As filed with the Securities and Exchange Commission on June 16, 2004
================================================================================
Registration No. 333-___________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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
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(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
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(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
Approximate date of commencement of proposed sale of the securities to the
public: upon the effective date of the merger of Slippery Rock Financial
Corporation with and into Registrant.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
maximum maximum
offering aggregate Amount of
Title of each class of Amount to be price offering registration
securities to be registered registered (1) per unit price(2) fee
--------------------------- -------------- -------- -------- -------------
Common Stock, $0.01 par value 4,250,000 shares $17.37 $73,814,733 $9,353.00
(1) Reflects the estimated maximum number of shares of the Registrant's common
stock that may be issued in connection with the proposed merger of
Slippery Rock Financial Corporation with and into the Registrant.
(2) Computed, in accordance with Rule 457(f)(1), as the product of (x) the
average of the high and low prices of the common stock of Slippery Rock
Financial Corporation on June 9, 2004 multiplied by (y) the estimated
maximum number of shares of Slippery Rock common stock to be received by
the Registrant in exchange for the securities registered hereby.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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 June 16, 2004
(LOGO)
SLIPPERY ROCK FINANCIAL CORPORATION
August [ ], 2004
Dear Slippery Rock Financial Corporation Shareholders:
We invite you to attend a special meeting of our shareholders that will be
held on ______________, August __, 2004 at 11:00 a.m., local time, at
____________________________, Slippery Rock, Pennsylvania 16057. 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, 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 $___ per share based
on FNB's closing share price of $___ on August ___, 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.
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 __ 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,
William C. Sonntag
President and Chief Executive Officer
Please see "Risk Factors" beginning on page __ 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 August __, 2004, and it is
first being mailed or otherwise delivered to our shareholders on or about August
__, 2004.
(LOGO)
SLIPPERY ROCK FINANCIAL CORPORATION
100 South Main Street
Slippery Rock, Pennsylvania 16057
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST __, 2004
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Slippery
Rock Financial Corporation will be held at 11:00 a.m., local time, on
__________, August __, 2004 at ________________________________ Slippery Rock,
Pennsylvania 16057, 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, 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 __, 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,
William C. Sonntag,
President and Chief Executive Officer
Slippery Rock, Pennsylvania
August __, 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 August __, 2004 in order to receive them
before our special meeting.
See "Where You Can Find More Information" on page __.
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE MERGER AND OUR SPECIAL MEETING........................ 1
SUMMARY............................................................................... 5
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF FNB................................ 14
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF SLIPPERY ROCK...................... 17
SELECTED CONSOLIDATED UNAUDITED PRO FORMA FINANCIAL INFORMATION....................... 19
RISK FACTORS RELATING TO THE MERGER................................................... 24
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS............................. 29
OUR SPECIAL MEETING................................................................... 31
General.......................................................................... 31
When and Where Our Special Meeting Will Be Held.................................. 31
Matters to Be Considered......................................................... 31
Record Date; Shares Outstanding and Entitled to Vote............................. 32
Quorum........................................................................... 32
Shareholder Vote Required........................................................ 32
Director and Executive Officer Voting............................................ 33
Proxies.......................................................................... 33
Recommendation of Our Board of Directors......................................... 35
Attending Our Special Meeting.................................................... 35
Questions and Additional Information............................................. 35
INFORMATION ABOUT FNB AND SLIPPERY ROCK............................................... 37
THE MERGER............................................................................ 39
Background of the Merger......................................................... 39
Our Board of Directors' Reasons for the Merger; Recommendation................... 41
Opinion of Our Financial Advisor................................................. 44
Structure of the Merger and the Merger Consideration............................. 53
Election Procedure............................................................... 55
Allocation of FNB Common Stock and Cash.......................................... 58
Procedures for the Exchange of Shares of Our Common Stock........................ 62
Resale of FNB Common Stock....................................................... 63
Interests of Our Directors and Executive Officers in the Merger.................. 64
Board of Directors of FNB and FNB Bank Following the Merger...................... 71
Regulatory Approvals Required for the Merger..................................... 71
Public Trading Markets........................................................... 73
FNB Dividends.................................................................... 74
Appraisal Rights of Dissenting Shareholders...................................... 74
THE MERGER AGREEMENT.................................................................. 79
(i)
Terms of the Merger.............................................................. 79
Treatment of Slippery Rock Stock Options......................................... 79
Closing and Effective Time of the Merger......................................... 80
Representations, Warranties, Covenants and Agreements............................ 80
Declaration and Payment of Dividends............................................. 85
Agreement Not to Solicit Other Offers............................................ 85
Expenses and Fees................................................................ 87
Conditions to Completion of the Merger........................................... 87
Amendment, Waiver and Termination of the Merger Agreement........................ 88
Effect of Termination; Break-up Fee.............................................. 89
Employee Benefit Plans........................................................... 90
ACCOUNTING TREATMENT.................................................................. 91
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER................................ 92
DESCRIPTION OF FNB CAPITAL STOCK...................................................... 98
FNB Common Stock................................................................. 98
FNB Preferred Stock.............................................................. 99
COMPARISON OF SHAREHOLDER RIGHTS...................................................... 100
COMPARATIVE MARKET PRICES AND DIVIDENDS............................................... 118
BENEFICIAL OWNERSHIP OF SLIPPERY ROCK STOCK........................................... 120
ADJOURNMENT PROPOSAL.................................................................. 123
LEGAL MATTERS......................................................................... 124
EXPERTS............................................................................... 124
OTHER MATTERS......................................................................... 125
WHERE YOU CAN FIND MORE INFORMATION................................................... 126
APPENDICES:
Appendix A -- Agreement and Plan of Merger dated as of
May 5, 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 may 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.
-1-
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 __, 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.
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.
-2-
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.
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.
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.
-3-
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 Dale R. Wimer,
our corporate secretary, at (724) 794-2210.
-4-
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 ___. 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 the "merger agreement."
The Parties
Slippery Rock (Pages - )
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 - )
FNB is a $4.6 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.
-5-
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 (Pages - )
Our special meeting will be held at ____________________________________ ,
at 11:00 a.m., local time, on __________, August __, 2004.
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,
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 (Pages - )
Our board of directors has established the close of business on July __,
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 __, 2004.
Each share of our common stock is entitled to one vote. On the record
date, __________ shares of our common stock were entitled to vote at our special
meeting.
-6-
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 - )
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 __________ shares of our common stock, or
approximately ___% 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,
and FNB's directors and executive officers and their affiliates beneficially
owned __________ shares of our common stock, an aggregate of approximately ___%
of the shares entitled to vote at our annual meeting.
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 - )
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
________________________, a professional proxy solicitation firm, to assist us
in the solicitation of proxies for a fee of $__________ plus such firm's
reasonable out-of-pocket expenses.
-7-
The Merger
Certain Effects of the Merger (Pages - )
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.
See "The Merger -- Election Procedure" and "The Merger -- Allocation of FNB
Common Stock and 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 - )
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.
