AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 2004
REGISTRATION NO. 333-116526
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
F.N.B. CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 6711 25-1255406
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
ONE F.N.B. BOULEVARD
HERMITAGE, PENNSYLVANIA 16148
(724) 981-6000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
STEPHEN J. GURGOVITS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
F.N.B. CORPORATION
ONE F.N.B. BOULEVARD
HERMITAGE, PENNSYLVANIA 16148
(724) 981-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
FREDERICK W. DREHER, ESQ. GREGORY A. GEHLMANN, ESQ.
DUANE MORRIS LLP MANATT, PHELPS & PHILLIPS, LLP
4200 ONE LIBERTY PLACE 1500 M STREET, N.W., SUITE 700
PHILADELPHIA, PA 19103 WASHINGTON, D.C. 20005
(215) 979-1234 (202) 463-4334
The information in this proxy statement/prospectus is not complete and may be
changed. We may not issue the shares of FNB common stock to be issued in
connection with the merger described in this proxy statement/prospectus until
the registration statement filed with the SEC is effective. This prospectus is
not an offer to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted. Any
representation to the contrary is a criminal offense.
SUBJECT TO COMPLETION, DATED JULY 21, 2004
(SLIPPERY ROCK FINANCIAL CORPORATION LOGO)
MERGER PROPOSAL -- YOUR VOTE IS VERY IMPORTANT
---------------------
Dear Slippery Rock Financial Corporation Shareholders:
We invite you to attend a special meeting of our shareholders that will be
held on Thursday, September 9, 2004 at 10:00 a.m., local time, at Grove City
Country Club, 73 Country Club Road, Grove City, Pennsylvania 16127. At the
special meeting, you will be asked to consider and vote upon, among other
things, a proposal to approve and adopt an agreement and plan of merger, dated
as of May 5, 2004, as amended and restated as of July 15, 2004, providing for
our merger with and into F.N.B. Corporation ("FNB").
Following the merger, our subsidiary bank, The First National Bank of
Slippery Rock, will be merged in a separate merger with and into FNB's
subsidiary bank, First National Bank of Pennsylvania.
If the merger agreement is approved and adopted and the merger is
subsequently completed, each outstanding share of our common stock will be
converted into the right to receive (i) 1.41 shares of FNB common stock or (ii)
$28.00 in cash. You may elect whether you want to receive all FNB common stock,
all cash or a combination of cash and FNB common stock. However, your election
will be subject to possible proration because the merger agreement provides that
15% of our common stock will be exchanged for cash and 85% of our common stock
will be exchanged for shares of FNB common stock. The actual allocation of cash
and FNB common stock will depend on the elections made by our shareholders and
may result in your receiving a combination of FNB common stock and cash
regardless of your choice.
1.41 shares of FNB common stock represents a value of $28.81 per share based
on FNB's closing share price of $20.43 on July 20, 2004, the latest practicable
trading date before the printing of this proxy statement/prospectus, as reported
on the New York Stock Exchange where shares of FNB common stock are listed under
the symbol "FNB".
No assurance can be given that the value of 1.41 shares of FNB common stock
received by you at the effective time of the merger will be substantially
equivalent to the value of 1.41 shares of FNB common stock at the time of the
vote to approve and adopt the merger agreement or at the time you elect the form
of merger consideration to be received. As the market value of FNB common stock
fluctuates, the value of 1.41 shares of FNB common stock that you will receive
will correspondingly fluctuate, and may be greater or less than $28.00 in cash.
The merger cannot be completed unless the holders of not less than 75% of
our outstanding shares of common stock vote to approve and adopt the merger
agreement at our special meeting and the required regulatory approvals are
received.
In addition, you will be asked to consider and vote upon a proposal to grant
discretionary authority to adjourn our special meeting to solicit additional
proxies in favor of approving and adopting the merger agreement.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL
TO APPROVE AND ADOPT THE MERGER AGREEMENT AND FOR THE ADJOURNMENT PROPOSAL.
The accompanying notice of special meeting and proxy statement/prospectus
give you detailed information about our special meeting, the merger, the merger
agreement, the shares of FNB common stock issuable in the merger and other
matters. We recommend that you read these materials carefully, including the
considerations discussed under "Risk Factors" beginning on page 19 and the
appendices thereto, which include the merger agreement.
Your vote is important. Whether or not you plan to attend our special
meeting, please complete, sign, date and promptly return the enclosed proxy to
ensure that your shares will be represented at our special meeting. If you
attend our special meeting and wish to vote in person, you may withdraw your
proxy and do so.
We appreciate your continuing loyalty and support, and we look forward to
seeing you at our special meeting.
Sincerely,
/s/ William C. Sonntag
William C. Sonntag
President and Chief Executive Officer
---------------------
Please see "Risk Factors" beginning on page 19 for a discussion of risks
associated with the merger and in owning FNB common stock.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE FNB COMMON STOCK TO BE ISSUED UNDER
THIS PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS
IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------
The date of this proxy statement/prospectus is July 23, 2004, and it is
first being mailed or otherwise delivered to our shareholders on or about July
26, 2004.
(SLIPPERY ROCK FINANCIAL CORPORATION LOGO)
100 SOUTH MAIN STREET
SLIPPERY ROCK, PENNSYLVANIA 16057
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 9, 2004
---------------------
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Slippery
Rock Financial Corporation will be held at 10:00 a.m., local time, on Thursday,
September 9, 2004 at Grove City Country Club, 73 Country Club Road, Grove City,
Pennsylvania 16127, for the following purposes, all of which are more completely
set forth in the accompanying proxy statement/prospectus:
(1) To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of May 5, 2004, between F.N.B.
Corporation ("FNB") and us, as amended and restated as of July 15, 2004,
pursuant to which we will merge with and into FNB as described in the
accompanying proxy statement/prospectus;
(2) To consider and vote upon a proposal to grant discretionary
authority to adjourn the special meeting if necessary to permit further
solicitation of proxies if there are not sufficient votes at the time of
our special meeting to approve and adopt the merger agreement; and
(3) To transact such other business as may be properly presented for
action at our special meeting and any adjournment, postponement or
continuation of our special meeting.
Our board of directors has fixed the close of business on July 19, 2004 as
the record date for the determination of our shareholders entitled to notice of,
and to vote at, our special meeting and any adjournment, postponement or
continuation of our special meeting. A list of our shareholders entitled to vote
at our special meeting will be available for examination by any shareholder for
any purpose related to our special meeting during normal business hours for ten
days prior to our special meeting at our offices at 100 South Main Street,
Slippery Rock, Pennsylvania 16057.
This notice also constitutes notice of your right to dissent from the
merger and, upon compliance with the procedural requirements of the Pennsylvania
Business Corporation Law (the "BCL"), to receive the appraised fair value of
your shares. A copy of the relevant sections of the BCL regarding appraisal
rights is included as Appendix C to the accompanying proxy statement/prospectus.
You are requested to complete, sign and return the enclosed proxy card in
the envelope provided, whether or not you expect to attend our special meeting
in person. If you attend our special meeting and wish to vote in person, you may
withdraw your proxy and vote in person.
By Order of the Board of Directors,
/s/ William C. Sonntag
WILLIAM C. SONNTAG,
President and Chief Executive Officer
Slippery Rock, Pennsylvania
July 23, 2004
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
POSTAGE-PAID ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND OUR SPECIAL MEETING.
ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about us and FNB from other documents that are not
included in or delivered with this proxy statement/prospectus. You can obtain
documents incorporated by reference in this proxy statement/prospectus, other
than certain exhibits to those documents, by requesting them in writing or by
telephone from us or FNB at the following addresses:
Slippery Rock Financial Corporation F.N.B. Corporation
Attn: Corporate Secretary Attn: Corporate Secretary
100 South Main Street One F.N.B. Boulevard
Slippery Rock, Pennsylvania 16057 Hermitage, Pennsylvania 16148
(724) 794-2210 (724) 981-6000
You will not be charged for any documents you request. Our shareholders
requesting documents should do so by September 2, 2004 in order to receive them
before our special meeting.
IF YOU HAVE SPECIFIC QUESTIONS REGARDING THE SPECIAL MEETING, PLEASE CALL
OUR PROXY SOLICITOR, MORROW & CO., TOLL-FREE AT (800) 607-0088.
See "Where You Can Find More Information" on page 82.
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS ABOUT THE MERGER AND OUR SPECIAL
MEETING................................................... 1
SUMMARY..................................................... 4
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF FNB...... 10
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF SLIPPERY
ROCK...................................................... 12
SELECTED CONSOLIDATED UNAUDITED PRO FORMA FINANCIAL
INFORMATION............................................... 14
RISK FACTORS RELATING TO THE MERGER......................... 19
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... 21
OUR SPECIAL MEETING......................................... 22
General................................................... 22
When and Where Our Special Meeting Will Be Held........... 22
Matters to Be Considered.................................. 22
Record Date; Shares Outstanding and Entitled to Vote...... 22
Quorum.................................................... 22
Shareholder Vote Required................................. 22
Director and Executive Officer Voting..................... 24
Proxies................................................... 24
Recommendation of Our Board of Directors.................. 25
Attending Our Special Meeting............................. 25
Questions and Additional Information...................... 26
INFORMATION ABOUT FNB AND SLIPPERY ROCK..................... 26
THE MERGER.................................................. 27
Background of the Merger.................................. 27
Our Board of Directors' Reasons for the Merger;
Recommendation......................................... 28
Opinion of Our Financial Advisor.......................... 30
Structure of the Merger and the Merger Consideration...... 36
Election Procedure........................................ 38
Allocation of FNB Common Stock and Cash................... 40
Procedures for the Exchange of Shares of Our Common
Stock.................................................. 42
Resale of FNB Common Stock................................ 43
Interests of Our Directors and Executive Officers in the
Merger................................................. 44
Boards of Directors of FNB and FNB Bank Following the
Merger................................................. 48
Regulatory Approvals Required for the Merger.............. 49
Public Trading Markets.................................... 50
FNB Dividends............................................. 50
Appraisal Rights of Dissenting Shareholders............... 51
THE MERGER AGREEMENT........................................ 53
Terms of the Merger....................................... 54
Treatment of Slippery Rock Stock Options.................. 54
Closing and Effective Time of the Merger.................. 54
Representations, Warranties, Covenants and Agreements..... 54
PAGE
----
Declaration and Payment of Dividends...................... 58
Agreement Not to Solicit Other Offers..................... 58
Expenses and Fees......................................... 59
Conditions to Completion of the Merger.................... 59
Amendment, Waiver and Termination of the Merger
Agreement.............................................. 60
Effect of Termination; Break-up Fee....................... 61
Employee Benefit Plans.................................... 61
ACCOUNTING TREATMENT........................................ 61
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER...... 62
Tax Opinion and Merger.................................... 62
Slippery Rock Shareholders Who Receive Solely FNB Common
Stock.................................................. 63
Slippery Rock Shareholders Who Receive Cash and FNB Common
Stock.................................................. 63
Slippery Rock Shareholders Who Receive Solely Cash........ 64
Fractional Shares......................................... 64
Material Federal Income Tax Consequences to FNB and
Slippery Rock.......................................... 64
Tax Consequences if the Merger Does Not Qualify as a
Reorganization Under Section 368(a) of the Internal
Revenue Code........................................... 64
Backup Withholding........................................ 65
DESCRIPTION OF FNB CAPITAL STOCK............................ 65
FNB Common Stock.......................................... 65
FNB Preferred Stock....................................... 66
COMPARISON OF SHAREHOLDER RIGHTS............................ 67
COMPARATIVE MARKET PRICES AND DIVIDENDS..................... 78
BENEFICIAL OWNERSHIP OF SLIPPERY ROCK STOCK................. 79
ADJOURNMENT PROPOSAL........................................ 80
LEGAL MATTERS............................................... 81
EXPERTS..................................................... 81
OTHER MATTERS............................................... 82
WHERE YOU CAN FIND MORE INFORMATION......................... 82
SHAREHOLDER PROPOSALS....................................... 83
APPENDICES:
Appendix A -- Amended and Restated Agreement and Plan of
Merger dated as of July 15, 2004 between
F.N.B. Corporation and Slippery Rock Financial
Corporation................................... A-1
Appendix B -- Opinion of Griffin Financial Group, LLC....... B-1
Appendix C -- Subchapter D and Section 1930 of the
Pennsylvania Business Corporation Law of 1988,
as amended.................................... C-1
ii
QUESTIONS AND ANSWERS ABOUT THE MERGER
AND OUR SPECIAL MEETING
Q. What matters will be considered at our special meeting?
A. At our special meeting, our shareholders will be asked to vote for a proposal
to approve and adopt the merger agreement whereby we will merge with and into
FNB. We sometimes refer to this proposal as the "merger proposal" in this
proxy statement/prospectus. Our shareholders will also be asked to vote for a
proposal to grant discretionary authority to adjourn our special meeting to
solicit additional proxies if we have not received sufficient votes to
approve the merger at the time of our special meeting. We sometimes refer to
this proposal as the "adjournment proposal" in this proxy
statement/prospectus.
Q. What will I receive upon consummation of the merger?
A. Upon consummation of the merger, you will have the right to elect to receive
the following, subject to possible proration, in exchange for each share of
our common stock:
- 1.41 shares of FNB common stock; or
- $28.00 in cash.
Q. What is the recommendation of our board of directors?
A. Our board of directors has unanimously determined that the merger is fair to
you and in the best interests of our shareholders and us and unanimously
recommends that you vote for the merger proposal and the adjournment
proposal.
In making this determination, our board of directors considered the opinion
of Griffin Financial Group, LLC, our independent financial advisor, whom we
refer to as "Griffin" in this proxy statement/prospectus, as to the fairness
from a financial point of view of the FNB shares and cash you will receive
pursuant to the merger agreement. Our board of directors also reviewed and
evaluated the terms and conditions of the merger agreement and the merger
with the assistance of our independent legal counsel.
Q. What was the opinion of our financial advisor?
A. Griffin presented an opinion to our board of directors to the effect that, as
of June 9, 2004 and based upon the assumptions made by Griffin, the matters
it considered and the limitations of its review as set forth in its opinion,
the merger consideration to be received by our shareholders pursuant to the
merger agreement is fair to them from a financial point of view.
Q. What do I need to do now?
A. After you carefully read this proxy statement/prospectus and decide how you
want to vote on the merger proposal and the adjournment proposal, you should
complete, date and sign your proxy card and mail it in the enclosed return
envelope as soon as possible so that your shares may be represented at our
special meeting, even if you plan to attend our special meeting and vote in
person.
Q. Why is my vote important?
A. Our articles of incorporation require the affirmative vote of the holders of
not less than 75% of our outstanding common stock in order to approve and
adopt the merger proposal. Therefore, if you fail to vote on the merger
proposal it will have the same effect as a vote against the merger proposal.
In addition, if you abstain from voting on the merger proposal, it will have
the same effect as a vote against the merger proposal.
Q. How do I vote in person?
A. If you attend our special meeting and wish to vote in person, we will give
you a ballot when you arrive at our special meeting. If your shares are held
in street name, which means that your shares are registered in the name of a
bank, broker, nominee or other holder of record instead of your own name, you
must bring an account statement or a letter from your holder of record
showing that you are the beneficial owner of the shares on July 19, 2004, the
record date for determining our shareholders who are entitled to notice of,
and to vote at, our special meeting, in order to be permitted to cast a
ballot at our special meeting.
1
Q. How do I vote my shares if they are held in street name?
A. If you are not a holder of record but you are a "beneficial holder," meaning
that your shares are registered in a name other than your own, such as a
street name, you must either direct the holder of record of your shares as to
how you want your shares to be voted or obtain a proxy from the holder of
record that you may vote yourself.
Q. What if I fail to instruct my broker?
A. Brokers may not vote shares of our common stock that they hold for the
benefit of another person either for or against the approval of the merger
proposal without specific instructions from the person who beneficially owns
those shares. Therefore, if your shares are held by a broker and you do not
give your broker instructions on how to vote your shares, this will have the
same effect as voting against the approval of the merger proposal.
Q. May I vote electronically over the internet or by telephone?
A. If your shares of Slippery Rock are registered in your own name, you may vote
either over the internet or by telephone. Special instructions to be followed
by any registered shareholder interested in voting via the internet or by
telephone are set forth on the enclosed proxy card. The internet and
telephone voting procedures are designed to authenticate your identity and to
allow you to vote your shares and confirm that your voting instructions have
been properly recorded.
If your shares are registered in the name of a bank or brokerage firm, you
may be eligible to vote your shares electronically over the internet or by
telephone. A large number of banks and brokerage firms participate in the ADP
Investor Communication Services online program. This program provides
eligible shareholders who receive a paper copy of this proxy
statement/prospectus the opportunity to vote via the internet or by
telephone. If your bank or brokerage firm is participating in ADP's program,
your proxy card will provide the instructions. If your proxy card does not
reference internet or telephone information, please complete and return the
proxy card in the self-addressed, postage paid envelope provided.
Q. May I change my vote after I have mailed my signed proxy?
A. Yes. You may revoke your proxy at any time before the vote is taken at our
special meeting. If you have not voted through a bank, broker, nominee or
other holder of record, you may revoke your proxy by:
- submitting written notice of revocation to our corporate secretary prior to
the voting of that proxy at our special meeting;
- submitting a properly executed proxy with a later date; or
- voting in person at our special meeting.
However, simply attending our special meeting without voting will not revoke
an earlier proxy.
If your shares are held in the name of a bank, broker, nominee or other
holder of record, you should follow the instructions of the bank, broker,
nominee or other holder of record regarding the revocation of proxies.
If you voted your shares by telephone or internet, you can revoke your prior
telephone or internet vote by recording a different vote, or by signing and
returning a proxy card dated as of a date that is later than your last
telephone or internet vote.
Q. When do you expect to complete the merger?
A. We anticipate that we will obtain all necessary regulatory approvals to
consummate the merger in the fourth quarter of 2004. However, we cannot
assure you when or if the merger will occur. We must first obtain the
approval of our shareholders at our special meeting and we and FNB must
obtain the requisite regulatory approvals.
Q. Should I send my stock certificates now?
A. No. Holders of our common stock should not submit their Slippery Rock stock
certificates for exchange until they receive the transmittal instructions and
an election form from the exchange agent.
2
Q. What rights do I have to dissent from the merger?
A. If you do not vote in favor of the merger proposal and you comply precisely
with the applicable procedural requirements, Pennsylvania law entitles you to
a judicial appraisal of the fair value of your shares. You must carefully and
precisely follow the applicable procedures under Pennsylvania law in order to
exercise your appraisal rights. A complete copy of the relevant sections of
the Pennsylvania Business Corporation Law of 1988, as amended, which we refer
to as the "BCL" in this proxy statement/prospectus, regarding appraisal
rights is included in this proxy statement/prospectus as Appendix C. The fair
value of your shares as determined in an appraisal rights proceeding may be
more or less than the merger consideration you are entitled to receive from
FNB under the merger agreement.
Q. Who can help answer my questions?
A. If you have additional questions about the merger or would like additional
copies of this proxy statement/ prospectus, please call our proxy solicitor,
Morrow & Co., toll-free at (800) 607-0088.
3
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus. While this summary describes the material aspects you
should consider in your evaluation of the merger agreement and the merger, it
does not contain all of the information that is important to you. We encourage
you to read carefully this entire proxy statement/prospectus and its appendices
as well as the other documents to which we refer in order to fully understand
the merger. See "Where You Can Find More Information" on page 82. In this
summary, we have included page references to direct you to a more detailed
description of the matters described in this summary.
Throughout this proxy statement/prospectus, "we," "us," "our" or "Slippery
Rock" refer to Slippery Rock Financial Corporation, "Slippery Rock Bank" refers
to The First National Bank of Slippery Rock, Slippery Rock's banking subsidiary,
"FNB" refers to F.N.B. Corporation, "FNB Bank" refers to First National Bank of
Pennsylvania, FNB's banking subsidiary, and "you" refers to the shareholders of
Slippery Rock. Also, we refer to the merger between Slippery Rock and FNB as the
"merger," and the agreement and plan of merger, dated as of May 5, 2004 between
Slippery Rock and FNB, as amended and restated as of July 15, 2004, as the
"merger agreement."
THE PARTIES
SLIPPERY ROCK (PAGE 26)
We are a $334.1 million one-bank holding company headquartered in Slippery
Rock, Pennsylvania. Our primary source of income has been dividends paid by
Slippery Rock Bank.
Slippery Rock Bank has two full service offices and a grocery store office
located in Slippery Rock, Pennsylvania and one full service office in each of
the following communities: Prospect, Portersville, Grove City, Harrisville, New
Wilmington and Hickory Township, Pennsylvania. Slippery Rock Bank's Wealth
Management Group operates from a separate freestanding facility, which also is
located in Slippery Rock. In addition to its retail locations, Slippery Rock
Bank has an operations center located in Slippery Rock Township.
Our principal executive offices are located at 100 South Main Street,
Slippery Rock, Pennsylvania 16057. Our telephone number is (724) 794-2210 and
our website address is www.fnbsr.com.
FNB (PAGES 26-27)
FNB is a $4.8 billion financial services holding company headquartered in
Hermitage, Pennsylvania. FNB provides a broad range of financial services to its
customers through FNB Bank and FNB's insurance agency, consumer finance and
trust company subsidiaries. FNB Bank has 134 banking offices in Western
Pennsylvania and Eastern Ohio and maintains four insurance agency locations.
Regency Finance, FNB's consumer finance subsidiary, has 24 offices in
Pennsylvania, 16 offices in Ohio and 16 offices in Tennessee. Another FNB
subsidiary, First National Trust Company, has approximately $1.3 billion of
assets under management.
The principal executive offices of FNB are located at One F.N.B. Boulevard,
Hermitage, Pennsylvania 16148. Its telephone number is (724) 981-6000 and its
website address is www.fnbcorporation.com.
OUR SPECIAL MEETING
DATE, TIME, PLACE AND PURPOSE OF OUR SPECIAL MEETING (PAGE 23)
Our special meeting will be held at Grove City Country Club, 73 Country
Club Road, Grove City, Pennsylvania 16127, at 10:00 a.m., local time, on
Thursday, September 9, 2004.
4
At our special meeting you will be asked to:
- Consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Merger, dated as of May 5, 2004, between FNB and us, as amended
and restated as of July 15, 2004, pursuant to which we will merge with
and into FNB as described in this proxy statement/prospectus;
- Consider and vote upon a proposal to grant discretionary authority to
adjourn our special meeting if necessary to permit further solicitation
of proxies if there are not sufficient votes at the time of our special
meeting to approve and adopt the merger agreement; and
- Transact such other business as may be properly presented for action at
our special meeting or any adjournment, postponement or continuation of
our special meeting.
RECORD DATE; QUORUM; OUTSTANDING COMMON STOCK ENTITLED TO VOTE (PAGE 23)
Our board of directors has established the close of business on July 19,
2004 as the record date for determining holders of shares of our common stock
entitled to vote at our special meeting. You will not be entitled to vote at our
special meeting if you are not a shareholder of record as of the close of
business on July 19, 2004.
Each share of our common stock is entitled to one vote. On the record date,
2,737,243 shares of our common stock were entitled to vote at our special
meeting.
The presence, in person or by properly executed proxy, of the holders of at
least a majority of our common stock issued and outstanding on the record date
is necessary to constitute a quorum at our special meeting. Abstentions will be
counted solely for the purpose of determining whether a quorum is present. There
must be a quorum in order for the vote on the merger proposal to occur.
REQUIRED VOTE (PAGES 23-24)
Under Pennsylvania law and our articles of incorporation, the merger
proposal must receive the affirmative vote of the holders of not less than 75%
of the outstanding shares of our common stock. The affirmative vote of the
holders of a majority of the outstanding shares of our common stock present in
person or by proxy at our special meeting is required to approve the proposal to
grant discretionary authority to adjourn our special meeting.
As of the record date, our directors and executive officers and their
affiliates beneficially owned 383,345 shares of our common stock, or
approximately 13.6% of our shares entitled to vote at our special meeting. In
addition, as of the record date, FNB owned 15,300 shares of our common stock, or
approximately 0.56% of the shares entitled to vote at our special meeting. None
of FNB's directors and executive officers and their affiliates owned any of our
common stock as of the record date.
Our board of directors believes that the merger is in the best interests of
our shareholders and us and unanimously recommends that you vote for the merger
proposal and for the adjournment proposal.
SOLICITATION (PAGES 24-25)
We will pay for the costs of our special meeting and for the mailing of
this proxy statement/prospectus to our shareholders. We and FNB will share
equally the costs of printing this proxy statement/prospectus and the filing fee
paid to the Securities and Exchange Commission, which we sometimes refer to as
the "SEC" in this proxy statement/prospectus.
In addition to soliciting proxies by mail, our directors, officers and
employees may also solicit proxies in person or by telephone, but will not be
specially compensated for doing so. We have also engaged Morrow & Co., a
professional proxy solicitation firm, to assist us in the solicitation of
proxies for a fee of $5,000 plus such firm's reasonable out-of-pocket expenses
and costs to solicit selected shareholders.
5
THE MERGER
CERTAIN EFFECTS OF THE MERGER (PAGES 36-38)
Upon consummation of the merger:
- Each share of our common stock will automatically be converted into the
right to receive, at your election, subject to the allocation provisions
in the merger agreement:
- 1.41 shares of FNB common stock; or
- $28.00 in cash.
- We will cease to exist as a separate legal entity and all of our
operations will be conducted by FNB; and
- The holders of our common stock will no longer have any interest in us,
including in any of our future growth or earnings.
Following consummation of the merger, FNB and its shareholders will be the
only beneficiaries of any future growth or earnings, but will also bear all of
the future risk of any decrease in the value of our business.
RECOMMENDATION OF OUR BOARD OF DIRECTORS (PAGES 28-30)
Our board of directors has unanimously determined that the terms of the
merger agreement and the merger are fair to and in the best interests of our
shareholders and us. Our board of directors unanimously recommends that you vote
"FOR" the merger proposal and "FOR" the adjournment proposal.
STOCK OPTIONS (PAGE 54)
The merger agreement provides that, at the effective time of the merger,
each outstanding option to purchase our common stock will cease to represent a
right to acquire our common stock and will be converted automatically into a
right to acquire that number of shares of FNB common stock equal to the number
of shares of our common stock subject to the option times 1.41 (the exchange
ratio in the merger) at a price equal to the pre-merger exercise price of the
option divided by 1.41 (the exchange ratio in the merger).
OPINION OF GRIFFIN AS OUR FINANCIAL ADVISOR (PAGES 30-36)
Griffin, our financial advisor in connection with the merger, on May 5,
2004 indicated that it was prepared to give a written fairness opinion and
subsequently delivered its written opinion to our board of directors that, as of
June 9, 2004, and based upon and subject to the factors and assumptions set
forth in its opinion, the consideration to be paid to our shareholders in the
merger is fair, from a financial point of view, to us and our shareholders.
Appendix B to this proxy statement/prospectus sets forth the full text of
the Griffin opinion, which sets forth the assumptions made, the procedures
followed, the matters considered and the limitations on the review undertaken by
Griffin in connection with its opinion. Griffin provided its opinion for the
information and assistance of our board of directors in connection with its
consideration of the merger. The Griffin opinion is not a recommendation as to
how you should vote with respect to the merger or any related matter. We
encourage you to read the opinion in its entirety. Pursuant to an engagement
letter between Griffin and us, we agreed to pay Griffin a fee, approximately
half of which has been paid and approximately half of which is payable upon
completion of the merger.
INTERESTS OF OUR DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER (PAGES 44-48)
In considering our board of directors' recommendation that you vote "FOR"
the merger proposal, you should be aware that certain of our executive officers
and directors have interests in the merger that are
6
different from, or in addition to, your interests as a shareholder. These
interests relate to or arise from, among other things:
- the continued indemnification of our current directors and executive
officers under the merger agreement and providing these individuals with
directors' and officers' insurance;
- the anticipated execution of a separation and release agreement between
us and William C. Sonntag, our President and Chief Executive Officer;
- the anticipated execution of a business development and retention
agreement between FNB and Mr. Sonntag;
- the anticipated execution of a non-competition agreement between FNB and
Mr. Sonntag;
- the potential receipt of severance payments by our senior officers
pursuant to key employee severance agreements;
- the potential for vesting in stock options, retirement benefits,
post-employment life insurance and other employee, officer and director
benefits that otherwise would terminate or lapse; and
- two members of our board of directors will be appointed to FNB Bank's
board of directors.
CONDITIONS TO THE MERGER (PAGE 59)
Currently, we expect to complete the merger in the fall of 2004. However,
as more fully described in this proxy statement/prospectus and in the merger
agreement, the completion of the merger depends on a number of conditions being
satisfied or, where legally permissible, waived. These conditions include, among
others:
- approval of the merger proposal by the holders of not less than 75% of
our outstanding common stock;
- the receipt of all regulatory approvals needed to complete the merger,
including the approval of the Office of the Comptroller of the Currency,
which we sometimes refer to as the "OCC" in this proxy
statement/prospectus and the Board of Governors of the Federal Reserve
System, which we sometimes refer to as the "Federal Reserve Board" in
this proxy statement/prospectus;
- the absence of any law or injunction that would effectively prohibit the
merger; and
- the receipt of legal opinions from FNB's and our legal counsel as to the
tax treatment of the merger.
We cannot be certain when, or if, the conditions to the merger will be
satisfied or waived, or that the merger will be completed.
TERMINATION OF THE MERGER AGREEMENT (PAGE 60)
We may agree to terminate the merger agreement before completing the
merger, even after our shareholders approve the merger proposal, if the
termination is approved by our board of directors and the board of directors of
FNB.
Either FNB or we may terminate the merger agreement, even after our
shareholders approve the merger proposal, if certain conditions have not been
met, such as:
- obtaining the necessary regulatory approvals for the merger;
- the other party's material breach of a representation, warranty or
covenant, provided the terminating party is not then in material breach
of any of its representations, warranties or covenants;
7
- if the merger has not been consummated by February 28, 2005, unless the
reason the merger has not been consummated by that date is a breach of
the merger agreement by the party seeking to terminate the merger
agreement; or
- if the holders of not less than 75% of our outstanding common stock fail
to approve the merger proposal, provided we are not in material breach of
our obligations to have our board of directors recommend approval of the
merger proposal and to take all reasonable lawful actions to solicit such
shareholder approval.
FNB may terminate the merger agreement at any time prior to our special
meeting if we have:
- breached our obligation not to initiate, solicit or encourage, or take
any action to facilitate, another proposal to acquire us, participate in
any discussions or negotiations relating to another proposal to acquire
us or, except as permitted by and subject to certain terms of, the merger
agreement, to enter into an agreement relating to a proposal to acquire
us on terms and conditions superior to those in the merger agreement or
approve, recommend or enter into any agreement relating to another
proposal to acquire us;
- failed to have our board of directors recommend approval of the merger
proposal to our shareholders or our board of directors shall have changed
such recommendation, except as permitted by the merger agreement with
respect to a proposal to acquire us on terms and conditions superior to
those in the merger agreement; or
- failed to call and hold our special meeting.
We may terminate the merger agreement if the average closing price of FNB
common stock during a specified period before receipt of the last required
regulatory approval of the merger is less than $15.38 and FNB common stock
underperforms the Nasdaq Bank Index by a specified amount.
Except as provided below with respect to termination fees and expenses and
the parties' respective confidentiality obligations, none of the parties will
have any liability or obligation other than liabilities or damages incurred by
any of them as a result of their willful breach of any of their respective
representations, warranties, covenants or agreements contained in the merger
agreement.
EXPENSES; TERMINATION FEE (PAGES 59 AND 61)
The merger agreement provides that we will pay FNB a break-up fee of
$4,250,000 if:
- we terminate the merger agreement in order to enter into an agreement
relating to an acquisition transaction that has terms superior to those
of the merger agreement from the perspective of our shareholders;
- FNB terminates the merger agreement because we have breached our
obligation not to solicit superior proposals, we have failed to hold our
special meeting or our board of directors has not recommended approval of
the merger proposal or has changed its recommendation; or
- FNB or we terminate the merger agreement because our shareholders did not
approve the merger proposal, a proposal to acquire us is made after May
5, 2004 and is not withdrawn prior to such termination and within 12
months thereafter we are acquired or other specified events occur.
APPRAISAL RIGHTS (PAGES 51-53)
If you do not vote in favor of approval of the merger proposal, and you
fulfill the other procedural requirements, Pennsylvania law entitles you to a
judicial appraisal of the fair value of your shares. You must carefully and
precisely follow the applicable procedures in order to be entitled to appraisal
rights. A copy of the provisions of the BCL applicable to appraisal rights is
included as Appendix C to this proxy statement/ prospectus.
8
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGES 62-65)
We expect the merger to qualify as a tax-free reorganization for United
States federal income tax purposes. In general, this means that our shareholders
who receive FNB common stock will not recognize any gain or loss on the exchange
of their common stock in the merger, except to the extent they receive cash
instead of fractional shares in addition to FNB common stock. Our shareholders
who receive all cash in exchange for their Slippery Rock common stock in the
merger will recognize gain or loss to the extent the cash received exceeds, or
is less than, their tax basis in their stock. Our shareholders who receive a
combination of cash and FNB common stock, including those who receive a
combination as a result of prorations under the merger agreement, will realize
gain to the extent that the amount of cash received plus the value of the FNB
common stock received exceeds their tax basis in the Slippery Rock common stock.
Our shareholders who receive a combination of cash and FNB common stock will
recognize gain, but not loss, in an amount equal to the lesser of the amount of
the gain realized or the amount of the cash received.
DIVIDENDS (PAGE 78)
During 2003, FNB paid cash dividends on its common stock, as adjusted to
reflect a 5% stock dividend declared on April 28, 2003, totaling $.93 per share,
and paid cash dividends of $.23 per share for each of the first and second
quarters of 2004. Based on the 1.41 share exchange ratio and FNB's current
dividend rate, holders of our common stock would experience an anticipated
annual dividend rate increase of approximately 115% (from $.60 to $1.29 per
share of Slippery Rock common stock equivalent). Although FNB has no current
plan or intention to increase its dividend rate, FNB's board of directors may,
subject to applicable law, change its dividend rate in the future. FNB's ability
to pay dividends on its common stock is subject to various legal and regulatory
limitations.
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS (PAGE 67-77)
When the merger is completed, the rights of our shareholders who receive
FNB common stock will be governed by Florida law and FNB's articles of
incorporation and by-laws rather than Pennsylvania law and our articles of
incorporation and by-laws.
FUTURE FNB ACQUISITIONS (PAGE 21)
As part of its growth strategy, FNB may acquire other bank or financial
services institutions to expand or strengthen its market position. Risks
associated with this strategy are described in "Risk Factors."
COMPARATIVE MARKET PRICES AND DIVIDENDS (PAGE 78)
FNB common stock is listed on the New York Stock Exchange. Prices for our
common stock are quoted on the OTC Bulletin Board of the National Association of
Securities Dealers. The table on page 78 lists the quarterly price range of FNB
common stock and our common stock since 2002 as well as the quarterly cash
dividends we and FNB have paid.
QUESTIONS AND ADDITIONAL INFORMATION (PAGE 26)
If you have questions about the merger or how to submit your proxy card, or
if you need additional copies of this proxy statement/prospectus or the enclosed
proxy card, please call our proxy solicitor, Morrow & Co., toll-free at (800)
607-0088.
9
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF FNB
Set forth below are highlights from FNB's consolidated financial data as of
and for the years December 31, 2003 through 1999 and FNB's unaudited
consolidated financial data as of and for the three months ended March 31, 2004
and 2003. The results of operations for the three months ended March 31, 2004
are not necessarily indicative of the results of operations for the full year or
any other interim period. FNB management prepared the unaudited information on
the same basis as it prepared FNB's audited consolidated financial statements.
In the opinion of FNB's management, this information reflects all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of this data for these periods. You should read this information in
conjunction with FNB's consolidated financial statements and related notes
included in FNB's Annual Report on Form 10-K for the year ended December 31,
2003, and FNB's Quarterly Report on Form 10-Q for the quarter ended March 31,
2004, that are incorporated by reference in this proxy statement/prospectus and
from which this information is derived. See "Where You Can Find More
Information" beginning on page 82.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF FNB
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SUMMARY OF EARNINGS DATA:
Interest income................. $ 61,976 $ 66,547 $ 257,019 $ 275,853 $ 301,638 $ 300,514 $ 274,459
Interest expense................ 19,771 21,394 86,990 98,372 134,984 136,775 112,874
Net interest income............. 42,205 45,153 170,029 177,481 166,654 163,739 161,585
Provision for loan losses....... 4,622 4,127 17,155 13,624 26,727 12,393 11,895
Net interest income after
provision for loan losses..... 37,583 41,026 152,874 163,857 139,927 151,346 149,690
Non-interest income............. 20,769 16,932 68,155 66,145 52,015 43,704 34,674
Merger and restructuring
expenses...................... -- -- 39,215 41,952 5,323 6,700 4,501
Other non-interest expense...... 34,611 37,289 145,810 143,051 143,936 129,548 115,685
Income before income taxes...... 23,741 20,669 36,004 44,999 42,683 58,802 64,178
Applicable income tax
expense....................... 7,519 6,060 8,966 13,728 10,914 16,649 19,398
Income from continuing
operations.................... 16,222 14,609 27,038 31,271 31,769 42,153 44,780
Earnings from discontinued
operations, net of taxes...... -- 8,719 31,751 32,064 21,216 19,755 16,365
NET INCOME...................... $ 16,222 $ 23,328 $ 58,789 $ 63,335 $ 52,985 $ 61,908 $ 61,145
PER SHARE DATA:
Basic earnings per share:
Continuing operations......... $ 0.35 $ 0.32 $ 0.58 $ 0.67 $ 0.71 $ 0.94 $ 0.99
Discontinued operations....... -- 0.19 0.69 0.70 0.48 0.44 0.36
Net income.................... 0.35 0.51 1.27 1.37 1.19 1.38 1.35
Diluted earnings per share:
Continuing operations......... 0.34 0.31 0.57 0.66 0.70 0.92 0.97
Discontinued operations....... -- 0.19 0.68 0.69 0.47 0.43 0.36
Net income.................... 0.34 0.50 1.25 1.35 1.17 1.35 1.33
Dividends paid.................. 0.23 0.21 0.93 0.81 0.68 0.61 0.59
Book value per share at period
end(1)........................ 5.40 13.17 13.10 12.93 12.37 10.87 11.13
Average number of shares
outstanding:
Basic......................... 46,173,243 46,043,113 46,080,966 46,012,908 44,289,772 44,748,338 44,882,552
Diluted....................... 47,067,603 46,895,439 46,972,863 47,073,785 45,385,495 45,690,289 46,111,743
10
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF CONDITION DATA (AT
END OF PERIOD):
Assets.......................... $ 4,635,436 $ 8,078,010 $ 8,308,310 $ 7,090,232 $ 6,488,383 $ 6,126,792 $ 5,892,263
Investment securities........... 1,018,183 814,585 902,697 689,914 720,198 649,782 601,859
Loans, net of unearned income... 3,240,065 3,200,866 3,259,197 3,259,609 3,109,604 3,020,051 2,960,212
Allowance for loan losses....... 46,227 46,625 46,139 46,985 46,345 39,803 38,651
Assets of discontinued
operations.................... -- 3,634,361 3,751,136 2,735,204 2,202,004 2,125,737 1,936,455
Deposits........................ 3,313,381 3,304,662 3,439,510 3,304,105 3,338,913 3,227,249 3,100,815
Short-term borrowings........... 404,338 346,989 232,966 255,370 209,912 176,102 262,601
Long-term debt.................. 602,511 426,587 584,808 400,056 276,802 198,907 196,860
Liabilities of discontinued
operations.................... -- 3,211,402 3,386,021 2,467,123 2,022,538 1,954,863 1,786,066
Stockholders' equity(1)......... 250,044 608,641 606,909 598,596 572,407 503,422 491,436
SIGNIFICANT RATIOS:
Return on average assets(1)..... 1.41% 1.33% 0.74% 0.93% 0.84% 1.03% 1.09%
Return on average equity(1)..... 26.77 15.58 9.66 10.97 9.81 12.28 12.50
Loans as a percent of
deposits...................... 97.79 96.86 94.76 98.65 93.13 93.58 95.47
Ratio of average equity to
average assets................ 5.26 8.52 7.66 8.51 8.58 8.42 8.75
Dividend payout ratio(1)........ 65.42 41.39 72.90 59.03 52.81 45.36 43.81
---------------
(1) Effective January 1, 2004, FNB spun-off its Florida operations into a
separate independent public company. As a result of the spin-off, the
Florida operations' earnings for prior years have been classified as
discontinued operations on FNB's consolidated income statements and the
assets and liabilities related to the discontinued Florida operations have
been disclosed separately on FNB's consolidated balance sheets for prior
years. In addition, note that, for years prior to 2004, the book value at
period end, stockholders' equity, the return on average assets ratio, the
return on average equity ratio and the dividend payout ratio for prior years
include the discontinued operations.
11
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF SLIPPERY ROCK
Set forth below are highlights from Slippery Rock's consolidated financial
data as of and for the years December 31, 2003 through 1999 and Slippery Rock's
unaudited consolidated financial data as of and for the three months ended March
31, 2004 and 2003. The results of operations for the three months ended March
31, 2004 are not necessarily indicative of the results of operation for the full
year or any other interim period. Slippery Rock management prepared the
unaudited information on the same basis as it prepared Slippery Rock's audited
consolidated financial statements. In the opinion of Slippery Rock's management,
this information reflects all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of this data for these periods.
You should read this information in conjunction with Slippery Rock's
consolidated financial statements and related notes included in Slippery Rock's
Annual Report on Form 10-K for the year ended December 31, 2003, and Slippery
Rock's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, that
are incorporated by reference in this proxy statement/prospectus and from which
this information is derived. See "Where You Can Find More Information" beginning
on page 82.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF SLIPPERY ROCK
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
SUMMARY OF EARNINGS DATA:
Interest income........... $ 3,947 $ 4,650 $ 17,556 $ 20,320 $ 22,773 $ 20,049 $ 16,619
Interest expense.......... 1,400 1,721 6,328 8,344 11,380 8,955 6,797
Net interest income....... 2,547 2,929 11,228 11,976 11,393 11,094 9,822
Provision for loan
losses.................. 150 150 1,519 911 1,020 820 720
Net interest income after
provision for loan
losses.................. 2,397 2,779 9,709 11,065 10,373 10,274 9,102
Other income.............. 770 1,206 4,283 3,063 2,947 1,969 1,735
Other expense............. 2,789 2,732 10,618 9,995 8,601 7,490 6,484
Income before income
taxes................... 378 1,253 3,374 4,133 4,719 4,753 4,353
Applicable income tax
expense................. 56 377 903 1,213 1,388 1,382 1,256
NET INCOME................ $ 322 $ 876 $ 2,471 $ 2,920 $ 3,331 $ 3,371 $ 3,097
PER SHARE DATA:
Earnings per share........ $ 0.12 $ 0.32 $ 0.90 $ 1.05 $ 1.20 $ 1.22 $ 1.12
Dividends paid............ 0.15 0.15 0.60 0.60 0.55 0.50 0.43
Book value per share at
period end.............. 11.53 11.58 11.42 11.51 10.82 10.16 9.26
Average number of shares
outstanding............. 2,731,653 2,774,838 2,743,720 2,775,915 2,769,846 2,769,236 2,765,086
STATEMENT OF CONDITION
DATA (AT END OF PERIOD):
Assets.................... $ 334,104 $ 337,815 $ 335,030 $ 337,543 $ 324,035 $ 283,442 $ 233,019
Deposits.................. 265,182 268,334 267,120 271,303 261,895 223,579 197,124
Loans..................... 200,156 221,344 207,234 232,157 240,786 231,321 183,142
Allowance for loan
losses.................. 3,133 2,916 3,106 3,110 2,766 2,142 1,681
Investment securities..... 80,910 69,831 80,370 78,553 45,335 26,452 29,573
Short-term borrowings..... 6,379 5,654 5,415 2,825 -- 30,000 9,000
Long-term debt............ 30,114 30,164 30,127 30,177 30,260 336 304
Stockholders' equity...... 31,493 32,146 31,323 31,960 29,979 28,143 25,610
12
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
SIGNIFICANT RATIOS(1):
Return on average
equity.................. 4.07% 10.93% 7.69% 9.36% 11.54% 12.46% 12.34%
Return on average
assets.................. 0.38 1.04 0.72 0.88 1.06 1.30 1.37
Loans as a percent of
deposits................ 75.48 82.49 77.58 85.57 91.94 103.46 92.91
Ratio of average equity to
average assets.......... 9.44 9.49 9.42 9.35 9.15 10.44 11.11
Dividends as a percent of
net income.............. 124.92 46.80 66.59 57.06 45.75 40.98 38.39
---------------
(1) Loans as a percent of deposits calculations use actual period end volume
data, all other ratios use average daily volume data.
13
SELECTED CONSOLIDATED UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following table sets forth information about FNB's financial condition
and results of operations, including per share data and financial ratios, after
giving effect to the merger. This information is called pro forma financial
information in this proxy statement/prospectus. The table shows the information
as if the merger had become effective on March 31, 2004, in the case of balance
sheet data, and on January 1, 2003, in the case of income statement data. This
pro forma information assumes that the merger is accounted for using the
purchase method of accounting and represents a current estimate based on
available information about FNB's and Slippery Rock's results of operations. See
"Accounting Treatment" on page 61. The pro forma financial information includes
adjustments to record the assets and liabilities of Slippery Rock at their
estimated fair value and is subject to further adjustment as additional
information becomes available and as further analyses are completed. The pro
forma income statements do not include any amount for merger-related costs that
will be incurred to combine the operations of Slippery Rock with those of FNB.
These charges will be recorded based on the nature and timing of the
integration. This table should be read in conjunction with, and is qualified in
its entirety by, the historical financial statements, including the notes
thereto, of Slippery Rock and FNB incorporated by reference in this proxy
statement/prospectus. See "Where You Can Find More Information" beginning on
page 82.
The pro forma financial information, while helpful in illustrating the
financial condition and results of operations of Slippery Rock and FNB once the
merger is completed under a particular set of assumptions, does not reflect the
impact of possible revenue enhancements, expense efficiencies and asset
dispositions, among other possibilities, that may occur as a result of the
merger and, accordingly, does not attempt to predict future results. The pro
forma financial information also does not necessarily reflect what the combined
historical results of operations of Slippery Rock and FNB would have been had
they been merged during these periods.
14
SELECTED CONSOLIDATED UNAUDITED PRO FORMA FINANCIAL INFORMATION
AS OF MARCH 31, 2004
---------------------------- PRO FORMA PRO FORMA
FNB SLIPPERY ROCK ADJUSTMENTS COMBINED FNB
----------- ------------- ------------ ------------
Assets
Cash and equivalents........... $ 91,329 $ 30,437 $ -- $ 121,766
Total investment securities.... 1,018,183 80,910 -- 1,099,093
Gross loans.................... 3,242,930 201,025 2,185(A) 3,446,140
Loan loss reserves............. (46,227) (3,133) -- (49,360)
----------- ---------- ------------ -----------
Net loans...................... $ 3,196,703 $ 197,892 $ 2,185(A) $ 3,396,780
Goodwill....................... 28,940 1,013 53,780(A)(B) 83,733
Other intangibles.............. 10,001 886 4,286(A) 15,173
Other assets................... 290,280 22,966 310(A) 313,556
----------- ---------- ------------ -----------
Total assets................ $ 4,635,436 $ 334,104 $ 60,561 $ 5,030,101
=========== ========== ============ ===========
Liabilities
Deposits....................... $ 3,313,381 $ 265,182 $ 1,607(A) $ 3,580,170
Other borrowings............... 1,006,849 36,493 14,974(A) 1,058,316
Other liabilities.............. 65,162 936 8,206(B) 74,304
----------- ---------- ------------ -----------
Total liabilities........... 4,385,392 302,611 24,787 4,712,790
----------- ---------- ------------ -----------
Shareholders' equity............. 250,044 31,493 35,774(A) 317,311
----------- ---------- ------------ -----------
Total liabilities and
shareholders' equity...... $ 4,635,436 $ 334,104 $ 60,561 $ 5,030,101
=========== ========== ============ ===========
Book value per share............. $ 5.40 $ 11.52 $ 6.35
Shares outstanding............... 46,284,226 2,733,544 938,241 49,956,011
Capital ratios
Tangible equity/tangible
assets......................... 4.59% 8.91% 4.43%
Leverage capital ratio........... 6.00 9.08 6.37
See notes to Selected Consolidated Unaudited Pro Forma Financial Information.
15
FOR THE THREE MONTHS ENDED
MARCH 31, 2004
---------------------------- PRO FORMA PRO FORMA
FNB SLIPPERY ROCK ADJUSTMENTS COMBINED FNB
----------- ------------- ------------ ------------
Total interest income............ $ 61,976 $ 3,947 $ (293)(A) $ 65,630
Total interest expense........... 19,771 1,400 (269)(A) 20,902
----------- ---------- ------------ -----------
Net interest income......... 42,205 2,547 (24) 44,728
Provision for loan losses........ 4,622 150 -- 4,772
----------- ---------- ------------ -----------
Net interest income after
provision for loan
losses.................... 37,583 2,397 (24) 39,956
Total non-interest income... 20,769 770 -- 21,539
Other non-interest expense....... 34,611 2,789 93(A) 37,493
----------- ---------- ------------ -----------
Total non-interest
expense................... 34,611 2,789 93 37,493
----------- ---------- ------------ -----------
Income before income taxes....... 23,741 378 (117) 24,002
Provision for income taxes....... 7,519 56 6(A) 7,581
----------- ---------- ------------ -----------
Net income.................. $ 16,222 $ 322 $ (123) $ 16,421
=========== ========== ============ ===========
Per common share:
Basic.......................... $ 0.35 $ 0.12 $ 0.33
Diluted........................ 0.34 0.12 0.32
Ratios:
Return on average assets....... 1.41% 0.38% 1.31%
Return on average equity....... 26.77 4.07 21.21
Dividend payout ratio.......... 65.42 127.33 67.12
See notes to Selected Consolidated Unaudited Pro Forma Financial Information.
16
FOR THE YEAR ENDED
DECEMBER 31, 2003
---------------------------- PRO FORMA PRO FORMA
FNB SLIPPERY ROCK ADJUSTMENTS COMBINED FNB
----------- ------------- ------------ ------------
Total interest income............ $ 257,019 $ 17,556 $ (1,173)(A) $ 273,402
Total interest expense........... 86,990 6,328 (1,074)(A) 92,244
----------- ---------- ------------ -----------
Net interest income......... 170,029 11,228 (99) 181,158
Provision for loan losses........ 17,155 1,519 -- 18,674
----------- ---------- ------------ -----------
Net interest income after
provision for loan
losses.................... 152,874 9,709 (99) 162,484
Total non-interest income... 68,155 4,283 -- 72,438
Merger and restructuring
charges........................ 39,215 -- -- 39,215
Other non-interest expense....... 145,810 10,618 370(A) 156,798
----------- ---------- ------------ -----------
Total non-interest
expense................... 185,025 10,618 370 196,013
----------- ---------- ------------ -----------
Income before income taxes....... 36,004 3,374 (469) 38,909
Provision for income taxes....... 8,966 903 24 9,893
----------- ---------- ------------ -----------
Net income from continuing
operations................ 27,038 2,471 (493) 29,016
=========== ========== ============ ===========
Net income from discontinued
operations................ 31,751 -- -- 31,751
----------- ---------- ------------ -----------
Net income.................. $ 58,789 $ 2,471 $ (493) $ 60,767
=========== ========== ============ ===========
Per common share:
Basic
Continuing operations....... $ 0.58 $ 0.90 $ 0.58
Discontinued operations..... 0.69 -- 0.64
Total..................... 1.27 0.90 1.22
Diluted
Continuing operations....... $ 0.57 $ 0.90 $ 0.57
Discontinued operations..... 0.68 -- 0.63
Total..................... 1.25 0.90 1.20
Ratios:
Return on average assets....... 0.74% 0.72% 0.73%
Return on average equity....... 9.66 7.69 8.99
Dividend payout ratio.......... 72.90 66.59 73.16
See notes to Selected Consolidated Unaudited Pro Forma Financial Information.
17
---------------
NOTE A:
The pro forma adjustments represent the estimated purchase accounting entries to
record the merger of Slippery Rock with FNB. The excess of the purchase price
over the fair value of the net assets acquired is allocated to goodwill.
Estimated fair value adjustments included in the unaudited pro forma balance
sheet and income statement have been determined based on information available
as of March 31, 2004. The final determination of the fair values of the assets
and liabilities will be made as of the effective date of the merger. As such,
the final purchase accounting entries may differ from the estimates provided
herein. Fair value adjustments will be amortized on a straight line basis over
their estimated remaining lives. Deferred tax adjustments, related to the net
fair value adjustments, are calculated based on a 35% tax rate.
Included in the pro forma adjustments is an allocation of the purchase price to
core deposit intangibles. Under the SFAS No. 141 and No. 142 accounting
standards, a core deposit intangible is separated from goodwill and amortized
over its remaining useful life. The remaining goodwill intangible is not subject
to amortization under SFAS No. 141 and No. 142 and will be evaluated
periodically for possible impairment.
NOTE B:
The pro forma adjustment represents estimated direct acquisition costs of
approximately $8.2 million related to certain severance payments, employee
benefits, fees related to the early termination of certain contracts and
professional fees such as legal, accounting and advisory fees.
