President and Chief Executive Officer of the
Corporation since 2001; President and Chief
Operating Officer of the Corporation from
1998-2001; Executive Vice President and Chief
Operating Officer of the Corporation 1997-1998;
Chairman of First National Bank of Florida
("FNBFL"); and director of Sun Bancorp and its
subsidiary Sun Bank, Selinsgrove, Pennsylvania,
since January 2003
PETER MORTENSEN 67 1974 2005 653,518 1.5
Chairman of the Corporation since 1988; Chief
Executive Officer of the Corporation 1988-2000;
and Chairman of the Corporation's subsidiary,
First National Bank of Pennsylvania ("FNBPA")
2
Amount and
Nature of
Expiration Beneficial
of Term of Ownership of Percent
Name and Director Office as Common Stock of
Principal Occupation Age Since Director (a) (b)(c) Class (d)
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STEPHEN J. GURGOVITS* 59 1981 2004 190,470(f)(g)
Vice Chairman of the Corporation since 1998;
Executive Vice President of the Corporation
1995-1998; President and Chief Executive Officer
of FNBPA since 1988; and director of Sun Bancorp
and its subsidiary, Sun Bank, Selinsgrove,
Pennsylvania, since 1997
G. SCOTT BATON, II 67 2002 2003 42,177
Former Chairman and Chief Executive Officer,
Chestnut Ridge Foam, Inc.
ALAN C. BOMSTEIN 57 1999 2003 43,283
President and Chief Executive Officer, Creative
Contractors, Inc.
WILLIAM B. CAMPBELL 64 1975 2004 67,796(h)
Retired Former Business Executive
CHARLES T. CRICKS 53 1994 2004 67,020(i)
Principal, Starboard Ventures; Executive Vice
President and Chief Operating Officer, Health
Care Solutions, Inc. 1996-1998
HENRY M. EKKER, ESQ. 64 1994 2004 27,314
Attorney at Law, Partner of Ekker, Kuster,
McConnell & Epstein, LLP
JAMES S. LINDSAY 54 1997 2005 145,702(j)
Managing Partner, Dor-J's LLP; Licensed Real
Estate Broker, The Lindsay Company
EDWARD J. MACE 46 1997 2005 129,288(k)
Edward J. Mace, Certified Public Accountant;
Chief Operating Officer, Ribek Corporation
HARRY F. RADCLIFFE 53 2002 2005 104,459(l)
Investment Manager, Director of Hawthorne
Financial Corporation
(bank holding company)
DAVID A. STRAZ, JR. 60 n/a n/a 329,215(m)
Chairman and President of Charter Banking Corp.
(bank holding company); Chairman and Chief
Executive Officer of Southern Exchange Bank; and
President of First Southeast Aviation Corp.
(aviation)
3
Amount and
Nature of
Expiration Beneficial
of Term of Ownership of Percent
Name and Director Office as Common Stock of
Principal Occupation Age Since Director (a) (b)(c) Class (d)
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WILLIAM J. STRIMBU 42 1995 2003 58,047
President, Nick Strimbu, Inc.
(common carrier)
EARL K. WAHL, JR. 63 2002 2005 34,262
Owner, J.E.D. Corporation (environmental
consulting)
ARCHIE O. WALLACE, ESQ. 68 1992 2003 40,926
Attorney at Law, Partner of Rowley, Wallace,
Keck, Karson & St. John
R. BENJAMIN WILEY 58 1997 2003 14,904
Chief Executive Officer, Greater Erie
Community Action Committee; and
Director of Erie Telecommunications Inc.
KEVIN C. HALE* 49 N/A N/A 36,670(n)
Executive Vice President & Chief
Operating Officer of the Corporation
CASS BETTINGER* 60 N/A N/A 5,996(o)
Executive Vice President of the Corporation
GARRETT S. RICHTER* 52 N/A N/A 134,809(p)
Executive Vice President of the Corporation; and
President and Chief Executive Officer of FNBFL
Directors and Executive Officers as a group (24 persons), as the beneficial
owners of 1,396,091 shares of the outstanding Common Stock, owned 3.2% of the
Common Stock of the Corporation as of February 18, 2003, and controlled 3.2% of
the outstanding voting power of the Corporation's issued and outstanding stock.
*Denotes person who served as an executive officer of the Corporation during
2002.
(a) The term of office for directors expires at the annual meeting to be
held during the year shown.
(b) Includes the following shares which the director or officer has the
right to acquire within sixty days upon exercise of stock options: Mr.
Mortensen, 553,423 shares; Mr. Tice, 153,866 shares; Mr. Gurgovits,
154,238 shares; Mr. Hale, 35,361 shares; Mr. Bettinger, 5,250 shares;
Mr. Richter, 85,610 shares; Mr. Baton, 7,049; Mr. Bomstein, 11,794
shares; Mr. Campbell, 7,205 shares; Mr. Cricks, 7,670 shares; Mr. Ekker,
6,716 shares; Mr. Lindsay, 7,250 shares; Mr. Mace, 6,092 shares; Mr.
Radcliffe, 972; Mr. Strimbu, 6,330 shares; Mr. Wahl, 1,945; Mr. Wallace,
6,790 shares; Mr. Wiley, 4,930 shares.
(c) Except as otherwise indicated, each director possesses sole voting power
and sole investment power as to all shares listed opposite his or her
name or shares these powers with his or her spouse or a wholly owned
company. This does not include the following shares held of record by
the director's spouse or children, or held in trust, and as to which
each director disclaims beneficial ownership: Mr. Mortensen, 394 shares;
Mr. Lindsay, 9,914 shares; and Mr. Tice, 671 shares.
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(d) Unless otherwise indicated, represents less than 1% of the class.
(e) Includes 4,886 shares jointly owned by Mr. Tice and his mother; and
8,871 shares held by the F.N.B. Corporation Salary Savings Plan for Mr.
Tice who has voting power over these shares.
(f) Does not include shares awarded as an employer matching contribution as
a part of the Corporation's 401(k) Plan.
(g) Includes 423 shares owned by Mr. Gurgovits' wife; 7,625 shares owned by
Mr. Gurgovits' wife as a participant in her employer's profit sharing
program and 69 shares held by Mr. Gurgovits as trustee for his daughter.
(h) Includes 1,974 shares owned by Mr. Campbell's wife.
(i) Includes 2,515 shares owned by Mr. Cricks' wife and 7,610 shares held by
Mr. Cricks as co-trustee for his mother.
(j) Includes 9,419 shares held by Mr. Lindsay as custodian for two of his
children; 89,805 shares owned by Dor'J's LLP, of which Mr. Lindsay is
the managing partner; and 1,403 shares held by Mr. Lindsay as trustee
for his mother.
(k) Includes 503 shares held by Mr. Mace as custodian for three of his
children; 286 shares jointly owned by Mr. Mace and his mother; 6,682
shares held by Mr. Mace as trustee for certain unrelated beneficiaries;
25,688 shares held by the Ribek Corporation Defined Contribution Pension
Trust of which Mr. Mace is a Trustee; and 72,248 shares owned by Ribek
Corporation of which Mr. Mace is Chief Operating Officer.
(l) Includes 2,835 shares owned by Mr. Radcliffe's wife; 1,724 shares held
by each of Mr. Radcliffe's three children.
(m) Includes 41,400 shares owned by the David A. Straz, Jr. Foundation of
which Mr. Straz, Jr. is sole Trustee and has sole voting power; 840
shares owned by Mr. Straz, Jr.'s daughter; 735 shares owned by the David
A. Straz, Jr. Profit Sharing Plan of which Mr. Straz, Jr. is sole
Trustee; and 840 shares owned by David A. Straz, Jr. IRA #2 of which Mr.