Stock Options (Pages - )
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).
-8-
Opinion of Griffin as Our Financial Advisor (Pages - )
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 merger 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 is payable upon completion of the merger.
Interests of Our Directors and Executive Officers in the Merger (Pages - )
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 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; and
- two members of our board of directors will be appointed to FNB
Bank's board of directors.
Conditions to the Merger (Pages - )
-9-
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 (Pages - )
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;
- 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
-10-
- 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 - )
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;
-11-
- 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 - )
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.
Material Federal Income Tax Consequences of the Merger (Pages - )
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 (Pages - )
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 a cash dividend of $.23 per share for the first quarter 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
-12-
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 - )
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 - )
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 (Pages - )
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 ___ 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 (Pages - )
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, ______________________,
toll-free at __________, or contact us in writing at our principal executive
offices at 100 South Main Street, Slippery Rock, Pennsylvania 16057, Attention:
Dale R. Wimer, Corporate Secretary, or by telephone at (724) 794-2210.
-13-
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" on page ___.
-14-
Selected Consolidated Historical Financial Data of FNB
(Dollars in thousands, except per share amounts)
Three Months
Ended March 31, Year Ended December 31,
------------------------- -------------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- ----------- ----------- -----------
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
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
-15-
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....... 5.26 8.52 7.66 8.51 8.58 8.42 8.75
average assets................
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.
-16-
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" on page
___.
-17-
Selected Consolidated Historical Financial Data of Slippery Rock
(Dollars in thousands, except per share amounts)
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
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.
-18-
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 ___. 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" on page ___.
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.
-19-
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
-20-
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
-21-
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(A) 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
------------------------
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.
-22-
Included in the pro forma adjustments is an allocation of the purchase price to
core deposit intangibles (CDI). 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.
-23-
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 August __, 2004, the last full
trading day prior to the date of the mailing of this proxy statement/prospectus,
the exchange ratio represented a value ranging from a high of $_____ to a low of
$_____ 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
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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 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
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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.
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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 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;
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- 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.
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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. 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 ___, 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;
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- 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.
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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.
When and Where Our Special Meeting Will Be Held
Our special meeting will be held on August __, 2004, at 11:00 a.m. local
time, at ________________________________, Slippery Rock, Pennsylvania 16057,
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.
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Record Date; Shares Outstanding and Entitled to Vote
Our board of directors has fixed the close of business on July __, 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, __________ shares of our common stock were issued and
outstanding and entitled to vote at our special meeting, held by approximately
_______ 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, __________ 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 __.
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
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addition to, your interests as a shareholder. See "The Merger -- Interests of
Our Directors and Executive Officers in the Merger" beginning on page __.
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 __________ shares of our common stock, or
approximately ___% of the issued and outstanding shares of our common stock
entitled to vote at the our special meeting. 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, and FNB's executive officers and directors and their affiliates
beneficially owned __________ shares of our common stock, or in the aggregate
approximately ___% of the shares of our common stock entitled to vote at our
special meeting. Such persons have advised us they will vote their shares for
approval of the merger proposal.
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.
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:
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- 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
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 a vote 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 the approval of the merger proposal.
In addition, brokers may not vote on the adjournment proposal without
specific instructions from the person who beneficially owns those shares.
Nevertheless, shares held
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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 pay the brokers, banks,
nominees and other holders of record certain expenses they incur for those
activities.
We have engaged _________________________, a professional proxy
solicitation firm, to assist us in the solicitation of proxies. The fee payable
to __________________________ in connection with the merger is $_________, plus
such firm's reasonable out-of-pocket expenses.
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. See "The Merger -- Our Board of
Directors' Reasons for the Merger; Recommendation" beginning on page __, 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 __,
2004, the record date for our special meeting.
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 __________________________,
toll free at ____________, or
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contact us in writing at our principal executive offices at 100 South Main
Street, Slippery Rock, Pennsylvania 16057, Attention: Dale R. Wimer, Corporate
Secretary, or by telephone at (724) 794-2210.
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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.
As of March 31, 2004, Slippery Rock Bank had total assets, total
liabilities and total stockholders' equity of approximately $334.1 million,
$302.6 million and $31.5 million, respectively.
For more information on us and Slippery Rock Bank, see "Where You Can Find
More Information" beginning on page __.
F.N.B. Corporation
One F.N.B. Boulevard
Hermitage, Pennsylvania 16148
(724) 981-6000
FNB is a $4.6 billion financial services holding company headquartered in
Hermitage, Pennsylvania. FNB provides a broad range of financial services to its
customers through the 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
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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
March 31, 2004, FNB Bank had total assets, total liabilities and total
stockholders' equity of approximately $4.5 billion, $4.1 billion and $347.2
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.
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", beginning on page
___, and "Where You Can Find More Information", beginning on page ___.
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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 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 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.
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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 Griffin to
solicit indications of interest from selected financial institutions regarding
our possible acquisition. On March 7, 2004, we formally engaged Griffin.
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).
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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. 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 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:
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- the value of the merger consideration compared to historical and
recent market prices of our common stock, which represented a
premium of approximately __% 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;
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- 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");
- 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
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- 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, consulting 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 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
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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" on page ____.
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;
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(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;
(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" on page ____.
Griffin assumed that the transaction
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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.
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
-47-
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,
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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.
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
__, 2004 of $19.88 (the last practicable trading day before the printing of this
proxy statement/prospectus) and the exchange ratio of 1.41, and assuming that
3,276,554 shares of FNB common stock are issued to holders of our common stock
in exchange for 2,323,797 shares of our 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 our common stock outstanding as of March 31, 2004, plus the value of
outstanding options to purchase 190,147 shares of our 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;
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- 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 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 FNB Peer
Group 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%
-------
(1) This data includes results of FNB's Florida operations prior to the
January 1, 2004 spin-off. Please refer to Selected Consolidated Historical
Data of FNB on page 16.
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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%
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.
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;
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- 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/ Price/ Price/ Premium/
LTM EPS Book Assets Core 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
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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. 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
__.
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 "
-- Board of Directors of FNB and FNB Bank Following the Merger" beginning on
page __.
Based on information as of the record date, upon completion of the merger,
holders of FNB common stock will own approximately ___% of, and holders of our
common stock will own approximately ___% of, the outstanding FNB common stock.
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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 ___.
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. 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
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price of FNB common stock for the 20 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, 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
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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" below.
For example, assuming you hold 100 shares of our common stock, if you
made:
- an all stock election, you will receive approximately 141 shares of
FNB common stock;
- an all cash election, you will receive approximately $2,800 in cash;
or
- 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 cash in
lieu of 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 cash in
lieu of 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 cash in
lieu of 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" below.
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,
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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"
below.
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
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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
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 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 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.