18
RISK FACTORS RELATING TO THE MERGER
In addition to the other information contained in or incorporated by
reference into this proxy statement/ prospectus, you should carefully consider
the following risk factors in deciding whether to vote in favor of the merger
proposal.
RISKS SPECIFICALLY RELATED TO THE MERGER
FNB MAY ENCOUNTER INTEGRATION DIFFICULTIES OR MAY FAIL TO REALIZE THE
ANTICIPATED BENEFITS OF THE MERGER.
FNB and Slippery Rock may not be able to integrate their operations without
encountering difficulties, including, without limitation, the loss of key
employees and customers, the disruption of their respective ongoing businesses
or possible inconsistencies in standards, controls, procedures and policies.
In determining that the merger is in the best interests of FNB and Slippery
Rock, their respective boards of directors considered that enhanced earnings may
result from the consummation of the merger, including from reduction of
duplicate costs, improved efficiency and cross-marketing opportunities. However,
there can be no assurance that any enhanced earnings will result from the
merger.
BECAUSE THE MARKET PRICE OF FNB COMMON STOCK MAY FLUCTUATE, YOU CANNOT BE
CERTAIN OF THE MARKET VALUE OF THE COMMON STOCK THAT YOU WILL RECEIVE IN THE
MERGER.
Upon completion of the merger, each share of our common stock will be
converted into the right to receive 1.41 shares of FNB common stock or $28.00 in
cash. Any change in the price of FNB common stock prior to the merger will
affect the market value of the stock that you will receive in the merger. Stock
price changes may result from a variety of factors, including general market and
economic conditions, changes in FNB's businesses, operations and prospects and
regulatory considerations.
The prices of FNB common stock and our common stock at the closing of the
merger may vary from their respective prices on the date the merger agreement
was executed, on the date of this proxy statement/ prospectus and on the date of
our special meeting. As a result, the value represented by the exchange ratio
will also vary. For example, based on the range of closing prices of FNB common
stock during the period from May 5, 2004, the last full trading day before
public announcement of the merger, through July 20, 2004, the last practicable
full trading day prior to the date of the printing of this proxy
statement/prospectus, the exchange ratio represented a value ranging from a high
of $29.14 to a low of $26.76 for each share of our common stock. Because the
date the merger will be completed will be later than the date of our special
meeting, at the time of our special meeting you will not know what the market
value of FNB's common stock will be upon completion of the merger, although we
have a right to terminate the merger agreement if the price of FNB common stock
declines by more than a specified amount and also underperforms the Nasdaq Bank
Index by a specified percentage.
FUTURE RESULTS OF THE COMBINED COMPANIES MAY MATERIALLY DIFFER FROM THE PRO
FORMA FINANCIAL INFORMATION PRESENTED IN THIS PROXY STATEMENT/PROSPECTUS.
Future results of the combined FNB and Slippery Rock may be materially
different from those shown in the pro forma financial statements that show only
a combination of their historical results. The costs FNB will incur in
connection with the merger may be higher or lower than FNB has estimated,
depending upon how costly or difficult it is to integrate FNB and Slippery Rock.
Furthermore, these charges may decrease the capital of FNB after the merger that
could be used for profitable, income-earning investments in the future.
THE MERGER AGREEMENT LIMITS OUR ABILITY TO PURSUE ALTERNATIVES TO THE MERGER.
The merger agreement contains provisions that, subject to limited
exceptions, limit our ability to discuss, facilitate or enter into agreements
with third parties to acquire us. In general, if we avail ourselves of those
limited exceptions, we will be obligated to pay FNB a break-up fee of
$4,250,000. These provisions could discourage a potential competing acquiror
that might have an interest in acquiring us from proposing or
19
considering our acquisition even if that potential acquiror were prepared to pay
a higher price to our shareholders than the price FNB proposes to pay under the
merger agreement.
RISKS RELATED TO OWNING FNB COMMON STOCK
FNB'S STATUS AS A HOLDING COMPANY MAKES IT DEPENDENT ON DIVIDENDS FROM ITS
SUBSIDIARIES TO MEET ITS OBLIGATIONS.
FNB is a holding company and conducts almost all of its operations through
its subsidiaries. FNB does not have any significant assets other than the stock
of its subsidiaries. Accordingly, FNB depends on dividends from its subsidiaries
to meet its obligations. FNB's right to participate in any distribution of
earnings or assets of its subsidiaries is subject to the prior claims of
creditors of such subsidiaries. Under federal and state law, FNB's bank
subsidiaries are limited in the amount of dividends they may pay to FNB without
prior regulatory approval. Also, bank regulators have the authority to prohibit
FNB's subsidiary bank from paying dividends if they determine the payment would
be an unsafe and unsound banking practice.
INTEREST RATE VOLATILITY COULD SIGNIFICANTLY HARM FNB'S BUSINESS.
FNB's results of operations are affected by the monetary and fiscal
policies of the federal government and the regulatory policies of governmental
authorities. A significant component of FNB's earnings is its net interest
income, which is the difference between the income from interest-earning assets,
such as loans, and the expense of interest-bearing liabilities, such as
deposits. A change in market interest rates could adversely affect FNB's
earnings if market interest rates change such that the interest FNB pays on
deposits and borrowings increases faster than the interest it collects on loans
and investments. Consequently, FNB, along with other financial institutions
generally, is sensitive to interest rate fluctuations.
FNB'S RESULTS OF OPERATIONS ARE SIGNIFICANTLY AFFECTED BY THE ABILITY OF ITS
BORROWERS TO REPAY THEIR LOANS.
Lending money is an essential part of the banking business. However,
borrowers do not always repay their loans. The risk of non-payment is affected
by:
- credit risks of a particular borrower;
- changes in economic and industry conditions;
- the duration of the loan; and
- in the case of a collateralized loan, uncertainties as to the future
value of the collateral.
Generally, commercial/industrial, construction and commercial real estate loans
present a greater risk of non-payment by a borrower than other types of loans.
FNB'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS WOULD BE ADVERSELY
AFFECTED IF ITS ALLOWANCE FOR LOAN LOSSES WERE NOT SUFFICIENT TO ABSORB ACTUAL
LOSSES.
There is no precise method of predicting loan losses. FNB can give no
assurance that its allowance for loan losses is or will be sufficient to absorb
actual loan losses. Excess loan losses could have a material adverse effect on
FNB's financial condition and results of operations. FNB attempts to maintain an
appropriate allowance for loan losses to provide for estimated losses in its
loan portfolio. FNB periodically determines the amount of its allowance for loan
losses based upon consideration of several factors, including:
- a regular review of the quality, mix and size of the overall loan
portfolio;
- historical loan loss experience;
- evaluation of non-performing loans;
- assessment of economic conditions and their effects on FNB's existing
portfolio; and
- the amount and quality of collateral, including guarantees, securing
loans.
20
FNB'S FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED IF IT IS UNABLE TO ATTRACT
SUFFICIENT DEPOSITS TO FUND ITS ANTICIPATED LOAN GROWTH.
FNB funds its loan growth primarily through deposits. To the extent that
FNB is unable to attract and maintain sufficient levels of deposits to fund its
loan growth, FNB would be required to raise additional funds through public or
private financings. FNB can give no assurance that it would be able to obtain
these funds on terms that are favorable to it.
FNB COULD EXPERIENCE SIGNIFICANT DIFFICULTIES AND COMPLICATIONS IN CONNECTION
WITH ITS GROWTH.
FNB has grown significantly over the last few years and may seek to
continue to grow by acquiring financial institutions and branches as well as
non-depository entities engaged in permissible activities for its financial
institution subsidiaries. However, the market for acquisitions is highly
competitive. FNB may not be as successful in the future as it has been in the
past in identifying financial institution and branch acquisition candidates,
integrating acquired institutions or preventing deposit erosion at acquired
institutions or branches.
FNB may encounter unforeseen expenses, as well as difficulties and
complications in integrating expanded operations and new employees without
disruption to its overall operations. In addition, rapid growth may adversely
affect FNB's operating results because of many factors, including start-up
costs, diversion of management time and resources, asset quality and required
operating adjustments. FNB may not successfully integrate acquired companies or
achieve the anticipated benefits of its growth or expanded operations.
FNB COULD BE ADVERSELY AFFECTED BY CHANGES IN THE LAW, ESPECIALLY CHANGES IN
THE REGULATION OF THE BANKING INDUSTRY.
FNB and its subsidiaries operate in a highly regulated environment and are
subject to supervision and regulation by several governmental regulatory
agencies, including the Federal Reserve Board, the OCC, the Federal Deposit
Insurance Corporation, which we sometimes refer to as the "FDIC" in this proxy
statement/ prospectus and the Pennsylvania Department of Banking. Regulations
are generally intended to provide protection for depositors and customers rather
than for investors. FNB is subject to changes in federal and state law,
regulations, governmental policies, income tax laws and accounting principles.
Changes in regulation could adversely affect the banking industry as a whole and
could limit FNB's growth and the return to investors by restricting such
activities as:
- the payment of dividends;
- mergers with or acquisitions by other institutions;
- investments;
- loans and interest rates;
- the provision of securities, insurance or trust services; and
- the types of non-deposit activities in which FNB's financial institution
subsidiaries may engage.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains or incorporates by reference a
number of forward-looking statements regarding the financial condition, results
of operations, earnings outlook, business and prospects of FNB, Slippery Rock
and the potential combined company as well as statements for the period
following the completion of the merger. You can find many of these statements by
looking for words such as "plan," "believe," "expect," "intend," "anticipate,"
"estimate," "project," "potential," "possible" or other similar expressions.
The forward-looking statements involve certain risks and uncertainties. The
ability of either FNB or Slippery Rock to predict results or the actual effects
of their plans and strategies, or those of the combined company, is inherently
uncertain. Accordingly, actual results may differ materially from anticipated
results.
21
Some of the factors that may cause actual results or earnings to differ
materially from those contemplated by the forward-looking statements include,
but are not limited to, those discussed under "Risk Factors" beginning on page
19, as well as the following:
- the businesses of FNB and Slippery Rock may not be integrated
successfully or the integration may be more difficult, time-consuming or
costly than currently anticipated;
- expected revenue synergies and cost savings from the merger may not be
realized within the expected time frame or at all;
- revenues may be lower than expected following the merger;
- deposit attrition, operating costs, loss of customers and business
disruption, including, without limitation, difficulties in maintaining
relationships with our employees, customers or suppliers may be greater
than anticipated following the merger;
- the regulatory approvals for the merger may not be obtained on acceptable
terms, on the anticipated schedule or at all;
- the merger may not be approved by the requisite vote of our shareholders;
- competitive pressure among financial services companies is increasing
significantly;
- general economic conditions may be less favorable than expected;
- political conditions and related actions by the United States military
abroad may adversely affect economic conditions as a whole;
- changes in the interest rate environment may reduce interest margins and
impact funding sources;
- changes in market rates and prices may adversely impact the value of
financial products and assets;
- legislation or changes in the regulatory environment may adversely affect
the businesses in which FNB and Slippery Rock are engaged; and
- litigation liabilities, including costs, expenses, settlements and
judgments, may adversely affect either company or their businesses.
Because these forward-looking statements are subject to assumptions and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements. You are cautioned not to place
undue reliance on these statements, which speak only as of the date of this
proxy statement/ prospectus or the date of any document incorporated by
reference in this proxy statement/prospectus.
All subsequent written and oral forward-looking statements concerning the
merger or other matters addressed in this proxy statement/prospectus and
attributable to FNB or Slippery Rock or any person acting on their behalf are
expressly qualified in their entirety by the cautionary statements contained or
referred to in this section. Except to the extent required by applicable law or
regulation, FNB and Slippery Rock undertake no obligation to update these
forward-looking statements to reflect events or circumstances after the date of
this proxy statement/prospectus or to reflect the occurrence of unanticipated
events.
OUR SPECIAL MEETING
This section contains information for our shareholders about the special
meeting of shareholders we have called to consider the approval of the merger
proposal and related matters.
GENERAL
This proxy statement/prospectus is being furnished to holders of our common
stock for use at our special meeting and any adjournment, postponement or
continuation of our special meeting.
22
WHEN AND WHERE OUR SPECIAL MEETING WILL BE HELD
Our special meeting will be held on September 9, 2004, at 10:00 a.m. local
time, at Grove City Country Club, 73 Country Club Road, Grove City, Pennsylvania
16127, subject to any adjournment, postponement or continuation of our special
meeting.
MATTERS TO BE CONSIDERED
The purpose of our special meeting is to consider and vote upon:
- Proposal 1 -- A proposal to approve and adopt the merger agreement
between FNB and us;
- Proposal 2 -- A proposal to grant discretionary authority to adjourn our
special meeting if necessary to permit further solicitation of proxies
because we have not received sufficient votes at the time of our special
meeting to approve the merger proposal; and
- Such other business as may properly come before our special meeting and
any adjournment, postponement or continuation of our special meeting.
Our shareholders must approve Proposal 1 for the merger to occur. If our
shareholders fail to approve this proposal, the merger will not occur.
At this time, our board of directors is unaware of any other matters, other
than as set forth above, that may be presented for action at our special
meeting. If other matters are properly presented, however, the persons named as
proxies will vote in accordance with their judgment with respect to such
matters.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
Our board of directors has fixed the close of business on July 19, 2004 as
the record date for the determination of holders of our common stock entitled to
notice of, and to vote at, our special meeting and any adjournment, postponement
or continuation of our special meeting.
On the record date, 2,737,243 shares of our common stock were issued and
outstanding and entitled to vote at our special meeting, held by approximately
680 holders of record. Each share of our common stock is entitled to cast one
vote on all matters that are properly submitted to our shareholders at our
special meeting.
QUORUM
The presence, in person or by properly executed proxy, of the holders of at
least a majority of our outstanding shares of common stock on the record date is
necessary to constitute a quorum at our special meeting. Abstentions will be
counted solely for the purpose of determining whether a quorum is present. A
quorum must be present in order for the vote on the merger proposal and the
adjournment proposal to occur.
Based on the number of shares of our common stock issued and outstanding as
of the record date, 1,368,622 shares of our common stock must be present in
person or represented by proxy at our special meeting to constitute a quorum.
SHAREHOLDER VOTE REQUIRED
Approve and Adopt the Merger Agreement. The affirmative vote of the
holders of not less than 75% of our outstanding shares of common stock on the
record date is required to approve the merger proposal. Therefore, the failure
to vote, either by proxy or in person, will have the same effect as a vote
against approval of the merger proposal. Abstentions will also have the same
effect as a vote against approval of the merger proposal. Accordingly, we urge
you to complete, date and sign the accompanying proxy card and return it
promptly in the enclosed postage-paid envelope.
In addition, to exercise appraisal rights, you must refrain from voting
your shares of our common stock in favor of approval of the merger proposal and
must strictly comply with all of the procedures required by Pennsylvania law.
See "The Merger -- Appraisal Rights of Dissenting Shareholders" beginning on
page 51.
23
When considering our board of directors' recommendation that you vote in
favor of the approval and adoption of the merger agreement, you should be aware
that certain of our executive officers and directors have interests in the
merger that may be different from, or in addition to, your interests as a
shareholder. See "The Merger -- Interests of Our Directors and Executive
Officers in the Merger" beginning on page 44.
Discretionary Authority to Adjourn Our Special Meeting. The affirmative
vote of the holders of a majority of the eligible shares of our common stock
present in person or represented by proxy at our special meeting is required to
approve the proposal to grant discretionary authority to adjourn our special
meeting if necessary to permit further solicitation of proxies for the merger
proposal. The failure to vote, either by proxy or in person, will have no effect
on the outcome of the voting on the adjournment proposal. However, abstentions
will have the same effect as a vote against the adjournment proposal.
DIRECTOR AND EXECUTIVE OFFICER VOTING
As of the record date, our directors and executive officers and their
affiliates beneficially owned 383,345 shares of our common stock, or
approximately 13.6% of the issued and outstanding shares of our common stock
entitled to vote at our special meeting. This number includes options to
purchase 68,562 shares exercisable within 60 days of the record date. To our
knowledge, our directors and executive officers and their affiliates intend to
vote their shares of our common stock in favor of the approval of the merger
proposal.
In addition, as of the record date, FNB owned 15,300 shares of our common
stock or approximately 0.56% of the shares of our common stock entitled to vote
at our special meeting. FNB has advised us it will vote its shares for approval
of the merger proposal. As of the record date, none of FNB's directors and
executive officers and their affiliates owned any shares of our common stock.
PROXIES
Voting. You should complete and return the proxy card accompanying this
proxy statement/prospectus in order to ensure that your vote is counted at our
special meeting and at any adjournment, postponement or continuation of our
special meeting, regardless of whether you plan to attend our special meeting.
If you sign and send in your proxy card and do not indicate how you want to
vote, we will count your proxy card as a vote in favor of approval of the merger
proposal and in favor of approval of the adjournment proposal.
If your shares of our common stock are held in the name of a bank, broker,
nominee or other holder of record, you will receive instructions from the bank,
broker, nominee or other holder of record that you must follow in order for your
shares of our common stock to be voted.
You might also be eligible to vote by phone or over the internet. Special
instructions can be found on the enclosed proxy card.
Revocability. You may revoke your proxy at any time before the vote is
taken at our special meeting. If you have not voted through a bank, broker,
nominee or other holder of record, you may revoke your proxy by:
- submitting written notice of revocation to our corporate secretary prior
to the voting of that proxy at our special meeting;
- submitting a properly executed proxy with a later date; or
- voting in person at our special meeting.
However, simply attending our special meeting without voting will not
revoke an earlier proxy.
Written notices of revocation and other communications regarding the
revocation of your proxy should be addressed to:
Slippery Rock Financial Corporation
100 South Main Street
Slippery Rock, Pennsylvania 16057
Attention: Dale R. Wimer, Corporate Secretary
24
If your shares are held in the name of a bank, broker, nominee or other
holder of record, you should follow the instructions of the bank, broker,
nominee or other holder of record regarding the revocation of proxies.
A proxy appointment will not be revoked by the death or incapacity of the
shareholder executing the proxy unless notice of the death or incapacity is
given to our corporate secretary before the shares of our common stock
represented by such proxy are voted.
How Proxies are Counted. All shares of our common stock represented by
properly executed proxies received before or at our special meeting, and not
revoked, will be voted in accordance with the instructions indicated in the
proxies.
We will count a properly executed proxy marked "ABSTAIN" as present for
purposes of determining the presence of a quorum, but an abstention will have
the effect of voting against approval of the merger proposal and voting against
approval of the adjournment proposal.
Brokers may not vote shares of our common stock that they hold beneficially
either for or against the approval of the merger proposal without specific
instructions from the person who beneficially owns those shares. Therefore, if
your shares are held by a broker and you do not give your broker instructions on
how to vote your shares, this will have the same effect as voting against
approval of the merger proposal.
In addition, brokers may not vote shares of our common stock on the
adjournment proposal without specific instructions from the person who
beneficially owns those shares. Nevertheless, shares held by a broker for which
you do not give your broker instructions on how to vote will have no effect on
the outcome of the voting on the adjournment proposal.
Solicitation. We will pay for the costs of our special meeting and for the
mailing of this proxy statement/prospectus to our shareholders, as well as all
other costs we incur in connection with the solicitation of proxies from our
shareholders. However, FNB and we will share equally the cost of printing this
proxy statement/prospectus and the filing fees paid to the SEC.
In addition to soliciting proxies by mail, our directors, officers and
employees may solicit proxies by telephone or in person. Our directors, officers
and employees will not be specially compensated for these activities. We also
intend to request that brokers, banks, nominees and other holders of record
solicit proxies from their principals, and we will reimburse the brokers, banks,
nominees and other holders of record for certain expenses they incur for those
activities.
We have engaged Morrow & Co., a professional proxy solicitation firm, to
assist us in the solicitation of proxies. The fee payable to Morrow & Co. for
such services is $5,000, plus such firm's reasonable out-of-pocket expenses and
costs to solicit additional shareholders.
RECOMMENDATION OF OUR BOARD OF DIRECTORS
Our board of directors unanimously approved the merger agreement and the
transactions contemplated by the merger agreement. Based on our reasons for the
merger described in this proxy statement/prospectus, our board of directors
believes that the merger is in our best interests and those of our shareholders.
Accordingly, our board of directors unanimously recommends that our shareholders
vote "FOR" approval of the merger proposal and "FOR" the adjournment proposal.
See "The Merger -- Our Board of Directors' Reasons for the Merger;
Recommendation" beginning on page 28, for a more detailed discussion of our
board of directors' recommendation.
ATTENDING OUR SPECIAL MEETING
If your shares are held in street name and you want to attend our special
meeting, you must bring an account statement or letter from your holder of
record showing that you were the beneficial owner of the shares on July 19,
2004, the record date for our special meeting.
25
QUESTIONS AND ADDITIONAL INFORMATION
If you have more questions about the merger or how to submit your proxy
card, or if you need additional copies of this proxy statement/prospectus or the
enclosed proxy card, please call our proxy solicitor, Morrow & Co., toll-free at
(800) 607-0088.
INFORMATION ABOUT FNB AND SLIPPERY ROCK
SLIPPERY ROCK FINANCIAL CORPORATION
100 SOUTH MAIN STREET
SLIPPERY ROCK, PENNSYLVANIA 16057
(724) 794-2210
We are a one-bank holding company organized under the laws of the
Commonwealth of Pennsylvania. In addition, we are registered with and supervised
by the Federal Reserve Board. Our primary business is the holding of all of the
outstanding common shares of our wholly owned subsidiary, Slippery Rock Bank.
Our primary source of income has been dividends paid by Slippery Rock Bank.
Slippery Rock Bank is nationally chartered and is a member of the Federal
Reserve System. Slippery Rock Bank's deposits are insured by the FDIC, up to
regulatory limits. Slippery Rock Bank is a full-service institution that offers
various demand and time deposit products and originates secured and unsecured
commercial, consumer and mortgage loans.
Slippery Rock Bank has two full service offices and a grocery store office
located in Slippery Rock, Pennsylvania and one full service office in each of
the following communities: Prospect, Portersville, Grove City, Harrisville, New
Wilmington and Hickory Township, Pennsylvania. Slippery Rock Bank's Wealth
Management Group operates from a separate freestanding facility, which also is
located in Slippery Rock. In addition to its retail locations, Slippery Rock
Bank has an operations center located in Slippery Rock Township.
For more information on us and Slippery Rock Bank, see "Where You Can Find
More Information" beginning on page 82.
F.N.B. CORPORATION
ONE F.N.B. BOULEVARD
HERMITAGE, PENNSYLVANIA 16148
(724) 981-6000
FNB is a $4.8 billion financial services holding company headquartered in
Hermitage, Pennsylvania. FNB provides a broad range of financial services to its
customers through FNB Bank and its insurance agency, consumer finance and trust
company subsidiaries.
FNB Bank has 134 banking offices in Western Pennsylvania and Eastern Ohio.
FNB Bank offers the services traditionally offered by full-service commercial
banks, including commercial and individual demand and time deposit accounts and
commercial, mortgage and individual installment loans. FNB Bank also offers
various alternative investment products, including mutual funds and annuities.
As of June 30, 2004, FNB Bank had total assets, total liabilities and total
stockholders' equity of approximately $4.77 billion, $4.54 billion and $230
million, respectively.
Regency Finance, FNB's consumer finance subsidiary, has 24 offices in
Pennsylvania, 16 offices in Ohio and 16 offices in Tennessee and principally
makes personal installment loans to individuals and purchases installment sales
finance contracts from retail merchants.
Another FNB subsidiary, First National Trust Company, a registered
investment advisor, provides a broad range of personal and corporate fiduciary
services, including the administration of decedent and trust estates, and has
approximately $1.3 billion of assets under management.
26
FNB's insurance agency subsidiary is a full-service insurance agency and,
through its four locations, offers commercial and personal insurance products of
major insurance companies.
For additional information about FNB, see "The Merger" below, and "Where
You Can Find More Information", beginning on page 82.
THE MERGER
The following discussion contains material information pertaining to the
merger. This discussion is subject, and qualified in its entirety by reference,
to the merger agreement and the financial advisor's opinion included as
Appendices A and B to this proxy statement/prospectus. We encourage you to read
and review those documents as well as the discussion in this proxy
statement/prospectus.
BACKGROUND OF THE MERGER
Over the past several years, our board of directors and senior management
have periodically conducted planning sessions to review our business operations
and direction, including a review and discussion of our strategic alternatives.
Although the primary focus of these planning efforts has been to increase
shareholder value by remaining independent, we also have been acutely aware in
recent years of changes in the financial services industry and, in particular,
the challenges facing a smaller independent financial institution. These
challenges include an interest rate environment that has resulted in net
interest margin pressure, increased expenses related to technology and training
and increasing governmental regulation.
In 2002, Slippery Rock Bank entered into a formal supervisory agreement
with the OCC. This agreement contained recommendations from the OCC and imposed
certain conditions on us related to, among other things, credit administration,
consumer compliance and internal control policies and procedures. We responded
to this agreement by creating several senior management positions, including a
Head of Credit Administration and a Chief Lending Officer, along with staff to
support those officers. We also spent significant resources on legal advice and
several consulting studies in order to address the recommendations and
conditions of the supervisory agreement.
In anticipation of continuing growth as an independent institution, we
engaged Griffin in the summer of 2003 to assist us in updating our strategic
plan. In September 2003, our board and senior management held a two-day planning
retreat during which Griffin presented an overview of the community banking
industry, senior management made presentations regarding the future of our
banking franchise and Griffin facilitated a discussion regarding the potential
for growth and expansion during the next three years.
During the fourth quarter of 2003, Griffin assisted our senior management
in preparing a draft strategic plan. Also during the fourth quarter of 2003, the
OCC continued to monitor closely our compliance with the supervisory agreement.
At a regularly scheduled board meeting in December 2003, Griffin reviewed the
draft strategic plan with our board and discussed the recent OCC activities and
communications. Our board was generally aware of the recent merger activity
involving Pennsylvania banks, and asked Griffin to prepare an overview of such
activity for our January 2004 board meeting.
At our regularly scheduled board meeting on January 20, 2004, Griffin
presented an analysis of recent merger activity involving community banks on a
national, regional and statewide (Pennsylvania) basis. Our board devoted
substantial time and discussion at this meeting to the feasibility and
desirability of remaining an independent institution. At the conclusion of the
meeting, our board asked Griffin to prepare an analysis of potential merger
partners and buyers. Griffin presented this analysis at our board's regular
meeting on February 17, 2004. After extensive discussion of our potential as an
independent institution, our regulatory issues and the merger and acquisition
market for community banks, our board authorized the engagement of
27
Griffin to solicit indications of interest from selected financial institutions
regarding our possible acquisition and Griffin was so engaged.
In March 2004, Griffin contacted six potential buyers. Five potential
buyers executed confidentiality agreements, reviewed a confidential information
memorandum and submitted preliminary indications of interest.
Our board held a special meeting on April 6, 2004 to consider the
indications of interest received from the five potential buyers. In addition to
our board, representatives of Griffin, as well as a representative of Manatt,
Phelps & Phillips, LLP, our legal counsel, were present. The Griffin
representatives reviewed with our board the financial terms of each written
indication of interest. All five institutions submitted non-binding proposals on
specified items, including the price per share, the form of consideration, the
treatment of outstanding stock options, ongoing board representation, the
ongoing role of senior executives and the severance policy for employees whose
employment would end upon closing of the transaction. Of the five indications of
interest received, only the indications of interest received from FNB (range of
$26.00 to $27.00 per share) and one other bank holding company ($26.00 to
$29.00) were within a range acceptable to our board. Following an in-depth
discussion of FNB and the other company, our board authorized Griffin to
coordinate the performance of due diligence on us by both FNB and the other
company. Throughout the process, William C. Sonntag, our president and chief
executive officer, had conversations and/or met with his counterparts at FNB and
the other company to discuss the proposed terms of the agreement and other
strategic matters.
Griffin contacted both potential buyers to schedule due diligence with the
understanding that each buyer would submit a revised indication of interest upon
completion of due diligence, if still interested in pursuing a transaction with
us. On April 27, 2004, Griffin received revised indications of interest from FNB
and the other company. FNB indicated a price of $28.00 per share in a
combination of stock (85% of the consideration) and cash (15% of the
consideration). The other potential buyer offered our board the choice of $29.00
per share in cash, or $26.00 per share in a combination of stock (51% of the
consideration) and cash (49% of the consideration).
At a special meeting on April 28, 2004, our board met to consider the
revised indications of interest. Griffin presented an analysis of the
indications of interest and a representative of Manatt, Phelps & Phillips, LLP
reviewed with our board its fiduciary duties pertinent to the proposed
transaction. The representative of Manatt, Phelps & Phillips, LLP also reviewed
with our board a draft merger agreement that had previously been provided to FNB
and the other potential buyer. At the conclusion of the presentations, our board
of directors, with the assistance of Griffin and Manatt, Phelps & Phillips, LLP,
discussed both offers at length. A number of factors were considered, including
but not limited to, those set forth below under "-- Our Board of Directors'
Reasons for the Merger." Each board member provided his or her thoughts on the
proposals, including the tax consequences of cash or stock as consideration, the
opportunity for shareholders to participate in any future appreciation of FNB
stock after the merger, compared with being cashed out, and the added value of
continued cash dividends. Upon conclusion of the discussions, the board
authorized Griffin, Manatt, Phelps & Phillips, LLP and senior management to seek
to finalize a merger agreement with FNB.
From April 29 through May 5, 2004, a number of drafts of the merger
agreement and related documents were circulated and negotiated by us, FNB and
our and their advisors. On May 3, 2004, a representative of Griffin and our
chief financial officer conducted a due diligence review of FNB. Negotiations
continued on the merger agreement. On May 5, 2004, our board met again to review
the status of negotiations and authorized management to execute the merger
agreement and related documents. On the evening of May 5, 2004, the merger
agreement was signed and the proposed merger was announced on the morning of May
6, 2004.
OUR BOARD OF DIRECTORS' REASONS FOR THE MERGER; RECOMMENDATION
Our board of directors believes that the terms of the merger agreement are
fair to, and in the best interests of, our shareholders and us. Accordingly, our
board of directors has unanimously approved the merger agreement and recommends
that our shareholders vote "FOR" approval of the merger proposal and "FOR" the
adjournment proposal. In the course of reaching its determination, our board of
directors consulted with senior management, Manatt, Phelps & Phillips, LLP, our
legal counsel, with respect to the terms of the
28
merger agreement and their legal and fiduciary duties and Griffin, its financial
advisor, with respect to the financial aspects and fairness of the merger from a
financial point of view.
The following discussion of the information and factors considered by our
board is not intended to be exhaustive, but does include the material factors
considered. Furthermore, the order of the factors should not be construed as to
any particular weight given to such factor in our board's decision process. In
reaching its determination that the merger is fair to, and in the best interests
of, our shareholders and us, our board considered a number of factors,
including, without limitation, the following:
- the value of the merger consideration compared to historical and recent
market prices of our common stock, which represented a premium of
approximately 53% over the price at which our common stock traded on May
5, 2004, the last date on which such shares were traded before the
announcement of the merger agreement;
- the ability of our shareholders who receive FNB common stock in the
merger to participate as shareholders in any potential future growth of
FNB and to participate in a larger, more financially diverse
organization;
- the current and prospective environment in which we operate, including
general economic conditions, competition in our business segments and our
geographic market, increasing regulatory burdens and costs facing
financial institutions, the continuing consolidation and diversification
of products and services in the banking industry and the likely effect of
the foregoing factors on our potential growth and profitability if we
were to remain independent;
- our board of directors' familiarity with and review of our business,
results of operations, financial condition, management, competitive
positions and future prospects and the nature of the industry in which we
operate;
- the strategic options available to us and our board's assessment that
none of these options, including remaining independent, is likely to
present an opportunity to create value for our shareholders that is equal
to or greater than that created by the proposed merger with FNB;
- our board of directors' review of the historical market prices of our
common stock compared to the merger consideration to be received by our
shareholders, the result of which indicated that the merger will provide
holders of our common stock with the opportunity to receive a premium
over the historical trading prices for their shares;
- our small stock market float and the consequent difficulty that holders
of large amounts of our shares would have in selling their holdings in
the public market over a relatively short period of time and without
depressing the market price of our common stock, were we to remain an
independent public company;
- the liquidity of FNB's stock, thereby giving shareholders who receive
stock in the transaction the ability to diversify their holdings should
they so desire;
- the tax-free nature of the merger consideration for our shareholders who
receive FNB common stock in the merger and their ability to recognize
additional value through an increased cash dividend per share equivalent;
- information concerning the financial performance, financial condition and
business operations of FNB;
- the terms of the merger agreement, which provide our board with the
ability to respond to, and to accept, an unsolicited offer that is
determined by our board to be superior to the merger, if necessary, to
comply with our board's fiduciary duties to our shareholders under
applicable law;
- the financial presentation of Griffin, our independent financial advisor,
and their opinion, as of the date of such opinion, that the merger
consideration was fair from a financial point of view to the holders of
our common stock (see "-- Opinion of Our Financial Advisor");
29
- the closing conditions in the merger agreement and the likelihood that
the merger would be approved by the requisite regulatory authorities and
that the merger agreement would be approved and adopted by our
shareholders; and
- the commitment by FNB to our employees and the communities we serve.
In addition to taking into account the foregoing factors, our board also
considered the following potentially negative factors in reaching its decision
to approve the merger agreement:
- the possibility that we would be substantially more profitable than
expected or that another acquiror would be willing to pay a higher price
sometime in the future;
- the possible effect of the public announcement of the merger on the
continuing commitment of our management, employees and customers pending
the consummation of the merger;
- the fact that our shareholders who receive cash in the merger will not
participate as shareholders in any potential future growth of FNB and
will recognize gain to the extent that the cash received exceeds their
basis in their shares;
- the possibility that the anticipated benefits of the merger to our
shareholders may not be realized as a result of FNB's execution of its
business plan, economic conditions and potential difficulties in
integrating the two companies and their operations;
- the fact that the fixed exchange ratio could result in less consideration
being paid in the event FNB's stock price drops between the date of the
merger agreement and the closing of the transaction; and
- the significant costs involved in connection with consummating the
merger, the substantial management time and effort required to effectuate
the merger and to integrate our business with FNB, and the related
disruption to our business.
The foregoing discussion of the information and factors considered by our
board includes the primary material factors that our board considered. In view
of the variety of factors considered in connection with its evaluation of the
merger, our board did not find it practicable to, and did not, quantify or
otherwise assign relative or specific weight or values to any of these factors,
although individual directors may have given different weights to different
factors. Our board considered all of the factors as a whole, and considered the
factors in their totality to be favorable to and to support the decision to
approve the merger agreement and the merger and to recommend their approval by
our shareholders.
Our board of directors also considered the potential benefits to certain
executive officers and directors discussed in the section entitled "Interests of
Our Directors and Executive Officers in the Merger," including change-in-control
severance agreements for certain officers of Slippery Rock Bank and a
separation, business development and non-competition agreement with our
president.
Finally, as noted above, one of the factors considered by our board of
directors was our ability under the terms of the merger agreement to respond to
an unsolicited offer under certain circumstances. Since the announcement of the
merger agreement, we have not received any proposals with respect to any other
possible business combination.
OPINION OF OUR FINANCIAL ADVISOR
On March 7, 2004, we engaged Griffin to serve as our financial advisor in
connection with a possible sale or merger transaction with a strategic partner.
Griffin acted as financial advisor to us in connection with the proposed merger
and participated in certain negotiations leading to the execution of the merger
agreement, but the decision as to whether to accept the FNB proposal and the
pricing of the merger was made by our board of directors. On April 28, 2004, our
board of directors held a special meeting to evaluate our proposed merger with
and into FNB. At this meeting, Griffin reviewed certain of the financial aspects
of the proposed merger and presented the results of certain analyses to our
board and indicated that Griffin would be prepared to provide an opinion that
the proposed consideration from FNB was fair to us and our shareholders from a
financial point of view. Griffin subsequently provided a written opinion, dated
June 9, 2004, to our board of
30
directors, that, based on the assumptions, factors, and limitations set forth in
the opinion, the merger consideration proposed to be paid in the transaction is
fair from a financial point of view to us and our shareholders.
We have the right, during the two-day period following the date of receipt
of the last regulatory approval of the merger, to terminate the merger agreement
if the average closing price of FNB common stock for the 20 consecutive trading
days ending on the trading day immediately preceding such date is less than
$15.38 (representing a 20% decline from the $19.23 closing sales price of FNB
common stock on May 7, 2004) and the decline in the average final price of FNB
common stock since May 7, 2004 is at least 20% (as further explained in the
merger agreement) greater than the change during the same period in the Nasdaq
Bank Index. It is not possible to know until such date if the average final
price will be less than $15.38 or if any decline in the price of FNB common
stock will be 20% greater than the change in the Nasdaq Bank Index. Griffin
cannot predict whether or not our board would exercise its right to give notice
to FNB that we desired to terminate the merger agreement, if these conditions
were met. Griffin's opinion does not address the fairness from a financial point
of view of the merger consideration if the above price conditions have been met
and our board does not terminate the merger agreement. See "The Merger
Agreement -- Amendment, Waiver and Termination of the Merger Agreement"
beginning on page 60.
The full text of Griffin's written opinion is included as Appendix B to
this proxy statement/prospectus and is incorporated herein by reference. The
opinion outlines the processes Griffin followed, the assumptions Griffin made,
the matters Griffin considered and the qualifications and limitations set forth
in Griffin's opinion. The description of the opinion set forth below is
qualified in its entirety by reference to the opinion. You are urged to, and
should, read this opinion carefully and in its entirety. Griffin's opinion
speaks only as of its date. Griffin's opinion is directed solely to our board of
directors and addresses only the fairness, from a financial point of view, of
the merger consideration to be paid in the merger. It does not address the
underlying business decision to proceed with the merger and does not constitute
a recommendation to you as to how you should vote at our special meeting on the
merger or as to whether you should elect FNB common stock or cash. Griffin's
opinion will not reflect any developments that may occur after the date of its
opinion and prior to the completion of the merger. We do not currently expect
that we will request an updated opinion from Griffin.
For purposes of providing its opinion, Griffin has:
(i) reviewed certain publicly available financial statements and other
information of FNB and us, respectively, which Griffin believed to be
relevant;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning each of FNB and us, including
financial forecasts and profit plans prepared by the management of FNB and
us, respectively;
(iii) reviewed the formal agreement, dated October 15, 2002, between
Slippery Rock Bank and the OCC and discussed with our management the
implications of the formal agreement on our future financial performance;
(iv) discussed the past and current operations and financial condition
and the prospects of each of FNB and us with senior executives of FNB and
us, respectively, including with respect to FNB (x) the potential impact on
FNB of the merger, including potential cost savings, synergies and other
strategic, financial and operational benefits that management of FNB
expects to realize from our combination with FNB and (y) the forecasted
impact of the proposed merger on the future financial performance of FNB;
(v) reviewed the publicly reported historical price and trading
activity for our common stock and FNB common stock, including a comparison
of certain financial and stock market information for FNB and us with
similar publicly available information for certain other financial
institutions the securities of which are publicly traded;
(vi) reviewed earnings per share consensus estimates for FNB for the
years ending December 31, 2004 and 2005 published by Thomson First Call;
31
(vii) reviewed the financial terms, to the extent publicly available,
of certain merger and acquisition transactions between financial
institutions that Griffin viewed as comparable;
(viii) participated in discussions and negotiations between FNB and
us;
(ix) reviewed the merger agreement (including the schedules and
exhibits thereto);
(x) considered the competitive environment for financial institutions;
and
(xi) performed market value, comparable company, selected reference
transaction and pro forma merger analyses.
In connection with its reviews and analyses and in providing its opinion,
Griffin assumed and relied upon the accuracy and completeness of all of the
financial, accounting, tax and other information discussed with or reviewed by
it for the purposes of rendering its opinion, without independent verification.
Griffin also relied upon assurances from management of FNB and us that they are
not aware of any facts and circumstances that would cause such information to
contain a misstatement or omission of a fact material to Griffin's opinion. With
respect to financial and operating forecasts and profit plans, including the
synergies, cost savings and other strategic, financial and operational benefits
to be realized in connection with the completion of the merger, Griffin has
assumed that such financial and operating forecasts reflect the best available
estimates and judgments of the future financial performance of FNB, after giving
effect to the merger, and were based on reasonable assumptions, estimates and
judgments of management. Griffin also relied upon the advice FNB and we have
each received from their and our legal counsel, tax advisors, and independent
public accountants as to all legal, tax and accounting matters relating to the
merger, including without limitation, that the merger will be treated as a
tax-free reorganization for federal income tax purposes to the extent indicated
in "Material Federal Income Tax Consequences of the Merger" beginning on page
62. Griffin assumed that the transaction will be completed in accordance with
the terms of the merger agreement and all laws and regulations applicable to FNB
and us and that in the course of obtaining the necessary regulatory approvals or
other approvals of the merger, no restrictions will be imposed that may have a
material adverse effect on the future results of operations or financial
condition of FNB, us or the combined entity, as the case may be, or on the
contemplated benefits of the merger. Griffin did not make an independent
valuation or appraisal of either FNB or us or their or our assets or liabilities
(including any hedge, swap, foreign exchange, derivative or off-balance sheet
assets or liabilities), nor has it been furnished with any such appraisals and
Griffin has not made any independent review of the loans, loan loss reserves or
reviewed any individual loan credit files of Slippery Rock Bank or FNB Bank.
Griffin also assumed that the published estimates of third party research
analysts constitute a reasonable basis upon which to evaluate the future
financial performance of FNB. In addition, Griffin did not conduct a physical
inspection of any of the properties or facilities of FNB or us. Griffin is not
expressing an opinion as to what the value of FNB common stock will actually be
when issued or the price at which FNB common stock will trade at any time or
whether FNB will realize the specific strategic objectives and benefits of the
merger. Griffin's opinion does not address the relative merits of the merger
compared to any other business strategy that might exist for us, nor does it
address our underlying business decision to engage in the merger.
Griffin's opinion was necessarily based upon market, economic and other
conditions as they existed on, and could be evaluated as of, the date of its
opinion. Griffin assumed, in all respects material to its analyses, that all of
the representations and warranties contained in the merger agreement and all
related agreements were true and correct, that each party to such agreements
would perform all of the covenants required to be performed by such party under
such agreements and that the conditions precedent in the merger agreement have
not been nor will be waived. Griffin also assumed that there had been no
material change in our or FNB's assets, financial condition, results of
operations, business or prospects since the date of the last financial
statements made available to Griffin. In providing its opinion, Griffin does not
admit that it is an expert within the meaning of the term "expert" as used
within the Securities Act of 1933, which we sometimes refer to as the
"Securities Act" in this proxy statement/prospectus and the rules and
regulations promulgated thereunder, or that its opinion constitutes a report or
valuation within the meaning of Section 11 of the Securities Act and the rules
and regulations promulgated thereunder.
32
SUMMARY OF ANALYSES BY GRIFFIN
The following is a summary of the material analyses undertaken by Griffin
in connection with its written opinion, dated as of June 9, 2004. The summary is
not a complete description of the analyses underlying Griffin's opinion or the
presentations made by Griffin to our board, but summarizes the material analyses
performed in connection with such presentations and its opinion. The preparation
of a fairness opinion is a complex analytic process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances.
Therefore, a fairness opinion is not readily susceptible to partial analysis or
summary description. In arriving at its opinion, Griffin did not attribute any
particular weight to any analysis or factor that it considered, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. The financial analyses summarized below include information presented in
tabular format. Accordingly, Griffin believes that its analyses and the summary
of its analyses must be considered as a whole and that selecting portions of its
analyses and factors or focusing on the information presented below in tabular
format, without considering all analyses and factors or the full narrative
description of the financial analyses, including the methodologies and
assumptions underlying the analyses, could create a misleading or incomplete
view of the processes underlying its analyses and opinion. The tables alone do
not provide a complete description of the financial analyses.
The earnings projections for each of FNB and us used and relied upon by
Griffin in its analyses were based upon internal financial projections provided
by each company. With respect to such financial projections and all estimates of
transaction costs, purchase accounting adjustments and expected cost savings and
synergies relating to the merger we furnished to Griffin, our management has
confirmed to Griffin that they reflect the best currently available estimates
and judgments of management of the future financial performance of FNB and us on
a combined basis, and Griffin assumed for purposes of its analyses that such
performances would be achieved. Griffin expressed no opinion as to such
financial projections or the assumptions on which they were based. The financial
projections for each of FNB and us were prepared for internal purposes only and
not with a view towards public disclosure. These projections, as well as the
other estimates used by Griffin in its analyses, were based on numerous
variables and assumptions that are inherently uncertain and, accordingly, actual
results could vary materially from those set forth in such projections.
In performing its analyses, Griffin also made numerous assumptions with
respect to industry performance, business and economic conditions and various
other matters, many of which cannot be predicted and are beyond the control of
FNB and us. The estimates set forth in Griffin's analyses and the ranges of
valuations resulting from any particular analysis are not necessarily indicative
of actual values or predictive of future results or values, which may be
significantly more or less favorable than those suggested by the analyses. In
addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, no company, transaction, or
business used in Griffin's analyses as a comparison is identical to FNB or us or
the merger. Thus, Griffin's analyses and opinion are necessarily subjective.
Griffin prepared its analyses solely for review by our board in connection
with its evaluation of possible transactions with strategic partners, including
the proposed transaction with FNB. Our board of directors considered Griffin's
analyses at its April 28, 2004 board meeting. Griffin's financial analyses were
only one of the many factors considered by our board of directors in its
evaluation of the proposed merger and should not be viewed as determinative of
the views of our board of directors or management with respect to the merger or
the merger consideration. Estimates on the values of companies do not purport to
be appraisals or necessarily reflect the prices at which companies or their
securities may actually be sold. Such estimates are inherently subject to
uncertainty and actual values may be materially different. Accordingly,
Griffin's analyses do not reflect the value of our common stock or FNB's common
stock or the prices at which our common stock or FNB's common stock may be sold
at any time. For purposes of providing its opinion on the date thereof, Griffin
reviewed certain of the procedures it had performed in connection with its
engagement as our financial advisor and updated its analyses.
33
Financial Terms of the Merger. Griffin reviewed the financial terms of the
proposed transaction. Based upon the closing price of FNB's common stock on June
9, 2004 of $19.88 and the exchange ratio of 1.41, and assuming that 3,276,554
shares of FNB common stock are issued to holders of Slippery Rock common stock
in exchange for 2,323,797 shares of Slippery Rock common stock and 407,335
shares of Slippery Rock common stock are exchanged for $28.00 per share in cash,
Griffin calculated an implied transaction value of approximately $28.03 per
Slippery Rock share and an implied aggregate transaction value of approximately
$78.5 million. The implied aggregate transaction value was based upon 2.73
million shares of Slippery Rock common stock outstanding as of March 31, 2004,
plus the value of outstanding options to purchase 190,147 shares of Slippery
Rock common stock calculated using $28.00 per share less a weighted average
exercise price of $16.43 per share. Griffin noted that the transaction value
represented a 53% premium over the May 5, 2004 closing sales price of our common
stock of $18.40 per share, the last trading day prior to the announcement of the
proposed merger.
Peer Group Analysis. Using publicly available information, Griffin
compared the financial condition, performance and market value measures of FNB
to the following 13 Pennsylvania-based financial institutions:
- Citizens & Northern Corporation;
- Community Banks, Inc.;
- First Commonwealth Financial Corporation;
- Fulton Financial Corporation;
- Harleysville National Corporation;
- National Penn Bancshares, Inc.;
- Omega Financial Corporation;
- PennRock Financial Services Corp.;
- Pennsylvania Commerce Bancorp, Inc.;
- Royal Bancshares of Pennsylvania, Inc.;
- Sterling Financial Corporation;
- Susquehanna Bancshares, Inc.; and
- Univest Corporation of Pennsylvania.
Griffin compared FNB's financial condition, performance and market value
measures to the median and mean statistics of this reference group of banks
selected by Griffin as of June 9, 2004. The FNB ratios were based on data
obtained from SNL Financial and include certain adjustments and assumptions
related to FNB's spin-off transaction which occurred on January 1, 2004. For
purposes of such analysis, the financial information used by Griffin was as of
and for the twelve months ended March 31, 2004. Stock price data was as of June
9, 2004. Certain financial information prepared by Griffin, and as referenced in
the tables presented
34
below, may not correspond to the data presented in FNB's and our historical
financial statements as a result of different assumptions and methods used by
Griffin to compute the financial data presented:
FNB PEER GROUP FNB PEER GROUP
FNB(1) MEDIAN MEAN
------ -------------- --------------
Tangible Equity & Trust Preferred Sec./Tangible
Assets....................................... 7.40% 9.50% 9.58%
Borrowings/Assets.............................. 21.72% 17.08% 17.50%
Loans/Deposits................................. 97.79% 87.51% 85.15%
Loan loss reserve/Loans........................ 1.43% 1.25% 1.38%
Non-performing assets/Assets................... 0.51% 0.39% 0.44%
Loan loss reserve/Non-performing assets........ 176.51% 238.14% 270.64%
Return on average equity....................... 9.99% 14.69% 14.24%
Return on average assets....................... 0.71% 1.40% 1.35%
Net interest margin............................ 4.07% 3.84% 3.90%
Yield on earning assets........................ 5.87% 5.54% 5.64%
Cost of funds.................................. 2.04% 2.06% 2.14%
Noninterest income/Operating revenue........... 30.09% 26.00% 24.58%
Noninterest income/Average assets.............. 1.54% 1.13% 1.16%
Noninterest expense/Average assets............. 3.88% 2.71% 2.81%
Efficiency ratio............................... 74.04% 58.20% 58.20%
Price/Trailing 12-month earnings per share..... 18.27x 16.18x 16.35x
Price/Book value per share..................... 368.12% 222.34% 216.37%
Price/Tangible book value per share............ 436.17% 245.74% 246.57%
Dividend yield................................. 4.72% 3.28% 2.98%
---------------
(1) This data includes results of FNB's Florida operations prior to the January
1, 2004 spin-off of those operations. Please refer to the Selected
Consolidated Historical Financial Data of FNB beginning on page 10.
Selected Reference Transaction Analysis. Griffin reviewed publicly
available information related to certain bank transactions that it selected and
believed to be comparable to the merger. These transactions included
acquisitions of commercial banks with between $250 million and $500 million in
assets in Pennsylvania and Ohio announced between January 1, 2000 and June 9,
2004. These transactions included:
ACQUIROR ACQUIRED COMPANY
-------- ----------------
WesBanco Inc............................................ Western Ohio Financial Corp.
Community Bank System Inc............................... First Heritage Bank
National Penn Bancshares, Inc........................... Peoples First, Inc.
Community Bank System, Inc.............................. Grange National Banc Corp.
National Penn Bancshares, Inc........................... FirstService Bank
First Merchants Corp.................................... CNBC Bancorp, Inc.
S&T Bancorp, Inc........................................ Peoples Financial Corp.
Berkshire Financial Holdings, Inc....................... USA BancShares.com Inc.
Promistar Financial Corp................................ FNH Corp.
United Community Fin'l Corp............................. Industrial Bancorp, Inc.
35
For these selected merger transactions, Griffin used publicly available
financial information, including information from SNL Financial's online
databases to determine:
- The multiples of the transaction price per share to publicly-disclosed
earnings per share for the latest twelve months ("LTM") at the time of
announcement;
- The multiples of the transaction price per share to book value per share
using the acquired companies' most recent publicly disclosed financial
statements at the time of announcement of the transaction;
- The multiples of the transaction price to total assets using the acquired
companies' most recent publicly disclosed financial statements at the
time of announcement of the transaction; and
- The implied tangible book premium to core deposits (defined as total
deposits less certificates of deposit greater than $100,000) using the
acquired companies' most recent publicly disclosed financial statements
at the time of announcement of the transaction.
Transaction multiples for the transaction were derived from the $28.03 per
share transaction value and financial data for us as of March 31, 2004. Griffin
compared these results with announced transaction multiples. The results of the
analysis are set forth in the following table:
PRICE/LTM PREMIUM/CORE
EPS PRICE/BOOK PRICE/ASSETS DEPOSITS
(X) (%) (%) (%)
--------- ---------- ------------ ------------
Pennsylvania/Ohio Median.............. 20.29 222.00 22.87 20.00
Pennsylvania/Ohio Mean................ 21.64 214.65 21.04 18.22
FNB/Slippery Rock..................... 40.04 244.38 23.59 20.17
Pro Forma Merger Analysis. Griffin analyzed certain potential forecasted
effects of the merger, assuming the following: (1) the transaction closes in the
fourth quarter of 2004, (2) 3,276,554 shares of FNB common stock are issued to
holders of our common stock in exchange for 2,323,797 shares (representing a
common stock exchange ratio of 1.41 shares of FNB common stock per share of our
common stock) and 407,335 shares of our common stock are exchanged for $28.00
per share in cash, (3) all outstanding options to purchase our common stock are
converted into options to purchase a number of shares of FNB common stock equal
to the number of shares of our common stock subject to the options multiplied by
1.41, (4) without independent review by us of underlying data or assumptions for
accuracy or reasonableness, all purchase accounting adjustments, transaction
costs and cost savings are as estimated by our senior management and (5) without
independent review by us of underlying data or assumptions for accuracy or
reasonableness, the operating performance of the combined companies will be as
forecasted by such senior management. The analysis indicated that for the year
ending December 31, 2005, the first full year after the closing of the
transaction, the transaction should be accretive to FNB's projected earnings per
share. The actual results achieved by the combined company may vary from
projected results and the variations may be significant.
