Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by the Chief Executive Officer of
SWVA during the year ended June 30, 2000. No other executive officers of SWVA
had a salary and bonus during the fiscal year ended June 30, 2000, that exceeded
$100,000 for services rendered in all capacities to SWVA.
43
Long-Term
Annual Compensation
Compensation Awards
Securities
Restricted Underlying
Name and Fiscal Other Annual Stock Options/ All Other
Principal Position Year Salary Bonus Compensation(1) Awards($) SARs(#) Compensation
------------------ ------ ------ ----- --------------- --------- ---------- ------------
D.W. Shilling 2000 $105,000 $ -- $ 3,700 $ -- -- $ 5,824(2)
Chief Executive 1999 $ 95,000 $ -- $ 1,300 $ -- -- $ 10,000(3)
Officer 1998 $ 64,000 $ -- $ -- $ -- -- $ --
(1) Consists of board of director fees from SWVA and Southwest Virginia Service
Corp. Does not include the value of certain other benefits, such as
automobile allowances, which do not exceed 10% of the total salary and
bonus of the individual.
(2) Includes 613 shares of common stock allocated, in the 2000 fiscal year,
under the ESOP with a market value of as of June 30, 2000, of $9.50 per
share, for a total value of $5,824.
(3) Consists of funds provided with the specific requirement that they be used
by the officer to obtain an equity interest in SWVA by purchasing shares of
SWVA common stock.
(4) Mr. Shilling joined SWVA in April 1998.
Employment Agreement. The Savings Bank maintains an employment agreement
with D. W. Shilling, President and Chief Executive Officer of the Savings Bank.
The employment agreement is for a term of three years at his then current salary
level. The employment agreement is terminable by the Savings Bank for "just
cause" as defined in the employment agreement. If the Savings Bank terminates
Mr. Shilling without just cause, he will be entitled to a continuation of his
salary from the date of termination through the remaining term of the employment
agreement, but in no event for a period of less than 12 months. The employment
agreement contains a provision stating that in the event of his involuntary
termination of employment in connection with, or within two years after, any
change in control of the Savings Bank, Mr. Shilling will be paid in a lump sum
an amount equal to 2.999 times his average annual compensation for the prior
five years. Following a change in control, a termination of employment as of
June 30, 2000, would have resulted in a lump sum payment of approximately
$315,000 to Mr. Shilling. The employment agreement may be renewed annually by
the Board of Directors upon a determination of satisfactory performance.
Certain Relationships and Related Transactions. Except as noted below, no
directors, executive officers, or immediate family members of such individuals
were engaged in transactions with the Savings Bank or any subsidiary involving
more than $60,000 during the fiscal year ended June 30, 2000. Furthermore, the
Savings Bank had no "interlocking" relationships existing on or after June 30,
2000, in which (1) any executive officer is a member of the Board of
Directors/Trustees of another entity, one of whose executive officers is a
member of the Savings Bank's Board of Directors, or where (2) any executive
officer is a member of the compensation committee of another entity, one of
whose executive officers is a member of the Savings Bank's Board of
Directors.
Set forth below is certain information as of June 30, 2000, relating to
mortgage and other loans given to executive officers and directors and their
immediate family who had aggregate outstanding loan balances with the Savings
Bank of $60,000 or greater.
The Savings Bank, like many financial institutions, has followed a policy
of granting various types of loans to officers, directors, and employees. Such
loans have been made in the ordinary course of business and on substantially the
same terms, including interest rates and collateral as those prevailing at the
time for comparable transactions with the Savings Bank's other customers, and do
not involve more than the normal risk of collectability, nor present other
unfavorable features. However, as part of the Savings Bank's compensation
program, the Savings Bank makes adjustable-rate first mortgage loans to full-
time employees, officers, directors and related parties at 1% above the Savings
Bank's cost of funds while adjustable-rate second mortgages and cash out
refinances are made at 1.5% above the Savings Bank's cost of funds. Such rates
are only effective while such persons are employees, officers, and/or directors
(including loans to related parties of such individuals) of the Savings Bank and
continue to occupy the real estate securing the loans as their primary
residence.
Highest Unpaid
Balance
Outstanding
During Last Unpaid
Original Interest Prevailing Rate Two Fiscal Balance As
Name of Officer Date Loan Rate at Time Loan Years Ended Of June 30,
or Director Type of Loan Originated Amount Charged was Made June 30, 2000 2000
-------------------------------------------------------------------------------------------------------------------------
Wayne F. Munden Home Mortgage 05/30/97 $ 200,000 5.75%(1) 5.50% $193,557 $189,142
(1) The interest rate of 5.75% on the home mortgage loan is an adjustable rate
mortgage plan. The loan was modified at the time the loan was made to 1% above
the cost of Savings Bank's funds rounded to the next one-quarter percent. The
rate on this loan adjusts annually. The loan was originated with a 5.5%
interest rate.
Ratification of Appointment of Auditors
Cherry Bekaert & Holland L.L.P. served as SWVA's auditors for the fiscal
year ended June 30, 2000. The Board of Directors has approved the selection of
Cherry Bekaert & Holland L.L.P. as its auditors for the fiscal year ended June
30, 2001, subject to ratification by SWVA's shareholders. A representative of
Cherry Bekaert & Holland L.L.P. is expected to be present at the meeting to
respond to shareholders' questions and will have the opportunity to make a
statement if he or she so desires.
The Board of Directors recommends that shareholders vote "FOR" the
ratification of the appointment of Cherry Bekaert & Holland L.L.P. as SWVA's
auditors for the fiscal year ended June 30, 2001.
44
The Companies
SWVA
SWVA is a Virginia-chartered corporation organized in June of 1994, at the
direction of Southwest Virginia Savings Bank, FSB to acquire all of the capital
stock that the Bank issued in its conversion from the mutual to stock form of
ownership. On October 7, 1994, the Savings Bank completed the conversion and
became a wholly owned subsidiary of SWVA. In connection with the conversion,
SWVA issued 570,590 shares of its common stock, par value $.10 per share. SWVA
is a unitary savings and loan holding company which, under existing laws,
generally is not restricted in the types of business activities in which it may
engage provided that the Savings Bank retains a specified amount of its assets
in housing-related investments.
The Savings Bank is primarily engaged in attracting deposits from the
general public and using those funds to originate real estate loans on one- to
four-family residences and, to a lesser extent, construction, multi-family and
non-residential real estate loans, commercial loans and consumer loans. In
addition, the Savings Bank invests in investments securities and mortgage-backed
securities. The Savings Bank offers its customers both ARMs and fixed-rate
mortgage loans. ARMs are originated for retention in the Savings Bank's
portfolio. Generally, the Savings Bank sells fixed rate mortgage loans upon
origination in the secondary market. Depending on the level of prevailing
interest rates, the Savings Bank may retain fixed rate mortgage loans in its
portfolio. Management of the Savings Bank determines whether to retain fixed
rate mortgage loans in its portfolio over the average life of the loan. All
commercial and consumer loans are retained in the Savings Bank's portfolio and
management anticipates that the future focus on these types of loans will
generate new business that will enable the Savings Bank to reduce its dependence
on mortgage activity.
The principal sources of funds for the Savings Bank's lending activities
are deposits and the amortization, repayment and maturity of loans, investments
and mortgaged-backed securities. The Savings Bank's primary sources of income
are interest and fees on loans, interest on investments and mortgage-backed
securities and customer service fees. The Savings Bank's primary expense is
interest paid on deposits.
The Savings Bank's primary market area consists of Roanoke County, the
City of Roanoke, the City of Salem, and the County of Botetourt. The Savings
Bank regards this area as its "basic" lending area, but loans are also made in
the adjoining counties of Bedford and Franklin.
The Savings Bank's main office is located at 302 Second Street, S.W., in
the City of Roanoke, Virginia. The Savings Bank has one branch office located
in the City of Roanoke. The Savings Bank has another branch and a loan
production office located in Roanoke County, as well as branch offices in Vinton
and Salem, Virginia.
The Roanoke Valley is equidistant from New York and Atlanta, 230 miles
south of Washington, D.C. and 250 miles west of the Port of Hampton Roads,
Virginia. The population in the Roanoke Valley area has remained relatively
stable over the past thirty years and was 269,100 according to the 1990 U.S.
Census. The Roanoke Valley area enjoys a diversified economy comprised of
services, retail, manufacturing, government offices, finance, insurance, real
estate, wholesale trade, transportation, public utilities, construction and
agriculture.
The outlying region of the Savings Bank's market area is rural in nature
and may represent limited opportunities for lending and investment growth which
could adversely affect the Savings Bank's ability to achieve asset growth. The
Savings Bank is the only savings bank headquartered in the Roanoke Valley area.
This area is also served by branch offices of regional commercial banks and
various community banks and credit unions.
45
FNB
Subsequent to December 31, 1995, the Board of Directors of First National
Bank approved a reorganization whereby a bank holding company (FNB Corporation)
was incorporated under the laws of the Commonwealth of Virginia. On June 11,
1996, the shareholders of the Bank approved a plan for the holding company to
exchange one share of its stock for each share of stock of the Bank. A
registration statement was filed with the SEC to register the stock of the
holding company, and such registration statement was subsequently declared
effective by the SEC. On July 11, 1996, the OCC approved the plan, and the
exchange was subsequently consummated. As a result, the Bank became a wholly
owned subsidiary of the holding company during the third quarter of 1996, and
the holding company began filing periodic reports under the Securities Exchange
Act of 1934. Prior to the consummation of the exchange, the Bank filed periodic
reports with the OCC.
First National Bank. First National Bank, which was organized in 1905,
does a general banking business, serving the commercial, agricultural, and
personal banking needs of its trade territory, commonly referred to as the New
River Valley, which consists of Montgomery County, Virginia and portions of
surrounding counties. The Bank engages in and offers a full range of banking
services, including trust services; demand, savings, and time deposits used to
fund the loan demand in its trade area; commercial, farm, consumer installment,
mortgage, credit card, FHA and SBA guaranteed loans.
Under national banking law, nontraditional activities of a bank must be
operated through a corporate subsidiary of the bank. During 1992, FNB formed a
wholly-owned subsidiary in order to expand its business operations. FNB
Financial Services, Inc. is a member of the Virginia Title Center, L.L.C. and
acts as an agent in the issuance of title insurance policies. Additionally,
this subsidiary has been licensed by the Commonwealth of Virginia to offer
annuity products through First National's Trust Department.
The local economy is tied primarily to the area's three largest employers
- Virginia Polytechnic Institute and State University, with a student population
in excess of 25,000; Radford University, with a student population in excess of
8,000; and the Radford Arsenal, a large munitions plant operated under contract
to the U.S. Army by the Hercules Corporation. Other industries include a wide
variety of manufacturing concerns and agriculture-related enterprises. The
Bank's main office is located in Christiansburg, the County Seat, with offices
strategically located to take advantage of its trade area's population mix. Of
the Bank's twelve full service offices, nine are located in Montgomery County,
one in the City of Radford, one in the Town of Dublin and one in Wythe County.
One paying and receiving office is located in Montgomery County.
Competition. FNB is the largest bank in the area, with approximately 60%
of those deposits held by independent banks. It is estimated that FNB holds 36%
of total deposits in its primary trade area including the offices of those
state-wide and multi-state bank holding companies located in its trade area.
Competition in the trade area consists of state-wide and multi-state bank
holding companies, independent banks, and credit unions.
Loan Commitments. The Bank's portfolio is not concentrated within any
single industry or group of related industries, nor is there any material risk
other than that which is expected in the normal course of business of a bank in
this location. Bank policy establishes lending limits for each officer. Loan
requests for amounts exceeding loan officer lending authority are referred to
the officer loan committee which can approve loans up to 80% of the Bank's legal
lending limit. Loan requests exceeding this limit are referred to the Executive
Committee of the Board of Directors.
46
Description of FNB Capital Stock
The information below outlines some provisions of FNB's articles of
incorporation and bylaws and the Virginia Stock Corporation Act. The information
is qualified in all respects by reference to the provisions of FNB's articles of
incorporation and bylaws, which are incorporated by reference as exhibits to the
registration statement, and the Virginia Business Corporation Act. See
"Available Information."
47
Common Stock
FNB's articles of incorporation authorized the issuance of up to ten
million shares of common stock, par value $5.00 per share.
Dividends. The holders of FNB common stock are entitled to share ratably
in dividends when and if declared by the FNB Board from funds legally available
therefor.
Voting Rights. Each holder of FNB common stock has one vote for each
share held on matters presented for consideration by the shareholders.
Classification of Board of Directors. The FNB Board is divided into three
classes, each serving three-year terms, so that approximately one-third of the
directors of FNB are elected at each annual meeting of the shareholders of FNB.
Classification of the FNB Board has the effect of decreasing the number of
directors that could be elected in a single year by any person who seeks to
elect its designees to a majority of the seats on the FNB Board and thereby
could impede a change in control of FNB.
Preemptive Rights. The holders of FNB common stock have no preemptive
rights to acquire any additional shares of FNB Common Stock.
Issuance of Stock. FNB's articles of incorporation authorize the FNB
Board to issue authorized shares of FNB common stock without shareholder
approval. However, FNB's common stock is listed on the NASDAQ National Market
System, which requires shareholder approval of the issuance of additional shares
of FNB common stock under some circumstances.
Liquidation Rights. In the event of liquidation, dissolution or winding-
up of FNB, whether voluntary or involuntary, the holders of FNB common stock
will be entitled to share ratably in any of its assets or funds that are
available for distribution to its shareholders after the satisfaction of its
liabilities (or after adequate provision is made therefor).
Control Acquisitions. The Federal Change in Bank Control Act of 1978, as
amended, prohibits a person or group of persons from acquiring "control" of a
bank holding company unless the Federal Reserve Board has been given 60 days'
prior written notice of such proposed acquisition and within that time period
the Federal Reserve Board has not issued a notice disapproving the proposed
acquisition or extending for up to another 30 days the period during which such
a disapproval may be issued. An acquisition may be made prior to the expiration
of the disapproval period if the Federal Reserve Board issues written notice of
its intent not to disapprove the action. Under a rebuttable presumption
established by the Federal Reserve Board, the acquisition of more than 10% of a
class of voting stock of a bank holding company with a class of securities
registered under Section 12 of the Exchange Act would, under the circumstances
set forth in the presumption, constitute the acquisition of control.
In addition, any "company" would be required to obtain the approval of the
Federal Reserve Board under the BHC Act before acquiring 25% (5% in the case of
an acquirer that is a bank holding company) or more of the outstanding shares of
FNB common stock, or such lesser number of shares as constitute control over
FNB.
48
State Anti-Takeover Statutes
The Virginia Stock Corporation Act restricts transactions between a
corporation and its affiliates and potential acquirors. The summary below is
necessarily general and is not intended to be a complete description of all the
features and consequences of those provisions, and is qualified in its entirety
by reference to the statutory provisions contained in the Virginia Stock
Corporation Act. Because both SWVA and FNB are Virginia corporations, the
provisions of the Virginia Stock Corporation Act described below apply to SWVA
and FNB and will continue to apply to FNB after the merger.
Affiliated Transactions. The Virginia Stock Corporation Act contains
provisions governing "Affiliated Transactions," found at Sections 13.1-725 -
727.1 of the Virginia Stock Corporation Act. Affiliated Transactions include
certain affiliations and share exchanges, certain material dispositions of
corporate assets not in the ordinary course of business, any dissolution of a
corporation proposed by or on behalf of an Interested Shareholder (as defined
below), and reclassifications, including reverse stock splits, recapitalizations
or affiliations of a corporation with its subsidiaries, or distributions or
other transactions which have the effect of increasing the percentage of voting
shares beneficially owned by an Interested Shareholder by more than 5%. For
purposes of the Virginia Stock Corporation Act, an "Interested Shareholder" is
defined as any beneficial owner of more than 10% of any class of the voting
securities of a Virginia corporation.
Subject to certain exceptions discussed below, the provisions governing
Affiliated Transactions require that, for three years following the date upon
which any shareholder becomes an Interested Shareholder, any Affiliated
Transaction must be approved by the affirmative vote of holders of two-thirds of
the outstanding shares of the corporation entitled to vote, other than the
shares beneficially owned by the Interested Shareholder, and by a majority (but
not less than two) of the Disinterested Directors (as defined below). A
"Disinterested Director" is defined in the Virginia Stock Corporation Act as a
member of a corporation's board of directors who (1) was a member before the
later of January 1, 1988 or the date on which a shareholder became an
Interested Shareholder and (2) was recommended for election by, or was elected
to fill a vacancy and received the affirmative vote of, a majority of the
Disinterested Directors then on the corporation's board of directors. At the
expiration of the three year period after a shareholder becomes an Interested
Shareholder, these provisions require approval of the Affiliated Transaction by
the affirmative vote of the holders of two-thirds of the outstanding shares of
the corporation entitled to vote, other than those beneficially owned by the
Interested Shareholder.
The principal exceptions to the special voting requirement apply to
Affiliated Transactions occurring after the three year period has expired and
require either that the transaction be approved by a majority of the
corporation's Disinterested Directors or that the transaction satisfy certain
fair price requirements of the statute. In general, the fair price requirements
provide that the shareholders must receive the higher of: the highest per share
price for their shares as was paid by the Interested Shareholder for his or its
shares, or the fair market value of the shares. The fair price requirements
also require that, during the three years preceding the announcement of the
proposed Affiliated Transaction, all required dividends have been paid and no
special financial accommodations have been accorded the Interested Shareholder,
unless approved by a majority of the Disinterested Directors.
None of the foregoing limitations and special voting requirements applies
to a transaction with an Interested Shareholder who has been an Interested
Shareholder continuously since the effective date of the statute (January 26,
1988) or who became an Interested Shareholder by gift or inheritance from such a
person or whose acquisition of shares making such person an Interested
Shareholder was approved by a majority of the Disinterested Directors of the
corporation.
49
These provisions were designed to deter certain takeovers of Virginia
corporations. In addition, the Virginia Stock Corporation Act provides that by
affirmative vote of a majority of the voting shares other than shares owned by
any Interested Shareholder, a corporation may adopt by meeting certain voting
requirements, an amendment to its articles of incorporation or bylaws providing
that the Affiliated Transactions provisions shall not apply to the corporation.
Neither SWVA nor FNB has adopted such an amendment. Currently, no shareholder
of SWVA owns or controls 10% or more of SWVA common stock, and there are no
Interested Shareholders of SWVA or FNB as defined by the Virginia Stock
Corporation Act.
Control Share Acquisitions. The Virginia Control Share Acquisitions
statute, found at Sections 13.1-728 - 728.8 of the Virginia Stock Corporation
Act, also is designed to afford shareholders of a public company incorporated in
Virginia protection against certain types of non-negotiated acquisitions in
which a person, entity or group (Acquiring Person) seeks to gain voting control
of that corporation. With certain enumerated exceptions, the statute applies to
acquisitions of shares of a corporation which would result in an Acquiring
Person's ownership of the corporation's shares entitled to vote in the election
of directors falling within any one of the following ranges: 20% to 33-13%, 33-
13% to 50% or 50% or more (a Control Share Acquisition). Shares that are the
subject of a Control Share Acquisition (Control Shares) will not be entitled to
voting rights unless the holders of a majority of the "Disinterested Shares"
vote at an annual or special meeting of shareholders of the corporation to
accord the Control Shares with voting rights. Disinterested shares do not
include shares owned by the Acquiring Person or by officers and inside directors
of the target company. Under certain circumstances, the statute permits an
Acquiring Person to call a special shareholders' meeting for the purpose of
considering granting voting rights to the holders of the Control Shares. As a
condition to having this matter considered at either an annual or special
meeting, the Acquiring Person must provide shareholders with detailed
disclosures about his identity, the method and financing of the Control Share
Acquisition and any plans to engage in certain transactions with, or to make
fundamental changes to, the corporation, its management or business. Under
certain circumstances, the statute grants dissenters' rights to shareholders who
vote against granting voting rights to the Control Shares. The Virginia Control
Share Acquisitions Statute also enables a corporation to make provisions for
redemption of Control Shares with no voting rights. Among the acquisitions
specifically excluded from the statute are acquisitions which are a part of
certain negotiated transactions to which the corporation is a party and which,
in the case of mergers or share exchanges, have been approved by the
corporation's shareholders under other provisions of the Virginia Stock
Corporation Act.
50
Listing of FNB Common Stock
The FNB common stock is traded on the NASDAQ National Market System under
the symbol "FNBP." FNB will obtain approval from NASDAQ for listing of
additional shares of FNB common stock to be issued as a result of the merger.
Differences in the Rights of FNB
Shareholders and SWVA Shareholders
General
FNB and SWVA are incorporated under the laws of Virginia and, accordingly,
the rights of SWVA's shareholders and FNB's shareholders are governed by the
laws of the Commonwealth of Virginia. In addition, as a result of the merger,
SWVA shareholders automatically will become shareholders of FNB to the extent
that they elect and receive stock consideration in the merger, and their rights
as shareholders will be determined by the articles of incorporation and bylaws
of FNB and the Virginia Stock Corporation Act, instead of by the articles of
incorporation and bylaws of SWVA. The following summarizes the material
differences in the rights of shareholders of FNB and SWVA. This summary is
necessarily general, and is qualified in its entirety by reference to, the
Virginia Stock Corporation Act and the articles of incorporation and bylaws of
each corporation.
Authorized Capital
FNB SWVA
Ten million (10,000,000) shares of common Two million two hundred twenty-five thousand
stock, par value five dollars ($5.00) per (2,225,000) shares of common stock, par value ten
share. As of January 2, 2001, there were cents ($0.10) per share, and two hundred
4,047,746 shares of common stock issued seventy-five thousand (275,000) shares of preferred
and outstanding. stock, par value ten cents ($0.10) per share.
Amendment of Articles of Incorporation and Bylaws
FNB SWVA
Approval of an amendment to the articles Approval of an amendment to the articles will be
requires a vote in favor by a majority of governed by Virginia law, except for changes to:
shareholders, provided that the amendment Articles 6.B. Bylaws; 6.C. Applicability of
has been approved and recommended by Statutes; 7.C. Board of Directors, Removal; 7.E.
two-thirds of the directors. If the Duties of Directors; Liability of Directors and
amendment was not so approved and Officers; 8. Indemnification, Etc., of Officers,
recommended, an 80% vote of shareholders Directors, Employees and Agents; 9. Meeting of
is needed to amend. The bylaws may be Stockholders and Stockholders Proposals; 10.
amended by either the Board or Restriction on Voting the Corporation's Common
shareholders. Stock and 11. Approval of Business Combinations,
which all require a vote in favor by 80% of
shareholders to amend. The bylaws may be amended
by either the Board or shareholders, provided, that
in the case of an amendment by shareholders, a vote
in favor by 67% of shareholders is required.
51
Mergers, Consolidations and Sale of Assets
FNB SWVA
Approval of a merger, consolidation and Approval of a merger, consolidation and sale of
sale of assets requires a vote in favor by assets requires a vote in favor by 80% of
a majority of shareholders, provided that shareholders unless two-thirds of the directors,
the transaction has been approved and who were directors prior to the time any person
recommended by two-thirds of the Directors acquired beneficial ownership of ten percent or
of FNB. If the transaction was not so more of the outstanding voting stock of SWVA,
approved and recommended, an 80% vote of approve the transaction.
shareholders is required to approve the
transaction.
Size and Classification of Board of Directors
FNB SWVA
The Board consists of not less than three The initial Board had seven members. The Board may
and no more than fifteen members. Directors increase or decrease the Board provided there will
are divided into three classes. Each class be no fewer than five nor more than fifteen members.
serves a three year term and the classes are Directors are divided into three classes. Each class
as nearly equal in size as possible. serves a three year term and the classes are as nearly
equal in size as possible.
Vacancies and Removal of Directors
FNB SWVA
A director may be removed for cause by a A director may be removed for cause by a
two-thirds vote of shareholders. Vancancies sixty-seven percent vote of shareholders.
are filled by the majority of the Board. Vacancies are filled by the majority of the Board.
Director Liability and Indemnifications
FNB SWVA
Except for liability arising from willful Except for liability arising from a breach of the
misconduct or a knowing violation of criminal duty of loyalty, acts or omissions not in good faith
law, directors are indemnified to fullest or involving intentional misconduct or knowing
extent permitted under the Virginia Stock violation of law, unlawful payment of dividends
Corporation Act. or for any transaction from which the director derived
an improper personal benefit, a director will not be
liable to SWVA or shareholders. A director is only
indemnified if he is successful on the merits or he
acted in good faith.
Special Meetings of Shareholders
FNB SWVA
For both FNB and SWVA, a special meeting of shareholders may only be called
by the Chairman of the Board, a majority of the Board of Directors, and those
permitted by the Virginia Stock Corporation Act.
Shareholder Nominations and Proposals
FNB SWVA
For both FNB and SWVA, shareholders may nominate directors at any annual
meeting. In order to do so, a shareholder must (1) be a shareholder entitled to
vote for election of directors, (2) provide notice to the company not less than
14 days and no more than 50 (60 for SWVA) days prior to the meeting and (3)
provide in the notice the nominee's name, address, occupation and number of
shares held by the nominee.
52
Regulation
Set forth below is a brief description of some laws and regulations that
relate to the regulation of FNB and SWVA. The description of these laws and
regulations, as well as descriptions of laws and regulations contained elsewhere
herein, is qualified in its entirety by reference to applicable laws and
regulations.
General
FNB is a bank holding company within the meaning of the Bank Holding
Company Act of 1956. SWVA is a unitary savings and loan holding company under
the Home Owners' Loan Act. FNB is supervised by the Board of Governors of the
Federal Reserve System and are required to file reports with the Federal Reserve
and provide such additional information as the Federal Reserve may require.
SWVA is supervised by the Office of Thrift Supervision and is required to file
reports with the OTS and provide such additional information as the OTS may
require. First National Bank, the banking subsidiary of FNB is a national
banking association and as such it is regulated by the Office of the Comptroller
of the Currency. The OCC conducts regular examinations of national banks,
reviewing such matters as the adequacy of loan loss reserves, quality of loans
and investments, management practices, compliance with laws, and other aspects
of their operations. In addition to these regular examinations, national banks
must furnish the OCC with periodic reports containing a full, accurate statement
of their affairs. Southwest Virginia Savings Bank, FSB is a federal savings
bank regulated by the OTS. The OTS conducts regular examinations of federal
savings banks, reviewing such matters as the adequacy of loan loss reserves,
quality of loans and investments, management practices, compliance with laws,
and other aspects of their operations. In addition to these regular
examinations, federal savings banks must furnish the OTS with periodic reports
containing a full, accurate statement of their affairs. Supervision, regulation
and examination of national banks by the OCC and federal savings banks by the
OTS are intended primarily for the protection of depositors rather than
shareholders. The various laws and regulations administered by the regulatory
agencies affect corporate practices, expansion of business, and provisions of
services. Also, monetary and fiscal policies of the United States directly
affect bank loans and deposits and thus may affect FNB's and SWVA's earnings.
The future impact of these policies and of the continuing regulatory changes in
the financial services industry cannot be predicted.