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
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- 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 product of
the following: (i) 1.41, (ii) the sum of the number of shares
of our common stock as to which you made a stock election and
the number of shares of our common stock for which FNB common
stock was elected in connection with combination elections and
(iii) the stock proration factor; and
- cash in an amount equal to the product of the following: (i)
$28.00, (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 and
(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:
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- a number of shares of FNB common stock equal to the product of the
following: (i) 1.41, (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 and (iii) the
stock proration factor; and
- cash in an amount equal to the product of the following: (i) $28.00,
(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 and (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
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cash election will receive the following for each share of our
common stock they hold:
- cash in an amount equal to the product of (i) $28.00, (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 and (iii) one minus the cash
proration factor; and
- the number of shares of FNB common stock equal to the product
of (i) 1.41, (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 and
(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" 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.
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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 __ and "-- Allocation of FNB Common Stock and Cash" beginning on page __.
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.
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
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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.
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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.
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 business development and retention
agreement between FNB and Mr. Sonntag;
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- 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; 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 our 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 prior to the effective
time of the merger. The 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 banking regulatory authorities or (iii) the 8th day after receipt
from Mr. Sonntag of a fully signed and dated copy
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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 two times Mr. Sonntag's salary and two
times Mr. Sonntag's average bonus for the last three years. The
aggregate amount of the severance payment will be approximately
[$___________]. 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 $_______.
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.
This agreement is subject to approval, consent or non-objection from the
bank regulatory agencies.
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 from banking regulatory authorities. The agreement
will terminate three years after its effective date. The 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
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- representing FNB in connection with community affairs and community
development outreach initiatives.
In consideration for these services, Mr. Sonntag will receive $_________
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.
This agreement is subject to approval, consent or non-objection from the
bank regulatory agencies.
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 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 banking regulatory authorities [if such approval is necessary] and will
terminate three years later. We refer to this three-year period as the
"restricted period." The 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
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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 $[________] 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.
This agreement is subject to approval, consent or non-objection from the
bank regulatory agencies.
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:
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- 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 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 and outplacement services in accordance with FNB's
policies;
- 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.
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The merger with FNB will be deemed a change of control with the meaning of
the key employee severance agreements.
These agreements are subject to approval, consent or non-objection from
the bank regulatory agencies. 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 the change in control severance benefits agreements are
substantially the same as the key employee severance agreements described above.
These agreements also may require the approvals of the OCC and the FDIC before
any severance benefits may be paid.
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"
beginning on page __.
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.
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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.
Board 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.
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 __________, 2004, all
applications and requests for waivers or exemptions were filed with the FDIC,
the OCC and the Federal Reserve Board.
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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 __________, 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 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
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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 or exempt the merger or the bank merger, and if such transactions
are approved or exempted, there can be no assurance as to the date such
approvals or exemptions 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"
and "The Merger Agreement -- Amendment, Waiver and Termination of the Merger
Agreement.
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 its
special meeting, as discussed in " -- Resale of FNB Common Stock " beginning on
page ___.
As reported on the NYSE, the closing price per share of FNB common stock
on July __, 2004 was $_____. The closing bid price per share of our common stock
on July __, 2004 was
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$_____. Based on the FNB closing price per share and the exchange ratio, the
implied per share value of our common stock was $_____ 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 a cash dividend of $.23 per share for the first quarter 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.
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
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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.
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
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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.
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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 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
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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.
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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.
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 __.
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
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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
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;
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- 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;
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- 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;
- 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;
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- 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;
- 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
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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;
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- 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 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:
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- 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
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- 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;
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- 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.
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
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- 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 ___ through ___;
- 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.
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:
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- 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
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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" on page ___.
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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:
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- 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, attorneys for FNB, and Manatt,
Phelps & Phillips, LLP, attorneys 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.
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.
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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
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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.
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
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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.
Cash Received in Lieu of 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. The 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.
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 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
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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.
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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 46,284,226 shares were outstanding as of
March 31, 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" and
"Comparison of Shareholder Rights -- Vote Required for Extraordinary Corporate
Transactions."
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.
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
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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 March 31,
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.
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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."
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
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Our articles of incorporation provide that a director, any Under Florida law, unless the articles of incorporation of
class of directors or our entire board of directors may be a corporation provide otherwise, directors may be removed
removed without cause by the affirmative vote of the holders by the corporation's shareholders with or without cause;
of at least 75% of our outstanding shares entitled to vote in provided that, if a director is elected by a voting group,
the election of directors. Pennsylvania law and our articles only the shareholders of that voting group may participate
of incorporation provide that vacancies on our board of in the vote to remove him or her. Article 6 of FNB's
directors, including vacancies resulting from an increase in articles of incorporation, however, provides that, subject
the number of directors, may be filled by a majority vote of to the rights of holders of any preferred stock, any
the remaining directors, though less than a quorum, except director or the entire board of directors may be removed
that a vacancy resulting from a removal of a director without cause by the affirmative vote of the holders of at
resulting from a shareholder vote may be filled by the least 75% of the then outstanding shares of FNB common
shareholders at the same meeting at which the removal occurs. stock. Florida law and FNB's bylaws provide that 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.
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Quorum of Shareholders
Slippery Rock FNB
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Pennsylvania law provides that the holders of a majority of FNB's bylaws and Florida law provide that the holders of a
votes entitled to be cast on a matter to be considered, majority of votes entitled to be cast on a matter to be
represented in person or by proxy, constitute a quorum of considered, represented in person or by proxy, constitute a
that voting group for action on the matter. Pennsylvania law quorum of that voting group for action on the matter. FNB's
further provides that, if a meeting called for the election bylaws further provide that whenever the holders of any
of directors is adjourned, the shareholders who attend the class or series of shares are entitled to vote separately
resumption of the adjourned meeting, although less than a on a specified item of business, the holders of a majority
quorum, shall nevertheless constitute a quorum for the of the votes of that class or series entitled to be cast,
purpose of electing directors. represented in person or by proxy, shall constitute a
quorum of such class or series.
Adjournment and Notice of Shareholder Meetings
Slippery Rock FNB
------------------------------------------------------------- -------------------------------------------------------------
Pennsylvania law provides that any regular or special meeting The FNB bylaws and Florida law provide that, if a quorum is
of shareholders may be adjourned for such periods as may be not present or represented at a shareholders meeting, the
directed by the shareholders present in person or by proxy at shareholders present and entitled to vote at the meeting may
the meeting who are entitled to vote at that meeting. adjourn such meeting from time to time.
Call of Special Meetings of Shareholders
Slippery Rock FNB
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Our bylaws provide that special meetings of our shareholders FNB's bylaws provide that special meetings of shareholders may
may be called by our board, our president or by the holders of be called only by the chairman of the board, the president or
at least 20% of the votes entitled to be cast on any issue to the secretary of FNB pursuant to a resolution or written
be considered at the special meeting of shareholders. direction of at least 75% of the members of the FNB board or by
the holders
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Slippery Rock FNB
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of not less than 10% of the outstanding shares of
FNB.