Straz, Jr. is sole Trustee.
(n) Includes 1,309 shares held by the F.N.B. Corporation Salary Savings Plan
for Mr. Hale who has voting power over these shares.
(o) Includes 446 shares held by the F.N.B. Corporation Salary Savings Plan
for Mr. Bettinger who has voting power over these shares.
(p) Includes 82 shares held by Mr. Richter's wife as custodian for three of
his children; and 7,219 shares held by the F.N.B. Corporation Salary
Savings Plan for Mr. Richter who has voting power over these shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Corporation's
directors, its executive officers, and persons who own more than ten percent of
a registered class of the Corporation's equity securities (currently there are
no such ten percent shareholders) to file with the Corporation and the SEC
initial reports of ownership and reports of changes in ownership of any equity
securities of the Corporation. With respect to 2002, to the best of the
Corporation's knowledge, all required reports were filed on a timely basis,
except for one time inadvertent delinquent Form 4 filings by Messrs. Bettinger,
Campbell, Coghill, Cricks, Gurgovits, Hale, Lindsay, Mace, Rundorff, Tice,
Waters and Wiley, concerning reporting in connection with the award of certain
"matching" stock under the Corporation's benefit plans which occurred during
transition to the new Form 4 filing deadline. Additionally, due to an
inadvertent administrative oversight, Mr. Mortensen had one delinquent Form 4
filing in 2002. In making this statement, the Corporation has relied in part on
written representations of its directors and certain of its current and former
executive officers, and the copies of reports provided to the Corporation.
DIRECTORS' FEES
During 2002, each non-employee director was paid an annual retainer of $15,000
and $2,000 for each monthly Board meeting attended. Additionally, the Board
Chairman and the Chairman of each of the Board Committees
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were paid a stipend of $5,000. Each director was issued stock options during
2002 under the Corporation's 1998 Directors' Stock Option Plan, which were based
on the Board fees earned during the year. Individual grants to directors ranged
from 1,874 to 2,513 stock options with exercise prices equal to the fair market
value of the Corporation's Common Stock on the date of grant. Non-employee
directors who serve on committees were compensated for their attendance at
various committee meetings of the Corporation and its subsidiaries at rates
ranging from $200 to $1,000 per meeting attended.
Each director of the Corporation may elect to receive shares of Common Stock in
lieu of cash as his or her compensation for attendance at regular and committee
meetings of the Board of Directors of the Corporation pursuant to the F.N.B.
Corporation Directors' Compensation Plan (the "Plan"). The number of shares of
Common Stock to be issued shall equal the number of shares of Common Stock
having a market value equal to the amount of cash otherwise payable to such
Director for attendance at such meetings. A director may also elect to defer
receipt of all of his annual fees payable under the Plan for the period
beginning on January 1st of the following year and continuing until the
Corporation receives written notice from the director terminating such deferral.
BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS
Certain directors and executive officers of the Corporation and its subsidiaries
and their associates were customers of, and had transactions with one or more of
the Corporation's subsidiaries in the ordinary course of business during 2002.
Similar transactions may be expected to take place in the future. Loans and
commitments included in such transactions were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons and did not involve more than the
normal risk of collectability, nor did they present other unfavorable features.
In addition, the Corporation's subsidiary, First National Trust Company, acts as
fiduciary under various employee benefit plans of and as investment manager to
certain customers, whose officers and directors are also directors of the
Corporation and of its bank subsidiaries.
In connection with the relocation of William J. Rundorff, the Corporation's
Executive Vice President and Chief Legal Officer, from the Corporation's former
headquarters in Hermitage, Pennsylvania, to its present headquarters in Naples,
Florida, the Corporation purchased Mr. Rundorff's home in Hermitage,
Pennsylvania, on September 10, 2002, for a price, as determined by taking the
average of two independent appraisals, of $254,000. The independent appraisal
firms are not affiliated with the Corporation and each is a member of the
American Institute of Appraisers. In addition, the Corporation reimbursed Mr.
Rundorff for customary moving expenses and for rental expenses he incurred for
temporary housing in Naples, while he established a permanent residence in
Naples in November 2002.
The Corporation reimbursed Mr. Bettinger $236,000 for the loss he incurred on
his Salt Lake City, Utah, residence in connection with his relocation to Naples,
Florida. Additionally, the Corporation reimbursed Mr. Bettinger's ordinary and
reasonable moving expenses incurred in connection with his relocation to Naples,
Florida.
Director Lindsay represented the Corporation and its affiliates in connection
with the purchase of two real estate parcels in 2002. Mr. Lindsay shared the
brokerage commission with the listing broker of the subject properties. The
commission fees paid for the brokerage services were consistent with relevant
industry standards and prevailing market commission rates. The amount of the
brokerage commission paid to Mr. Lindsay by the seller of the two real estate
parcels was $212,909.
As discussed under "Election of Directors," if the Corporation completes the
pending acquisition of Charter Banking Corp., the Corporation will elect David
A. Straz, Jr., the sole shareholder of Charter Banking Corp., to the
Corporation's Board of Directors. Under the terms of the Stock Purchase
Agreement entered into among the Corporation, Charter Banking Corp., and Mr.
Straz, the Corporation will pay Mr. Straz $150,250,000 for all of the
outstanding stock of Charter Banking Corp., and continue to provide Mr. Straz
with certain benefits he is presently receiving from Charter Banking Corp., such
as health insurance, payment of country club dues, and use of office space and
secretarial support.
6
The Corporation and Peter Mortensen, the present Chairman of the Board and
former Chief Executive Officer of the Corporation, agreed, effective January 24,
2002, to the buy-out and cancellation of an agreement pursuant to which Mr.
Mortensen had agreed to serve as an advisor to the Corporation during a period
beginning on January 1, 2001, and ending not later than December 31, 2007. The
terms of the buy-out and cancellation agreement are described on Page 17 under
the caption "Termination of Employment Continuation Agreement with Mr.
Mortensen".
BOARD AND COMMITTEE MEETINGS
During 2002, the Board of Directors of the Corporation held nine meetings. All
directors attended at least 75% of the aggregate number of meetings of the Board
of Directors and the respective committees on which they serve.
The Board of Directors has appointed an Audit Committee ("Committee") consisting
of Messrs. Mace, Bomstein, Ekker and Radcliffe. Committee members satisfy
applicable SEC and Nasdaq independence requirements and related standards
concerning financial literacy and expertise. The Corporation's Audit Committee
Charter, which is attached to this proxy statement as Exhibit A, has been
approved by the Board of Directors. Additional information regarding the
functions performed by the Committee, its membership, and the number of meetings
held during the fiscal year is set forth in the "Report of Audit Committee,"
included in this proxy statement.
The Compensation Committee of the Board of Directors consists of Messrs. Baton,
Cricks, and Lindsay. During 2002, Mr. Mortensen, as Chairman, and Mr. Tice as
Chief Executive Officer of the Corporation, attended meetings of the
Corporation's Compensation Committee, but did not vote on any matters and did
not participate in any deliberations regarding their own compensation. During
2002, the Compensation Committee met five times. Duties of the Compensation
Committee include reviewing the performance of the officers of F.N.B.
Corporation and affiliate chief executive officers and recommending to the
Corporation's Board the compensation to be paid to these individuals; reviewing
and approving the compensation of affiliate senior officers as proposed by
affiliate boards of directors; and reviewing compensation and benefit matters
that have corporate-wide significance. The Compensation Committee also
administers the various Stock Option Plans, the Restricted Stock and Incentive
Bonus Plan and the Directors' Compensation Plan and awards made under these
Plans. This Committee also recommends for approval to the Corporation's Board
the fees for the Corporation's Board and Board Committees.