The BHC Act further provides that the Federal Reserve may not approve any
acquisition, merger or consolidation that would result in a monopoly or would be
in furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any part of the United States, or the
effect of which may be substantially to lessen competition or to tend to create
a monopoly in any section of the country, or that in any other manner would be
in restraint of trade, unless it finds the
53
anti-competitive effects of the proposed transaction are clearly outweighed in
the public interest by the probable effect of the transaction in meeting the
convenience and needs of the community to be served. The Federal Reserve is also
required to consider the financial and managerial resources and future prospects
of the bank holding companies and banks concerned and the convenience and needs
of the community to be served. Consideration of financial resources generally
focuses on capital adequacy, which is discussed below.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1995, which
became effective on September 29, 1996, repealed the prior statutory
restrictions on interstate acquisitions of banks by bank holding companies. As
a result, FNB and any other bank holding company located in Virginia may now
acquire a bank located in any other state, and any bank holding company located
outside Virginia may lawfully acquire any Virginia-based bank, regardless of
state law to the contrary, in either case subject to some deposit-percentage
limitations, aging requirements, and other restrictions. The Act also generally
provides that, after June 1, 1998, national and state-chartered banks may branch
interstate through acquisitions of banks in other states. By adopting
legislation prior to that date, a state had the ability either to "opt in" and
accelerate the date after which interstate branching is permissible or "opt out"
and prohibit interstate branching altogether. The State of Virginia enacted
"opt in" legislation that permitted interstate branching in Virginia on a
reciprocal basis through June 1, 1998, and on an unlimited basis thereafter.
Accordingly, the banking subsidiaries of FNB and SWVA are currently able to
establish and operate branches in other states that have also enacted "opt in"
legislation.
Subject to certain amendments made by the recently enacted Gramm-Leach-
Bliley Act of 1999 described below, the BHC Act generally prohibits FNB from
engaging in activities other than banking or managing or controlling banks,
savings banks or other permissible subsidiaries and from acquiring or retaining
direct or indirect control of any company engaged in any activities other than
those activities determined by the Federal Reserve to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto. In
determining whether a particular activity is permissible, the Federal Reserve
must consider whether the performance of such an activity reasonably can be
expected to produce benefits to the public, such as greater convenience,
increased competition, or gains in efficiency, that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices.
For example, factoring accounts receivable, acquiring or servicing loans,
leasing personal property, conducting discount securities brokerage activities,
performing some data processing services, acting as agent or broker in selling
credit life insurance and other types of insurance in connection with credit
transactions, and performing some insurance underwriting activities all have
been determined by the Federal Reserve to be permissible activities of bank
holding companies. Despite prior approval, the Federal Reserve has the power to
order a holding company or its subsidiaries to terminate any activity or to
terminate its ownership or control of any subsidiary when it has reasonable
cause to believe that continuation of such activity or such ownership or control
constitutes a serious risk to the financial safety, soundness, or stability of
any bank subsidiary of that bank holding company and is inconsistent with sound
banking principles.
54
The Gramm-Leach-Bliley Act of 1999. The Gramm-Leach-Bliley Act of 1999
was enacted on November 12, 1999. The Act draws new lines between the types of
activities that are permitted for banking organizations as financial in nature
and those that are not permitted because they are commercial in nature. The Act
imposes Community Reinvestment Act requirements on financial service
organizations that seek to qualify for the expanded powers to engage in broader
financial activities and affiliations with financial companies that the Act
permits.
The Act creates a new form of financial organization called a financial
holding company that may own and control banks, insurance companies and
securities firms. A financial holding company is authorized to engage in any
activity that is financial in nature or incidental to an activity that is
financial in nature or is a complementary activity. These activities include
insurance, securities transactions, and traditional banking related activities.
The Act establishes a consultative and cooperative procedure between the Federal
Reserve Board and the Secretary of the Treasury for the designation of new
activities that are financial in nature within the scope of the activities
permitted by the Act for a financial holding company. A financial holding
company must satisfy special criteria to qualify for the expanded financial
powers authorized by the Act. Among those criteria are requirements that all of
the depository institutions owned by the financial holding company be rated as
well capitalized and well-managed and that all of its insured depository
institutions have received a satisfactory rating for Community Reinvestment Act
compliance during their last examination. A bank holding company that does not
qualify as a financial holding company under the Act is generally limited in the
types of activities in which it may engage to those that the Federal Reserve
Board has recognized as permissible for bank holding companies prior to the date
of enactment of the Act. These activities are described under the "General"
heading found above. The Act also authorizes a state bank to have a financial
subsidiary that engages as a principal in the same activities that are permitted
for a financial subsidiary of a national bank if the state bank meets
eligibility criteria and special conditions for maintaining the financial
subsidiary.
The Act repeals the prohibition in the Glass-Steagal Act on bank
affiliations with companies that are engaged primarily in securities
underwriting activities. The Act authorizes a financial holding company to
engage in a wide range of securities activities, including underwriting,
broker/dealer activities and investment company and investment advisory
activities.
Support of Subsidiary Banks. Under Federal Reserve and OTS policy, FNB
and SWVA are expected to act as a source of financial strength for, and to
commit resources to support their subsidiary banks. This support may be
required at times when, absent such policy, FNB may not be inclined to provide
it. In addition, any capital loans by a bank holding company to any of its
banking subsidiaries are subordinate in right of payment to deposits and to
certain other indebtedness of such banks. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a banking subsidiary will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
55
Restrictions on Repurchase of Stock. The BHC Act permits a bank holding
company such as FNB to purchase shares of its capital stock in an amount up to
10% of its consolidated net worth within a twelve month period without prior
approval from the Federal Reserve Board, provided, however, that purchases over
10% must receive prior Federal Reserve Board approval unless the bank holding
company qualifies for an exception. The exception provides that a bank holding
company is not required to obtain prior Federal Reserve Board approval for its
repurchase if the following three conditions are met: (1) both before and
immediately after the redemption, the bank holding company is well capitalized;
(2) the bank holding company is well managed; and (3) the bank holding company
is not the subject of any unresolved supervisory issues. The Federal Reserve
Board construes the first test as requiring the holding company to have a
consolidated total risk based capital ratio of 10% or greater, a consolidated
tier-1 risk based capital ratio of 6% or more, and the holding company must not
be subject to any written regulatory agreement regarding capital. At the
present time, FNB would qualify for the exemption described above, and would
continue to do so after the proposed merger.
FDIC Regulations
The Federal Deposit Insurance Corporation Act of 1991, which became law in
December 1991, requires each federal banking agency to revise its risk-based
capital standards to ensure that those standards take adequate account of
interest rate risk, concentration of credit risk and the risks of non-
traditional activities. In addition, pursuant to FDICIA, each federal banking
agency has promulgated regulations, specifying the levels at which a financial
institution would be considered "well capitalized", "adequately capitalized",
"under capitalized", "significantly under capitalized", or "critically under
capitalized", and to take certain mandatory and discretionary supervisory
actions based on the capital level of the institution.
Under the regulations implementing the prompt corrective action
provisions, an institution shall be deemed to be (1) "well capitalized" if it
has total risk-based capital of 10% or more, has a Tier I risk-based capital
ratio of 6% or more, has a leverage capital ratio of 5% or more and is not
subject to any order or final capital directive to meet and maintain a specific
capital level for any capital measure, (2) "adequately capitalized" if it has a
total risk-based capital ratio of 8% or more, a Tier I risk-based ratio of 4% or
more and a leverage capital ratio of 4% or more (3% under certain circumstances)
and does not meet the definition of "well capitalized", (3) "undercapitalized"
if it has a total risk-based capital ratio that is less than 8%, a Tier I risk-
based capital ratio that is less than 4% or a leverage capital ratio that is
less than 4% (3% in certain circumstances), (4) "significantly undercapitalized"
if it has a total risk-based capital ratio that is less than 6%, a Tier I risk-
based capital ratio that is less than 3% or a leverage capital ratio that is
less than 3% and (5) "critically undercapitalized" if it has a ratio of tangible
equity to total assets that is equal to or less than 2%. In addition, under
certain circumstances, a federal banking agency may reclassify a well
capitalized institution as adequately capitalized and may require an adequately
capitalized institution or an undercapitalized institution to comply with
supervisory actions as if it were in the next lower category (except that the
FDIC may not reclassify a significantly undercapitalized institution as
critically undercapitalized). Immediately upon becoming undercapitalized, or
upon failing to submit or implement a capital plan as required, an institution
shall become subject to various regulatory restrictions.
FDICIA also contained the Truth in Savings Act, which requires disclosures
to be made in connection with deposit accounts offered to consumers. The
regulations have been adopted implementing the provisions of the Truth in
Savings Act.
56
In addition, significant provisions of FDICIA required federal banking
regulators to draft standards in a number of other important areas to assure
bank safety and soundness, including internal controls, information systems and
internal audit systems, credit underwriting, asset growth, compensation, loan
documentation and interest rate exposure. FDICIA also required the regulators
to establish maximum ratios of classified assets to capital, and minimum
earnings sufficient to absorb losses without impairing capital. The legislation
also contained other provisions which restricted the activities of state-
chartered banks, amended various consumer banking laws, limited the ability of
"under capitalized" banks to borrow from the Federal Reserve's discount window,
and required federal banking regulators to perform annual onsite bank
examinations and set standards for real estate lending.
Regulatory Capital Requirements
All depository institutions are required to maintain minimum levels of
regulatory capital. The federal bank regulatory agencies have established
substantially similar risked based and leverage capital standards for financial
institutions that they regulate. These regulatory agencies also may impose
capital requirements in excess of these standards on a case-by-case basis for
various reasons, including financial condition or actual or anticipated growth.
Under the risk-based capital requirements of these regulatory agencies, the bank
subsidiaries of FNB and SWVA are each required to maintain a minimum ratio of
total capital to risk-weighted assets of at least 8%. At least half of the
total capital is required to be "Tier 1 capital," which consists principally of
common and some qualifying preferred shareholders' equity, less certain
intangibles and other adjustments. The remainder ("Tier 2 capital") consists of
a limited amount of subordinated and other qualifying debt (including certain
hybrid capital instruments) and a limited amount of the general loan loss
allowance. Based upon the applicable regulations, First National Bank and
Southwest Virginia Savings Bank, FSB are both "well capitalized."
In addition, the federal regulatory agencies have established a minimum
leverage capital ratio (Tier 1 capital to tangible assets). These guidelines
provide for a minimum leverage capital ratio of 3% for banks and their
respective holding companies that meet certain specified criteria, including
that they have the highest regulatory examination rating and are not
contemplating significant growth or expansion. All other institutions are
expected to maintain a leverage ratio of at least 100 to 200 basis points above
that minimum. The guidelines also provide that banking organizations
experiencing internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above the minimum supervisory levels,
without significant reliance on intangible assets.
Deposit Insurance
The deposits of Southwest Virginia Savings Bank, FSB and First National
Bank are currently insured to a maximum of $100,000 per depositor, subject to
certain aggregation rules. The FDIC has implemented a risk-related assessment
system for deposit insurance premiums. All depository institutions have been
assigned to one of nine risk assessment classifications based on certain capital
and supervisory measures.
Federal Reserve System
The Federal Reserve Board requires all depository institutions to maintain
reserves against their transaction accounts (primarily NOW and Super NOW
checking accounts) and non-personal time deposits. Because required reserves
must be maintained in the form of vault cash or a noninterest-bearing account at
a Federal Reserve Bank, the effect of this reserve requirement is to reduce the
earning assets of FNB's and SWVA's subsidiary banks.
57
Office of Thrift Supervision
As a federally chartered, SAIF-insured savings association, Southwest
Virginia Savings Bank, FSB (the "Savings Bank") is subject to extensive
regulation by the Office of Thrift Supervision and the Federal Deposit Insurance
Corporation. Lending activities and other investments must comply with various
federal statutory and regulatory requirements. The Savings Bank is also subject
to certain reserve requirements promulgated by the Federal Reserve.
The OTS, in conjunction with the FDIC, regularly examines the Savings Bank
and prepares reports for the consideration of the Savings Bank's Board of
Directors on any deficiencies that are found in the Savings Bank's operations.
The Savings Bank's relationship with its depositors and borrowers is also
regulated to a great extent by federal and state law, especially in such matters
as the ownership of savings accounts and the form and content of the Savings
Bank's mortgage documents.
The Savings Bank must file reports with the OTS and the FDIC concerning
its activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with or
acquisitions of other savings institutions. This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the SAIF and depositors.
The regulatory structure also gives the regulatory authorities extensive
discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to the classification of
assets and the establishment of adequate loan loss reserves for regulatory
purposes. Any change in such regulations, whether by the Office of Thrift
Supervision, the FDIC, or the U.S. Congress could have a material impact on the
Company, the Bank, and their operations.
OTS capital regulations require savings institutions to meet three capital
standards: (1) tangible capital equal to 1.5% of total adjusted assets, (2) a
leverage ratio (core capital) equal to at least 3% of total adjusted assets, and
(3) a risk-based capital requirement equal to 8.0% of total risk-weighted
assets.
OTS regulations also require the Savings Bank to give the OTS 30 days
advance notice of any proposed declaration of dividends to SWVA and the OTS has
the authority under its supervisory powers to prohibit the payment of dividends
to SWVA. In addition, the Savings Bank may not declare or pay a cash dividend
on its capital stock if the effect of the dividend would be to reduce the
regulatory capital of the Savings Bank below the amount required for the
liquidation account established in connection with the Merger.
OTS regulations impose limitations upon all capital distributions by
savings institutions, such as cash dividends, payments to repurchase or
otherwise acquire its shares, payments to shareholders of another institution in
a cash-out merger, and other distributions charged against capital. An
institution that exceeds all capital requirements before and after a proposed
capital distribution and has not been advised by the OTS that it is in need of
more than the normal supervision can, after prior notice to the OTS, make
capital distribution during a calendar year equal to its net income to date
during the calendar year plus retained net income for the preceding two years.
Any additional capital distributions require prior regulatory approval. In the
event the Savings Bank's capital fell below its requirements or the OTS notified
it that it was in need of more than normal supervision, the Savings Bank's
ability to make capital distributions could be further restricted. In addition,
the OTS could prohibit a proposed capital distribution by any institution, which
would otherwise be permitted by the regulation, if the OTS determines that such
distribution would constitute an unsafe or unsound practice.
Savings institutions must meet a QTL test or the definition of a domestic
building and loan association under Section 7701 of the Internal Revenue Code.
If the Savings Bank maintains an appropriate level of qualified thrift
investments (primarily residential mortgages and related investments, including
certain mortgage-related securities) and otherwise qualifies as a QTL or a
domestic building and loan association, it will continue to enjoy full borrowing
privileges from the FHLB of Atlanta. The required percentage of qualified
thrift investments is 65% of assets while the Code requires investments of 60%
of assets.
58
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Condensed Balance Sheet
combines the historical consolidated balance sheet of FNB and subsidiaries with
the historical consolidated balance sheet of SWVA and subsidiaries, giving
effect to the consummation of the merger as of September 30, 2000, using the
purchase method of accounting and giving effect to the related pro forma
adjustments described in the accompanying Notes to the Unaudited Pro Forma
Combined Condensed Financial Statements. The following Unaudited Pro Forma
Combined Condensed Statements of Income for the year ended December 31, 1999,
and the nine months ended September 30, 2000, combine the historical
Consolidated Statements of Income of FNB and subsidiaries and SWVA and
subsidiaries, giving effect to the merger as if the merger had become effective
on January 1, 1999, using the purchase method of accounting and giving effect to
the related pro forma adjustments described in the accompanying Notes to the
Unaudited Pro Forma Combined Consolidated Financial Statements.
The unaudited pro forma combined condensed financial statements included
herein are presented for informational purposes only. This information includes
various estimates and may not necessarily be
59
indicative of the financial position or results of operations that would have
occurred if the merger had been consummated on the date or at the beginning of
the period indicated or which may be obtained in the future. The unaudited pro
forma combined condensed financial statements and accompanying notes should be
read in conjunction with and are qualified in their entirety by reference to the
historical financial statements and related notes thereto of FNB and
subsidiaries and SWVA and subsidiaries, which are incorporated by reference in
this proxy statement/prospectus. See "Incorporation of Certain Information by
Reference."
FNB uses a calendar year-end for financial reporting purposes, while SWVA
uses a June 30 fiscal year-end. In order to enhance the comparability of this
unaudited pro forma combined financial data, the historical SWVA financial
information upon which this pro forma data is based was converted to a calendar
year basis.
60
FNB CORPORATION(FNB)
Unaudited Pro Forma Combined Condensed Balance Sheet
As of September 30, 2000
(Dollars in thousands)
SWVA SWVA CNB CNB
FNB Bankshares Proforma Holdings Proforma
Corp (FNB) (SWVA) Adjustments FNB+SWVA (CNB) Adjustments
---------- ------ ----------- -------- ----- -----------
Assets:
Cash and due from banks $ 10,664 $ 1,917 $ -- $ 12,581 $ 3,311 $ --
Interest-bearing deposits with banks -- 298 -- 298 -- --
Federal funds sold and securities purchased
with resale agreements or similar
arrangements 2,150 -- -- 2,150 -- --
Trading securities -- -- -- -- -- --
Securities available for sale 60,946 21,489 (368) 8/ 82,067 13,749 --
Securities held to maturity 30,244 815 -- 31,059 -- --
Loans and leases, net of unearned income 403,486 55,361 129 1/ 458,976 32,120 (342) 1/
Allowance for loan and lease losses 5,713 232 -- 5,945 339 --
--------- --------- --------- --------- --------- ---------
Loans and leases, net 397,773 55,129 129 453,031 31,781 (342)
--------- --------- --------- --------- --------- ---------
Premises and equipment, net 13,498 1,664 1,262 1/ 16,424 1,937 250 1/
Other assets 7,527 2,514 327 2/ 10,368 430 4,962 2/
--------- --------- --------- --------- --------- ---------
Total assets $ 522,802 $ 83,826 $ 1,350 $ 607,978 $ 51,208 $ 4,870
========= ========= ========= ========= ========= =========
Liabilities and stockholders' equity:
Deposits $ 424,249 $ 66,634 $ (583) $ 490,300 $ 44,541 $ 411 1/
Short-term borrowed funds 7,671 -- -- 7,671 314 --
Long-term debt 36,131 9,450 1,594 9/ 47,175 -- 5,304 3/
Accounts payable and other liabilities 3,729 888 687 10/ 5,304 244 --
--------- --------- --------- --------- --------- ---------
Total liabilities 471,780 76,972 1,698 550,450 45,099 5,715
Stockholders' equity:
Preferred Stock -- -- -- -- -- --
Common Stock 20,370 42 1,771 11/ 22,183 4,632 (3,268) 4/
Additional paid-in-capital 25,355 2,832 1,861 12/ 30,048 2,804 1,096 5/
Retained earnings 6,938 5,091 (5,091) 6/ 6,938 (950) 950 6/
Unearned ESOP shares and compensation (1,458) (381) 381 13/ (1,458) -- --
Treasury stock account -- -- -- -- -- --
Net unrealized (depreciation) appreciation (183) (730) 730 7/ (183) (377) 377 7/
on securities available for sale
--------- --------- --------- --------- --------- ---------
Total stockholders' equity 51,022 6,854 (348) 57,528 6,109 (845)
--------- --------- --------- --------- --------- ---------
Total liabilities and stockholders'
equity $ 522,802 83,826 $ 1,350 $ 607,978 $ 51,208 $ 4,870
========= ========= ========= ========= ========= =========
FTU
FNB+CNB First Proforma FNB+CNB+
+SWVA Union(FTU) Adjustments SWVA+FTU
----- ---------- ----------- --------
Assets:
Cash and due from banks $ 15,892 $ 1,537 $ -- $ 17,429
Interest-bearing deposits with banks 298 -- -- 298
Federal funds sold and securities purchased
with resale agreements or similar
arrangements 2,150 -- -- 2,150
Trading securities -- -- -- --
Securities available for sale 95,816 64,512 (5,313) 14/ 155,015
Securities held to maturity 31,059 -- -- 31,059
Loans and leases, net of unearned income 490,754 16,746 95 1/ 507,595
Allowance for loan and lease losses 6,284 -- -- 6,284
--------- --------- --------- ---------
Loans and leases, net 484,470 16,746 501,311
--------- --------- --------- ---------
Premises and equipment, net 8,611 1,683 -- 20,294
Other assets 15,760 -- 4,211 2/ 19,971
--------- --------- --------- ---------
Total assets $ 664,056 $ 84,478 $ (1,007) $ 747,527
========= ========= ========= =========
Liabilities and stockholders' equity:
Deposits $ 535,252 $ 84,478 $ (1,007) 1/$ 618,723
Short-term borrowed funds 7,985 -- -- 7,985
Long-term debt 52,479 -- -- 52,479
Accounts payable and other liabilities 5,548 -- -- 5,548
--------- --------- --------- ---------
Total liabilities 601,264 84,478 (1,007) 684,735
Stockholders' equity:
Preferred Stock -- --
Common Stock 23,547 -- -- 23,547
Additional paid-in-capital 33,948 -- -- 33,948
Retained earnings 6,938 -- -- 6,938
Unearned ESOP shares and compensation (1,458) -- -- (1,458)
Treasury stock account -- --
Net unrealized (depreciation) appreciation (183) -- -- (183)
on securities available for sale
--------- --------- --------- ---------
Total stockholders' equity 62,792 -- -- 62,792
--------- --------- --------- ---------
Total liabilities and stockholders'
equity $ 664,056 $ 84,478 $ (1,007) $ 747,527
========= ========= ========= =========
See accompanying notes to pro forma financial statements.
61
FNB Corporation
Notes to Unaudited Pro Forma Combined Condensed Balance Sheet
As of September 30, 2000
(Dollars in thousands)
N/A = not applicable
NM = not meaningful
1. Adjust to fair value under generally accepted accounting principles for
purchase accounting.
2. Record excess of cost over fair values of assets acquired (goodwill).
3. Debt assumed to be incurred to finance the cash payments to shareholders
holding 50% of CNB shares and for 50% of CNB stock options, plus estimated
merger costs of $100. Calculated as follows:
CNB shares x 50% x per share merger consideration (926,399 x 50% x $10.60 =
$4,910) plus CNB options x 50% x value (consideration of $10.60 minus
average exercise price of $8.06 = $2.54): 231,833 x 50% x $2.54 = $294 plus
Estimated merger related costs of $100.
Total = $4,910 + $294 + $100 = $5,304.
4. Elimination of CNB common stock at par ($4,632) and replace with FNB common
stock assumed to be issued in exchange for 50% of CNB shares. Calculated as
follows: CNB shares x 50% stock x assumed exchange ratio based on $18
mid-point FNB stock price ($10.60 consideration / $18 = .5889) x $5 par
value, or 926,399 x 50% x .5889 x $5 = $1,364 - $4,632 (CNB stock) =
($3,268)
5. Elimination of CNB's additional paid-in-capital ($2,804) and replace with
incremental FNB additional paid-in-capital from assumed stock issuance plus
estimated fair value of assumed FNB stock options to be issued in exchange
for 50% of CNB options. Calculated as follows:
CNB shares x 50% x exchange ratio based on $18 mid-point stock price minus
$5 par ($13) plus $354 present value of new FNB stock options, or 926,399 x
50% x .5889 x $13 = $3,546 + $354 - $2,804 = $1,096.
Note: The amounts recorded in common stock and paid-in-capital above in
notes 4 and 5 above will vary depending on the exchange ratio; however, the
total amount of the two will be the same because the consideration of $10.60
remains constant under any scenario.
6. Elimination of SWVA's and CNB's retained earnings.
7. Elimination of SWVA's and CNB's net unrealized (depreciation) appreciation
on securities available for sale. The securities were recorded at fair value
in the allocation of the acquisition cost.
8. FNB acquired 20,451 shares of SWVA common stock on August 24, 2000 for $368.
This investment would be eliminated on the date of merger.
9. Debt assumed to be incurred to finance the cash payments to shareholders
holding 20% of SWVA shares, plus estimated merger costs of $100, less a $47
fair value adjustment related to existing borrowings from FHLB. Calculated
as follows:
SWVA shares x 20% x merger consideration (380,575 x 20% x $20.25 = $1,541)
plus merger costs of $100, less $47 fair value adjustment
$1,541 + $100 - $47 = $1,594.
10. Record deferred tax liability resulting from the fair value adjustments
related to SWVA, at effective tax rate of 34%. Because the tax bases of the
assets will not change, deferred taxes will be recorded for purchase
adjustments except goodwill, in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109. No deferred taxes are reflected for the
CNB fair value adjustments because they are fully offset by a valuation
reserve under SFAS 109.
62
11. Elimination of SWVA common stock at par ($42) and replace with FNB common
stock assumed to be issued in exchange for 80% of SWVA shares. Calculated as
follows:
SWVA shares x 80% stock x exchange ratio based on $17 mid-point FNB stock
price ($20.25 consideration / $17 = 1.191) x $5 par value, or
380,575 x 80% x 1.191 x $5 = $1,813 - $42 = $1,771.
12. Elimination of SWVA's additional paid-in-capital of $2,832 and replace with
FNB's incremental additional paid-in-capital from assumed stock issuance
plus $342 estimated fair value of assumed FNB stock options to be issued in
exchange for 100% of SWVA options. Calculated as follows:
SWVA shares x 80% x exchange ratio based on excess of $17 mid-point FNB
stock price over $5 par ($12), or 380,575 x 80% x 1.191 x $12 = $4,351 + 342
-$2,832 = $1,861.
Note: the amounts recorded in common stock and paid-in-capital above in
footnotes 11 and 12 will vary depending on the exchange ratio; however, the
total amount of the two will be the same because the consideration of $20.25
per share remains constant under any scenario.
13. Elimination of SWVA's unearned ESOP and unearned compensation.
14. Represents the premium over book value of deposits to be acquired that is
reflected in net proceeds from acquisition of the two First Union branches.