Fees Payable by Us to Our Financial Advisor. We have agreed to pay Griffin
a fee in connection with the merger of 1% of total transaction value, of which
$197,990 has been paid. An additional payment of $197,990 is payable upon
approval of the merger proposal by our shareholders and the balance of Griffin's
fee is payable upon closing of the merger. We have also agreed to reimburse
certain of Griffin's reasonable out-of-pocket expenses incurred in connection
with its engagement and to indemnify Griffin and its affiliates and their
respective partners, directors, officers, employees, agents and controlling
persons against certain expenses and liabilities, including liabilities under
the federal securities laws.
Griffin has previously provided financial advisory services to Slippery
Rock and has received customary fees for the rendering of such services.
STRUCTURE OF THE MERGER AND THE MERGER CONSIDERATION
Structure. Subject to the terms and conditions of the merger agreement,
and in accordance with Pennsylvania and Florida law, at the completion of the
merger, we will merge with and into FNB. FNB will be the surviving corporation
and will continue its corporate existence under the laws of the State of
Florida.
36
Immediately thereafter, Slippery Rock Bank, our wholly owned subsidiary, will
merge with and into FNB Bank, a wholly owned subsidiary of FNB. Each share of
our common stock issued and outstanding at the effective time of the merger will
be converted into either cash or shares of FNB common stock.
When the merger is completed, our separate corporate existence will
terminate. FNB's certificate of incorporation will be the certificate of
incorporation of the combined company, and FNB's bylaws will be the bylaws of
the combined company. See "Comparison of Shareholder Rights" beginning on page
67.
The board of directors of FNB will continue as the board of directors of
the combined company. The board of directors of FNB Bank will continue as the
board of directors of the combined bank, except that at the completion of the
merger, FNB will appoint to the board of directors of FNB Bank two current
members of our board of directors, as mutually agreed upon by FNB and us. See
"-- Boards of Directors of FNB and FNB Bank Following the Merger" beginning on
page 48.
Based on information as of the record date, upon completion of the merger,
current holders of FNB common stock will own approximately 93.4% of, and holders
of our common stock will own approximately 6.6% of, the outstanding FNB common
stock.
Merger Consideration. The merger agreement provides that at the effective
time of the merger each share of our common stock issued and outstanding
immediately prior to the effective time, other than shares held by FNB and
shares as to which appraisal rights are perfected, will be converted into
either:
- $28.00 in cash; or
- 1.41 shares of FNB common stock.
You may elect whether you want to receive all FNB common stock, all cash or
a combination of cash and FNB common stock in exchange for the shares of our
common stock that you hold. However, your election is subject to possible
proration because the allocation procedures in the merger agreement provide that
15% of the shares of our common stock will be exchanged for cash and 85% of the
shares of our common stock will be exchanged for shares of FNB common stock,
although FNB has the option of increasing the amount of FNB common stock it
issues in the merger if our shareholders elect to receive more than 85% of the
merger consideration in FNB common stock. The actual allocation of cash and FNB
common stock will be dependent on the elections made by our shareholders and may
result in your receiving a combination of FNB common stock and cash regardless
of your choice. See "-- Election Procedure" beginning on page 38.
Since the market value of FNB common stock may fluctuate due to a variety
of factors and the exchange ratio of 1.41 shares of FNB common stock for each
share of our common stock is fixed, no assurance can be given that the value of
1.41 shares of FNB common stock received in the merger will be substantially
equivalent to $28.00 in cash. In addition, no assurance can be given that the
value of 1.41 shares of FNB common stock received by a Slippery Rock shareholder
at the effective time of the merger will be substantially equivalent to the
value of 1.41 shares of FNB common stock at the time of the vote to approve the
merger proposal or at the time you elect the form of merger consideration you
want to receive. As the market value of FNB common stock fluctuates, the value
of 1.41 shares of FNB common stock that you will receive will correspondingly
fluctuate, and may be greater or less than $28.00 in cash.
If, between the date of the merger agreement and the effective time of the
merger, shares of FNB common stock are changed into a different number or class
of shares by reason of any reclassification, split-up, combination, exchange of
shares or readjustment, or a stock dividend is declared with a record date
within that period, appropriate adjustments will be made to the per share cash
consideration and the per share stock consideration.
Fractional Shares. No fractional shares of FNB common stock will be issued
to you upon completion of the merger, unless you elect to enroll in FNB's
dividend reinvestment plan in which event FNB will issue to you, in book-entry
form in your dividend reinvestment plan account, the exact number of shares,
rounded to three decimal places, to which you are entitled. For each fractional
share that you would otherwise be entitled to receive, FNB will pay cash in an
amount, rounded to the nearest cent, equal to the product of the number of
fractional shares held by you multiplied by the average closing price of FNB
common stock for the 20
37
consecutive trading-day period ending on the date the last required regulatory
approval for the merger is obtained, without regard to any required waiting
periods. No interest will be paid or accrued on cash payable in lieu of
fractional shares of FNB common stock nor will any holder of fractional shares
be entitled to dividends or other rights in respect of such fractional shares.
Treasury Shares. Upon consummation of the merger, any shares of our common
stock held by us or any of our subsidiaries or by FNB or any of its
subsidiaries, other than in a fiduciary capacity or as a result of debts
previously contracted in good faith, will be cancelled and retired and no merger
consideration will be given with respect to those shares.
Dissenting Shares. If you perfect appraisal rights under Pennsylvania law,
and you are therefore entitled to be paid the fair value of your shares as
provided for under Pennsylvania law, you will not be entitled to receive the
merger consideration, unless and until you have withdrawn or lost your appraisal
rights.
ELECTION PROCEDURE
Subject to the allocation process described in the next section, you will
have the right to elect to receive in exchange for your shares of our common
stock:
- all cash,
- all shares of FNB common stock, or
- a combination of cash and shares of FNB common stock.
In our discussion, we refer to each of these three possible elections as
the "all cash election," the "all stock election" and the "combination
election," respectively.
All Cash Election. If you choose the all cash election, you will receive
$28.00 in cash for each share of our common stock you hold, subject to the
allocation mechanism described below. In our description below, we refer to the
shares held by a Slippery Rock shareholder who has made an all cash election as
"cash election shares."
All Stock Election. If you choose the all stock election, you will receive
1.41 shares of FNB common stock for each share of our common stock you hold,
subject to the allocation mechanism described below. In our description below,
we refer to the shares held by a Slippery Rock shareholder who has made an all
stock election as "stock election shares."
Combination Election. If you choose the combination election, you will
receive (i) 1.41 shares of FNB common stock for each share of our common stock
you hold for which you elected to receive FNB common stock and (ii) $28.00 in
cash for each remaining share of our common stock you hold, subject to the
allocation mechanism described below. If you choose the combination election,
you will able to specify the number of shares of our common stock you want
converted into shares of FNB common stock. All shares of our common stock for
which you do not elect to receive FNB common stock will be converted into cash,
subject to the allocation mechanism described below.
Undesignated Shares. Any shares of our common stock, other than shares for
which appraisal rights have properly been perfected under Pennsylvania law and
treasury shares, with respect to which the exchange agent does not receive an
effective, properly completed election form prior to the election deadline will
be deemed "undesignated shares." If you hold shares of our common stock that are
deemed to be undesignated shares, you will receive $28.00 in cash for each share
of our common stock you hold unless there is an oversubscription of the cash
consideration, in which case you may receive 1.41 shares of FNB common stock for
some or all of your shares of our common stock. See "-- Allocation of FNB Common
Stock and Cash" beginning on page 40.
For example, assuming you hold 100 shares of our common stock, if you made:
- an all stock election, you will receive 141 shares of FNB common stock;
- an all cash election, you will receive $2,800 in cash; or
38
- a combination election, you will receive:
- assuming an election of 75% cash and 25% stock, approximately $2,100 in
cash and 35 shares of FNB common stock (and payment for any fractional
share);
- assuming an election of 50% cash and 50% stock, approximately $1,400 in
cash and 70 shares of FNB common stock (and payment for any fractional
share); or
- assuming an election of 75% stock and 25% cash, approximately $700 in
cash and 105 shares of FNB common stock (and payment for any fractional
share).
The actual allocation of cash and stock will be subject in each case to the
allocation procedures described under the heading "-- Allocation of FNB Common
Stock and Cash" beginning on page 40.
Under the terms of the merger agreement, 15% of the shares of our common
stock will be exchanged for cash and 85% of the shares of our common stock will
be exchanged for FNB common stock, unless FNB exercises its option to increase
the number of shares of FNB common stock issued in the merger in the case of a
stock oversubscription. Accordingly, there is no assurance that you will receive
the form of the merger consideration that you elect with respect to all of your
shares of our common stock. If the elections of our shareholders result in an
oversubscription for the available pool of FNB common stock or cash, the
procedures for allocating FNB common stock and cash to be received by our
shareholders will be followed by the exchange agent. See the section entitled
"-- Allocation of FNB Common Stock and Cash" beginning on page 40.
Election Form. The merger agreement provides that 35 days prior to the
anticipated date of completion of the merger, or on a different date mutually
agreed upon by FNB and us, an election form and other appropriate and customary
transmittal materials will be mailed by, or on behalf of, FNB to you. Each
election form will allow you to elect to receive:
- 1.41 shares of FNB common stock for each share of our common stock you
hold;
- $28.00 in cash for each share of our common stock you hold; or
- 1.41 shares of FNB common stock for each share of our common stock you
hold for which you elected to receive FNB common stock and $28.00 in cash
for each remaining share of our common stock you hold.
The form of election will be mailed to you if you are a holder of record as
of the close of business on the fifth business day prior to the mailing date. In
our discussion, we refer to this date at the "election form record date." FNB
will also make election forms available to persons who become holders of our
common stock subsequent to the election form record date and prior to the
election deadline.
If you wish to elect the type of merger consideration you will receive in
the merger, you should carefully review and follow the instructions set forth in
the election form. Shares of our common stock as to which you have not made a
valid election prior to the election deadline, which is 5:00 p.m. on the 30th
day following the mailing date, will be deemed undesignated shares.
An election will have been properly made and effective only if the exchange
agent has actually received a properly completed election form that has not been
revoked by the election deadline. An election form will be properly completed
only if an election is indicated for each share of our common stock covered by
such election form and accompanied by one of more certificates representing all
shares of our common stock covered by the election form (or customary affidavits
and indemnification regarding the loss or destruction of such certificates or
the guaranteed delivery of such certificates), together with duly executed
transmittal materials included in or required by the election form.
You may revoke your election form prior to the election deadline, provided
that the exchange agent actually receives a written notice from you revoking
your election form and specifying the shares of our common stock covered by such
revoked election form prior to the election deadline. In the event an election
form is revoked prior to the election deadline, the shares of our common stock
represented by such revoked
39
election form will automatically become undesignated shares unless and until a
new election is properly made with respect to such shares of our common stock on
or before the election deadline. In the event of a revocation of an election,
FNB will cause the certificates representing such shares of our common stock to
be promptly returned without charge to the person submitting the revoked
election form upon request to that effect from the holder who submitted such
election form.
The exchange agent will have reasonable discretion to determine whether any
election or revocation has been properly or timely made and to disregard
immaterial defects in the election forms, and any decisions of Slippery Rock and
FNB required by the exchange agent and made in good faith in determining such
matters will be binding and conclusive. Neither FNB nor the exchange agent will
be under any obligation to notify any person of any defects in an election form.
ALLOCATION OF FNB COMMON STOCK AND CASH
Under the terms of the merger agreement, 15% of our shares of common stock
will be exchanged for cash and 85% of our shares of common stock will be
exchanged for FNB common stock. Accordingly, there is no assurance that you will
receive the form of merger consideration that you elect with respect to all
shares of our common stock you hold. If the elections of all of our shareholders
result in an oversubscription of the available pool of cash or FNB common stock,
the exchange agent will allocate between the cash and shares of FNB common stock
to be received by you in the manner described below. For a discussion of
fractional interests in shares of FNB common stock, see "-- Structure of the
Merger and the Merger Consideration" beginning on page 36.
If the aggregate number of shares of FNB common stock that would be issued
in the merger is approximately equal to 3,276,554, subject to adjustment
pursuant to the merger agreement, then:
- if you made an all cash election, you will receive $28.00 in cash for
each share of our common stock you hold;
- if you made an all stock election, you will receive 1.41 shares of FNB
common stock for each share of our common stock you hold;
- if you made a combination election, you will receive 1.41 shares of FNB
common stock per share of our common stock you hold for which you elected
to receive FNB common stock and $28.00 in cash for each remaining share
of our common stock you hold; and
- if you hold undesignated shares, you will be deemed to have made an all
cash election and will receive $28.00 in cash for each share of our
common stock you hold, subject to the allocation provisions in the merger
agreement.
Oversubscription of the Stock Consideration. If the aggregate number of
shares of FNB common stock that would be issued in the merger exceeds, and is
not approximately equal to, 3,276,554, subject to adjustment pursuant to the
merger agreement, FNB may issue such number of its shares of common stock even
though more than 3,276,554 shares of its common stock would be issued. However,
FNB also has the right not to issue more than 3,276,554 shares of its common
stock. If FNB chooses not to issue more than 3,276,554 shares of its common
stock, then:
- if you made an all cash election, you will receive $28.00 in cash for
each share of our common stock you hold;
- if you hold undesignated shares, you will be deemed to have made an all
cash election and you will receive $28.00 in cash for each share of our
common stock you hold;
- if you made a combination election, you will receive the following for
the shares of our common stock you hold for which you elected to receive
FNB common stock:
- a number of shares of FNB common stock equal to the following: (i) 1.41
multiplied by (ii) the sum of the number of shares of our common stock
as to which you made a stock election and the number
40
of shares of our common stock for which FNB common stock was elected in
connection with combination elections multiplied by (iii) the stock
proration factor; and
- cash in an amount equal to the following: (i) $28.00 multiplied by (ii)
the sum of the number of shares of our common stock with respect to
which all stock elections were made and the number of shares of our
common stock for which FNB common stock was elected in connection with
combination elections multiplied by (iii) one minus the stock proration
factor; and
- if you made a combination election, you will receive $28.00 in cash for
each of the remaining shares of our common stock you hold;
- if you made an all stock election, you will receive the following for
each share of our common stock you hold:
- a number of shares of FNB common stock equal to the following: (i) 1.41
multiplied by (ii) the sum of the number of shares of our common stock
with respect to which all stock elections were made and the number of
shares of our common stock for which FNB common stock was elected in
connection with combination elections multiplied by (iii) the stock
proration factor; and
- cash in an amount equal to the following: (i) $28.00 multiplied by (ii)
the sum of the number of shares of our common stock with respect to
which all stock elections were made and the number of shares of our
common stock for which FNB common stock was elected in connection with
combination elections multiplied by (iii) one minus the stock proration
factor.
The stock proration factor will be calculated by dividing (i) 3,276,554 by
(ii) the product of (x) 1.41 and (y) the sum of the number of shares of our
common stock with respect to which all stock elections were made and the number
of shares of our common stock for which FNB common stock was elected in
connection with combination elections.
Oversubscription of the Cash Consideration. If the aggregate number of
shares of FNB common stock that would be issued in the merger is less than, and
is not approximately equal to, 3,276,554, subject to adjustment pursuant to the
merger agreement, then:
- if you made an all stock election, you will receive 1.41 shares of FNB
common stock for each share of our common stock you hold;
- if you made a combination election will receive 1.41 shares of FNB common
stock for each share of our common stock you hold for which you elected
to receive FNB common stock;
- the exchange agent will then select by random from among the undesignated
shares (other than shares for which appraisal rights have properly been
perfected under Pennsylvania law) a sufficient number of shares such that
aggregate number of shares of FNB common stock that would be issued in
the merger equals as closely as possible to 3,276,554, subject to
adjustment pursuant to the merger agreement;
- if the sum of the undesignated shares plus the shares of our common stock
as to which all stock elections were made plus the number of shares of
our common stock for which FNB common stock was elected in connection
with combination elections multiplied by 1.41 is less than, and not
approximately equal to, 3,276,554 shares of FNB common stock, then (i)
each shareholder who made a combination election will receive the
following for each share of our common stock they hold for which they
elected to receive cash and (ii) each shareholder who made an all cash
election will receive the following for each share of our common stock
they hold:
- cash in an amount equal to the following: (i) $28.00 multiplied by (ii)
the sum of the number of shares of our common stock with respect to
which all cash elections were made and the number of shares of our
common stock for which cash was elected in connection with combination
elections multiplied by (iii) one minus the cash proration factor; and
- the number of shares of FNB common stock equal to the following: (i)
1.41 multiplied by (ii) the sum of the number of shares of our common
stock with respect to which all cash elections were
41
made and the number of shares of our common stock for which cash was
elected in connection with combination elections multiplied by (iii) the
cash proration factor.
The cash proration factor will be calculated by dividing (i) the amount
that is the difference between (x) the number obtained by dividing 3,276,554 by
1.41 and (y) the sum of the number of shares of our common stock with respect to
which all stock elections were made, the number of shares of our common stock
for which FNB common stock was elected in connection with combination elections
and the number of undesignated shares selected pursuant to the second preceding
bullet point by (ii) the sum of the number of shares of our common stock with
respect to which all cash elections were made and the number of shares of our
common stock for which cash was elected in connection with combination
elections.
No later than five business days prior to the effective time of the merger,
FNB will cause the exchange agent to compute the allocation described above. The
pro rata allocation process or the random selection process to be used by the
exchange agent will consist of such procedures as FNB and we mutually determine.
Because the United States federal income tax consequences of receiving
cash, FNB common stock or both cash and FNB common stock will differ, you are
urged to read carefully the information set forth under the section "Material
Federal Income Tax Consequences of the Merger" beginning on page 62 and to
consult your tax advisors for a full understanding of the tax consequences of
the merger to you. In addition, because the value of 1.41 shares of FNB common
stock can fluctuate during the election period, the economic value per share
received by our shareholders who receive FNB common stock may, as of the date of
receipt by them, be more or less than the $28.00 in cash received by our
shareholders who received cash consideration.
PROCEDURES FOR THE EXCHANGE OF SHARES OF OUR COMMON STOCK
Exchange Fund. At the effective time of the merger, FNB will deposit with
the exchange agent certificates representing the shares of FNB common stock and
cash to be exchanged for shares of our common stock.
After the effective time of the merger, each holder of a Slippery Rock
stock certificate (other than shares for which appraisal rights have properly
been perfected under Pennsylvania law and treasury shares), who has surrendered
such certificate (or customary affidavits and indemnification regarding the loss
or destruction of such certificate) together with duly executed transmittal
materials to the exchange agent, will be entitled to receive a certificate
representing FNB common stock and/or cash in accordance with the election and
allocation procedures described above. See "-- Election Procedure" beginning on
page 38 and "-- Allocation of FNB Common Stock and Cash" beginning on page 40.
Holders of our common stock should not submit their Slippery Rock stock
certificates for exchange until they receive the transmittal instructions and an
election form from the exchange agent.
If your Slippery Rock stock certificate has been lost, stolen or destroyed,
you may receive shares of FNB common stock if you make an affidavit of that
fact. FNB may require that you post a bond in a reasonable amount as an
indemnity against any claim that may be made against FNB with respect to the
lost, stolen or destroyed Slippery Rock stock certificate.
Until you exchange your Slippery Rock stock certificates, you will not
receive any dividends or distributions in respect of any shares of FNB common
stock you are entitled to receive in connection with the merger. Once you
exchange your Slippery Rock stock certificates for FNB stock certificates, you
will receive, without interest, any dividends or distributions with a record
date after the effective time of the merger and payable with respect to your
shares of FNB common stock, as well as any dividends with respect to our common
stock declared before the effective time of the merger but unpaid.
After completion of the merger, no transfers of our common stock issued and
outstanding immediately prior to the completion of the merger will be allowed,
except as required to settle trades executed prior to the completion of the
merger. If certificates representing shares of our common stock are presented
for transfer after the completion of the merger, they will be cancelled and
exchanged for the merger consideration into which such shares represented by
that certificate have been converted.
42
The exchange agent will issue a FNB stock certificate, or a check
representing cash, in a name other than the name in which a surrendered Slippery
Rock stock certificate is registered only if the surrendered Slippery Rock stock
certificate is properly endorsed and otherwise in proper form for transfer and
the person requesting such exchange either affixes any requisite stock transfer
tax stamps to the surrendered certificate, provides funds for their purchase or
establishes to the satisfaction of the exchange agent that such transfer taxes
are not payable.
Our stock certificates may be exchanged for cash and/or FNB stock
certificates with the exchange agent for up to nine months after the completion
of the merger. At the end of that period, any FNB stock certificates and cash
will be returned to FNB. Any holders of our stock certificates who have not
exchanged their certificates will then be entitled to look only to FNB to seek
payment of their claim for cash and/or FNB common stock to be received as merger
consideration.
FNB or the exchange agent may be entitled to deduct and withhold from any
amounts payable to any holder of shares of our common stock such backup
withholding as is required under the Internal Revenue Code of 1986, as amended,
or any state, local or foreign tax law or regulation. Any amounts that are
withheld will be treated as having been paid to the holder of our common stock.
Neither we nor FNB will be liable to any former holder of our common stock
for any shares of FNB common stock or cash that is paid to a public official
pursuant to any applicable abandoned property, escheat or similar laws.
RESALE OF FNB COMMON STOCK
The shares of FNB common stock to be issued pursuant to the merger will be
registered under the Securities Act, and will be freely transferable, except for
shares issued to any Slippery Rock shareholder who may be deemed to be either an
affiliate of (i) FNB, at or after the effective time of the merger, for purposes
of Rule 144 promulgated under the Securities Act or (ii) Slippery Rock, at the
time of our special meeting, for purposes of Rule 145 promulgated under the
Securities Act. Affiliates include persons who control, are controlled by or are
under common control with Slippery Rock or FNB, as the case may be, and
generally consist of executive officers, directors and 10% or greater
shareholders.
Rule 145 will restrict the sale of FNB common stock received in the merger
by affiliates of Slippery Rock and certain of their family members and related
interests. Generally speaking, during the year following the effective time of
the merger, those persons who are affiliates of Slippery Rock at the time of our
special meeting, provided they are not affiliates of FNB at or following the
effective time of the merger, may publicly resell any FNB common stock received
by them in the merger, subject to certain limitations as to, among other things,
the amount of FNB common stock sold by them in any three-month period and the
manner of sale. After the one-year period, such affiliates may resell their
shares without such restrictions so long as there is adequate current public
information with respect to FNB as required by Rule 144.
Persons who are affiliates of FNB after the effective time of the merger
may publicly resell the shares of FNB common stock received by them in the
merger subject to similar limitations and subject to certain filing requirements
specified in Rule 144 and in a manner consistent with FNB's insider trading
policy. At the present time, it is anticipated that only two affiliates of
Slippery Rock will become directors of FNB Bank. Those individuals will become
affiliates of FNB after the merger.
The ability of affiliates to resell shares of FNB common stock received in
the merger under Rules 144 or 145 as summarized above generally will be subject
to FNB having satisfied its reporting requirements under the Securities Exchange
Act of 1934, which we sometimes refer to as the "Exchange Act" in this proxy
statement/prospectus, for specified periods prior to the time of sale.
Affiliates also would be permitted to resell FNB common stock received in the
merger pursuant to an effective registration statement under the Securities Act
or another available exemption from the registration requirements of the
Securities Act. Neither the registration statement of which this proxy
statement/prospectus is a part nor this proxy statement/prospectus cover any
resales of FNB common stock received by persons who may be deemed to be
affiliates of FNB or Slippery Rock in the merger.
43
We have agreed in the merger agreement to use our reasonable best efforts
to identify each person who may be deemed to be our affiliate for purposes of
Rule 145 and to cause such person to deliver to FNB, prior to the date of our
special meeting, a written agreement intended to ensure compliance with the
Securities Act in connection with the sale or other transfer of FNB common stock
received in the merger.
INTERESTS OF OUR DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER
In considering the recommendation of our board of directors that you vote
in favor of the approval of the merger proposal, you should be aware that some
of our executive officers and directors have interests in the merger that are
different from, or in addition to, your interests as our shareholders. Our board
of directors was aware of these interests and took them into account in its
decision to approve the merger agreement.
These interests relate to or arise from, among other things:
- the continued indemnification of our current directors and executive
officers under the merger agreement and providing these individuals with
directors' and officers' insurance;
- the anticipated execution of a separation and release agreement between
us and William C. Sonntag, our President and Chief Executive Officer;
- the anticipated execution of a business development and retention
agreement between FNB and Mr. Sonntag;
- the anticipated execution of a non-competition agreement between FNB and
Mr. Sonntag;
- the potential receipt of severance payments pursuant to key employee
severance agreements;
- the potential for vesting in stock options, retirement benefits,
post-employment life insurance and other employee, officer and director
benefits that otherwise would terminate or lapse; and
- two members of our board of directors will be appointed to FNB Bank's
board of directors.
Indemnification and Directors' and Officers' Insurance. FNB has agreed in
the merger agreement that for six years following the effective time of the
merger, FNB will indemnify and hold harmless, each of the present and former
directors, officers and employees of us and of our subsidiaries, determined as
of the effective time of the merger, against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, arising out of matters
existing or occurring at or prior to the effective time of the merger (including
the transactions contemplated by the merger agreement), whether asserted or
claimed prior to, at or after the effective time of the merger, to the fullest
extent that the person would have been indemnified pursuant to (i) our articles
of incorporation and bylaws and (ii) any agreement, arrangement or understanding
disclosed by us to FNB, in each case as in effect on the date of the merger
agreement.
FNB has also agreed in the merger agreement that for a period of six years
after the effective time of the merger, it will cause the persons serving as our
directors and officers immediately prior to the effective time of the merger to
be covered by the directors' and officers' liability insurance policy we
currently maintain. FNB is permitted to provide a substitute insurance policy of
at least the same coverage and amounts that contains terms and conditions that
are not materially less advantageous than the insurance policy we presently
maintain. In no case, however, will FNB be required to expend in any one year an
amount in excess of 150% of the annual premium currently paid by us for such
insurance (the "Insurance Amount"). If FNB is unable to maintain or obtain such
insurance for the Insurance Amount, then FNB will use its reasonable best
efforts to obtain the most advantageous coverage as is available for the
Insurance Amount.
Separation and Release Agreement with William C. Sonntag. Slippery Rock
and William C. Sonntag, our President and Chief Executive Officer, are expected
to enter into a separation and release agreement at or
44
prior to the effective time of the merger. The principal terms of the separation
and release agreement are described below.
Under the separation and release agreement, Mr. Sonntag's employment with
us will be terminated on the effective date of the merger. Upon the later of (i)
the effective date of the merger, (ii) approval of the separation and release
agreement by bank regulatory authorities or (iii) the 8th day after receipt from
Mr. Sonntag of a fully signed and dated copy of the agreement, Slippery Rock or
FNB, as the case may be, will agree to provide Mr. Sonntag with the following:
- a severance payment equal to 1.5 times Mr. Sonntag's salary and 1.5 times
Mr. Sonntag's average bonus for the last three years. The aggregate
amount of the severance payment will be approximately $272,836. However,
the amount may be reduced to the extent necessary to avoid an imposition
of any excise tax pursuant to Section 4999 of the Internal Revenue Code;
and
- a payment for all unused vacation days for the year 2004 equal to
approximately $6,291.68.
In consideration for these payments, Mr. Sonntag will agree to release
Slippery Rock, FNB and any affiliated entities, and their respective officers,
directors, shareholders, employees and agents, from all claims, demands, suits,
causes of action, damages or expenses that Mr. Sonntag has had or may have in
the future arising out of his employment with us and the termination of his
employment with us.
In addition, at the effective time of the merger, Mr. Sonntag's existing
employment agreement with us will be terminated in connection with the execution
of the separation and release agreement as described above.
The separation and release agreement is subject to approval, consent or
non-objection from the bank regulatory authorities.
Business Retention and Development Agreement with William C. Sonntag.
Because Mr. Sonntag possesses important customer knowledge and customer
contacts, FNB determined that it was critical to retain Mr. Sonntag's expertise
in these areas following the merger. As a result, FNB and Mr. Sonntag are
expected to enter into a business retention and development agreement that will
be effective upon the later of (i) the completion of the merger or (ii) the
approval of such agreement by bank regulatory authorities. The agreement will
terminate three years after its effective date. The principal terms of the
business retention and development agreement are described below.
Following the completion of the merger, Mr. Sonntag will provide the
following services for FNB:
- assistance in identifying, development and generating new business for
FNB;
- assistance in the retention of our existing customers as customers of
FNB;
- serving as liaison between FNB and our former market areas and our
customers; and
- representing FNB in connection with community affairs and community
development outreach initiatives.
In consideration for these services, Mr. Sonntag will receive $80,000
annually, payable in installments twice a month. Any costs associated with Mr.
Sonntag's performance of these services, including telephone, postage, equipment
and supplies, will be at his sole expense unless otherwise agreed in advance by
FNB. Mr. Sonntag will be reimbursed by FNB for all previously approved expenses
such as travel and overnight accommodations.
FNB may terminate the business retention and development agreement at any
time if Mr. Sonntag fails to perform his duties under such agreement to the
reasonable satisfaction of FNB or if Mr. Sonntag violates such agreement or any
other agreement with FNB.
The business retention and development agreement may be subject to
approval, consent or non-objection from the bank regulatory authorities.
Non-Competition Agreement with William C. Sonntag. Because of Mr.
Sonntag's stature in the greater Slippery Rock area, FNB wants to assure itself
that Mr. Sonntag uses his expertise, community relations and
45
presence in the community to bring customers to FNB and is not in a position to
compete with FNB. As a result, Mr. Sonntag and FNB are expected to enter into a
non-competition agreement that will be effective upon the later of (i) the
completion of the merger or (ii) the approval of the non-competition agreement
by bank regulatory authorities and will terminate three years later. We refer to
this three-year period as the "restricted period." The principal terms of the
non-competition agreement as follows:
During the restricted period, Mr. Sonntag will agree not to:
- accept a position as director, employee, consultant, advisor or agent of
any competitive enterprise that is located in any county in Pennsylvania
in which FNB is then doing business;
- acquire an ownership interest, individually or in concert with others, in
a competitive enterprise where such ownership interest would enable Mr.
Sonntag to, directly or indirectly, in a substantial manner, control,
direct, influence, affect or impact the operations, services or business
activities of a competitive enterprise in any county in Pennsylvania in
which FNB is then operating an office;
- solicit, divert or entice (i) any customer or existing business of FNB,
whom Mr. Sonntag solicited, become aware of or transacted business with,
during his engagement by FNB or its predecessors, or (ii) any potential
customer or business identified by FNB, whom Mr. Sonntag solicited,
became aware of or transacted business with, during his engagement by FNB
or its predecessors, in each case for the purpose of selling any product
or service that competes with a product or service offered by FNB;
- employ or assist in employing any present employee of FNB or any of its
affiliates, whether or not such employment is full time or is pursuant to
a written contract, for the purpose of having such employee perform
services for any competitive enterprise or other organization in
competition with the business of FNB or any of its present subsidiaries
or affiliates; or
- in any way, directly or indirectly, make any oral or written statement,
comment, or other communication designed or intended to impugn, disparage
or otherwise malign the reputation, ethics, competency, morality or
qualifications of FNB or any of its directors, employees or customers.
In consideration for his covenants not to compete, Mr. Sonntag will receive
$90,960 annually, payable in installments twice a month for three years.
The term "competitive enterprise" is defined in the non-competition
agreement as any bank holding company, finance company or insured depository
institution, including an institution in the organization stage or in the
process of applying for or receiving appropriate regulatory approval, including,
without limitation, any federal or state chartered bank, savings bank, savings
and loan association, credit union or other financial services provider or
non-banking affiliate thereof offering services or products similar to those
offered by FNB to its customers.
The non-competition agreement may be subject to approval, consent or
non-objection from the bank regulatory authorities.
Key Employee Severance Agreements. Prior to the effective time of the
merger, we expect to enter into key employee severance agreements with the
following six executive officers: Mark Volponi, Chief Financial Officer; Dale
Wimer, Corporate Secretary; Brett Wise, Vice President, Credit Administration;
William Stanley, Vice President, Information Technology; Wendy Murphy, Vice
President, Branch Administration, Human Resources and Keith Warcup, Vice
President, Commercial Lending.
The key employee severance agreements provide that if, within two years
following the date of a change of control of us, (i) we or our successors
terminate the key employee's employment for any reason other than "cause" or the
death of the key employee or (ii) the key employee terminates his employment
with us or our successors because the scope of the key employee's authority,
duties or responsibilities were materially diminished after the change of
control without the key employee's written consent, then the key employee will
be entitled to receive:
- a lump-sum payment in an amount equal to the key employee's annual salary
on the date of termination and the average of his annual and/or incentive
bonuses paid over the three years
46
immediately preceding the date of termination, excluding all other extra
pay such as overtime, commissions, premiums and living or other
allowances;
- reimbursement for out-of-pocket business expenses properly incurred but
not yet reimbursed by us or our successor;
- for one year, health, disability, accident and life insurance coverages
under group plans then in effect on terms offered to current employees;
- any other amounts earned, accrued or owing but not yet paid and any other
benefits in accordance with the terms of any of our plans and programs;
and
- outplacement assistance for one year.
The key employees will receive the benefits described above only if they
sign and do not revoke a release of all claims in a form acceptable to us or our
successors, as the case may be. In addition, the key employees will not receive
such benefits if their employment terminates for "cause" or upon death or
resignation prior to the occurrence of a change of control.
The key employees, during their employment by us or by our successors, as
the case may be, and for a period of one-year following a change of control,
will not, without the prior written consent of the board of directors of FNB:
- solicit, divert or entice (i) any customer or existing business of
Slippery Rock whom the key employee solicited, became aware of or
transacted business with during his employment with us or our
predecessors or (ii) any potential customer or business identified by us,
with whom he solicited, became aware of or transacted business with
during his engagement by us or our predecessors, in each case for the
purpose of selling any product or service that competes with a product or
service offered by us or our present or future subsidiaries or
affiliates; or
- employ or assist in employing any of our present employees or any of our
affiliates, whether or not such employment is full time or is pursuant to
a written contract, for the purpose of having such employee perform
services for any competitive enterprise or other organization in
competition with our business or any of our present subsidiaries or
affiliates.
The merger with FNB will be deemed a change of control with the meaning of
the key employee severance agreements.
The key employee severance agreements are subject to approval, consent or
non-objection from the bank regulatory authorities. Two other key employees of
Slippery Rock Bank, John J. Boczar, Vice President, Wealth Management and Wayne
A. Grinnik, Senior Vice President and Chief Lending Officer, have similar
agreements with us.
Change in Control Severance Benefits Agreements. We entered into a change
in control severance benefit agreement with John Boczar on July 12, 2001 and a
change in control severance benefit agreement with Wayne Grinnik on December 18,
2002. The terms of these agreements provide that if, within two years following
the date of a change of control of us, (i) we or our successors terminate the
key employee's employment for any reason other than the death, disability,
normal retirement or conviction of a felony of the employee or (ii) the employee
terminates his employment with us or our successors because of a change in the
employee's duties, responsibilities, status, title or office; a reduction in the
employee's annual salary; a material diminution in benefits; or a breach or
failure to obtain successor assumption of the agreement, then the employee will
be entitled to receive:
- a lump-sum payment in an amount equal to the employee's annual base
salary on the date of termination (or date of the change in control if
higher);
- reimbursement for legal expenses incurred attempting to obtain severance
benefits;
47
- for one year, health, disability, accident and life insurance coverages
substantially similar to that in effect at time of termination, reduced
to the extent the employee obtains coverage from a subsequent employer;
and
- any other amounts earned, accrued or owing but not yet paid and any other
benefits in accordance with the terms of any of our plans and programs.
These agreements may also require the approvals of the OCC and the FDIC
before any severance benefits may be paid.
Executive Supplemental Life Insurance. We provide supplemental life
insurance coverage for our executives that continues after termination of
employment, provided that the executive's employment terminates after age 65,
after age 55 with age plus service equaling at least 70, due to disability or
after a change in control. In the case of vice presidents and above, the
insurance benefit is two times last annual base salary, and, in the case of
other officers, it is one times last annual base salary. This benefit will vest
for 40 of our officers as a result of the change in control.
FNB Bank Board of Directors. FNB has agreed to add two current members of
our board of directors to the existing board of directors of FNB Bank two
current members of our board of directors, as mutually agreed by FNB and us. Our
designees will serve until the first annual meeting of shareholders of FNB Bank
following the effective time of the merger. Our directors who serve on FNB
Bank's board of directors are expected to be compensated for their services in
that capacity in accordance with FNB Bank's standard director compensation
policy. See "-- Board of Directors of FNB and FNB Bank Following the Merger"
below.
Acceleration and Conversion of Stock Options. All converted stock options
to purchase shares of our common stock held by our directors and executive
officers will become fully-vested and exercisable prior to the merger and, if
not exercised prior to the merger, will be converted automatically into
fully-vested stock options to purchase shares of FNB common stock at the time of
the completion of the merger. As of the date of our special meeting, our
executive officers and directors are expected to hold unvested stock options to
purchase a total of approximately 48,893 shares of our common stock with
exercise prices ranging from $14.14 per share to $19.50 per share.
401(k) Retirement Plan. Under the Slippery Rock Bank 401(k) Profit Sharing
Plan (the "401(k) Plan"), all employer contribution accounts will become fully
vested upon the termination of the 401(k) Plan. We have agreed to terminate the
401(k) Plan immediately prior to the effective time of the merger. Of our senior
management who participate in the 401(k) Plan, two are not currently
fully-vested in their employer contribution accounts. The aggregate employer
contribution account balances for these two individuals who will become vested
in the event the 401(k) Plan is terminated is approximately $3,400.
Other than as set forth above, no director or executive officer of Slippery
Rock has any direct or indirect material interest in the merger, except insofar
as ownership of Slippery Rock common stock might be deemed such an interest.
BOARDS OF DIRECTORS OF FNB AND FNB BANK FOLLOWING THE MERGER
The board of directors of FNB immediately prior to the effective time of
the merger will be the board of directors of FNB following the closing of the
merger. At the closing of the merger, FNB has agreed to add to the existing
board of directors of FNB Bank two current members of our board of directors
mutually agreed upon by FNB and us. Our designees will serve until the first
annual meeting of shareholders of FNB Bank following the effective time of the
merger. FNB Bank anticipates that its first annual shareholder meeting following
the effective time of the merger will be its 2005 annual meeting.
FNB has also agreed, subject to the fiduciary duties of FNB Bank's board of
directors, that FNB Bank will include our designees on the list of nominees for
directors presented by FNB Bank's board of directors for its 2005 annual
meeting.
48
FNB has also agreed, subject to the fiduciary duties of FNB Bank's board of
directors, that if one of our designees dies or becomes incapacitated prior to
the closing of the merger, our remaining designee will recommend to the FNB Bank
board of directors a person to serve as successor, provided that person is
reasonably acceptable to the FNB Bank board of directors.
FNB has agreed, subject to the fiduciary duties of FNB Bank's board of
directors, that if, during the term prior to the FNB Bank 2005 annual meeting or
the term immediately following the FNB Bank 2005 annual meeting any one of our
designees vacates his seat on the FNB Bank board of directors for any reason, it
will appoint one of our current directors to replace the vacating director. In
addition, if there is a vacancy on FNB Bank's board of directors during the
first initial term or the longest term to which any of our designees is elected
at the FNB Bank 2005 annual meeting, FNB has agreed that FNB Bank will consider
one of our current directors to fill the vacancy, provided that FNB Bank is not
obligated to appoint one of our current directors to its board of directors
under such circumstances.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
Completion of the merger is subject to several federal bank regulatory
agency filings and approvals. The merger cannot be completed unless FNB, FNB
Bank and Slippery Rock Bank receive prior approvals or exemptions from the OCC
and the Federal Reserve Board.
Neither FNB nor we can predict whether or when the required regulatory
approvals or exemptions will be obtained. As of the date of this proxy
statement/prospectus, all applications and requests for waivers or exemptions
were filed with the FDIC, the OCC and the Federal Reserve Board.
Federal Reserve Board. Because FNB and we are bank holding companies
registered under the Bank Holding Company Act of 1956, as amended, the merger is
subject to prior approval or waiver from the Federal Reserve Board under Section
3 of the Bank Holding Company Act.
Office of the Comptroller of the Currency. The merger of Slippery Rock
Bank with and into FNB is subject to the prior approval of the OCC under the
Bank Merger Act. On July 16, 2004, FNB and FNB Bank filed its application for
the bank merger with the OCC. In reviewing applications under the Bank Merger
Act, the OCC must consider, among other factors, the financial and managerial
resources and future prospects of the existing and proposed institutions, the
convenience and needs of the communities to be served and the effectiveness of
both institutions in combating money laundering. In addition, the OCC may not
approve a transaction:
- that will result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of
banking in any part of the United States;
- if its effect in any section of the country may be substantially to
lessen competition or tend to create a monopoly; or
- if it would in any other manner be a restraint of trade,
unless the OCC finds that the anticompetitive effects of the transaction are
clearly outweighed by the public interest and the probable effect of the
transaction on meeting the convenience and needs of the communities to be
served.
Under the Community Reinvestment Act, the OCC must also take into account
the record of performance of each of the merging banks in meeting the credit
needs of the entire community, including low and moderate income neighborhoods
served by each institution. As part of the merger review process, the federal
supervisory agencies frequently receive comments and protests from community
groups and others. Each of Slippery Rock Bank and FNB Bank received
"Satisfactory" or "Outstanding" performance ratings in their most recent
Community Reinvestment Act evaluations.
The OCC is also authorized to, but generally does not, hold a public
hearing or meeting in connection with an application under the Bank Merger Act.
A decision by the OCC that such a hearing or meeting would
49
be appropriate regarding any application could prolong the period during which
the application is subject to review.
Mergers approved by the OCC under the Bank Merger Act, with certain
exceptions, may not be consummated until 30 days after such approval, during
which time the United States Department of Justice may challenge such
transaction on antitrust grounds and may require the divestiture of certain
assets and liabilities. With the approval of the OCC and the Department of
Justice, the waiting period may be, and customarily is, reduced to no less than
15 days. There can be no assurance that the Department of Justice will not
challenge the merger or, if such a challenge is made, as to the result of such
challenge.
Other Regulatory Approvals. FNB and Slippery Rock are not aware of any
other regulatory approvals that would be required for completion of the merger
or the bank merger except as described above. Should any other approvals be
required, it is presently contemplated that such approvals would be sought.
There can be no assurance, however, that any other approvals, if required, will
be obtained.
There can be no assurance that the regulatory authorities described above
will approve the merger or the bank merger, and if such transactions are
approved, there can be no assurance as to the date such approvals will be
received. In any event, FNB and Slippery Rock do not expect to obtain all
required regulatory approvals until during the third quarter of 2004. The merger
cannot proceed in the absence of the receipt of all requisite regulatory
approvals and the expiration of statutory antitrust waiting periods. See "The
Merger Agreement -- Conditions to Completion of the Merger" beginning on page 59
and "The Merger Agreement -- Amendment, Waiver and Termination of the Merger
Agreement" beginning on page 60.
The approval of any application merely implies the satisfaction of
regulatory criteria for approval, which do not include review of the merger from
the standpoint of the adequacy of consideration to be received by our
shareholders. Further, regulatory approvals do not constitute an endorsement or
recommendation of the merger.
PUBLIC TRADING MARKETS
FNB common stock is listed on the New York Stock Exchange under the symbol
"FNB." Our common stock is currently traded in the local over-the-counter market
and its price is quoted on the OTC Bulletin Board under the symbol "SRCK". Upon
completion of the merger, our common stock will no longer be quoted on the OTC
Bulletin Board and will be deregistered under the Exchange Act. The FNB common
stock issuable pursuant to the merger agreement will be listed on the New York
Stock Exchange.
The shares of FNB common stock to be issued in connection with the merger
will be freely transferable under the Securities Act, except for shares issued
to any of our shareholders that may be deemed either to be an affiliate of (i)
FNB at or after the effective time of the merger or (ii) us at the time of our
special meeting, as discussed in "-- Resale of FNB Common Stock" beginning on
page 43.
As reported on the NYSE, the closing price per share of FNB common stock on
July 20, 2004 was $20.43. The closing bid price per share of our common stock on
July 20, 2004 was $27.50. Based on the FNB closing price per share and the
exchange ratio, the implied per share value of our common stock was $28.81 as of
that date.
FNB DIVIDENDS
During 2003, FNB paid cash dividends on its common stock, as adjusted to
reflect the 5% stock dividend declared on April 28, 2003, totaling $0.93 per
share, and cash dividends of $.23 per share for each of the first two quarters
of 2004. Based on the 1.41 share exchange ratio and FNB's current dividend rate,
holders of our common stock would experience an anticipated annual dividend rate
increase of approximately 115% (from $.60 to approximately $1.29) per share of
our common stock equivalent). FNB currently pays a quarterly cash dividend of
$0.23 per share, although the FNB board of directors may change this dividend
policy at any time.
50
FNB shareholders are entitled to receive cash dividends when and if
declared by the FNB board of directors out of funds legally available for
dividends. The FNB board of directors will periodically consider the payment of
dividends, taking into account FNB's financial condition and level of net
income, FNB's future prospects, economic conditions, industry practices and
other factors, including applicable banking laws and regulations.
The primary source of FNB's funds for cash dividends to its shareholders is
dividends received from its subsidiaries, including FNB Bank. FNB Bank is
subject to various regulatory policies and requirements relating to the payment
of dividends to FNB, including requirements to maintain capital above regulatory
minimums. The appropriate federal regulatory authority is authorized to
determine under certain circumstances relating to the financial condition of a
bank or bank holding company that the payment of dividends would be an unsafe or
unsound practice and to prohibit payment thereof. In addition, the ability of
FNB and the ability of FNB Bank to pay dividends may be affected by the various
minimum capital requirements and the capital and non-capital standards
established under Federal Deposit Insurance Corporation Improvement Act of 1991.
APPRAISAL RIGHTS OF DISSENTING SHAREHOLDERS
Appraisal rights are statutory rights that enable shareholders to dissent
from an extraordinary transaction, such as a merger, and to demand that the
corporation pay the fair value for their shares as determined by a court in a
judicial proceeding instead of receiving the consideration offered to
shareholders in connection with the extraordinary transaction.
A holder of shares of our common stock is entitled to exercise the rights
under Subchapter D of the BCL, which we refer to as "Subchapter D" in this proxy
statement/prospectus, to object to the merger and to make a written demand that
we pay in cash the fair value of the shares held by the shareholder as
determined in accordance with Subchapter D. The following summary does not
purport to be a complete statement of the provisions of Subchapter D and is
qualified in its entirety by reference to the provisions of Subchapter D, which
are set forth in full as Appendix C to this proxy statement/prospectus.
The fair value of our shares of common stock is defined in Subchapter D as
the fair value of the shares immediately before the effective time of the
merger, taking into account all relevant factors, but excluding any appreciation
or depreciation in anticipation of the merger. You should recognize that the
fair value could be more than, the same as or less than the merger consideration
of 1.41 shares of FNB common stock or $28.00 in cash per share of our common
stock that a shareholder will receive under the terms of the merger agreement if
the shareholder does not exercise appraisal rights with respect to the
shareholder's shares. Opinions of investment banking firms as to the fairness
from a financial point of view of consideration received in a merger, such as
the opinion issued by Griffin, are not necessarily determinative of fair value
under Subchapter D.
Except as otherwise provided below, only a record holder of shares of our
common stock is entitled to assert appraisal rights with respect to the shares
registered in the holder's name. A record holder, such as a broker or depository
nominee, who holds shares as a nominee for others, may exercise appraisal rights
with respect to all (but not less than all) of the shares held for one or more
beneficial owners, while not exercising the rights for other beneficial owners.
The demand for payment described below must show the name and address of the
person or persons on whose behalf the appraisal rights are being exercised. A
beneficial owner who is not a record holder who wishes to exercise appraisal
rights may do so only if the shareholder submits a written consent of the record
holder with his demand for payment. Accordingly, if you are a beneficial owner
of shares, you are advised to consult promptly with your record holder as to the
timely exercise of appraisal rights. A beneficial owner may not assert appraisal
rights with respect to some but less than all shares owned by him, whether or
not all of the shares so owned by him are registered in his name.
51
To exercise appraisal rights and obtain payment of the fair value of his
shares, a shareholder must satisfy all the following conditions:
- He must notify us in writing before date of our special meeting of his
intention to demand that he be paid the fair value for his shares if the
merger is consummated. Neither a proxy nor a vote against the merger will
constitute the required notice.
- He must make no change in the beneficial ownership of his shares from the
date he files the written notice continuously through the effective time
of the merger.
- He must refrain from voting his shares in favor of the merger. Neither an
abstention from voting with respect to, nor a failure to vote in person
or by proxy against approval of, the merger proposal will constitute a
waiver of a shareholder's appraisal rights. However, a signed proxy that
is returned without any instruction as to how the proxy should be voted
will be voted in favor of the merger proposal and will be deemed to be a
waiver of the shareholder's appraisal rights.
A notice of intention to demand payment must clearly state that the
shareholder intends to demand that he be paid the fair value of his shares if
the merger is consummated, must provide the name, address and telephone number
of the shareholder making the demand and must be sent to us. A shareholder who
exercises appraisal rights will retain all of his other rights as a shareholder
until the merger is consummated.
If the merger is approved at our special meeting, we will mail to each
shareholder who complied with the procedures listed above a notice stating where
and when a demand for payment of the fair value of one's shares must be sent,
and where and when stock certificates must be deposited to obtain payment of the
fair value. The notice will be accompanied by a demand for payment form, which
will include a request that the shareholder certify the date on which he (or the
person on whose behalf the shareholder exercises appraisal rights) acquired
beneficial ownership of the shares. A shareholder exercising appraisal rights
will have 30 days from the date that we mail the notice to send in his demand
for payment form and to deposit his stock certificate. If a shareholder fails to
send in his demand for payment or stock certificate on a timely basis, the
shareholder will lose his appraisal rights under Subchapter D, but will retain
all other rights as a shareholder until the merger is consummated.
If the merger has not been effectuated within 60 days after the date set
for demanding payment and depositing certificates, we will return any
certificates that have been deposited. Once the deposited certificates are
returned, we may thereafter send a new notice to demand payment, which will have
the same effect as the original notice.
Promptly after completion of the merger, or upon timely receipt of demand
for payment if the merger has already been effectuated, we will either remit to
shareholders who have made a demand and have deposited their stock certificates
the amount we estimate to be the fair value of the shares, or give written
notice that no remittance will be made. The remittance or notice must be
accompanied by the following documents:
- Our closing balance sheet and statement of income for the fiscal year
ending not more than 16 months before the date of remittance or notice,
together with our latest available interim financial statements;
- A statement of our estimate of the fair value of the shares; and
- A notice of the right of the shareholder to demand payment or
supplemental payment, as the case may be, accompanied by a copy of
Subchapter D.
If we do not remit the amount of our estimate of the fair value of the
shares, we will return all stock certificates that the shareholders have
deposited. We may make a notation on any of the certificates that a demand for
payment has been made. If shares with respect to which a notation has been so
made are transferred, a transferee of the shares will not acquire by virtue of
the transfer any rights in the shares other than those that the original
shareholder had after making a demand for payment.
If we give notice of our estimate of the fair value of the shares without
remitting payment, or if we remit payment of the amount for any shareholder's
shares and the shareholder believes that the amount stated or remitted is less
than the fair value of his shares, he may elect to send to us his own estimate
of the fair value of
52
the shares, which will be deemed a demand for payment of the amount of the
deficiency. If a shareholder does not file his own estimate within 30 days after
our mailing of our remittance or notice, the shareholder will be entitled to no
more than the amount stated on the notice or remitted to him by us.
If any demand for payment remains unsettled within 60 days after the latest
to occur of: (i) completion of the merger, (ii) timely receipt of any demands
for payment or (iii) timely receipt of any estimates by shareholders of the fair
value of their shares, we may file an application for relief in court requesting
that the fair value of the shares be determined by the court. While we do not
anticipate filing an application for the court to determine the fair market
value of the shares, if we elected to file an application, the court's
determination of the fair market value of the shares may be higher or lower than
the merger consideration.
Any shareholder who exercises appraisal rights, wherever residing, whose
demand has not been settled, will be made a party to the proceeding. A copy of
the application for relief will be served on each such shareholder. If a
shareholder is a nonresident of Pennsylvania, the application will be served in
the manner provided or prescribed by or under applicable provisions of
Pennsylvania law relating to bases of jurisdiction and interstate and
international procedure. The jurisdiction of the court will be plenary and
exclusive. The court may appoint an appraiser to receive evidence and recommend
a decision on the issue of fair value. The appraiser will have the power and
authority that is specified in the order of appointment or in any amendment of
the order. Each shareholder who is made a party will be entitled to recover the
amount by which the fair value of his shares is found to exceed the amount, if
any, previously remitted, plus interest from the effective time of the merger
until the date of payment. Interest will be at a rate that is fair and equitable
under all of the circumstances, taking into account all relevant factors.
If we fail to file an application for relief, any shareholder who made a
demand for payment and who has not already settled his claim against us may file
an application for relief in our name at any time within 30 days after the
expiration of the 60-day period referred to above. If a shareholder does not
file an application within the 30-day period, the shareholder will be paid our
estimate of the fair value of his shares and no more, and may bring an action to
recover any amount not previously remitted.