The Nominating Committee of the Board of Directors consists of Messrs. Campbell,
Strimbu, Wahl and Wallace. During 2002, the Nominating Committee met one time.
The Nominating Committee is responsible for selecting and recommending nominees
for election as director to the Board of Directors. The Nominating Committee
will consider nominees recommended by shareholders of the Corporation. Such
recommendations must be made in writing, include a statement of the nominee's
qualifications, and be addressed to the Nominating Committee at the address of
the Corporation. Shareholders may also nominate persons for election as
directors in accordance with the procedures set forth in the Corporation's
Bylaws.
The Community Development Committee is responsible for reviewing and guiding the
efforts of the Corporation's bank subsidiaries to serve the needs of their local
communities by offering deposit and lending products designed for moderate and
low income households. Additionally, this Committee reviews and approves special
equity investments designed to benefit local communities, businesses and
neighborhoods. The Community Development Committee is comprised of Messrs.
Wiley, Baton and Bomstein and met two times in 2002.
The Executive Committee consists of Messrs. Tice, Campbell, Cricks, Lindsay and
Mortensen. This Committee met five times in 2002. This Committee's
responsibilities include review and approval of the Corporation's governance
policies, procedures and processes and implementation of applicable SEC and
Nasdaq standards and reporting requirements. This Committee possesses all powers
and authority of the Board except as limited by applicable law or the Board of
Directors.
7
REPORT OF AUDIT COMMITTEE
To Our Shareholders:
The Audit Committee ("Committee") oversees the Corporation's financial reporting
process on behalf of the Board of Directors. Management has the primary
responsibility for the financial statements and the reporting process, including
the system of internal control. In fulfilling its oversight responsibilities,
the Committee reviewed the audited financial statements in the Annual Report
with management, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial statements.
The Committee reviewed with Ernst & Young LLP, its independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Corporation's
accounting principles and such other matters as are required to be discussed
with the Committee under generally accepted auditing standards.
The Committee has discussed with Ernst & Young LLP their independence from
management and the Corporation, including the matters in the required written
disclosures. The Committee has considered whether the provision of non-audit
services by Ernst & Young LLP is compatible with maintaining their independence.
The Committee discussed with the Corporation's internal auditors and Ernst &
Young LLP the overall scope and plans for their respective audits. The Committee
meets with the internal auditors and Ernst & Young LLP, with and without
management present, to discuss the results of their examinations, their
evaluations of the Company's internal controls, and the overall quality of the
Company's financial reporting. The Committee met five times during fiscal year
2002. In addition, the Committee met telephonically to review SEC filings. The
Chairman of the Committee met quarterly with management and internal and
external auditors to review press releases and held additional meetings with
management to review significant acquisition and conversion activity and audit
administration matters.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors that the audited financial statements be
included in the Annual Report on Form 10-K for the year ended December 31, 2002,
for filing with the Securities and Exchange Commission.
Respectfully submitted,
Edward J. Mace, Chairman
Alan C. Bomstein
Henry M. Ekker
Harry F. Radcliffe
8
EXECUTIVE COMPENSATION, BENEFITS AND RELATED MATTERS
REPORT OF COMPENSATION COMMITTEE
To Our Shareholders:
The following is the Report of the Compensation Committee to Shareholders on the
Corporation's executive compensation policies with respect to compensation
reported for fiscal year 2002. In accordance with the rules of the SEC, this
report shall not be incorporated by reference into any of the Corporation's
future filings made under the Securities Exchange Act of 1934 or under the
Securities Act of 1933, and shall not be deemed to be soliciting material or to
be filed with the SEC under the Securities Exchange Act of 1934 or the
Securities Act of 1933.
RESPONSIBILITIES AND COMPOSITION OF THE COMPENSATION COMMITTEE
The Compensation Committee ("Committee") meets periodically during the course of
the year and establishes compensation programs for executive officers and senior
managers of the Corporation and its affiliates that are designed to attract,
retain, motivate and appropriately reward individuals who are responsible for
the Corporation's short- and long-term growth and profitability. The Committee
conducts regular comprehensive reviews of the Corporation's executive
compensation program and establishes the annual compensation of the
Corporation's executive officers. The Committee also takes action, or recommends
that the Board take action, regarding the adoption, amendment or administration
of executive compensation, incentive and benefit plans. The Committee is
comprised entirely of directors who are not officers of the Corporation or its
affiliates.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The central objective of the compensation philosophy of the Corporation is to
provide fair and reasonable compensation to all employees, including executive
officers and senior managers, which compensation is determined by a
performance-based framework that enhances shareholder value through the
integration of the overall financial condition and results of the operation of
Corporation with individual contribution and business unit performance. Within
this philosophy, the Committee's specific objectives are to: (i) provide annual
compensation that takes into account the Corporation's performance relative to
its financial goals and objectives, the performance of functions and business
units under the executive's management and performance against assigned
individual goals; (ii) align the financial interests of the executive officers
with those of shareholders by providing significant equity-based long-term
incentives; and (iii) offer a total compensation program for each executive
officer based on the level of responsibility of the executive's position and
necessary skills and experience relative to other senior management positions
and comparative compensation of similarly positioned executives and senior
managers of peer group financial institutions.
A critical aspect of the Committee's compensation philosophy is that some
portion of the executive officer's and senior manager's total compensation be
"at risk." The "at risk" portion is a function of the executive officer's and
senior manager's performance against Corporation, business unit and individual
goals and objectives.
The following two components of executive officer and senior manager
compensation are "at risk": (i) an annual cash bonus based on short-term
performance; and (ii) stock options as an award for long-term performance. The
total cash compensation opportunities for executive officers and senior managers
are targeted at the median of industry practices among the Corporation's peer
group. In addition, the Corporation's incentive cash and bonus award program is
specifically designed to offer an opportunity for larger rewards when the
Corporation's performance exceeds its financial goals and objectives.
COMPENSATION COMPONENTS AND PROCESS
The major components of the Corporation's executive officer and senior manager
compensation are: (i) base salary, (ii) annual incentive awards and (iii)
long-term incentive awards (typically in the form of stock options or restricted
stock).
9
The process utilized by the Committee in determining executive officer and
senior manager compensation levels for all of these components ties a
significant portion of executive compensation to the success of the executive
officer and senior manager and the Corporation in meeting predetermined
financial and other performance goals. In addition to these qualitative and
quantitative factors, the Committee also exercises its subjective judgment in
making compensation determinations.
In making compensation decisions, the Committee relies upon the work performed
by its independent compensation consultant and the Corporation's internal
support staff. The independent compensation consultant reviewed market data to
determine relevant compensation practices of the Corporation's peer group. The
Corporation's peer group developed by the independent compensation consultant
consisted of national and regional financial institutions and bank holding
companies that are determined to be indicative of the Corporation's financial
service competitors in terms of size and mix of business. The Committee
determined that the Corporation's peer group identified by the independent
consultant is reasonable to measure the Corporation's compensation practices
given the Corporation's continued and expected growth. The peer information
provides guidance to the Committee, but the Committee does not target total
compensation to any particular point within the range of the peer group results.
In general, the Committee continues to adjust the mix of base salary, annual
incentive awards and long-term incentives. In making such determinations, the
Committee considers various factors and criteria including: (i) relevant
industry compensation practices; (ii) the complexity and level of responsibility
attendant to the executive position and job function; (iii) the importance of
the executive's position to the Corporation compared to other executive
positions; (iv) the competitiveness of the executive's total compensation; (v)
financial performance of the Corporation; (vi) accomplishment of Corporation's
and business unit's strategic goals. Specifically, the Committee's focus is to
emphasize the amount of executive compensation that is at risk.