The net proceeds is reflected on a pro forma basis as being used to purchase
investment securities available for sale. The terms of the acquisition
reflected in the accompanying pro forma financial statements include FNB
purchasing premises and equipment, loans, and cash on hand related to the
branches. Also reflected is the assumption by FNB of the deposits of the
branches. The premium reflected in the transaction (i.e., a reduction of the
net proceeds to FNB) is comprised of 8% of the deposits of the Pearisburg
branch and 5% of the deposits of the Wytheville branch. The allocation of
the net acquisition proceeds among assets (in parentheses) and liabilities
assumed is as follows:
(1,537) Cash acquired
(1,683) Premises and equipment acquired at fair value
(16,841) Loans acquired at fair value
83,471 Deposits assumed at fair value before considering premium
(4,211) Goodwill recognized
---------
59,199 Net "purchase price" (i.e., proceeds to FNB invested in securities)
5,313 Deposit premium reflected in above purchase price
--------
$64,512
======== Increase to investment securities reflected in accompanying pro
forma balance sheet before consideration of deposit premium
63
FNB CORPORATION (FNB)
Unaudited Pro Forma Combined Condensed Statement of Income
Year Ended December 31, 1999
(Dollars in thousands)
SWVA SWVA CNB
FNB Bankshares Proforma CNB Proforma
Corp (FNB) (SWVA) Adjustments FNB+SWVA Holdings(CNB) Adjustments
---------- ------ ----------- -------- ------------- -----------
Interest income $ 37,563 5,778 (37) 43,304 3,647 (1)1/
Interest expense 17,610 3,193 680 8/ 21,483 1,831 (74)2/
-------- ------- ------ -------- -------- ------
Net Interest Income 19,953 2,585 (717) 21,821 1,816 73
Provision for loan losses 1,445 13 1,458 173 -
Noninterest income 3,729 492 4,221 265 -
Noninterest expense 13,964 2,513 100 9/ 16,577 1,879 223 3/
-------- ------- ------ -------- -------- ------
Income before income taxes 8,273 551 (817) 8,007 29 (150)
Income taxes 1,946 171 (272) 10/ 1,845 - (132)4/
-------- ------- ------ -------- -------- ------
Net Income $ 6,327 380 (545) 6,162 29 (18)
======== ======= ====== ======== ======== ======
Based on Stock Price Mid-Point ($18.00 for CNB/$17.00 For SWVA):
----------------------------------------------------------------
Weighted average common shares
outstanding for:
Basic earnings per share 3,982,147 411,099 362,666 4,344,813 926,399 272,773 5/
Fully diluted earnings per share 3,982,147 411,099 375,664 12/ 4,357,811 948,676 289,130 6/
Per common share data:
Basic earnings per common share $ 1.59 $0.92 NM $ 1.42 $0.03 NM
Fully diluted earnings per common share $ 1.59 $0.92 NM $ 1.41 $0.03 NM
Based on Stock Price Ceiling ($19.50 for CNB/$18.70 For SWVA):
--------------------------------------------------------------
Weighted average common shares
outstanding for:
Basic earnings per share 3,982,147 411,099 329,696 11/ 4,311,843 926,399 251,790 5/
Fully diluted earnings per share 3,982,147 411,099 341,513 12/ 4,323,660 948,676 266,889 6/
Per common share data:
Basic earnings per common share $ 1.59 $0.92 NM $ 1.43 $0.03 NM
Fully diluted earnings per common share $ 1.59 $0.92 NM $ 1.43 $0.03 NM
Based on Stock Price Floor ($16.50 for CNB/$15.30 For SWVA):
------------------------------------------------------------
Weighted average common shares
outstanding for:
Basic earnings per share 3,982,147 411,099 402,962 11/ 4,385,109 926,399 297,571 5/
Fully diluted earnings per share 3,982,147 411,099 417,404 12/ 4,399,551 948,676 315,415 6/
Per common share data:
Basic earnings per common share $ 1.59 $0.92 NM $ 1.41 $0.03 NM
Fully diluted earnings per common share $ 1.59 $0.92 NM $ 1.40 $0.03 NM
FTU
FNB+CNB First Proforma FNB+CNB+
+SWVA Union (FTU) Adjustments SWVA+FTU
----- ----------- ----------- --------
Interest income 46,950 5,720 18/ (414) 13/ 52,256
Interest expense 23,240 3,662 18/ 652 14/ 27,554
------- ------ ------- -------
Net Interest Income 23,710 2,058 (1,066) 24,702
Provision for loan losses 1,631 41 - 1,672
Noninterest income 4,486 387 - 4,873
Noninterest expense 18,679 687 421 15/ 19,787
------- ------ ------- -------
Income before income taxes 7,886 1,717 (1,487) 8,116
Income taxes 1,713 584 (506)16/ 1,791
------- ------ ------- -------
Net Income 6,173 1,133 (981) 6,325
======= ====== ======= =======
Based on Stock Price Mid-Point ($18.00 for CNB/$17.00 For SWVA):
----------------------------------------------------------------
Weighted average common shares
outstanding for:
Basic earnings per share 4,617,586 N/A N/A 4,617,586
Fully diluted earnings per share 4,646,941 N/A N/A 4,646,941
Per common share data:
Basic earnings per common share $ 1.34 N/A N/A $ 1.37
Fully diluted earnings per common share $ 1.33 N/A N/A $ 1.36
Based on Stock Price Ceiling ($19.50 for CNB/$18.70 For SWVA):
--------------------------------------------------------------
Weighted average common shares
outstanding for:
Basic earnings per share 4,563,633 N/A N/A 4,563,633
Fully diluted earnings per share 4,590,549 N/A N/A 4,590,549
Per common share data:
Basic earnings per common share $ 1.35 N/A N/A $ 1.39
Fully diluted earnings per common share $ 1.34 N/A N/A $ 1.38
Based on Stock Price Floor ($16.50 for CNB/$15.30 For SWVA):
------------------------------------------------------------
Weighted average common shares
outstanding for:
Basic earnings per share 4,682,679 N/A N/A 4,682,679
Fully diluted earnings per share 4,714,966 N/A N/A 4,714,966
Per common share data:
Basic earnings per common share $ 1.32 N/A N/A $ 1.35
Fully diluted earnings per common share $ 1.31 N/A N/A $ 1.34
See accompanying notes to pro forma financial statements.
64
FNB Corporation
Notes to Unaudited Pro Forma Combined Condensed Statement of Income
Year Ending December 31, 1999
(Dollars in thousands)
1. Amortization of CNB's loan fair value adjustment. The amortization periods
represent the average remaining expected life of the loans, and they vary
from 1.3 years to 7 years depending on the type of loan.
2. Interest on the cost of borrowing amounts to fund cash payments to CNB
shareholders in exchange for stock ($388) less amortization of fair value
adjustment made relating to CNB's deposits ($462). The assumed annual
interest rate on the borrowings is 7.3%. The fair value adjustment is
amortized over the expected remaining average life of the related deposits
of 1.15 years.
3. Amortization of excess of cost over fair value of assets acquired (goodwill)
related to CNB ($217) plus amortization of premises and equipment fair value
adjustment ($6). The goodwill is amortized over 20 years using the straight-
line method. The premises and equipment adjustments are amortized on a
straight-line basis over the 35 year estimated remaining life of the real
estate to which it relates.
4. Tax effect of interest on borrowings referred to in Note 2 above ($388 x 34%
tax rate = $132).
5. FNB shares to be issued in exchange for 50% of CNB shares outstanding
(926,399). Following is the calculation assuming three scenarios regarding
FNB's stock price ($18.00, $19.50, and $16.50):
Mid-point: 926,399 x 50% x ($10.60/$18.00) = 272,773 incremental shares
Ceiling: 926,399 x 50% x ($10.60/$19.50) = 251,790 incremental shares Floor:
926,399 x 50% x ($10.60/ $16.50) = 297,571 incremental shares
6. FNB shares/stock options to be issued in exchange for 50% of CNB shares and
stock options outstanding, assuming all such options were then exercised to
the extent the effect would be dilutive for earnings per share. The
methodology is:
Basic shares to be issued (Note 5) plus options x 50% x value (consideration
of $10.60 less average exercise price of $8.06 = $2.54) divided by FNB share
price under all three scenarios.
Mid-point: 272,773 + (231,833 x 50% x $2.54/ $18.00 = 16,357) = 289,130
incremental shares for fully diluted purposes
Ceiling: 251,790 + (231,833 x 50% x $2.54/$19.50 = 15,098) = 266,889
incremental shares for fully diluted
purposes
Floor: 297,571 + (231,833 x 50% x $2.54/$16.50 = 17,844) = 315,415
incremental shares for fully diluted purposes
7. Amortization of SWVA's loan fair value adjustment. The amortization period
of 3.5 years represents the average remaining expected life of the loans.
8. Interest on the cost of borrowing amounts to fund cash payments to SWVA
shareholders in exchange for stock ($123) at assumed interest rate of 7.3%.
Also includes amortization of fair value adjustment made relating to SWVA's
deposits ($530) and FHLB borrowings ($27). The fair value adjustments are
amortized over the remaining average life of the related deposits of 13.2
months and the remaining contractual term of the FHLB borrowings of 20.4
months.
65
9. Amortization of excess of cost over fair value of assets acquired (goodwill)
related to SWVA ($17) plus amortization of premises and equipment fair value
adjustment ($83). The goodwill is amortized over 20 years using the
straight- line method. The premises and equipment adjustments are amortized
on a straight-line basis over the estimated remaining lives of the
particular assets to which they relate, which vary depending on the age and
condition of the asset.
10. Tax effect of interest on borrowings referred to in Note 8 above at 34% tax
rate. Also includes deferred tax benefit related to reversal of portion of
deferred taxes related to fair value adjustments.
11. FNB shares to be issued in exchange for 80% of SWVA shares outstanding, net
of SWVA shares already owned by FNB (380,575). Following is the calculation
assuming three scenarios regarding FNB's stock price ($17.00, $18.70, and
$15.30):
Mid-point: 380,575 x 80% x ($20.25/$17.00) = 362,666 incremental shares
Ceiling: 380,575 x 80% x ($20.25/$18.70) = 329,696 incremental shares Floor:
380,575 x 80% x ($20.25/$15.30) = 402,962 incremental shares
12. FNB shares/stock options to be issued in exchange for 80% of SWVA shares and
100% of SWVA stock options outstanding, assuming all such options were then
exercised to the extent the effect would be dilutive for earnings per share.
The methodology is:
Basic shares to be issued (Note 11) plus options x value (consideration of
$20.25 less average exercise price of $16.80 = $3.45) divided by FNB share
price under all three scenarios.
Mid-point: 362,666 + (64,049 x $3.45/$17.00 = 12,998) = 375,664 incremental
shares for fully diluted purposes
Ceiling: 329,696 + (64,049 x $3.45/$18.70 = 11,817) = 341,513 incremental
shares for fully diluted purposes
Floor: 402,962 + (64,049 x $3.45/$15.30 = 14,442) = 417,404 incremental
shares for fully diluted purposes
13. Interest income effect ($364) of deposit premium reflected in acquisition of
First Union branches. The premium has the effect of reducing the amount
available to invest in securities, and as such the rate used to calculate
the effect is the average yield on FNB's securities portfolio of 6.85%.
This item also includes amortization of the loan fair value adjustment ($50)
related to the First Union purchase over the average remaining expected life
of the loans of 1.9 years.
14. Amortization of First Union deposit fair value adjustment over the expected
remaining average life of each of the related categories of deposits. The
weighted average life is 1.6 years.
15. Amortization of excess of cost over fair value of assets acquired (goodwill)
related to First Union. The goodwill is amortized over 10 years using the
straight-line method. This term represents management's estimate of the
estimated average remaining life of the customer deposit base being acquired
in accordance with SFAS No. 72.
16. Income tax benefit at a 34% tax rate is reflected on the net pre-tax
adjustments. The tax benefit of goodwill amortization is included because
the goodwill resulting from the First Union acquisition is expected to be
deductible under the provisions of the Internal Revenue Code.
17. Historical interest income and expense amounts for the First Union branches
were not available. Amounts of interest income and expense were estimated
based on the amounts of loans being purchased and deposits being assumed,
respectively, using historical average yield percentages for FNB modified to
the extent necessary to reflect characteristics of the particular loan
portfolios and deposits being purchased/assumed. Historical noninterest
income and expenses for the branches were available and were used in these
proformas. Income taxes were recorded using a 34% rate.
66
FNB CORPORATION (FNB)
Unaudited Pro Forma Combined Condensed Statement of Income
Nine Months Ended September 30, 2000
(Dollars in thousands)
SWVA SWVA
FNB Bankshares Proforma CNB
Corp (FNB) (SWVA) Adjustments FNB+SWVA Holdings (CNB)
---------- -------- ----------- -------- --------------
Interest income $ 31,042 4,673 (28) 7/ 35,687 2,808
Interest expense 14,840 2,639 166 8/ 17,645 1,416
------- ------- -------- ------- -------
Net Interest Income 16,202 2,034 (194) 18,042 1,392
Provision for loan losses 877 21 - 898 89
Noninterest income 2,600 320 2,920 245
Noninterest expense 11,084 2,070 (75) 9/ 13,079 1,213
------- ------- -------- ------- -------
Income before income taxes 6,841 263 (119) 6,985 335
Income taxes 1,790 78 (36) 10/ 1,832 -
------- ------- -------- ------- -------
Net Income $ 5,051 185 (83) 5,153 335
======= ======= ======== ======= =======
Based on Stock Price Mid-Point ($18.00 for CNB/$17.00 For SWVA):
----------------------------------------------------------------
Weighted average common shares
outstanding for:
Basic earnings per share 3,999,724 402,313 362,666 11/ 4,362,390 926,399
Fully diluted earnings per share 3,999,779 402,313 375,664 12/ 4,375,443 972,519
Per common share data:
Basic earnings per common share $ 1.26 $ 0.46 NM $ 1.18 $ 0.36
Fully diluted earnings per
common share $ 1.26 $ 0.46 NM $ 1.18 $ 0.34
Based on Stock Price Ceiling ($19.50 for CNB/$18.70 For SWVA):
--------------------------------------------------------------
Weighted average common shares
outstanding for:
Basic earnings per share 3,999,724 402,313 329,696 11/ 4,329,420 926,399
Fully diluted earnings per share 3,999,779 402,313 341,513 12/ 4,341,292 972,519
Per common share data:
Basic earnings per common share $ 1.26 $ 0.46 NM $ 1.19 $ 0.36
Fully diluted earnings per
common share $ 1.26 $ 0.46 NM $ 1.19 $ 0.34
Based on Stock Price Floor ($16.50 for CNB/$15.30 For SWVA):
------------------------------------------------------------
Weighted average common shares
outstanding for:
Basic earnings per share 3,999,724 402,313 402,962 11/ 4,402,686 926,399
Fully diluted earnings per share 3,999,779 402,313 417,404 12/ 4,417,183 972,519
Per common share data:
Basic earnings per common share $ 1.26 $ 0.46 NM $ 1.17 $ 0.36
Fully diluted earnings per
common share $ 1.26 $ 0.46 NM $ 1.17 $ 0.34
CNB FTU
Proforma FNB+CNB First Proforma FNB+CNB+
Adjustments +SWVA Union (FTU) Adjustments SWVA+FTU
----------- ----------- ----------- ----------- --------
Interest income (8) 1/ 38,487 4,290 18/ (311) 13/ 42,466
Interest expense 221 2/ 19,282 2,747 18/ 309 14/ 22,338
------- ------- ------- ------- -------
Net Interest Income (229) 19,205 1,543 (620) 20,128
Provision for loan losses - 987 31 - 1,018
Noninterest income - 3,165 290 - 3,455
Noninterest expense 167 3/ 14,459 515 316 15/ 15,290
------- ------- ------- ------- -------
Income before income taxes (396) 6,924 1,287 (936) 7,275
Income taxes (99) 4/ 1,733 438 (318) 16/ 1,853
------- ------- ------- ------- -------
Net Income (297) 5,191 849 (618) 5,422
======= ======= ======= ======= =======
Based on Stock Price Mid-Point ($18.00 for CNB/$17.00 For SWVA):
----------------------------------------------------------------
Weighted average common shares
outstanding for:
Basic earnings per share 272,773 5/ 4,635,163 N/A N/A 4,635,163
Fully diluted earnings per share 289,130 6/ 4,664,573 N/A N/A 4,664,573
Per common share data:
Basic earnings per common share NM $ 1.12 N/A N/A $ 1.17
Fully diluted earnings per
common share NM $ 1.11 N/A N/A $ 1.16
Based on Stock Price Ceiling ($19.50 for CNB/$18.70 For SWVA):
--------------------------------------------------------------
Weighted average common shares
outstanding for:
Basic earnings per share 251,790 5/ 4,581,210 N/A N/A 4,581,210
Fully diluted earnings per share 266,889 6/ 4,608,181 N/A N/A 4,608,181
Per common share data:
Basic earnings per common share NM $ 1.13 N/A N/A $ 1.18
Fully diluted earnings per
common share NM $ 1.13 N/A N/A $ 1.18
Based on Stock Price Floor ($16.50 for CNB/$15.30 For SWVA):
------------------------------------------------------------
Weighted average common shares
outstanding for:
Basic earnings per share 297,571 5/ 4,700,256 N/A N/A 4,700,256
Fully diluted earnings per share 315,415 6/ 4,732,598 N/A N/A 4,732,598
Per common share data:
Basic earnings per common share NM $ 1.10 N/A N/A $ 1.15
Fully diluted earnings per
common share NM $ 1.10 N/A N/A $ 1.15
See accompanying notes to pro forma financial statements.
67
FNB Corporation
Notes to Unaudited Pro Forma Combined Condensed Statement of Income
Nine Months Ending September 30, 2000
(Dollars in thousands)
1. Amortization of CNB's loan fair value adjustments. The amortization periods
represent the average remaining expected life of the loans, and they vary
from 1.3 years to 7 years depending on the type of loan.
2. Interest on the cost of borrowing amounts to fund cash payments to CNB
shareholders in exchange for stock ($291) less the amortization of the
remaining portion of the fair value adjustment made relating to CNB's
deposits ($70). The assumed annual interest rate on the borrowings is 7.3%.
3. Amortization of excess of cost over fair value of assets acquired (goodwill)
related to CNB ($163) plus amortization of premises and equipment fair value
adjustment ($4). The goodwill is amortized over 20 years using the straight-
line method. The premises and equipment adjustments are amortized on a
straight-line basis over the 35 year estimated remaining life of the real
estate to which it relates.
4. Tax effect of interest on borrowings referred to in footnote 2 above ($291 x
34% tax rate = $99).
5. FNB shares to be issued in exchange for 50% of CNB shares outstanding
(926,399). Following is the calculation assuming three scenarios regarding
FNB's stock price ($18.00, $19.50, and $16.50):
Mid-point: 926,399 x 50% x ($10.60/$18.00) = 272,773 incremental shares
Ceiling: 926,399 x 50% x ($10.60/$19.50) = 251,790 incremental shares Floor:
926,399 x 50% x ($10.60/ $16.50) = 297,571 incremental shares
6. FNB shares/stock options to be issued in exchange for 50% of CNB shares and
stock options outstanding, assuming all such options were then exercised to
the extent the effect would be dilutive for earnings per share. The
methodology is:
Basic shares to be issued (Note 5) plus options x 50% x value (consideration
of $10.60 less average exercise price of $8.06 = $2.54) divided by FNB share
price under all three scenarios.
Mid-point: 272,773 + (231,833 x 50% x $2.54/ $18.00 = 16,357) = 289,130
incremental shares for fully diluted purposes
Ceiling: 251,790 + (231,833 x 50% x $2.54/$19.50 = 15,098) = 266,889
incremental shares for fully diluted purposes
Floor: 297,571 + (231,833 x 50% x $2.54/$16.50 = 17,844) = 315,415
incremental shares for fully diluted purposes
7. Amortization of SWVA's loan fair value adjustment. The amortization period
of 3.5 years represents the average remaining expected life of the loans.
68
8. Interest on the cost of borrowing amounts to fund cash payments to SWVA
shareholders in exchange for stock ($92) at assumed interest rate of 7.3%.
Also includes amortization of fair value adjustment made relating to FHLB
borrowings ($21) and the remaining portion of the fair value adjustment for
SWVA's deposits ($53). The fair value adjustments are amortized over the
remaining average life of the related deposits of 13.2 months and the
remaining contractual term of the FHLB borrowings of 20.4 months.
9. Amortization of excess of cost over fair value of assets acquired (goodwill)
related to SWVA ($12) plus amortization of premises and equipment fair value
adjustment ($63). The goodwill is amortized over 20 years using the
straight- line method. The premises and equipment adjustments are amortized
on a straight-line basis over the estimated remaining lives of the
particular assets to which they relate, which vary depending on the age and
condition of the asset. Also reflected here is a reduction of $150 of
non-recurring merger related expenses. See Note 17 for details.
10. Tax effect of interest on borrowings referred to in Note 8 above at 34% tax
rate. Also includes deferred tax benefit related to reversal of portion of
deferred taxes related to fair value adjustments and the tax effect of the
excluded merger related expenses ($98).
11. FNB shares to be issued in exchange for 80% of SWVA shares outstanding, net
of SWVA shares already owned by FNB (380,575). Following is the calculation
assuming three scenarios regarding FNB's stock price ($17.00, $18.70, and
$15.30):
Mid-point: 380,575 x 80% x ($20.25/$17.00) = 362,666 incremental shares
Ceiling: 380,575 x 80% x ($20.25/$18.70) = 329,696 incremental shares
Floor: 380,575 x 80% x ($20.25/$15.30) = 402,962 incremental shares
12. FNB shares/stock options to be issued in exchange for 80% of SWVA shares and
100% of SWVA stock options outstanding, assuming all such options were then
exercised to the extent the effect would be dilutive for earnings per share.
The methodology is:
Basic shares to be issued (Note 11) plus options x value (consideration of
$20.25 less average exercise price of $16.80 = $3.45) divided by FNB share
price under all three scenarios.
Mid-point: 362,666 + (64,049 x $3.45/$17.00 = 12,998) = 375,664
incremental shares for fully diluted purposes
Ceiling: 329,696 + (64,049 x $3.45/$18.70 = 11,817) = 341,513
incremental shares for fully diluted purposes
Floor: 402,962 + (64,049 x $3.45/$15.30 = 14,442) = 417,404
incremental shares for fully diluted purposes
13. Interest income effect ($273) of deposit premium reflected in acquisition of
First Union branches. The premium has the effect of reducing the amount
available to invest in securities, and as such the rate used to calculate
the effect is the average yield on FNB's securities portfolio of 6.85%.
This item also includes amortization of the loan fair value adjustment ($38)
related to the First Union purchase over the average remaining expected life
of the loans of 1.9 years.
14. Amortization of First Union deposit fair value adjustment over the expected
remaining average life of each of the related categories of deposits. The
weighted average life is 1.6 years.
69
15. Amortization of excess of cost over fair value of assets acquired (goodwill)
related to First Union. The goodwill is amortized over 10 years using the
straight-line method. This term represents management's estimate of the
estimated average remaining life of the customer deposit base being acquired
in accordance with SFAS No. 72.
16. Income tax benefit at a 34% tax rate is reflected on the net pre-tax
adjustments. The tax benefit of goodwill amortization is included because
the goodwill resulting from the First Union acquisition is expected to be
deductible under the provisions of the Internal Revenue Code.
17. Note 9 refers to an adjustment to SWVA historical amounts for the nine
months ended September 30, 2000 to remove $150 of nonrecurring costs ($98
after tax) directly related to the merger. These costs are comprised of fees
paid to attorneys and financial advisors for services directly related to
the proposed merger with FNB, including evaluation of the legal and
financial details of the merger, the fairness opinion, and other related
matters. CNB had not incurred significant merger related costs as of
September 30, 2000. Most merger related costs for FNB had been capitalized
under generally accepted accounting principles.
18. Historical interest income and expense amounts for the First Union branches
were not available. Amounts of interest income and expense were estimated
based on the amounts of loans being purchased and deposits being assumed,
respectively, using historical average yield percentages for FNB modified to
the extent necessary to reflect characteristics of the particular loan
portfolios and deposits being purchased/assumed. Historical noninterest
income and expenses for the branches were available and were used in these
proformas. Income taxes were recorded using a 34% rate.
Comparative Per Share Data
The following table sets forth certain historical, pro forma and pro forma
equivalent per share financial information for the common stock of FNB and SWVA.
The pro forma and pro forma equivalent per share information gives effect to the
merger as if the merger had been effective on the dates presented in the case of
the book value data, and as if the merger had become effective January 1, 1999,
in the case of the net income and dividends declared data presented. The pro
forma data in the tables assumes that the merger is accounted for using the
purchase method of accounting. See "Accounting Treatment." The information
presented herein is based on, and is qualified in its entirety by, the
historical financial statements, including the notes thereto, of FNB and SWVA
incorporated by reference herein, and should be read in conjunction therewith.
See "Available Information," and "Incorporation of Certain Information by
Reference." The pro forma and equivalent pro forma per share data in the
following tables are presented for comparative purposes only and are not
necessarily indicative of what the combined financial position or results of
operations would have been had the merger been consummated during the periods or
as of the date for which such pro forma tables are presented.
The ultimate exchange ratio for the merger will be based upon the average
per share market price of FNB common stock over a 30 day trading period shortly
before the closing of the merger. The tables below reflect three potential per
share market prices of FNB common stock: $17, $18.70, and $15.30.
70
The data in the following tables reflect only the proposed merger of FNB
with SWVA. An additional merger and a purchase of two branches are also planned
which are not reflected in these amounts.
71
COMPARATIVE PER SHARE DATA
ASSUMES FNB STOCK PRICE OF $17/SHARE
PER
SWVA EQUIVALENT
FNB HISTORICAL PRO FORMA SWVA SHARE
HISTORICAL (1) COMBINED (2)
------------ ------------ ----------- ------------
NET INCOME FOR THE YEAR ENDED
DECEMBER 31, 1999
Basic $ 1.59 $ 0.92 $ 1.42 (3) $ 1.69
Fully diluted 1.59 0.92 1.41 (3) 1.68
NET INCOME FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2000
Basic 1.26 0.46 1.18 (3) 1.41
Fully diluted 1.26 0.46 1.18 (3) 1.41
CASH DIVIDENDS DECLARED
PER SHARE
Year ended December 31, 1999: 0.63 0.40 0.63 (4) 0.75
Nine months ended September 30, 2000: 0.52 0.40 0.52 (4) 0.62
BOOK VALUE PER SHARE
As of December 31, 1999 11.93 16.34 -- --
As of September 30, 2000 12.80 16.91 13.23 (5) 15.76
72
COMPARATIVE PER SHARE DATA
ASSUMES FNB STOCK PRICE OF $18.70/SHARE
PER
SWVA EQUIVALENT
FNB HISTORICAL PRO FORMA SWVA SHARE
HISTORICAL (1) COMBINED (2)
------------ ------------ ----------- ------------
NET INCOME FOR THE YEAR
ENDED
DECEMBER 31, 1999
Basic $ 1.59 $ 0.92 $ 1.43 (3) $ 1.55
Fully diluted
1.59 0.92 1.43 (3) 1.55
NET INCOME FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2000
Basic 1.26 0.46 1.18 (3) 1.28
Fully diluted
1.26 0.46 1.18 (3) 1.28
CASH DIVIDENDS DECLARED
PER SHARE
Year ended December 31, 1999: 0.63 0.40 0.63 (4) 0.68
Nine months ended September 30, 2000: 0.52 0.40 0.52 (4) 0.56
BOOK VALUE PER SHARE
As of December 31, 1999 11.93 16.34 -- --
As of September 30, 2000 12.80 16.91 13.33 (5) 14.43
73
COMPARATIVE PER SHARE DATA
ASSUMES FNB STOCK PRICE OF $15.30/SHARE
PER
SWVA EQUIVALENT
FNB HISTORICAL PRO FORMA SWVA SHARE
HISTORICAL (1) COMBINED (2)
------------ ------------ ----------- ------------
NET INCOME FOR THE YEAR
ENDED
DECEMBER 31, 1999
Basic $ 1.59 $ 0.92 $ 1.41 (3) $ 1.87
Fully diluted
1.59 0.92 1.40 (3) 1.85
NET INCOME FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2000
Basic 1.26 0.46 1.17 (3) 1.55
Fully diluted
1.26 0.46 1.17 (3) 1.55
CASH DIVIDENDS DECLARED
PER SHARE
Year ended December 31, 1999: 0.63 0.40 0.63 (4) 0.83
Nine months ended
September 30, 2000: 0.52 0.40 0.52 (4) 0.69
BOOK VALUE PER SHARE
As of December 31, 1999 11.93 16.34 -- --
As of September 30, 2000 12.80 16.91 13.11 (5) 17.35
(1) FNB uses a calendar year-end for financial reporting purposes, while SWVA
uses a June 30 fiscal year-end. In order to enhance the comparability of
this per share data, the historical SWVA financial information was
converted to a calendar year basis.