In general, the costs and expenses of any valuation proceeding, including
the reasonable compensation and expenses of any appraiser appointed by the
court, will be determined by the court and assessed against us. However, any
part of the costs and expenses may be apportioned and assessed as the court
deems appropriate against all or some of the shareholders who are parties to the
proceeding and whose action in demanding supplemental payment the court finds to
be dilatory, obdurate, arbitrary, vexatious or in bad faith. If the court finds
that the services of counsel for any shareholder were of substantial benefit to
other shareholders similarly situated and should not be assessed against us, it
may award to those counsel reasonable fees to be paid out of the amounts awarded
to the shareholders who were benefited.
From and after the effective time of the merger, shareholders exercising
their appraisal rights will not be entitled to receive payment of dividends or
other distributions on their shares of our common stock.
ANY SHAREHOLDER CONSIDERING EXERCISING APPRAISAL RIGHTS UNDER SUBCHAPTER D
IS ADVISED TO CONSULT WITH LEGAL COUNSEL. A SHAREHOLDER WHO FAILS TO FOLLOW WITH
PARTICULARITY ALL OF THE STEPS REQUIRED TO PRESERVE AND PERFECT HIS APPRAISAL
RIGHTS LOSES THE RIGHT TO SEEK APPRAISAL UNDER SUBCHAPTER D, IN WHICH EVENT,
UPON THE SURRENDER OF CERTIFICATES REPRESENTING SHARES OF OUR COMMON STOCK HELD
BY THE SHAREHOLDER, THE SHAREHOLDER WILL RECEIVE THE PER SHARE MERGER
CONSIDERATION SET FORTH IN THE MERGER AGREEMENT WITHOUT INTEREST FOR THE SHARES
HE HOLDS, SUBJECT TO THE ALLOCATION PROVISIONS IN THE MERGER AGREEMENT.
THE MERGER AGREEMENT
The following section describes certain aspects of the merger, including
material provisions of the merger agreement. The following description of the
merger agreement is subject to, and qualified in its entirety by reference to,
the merger agreement, which is included as Appendix A to this proxy
statement/prospectus and is incorporated by reference in this proxy
statement/prospectus. We urge you to read the merger agreement carefully and in
its entirety.
53
TERMS OF THE MERGER
The merger agreement provides for the merger of Slippery Rock with and into
FNB. FNB will be the surviving corporation in the merger. Each share of our
common stock issued and outstanding immediately prior to the completion of the
merger, except for shares of our common stock held by FNB or shares as to which
appraisal rights are perfected, will be converted into the right to receive, at
the election of the Slippery Rock shareholder, subject to the allocation
provisions in the merger agreement, either 1.41 shares of FNB common stock or
$28.00 in cash.
Our shareholders may elect whether they want to receive all FNB common
stock, all cash or a combination of cash and FNB common stock. However,
shareholder elections are subject to possible proration because the allocation
procedures in the merger agreement provide that 15% of the shares of our common
stock will be exchanged for cash and 85% of the shares of our common stock will
be exchanged for 3,283,725 shares of FNB common stock. The actual allocation of
cash and FNB common stock will be dependent on the elections made by our
shareholders and may result in a Slippery Rock shareholder receiving a mixture
of FNB common stock and cash regardless of that shareholder's choice. See "The
Merger -- Election Procedure" beginning on page 38.
TREATMENT OF SLIPPERY ROCK STOCK OPTIONS
The merger agreement provides that, upon completion of the merger, each
outstanding and unexercised stock option to acquire shares of our common stock
will cease to represent the right to acquire or receive shares of our common
stock and will be converted into, and become a right, to acquire the number of
shares of FNB common stock equal to the number of shares of our common stock
covered by the option times the exchange ratio, with the exercise price of each
converted stock option equaling the per share exercise price of our stock option
divided by the exchange ratio.
FNB has agreed to assume our obligations with respect to our stock options
that are converted into FNB stock options in accordance with the terms of the
plans under which they have been granted. FNB has agreed to reserve additional
shares of FNB common stock to satisfy its obligations under the converted stock
options. If necessary, FNB will file a registration statement with the SEC on an
appropriate form to the extent necessary to register FNB common stock subject to
the converted stock options.
CLOSING AND EFFECTIVE TIME OF THE MERGER
The merger will be completed only if all of the following occur:
- our shareholders approve and adopt the merger agreement;
- we obtain all required governmental and regulatory consents and
approvals; and
- all other conditions to the merger discussed in this proxy
statement/prospectus and the merger agreement are either satisfied or
waived.
The merger will become effective when articles of merger are filed with the
Secretary of State of the State of Florida and with the Secretary of the
Commonwealth of the Commonwealth of Pennsylvania. In the merger agreement, we
have agreed to cause the completion of the merger to occur no later than the
fifth business day following the satisfaction or waiver of the last of the
conditions specified in the merger agreement, or on another mutually agreed
date, provided that such date shall not be less than 10 days following our
special meeting. It currently is anticipated that the effective time of the
merger will occur on or about October 1, 2004, but we cannot guarantee when or
if the merger will be completed. FNB's articles of incorporation and FNB's
bylaws as in effect immediately prior to the effective time will be FNB's
articles of incorporation and FNB's bylaws upon completion of the merger.
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
The merger agreement contains generally reciprocal customary
representations and warranties of Slippery Rock and FNB relating to their
respective businesses. No representation or warranty will be deemed untrue or
54
incorrect as a consequence of the existence or absence of any fact, event or
circumstance unless that fact, event or circumstance has had or is reasonably
likely to have a material adverse effect on the party making the representation
or warranty, disregarding any materiality or material adverse effect
qualifications in any representations or warranties. The representations in the
merger agreement do not survive the effective time of the merger.
Each of FNB and Slippery Rock has made representations and warranties
regarding, among other things:
- corporate matters, including due organization, qualification and
authority;
- capitalization;
- subsidiaries;
- corporate power and authority to conduct its business;
- authority relative to execution and delivery of the merger agreement and
the absence of conflicts with, or violations of, organizational documents
or other obligations as a result of the merger;
- required governmental filings and consents for approval of the merger and
the absence of any defaults;
- the timely filing of reports with governmental entities, and the absence
of investigations by regulatory agencies;
- financial statements and the absence of undisclosed liabilities;
- broker's fees payable in connection with the merger;
- the absence of material adverse effects;
- legal proceedings;
- tax matters;
- material contracts and the absence of defaults thereunder;
- employee benefit plans;
- fiduciary accounts;
- real property;
- intellectual property;
- loans and nonperforming and classified assets;
- labor matters
- SEC reports;
- compliance with applicable laws;
- insurance;
- the absence of agreements with regulatory agencies;
- allowance for loan losses;
- interest rate risk management instruments;
- books and records;
- environmental liabilities;
- the inapplicability of state anti-takeover laws;
- the absence of knowledge preventing the merger from qualifying as a
reorganization;
55
- the receipt of a fairness opinion from our financial advisor; and
- the accuracy of information supplied for inclusion in this proxy
statement/prospectus and other similar documents.
We have agreed to certain customary covenants that place restrictions on us
and our subsidiaries until the effective time of the merger. In general, we
agree to:
- conduct our business in the ordinary course in all material respects;
- use reasonable best efforts to maintain and preserve intact our business
organization, employees and advantageous business relationships; and
- take no action that would adversely affect or materially delay our
ability to obtain any necessary regulatory approvals of the merger,
perform our covenants or complete the merger.
We have further agreed in the merger agreement that, except with FNB's
prior written consent, we will not, among other things, undertake the following
actions:
- issue, sell or otherwise permit to become outstanding any shares of our
common stock or options or other rights to acquire our common stock,
except for currently outstanding stock options;
- make, declare or pay any dividends or other distributions on any shares
of our capital stock, other than regular quarterly dividends not in
excess of $0.15 per share;
- adjust, split, combine, reclassify, redeem, purchase or acquire any
shares of our common stock;
- except as contemplated by the merger agreement, grant any salary increase
other than:
- changes required by applicable law;
- changes pursuant to existing contractual obligations;
- retention bonuses not in excess of $125,000 in the aggregate to such
persons and in such amounts as we and FNB mutually agree;
- severance payments as disclosed to FNB; and
- grants of options to newly-hired employees consistent with past
practice.
- hire or promote any employee, except to satisfy existing contractual
obligations or to fill vacancies where employment is terminable at our
will and where the total compensation is less than $40,000 annually;
- enter into, establish, amend or make any contributions to any employee
benefit plan, except as is required by applicable law or to satisfy
existing contractual obligations or take any action to accelerate the
vesting or exercisability of stock options or other benefits;
- other than in the ordinary course of business, sell, transfer, mortgage,
encumber or otherwise dispose of any assets, deposits, business or
properties;
- acquire, other than by foreclosure or in satisfaction of debts in the
ordinary course of business, any assets, business, deposits or properties
of any other person;
- make any capital expenditure other than as disclosed to FNB in amounts
not exceeding $15,000 individually or $50,000 in the aggregate;
- amend our articles of incorporation or by-laws;
- implement or adopt any change in our tax accounting or financial
accounting principles, practices or methods, except as required by
changes in law or regulations or generally accepted accounting
principles;
56
- other than in the ordinary course of business and as permitted by the
merger agreement, enter into or terminate any material contract or amend
any material contract in any material respect;
- enter into any settlement of any action, proceeding, order or
investigation to which we are a party that involves the payment of more
than $5,000 by us or that would impose any material restriction on our
business;
- enter into any new line of business or change our lending, investment,
underwriting, risk and asset liability management or other banking and
operating policies that are material to us, except as required by
applicable law or open or close any branch location;
- enter into any derivative contract;
- other than in the ordinary course of business incur any indebtedness or
assume, guarantee, endorse or otherwise become responsible for the
indebtedness of any other person or prepay any indebtedness;
- other than in the ordinary course of business, acquire any debt security
or equity security other than federal funds or United States Government
or agency securities with a term of one year or less or restructure or
materially change our investment securities portfolio or gap position;
- other than in the ordinary course of business, make, renew or otherwise
modify any loan, loan commitment or other extension of credit, provided
that we may not make, renew or otherwise modify (i) any loan (other than
a permanent loan secured by an owner-occupied 1-4 family single-family
residence) with a principal balance in excess of $250,000, (ii) any
permanent loan secured by an owner-occupied 1-4 single-family residence
with a principal balance in excess of $333,700 or (iii) any loan that
contains terms that involve an exception to our credit policy manual;
- other than in the ordinary course of business, make any investment or
commitment to invest in real estate or a real estate development project
other than in foreclosures, acquisitions in a fiduciary capacity or in
satisfaction of a debt previously contracted;
- take any action that would, or is reasonably likely to, prevent the
merger from qualifying as a reorganization;
- fail to hold our special meeting;
- take any action that is reasonably likely to result in any
representations or warranties under the merger agreement becoming untrue
in any material respect; or
- enter into any contract or otherwise agree or commit to do any of the
foregoing.
FNB agrees that, except with our prior written consent, FNB will not, among
other things, undertake the following actions:
- take any action that would, or is reasonably likely to, prevent the
merger from qualifying as a reorganization;
- take any action that is intended, or is reasonably likely to, result in:
- any representations or warranties under the merger agreement becoming
untrue in any material respect;
- any of the conditions to the merger not being satisfied; or
- a material violation of the merger agreement or the bank merger
agreement; or
- take any action that would adversely affect or materially delay necessary
governmental or regulatory approvals, or our ability to perform our
covenants and agreements under the merger agreement or to consummate the
transactions contemplated by the merger agreement.
The merger agreement also contains mutual covenants relating to the
preparation of this proxy statement/prospectus and the holding of our special
meeting of shareholders, access to information of the
57
other company and public announcements with respect to the transactions
contemplated by the merger agreement.
DECLARATION AND PAYMENT OF DIVIDENDS
We have agreed that, until the merger is completed, we will not pay or make
any dividends or distributions on our common stock other than regular quarterly
cash dividends not in excess of $0.15 per share of our common stock. FNB and we
also have agreed to coordinate declaration of dividends so that holders of our
common stock will not receive two dividends, or fail to receive one dividend,
for any quarter with respect to their Slippery Rock common stock and any FNB
common stock any holder receives in the merger.
AGREEMENT NOT TO SOLICIT OTHER OFFERS
We have also agreed that we, our subsidiaries and our and their officers,
directors, employees, agents and representatives will not, directly or
indirectly:
- initiate, solicit, encourage or take any action to facilitate any
inquiries or proposals for any "Acquisition Proposal", as defined below;
or
- participate in any discussions or negotiations, furnish any information
to, or approve, recommend or enter into any agreement, regarding any
"Acquisition Proposal."
However, prior to the effective time of the merger, we may consider and
participate in discussions and negotiations with respect to a "Superior
Proposal", as defined below, if:
- we have first entered into a confidentiality agreement with the party
proposing the Superior Proposal on terms comparable to our
confidentiality agreement with FNB; and
- our board of directors concludes in good faith, after consultation with
our outside legal counsel and our financial advisor, that failure to take
these actions would cause our board of directors to violate its fiduciary
duties to our shareholders. We have also agreed, at least 72 hours prior
to providing any information to any person or entering into any
discussions or negotiations with any person, to notify FNB in writing of
the name of such person and the material terms and conditions of any such
Superior Proposal. The merger agreement permits our board of directors to
withdraw or qualify its recommendation of our merger with FNB if our
board of directors concludes in good faith, after consultation with our
outside counsel and financial advisors, that failure to take such actions
would breach its fiduciary duties to our shareholders.
We have agreed:
- to notify FNB promptly, and in any event within 24 hours, after we
receive any Acquisition Proposal, or any material change to any
Acquisition Proposal or any request for nonpublic information relating to
us, and to provide FNB with relevant information regarding the
Acquisition Proposal or request;
- to keep FNB fully informed, on a current basis, of any material changes
in the status and any material changes in the terms of any such
Acquisition Proposal; and
- to cease any existing discussions or negotiations with any persons with
respect to any Acquisition Proposal.
As used in the merger agreement, an "Acquisition Proposal" means any
inquiry, proposal, offer, regulatory filing or disclosure of an intention to do
any of the foregoing regarding any:
- direct or indirect acquisition of a substantial portion of the net
revenues, net income or net assets of us or any of our subsidiaries;
- direct or indirect acquisition of 10% or more of the voting power of our
common stock;
- tender offer or exchange offer that if consummated would result in any
person beneficially owning 10% or more of our common stock; or
58
- merger, consolidation, business combination, recapitalization,
liquidation or dissolution involving us, other than our proposed merger
with FNB.
As used in the merger agreement, "Superior Proposal" means any bona fide,
unsolicited written Acquisition Proposal made by a third party to acquire more
than 50% of the voting power of our then outstanding shares of common stock or
all or substantially all of our consolidated assets for a consideration
consisting of cash and/or securities that is on terms that our board of
directors in good faith concludes, after consultation with our financial
advisors and outside counsel, and taking into account, among other things, all
legal, financial, regulatory and other respects of the proposal and the person
making the proposal, including any break-up fees, expense reimbursement
provisions and conditions to consummation:
- are more favorable from a financial point of view to our shareholders
than the terms of the proposed merger with FNB;
- have financing, to the extent required, that is fully committed or
reasonably determined to be available; and
- make the transaction reasonably capable of being completed.
EXPENSES AND FEES
In general, each of FNB and Slippery Rock will be responsible for all
expenses incurred by it in connection with the negotiation and completion of the
transactions contemplated by the merger agreement. However, the costs and
expenses of printing and mailing this proxy statement/prospectus, and all filing
and other fees paid to the SEC in connection with the merger, will be shared
equally by FNB and us.
CONDITIONS TO COMPLETION OF THE MERGER
Our respective obligations to complete the merger are subject to the
fulfillment or waiver of certain conditions, including:
- the approval and adoption of the merger agreement and the approval of the
merger by our shareholders;
- the receipt and effectiveness of all governmental and other approvals,
registrations and consents, and the expiration of all related waiting
periods required to complete the merger;
- the absence of any law, statute, regulation, judgment, decree, injunction
or other order in effect by any court or other governmental entity that
prohibits completion of the transactions contemplated by the merger
agreement;
- the registration statement with respect to the FNB common stock to be
issued in the merger shall have become effective under the Securities Act
and no stop order or proceedings for that purpose will have been
initiated or threatened by the SEC;
- the approval of the listing of the FNB common stock to be issued in the
merger on the New York Stock Exchange, subject to official notice of
issuance;
- the truth and correctness of the representations and warranties of FNB
and Slippery Rock in the merger agreement, subject to the materiality
standard provided in the merger agreement, and the performance by each of
us in all material respects of our obligations under the merger agreement
and the receipt by each of us of certificates from the other to that
effect; and
- the receipt by each of FNB and Slippery Rock of a legal opinion with
respect to certain federal income tax consequences of the merger.
We cannot provide assurance as to when or if all of the conditions to the
merger can or will be satisfied or waived by the appropriate party. As of the
date of this proxy statement/prospectus, we have no reason to believe that any
of these conditions will not be satisfied.
59
AMENDMENT, WAIVER AND TERMINATION OF THE MERGER AGREEMENT
Subject to applicable law, FNB and Slippery Rock may amend the merger
agreement by written agreement authorized by their boards of directors. However,
after approval of the merger proposal by our shareholders, there may not be,
without further approval of our shareholders, any amendment of the merger
agreement that requires such further approval. Either party to the merger
agreement may waive any inaccuracies in the representations and warranties of
the other party, or, subject to applicable law, may waive compliance by the
other party with any of the other agreements or conditions contained in the
merger agreement. The merger agreement may be terminated at any time prior to
closing by mutual consent and by either party in the following circumstances:
- if any of the required regulatory approvals for the merger are denied and
the denial is final and nonappealable;
- if the merger has not been completed by February 28, 2005, unless the
failure to complete the merger by that date is due to the terminating
party's actions;
- provided the terminating party is not then in material breach, if there
is a breach by the other party that would cause the failure of the
closing conditions described above, unless the breach is capable of
being, and is, cured within 30 days of notice of the breach; or
- if our shareholders do not approve and adopt the merger agreement and
approve the merger by the requisite vote, provided that we are not in
material breach of our covenant to hold our special meeting and our board
of directors is not in breach of its covenant to recommend such approval.
FNB may terminate the merger agreement at any time prior to our special
meeting in the following circumstances:
- if we have breached in any material respect our obligations with respect
to Acquisition Proposals and Superior Proposals as described on pages 58
and 59;
- if we have failed to have our board of directors recommend that our
shareholders approve and adopt the merger agreement and approve the
merger, or if our board of directors has withdrawn or modified its
recommendation in a manner adverse to FNB; or
- if we have breached in any material respect our obligation to hold our
special meeting.
We may terminate the merger agreement during the two-day period following
receipt of the last required bank regulatory authority approval if both of the
following conditions apply:
- if the average closing price of FNB common on the New York Stock Exchange
as reported in The Wall Street Journal for the 20 consecutive trading
days preceding the commencement of the aforesaid two-day period is less
than the product of 0.800 and the closing price of FNB common stock on
May 7, 2004 ($19.23); and
- if the number obtained by dividing such average closing price by the
closing price of FNB common stock on May 7, 2004 ($19.23) is less than
the number obtained by dividing the price of the Nasdaq Bank Index on the
date of commencement of the aforesaid two-day period by the price of the
Nasdaq Bank Index on May 7, 2004.
The merger agreement also provided us with certain rights to terminate the
merger agreement until the date of mailing of this proxy statement/prospectus in
connection with a Superior Proposal. We did not exercise these rights.
60
EFFECT OF TERMINATION; BREAK-UP FEE
If the merger agreement is terminated, it will become void, and there will
be no liability on the part of FNB or us, except that:
- termination will not relieve a breaching party from liability for any
willful breach giving rise to the termination; and
- the confidentiality agreement between the parties will survive
termination.
We are obligated under the merger agreement to pay FNB a break-up fee of
$4,250,000 in the following three circumstances:
- if FNB terminates the merger agreement prior to our special meeting
because we have breached our obligations with respect to Acquisition
Proposals or Superior Proposals in a manner adverse to FNB, our board of
directors refuses to or withdraws its recommendation of the merger
proposal or we fail to hold our special meeting;
- if we terminate the merger agreement and accept an Acquisition Proposal
that is a Superior Proposal prior to the date of our special meeting and,
after giving FNB an opportunity to adjust the terms of the merger
agreement such that the Acquisition Proposal no longer remains a Superior
Proposal, the Acquisition Proposal remains a Superior Proposal; or
- if FNB or we terminate the agreement because our shareholders did not
approve the merger proposal provided that an Acquisition Proposal shall
have been made after May 5, 2004 and prior to such termination that shall
not have been withdrawn prior to such termination and within 12 months
following such termination we merge with or are acquired by a third party
or a third party acquires more than 50% of our common stock or other
specified events occur within such time period.
EMPLOYEE BENEFIT PLANS
The merger agreement provides that as soon as administratively practicable
after completion of the merger FNB will provide our employees with benefits and
compensation plans that are equivalent to those provided to similarly situated
FNB employees. Eligible Slippery Rock employees whose employment is terminated
at any time during the first year following completion of the merger will be
entitled to receive severance benefits in accordance with the terms of a
schedule to the merger agreement.
FNB will generally provide our employees with service credit for their
service with us for purposes of eligibility, participation, vesting and levels
of benefits, but generally not for benefit accruals under defined benefit
pension plans, under the employee benefit and compensation plans of FNB in which
such employees are eligible to participate following the merger. FNB has agreed
to waive specified exclusions and limitations under its welfare benefit plans in
which our employees are eligible to participate following the merger under the
corresponding Slippery Rock's plan in which the applicable employee participated
prior to the merger and to give our employees credit, for the plan year in which
they start participating in any such plan, towards applicable deductibles and
annual out-of-pocket limits for expenses incurred before such participation.
ACCOUNTING TREATMENT
The merger will be accounted for as a "purchase," as that term is used
under GAAP, for accounting and financial reporting purposes. Under purchase
accounting, our assets, including identifiable intangible assets, and
liabilities, including executory contracts and other commitments, as of the
effective time of the merger will be recorded at their respective fair values
and added to the balance sheet of FNB. Any excess of the purchase price over the
fair values will be recorded as goodwill. Financial statements of FNB issued
after the merger would reflect these fair values and the results of operations
for us from the date of acquisition. See "Selected Consolidated Unaudited Pro
Forma Financial Information" beginning on page 14.
61
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion is a summary description of the material U.S.
federal income tax consequences of the merger applicable to Slippery Rock
shareholders. This discussion does not purport to consider all aspects of U.S.
federal income taxation that may be relevant to a Slippery Rock shareholder.
This discussion is based upon the provisions of the Internal Revenue Code,
existing regulations and administrative and judicial interpretations of the
Internal Revenue Code, all of which are as in effect as of the date of this
proxy statement/prospectus and are subject to change, possibly with retroactive
effect. This discussion applies only to Slippery Rock shareholders who hold
their shares of Slippery Rock stock as capital assets within the meaning of
Section 1221 of the Internal Revenue Code and does not apply to the following:
- shareholders who received their shares of Slippery Rock stock from the
exercise of employee stock options or similar securities or otherwise as
compensation;
- shareholders who hold their shares of Slippery Rock stock as part of a
"straddle," "hedge," "conversion transaction," "synthetic security" or
other integrated investment;
- shareholders, including, without limitation, financial institutions,
insurance companies, tax-exempt organizations, dealers or traders in
securities and shareholders subject to the alternative minimum tax, who
may be subject to special rules;
- shareholders whose functional currency is not the U.S. dollar; or
- shareholders who, for U.S. federal income tax purposes, are non-resident
alien individuals, foreign corporations, foreign partnerships, foreign
estates or foreign trusts.
This discussion also does not consider the effect of any foreign, state or
local laws or any U.S. federal laws other than those pertaining to the income
tax.
Accordingly, you should consult your tax advisor to determine the tax
effect to you of the merger, including the application and effect of foreign or
U.S. federal, state, local or other tax laws.
TAX OPINION AND MERGER
Completion of the merger is contingent upon the receipt by:
- FNB of an opinion from its outside counsel to the effect that the merger
will be treated as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code; and
- Slippery Rock of an opinion from its outside counsel to the effect that
the merger will be treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
The tax opinions of Duane Morris LLP, counsel for FNB, and Manatt, Phelps &
Phillips, LLP, counsel for Slippery Rock, are included as exhibits 8.1 and 8.2
to the registration statement filed with the SEC of which this proxy
statement/prospectus is a part. These opinions are based upon, among other
things, representations of fact contained in certificates of officers of FNB and
Slippery Rock. We will not seek any ruling from the Internal Revenue Service as
to the U.S. federal income tax consequences of the merger, and the opinions of
counsel are not binding upon the Internal Revenue Service or any court.
Accordingly, we can give no assurance that the Internal Revenue Service will not
contest the conclusions expressed in the opinions or that a court will not
sustain that contest.
Assuming the merger is consummated in the manner described in this proxy
statement/prospectus and in accordance with the merger agreement, the merger
will qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code. The following discussion sets forth the U.S. federal
income tax consequences to Slippery Rock shareholders of the qualification of
the merger as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code. As discussed below, the U.S. federal income tax
consequences of the merger to a Slippery Rock shareholder depend on the form of
merger consideration received by the Slippery Rock shareholder.
62
SLIPPERY ROCK SHAREHOLDERS WHO RECEIVE SOLELY FNB COMMON STOCK
A Slippery Rock shareholder who exchanges shares of Slippery Rock common
stock solely for FNB common stock will not recognize any gain or loss on that
exchange, except to the extent the shareholder receives cash in lieu of a
fractional share of FNB common stock, as discussed below. The aggregate adjusted
tax basis of FNB common stock received will equal the Slippery Rock
shareholder's aggregate adjusted tax basis in the shares of Slippery Rock common
stock surrendered in the merger, decreased by the amount of any tax basis
allocable to any fractional share of FNB common stock for which cash is
received. The holding period of the FNB common stock received in the merger will
include the holding period of the Slippery Rock common stock surrendered in the
merger. If a Slippery Rock shareholder has differing tax bases and/or holding
periods in respect of the shareholder's shares of Slippery Rock common stock,
the shareholder should consult with a tax advisor in order to identify the tax
bases and/or holding periods of the particular shares of FNB common stock that
the shareholder receives.
SLIPPERY ROCK SHAREHOLDERS WHO RECEIVE CASH AND FNB COMMON STOCK
If the consideration received in the merger by a Slippery Rock shareholder
consists of part cash and part FNB common stock, the shareholder will recognize
gain, but not loss, to the extent of the lesser of the excess of the sum of the
amount of cash and the fair market value, as of the date of the merger, of the
shares of FNB common stock received, over the adjusted basis of the shares of
Slippery Rock common stock surrendered in exchange for FNB common stock, and the
amount of cash received by the shareholder in the exchange. For this purpose, a
Slippery Rock shareholder must calculate gain or loss separately for each
identifiable block of shares of Slippery Rock common stock that such shareholder
surrenders pursuant to the merger, and a Slippery Rock shareholder cannot offset
a loss recognized on one block of such shares of Slippery Rock common stock
against a gain recognized on another block of such shares of Slippery Rock
common stock.
In the case of a Slippery Rock shareholder who recognizes gain on the
exchange, if the exchange sufficiently reduces the shareholder's proportionate
stock interest, as discussed below, the gain will be characterized as a capital
gain. If the exchange does not sufficiently reduce the shareholder's
proportionate stock interest, that gain will be taxable as a dividend to the
extent of the shareholder's ratable share of accumulated earnings and profits,
as calculated for U.S. federal income tax purposes, and the remainder, if any,
of that recognized gain will be capital gain. Any recognized capital gain will
be long-term capital gain if the shareholder's holding period for the
surrendered shares of Slippery Rock common stock exceeds one year.
The determination of whether the exchange sufficiently reduces a Slippery
Rock shareholder's proportionate stock interest will be made in accordance with
Section 302 of the Internal Revenue Code, taking into account the stock
ownership attribution rules of Section 318 of the Internal Revenue Code. Under
Section 318, individuals are treated as constructively owning stock owned by
specified members of the individual's family or by certain entities in which the
individual or his family members have a beneficial interest and certain entities
are treated as constructively owning stock owned by persons having a beneficial
interest in the entity. For purposes of determining whether the exchange
sufficiently reduces a shareholder's proportionate stock interest, a Slippery
Rock shareholder is treated as if (1) all of that shareholder's shares of
Slippery Rock common stock were first exchanged in the merger for FNB common
stock, and (2) a portion of that FNB common stock was then redeemed for the cash
actually received in the merger. The Slippery Rock shareholder's hypothetical
stock interest in FNB (both actual and constructive) after hypothetical step (2)
is compared to the Slippery Rock shareholder's hypothetical stock interest in
FNB, both actual and constructive, after hypothetical step (1). Dividend
treatment will apply unless (A) the shareholder's stock interest in FNB has been
completely terminated, (B) there has been a "substantially disproportionate"
reduction in the shareholder's stock interest in FNB (i.e., the interest after
hypothetical step (2) is less than 80% of the interest after hypothetical step
(1)), or (C) the exchange is not "essentially equivalent to a dividend." While
the determination is based on a Slippery Rock shareholder's particular facts and
circumstances, the Internal Revenue Service has indicated in published rulings
that a distribution is not "essentially equivalent to a dividend" and will
therefore result in capital gain treatment if the distribution results in any
actual reduction in the stock interest of an extremely small minority
shareholder in a publicly held corporation and the shareholder exercises no
control with respect to corporate affairs.
63
Because the determination of whether a payment will be treated as having
the effect of the distribution of a dividend generally will depend upon the
facts and circumstances of each Slippery Rock shareholder, you are strongly
advised to consult your own tax advisors regarding the tax treatment of cash
received in the merger, including the application of the constructive ownership
rules of the Internal Revenue Code and the effect of any transactions in FNB
common stock or shares of Slippery Rock common stock by you.
The basis in the FNB common stock of a Slippery Rock shareholder who
receives cash and FNB common stock in the merger in the FNB common stock
received will equal the Slippery Rock shareholder's adjusted basis in the
shareholder's shares of Slippery Rock common stock increased by any gain
recognized as a result of the merger and reduced by the amount of cash received
in the merger. The holding period of the FNB common stock received will include
the holding period of the shares of Slippery Rock common stock surrendered in
the merger. Cash received and gain realized in connection with the receipt of
cash in lieu of a fractional share of FNB common stock will not be taken into
account in making the computations of gain realized or recognized and of the
basis in the FNB common stock received. Rather, such cash and gain are treated
as described below.
SLIPPERY ROCK SHAREHOLDERS WHO RECEIVE SOLELY CASH
The exchange of shares of Slippery Rock common stock solely for cash
generally will result in recognition of gain or loss by the shareholder in an
amount equal to the difference between the amount of cash received and the
shareholder's adjusted tax basis in the shares of Slippery Rock common stock
surrendered. The amount and character of gain or loss will be computed
separately for each block of Slippery Rock common stock that was purchased by
the holder. The gain or loss recognized will be long-term capital gain or loss
if the shareholder's holding period for the shares of Slippery Rock common stock
surrendered exceeds one year. There are limitations on the extent to which
shareholders may deduct capital losses from ordinary income.
If a Slippery Rock shareholder who receives only cash in exchange for all
of the shareholder's shares of Slippery Rock common stock actually or
constructively owns FNB common stock after the merger (as the result of
constructive ownership of shares of Slippery Rock common stock that are
exchanged for FNB common stock in the merger, prior actual or constructive
ownership of FNB common stock or otherwise), all or a portion of the cash
received by the shareholder may be taxed as a dividend, and those shareholders
should consult their tax advisors to determine the amount and character of the
income recognized in connection with the merger.
FRACTIONAL SHARES
A Slippery Rock shareholder who receives cash in lieu of a fractional share
of FNB common stock will be treated as having first received the fractional
share of FNB common stock in the merger and then as having received cash in
exchange for the fractional share interest. A Slippery Rock shareholder
generally will recognize gain or loss in an amount equal to the difference
between the amount of cash received in lieu of the fractional share of FNB
common stock and the portion of the basis in the shares of Slippery Rock common
stock allocable to that fractional interest. A Slippery Rock shareholder who
receives a fractional share of FNB common stock generally will not recognize any
gain or loss on that fractional share.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES TO FNB AND SLIPPERY ROCK
Neither FNB nor Slippery Rock will recognize gain or loss as a result of
the merger.
TAX CONSEQUENCES IF THE MERGER DOES NOT QUALIFY AS A REORGANIZATION UNDER
SECTION 368(A) OF THE INTERNAL REVENUE CODE
If the Internal Revenue Service determines that the merger of Slippery Rock
with and into FNB does not qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, the Slippery Rock shareholders
would be required to recognize gain or loss with respect to each share of
Slippery Rock common stock surrendered in the merger in an amount equal to the
difference between (a) the sum of the fair market value of any FNB common stock
and cash received in the merger and (b) the tax basis of the shares of
64
Slippery Rock common stock surrendered in exchange therefor. Such gain or loss
will be long-term capital gain or loss if such shareholder held the Slippery
Rock common stock for more than one year, and will be short-term capital gain or
loss if such shareholder held the Slippery Rock common stock for less than one
year. The amount and character of gain or loss will be computed separately for
each block of Slippery Rock common stock that was purchased by the holder in the
same transaction. A Slippery Rock shareholder's aggregate tax basis in the FNB
common stock received in the merger would in this case be equal to its fair
market value at the time of the closing of the merger, and the holding period
for the FNB common stock would begin the day after the closing of the merger.
BACKUP WITHHOLDING
Payments in connection with the merger may be subject to "backup
withholding" at a rate of 28%, unless a Slippery Rock shareholder, (1) provides
a correct taxpayer identification number (which, for an individual shareholder,
is the shareholder's social security number) and any required information to the
exchange agent, (2) provides a certification of foreign status on Form W-8 , or
successor form, or (3) is a corporation or comes within certain exempt
categories and otherwise complies with applicable requirements of the backup
withholding rules. A Slippery Rock shareholder who does not provide a correct
taxpayer identification number may be subject to penalties imposed by the
Internal Revenue Service. Any amount paid as backup withholding does not
constitute an additional tax and will be creditable against the shareholder's
U.S. federal income tax liability. Each Slippery Rock shareholder should consult
with his own tax advisor as to his qualification for exemption from backup
withholding and the procedure for obtaining this exemption. You may prevent
backup withholding by completing a substitute form W-9 (contained with the
election form to be forwarded to you) and submitting it to the exchange agent
for the merger when you submit your Slippery Rock share certificates for
exchange.
DESCRIPTION OF FNB CAPITAL STOCK
FNB COMMON STOCK
General. FNB is authorized to issue 500,000,000 shares of common stock,
par value $0.01 per share, of which 46,296,327 shares were outstanding as of
June 30, 2004. FNB common stock is traded on the New York Stock Exchange under
the symbol "FNB." FNB provides transfer agent and registrar services for its
common stock.
As of December 31, 2003, approximately 3.1 million shares of FNB common
stock were reserved for issuance upon the exercise of outstanding options. In
addition, FNB has reserved 4.2 million shares of common stock for issuance in
connection with the merger and the Slippery Rock stock options being assumed by
FNB. After taking into account these reserved shares, FNB will have
approximately 446.2 million shares of authorized but unissued common stock
available for issuance for other corporate purposes.
Voting and Other Rights. The holders of FNB common stock are entitled to
one vote per share, and in general a majority of the votes cast with respect to
a matter is sufficient to authorize action upon routine matters. Directors are
elected by a plurality of votes cast, and each shareholder entitled to vote in
an election of directors is entitled to vote each share of stock for as many
persons as there are directors to be elected. In elections of directors,
shareholders do not have the right to cumulate their votes. See "Comparison of
Shareholder Rights -- Amendment of Articles of Incorporation and Bylaws"
beginning on page 73 and "Comparison of Shareholder Rights -- Vote Required for
Extraordinary Corporate Transactions" on page 74.
In the event of a liquidation, holders of FNB common stock are entitled to
receive pro rata any assets legally available for distribution to shareholders
with respect to shares held by them, subject to any prior rights of the holders
of any FNB preferred stock then outstanding.
FNB common stock does not carry any preemptive rights, redemption
privileges, sinking fund privileges or conversion rights. All outstanding shares
of FNB common stock are, and the shares of FNB common stock to be issued to our
shareholders in the merger will be, validly issued, fully paid and
nonassessable.
65
Distributions. The holders of FNB common stock are entitled to receive
such dividends or distributions as the FNB board of directors may declare out of
funds legally available for such payments. The payment of distributions by FNB
is subject to the restrictions of Florida law applicable to the declaration of
distributions by a business corporation. A corporation generally may not
authorize and make distributions if, after giving effect thereto, it would be
unable to meet its debts as they become due in the usual course of business or
if the corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed, if it were to be dissolved at
the time of distribution, to satisfy claims upon dissolution of shareholders who
have preferential rights superior to the rights of the holders of its common
stock. In addition, the payment of distributions to shareholders is subject to
any prior rights of any then outstanding FNB preferred stock. Stock dividends,
if any are declared, may be paid from authorized but unissued shares.
The ability of FNB to pay distributions is affected by the ability of its
subsidiaries to pay dividends. The ability of FNB's subsidiaries, as well as of
FNB, to pay dividends in the future is influenced by bank regulatory
requirements and capital guidelines.
FNB PREFERRED STOCK
General. FNB is authorized to issue 20,000,000 shares of preferred stock,
par value $0.01 per share, of which no shares were outstanding as of June 30,
2004. The FNB board of directors has the authority to issue FNB preferred stock
in one or more series and to fix the dividend rights, dividend rates,
liquidation preferences, conversion rights, voting rights, rights and terms of
redemption, including sinking fund provisions, and the number of shares
constituting any such series, without any further action by the shareholders of
FNB unless such action is required by applicable rules or regulations or by the
terms of any other outstanding series of FNB preferred stock. Any shares of FNB
preferred stock that may be issued may rank prior to shares of FNB common stock
as to payment of dividends and upon liquidation.
66
COMPARISON OF SHAREHOLDER RIGHTS
After the merger, you will become shareholders of FNB and your rights will
be governed by FNB's articles of incorporation, FNB's bylaws and the Florida
Business Corporations Act. The following summary discusses differences between
FNB's articles of incorporation and bylaws and our articles of incorporation and
bylaws and the differences between the BCL and the Florida Business Corporations
Act. For information as to how to get the full text of each document, see "Where
You Can Find More Information" beginning on page 82.
The following summary is not intended to be a complete statement of the
differences affecting the rights of our shareholders who become FNB
shareholders, but rather summarizes the more significant differences affecting
the rights of such shareholders and certain important similarities. The summary
is qualified in its entirety by reference to the articles of incorporation and
bylaws of FNB, our articles of organization and by-laws and applicable laws and
regulations.
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
SLIPPERY ROCK FNB
------------- ---
Our articles of incorporation provide that a Under Florida law, unless the articles of
director, any class of directors or our incorporation of a corporation provide
entire board of directors may be removed otherwise, directors may be removed by the
without cause by the affirmative vote of the corporation's shareholders with or without
holders of at least 75% of our outstanding cause; provided that, if a director is
shares entitled to vote in the election of elected by a voting group, only the
directors. Pennsylvania law and our articles shareholders of that voting group may
of incorporation provide that vacancies on participate in the vote to remove him or her.
our board of directors, including vacancies Article 6 of FNB's articles of incorporation,
resulting from an increase in the number of however, provides that, subject to the rights
directors, may be filled by a majority vote of holders of any preferred stock, any
of the remaining directors, though less than director or the entire board of directors may
a quorum, except that a vacancy resulting be removed without cause by the affirmative
from a removal of a director resulting from a vote of the holders of at least 75% of the
shareholder vote may be filled by the then outstanding shares of FNB common stock.
shareholders at the same meeting at which the Florida law and FNB's bylaws provide that
removal occurs. vacancies on the FNB board of directors,
including vacancies resulting from an
increase in the number of directors or
resulting from removal from office, may be
filled by a majority vote of the remaining
directors, though less than a quorum.
QUORUM OF SHAREHOLDERS
SLIPPERY ROCK FNB
------------- ---
Pennsylvania law provides that the holders of FNB's bylaws and Florida law provide that the
a majority of votes entitled to be cast on a holders of a majority of votes entitled to be
matter to be considered, represented in cast on a matter to be considered,
person or by proxy, constitute a quorum of represented in person or by proxy, constitute
that voting group for action on the matter. a quorum of that voting group for action on
Pennsylvania law further provides that, if a the matter. FNB's bylaws further provide that
meeting called for the election of directors whenever the holders of any class or series
is adjourned, the shareholders who attend the of shares are entitled to vote separately on
resumption of the adjourned meeting, although a specified item of business, the holders of
less than a quorum, shall nevertheless a majority of the votes of that class or
constitute a quorum for the purpose of series entitled to be cast, represented in
electing directors. person or by proxy, shall constitute a quorum
of such class or series.
67
ADJOURNMENT AND NOTICE OF SHAREHOLDER MEETINGS
SLIPPERY ROCK FNB
------------- ---
Pennsylvania law provides that any regular or The FNB bylaws and Florida law provide that,
special meeting of shareholders may be if a quorum is not present or represented at
adjourned for such periods as may be directed a shareholders meeting, the shareholders
by the shareholders present in person or by present and entitled to vote at the meeting
proxy at the meeting who are entitled to vote may adjourn such meeting from time to time.
at that meeting.
CALL OF SPECIAL MEETINGS OF SHAREHOLDERS
SLIPPERY ROCK FNB
------------- ---
Our bylaws provide that special meetings of FNB's bylaws provide that special meetings of
our shareholders may be called by our board, shareholders may be called only by the
our president or by the holders of at least chairman of the board, the president or the
20% of the votes entitled to be cast on any secretary of FNB pursuant to a resolution or
issue to be considered at the special meeting written direction of at least 75% of the
of shareholders. members of the FNB board or by the holders of
not less than 10% of the outstanding shares
of FNB.
SHAREHOLDER CONSENT IN LIEU OF MEETING
SLIPPERY ROCK FNB
------------- ---
Pennsylvania law provides that any action Florida law permits any action that may be
that may be taken at a meeting of the taken at a meeting of the shareholders of FNB
shareholders may be taken without a meeting, to be taken without a meeting, if, prior or
if a consent or consents in writing setting subsequent to the action, one or more written
forth the action so taken shall be signed by consents signed by a majority the
all of the shareholders who would be entitled shareholders who would be entitled to vote at
to vote at a meeting for such purpose and a meeting for such purpose are delivered to
shall be filed with our secretary. FNB.
DISSENTERS' RIGHTS
SLIPPERY ROCK FNB
------------- ---
Under Pennsylvania law, dissenters' rights Under Florida law, dissenters' appraisal
are generally afforded to shareholders in the rights are available in connection with
event of corporate actions involving certain corporate actions involving certain mergers,
mergers, share exchanges, transfers of all or share exchanges, consolidations, sales or
substantially all of the assets of the other dispositions of all or substantially
corporation, as well as certain other all of the property of the corporation other
fundamental transactions in which the than in the ordinary course of business, the
corporation is not the acquiring corporation. approval of certain control-share
See "Provisions with Possible Anti-Takeover acquisitions and amendments of the articles
Effects" for a description of special of incorporation where such amendment would
dissenters' rights provisions under adversely affect the shareholder by:
Pennsylvania law applicable to registered
companies such as us in a transaction where a - altering or abolishing any preemptive
controlling interest in a corporation is rights attached to such shareholder's
acquired. shares;
Under Pennsylvania law, dissenters' rights
generally are denied to holders of shares - altering or abolishing the voting rights
that are listed on a national securities pertaining to such shareholder's shares,
exchange, quoted on the Nasdaq National except as such rights may be affected by
Market or held beneficially or of record by the voting rights of new shares then being
more than 2,000 shareholders when a plan of authorized of any existing or new class or
merger converts the shares into shares of the series of shares;
acquiring, surviving, new or other
corporation, whether or not the shares of the - effecting an exchange, cancellation or
acquiring, surviving, new or other reclassification of any of such
corporation are listed on the exchange or shareholder's shares, when such amendment
privately held. would alter or abolish the shareholder's
voting rights or alter his percentage of
equity in the corporation, or effecting a
reduction or cancellation of accrued
dividends or other arrearages;
68
SLIPPERY ROCK FNB
------------- ---
- reducing the stated redemption price of any
of the shareholder's redeemable shares,
altering or abolishing any provision
relating to any sinking fund for the
redemption or purchase of any of his shares
or making any of the shareholder's shares
subject to redemption when they are not
otherwise redeemable;
- making non-cumulative, in whole or in part,
dividends on any of his preferred shares
which had theretofore been cumulative;
- reducing the stated dividend preference of
any of his preferred shares; or
- reducing any stated preferential amount
payable on the shareholder's preferred
shares upon voluntary or involuntary
liquidation.
Under Florida law, appraisal rights generally
are denied in the case of a merger or share
exchange or a proposed sale or exchange of
property when the corporation's shares to be
received are listed on a national securities
exchange or the Nasdaq National Market and
when the corporation's shares are held of
record by at least 2,000 persons and such
outstanding shares have a market value of at
least $10 million, not counting the value of
certain insider shares.
DERIVATIVE ACTIONS
SLIPPERY ROCK FNB
------------- ---
Under Pennsylvania law, derivative actions Under Florida law, a derivative action may be
may be brought by a shareholder, even if the brought only by a person who was a
shareholder was not a shareholder at the time shareholder of FNB at the time of the alleged
of the alleged wrongdoing, if a court wrongdoing unless the person became a
determines that there is a strong prima facie shareholder through transfer by operation of
case in favor of the claim and a serious law from one who was a shareholder at the
injustice will result without such action. time of the alleged wrongdoing.
DIVIDENDS AND DISTRIBUTIONS
SLIPPERY ROCK FNB
------------- ---
Subject to any restrictions in a Subject to any restrictions in a
corporation's articles of incorporation, corporation's articles of incorporation,
Pennsylvania law generally provides that a Florida law generally provides that a
corporation may make distributions to its corporation may make distributions to its
shareholders unless after giving effect shareholders unless after giving effect
thereto (i) the corporation would not be able thereto (i) the corporation would not be able
to pay its debts as they become due in the to pay its debts as they become due in the
usual course of business, or (ii) the usual course of business, or (ii) the
corporation's total assets would be less than corporation's total assets would be less than
the sum of its total liabilities plus the the sum of its total liabilities plus the
amount that would be needed upon the amount that would be needed upon the
dissolution of the corporation to satisfy the dissolution of the corporation to satisfy the
preferential rights of shareholders having preferential rights of shareholders having
superior preferential rights to those superior preferential rights to those
shareholders receiving the distribution. Our shareholders receiving the distribution.
articles of incorporation do not contain any FNB's articles of incorporation do not
restrictions on the payment of dividends or contain any restrictions on the payment of
the making of distributions to shareholders. dividends or the making of distributions to
shareholders.
69
CLASSES OF STOCK WITH PREFERENTIAL RIGHTS
SLIPPERY ROCK FNB
------------- ---
We only have one authorized class of stock. The articles of incorporation of FNB
authorize it to issue multiple classes of
stock that may have rights preferential to
the FNB common stock to be received by
Slippery Rock shareholders as a result of the
merger. No such stock is currently
outstanding. Such preferential rights include
rights to preferential dividend rates
compared to such rates for FNB common stock,
rights to prevent dividends being paid on the
common stock until dividends have been paid
on the preferred stock, rights to
preferential payments upon any liquidation of
FNB, independent class voting rights with
respect to certain fundamental transactions
and rights to convert shares of FNB preferred
stock into FNB common stock at a conversion
ratio that protects such preferred
shareholders against a decline in the price
of FNB common stock by further diluting the
common stock.
DIRECTOR QUALIFICATIONS, NUMBER AND TERM
SLIPPERY ROCK FNB
------------- ---
Our articles of incorporation provide that The FNB bylaws provide that the board of
our board of directors shall consist of not directors of FNB shall consist of such number
less than 5 nor more than 25 members divided of directors as may be determined by the
into three classes, as equal in number as board of directors of FNB, which number shall
possible, with each director serving a be not less than 5 nor more than 25. The FNB
staggered three-year term. Under Pennsylvania bylaws further provide that the FNB board of
law, a director must be at least 18 years of directors shall be divided into three
age, but need not be a resident of classes, with each director having a
Pennsylvania. staggered, three-year term. Under Florida law
and the FNB bylaws, a director need not be a
resident of Florida or a shareholder of FNB
to qualify to serve as a director.
NOMINATION OF DIRECTORS
SLIPPERY ROCK FNB
------------- ---
Our bylaws do not provide a process for FNB's bylaws provide that directors may be
nominating directors. Under Pennsylvania law, nominated for election to the FNB board by
shareholders may vote for any qualified either a resolution of the board or by a
person regardless of whether they have been shareholder of FNB. The FNB bylaws provide
nominated unless the corporation has contrary that a shareholder may make nominations for
provisions in its articles of incorporation director by providing FNB with written notice
or bylaws. of the shareholder's intention to nominate a
director, which written notice generally must
be received not less than 14 days prior to
the meeting of shareholders called for the
election of directors. The notice of a
shareholder's intention to nominate a
director must include, among other things:
- the name and address of the nominating
shareholder;
- a representation that the shareholder is a
holder of record of FNB voting stock and
intends to appear in person or by proxy at
the meeting to
70
SLIPPERY ROCK FNB
------------- ---
nominate the person or persons specified in
the notice;
- information regarding each nominee as would
have been required under the SEC's proxy
rules;
- a description of all arrangements or
understandings among the shareholder and
each nominee pursuant to which the
nomination or nominations are to be made by
the shareholder; and
- the written consent of each nominee to
serve as a director of FNB if so elected.
CUMULATIVE VOTING
SLIPPERY ROCK FNB
------------- ---
In an election of directors under cumulative Under Florida law, cumulative voting in the
voting, each share of stock normally having election of directors is not available unless
one vote for each director to be elected is provided for in the articles of incorporation
entitled to a number of votes equal to the of the corporation. FNB has not provided for
number of directors to be elected times the cumulative voting in its articles of
number of shares held with the right to incorporation.
distribute that number of votes among one or
more candidates. Under Pennsylvania law,
cumulative voting in the election of
directors is available unless otherwise
provided for in the articles of incorporation
of the corporation. We have precluded
cumulative voting in the election of
directors in our articles of incorporation.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
SLIPPERY ROCK FNB
------------- ---
Pennsylvania law permits a corporation to Florida law permits a corporation to
indemnify its directors and officers against indemnify a director or officer who
expenses, judgments, fines and amounts paid was or is a party to any threatened,
in settlement incurred by them in connection pending or completed action, suit or
with any pending, threatened or completed other type of proceeding other than an action
action or proceeding, and permits such by or in the right of the corporation by
indemnification against expenses incurred in reason of the fact that he is or was a
connection with any pending, threatened or director or officer or is now serving at the
completed derivative action, if the director request of the corporation as a director or
or officer has acted in good faith and in a officer of another entity against expenses,
manner he reasonably believed to be in or not including attorneys' fees, judgments, fines,
opposed to the best interests of the penalties and amounts paid in settlement
corporation and, with respect to any criminal actually and reasonably incurred by him in
proceeding, had no reasonable cause to connection with such action, suit or
believe his conduct was unlawful. proceeding. These indemnification rights
Pennsylvania law further provides that apply if the director or officer acted in
expenses incurred in defending any action or good faith and in a manner in which he
proceeding may be paid by the corporation in reasonably believed to be in or not opposed
advance of the final disposition upon receipt to the best interest of the corporation and,
of an undertaking by or on behalf of the with respect to a criminal action or
director or officer to repay the amount if it proceeding, had no reasonable cause to
is ultimately determined that the director or believe his conduct was unlawful. In
officer is not entitled to be indemnified by addition, under Florida law, FNB may
the corporation. indemnify and hold harmless an officer or
director who is a party in an action by or in
Under Pennsylvania law, the statutory the right of the corporation against
provisions for indemnification and expenses, including attorneys' fees, and
advancement of expenses are non-exclusive certain amounts paid in settlement, actually
with respect to any other rights, and reasonably incurred in connection with
71
SLIPPERY ROCK FNB
------------- ---
such as contractual rights or rights granted the defense or settlement of such proceeding,
pursuant to a bylaw or by vote of including any appeal thereof. Such
shareholders or disinterested directors, to indemnification shall be authorized if the
which a person seeking indemnification or director or officer has acted in good faith
advancement of expenses may be entitled. Such and in a manner in which he reasonably
rights may, for example, provide for believed to be in or not opposed to the best
indemnification against judgments, fines and interest of the corporation, except
amounts paid in settlement incurred by the indemnification is not authorized where there
indemnified person in connection with is an adjudication of liability, unless a
derivative actions. Pennsylvania law permits court determines, in view of all the
such derivative action indemnification in any circumstances, that such person is fairly and
case except where the act or failure to act reasonably entitled to indemnity for such
giving rise to the claim for indemnification expenses.
is determined by a court to have constituted
willful misconduct or recklessness. Florida law further provides that
Pennsylvania law and our bylaws permit us to indemnification against the costs and
purchase and maintain insurance on behalf of expenses of defending any action is required
our directors and officers against any to be made to any officer or director who is
liability asserted against the director or successful in defending an action of the type
officer and incurred in such capacity, referred to in the immediately preceding
whether or not we would have the power to paragraph. Except with regard to the costs
indemnify a director or officer against such and expenses of successfully defending an
liability. Our articles of incorporation action as may be ordered by a court,
further provide that our directors and indemnification as described in the previous
officers are entitled to be indemnified to paragraph is only required to be made to a
the fullest extent permitted by law. director or officer if a determination is
made that indemnification is proper under the
circumstances. Such determination shall be
made in accordance with the provisions of
Florida law.