LONG-TERM INCENTIVE AWARDS
The stock-based awards (stock option awards and restricted stock grants) are
generally granted to executive officers and senior managers on an annual basis.
It has been the practice of the Committee to grant stock options and restricted
stock to executive officers and senior management. The stock option awards
cannot be issued with an exercise price below the market price of the
Corporation's Common Stock at the time of the award and the exercise price
cannot be changed after the award is issued, except to accommodate any
dividends, stock splits or conversions which would affect all shareholders.
The Committee has historically granted stock options as a means of providing
long-term incentives to employees. All stock options granted by the Corporation
under its 2001 Incentive Plan vest incrementally over a five-year period based
on the optionee's continued employment by the Corporation or one of its
principal subsidiaries. The Committee based its 2002 option award decisions with
regard to the stock options granted to its executive officers primarily upon the
total number of options available for grant, the officer's position and a
multiple of the officer's base salary.
The Committee granted restricted stock in 2002 to certain non-executive officers
and other employees under the Corporation's 2001 Incentive Plan. There were no
restricted stock grants awarded to the Corporation's executive officers during
2002. The restricted stock grants were made to reward individuals who made a
particularly important contribution to the Corporation in 2002. These grants are
also a key component of the Committee's long-term incentive compensation policy
because restricted stock granted under this plan vests incrementally over a
five-year period based on the recipient's continued employment by the
Corporation or one of its principal subsidiaries.
CHIEF EXECUTIVE OFFICER COMPENSATION
When deciding the compensation to be paid to the Corporation's Chief Executive
Officer, the Committee acts privately, without the Chief Executive Officer or
other officers present. As appropriate, the Committee will confer with its
independent compensation consultant to determine whether the Corporation's
executive compensation
10
program is consistent with marketplace and peer practices linking pay to
performance. In general, the Committee considers the Corporation's overall
financial performance and measures such financial performance as compared to its
peer group's financial performance and compensation data when making decisions
regarding the Chief Executive Officer's compensation. In evaluating the
compensation of Mr. Gary Tice for services rendered in 2002 as Chief Executive
Officer of the Corporation, the Committee examined both quantitative and
qualitative factors. The Committee also considers the Chief Executive Officer's
leadership, decision-making skills, experience, knowledge, communication with
the Board and strategic recommendations, as well as the Corporation's
positioning for future performance. In considering these factors, the Committee
places more relative weight on the Corporation's financial performance.
The Committee's significant decisions regarding the Chief Executive Officer's
compensation are reported to, discussed with and ratified by the full Board,
excluding directors who are also officers of the Corporation.
In deciding upon Mr. Tice's compensation (including base salary, cash bonus and
stock option awards), as set forth in the tables entitled "Summary Compensation"
and "Option Grants in Last Fiscal Year" contained on Pages 13 and 14 of this
proxy statement, the Committee considered the following significant quantitative
accomplishments, in addition to the Corporation's attainment of financial
performance goals for 2002:
-- Net income for 2002 was $63.3 million, up 20% from $53 million for 2001.
Net income per diluted share was $1.41, up 15% from $1.23 per diluted
share in 2001.
-- Earnings, excluding merger related and other nonrecurring charges for
2002, were $94.4 million, or $2.11 per diluted share compared to $60.9
million, or $1.41 per diluted share in 2001.
-- The return on average assets and return on average equity, based on
earnings, excluding merger-related and other non-recurring charges, for
2002 was 1.39% and 16.3%, respectively. Operating revenue increased by
14% in 2002 (compared to 2001) and amounted to $408 million.
-- Net interest income during 2002 on a tax-equivalent basis was $286.8
million, which represents a 12% increase from 2001. The net interest
margin for the year ended December 31, 2002, was 4.70%, up from 4.69% in
2001. Non-interest income increased 21% to $120.8 million in 2002,
compared to 2001. At year end 2002, the Corporation had approximately
$7.1 billion in assets and with the pending Charter Banking Corp.
acquisition, the Corporation's asset size will be approximately $7.8
billion, which will rank the Corporation among the nation's sixty-three
largest bank holding companies and as the largest bank holding company
headquartered in Florida.
-- The Corporation continued to maintain its superior asset quality despite
the difficult economic circumstances in 2002, as evidenced by the
improvement of the Corporation's non-performing assets as a percentage
of total assets as of December 31, 2002, which were a mere 0.45%,
compared to 0.48% as of December 31, 2001.
In addition to the above quantitative considerations, the Committee reviewed the
following significant accomplishments of the Corporation in 2002 that are
qualitative in nature. The Corporation continued pursuit of its charter
consolidation strategy in 2002 as part of its ongoing effort to improve
long-term shareholder value by promoting operational efficiencies and cost
reductions. In 2002, the Corporation's Ohio banking affiliate was merged into
its Pennsylvania bank thereby reducing the number of bank charters subject to
regulatory supervision to two. The Corporation's charter consolidation
initiative resulted in significant cost reductions and enhanced efficiencies by
the elimination of certain operational redundancies and duplicative
administrative and regulatory obligations.
11
Under Mr. Tice's leadership, the Corporation continued to exploit the
substantial revenue opportunities presented by its wealth management, trust,
insurance agency and investment businesses, which increasingly make up a
substantial portion of the Corporation's overall earnings. In furtherance of
this strategy, the Corporation completed its acquisition of the Harry Blackwood
Agencies in 2002. Moreover, Mr. Tice's strategic initiatives have positioned the
Corporation to take advantage of the significant revenue opportunities presented
by the integration of these businesses and the Corporation's core banking
business.
After considering all of the above-described quantitative and qualitative
factors carefully, the Committee authorized Mr. Tice's total compensation
described in the "Summary Compensation" and "Option Grants in Last Fiscal Year"
tables contained on Pages 13 and 14 of this proxy statement. The Committee's
decisions relating to Mr. Tice's compensation were ratified by the Board. Also,
consistent with the principles and procedures outlined in this Report, the
Committee approved the compensation of the Corporation's other executive
officers for 2002 and those decisions were also ratified by the Board.
TAX POLICY
Section 162(m) of the Internal Revenue Code generally would disallow a federal
income tax compensation deduction to the extent that the Corporation paid in a
taxable year compensation in excess of $1 million to the Chief Executive Officer
or to any of the other executive officers of the Corporation included in the
Summary Compensation Table contained on Page 13 of this proxy statement.
However, performance-based compensation paid pursuant to shareholder-approved
plans and meeting certain other procedural requirements is not subject to the
deduction limitation imposed by Section 162(m). Awards made under the 2001
Incentive Plan can be made eligible for that performance-based exception. As a
result, Section 162(m) would not limit any compensation deduction otherwise
available to the Corporation with respect to awards under the 2001 Incentive
Plan that meet those procedural requirements.
Although the Committee keeps in mind the desirability of controlling the
Corporation's non-deductible compensation expense, the Committee also believes
that it is equally important to maintain the flexibility and competitive
effectiveness of the Corporation's executive compensation program. Therefore,
the Committee may from time to time, decide to make grants and awards which may
not be deductible for federal income tax purposes due to the provisions of
Section 162(m).
CONCLUSION
Based upon its review of the Corporation's executive compensation program, the
Committee believes that the program's basic structure is appropriate,
competitive and effectively serves the purposes for which it was established.
Respectfully submitted,
Charles T. Cricks, Chairman
G. Scott Baton, II
James S. Lindsay
12
EXECUTIVE REMUNERATION
The following table sets forth information regarding remuneration paid by the
Corporation and its subsidiaries for the years shown to the Chief Executive
Officer of the Corporation and the four other most highly compensated executive
officers of the Corporation (the "Named Executive Officers").