(2) Per equivalent SWVA share amounts are calculated by multiplying the pro
forma combined amounts by the Exchange Ratio of 1.191 for the $17 per FNB
share market price scenario, an Exchange Ratio of 1.083 for the $18.70 per
FNB share market price scenario, and an Exchange Ratio of 1.324 for the
$15.30 per FNB share market price scenario.
(3) The pro forma net income per share amounts are calculated by totaling the
historical net income of FNB and SWVA (as adjusted per Note 1 above),
adjusting the result to give effect to the merger as though it had occurred
on January 1, 1999, and dividing it by pro forma average basic and fully
diluted shares. To arrive at pro forma shares, FNB's historical average
shares outstanding were added to the incremental shares that would be
issued, assuming the Exchange Ratio applicable to the particular scenario,
in exchange for 80% of the historical SWVA shares outstanding. The pro
forma net income per share amounts do not take into consideration any
operating efficiencies that may be realized as a result of the merger.
74
(4) Pro forma cash dividends represents the FNB historical amounts.
(5) Pro forma book value per share amounts are calculated by dividing pro forma
combined stockholders' equity by pro forma common shares outstanding at the
end of the period. Pro forma stockholders' equity gives effect to the
merger as though it had occurred on September 30, 2000. To arrive at pro
forma shares outstanding, FNB's historical shares outstanding at September
30, 2000 were added to the incremental shares that would be issued assuming
the merger occurred at September 30, 2000, assuming the Exchange Ratio
applicable to the particular scenario, in exchange for 80% of the
historical SWVA shares outstanding at that date. Pro forma shares
outstanding used for book value calculations in the above table do not
include unearned shares held by Employee Stock Ownership Plans sponsored by
FNB and SWVA.
Experts
The consolidated financial statements of FNB as of December 31, 1999 and
1998 and for each of the years in the three-year period ended December 31, 1999,
included in FNB's 1999 Annual Report on Form 10-K have been incorporated by
reference herein in reliance upon the report of McLeod & Company, independent
certified public accountants, which has been given upon the authority of that
firm as experts in accounting and auditing. McLeod & Company's report is
included in FNB's Annual Report on Form 10-K, which is incorporated by reference
herein.
The consolidated financial statements of SWVA as of June 30, 2000, and for
each of the years in the three-year period ended June 30, 2000, incorporated by
reference into SWVA's 2000 Annual Report on Form 10-KSB, have been incorporated
by reference herein in reliance upon the report of Cherry Bekaert & Holland
L.L.P., independent certified public accountants, which has been given upon the
authority of that firm as experts in accounting and auditing. Cherry Bekaert &
Holland's report is incorporated into SWVA's Annual Report on Form 10-KSB, which
is incorporated by reference herein.
Validity of FNB Common Stock
The validity of the shares of FNB common stock being offered hereby will
be passed upon for FNB by Troutman Sanders Mays & Valentine LLP.
Shareholder Proposals
If the merger is not consummated, SWVA expects to hold its next annual
meeting of shareholders during October 2001. In the event that such a meeting is
held, any proposals of shareholders intended to be presented at such meeting
must be received at SWVA's principal executive offices at 302 Second Street,
S.W., Roanoke, VA 24011-1597, Attn: Secretary, a reasonable time before SWVA
begins to mail its proxy materials in order for such proposals to be included in
SWVA's proxy statement and form of proxy related to such meeting. As required by
Section 12 of SWVA's bylaws for business to be properly brought before an annual
meeting by a shareholder, the shareholder must have given timely notice thereof
in writing to the Secretary of SWVA. To be timely, a shareholder's notice must
be delivered to or mailed and received at the principal executive offices of
SWVA not less than 10 days prior to the meeting. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder proposes to bring
before the annual meeting (1) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
75
at the annual meeting, (2) the name and address, as they appear on SWVA's books,
of the shareholder proposing such business, (3) the class and number of shares
of common stock of SWVA that are beneficially owned by the shareholder, and (4)
any material interest of the shareholder in such business.
Available Information
On your written or oral request, SWVA or FNB will provide you, without
charge, with a copy of any of the documents incorporated by reference into this
proxy statement/prospectus, not including exhibits to the information unless
those exhibits are specifically incorporated by reference. You should make any
request for documents by __________, _________, to ensure timely delivery of
the documents.
Requests for documents relating to SWVA Requests for documents relating to FNB or CNB
should be directed to: should be directed to:
Barbara C. Weddle Peter A. Seitz
SWVA Bancshares, Inc. FNB Corporation
302 Second Street, S.W. 105 Arbor Drive
Roanoke, Virginia 24011-1597 Christiansburg, Virginia 24068
(540) 983-1410 (540) 382-4951
SWVA, FNB and CNB file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
Copies of SWVA's, FNB's or CNB's reports, proxy statements and other information
may be inspected and copied at the public reference facilities maintained by the
SEC:
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a Web site that include reports, proxy statements and other
information regarding SWVA and FNB. The address of the SEC Web site is
http://www.sec.gov.
FNB has filed a registration statement under the Securities Act with the
SEC to register the FNB common stock to be issued to SWVA's shareholders in the
merger. This proxy statement/prospectus is part of that registration statement.
As allowed by SEC rules, this proxy statement/prospectus does not contain all of
the information you can find in the registration statement or the exhibits to
the registration statement, and constitutes a prospectus of FNB in addition to
being a proxy statement of SWVA for the special meeting. You may inspect and
copy the registration statement at any of the addresses listed above.
All information contained herein with respect to FNB and its subsidiaries
have been supplied by FNB, and all information with respect to SWVA and its
subsidiaries has been supplied by SWVA.
No person has been authorized to give any information or to make any
representation other than those contained 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 SWVA. Neither the delivery of this
76
proxy statement/prospectus nor any distribution of the securities to which this
proxy statement/prospectus relates shall, under any circumstances, create any
implication that there has been no change in the affairs of FNB, SWVA, or any of
their respective subsidiaries since the date hereof or that the information
contained herein is correct as of any time subsequent to its date. This proxy
statement/prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, any securities other than the securities to which it
relates or an offer to sell or a solicitation of an offer to purchase the
securities offered by this proxy statement/prospectus in any jurisdiction in
which such an offer or solicitation is not lawful.
Incorporation of Certain Information by Reference
This proxy statement/prospectus incorporates documents by reference that
are not presented in or delivered with this document.
The SEC allows FNB and SWVA to "incorporate by reference" information into
this proxy statement/prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
proxy statement/prospectus, except for any information superseded by information
included in or incorporated by reference from subsequently filed documents into
this proxy statement/prospectus. This proxy statement/prospectus incorporates
by reference the documents listed below that FNB and SWVA have previously filed
with the SEC. These documents contain important information about SWVA's
business and finances.
The following documents filed by FNB with the SEC: FNB's Annual Report on
Form 10-K as of and for the year ended December 31, 1999; the portions of FNB's
Proxy Statement for the Annual Meeting of shareholders held on May 9, 2000, that
have been incorporated by reference in the 1999 FNB 10-K; FNB's Quarterly
Reports on Form 10-Q for the three months ended March 31, 2000, the six months
ended June 30, 2000, and the nine months ended September 30, 2000; the
description of FNB common stock set forth in FNB's Registration Statement on
Form S-4, Registration No. 333-02524, and any amendment or report filed for the
purpose of updating any such description; and FNB's Current Reports on Form 8-K,
dated April 21, 2000, July 11, 2000, August 7, 2000, and September 18, 2000.
The following documents filed by SWVA with the SEC: SWVA's Annual Report
on Form 10-KSB as of and for the year ended June 30, 2000, including SWVA's 2000
Annual Report to Stockholders, filed as Exhibit 13 to the Form 10-KSB; SWVA's
Quarterly Report on Form 10-QSB for the three months ended September 30, 2000.
The following document filed by CNB with the SEC: CNB's Current Report on
Form 8-K dated December 21, 2000 and filed on December 29, 2000.
We also incorporate by reference any additional documents that FNB or SWVA
files with the SEC after the date of this proxy statement/prospectus and before
the date of the annual meeting.
This proxy statement/prospectus is dated _________, ____. You should not
assume that the information contained in this proxy statement/prospectus is
accurate as of any other date, and neither the mailing of the proxy
statement/prospectus to shareholders nor the issuance of FNB common stock in the
merger shall create any implication to the contrary. Please note that FNB has
supplied all information contained or incorporated by reference into this proxy
statement/prospectus relating to FNB, and SWVA has supplied all information
relating to SWVA.
77
You should rely only on the information contained in this document or in
documents to which we have referred you. We have not authorized anyone to
provide you with different information.
78
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
SWVA BANCSHARES, INC.
AND
FNB CORPORATION
August 7, 2000
TABLE OF CONTENTS
ARTICLE 1
The Merger and Related Matters
Page
1.1 Definitions.................................................. 2
1.2 The Merger................................................... 2
1.3 Name and Continuing Operations............................... 2
1.4 Management of FNB and the Banks.............................. 3
1.5 The Closing and Effective Date............................... 3
ARTICLE 2
Basis and Manner of Conversion
2.1 Conversion of SWVA Stock..................................... 3
2.2 Allocation................................................... 4
2.3 Election..................................................... 5
2.4 Allocation of Cash Election Shares........................... 5
2.5 Allocation of Stock Election Shares.......................... 6
2.6 No Allocation................................................ 6
2.7 Computations................................................. 6
2.8 Cancellation of Shares....................................... 6
ARTICLE 3
Manner of Exchange
3.1 Exchange Procedures.......................................... 7
3.2 Distributions with Respect to Unexchanged Shares............. 8
3.3 No Fractional Securities..................................... 8
3.4 Certain Adjustments.......................................... 8
3.5 Rights of Dissenting Shareholders............................ 9
ARTICLE 4
Representations and Warranties
4.1 Representations and Warranties of SWVA....................... 9
(a) Organization, Standing and Power...................... 9
(b) Authority............................................. 9
(c) Capital Structure.....................................10
(d) Ownership Capital Structure and
Organization of SVSB.........................................10
(e) Financial Statements..................................11
(f) Absence of Undisclosed Liabilities....................11
(g) Legal Proceedings; Compliance with Laws 12
(h) Regulatory Approvals..................................12
(i) Labor Relations.......................................12
(j) Tax Matters...........................................13
(k) Property..............................................13
(l) Reports...............................................13
(m) Employee Benefit Plans................................13
(n) Investment Securities.................................14
(o) Certain Contracts.....................................14
(p) Insurance.............................................15
(q) Loans, OREO and Allowance for Loan Losses 15
(r) Absence of Material Changes and Events................16
(s) Statements True and Correct...........................16
(t) Brokers and Finders...................................17
(u) Repurchase Agreements.................................17
(v) Trust Accounts........................................17
(w) Environmental Matters..................................17
4.2 Representations and Warranties of FNB........................18
(a) Organization, Standing and Power......................18
(b) Authority.............................................19
(c) Capital Structure.....................................19
(d) Ownership of the FNB Subsidiaries; Capital Structure
of the FNB Subsidiaries; and Organization of the FNB
Subsidiaries.........................................20
(e) Financial Statements..................................20
(f) Absence of Undisclosed Liabilities....................21
(g) Legal Proceedings; Compliance with Laws...............21
(h) Regulatory Approvals..................................22
(i) Labor Relations.......................................22
(j) Tax Matters...........................................22
(k) Property..............................................22
(l) Reports...............................................23
(m) Employee Benefit Plans................................23
(n) Investment Securities.................................24
(o) Certain Contracts.....................................24
(p) Insurance.............................................24
(q) Loans, OREO, and Allowance for Loan Losses............25
(r) Absence of Material Changes and Events................26
(s) Statements True and Correct...........................26
(t) Brokers and Finders...................................26
(u) Repurchase Agreements.................................26
(v) Administration of Trust Accounts......................27
(w) Environmental Matters.................................27
ARTICLE 5
Conduct Prior to the Effective Date
5.1 Access to Records and Properties.............................28
5.2 Confidentiality..............................................29
5.3 Registration Statement, Proxy Statement and
Shareholder Approval.........................................29
5.4 Operation of the Business of FNB and SWVA....................30
5.5 Dividends....................................................31
5.6 No Solicitation..............................................31
5.7 Regulatory Filings...........................................31
5.8 Public Announcements.........................................32
5.9 Notice of Breach.............................................32
5.10 Accounting Treatment.........................................32
5.11 Merger Consummation..........................................32
5.12 FNB Acquisition Transaction..................................32
5.13 Affiliate Agreements.........................................32
ARTICLE 6
Additional Agreements
6.1 Conversion of Stock Options..................................32
6.2 Benefit Plans................................................33
6.3 Indemnification..............................................35
ARTICLE 7
Conditions to the Merger
7.1 Conditions to Each Party's Obligations to Effect the Merger..35
(a) Shareholder Approval..................................35
(b) Regulatory Approvals..................................35
(c) Registration Statement................................35
(d) Tax Opinion...........................................35
(e) Opinions of Counsel...................................35
(f) Legal Proceedings.....................................35
(g) Amendment of SVSB ESOP................................35
7.2 Conditions to Obligations of FNB.............................36
(a) Representations and Warranties........................36
(b) Performance of Obligations............................37
7.3 Conditions to Obligations of SWVA............................37
(a) Representations and Warranties........................37
(b) Performance of Obligations............................37
(c) Investment Banking Letter.............................37
ARTICLE 8
Termination
8.1 Termination..................................................37
8.2 Effect of Termination........................................38
8.3 Non-Survival of Representations, Warranties and Covenants....39
8.4 Expenses.....................................................39
ARTICLE 9
General Provisions
9.1 Entire Agreement.............................................40
9.2 Waiver and Amendment.........................................40
9.3 Descriptive Headings.........................................41
9.4 Governing Law................................................41
9.5 Notices......................................................41
9.6 Counterparts.................................................42
9.7 Severability.................................................42
9.8 Subsidiaries.................................................42
Exhibit 1.4 - Addendum to Employment Agreements
Exhibit A - Plan of Merger between SWVA Bancshares, Inc. and
FNB Corporation
Exhibit B - Exchange Agent Agreement
Exhibit C - Affiliate Agreement
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and
entered into as of August 7, 2000 by and between FNB Corporation, a Virginia
corporation with its principal office located in Christiansburg, Virginia
("FNB"), and SWVA Bancshares, Inc., a Virginia corporation with its principal
office located in Roanoke, Virginia ("SWVA").
WITNESSETH:
WHEREAS, FNB and SWVA (together, the "Companies") desire to affiliate,
so that First National Bank ("First National") and Southwest Virginia Savings
Bank, FSB ("SVSB") (together, the "Banks") will be under the common control of
FNB; and
WHEREAS, FNB and SWVA have agreed to the affiliation of their two
companies through a merger under Virginia law, as a result of which SWVA would
merge with and into FNB and the shareholders of SWVA would become shareholders
of FNB, all as more specifically provided in this Agreement and the Plan of
Merger in the form attached hereto as Exhibit A (the "Plan"); and
WHEREAS, the Boards of Directors of the Companies each believe it is
in the best interests of their respective corporations and their shareholders to
affiliate as provided herein and that the respective shareholder values of FNB
and SWVA can be maximized over time through this affiliation; and
WHEREAS, the Boards of Directors of the Companies each believe that
the transaction contemplated in this Agreement is in the best interests of the
communities they serve and of their respective employees; and
WHEREAS, the Boards of Directors of the Companies each believe that
after the affiliation the holding company structure should provide management
and technical assistance and support for recruitment, training and retention of
skilled officers and employees to the Banks in order to enable the combined
organization to operate more efficiently; and
WHEREAS, the respective Boards of Directors of the Companies have
resolved that the transactions described herein are in the best interests of the
parties and their respective shareholders and have authorized and approved the
execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereby agree as follows:
ARTICLE 1
The Merger and Related Matters
1.1 Definitions. Any term defined anywhere in this Agreement shall
have the meaning ascribed to it for all purposes of this Agreement (unless
expressly noted to the contrary). In addition:
(a) the term "knowledge" when used with respect to a party shall
mean the knowledge of any "Executive Officer" of such party, as such term is
defined in Regulation O, (12 C.F.R. 215);
(b) the term "Material Adverse Effect", when applied to a party,
shall mean an event, occurrence or circumstance (including without limitation
(i) the making of any provisions for possible loan and lease losses, write-downs
or other real estate and taxes and (ii) any breach of a representation or
warranty by such party) which (a) has or is reasonably likely to have a material
adverse effect on the financial position, results of operations or business of
the party and its subsidiaries, taken as a whole, or (b) would materially impair
the party's ability to perform its obligations under this Agreement or the
consummation of the Merger and the other transactions contemplated by this
Agreement; provided, however, that solely for purposes of measuring whether an
event, occurrence or circumstance has a material adverse effect on such party's
results of operations, the term "results of operations" shall mean net interest
income plus non-interest income (less securities gains) less gross expenses
(excluding provisions for possible loan and lease losses, write-downs of other
real estate and taxes); and provided further, that material adverse effect and
material impairment shall not be deemed to include the impact of (i) changes in
banking and similar laws of general applicability or interpretations thereof by
courts or governmental authorities, (ii) changes in generally accepted
accounting principles or regulatory accounting requirements applicable to banks
and bank holding companies generally, and (iii) the Merger and related expenses
associated with the transactions contemplated by this Agreement on the operating
performance of the parties to this Agreement; and
(c) the term "Previously Disclosed" by a party shall mean
information set forth in a written disclosure letter that is delivered by that
party to the other party prior to or contemporaneously with the execution of
this Agreement and specifically designated as information "Previously Disclosed"
pursuant to this Agreement.
1.2 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Date as defined in Section 1.5 hereof, SWVA will be
merged with and into FNB (the "Merger"). At the Effective Date, the Merger
shall have the effect as provided in Section 13.1-721 of the Virginia Stock
Corporation Act.
1.3 Name and Continuing Operations. The respective names and banking
offices of the Banks will not change as a result of the Merger. After the
Effective Date, FNB shall continue to be headquartered in Christiansburg,
Virginia.
2
1.4 Management of FNB and the Banks. The directors, officers and
employees of the Banks will not change as a result of the Merger except that
Julian D. Hardy, Jr. shall be appointed to the Board of SVSB. On the Effective
Date, the number of Directors of FNB shall be increased by two members by adding
one member in Class I whose terms expire at the 2003 annual meeting of
shareholders and by adding one member in Class III whose terms expire at the
2002 annual meeting of shareholders. B. L. Rakes shall be appointed to fill the
vacancy created in Class I and Courtney Hoge shall be appointed to fill the
vacancy created in Class III. At the next annual meeting of shareholders of
FNB, management of FNB will recommend to shareholders that those gentlemen be
elected as a member of Class I and Class III, respectively. In addition, on the
Effective Date, FNB agrees to assume the employment agreements between SWVA and
D. W. Shilling and Barbara Weddle, and as of the Effective Time, FNB shall enter
into an Addendum to the employment agreement for D. W. Shilling and Barbara
Weddle, as attached hereto as Exhibit 1.4. In addition, as of the Effective
Date, FNB shall enter into an agreement with B. L. Rakes in which FNB agrees to
pay Mr. Rakes $17,000 in consideration for his agreement not to compete with FNB
and its affiliates for a period of one year.
1.5 The Closing and Effective Date. The closing of the transactions
contemplated by this Agreement and the Plan of Merger shall take place at the
offices of FNB in Christiansburg, Virginia or at such other place as may be
mutually agreed upon by the parties. The Merger shall become effective on the
date shown on the Certificate of Merger issued by the State Corporation
Commission of Virginia effecting the Merger (the "Effective Date"). Unless
otherwise agreed upon in writing by the chief executive officers of FNB and
SWVA, subject to the conditions to the obligations of the parties to effect the
Merger as set forth in Article 6, the parties shall use their best efforts to
cause the Effective Date to occur on the first day of the month following the
month in which the conditions set forth in Sections 7.1(a) and 7.1(b) are
satisfied. All documents required by the terms of this Agreement to be
delivered at or prior to consummation of the Merger will be exchanged by the
parties at the closing of the Merger (the "Merger Closing"), which shall be held
on or before the Effective Date. FNB and SWVA shall execute and deliver to the
Virginia State Corporation Commission Articles of Merger containing a Plan of
Merger in substantially the form of Exhibit A hereto.
ARTICLE 2
Basis and Manner of Conversion
2.1 Conversion of SWVA Stock. At the Effective Date, by virtue of the
Merger, each share of the common stock, par value $0.10 per share, of SWVA
("SWVA Common Stock") issued and outstanding immediately prior to the Effective
Date will be converted into either cash (the "Cash Consideration") or shares of
common stock, par value $5.00 per share, of FNB ("FNB Common Stock"), the "Stock
Consideration," which Stock Consideration together with the Cash Consideration
(the "Merger Consideration"), in each case as the holder thereof shall have
elected or be deemed to have elected in accordance with Section 2.3.
3
In the case that the Market Value of FNB Common Stock (as defined
later in this Section 2.1) is equal to or greater than $15.30 per share and
equal to or less than $18.70 per share, the Cash Consideration will be $20.25
per share and the Stock Consideration will equal shares of FNB Common Stock with
a Market Value of $20.25. In the case that the Market Value of FNB Common Stock
is greater than $18.70 and less than or equal to $20.00, the Stock Consideration
will equal 1.083 shares of FNB Common Stock for each outstanding share of SWVA
Common Stock, and the Cash Consideration will be $20.25. In the case that the
Market Value of FNB Common Stock is less than $15.30 and equal to or greater
than $14.00, the Stock Consideration will equal 1.324 shares of FNB Common Stock
for each outstanding share of SWVA Common Stock, and the Cash Consideration will
be $20.25.
The Market Value of FNB Common Stock will be the average of the last
reported sales prices per share of FNB Common Stock as reported on the NASDAQ
Exchange Composite Transactions Tape (as reported in The Wall Street Journal,
or, if not reported thereby, another authoritative source as chosen by FNB) for
the thirty consecutive full trading days on such exchange (even if FNB Common
Stock does not trade in each such day) ending at the close of trading on the
tenth calendar day before the Effective Date (the "Market Value" and the
"Measurement Period"). The ratio of shares of FNB's Common Stock that will be
exchanged for each outstanding share of SWVA Common Stock shall be referred to
herein as the "Exchange Ratio" and shall be rounded to the nearest thousandth
decimal point.
2.2 Allocation. Notwithstanding anything in this Agreement to the
contrary, the aggregate amount of cash to be issued to shareholders of SWVA in
the Merger shall be equal to $1,785,742 (the "Cash Amount"); provided that the
Cash Amount may be changed by FNB to accommodate the exercise by FNB of its
option to change the Cash Number and the Stock Number pursuant to the last
sentence of this Section 2.2. As used in this Agreement, the Cash Number shall
mean the aggregate number of shares of SWVA Common Stock to be converted into
the right to receive the Cash Consideration in the Merger, which shall be equal
to the Cash Amount divided by $20.25. The number of shares of SWVA Common Stock
to be converted into the right to receive Stock Consideration (the "Stock
Number") will be equal to (i) the number of shares of SWVA Common Stock issued
and outstanding immediately prior to the Effective Date of the Merger less (ii)
the sum of (A) the Cash Number and (B) the aggregate number of shares of SWVA
Common Stock to be exchanged for cash pursuant to Section 3.3. FNB shall have
the option to change the Cash Number and the Stock Number to more closely follow
the actual elections of SWVA shareholders pursuant to this Article 2, so long as
such modification to the Cash Number and the Stock Number does not prevent the
condition set forth in Section 7.1(d) from being satisfied.
2.3 Election. Subject to allocation in accordance with the provisions of
this Article, each record holder of shares of SWVA Common Stock issued and
outstanding immediately prior to the Election Deadline (as defined in Section
3.1(i)) will be entitled, in accordance with Section 3.1, (i) to elect to
receive in respect of each such share held in such manner (A) Cash Consideration
(a "Cash Election") or (B) Stock Consideration (a "Stock Election") thus, making
an election for all Cash Consideration, all Stock Consideration, or a mixture
4
thereof or (ii) to indicate that such record holder has no preference as to the
receipt of Cash Consideration or Stock Consideration for all such shares held by
such holder (a "Non-Election"). Shares of SWVA Common Stock in respect of which
a Non-Election is made or as to which no election is made (collectively, "Non-
Election Shares") shall be deemed by FNB to be shares in respect of which Cash
Elections or Stock Elections have been made, as FNB shall determine. Holders of
record of shares of SWVA Common Stock who hold such shares as nominees, trustees
or in other representative capacities (a "Representative") may submit multiple
Forms of Election (as hereinafter defined), provided that each such Form of
Election covers all the shares of SWVA Common Stock held by that Representative
for a particular beneficial owner.
2.4 Allocation of Cash Election Shares. In the event that the
aggregate number of shares in respect of which Cash Elections have been made
(the "Cash Election Shares") exceeds the Cash Number, all shares of SWVA Common
Stock in respect of which Stock Elections have been made (the "Stock Election
Shares") and all Non-Election Shares will be converted into the right to receive
Stock Consideration (and cash in lieu of fractional interests in accordance with
Section 3.3), and Cash Election Shares will be converted into the right to
receive Cash Consideration or Stock Consideration in the following manner:
(i) the number of Cash Election Shares covered by each Form
of Election (as defined in Section 3.1(i)) to be converted into
Cash Consideration will be determined by multiplying the number
of Cash Election Shares covered by such Form of Election by a
fraction, (A) the numerator of which is the Cash Number and (B)
the denominator of which is the aggregate number of Cash Election
Shares rounded down to the nearest whole number; and
(ii) all Cash Election Shares not converted into Cash
Consideration in accordance with Section 2.4(i) will be converted
into the right to receive Stock Consideration (and cash in lieu
of fractional interests in accordance with Section 3.3).
Provided, however, that cash in lieu of fractional interests and cash to be paid
in connection with rights of dissenting shareholders, as provided in Sections
3.3 and 3.5, respectively, shall not be included in any determination of whether
this Section 2.4 shall be given effect.
2.5 Allocation of Stock Election Shares. In the event that the
aggregate number of Stock Election Shares exceeds the Stock Number, all Cash
Election Shares and all Non-Election Shares (together, the " Cash Shares") will
be converted into the right to receive Cash Consideration, and all Stock
Election Shares will be converted into the right to receive Cash Consideration
or Stock Consideration in the following manner:
(i) the number of Stock Election Shares covered by each Form
of Election to be converted into Cash Consideration will be
determined
5
by multiplying the number of Stock Election Shares covered by
such Form of Election by a fraction, (A) the numerator of which
is the Cash Number less the number of Cash Shares and (B) the
denominator of which is the aggregate number of Stock Election
Shares, rounded down to the nearest whole number; and
(ii) all Stock Election Shares not converted into Cash
Consideration in accordance with Section 2.5(i) will be converted
into the right to receive Stock Consideration (and cash in lieu
of fractional interests in accordance with Section 3.3).
2.6 No Allocation. In the event that neither Section 2.4 nor Section
2.5 is applicable, all Cash Election Shares will be converted into the right to
receive Cash Consideration, all Stock Election Shares will be converted into
the right to receive Stock Consideration (and cash in lieu of fractional
interests in accordance with Section 3.3) and Non-Election Shares will be
converted into the right to receive Cash Consideration or Stock Consideration
(and cash in lieu of fractional interests in accordance with Section 3.3) as the
Exchange Agent shall determine.