Florida law further provides that expenses
incurred in defending any action or
proceeding may be paid by the corporation in
advance of the final disposition upon receipt
of an undertaking by or on behalf of the
director or officer to repay the amount if it
is ultimately determined that the director or
officer is not entitled to be indemnified by
the corporation.
Under Florida law, the provisions for
indemnification and advancement of expenses
are not exclusive. Accordingly, a corporation may
make any other or further indemnification or
advancement of expenses of any of its
officers or directors, both as to action in
his official capacity and as to action in
another capacity while holding such office.
Under Florida law, indemnification or
advancement of expenses, however, shall
generally not be made to or on behalf of any
officer or director if a judgment or other
final adjudication establishes that his
actions or omissions were material to the
cause of action so adjudicated and
constitute:
- a violation of the criminal law;
- a transaction from which the officer or
director derived an improper personal
benefit;
- an unlawful distribution; or
- willful misconduct or a conscious disregard
for the best interest of the corporation.
Florida law and the articles of incorporation
of FNB permit FNB to purchase and maintain
72
SLIPPERY ROCK FNB
------------- ---
insurance on behalf of any director or
officer of FNB against any liability asserted
against the director or officer and incurred
in such capacity, whether or not FNB would
have the power to indemnify the director or
officer against such liability. The articles
of incorporation of FNB further provide that
its directors, officers and any other person
designated by the board of directors of FNB
is entitled to be indemnified to the fullest
extent permitted by law.
DIRECTOR LIABILITY
SLIPPERY ROCK FNB
------------- ---
Pennsylvania law provides that the bylaws of Under Florida law, a director is not liable
a corporation may include a provision for monetary damages for any statement, vote,
limiting the personal liability of directors decision or failure to act regarding
for monetary damages for actions taken as a corporate management or policy, unless the
director, other than as would constitute director breached or failed to perform his or
criminal conduct or with respect to liability her duties as a director and the director's
for nonpayment of taxes, and except to the breach of, or failure to perform, those
extent that the director has breached or duties constitutes a violation of criminal
failed to perform his or her duties to the law, self- dealing, willful misconduct or
corporation and the breach or failure to recklessness. The bylaws of FNB contain a
perform constitutes self-dealing, willful provision limiting the liability of its
misconduct or recklessness. Our bylaws do not directors to the fullest extent permitted by
contain such a provision. law.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
SLIPPERY ROCK FNB
------------- ---
Pennsylvania law requires the affirmative In order to amend the articles of
vote of a majority of the votes cast by all incorporation of a Florida corporation,
shareholders entitled to vote thereon to Florida law generally requires that, unless
amend a corporation's articles of the articles of incorporation provide for a
incorporation, provided that shareholder greater vote, the votes cast in favor of such
approval is not required for certain an amendment must exceed the votes cast
non-material amendments. Our articles of against such an amendment at a meeting at
incorporation provide that, generally, our which a quorum is present; provided, however,
articles may be amended by our shareholders that a majority of the outstanding votes
as provided by Pennsylvania law. However, the entitled to be cast on the amendment is
affirmative vote of the holders of at least required with respect to amendments that
75% of our outstanding shares is required to would create dissenters' rights under Florida
amend provisions in our articles of law. Further, under Florida law shareholder
incorporation relating to the approval rights approval is not required for certain
of shareholders with respect to certain non-material amendments.
corporate transactions. In the case of a
registered corporation such as us, Under Florida law, a corporation's bylaws may
Pennsylvania law provides that the be amended or repealed by the board of
shareholders may not propose an amendment to directors or shareholders; provided, however,
the articles. that the board may not amend or repeal the
corporation's bylaws if the articles of
Under Pennsylvania law, the power to adopt, incorporation reserve such power to the
amend or repeal bylaws may generally be shareholders, or the shareholders, in
vested, pursuant to the bylaws, in the amending or repealing the bylaws, expressly
directors, with certain statutory exceptions provide that the board of directors may not
and subject to the power of the shareholders amend or repeal the bylaws or a particular
to change such action. Pennsylvania law bylaw provision. The bylaws of FNB provide
further provides that, unless the articles of that FNB's bylaws may be altered or amended
incorporation provide otherwise, the board of and new bylaws adopted by the affirmative
directors does not have the authority to vote of at least 75% of the members of FNB's
adopt or change a bylaw on any subject that board of directors or by the affirmative vote
is committed expressly to the shareholders by of the holders of at least 75% of
statute, other than on the subject
shareholder quorum rules
73
SLIPPERY ROCK FNB
------------- ---
if the corporation is a registered the outstanding shares entitled to vote thereon.
corporation such as us. Our bylaws provide
that our bylaws may be amended by the
affirmative vote of a majority of the
members of our board of directors or by the
affirmative vote of our shareholders entitled
to cast a majority of the votes which all
shareholders present at a regular or special
meeting are entitled to cast.
VOTE REQUIRED FOR EXTRAORDINARY CORPORATION TRANSACTIONS
SLIPPERY ROCK FNB
------------- ---
Under Pennsylvania law, generally, a merger, Under Florida law, generally, a merger,
consolidation, share exchange, dissolution or consolidation, share exchange, dissolution or
sale of substantially all of a corporation's sale of substantially all of a corporation's
assets other than in the ordinary course of assets other than in the ordinary course of
business must be approved by the affirmative business must be approved by the affirmative
vote of a majority of the votes cast by all vote of the holders of a majority of the
shareholders entitled to vote thereon. Except shares entitled to vote thereon unless the
as otherwise provided by the bylaws of a corporation's articles of incorporation
corporation, the shareholders of a require a higher vote. Florida law further
corporation do not have to approve a board of provides that, unless required by its
directors-approved plan of merger if, among articles of incorporation, the shareholders
other situations, immediately prior to the approval of a plan of merger if is not
transaction, another corporation that is a required if:
party to the transaction directly or
indirectly owns 80% or more of the - the articles of incorporation of the
outstanding shares of each class of the surviving corporation will not differ
constituent corporation, or if (except for certain minor amendments
approved by the board of directors as
- the surviving or new corporation is a provided by Florida law) from its articles
business corporation incorporated in before the merger; and
Pennsylvania with articles of incorporation
that are identical to the articles of - each shareholder of the surviving
incorporation of the merged corporation corporation whose shares were outstanding
(except for changes permitted by a board of immediately prior to the effective date of
directors without shareholder approval the merger will hold the same number of
under Pennsylvania law), shares, with identical designations,
preferences, limitations and relative
- each share of the merged corporation rights, immediately after the merger.
outstanding immediately prior to the
effective date of the merger is to continue The articles of incorporation of FNB require
to be outstanding or will be converted into an affirmative vote of the holders of at
an identical share of the surviving or new least 75% of the outstanding shares of FNB
corporation after the effective date of the common stock entitled to vote to approve a
merger, and merger, consolidation or sale, lease,
exchange or other disposition, in a single
- the shareholders of the merged corporation transaction or series of related
are to hold, in the aggregate, shares of transactions, of all or substantially all or
the surviving or new corporation to be a substantial part of the properties or
outstanding immediately after effectiveness assets of FNB, unless the board of directors
of the plan of merger at least a majority of FNB has approved and recommended the
of the votes entitled to be cast generally transaction prior to the consummation
for the election of directors. thereof.
INTERESTED SHAREHOLDER TRANSACTIONS
SLIPPERY ROCK FNB
------------- ---
Pennsylvania law provides that, with respect Florida law contains a number of provisions
to registered companies such as us, if a that require supermajority approval for
shareholder of a corporation is a party to a certain affiliate transactions. Under Florida
sale of assets transaction, share exchange, law, if any person who together with his or
merger or consolidation involving the her affiliates and associates beneficially
corporation or a owns 10% or more of any voting stock
74
SLIPPERY ROCK FNB
------------- ---
subsidiary, or if a shareholder is to be of the corporation (an "Interested Person")
treated differently in a corporate is a party to any merger, consolidation,
dissolution from other shareholders of the disposition of all or a substantial part of
same class, or if a shareholder is to receive the assets of the corporation or a subsidiary
a disproportionate amount of shares resulting of the corporation, or exchange of securities
from a division of the corporation, or if the requiring shareholder approval (a "Business
articles of incorporation of the corporation Combination"), such transaction shall be
are to be amended so as to result in a approved by the affirmative vote of the
shareholder receiving an increased voting or holders of two-thirds of the voting shares
economic share interest a relation to other than the shares beneficially owned by
substantially all other shareholders, then the Interested Person; provided, that such
approval must be obtained from the approval is not required if (1) the
shareholders entitled to cast at least a Interested Shareholder transaction has been
majority of the votes which all shareholders approved by a majority of the disinterested
other than the interested shareholder are directors; (2) the corporation has not had
entitled to cast with respect to the more than 300 shareholders of record at any
transaction, without counting the votes of time during the three years preceding the
the interested shareholder. Such additional date of the transaction's announcement; (3)
shareholder approval is not required if the the Interested Person has been the beneficial
consideration to be received by the other owner of at least 80% of the corporation's
shareholders in such transaction for shares outstanding voting shares for at least five
of any class is not less than the highest years preceding the date of the transaction's
amount paid by the interested shareholder in announcement; (4) the Interested Person is
acquiring shares of the same class, or if the the beneficial owner of at least 90% of the
proposed transaction is approved by a outstanding voting shares of the corporation,
majority of the board of directors other than exclusive of shares acquired directly from
certain directors ("disqualified directors") the corporation in a transaction not approved
affiliated or associated with, or nominated by a majority of the disinterested directors;
by, the interested shareholder. (5) the corporation is an investment company
registered under the Investment Company Act
of 1940 or (6) the consideration to be
received by holders of the stock of the
corporation meets certain minimum levels
determined by a formula under Section
607.0901(4)(f) of the Florida Business
Corporations.
FIDUCIARY DUTY
SLIPPERY ROCK FNB
------------- ---
Under Pennsylvania law, a director shall The articles of incorporation of FNB provide
perform his duties as a director in good that the board of directors of FNB, in
faith, in a manner he reasonably believes evaluating a proposal for an extraordinary
to be in the best interests of the corporate transaction, shall consider all
corporation and with such care, including relevant factors, including, without
reasonable inquiry, skill and diligence, as a limitation, the long-term prospects and
person of ordinary prudence would use under interests of the corporation and its
similar circumstances, and shall be entitled shareholders, the social, economic, legal or
in performing his duties to rely in good other effects of any action on the employees,
faith on information, opinions, reports or suppliers and customers of the corporation
statements, including financial statements and its subsidiaries, the communities and
and other financial data, prepared or societies in which FNB and its subsidiaries
presented by: (1) one or more officers or operate, and the economy of the state and the
employees of the corporation whom the nation.
director reasonably believes to be reliable
and competent in the matters presented; (2) The articles of incorporation of FNB further
counsel, public accountants or other persons provide that, if the board of directors of
as to matters which the director reasonably FNB determines that such a proposal should be
believes to be within the professional or rejected, it may take any lawful action to
expert competence of such person or (3) a accomplish its purposes.
committee of the board upon which he does not
serve, as to matters within its designated Under Florida law, a director is required to
authority, which committee the director discharge his duties in good faith, with the
reasonably care an
75
SLIPPERY ROCK FNB
------------- ---
believes to merit confidence. Pennsylvania ordinarily prudent person in a like
law further provides that a director may, in position would exercise under similar
considering the best interests of a circumstances and in a manner reasonably
corporation, consider (1) the effects of any believed to be in the best interests of the
action on shareholders, employees, suppliers, corporation. In discharging his duties, a
customers and creditors of the corporation, director is entitled to rely on: (1)
and upon communities in which offices or information, opinions, reports, or
other facilities of the corporation are statements, including financial statements
located, (2) the short-term and long-term and other financial data, if presented or
interests of the corporation, including the prepared by officers or employees of the
possibility that the best interests of the corporation whom the director reasonably
corporation may be served by the continued believes to be reliable and competent in the
independence of the corporation, (3) the matters presented; (2) legal counsel, public
resources, intent and conduct of any person accountants or other persons as to matters
seeking to acquire control of the corporation the director reasonably believes are within
and (4) all other pertinent factors. the person's professional or expert
competence or (3) a committee of the Board of
which the director is not a member if the
director reasonably believes the committee
merits confidence.
PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECTS
SLIPPERY ROCK FNB
------------- ---
Pennsylvania law contains various statutory FNB is subject to statutory "anti-takeover"
"anti-takeover" provisions, which apply to provisions under Florida law. Section
us, including Subchapters 25E through 25J of 607.0902 of the Florida Business Corporations
the BCL. Subchapter 25E (relating to control Act restricts the voting rights of certain
transactions) provides that, if any person or shares of a corporation's stock when those
group acquires 20% or more of the voting shares are acquired by a party who, by such
power of a corporation, the remaining acquisition, would control at least 20% of
shareholders may demand from such person or all voting rights of the corporation's issued
group the fair value of their shares, and outstanding stock. The statute provides
including a proportionate amount of any that the acquired shares (the "control
control premium. Subchapter 25F (relating to shares") will, upon such acquisition, cease
business combinations) delays for five years to have any voting rights. The acquiring
and imposes conditions upon business party may, however, petition the corporation
combinations between an interested to have voting rights re-assigned to the
shareholder and the corporation. Subchapter control shares by way of an "acquiring
25G (relating to control share acquisitions) person's statement" submitted to the
prevents a person who has acquired 20% or corporation in compliance with the
more of the voting power of a covered requirements of the statute. Upon receipt of
corporation from voting such shares unless such request, the corporation must submit,
the "disinterested' shareholders approve such for shareholder approval, such request.
voting rights. Subchapter 25H (relating to Voting rights may be reassigned to the
disgorgement) requires disgorgement of control shares by a resolution of a majority
certain profits made by controlling of the corporation's shareholders for each
shareholders following their attempts to gain class and series of stock, with the control
control of the corporation. Subchapter 25I shares not voting. If such a resolution is
provides for a minimum severance payments to approved, and the voting rights re-assigned
certain employees terminated within two years to the control shares represent a majority of
of the approval. Subchapter 25J prohibits the all voting rights of the corporation's
abrogation of certain labor contracts prior outstanding voting stock, then, unless the
to their stated date of expiration. corporation's articles of incorporation or
Subchapters 25E through 25H of the BCL bylaws provide otherwise, all shareholders of
contain a wide variety of transactional and the corporation shall be able to exercise
status exemptions, exclusions and safe appraisal rights in accordance with Florida
harbors. law.
The Pennsylvania laws pertaining to control Florida law further provides that a
share acquisitions do not alter the voting corporation may, by amendment to its articles
rights of any stock of the corporation of incorporation or bylaws, provide that, if
acquired in certain specified transactions. the party acquiring the control shares does
not submit an acquiring person's statement in
In addition, Pennsylvania law permits an accordance with the statute, the corporation
may redeem the control shares at
76
SLIPPERY ROCK FNB
------------- ---
amendment to the corporation's articles of any time during the period ending 60 days
incorporation or other corporate action, if after the acquisition of control shares. If the
approved by shareholders, to provide acquiring party files an acquiring person's
mandatory special treatment for specified statement, the control shares are not subject
groups of nonconsenting shareholders of the to redemption by the corporation unless the
same class. Pennsylvania law also provides shareholders, acting on the acquiring party's
that directors may, in discharging their request for re-assignment, deny full voting
duties, consider the interests of a number of rights to the control shares. Neither the
different constituencies, including articles of incorporation of FNB nor its
shareholders, employees, suppliers, bylaws have been amended to include such a
customers, creditors and the communities in provision.
which the corporation is located. Directors
are not required to consider the interests of The statute does not alter the voting rights
shareholders to a greater degree than other of any stock of the corporation acquired in
constituencies' interests. Pennsylvania law certain specified transactions. In addition,
expressly provides that directors do not there are various provisions in the articles
violate their fiduciary duties solely by of incorporation and bylaws of FNB that may
relying on poison pills or the anti-takeover serve as anti-takeover protections including:
provisions of Pennsylvania law.
- the ability of the board of directors of
FNB to fill vacancies resulting from an
increase in the number of directors;
- the supermajority voting requirements for
certain corporate transactions;
- the broad range of factors that the board
of directors of FNB may consider in
evaluating an unsolicited offer including a
tender offer proposal; and
- provisions in the FNB articles of
incorporation which authorize the board of
directors of FNB, without further
shareholder action, to issue from time to
time, up to 20,000,000 shares of FNB
preferred stock. The board of directors of
FNB is empowered to divide any and all of
the shares of the FNB preferred stock into
series and to fix and determine the
relative rights and preferences of the
shares of any series so established.
The "anti-takeover" provisions of Florida law
and FNB's articles of incorporation and
bylaws may have the effect of deterring
merger proposals, tender offers or other
attempts to effect changes in control of FNB
that are not negotiated with and approved by
the board of directors of FNB. FNB is not
aware of any effort or intent to gain control
of FNB or any effort to organize a proxy
contest or to accumulate shares of FNB.
77
COMPARATIVE MARKET PRICES AND DIVIDENDS
FNB common stock is listed on the New York Stock Exchange. Prices for our
common stock are quoted on the OTC Bulletin Board of the National Association of
Securities Dealers. The following table sets forth:
- the high and low trading prices of shares of FNB common stock as reported
on the New York Stock Exchange since December 17, 2003 and prior thereto
on the Nasdaq Stock Market, as adjusted to reflect 5% stock dividends
declared on May 6, 2002 and April 28, 2003;
- the average of the high bid and low sales prices of shares of our common
stock in the local over-the-counter market as reported on the OTC
Bulletin Board. These quotations reflect inter-dealer prices without
retail markup, markdown or commission and may not necessarily represent
actual transactions. In each case, this information is based on published
sources; and
- quarterly cash dividends paid per share by FNB and us for the periods
indicated.
FNB COMMON STOCK SLIPPERY ROCK COMMON STOCK
---------------------------- --------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------ ------ -------- ------ ------ --------
2002:
First quarter.................. $23.21 $27.49 $.18 $16.00 $14.75 $0.15
Second quarter................. 24.89 29.65 .21 15.50 14.75 0.15
Third quarter.................. 23.53 27.76 .21 15.35 14.25 0.15
Fourth quarter................. 24.64 26.35 .21 15.75 14.25 0.15
2003:
First quarter.................. 25.52 27.62 .21 15.30 14.15 0.15
Second quarter................. 27.20 31.04 .24 16.25 15.50 0.15
Third quarter.................. 29.35 35.08 .24 17.75 15.85 0.15
Fourth quarter................. 31.68 35.48 .24 20.85 17.50 0.15
2004:
First quarter.................. 22.79(1) 18.79(1) .23 19.50 18.75 0.15
Second quarter................. 22.63 18.80 .23 28.00 18.05 0.15
Third quarter (to July 19)..... 20.50 19.91 -- 28.07 27.10 --
---------------
(1) On January 1, 2004, FNB distributed one share of First National Bancshares
of Florida, Inc., which until then was a wholly owned subsidiary of FNB, for
each share held of FNB, and the prices of FNB common stock since January 1,
2004 reflect that distribution.
You are advised to obtain current market quotations for FNB common stock. The
market price of FNB common stock will fluctuate between the date of this proxy
statement/prospectus and the completion of the merger. No assurance can be given
concerning the market price of FNB common stock.
78
BENEFICIAL OWNERSHIP OF SLIPPERY ROCK STOCK
The following table sets forth information pertaining to the beneficial
ownership of the outstanding shares of our common stock as of June 30, 2004 by
(1) persons known to us to own more than five percent of the outstanding shares
of our common stock, (2) each director and (3) all directors and executive
officers of Slippery Rock as a group. The information contained herein has been
obtained from our records and from information furnished to us by each
individual. We know of no person who owns, beneficially or of record, either
individually or with associates, more than five percent of our common stock,
except as set forth below.
AMOUNT AND NATURE PERCENT
NAME AND POSITION OF BENEFICIAL OWNER OF OWNERSHIP(1)(2) OF CLASS
------------------------------------- ------------------ --------
John W. Conway............................................. 99,080(3) 3.5%
Chairman of the Board
Robert M. Greenberger...................................... 15,964(3) *
Director
Robert E. Gregg............................................ 14,939(3)(4) *
Director
William D. Kingery......................................... 13,255(3) *
Director
Brenda K. McBride.......................................... 4,000(3) *
Director
Thomas D. McClymonds....................................... 10,597(3) *
Director
Scott A. McDowell.......................................... 4,878(3) *
Director
S. P. Snyder............................................... 34,502(3) 1.2%
Director
William C. Sonntag......................................... 35,651(5) 1.3%
President, Chief Executive Officer and Director
Charles C. Stoops, Jr. .................................... 91,416(3) 3.3%
Director
Norman P. Sundell.......................................... 14,504(3)(4) *
Director
Officers and Directors as a Group(3)(6).................... 381,737(5) 13.6%
Grady W. Cooper............................................ 383,345 13.7%
St. Cloud, Florida 34769
---------------
* Less than 1%
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
General Rules and Regulations of the SEC and may include securities owned by
or for the individual's spouse and minor children and any other relative who
has the same home, as well as securities to which the individual has or
shares voting or investment power or has the right to acquire beneficial
ownership within 60 days as of the date hereof. Beneficial ownership may be
disclaimed as to certain of the securities. Except as otherwise indicated,
the address for each of the following persons is our principal corporate
address.
(2) Information furnished by our directors and officers.
(3) Includes shares of our common stock that may be acquired within 60 days by
exercise of stock options granted pursuant to our Non-Employee Directors
Stock Option Plan. Shares of our common stock that are subject to stock
options are deemed to be outstanding for computing the percentage of common
stock
79
owned by such person, but are not deemed to be outstanding for the purpose
of computing the percentage of any other person. The number of such shares
included above are as follows:
Mr. Snyder, 3,600 shares; Mr. Sundell, 4,600 shares; Mr. Gregg, 5,200
shares; Mr. Kingery, 5,200 shares; Mr. Conway, 4,000 shares; Mr. Stoops,
Jr., 4,000 shares; Ms. McBride, 3,000 shares; Mr. McDowell, 3,000 share;
Mr. Greenberger, 2,000 shares and Mr. McClymonds, 2,000 shares.
(4) Includes voting power of attorney over 3,689 shares owned by members of Mr.
Gregg's family and 332 shares for which Mr. Sundell holds a power of
attorney.
(5) Includes 19,331 shares of common stock that may be acquired within 60 days
by exercise of stock options granted to Mr. Sonntag and 31,962 shares
granted to officers as a group (including Mr. Sonntag) pursuant to our
Employee Incentive Stock Option Plan.
(6) The group consists of 13 persons, as of the date hereof.
ADJOURNMENT PROPOSAL
GRANTING OF DISCRETIONARY AUTHORITY TO ADJOURN OUR SPECIAL MEETING
General. If, at our special meeting on Thursday, September 9, 2004, the
number of shares of our common stock, present in person or by proxy, is
insufficient to constitute a quorum or the number of shares of our common stock
voting in favor of approval of the merger proposal is insufficient to approve
the merger proposal under Pennsylvania law and our articles of incorporation,
our management intends to move to adjourn our special meeting in order to enable
our board of directors to solicit additional proxies. In that event, we will ask
our shareholders to vote only upon the adjournment proposal and not on the
merger proposal.
In this proposal, we are asking you to grant discretionary authority to the
holder of any proxy solicited by our board of directors so that the holder can
vote in favor of the proposal to adjourn our special meeting to solicit
additional proxies. If our shareholders approve the adjournment proposal, we
could adjourn our special meeting, and any adjourned session of the special
meeting, and use the additional time to solicit additional proxies, including
the solicitation of proxies from shareholders who have previously voted. Among
other things, approval of the adjournment proposal could mean that, even if we
had received proxies representing a sufficient number of votes against approval
of the merger proposal to defeat the merger proposal, we could adjourn our
special meeting without a vote on the merger proposal and seek to convince the
holders of those shares to change their votes to vote in favor of the approval
of the merger proposal.
If our special meeting is adjourned, no notice of the adjourned meeting is
required to be given to shareholders, other than an announcement at the special
meeting of the place, date and time to which the meeting is adjourned.
Vote Required. The affirmative vote of the holders of a majority of the
shares of our common stock present in person or represented by proxy at our
special meeting and entitled to vote is required to grant discretionary
authority to approve the proposal to adjourn our special meeting if necessary to
permit further solicitation of proxies in favor of the merger proposal. The
failure to vote, either by proxy or in person, will have no effect on the
outcome of the voting on the adjournment proposal. However, abstentions will
have the same effect as a vote against the adjournment proposal.
Brokers may not vote on the adjournment proposal without specific
instructions from the person who beneficially owns the shares. However, shares
held by a broker for whom you do not give your broker instructions on how to
vote will have no effect on the outcome of the vote on the adjournment proposal.
No proxy that is specifically marked "AGAINST" approval of the merger
proposal will be voted in favor of the adjournment proposal, unless it is
specifically marked "FOR" granting the discretionary authority to adjourn our
special meeting.
Recommendation of Our Board of Directors. Our board of directors believes
that if the number of shares of our common stock present in person or by proxy
at our special meeting and voting for approval of the
80
merger proposal is insufficient to approve the merger proposal, it is in the
best interests of our shareholders to enable our board to continue to seek to
obtain a sufficient number of additional votes for approval of the merger
proposal. Therefore, our board of directors recommends that you vote "FOR" the
proposal to grant discretionary authority to adjourn our special meeting for the
purpose of soliciting additional proxies.
LEGAL MATTERS
The validity of the FNB common stock being registered in connection with
the merger has been passed upon for FNB by Duane Morris LLP, Philadelphia,
Pennsylvania. Duane Morris LLP and Manatt, Phelps & Phillips, LLP will deliver
their opinions to FNB and Slipper Rock, respectively, as to certain federal
income tax consequences of the merger. See "Material Federal Income Tax
Consequences of the Merger" beginning on page 62.
EXPERTS
The consolidated financial statements of FNB and subsidiaries appearing in
FNB's Annual Report (Form 10-K) for the year ended December 31, 2003, have been
audited by Ernst & Young LLP, independent registered public accounting firm, as
set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
With respect to the unaudited condensed consolidated interim financial
information of FNB for the three-month period ended March 31, 2004, incorporated
by reference in this proxy statement/prospectus, Ernst & Young LLP reported that
they have applied limited procedures in accordance with professional standards
for a review of such information. However, their separate report dated May 7,
2004, included in FNB's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2004, and incorporated by reference herein, states that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
Ernst & Young LLP is not subject to the liability provisions of Section 11 of
the Securities Act for their report on the unaudited interim financial
information because that report is not a "report" or a "part" of the
registration statement prepared or certified by Ernst & Young LLP within the
meaning of Sections 7 and 11 of the Securities Act.
The consolidated financial statements of Slippery Rock and subsidiaries
appearing in Slippery Rock's Annual Report (Form 10-K) for the year ended
December 31, 2003, have been audited by S.R. Snodgrass A.C., independent
registered public accounting firm, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
With respect to the unaudited condensed consolidated interim financial
information for the three-month periods ended March 31, 2004, incorporated by
reference in this proxy statement/prospectus, S.R. Snodgrass A.C. have reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate report,
included in Slippery Rock's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2004, and incorporated herein by reference, states that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted considering the limited nature of the review procedures applied.
The independent auditors are not subject to the liability provisions of Section
11 of the Securities Act for their report on the unaudited interim financial
information because that report is not a "report" or a "part" of the
registration statement prepared or certified by the auditors within the meaning
of Sections 7 and 11 of the Securities Act.
81
OTHER MATTERS
As of the date of this proxy statement/prospectus, we do not know of any
matters that will be presented for consideration at our special meeting other
than approval of the merger proposal and the adjournment proposal. However, if
any other matters shall properly come before our special meeting or any
adjournment, postponement or continuation thereof and be voted upon, the
enclosed proxies shall be deemed to confer discretionary authority on the
individuals named as proxies therein to vote the shares represented by such
proxies as to any such matters.
No person is authorized to give any information or make any representation
other than those contained or incorporated by reference in this proxy
statement/prospectus, and, if given or made, such information or representation
should not be relied upon as having been authorized by FNB or us.
This proxy statement/prospectus does not constitute an offer to exchange or
sell, or a solicitation of an offer to exchange or purchase, the FNB common
stock offered by this proxy statement/prospectus, nor does it constitute the
solicitation of a proxy, in any jurisdiction in which such offer or solicitation
is not authorized or to or from any person to whom it is unlawful to make such
offer or solicitation.
The information contained in this proxy statement/prospectus speaks as of
the date hereof unless otherwise specifically indicated. The delivery of this
proxy statement/prospectus shall not, under any circumstances, create any
implication that there has been no change in the affairs of Slippery Rock or FNB
since the date of this proxy statement/prospectus or that the information in
this proxy statement/prospectus or in the documents incorporated by reference in
this proxy statement/prospectus is correct at any time subsequent to that date.
This proxy statement/prospectus does not cover any resales of the FNB
common stock offered hereby to be received by shareholders of Slippery Rock
deemed to be "affiliates" of Slippery Rock or FNB upon the consummation of the
merger. No person is authorized to make use of this proxy statement/prospectus
in connection with any such resales.
WHERE YOU CAN FIND MORE INFORMATION
FNB and Slippery Rock each file reports, proxy statements and other
information with the SEC under the Exchange Act. You may read and copy any
reports, statements or other information filed by FNB or Slippery Rock at the
SEC's public reference room at 450 Fifth Street, N.W., Washington D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. FNB's and Slippery Rock's SEC filings are also available to the
public from commercial document retrieval services and at the web site
maintained by the SEC at www.sec.gov.
FNB filed a registration statement on Form S-4 to register with the SEC
under the Securities Act the issuance of FNB common stock to Slippery Rock
shareholders in the merger. This proxy statement/ prospectus is a part of that
registration statement and constitutes a prospectus of FNB and a proxy statement
of Slippery Rock for our special meeting. As allowed by the SEC rules, this
proxy statement/prospectus does not contain all the information contained in the
registration statement.
The SEC allows the "incorporation by reference" of information into this
proxy statement/prospectus, which means that FNB and Slippery Rock can disclose
important information to you by referring you to another document filed
separately with the SEC by FNB or Slippery Rock. The information incorporated by
reference is deemed to be part of this proxy statement/prospectus, except for
any information that is superseded by information in this proxy
statement/prospectus. This proxy statement/prospectus incorporates by reference
the documents set forth below that FNB or Slippery Rock have previously filed
with the SEC. These documents contain important information about FNB and
Slippery Rock.
82
The following documents previously filed with the SEC by FNB (SEC File No.
001-31940) are incorporated by reference into this proxy statement/prospectus:
FNB's Annual Report on Form 10-K for the year ended December 31, 2003;
FNB's Quarterly Report on Form 10-Q for the quarter ended March 31,
2004; and
FNB's Current Reports on Form 8-K filed April 19, 2004, May 6, 2004,
May 28, 2004 and July 21, 2004; and
The description of FNB common stock contained in the FNB registration
statement filed pursuant to Section 12 of the Exchange Act, and any
amendment or report filed for the purpose of updating such description.
The following documents previously filed with the SEC by Slippery Rock (SEC
File No. 000-21720) are incorporated by reference into this proxy
statement/prospectus:
Slippery Rock's Annual Report on Form 10-K for the year ended December
31, 2003;
Slippery Rock's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2004;
Slippery Rock's Current Reports on Form 8-K filed April 30, 2004, May
6, 2004 and May 28, 2004; and
The description of Slippery Rock's common stock contained in the
Slippery Rock registration statement filed pursuant to Section 12 of the
Exchange Act, and any amendment or report filed for the purpose of updating
such description.
Each of FNB and Slippery Rock further incorporates by reference any
additional documents that it files with the SEC under Section 13(a), 13(c), 14,
or 15(d) of the Exchange Act between the date of this proxy statement/prospectus
and the termination of the effectiveness of the registration statement in which
this proxy statement/prospectus is included. These documents include periodic
reports such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as proxy statements.
If you would like to receive a copy of any of the documents incorporated by
reference, please contact Slippery Rock or FNB at the address or telephone
number listed under the heading "Additional Information."
SHAREHOLDER PROPOSALS
We will hold our annual meeting of shareholders in 2005 only if the merger
is not completed. Any eligible shareholder desiring to present a proposal
pursuant to Rule 14a-8 promulgated by the SEC to be considered at our 2005
annual meeting of shareholders should submit the proposal in writing to: William
C. Sonntag, President, Slippery Rock Financial Corporation, 100 South Main
Street, Slippery Rock, Pennsylvania 16057 no later than November 21, 2004. A
shareholder wishing to submit a proposal other than pursuant to Rule 14a-8 must
notify us within a reasonable time prior to the annual meeting. In the absence
of timely notice, management will exercise its discretionary power in voting on
any such matter.
83
APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 15, 2004
BETWEEN
F.N.B. CORPORATION
AND
SLIPPERY ROCK FINANCIAL CORPORATION
A-1
TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS......................................... 1
1.01 Certain Definitions......................................... 1
ARTICLE II THE MERGER.................................................. 10
2.01 The Merger.................................................. 10
2.02 Effective Date and Effective Time; Closing.................. 10
ARTICLE III MERGER CONSIDERATION; EXCHANGE PROCEDURES................... 11
3.01 Conversion of Shares........................................ 11
3.02 Fractional Shares........................................... 11
3.03 Election and Proration Procedures........................... 12
3.04 Exchange Procedures......................................... 14
3.05 Adjustments for Dilution and Other Matters.................. 15
3.06 Dissenting Shares........................................... 16
3.07 Withholding Rights.......................................... 16
3.08 Slippery Rock Options....................................... 16
3.09 Bank Merger................................................. 16
ARTICLE IV ACTIONS PENDING ACQUISITION................................. 17
4.01 Forbearances of Slippery Rock............................... 17
4.02 Forbearances of Parent...................................... 19
ARTICLE V REPRESENTATIONS AND WARRANTIES.............................. 19
5.01 Disclosure Schedules........................................ 19
5.02 Standard.................................................... 20
5.03 Representations and Warranties of Slippery Rock............. 20
5.04 Representations and Warranties of Parent.................... 31
ARTICLE VI COVENANTS................................................... 35
6.01 Reasonable Best Efforts..................................... 35
6.02 Stockholder Meeting......................................... 35
6.03 Registration Statement...................................... 35
6.04 Regulatory Filings.......................................... 36
6.05 Press Releases.............................................. 36
6.06 Access; Information......................................... 37
6.07 Affiliates.................................................. 37
6.08 Certain Actions............................................. 37
6.09 Certain Policies............................................ 39
6.10 NYSE Listing................................................ 39
6.11 Indemnification............................................. 39
6.12 Benefit Plans............................................... 40
6.13 Parent Bank Board........................................... 41
6.14 Notification of Certain Matters............................. 42
6.15 Regulatory Conditions....................................... 42
6.16 Exemption From Liability Under Section 16(b)................ 42
6.17 Regulatory Approval of Certain Agreements and Payments...... 42
A-2
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER.................... 43
Conditions to Each Party's Obligation to Effect the
7.01 Merger...................................................... 43
7.02 Conditions to Obligation of Slippery Rock................... 43
7.03 Conditions to Obligation of Parent.......................... 44
ARTICLE VIII TERMINATION................................................. 44
8.01 Termination................................................. 44
8.02 Effect of Termination....................................... 46
ARTICLE IX MISCELLANEOUS............................................... 46
9.01 Survival.................................................... 46
9.02 Waiver; Amendment........................................... 46
9.03 Counterparts................................................ 46
9.04 Governing Law............................................... 46
9.05 Expenses.................................................... 46
9.06 Notices..................................................... 46
9.07 Entire Understanding; No Third Party Beneficiaries.......... 47
9.08 Severability................................................ 47
9.09 Enforcement................................................. 47
9.10 Interpretation.............................................. 48
9.11 Assignment.................................................. 48
9.12 Alternative Structure....................................... 48
ANNEX A Form of Bank Merger Agreement............................... 50
ANNEX B Form of Affiliate Letter.................................... 53
A-3
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of May 5, 2004
(this "Agreement"), between F.N.B. Corporation ("Parent") and Slippery Rock
Financial Corporation ("Slippery Rock") and as amended and restated on July 15,
2004.
RECITALS
A. Slippery Rock. Slippery Rock is a Pennsylvania corporation, having its
principal place of business in Slippery Rock, Pennsylvania.
B. Parent. Parent is a Florida corporation, having its principal place of
business in Hermitage, Pennsylvania.
C. Intention of the Parties. It is the intention of the parties to this
Agreement that the Merger provided for herein be treated as a "reorganization"
under Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and this Agreement constitutes a "plan of reorganization" within the
meaning of Treasury Regulations Section 1.368-1(c).
D. Board Action. The respective Boards of Directors of Parent and Slippery
Rock have determined that it is in the best interests of their respective
companies and their stockholders to consummate the Merger provided for herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 Certain Definitions. The following terms are used in this Agreement
with the meanings set forth below:
"Acquisition Proposal" has the meaning set forth in Section 6.08(e).
"Affiliate" has the meaning set forth in Section 3.04(h).
"Affiliate Letter" has the meaning set forth in Section 6.07.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
"Approval Recommendation" has the meaning set forth in Section 6.02.
"Articles of Merger" has the meaning set forth in Section 2.02(a).
"Average Closing Price" has the meaning set forth in Section 8.01(h).
"Bank" means The First National Bank of Slippery Rock.
"Bank Insurance Fund" means the Bank Insurance Fund maintained by the
FDIC.
"Bank Merger Agreement" means the Agreement of Merger by and between
Parent Bank and Slippery Rock Bank, the form of which is attached hereto as
Annex A.
"Bank Merger" has the meaning set forth in Section 3.09.
"Bank Regulatory Authority" means the OCC, the FDIC or any other state
or federal bank regulatory agency charged with the supervision or
regulation of Slippery Rock, Slippery Rock Bank, Parent or Parent Bank or
the insurance of the deposits of Slippery Rock Bank or Parent Bank.
"Bank Secrecy Act" means the Bank Secrecy Act of 1970, as amended.
"BIF" means the Bank Insurance Fund.
A-4
"Benefit Plans" has the meaning set forth in Section 5.03(m)(i).
"Break-up Fee" has the meaning set forth in Section 6.08(f).
"Business Day" means Monday through Friday of each week, except a
legal holiday recognized as such by the U.S. Government or any day on which
banking institutions in the Commonwealth of Pennsylvania are authorized or
obligated to close.
"Business Retention and Development Agreement" means the form of
proposed business retention and development agreement between William
Sonntag and Parent.
"Cash Amount" means that portion of the Merger Consideration not
consisting of shares of Parent Common Stock.
"Cash Election" has the meaning set forth in Section 3.03(a).
"Cash Proration Factor" has the meaning set forth in Section
3.03(c)(iii)(C).
"Certificate" means any certificate that immediately prior to the
Effective Time represented shares of Slippery Rock Common Stock.
"Change in Slippery Rock Recommendation" has the meaning set forth in
Section 6.08(b).
"Closing" and "Closing Date" have the meanings set forth in Section
2.02(b).
"Code" has the meaning set forth in the recitals to this Agreement.
"Combination Cash Election" has the meaning set forth in Section
3.03(a).
"Combination Stock Election" has the meaning set forth in Section
3.03(a).
"Community Reinvestment Act" means the Community Reinvestment Act of
1977, as amended.
"Confidentiality Agreement" has the meaning set forth in Section
6.06(c).
"Derivatives Contract" has the meaning set forth in Section 5.03(q).
"Determination Date" means the date on which the last required Bank
Regulatory Authority approval is obtained with respect to the Transaction,
without regard to a requisite waiting period.
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Dissenting Shares" means shares of Slippery Rock Common Stock as to
which appraisal rights are perfected under Subchapter D of Chapter 15 of
the PBCL.
"DOL" means the Department of Labor.
"Effective Date" has the meaning set forth in Section 2.02(a).
"Effective Time" has the meaning set forth in Section 2.02(a).
"Election" has the meaning set forth in Section 3.03(a).
"Election Deadline" has the meaning set forth in Section 3.03(b).
"Election Form" has the meaning set forth in Section 3.03(a).
"Election Form Record Date" has the meaning set forth in Section
3.03(a).
"Employees" has the meaning set forth in Section 5.03(m)(i).
"Employment Agreement" shall mean the form of employment agreement
between William Sonntag and Slippery Rock.
"Environmental Laws" has the meaning set forth in Section 5.03(o).
"Equal Credit Opportunity Act" means the Equal Credit Opportunity Act,
as amended.
A-5
"Equity Investment" means (i) an Equity Security, (ii) any ownership
interest in any company or other entity, any membership interest that
includes a voting right in any company or other entity or any interest in
real estate or (iii) any investment or transaction which in substance falls
into any of these categories even though it may be structured as some other
form of investment or transaction.
"Equity Security" means any stock (other than adjustable-rate
preferred stock, money market (auction rate) preferred stock or other
instrument determined by the OCC to have the character of debt securities),
certificate of interest or participation in any profit-sharing agreement,
collateral-trust certificate, preorganization certificate or subscription,
transferable share, investment contract, or voting-trust certificate; any
security convertible into such a security; any security carrying any
warrant or right to subscribe to or purchase any such security and any
certificate of interest or participation in, temporary or interim
certificate for or receipt for any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m)(iii).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" means such entity selected by Parent to effect the
exchange of Slippery Rock Common Stock for Parent Common Stock and/or cash.
"Exchange Fund" has the meaning set forth in Section 3.04(a).
"Exchange Ratio" shall mean 1.41, subject to adjustment pursuant to
Sections 3.05, and shall be rounded to the nearest one-ten-thousandth.
"Fair Housing Act" means the Fair Housing Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Act" means the Federal Reserve Act, as amended.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"FLBC" means the Florida Business Corporation Act, as amended.
"GAAP" means generally accepted accounting principles and practices as
in effect from time to time in the United States.
"Governmental Authority" means any federal, state or local court,
administrative agency or commission or other governmental authority or
instrumentality.
"Hazardous Substance" has the meaning set forth in Section 5.03(o).
"Home Mortgage Disclosure Act" means the Home Mortgage Disclosure Act,
as amended.
"Indemnified Parties" and "Indemnifying Party" have the meanings set
forth in Section 6.11(a).
"Index Price" has the meaning set forth in Section 8.01(h).
"Index Ratio" has the meaning set forth in Section 8.01(h).
"Insurance Amount" has the meaning set forth in Section 6.11(c).
"Insurance Policies" has the meaning set forth in Section 5.03(w).
"IRS" means the Internal Revenue Service.
"Key Employee Severance Agreement" means the proposed form of key
employment severance agreement between Slippery Rock and certain Slippery
Rock employees.
"Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien or encumbrance.
A-6
"Loans" has the meaning set forth in Section 4.01(r).
"Mailing Date" has the meaning set forth in Section 3.03(a).
"Material Adverse Effect" means, with respect to Parent or Slippery
Rock any effect that (i) is material and adverse to the financial position,
results of operations or business of Parent and its Subsidiaries taken as a
whole or Slippery Rock and its Subsidiaries taken as a whole, as the case
may be, or (ii) would materially impair the ability of any of Parent and
its Subsidiaries or Slippery Rock and its Subsidiaries to perform their
respective obligations under this Agreement or the Bank Merger Agreement or
otherwise materially impede the consummation of the Transaction; provided,
however, that Material Adverse Effect shall not be deemed to include the
impact of (a) changes after the date hereof in banking and similar laws of
general applicability or interpretations thereof by Governmental
Authorities, (b) changes after the date hereof in GAAP or regulatory
accounting requirements applicable to banks, federal savings institutions
and their holding companies generally, (c) changes after the date hereof in
general economic or market conditions affecting banks and their holding
companies generally, (d) public disclosure of the transactions contemplated
hereby, (e) costs incurred in connection with the Transaction including,
without limitation, change in control and severance payments, investment
banking fees, legal fees, accounting fees and printing costs, in each case
in accordance with GAAP and (f) any action or omission of Slippery Rock or
Parent taken with the prior consent of the other or as otherwise
contemplated by this Agreement in connection with the consummation of the
Transaction.
"Material Contract" has the meaning set forth in Section 5.03(k)(i).
"Merger" has the meaning set forth in Section 2.01(a).
"Merger Consideration" means the number of whole shares of Parent
Common Stock, cash or a combination thereof, plus cash in lieu of any
fractional share interest, into which shares of Slippery Rock Common Stock
shall be converted pursuant to the provisions of Article III.
"National Labor Relations Act" means the National Labor Relations Act,
as amended.
"Non-Competition Agreement" means the proposed non-competition
agreement between Parent and William Sonntag.
"NYSE" means The New York Stock Exchange, Inc.
"OCC" means the Office of the Comptroller of the Currency.
"OREO" means other real estate owned.
"Parent" has the meaning set forth in the preamble to this Agreement.
"Parent Articles" means the Articles of Incorporation of Parent, as
amended.
"Parent Bank" means The First National Bank of Pennsylvania, a
national association and wholly owned subsidiary of Parent.
"Parent Bank Board" means the Board of Directors of Parent Bank.
"Parent Bank 2005 Annual Meeting" has the meaning set forth in Section
6.13.
"Parent Benefit Plans" has the meaning set forth in Section 6.12(a).
"Parent Board" means the Board of Directors of Parent.
"Parent Bylaws" means the Amended Bylaws of Parent.
"Parent Closing Average" means the average of the last sales price per
share for Parent Common Stock on the NYSE (as reported in The Wall Street
Journal, or if not reported therein, another authorized source) for the
twenty consecutive NYSE trading day period ending on the Determination
Date, rounded to the nearest whole cent, subject to adjustment pursuant to
Section 3.05.
"Parent Common Stock" means the common stock, $.01 par value per
share, of Parent.
A-7
"Parent Preferred Stock" means the preferred stock, $.01 par value per
share, of Parent.
"Parent Ratio" has the meaning set forth in Section 8.01(h).
"Parent Regulatory Authorities" has the meaning set forth in Section
5.04(i)(i).
"Payment Event" has the meaning set forth in Section 6.08(g).
"PBCL" means the Pennsylvania Business Corporation Law of 1988, as
amended.
"Pension Plan" has the meaning set forth in Section 5.03(m)(ii).
"Person" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust, limited liability company
or unincorporated organization.
"Previously Disclosed" by a party shall mean information set forth in
a section of its Disclosure Schedule corresponding to the section of this
Agreement where such term is used.
"Price Per Share" means $28.00.
"Proxy Statement" has the meaning set forth in Section 6.03(a).
"Registration Statement" has the meaning set forth in Section 6.03(a).
"Representatives" has the meaning set forth in Section 6.08(a).
"Rights" means, with respect to any Person, warrants, options, rights,
convertible securities and other arrangements or commitments that obligate
the Person to issue or dispose of any of its capital stock or other
ownership interests.
"SEC" means the Securities and Exchange Commission.
"Section 16 Information" means information accurate in all respects
regarding the Slippery Rock Insiders, the number of shares of Slippery Rock
Common Stock held by each such Slippery Rock Insider and the number and
description of the Slippery Rock Options held by each such Slippery Rock
Insider.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Securities Documents" has the meaning set forth in Sections
5.03(g)(i) and 5.04(g)(i) in the case of Slippery Rock and Parent,
respectively.
"Separation and Release Agreement" means the proposed separation and
release agreement between Slippery Rock and William Sonntag.
"Slippery Rock" has the meaning set forth in the preamble to this
Agreement.
"Slippery Rock Affiliates" has the meaning set forth in Section 6.07.
"Slippery Rock Articles" means the Articles of Incorporation of
Slippery Rock, as amended.
"Slippery Rock Bank" means The First National Bank of Slippery Rock, a
national association and wholly owned subsidiary of Slippery Rock.
"Slippery Rock Board" means the Board of Directors of Slippery Rock.
"Slippery Rock Bylaws" means the Bylaws of Slippery Rock, as amended.
"Slippery Rock Common Stock" means the common stock, $0.25 par value
per share, of Slippery Rock.
"Slippery Rock Designees" has the meaning set forth in Section 6.13.
"Slippery Rock Group" means any "affiliated group" (as defined in
Section 1504(a) of the Code without regard to the limitations contained in
Section 1504(b) of the Code) that includes Slippery Rock
A-8
and its Subsidiaries or any predecessor of or any successor to Slippery
Rock (or to another such predecessor or successor).
"Slippery Rock Insiders" means those officers, directors and 10% or
greater stockholders of Slippery Rock who are subject to the reporting
requirements of Section 16(a) of the Exchange Act and who are listed in the
Section 16 Information.
"Slippery Rock Loan Property" has the meaning set forth in Section
5.03(o)(i).
"Slippery Rock Meeting" has the meaning set forth in Section 6.02.
"Slippery Rock Options" means the options to acquire Slippery Rock
Common Stock issued under the Slippery Rock Common Stock Option Plan.
"Slippery Rock Regulatory Authorities" has the meaning set forth in
Section 5.03(i).
"Slippery Rock Stock Option Plans" means the Slippery Rock Employees
Incentive Stock Option Plan and the Non-Employee Directors Stock Option
Plan.
"Starting Date" means the trading day on the NYSE immediately
following the day on which the parties publicly announced the signing of
this Agreement.
"Starting Price" means the closing price of Parent Common Stock on the
Starting Date, subject to adjustment pursuant to Section 3.05 and rounded
to the nearest whole cent.
"Stock Amount" means 3,276,554 shares of Parent Common Stock, subject
to adjustment pursuant to Sections 3.03 and 3.05.
"Stock Election" has the meaning set forth in Section 3.03(a).
"Stock Proration Factor" has the meaning set forth in Section
3.03(c)(ii).
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed
to those terms in Rule 1-02 of Regulation S-X of the SEC.
"Superior Proposal" has the meaning set forth in Section 6.08(e)(ii).
"Surviving Corporation" has the meaning set forth in Section 2.01(a).
"Tax" and "Taxes" mean all federal, state, local or foreign income,
gross income, gains, gross receipts, sales, use, ad valorem, goods and
services, capital, production, transfer, franchise, windfall profits,
license, withholding, payroll, employment, disability, employer health,
excise, estimated, severance, stamp, occupation, property, environmental,
custom duties, unemployment or other taxes of any kind whatsoever, together
with any interest, additions or penalties thereto and any interest in
respect of such interest and penalties.
"Tax Returns" means any return, declaration or other report (including
elections, declarations, schedules, estimates and information returns) with
respect to any Taxes.
"Third Party" has the meaning set forth in Section 6.08(g).
"Transaction" means the Merger and any other transactions contemplated
by this Agreement.
"Treasury Stock" means shares of Slippery Rock Common Stock held by
Slippery Rock or any of its Subsidiaries or by Parent or any of its
Subsidiaries, other than in a fiduciary (including custodial or agency)
capacity or as a result of debts previously contracted in good faith.
"Undesignated Shares" has the meaning set forth in Section 3.03(a).
A-9
ARTICLE II
THE MERGER
2.01 The Merger.
(a) The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time, Slippery Rock shall merge with and into Parent in accordance
with the applicable provisions of the PBCL and the FLBC (the "Merger"), the
separate corporate existence of Slippery Rock shall cease and Parent shall
survive and continue to exist as a corporation incorporated under the FLBC
(Parent, as the surviving corporation in the Merger, sometimes being referred to
herein as the "Surviving Corporation").
(b) Name. The name of the Surviving Corporation shall be "F.N.B.
Corporation."
(c) Articles of Incorporation and Bylaws. The articles of incorporation
and bylaws of the Surviving Corporation immediately after the Merger shall be
the articles of incorporation and the bylaws of Parent as in effect immediately
prior to the Merger, in each case until thereafter amended in accordance with
applicable law.
(d) Directors and Executive Officers of the Surviving Corporation. The
directors of the Surviving Corporation immediately after the Merger shall be the
directors of Parent immediately prior to the Merger, each of whom shall serve
until such time as their successors shall be duly elected and qualified. The
executive officers of the Surviving Corporation immediately after the Merger
shall be the executive officers of Parent immediately prior to the Merger, each
of whom shall serve until such time as their successors shall be duly elected
and qualified.
(e) Authorized Capital Stock. The authorized capital stock of the
Surviving Corporation upon consummation of the Merger shall be as set forth in
the Parent articles of incorporation immediately prior to the Merger.
(f) Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in Sections 1921 through 1932 of the PBCL and Sections
607.1101 through 607.11101 of the FLBC. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Slippery Rock shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of Slippery Rock shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
(g) Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider that any further assignments or assurances
in law or any other acts are necessary or desirable to (i) vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation its right, title
or interest in, to or under any of the rights, properties or assets of Slippery
Rock acquired or to be acquired by the Surviving Corporation as a result of, or
in connection with, the Merger, or (ii) otherwise carry out the purposes of this
Agreement, Slippery Rock, and its proper officers and directors, shall be deemed
to have granted to the Surviving Corporation an irrevocable power of attorney to
execute and deliver all such proper deeds, assignments and assurances in law and
to do all acts necessary or proper to vest, perfect or confirm title to and
possession of such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the purposes of this Agreement, and the proper officers
and directors of the Surviving Corporation are fully authorized in the name of
the Surviving Corporation or otherwise to take any and all such action.