====================================================================================================================================
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------------------
Long Term Compensation
---------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------------------------------------------------
Name and Other Restricted Securities
Principal Year Salary Bonus(1) Annual Stock Underlying LTIP All Other
Position ($) ($) Compensation(2) Award(3) Options Payouts Compensation
($) ($) (#) ($) ($)
------------------------------------------------------------------------------------------------------------------------------------
Gary L. Tice 2002 600,000 600,000 None 59,819 None 212,594(4,5)
President and Chief 2001 460,000 325,000 None 75,607 None 146,352
Executive Officer 2000 362,000 180,000 None 43,897 None 150,105
Stephen J. Gurgovits 2002 375,000 220,439 None 27,616 None 41,614(4,5)
Vice Chairman 2001 355,008 176,000 None 42,307 None 43,467
2000 338,000 121,903 None 41,072 None 28,823
Kevin C. Hale 2002 375,000 294,014 None 26,347 None 25,823(4,5)
Executive V.P. and Chief 2001 263,000 196,000 None 30,305 None 20,822
Operating Officer 2000 205,492 50,000 None 27,562 None
Cass Bettinger(6) 2002 325,008 212,343 409,163 None 26,250 None 22,923(4,5)
Executive V.P. and Chief
Admin. Officer
Garrett S. Richter 2002 280,008 254,618 None 19,672 None 29,849(4,5)
Executive 2001 240,000 117,125 None 13,827 None 17,394
Vice President 2000 233,012 37,125 None 13,065 None 13,974
====================================================================================================================================
(1) Amount earned by the officer as a cash incentive bonus under the
Corporation's Incentive Cash and Bonus Award Program.
(2) The aggregate amount of payments made to each officer for perquisites or
other personal benefits did not exceed 10% of salary and bonus in 2002
except for Mr. Bettinger. Mr. Bettinger received $2,261 for car allowance,
$20,000 club dues, $3,168 in group term life insurance, $283,734 for
relocation expenses and $100,000 signing bonus.
(3) Aggregate restricted stock holdings in terms of number of shares and dollar
value as of December 31, 2002, for each named executive officer were as
follows: Mr. Tice: 1,623, $44,671; Mr. Gurgovits: 0, $0; Mr. Hale: 0, $0;
Mr. Bettinger: 0, $0 and Mr. Richter 1,217, $33,499.
(4) Includes the following amounts paid or accrued by the Corporation for 2002
under the following programs to Messrs. Tice, Gurgovits, Hale, Bettinger and
Richter, respectively: 401(k) Plan (employer matching contributions),
$16,500, $5,500, $16,500, $16,500 and $16,500; Basic Retirement Plan
(employer matching contributions relating to 401(k) Plan), $26,095, $19,981,
$9,323, $6,423 and $4,475; Supplemental Disability, $8,969, $5,102, $0, $0
and $8,874.
(5) Includes the following amounts which represent the present value of imputed
interest on the Corporation's portion of split dollar life insurance
premiums paid during 2002: Mr. Tice, $161,030; Mr. Gurgovits, $11,031; Mr.
Hale, $0; Mr. Bettinger, $0 and Mr. Richter $0. These premiums will be
returned to the Corporation upon the earlier of either the death of the
covered employee or termination of the policy.
(6) Mr. Bettinger joined the Corporation in January 2002.
13
DEFERRED COMPENSATION
In addition to the Basic Retirement Plan (more fully described below), the Board
of Directors of the Corporation and FNBPA have established a Deferred
Compensation Plan (the "Compensation Plan") for Mr. Gurgovits and other officers
which commenced January 1, 1986. The Compensation Plan provides for payments of
annual benefits of $25,000 for Mr. Gurgovits for a period of ten years
commencing upon the occurrence of: (a) retirement from the Corporation or FNBPA;
(b) complete and total disability; or (c) the death of the participant in the
event such death occurs prior to retirement.
STOCK OPTIONS
The following tables show certain information relating to stock options granted
during the last fiscal year and aggregated stock options for the Named Executive
Officers and all unexercised options held by such officers as of December 31,
2002.
===========================================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------------------------------------------------------------------------------------------------
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants(1) for Option Term(4)
---------------------------------------------------------------------------------------------------------------------------
Securities % of Total Exercise
Underlying Options Granted to or Base
Options Granted Employees in Price Expiration
Name (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
---------------------------------------------------------------------------------------------------------------------------
Mr. Tice 58,550(2) 9.2 25.62 01/20/12 943,367 2,390,691
1,269(3) 4.1 25.62 01/20/12 20,446 51,815
Mr. Gurgovits 26,347(2) 4.2 25.62 01/20/12 424,507 1,075,791
1,269(3) 4.1 25.62 01/20/12 20,446 51,815
Mr. Hale 26,347(2) 4.2 25.62 01/20/12 424,507 1,075,791
Mr. Bettinger 26,250(2) 4.1 25.62 01/20/12 422,944 1,071,830
Mr. Richter 19,672(2) 3.1 25.62 01/20/12 316,958 803,240
===========================================================================================================================
(1) Adjusted for a 5% stock dividend declared on May 5, 2002.
(2) Options were granted on January 20, 2002, and are 20% vested on each of the
first through fifth anniversaries of the grant date.
(3) Options were granted on January 20, 2002, and are fully vested after one
year.
(4) In order for the gains to be realized over the ten-year term of the option,
the stock price at expiration date January 20, 2012, would be $41.73 and
$66.45, reflecting increases in the overall market price of each share of
Common Stock of the Corporation by approximately 63% and 159%, respectively.
14
===============================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
-------------------------------------------------------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised
Unexercised In-The-Money Options at
Options at 12/31/02 12/31/02($)(1)
---------------------------------------------------------------------------
Value
Shares Acquired Realized
Name on Exercise ($) Exercisable Unexercisable Exercisable Unexercisable
-------------------------------------------------------------------------------------------------------------------------------
Mr. Tice 39,150 805,120 98,180 175,580 507,869 878,317
Mr. Gurgovits 7,751 183,695 110,527 107,333 942,298 603,324
Mr. Hale 0 0 17,940 69,167 163,121 403,884
Mr. Bettinger 0 0 0 26,250 0 49,875
Mr. Richter 0 0 38,158 50,647 119,186 216,146
===============================================================================================================================
(1) Represents the difference between the aggregate market value at December 31,
2002, of the shares subject to the options and the aggregate option price of
those shares.
RETIREMENT BENEFITS
The following table illustrates the maximum annual benefits payable in 2003 upon
normal retirement age of 62 under the life annuity option of the Corporation's
Basic Retirement Plan, ERISA Excess Profit Sharing and Lost Match Plan
(excluding matching contributions), ERISA Excess Pension Plan and any applicable
qualified retirement plan in which Messrs. Tice, Gurgovits, Hale, Bettinger and
Richter participate. Messrs. Richter, Hale and Tice participate in the F.N.B.
Corporation Salary Savings Plan, which is different from the retirement plan
(F.N.B. Corporation Retirement Income Plan) in which Mr. Gurgovits participates.
Mr. Bettinger does not participate in the Basic Retirement Plan but is provided
nonqualified retirement benefits under his employment agreement, providing a
comparable level of benefits to the Basic Retirement Plan. The estimated annual
pension payments shown in the chart below are reasonable representations of the
total benefits under the Basic Retirement Plan, ERISA Excess Profit Sharing and
Lost Match Plan (excluding matching contributions), ERISA Excess Retirement
Plan, F.N.B. Corporation Salary Savings Plan, F.N.B. Corporation Retirement
Income Plan and Mr. Bettinger's employment agreement. Messrs. Tice, Gurgovits,
Hale and Richter are respectively credited with the following years of services
for annual pension payments described in the chart on the next page: 19, 42, 3
and 14.