2.7 Computations. The Exchange Agent (as defined in Section 3.1(i))
will make all computations to give effect to this Article 2.
2.8 Cancellation of Shares. As of the Effective Date of the Merger,
all such shares of SWVA Common Stock will no longer be outstanding and
automatically be cancelled and retired and will cease to exist and each holder
of a certificate formerly representing any such shares of SWVA Common Stock (a
"SWVA Certificate") will cease to have any rights with respect thereto, except
the right to receive Merger Consideration and any additional cash in lieu of
fractional shares of FNB Common Stock to be issued or paid in consideration
therefor upon surrender of such SWVA Certificate in accordance with Article 3,
without interest, subject to rights of dissenting shareholders as provided under
Section 3.5.
ARTICLE 3
Manner of Exchange
3.1 Exchange Procedures.
(i) Not more than 45 days nor fewer than 30 days prior to the
Effective Date, First National, as the exchange agent ("Exchange
Agent"), will mail a form of election (the "Form of Election") to
each shareholder of record of SWVA as of a record date as close
as practicable to the date of mailing and mutually agreed to by
SWVA and FNB. The Exchange Agent shall enter into a written
agreement with FNB and SWVA detailing its duties and
responsibilities and shall furnish evidence of liability
insurance for such activities in a form substantially similar to
Exhibit B. In addition, the Exchange Agent will use its best
efforts to make the Form of Election available to the persons who
become shareholders of SWVA during the period between such record
6
date and the Effective Date. Any election to receive Merger
Consideration will have been properly made only if the Exchange
Agent shall have received on the fifth business day immediately
preceding the Effective Date (the "Election Deadline"), a Form of
Election properly completed and accompanied by a SWVA Certificate
("Certificate(s)") for the shares to which such Form of Election
relates, acceptable for transfer on the books of SWVA (or an
appropriate guarantee of delivery), as set forth in such Form of
Election. An election may be revoked only by written notice
received by the Exchange Agent prior to 5:00 p.m. on the Election
Deadline. If an election is so revoked, the Certificate(s) (or
guarantee of delivery, as appropriate) to which such election
relates will be promptly returned to the person submitting the
same to the Exchange Agent.
(ii) As soon as reasonably practicable after the Effective
Date, the Exchange Agent will mail to each holder of record of a
Certificate, whose shares of SWVA Common Stock were converted
into the right to receive Merger Consideration and those who
failed to return a properly completed Form of Election, (i) a
letter of transmittal (which will specify that delivery will be
effected, and risk of loss and title to the Certificates will
pass, only upon delivery of the Certificates to the Exchange
Agent and will be in such form and have such other provisions as
the Exchange Agent may specify consistent with this Agreement)
and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration.
(iii) With respect to properly made elections in accordance
with Section 3.1(i), and upon surrender in accordance with
Section 3.1(ii) of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate will be entitled
to receive in exchange therefor the Merger Consideration that
such holder has the right to receive pursuant to the provisions
of Article 2, and the Certificate so surrendered will forthwith
be canceled. In the event of a transfer of ownership of Shares
that are not registered in the transfer records of SWVA, as the
case may be, payment may be issued to a person other than the
person in whose name the Certificate so surrendered is registered
if such Certificate is properly endorsed or otherwise in proper
form for transfer and the person requesting such issuance pays
any transfer or other taxes required by reason of such payment to
a person other than the registered holder of such Certificate or
establishes to the satisfaction of FNB that such tax has been
paid or is not applicable. Until surrendered as contemplated by
this Section 3.1, each Certificate will be deemed at any time
after the Effective Date to represent only the right to receive
upon such surrender the Merger Consideration that the holder
thereof has the right to receive in respect of such Certificate
7
pursuant to the provisions of Article 2. No interest will be paid
or will accrue on any cash payable to holders of Certificates
pursuant to the provisions of Article 2.
3.2 Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to the shares of SWVA Common Stock with a
record date after the Effective Date shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of SWVA Common Stock
represented thereby, and no cash payment in lieu of any fractional shares shall
be paid to any such holder pursuant to Section 3.3. Subject to the effect of
unclaimed property, escheat and other applicable laws, following surrender of
any such Certificate, there shall be paid to the holder of the Certificate
representing whole shares of SWVA Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of SWVA Common Stock to which such holder
is entitled pursuant to Section 3.3, and (ii) the amount of dividends or other
distributions, if any, with a record date after the Effective Date.
3.3 No Fractional Securities. No FNB Certificates or scrip
representing fractional shares of FNB Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional shares shall not
entitle the owner thereof to vote or to any other rights of a holder of FNB
Common Stock. A holder of Shares converted in the Merger who would otherwise
have been entitled to a fractional share of FNB Common Stock shall be entitled
to receive a cash payment (without interest) in lieu of such fractional share in
an amount determined by multiplying (i) the fractional share interest to which
such holder would otherwise be entitled by (ii) the Market Value of FNB Common
Stock.
3.4 Certain Adjustments. If, after the date hereof and on or prior
to the Closing Date, the outstanding shares of SWVA Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock or other securities is declared thereon with a record date
within such period, or any similar event shall occur, the Merger Consideration
will be adjusted accordingly to provide to the holders of SWVA Common Stock,
respectively, the same economic effect as contemplated by this Agreement prior
to such reclassification, recapitalization, split-up, combination, exchange or
dividend or similar event.
3.5 Rights of Dissenting Shareholders. Shareholders of SWVA who
object to the Merger will be entitled to the rights and remedies set forth in
sections 13.1-729 through 13.1-741 of the Virginia Stock Corporation Act.
ARTICLE 4
Representation and Warranties
4.1 Representations and Warranties of SWVA. SWVA represents and
warrants to FNB as follows:
8
(a) Organization, Standing and Power. (1) SWVA is a corporation duly
organized, validly existing and in good standing under the laws of Virginia. It
has all requisite corporate power and authority to carry on its business as now
being conducted and to own and operate its assets, properties and business, and
SWVA has the corporate power and authority to execute and deliver this Agreement
and perform the respective terms of this Agreement and Plan of Merger. SWVA is
duly registered as a unitary savings and loan holding company under the 12
U.S.C. (S) 1467a. SVSB is the only subsidiary of SWVA and is wholly-owned by
it, and is a federal savings bank, duly organized, validly existing and in good
standing under the laws of the United States, is in compliance in all material
respects with all rules and regulations promulgated by any relevant regulatory
authority, has all requisite corporate power and authority to carry on its
business as now being conducted and to own and operate its assets, properties
and business, is an "insured bank" as defined in the Federal Deposit Insurance
Act and applicable regulations thereunder, and its deposits are insured to the
fullest extent allowed by law by the Federal Deposit Insurance Corporation.
(2) Except as Previously Disclosed, neither SWVA nor SVSB
(collectively with SWVA, the "SWVA Companies") owns any equity securities of any
other corporation or entity.
(b) Authority. (1) The execution and delivery of this Agreement and
the Plan of Merger and the consummation of the Merger have been duly and validly
authorized by all necessary corporate action on the part of SWVA, except the
approval of shareholders. The Agreement has been approved by at least two-
thirds of SWVA's Board of Directors and represents the legal, valid, and binding
obligation of SWVA, enforceable against SWVA in accordance with its terms
(except in all such cases as enforceability may be limited by applicable
bankruptcy, insolvency, merger, moratorium or similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
(2) Neither the execution and delivery of the Agreement, the
consummation of the transactions contemplated therein, nor the compliance by
SWVA with any of the provisions thereof will (i) conflict with or result in a
breach of any provision of the Articles of Incorporation or Bylaws of SWVA, (ii)
except as Previously Disclosed, constitute or result in the breach of any term,
condition or provision of, or constitute default under, or give rise to any
right of termination, cancellation or acceleration with respect to, or result in
the creation of any lien, charge or encumbrance upon, any property or assets of
the SWVA Companies pursuant to (A) any note, bond, mortgage, indenture, or (B)
any material license, agreement, lease or other instrument or obligation, to
which any of the SWVA Companies is a party or by which any of them or any of
their properties or assets may be bound, or (iii) subject to the receipt of the
requisite approvals referred to in Section 4.7, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to any of the SWVA
Companies or any of their properties or assets.
9
(c) Capital Structure. The authorized capital stock of SWVA consists
of 2,225,000 shares of common stock, par value $0.10 per share ("SWVA Common
Stock"), of which 423,612 shares (including 4,328 shares held by the Management
Stock Bonus Plan of SVSB, which have not been awarded under such plan and for
which a Cash Election shall be made) are issued and outstanding, fully paid and
nonassessable, not subject to shareholder preemptive rights, and not issued in
violation of any agreement to which SWVA is a party or otherwise bound, or of
any registration or qualification provisions of any federal or state securities
laws outstanding options to purchase 64,049 shares of SWVA Common Stock; 275,000
shares of preferred stock, par value $0.10 per share ("SWVA Preferred Stock"),
none of which shares are issued and outstanding. Except as Previously
Disclosed, there are no outstanding understandings or commitments of any
character pursuant to which SWVA and any of the SWVA Companies could be required
or expected to issue shares of capital stock.
(d) Ownership, Capital Structure, and Organization of SVSB. (1) SWVA
does not own, directly or indirectly, 5% or more of the outstanding capital
stock or other voting securities of any corporation, bank or other organization
actively engaged in business except SVSB and a service corporation wholly-owned
by SVSB, Southwest Virginia Service Corporation, Inc. The outstanding shares of
capital stock of SVSB have been duly authorized and are validly issued, and are
fully paid and nonassessable and all such shares are owned by SWVA free and
clear of all liens, claims and encumbrances and were not issued in violation of
any agreement or of any regulation or qualification provisions of federal or
state securities laws. No rights are authorized, issued or outstanding with
respect to the capital stock of SVSB and there are no agreements, understandings
or commitments relating to the right of SWVA to vote or to dispose of said
shares. None of the shares of capital stock of SVSB has been issued in
violation of the preemptive rights of any person.
(2) SVSB is a duly organized federal savings bank, validly
existing and in good standing under applicable laws. SVSB (i) has full corporate
power and authority to own, lease and operate its properties and to carry on its
business as now conducted except where the absence of such power or authority
would not have a material adverse effect on the financial condition, results of
operations or business of SWVA on a consolidated basis, and (ii) is duly
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification and where failure to do qualify would have
a material adverse effect on the financial condition, results of operations or
business of SWVA on a consolidated basis. SVSB has all federal, state, local and
foreign governmental authorizations and licenses necessary for it to own or
lease its properties and assets and to carry on its business as it is now being
conducted, except where failure to obtain such authorization or license would
not have a material adverse effect on its business.
(e) Financial Statements. SWVA's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1999, and all other documents filed or to be filed
subsequent to June 30, 1999 under Sections 13(a), 13(c), 14 or 15(d) of the
10
Securities Exchange Act of 1934, as amended (together with the rules and
regulations thereunder, the "Exchange Act"), in the form filed with the SEC (in
each such case, the "SWVA Financial Statements") 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 made therein,
in light of the circumstances under which they were made, not misleading; and
each of the balance sheets in or incorporated by reference into the SWVA
Financial Statements (including the related notes and schedules thereto) fairly
presents and will fairly present the financial position of the entity or
entities to which it relates as of its date and each of the statements of income
and changes in stockholders' equity and cash flows or equivalent statements in
the SWVA Financial Statements (including any related notes and schedules
thereto) fairly presents and will fairly present the results of operations,
changes in stockholders' equity and changes in cash flows, as the case may be,
of the entity or entities to which it relates for the periods set forth therein,
in each case in accordance with generally accepted accounting principles
consistently applied to banks and savings and loan holding companies during the
periods involved, except as may be noted therein, subject to normal and
recurring year-end audit adjustments in the case of unaudited statements.
(f) Absence of Undisclosed Liabilities. At June 30, 1999, and at any
subsequent date reflected in such Financial Statements, none of the SWVA
Companies had any obligation or liability (contingent or otherwise) of any
nature which were not reflected in the SWVA Financial Statements, except for
those which in the aggregate are immaterial or have been Previously Disclosed.
(g) Legal Proceedings; Compliance with Laws. Except as Previously
Disclosed, there are no actions, suits or proceedings instituted or pending or,
to the best knowledge of SWVA, threatened or probable of assertion against any
of the SWVA Companies, or against any property, asset, interest or right of any
of them, that are reasonably expected to have, either individually or in the
aggregate, a material adverse effect on the financial condition of SWVA on a
consolidated basis or that are reasonably expected to threaten or impede the
consummation of the transactions contemplated by this Agreement. None of the
SWVA Companies is a party to any agreement or instrument or subject to any
judgment, order, writ, injunction, decree or rule that might reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), business or prospects of SWVA on a consolidated basis. Except as
Previously Disclosed, as of the date of this Agreement, none of the SWVA
Companies nor any of their properties is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement with, or a
11
commitment letter or similar submission to, any federal or state governmental
agency or authority charged with the supervision or regulation of depository
institutions or mortgage lenders or engaged in the insurance of deposits which
restricts or purports to restrict in any material respect the conduct of the
business of it or any of its subsidiaries or properties, or in any manner
relates to the capital, liquidity, credit policies or management of it; and
except as Previously Disclosed, none of the SWVA Companies has been advised by
any such regulatory authority that such authority is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding, commitment letter or
similar submission. To the best knowledge of SWVA, the SWVA Companies have
complied in all material respects with all laws, ordinances, requirements,
regulations or orders applicable to its business (including environmental laws,
ordinances, requirements, regulations or orders).
(h) Regulatory Approvals. SWVA knows of no reason why the regulatory
approvals referred to in Section 7.1(b) should not be obtained without the
imposition of any condition of the type referred to in Section 7.1(b). SVSB is
in material compliance with the applicable provisions of the Community
Reinvestment Act and the regulations promulgated thereunder, and SVSB currently
has a CRA rating of satisfactory or better. To the knowledge of SWVA, there is
no fact or circumstance or set of facts or circumstances that would cause SVSB
to fail to comply with such provisions or cause the rating of SVSB to fall below
satisfactory.
(i) Labor Relations. None of the SWVA Companies is a party to, or is
bound by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is it the subject of
a proceeding asserting that is has committed an unfair labor practice (within
the meaning of the National Labor Relations Act) or seeking to compel it to
bargain with any labor organization as to wages and conditions of employment,
nor is there any strike or other labor dispute involving it, pending or, to the
best of its knowledge, threatened, nor is it aware of any activity involving its
employees seeking to certify a collective bargaining unit or engaging in any
other organizational activity.
(j) Tax Matters. The SWVA Companies have filed all federal, state,
and local tax returns and reports required to be filed, and all taxes shown by
such returns to be due and payable have been paid or are reflected as a
liability in the SWVA Financial Statements or are being contested in good faith
and have been Previously Disclosed. Except to the extent that liabilities
therefor are specifically reflected in the SWVA Financial Statements, there are
no federal, state or local tax liabilities of the SWVA Companies other than
liabilities that have arisen since December 31, 1999, all of which have been
properly accrued or otherwise provided for on the books and records of the SWVA
Companies. Except as Previously Disclosed, no tax return or report of any of
the SWVA Companies is under examination by any taxing authority or the subject
of any administrative or judicial proceeding, and no unpaid tax deficiency has
been asserted against any of the SWVA Companies by any taxing authority.
(k) Property. Except as disclosed or reserved against in the SWVA
Financial Statements, all of the SWVA Companies have good and marketable title
free and clear of all material liens, encumbrances, charges, defaults or
equities of whatever character to all of the material properties and assets,
tangible or intangible, reflected in the SWVA Financial Statements as being
owned by the SWVA Companies as of the dates thereof. To the best knowledge of
SWVA, all buildings, and all fixtures, equipment, and other property and assets
which are material to its business on a consolidated basis, held under leases or
subleases by the SWVA Companies are held under valid instruments enforceable in
accordance with their respective terms, subject to bankruptcy, insolvency,
12
merger, moratorium and similar laws. The buildings, structures, and
appurtenances owned, leased, or occupied by the SWVA Companies are, to the best
knowledge of SWVA, in good operating condition, in a state of good maintenance
and repair and (i) comply with applicable zoning and other municipal laws and
regulations, and (ii) there are no defects therein.
(l) Reports. Since January 1, 1998, the SWVA Companies have filed all
reports and statements, together with any amendments required to be made with
respect thereto, that were required to be filed with the SEC, the Federal
Reserve, the SCC, and any other governmental or regulatory authority or agency
having jurisdiction over their operations.
(m) Employee Benefit Plans. (1) SWVA will deliver for FNB's review,
as soon as practicable, true and complete copies of all material pension,
retirement, profit-sharing, deferred compensation, stock option, bonus, vacation
or other material incentive plans or agreements, all material medical, dental or
other health plans, all cafeteria or flexible benefits plans, all life insurance
plans and all other material employee benefit plans or fringe benefit plans and
any related trust or other funding instrument, including, without limitation,
all "employee benefit plans" as that term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), currently
adopted, maintained by, sponsored in whole or in part by, or contributed to by
SWVA or SVSB for the benefit of current or former employees, retirees or other
beneficiaries eligible to participate (collectively, the "SWVA Benefit Plans").
Any of the SWVA Benefit Plans which is an "employee pension benefit plan," as
that term is defined in Section 3(2) of ERISA, is referred to herein as a "SWVA
ERISA Plan." No SWVA Benefit Plan is or has been a "multiemployer plan," as
defined in Section 3(37) of ERISA.
(2) Except as Previously Disclosed, all SWVA Benefit Plans are in
compliance with the applicable terms of ERISA, the Internal Revenue Code of
1986, as amended (the "IRC") and any other applicable laws, rules and
regulations the breach or violation of which could result in a material
liability to SWVA on a consolidated basis. In the case of any plan intended to
be qualified under IRC Section 401, compliance with such qualification
requirements shall mean the receipt of a current, favorable determination letter
from the Internal Revenue Service based on laws changes effective through 1994
and operation of the plan in accordance with its terms or in accordance with any
subsequently enacted law for which the remedial amendment period has not yet
ended.
(3) No SWVA ERISA Plan which is subject to the minimum funding
standards of Section 302 of ERISA or IRC Section 412 has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, and the
present fair market value of the assets of any such plan which is a "defined
benefit plan," as that term is defined in Section 3(35) of ERISA, exceeds the
plan's "benefit liabilities," as that term is defined in Section 4001(a)(16) of
13
ERISA, when determined under actuarial factors that would apply if the plan was
terminated in accordance with all applicable legal requirements.
(n) Investment Securities. Except as Previously Disclosed and except
for pledges to secure public and trust deposits and obligations under agreements
pursuant to which any of the SWVA Companies has sold securities subject to an
obligation to repurchase, none of the investment securities reflected in the
SWVA Financial Statements is subject to any restriction, contractual, statutory,
or otherwise, which would impair materially the ability of the holder of such
investment to dispose freely of any such investment at any time.
(o) Certain Contracts. (1) Except as Previously Disclosed, neither
SWVA nor any SWVA subsidiary is a party to, or is bound by, (i) any material
agreement, arrangement or commitment, (ii) any agreement, indenture or other
instrument relating to the borrowing of money by SWVA or SVSB or the guarantee
by SWVA or SVSB of any such obligation, (iii) any agreement, arrangement or
commitment relating to the employment of a consultant or the employment,
election, retention in office or severance of any present or former director or
officer, (iv) any agreement to make loans or for the provision, purchase or sale
of goods, services or property between SWVA or SVSB and any director or officer
of SWVA or SVSB, or any member of the immediate family or affiliate of any of
the foregoing, or (v) any agreement between SWVA or SVSB and any 5% or more
shareholder of SWVA; in each case other than agreements entered into in the
ordinary course of the banking business of SWVA or SVSB consistent with past
practice.
(2) Neither SWVA or SVSB, nor to the knowledge of SWVA, the other
party thereto, is in default under any material agreement, commitment,
arrangement, lease, insurance policy or other instrument whether entered into in
the ordinary course of business or otherwise, nor has there occurred any event
that, with the lapse of time or giving of notice or both, would constitute such
a default, other than defaults of loan agreements by borrowers from SWVA or SVSB
in the ordinary course of its business.
(p) Insurance. A complete list of all policies or binders of fire,
liability, product liability, workmen's compensation, vehicular and other
insurance held by or on behalf of the SWVA Companies has previously been
furnished to FNB and all such policies or binders are valid and enforceable in
accordance with their terms, are in full force and effect, and insure against
risks and liabilities to the extent and in the manner customary for the industry
and are deemed appropriate and sufficient by SWVA. The SWVA Companies are not
in default with respect to any provision contained in any such policy or binder
and have not failed to give any notice or present any claim under any such
policy or binder in due and timely fashion. None of the SWVA Companies has
received notice of cancellation or non-renewal of any such policy or binder.
None of the SWVA Companies has knowledge of any inaccuracy in any application
for such policies or binders, any failure to pay premiums when due or any
similar state of facts or the occurrence of any event that is reasonably likely
to form the basis for any material claim against it not fully covered (except to
14
the extent of any applicable deductible) by the policies or binders referred to
above. None of the SWVA Companies has received notice from any of its insurance
carriers that any insurance premiums will be increased materially in the future
or that any such insurance coverage will not be available in the future on
substantially the same terms as now in effect.
(q) Loans, OREO, and Allowance for Loan Losses. (1) Except as
Previously Disclosed, and except for matters which individually or in the
aggregate, do not materially adversely affect the Merger or the financial
condition of SWVA, to SWVA's best knowledge each loan reflected as an asset in
the SWVA Financial Statements or the financial statements of SVSB (i) is
evidenced by notes, agreements, or other evidences of indebtedness which are
true, genuine and what they purport to be, (ii) to the extent secured, has been
secured by valid liens and security interests which have been perfected, and
(iii) is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
and other laws of general applicability relating to or affecting creditors'
rights and to general equity principles. All loans and extensions of credit
which are subject to regulation of the Federal Reserve which have been made by
SWVA and SVSB comply therewith.
(2) The classification on the books and records of SWVA and SVSB
of loans and/or non-performing assets as nonaccrual, troubled debt
restructuring, OREO or other similar classification, complies in all material
respects with generally accepted accounting principles and applicable regulatory
accounting principles.
(3) Except for liens, security interests, claims, charges, or
such other encumbrances as have been appropriately reserved for in the SWVA
Financial Statements or are not material, title to the OREO is good and
marketable, and there are no adverse claims or encumbrances on the OREO. All
title, hazard and other insurance claims and mortgage guaranty claims with
respect to the OREO have been timely filed and neither SWVA nor SVSB has been
received any notice of denial of any such claim.
(4) SWVA and SVSB are in possession of all of the OREO or, if any
of the OREO remains occupied by the mortgagor, eviction or summary proceedings
have been commenced or rental arrangements providing for market rental rates
have been agreed upon and SWVA and/or SVSB are diligently pursuing such eviction
of summary proceedings or such rental arrangements. Except as Previously
Disclosed, no legal proceeding or quasi-legal proceeding is pending or, to the
knowledge of SWVA and SVSB, threatened concerning any OREO or any servicing
activity or omission to provide a servicing activity with respect to any of the
OREO.
(5) Except as Previously Disclosed, all loans made by any of the
SWVA Companies to facilitate the disposition of OREO are performing in
accordance with their terms.
15
(6) The allowance for possible loan losses shown on the SWVA Financial
Statements was, and the allowance for possible loan losses shown on the
financial statements of SWVA as of dates subsequent to the execution of this
Agreement will be, in each case as of the dates thereof, adequate in all
material respects to provide for possible losses, net of recoveries relating to
loans previously charged off, on loans outstanding (including accrued interest
receivable) of the SWVA Companies and other extensions of credit (including
letters of credit and commitments to make loans or extend credit) by SWVA.
(r) Absence of Material Changes and Events. Since June 30, 1999,
there has not been any material adverse change in the condition (financial or
otherwise), aggregate assets or liabilities, cash flow, earnings or business or
SWVA, and SWVA has conducted its business only in the ordinary course consistent
with past practice.
(s) Statements True and Correct. None of the information supplied or
to be supplied by SWVA for inclusion in the Registration Statement, the proxy
statement/prospectus or any other document to be filed with the SEC or any other
regulatory authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, and, in the case of the
Registration Statement, when it becomes effective and with respect to the proxy
statement/prospectus, when first mailed to SWVA shareholders, be false or
misleading with respect to any material fact or omit to state any material fact
necessary in order to make the statements therein not misleading, or, in the
case of the proxy statement/prospectus or any supplement thereto, at the time of
the SWVA Shareholders' Meeting, be false or misleading with respect to any
material fact or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the SWVA Shareholders' Meeting. All documents that SWVA is
responsible for filing with the SEC or any other regulatory authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable law, including
applicable provisions of federal and state securities law.
(t) Brokers and Finders. Neither SWVA nor SVSB, nor any of their
respective officers, directors or employees, has employed any broker, finder or
financial advisor or incurred any liability for any fees or commissions in
connection with the transactions contemplated herein, except for RP Financial.
(u) Repurchase Agreements. With respect to all agreements pursuant to
which SWVA or SVSB has purchased securities subject to an agreement to resell,
if any, SWVA or SVSB, as the case may be, has a valid, perfected first lien or
security interest in the government securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
(v) Trust Accounts. SVSB does not provide trust services.
16
(w) Environmental Matters. (1) Except as Previously Disclosed, to
the best of SWVA's knowledge, neither SWVA nor SVSB owns or leases any
properties affected by toxic waste, radon gas or other hazardous conditions or
constructed in part with the use of asbestos. Each of SWVA and SVSB is in
substantial compliance with all Environmental Laws applicable to real or
personal properties in which it has a direct fee ownership or, with respect to a
direct interest as lessee, applicable to the leasehold premises or, to the best
knowledge of SWVA and SVSB, the premises on which the leasehold is situated.
Neither SWVA nor SVSB has received any Communication alleging that SWVA or SVSB
is not in such compliance and, to the best knowledge of SWVA and SVSB, there are
no present circumstances (including Environmental Laws that have been adopted
but are not yet effective) that would prevent or interfere with the continuation
of such compliance.
(2) There are no legal, administrative, arbitral or other claims,
causes of action or governmental investigations of any nature, seeking to
impose, or that could result in the imposition, on SWVA and SVSB of any
liability arising under any Environmental Laws pending or, to the best knowledge
of SWVA and SVSB, threatened against (A) SWVA or SVSB, (B) any person or entity
whose liability for any Environmental Claim, SWVA or SVSB has or may have
retained or assumed either contractually or by operation of law, or (C)any real
or personal property which SWVA or SVSB owns or leases, or has been or is judged
to have managed or to have supervised or participated in the management of,
which liability might have a material adverse effect on the business, financial
condition or results of operations of SWVA. SWVA and SVSB are not subject to any
agreement, order, judgment, decree or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any such
liability.
(3) To the best knowledge of SWVA and SVSB, there are no legal,
administrative, arbitral or other proceedings, or Environmental Claims or other
claims, causes of action or governmental investigations of any nature, seeking
to impose, or that could result in the imposition, on SWVA or SVSB of any
liability arising under any Environmental Laws pending or threatened against any
real or personal property in which SWVA or SVSB holds a security interest in
connection with a loan or a loan participation which liability might have a
material adverse effect on the business, financial condition or results of
operations of SWVA. SWVA and SVSB are not subject to any agreement, order,
judgment, decree or memorandum by or with any court, governmental authority,
regulatory agency or third party imposing any such liability.