Shareholder Consent in Lieu of Meeting
Slippery Rock FNB
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Pennsylvania law provides that any action that may be Florida law permits any action that may be taken at a
taken at a meeting of the shareholders may be taken meeting of the shareholders of FNB to be taken without
without a meeting, if a consent or consents in writing a meeting, if, prior or subsequent to the action, one
setting forth the action so taken shall be signed by or more written consents signed by a majority the
all of the shareholders who would be entitled to vote shareholders who would be entitled to vote at a
at a meeting for such purpose and shall be filed with meeting for such purpose are delivered to FNB.
our secretary.
Dissenters' Rights
Slippery Rock FNB
------------------------------------------------------------- ---------------------------------------------------------------
Under Pennsylvania law, dissenters' rights are generally Under Florida law, dissenters' appraisal rights are
afforded to shareholders in the event of corporate actions available in connection with corporate actions involving
involving certain mergers, share exchanges, transfers of all certain mergers, share exchanges, consolidations, sales or
or substantially all of the assets of the corporation, as other dispositions of all or substantially all of the
well as certain other fundamental transactions in which the property of the corporation other than in the ordinary
corporation is not the acquiring corporation. See course of business, the approval of certain control-share
"Provisions with Possible Anti-Takeover Effects" for a acquisitions and amendments of the articles of
description of special dissenters' rights provisions under incorporation where such amendment would adversely affect
Pennsylvania law applicable to registered companies such as the shareholder by:
us in a transaction where a controlling interest in a
corporation is acquired. - altering or abolishing any preemptive rights
attached to such shareholder's shares;
Under Pennsylvania law, dissenters' rights generally are
denied to holders of shares that are listed on a national - altering or abolishing the voting rights
securities exchange, quoted on the Nasdaq National Market or pertaining to such shareholder's shares, except as
held beneficially or of record by more than such rights may be affected by the voting rights of
new shares then being
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Slippery Rock FNB
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2,000 shareholders when a plan of merger converts the shares authorized of any existing or new class or series of
into shares of the acquiring, surviving, new or other shares;
corporation whether or not the shares of the acquiring,
surviving, new or other corporation are listed on the
exchange or privately held. - effecting an exchange, cancellation or
reclassification of any of such shareholder's shares,
when such amendment 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;
- 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
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Slippery Rock FNB
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least $10 million,
not counting the value of certain insider shares.
Derivative Actions
Slippery Rock FNB
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Under Pennsylvania law, derivative actions may be Under Florida law, a derivative action may be brought
brought by a shareholder, even if the shareholder was only by a person who was a shareholder of FNB at the
not a shareholder at the time of the alleged time of the alleged wrongdoing unless the person
wrongdoing, if a court determines that there is a became a shareholder through transfer by operation of
strong prima facie case in favor of the claim and a law from one who was a shareholder at the time of the
serious injustice will result without such action. alleged wrongdoing.
Dividends and Distributions
Slippery Rock FNB
------------------------------------------------------------- ---------------------------------------------------------------
Subject to any restrictions in a corporation's articles of Subject to any restrictions in a corporation's articles of
incorporation, Pennsylvania law generally provides that a incorporation, Florida law generally provides that a
corporation may make distributions to its shareholders unless corporation may make distributions to its shareholders
after giving effect thereto (i) the corporation would not be unless after giving effect thereto (i) the corporation
able to pay its debts as they become due in the usual course would not be able to pay its debts as they become due in
of business, or (ii) the corporation's total assets would be the usual course of business, or (ii) the corporation's
less than the sum of its total liabilities plus the amount total assets would be less than the sum of its total
that would be needed upon the dissolution of the corporation liabilities plus the amount that would be needed upon the
to satisfy the preferential rights of shareholders having dissolution of the corporation to satisfy the preferential
superior preferential rights to those shareholders receiving rights of shareholders having superior preferential rights
the distribution. Our articles of incorporation do not to those shareholders receiving the distribution. FNB's
contain any restrictions on the payment of dividends or the articles of incorporation do not contain any restrictions
making of distributions to shareholders. on the payment of dividends or the making of distributions
to shareholders.
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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 our board The FNB bylaws provide that the board of directors of
of directors shall consist of not less than 5 nor more FNB shall consist of such number of directors as may
than 25 members divided into three classes, as equal be determined by the board of directors of FNB, which
in number as possible, with each director serving a number shall be not less than 5 nor more than 25. The
staggered three-year term. Under Pennsylvania law, a FNB bylaws further provide that the FNB board of
director must be at least 18 years of age, but need directors shall be divided into three classes, with
not be a resident of Pennsylvania. each director having a 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.
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Nomination of Directors
Slippery Rock FNB
------------------------------------------------------------- ---------------------------------------------------------------
Our bylaws do not provide a process for nominating FNB's bylaws provide that directors may be nominated
directors. Under Pennsylvania law, shareholders may for election to the FNB board by either a resolution
vote for any qualified person regardless of whether of the board or by a shareholder of FNB. The FNB
they have been nominated unless the corporation has bylaws provide that a shareholder may make nominations
contrary provisions in its articles of incorporation for director by providing FNB with written notice of
or bylaws. 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 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.
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Cumulative Voting
Slippery Rock FNB
------------------------------------------------------------- ---------------------------------------------------------------
In an election of directors under cumulative voting, Under Florida law, cumulative voting in the election
each share of stock normally having one vote for each of directors is not available unless provided for in
director to be elected is entitled to a number of the articles of incorporation of the corporation. FNB
votes equal to the number of directors to be elected has not provided for cumulative voting in its articles
times the number of shares held with the right to of 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 indemnify its Florida law permits a corporation to indemnify a director
directors and officers against expenses, judgments, fines and or officer who was or is a party to any threatened, pending
amounts paid in settlement incurred by them in connection or completed action, suit or other type of proceeding other
with any pending, threatened or completed action or than an action by or in the right of the corporation by
proceeding, and permits such indemnification against expenses reason of the fact that he is or was a director or officer
incurred in connection with any pending, threatened or or is now serving at the request of the corporation as a
completed derivative action, if the director or officer has director or officer of another entity against expenses,
acted in good faith and in a manner he reasonably believed to including attorneys' fees, judgments, fines, penalties and
be in or not opposed to the best interests of the corporation amounts paid in settlement actually and reasonably incurred
and, with respect to any criminal proceeding, had no by him in connection with such action, suit or proceeding.