15
============================================================================================================================
ESTIMATED ANNUAL PENSION PAYMENTS
----------------------------------------------------------------------------------------------------------------------------
Average Annual Earnings
for Five Years Preceding Years of Service
Retirement --------------------------------------------------------------------------------------------
10 15 20 25 30 or more
----------------------------------------------------------------------------------------------------------------------------
$225,000 $60,559 $83,059 $105,559 $113,996 $122,434
$250,000 $69,309 $94,309 $119,309 $128,684 $138,059
$275,000 $78,059 $105,559 $133,059 $143,371 $153,684
$300,000 $86,809 $116,809 $146,809 $158,059 $169,309
$325,000 $95,559 $128,059 $160,559 $172,746 $184,934
$350,000 $104,309 $139,309 $174,309 $187,434 $200,559
$375,000 $113,059 $150,559 $188,059 $202,121 $216,184
$400,000 $121,809 $161,809 $201,809 $216,809 $231,809
$500,000 $156,809 $206,809 $256,809 $275,559 $294,309
$600,000 $221,809 $296,809 $371,809 $401,809 $461,809
$800,000 $301,809 $401,809 $501,809 $541,809 $621,809
============================================================================================================================
The retirement benefit for each employee covered by the Corporation's Retirement
Income Plan is a monthly benefit in the form of a Five Year Certain and Life
annuity, equal to 1.2% of Final Average Earnings plus .5% of Final Average
Earnings in excess of the employee's Covered Compensation (as defined by Section
401(l)(5)(E) of the Internal Revenue Code) times Years of Service, not to exceed
25 years. The Final Average Earnings figure is calculated using the highest 60
consecutive months of earnings of the last 120 months of service as an employee.
The benefits listed above are not subject to deduction for Social Security.
The retirement benefit for each employee covered by the F.N.B. Corporation
Salary Savings Plan is based on a discretionary contribution credited to the
employee's account, which accumulates investment income. The discretionary
contribution for the past few years has been 6% of pay.
Compensation included in the computation of benefits is base salary and bonus as
indicated in the Summary Compensation Table on Page 13 of this proxy statement.
NONQUALIFIED PLANS
The Corporation maintains three supplemental nonqualified retirement plans. The
ERISA Excess Profit Sharing and Lost Match Plan provides retirement benefits
equal to the difference, if any, between the maximum benefit allowable under the
Internal Revenue Code and the amount that would be provided under the F.N.B.
Corporation Salary Savings Plan or the F.N.B. Corporation Progress Savings Plan,
if no limits were applied. The ERISA Excess Retirement Plan provides retirement
benefits equal to the difference, if any, between the maximum benefit allowable
under the Internal Revenue Code and the amount that would be provided under the
F.N.B. Corporation Retirement Income Plan, if no limits were applied.
The Corporation maintains a separate supplemental retirement benefit plan, the
Basic Retirement Plan (BRP), applicable to certain officers of the Corporation
and its subsidiaries who are designated by the Board of Directors of the
Corporation (the "Board"). Officers participating in this plan receive a benefit
based on a target benefit percentage based on years of service at retirement and
designated tier as determined by the Board. When a
16
participant retires, the basic benefit under the BRP is a monthly benefit equal
to the target benefit percentage times the participant's highest average monthly
cash compensation during five consecutive calendar years within the last ten
calendar years of employment. This monthly benefit is reduced by the monthly
benefit the participant receives from Social Security, their qualified plan
benefit (to the extent the benefit relates to employer contributions other than
matching contributions) and ERISA Excess benefits (to the extent the benefit
relates to employer contributions other than matching contributions).
The BRP contains provisions for reducing the basic benefit if the participant
retires prior to normal retirement (age 62) but on or after early retirement
date (age 55 with 5 years of service). The participant's rights to benefits
under the BRP vest at 100% upon the attainment of age 55 and 5 years of service
or upon normal retirement, "change in control" (as defined in the BRP), death or
disability. Benefits are forfeited in the event a participant's employment is
terminated for cause or a participant terminates employment prior to early
retirement.
EMPLOYMENT AGREEMENTS
The Corporation has entered into an employment agreement with each of the Named
Executive Officers. Under these agreements, each executive receives an annual
base salary that is subject to periodic increases at the discretion of the
Corporation's Board of Directors. At December 31, 2002, these annual base
salaries were $600,000 for Mr. Tice; $375,000 for Mr. Gurgovits; $375,000 for
Mr. Hale; $325,000 for Mr. Bettinger; and $280,008 for Mr. Richter.
Each of the executives is entitled to receive all other benefits approved by the
Board of Directors and made available to senior executive officers of the
Corporation. In addition, the Corporation has agreed to pay the premiums on
split-dollar life insurance policies of $213,000 for Mr. Tice and $15,749 for
Mr. Gurgovits.
The employment agreement of each of Messrs. Tice and Gurgovits has a term of
five years, while the employment agreement of each of Messrs. Hale, Bettinger
and Richter has a term of three years. Each of the agreements renews
automatically each year for one additional year; provided, however, that the
term of agreements for Messrs. Tice, Gurgovits, Richter, Hale and Bettinger will
not extend beyond the year in which the executive reaches the age of 65.
In the event the employment of any of the executives is terminated without
cause, the executive is entitled to receive his base salary then in effect
through the end of the term of the Agreement. Upon a change in control of the
Corporation, Messrs. Tice, Gurgovits, Bettinger and Hale would each be entitled
to receive an amount equal to approximately three times his base salary then in
effect, and Mr. Richter would be entitled to receive an amount equal to twice
his base salary then in effect. In addition, Mr. Tice would also be entitled to
receive an amount equal to three times the highest bonus paid to him in the
three-year period prior to the change of control, and the Corporation would be
required to pay the premiums on his split-dollar life insurance policy and
maintain his benefits coverage for up to 36 months from the date of the change
of control.
Each of the employment agreements contains a confidentiality provision, a
covenant not to compete for a term of up to three years following the date of
termination, and a covenant not to solicit any of the Corporation's executives
or employees for a period of up to two years following the date of termination.
TERMINATION OF EMPLOYMENT CONTINUATION AGREEMENT WITH PETER MORTENSEN
The Corporation and Peter Mortensen, the present Chairman of the Board and
former Chief Executive Officer of the Corporation, agreed to the buy-out and
cancellation of an agreement pursuant to which Mr. Mortensen had agreed to serve
as an internal advisor to the Corporation during a period beginning on January
1, 2001 and ending not later than December 31, 2007. Under that agreement, Mr.
Mortensen was entitled to receive annual compensation in an amount equal to
one-half of the amount of his salary during 2000, the last year during which he
served as the Corporation's Chief Executive Officer, and certain other benefits.
Mr. Mortensen received $280,000 in salary during 2001 pursuant to this
agreement. In consideration of the termination of the agreement,
17
and in lieu of the payment of any bonus to Mr. Mortensen for 2001, the
Corporation paid $3,166,982 on January 24, 2002, to a trust of which Mr.
Mortensen is the beneficiary and awarded 164,640 stock options to Mr. Mortensen
at an exercise price of $25.62. The Corporation will also provide certain
benefits to Mr. Mortensen until his 72nd birthday, including medical and dental
benefits, use of corporate office space and corporate transportation and
reimbursement of customary business expenses. The buy-out agreement was approved
by the Corporation's Compensation Committee and ratified by the Corporation's
Board. Mr. Mortensen continues to serve as the Chairman of the Corporation and
is entitled to receive all usual and customary fees for his service as a
director of the Corporation.