(4) With respect to all real and personal property owned or
leased by SWVA or SVSB, other than OREO, SWVA has made available to FNB copies
of any environmental audits, analyses and surveys that have been prepared
relating to such properties. With respect to all OREO held by SWVA or SVSB and
all real or personal property which SWVA or SVSB has been or is judged to have
managed or to have supervised or participated in the management of, SWVA has
made available to FNB the information relating to such OREO available to SWVA.
SWVA and SVSB are in compliance in all material respects with all
recommendations contained in any environmental audits, analyses and surveys
17
relating to any of the properties, real or personal, described in this
subsection (4).
(5) There are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge or disposal of any Materials of Environmental
Concern, that could reasonably form the basis of any Environmental Claim or
other claim or action or governmental investigation that could result in the
imposition of any liability arising under any Environmental Laws currently in
effect or adopted but not yet effective against SWVA or SVSB or against any
person or entity whose liability for any Environmental Claim SWVA or SVSB has or
may have retained or assumed either contractually or by operation of law.
4.2 Representations and Warranties of FNB. FNB represents and
warrants to SWVA as follows:
(a) Organization, Standing and Power. (1) FNB is a corporation duly
organized, validly existing and in good standing under the laws of Virginia. It
has all requisite corporate power and authority to carry on its business as now
being conducted and to own and operate its assets, properties and business, and
FNB has the corporate power and authority to execute and deliver this Agreement
and perform the respective terms of this Agreement and Plan of Merger. FNB is
duly registered as a bank holding company under the Bank Holding Company Act of
1956. First National Bank, a wholly owned subsidiary of FNB, is a national
banking association, duly organized, validly existing and in good standing under
the laws of the United States, is in compliance in all material respects with
all rules and regulations promulgated by any relevant regulatory authority, it
has all requisite corporate power and authority to carry on its business as now
being conducted and to own and operate its assets, properties and business, is
an "insured bank" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder and its deposits are insured to the fullest extent
allowed by law by the Bank Insurance Fund of the Federal Deposit Insurance
Corporation.
(2) FNB has Previously Disclosed its subsidiary corporations (and
the subsidiaries thereof) (the "FNB Subsidiaries" and, collectively with FNB,
the "FNB Companies"). Except as Previously Disclosed, none of the FNB Companies
owns any equity securities of any other corporation or entity.
(b) Authority. (1) The execution and delivery of this Agreement and
the Plan of Merger and the consummation of the Merger have been duly and validly
authorized by all necessary corporate action on the part of FNB, except the
approval of shareholders. The Agreement represents the legal, valid, and
binding obligation of FNB, enforceable against FNB in accordance with its terms
(except in all such cases as enforceability may be limited by applicable
bankruptcy, insolvency, merger, moratorium or similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
18
(2) Neither the execution and delivery of the Agreement, the
consummation of the transactions contemplated therein, nor the compliance by FNB
with any of the provisions thereof will (i) conflict with or result in a breach
of any provision of the Articles of Incorporation or Bylaws of FNB, (ii) except
as Previously Disclosed, constitute or result in the breach of any term,
condition or provision of, or constitute default under, or give rise to any
right of termination, cancellation or acceleration with respect to, or result in
the creation of any lien, charge or encumbrance upon, any property or assets of
the FNB Companies pursuant to (A) any note, bond, mortgage, indenture, or (B)
any material license, agreement, lease or other instrument or obligation, to
which any of the FNB Companies is a party or by which any of them or any of
their properties or assets may be bound, or (iii) subject to the receipt of the
requisite approvals referred to in Section 4.7, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to any of the FNB
Companies or any of their properties or assets.
(c) Capital Structure. The authorized capital stock of FNB consists
of: 10,000,000 shares of common stock, par value $5.00 per share ("FNB Common
Stock), of which 4,084,172 shares are issued and outstanding, fully paid and
nonassessable, not subject to shareholder preemptive rights, and not issued in
violation of any agreement to which FNB is a party or otherwise bound, or of any
registration or qualification provisions of any federal or state securities
laws. The shares of FNB Common Stock to be issued in exchange for shares of
SWVA Common Stock upon consummation of the Merger will have been duly authorized
and, when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable and subject to no preemptive rights.
Except as Previously Disclosed, there are no outstanding understandings or
commitments of any character pursuant to which FNB and any of the FNB Companies
could be required or expected to issue shares of capital stock.
(d) Ownership of the FNB Subsidiaries; Capital Structure of FNB
Subsidiaries; and Organization of the FNB Subsidiaries. (1) FNB does not own,
directly or indirectly, 5% or more of the outstanding capital stock or other
voting securities of any corporation, bank or other organization actively
engaged in business except as Previously Disclosed. The outstanding shares of
capital stock of each FNB Subsidiary have been duly authorized and are validly
issued, and are fully paid and nonassessable and all such shares are owned by
FNB or an FNB Subsidiary free and clear of all liens, claims and encumbrances
and were not issued in violation of any agreement or of any regulation or
qualification provisions of federal or state securities laws. No rights are
authorized, issued or outstanding with respect to the capital stock of any FNB
Subsidiary and there are no agreements, understandings or commitments relating
to the right of FNB to vote or to dispose of said shares. None of the shares of
capital stock of any FNB Subsidiary has been issued in violation of the
preemptive rights of any person.
(2) Each FNB Subsidiary is a duly organized corporation or
association, validly existing and in good standing under applicable laws. Each
FNB Subsidiary (i) has full corporate power and authority to own, lease and
19
operate its properties and to carry on its business as now conducted except
where the absence of such power or authority would not have a material adverse
effect on the financial condition, results of operations or business of FNB on a
consolidated basis, and (ii) is duly qualified to do business in the states of
the United States and foreign jurisdictions where its ownership or leasing of
property or the conduct of its business requires such qualification and where
failure to do qualify would have a material adverse effect on the financial
condition, results of operations or business of FNB on a consolidated basis.
Each FNB Subsidiary has all federal, state, local and foreign governmental
authorizations and licenses necessary for it to own or lease its properties and
assets and to carry on its business as it is now being conducted, except where
failure to obtain such authorization or license would not have a material
adverse effect on the business of such FNB Subsidiary.
(e) Financial Statements. FNB's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, and all other documents filed or to be
filed subsequent to December 31, 1999 under Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, as amended (together with the rules and
regulations thereunder, the "Exchange Act"), in the form filed with the SEC (in
each such case, the "FNB Financial Statements") 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 made therein, in light of
the circumstances under which they were made, not misleading; and each of the
balance sheets in or incorporated by reference into the FNB Financial Statements
(including the related notes and schedules thereto) fairly presents and will
fairly present the financial position of the entity or entities to which it
relates as of its date and each of the statements of income and changes in
stockholders' equity and cash flows or equivalent statements in the FNB
Financial Statements (including any related notes and schedules thereto) fairly
presents and will fairly present the results of operations, changes in
stockholders' equity and changes in cash flows, as the case may be, of the
entity or entities to which it relates for the periods set forth therein, in
each case in accordance with generally accepted accounting principles
consistently applied to banks and bank holding companies during the periods
involved, except as may be noted therein, subject to normal and recurring year-
end audit adjustments in the case of unaudited statements.
(f) Absence of Undisclosed Liabilities. At December 31, 1999, and at
any subsequent date reflected in such Financial Statements, none of the FNB
Companies had any obligation or liability (contingent or otherwise) of any
nature which were not reflected in the FNB Financial Statements, except for
those which in the aggregate are immaterial or have been Previously Disclosed.
(g) Legal Proceedings; Compliance with Laws. Except as Previously
Disclosed, there are no actions, suits or proceedings instituted or pending or,
to the best knowledge of FNB, threatened or probable of assertion against any of
the FNB Companies, or against any property, asset, interest or right of any of
them, that are reasonably expected to have, either individually or in the
aggregate, a material adverse effect on the financial condition of FNB on a
20
consolidated basis or that are reasonably expected to threaten or impede the
consummation of the transactions contemplated by this Agreement. None of the
FNB Companies is a party to any agreement or instrument or subject to any
judgment, order, writ, injunction, decree or rule that might reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), business or prospects of FNB on a consolidated basis. Except as
Previously Disclosed, as of the date of this Agreement, none of the FNB
Companies nor any of their 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, any federal or state governmental
agency or authority charged with the supervision or regulation of depository
institutions or mortgage lenders or engaged in the insurance of deposits which
restricts or purports to restrict in any material respect the conduct of the
business of it or any of its subsidiaries or properties, or in any manner
relates to the capital, liquidity, credit policies or management of it; and
except as Previously Disclosed, none of the FNB Companies has been advised by
any such regulatory authority that such authority is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding, commitment letter or
similar submission. To the best knowledge of FNB, the FNB Companies have
complied in all material respects with all laws, ordinances, requirements,
regulations or orders applicable to its business (including environmental laws,
ordinances, requirements, regulations or orders).
(h) Regulatory Approvals. FNB knows of no reason why the regulatory
approvals referred to in Section 7.1(b) should not be obtained without the
imposition of any condition of the type referred to in Section 7.1(b). First
National is in material compliance with the applicable provisions of the
Community Reinvestment Act and the regulations promulgated thereunder, and First
National currently has a CRA rating of satisfactory or better. To the knowledge
of FNB, there is no fact or circumstance or set of facts or circumstances that
would cause First National to fail to comply with such provisions or cause the
rating of First National to fall below satisfactory.
(i) Labor Relations. None of the FNB Companies is a party to, or is
bound by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is it the subject of
a proceeding asserting that is has committed an unfair labor practice (within
the meaning of the National Labor Relations Act) or seeking to compel it to
bargain with any labor organization as to wages and conditions of employment,
nor is there any strike or other labor dispute involving it, pending or, to the
best of its knowledge, threatened, nor is it aware of any activity involving its
employees seeking to certify a collective bargaining unit or engaging in any
other organizational activity.
(j) Tax Matters. The FNB Companies have filed all federal, state, and
local tax returns and reports required to be filed, and all taxes shown by such
returns to be due and payable have been paid or are reflected as a liability in
the FNB Financial Statements or are being contested in good faith and have been
Previously Disclosed. Except to the extent that liabilities therefor are
specifically reflected in the FNB Financial Statements, there are no federal,
21
state or local tax liabilities of the FNB Companies other than liabilities that
have arisen since December 31, 1999, all of which have been properly accrued or
otherwise provided for on the books and records of the FNB Companies. Except as
Previously Disclosed, no tax return or report of any of the FNB Companies is
under examination by any taxing authority or the subject of any administrative
or judicial proceeding, and no unpaid tax deficiency has been asserted against
any of the FNB Companies by any taxing authority.
(k) Property. Except as disclosed or reserved against in the FNB
Financial Statements, all of the FNB Companies have good and marketable title
free and clear of all material liens, encumbrances, charges, defaults or
equities of whatever character to all of the material properties and assets,
tangible or intangible, reflected in the FNB Financial Statements as being owned
by the FNB Companies as of the dates thereof. To the best knowledge of FNB, all
buildings, and all fixtures, equipment, and other property and assets which are
material to its business on a consolidated basis, held under leases or subleases
by the FNB Companies are held under valid instruments enforceable in accordance
with their respective terms, subject to bankruptcy, insolvency, merger,
moratorium and similar laws. The buildings, structures, and appurtenances
owned, leased, or occupied by the FNB Companies are, to the best knowledge of
FNB, in good operating condition, in a state of good maintenance and repair and
(i) comply with applicable zoning and other municipal laws and regulations, and
(ii) there are no latent defects therein.
(l) Reports. Since January 1, 1998, the FNB Companies have filed all
reports and statements, together with any amendments required to be made with
respect thereto, that were required to be filed with the SEC, the Federal
Reserve, the SCC, and any other governmental or regulatory authority or agency
having jurisdiction over their operations.
(m) Employee Benefit Plans. (1) FNB will deliver for SWVA's review,
as soon as practicable, true and complete copies of all material pension,
retirement, profit-sharing, deferred compensation, stock option, bonus, vacation
or other material incentive plans or agreements, all material medical, dental or
other health plans, all cafeteria or flexible benefits plans, all life insurance
plans and all other material employee benefit plans or fringe benefit plans and
any related trust or other funding instrument, including, without limitation,
all "employee benefit plans" as that term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), currently
adopted, maintained by, sponsored in whole or in part by, or contributed to by
FNB or any FNB Subsidiary for the benefit of current or former employees,
retirees or other beneficiaries eligible to participate (collectively, the "FNB
Benefit Plans"). Any of the FNB Benefit Plans which is an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA, is referred to
herein as a "FNB ERISA Plan." No FNB Benefit Plan is or has been a
"multiemployer plan," as defined in Section 3(37) of ERISA.
22
(2) Except as Previously Disclosed, all FNB Benefit Plans are in
compliance with the applicable terms of ERISA, the Internal Revenue Code of
1986, as amended (the "IRC") and any other applicable laws, rules and
regulations the breach or violation of which could result in a material
liability to FNB on a consolidated basis. In the case of any plan intended to
be qualified under IRC Section 401, compliance with such qualification
requirements shall mean the receipt of a current, favorable determination letter
from the Internal Revenue Service based on laws changes effective through 1994
and operation of the plan in accordance with its terms or in accordance with any
subsequently enacted law for which the remedial amendment period has not yet
ended.
(3) No FNB ERISA Plan which is subject to the minimum funding
standards of Section 302 of ERISA or IRC Section 412 has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, and the
present fair market value of the assets of any such plan which is a "defined
benefit plan," as that term is defined in Section 3(35) of ERISA, exceeds the
plan's "benefit liabilities," as that term is defined in Section 4001(a)(16) of
ERISA, when determined under actuarial factors that would apply if the plan was
terminated in accordance with all applicable legal requirements.
(n) Investment Securities. Except for pledges to secure public and
trust deposits and obligations under agreements pursuant to which any of the FNB
Companies has sold securities subject to an obligation to repurchase, none of
the investment securities reflected in the FNB Financial Statements is subject
to any restriction, contractual, statutory, or otherwise, which would impair
materially the ability of the holder of such investment to dispose freely of any
such investment at any time.
(o) Certain Contracts. (1) Except as Previously Disclosed, neither
FNB nor any FNB subsidiary is a party to, or is bound by, (i) any material
agreement, arrangement or commitment, (ii) any agreement, indenture or other
instrument relating to the borrowing of money by FNB or any FNB Subsidiary or
the guarantee by FNB or any FNB Subsidiary of any such obligation, (iii) any
agreement, arrangement or commitment relating to the employment of a consultant
or the employment, election, retention in office or severance of any present or
former director or officer, (iv) any agreement to make loans or for the
provision, purchase or sale of goods, services or property between FNB or any
FNB Subsidiary and any director or officer of FNB or any FNB Subsidiary, or any
member of the immediate family or affiliate of any of the foregoing, or (v) any
agreement between FNB or any FNB Subsidiary and any 5% or more shareholder of
FNB; in each case other than agreements entered into in the ordinary course of
the banking business of FNB or a FNB Subsidiary consistent with past practice.
(2) Neither FNB or any FNB Subsidiary, nor to the knowledge of FNB,
the other party thereto, is in default under any material agreement, commitment,
arrangement, lease, insurance policy or other instrument whether entered into in
the ordinary course of business or otherwise, nor has there occurred any event
23
that, with the lapse of time or giving of notice or both, would constitute such
a default, other than defaults of loan agreements by borrowers from FNB or a FNB
Subsidiary in the ordinary course of its business.
(p) Insurance. A complete list of all policies or binders of fire,
liability, product liability, workmen's compensation, vehicular and other
insurance held by or on behalf of the FNB Companies has previously been
furnished to SWVA and all such policies or binders are valid and enforceable in
accordance with their terms, are in full force and effect, and insure against
risks and liabilities to the extent and in the manner customary for the industry
and are deemed appropriate and sufficient by FNB. The FNB Companies are not in
default with respect to any provision contained in any such policy or binder and
have not failed to give any notice or present any claim under any such policy or
binder in due and timely fashion. None of the FNB Companies has received notice
of cancellation or non-renewal of any such policy or binder. None of the FNB
Companies has knowledge of any inaccuracy in any application for such policies
or binders, any failure to pay premiums when due or any similar state of facts
or the occurrence of any event that is reasonably likely to form the basis for
any material claim against it not fully covered (except to the extent of any
applicable deductible) by the policies or binders referred to above. None of
the FNB Companies has received notice from any of its insurance carriers that
any insurance premiums will be increased materially in the future or that any
such insurance coverage will not be available in the future on substantially the
same terms as now in effect.
(q) Loans, OREO, and Allowance for Loan Losses. (1) Except as
Previously Disclosed, and except for matters which individually or in the
aggregate, do not materially adversely affect the Merger or the financial
condition of FNB, to FNB's best knowledge each loan reflected as an asset in the
FNB Financial Statements or the financial statements of any FNB Subsidiary (i)
is evidenced by notes, agreements, or other evidences of indebtedness which are
true, genuine and what they purport to be, (ii) to the extent secured, has been
secured by valid liens and security interests which have been perfected, and
(iii) is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
and other laws of general applicability relating to or affecting creditors'
rights and to general equity principles. All loans and extensions of credit
which are subject to regulation of the Federal Reserve which have been made by
FNB and the FNB Subsidiaries comply therewith.
(2) The classification on the books and records of FNB and each
FNB Subsidiary of loans and/or non-performing assets as nonaccrual, troubled
debt restructuring, OREO or other similar classification, complies in all
material respects with generally accepted accounting principles and applicable
regulatory accounting principles.
(3) Except for liens, security interests, claims, charges, or
such other encumbrances as have been appropriately reserved for in the FNB
Financial Statements or are not material, title to the OREO is good and
marketable, and there are no adverse claims or encumbrances on the OREO. All
title, hazard and
24
other insurance claims and mortgage guaranty claims with respect to the OREO
have been timely filed and neither FNB nor any FNB Subsidiary has been received
any notice of denial of any such claim.
(4) FNB and each FNB Subsidiary are in possession of all of the
OREO or, if any of the OREO remains occupied by the mortgagor, eviction or
summary proceedings have been commenced or rental arrangements providing for
market rental rates have been agreed upon and FNB and/or each FNB Subsidiary are
diligently pursuing such eviction of summary proceedings or such rental
arrangements. Except as Previously Disclosed, no legal proceeding or quasi-
legal proceeding is pending or, to the knowledge of FNB and each FNB Subsidiary,
threatened concerning any OREO or any servicing activity or omission to provide
a servicing activity with respect to any of the OREO.
(5) Except as Previously Disclosed, all loans made by any of the
FNB Companies to facilitate the disposition of OREO are performing in accordance
with their terms.
(6) The allowance for possible loan losses shown on the FNB
Financial Statements was, and the allowance for possible loan losses shown on
the financial statements of FNB as of dates subsequent to the execution of this
Agreement will be, in each case as of the dates thereof, adequate in all
material respects to provide for possible losses, net of recoveries relating to
loans previously charged off, on loans outstanding (including accrued interest
receivable) of the FNB Companies and other extensions of credit (including
letters of credit and commitments to make loans or extend credit) by FNB.
(r) Absence of Material Changes and Events. Since December 31, 1999,
there has not been any material adverse change in the condition (financial or
otherwise), aggregate assets or liabilities, cash flow, earnings or business or
FNB, and FNB has conducted its business only in the ordinary course consistent
with past practice.
(s) Statements True and Correct. None of the information supplied or
to be supplied by FNB for inclusion in the Registration Statement, the proxy
statement/prospectus or any other document to be filed with the SEC or any other
regulatory authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, and, in the case of the
Registration Statement, when it becomes effective and with respect to the proxy
statement/prospectus, when first mailed to SWVA shareholders, be false or
misleading with respect to any material fact or omit to state any material fact
necessary in order to make the statements therein not misleading, or, in the
case of the proxy statement/prospectus or any supplement thereto, at the time of
the SWVA Shareholders' Meeting, be false or misleading with respect to any
material fact or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
25
proxy for the SWVA Shareholders' Meeting. All documents that FNB is responsible
for filing with the SEC or any other regulatory authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable law, including applicable provisions of
federal and state securities law.
(t) Brokers and Finders. Neither FNB nor any FNB Subsidiary, nor any
of their respective officers, directors or employees, has employed any broker,
finder or financial advisor or incurred any liability for any fees or
commissions in connection with the transactions contemplated herein, except for
The Carson Medlin Company.
(u) Repurchase Agreements. With respect to all agreements pursuant to
which FNB or any FNB Subsidiary has purchased securities subject to an agreement
to resell, if any, FNB or such FNB Subsidiary, as the case may be, has a valid,
perfected first lien or security interest in the government securities or other
collateral securing the repurchase agreement, and the value of such collateral
equals or exceeds the amount of the debt secured thereby.
(v) Administration of Trust Accounts. FNB and FNB Subsidiaries have
properly administered, in all respects material and which could reasonably be
expected to be material to the business, operations or financial condition of
FNB and FNB Subsidiaries, taken as a whole, all accounts for which they act as
fiduciaries including but not limited to accounts for which they serve as
trustees, agents, custodians, personal representatives, guardians, conservators
or investment advisors, in accordance with the terms of the governing documents
and applicable state and federal law and regulation and common law. Neither FNB
nor a FNB Subsidiary, nor any director, officer or employee of FNB or a FNB
Subsidiary has committed any breach of trust with respect to any such fiduciary
account which is material to or could reasonably be expected to be material to
the business, operations or financial condition of FNB, or a FNB Subsidiary,
taken as a whole, and the accountings for each such fiduciary account are true
and correct in all material respects and accurately reflect the assets of such
fiduciary account in all material respects.
(w) Environmental Matters. (1) Except as Previously Disclosed, to
the best of FNB's knowledge, neither FNB nor any FNB Subsidiary owns or leases
any properties affected by toxic waste, radon gas or other hazardous conditions
or constructed in part with the use of asbestos. Each of FNB and the FNB
Subsidiaries is in substantial compliance with all Environmental Laws
applicable to real or personal properties in which it has a direct fee ownership
or, with respect to a direct interest as lessee, applicable to the leasehold
premises or, to the best knowledge of FNB and the FNB Subsidiaries, the premises
on which the leasehold is situated. Neither FNB nor any FNB Subsidiary has
received any Communication alleging that FNB or such FNB Subsidiary is not in
such compliance and, to the best knowledge of FNB and the FNB Subsidiaries,
there are no present circumstances (including Environmental Laws that have
been adopted but are not yet effective) that would prevent or interfere with the
continuation of such compliance.
26
(2) There are no legal, administrative, arbitral or other claims,
causes of action or governmental investigations of any nature, seeking to
impose, or that could result in the imposition, on FNB and the FNB Subsidiaries
of any liability arising under any Environmental Laws pending or, to the best
knowledge of FNB and the FNB Subsidiaries, threatened against (A) FNB or any FNB
Subsidiary, (B) any person or entity whose liability for any Environmental
Claim, FNB or any FNB Subsidiary has or may have retained or assumed either
contractually or by operation of law, or (C)any real or personal property which
FNB or any FNB Subsidiary owns or leases, or has been or is judged to have
managed or to have supervised or participated in the management of, which
liability might have a material adverse effect on the business, financial
condition or results of operations of FNB. FNB and the FNB Subsidiaries are not
subject to any agreement, order, judgment, decree or memorandum by or with any
court, governmental authority, regulatory agency or third party imposing any
such liability.
(3) To the best knowledge of FNB and the FNB Subsidiaries, there
are no legal, administrative, arbitral or other proceedings, or Environmental
Claims or other claims, causes of action or governmental investigations of any
nature, seeking to impose, or that could result in the imposition, on FNB or any
FNB Subsidiary of any liability arising under any Environmental Laws pending or
threatened against any real or personal property in which FNB or any FNB
Subsidiary holds a security interest in connection with a loan or a loan
participation which liability might have a material adverse effect on the
business, financial condition or results of operations of FNB. FNB and the FNB
Subsidiaries are not subject to any agreement, order, judgment, decree or
memorandum by or with any court, governmental authority, regulatory agency or
third party imposing any such liability.
(4) With respect to all real and personal property owned or
leased by FNB or any FNB Subsidiary, other than OREO, FNB has made available to
SWVA copies of any environmental audits, analyses and surveys that have been
prepared relating to such properties. With respect to all OREO held by FNB or
any FNB Subsidiary and all real or personal property which FNB or any FNB
Subsidiary has been or is judged to have managed or to have supervised or
participated in the management of, FNB has made available to SWVA the
information relating to such OREO available to FNB. FNB and the FNB Subsidiaries
are in compliance in all material respects with all recommendations contained in
any environmental audits, analyses and surveys relating to any of the
properties, real or personal, described in this subsection (4).
(5) There are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge or disposal of any Materials of Environmental
Concern, that could reasonably form the basis of any Environmental Claim or
other claim or action or governmental investigation that could result in the
imposition of any liability arising under any Environmental Laws currently in
effect or adopted but not yet effective against FNB or any FNB Subsidiary or
against any person or entity whose liability for any Environmental Claim FNB or
any FNB Subsidiary has or may have retained or assumed either contractually or
by operation of law.
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ARTICLE 5
Conduct Prior to the Effective Date
5.1 Access to Records and Properties. SWVA will keep FNB, and FNB
will keep SWVA advised of all material developments relevant to their respective
businesses prior to consummation of the Merger. Prior to the Effective Date,
FNB, on the one hand, and SWVA on the other, agree to give to the other party
reasonable access to all the premises and books and records (including tax
returns filed and those in preparation) of it and its subsidiaries and to cause
its officers to furnish the other with such financial and operating data and
other information with respect to the business and properties as the other shall
from time to time request for the purposes of verifying the warranties and
representations set forth herein; provided, however, that any such investigation
shall be conducted in such manner as not to interfere unreasonably with the
operation of the respective business of the other.
5.2 Confidentiality. Between the date of this Agreement and the
Effective Date, FNB and SWVA each will maintain in confidence, and cause its
directors, officers, employees, agents and advisors to maintain in confidence,
and not use to the detriment of the other party, any written, oral or other
information obtained in confidence from the other party or a third party in
connection with this Agreement or the transactions contemplated hereby unless
such information is already known to such party or to others not bound by a duty
of confidentiality or unless such information becomes publicly available through
no fault of such party, unless use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the transactions contemplated hereby or unless the
furnishing or use of such information is required by or necessary or appropriate
in connection with legal proceedings. If the Merger is not consummated, each
party will return or destroy as much of such written information as may
reasonably be requested.