2.02 Effective Date and Effective Time; Closing.
(a) Subject to the satisfaction or waiver of the conditions set forth in
Article VII (other than those conditions that by their nature are to be
satisfied at the consummation of the Merger, but subject to the fulfillment or
waiver of those conditions), the parties shall cause an articles of merger
relating to the Merger (the "Articles of Merger") to be filed with the Secretary
of State of the Commonwealth of Pennsylvania pursuant to the PBCL and the
Secretary of State of the State of Florida pursuant to the FLBC on (i) a date
selected by Parent after such satisfaction or waiver that is no later than five
Business Days after such satisfaction or waiver, or (ii) such other date to
which the parties may mutually agree in writing, provided that
A-10
in either case, such date shall be no less than ten days following the Slippery
Rock Meeting. The Merger provided for herein shall become effective upon such
filings or on such date as may be specified therein. The date of such filings or
such later effective date is herein called the "Effective Date." The "Effective
Time" of the Merger shall be the time of such filings or as set forth in such
filings.
(b) A closing (the "Closing") shall take place immediately prior to the
Effective Time at 8:00 a.m., prevailing time, at the principal offices of Parent
in Hermitage, Pennsylvania, or at such other place, at such other time, or on
such other date as the parties may mutually agree upon (such date, the "Closing
Date"). At the Closing, there shall be delivered to Parent and Slippery Rock the
opinions, certificates and other documents required to be delivered under
Article VII.
ARTICLE III
MERGER CONSIDERATION; EXCHANGE PROCEDURES
3.01 Conversion of Shares.
(a) Subject to the provisions of this Agreement, each share of Slippery
Rock Common Stock issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares and Treasury Stock) shall, by virtue of the
Merger, no longer be outstanding and shall as of the Effective Time
automatically be converted into and shall thereafter only represent the right to
receive, at the election of the holder thereof as provided in Section 3.03, any
of the following:
(i) Parent Common Stock equal to the Exchange Ratio;
(ii) cash in the amount of the Price Per Share; or
(iii) a combination of Parent Common Stock and cash as set forth in
Section 3.03(a), provided that all elections shall be made as to whole
shares only.
(b) At and after the Effective Time, each share of Treasury Stock shall be
cancelled and retired and no shares of Parent Common Stock, cash or
consideration shall be in exchange therefor.
(c) At the Effective Time, the stock transfer books of Slippery Rock shall
be closed as to holders of Slippery Rock Common Stock immediately prior to the
Effective Time and no transfer of Slippery Rock Common Stock by any such holder
shall thereafter be made or recognized. If, after the Effective Time,
certificates are properly presented in accordance with Section 3.04 of this
Agreement to the Exchange Agent, such certificates shall be canceled and
exchanged for certificates representing the number of whole shares of Parent
Common Stock, if any, and/or a check representing the amount of cash, if any,
into which the Slippery Rock Common Stock represented thereby was converted in
the Merger, plus any payment for a fractional share of Parent Common Stock
without any interest thereon.
(d) At and after the Effective Time, each share of Parent Common Stock
issued and outstanding immediately prior to the Effective Time shall remain
issued and outstanding and shall not be affected by the Merger.
3.02 Fractional Shares. Each holder of Slippery Rock Common Stock shall
have the option of enrolling the shares of Parent Common Stock issuable to such
shareholder upon the consummation of the Merger in Parent's Dividend
Reinvestment and Stock Purchase Plan (the "DRSP Plan"). Notwithstanding any
other provision of this Agreement, each holder of Slippery Rock Common Stock who
elects not to enroll in the DRSP Plan and who would otherwise be entitled to
receive a fractional share of Parent Common Stock (after taking into account all
Certificates delivered by such holder) shall receive an amount in cash (without
interest), rounded to the nearest cent, equal to the product obtained by
multiplying (a) the Parent Closing Average by (b) the fraction (calculated to
the nearest ten-thousandth) of the share of Parent Common Stock to which such
holder would otherwise be entitled. No such holder shall be entitled to
dividends or other rights in respect of any such fractional shares. Each
Slippery Rock shareholder electing to enroll in the DRSP Plan shall be issued
the shares of Parent Common Stock issuable to such shareholder in book-entry
form, with any
A-11
fractional share rounded to the third decimal place and such shareholders shall
be entitled to dividends and voting rights with respect to such fractional
shares.
3.03 Election and Proration Procedures.
(a) An election form and other appropriate and customary transmittal
materials, which shall specify that delivery shall be effected, and risk of loss
and title to the certificates theretofore representing shares of Slippery Rock
Common Stock shall pass, only upon proper delivery of such certificates to the
Exchange Agent in such form as Parent and Slippery Rock shall mutually agree
("Election Form") shall be mailed by or on behalf of Parent no less than
thirty-five (35) days prior to the anticipated Effective Time of the Merger, as
jointly determined by Parent and Slippery Rock, or on such other date as Parent
and Slippery Rock shall mutually agree ("Mailing Date") to each holder of record
of Slippery Rock Common Stock as of the close of business on the fifth business
day prior to the mailing date (the "Election Form Record Date"). Parent shall
make available one or more Election Forms as may be reasonably requested by all
persons who become holders (or beneficial owners) (the term "beneficial owner"
and "beneficial ownership" for purposes of this Agreement shall have the meaning
set forth in Section 13(d) of the Exchange Act) of Slippery Rock Common Stock
after the Election Form Record Date and prior to the Election Deadline, and
Slippery Rock shall provide to the Exchange Agent all information reasonably
necessary for it to perform its obligations as specified herein. Each Election
Form shall permit the holder (or the beneficial owner through appropriate and
customary documentation and instructions) to elect (an "Election") to receive
(i) Parent Common Stock (a "Stock Election") with respect to all of such
holder's Slippery Rock Common Stock, or (ii) cash (a "Cash Election") with
respect to all of such holder's Slippery Rock Common Stock, or (iii) Parent
Common Stock for a specified number of shares of Slippery Rock Common Stock (a
"Combination Stock Election") and cash for the remaining number of shares of
Slippery Rock Common Stock held by such holder (a "Combination Cash Election").
Any Slippery Rock Common Stock other than Dissenting Shares and Treasury Shares,
with respect to which the Exchange Agent has not received an effective, properly
completed Election Form prior to the Election Deadline shall be deemed to be
"Undesignated Shares" hereunder.
(b) Any Election shall have been properly made and effective only if the
Exchange Agent shall have actually received a properly completed Election Form
that has not been revoked by 5:00 p.m., prevailing time, by the 30th day
following the Mailing Date (or such other time and date as Parent and Slippery
Rock may mutually agree) (the "Election Deadline"). An Election Form shall be
deemed properly completed only if an Election is indicated for each share of
Slippery Rock Common Stock covered by such Election Form and if accompanied by
one or more certificates (or customary affidavits and indemnification regarding
the loss or destruction of such certificates or the guaranteed delivery of such
certificates) representing all shares of Slippery Rock Common Stock covered by
such Election Form, together with duly executed transmittal materials included
in or required by the Election Form. Any Election Form may be revoked by the
person submitting such Election Form at or prior to the Election Deadline,
provided that the Exchange Agent shall have actually received prior to the
Election Deadline a written notice revoking such Election Form and specifying
the shares of Slippery Rock Common Stock covered by such revoked Election Form.
In the event an Election Form is revoked prior to the Election Deadline, the
shares of Slippery Rock Common Stock representing such Election Form shall
automatically become Undesignated Shares unless and until a new Election is
properly made with respect to such shares on or before the Election Deadline,
and Parent shall cause the certificates representing such shares of Slippery
Rock Common Stock to be promptly returned without charge to the person
submitting the revoked Election Form upon written request to that effect from
the holder who submitted such Election Form. Subject to the terms of this
Agreement and of the Election Form, the Exchange Agent shall have reasonable
discretion to determine whether any Election or revocation has been properly or
timely made and to disregard immaterial defects in the Election Forms, and any
decisions of Slippery Rock and Parent required by the Exchange Agent and made in
good faith in determining such matters shall be binding and conclusive. Neither
Parent nor the Exchange Agent shall be under any obligation to notify any person
of any defect in an Election Form.
(c) As promptly as practicable but not later than five Business Days prior
to the Effective Time of the Merger, Parent shall cause the Exchange Agent to
effect the allocation among the holders of Slippery Rock
A-12
Common Stock of rights to receive Parent Common Stock or cash in the Merger in
accordance with the Election Forms as follows:
(i) if the aggregate number of shares of Slippery Rock Common Stock as
to which Stock Elections and Combination Stock Elections shall have
effectively been made times the Exchange Ratio is approximately equal to
the Stock Amount, then:
(A) Each holder of Slippery Rock Common Stock who made an effective
Stock Election or Combination Stock Election shall receive the number of
shares of Parent Common Stock that is equal to the product of the
Exchange Ratio multiplied by the number of shares of Slippery Rock
Common Stock covered by such Stock Election or Combination Stock
Election; and
(B) Each holder of Slippery Rock Common Stock who made an effective
Cash Election or Combination Cash Election, and each holder of
Undesignated Shares shall receive the Price Per Share in cash for each
such share of Slippery Rock Common Stock or Undesignated Share.
(ii) if the aggregate number of shares of Slippery Rock Common Stock
as to which Stock Elections and Combination Stock Elections shall have
effectively been made times the Exchange Ratio exceeds, and is not
approximately equal to, the Stock Amount, then Parent shall have the option
to issue Parent Common Stock in accordance with such elections. If Parent
chooses not to exercise such option, then:
(A) Each holder of Slippery Rock Common Stock who made an effective
Cash Election or Combination Cash Election shall receive the Price Per
Share in cash for each such share of Slippery Rock Common Stock;
(B) Each holder of Undesignated Shares shall be deemed to have made
Cash Elections and shall receive the Price Per Share in cash for each
such Undesignated Share; and
(C) A stock proration factor (the "Stock Proration Factor") shall
be determined by dividing (1) the Stock Amount by (2) the product of the
Exchange Ratio and the number of shares of Slippery Rock Common Stock
with respect to which effective Stock Elections and Combination Stock
Elections were made. Each holder of Slippery Rock Common Stock who made
an effective Stock Election or Combination Stock Election shall be
entitled to:
(I) the number of shares of Parent Common Stock equal to the
product of (x) the Exchange Ratio, multiplied by (y) the number of
shares of Slippery Rock Common Stock covered by such Stock Election
or Combination Stock Election, multiplied by (z) the Stock Proration
Factor, and
(II) cash in an amount equal to the product of (x) the Price Per
Share, multiplied by (y) the number of shares of Slippery Rock Common
Stock covered by such Stock Election or Combination Stock Election,
multiplied by (z) one minus the Stock Proration Factor.
(iii) if the aggregate number of shares of Slippery Rock Common Stock
as to which Stock Elections and Combination Stock Elections shall have
effectively been made times the Exchange Ratio is less than, and is not
approximately equal to, the Stock Amount, then:
(A) Each holder of Slippery Rock Common Stock who made an effective
Stock Election or Combination Stock Election shall receive the number of
shares of Parent Common Stock equal to the product of the Exchange Ratio
multiplied by the number of shares of Slippery Rock Common Stock covered
by such Stock Election or Combination Stock Election;
(B) The Exchange Agent shall select by random such number of
holders of Undesignated Shares (other than holders of Undesignated
Shares who refrained from voting in favor of the Merger as required by
Section 1574 of the PBCL prior to the Slippery Rock Meeting to receive
Parent Common Stock as shall be necessary so that the shares of Parent
Common Stock to be received by those holders, when combined with the
number of shares for which a Stock Election or Combination Stock
Election has been made, multiplied by the Exchange Ratio shall be
approximately equal to the Stock Amount. If all of said Undesignated
Shares plus all shares as to which Stock Elections and
A-13
Combination Stock Elections have been made together multiplied by the
Exchange Ratio are less than, and not approximately equal to, the Stock
Amount, then:
(C) A cash proration factor (the "Cash Proration Factor") shall be
determined by dividing (1) the amount which is the difference between
(x) the number obtained by dividing the Stock Amount by the Exchange
Ratio and (y) the sum of the number of shares of Slippery Rock Common
Stock with respect to which effective Stock Elections and Combination
Stock Elections were made and the number of Undesignated Shares selected
pursuant to subparagraph (iii)(B) above by (2) the number of shares of
Slippery Rock Common Stock with respect to which effective Cash
Elections and Combination Cash Elections were made. Each holder of
Slippery Rock Common Stock who made an effective Cash Election or
Combination Cash Election shall be entitled to:
(I) cash equal to the product of (x) the Price Per Share,
multiplied by (y) the number of shares of Slippery Rock Common Stock
covered by such Cash Election or Combination Cash Election,
multiplied by (z) one minus the Cash Proration Factor, and
(II) the number of shares of Parent Common Stock equal to the
product of (x) the Exchange Ratio, multiplied by (y) the number of
shares of Slippery Rock Common Stock covered by such Cash Election or
Combination Cash Election, multiplied by (z) the Cash Proration
Factor.
(iv) The prorata allocation process or the random selection process to
be used by the Exchange Agent shall consist of such procedures as Parent
and Slippery Rock shall mutually determine.
(d) For purposes of this Section 3.03, the shares of which Parent Common
Stock is to be issued as consideration in the Merger shall be deemed to be
"approximately equal" to the Stock Amount if such number is within 10,000 shares
of Parent Common Stock of such amount.
3.04 Exchange Procedures.
(a) At the Effective Time of the Merger, Parent shall deposit with the
Exchange Agent for the benefit of the holders of shares of Slippery Rock Common
Stock, for exchange in accordance with this Section 3.04, certificates
representing the shares of Parent Common Stock and cash issuable pursuant to
Section 3.01 in exchange for shares of Slippery Rock Common Stock outstanding
immediately prior to the Effective Time of the Merger and funds in an amount not
less than the amount of cash payable in lieu of fractional shares of Parent
Common Stock that would otherwise be issuable in connection with Section 3.01,
but for the operation of Section 3.02 of this Agreement (collectively, the
"Exchange Fund").
(b) After the Effective Time of the Merger, each holder of a certificate
("Certificate") formerly representing Slippery Rock Common Stock (other than
Dissenting Shares and Treasury Shares) who surrenders or has surrendered such
Certificate (or customary affidavits and indemnification regarding the loss or
destruction of such Certificate), together with duly executed transmittal
materials included in or required by the Election Form, to the Exchange Agent,
shall, upon acceptance thereof, be entitled to (i) a certificate representing
Parent Common Stock and/or (ii) cash into which the shares of Slippery Rock
Common Stock shall have been converted pursuant to Section 3.01 and Section
3.03, as well as cash in lieu of fractional shares of Slippery Rock Common Stock
to which such holder would otherwise be entitled, if applicable. The Exchange
Agent shall accept such Certificate upon compliance with such reasonable and
customary terms and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal practices. Until surrendered
as contemplated by this Section 3.04, each Certificate representing Slippery
Rock Common Stock shall be deemed from and after the Effective Time of the
Merger to evidence only the right to receive the consideration to which it is
entitled hereunder upon such surrender. Parent shall not be obligated to deliver
the Merger Consideration to which any former holder of Slippery Rock Common
Stock is entitled as a result of the Merger until such holder surrenders his
Certificate or Certificates for exchange as provided in this Section 3.04. If
any certificate for shares of Parent Common Stock, or any check representing
cash and/or declared but unpaid dividends, is to be issued in a name other than
that in which a Certificate surrendered for exchange is issued, the Certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer and the person requesting such exchange shall affix any requisite stock
A-14
transfer tax stamps to the Certificate surrendered or provide funds for their
purchase or establish to the satisfaction of the Exchange Agent that such taxes
are not payable.
(c) No dividends or other distributions declared or made after the
Effective Time of the Merger with respect to Parent Common Stock with a record
date after the Effective Time of the Merger shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 3.02, until the holder of record of
such Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange thereof, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a fractional
share of Parent Common Stock to which such holder is entitled pursuant to
Section 3.02 and the amount of dividends or other distributions with a record
date after the Effective Time of the Merger theretofore paid with respect to
such whole shares of Parent Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time of the Merger but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Parent
Common Stock.
(d) All cash and shares of Parent Common Stock issued upon the surrender
for exchange of shares of Slippery Rock Common Stock in accordance with the
terms hereof (including any cash paid pursuant to Section 3.02) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Slippery Rock Common Stock, and there shall be no further registration of
transfers on the stock transfer books of Parent, after the Merger, of the shares
of Slippery Rock Common Stock that were outstanding immediately prior to the
Effective Time of the Merger. If, after the Effective Time of the Merger,
Certificates are presented to Parent for any reason, they shall be canceled and
exchanged as provided in this Agreement.
(e) Any portion of the Exchange Fund, including any interest thereon, that
remains undistributed to the stockholders of Slippery Rock following the passage
of nine (9) months after the Effective Time of the Merger shall be delivered to
Parent, upon demand, and any stockholders of Slippery Rock who have not
theretofore complied with this Section 3.04 shall thereafter look only to Parent
for payment of their claim for cash and Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions with
respect to Parent Common Stock.
(f) Neither Slippery Rock nor Parent shall be liable to any holder of
shares of Slippery Rock Common Stock or Parent Common Stock, as the case may be,
for such shares (or dividends or distributions with respect thereto) or cash
from the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(g) The Exchange Agent shall not be entitled to vote or exercise any rights
of ownership with respect to the shares of Parent Common Stock held by it from
time to time hereunder, except that it shall receive and hold all dividends or
other distributions paid or distributed with respect to such shares of Parent
Common Stock for the account of the Persons entitled thereto.
(h) Certificates surrendered for exchange by any Person constituting an
"Affiliate" of Slippery Rock for purposes of Rule 144(a) under the Securities
Act shall not be exchanged for certificates representing whole shares of Parent
Common Stock until Parent has received a written agreement from such person as
provided in Section 6.07.
3.05 Adjustments for Dilution and Other Matters. If prior to the
Effective Time of the Merger, (a) Parent shall declare a stock dividend or
distribution on Parent Common Stock with a record date prior to the Effective
Time of the Merger, or subdivide, split up, reclassify or combine Parent Common
Stock, or make a distribution other than a regular quarterly cash dividend not
in excess of $.30 per share, on the Parent Common Stock in any security
convertible into Parent Common Stock, in each case with a record date prior to
the Effective Time of the Merger, or (b) the outstanding shares of Parent Common
Stock shall have been increased, decreased, changed into or exchanged for a
different number or kind of shares or securities, in each case as a result of a
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock
A-15
split or other similar change in Parent's capitalization other than a
transaction in which Parent shall have received fair (as determined by its Board
of Directors) consideration for the shares issued, then a proportionate
adjustment or adjustments will be made to the Exchange Ratio, the Stock Amount,
the Starting Price and the Average Closing Price, which adjustment or
adjustments may include, as appropriate, the issuance of securities, property or
cash on the same basis as that on which any of the foregoing shall have been
issued, distributed or paid to holders of Parent Common Stock generally.
3.06 Dissenting Shares. Notwithstanding anything to the contrary
contained in this Agreement, any holder of Slippery Rock Common Stock who shall
be entitled to be paid the "fair value" of such holder's Dissenting Shares of
Slippery Rock Common Stock, as provided in Section 1572 of the PBCL, shall not
be entitled to the consideration to which such holder would otherwise have been
entitled pursuant to Sections 2.01 and 3.01, unless and until such holder shall
have failed to perfect or withdrawn or lost such holder's rights under
Subchapter D of Chapter 15 of the PBCL, and shall be entitled to receive only
such payment as is provided for by Section 1579 of the PBCL.
3.07 Withholding Rights. Parent (through the Exchange Agent, if
applicable) shall be entitled to deduct and withhold from any amounts otherwise
payable pursuant to this Agreement to any holder of shares of Slippery Rock
Common Stock such amounts as Parent is required under the Code or any state,
local or foreign tax law or regulation thereunder to deduct and withhold with
respect to the making of such payment. Any amounts so withheld shall be treated
for all purposes of this Agreement as having been paid to the holder of Slippery
Rock Common Stock in respect of which such deduction and withholding was made by
Parent.
3.08 Slippery Rock Options. At the Effective Time, each Slippery Rock
Option which is then outstanding shall cease to represent a right to acquire
shares of Slippery Rock Common Stock and shall be converted automatically into
an option to purchase shares of Parent Common Stock, and Parent shall assume
each Slippery Rock Option, in accordance with the terms of the Slippery Rock
Stock Option Plans and stock option or other agreement by which it is evidenced,
except that from and after the Effective Time, (i) Parent and the Compensation
Committee of its Board of Directors shall be substituted for Slippery Rock and
the committee of the Board of Directors of Slippery Rock (including, if
applicable, the entire Board of Directors of Slippery Rock) administering such
Slippery Rock Stock Option Plans, (ii) each Slippery Rock Option assumed by
Parent may be exercised solely for shares of Parent Common Stock, (iii) the
number of shares of Parent Common Stock subject to such Slippery Rock Option
shall be equal to the number of shares of Slippery Rock Common Stock subject to
such Slippery Rock Option immediately prior to the Effective Time multiplied by
the Exchange Ratio, provided that any fractional shares of Parent Common Stock
resulting from such multiplication shall be rounded down to the nearest share,
and (iv) the per share exercise price under each such Slippery Rock Option shall
be adjusted by dividing the per share exercise price under each such Slippery
Rock Option by the Exchange Ratio, provided that such exercise price shall be
rounded up to the nearest cent. Notwithstanding clauses (iii) and (iv) of the
preceding sentence, each Slippery Rock Option that is an "incentive stock
option" shall be adjusted as required by Section 424 of the Code, and the
regulations promulgated thereunder, so as not to constitute a modification,
extension or renewal of the option within the meaning of Section 424(h) of the
Code. Parent and Slippery Rock agree to take all necessary steps to effect the
foregoing provisions of this Section 3.08. As of the Effective Time, Parent
shall issue to each holder of an outstanding Slippery Rock Option that has been
assumed by Parent a document evidencing the conversion and assumption of the
Slippery Rock Option by Parent pursuant to this Section 3.08.
3.09 Bank Merger. As soon as practicable after the execution of this
Agreement, Slippery Rock and Parent shall cause Slippery Rock Bank and Parent
Bank to enter into the Bank Merger Agreement, the form of which is attached
hereto as Annex A, that provides for the merger of Slippery Rock Bank with and
into Parent Bank (the "Bank Merger"), in accordance with applicable laws and
regulations and the terms of the Bank Merger Agreement and as soon as
practicable after consummation of the Merger. The Bank Merger Agreement provides
that the directors of Parent Bank upon consummation of the Bank Merger shall be
the directors of Parent Bank immediately prior to the Bank Merger, plus the two
Slippery Rock Designees.
A-16
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01 Forbearances of Slippery Rock. From the date hereof until the
Effective Time, except as expressly contemplated or permitted by this Agreement
or as Previously Disclosed, without the prior written consent of Parent, not to
be unreasonably withheld, Slippery Rock will not, and will cause each of its
Subsidiaries not to:
(a) Ordinary Course.
(i) Conduct its business other than in the ordinary and usual
course consistent with past practice or fail to use reasonable best
efforts to preserve intact its business organization and advantageous
business relationships;
(ii) Fail to keep available the present services of its employees
and preserve for itself and Parent the goodwill of the customers of
Slippery Rock and its Subsidiaries and others with whom business
relations exist; and
(iii) Take any action that would adversely affect or materially
delay the ability of either Slippery Rock or Parent to obtain any
necessary approvals of any regulatory agency required for the
transactions contemplated hereby or to perform its covenants and
agreements under this Agreement or to consummate the transactions
contemplated hereby.
(b) Capital Stock. Other than pursuant to Rights set forth on
Schedule 4.01(b) of Slippery Rock's Disclosure Schedule and outstanding on
the date hereof, (i) issue, sell or otherwise permit to become outstanding,
or authorize the creation of, any additional shares of stock or any Rights
or (ii) permit any additional shares of stock to become subject to grants
of employee or director stock options or other Rights.
(c) Dividends; Etc. (i) Make, declare, pay or set aside for payment
any dividend on or in respect of, or declare or make any other distribution
on any shares of Slippery Rock capital stock, other than dividends from
wholly owned Subsidiaries to Slippery Rock or another wholly owned
Subsidiary of Slippery Rock or as set forth on Schedule 4.01(c) of Slippery
Rock's Disclosure Schedule regular quarterly dividends not in excess of
$.15 per share or (ii) directly or indirectly adjust, split, combine,
redeem, reclassify, purchase or otherwise acquire, any shares of its
capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of Slippery Rock or its
Subsidiaries or grant any salary or wage increase or increase any employee
benefit (including incentive or bonus payments), except (i) for normal
individual increases in compensation to employees in the ordinary course of
business consistent with past practice, provided that no such increase
shall result in an annual adjustment of more than 3%, (ii) for other
changes that are required by applicable law, (iii) to satisfy contractual
obligations existing as of the date hereof and set forth in Schedule
4.01(d) of Slippery Rock's Disclosure Schedule, (iv) for retention bonuses
that will not exceed $125,000 in the aggregate to such persons and in such
amounts as are mutually agreed by Parent and Slippery Rock and that are set
forth in Schedule 4.01(d) of the Slippery Rock Disclosure Schedule, (v)
severance payments pursuant to the severance agreements or employment
agreements that are set forth in Schedule 4.01(d) of the Slippery Rock
Disclosure Schedule or (vi) for grants of awards to newly-hired employees
consistent with past practice.
(e) Hiring. Hire any person as an employee of Slippery Rock or any of
its Subsidiaries or promote any employee, except (i) to satisfy contractual
obligations existing as of the date hereof and set forth on Schedule
4.01(e) of Slippery Rock's Disclosure Schedule and (ii) persons hired to
fill any vacancies arising after the date hereof and whose employment is
terminable at the will of Slippery Rock or a Subsidiary of Slippery Rock,
as applicable, or any other person to be hired who would have a base
salary, including any guaranteed bonus or any similar bonus, considered on
an annual basis of more than $40,000.
A-17
(f) Benefit Plans. Enter into, establish, adopt or amend, or make any
contributions to (except (i) as may be required by applicable law or (ii)
to satisfy contractual obligations existing as of the date hereof and set
forth on Schedule 4.01(f) of Slippery Rock's Disclosure Schedule), 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 (or similar arrangement) related thereto, in respect of any
director, officer or employee of Slippery Rock or its Subsidiaries or take
any action to accelerate the vesting or exercisability of stock options,
restricted stock or other compensation or benefits payable thereunder.
(g) Dispositions. Sell, transfer, mortgage, encumber or otherwise
dispose of or discontinue any of its assets, deposits, business or
properties except in the ordinary course of business consistent with past
practice and in a transaction that, together with all other such
transactions, is not material to Slippery Rock and its Subsidiaries taken
as a whole.
(h) Acquisitions. 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 assets, business, deposits or properties of any
other entity.
(i) Capital Expenditures. Make any capital expenditures other than
those identified on Schedule 4.01(i) of Slippery Rock's Disclosure Schedule
and other than capital expenditures in the ordinary course of business
consistent with past practice in amounts not exceeding $15,000 individually
or $50,000 in the aggregate.
(j) Governing Documents. Amend the Slippery Rock Articles or the
Slippery Rock Bylaws or the articles of incorporation or bylaws (or
equivalent documents) of any Subsidiary of Slippery Rock.
(k) Accounting Methods. Implement or adopt any change in its tax
accounting or financial accounting principles, practices or methods, other
than as may be required by changes in laws or regulations or GAAP.
(l) Contracts. Except in the ordinary course of business consistent
with past practice or as otherwise permitted under this Section 4.01, enter
into or terminate any Material Contract or amend or modify in any material
respect any of its existing Material Contracts.
(m) Claims. Enter into any settlement or similar agreement with
respect to any action, suit, proceeding, order or investigation to which
Slippery Rock or any of its Subsidiaries is or becomes a party, which
settlement, agreement or action involves payment by Slippery Rock or any of
its Subsidiaries of an amount that exceeds $50,000 and/or would impose any
material restriction on the business of Slippery Rock or any of its
Subsidiaries or create precedent for claims that are reasonably likely to
be material to Slippery Rock and its Subsidiaries taken as a whole.
(n) Banking Operations. Enter into any new material line of business;
change its material lending, investment, underwriting, risk and asset
liability management and other material banking and operating policies,
except as required by applicable law, regulation or policies imposed by any
Governmental Authority; or file any application or make any contract with
respect to opening or closing a branching or site location or branching or
site relocation.
(o) Derivatives Contracts. [INTENTIONALLY DELETED]
(p) Indebtedness. (i) Incur any indebtedness for borrowed money
(other than deposits, federal funds purchased, cash management accounts,
Federal Home Loan Bank borrowings that mature within one year and
securities sold under agreements to repurchase that mature within 90 days,
in each case in the ordinary course of business consistent with past
practice) or assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other Person, other than in
the ordinary course of business consistent with past practice or (ii)
prepay any indebtedness.
A-18
(q) Investment Securities. (i) Acquire (other than by way of
foreclosures or acquisitions in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each case in
the ordinary course of business consistent with past practice) any debt
security or Equity Investment other than federal funds or United States
Government securities or United States Government agency securities, in
each case with a term of one (1) year or less, (ii) restructure or
materially change its investment securities portfolio or its gap position
or (iii) enter in any Derivatives Contract.
(r) Loans. Make, renew or otherwise modify any loan, loan commitment,
letter of credit or other extension of credit (collectively, "Loans") other
than in the ordinary course of business consistent with past practice,
provided that Slippery Rock Bank shall not make, renew or otherwise modify
(i) any Loan (other than a permanent Loan secured by an owner-occupied 1-4
single-family residence) with a principal balance in excess of $250,000,
(ii) any permanent Loan secured by an owner-occupied 1-4 single-family
residence with a principal balance in excess of $333,700 or (iii) any Loan
that contains terms that involve an exception to Slippery Rock's Credit
Policy Manual.
(s) Investments in Real Estate. Make any investment or commitment to
invest in real estate or in any real estate development project (other than
by way of foreclosure or acquisitions in a bona fide fiduciary capacity or
in satisfaction of a debt previously contracted in good faith, in each case
in the ordinary course of business consistent with past practice).
(t) Adverse Actions. (i) Take any action that would, or is reasonably
likely to, prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code or (ii) take any action
that is intended or is reasonably likely to result in (x) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (y) any of the conditions to the Merger set forth in
Article VII not being satisfied or (z) a material violation of any
provision of this Agreement or the Bank Merger Agreement, in either case,
except as may be required by applicable law or regulation.
(u) Commitments. Enter into any contract with respect to, or
otherwise agree or commit to do, any of the foregoing.
4.02 Forbearances of Parent. From the date hereof until the Effective
Time, except as expressly contemplated or permitted by this Agreement or as
Previously Disclosed, without the prior written consent of Slippery Rock, not to
be unreasonably withheld, Parent will not, and will cause each of its
Subsidiaries not to:
(a) Adverse Actions. (i) Take any action that would, or is reasonably
likely to, prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code, (ii) take any action that
is intended or is reasonably likely to result in (x) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (y) any of the conditions to the Merger set forth in
Article VII not being satisfied or (z) a material violation of any
provision of this Agreement or the Bank Merger Agreement, except as may be
required by applicable law or regulation or (iii) take any action that
would adversely affect or materially delay the ability of either Parent or
Slippery Rock to obtain any necessary approvals required of any regulatory
agency for the transactions contemplated hereby or to perform its covenants
and agreements under this Agreement or to consummate the transactions
contemplated hereby.
(b) Commitments. Enter into any contract with respect to, or
otherwise agree or commit to do, any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules. On or prior to the date hereof, Parent has
delivered to Slippery Rock a schedule and Slippery Rock has delivered to Parent
a schedule (respectively, its "Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a provision hereof or
as an exception to one or more
A-19
representations or warranties contained in Section 5.03 or 5.04 or to one or
more of its covenants contained in Article IV; provided, however, that (a) no
such item is required to be set forth in a Disclosure Schedule as an exception
to a representation or warranty or as an exception to a covenant in Article IV
if its absence would not be reasonably likely to result in the related
representation or warranty being deemed untrue or incorrect under the standard
established by Section 5.02 and (b) the mere inclusion of an item in a
Disclosure Schedule as an exception to a representation or warranty shall not be
deemed an admission by a party that such item represents a material exception or
fact, event or circumstance or that, absent such inclusion in the Disclosure
Schedule, such item is or would be reasonably likely to result in a Material
Adverse Effect.
5.02 Standard. No representation or warranty of Slippery Rock or Parent
contained in Sections 5.03 or 5.04, respectively, shall be deemed untrue or
incorrect for any purpose under this Agreement, and no party hereto shall be
deemed to have breached a representation or warranty, in any case, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in Sections 5.03, 5.04 or 5.05, has had or would be reasonably likely
to have a Material Adverse Effect on the party making such representation or
warranty disregarding for the purposes of this Section 5.02 any materiality or
Material Adverse Effect qualification contained in any representations or
warranties.
5.03 Representations and Warranties of Slippery Rock. Subject to Sections
5.01 and 5.02, Slippery Rock hereby represents and warrants to Parent:
(a) Organization, Standing and Authority. Slippery Rock is a
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania. Slippery Rock is duly qualified
to do business and is in good standing in each jurisdiction where its
ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified. Except as set forth in Schedule 5.03(a) of
the Slippery Rock Disclosure Schedule, Slippery Rock has in effect all
federal, state, local and foreign governmental authorizations necessary for
it to own or lease its properties and assets and to carry on its business
as now conducted.
(b) Slippery Rock Capital Stock. The authorized capital stock of
Slippery Rock consists solely of 12,000,000 shares of Slippery Rock Common
Stock, of which 2,733,879 shares are issued and outstanding as of the date
hereof and options to purchase 190,147 shares are outstanding as of the
date hereof. As of the date hereof, 49,000 shares of Slippery Rock Common
Stock were held in treasury by Slippery Rock or otherwise directly or
indirectly owned by Slippery Rock. The outstanding shares of Slippery Rock
Common Stock have been duly authorized and validly issued and are fully
paid and non-assessable, and none of the outstanding shares of Slippery
Rock Common Stock have been issued in violation of the preemptive rights of
any Person. Section 5.03(b) of Slippery Rock's Disclosure Schedule sets
forth for each Slippery Rock Option the name of the grantee, the date of
the grant, the type of grant, the status of the option grant as qualified
or non-qualified under Section 422 of the Code (with respect to the
Slippery Rock Options), the number of shares of Slippery Rock Common Stock
subject to each Slippery Rock Option, the number of shares of Slippery Rock
Common Stock subject to Slippery Rock Options that are currently
exercisable and the exercise price per share. Except as set forth in the
preceding sentence, there are no shares of Slippery Rock Common Stock
reserved for issuance, Slippery Rock does not have any Rights issued or
outstanding with respect to Slippery Rock Common Stock and Slippery Rock
does not have any commitment to authorize, issue or sell any Slippery Rock
Common Stock or Rights.
(c) Subsidiaries.
(i) (A) Schedule 5.03(c) of the Slippery Rock Disclosure Schedule
sets forth a list of all of its Subsidiaries together with the
jurisdiction of organization of each such Subsidiary; (B) except as set
forth on Schedule 5.03(c) of Slippery Rock's Disclosure Schedule,
Slippery Rock owns, directly or indirectly, all the issued and
outstanding equity securities of each of its Subsidiaries; (C) no equity
securities of any of its Subsidiaries are or may become required to be
issued (other than to Slippery Rock) by reason of any Right or
otherwise; (D) there are no contracts, commitments, understandings or
arrangements by which any of its Subsidiaries is or may be bound to sell
or otherwise transfer any of its equity securities (other than to
Slippery Rock or any of its wholly owned Subsidiaries);
A-20
(E) there are no contracts, commitments, understandings or arrangements
relating to Slippery Rock's rights to vote or to dispose of such
securities and (F) all the equity securities of Slippery Rock's
Subsidiaries held by Slippery Rock or its Subsidiaries are fully paid
and nonassessable and are owned by Slippery Rock or its Subsidiaries
free and clear of any Liens.
(ii) Except for securities and other interests held in a fiduciary
capacity and beneficially owned by third parties or taken in
consideration of debts previously contracted, ownership interests in
Slippery Rock's Subsidiaries and stock in the Federal Home Loan Bank of
Pittsburgh, Slippery Rock does not own beneficially, directly or
indirectly, any equity securities or similar interests of any Person or
any interest in a partnership or joint venture of any kind.
(iii) Each of Slippery Rock's Subsidiaries has been duly organized
and is validly existing in good standing under the laws of the
jurisdiction of its organization and 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.
(iv) The deposit accounts of Slippery Rock Bank are insured by the
Bank Insurance Fund, in the manner and to the maximum extent provided by
applicable law, and Slippery Rock Bank has paid all deposit insurance
premiums and assessments required by applicable laws and regulations.
(d) Corporate Power. Except as set forth in Schedule 5.03(d) of the
Slippery Rock Disclosure Schedule, each of Slippery Rock and its
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
Slippery Rock has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement and to consummate the
Transaction, subject to receipt of all necessary approvals of Governmental
Authorities and the approval of Slippery Rock's stockholders of this
Agreement, and no other corporate proceedings are necessary on the part of
Slippery Rock to approve this Agreement or to consummate the Transaction.
(e) Corporate Authority. Except as set forth in Schedule 5.03(e) of
the Slippery Rock Disclosure Schedule, subject to the approval of this
Agreement by the holders of 75% of the outstanding Slippery Rock Common
Stock, this Agreement and the Transaction have been authorized by all
necessary corporate action of Slippery Rock and the Slippery Rock Board on
or prior to the date hereof. Slippery Rock has duly executed and delivered
this Agreement and, assuming due authorization, execution and delivery by
Parent of this Agreement, this Agreement is a valid and legally binding
obligation of Slippery Rock, enforceable in accordance with its terms
(except as enforceability 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).
(f) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or waivers by, or filings or
registrations with, any Governmental Authority or with any third party
are required to be made or obtained by Slippery Rock or any of its
Subsidiaries in connection with the execution, delivery or performance
by Slippery Rock and Slippery Rock Bank of this Agreement and the Bank
Merger Agreement, respectively, or to consummate the Transaction, except
as set forth in Schedule 5.03(f) of the Slippery Rock Disclosure
Schedule and except for (A) filings of applications or notices with, and
approvals or waivers by, the OCC, FDIC and/or Federal Reserve Board, (B)
filings with the SEC and state securities authorities, as applicable, in
connection with the submission of this Agreement for the approval of the
holders of Slippery Rock Common Stock and the registration of Parent
Common Stock issuable in the Merger, (C) the filing of Articles of
Merger with the Secretary of State of the Commonwealth of Pennsylvania
pursuant to the PBCL and the Secretary of State of the State of Florida
pursuant to the FLBC with respect to the Merger and (D) the approval of
this Agreement by the holders of 75% of the outstanding shares of
Slippery Rock Common Stock. As of the date hereof, Slippery Rock is not
aware of any reason why the approvals set forth above and referred to in
Section 7.01(b) will not be received in a timely manner and without the
imposition of a condition, restriction or requirement of the type
described in Section 7.01(b).
A-21
(ii) Subject to receipt, or the making, of the consents, approvals,
waivers and filings referred to in the preceding paragraph and the
expiration of related waiting periods, the execution, delivery and
performance of this Agreement and the Bank Merger Agreement by Slippery
Rock and Slippery Rock Bank, respectively, and the consummation of the
Transaction do not and will not (A) except as Previously Disclosed,
constitute a breach or violation of, or a default under, or give rise to
any Lien, any acceleration of remedies or any right of termination
under, any law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or instrument of
Slippery Rock or any of its Subsidiaries or to which Slippery Rock or
any of its Subsidiaries or any of their respective properties is subject
or bound, (B) constitute a breach or violation of, or a default under,
the Slippery Rock Articles, the Slippery Rock Bylaws or similar
governing documents of Slippery Rock's Subsidiaries or (C) require any
consent or approval under any such law, rule, regulation, judgment,
decree, order, governmental permit or license, agreement, indenture or
instrument.
(g) Financial Reports; Undisclosed Liabilities.
(i) Slippery Rock's Annual Reports on Form 10-K for the fiscal
years ended December 31, 2003, 2002 and 2001 and all other reports,
registration statements, definitive proxy statements or information
statements filed or to be filed by it subsequent to December 31, 2001
with the SEC (collectively, Slippery Rock's "Securities Documents"), as
of the date filed or to be filed and as amended prior to the date
hereof, (A) complied or will comply in all material respects as to form
with the applicable regulations of the SEC as the case may be and (B)
did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that information as of a
later date shall be deemed to modify information as of an earlier date;
and each of the consolidated statements of financial condition contained
in any such Securities Documents (including the related notes and
schedules thereto) fairly presents, or will fairly present, the
consolidated financial position of Slippery Rock and its Subsidiaries as
of its date, and each of the consolidated statements of income,
stockholders' equity and cash flows or equivalent statements in such
Securities Documents (including any related notes and schedules thereto)
fairly presents, or will fairly present, the consolidated results of
operations, changes in stockholders' equity and changes in cash flows,
as the case may be, of Slippery Rock and its Subsidiaries for the
periods to which they relate, in each case in accordance with GAAP
consistently applied during the periods involved, except in each case as
may be noted therein.
(ii) Except as set forth in Schedule 5.03(g) of the Slippery Rock
Disclosure Schedule, since December 31, 2003, neither Slippery Rock nor
any of its Subsidiaries has incurred any liability other than in the
ordinary course of business consistent with past practice (excluding the
incurrence of expenses related to this Agreement and the Transaction).
(iii) (A) Since December 31, 2003, (A) Slippery Rock and its
Subsidiaries have conducted their respective businesses in the ordinary
and usual course consistent with past practice (excluding the incurrence
of expenses related to this Agreement and the Transaction); (B) except
as set forth in Schedule 5.03(g) of the Slippery Rock Disclosure
Schedule, neither Slippery Rock nor any of its Subsidiaries has taken
nor permitted or entered into any contract with respect to, or otherwise
agreed or committed to do or take, any of the actions set forth in
Sections 4.01(d), (f), (g), (h), (j), (k) and (n) hereof between
December 31, 2003 and the date hereof; (C) except as set forth in
Schedule 5.03(g) of the Slippery Rock Disclosure Schedule, neither
Slippery Rock nor any of its Subsidiaries has taken or permitted or
entered into any contract with respect to, or otherwise agreed or
committed to do or take, any of the actions set forth in Sections
4.01(e), (i), (l), (m), (p), (q) and (r) between January 1, 2004 and the
date hereof and (D) except as set forth in Schedule 5.03(g) of the
Slippery Rock Disclosure Schedule or the Slippery Rock Securities
Documents, since December 31, 2003, no event has occurred or
circumstance arisen that, individually or taken together with all other
facts, circumstances and events (described in any
A-22
paragraph of this Section 5.03 or otherwise), is reasonably likely to
have a Material Adverse Effect with respect to Slippery Rock.
(iv) No agreement pursuant to which any loans or other assets have
been or shall be sold by Slippery Rock or its Subsidiaries entitled the
buyer of such loans or other assets, unless there is material breach of
a representation or covenant by Slippery Rock or its Subsidiaries, to
cause Slippery Rock or its Subsidiaries to repurchase such loan or other
asset or the buyer to pursue any other form of recourse against Slippery
Rock or its Subsidiaries. To the knowledge of Slippery Rock, there has
been no material breach of a representation or covenant by Slippery Rock
or its Subsidiaries in any such agreement. Except as disclosed in
Slippery Rock's Securities Documents filed prior to the date hereof or
except as set forth in Schedule 5.03(g) of the Slippery Rock Disclosure
Schedule, since December 31, 2001, no cash, stock or other dividend or
any other distribution with respect to the capital stock of Slippery
Rock or any of its Subsidiaries has been declared, set aside or paid.
Except as disclosed in Slippery Rock's Securities Documents filed prior
to the date hereof or except as set forth in Schedule 5.03(g) of the
Slippery Rock Disclosure Schedule, no shares of capital stock of
Slippery Rock have been purchased, redeemed or otherwise acquired,
directly or indirectly, by Slippery Rock since December 31, 2003, and no
agreements have been made to do the foregoing.
(v) Slippery Rock maintains disclosure controls and procedures
required by Rule 13a-15 or 15d -15 under the Exchange Act; such controls
and procedures are effective to ensure that all material information
concerning Slippery Rock and its Subsidiaries is made known on a timely
basis to the individuals responsible for the preparation of Slippery
Rock's Securities Documents and other public disclosure documents. The
Chief Executive Officer and the Chief Financial Officer of Slippery Rock
have signed, and Slippery Rock has furnished to the SEC, all
certifications required by Rule 13a-14 or 15d-14 under the Exchange Act
or 18 U.S.C. sec. 1350; such certifications contain no qualifications or
exceptions to the matters certified therein and have not been modified
or withdrawn; and neither Slippery Rock nor any of its officers has
received notice from any Governmental Authorities questioning or
challenging the accuracy, completeness, form or manner of filing or
submission of such certifications.
(h) Litigation. Except as set forth in Schedule 5.03(h) of the
Slippery Rock Disclosure Schedule, no litigation, claim or other proceeding
before any court or governmental agency is pending against Slippery Rock or
any of its Subsidiaries and, to Slippery Rock's knowledge, no such
litigation, claim or other proceeding has been threatened and there are no
facts that could reasonably give rise to such litigation, claim or other
proceeding. Neither Slippery Rock nor any of its Subsidiaries is a party to
any order, judgment or decree that has or could reasonably be expected to
have a Material Adverse Effect with respect to Slippery Rock.
(i) Regulatory Matters.
(i) Except as set forth in Schedule 5.03(i) of the Slippery Rock
Disclosure Schedule, neither Slippery Rock nor any of its Subsidiaries
nor any of their respective 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
extraordinary supervisory letter from, any Bank Regulatory Authority or
any federal or state governmental agency or authority charged with the
supervision or regulation of issuers of securities or the supervision or
regulation of it (collectively, the "Slippery Rock Regulatory
Authorities"). Slippery Rock and its Subsidiaries have paid all
assessments made or imposed by any Slippery Rock Regulatory Authority.
(ii) Except as set forth in Schedule 5.03(i) of the Slippery Rock
Disclosure Schedule, neither Slippery Rock nor any of its Subsidiaries
has been advised by, nor does it have any knowledge of facts that could
give rise to an advisory notice by, any Slippery Rock Regulatory
Authority that such Slippery Rock 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, supervisory letter or similar
submission.
A-23
(iii) Slippery Rock and each of its Subsidiaries have timely filed
all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to
file since January 1, 2001 with (A) the Federal Reserve Board, (B) the
FDIC, (C) the OCC, (D) any state regulatory authority and (E) the SEC,
and all other reports and statements required to be filed by them since
January 1, 2001, and have paid all fees and assessments due and payable
in connection therewith. Except as set forth in Section 5.03(j) of
Slippery Rock's Disclosure Schedule and except for normal examinations
conducted by Bank Regulatory Authorities, (A) no Bank Regulatory
Authority has initiated or has pending any proceeding or, to the
knowledge of Slippery Rock, investigation into the business or
operations of Slippery Rock or any of its Subsidiaries since January 1,
2001, except where such proceedings or investigation are not reasonably
likely to have, either individually or in the aggregate, a Slippery Rock
Material Adverse Effect, and (B) there is no unresolved violation,
criticism or exception by any Bank Regulatory Authority with respect to
the business, operations, policies or procedures of Slippery Rock or
Slippery Rock Bank since January 1, 2001 that are reasonably likely to
have, either individually or in the aggregate, a Slippery Rock Material
Adverse Effect.
(j) Compliance With Laws. Except as set forth in Schedule 5.03(j) of
the Slippery Rock Disclosure Schedule, each of Slippery Rock and its
Subsidiaries:
(i) is in material compliance 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, Sections 23A
and 23B of the Federal Reserve Act and OCC regulations pursuant thereto,
the Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act
and all other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities that are required in order to permit
it to own or lease its properties and to conduct its business as
presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to
Slippery Rock's knowledge, no suspension or cancellation of any of them
is threatened; and
(iii) has received, since December 31, 2001, no notification or
communication from any Governmental Authority (A) asserting that
Slippery Rock or any of its Subsidiaries is not in compliance with any
of the statutes, regulations or ordinances that such Governmental
Authority enforces or (B) threatening to revoke any license, franchise,
permit or governmental authorization (nor, to Slippery Rock's knowledge,
do any grounds for any of the foregoing exist).
(k) Material Contracts; Defaults.
(i) Except for documents listed as exhibits to Slippery Rock's
Securities Documents or as set forth in Schedule 5.03(k) of the Slippery
Rock Disclosure Schedule, neither Slippery Rock nor any of its
Subsidiaries is a party to, bound by or subject to any agreement,
contract, arrangement, commitment or understanding (whether written or
oral) (A) with respect to the employment of any of its directors,
officers, employees or consultants; (B) that would entitle any present
or former director, officer, employee or agent of Slippery Rock or any
of its Subsidiaries to indemnification from Slippery Rock or any of its
Subsidiaries; (C) that is a material contract (as defined in Item
601(b)(10) of Regulation S-K of the SEC); (D) that is a consulting
agreement (including data processing, software programming and licensing
contracts) not terminable on 60 days or less notice and involving the
payment of more than $25,000 per annum or (E) that materially restricts
the conduct of any business by Slippery Rock or by any of its
Subsidiaries (collectively, "Material Contracts"). Slippery Rock has set
forth in Schedule 5.03(k) of the Slippery Rock Disclosure Schedule and
made available to Parent true, correct and complete copies of each such
Material Contract.
A-24
(ii) Neither Slippery Rock nor any of its Subsidiaries is in
material default under any contract, agreement, commitment, arrangement,
lease, insurance policy or other instrument to which it is a party, by
which its 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 that, with the lapse of
time or the giving of notice or both, would constitute such a default.
Except as provided in this Agreement, no power of attorney or similar
authorization given directly or indirectly by Slippery Rock or any of
its Subsidiaries is currently outstanding.
(l) No Brokers. Except as set forth in Schedule 5.03(l) of the
Slippery Rock Disclosure Schedule, no action has been taken by Slippery
Rock or any of its Subsidiaries that would give rise to any valid claim
against any party hereto for a brokerage commission, finder's fee or other
like payment with respect to the Transaction.
(m) Employee Benefit Plans.
(i) All benefit and compensation plans, contracts, policies or
arrangements covering current or former employees of Slippery Rock and
its Subsidiaries (the "Employees") and current or former directors of
Slippery Rock and its Subsidiaries including, but not limited to,
"employee benefit plans" within the meaning of Sections 3(1), 3(2), 3(3)
and 3(37) of ERISA, and deferred compensation, stock option, stock
purchase, stock appreciation rights, stock based, incentive and bonus
plans (the "Benefit Plans"), have been set forth in Schedule 5.03(m) of
the Slippery Rock Disclosure Schedule. True and complete copies of the
following have been provided or made available to Parent: (A) all
Benefit Plans including, but not limited to, any trust instruments and
insurance contracts forming a part of any Benefit Plans and all
amendments thereto; (B) the most recent annual report (Form 5500),
together with all schedules, as required, filed with the Internal
Revenue Service ("IRS") or Department of Labor (the "DOL"), as
applicable, and any financial statements and opinions required by
Section 103(e)(3) of ERISA with respect to each Benefit Plan; (C) for
each Benefit Plan that is a "top-hat" plan, a copy of filings with the
DOL; (D) the most recent determination letter issued by the IRS for each
Benefit Plan that is intended to be "qualified" under Section 401(a) of
the Code; (E) the most recent summary plan description and any summary
of material modifications, as required, for each Benefit Plan; (F) the
most recent actuarial report, if any, relating to each Benefit Plan; (G)
the most recent actuarial valuation, study or estimate of any retiree
medical and life insurance benefits plan or supplemental retirement
benefits plan and (H) the most recent summary annual report for each
Benefit Plan required to provide summary annual reports by Section 104
of ERISA.
(ii) Each Benefit Plan has been administered to date in all
material respects in accordance with the applicable provisions of ERISA,
the Code and applicable law and with the terms and provisions of all
documents, contracts or agreements pursuant to which such Benefit Plan
is maintained. Each Benefit Plan that is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") and
that is intended to be qualified under Section 401(a) of the Code, has
received a favorable determination letter from the IRS (and has applied
for but not yet received a GUST determination letter from the IRS) or is
the adoption of a prototype plan for which the prototype sponsor has a
favorable determination letter from the IRS, and Slippery Rock is not
aware of any circumstances likely to result in revocation of any such
favorable determination letter or the loss of the qualification of such
Pension Plan under Section 401(a) of the Code. Neither Slippery Rock nor
any of its Subsidiaries has received any correspondence or written or
verbal notice from the IRS, DOL, any other governmental agency, any
participant in or beneficiary of, a Benefit Plan, or any agent
representing any of the foregoing that brings into question the
qualification of any such Benefit Plan. There is no material pending or,
to Slippery Rock's knowledge, threatened litigation relating to the
Benefit Plans. Neither Slippery Rock nor any of its Subsidiaries has
engaged in a transaction with respect to any Benefit Plan or Pension
Plan that, assuming the taxable period of such transaction expired as of
the date hereof, could subject Slippery Rock or any of its Subsidiaries
to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA. There are no matters pending before the
A-25
IRS, DOL or other governmental agency with respect to any Benefit Plans,
nor does Slippery Rock have knowledge that any is threatened.