STOCK PERFORMANCE GRAPH
The following five-year performance graph compares the cumulative total
shareholder return (assuming reinvestment of dividends) on the Corporation's
Common Stock to the Nasdaq Bank Index and the Russell 2000 Index. This stock
performance graph assumes $100 was invested on December 31, 1997, and the
cumulative return is measured as of each subsequent fiscal year end.
F.N.B. CORPORATION FIVE-YEAR STOCK PERFORMANCE
TOTAL RETURN, INCLUDING STOCK AND CASH DIVIDENDS
PERIOD ENDING
-------------------------------------------------------------------------------------
INDEX 12/31/1997 12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002
---------------------------------------------------------------------------------------------------------
FNB Corporation 100.00 80.64 68.58 70.42 95.72 108.00
Nasdaq Bank Index 100.00 99.36 95.51 108.95 117.97 120.61
Russell 2000 100.00 97.45 118.17 114.60 117.45 93.39
18
SECURITY OWNERSHIP OF CERTAIN SHAREHOLDERS
The following table sets forth certain information concerning persons known to
the Corporation to be the beneficial owner of 5% or more of the outstanding
Common Stock or Series A Preferred Stock of the Corporation as of February 18,
2003.
====================================================================================================
Shares Percent of Outstanding Series A
Name and Address Beneficially Owned Preferred Stock Beneficially Owned
====================================================================================================
Hilton G. Klein 1,080 5.6
122 Hilton Drive
New Brighton, PA 15066-3510
Joan H. Klein 1,080 5.6
122 Hilton Drive
New Brighton, PA 15066-3510
====================================================================================================
INDEPENDENT AUDITORS
Ernst & Young LLP served as independent auditors of the Corporation for the
fiscal year ended December 31, 2002, and has been selected by the Board of
Directors to serve as independent auditors of the Corporation for the fiscal
year ending December 31, 2003. Representatives of Ernst & Young LLP are expected
to be present at the Annual Meeting and will have the opportunity to make a
statement if they desire to do so and to respond to appropriate questions.
Fees paid to Ernst & Young LLP for professional services were:
Audit Audit-Related Tax All Other
----- ------------- --- ---------
2002 $625,701 $561,818 $321,944 $0
2001 $482,658 $239,475 $ 70,931 $0
AUDIT FEES relate to the audit of the Corporation's annual financial statements
and review of the financial statements included in the Corporation's Reports on
Form 10-Q, services provided in connection with regulatory filings and
accounting consultations related to the audit.
AUDIT-RELATED FEES relate to merger and acquisition services, employee benefit
plan audits, internal control reviews, and cash management reconciliation
services.
TAX FEES relate to tax services for tax compliance reviews, tax planning and
advice on tax implications of transactions.
ALL OTHER FEES relate to any services not included in the above categories.
The Audit Committee of the Board of Directors has considered whether the
provision of non-audit services by Ernst & Young LLP to the Corporation is
compatible with maintaining such firm's independence. See also "Report of Audit
Committee" on Page 8 of this proxy statement.
19
ANNUAL REPORT ON FORM 10-K
Upon written request to the undersigned Secretary of the Corporation (at the
address specified on Page 1), the Corporation will furnish to any shareholder
without charge a copy of its Annual Report on Form 10-K for the year ended
December 31, 2002, as filed with the Securities and Exchange Commission,
together with financial statements and schedules thereto. Additionally, the
information may be obtained on the Corporation's website at:
www.fnbcorporation.com.
ADDITIONAL INFORMATION
The Corporation knows of no other matters which will be presented to
shareholders for action at the Annual Meeting. However, if other matters are
presented which are proper subjects for action by shareholders, it is the
intention of those named in the accompanying proxy to vote such proxy in
accordance with their judgment upon such matters.
Solicitation of proxies will be made by employees of the Corporation, and the
cost will be borne by the Corporation. Proxies will be solicited by mail and may
also be solicited by telephone, telegraph and personal interview. The
Corporation will also request brokerage houses and other custodians, nominees
and fiduciaries to forward soliciting material to the beneficial owners of the
stock held of record by such persons and will reimburse such persons for their
costs incurred in forwarding such materials.
SHAREHOLDER PROPOSALS
The Corporation's Bylaws provide that no proposals submitted by a shareholder of
the Corporation for consideration at the Annual Meeting will be considered
unless the Secretary of the Corporation has received written notice of the
matter proposed to be presented from the shareholder on or prior to the date
which is 120 days prior to the date on which the Corporation first mailed its
proxy materials for the prior year's annual meeting of the shareholders.
Accordingly, any shareholder proposal must be submitted to the Corporation by
November 19, 2003, to be considered for the 2004 Annual Meeting of Shareholders.
In accordance with SEC Rule 14a-4(c) under the Securities Exchange Act of 1934,
proxy holders will have discretionary authority to vote in accordance with their
judgment upon any proposal which is not timely received by the Corporation or
which does not otherwise comply with applicable SEC rules.
BY ORDER OF THE BOARD OF DIRECTORS
David B. Mogle, Secretary
20
EXHIBIT A
F.N.B. CORPORATION
AUDIT COMMITTEE CHARTER
I. ORGANIZATION
This charter governs the operations of the F.N.B. Corporation Audit Committee
("Committee"). The Committee shall review and reassess this charter at least
annually and obtain the approval of the F.N.B. Corporation board of directors.
The Committee shall disclose the charter in the proxy statement at least once
every three years, and shall disclose in the proxy statement annually the fact
that the charter has been adopted. The Committee shall be members of, and
appointed by, the board of directors and shall comprise at least three
directors, each of whom are independent of management and the Corporation.
Members of the Committee shall be considered independent as long as they meet
the current independence requirements of the stock exchange listing standards
and have no relationship that may interfere with the exercise of their
independence from management and the Corporation. All Committee members shall be
financially literate, and at least one member shall be an "audit committee
financial expert," as defined by SEC regulations. Committee members shall not
serve on more than two other public company audit committees.
II. PURPOSE
The Committee shall provide assistance to the board of directors in fulfilling
their oversight responsibility to the shareholders, potential shareholders, the
investment community, and others relating to the integrity of the Corporation's
financial statements; the financial reporting process; the systems of internal
accounting and financial controls; the performance of the Corporation's internal
audit function and independent auditors; the independent auditor's
qualifications and independence; and the Corporation's compliance with ethics
policies and legal and regulatory requirements. In so doing, it is the
responsibility of the Committee to maintain free and open communication between
the Committee, independent auditors, the internal auditors, and management of
the Corporation.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities, and personnel of the Corporation and the authority to engage
independent counsel and other advisers as it determines necessary to carry out
its duties. The Corporation shall provide appropriate funding, as determined by
the Committee, for compensation to the independent auditor and to any advisers
that the Committee chooses to engage.
III. DUTIES AND RESPONSIBILITIES
The primary responsibility of the Committee is to oversee the Corporation's
financial reporting process on behalf of the board and report the results of
their activities to the board. While the Committee has the responsibilities and
powers set forth in this Charter, it is not the duty of the Committee to plan or
conduct audits or to determine that the Corporation's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. Management is responsible for the preparation, presentation, and
integrity of the Corporation's financial statements and for the appropriateness
of the accounting principles and reporting policies that are used by the
Corporation. The independent auditors are responsible for auditing the
Corporation's financial statements and for reviewing the Corporation's unaudited
interim financial statements.
The Committee, in carrying out its responsibilities, believes its policies and
procedures should remain flexible, in order to best react to changing conditions
and circumstances. The Committee should take appropriate actions to set the
overall corporate "tone" for quality financial reporting, sound business risk
practices, and ethical behavior. The following shall be the principal duties and
responsibilities of the Committee. These are set forth as a guide with the
understanding that the Committee may supplement them as appropriate.