5.3 Registration Statement, Proxy Statement and Shareholder Approval.
The Board of Directors of SWVA will duly call and will hold a meeting of its
shareholders as soon as practicable for the purpose of approving the Merger (the
"SWVA Shareholders' Meeting") and, subject to the fiduciary duties of the Board
of Directors of SWVA (as determined after consultation with its counsel and as
presented in writing), SWVA shall use its best efforts to solicit and obtain
votes of the holders of its Common Stock in favor of the Merger and will comply
with the provisions in its Articles of Incorporation and Bylaws relating to the
call and holding of a meeting of shareholders for such purpose; and SWVA shall,
at its own discretion, recess or adjourn the meeting if such recess or
adjournment is deemed by SWVA to be necessary or desirable. FNB and SWVA agree
to cooperate in the preparation of the Registration Statement to be filed by FNB
with the SEC (the "Registration Statement") in connection with the issuance of
FNB Common Stock in the Merger, including the proxy statement and other proxy
material of SWVA constituting a part thereof (the "Proxy Statement"), and FNB
will use its best efforts to have the Registration Statement declared effective
as promptly as possible. When the Registration Statement or any post-effective
amendment or supplement thereto shall become effective, and at all times
subsequent to such effectiveness, up to and including the date of the SWVA
Shareholders' Meeting, such Registration Statement and all amendments or
supplements thereto, with respect to all information set forth therein furnished
or to be furnished by SWVA relating to the SWVA Companies and by FNB relating to
28
the FNB Companies, (i) will comply in all material respects with the provisions
of the Securities Act of 1933 and any other applicable statutory or regulatory
requirements, including applicable state blue-sky and securities laws, and (ii)
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
contained therein not misleading; provided, however, in no event shall any party
hereto be liable for any untrue statement of a material fact or omission to
state a material fact in the Registration Statement made in reliance upon, and
in conformity with, written information concerning another party furnished by
such other party specifically for use in the Registration Statement.
5.4 Operation of the Business of FNB and SWVA. From the date hereof
to the Effective Date, FNB and SWVA will operate their respective businesses
substantially as presently operated and only in the ordinary course, and,
consistent with such operation, they will use their best efforts to preserve
intact their relationships with persons having business dealings with them.
Without limiting the generality of the foregoing, and except as provided in
Section 5.12, neither FNB nor SWVA will, without the prior written consent of
the other, which consent shall not be unreasonably withheld:
(a) Make any change in its authorized capital stock, or issue or sell
any additional shares of, securities convertible into or exchangeable for, or
options (excluding those options provided for in the 2000 FNB Corporation
Incentive Stock Compensation Plan, but the number of such options to be issued
shall not exceed 50,000), warrants or rights to purchase, its capital stock, nor
shall it purchase, redeem or otherwise acquire any of its outstanding shares of
capital stock, provided that FNB or SWVA may issue shares of common stock
pursuant to options granted or issued prior to the date hereof and FNB may
repurchase FNB Common Stock consistent with past practices;
(b) Voluntarily make any
changes in the composition of its officers, directors or other key management
personnel;
(c) Make any change in the compensation or title of any officer,
director or key management employee or make any change in the compensation or
title of any other employee, other than permitted by current employment policies
in the ordinary course of business, any of which changes shall be reported
promptly to the other party provided, however, that on or before the Effective
Date, SWVA may extend the term of the employment agreements of D. W. Shilling
and Barbara Weddle for terms not to exceed 36 months and 12 months from the
Effective Date, respectively;
(d) Enter into any bonus, incentive compensation, stock option,
deferred compensation, profit sharing, thrift, retirement, pension, group
29
insurance or other benefit plan or any employment or consulting agreement
(excluding calendar year bonuses and 2001 Sales Incentives consistent with past
practice);
(e) Incur any obligation or liability (whether absolute or contingent,
excluding suits instituted against it), make any pledge, or encumber any of its
assets, nor dispose of any of its assets in any other manner, except in the
ordinary course of its business and for adequate value, or as otherwise
specifically permitted in this Agreement, and excluding FHLB borrowings
consistent with past practice;
(f) Except as permitted by Section 5.4(a) hereof, issue or contract to
issue any shares of its Common Stock, options for shares of its Common Stock, or
securities exchangeable for or convertible into such shares;
(g) Knowingly waive any right to substantial value;
(h) Enter into material transactions otherwise than in the
ordinary course of its business;
(i) Alter, amend or repeal its Bylaws or Articles of Incorporation
(excluding any amendment with respect to SVSB in order to add one director to
SVSB's Board); or
(j) Propose or take any other action which would make any
representation or warranty in Section 4.1 or Section 4.2 hereof untrue.
5.5 Dividends. FNB and SWVA may declare and pay only regular
periodic cash dividends in the ordinary course of business and consistent with
past practice from the date of this Agreement through the Effective Date. Any
dividend increase by SWVA or FNB in excess of $.01 per share must be approved by
the other.
5.6 No Solicitation. Without the prior written consent of FNB, SWVA
shall not, and shall cause its officers, directors, agents, advisors and
affiliates not to, solicit or encourage inquires or proposals with respect to,
furnish any information relating to, or participate in any negotiations or
discussions concerning, an Acquisition Transaction (as hereinafter defined);
provided, however, that nothing contained in this Section 5.6 shall prohibit the
Board of Directors of SWVA from furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an
unsolicited, written bona fide proposal regarding an Acquisition Transaction if,
and only to the extent that (A) the Board of Directors of SWVA concludes in good
faith, after consultation with and consideration of the written advice of
outside counsel, that the failure to furnish such information or enter into such
discussions or negotiations would constitute a breach of its fiduciary duties to
shareholders under applicable law, and (B) the Board of Directors of SWVA
concludes in good faith that the proposal regarding the Acquisition Transaction
contains an offer of consideration that is superior to the consideration set
forth herein. SWVA shall immediately notify FNB orally and in writing of its
receipt of any such proposal or inquiry, of the material terms and conditions
thereof, and, if possible, of the identity of the person making such proposal or
30
inquiry. For purposes of this Agreement, "Acquisition Transaction" means any
merger, consolidation, share exchange, joint venture, business combination or
similar transaction or any purchase of all or any material portion of the assets
of an entity.
5.7 Regulatory Filings. FNB and SWVA shall prepare jointly all
regulatory filings required to consummate the transactions contemplated by the
Agreement and the Plan of Merger and submit the filings for approval with the
Federal Reserve Board and the SCC, and any other governing regulatory authority,
as soon as practicable after the date hereof. FNB and SWVA shall use their best
efforts to obtain approvals of such filings.
5.8 Public Announcements. Each party will consult with the other
before issuing any press release or otherwise making any public statements with
respect to the Merger and shall not issue any such press release or make any
such public statement prior to such consultations except as may be required by
law.
5.9 Notice of Breach. FNB and SWVA will give written notice to the
other promptly upon becoming aware of the impending or threatened occurrence of
any event which would cause or constitute a breach of any of the
representations, warranties or covenants made to the other party in this
Agreement and will use its best efforts to prevent or promptly remedy the same.
5.10 Accounting Treatment. FNB and SWVA acknowledge that the Merger
shall be accounted for as a purchase under generally accepted accounting
principles.
5.11 Merger Consummation. Subject to the terms and conditions of
this Agreement, each party shall use its best efforts in good faith to take, or
cause to be taken, all actions, and to do or cause to be done all things
necessary, proper or desirable, or advisable under applicable laws, as promptly
as practicable so as to permit consummation of the Merger at the earliest
possible date, consistent with Section 1.5 herein, and to otherwise enable
consummation of the transactions contemplated hereby and shall cooperate fully
with the other parties hereto to that end, and each of FNB and SWVA shall use,
and shall cause each of their respective subsidiaries to use, its best efforts
to obtain all consents (governmental or other) necessary or desirable for the
consummation of the transactions contemplated by this Agreement.
5.12 FNB Acquisition Transaction. Nothing contained in this
Agreement shall prevent FNB from entering into an Acquisition Transaction with a
third party so long as FNB and its successors comply with the terms of the
Merger with SWVA.
5.13 Affiliate Agreements. SWVA shall use its best efforts to cause
each director, executive officer and other person who is an "affiliate" of SWVA
under Rule 145 of the Securities Act to deliver to FNB as soon as practicable,
and prior to the mailing of the proxy statement/prospectus, executed letter
31
agreements in the form of Exhibit C attached hereto providing that such person
will comply with Rule 145 and will vote in favor of the Merger.
ARTICLE 6
Additional Agreements
6.1 Conversion of Stock Options. (a) On the Effective Date, all
rights with respect to SWVA Common Stock pursuant to stock options ("SWVA
Options") granted by SWVA under a SWVA stock option plan which are outstanding
on the Effective Date, whether or not they are exercisable, shall be converted
into and become rights with respect to FNB Common Stock, and FNB shall assume
each SWVA Option in accordance with the terms of the stock option plan under
which it was issued and the stock option agreement by which it is evidenced.
From the Effective Date forward, (i) each SWVA Option assumed by FNB may be
excised solely for shares of FNB Common Stock, (ii) the number of shares of FNB
Common Stock subject to each SWVA Option shall be equal to the number of shares
of SWVA Common Stock subject to such option immediately prior to the Effective
Date multiplied by the Exchange Ratio and (iii) the per share exercise price
under each such SWVA Option shall be adjusted by dividing the per share exercise
price under each such option by the Exchange Ratio and rounding down to the
nearest cent; provided, however, that the terms of each SWVA Option shall, in
accordance with its terms, be subject to further adjustment as appropriate to
reflect any stock split, stock dividend, recapitalization or other similar
transaction after the Effective Date. It is intended that the foregoing
assumption shall be undertaken in a manner that will not constitute a
"modification" as defined in Section 425 of the Code, as to any stock option
which is an "incentive stock option." Shares of FNB Common Stock issuable upon
exercise of SWVA Options shall be covered by an effective registration statement
on Form S-8, and FNB shall use its reasonable best efforts to file a
registration statement on Form S-8 covering such shares as soon as possible
after the Effective Date, but in no event, no later than 30 days after the
Effective Date.
6.2 Benefit Plans.
(a) Effective with the consummation of the Merger, the Management
Stock Bonus Plan of SVSB shall be terminated and all unawarded shares (and the
Merger Consideration attributable thereto) shall be forfeited to SVSB. In
addition, the SVSB ESOP (as defined in Section 6.2(c)) shall be continued and
then merged as provided Section 6.2(c) below, the SVSB Defined Benefit Plan (as
defined in Section 6.2(d)) shall be continued and then terminated as provided
Section 6.2(d) below, and participation in the FNB 401(k) plan shall be made
available to SVSB employees as provided Section 6.2(e) below. Otherwise, after
consummation of the Merger, at the option of FNB (which may be applied on a plan
or program by plan or program basis) and subject to FNB's best efforts,
employees of SWVA and SVSB shall be entitled to participate either (x) in one or
more combined plans or programs of FNB and SWVA on substantially the same basis
as similarly situated employees of FNB or First National (taking into account
all applicable factors, including but not limited to position, employment
classification, age, length of service, pay, part time or full time status, and
the like, as well as changes made in such plans and programs in the future), or
(y) in plans and programs which, subject to changes required by applicable laws
32
or by limitations imposed by insurance companies providing plan benefits, are
comparable to (or a continuation of), and provide for participation on
substantially the same basis, as SWVA's employee benefit plans and programs
currently in effect. If and to the extent option (x) is effectuated:
(1) (A) Coverage under FNB's plans and programs shall be available to
each employee of SWVA and SVSB and his or her dependents without regard to any
waiting period, evidence or requirement of insurability, actively at work
requirement or preexisting condition exclusion or limitation (except to the
extent and in the manner any such waiting period, evidence or requirement of
insurability, actively at work requirement or exclusion or limitation applies to
such employee or dependents immediately prior to the effectuation of option (x))
and (B) amounts paid or payable by employees for health care expenses for the
portion of the annual benefit period prior to the date as of which option (x)
becomes effective shall be credited in satisfaction of any deductible
requirement and any out-of-pocket limit for the balance of the annual benefit
period which includes such date.
(2) FNB shall treat service with SWVA and SVSB before the consummation
of the Merger as service with FNB for purposes of eligibility to begin
participation and vesting (but not benefit accruals, except in the case of a
continuation of any plan maintained by SWVA or SVSB) for purposes of all
employee benefit and seniority based plans and programs, including but not
limited to annual, sick and personal leave accruing following the consummation
of the Merger.
Nothing contained in this Section is intended to provide any third party
beneficiary rights in any current or former employee, or any spouse or dependent
thereof, of SWVA, SVSB, FNB or any FNB Subsidiary, except as otherwise required
by ERISA or other applicable law (determined without regard to third party
beneficiary contract law).
(b) Except to extent individually negotiated replacement contracts or
settlement agreements are entered into, FNB shall honor all employment
severance, consulting and other compensation contracts and agreements Previously
Disclosed and executed in writing by SWVA on the one hand and any individual
current or former director, officer or employee thereof on the other hand,
copies of which have been previously delivered by SWVA to FNB.
(c) As of the Effective Date, all SWVA and SVSB employees who are
participants in the SVSB Employee Stock Ownership Plan (the "SVSB ESOP") shall
be fully vested in their accrued benefits under the SVSB ESOP, and the SVSB ESOP
shall be continued and shall be merged into the FNB Employee Stock Ownership
Plan no later than two years after the Merger, with participation in the FNB
Employee Stock Ownership Plan extended to eligible employees of SVSB as of the
time of such plan merger. FNB shall treat service with SWVA and SVSB before the
consummation of the Merger as service with FNB for purposes of eligibility to
begin participation, vesting and future benefit accrual under its Employee Stock
Ownership Plan.
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(d) As of the Effective Date, all SWVA and SVSB employees who are
participants in the SWVA defined benefit plan maintained through the Financial
Institutions Retirement Fund (the "SWVA Defined Benefit Plan") shall be fully
vested in their accrued benefits under the SWVA Defined Benefit Plan, and all
necessary steps shall be taken to cause the SWVA Defined Benefit Plan to be
terminated no later than the end of its plan year in which the Merger occurs, in
accordance with applicable law. If the SWVA Defined Benefit Plan is fully
funded on termination, any funding surplus shall be used to increase accrued
benefits on a basis which is nondiscriminatory under the IRC in a manner
mutually agreeable to FNB, SWVA and SVSB.
(e) Effective no later than the beginning of the first plan year of
FNB's 401(k) plan commencing after the effective date of the termination of the
SWVA Defined Benefit Plan, FNB shall make participation in its 401(k) plan
available to the eligible employees of SWVB. FNB shall treat service with SWVA
and SVSB before the consummation of the Merger as service with FNB for purposes
of eligibility to begin participation, vesting and future benefit accrual under
its 401(k) plan.
6.3 Indemnification. Following the Effective Date, FNB shall
indemnify and hold harmless any person who has rights to indemnification from
SWVA, to the maximum extent permitted under Virginia law and in accordance with
SWVA's Articles of Incorporation or Bylaws, as in effect on the date of this
Agreement, to the extent legally permitted to do so, with respect to matters
occurring on or prior to the Effective Date. FNB further agrees that any such
person who has rights to indemnification pursuant to this Section 6.3 is
expressly made a third party beneficiary of this Section 6.3 and may directly,
in such person's personal capacity, enforce such rights through an action at law
or in equity or through any other manner or means of redress allowable under
Virginia law to the same extent as if such person were a party hereto. Without
limiting the foregoing, in any case in which corporate approval may be required
to effectuate any indemnification, FNB shall direct, at the election of the
party to be indemnified, that the determination of permissibility of
indemnification shall be made by independent counsel mutually agreed upon
between FNB and the indemnified party. Upon written application, and in
accordance with, and to the extent permitted by, Virginia law, FNB will advance
reasonable expenses to any person who has rights to indemnification from SWVA.
FNB shall use its reasonable best efforts to maintain SWVA's existing directors'
and officers' liability policy, or some other policy, including FNB's existing
policy, providing at least comparable coverage, covering persons who are
currently covered by such insurance of SWVA for a period of six years after the
Effective Date on terms no less favorable than those in effect on the date
hereof.
ARTICLE 7
Conditions to the Merger
7.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each of FNB and SWVA to effect the Merger and the
34
other transactions contemplated by this Agreement shall be subject to the
fulfillment or waiver at or prior to the Effective Date of the following
conditions:
(a) Shareholder Approval. Shareholders of SWVA shall have approved
all matters relating to this Agreement and the Merger required to be approved
by such shareholders in accordance with Virginia law.
(b) Regulatory Approvals. This Agreement and the Plan of Merger shall
have been approved by the Federal Reserve, the SCC, the Office of Thrift
Supervision and any other regulatory authority whose approval is required for
consummation of the transactions contemplated hereby, and such approvals shall
not have imposed any condition or requirement which would so materially
adversely impact the economic or business benefits of the transactions
contemplated by this Agreement as to render inadvisable the consummation of the
Merger in the reasonable opinion of the Board of Directors of FNB or SWVA.
(c) Registration Statement. The Registration Statement shall have
been declared effective and shall not be subject to a stop order or any
threatened stop order.
(d) Tax Opinion. FNB and SWVA shall have received an opinion of
Troutman Sanders Mays & Valentine LLP, or other counsel reasonably satisfactory
to FNB and SWVA, to the effect that the Merger will constitute a merger within
the meaning of Section 368 of the Internal Revenue Code and that no gain or loss
will be recognized by the shareholders of SWVA to the extent they receive FNB
Common Stock solely in exchange for their SWVA Common Stock in the Merger.
(e) Opinions of Counsel. SWVA shall have delivered to FNB and FNB
shall have delivered to SWVA opinions of counsel, dated as of the Effective
Date, as to such matters as they may each reasonably request with respect to the
transactions contemplated by this Agreement and in a form reasonably acceptable
to each of them.
(f) Legal Proceedings. Neither FNB nor SWVA shall be subject to any
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Merger.
(g) Amendment of SVSB ESOP. Prior to Merger, SVSB shall have amended
the SVSB ESOP (as defined in Section 6.2(c)) to eliminate the provision thereof
(i.e., section 8.2(c)) requiring satisfaction of any acquisition loan,
allocation to participants of the remaining value of collateral not used to
satisfy any acquisition loan, and termination of such plan on the consummation
of a transaction such as the Merger.
7.2 Conditions to Obligations of FNB. The obligations of FNB to
effect the Merger shall be subject to the fulfillment or waiver at or prior to
the Effective Date of the following additional conditions:
35
(a) Representations and Warranties. Each of the representations and
warranties contained herein of SWVA shall be true and correct in all material
respects as of the date of this Agreement and upon the Effective Date with the
same effect as though all such representations and warranties had been made on
the Effective Date, except (i) for any such representations and warranties made
as of a specified date, which shall be true and correct as of such date, (ii) as
expressly contemplated by this Agreement, or (iii) for representations and
warranties the inaccuracies of which relate to matters that, individually or in
the aggregate, do not materially adversely affect the Merger and the other
transactions contemplated by this Agreement and FNB shall have received a
certificate or certificates signed by the Chief Executive Officer and Chief
Financial Officer of SWVA dated the Effective Date, to such effect.
(b) Performance of Obligations. SWVA shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Date, and FNB shall have received a certificate
signed by the Chief Executive Officer of SWVA to that effect.
7.3 Conditions to Obligations of SWVA. The obligations of SWVA to
effect the Merger shall be subject to the fulfillment or waiver at or prior to
the Effective Date of the following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties contained herein of FNB shall be true and correct in all material
respects as of the date of this Agreement and upon the Effective Date with the
same effect as though all such representations and warranties had been made on
the Effective date, except (i) for any such representations and warranties made
as of a specified date, which shall be true and correct as of such date, (ii) as
expressly contemplated by this Agreement, or (iii) for representations and
warranties the inaccuracies of which relate to matters that, individually or in
the aggregate, do not materially adversely affect the Merger and the other
transactions contemplated by this Agreement and SWVA shall have received a
certificate or certificates signed by the Chief Executive Officer and Chief
Financial Officer of FNB dated the Effective Date, to such effect.
(b) Performance of Obligations. FNB shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Date, and SWVA shall have received a
certificate signed by Chief Executive Officer of FNB to that effect.
(c) Investment Banking Letter. SWVA shall have received a written
opinion in form and substance satisfactory to SWVA from RP Financial addressed
to SWVA and dated the date the proxy statement/prospectus is mailed to
shareholders of SWVA, to the effect that the terms of the Merger, including the
Exchange Ratio, are fair, from a financial point of view, to SWVA.
36
ARTICLE 8
Termination
8.1 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement and the Plan of
Merger by the shareholders of SWVA, this Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Date:
(a) By the mutual consent of the Board of Directors of each of
FNB and SWVA;
(b) By the respective Boards of Directors of FNB or SWVA if the
conditions set forth in Section 7.1 have not been met or waived by FNB and SWVA;
(c) By the Board of Directors of FNB if the conditions set forth
in Section 7.2 have not been met or waived by FNB;
(d) By the Board of Directors of SWVA if the conditions set forth
in Section 7.3 have not been met or waived by SWVA;
(e) By the respective Boards of Directors FNB or SWVA if the
Merger is not consummated by June 1, 2001.
(f) By the Board of Directors of SWVA, within five business days
after the end of the Measurement Period (as defined in Section 2.1), if the
Market Value (as defined in Section 2.1) is less than $14.00; provided, however,
that if within five calendar days after receipt of notice of termination
pursuant to this paragraph 8.1(f), FNB provides written notice to SWVA that it
shall increase the Exchange Ratio to an amount (rounded to the nearest
one-thousandth) so as to provide the same Stock Consideration that would be
received were the Market Value equal to $14.00 per share, in which case no
termination shall be deemed to have occurred pursuant to this Section 8.1(f) and
this Agreement shall remain in full force and effect in accordance with its
terms (except the Exchange Ratio shall have been so modified).
(g) By the Board of Directors of FNB, within five business days
after the end of the Measurement Period (as defined in Section 2.1), if the
Market Value (as defined in Section 2.1) is greater than $20.00; provided,
however, that if within five calendar days after receipt of notice of
termination pursuant to this paragraph 8.1(g), SWVA provides written notice to
FNB that it will agree to decrease the Exchange Ratio to an amount (rounded to
the nearest one-thousandth) so as to provide the same Stock Consideration that
would be received were the Market Value equal to $20.00 per share, in which case
no termination shall be deemed to have occurred pursuant to this Section 8.1(g)
and this Agreement shall remain in full force and effect in accordance with its
terms (except the Exchange Ratio shall have been so modified); and further
provided, however, that (i) if the Market Value (as defined in Section 2.1) is
greater than $20.00, and (ii) FNB shall have, prior to the Effective Date of the
Merger, publicly announced that it has agreed to a transaction in which control
37
of FNB will be acquired by another entity in an Acquisition Transaction, the
Board of Directors of FNB may not terminate the Merger pursuant to this Section
8.1(g) and the Exchange Ratio shall be 1.083.
8.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement and the Merger pursuant to Section 8.1, this
Agreement shall become void and have no effect, except that (i) the last
sentence of Section 5.2 and all of Sections 5.8 and 8.4 shall survive any such
termination and abandonment and (ii) no party shall be relieved or released from
any liability arising out of an intentional breach of any provision of this
Agreement.
8.3 Non-Survival of Representations, Warranties and Covenants.
Except for Sections 1.3, 1.4, Article 2, Article 3, 5.4(c), 6.2, 6.3 and 8.4 of
this Agreement, none of the respective representations and warranties,
obligations, covenants and agreements of the parties shall survive the Effective
Date, provided that no such representations, warranties, obligations, covenants
and agreements shall be deemed to be terminated or extinguished so as to deprive
FNB or SWVA (or any director, officer, or controlling person thereof) of any
defense in law or equity which otherwise would be available against the claims
of any person, including without limitation any shareholder or former
shareholder of either FNB or SWVA.
8.4 Expenses. The parties provide for the payment of expenses as
follows:
(a) Except as provided below, each of the parties shall bear and pay
all costs and expenses incurred by it in connection with the transactions
contemplated herein, including fees and expenses of its own financial
consultants, accountants and counsel, except that printing expenses shall be
shared equally between FNB and SWVA.
(b) In the event FNB terminates this Agreement based on the occurrence
of a Termination Event (as defined below), SWVA shall pay to FNB a termination
fee of Two Hundred Fifty Thousand Dollars ($250,000.00) in cash within five
business days after written notice of such termination. For the purposes of
this Agreement, a "Termination Event" shall mean any of the following events or
transactions occurring after the date hereof:
(i) SWVA, without having received FNB's prior written consent,
shall have entered into an agreement with any person to (A) acquire,
merger or consolidate, or enter into any similar transaction, with
SWVA, (B) purchase, lease or otherwise acquire all or substantially
all of the assets of SWVA, or (C) purchase or otherwise acquire
directly from SWVA securities representing 10% or more of the voting
power of SWVA;
(ii) any person shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 20% or more of the
outstanding shares of SWVA Common Stock after the date hereof (the
term "beneficial ownership" for purposes of this Agreement having the
38
meaning assigned thereto in Section 13(d) of the Exchange Act, and the
regulations promulgated thereunder); or
(iii) any person shall have made a bona fide proposal to SWVA by
public announcement or written communication that is or becomes the
subject of public disclosure to acquire SWVA by merger, shares
exchange, consolidation, purchase of all or substantially all of its
assets or any other similar transaction, and following such bona fide
proposal the shareholders of SWVA vote not to approve the Agreement.
Notwithstanding the foregoing, SWVA shall not be obligated to pay to FNB the
termination fee described in this Section 8.4(b) in the event that at or prior
to such time as such fee becomes payable (i) FNB and SWVA validly terminate this
Agreement pursuant to Section 8.1(a), (ii) FNB or SWVA validly terminates this
Agreement pursuant to Sections 8.1(b) [other than as a result of such
Termination Event], 8.1(c) [other than as a result of such Termination Event],
8.1(d) [other than as a result of such Termination Event] or 8.1(e) [other than
as a result of such Termination Event]. Upon payment of the termination fee and
any other amounts that may be due by SWVA to FNB hereunder, this Agreement shall
terminated as provided in Section 8.2.
(c) If this Agreement is terminated by FNB or SWVA because of a
willful and material breach by the other of any representation, warranty,
covenant, undertaking or restriction set forth herein, and provided that the
terminating party shall not have been in breach (in any material respect) of any
representation and warranty, covenant, undertaking or restriction contained
herein, then the breaching party shall bear and pay all such reasonable and
documented costs and expenses of the other party actually incurred, including
fees and expenses of consultants, investment bankers, accountants, counsel,
printers, and persons involved in the transactions contemplated by this
Agreement, including the preparation of the Registration Statement and the Joint
Proxy Statement.
(d) Except for the payment of the termination fee which shall be paid
as required by Section 8.4(b), final settlement with respect to the payment of
other fees and expenses by the parties shall be made within thirty (30) days
after the termination of this Agreement.
ARTICLE 9
General Provisions
9.1 Entire Agreement. This Agreement contains the entire agreement
among FNB and SWVA with respect to the Merger and the related transactions and
supersedes all prior arrangements or understandings with respect thereto.
9.2 Waiver and Amendment. Any term or provision of this Agreement
may be waived in writing at any time by the party which is, or whose
shareholders are, entitled to the benefits thereof, and this Agreement may be
amended or supplemented by written instructions duly executed by the parties
hereto at any time, whether before or after the meetings of SWVA shareholders
39
referred to in Section 7.1(a) hereof, except statutory requirements and
requisite approvals of shareholders and regulatory authorities.
9.3 Descriptive Headings. Descriptive headings are for convenience
only and shall not control or affect the meaning and construction of any
provisions of this Agreement.
9.4 Governing Law. Except as required otherwise or otherwise
indicated herein, this Agreement shall be construed and enforced according to
the laws of the Commonwealth of Virginia.