reasonable cause to believe his conduct was unlawful. These indemnification rights apply if the director or
Pennsylvania law further provides that expenses incurred in officer acted in good faith and in a manner in which he
defending any action or proceeding may be paid by the reasonably believed to be in or not opposed to the best
corporation in advance of the final disposition upon interest of the corporation and, with respect to a criminal
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Slippery Rock FNB
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receipt of an undertaking by or on behalf of the action or proceeding, had no reasonable cause to believe
director or officer to repay the amount if it is his conduct was unlawful. In addition, under Florida law,
ultimately determined that the director or officer is FNB may indemnify and hold harmless an officer or director
not entitled to be indemnified by the corporation. who is a party in an action by or in the right of the
corporation against expenses, including attorneys' fees,
Under Pennsylvania law, the statutory provisions for and certain amounts paid in settlement, actually and
indemnification and advancement of expenses are non-exclusive reasonably incurred in connection with the defense or
with respect to any other rights, such as contractual rights settlement of such proceeding, including any appeal
or rights granted pursuant to a bylaw or by vote of thereof. Such indemnification shall be authorized if the
shareholders or disinterested directors, to which a person director or officer has acted in good faith and in a manner
seeking indemnification or advancement of expenses may be in which he reasonably believed to be in or not opposed to
entitled. Such rights may, for example, provide for the best interest of the corporation, except
indemnification against judgments, fines and amounts paid in indemnification is not authorized where there is an
settlement incurred by the indemnified person in connection adjudication of liability, unless a court determines, in
with derivative actions. Pennsylvania law permits such view of all the circumstances, that such person is fairly
derivative action indemnification in any case except where and reasonably entitled to indemnity for such expenses.
the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted Florida law further provides that indemnification against
willful misconduct or recklessness. Pennsylvania law and our the costs and expenses of defending any action is required
bylaws permit us to purchase and maintain insurance on behalf to be made to any officer or director who is successful in
of our directors and officers against any liability asserted defending an action of the type referred to in the
against the director or officer and incurred in such immediately preceding paragraph. Except with regard to the
capacity, whether or not we would have the power to indemnify costs and expenses of successfully defending an action as
a director or officer against such liability. Our articles may be ordered by a court, indemnification as described in
of incorporation further provide that our directors and the previous paragraph is only required to be made to a
officers are entitled to be indemnified to the fullest extent director or officer if a determination is made that
permitted by law. 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
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Slippery Rock FNB
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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 insurance on
behalf of any director or officer of FNB against any
liability asserted against the director or officer and
incurred in such
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Slippery Rock FNB
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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 a corporation Under Florida law, a director is not liable for monetary
may include a provision limiting the personal liability of damages for any statement, vote, decision or failure to act
directors for monetary damages for actions taken as a regarding corporate management or policy, unless the
director, other than as would constitute criminal conduct or director breached or failed to perform his or her duties as
with respect to liability for nonpayment of taxes, and except a director and the director's breach of, or failure to
to the extent that the director has breached or failed to perform, those duties constitutes a violation of criminal
perform his or her duties to the corporation and the breach law, self-dealing, willful misconduct or recklessness. The
or failure to perform constitutes self-dealing, willful bylaws of FNB contain a provision limiting the liability of
misconduct or recklessness. Our bylaws do not contain such a its directors to the fullest extent permitted by law.
provision.
Amendment of Articles of Incorporation and Bylaws
Slippery Rock FNB
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Pennsylvania law requires the affirmative vote of a majority In order to amend the articles of incorporation of a
of the votes cast by all shareholders entitled to vote Florida corporation, Florida law generally requires that,
thereon to amend a corporation's articles of incorporation, unless the articles of incorporation provide for a greater
provided that shareholder approval is not required for vote, the votes cast in favor of such an amendment must
certain non-material amendments. Our articles of exceed the votes cast against such an amendment at a
incorporation provide that, generally, our articles may be meeting at which a quorum is present; provided, however,
amended by our shareholders that a majority of the outstanding
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Slippery Rock FNB
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as provided by Pennsylvania law. However, the votes entitled to be cast on the amendment is required
affirmative vote of the holders of at least 75% of our with respect to amendments that would create
outstanding shares is required to amend provisions in dissenters' rights under Florida law. Further, under
our articles of incorporation relating to the approval Florida law shareholder approval is not required for
rights of shareholders with respect to certain certain non-material amendments.
corporate transactions. In the case of a registered
corporation such as us, Pennsylvania law provides that Under Florida law, a corporation's bylaws may be amended or
the shareholders may not propose an amendment to the repealed by the board of directors or shareholders;
articles. provided, however, that the board may not amend or repeal
the corporation's bylaws if the articles of incorporation
Under Pennsylvania law, the power to adopt, amend or repeal reserve such power to the shareholders, or the
bylaws may generally be vested, pursuant to the bylaws, in shareholders, in amending or repealing the bylaws,
the directors, with certain statutory exceptions and subject expressly provide that the board of directors may not amend
to the power of the shareholders to change such action. or repeal the bylaws or a particular bylaw provision. The
Pennsylvania law further provides that, unless the articles bylaws of FNB provide that FNB's bylaws may be altered or
of incorporation provide otherwise, the board of directors amended and new bylaws adopted by the affirmative vote of
does not have the authority to adopt or change a bylaw on any at least 75% of the members of FNB's board of directors or
subject that is committed expressly to the shareholders by by the affirmative vote of the holders of at least 75% of
statute, other than on the subject shareholder quorum rules the outstanding shares entitled to vote thereon.
if the corporation is a registered 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
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Under Pennsylvania law, generally, a merger, consolidation, Under Florida law, generally, a merger, consolidation,
share exchange, share exchange, dissolution or
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Slippery Rock FNB
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dissolution or sale of substantially all of a sale of substantially all of a corporation's assets
corporation's assets other than in the ordinary course of other than in the ordinary course of business must be
business must be approved by the affirmative vote of a approved by the affirmative vote of the holders of a
majority of the votes cast by all shareholders entitled to majority of the shares entitled to vote thereon unless
vote thereon. Except as otherwise provided by the bylaws of a the corporation's articles of incorporation require a
corporation, the shareholders of a corporation do not have to higher vote. Florida law further provides that, unless
approve a board of directors-approved plan of merger if, required by its articles of incorporation, the
among other situations, immediately prior to the transaction, shareholders approval of a plan of merger if is not
another corporation that is a party to the transaction required if:
directly or indirectly owns 80% or more of the outstanding
shares of each class of the constituent corporation, or if - the articles of incorporation of the surviving
corporation will not differ (except for certain minor
- the surviving or new corporation is a business amendments approved by the board of directors as
corporation incorporated in Pennsylvania with articles provided by Florida law) from its articles before the
of incorporation that are identical to the articles of merger; and
incorporation of the merged corporation (except for
changes permitted by a board of directors without - each shareholder of the surviving corporation whose
shareholder approval under Pennsylvania law), shares were outstanding immediately prior to the
effective date of the merger will hold the same number
- each share of the merged corporation outstanding of shares, with identical designations, preferences,
immediately prior to the effective date of the merger is limitations and relative rights, immediately after the
to continue to be outstanding or will be converted into merger.
an identical share of the surviving or new corporation
after the effective date of the merger, and The articles of incorporation of FNB require an
affirmative vote of the holders of at least 75% of the
- the shareholders of the merged corporation are to hold, outstanding shares of FNB common stock entitled to vote
in the aggregate, shares of the surviving or new to approve a merger, consolidation or sale, lease,
corporation to be outstanding immediately after exchange or other disposition, in a single transaction
effectiveness of the plan of merger at least a majority or series of related transactions, of all or
of the votes entitled to be cast generally for the substantially all or a substantial part of the
properties or assets of FNB, unless the board of
directors of FNB has approved and recommended the
transaction prior to the consummation thereof.