(iii) No liability under Subtitle C or D of Title IV of ERISA has
been or is presently expected to be incurred by Slippery Rock 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 that is considered one employer with
Slippery Rock under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA Affiliate"). Neither Slippery Rock nor any of its Subsidiaries
has incurred, and neither expects to incur, any withdrawal liability
with respect to a multiemployer plan under Subtitle E of Title IV of
ERISA (regardless of whether based on contributions of an ERISA
Affiliate). 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 or by
any ERISA Affiliate.
(iv) All contributions required to be made under the terms of any
Benefit Plan have been timely made. Neither any Pension Plan nor any
single-employer plan of an ERISA Affiliate has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA and no ERISA Affiliate has an
outstanding funding waiver. Except as set forth in Schedule 5.03(m) of
the Slippery Rock Disclosure Schedule, neither Slippery Rock 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.
(v) Except as set forth in Schedule 5.03(m) of the Slippery Rock
Disclosure Schedule, neither Slippery Rock nor any of its Subsidiaries
has any obligations for retiree health and life benefits under any
Benefit Plan, other than coverage as may be required under Section 4980B
of the Code or Part 6 of Title I of ERISA, or under the continuation of
coverage provisions of the laws of any state or locality. No event or
condition exists with respect to a Benefit Plan that could subject
Slippery Rock to tax under Section 4980B of the Code.
(vi) None of the execution of this Agreement, stockholder approval
of this Agreement or consummation of the Transaction will, except as set
forth in Schedule 5.03(m) of the Slippery Rock Disclosure Schedule, (A)
entitle any employees of Slippery Rock or any of its Subsidiaries to
severance pay or any increase in severance pay upon any termination of
employment after the date hereof, (B) accelerate the time of payment or
vesting or trigger any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of the
Benefit Plans, (C) result in any breach or violation of, or a default
under, any of the Benefit Plans or (D) result in any payment that would
be a "parachute payment" to a "disqualified individual" as those terms
are defined in Section 280G of the Code, without regard to whether such
payment is reasonable compensation for personal services performed or to
be performed in the future.
(vii) All required reports and descriptions (including but not
limited to Form 5500 annual reports and required attachments, Forms
1099-R, summary annual reports, Forms PBGC-1 and summary plan
descriptions) have been filed or distributed appropriately with respect
to each Benefit Plan. All required tax filings with respect to each
Benefit Plan have been made, and any taxes due in connection with such
filings have been paid.
(n) Labor Matters. Neither Slippery Rock 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 Slippery Rock or any of its Subsidiaries the subject
of a proceeding asserting that it has committed an unfair labor practice
(within the meaning of the National Labor Relations Act) or seeking to
compel Slippery Rock or any of its Subsidiaries to bargain with any labor
organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving it or any of its Subsidiaries
pending or, to Slippery Rock's knowledge, threatened, nor is Slippery Rock
or any of its
A-26
Subsidiaries aware of any activity involving its employees seeking to
certify a collective bargaining unit or engaging in other organizational
activity.
(o) Environmental Matters.
(i) Slippery Rock and its Subsidiaries are in compliance with
applicable Environmental Laws; (ii) except as Previously Disclosed, to
Slippery Rock's knowledge, no real property (including buildings or
other structures) currently or formerly owned or operated by Slippery
Rock or any of its Subsidiaries, or any property in which Slippery Rock
or any of its Subsidiaries has held a security interest, Lien or a
fiduciary or management role ("Slippery Rock Loan Property"), has been
contaminated with, or has had any release of, any Hazardous Substance
except in compliance with Environmental Laws; (iii) neither Slippery
Rock nor any of its Subsidiaries could be deemed the owner or operator
of, nor has it participated in the management regarding Hazardous
Substances of, any Slippery Rock Loan Property that has been
contaminated with, or has had any release of, any Hazardous Substance;
(iv) neither Slippery Rock nor any of its Subsidiaries has any liability
for any Hazardous Substance disposal or contamination on any third party
property; (v) neither Slippery Rock nor any of its Subsidiaries has
received any notice, demand letter, claim or request for information
alleging any violation of, or liability under, any Environmental Law;
(vi) neither Slippery Rock nor any of its Subsidiaries is subject to any
order, decree, injunction or other agreement with any Governmental
Authority or any third party relating to any Environmental Law; (vii)
except as set forth in Schedule 5.03(o) of the Slippery Rock Disclosure
Schedule, to Slippery Rock's knowledge, there are no circumstances or
conditions (including the presence of asbestos, underground storage
tanks, lead products, polychlorinated biphenyls, prior manufacturing
operations, dry-cleaning or automotive services) involving Slippery Rock
or any of its Subsidiaries, any currently or formerly owned or operated
property, or any Slippery Rock Loan Property, that could reasonably be
expected to result in any claims, liability or investigations against
Slippery Rock or any of its Subsidiaries, result in any restrictions on
the ownership, use or transfer of any property pursuant to any
Environmental Law or adversely affect the value of any Slippery Rock
Loan Property, (viii) Slippery Rock has set forth in Schedule 5.03(o) of
the Slippery Rock Disclosure Schedule and made available to Parent
copies of all environmental reports or studies, sampling data,
correspondence and filings in its possession or reasonably available to
it relating to Slippery Rock, its Subsidiaries and any currently owned
or operated property of Slippery Rock and (ix) Slippery Rock has made
available to Parent copies of all environmental reports or studies,
sampling data, correspondence and filings in the possession or
reasonably available to it relating to any Slippery Rock Loan.
As used herein, the term "Environmental Laws" means any federal,
state or local law, regulation, order, decree, permit, authorization,
opinion or agency requirement relating to: (A) the protection or
restoration of the environment, health, safety or natural resources; (B)
the handling, use, presence, disposal, release or threatened release of
any Hazardous Substance or (C) wetlands, indoor air, pollution,
contamination or any injury or threat of injury to persons or property
in connection with any Hazardous Substance; and the term "Hazardous
Substance" means any substance that is: (A) listed, classified or
regulated pursuant to any Environmental Law; (B) any petroleum product
or by-product, asbestos-containing material, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive materials or radon or
(C) any other substance that is the subject of regulatory action by any
Governmental Authority in connection with any Environmental Law.
(p) Tax Matters.
(i) (A) All Tax Returns that are required to be filed on or before
the Effective Date (taking into account any extensions of time within
which to file that have not expired) by or with respect to the Slippery
Rock Group, including Slippery Rock and its Subsidiaries, have been or
will be timely filed on or before the Effective Date; (B) all such Tax
Returns are or will be true and complete in all material respects; (C)
all Taxes due of the Slippery Rock Group, including Slippery Rock and
its
A-27
Subsidiaries, whether or not shown on the Tax Returns referred to in
clause (A) have been or will be timely paid in full; (D) the Tax Returns
referred to in clause (A) have not been examined by the IRS or the
appropriate Tax authority, the Slippery Rock Group has not extended the
statute of limitations for any such Tax Returns and the period for
assessment of the Taxes in respect of which such Tax Returns were
required to be filed has expired; (E) all deficiencies asserted or
assessments made as a result of examinations conducted by any taxing
authority have been paid in full; (F) no issues that have been raised by
the relevant taxing authority in connection with the examination of any
of the Tax Returns referred to in clause (A) are currently pending and
(G) no member of the Slippery Rock Group has extended any statutes of
limitation with respect to any Taxes of Slippery Rock.
(ii) Slippery Rock has made available to Parent true and correct
copies of the United States federal income Tax Returns filed by Slippery
Rock for each of the three most recent fiscal years for which such
returns have been filed.
(iii) Neither Slippery Rock nor any of its Subsidiaries has any
liability with respect to income, franchise or similar Taxes that
accrued on or before the end of the most recent period covered by
Slippery Rock's Securities Documents filed prior to the date hereof in
excess of the amounts accrued or subject to a reserve with respect
thereto that are reflected in the financial statements included in
Slippery Rock's Securities Documents filed on or prior to the date
hereof.
(iv) Neither Slippery Rock nor any of its Subsidiaries is a party
to any Tax allocation or sharing agreement, is or has been a member of
an affiliated group filing consolidated or combined Tax Returns (other
than a group the common parent of which is or was Slippery Rock) or
otherwise has any liability for the Taxes of any Person (other than a
member of the Slippery Rock Group).
(v) No closing agreements, private letter rulings, technical advice
memoranda or similar agreements or rulings have been entered into or
issued by any taxing authority with respect to Slippery Rock and its
Subsidiaries.
(vi) Neither Slippery Rock nor any of its Subsidiaries maintains
any compensation plans, programs or arrangements the payments under
which would not reasonably be expected to be deductible as a result of
the limitations under Section 162(m) of the Code and the regulations
issued thereunder.
(vii) As of the date hereof, Slippery Rock has no reason to believe
that any conditions exist that might prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Code.
(viii) (A) No Tax is required to be withheld pursuant to Section
1445 of the Code as a result of the Transaction and (B) all Taxes that
Slippery Rock or any of its Subsidiaries is or was required by law to
withhold or collect have been duly withheld or collected and, to the
extent required by applicable law, have been paid to the proper
Governmental Authority or other Person.
(ix) There are no Liens for Taxes on any of the assets of Slippery
Rock or any of its Subsidiaries, except for Liens for Taxes not yet due
and payable.
(x) Neither Slippery Rock nor any of its Subsidiaries (A) has
agreed, or is required, to make any adjustment under Section 481(a) of
the Code (or any comparable provision of state, local or foreign law) or
has any knowledge that a Governmental Authority has proposed any such
adjustment or change in accounting method with respect to Slippery Rock
or its Subsidiaries or (B) has any application pending with any
Governmental Authority requesting permission for any change in
accounting method.
(xi) Neither Slippery Rock nor any of its Subsidiaries is a
successor for Tax purposes to any Person by way of merger,
reorganization or similar transaction.
A-28
(xii) No claim has ever been made by a Governmental Authority in a
jurisdiction where Slippery Rock or any of its Subsidiaries does not
file Tax Returns that Slippery Rock or such Subsidiaries is or may be
subject to taxation by that jurisdiction.
(xiii) Neither Slippery Rock nor any of its Subsidiaries has been
the "distributing corporation" (within the meaning of Section 355(c)(2)
of the Code) or has been the subject of a distribution with respect to a
transaction described in Section 355 of the Code within the five-year
period ending as of the date of this Agreement.
(q) Risk Management Instruments. Neither Slippery Rock nor any of its
Subsidiaries is a party or has agreed to enter into an exchange traded or
over-the-counter equity, interest rate, foreign exchange or other swap,
forward, future, option, cap, floor or collar or any other contract that is
not included on Slippery Rock's consolidated statement of financial
condition and is a derivatives contract (including various combinations
thereof) (each, a "Derivatives Contract") nor does Slippery Rock or any of
its Subsidiaries own securities that (i) are referred to generically as
"structured notes," "high risk mortgage derivatives," "capped floating rate
notes" or "capped floating rate mortgage derivatives" or (ii) are likely to
have changes in value as a result of interest or exchange rate changes that
significantly exceed normal changes in value attributable to interest or
exchange rate changes.
(r) Loans; Nonperforming and Classified Assets.
(i) Except as set forth in Schedule 5.03(r) of the Slippery Rock
Disclosure Schedule, each Loan on the books and records of Slippery Rock
and its Subsidiaries was made and has been serviced in all material
respects in accordance with their customary lending standards in the
ordinary course of business, is evidenced in all material respects by
appropriate and sufficient documentation and, to the knowledge of
Slippery Rock, constitutes the legal, valid and binding obligation of
the obligor named therein, subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditor's rights or by
general equity principles.
(ii) Slippery Rock has set forth in Schedule 5.03(r) of the
Slippery Rock Disclosure Schedule as to Slippery Rock and each Slippery
Rock Subsidiary as of the latest practicable date prior to the date of
this Agreement: (A) any written or, to Slippery Rock's knowledge, oral
Loan under the terms of which the obligor is 60 or more days delinquent
in payment of principal or interest, or to Slippery Rock's knowledge, in
default of any other material provision thereof; (B) each Loan that has
been classified as "substandard," "doubtful," "loss" or "special
mention" (or words of similar import) by Slippery Rock, a Slippery Rock
Subsidiary or an applicable regulatory authority; (C) a listing of the
OREO acquired by foreclosure or by deed-in-lieu thereof, including the
book value thereof and (D) each Loan with any director, executive
officer or five percent or greater shareholder of Slippery Rock or a
Slippery Rock Subsidiary, or to the knowledge of Slippery Rock, any
Person controlling, controlled by or under common control with any of
the foregoing.
(s) Properties. All real and personal property owned by Slippery Rock
or a Subsidiary of Slippery Rock or presently used by any of them in their
respective business is in an adequate condition (ordinary wear and tear
excepted) and is sufficient to carry on its business in the ordinary course
of business consistent with its past practices. Slippery Rock has good and
marketable fee simple title free and clear of all Liens to all of the
material properties and assets, real and personal, reflected on the
consolidated statement of financial condition of Slippery Rock as of
December 31, 2003 included in Slippery Rock's Securities Documents or
acquired after such date, other than properties sold by Slippery Rock in
the ordinary course of business, except (i) Liens for current taxes and
assessments not yet due or payable, (ii) pledges to secure deposits and
other Liens incurred in the ordinary course of its banking business and
(iii) such imperfections of title, easements and encumbrances, if any, as
are not material in character, amount or extent and as are reflected on the
consolidated statement of financial condition of Slippery Rock as of
December 31, 2003 included in Slippery Rock's Securities Documents. Except
as set forth in Schedule 5.03(s) of the Slippery Rock Disclosure Schedule,
all real and personal property that is material to Slippery Rock's business
on a consolidated basis and leased or licensed by Slippery Rock or a
A-29
Subsidiary of Slippery Rock is held pursuant to leases or licenses that are
valid and enforceable in accordance with their respective terms and such
leases will not terminate or lapse prior to the Effective Time.
(t) Intellectual Property. Slippery Rock and each Subsidiary of
Slippery Rock owns or possesses valid and binding licenses and other rights
to use without payment of any material amount all material patents,
copyrights, trade secrets, trade names, service marks and trademarks used
in its businesses, all of which have been Previously Disclosed by Slippery
Rock, and none of Slippery Rock or any of its Subsidiaries has received any
notice of conflict with respect thereto that asserts the right of others.
Slippery Rock and each of its Subsidiaries have performed in all material
respects all the obligations required to be performed by them and are not
in default under any contract, agreement, arrangement or commitment
relating to any of the foregoing. Schedule 5.03(t) to the Slippery Rock
Disclosure Schedule sets forth a description of all intellectual property
rights of Slippery Rock, including, without limitation, patents,
trademarks, copyrights, service marks and all licenses relating thereto.
(u) Fiduciary Accounts. Slippery Rock and each of its Subsidiaries
has properly administered all accounts for which it acts as a fiduciary,
including but not limited to accounts for which it serves as a trustee,
agent, custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the governing documents
and applicable laws and regulations. Neither Slippery Rock nor any of its
Subsidiaries, nor any of their respective directors, officers or employees,
has committed any breach of trust with respect to any fiduciary account and
the records for each such fiduciary account are true and correct and
accurately reflect the assets of such fiduciary account.
(v) Books and Records. The books and records of Slippery Rock and its
Subsidiaries have been fully, properly and accurately maintained in
material compliance with applicable legal and accounting requirements, and
such books and records accurately reflect in all material respects all
dealings and transactions in respect of the business, assets, liabilities
and affairs of Slippery Rock and its Subsidiaries.
(w) Insurance. Slippery Rock has set forth in Schedule 5.03(w) of the
Slippery Rock Disclosure Schedule a description of all of the material
insurance policies, binders or bonds currently maintained by Slippery Rock
and its Subsidiaries ("Insurance Policies"). Slippery Rock and its
Subsidiaries are insured with reputable insurers against such risks and in
such amounts as the management of Slippery Rock reasonably has determined
to be prudent in accordance with industry practices. All the Insurance
Policies are in full force and effect; Slippery Rock and its Subsidiaries
are not in material default thereunder and all claims thereunder have been
filed in due and timely fashion.
(x) Allowance for Loan Losses. Slippery Rock's allowance for loan
losses is sufficient at the date of this Agreement for its reasonably
anticipated loan losses, is in compliance with the standards established by
applicable Governmental Authorities and GAAP and is adequate under all such
standards.
(y) Required Vote. The affirmative vote of the holders of 75% of the
issued and outstanding shares of Slippery Rock Common Stock is necessary to
approve this Agreement and the Merger on behalf of Slippery Rock. No other
vote of the stockholders of Slippery Rock is required by law, the Slippery
Rock Articles, the Slippery Rock Bylaws or otherwise to approve this
Agreement and the Merger.
(z) Fairness Opinion. The Slippery Rock Board has received an opinion
of Griffin Financial Group LLP to the effect that as of the date hereof the
Merger Consideration is fair to the holders of Slippery Rock Common Stock
from a financial point of view.
(aa) Absence of Certain Changes or Events.
(i) Except as publicly disclosed in the Slippery Rock Securities
Documents filed prior to the date of this Agreement, since December 31,
2003, no event or events have occurred that have had or are reasonably
likely to have, either individually or in the aggregate, a Slippery Rock
Material Adverse Effect.
A-30
(ii) Except as publicly disclosed in the Slippery Rock Securities
Documents filed prior to the date of this Agreement, Slippery Rock and
its Subsidiaries have carried on their respective business in all
material respects in the ordinary course.
(bb) State Takeover Laws. The Board of Directors of Slippery Rock has
approved this Agreement and the transactions contemplated hereby as
required to render inapplicable to such Agreement and the Transaction the
provisions of the PBCL applicable to registered corporations.
(cc) Disclosure. The representations and warranties contained in this
Section 5.03, when considered as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this Section
5.03 not misleading.
5.04 Representations and Warranties of Parent. Subject to Sections 5.01
and 5.02, Parent hereby represents and warrants to Slippery Rock as follows:
(a) Organization, Standing and Authority. Parent is duly organized,
validly existing and in good standing under the laws of the State of
Florida. Parent is duly qualified to do business and is in good standing in
each jurisdiction where its ownership or leasing of property or assets or
the conduct of its business requires it to be so qualified, except where
the failure to be so qualified would not have a Material Adverse Effect on
Parent. Parent has in effect all federal, state, local and foreign
governmental authorizations necessary for it to own or lease its properties
and assets and to carry on its business as it is now conducted.
(b) Parent Stock.
(i) As of the date hereof, the authorized capital stock of Parent
consists solely of 500,000,000 shares of Parent Common Stock, of which
46,284,226 shares were issued and outstanding as of March 31, 2004, and
20,000,000 shares of Parent Preferred Stock, of which no shares were
issued and outstanding as of the date hereof. The outstanding shares of
Parent Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable, and none of the shares of Parent Common
Stock have been issued in violation of the preemptive rights of any
Person. As of the date hereof, there are no Rights authorized, issued or
outstanding with respect to the capital stock of Parent, except for
shares of Parent Common Stock issuable pursuant to the Parent Benefits
Plans and by virtue of this Agreement.
(ii) The shares of Parent Common Stock to be issued in exchange for
shares of Slippery Rock Common Stock in the Merger, when issued in
accordance with the terms of this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable and the issuance thereof is
not subject to any preemptive right.
(c) Subsidiaries.
(i) Each of Parent's Subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of
its organization, and is duly qualified to do business and is 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, except
where the failure to be so qualified would not have a Material Adverse
Effect on Parent. Parent Bank is duly licensed by the OCC and its
deposits are insured by the Bank Insurance Fund in the manner and to the
maximum extent provided by law.
(ii) As of the date hereof, (A) except as set forth in Schedule
5.04(c) of Parent's Disclosure Schedule, Parent owns, directly or
indirectly, all the issued and outstanding equity securities of each of
its Subsidiaries; (B) no equity securities of any of Parent's
Subsidiaries are or may become required to be issued (other than to
Parent) by reason of any Right or otherwise; (C) there are no contracts,
commitments, understandings or arrangements by which Parent's
Subsidiaries are or may be bound to sell or otherwise transfer any of
its equity securities (other than to Parent or any of its wholly owned
Subsidiaries) and (D) there are no contracts, commitments,
understandings or arrangements relating to Parent's right to vote or to
dispose of such securities.
A-31
(d) Corporate Power. Each of Parent and its 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. Parent has the
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the Transaction, subject
to the receipt of all necessary approvals of Governmental Authorities, and
no other corporate proceedings are necessary on the part of Parent to
approve this Agreement or the consummation of the Transaction.
(e) Corporate Authority. This Agreement and the Transaction have been
authorized by all necessary corporate action of Parent and the Parent
Board. This Agreement has been duly executed and delivered by Parent and,
assuming due authorization, execution and delivery by Slippery Rock, this
Agreement is a valid and legally binding agreement of Parent enforceable in
accordance with its terms (except as enforceability 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).
(f) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or waivers by, or filings or
registrations with, any Governmental Authority or with any third party
are required to be made or obtained by Parent or any of its Subsidiaries
in connection with the execution, delivery or performance by Parent and
Parent Bank of this Agreement and the Bank Merger Agreement,
respectively, or to consummate the Transaction, except as Previously
Disclosed, and except for (A) filings of applications or notices with
and approvals or waivers by the Federal Reserve Board and the OCC; (B)
filings with the SEC and state securities authorities, as applicable, in
connection with the registration of Parent Common Stock issuable in the
Merger; (C) the approval of the listing on the NYSE of the Parent Common
Stock to be issued in the Merger and (D) the filing of Articles of
Merger with the Secretary of State of the Commonwealth of Pennsylvania
pursuant to the PBCL and with the Secretary of State of the State of
Florida pursuant to the FLBC with respect to the Merger. As of the date
hereof, Parent is not aware of any reason why the approvals set forth
above and referred to in Section 7.01(b) will not be received in a
timely manner and without the imposition of a condition, restriction or
requirement of the type described in Section 7.01(b).
(ii) Subject to receipt, or the making, of the consents, approvals,
waivers and filings referred to in the preceding paragraph and
expiration of the related waiting periods, the execution, delivery and
performance of this Agreement and the Bank Merger Agreement by Parent
and Parent Bank, respectively, and the consummation of the Transaction
do not and will not (A) constitute a breach or violation of, or a
default under, or give rise to any Lien, any acceleration of remedies or
any right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of Parent or of any of its Subsidiaries or to
which Parent or any of its Subsidiaries or properties is subject or
bound, (B) constitute a breach or violation of, or a default under, the
articles of incorporation or bylaws (or similar governing documents) of
Parent or any of its Subsidiaries or (C) require any consent or approval
under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, agreement, indenture or instrument.
(g) Financial Reports and Securities Documents; Material Adverse
Effect.
(i) Parent's Annual Report on Form 10-K for the years ended
December 31, 2003, 2002 and 2001 and all other reports, registration
statements, definitive proxy statements or information statements filed
or to be filed by it subsequent to December 31, 2001 under the
Securities Act, or under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act in the form filed or to be filed (collectively, Parent's
"Securities Documents") with the SEC, as of the date filed or to be
filed, (A) complied or will comply in all material respects as to form
with the applicable requirements under the Securities Act or the
Exchange Act, as the case may be and (B) did not and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which
A-32
they were made, not misleading, except that information as of a later
date shall be deemed to modify information as of an earlier date. Each
of the consolidated statements of financial condition contained in or
incorporated by reference into any such Securities Document (including
the related notes and schedules thereto) fairly presents, or will fairly
present, the consolidated financial position of Parent and its
Subsidiaries as of its date, and each of the consolidated statements of
operations, stockholders' equity and comprehensive income and cash flows
or equivalent statements in such Securities Documents (including any
related notes and schedules thereto) fairly presents, or will fairly
present, the consolidated results of operations, changes in
stockholders' equity and cash flows, as the case may be, of Parent and
its Subsidiaries for the periods to which they relate, in each case in
accordance with GAAP consistently applied during the periods involved,
except in each case as may be noted therein.
(ii) Except as Previously Disclosed, since December 31, 2003,
neither Parent nor any of its Subsidiaries has incurred any liability
other than in the ordinary course of business consistent with past
practice (excluding the incurrence of expenses related to this Agreement
and the Transaction).
(iii) Since December 31, 2003, (A) Parent and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding the incurrence of expenses
related to this Agreement and the Transaction); (B) except as Previously
Disclosed, neither Parent nor any of its Subsidiaries has taken nor
permitted any of the actions set forth in Section 4.02 between December
31, 2003 and the date hereof and (C) no event has occurred or
circumstance arisen that, individually or taken together with all other
facts, circumstances and events (described in any paragraph of this
Section 5.04 or otherwise), is reasonably likely to have a Material
Adverse Effect with respect to Parent.
(iv) Parent maintains disclosure controls and procedures required
by Rule 13a-15 or 15d-15 under the Exchange Act; such controls and
procedures are effective to ensure that all material information
concerning Parent and its Subsidiaries is made known on a timely basis
to the individuals responsible for the preparation of Parent's
Securities Documents and other public disclosure documents. The Chief
Executive Officer and the Chief Financial Officer of Parent have signed,
and Parent has furnished to the SEC, all certifications required by Rule
13a-14 or 15d-14 under the Exchange Act or 18 U.S.C. sec. 1350; such
certifications contain no qualifications or exceptions to the matters
certified therein and have not been modified or withdrawn; and neither
Parent nor any of its officers has received notice from any Governmental
Authorities questioning or challenging the accuracy, completeness, form
or manner of filing or submission of such certifications.
(h) Litigation. No litigation, claim or other proceeding before any
court or governmental agency is pending against Parent or its Subsidiaries
that could reasonably be expected to have a Material Adverse Effect with
respect to Parent and, to Parent's knowledge, no such litigation, claim or
other proceeding has been threatened and there are no facts that could
reasonably give rise to such litigation, claim or other proceeding. Neither
Parent nor any of its Subsidiaries is a party to any order, judgment or
decree that has or could reasonably be expected to have a Material Adverse
Effect with respect to Parent.
(i) Regulatory Matters.
(i) Neither Parent nor any of its Subsidiaries nor any of any of
their respective properties is a party to or is subject to any order or
decree, agreement, memorandum of understanding or similar arrangement
with, or commitment letter or similar submission to, or extraordinary
supervisory letter from, any federal or state governmental agency or
authority charged with the supervision or regulation of financial
institutions or issuers of securities or engaged in the insurance of
deposits or the supervision or regulation of it (collectively, the
"Parent Regulatory Authorities"). Parent and its Subsidiaries have paid
all assessments made or imposed by any Parent Regulatory Authority.
(ii) Neither Parent nor any its Subsidiaries has been advised by,
and does not have any knowledge of facts that could give rise to an
advisory notice by, any Parent Regulatory Authority that such Parent
Regulatory Authority is contemplating issuing or requesting (or is
considering the
A-33
appropriateness of issuing or requesting) any such order, decree,
agreement, memorandum of understanding, commitment letter, supervisory
letter or similar submission.
(iii) Parent and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to
file since January 1, 2001 with (A) the Federal Reserve Board, (B) the
FDIC, (C) the OCC, (D) any state regulatory authority and (E) the SEC,
and all other reports and statements required to be filed by them since
January 1, 2001, and have paid all fees and assessments due and payable
in connection therewith. Except as set forth in Section 5.04(i) of
Parent Disclosure Schedule and except for normal examinations conducted
by Bank Regulatory Authorities, (A) no Bank Regulatory Authority has
initiated or has pending any proceeding or, to the knowledge of Parent,
investigation into the business or operations of Parent or any of its
Subsidiaries since January 1, 2001, except where such proceedings or
investigation are not reasonably likely to have, either individually or
in the aggregate, a Parent Material Adverse Effect and (B) there is no
unresolved violation, criticism or exception by any Bank Regulatory
Authority with respect to the business, operations, policies or
procedures of Parent or Parent Bank since January 1, 2001 that are
reasonably likely to have, either individually or in the aggregate, a
Parent Material Adverse Effect.
(j) Compliance With Laws. Except for matters that could not
reasonably be expected to have a Material Adverse Effect with respect to
Parent and its Subsidiaries, each of Parent and its Subsidiaries:
(i) is in material compliance 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 Sections 23A
and 23B of the Federal Reserve Act and OCC regulations pursuant thereto,
the Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act
and all other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities that are required in order to permit
them to own or lease their properties and to conduct their businesses as
presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to
Parent's knowledge, no suspension or cancellation of any of them is
threatened; and
(iii) has received, since December 31, 2001, no notification or
communication from any Governmental Authority (A) asserting that Parent
or any of its Subsidiaries is not in compliance with any of the
statutes, regulations or ordinances which such Governmental Authority
enforces or (B) threatening to revoke any license, franchise, permit or
governmental authorization (nor, to Parent's knowledge, do any grounds
for any of the foregoing exist).
(k) No Brokers. No action has been taken by Parent or its
Subsidiaries that would give rise to any valid claim against any party
hereto for a brokerage commission, finder's fee or other like payment with
respect to the Transaction, except a fee to be paid to Keefe, Bruyette &
Woods, Inc.
(l) Tax Matters. As of the date hereof, Parent does not have any
reason to believe that any conditions exist that might prevent or impede
the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
(m) Risk Management Instruments. Neither Parent nor any of its
Subsidiaries is a party or has agreed to enter into any Derivatives
Contract that is not included on Parent's consolidated statement of
financial condition nor does Parent or any of its Subsidiaries own
securities that (i) are referred to generically as "structured notes,"
"high risk mortgage derivatives," "capped floating rate notes" or "capped
floating rate mortgage derivatives" or (ii) are likely to have changes in
value as a result of interest or exchange rate changes that significantly
exceed normal changes in value attributable to interest or exchange rate
changes.
A-34
(n) Ownership of Slippery Rock Common Stock. Except as set forth on
Schedule 5.04(n) of the Parent Disclosure Schedule, none of Parent or any
of its Subsidiaries, or to Parent's knowledge, any of its other affiliates
or associates (as such terms are defined under the Exchange Act), owns
beneficially or of record, directly or indirectly, or is a party to any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, shares of Slippery Rock Common Stock
(other than shares held in a fiduciary capacity that are beneficially owned
by third parties or as a result of debts previously contracted).
(o) Disclosure. The representations and warranties contained in this
Section 5.04, when considered as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this Section
5.04 not misleading.
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, each of Slippery Rock, Parent and their Subsidiaries agrees to use
its reasonable 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 Transaction as promptly as practicable and otherwise to enable consummation
of the Transaction, including the satisfaction of the conditions set forth in
Article VII, and shall cooperate fully with the other party hereto to that end.
6.02 Stockholder Meeting. Slippery Rock shall take, in accordance with
applicable law and the Slippery Rock Articles and the Slippery Rock Bylaws, all
action necessary to duly call, give notice of, convene and hold as soon as
reasonably practicable after the date on which the Registration Statement
becomes effective a special meeting of its stockholders (including any
adjournment or postponement, the "Slippery Rock Meeting") to consider and vote
upon the approval of this Agreement and any other matters required to be
approved by Slippery Rock's stockholders for consummation of the Transaction
unless this Agreement shall have been terminated in accordance with its terms.
Subject to the right of Slippery Rock and its Board of Directors to take action
permitted by Section 6.08(b) with respect to a Superior Proposal, Slippery Rock
shall, through its Board of Directors, recommend to its stockholders approval of
this Agreement and the transactions contemplated hereby and shall take all
reasonable lawful action to solicit such approval by its stockholders (the
"Approval Recommendation").
6.03 Registration Statement.
(a) Parent agrees to prepare a registration statement on Form S-4 or other
applicable form (the "Registration Statement") to be filed by Parent with the
SEC in connection with the issuance of Parent Common Stock in the Merger
(including the proxy statement and prospectus and other proxy solicitation
materials of Slippery Rock constituting a part thereof (the "Proxy Statement")
and all related documents). Slippery Rock shall prepare and furnish such
information relating to it and its directors, officers and stockholders as may
be reasonably required in connection with the above referenced documents based
on its knowledge of and access to the information required for said documents,
and Slippery Rock, and its legal, financial and accounting advisors, shall have
the right to review in advance such Registration Statement prior to its filing.
Slippery Rock agrees to cooperate with Parent and Parent's counsel and
accountants in requesting and obtaining appropriate opinions, consents and
letters from its financial advisor and independent auditor in connection with
the Registration Statement and the Proxy Statement. Provided that Slippery Rock
has cooperated as described above, Parent agrees to file, or cause to be filed,
the Registration Statement and the Proxy Statement with the SEC as promptly as
reasonably practicable. Each of Slippery Rock and Parent agrees to use its
reasonable best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as reasonably practicable after
the filing thereof. Parent also agrees to use its reasonable best efforts to
obtain all necessary state securities law or "Blue Sky" permits and approvals
required to carry out the transactions contemplated by this Agreement. After the
Registration Statement is
A-35
declared effective under the Securities Act, Slippery Rock shall promptly mail
at its expense the Proxy Statement to its stockholders.
(b) Each of Slippery Rock and Parent agrees that none of the information
supplied or to be supplied by it for inclusion or incorporation by reference in
the Registration Statement shall, at the time the Registration Statement and
each amendment or supplement 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. Each of Slippery Rock and Parent agrees that
none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in the Proxy Statement and any amendment or
supplement thereto shall, at the date of mailing to Slippery Rock's stockholders
and at the time of the Slippery Rock Meeting, 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. Each of Slippery
Rock and Parent further agrees that if such party shall become aware prior to
the Effective Date of any information furnished by such party that would cause
any of the statements in the Registration Statement or the Proxy Statement to be
false or misleading with respect to any material fact, or to omit to state any
material fact necessary to make the statements therein not false or misleading,
to promptly inform the other parties thereof and to take the necessary steps to
correct the Registration Statement or the Proxy Statement.
(c) Parent agrees to advise Slippery Rock, promptly after Parent 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 Parent Common Stock for offering or
sale in any jurisdiction, of the initiation or, to the extent Parent is aware
thereof, 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.
6.04 Regulatory Filings.
(a) Each of Parent and Slippery Rock and their respective Subsidiaries
shall cooperate and use their respective reasonable best efforts to prepare all
documentation, to effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties and Governmental Authorities
necessary to consummate the Transaction; and any initial filings with
Governmental Authorities shall be made by Parent as soon as reasonably
practicable after the execution hereof. Each of Parent and Slippery Rock shall
have the right to review in advance, and to the extent practicable each shall
consult with the other, in each case subject to applicable laws relating to the
exchange of information, all written information submitted to any third party or
any Governmental Authority in connection with the Transaction. In exercising the
foregoing right, each of such parties agrees to act reasonably and as promptly
as practicable. Each party hereto agrees that it shall consult with the other
party with respect to the obtaining of all permits, consents, approvals, waivers
and authorizations of all third parties and Governmental Authorities necessary
or advisable to consummate the Transaction, and each party shall keep the other
parties apprised of the status of material matters relating to completion of the
Transaction.
(b) Each party agrees, upon request, to furnish the other parties with all
information concerning itself, its Subsidiaries (if applicable), directors,
officers and stockholders 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 parties or any of their respective Subsidiaries to any
third party or Governmental Authority.
6.05 Press Releases. Slippery Rock and Parent shall consult with each
other before issuing any press release with respect to the Transaction or this
Agreement and shall not issue any such press release or make any such public
statements without the prior consent of the other party, which shall not be
unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party (but after such consultation, to the extent
practicable under the circumstances), issue such press release or make such
public statements as may upon the advice of outside counsel be required by law
or the rules or regulations of the NYSE. Slippery Rock and Parent shall
cooperate to develop all public announcement materials and make appropriate
management available at presentations related to the Transaction as reasonably
requested by the other party.
A-36
6.06 Access; Information.
(a) Slippery Rock agrees that upon reasonable notice and subject to
applicable laws relating to the exchange of information, it shall afford Parent
and Parent's officers, employees, counsel, accountants and other authorized
representatives such access during normal business hours throughout the period
prior to the Effective Time to the books, records (including, without
limitation, Tax Returns and work papers of independent auditors), properties and
personnel of Slippery Rock and to such other information relating to Slippery
Rock as Parent may reasonably request and, during such period, it shall furnish
promptly to Parent all information concerning the business, properties and
personnel of Slippery Rock as Parent may reasonably request.
(b) Parent agrees that upon reasonable notice and subject to applicable
laws relating to the exchange of information, it shall afford Slippery Rock and
Slippery Rock's officers, employees, counsel, accountants and other authorized
representatives such access during normal business hours throughout the period
prior to the Effective Time to the books, records (including without limitation,
Tax Returns and work papers of independent auditors), properties and personnel
of Parent and to such other information relating to Parent as Slippery Rock may
reasonably request and, during such period, it shall furnish promptly to
Slippery Rock all information concerning the business, properties and personnel
of Parent and its Subsidiaries as Slippery Rock may reasonably request.
(c) All information furnished to either party by the other party pursuant
to this Section 6.06 shall be subject to, and such receiving party shall hold
all such information in confidence in accordance with the provisions of the
Confidentiality Agreement, dated as of March 19, 2004 between Parent and
Slippery Rock (the "Confidentiality Agreement").
(d) As soon as reasonably available but in no event more than five business
days after filing, Slippery Rock will deliver to Parent each report, financial
or otherwise, filed by it or Slippery Rock Bank with any Bank Regulatory
Authority or the SEC.
(e) Within 15 days after the end of each month, Slippery Rock will deliver
to Parent the unaudited consolidated balance sheet and unaudited consolidated
statement of operations of Slippery Rock for the immediately preceding month
prepared in accordance with GAAP except for the absence of footnotes.
6.07 Affiliates. Slippery Rock shall use its reasonable best efforts to
identify those persons who may be deemed to be "affiliates" of Slippery Rock
within the meaning of Rule 145 promulgated by the SEC under the Securities Act
(the "Slippery Rock Affiliates") and to cause each person so identified to
deliver to Parent as soon as practicable, and in any event prior to the date of
Slippery Rock Meeting, a written agreement to comply with the requirements of
Rule 145 under the Securities Act in connection with the sale or other transfer
of Parent Common Stock received in the Merger, which agreement shall be in the
form attached hereto as Annex B (the "Affiliate Letter").
6.08 Certain Actions.
(a) From the date of this Agreement through the Effective Time, except as
otherwise permitted by this Section 6.08, Slippery Rock will not, and will not
authorize or permit any of its directors, officers, agents, employees,
investment bankers, attorneys, accountants, advisors, agents, affiliates (as
such term is used in Rule 12b-2 under the Exchange Act) or representatives
(collectively, "Representatives") to, directly or indirectly, (i) initiate,
solicit, encourage or take any action to facilitate (including by way of
furnishing information) any Acquisition Proposal (as defined below) or any
inquiries with respect to or the making of any Acquisition Proposal, (ii) enter
into or participate in any discussions or negotiations with, furnish any
information relating to Slippery Rock or any of its Subsidiaries or afford
access to the business, properties, assets, books or records of Slippery Rock or
any of its Subsidiaries to, otherwise cooperate in any way with, or knowingly
assist, participate in, facilitate or encourage any effort by any third party
that is seeking to make, or has made, an Acquisition Proposal or (iii) except in
accordance with Section 8.01(g), approve, endorse or recommend or enter into any
letter of intent or similar document or any contract, agreement or commitment
contemplating or otherwise relating to an Acquisition Proposal.
A-37
(b) Notwithstanding anything herein to the contrary, Slippery Rock and its
Board of Directors shall be permitted (i) to comply with Rule 14d-9 and Rule
14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal
(provided that the Board of Directors of Slippery Rock shall not withdraw or
modify in a manner adverse to Parent its Approval Recommendation, except as set
forth in subsection (iii) below); (ii) to engage in any discussions or
negotiations with, or provide any information to, any person in response to a
Superior Proposal (as defined below) by any such person, if and only to the
extent that (x) Slippery Rock's Board of Directors concludes in good faith,
after consultation with outside counsel, that failure to do so would breach its
fiduciary duties to Slippery Rock's stockholders under applicable law, (y) prior
to providing any information or data to any person in connection with a Superior
Proposal by any such person, Slippery Rock's Board of Directors receives from
such person an executed confidentiality agreement on terms no less favorable to
Slippery Rock than those contained in the Confidentiality Agreement between
Slippery Rock and Parent (a copy of which executed confidentiality agreement
shall have been provided to Parent for informational purposes), and (z) at least
72 hours prior to providing any information or data to any person or entering
into discussions or negotiations with any person, Slippery Rock promptly
notifies Parent in writing of the name of such person and the material terms and
conditions of any such Superior Proposal and (iii) to withdraw, modify, qualify
in a manner adverse to Parent, condition or refuse to make its Approval
Recommendation (the "Change in Slippery Rock Recommendation") if Slippery Rock's
Board of Directors concludes in good faith, after consultation with outside
counsel and financial advisors, that failure to do so would breach its fiduciary
duties to Slippery Rock's stockholders under applicable law.
(c) Slippery Rock will promptly (and in any event within 24 hours) notify
Parent in writing of the receipt of any Acquisition Proposal or any information
related thereto, which notification shall describe the Acquisition Proposal and
identify the third party making the same.
(d) Slippery Rock agrees that it will, and will cause its Representatives
to, immediately cease and cause to be terminated any activities, discussions or
negotiations existing as of the date of this Agreement with any parties
conducted heretofore with respect to any Acquisition Proposal.
(e) For purposes of this Agreement:
(i) The term "Acquisition Proposal" means any inquiry, proposal or
offer, filing of any regulatory application or notice (whether in draft or
final form) or disclosure of an intention to do any of the foregoing from
any person relating to any (w) direct or indirect acquisition or purchase
of a business that constitutes a substantial portion of the net revenues,
net income or net assets of Slippery Rock or any of its Subsidiaries, (x)
direct or indirect acquisition or purchase of any class of equity
securities representing 10% or more of the voting power of Slippery Rock
Common Stock, (y) tender offer or exchange offer that if consummated would
result in any person beneficially owning 10% or more of any class of equity
securities of Slippery Rock or (z) merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving Slippery Rock other than the transactions
contemplated by this Agreement.
(ii) The term "Superior Proposal" means any bona fide, unsolicited
written Acquisition Proposal made by a Third Party to acquire more than 50%
of the combined voting power of the shares of Slippery Rock Common Stock
then outstanding or all or substantially all of Slippery Rock's
consolidated assets for consideration consisting of cash and/or securities
that is on terms that the Board of Directors of Slippery Rock in good faith
concludes (after consultation with its financial advisors and outside
counsel), taking into account, among other things, all legal, financial,
regulatory and other aspects of the proposal and the person making the
proposal (including any break-up fees, expense reimbursement provisions and
conditions to consummation), (A) is on terms that the Board of Directors of
Slippery Rock in its good faith judgment believes to be more favorable from
a financial point of view to its stockholders than the Merger; (B) for
which financing, to the extent required, is then fully committed or
reasonably determined to be available by the Board of Directors of Slippery
Rock and (C) is reasonably capable of being completed.
A-38
(f) If a Payment Event (as hereinafter defined) occurs, Slippery Rock shall
pay to Parent (by wire transfer of immediately available funds), within two (2)
business days following such Payment Event, a fee of $4,250,000 (the "Break-up
Fee").
(g) The term "Payment Event" means any of the following:
(i) the termination of this Agreement by Parent pursuant to Section
8.01(f);
(ii) the termination of this Agreement by Slippery Rock pursuant to
Section 8.01(g); or
(iii) the occurrence of any of the following events within twelve (12)
months of the termination of this Agreement pursuant to Section 8.01(e),
provided that an Acquisition Proposal shall have been made after the date
hereof and prior to such termination that shall not have been withdrawn in
good faith prior to such termination: (A) Slippery Rock merges with or
into, or is acquired, directly or indirectly, by merger or otherwise by, a
Third Party; (B) a Third Party, directly or indirectly acquires
substantially all of the total assets of Slippery Rock and its
Subsidiaries, taken as a whole; (C) a Third Party, directly or indirectly,
acquires more than 50% of the outstanding Slippery Rock Common Stock or (D)
Slippery Rock adopts or implements a plan of liquidation, recapitalization
or share repurchase relating to more than 50% of the outstanding Slippery
Rock Common Stock or an extraordinary dividend relating to more than
substantially all of the outstanding Slippery Rock Common Stock or
substantially all of the assets of Slippery Rock and its Subsidiaries,
taken as a whole. As used herein, "Third Party" means any person as defined
in Section 13(d) of the Exchange Act (other than Parent or its affiliates).
(h) Slippery Rock acknowledges that the agreements contained in Section
6.08(e) are an integral part of the transactions contemplated in this Agreement
and that without these agreements Parent would not enter into this Agreement.
Accordingly, in the event Slippery Rock fails to pay to Parent the Break-up Fee,
promptly when due, Slippery Rock shall, in addition thereto, pay to Parent all
costs and expenses (including attorneys' fees and disbursements) incurred in
collecting such Break-up Fee together with interest on the amount of the
Break-up Fee (or any unpaid portion thereof), from the date such payment was due
until the date such payment is received by Parent, accrued at the fluctuating
prime rate (as quoted in The Wall Street Journal) as in effect from time to time
during the period.
6.09 Certain Policies. Prior to the Effective Date, each of Slippery Rock
and its Subsidiaries shall, consistent with GAAP, the rules and regulations of
the SEC and applicable banking laws and regulations, modify or change its loan,
OREO, accrual, reserve, tax, litigation and real estate valuation policies and
practices (including loan classifications and levels of reserves) so as to be
applied on a basis that is consistent with that of Parent; provided, however,
that no such modifications or changes need be made prior to the satisfaction of
the conditions set forth in Section 7.01(b); and further provided that in any
event, no accrual or reserve made by Slippery Rock or any of its Subsidiaries
pursuant to this Section 6.09 shall constitute or be deemed to be a breach,
violation of or failure to satisfy any representation, warranty, covenant,
agreement, condition or other provision of this Agreement or otherwise be
considered in determining whether any such breach, violation or failure to
satisfy shall have occurred. The recording of any such adjustments shall not be
deemed to imply any misstatement of previously furnished financial statements or
information and shall not be construed as a concurrence of Slippery Rock or its
management with any such adjustments.
6.10 NYSE Listing. Parent agrees to use its reasonable best efforts to
list on the NYSE, upon official notice of issuance prior to the Effective Date,
the shares of Parent Common Stock to be issued in connection with the Merger.
6.11 Indemnification.
(a) From and after the Effective Time through the sixth anniversary of the
Effective Time, Parent (the "Indemnifying Party") shall indemnify and hold
harmless each present and former director, officer and employee of Slippery Rock
or a Slippery Rock Subsidiary, as applicable, determined as of the Effective
Time (the "Indemnified Parties") against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or
A-39
occurring at or prior to the Effective Time, whether asserted or claimed prior
to, at or after the Effective Time, arising in whole or in part out of or
pertaining to the fact that he or she was a director, officer, employee,
fiduciary or agent of Slippery Rock or any Slippery Rock Subsidiary or is or was
serving at the request of Slippery Rock or any of the Slippery Rock Subsidiaries
as a director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise, including without
limitation matters related to the negotiation, execution and performance of this
Agreement or consummation of the Transaction, to the fullest extent that such
Indemnified Parties would be entitled under the Slippery Rock Articles and the
Slippery Rock Bylaws or equivalent documents of any Slippery Rock Subsidiary, as
applicable, or any agreement, arrangement or understanding that has been
Previously Disclosed by Slippery Rock pursuant to this Section, in each case as
in effect on the date hereof.
(b) Any Indemnified Party wishing to claim indemnification under this
Section 6.11, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not actually prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues that raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to the
Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements
therefor are received, the reasonable fees and expenses of such counsel for the
Indemnified Parties (which may not exceed one firm in any jurisdiction), (ii)
the Indemnified Parties will cooperate in the defense of any such matter, (iii)
the Indemnifying Party shall not be liable for any settlement effected without
its prior written consent which shall not be unreasonably withheld and (iv) the
Indemnifying Party shall have no obligation hereunder in the event that a
federal or state banking agency or a court of competent jurisdiction shall
determine that indemnification of an Indemnified Party in the manner
contemplated hereby is prohibited by applicable laws and regulations.
(c) Prior to the Effective Time, Parent shall cause the persons serving as
directors and officers of Slippery Rock immediately prior to the Effective Time
to be covered by the directors' and officers' liability insurance policy
maintained by Slippery Rock for a period of six years after the Effective Time
(provided that Parent may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions that are not materially
less advantageous than such policy or single premium tail coverage with policy
limits equal to Slippery Rock's existing coverage limits) with respect to acts
or omissions occurring prior to the Effective Time that were committed by such
directors and officers in their capacities as such, provided that in no event
shall Parent be required to expend for any one year an amount in excess of 150%
of the annual premium currently paid by Slippery Rock for such insurance (the
"Insurance Amount"), and further provided that if Parent is unable to maintain
or obtain the insurance called for by this Section 6.11(c) as a result of the
preceding provision, Parent shall use its reasonable best efforts to obtain the
most advantageous coverage as is available for the Insurance Amount.
(d) The provisions of this Section 6.11 are intended to be for the benefit
of and shall be enforceable by each of the Indemnified Parties and his or her
heirs.
6.12 Benefit Plans.
(a) As soon as administratively practicable after the Effective Time,
Parent shall take all reasonable action so that employees of Slippery Rock and
its Subsidiaries shall be entitled to participate in each employee benefit plan,
program or arrangement of Parent of general applicability (the "Parent Benefit
Plans") to the same extent as similarly-situated employees of Parent and its
Subsidiaries (it being understood that inclusion of the employees of Slippery
Rock and its Subsidiaries in the Parent Benefit Plans may occur at different
times with respect to different plans), provided that coverage shall be
continued under corresponding Benefit Plans of Slippery Rock and its
Subsidiaries until such employees are permitted to participate in the Parent
Benefit
A-40
Plans and provided further, however, that nothing contained herein shall require
Parent or any of its Subsidiaries to make any grants to any former employee of
Slippery Rock under any discretionary equity compensation plan of Parent. Parent
shall cause each Parent Benefit Plan in which employees of Slippery Rock and its
Subsidiaries are eligible to participate to recognize, for purposes of
determining eligibility to participate in, the vesting of benefits and for all
other purposes (but not for accrual of pension benefits) under the Parent
Benefit Plans, the service of such employees with Slippery Rock and its
Subsidiaries to the same extent as such service was credited for such purpose by
Slippery Rock, provided, however, that such service shall not be recognized to
the extent that such recognition would result in a duplication of benefits.
Except for the commitment to continue those Benefit Plans of Slippery Rock and
its Subsidiaries that correspond to Parent Benefit Plans until employees of
Slippery Rock and its Subsidiaries are included in such Parent Benefit Plans,
nothing herein shall limit the ability of Parent to amend or terminate any of
Slippery Rock's Benefit Plans in accordance with and to the extent permitted by
their terms at any time permitted by such terms.
(b) At and following the Effective Time, and except as otherwise provided
in Sections 6.12(d), (e) and (f) Parent shall honor, and the Surviving
Corporation shall continue to be obligated to perform, in accordance with their
terms, all benefit obligations to, and contractual rights of, current and former
employees of Slippery Rock and its Subsidiaries and current and former directors
of Slippery Rock and its Subsidiaries existing as of the Effective Date, as well
as all employment, executive severance or "change-in-control" or similar
agreements, plans or policies of Slippery Rock that are set forth on Schedule
6.12(b) of the Slippery Rock Disclosure Schedule, subject to the receipt of any
necessary approval from any Bank Regulatory Authority. The severance or
termination payments that are payable pursuant to such agreements, plans or
policies of Slippery Rock are set forth on Schedule 6.12(b) of the Slippery Rock
Disclosure Schedule. Following the consummation of the Merger and for one year
thereafter, Parent shall, to the extent not duplicative of other severance
benefits, pay employees of Slippery Rock or its Subsidiaries who are terminated
for other than cause, severance as set forth on Schedule 6.12(b) of the Parent
Disclosure Schedule. Following the expiration of the foregoing severance policy,
any years of service recognized for purposes of this Section 6.12(b) will be
taken into account under the terms of any applicable severance policy of Parent
or its Subsidiaries.
(c) At such time as employees of Slippery Rock and its Subsidiaries become
eligible to participate in a medical, dental or health plan of Parent or its
Subsidiaries, Parent shall cause each such plan to (i) waive any preexisting
condition limitations to the extent such conditions are covered under the
applicable medical, health or dental plans of Parent, (ii) provide full credit
under such plans for any deductibles, co-payment and out-of-pocket expenses
incurred by the employees and their dependents during the portion of the
calendar year prior to such participation and (iii) waive any waiting period
limitation or evidence of insurability requirement that would otherwise be
applicable to such employee or dependent on or after the Effective Time to the
extent such employee or dependent had satisfied any similar limitation or
requirement under an analogous Benefit Plan prior to the Effective Time.
(d) Immediately prior to the Effective Time, Slippery Rock shall, at the
written request of Parent, terminate such of the Slippery Rock Benefit Plans as
is requested by Parent.
(e) At the Effective Time, the Employment Agreement between Slippery Rock
and William Sonntag shall be terminated without further obligation on the part
of Slippery Rock or Parent, and Slippery Rock shall, subject to compliance with
Section 6.17, enter into the Separation and Release Agreement with William
Sonntag and Parent shall, subject to compliance with Section 6.17, enter into
the Business Retention and Development Agreement and the Non-Competition
Agreement with William Sonntag.
(f) Prior to the date of this Agreement, the Slippery Rock Board of
Directors shall have terminated the Slippery Rock Financial Corporation
Executive Change in Control Pay Plans and at the Effective Time, subject to
compliance with Section 6.17, Slippery Rock shall enter into the Key Employee
Severance Agreements with the persons indicated in Section 6.17(d).