The Committee shall be directly responsible for the appointment, retention, and
termination of the independent auditors (subject, if applicable, to shareholder
ratification), and the independent auditors must report directly to the
Committee. The Committee also shall be directly responsible for the oversight of
the work of the independent auditors, including resolution of disagreements
between management and the auditor regarding financial reporting. The Committee
shall pre-approve all audit and non-audit services provided by the independent
auditors and shall not engage the independent auditors to perform the specific
non-audit services proscribed by law or regulation. The Committee may delegate
pre-approval authority to a member of the Committee. The decisions of any
Committee member to whom pre-approval authority is delegated must be presented
to the full Committee at its next scheduled meeting.
At least annually, the Committee shall obtain and review with the independent
auditors their report describing:
- The firm's internal quality control procedures.
- Any material issues raised by the most recent internal quality
control review, or peer review, of the firm, or by any inquiry
or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more
independent audits carried out by the firm, and any steps taken
to deal with any such issues.
- All relationships between the independent auditor and the
Corporation (to assess the auditor's independence).
The Committee shall set clear hiring policies for employees or former employees
of the independent auditors that meet the SEC regulations and stock exchange
listing standards.
The Committee shall discuss with the internal auditors and the independent
auditors the overall scope and plans for their respective audits, including the
adequacy of staffing and compensation. Also, the Committee shall discuss with
management, the internal auditors, and the independent auditors the adequacy and
effectiveness of the accounting and financial controls, including the
Corporation's policies and procedures to assess, monitor, and manage business
risk, and legal and ethical compliance programs (e.g., Corporation's Code of
Conduct).
The Committee shall meet separately periodically with management, the internal
auditors, and the independent auditors to discuss issues and concerns warranting
Committee attention. The Committee shall provide sufficient opportunity for the
internal auditors and the independent auditors to meet privately with the
members of the Committee. The Committee shall review with the independent
auditor any audit problems or difficulties and management's response.
The Committee shall receive a report from the independent auditor, prior to the
filing of its audit report with the SEC, on all critical accounting policies and
practices of the Corporation, all material alternative treatments of financial
information within generally accepted accounting principles that have been
discussed with management, including the ramifications of the use of such
alternative treatments and disclosures and the treatment preferred by the
independent auditor, and other material written communications between the
independent auditor and management.
The Committee shall review management's assertion on its assessment of the
effectiveness of internal controls as of the end of the most recent fiscal year
and the independent auditors' report on management's assertion.
The Committee shall review and discuss earnings press releases, as well as
financial information and earnings guidance provided to analysts and rating
agencies. The chair of the Committee may represent the entire Committee for
purposes of this review.
A-2
The Committee shall review the interim financial statements and disclosures
under Management's Discussion and Analysis of Financial Condition and Results of
Operations with management and the independent auditors prior to the filing of
the Corporation's Quarterly Report on Form 10-Q. Also, the Committee shall
discuss the results of the quarterly review and any other matters required to be
communicated to the Committee by the independent auditors under generally
accepted auditing standards.
The Committee shall review with management and the independent auditors the
financial statements and disclosures under Management's Discussion and Analysis
of Financial Condition and Results of Operations to be included in the
Corporation's Annual Report on Form 10-K (or the annual report to shareholders
if distributed prior to the filing of Form 10-K), including their judgment about
the quality, not just acceptability, of accounting principles, the
reasonableness of significant judgments, and the clarity of the disclosures in
the financial statements. Based on these reviews, the Committee shall recommend
to the board of directors whether the audited financial statements should be
included in the Annual Report on Form 10-K. Also, the Committee shall discuss
the results of the annual audit and any other matters required to be
communicated to the Committee by the independent auditors under generally
accepted auditing standards.
The Committee shall review disclosures made to the Committee by the
Corporation's CEO and CFO during their certification process for the Form 10-K
and Form 10-Q about any significant deficiencies in the design or operation of
internal controls or material weaknesses therein and any fraud involving
management or other employees who have a significant role in the Corporation's
internal controls.
The Committee shall establish procedures for the receipt, retention, and
treatment of complaints received by the issuer regarding accounting, internal
accounting controls, or auditing matters, and the confidential, anonymous
submission by employees of the issuer of concerns regarding questionable
accounting or auditing matters.
The Committee shall receive corporate attorneys' reports of evidence of a
material violation of securities laws or breaches of fiduciary duty.
The Committee shall investigate any reported known or suspected violations of
the Code of Conduct for Senior Executives and Financial Managers or the
company-wide Code of Ethics where required, and shall oversee an appropriate
response, corrective action and preventive measures for both. The Committee
shall review any proposed amendments or waivers to the codes and shall make a
recommendation to the full Board of Directors for appropriate action, which will
be subject to public disclosure as required by SEC regulation and stock exchange
listing standards.
The Committee shall prepare its report to be included in the Corporation's
annual proxy statement, as required by SEC regulations.
The Committee shall perform an evaluation of its performance at least annually
to determine whether it is functioning effectively.
A-3
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F.N.B. Corporation
F.N.B. Center o 2150 Goodlette Road North o Naples, Florida 34102
(941) 262-7600
Website: www.fnbcorporation.com
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS:
G. Scott Baton, II, Alan C. Bomstein, David A. Straz, Jr., FOR WITHHOLD
William J. Strimbu, Archie O. Wallace and R. Benjamin Wiley all nominees listed authority to vote I (We) will attend the meeting.
(Mr. Straz is nominated subject to the Corporation's (except as marked to for all nominees
acquisition of Charter Banking Corp. prior to the 2003 the contrary below) listed Yes No
Annual Meeting, as described in the accompanying proxy
statement.) [ ] [ ] [ ] [ ]
INSTRUCTION: To withhold authority to vote your shares for any
individual nominee, write that nominee's name here:
------------------------------------------------------------------------
Your shares will be voted for the election of each nominee
whose name is not written in the space above.
In their discretion, the Proxies are authorized
to vote upon such other matters as may properly
come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED AS DIRECTED HEREBY BY THE UNDERSIGNED
SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF ALL
NOMINEES FOR DIRECTOR.
PLEASE DATE, EXECUTE AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE.
Daytime Phone:____________________________
Signatures(s): _______________________________Signature(s):______________________________________Date:______________________________
Please sign exactly as your name appears hereon. When signing as attorney, executor, administrator, trustee, etc., or as officer of
a corporation, please give your full title(s) as such. For joint accounts, each joint owner must sign.
FOLD AND DETACH HERE
Dear Shareholder:
F.N.B. Corporation offers a Dividend Reinvestment and Direct
Stock Purchase Plan for its shareholders.
This plan provides features such as safekeeping to eliminate the
risk of loss, theft or destruction of stock certificates;
automatic dividend reinvestment and purchase of additional
common shares without a broker fee.
All of these convenient features are at no cost to you.
If you wish to participate in this Plan, a Prospectus and
enrollment form may be obtained by calling F.N.B. Shareholder
Services at 888-441-4FNB (4362).
Sincerely,
F.N.B. Corporation
F.N.B. CORPORATION
2003 ANNUAL MEETING OF SHAREHOLDERS
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas E. Fahey, Robert T. Reichert, and William
J. Rundorff, each with full power to act without the others, as Proxies of the
undersigned, each with the full power to appoint his substitute, and hereby
authorizes them to represent and to vote, as indicated on the reverse, all the
shares of Common Stock and/or Series A Cumulative Convertible Preferred Stock of
F.N.B. Corporation held of record by the undersigned on February 18, 2003 at the
Annual Meeting of Shareholders to be held on April 28, 2003 or any adjournment
of it.
(Continued, and to be marked, dated and signed, on the other side.)
- FOLD AND DETACH HERE -