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Slippery Rock FNB
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election of directors.
Interested Shareholder Transactions
Slippery Rock FNB
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Pennsylvania law provides that, with respect to registered Florida law contains a number of provisions that require
companies such as us, if a shareholder of a corporation is a supermajority approval for certain affiliate transactions.
party to a sale of assets transaction, share exchange, merger Under Florida law, if any person who together with his or
or consolidation involving the corporation or a subsidiary, her affiliates and associates beneficially owns 10% or more
or if a shareholder is to be treated differently in a of any voting stock of the corporation (an "Interested
corporate dissolution from other shareholders of the same Person") is a party to any merger, consolidation,
class, or if a shareholder is to receive a disproportionate disposition of all or a substantial part of the assets of
amount of shares resulting from a division of the the corporation or a subsidiary of the corporation, or
corporation, or if the articles of incorporation of the exchange of securities requiring shareholder approval (a
corporation are to be amended so as to result in a "Business Combination"), such transaction shall be approved
shareholder receiving an increased voting or economic share by the affirmative vote of the holders of two-thirds of the
interest a relation to substantially all other shareholders, voting shares other than the shares beneficially owned by
then approval must be obtained from the shareholders entitled the Interested Person; provided, that such approval is not
to cast at least a majority of the votes which all required if (1) the Interested Shareholder transaction has
shareholders other than the interested shareholder are been approved by a majority of the disinterested directors;
entitled to cast with respect to the transaction, without (2) the corporation has not had more than 300 shareholders
counting the votes of the interested shareholder. Such of record at any time during the three years preceding the
additional shareholder approval is not required if the date of the transaction's announcement; (3) the Interested
consideration to be received by the other shareholders in Person has been the beneficial owner of at least 80% of the
such transaction for shares of any class is not less than the corporation's outstanding voting shares for at least five
highest amount paid by the interested shareholder in years preceding the date of the transaction's announcement;
acquiring shares of the same class, or if the proposed (4) the Interested Person is the beneficial owner of at
transaction is approved by a majority of the board of least 90% of the outstanding voting shares of the
directors other than certain directors ("disqualified corporation, exclusive of shares acquired directly from the
directors") affiliated or corporation in a transaction not approved by
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Slippery Rock FNB
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associated with, or nominated by, teh intrested shareholder. a majority of the disinterested directors; (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
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Under Pennsylvania law, a director shall perform his duties The articles of incorporation of FNB provide that the board
as a director in good faith, in a manner he reasonably of directors of FNB, in evaluating a proposal for an
believes to be in the best interests of the corporation and extraordinary corporate transaction, shall consider all
with such care, including reasonable inquiry, skill and relevant factors, including, without limitation, the
diligence, as a person of ordinary prudence would use under long-term prospects and interests of the corporation and
similar circumstances, and shall be entitled in performing its shareholders, the social, economic, legal or other
his duties to rely in good faith on information, opinions, effects of any action on the employees, suppliers and
reports or statements, including financial statements and customers of the corporation and its subsidiaries, the
other financial data, prepared or presented by: (1) one or communities and societies in which FNB and its subsidiaries
more officers or employees of the corporation whom the operate, and the economy of the state and the nation.
director reasonably believes to be reliable and competent in
the matters presented; (2) counsel, public accountants or The articles of incorporation of FNB further provide that,
other persons as to matters which the director reasonably if the board of directors of FNB determines that such a
believes to be within the professional or expert competence proposal should be rejected, it may take any lawful action
of such person or (3) a committee of the board upon which he to accomplish its purposes.
does not serve, as to matters within its designated
authority, which committee the director reasonably believes Under Florida law, a director is required to discharge his
to merit confidence. Pennsylvania law further provides that duties in good faith, with the care an ordinarily prudent
a director may, in considering the best interests of a person in a like position would exercise under similar
circumstances and in a manner reasonably
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Slippery Rock FNB
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corporation, consider (1) the effects of any action on believed to be in the best interests of the corporation.
shareholders, employees, suppliers, customers and creditors In discharging his duties, a director is entitled to
of the corporation, and upon communities in which offices or rely on: (1) information, opinions, reports, or
other facilities of the corporation are located, (2) the statements, including financial statements and other
short-term and long-term interests of the corporation, financial data, if presented or prepared by officers or
including the possibility that the best interests of the employees of the corporation whom the director
corporation may be served by the continued independence of reasonably believes to be reliable and competent in the
the corporation, (3) the resources, intent and conduct of any matters presented; (2) legal counsel, public accountants
person seeking to acquire control of the corporation and (4) or other persons as to matters the director reasonably
all other pertinent factors. believes are within 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
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Pennsylvania law contains various statutory "anti-takeover" FNB is subject to statutory "anti-takeover" provisions
provisions, which apply to us, including Subchapters 25E under Florida law. Section 607.0902 of the Florida
through 25J of the BCL. Subchapter 25E (relating to control Business Corporations Act restricts the voting rights of
transactions) provides that, if any person or group acquires certain shares of a corporation's stock when those shares
20% or more of the voting power of a corporation, the are acquired by a party who, by such acquisition, would
remaining shareholders may demand from such person or group control at least 20% of all voting rights of the
the fair value of their shares, including a proportionate corporation's issued and outstanding stock. The statute
amount of any control premium. Subchapter 25F (relating to provides that the acquired shares (the "control shares")
business combinations) delays for five years and imposes will, upon such acquisition, cease to have any voting
conditions upon business combinations between an interested rights. The acquiring party may, however, petition the
shareholder and the corporation. Subchapter 25G (relating to corporation to have voting rights re-assigned to the
control share acquisitions) prevents a person who has control shares by way of an "acquiring person's statement"
acquired 20% or more of the voting power of a covered submitted to the corporation in compliance with the
requirements of the statute. Upon receipt of such request,
the
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Slippery Rock FNB
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corporation from voting such shares unless the corporation must submit, for shareholder approval, such
"disinterested" shareholders approve such voting rights. request. Voting rights may be reassigned to the control
Subchapter 25H (relating to disgorgement) requires shares by a resolution of a majority of the corporation's
disgorgement of certain profits made by controlling shareholders for each class and series of stock, with the
shareholders following their attempts to gain control of control shares not voting. If such a resolution is
the corporation. Subchapter 25I provides for a minimum approved, and the voting rights re-assigned to the control
severance payments to certain employees terminated shares represent a majority of all voting rights of the
within two years of the approval. Subchapter 25J corporation's outstanding voting stock, then, unless the
prohibits the abrogation of certain labor contracts corporation's articles of incorporation or bylaws provide
prior to their stated date of expiration. Subchapters otherwise, all shareholders of the corporation shall be
25E through 25H of the BCL contain a wide variety of able to exercise appraisal rights in accordance with
transactional and status exemptions, exclusions and safe Florida law.
harbors.