6.13 Parent Bank Board. Parent agrees to take all action necessary to
appoint or elect, effective as of the Effective Time, as directors of Parent
Bank two current members of Slippery Rock's Board of Directors (the "Slippery
Rock Designees") as are mutually agreed by Parent and Slippery Rock. Such
persons shall serve until the first annual meeting of stockholders of Parent
Bank following the Effective Time and until his
A-41
successor is elected and qualified. Subject to the fiduciary duties of the
Parent Bank Board, Parent Bank shall include the Slippery Rock Designees on the
list of nominees for director presented by the Parent Bank Board and for which
the Parent Bank Board shall solicit proxies at the first annual meeting of
stockholders of Parent Bank following the Effective Time (the "Parent Bank 2005
Annual Meeting"). Subject to the fiduciary duties of the Parent Bank Board,
Parent Bank agrees that to the extent that one or more of the Slippery Rock
Designees dies or becomes incapacitated prior to the Effective Time, the
remaining Slippery Rock Designees may recommend to the Parent Bank Board a
person to serve as successor, and provided that such person is reasonably
acceptable to the Parent Bank Board, such person shall be appointed to fill the
vacancy so created. If, during the initial term prior to the Parent Bank 2005
Annual Meeting or the term immediately following the Parent Bank 2005 Annual
Meeting, any one of the Slippery Rock Designees vacates the seat they have been
elected to for any reason, Parent Bank agrees, subject to the fiduciary duties
of the Parent Bank Board, to appoint a current Slippery Rock director to replace
that director. Additionally, if during the first initial term or the longest
term to which any of the Slippery Rock Designees is elected at the Parent Bank
2005 Annual Meeting, there is a vacancy that occurs on the Parent Bank Board,
Parent Bank agrees to consider a current Slippery Rock director to fill the
vacancy, provided that nothing herein shall obligate Parent Bank to appoint a
current Slippery Rock director to the Parent Bank Board under such
circumstances.
6.14 Notification of Certain Matters. Each of Slippery Rock and Parent
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.
6.15 Regulatory Conditions. In the event of the imposition of any
conditions, restrictions or requirements in connection with the regulatory
approvals required by Section 7.01(b) that Parent determines would materially
reduce the benefits of the Merger as provided in Section 7.01(b), Parent shall
use its commercially reasonable efforts to obtain the removal of any such
condition, restriction or requirement.
6.16 Exemption From Liability Under Section 16(b). Assuming that Slippery
Rock delivers to Parent the Section 16 Information not less than five Business
Days in advance of the Effective Time, the Board of Directors of Parent, or a
committee of Non-Employee Directors thereof (as such term is defined for
purposes of Rule 16b-3(d) under the Exchange Act), shall reasonably promptly
thereafter and in any event prior to the Effective Time adopt a resolution
providing that the receipt by the Slippery Rock Insiders of Parent Common Stock
in exchange for shares of Slippery Rock Common Stock, and of options to purchase
Parent Common Stock upon conversion of Slippery Rock Options pursuant to the
transactions contemplated hereby and to the extent such securities are listed in
the Section 16 Information provided by Slippery Rock to Parent prior to the
Effective Time, are intended to be exempt from liability pursuant to Section
16(b) under the Exchange Act such that any such receipt shall be so exempt.
6.17 Regulatory Approval of Certain Agreements and Payments. Parent shall
use commercially reasonable efforts to obtain the approval of the OCC, together
with the written concurrence of the FDIC, for:
(a) the proposed Non-Competition Agreement between Parent and William
Sonntag and the payments contemplated thereby;
(b) the proposed Business Retention and Development Agreement between
Parent and William Sonntag and the payments contemplated thereby;
(c) the proposed Separation and Release Agreement between Slippery
Rock and William Sonntag and the payments contemplated thereby;
(d) the Key Employee Severance Agreements between Slippery Rock and
the Slippery Rock officers identified as Covered Persons in Schedule
4.01(d) of the Slippery Rock Disclosure Schedule and the payments
contemplated thereby;
(e) payments contemplated by the Change of Control Severance Benefits
Agreement between Slippery Rock and John J. Boczar dated July 12, 2001; and
A-42
(f) the payments contemplated by the Change of Control Severance
Benefits Agreement between Slippery Rock and Wayne Grinnik dated December
18, 2002.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of the parties hereto to consummate the Merger is
subject to the fulfillment or, to the extent permitted by applicable law,
written waiver by the parties hereto prior to the Closing Date of each of the
following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
been duly approved by the requisite vote of the holders of outstanding
shares of Slippery Rock Common Stock.
(b) Regulatory Approvals. All regulatory approvals required to
consummate the Merger shall have been obtained and shall remain in full
force and effect and all statutory waiting periods in respect thereof shall
have expired and no such approvals shall contain any conditions,
restrictions or requirements that the Parent Board reasonably determines in
good faith would, individually or in the aggregate, materially reduce the
benefits of the Transaction to such a degree that Parent would not have
entered into this Agreement had such conditions, restrictions or
requirements been known at the date hereof.
(c) No Injunction. No Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and
prohibits consummation of the Transaction.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act 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 by the SEC and not
withdrawn.
(e) Listing. The shares of Parent Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE.
7.02 Conditions to Obligation of Slippery Rock. The obligation of
Slippery Rock to consummate the Merger is also subject to the fulfillment by
Parent or written waiver by Slippery Rock prior to the Closing Date of each of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent set forth in this Agreement, subject in all cases to
the standard set forth in Section 5.02, shall be true and correct as of the
date of this Agreement and as of the Effective Date as though made on and
as of the Effective Date (except that representations and warranties that
by their terms speak as of the date of this Agreement or some other date
shall be true and correct as of such date), and Slippery Rock shall have
received a certificate, dated the Effective Date, signed on behalf of
Parent by the Chief Executive Officer and the Chief Financial Officer of
Parent to such effect.
(b) Performance of Obligations of Parent. Parent shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Effective Time in order to
consummate the Merger, and Slippery Rock shall have received a certificate,
dated the Effective Date, signed on behalf of Parent by the Chief Executive
Officer and the Chief Financial Officer of Parent to such effect.
(c) Tax Opinion. Slippery Rock shall have received the written
opinion of Manatt, Phelps & Phillips, LLP, dated as of the Effective Date
(which shall be based on such written representations from Parent, Slippery
Rock and others as such counsel shall reasonably request) to the effect
that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code.
A-43
(d) Other Actions. Parent shall have furnished Slippery Rock with
such certificates of its respective officers or others and such other
documents to evidence fulfillment of the conditions set forth in Sections
7.01 and 7.02 as Slippery Rock may reasonably request.
7.03 Conditions to Obligation of Parent. The obligation of Parent to
consummate the Merger is also subject to the fulfillment by Slippery Rock or
written waiver by Parent prior to the Closing Date of each of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Slippery Rock set forth in this Agreement, subject in all
cases to the standard set forth in Section 5.02, shall be true and correct
as of the date of this Agreement and as of the Effective Date as though
made on and as of the Effective Date (except that representations and
warranties that by their terms speak as of the date of this Agreement or
some other date shall be true and correct as of such date), and Parent
shall have received a certificate, dated the Effective Date, signed on
behalf of Slippery Rock by the Chief Executive Officer and the Chief
Financial Officer of Slippery Rock to such effect.
(b) Performance of Obligations of Slippery Rock. Slippery Rock shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time in
order to consummate the Merger, and Parent shall have received a
certificate, dated the Effective Date, signed on behalf of Slippery Rock by
the Chief Executive Officer and the Chief Financial Officer of Slippery
Rock to such effect.
(c) Tax Opinion. Parent shall have received the written opinion of
Duane Morris LLP, dated as of the Effective Date (which shall be based on
such written representations from Parent, Slippery Rock and others as such
counsel shall reasonably request) to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Code.
(d) Other Actions. Slippery Rock shall have furnished Parent with
such certificates of its officers or others and such other documents to
evidence fulfillment of the conditions set forth in Sections 7.01 and 7.03
as Parent may reasonably request.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated at any time prior to
the Effective Date, and the Transaction may be abandoned:
(a) Mutual Consent. By the mutual consent in writing of Parent and
Slippery Rock if the Board of Directors of each so determines by vote of a
majority of the members of its entire Board.
(b) Breach. Provided that the terminating party is not then in
material breach of any representation, warranty, covenant or agreement
contained therein (subject in all cases to the standard set forth in
Section 5.02), by Parent or Slippery Rock, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event of: (i) a breach by Parent, on the one hand, or Slippery Rock, on the
other hand, as the case may be, of any representation or warranty contained
herein (subject to the standard set forth in Section 5.02), which breach
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching party or parties of such breach; or (ii) a breach
by Parent, on the one hand, or Slippery Rock, on the other hand, as the
case may be, of any of the covenants or agreements contained herein, which
breach cannot be or has not been cured within 30 days after the giving of
written notice to the breaching party or parties of such breach, which
breach (whether under (i) or (ii)) would be reasonably expected,
individually or in the aggregate with other breaches, to result in a
Material Adverse Effect with respect to Parent or Slippery Rock, as the
case may be.
(c) Delay. By Parent or Slippery Rock, 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 February 28, 2005, except to
the extent that the failure of the Merger then to be consummated by such
A-44
date shall be due to the failure of the party seeking to terminate pursuant
to this Section 8.01(c) to perform or observe the covenants and agreements
of such party, in the case of Parent, set forth in this Agreement.
(d) No Regulatory Approval. By Parent or Slippery Rock, if its Board
of Directors so determines by a vote of a majority of the members of its
entire Board, in the event the approval of any Governmental Authority
required for consummation of the Merger and the other transactions
contemplated by this Agreement (other than any governmental action required
under Part 359 of the Rules and Regulations of the FDIC) shall have been
denied by final nonappealable action of such Governmental Authority or an
application therefor shall have been permanently withdrawn at the request
of a Governmental Authority, provided, however, that no party shall have
the right to terminate this Agreement pursuant to this Section 8.01(d) if
such denial shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe the covenants of such party set forth
herein.
(e) No Slippery Rock Common Stockholder Approval. By either Parent or
Slippery Rock provided that Slippery Rock shall not be in material breach
of any of its obligations under Section 6.02, if any approval of the
stockholders of Slippery Rock contemplated by this Agreement shall not have
been obtained by reason of the failure to obtain the required vote at the
Slippery Rock Meeting or at any adjournment or postponement thereof.
(f) Slippery Rock Failure to Recommend. At any time prior to the
Slippery Rock Meeting, by Parent if (i) Slippery Rock shall have breached
Section 6.08 in any respect materially adverse to Parent, (ii) the Slippery
Rock Board of Directors shall have failed to make its Approval
Recommendation or shall have effected a Change in the Slippery Rock
Recommendation or (iii) Slippery Rock shall have materially breached its
obligations under Section 6.02 by failing to call, give notice of, convene
and hold the Slippery Rock Meeting.
(g) Superior Proposal. At any time prior to the date of mailing of
the Proxy Statement, by Slippery Rock in order to concurrently enter into
an Acquisition Proposal that has been received by Slippery Rock and the
Slippery Rock Board of Directors in compliance with Sections 6.08(a) and
(b) and that Slippery Rock's Board of Directors concludes in good faith, in
consultation with its financial and legal advisors, that such Acquisition
Proposal is a Superior Proposal; provided, however, that this Agreement may
be terminated by Slippery Rock pursuant to this Section 8.01(g) only after
the fifth Business Day following Slippery Rock's provision of written
notice to Parent advising Parent, that the Slippery Rock Board of Directors
is prepared to accept a Superior Proposal and only if (i) during such
five-Business Day period, Slippery Rock has caused its financial and legal
advisors to negotiate in good faith to make such adjustments in the terms
and conditions of this Agreement such that such Acquisition Proposal would
no longer constitute a Superior Proposal, (ii) Slippery Rock's Board of
Directors has considered such adjustments in the terms and conditions of
this Agreement resulting from such negotiations and has concluded in good
faith, based upon consultation with its financial and legal advisers, that
such Acquisition Proposal remains a Superior Proposal even after giving
effect to the adjustments proposed by Parent and further provided that such
termination shall not be effective until Slippery Rock has paid the
Break-up Fee to Parent.
(h) Possible Adjustment. By Slippery Rock at any time during the
two-day period following the Determination Date, if both of the following
conditions (1) and (2) are satisfied:
(1) the Average Closing Price (as defined below) shall be less than
the product of 0.800 and the Starting Price; and
(2) the number obtained by dividing the Average Closing Price by
the Starting Price (such number being referred to herein as the "Parent
Ratio") shall be less than the number obtained by dividing the Index
Price on the Determination Date by the Index Price on the Starting Date
and subtracting 0.200 from such quotient (such number being referred to
herein as the "Index Ratio");
subject to the following. If Slippery Rock elects to exercise its termination
right pursuant to the immediately preceding sentence, it shall give prompt
written notice to Parent; provided that such notice of election to
A-45
terminate may be withdrawn at any time within the aforementioned two-day period.
For the purposes of this Agreement, (i) "Average Closing Price" means the
average of the last reported closing prices per share of Parent Common Stock as
reported on the NYSE (as reported in The Wall Street Journal or, if not reported
therein, in another mutually agreed upon authoritative source) for the twenty
consecutive trading days immediately preceding the Determination Date and (ii)
"Index Price" on a given date means the closing price of the Nasdaq Bank Index.
8.02 Effect of Termination. In the event of termination of this Agreement
by either Parent or Slippery Rock as provided in Section 8.01, this Agreement
shall forthwith become void and have no effect except (i) Sections 6.06(c),
6.08(e) and (f), 8.02 and 9.05 shall survive any termination of this Agreement
and (ii) notwithstanding anything to the contrary contained in this Agreement,
no party shall be relieved or released from any liability or damages arising out
of its willful breach of any of the provisions of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.01 Survival. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than
agreements or covenants contained herein that by their express terms are to be
performed in whole or in part after the Effective Time) or the termination of
this Agreement if this Agreement is terminated prior to the Effective Time
(other than Sections 6.06(c), 8.02 and, excepting Section 9.12 hereof, this
Article IX, which shall survive any such termination). Notwithstanding anything
in the foregoing to the contrary, no representations, warranties, agreements and
covenants contained in this Agreement shall be deemed to be terminated or
extinguished so as to deprive a party hereto or any of its affiliates of any
defense at law or in equity that otherwise would be available against the claims
of any Person, including without limitation any stockholder or former
stockholder.
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of
this 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 hereto executed in the same manner as this Agreement, except that after
the Slippery Rock Meeting no amendment shall be made that by law requires
further approval by the stockholders of Slippery Rock without obtaining such
approval.
9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 Governing Law. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the Commonwealth of Pennsylvania applicable to
contracts made and to be performed entirely within such State.
9.05 Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby,
including fees and expenses of its own financial consultants, accountants and
counsel, except that expenses of printing the Proxy Statement and the
registration fee to be paid to the SEC in connection with the Registration
Statement shall be shared equally between Slippery Rock and Parent, and provided
further that nothing contained herein shall limit either party's rights to
recover any liabilities or damages arising out of the other party's willful
breach of any provision of this Agreement.
9.06 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.
A-46
If to Slippery Rock to:
Slippery Rock Financial Corporation
100 South Main Street
Slippery Rock, Pennsylvania 16057
Attention: William Sonntag,
President and Chief Executive Officer
Fax: (724) 794-1087
With a copy to:
Manatt, Phelps & Phillips, LLP
1501 M Street, NW, Suite 700
Washington, D.C. 20005
Attention: Gregory A. Gehlmann, Esq.
Fax: (202) 463-1741
If to Parent to:
F.N.B. Corporation
One F.N.B. Boulevard
Hermitage, Pennsylvania 16148
Attention: Stephen J. Gurgovits
President and Chief Executive Officer
Fax: (724) 983-3515
With a copy to:
Duane Morris LLP
4200 One Liberty Place
Philadelphia, PA 19103
Attention: Frederick W. Dreher, Esq.
Fax: (215) 979-1213
9.07 Entire Understanding; No Third Party Beneficiaries. This Agreement,
the Bank Merger Agreement and the Confidentiality Agreement represent the entire
understanding of the parties hereto and thereto with reference to the
Transaction, and this Agreement, the Bank Merger Agreement and the
Confidentiality Agreement supersede any and all other oral or written agreements
heretofore made. Except for the Indemnified Parties' right to enforce Parent's
obligations under Sections 6.11 and 6.12(e) and (f), which are expressly
intended to be for the irrevocable benefit of, and shall be enforceable by, each
Indemnified Party and his or her heirs and representatives, nothing in this
Agreement, 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 Agreement.
9.08 Severability. Except to the extent that application of this Section
9.08 would have a Material Adverse Effect on Slippery Rock or Parent, any term
or provision of this Agreement that is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable. In all such cases, the parties shall use their reasonable best
efforts to substitute a valid, legal and enforceable provision that, insofar as
practicable, implements the original purposes and intents of this Agreement.
9.09 Enforcement. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of
A-47
the United States or any state having jurisdiction, this being in addition to
any other remedy to which they are entitled at law or in equity. In the event
attorneys' fees or other costs are incurred to secure performance of any of the
obligations herein provided for, or to establish damages for the breach thereof,
or to obtain any other appropriate relief, whether by way of prosecution or
defense, the prevailing party shall be entitled to recover reasonable attorneys'
fees and costs incurred therein.
9.10 Interpretation. When a reference is made in this Agreement to
Sections, Annexes or Schedules, such reference shall be to a Section of, or
Annex or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." Whenever the words "as of the date
hereof" are used in this Agreement, they shall be deemed to mean the day and
year first above written.
9.11 Assignment. No party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
9.12 Alternative Structure. Notwithstanding any provision of this
Agreement to the contrary, Parent may at any time modify the structure of the
acquisition of Slippery Rock set forth herein, subject to the prior written
consent of Slippery Rock, which consent shall not be unreasonably withheld or
delayed, provided that (i) the Merger Consideration to be paid to the holders of
Slippery Rock Common Stock is not thereby changed in kind or reduced in amount
as a result of such modification, (ii) such modification will not adversely
affect the tax treatment to Slippery Rock's stockholders as a result of
receiving the Merger Consideration and (iii) such modification will not
materially delay or jeopardize receipt of any required approvals of Governmental
Authorities.
A-48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
F.N.B. CORPORATION
By: /s/ STEPHEN J. GURGOVITS
------------------------------------
Name: Stephen J. Gurgovits
Title: President and Chief
Executive Officer
SLIPPERY ROCK FINANCIAL CORPORATION
By: /s/ WILLIAM SONNTAG
------------------------------------
Name: William Sonntag
Title: President and Chief
Executive Officer
A-49
ANNEX A
AGREEMENT OF MERGER
Agreement of Merger, dated as of , 2004, by and between The First
National Bank of Pennsylvania (the "Acquiror Bank") and The First National Bank
of Slippery Rock (the "Bank").
WLTNESSETH:
WHEREAS, the Bank is a national association and a wholly owned subsidiary
of Slippery Rock Financial Corporation ("Slippery Rock"); and
WHEREAS, the Acquiror Bank is a national association and a wholly owned
subsidiary of F.N.B. Corporation (the "Acquiror"); and
WHEREAS, the Acquiror and Slippery Rock have entered into an Agreement and
Plan of Merger, dated as of May 5, 2004, as amended and restated as of July 15,
2004 (the "Agreement"), pursuant to which Slippery Rock will merge with and into
Parent (the "Parent Merger"); and
WHEREAS, the Bank and the Acquiror Bank desire to merge on the terms and
conditions herein provided immediately following the effective time of the
Parent Merger.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. The Merger. Subject to the terms and conditions of this Agreement
of Merger, at the Effective Time (as defined in Section 2 hereof), the Bank
shall merge with and into the Acquiror Bank (the "Merger") under the laws
of the United States. The Acquiror Bank shall be the surviving bank of the
Merger (the "Surviving Bank").
2. Effective Time. The Merger shall become effective on the date and
at the time that Articles of Combination are filed with the Office of the
Comptroller of the Currency (the "OCC"), unless a later date and time is
specified as the effective time on such Articles of Combination (the
"Effective Time").
3. Charter; Bylaws. The Charter and Bylaws of the Acquiror Bank in
effect immediately prior to the Effective Time shall be the Charter and
Bylaws of the Surviving Bank, until altered, amended or repealed in
accordance with their terms and applicable law.
4. Name; Offices. The name of the Surviving Bank shall be "The First
National Bank of Pennsylvania." The main office of the Surviving Bank shall
be the main office of the Acquiror Bank immediately prior to the Effective
Time. All branch offices of the Bank and the Acquiror Bank that were in
lawful operation immediately prior to the Effective Time shall be the
branch offices of the Surviving Bank upon consummation of the Merger,
subject to the opening or closing of any offices that may be authorized by
the Bank or the Acquiror Bank and the OCC after the date hereof. Schedule I
hereto contains a list of each of the deposit taking offices of the Bank
and the Acquiror Bank that shall be operated by the Surviving Bank, subject
to the opening or closing of any offices which may be authorized by the
Bank or the Acquiror Bank and the OCC after the date hereof.
5. Directors and Executive Officers. Upon consummation of the Merger,
(i) the directors of the Surviving Bank immediately prior to the Effective
Time shall continue as directors of the Surviving Bank and two directors of
the Bank, as mutually agreed by Slippery Rock and Parent shall be appointed
as directors of the Surviving Bank to serve until the first annual meeting
of stockholders following the Effective Time and (ii) the executive
officers of the Surviving Bank shall be the executive officers of the
Acquiror Bank immediately prior to the Effective Time.
A-50
6. Effects of the Merger. Upon consummation of the Merger, and in
addition to the effects set forth at 12 U.S.C. sec. 215a and other
applicable law:
(a) all rights, franchises and interests of the Bank in and to
every type of property (real, personal and mixed), tangible and
intangible, and choses in action shall be transferred to and vested in
the Surviving Bank by virtue of the Merger without any deed or other
transfer, and the Surviving Bank, without any order or other action on
the part of any court or otherwise, shall hold and enjoy all rights of
property, franchises and interests, including appointments, designations
and nominations, and all other rights and interests as trustee,
executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver and committee, and in every other fiduciary
capacity, in the same manner and to the same extent as such rights,
franchises and interest were held or enjoyed by the Bank immediately
prior to the Effective Time; and
(b) the Surviving Bank shall be liable for all liabilities of the
Bank, fixed or contingent, including all deposits, accounts, debts,
obligations and contracts thereof, matured or unmatured, whether
accrued, absolute, contingent or otherwise, and whether or not reflected
or reserved against on balance sheets, books of account or records
thereof, and all rights of creditors or obligees and all liens on
property of the Bank shall be preserved unimpaired; after the Effective
Time, the Surviving Bank will continue to issue savings accounts on the
same basis as immediately prior to the Effective Time.
7. Effect on Shares of Stock.
(a) Each share of Acquiror Bank common stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding.
(b) At the Effective Time, each share of Bank common stock issued and
outstanding prior to the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled. Any shares of Bank common
stock held in the treasury of the Bank immediately prior to the Effective Time
shall be retired and canceled.
8. Additional Actions. If, at any time after the Effective Time, the
Surviving Bank shall consider that any further assignments or assurances in law
or any other acts are necessary or desirable to (a) vest, perfect or confirm, of
record or otherwise, in the Surviving Bank its rights, title or interest in, to
or under any of the rights, properties or assets of the Bank acquired or to be
acquired by the Surviving Bank as a result of, or in connection with, the
Merger, or (b) otherwise carry out the purposes of this Agreement of Merger, the
Bank and its proper officers and directors shall be deemed to have granted to
the Surviving Bank an irrevocable power of attorney to (i) execute and deliver
all such proper deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of such
rights, properties or assets in the Surviving Bank and (ii) otherwise to carry
out the purposes of this Agreement of Merger. The proper officers and directors
of the Surviving Bank are fully authorized in the name of the Bank or otherwise
to take any and all such action.
9. Counterparts. This Agreement of Merger may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one agreement.
10. Governing Law. This Agreement of Merger shall be governed in all
respects, including, but not limited to, validity, interpretation, effect and
performance, by the laws of the United States.
11. Amendment. Subject to applicable law, this Agreement of Merger may be
amended, modified or supplemented only by written agreement of the Acquiror Bank
and the Bank at any time prior to the Effective Time.
12. Waiver. Any of the terms or conditions of this Agreement of Merger may
be waived at any time by whichever of the parties hereto is, or the shareholders
of which are, entitled to the benefit thereof by action taken by the Board of
Directors of such waiving party
A-51
13. Assignment. This Agreement of Merger may not be assigned by any party
hereto without the prior written consent of the other party.
14. Termination. This Agreement of Merger shall terminate upon the
termination of this Agreement of Merger in accordance with its terms.
15. Procurement of Approvals. This Agreement of Merger shall be subject to
the approval of the Acquiror as the sole shareholder of the Acquiror Bank and
Slippery Rock as the sole shareholder of the Bank at meetings to be called and
held or by consent in lieu thereof in accordance with the applicable provisions
of law and their respective organizational documents. The Acquiror Bank and the
Bank shall proceed expeditiously and cooperate fully in the procurement of any
other consents and approvals and in the taking of any other action, and the
satisfaction of all other requirements prescribed by law or otherwise necessary
for consummation of the Merger on the terms provided herein, including without
limitation the preparation and submission of such applications or other filings
for approval of the Merger to the OCC as may be required by applicable laws and
regulations.
16. Conditions Precedent. The obligations of the parties under this
Agreement of Merger shall be subject to: (i) the approval of this Agreement of
Merger by the Acquiror as the sole shareholder of the Acquiror Bank and Slippery
Rock as the sole shareholder of the Bank at meetings of shareholders duly called
and held (or by consent or consents in lieu thereof), in each case without any
exercise of such dissenters' rights as may be applicable; (ii) receipt of
approval of the Merger from all governmental and banking authorities whose
approval is required; (iii) receipt of any necessary regulatory approval to
operate the main office and the branch offices of the Bank as offices of the
Surviving Bank; and (iv) the consummation of the Parent Merger pursuant to the
Agreement on or before the Effective Time.
17. Effectiveness of Agreement. Notwithstanding anything to the contrary
contained herein, the execution and delivery of this Agreement of Merger by the
parties hereto shall not be deemed to be effective unless and until the
requirements of 12 C.F.R. sec. 5.33 are met.
IN WITNESS WHEREOF, each of the Acquiror Bank and the Bank has caused this
Agreement of Merger to be executed on its behalf by its duly authorized
officers.
THE FIRST NATIONAL BANK
OF PENNSYLVANIA
By:
--------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK
OF SLIPPERY ROCK
By:
--------------------------------------
Name:
Title:
A-52
ANNEX B
, 2004
F.N.B. Corporation
One F.N.B. Boulevard
Hermitage, PA 16148
Ladies and Gentlemen:
I have been advised that I may be deemed an "affiliate" of Slippery Rock
Financial Corporation, a Pennsylvania corporation ("Slippery Rock"), as that
term is defined in Rule 144 and used in Rule 145 promulgated by the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "Securities Act"). I understand that pursuant to the terms of the Agreement
and Plan of Merger, dated as of , 2004 (the "Agreement"), between
F.N.B. Corporation, a Florida corporation ("Parent") and Slippery Rock, Slippery
Rock plans to merge with and into Parent (the "Merger").
I further understand that as a result of the Merger, I will be entitled to
elect to receive shares of common stock, par value $.01 per share, of Parent
("Parent Common Stock") in exchange for shares of common stock, par value $0.25
per share, of Slippery Rock ("Slippery Rock Common Stock").
I have carefully read this letter and reviewed the Agreement, discussed
their requirements and other applicable limitations upon my ability to sell,
transfer, or otherwise dispose of Parent Common Stock, to the extent I felt
necessary, with my counsel or counsel for Slippery Rock.
I represent, warrant and covenant with and to Parent that in the event I
receive any shares of Parent Common Stock as a result of the Merger:
I shall not make any sale, transfer or other disposition of such shares of
Parent Common Stock unless (i) such sale, transfer or other disposition has been
registered under the Securities Act, (ii) such sale, transfer or other
disposition is made in conformity with the provisions of Rule 145 under the
Securities Act (as such rule may be amended from time to time), or (iii) in the
opinion of counsel in form and substance reasonably satisfactory to Parent, or
under a "no-action" letter obtained by me from the staff of the SEC, such sale,
transfer or other disposition will not violate the registration requirements of,
or is otherwise exempt from registration under, the Securities Act.
I understand that Parent is under no obligation to register the sale,
transfer or other disposition of shares of Parent Common Stock by me or on my
behalf under the Securities Act or to take any other action necessary in order
to make compliance with an exemption from such registration available.
I understand that stop transfer instructions will be given to Parent's
transfer agent with respect to shares of Parent Common Stock issued to me as a
result of the Merger and that there will be placed on the certificates for such
shares, or any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued as a result of the
merger of Slippery Rock Financial Corporation with and into F.N.B.
Corporation, on , 2004 in a transaction to which Rule 145
promulgated under the Securities Act of 1933 applies. The shares
represented by this certificate may be transferred only in accordance with
the terms of a letter agreement between the registered holder hereof and
F.N.B. Corporation, a copy of which agreement is on file at the principal
offices of F.N.B. Corporation.
I understand that, unless transfer by me of the Parent Common Stock issued
to me as a result of the Merger has been registered under the Securities Act or
such transfer is made in conformity with the provisions of Rule 145(d) under the
Securities Act, Parent reserves the right, in its sole discretion, to place the
following legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933 and were acquired from [SHAREHOLDER] who, in
turn, received such shares as a result of the merger of
A-53
Slippery Rock Financial Corporation with and into F.N.B. Corporation on
, 2004 in a transaction to which Rule 145 under the Securities
Act of 1933 applies. The shares have been acquired by the holder not with a
view to, or for resale in connection with, any distribution thereof within
the meaning of the Securities Act of 1933 and may not be offered, sold,
pledged or otherwise transferred except in accordance with an exemption
from the registration requirements of the Securities Act of 1933."
It is understood and agreed that the legends set forth above shall be
removed by delivery of substitute certificates without such legends if I shall
have delivered to Parent (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 Parent, to the effect that such legend is not required for purposes of the
Securities Act, or (ii) evidence or representations satisfactory to Parent that
Parent Common Stock represented by such certificates is being or has been sold
in conformity with the provisions of Rule 145(d).
I further understand and agree that the provisions of Rule 145 shall apply
to all shares of Parent Common Stock that (i) my spouse, (ii) any relative of
mine or any relative of my spouse or any one of whom has the same home as me,
(iii) any trust or estate in which I, my spouse or any such relative owns at
least a 10% beneficial interest or of which any of us serves as trustee,
executor or in any similar capacity and (iv) any corporation or other
organization in which I, my spouse or any such relative owns at least 10% of any
class of equity securities or of the equity interest, receives as a result of
the Merger and I further represent, warrant and covenant with and to Parent that
I will have, and will cause each of such persons to have, all shares of Slippery
Rock Common Stock owned (other than shares held through tax qualified retirement
or benefit plans) by me or such persons registered in my name or the name of
such persons, as applicable, prior to the effective date of the Merger and not
in the name of any bank, broker or dealer, nominee or clearing house.
By acceptance hereof, Parent agrees, for a period of two years after the
Effective Time (as defined in the Agreement) that, so long as it is obligated to
file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, it will use its reasonable best efforts to timely file such
reports so that the public information requirements of Rule 144(c) promulgated
under the Securities Act are satisfied and the resale provisions of Rule
145(d)(1) and (2) are therefore available to me in the event I desire to
transfer any Parent Common Stock issued to me in the Merger.
It is understood and agreed that this letter shall terminate and be of no
further force and effect if the Merger Agreement is terminated in accordance
with its terms.
Execution of this letter should not be construed as an admission on my part
that I am an "affiliate" of Slippery Rock as described in the first paragraph of
this letter or as a waiver of any rights I might have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
By:
------------------------------------
Name:
Acknowledged this day of , 2004.
F.N.B. CORPORATION
By:
--------------------------------------------------------
[name]
[title]
A-54
APPENDIX B
OPINION OF GRIFFIN FINANCIAL GROUP, LLC
607 Washington Street
P.O. Box 1497
Reading, PA 19603
Phone (610) 478-2102
EMAIL egh@go2griffin.com
FAX (610) 371-7377
June 9, 2004
Slippery Rock Financial Corporation
100 South Main Street
Slippery Rock, PA 16057
Members of the Board:
F.N.B. Corporation ("FNB") and Slippery Rock Financial Corporation
("Slippery Rock") have entered into an Agreement and Plan of Merger, dated as of
May 5, 2004 (the "Merger Agreement"), that provides, among other things, for the
merger (the "Transaction") of Slippery Rock into FNB. Pursuant to the terms of
the Merger Agreement, upon completion of the Transaction, each share of common
stock, par value $0.25 per share, of Slippery Rock issued and outstanding
immediately prior to the completion of the Transaction (the "Slippery Rock
Common Stock") will be converted into the right to receive, at the election of
the holder thereof, either (i) 1.41 shares of FNB common stock, par value $0.10
per share ("FNB Common Stock"), or (ii) $28.00 in cash without interest
(collectively, the "Merger Consideration"), subject to the election and
proration procedures set forth in the Merger Agreement, which provide generally,
among other things, that at least 3,266,554 shares of FNB Common Stock shall be
issued to holders of Slippery Rock Common Stock in exchange for some, but not
all, of the shares of Slippery Rock Common Stock. The terms and conditions of
the Transaction are more fully set forth in the Merger Agreement.
Slippery Rock has the right, during the two-day period following the
Determination Date (as defined in the Merger Agreement), to terminate the Merger
Agreement if the average final price of FNB Common Stock for the twenty (20)
consecutive trading days ending on the trading day immediately preceding the
Determination Date is less than $15.38 (representing a 20% decline from the
$19.23 closing sales price of FNB Common Stock on May 7, 2004) and the decline
in the average final price of FNB Common Stock since May 7, 2004 is at least 20%
(as further explained in the Merger Agreement) greater than the change during
the same period in the Nasdaq Bank Index. It is not possible to know until the
Determination Date if the average final price will be less than $15.38 or if the
decline in the price of FNB common stock will be 20% greater than the change in
the Nasdaq Bank Index. Griffin cannot predict whether or not the Slippery Rock
board would exercise its right to give notice to FNB that Slippery Rock desired
to terminate the Merger Agreement, if these conditions were met. Griffin's
opinion does not address the fairness from a financial point of view of the
Merger Consideration if the above price conditions have been met and the
Slippery Rock board does not terminate the Merger Agreement.
You have asked for our opinion as to whether the Merger Consideration
proposed to be paid for each share of Slippery Rock Common Stock in the
Transaction is fair from a financial point of view to Slippery Rock and its
shareholders.
B-1
[Griffin Financial Group, LLC LOGO]
Slippery Rock Financial Corporation
June 9, 2004
Page
For purposes of providing the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of FNB and Slippery Rock, respectively, that we believe to be
relevant;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning each of FNB and Slippery Rock,
including financial forecasts and profit plans, prepared by the management
of FNB and Slippery Rock, respectively;
(iii) reviewed the Formal Agreement, dated October 15, 2002, between
The First National Bank of Slippery Rock and the Office of the Comptroller
of the Currency (the "Formal Agreement") and discussed with management of
Slippery Rock the implications of the Formal Agreement on the future
financial performance of Slippery Rock;
(iv) discussed the past and current operations, financial condition,
lines of business and the prospects of each of FNB and Slippery Rock with
senior executives of FNB and Slippery Rock, respectively, including with
respect to FNB (x) the potential impact on FNB of the Transaction,
including potential cost savings synergies and other strategic, financial
and operational benefits that management of FNB expects to realize from the
combination of FNB and Slippery Rock and (y) the forecasted impact of the
proposed Transaction on the future financial performance of FNB;
(v) reviewed earnings per share consensus estimates for FNB for the
years ending December 31, 2004 and 2005 published by Thomson First Call;
(vi) reviewed the publicly reported historical price and trading
activity for Slippery Rock Common Stock and FNB Common Stock, including a
comparison of certain financial and stock market information for Slippery
Rock and FNB with similar publicly available information for certain other
financial institutions the securities of which are publicly traded;
(vii) reviewed the financial terms, to the extent publicly available,
of certain merger and acquisition transactions between financial
institutions which we viewed as comparable;
(viii) participated in discussions and negotiations between FNB and
Slippery Rock;
(ix) reviewed the Merger Agreement (including the schedules and
exhibits thereto);
(x) considered the competitive environment for financial institutions;
and
(xi) performed comparable company, selected reference transaction and
pro forma merger analyses.
In connection with our review of Slippery Rock, FNB and the proposed
Transaction, we have assumed and relied upon, the accuracy and completeness of
the information reviewed by us for the purposes of this opinion, without
independent verification. We have also relied upon assurances from management of
Slippery Rock and FNB that they are not aware of any facts and circumstances
that may cause the information reviewed by us to contain a misstatement or
omission of a fact material to our opinion. With respect to financial and
operating forecasts and profit plans, including the synergies, cost savings and
other strategic, financial and operational benefits to be realized in connection
with the completion of the Transaction, we have assumed that such financial and
operating forecasts reflect the best available estimates and judgments of the
future financial performance of FNB, after giving effect to the Transaction and
are based on reasonable assumptions, estimates and judgments of management. We
have also relied upon the advice Slippery Rock and FNB have each received from
their respective legal counsel, tax advisors and independent public accountants
as to all legal, tax and accounting matters relating to the Transaction,
including without limitation, that the Transaction will be treated as a tax-free
reorganization for federal income tax purposes to
B-2
[Griffin Financial Group, LLC LOGO]
Slippery Rock Financial Corporation
June 9, 2004
Page
the extent indicated in the opinions of counsel to Slippery Rock and FNB. We
have assumed that the Transaction is, and will be completed in accordance with
the terms of the Merger Agreement and all laws and regulations applicable to
Slippery Rock and FNB and that in the course of obtaining the necessary
regulatory approvals or other approvals of the Transaction, no restrictions will
be imposed that may have a material adverse effect on the future results of
operation or financial condition of FNB, Slippery Rock or the combined entity,
as the case may be, or on the contemplated benefits of the Transaction. We have
not made any independent valuation or appraisal of either of Slippery Rock or
FNB or their respective assets or liabilities (including any hedge, swap foreign
exchange, derivative or off-balance sheet assets or liabilities), nor have we
been furnished with any such appraisals and we have not made any review of the
loans, loan loss reserves or reviewed any individual loan credit files of the
bank subsidiaries, Slippery Rock or FNB. We have also assumed that the published
estimates of third party research analysts constitute a reasonable basis upon
which to evaluate the future financial performance of each of Slippery Rock and
FNB. In addition, we did not conduct a physical inspection of any of the
properties or facilities of FNB or Slippery Rock. We are not expressing an
opinion as to what the value of FNB common stock will actually be when issued or
the price at which FNB common stock will trade at any time or whether FNB will
realize the intended specific strategic and operational objectives and benefits
of the Transaction. This opinion is based upon market, economic and other
conditions as they exist on, and could be evaluated, as a practical matter, as
of the date hereof. We assumed, in all respects material to our analyses, that
all of the representations and warranties contained in the Merger Agreement and
all related agreements were true and correct, that each party to such agreements
would perform all of the covenants required to be performed by such party under
such agreements and that the conditions precedent in the Merger Agreement have
not been nor will be waived. We also assumed that there has been no material
change in FNB's or Slippery Rock's assets, financial condition, results of
operations, business or prospects since the date of the last financial
statements made available to us. Our opinion does not address the relative
merits of the Transaction as compared to any other business strategy that might
exist for Slippery Rock, nor does it address the underlying business decision of
Slippery Rock to engage in the Transaction.
We have served as financial advisor to the Board of Directors of Slippery
Rock in connection with this Transaction and will receive a fee for our
services, a part of which is contingent on the closing of the Transaction.
Griffin Financial Group, LLC has previously provided financial advisory services
to Slippery Rock and has received customary fees for providing such services.
This letter is directed to the Board of Directors of Slippery Rock solely
in connection with its evaluation of the Transaction and speaks as of the date
hereof and we assume no obligation to update this opinion for any purpose. Our
opinion is directed only to the fairness, from a financial point of view, of the
Merger Consideration to be paid by FNB in the Transaction. This opinion does not
constitute a recommendation to any shareholder of Slippery Rock as to how such
shareholder should vote as to the Transaction. It may not be used for any other
purpose without our prior written consent, except that this opinion may be
included as an Appendix to the Proxy Statement/Prospectus of Slippery Rock and
FNB dated the date hereof and to the references to this opinion therein.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration is fair, from a financial point of view,
to Slippery Rock.
Very truly yours,
GRIFFIN FINANCIAL GROUP, LLC
B-3
APPENDIX C
STATUTORY PROVISIONS CONCERNING APPRAISAL RIGHTS OF
SLIPPERY ROCK SHAREHOLDERS
PENNSYLVANIA BUSINESS CORPORATION LAW OF 1988
SUBCHAPTER D. -- DISSENTERS RIGHTS
AND SECTION 1930. -- DISSENTERS RIGHTS
SECTION 1571. Application and Effect of Subchapter.
(a) General Rule. Except as otherwise provided in subsection (b), any
shareholder (as defined in section 1572 (relating to definitions)) of a business
corporation shall have the right to dissent from, and to obtain payment of the
fair value of his shares in the event of, any corporate action, or to otherwise
obtain fair value for his shares, only where this part expressly provides that a
shareholder shall have the rights and remedies provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of election).
Section 2904(b) (relating to procedure).
Section 2907(a) (relating to proceedings to terminate breach of qualifying
conditions).
Section 7104(b)(3) (relating to procedure).
(b) Exceptions.
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares shall not have the right to dissent
and obtain payment of the fair value of the shares under this subchapter
if, on the record date fixed to determine the shareholders entitled to
notice of and to vote at the meeting at which a plan specified in any of
section 1930, 1931(d), 1932(c) or 1952(d) is to be voted on, or on the date
of the first public announcement that such a plan has been approved by the
shareholders by consent without a meeting, the shares are either:
(i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by
the National Association of Securities Dealers, Inc.; or
(ii) held beneficially or of record by more than 2,000 persons.
C-1
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:
(i) (Repealed.)
(ii) Shares of any preferred or special class or series unless the
articles, the plan or the terms of the transaction entitle all
shareholders of the class or series to vote thereon and require for the
adoption of the plan or the effectuation of the transaction the
affirmative vote of a majority of the votes cast by all shareholders of
the class or series.
(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase,
lease, exchange or other disposition all or substantially all of the
shares, property or assets of another corporation by the issuance of
shares, obligations or otherwise, with or without assuming the liabilities
of the other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by
the issuance of voting shares of the corporation to be outstanding
immediately after the acquisition sufficient to elect a majority or more of
the directors of the corporation.
(c) Grant of Optional Dissenters Rights. The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall have
dissenters rights in connection with any corporate action or other transaction
that would otherwise not entitle such shareholders to dissenters rights.
(d) Notice of Dissenters Rights. Unless otherwise provided by statute, if
a proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and
(2) a copy of this subchapter.
(e) Other Statutes. The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain Provisions of Articles Ineffective. This subchapter may not be
relaxed by any provision of the articles.
(g) Computation of Beneficial Ownership. For purposes of subsection
(b)(1)(ii), shares that are held beneficially as joint tenants, tenants by the
entireties, tenants in common or in trust by two or more persons, as fiduciaries
or otherwise, shall be deemed to be held beneficially by one person.
(h) Cross References. See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished),
1763(c) (relating to determination of shareholders of record) and 2512 (relating
to dissenters rights procedure).
SECTION 1572. Definitions.
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
"Corporation." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
one or more of the resulting corporations is the successor corporation for the
purpose of this subchapter. The designated successor corporation or corporations
in a division shall have sole responsibility for
C-2
payments to dissenters and other liabilities under this subchapter except as
otherwise provided in the plan of division.
"Dissenter." A shareholder who is entitled to and does assert dissenters
rights under this subchapter and who has performed every act required up to the
time involved for the assertion of those rights.
"Fair Value." The fair value of shares immediately before the effectuation
of the corporate action to which the dissenter objects taking into account all
relevant factors, but excluding any appreciation or depreciation in anticipation
of the corporate action.
"Interest." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors including the average
rate currently paid by the corporation on its principal bank loans.
"Shareholder." A shareholder as defined in section 1103 (relating to
definitions), or an ultimate beneficial owner of shares, including, without
limitation, a holder of depository receipts, where the beneficial interest owned
includes an interest in the assets of the corporation upon dissolution.
SECTION 1573. Record and Beneficial Holders and Owners.
(a) Record Holders of Shares. A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented and
his other shares were registered in the names of different shareholders.
(b) Beneficial Owners of Shares. A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.
SECTION 1574. Notice of Intention to Dissent.
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.
SECTION 1575. Notice to Demand Payment.
(a) General Rule. If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action is
to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporate action. In
either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
C-3
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for Receipt of Demand for Payment. The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
SECTION 1576. Failure to Comply with Notice to Demand Payment, Etc.
(a) Effect of Failure of Shareholder to Act. A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
(b) Restriction on Uncertificated Shares. If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).
(c) Rights Retained by Shareholder. The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
SECTION 1577. Release of Restrictions or Payment for Shares.
(a) Failure to Effectuate Corporate Action. Within 60 days after the date
set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of Notice to Demand Payment. When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.
(c) Payment of Fair Value of Shares. Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(d) Failure to Make Payment. If the corporation does not remit the amount
of its estimate of the fair value of the shares as provided by subsection (c),
it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the
C-4
corporation other than those such the original dissenter had after making demand
for payment of their fair value.
SECTION 1578. Estimate by Dissenter of Fair Value of Shares.
(a) General Rule. If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenter's shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(b) Effect of Failure to File Estimate. Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the corporation.
SECTION 1579. Valuation Proceedings Generally.
(a) General Rule. Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
(2) timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) timely receipt of any estimates pursuant to section 1578 (relating
to estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may
file in court an application for relief requesting that the fair value of
the shares be determined by the court.
(b) Mandatory Joinder of Dissenters. All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(c) Jurisdiction of the Court. The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of Recovery. Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(e) Effect of Corporation's Failure to File Application. If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not previously
remitted.
SECTION 1580. Costs and Expenses of Valuation Proceedings.
(a) General Rule. The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578
C-5
(relating to estimate by dissenter of fair value of shares) the court finds to
be dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of Counsel Fees and Expert Fees Where Lack of Good Faith
Appears. Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the requirements of this subchapter and may be assessed against either the
corporation or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted in bad faith or
in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights
provided by this subchapter.
(c) Award of Fees for Benefits to Other Dissenters. If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
SECTION 1930. Dissenters Rights.
(a) General Rule. If any shareholder of a domestic business corporation
that is to be a party to a merger or consolidation pursuant to a plan of merger
or consolidation objects to the plan of merger or consolidation and complies
with the provisions of Subchapter D of Chapter 15 (relating to dissenters
rights), the shareholder shall be entitled to the rights and remedies of
dissenting shareholders therein provided, if any. See also section 1906(c)
(relating to dissenters rights upon special treatment).
(b) Plans Adopted by Directors Only. Except as otherwise provided pursuant
to section 1571(c) (relating to grant of optional dissenters' rights),
Subchapter D of Chapter 15 shall not apply to any of the shares of a corporation
that is a party to a merger or consolidation pursuant to section 1924(b)(1)(i)
or (4) (relating to adoption by board of directors).
(c) Cross References. See sections 1571(b) (relating to exceptions) and
1904 (relating to de facto transaction doctrine abolished).
C-6
PART II:
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits are filed with or incorporated by reference in this
Registration Statement:
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
2.1 Amended and Restated Agreement and Plan of Merger dated as
of July 15, 2004 between F.N.B. Corporation and Slippery
Rock Financial Corporation (included as Appendix A to this
proxy statement/prospectus)
5.1 Opinion of Duane Morris LLP
8.1 Tax Opinion of Duane Morris LLP
8.2 Tax Opinion of Manatt, Phelps & Phillips, LLP
10.1* Form of Separation and Release Agreement between Slippery
Rock Financial Corporation and William C. Sonntag
10.2* Form of Non-Competition Agreement between F.N.B. Corporation
and William C. Sonntag
10.3* Form of Business Retention and Development Agreement between
F.N.B. Corporation and William C. Sonntag
10.4* Form of Key Employee Severance Agreements between Slippery
Rock Financial Corporation and John J. Boczar (executed July
12, 2001), Wayne Grinnik (executed December 18, 2001), Mark
A. Volponi, Brett Wise, William Stanley, Wendy Murphy, Keith
Warcup and Dale Winner.
23.1 Consent of Ernst & Young LLP
23.2 Consent of S.R. Snodgrass, A.C.
23.3 Consent of Duane Morris LLP (included in Exhibit 5.1)
23.4 Consent of Duane Morris LLP (included in Exhibit 8.1)
23.5 Consent of Manatt, Phelps & Phillips, LLP (included in
Exhibit 8.2)
23.6 Consent of Griffin Financial Group, LLC
23.7 Acknowledgement of Ernst & Young LLP dated July 19, 2004 to
the Board of Directors of F.N.B. Corporation
23.8 Letter of S.R. Snodgrass, A.C. dated July 16, 2004 to the
Board of Directors of Slippery Rock Financial Corporation
24.1* Power of Attorney
99.1 Form of Proxy for Special Meeting of Shareholders of
Slippery Rock Financial Corporation
99.2 Form of Election Form/Transmittal Letter
99.3* Opinion of Griffin Financial Group, LLC (included as
Appendix B to this proxy statement/ prospectus)
---------------
*Previously filed
II-1
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Hermitage,
Commonwealth of Pennsylvania, on July 21, 2004.
F.N.B. CORPORATION
By: /s/ STEPHEN J. GURGOVITS
------------------------------------
Stephen J. Gurgovits
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, the
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ PETER MORTENSEN* Chairman of the Board July 21, 2004
------------------------------------------------
Peter Mortensen
/s/ STEPHEN J. GURGOVITS* President, Chief Executive Officer July 21, 2004
------------------------------------------------ and Director
Stephen J. Gurgovits (principal executive officer)
/s/ BRIAN F. LILLY Vice President and Chief July 21, 2004
------------------------------------------------ Financial Officer
Brian F. Lilly (principal financial officer)
/s/ TITO L. LIMA* Corporate Controller July 21, 2004
------------------------------------------------ (principal accounting officer)
Tito L. Lima
/s/ WILLIAM B. CAMPBELL* Director July 21, 2004
------------------------------------------------
William B. Campbell
/s/ HENRY M. EKKER* Director July 21, 2004
------------------------------------------------
Henry M. Ekker
/s/ ROBERT B. GOLDSTEIN* Director July 21, 2004
------------------------------------------------
Robert B. Goldstein
/s/ HARRY F. RADCLIFFE* Director July 21, 2004
------------------------------------------------
Harry F. Radcliffe
/s/ JOHN W. ROSE* Director July 21, 2004
------------------------------------------------
John W. Rose
/s/ WILLIAM J. STRIMBU* Director July 21, 2004
------------------------------------------------
William J. Strimbu
II-2
SIGNATURE TITLE DATE
--------- ----- ----
/s/ EARL K. WAHL, JR.* Director July 21, 2004
------------------------------------------------
Earl K. Wahl, Jr.
/s/ ARCHIE O. WALLACE* Director July 21, 2004
------------------------------------------------
Archie O. Wallace
/s/ R. BENJAMIN WILEY* Director July 21, 2004
------------------------------------------------
R. Benjamin Wiley
---------------
* signed by Brian F. Lilly as attorney-in-fact
II-3
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
2.1 Amended and Restated Agreement and Plan of Merger dated as
of July 15, 2004 between F.N.B. Corporation and Slippery
Rock Financial Corporation (included as Appendix A to this
proxy statement/prospectus)
5.1 Opinion of Duane Morris LLP
8.1 Tax Opinion of Duane Morris LLP
8.2 Tax Opinion of Manatt, Phelps & Phillips, LLP
10.1* Form of Separation and Release Agreement between Slippery
Rock Financial Corporation and William C. Sonntag
10.2* Form of Non-Competition Agreement between F.N.B. Corporation
and William C. Sonntag
10.3* Form of Business Retention and Development Agreement between
F.N.B. Corporation and William C. Sonntag
10.4* Form of Key Employee Severance Agreements between Slippery
Rock Financial Corporation and John J. Boczar (executed July
12, 2001), Wayne Grinnik (executed December 18, 2001), Mark
A. Volponi, Brett Wise, William Stanley, Wendy Murphy, Keith
Warcup and Dale Winner.
23.1 Consent of Ernst & Young LLP
23.2 Consent of S.R. Snodgrass, A.C.
23.3 Consent of Duane Morris LLP (included in Exhibit 5.1)
23.4 Consent of Duane Morris LLP (included in Exhibit 8.1)
23.5 Consent of Manatt, Phelps & Phillips, LLP (included in
Exhibit 8.2)
23.6 Consent of Griffin Financial Group, LLC
23.7 Acknowledgement of Ernst & Young LLP dated July 19, 2004 to
the Board of Directors of F.N.B. Corporation
23.8 Letter of S.R. Snodgrass, A.C. dated July 16, 2004 to the
Board of Directors of Slippery Rock Financial Corporation
24.1* Power of Attorney
99.1 Form of Proxy for Special Meeting of Shareholders of
Slippery Rock Financial Corporation
99.2 Form of Election Form/Transmittal Letter
99.3* Opinion of Griffin Financial Group, LLC (included as
Appendix B to this proxy statement/ prospectus)
---------------
*Previously filed
II-4