Florida law further provides that a corporation may, by
The Pennsylvania laws pertaining to control share amendment to its articles of incorporation or bylaws,
acquisitions do not alter the voting rights of any stock of provide that, if the party acquiring the control shares
the corporation acquired in certain specified transactions. does not submit an acquiring person's statement in
accordance with the statute, the corporation may redeem the
In addition, Pennsylvania law permits an amendment to the control shares at any time during the period ending 60 days
corporation's articles of incorporation or other corporate after the acquisition of control shares. If the acquiring
action, if approved by shareholders, to provide mandatory party files an acquiring person's statement, the control
special treatment for specified groups of nonconsenting shares are not subject to redemption by the corporation
shareholders of the same class. Pennsylvania law also unless the shareholders, acting on the acquiring party's
provides that directors may, in discharging their duties, request for re-assignment, deny full voting rights to the
consider the interests of a number of different control shares. Neither the articles of incorporation of
constituencies, including shareholders, employees, suppliers, FNB nor its bylaws have been amended to include such a
customers, creditors and the communities in which the provision.
corporation is located. Directors are not required to
consider the interests of shareholders to a greater degree
than other constituencies' interests. Pennsylvania law The statute does not alter the voting rights of any stock
expressly provides that directors do not of the corporation acquired in certain specified
transactions.
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Slippery Rock FNB
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violate thneir fiduciary duties solely by relying on poison In addition, there are various provisions in the
pills or the anti-takeover provisions of Pennsylvania law. articles of incorporation and bylaws of FNB that may
serve as anti-takeover protections including:
- 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.
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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 closing 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.................
Third quarter
(to August __).................
--------------------
(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.
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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.
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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 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
Name and Position of Beneficial Owner of Ownership (1)(2) Percent 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
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Charles C. Stoops, Jr. 91,416(3) 3.3%
Director
Norman P. Sundell 14,504(3)(4) *
Director
Officers and Directors and 381,737(5) 13.6%
Directors as a Group(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 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 shares;
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.
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(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 pursuant to our Employee Incentive Stock
Option Plan.
(6) The group consists of 13 persons, as of the date hereof.
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ADJOURNMENT PROPOSAL
Granting of Discretionary Authority to Adjourn Our Special Meeting
General. If, at our special meeting on __________, August __, 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.
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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 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."
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 for the three-month periods ended March 31, 2004, incorporated by
reference in this proxy statement/prospectus, Ernst & Young LLP 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 FNB'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
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registration statement prepared or certified by the auditors 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.
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
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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.
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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 and
May 28, 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 and May
6, 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
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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.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 5, 2004
BETWEEN
F.N.B. CORPORATION
AND
SLIPPERY ROCK FINANCIAL CORPORATION
TABLE OF CONTENTS
PAGE
----
Article I CERTAIN DEFINITIONS........................................ A-1
1.01 Certain Definitions........................................... A-1
Article II THE MERGER................................................. A-9
2.01 The Merger.................................................... A-9
2.02 Effective Date and Effective Time; Closing.................... A-10
Article III MERGER CONSIDERATION; EXCHANGE PROCEDURES.................. A-11
3.01 Conversion of Shares.......................................... A-11
3.02 Fractional Shares............................................. A-11
3.03 Election and Proration Procedures............................. A-12
3.04 Exchange Procedures........................................... A-15
3.05 Adjustments for Dilution and Other Matters.................... A-17
3.06 Dissenting Shares............................................. A-17
3.07 Withholding Rights............................................ A-17
3.08 Slippery Rock Options......................................... A-17
3.09 Bank Merger................................................... A-18
Article IV ACTIONS PENDING ACQUISITION................................ A-18
4.01 Forbearances of Slippery Rock................................. A-18
4.02 Forbearances of Parent........................................ A-22
Article V REPRESENTATIONS AND WARRANTIES............................. A-22
5.01 Disclosure Schedules.......................................... A-22
5.02 Standard...................................................... A-22
5.03 Representations and Warranties of Slippery Rock............... A-23
5.04 Representations and Warranties of Parent...................... A-37
Article VI COVENANTS.................................................. A-42
6.01 Reasonable Best Efforts....................................... A-42
6.02 Stockholder Meeting........................................... A-43
6.03 Registration Statement........................................ A-43
6.04 Regulatory Filings............................................ A-44
6.05 Press Releases................................................ A-44
6.06 Access; Information........................................... A-45
6.07 Affiliates.................................................... A-45
6.08 Certain Actions............................................... A-46
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TABLE OF CONTENTS
(CONTINUED)
6.09 Certain Policies.............................................. A-48
6.10 NYSE Listing.................................................. A-48
6.11 Indemnification............................................... A-49
6.12 Benefit Plans................................................. A-50
6.13 Parent Bank Board............................................. A-51
6.14 Notification of Certain Matters............................... A-52
6.15 Regulatory Conditions......................................... A-52
6.16 Exemption From Liability Under Section 16(b).................. A-52
6.17 Regulatory Approval of Certain Agreements and Payments........ A-52
Article VII CONDITIONS TO CONSUMMATION OF THE MERGER................... A-53
7.01 Conditions to Each Party's Obligation to Effect the Merger.... A-53
7.02 Conditions to Obligation of Slippery Rock..................... A-54
7.03 Conditions to Obligation of Parent............................ A-54
Article VIII TERMINATION................................................ A-55
8.01 Termination................................................... A-55
8.02 Effect of Termination......................................... A-57
Article IX MISCELLANEOUS.............................................. A-57
9.01 Survival...................................................... A-57
9.02 Waiver; Amendment............................................. A-57
9.03 Counterparts.................................................. A-57
9.04 Governing Law................................................. A-58
9.05 Expenses...................................................... A-58
9.06 Notices....................................................... A-58
9.07 Entire Understanding; No Third Party Beneficiaries............ A-59
9.08 Severability.................................................. A-59
9.09 Enforcement................................................... A-59
9.10 Interpretation................................................ A-59
9.11 Assignment.................................................... A-60
9.12 Alternative Structure......................................... A-60
A-ii
TABLE OF CONTENTS
(CONTINUED)
ANNEX A FORM OF BANK MERGER AGREEMENT
ANNEX B FORM OF AFFILIATE LETTER
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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").
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.
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"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.
"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.
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"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.
"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
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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).
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"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.
"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.
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"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.
"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.
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"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.
A-7
"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 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.
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"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).
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.
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(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 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.
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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. Notwithstanding any other provisions of this
Agreement, no fractional shares of Parent Common Stock shall be issued in the
Merger. In lieu thereof, each holder of Slippery Rock Common Stock 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.
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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
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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 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:
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(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 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
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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
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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 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.
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(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
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
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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.
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;
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(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.
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(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
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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.
(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.
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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 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
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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); (E) there are no contracts, commitments, understandings or
arrangements relating to Slippery Rock's rights to vote or to dispose of
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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
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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).
(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
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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 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
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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.Section 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.
(iii) Slippery Rock and each of its Subsidiaries have timely
filed all reports, registrations and statements, together with any
amendments required to be made
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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
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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.
(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
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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 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
A-30
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 Subsidiaries aware of
any activity involving its employees seeking to certify a collective bargaining
unit or engaging in other organizational activity.
A-31
(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
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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
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.
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(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.
(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
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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
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
A-35
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.
A-36
(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.
(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
A-37
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.
(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
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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 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
A-39
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. Section 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
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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 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
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(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.
(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
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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 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
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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
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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.
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
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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.
(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,
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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.
(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);
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(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.
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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 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
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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 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
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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 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
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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;
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(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
(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.
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(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.
(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
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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 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
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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
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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 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.
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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.
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
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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 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
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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.
[SIGNATURE PAGE TO FOLLOW]
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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
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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").
WITNESSETH:
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 (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
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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.
6. EFFECTS OF THE MERGER. Upon consummation of the Merger, and in addition
to the effects set forth at 12 U.S.C. Section 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,
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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
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
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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. Section 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:
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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
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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 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
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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]
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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
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(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.
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
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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
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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
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,
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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
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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).
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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.
(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
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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 payments to dissenters and
other liabilities under this subchapter except as otherwise provided in the plan
of division.
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"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
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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.
(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).
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(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
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shares shall not acquire by such transfer any rights in the 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.
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(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
(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
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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).
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PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Florida Business Corporations Act, as amended (the "Florida
Act"), provides that, in general, a business corporation may indemnify any
person who is or was a party to any proceeding, other than an action by, or in
the right of, the corporation, by reason of the fact that he or she is or was a
director or officer of the corporation, against liability incurred in connection
with such proceeding, including any appeal thereof, provided certain standards
are met, including that such officer or director acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation, and provided further that, with respect to any
criminal action or proceeding, the officer or director had no reasonable cause
to believe his or her conduct was unlawful. In the case of proceedings by or in
the right of the corporation, the Florida Act provides that, in general, a
corporation may indemnify any person who was or is a party to any such
proceeding by reason of the fact that he or she is or was a director or officer
of the corporation against expenses and amounts paid in settlement actually and
reasonably incurred in connection with the defense or settlement of such
proceeding, including any appeal thereof, provided that such person acted in
good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation, except that no
indemnification shall be made with respect to any claim as to which such person
is adjudged liable, unless a court of competent jurisdiction determines upon
application that such person is fairly and reasonably entitled to indemnity. To
the extent that any officer or director is successful on the merits or otherwise
in the defense of any of such proceedings, the Florida Act provides that the
corporation is required to indemnify such officer or director against expenses
actually and reasonably incurred in connection therewith. However, the Florida
Act further provides that, in general, indemnification or advancement of
expenses shall not be made to or on behalf of any officer or director if a
judgment or other final adjudication establishes that his or her actions, or
omissions to act, were material to the cause of action so adjudicated and
constitute: (i) a violation of the criminal law, unless the director or officer
had reasonable cause to believe his or her conduct was lawful or had no
reasonable cause to believe it was unlawful; (ii) a transaction from which the
director or officer derived an improper personal benefit; (iii) in the case of a
director, a circumstance under which the director has voted for or assented to a
distribution made in violation of the Florida Act or the corporation's articles
of incorporation or (iv) willful misconduct or a conscious disregard for the
best interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
The Registrant's articles of incorporation provide that the
Registrant shall indemnify its directors and officers to the fullest extent
permitted by law in connection with any actual or threatened action, suit or
proceeding, civil, criminal, administrative, investigative or other (whether
brought by or in the right of the Registrant or otherwise)
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arising out of the service to the Registrant or to another organization at the
Registrant's request, or because of their positions with the Registrant. FNB's
articles of incorporation further provide that the Registrant may purchase and
maintain insurance to protect itself and any such director or officer against
any liability, cost or expense asserted against or incurred by him or her with
respect to such service, whether or not the Registrant would have the power to
indemnify him or her against such liability by law or under the provisions of
this paragraph.
The Registrant's By-laws provide that to the fullest extent
permitted by law, no director of the Registrant shall be personally liable for
monetary damages for any action taken or any failure to take any action.
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 Agreement and Plan of Merger dated as of May 5, 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
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Wimer.
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 June 11, 2004 to
the Board of Directors of F.N.B. Corporation
23.8 Letter of S.R. Snodgrass, A.C. dated June 11, 2004 to the
Board of Directors of Slippery Rock Financial Corporation
24.1 Power of Attorney
99.1 Proxy for Special Meeting of Shareholders of Slippery
Rock Financial Corporation
99.2 Form of Election Form and Transmittal Letter
99.3 Opinion of Griffin Financial Group, LLC (included as
Appendix B to this proxy statement/prospectus)
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
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decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change in such
information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
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(d) (1) The undersigned registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the
applicable form.
(2) The registrant undertakes that every prospectus (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii)
that purports to meet the requirements of Section 10(a)(3) of the
Act and is used in connection with an offering of securities subject
to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
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(g) The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hermitage, Commonwealth
of Pennsylvania, on June 9, 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 June 9, 2004
-------------------------------
Peter Mortensen
/s/ Stephen J. Gurgovits President, Chief Executive Officer and Director June 9, 2004
------------------------------- (principal executive officer)
Stephen J. Gurgovits
/s/ Brian F. Lilly Vice President and Chief Financial Officer June 9, 2004
------------------------------- (principal financial officer)
Brian F. Lilly
/s/ Tito L. Lima Corporate Controller (principal accounting June 9, 2004
------------------------------- officer)
Tito L. Lima
/s/ William B. Campbell Director June 9, 2004
-------------------------------
William B. Campbell
/s/ Henry M. Ekker Director June 9, 2004
-------------------------------
Henry M. Ekker
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/s/ Robert B. Goldstein Director June 9, 2004
-------------------------------
Robert B. Goldstein
/s/ Harry F. Radcliffe Director June 9, 2004
-------------------------------
Harry F. Radcliffe
/s/ John W. Rose Director June 9, 2004
-------------------------------
John W. Rose
/s/ William J. Strimbu Director June 9, 2004
-------------------------------
William J. Strimbu
/s/ Earl K. Wahl, Jr. Director June 9, 2004
-------------------------------
Earl K. Wahl, Jr.
/s/ Archie O. Wallace Director June 9, 2004
-------------------------------
Archie O. Wallace
/s/ R. Benjamin Wiley Director June 9, 2004
------------------------------
R. Benjamin Wiley
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
2.1 Agreement and Plan of Merger dated as of May 5, 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 Wimer.
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
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23.7 Acknowledgement of Ernst & Young LLP dated June 11, 2004 to the
Board of Directors of F.N.B. Corporation
23.8 Letter of S.R. Snodgrass, A.C. dated June 11, 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)
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