9.5 Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered
personally, telecopied or sent by recognized overnight courier service or
registered or certified mail, postage prepaid, addressed as follows:
If to FNB:
J. Daniel Hardy, Jr. , President
FNB Corporation
105 Arbor Drive
P. O. Box 600
Christiansburg, Virginia 24068
(Tel. 540-382-6041)
(Fax: 540-381-6768)
Copies to:
Peter A. Seitz, Esquire
First National Bank
P. O. Box 600
Christiansburg, Virginia 24073
(Tel. 540-382-4951)
(Fax: 540-381-6768)
Fred W. Palmore, III, Esquire
Troutman Sanders Mays & Valentine LLP
1111 East Main Street, 23rd Floor (23219)
P. O. Box 1122
Richmond, Virginia 23218-1122
(Tel. 804-697-1396)
(Fax: 804-697-1339)
40
If to SWVA:
D. W. Shilling, President
SWVA Bancshares, Inc.
302 Second Street, S.W.
Roanoke, Virginia 24011-1597
(Tel: 540-983-1405)
(Fax: 540-344-9028)
Copy to:
Richard Fisch, Esq.
Malizia, Spidi & Fisch, PC
1301 K Street, N.W., Suite 700 East
Washington, D.C. 20005
(Tel. 202-434-4660)
(Fax: 202-434-4661)
9.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts together
shall constitute one and the same agreement.
9.7 Severability. In the event any provisions of this Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provisions
hereof. Any provision of this Agreement held invalid or unenforceable only in
part or degree shall remain in full force and effect to the extent not held
invalid or unenforceable. Further, the parties agree that a court of competent
jurisdiction may reform any provision of this Agreement held invalid or
unenforceable so as to reflect the intended agreement of the parties hereto.
9.8 Subsidiaries. All representations, warranties, and covenants
herein, where pertinent, include and shall apply to the Subsidiaries of the
party making such representations, warranties, and covenants.
41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in counterparts by their duly authorized officers and their
corporate seals to be affixed hereto, all as of the dates first written above.
FNB Corporation
By: /s/ J. Daniel Hardy, Jr.
----------------------------
J. Daniel Hardy, Jr.
President and Chief Executive Officer
ATTEST:
/s/ Peter A. Seitz
------------------
Secretary
SWVA Bancshares, Inc.
By: /s/ D. W. Shilling
----------------------
President and Chief Executive Officer
ATTEST:
/s/ Barbara C. Weddle
---------------------
Secretary
42
CERTIFICATE OF THE DIRECTORS OF
SWVA BANCSHARES, INC.
SOUTHWEST VIRGINIA SAVINGS BANK, FSB
Reference is made to the Agreement and Plan of Merger, dated as of July __,
2000 (the "Agreement"), among SWVA Bancshares, Inc. ("SWVA") and FNB
Corporation. Capitalized terms used herein have the meanings given to them in
the Agreement.
Each of the following persons, being all of the directors of SWVA and
Southwest Virginia Savings Bank, FSB, express their intention to vote or cause
to be voted all shares of SWVA common stock which are held by such person, or
over which such person exercises full voting control (other than shares with
respect to which such person exercises control in a fiduciary capacity, as to
which no agreement is made hereby), in favor of the Merger.
43
ADDENDUM TO EMPLOYMENT AGREEMENT
WHEREAS, Southwest Virginia Savings Bank, FSB (the "Bank") and DW
Shilling (the "Employee") have previously entered into an Employment Agreement,
as amended (the "Agreement") dated May 19, 1999, and
WHEREAS, Section 12 of this Agreement provides that amendments to this
Agreement may be made in writing and signed by the parties, and
WHEREAS, SWVA Bancshares, Inc. ("Company") and FNB Corporation ("FNB")
have entered into an Agreement of Merger whereby the Company shall merge into
FNB, with FNB as the survivor and new parent corporation of the Bank ("Merger"),
and
WHEREAS, FNB and the Bank seek to retain the employment of the Employee as
the President and CEO of the Bank after the Merger,
NOW THEREFORE, BE IT RESOLVED that this Addendum to the Agreement is hereby
authorized and agreed to by FNB and the Bank, and that this Addendum to the
Agreement shall be executed by FNB and the Bank prior to the Merger and be
presented to the Employee for acceptance and execution immediately upon and
coincident with the effective time of the Merger as follows:
1. As of the effective time of the Merger, the term of the Agreement shall
be amended at Section 2 of the Agreement to be for a period commencing on
the date of the Merger and ending thirty-six (36) months thereafter.
2. As of the effective time of the Merger, the Base Salary of the Employee
as specified at Section 3(a) of the Agreement shall be $112,800 per annum.
3. After the Merger, the Bank shall continue to maintain and operate the
automobile presently owned by the Bank and utilized by the Employee for
business use.
4. That the Employee shall be entitled to participate in any supplemental
executive retirement plan and any stock option plan maintained or
implemented for senior management of FNB or its subsidiaries.
5. That Employee hereby waives any rights or claims to voluntarily
terminate employment pursuant to Section 9(b) of the Agreement as it
relates to any changes in employee benefit plans of the Bank detailed at
Section 9(b)(ii) of the Agreement resulting from the Merger. Such waiver
shall not include a waiver of the right to terminate employment in the
event that the Bank shall fail to maintain the Employee's Base Salary as
detailed at Section 2. of this Addendum.
6. FNB shall reimburse the Employee for the reasonable fees and expenses
associated with maintaining a membership in a local country club in order
to facilitate the conduct of Bank business in an effective manner.
This Addendum to the Agreement is hereby executed and agreed to by the parties
as evidenced below:
Southwest Virginia Savings Bank, FSB
By: ____________________
Its: ___________________
Date: __________________
As Secretary to the Bank, I hereby certify that the foregoing Addendum
was adopted and approved by a majority vote of a meeting of the Board of
Directors of the Bank, held on __________________, 2000, a quorum being present,
with DW Shilling absent from the discussion or the voting.
WHEREAS, Southwest Virginia Savings Bank, FSB (the "Bank") and Barbara
Weddle (the "Employee") have previously entered into an Employment Agreement, as
amended (the "Agreement") dated May ___, 2000, and
WHEREAS, Section 12 of this Agreement provides that amendments to this
Agreement may be made in writing and signed by the parties, and
WHEREAS, SWVA Bancshares, Inc. ("Company") and FNB Corporation ("FNB") have
entered into an Agreement of Merger whereby the Company shall merge into FNB,
with FNB as the survivor and new parent corporation of the Bank ("Merger"), and
WHEREAS, FNB and the Bank seek to retain the employment of the Employee as
the Senior Vice President of the Bank after the Merger,
NOW THEREFORE, BE IT RESOLVED that this Addendum to the Agreement is hereby
authorized and agreed to by FNB and the Bank, and that this Addendum to the
Agreement shall be executed by FNB and the Bank prior to the Merger and be
presented to the Employee for acceptance and execution immediately upon and
coincident with the effective time of the Merger as follows:
1. As of the effective time of the Merger, the term of the Agreement shall
be amended at Section 2 of the Agreement to be for a period commencing on
the date of the Merger and ending twelve (12) months thereafter.
2. As of the effective time of the Merger, the Base Salary of the Employee
as specified at Section 3(a) of the Agreement shall be $___________ per
annum.
3. That Employee hereby waives any rights or claims to voluntarily
terminate employment pursuant to Section 9(b) of the Agreement as it
relates to any changes in employee benefit plans of the Bank detailed at
Section 9(b)(ii) of the Agreement resulting from the Merger. Such waiver
shall not include a waiver of the right to terminate employment in the
event that the Bank shall fail to maintain the Employee's Base Salary as
detailed at Section 2. of this Addendum.
This Addendum to the Agreement is hereby executed and agreed to by the parties
as evidenced below:
Southwest Virginia Savings Bank, FSB
By:_________________________
Its:________________________
Date:_______________________
As Secretary to the Bank, I hereby certify that the foregoing Addendum
was adopted and approved by a majority vote of a meeting of the Board of
Directors of the Bank, held on __________________, 2000, a quorum being present,
with Barbara Weddle absent from the discussion or the voting.
____________________________ SEAL
Secretary
FNB Corporation
By:__________________________
Its:_________________________
Date:________________________
Barbara Weddle, Employee
Date:________________________
2
EXHIBIT A
to the
Agreement and Plan
of Merger
PLAN OF MERGER
BETWEEN
SWVA BANCSHARES, INC.
AND
FNB CORPORATION
Pursuant to this Plan of Merger ("Plan of Merger"), SWVA Bancshares,
Inc. ("SWVA"), a Virginia corporation, shall merge with and into FNB Corporation
("FNB"), a Virginia corporation in a merger under Section 13.1-716 of the
Virginia Stock Corporation Act.
ARTICLE 1
Terms of the Merger
1.1 The Merger. Subject to the terms and conditions of the Agreement
and Plan of Merger, dated as of August ___, 2000 between FNB and SWVA (the
"Merger Agreement"), at the Effective Date, SWVA shall merge with and into FNB ,
which shall be the surviving corporation. Each outstanding share of common
stock of SWVA shall be converted into and exchanged for shares of the common
stock of FNB and/or cash in accordance with Article 2 of this Plan of Merger
pursuant to a merger under Section 13.1-716 of the Virginia Stock Corporation
Act (the "Merger"). At the Effective Date, the Merger shall have the effect as
provided in Section 13.1-721 of the Virginia Stock Corporation Act.
1.2 Articles of Incorporation and Bylaws. The Articles of
Incorporation of FNB shall be the Articles of Incorporation of the surviving
corporation following the Effective Date until amended or repealed. The Bylaws
of FNB shall be the Bylaws of the surviving corporation following the Effective
Date until amended or repealed in accordance with the terms of such Bylaws.
1.3 Management of Surviving Corporation. On the Effective Date,
the number of Directors of FNB shall be increased by two members by adding one
member in Class I whose terms expire at the 2003 annual meeting of shareholders
and by adding one member in Class III whose terms expire at the 2002 annual
meeting of shareholders. B. L. Rakes shall be appointed to fill the vacancy
created in Class I and Courtney Hoge shall be appointed to fill the vacancy
created in Class III. At the next annual meeting of shareholders of FNB,
management of FNB will recommend to shareholders that those gentlemen be elected
as a member of Class I and Class III, respectively. In addition, on the
Effective Date, FNB agrees to assume the employment agreements between SWVA and
D. W. Shilling and Barbara Weddle, and as of the Effective Time, FNB shall enter
into an Addendum to the employment agreement for D. W. Shilling and Barbara
Weddle, as attached as Exhibit 1.4 to the Merger Agreement. In addition, as of
the Effective Date, FNB shall enter into an agreement with B. L. Rakes in which
FNB agrees to pay Mr. Rakes $17,000 in consideration for his agreement not to
compete with FNB and its affiliates for a period of one year.
ARTICLE 2
Manner of Converting Shares
2.1 Conversion of SWVA Stock and Stock Options. At the Effective
Date, by virtue of the Merger, each share of the common stock, par value $0.10
per share, of SWVA ("SWVA Common Stock") issued and outstanding immediately
prior to the Effective Date will be converted into either cash (the "Cash
Consideration") or shares of common stock, par value $5.00 per share, of FNB
("FNB Common Stock"), the "Stock Consideration," which Stock Consideration
together with the Cash Consideration (the "Merger Consideration"), in each case
as the holder thereof shall have elected or be deemed to have elected in
accordance with Section 2.3.
In the case that the Market Value of FNB Common Stock (as defined
later in this Section 2.1) is equal to or greater than $15.30 per share and
equal to or less than $18.70 per share, the Cash Consideration will be $20.25
per share and the Stock Consideration will equal shares of FNB Common Stock with
a Market Value of $20.25. In the case that the Market Value of FNB Common Stock
is greater than $18.70 and less than or equal to $20.00, the Stock Consideration
will equal 1.083 shares of FNB Common Stock for each outstanding share of SWVA
Common Stock, and the Cash Consideration will be $20.25. In the case that the
Market Value of FNB Common Stock is less than $15.30 and equal to or greater
than $14.00, the Stock Consideration will equal 1.324 shares of FNB Common Stock
for each outstanding share of SWVA Common Stock, and the Cash Consideration will
be $20.25.
The Market Value of FNB Common Stock will be the average of the last
reported sales prices per share of FNB Common Stock as reported on the NASDAQ
Exchange Composite Transactions Tape (as reported in The Wall Street Journal,
or, if not reported thereby, another authoritative source as chosen by FNB) for
the thirty consecutive full trading days on such exchange (even if FNB Common
Stock does not trade in each such day) ending at the close of trading on the
tenth calendar day before the Effective Date (the "Market Value" and the
Measurement Period"). The ratio of shares of FNB's common stock that will be
exchanged for each outstanding share of SWVA Common Stock shall be referred to
herein as the "Exchange Ratio" and shall be rounded to the nearest thousandth
decimal point.
2.2 Allocation. Notwithstanding anything in this Plan of Merger to the
contrary, the aggregate amount of cash to be issued to shareholders of SWVA in
the Merger shall be equal to $1,785,742 (the "Cash Amount"); provided that the
Cash Amount may be changed by FNB to accommodate the exercise by FNB of its
option to change the Cash Number and the Stock Number pursuant to the last
sentence of this Section 2.2. As used in the Merger Agreement, the Cash Number
shall mean the aggregate number of shares of SWVA Common Stock to be converted
into the right to receive the Cash Consideration in the Merger, which shall be
equal to the Cash Amount divided by $20.25. The number of shares of SWVA Common
Stock to be converted into the right to receive Stock Consideration (the "Stock
Number") will be equal to (i) the number of shares of SWVA Common Stock issued
and outstanding immediately prior to the Effective Date of the Merger less (ii)
the sum of (A) the Cash Number and (B) the aggregate number of shares of SWVA
Common Stock to be exchanged for cash pursuant to Section 3.3. FNB shall have
2
the option to change the Cash Number and the Stock Number to more closely follow
the actual elections of SWVA shareholders pursuant to this Article 2, so long as
such modification to the Cash Number and the Stock Number does not prevent the
condition set forth in Section 7.1(d) of the Merger Agreement from being
satisfied.
2.3 Election. Subject to allocation in accordance with the provisions of
this Article, each record holder of shares of SWVA Common Stock issued and
outstanding immediately prior to the Election Deadline (as defined in Section
3.1(i)) will be entitled, in accordance with Section 3.1, (i) to elect to
receive in respect of each such share held in such manner (A) Cash Consideration
(a "Cash Election") or (B) Stock Consideration (a "Stock Election") thus, making
an election for all Cash Consideration, all Stock Consideration, or a mixture
thereof or (ii) to indicate that such record holder has no preference as to the
receipt of Cash Consideration or Stock Consideration for all such shares held by
such holder (a "Non-Election"). Shares of SWVA Common Stock in respect of which
a Non-Election is made or as to which no election is made (collectively, "Non-
Election Shares") shall be deemed by FNB to be shares in respect of which Cash
Elections or Stock Elections have been made, as FNB shall determine. Holders of
record of shares of SWVA Common Stock who hold such shares as nominees, trustees
or in other representative capacities (a "Representative") may submit multiple
Forms of Election (as hereinafter defined), provided that each such Form of
Election covers all the shares of SWVA Common Stock held by that Representative
for a particular beneficial owner.
2.4 Allocation of Cash Election Shares. In the event that the
aggregate number of shares in respect of which Cash Elections have been made
(the "Cash Election Shares") exceeds the Cash Number, all shares of SWVA Common
Stock in respect of which Stock Elections have been made (the "Stock Election
Shares") and all Non-Election Shares will be converted into the right to receive
Stock Consideration (and cash in lieu of fractional interests in accordance with
Section 3.3), and Cash Election Shares will be converted into the right to
receive Cash Consideration or Stock Consideration in the following manner:
(i) the number of Cash Election Shares covered by each Form of
Election (as defined in Section 3.1(i)) to be converted into Cash
Consideration will be determined by multiplying the number of Cash
Election Shares covered by such Form of Election by a fraction, (A)
the numerator of which is the Cash Number and (B) the denominator of
which is the aggregate number of Cash Election Shares rounded down to
the nearest whole number; and
(ii) all Cash Election Shares not converted into Cash
Consideration in accordance with Section 2.4(i) will be converted into
the right to receive Stock Consideration (and cash in lieu of
fractional interests in accordance with Section 3.3).
Provided, however, that cash in lieu of fractional interests and cash to be paid
in connection with rights of dissenting shareholders, as provided in Sections
3.3 and 3.5, respectively, shall not be included in any determination of whether
this Section 2.4 shall be given effect.
2.5 Allocation of Stock Election Shares. In the event that the
aggregate number of Stock Election Shares exceeds the Stock Number, all Cash
Election Shares and all Non-Election Shares (together, the " Cash Shares") will
3
be converted into the right to receive Cash Consideration, and all Stock
Election Shares will be converted into the right to receive Cash Consideration
or Stock Consideration in the following manner:
(i) the number of Stock Election Shares covered by each Form of
Election to be converted into Cash Consideration will be determined
by multiplying the number of Stock Election Shares covered by such
Form of Election by a fraction, (A) the numerator of which is the
Cash Number less the number of Cash Shares and (B) the denominator of
which is the aggregate number of Stock Election Shares, rounded down
to the nearest whole number; and
(ii) all Stock Election Shares not converted into Cash Consideration
in accordance with Section 2.5(i) will be converted into the right to
receive Stock Consideration (and cash in lieu of fractional interests
in accordance with Section 3.3).
2.6 No Allocation. In the event that neither Section 2.4 nor Section
2.5 is applicable, all Cash Election Shares will be converted into the right to
receive Cash Consideration, all Stock Election Shares will be converted into
the right to receive Stock Consideration (and cash in lieu of fractional
interests in accordance with Section 3.3) and Non-Election Shares will be
converted into the right to receive Cash Consideration or Stock Consideration
(and cash in lieu of fractional interests in accordance with Section 3.3) as the
Exchange Agent shall determine.
2.7 Computations. The Exchange Agent (as defined in Section 3.1(i))
will make all computations to give effect to this Article 2.
2.8 Cancellation of Shares. As of the Effective Date of the Merger,
all such shares of SWVA Common Stock will no longer be outstanding and
automatically be cancelled and retired and will cease to exist and each holder
of a certificate formerly representing any such shares of SWVA Common Stock (a
"SWVA Certificate") will cease to have any rights with respect thereto, except
the right to receive Merger Consideration and any additional cash in lieu of
fractional shares of FNB Common Stock to be issued or paid in consideration
therefor upon surrender of such SWVA Certificate in accordance with Article 3,
without interest, subject to rights of dissenting shareholders as provided under
Section 3.5.
ARTICLE 3
Manner of Exchange
3.1 Exchange Procedures.
(i) Not more than 45 days nor fewer than 30 days prior to the
Effective Date, First National Bank, Christiansburg, Virginia, as the
exchange agent ("Exchange Agent"), will mail a form of election (the
"Form of Election") to each shareholder of record of SWVA as of a
record date as close as practicable to the date of mailing and
mutually agreed to by SWVA and FNB. The Exchange Agent shall enter
into a written agreement with FNB and SWVA detailing its duties and
4
responsibilities and shall furnish evidence of liability insurance for
such activities in a form substantially similar to Exhibit C to the
Merger Agreement. In addition, the Exchange Agent will use its best
efforts to make the Form of Election available to the persons who
become shareholders of SWVA during the period between such record date
and the Effective Date. Any election to receive Merger Consideration
will have been properly made only if the Exchange Agent shall have
received on the fifth business day immediately preceding the Effective
Date (the "Election Deadline"), a Form of Election properly completed
and accompanied by a SWVA Certificate ("Certificate(s)") for the
shares to which such Form of Election relates, acceptable for transfer
on the books of SWVA (or an appropriate guarantee of delivery), as set
forth in such Form of Election. An election may be revoked only by
written notice received by the Exchange Agent prior to 5:00 p.m. on
the Election Deadline. If an election is so revoked, the
Certificate(s) (or guarantee of delivery, as appropriate) to which
such election relates will be promptly returned to the person
submitting the same to the Exchange Agent.
(ii) As soon as reasonably practicable after the Effective Date,
the Exchange Agent will mail to each holder of record of a
Certificate, whose shares of SWVA Common Stock were converted into the
right to receive Merger Consideration and those who failed to return a
properly completed Form of Election, (i) a letter of transmittal
(which will specify that delivery will be effected, and risk of loss
and title to the Certificates will pass, only upon delivery of the
Certificates to the Exchange Agent and will be in such form and have
such other provisions as the Exchange Agent may specify consistent
with the Merger Agreement) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for the Merger
Consideration.
(iii) With respect to properly made elections in accordance with
Section 3.1(i), and upon surrender in accordance with Section 3.1(ii)
of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, and such other documents as
may reasonably be required by the Exchange Agent, the holder of such
Certificate will be entitled to receive in exchange therefor the
Merger Consideration that such holder has the right to receive
pursuant to the provisions of Article 2, and the Certificate so
surrendered will forthwith be canceled. In the event of a transfer of
ownership of Shares that are not registered in the transfer records of
SWVA, as the case may be, payment may be issued to a person other than
the person in whose name the Certificate so surrendered is registered
if such Certificate is properly endorsed or otherwise in proper form
for transfer and the person requesting such issuance pays any transfer
or other taxes required by reason of such payment to a person other
than the registered holder of such Certificate or establishes to the
satisfaction of FNB that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 3.1, each
Certificate will be deemed at any time after the Effective Date to
represent only the right to receive upon such surrender the Merger
Consideration that the holder thereof has the right to receive in
respect of such Certificate pursuant to the provisions of Article 2.
No interest will be paid or will accrue on any cash payable to holders
of Certificates pursuant to the provisions of Article 2.
5
3.2 Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to the shares of SWVA Common Stock with a
record date after the Effective Date shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of SWVA Common Stock
represented thereby, and no cash payment in lieu of any fractional shares shall
be paid to any such holder pursuant to Section 3.3. Subject to the effect of
unclaimed property, escheat and other applicable laws, following surrender of
any such Certificate, there shall be paid to the holder of the Certificate
representing whole shares of SWVA Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of SWVA Common Stock to which such holder
is entitled pursuant to Section 3.3, and (ii) the amount of dividends or other
distributions, if any, with a record date after the Effective Date.
3.3 No Fractional Securities. No FNB Certificates or scrip
representing fractional shares of FNB Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional shares shall not
entitle the owner thereof to vote or to any other rights of a holder of FNB
Common Stock. A holder of Shares converted in the Merger who would otherwise
have been entitled to a fractional share of FNB Common Stock shall be entitled
to receive a cash payment (without interest) in lieu of such fractional share in
an amount determined by multiplying (i) the fractional share interest to which
such holder would otherwise be entitled by (ii) the Market Value of FNB Common
Stock.
3.4 Certain Adjustments. If, after the date hereof and on or prior
to the Closing Date, the outstanding shares of SWVA Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock or other securities is declared thereon with a record date
within such period, or any similar event shall occur, the Merger Consideration
will be adjusted accordingly to provide to the holders of SWVA Common Stock,
respectively, the same economic effect as contemplated by the Merger Agreement
prior to such reclassification, recapitalization, split-up, combination,
exchange or dividend or similar event.
3.5 Rights of Dissenting Shareholders. Shareholders of SWVA who
object to the Merger will be entitled to the rights and remedies set forth in
sections 13.1-729 through 13.1-741 of the Virginia Stock Corporation Act.
ARTICLE 4
Treatment of Stock Options
4.1 Conversion of Stock Options. (a) On the Effective Date, all
rights with respect to SWVA Common Stock pursuant to stock options ("SWVA
Options") granted by SWVA under a SWVA stock option plan which are outstanding
on the Effective Date, whether or not they are exercisable, shall be converted
into and become rights with respect to FNB Common Stock, and FNB shall assume
each SWVA Option in accordance with the terms of the stock option plan under
which it was issued and the stock option agreement by which it is evidenced.
From the Effective Date forward, (i) each SWVA Option assumed by FNB may be
excised solely for shares of FNB Common Stock, (ii) the number of shares of FNB
Common Stock subject to each SWVA Option shall be equal to the number of shares
of SWVA Common Stock subject to such option immediately prior to the Effective
Date multiplied by the Exchange Ratio and (iii) the per share exercise price
6
under each such SWVA Option shall be adjusted by dividing the per share exercise
price under each such option by the Exchange Ratio and rounding down to the
nearest cent; provided, however, that the terms of each SWVA Option shall, in
accordance with its terms, be subject to further adjustment as appropriate to
reflect any stock split, stock dividend, recapitalization or other similar
transaction after the Effective Date. It is intended that the foregoing
assumption shall be undertaken in a manner that will not constitute a
"modification" as defined in Section 425 of the Code, as to any stock option
which is an "incentive stock option." Shares of FNB Common Stock issuable upon
exercise of SWVA Options shall be covered by an effective registration statement
on Form S-8, and FNB shall use its reasonable best efforts to file a
registration statement on Form S-8 covering such shares as soon as possible
after the Effective Date, but in no event, no later than 30 days after the
Effective Date.
ARTICLE 5
Termination
5.1 Termination. This Plan of Merger may be amended or terminated
prior to the Effective Time as provided in the Merger Agreement, subject to the
provisions of the Virginia Stock Corporation Act.
7
EXHIBIT B
EXCHANGE AGENT AGREEMENT
This EXCHANGE AGENT AGREEMENT entered into this _____ day of __________,
2000, by and among FNB CORPORATION, a Virginia corporation ("FNB"), SWVA
BANCSHARES, INC., a Virginia corporation ("SWVA"), and FIRST NATIONAL BANK, a
national banking association with trust powers (the "Exchange Agent"), provides:
FNB and SWVA have entered into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which, SWVA will be merged with and into FNB on the
terms and conditions described therein. Capitalized terms used in this
Agreement and not otherwise defined shall have the meaning provided in the
Merger Agreement.
Section 3.1 of the Merger Agreement provides that FNB and SWVA will enter
into a written agreement with the Exchange Agent detailing the duties and
responsibilities of the Exchange Agent.
NOW, THEREFORE, in consideration of the premises, and the covenants and
agreements contained herein, the parties hereby agree as follows:
1. Service as Exchange Agent. The Exchange Agent agrees to serve as
exchange agent in connection with the Merger and agrees to perform the duties
and responsibilities provided for the Exchange Agent in the Merger Agreement.
Specifically, the Exchange Agent agrees to make all computations to give effect
to Article 2 of the Merger Agreement and to perform the exchange functions
provided in Article 3 of the Merger Agreement.
2. Representations. The Exchange Agent represents to SWVA and FNB that it
has liability insurance for the activities in which it will engage pursuant to
the terms hereof and that it has supplied evidence of such insurance to SWVA and
FNB.
3. Indemnity. Each of FNB and SWVA agree to indemnify and hold the Exchange
Agent harmless with respect to all claims, demands and causes of action related
to the performance of its duties as Exchange Agent under the Merger Agreement
except for matters arising from its own gross negligence or willful misconduct
in connection with the performance of such duties.
4. Entire Agreement. This Agreement contains the entire agreement among the
parties hereto with respect to the subject matter hereof and supercedes all
prior arrangements and understandings with respect thereto.
5. Governing Law. This Agreement shall be construed and enforced according
to the laws of the Commonwealth of Virginia.
6. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficiently delivered, personally
or telecopied, or sent by recognized overnight courier service, or registered or
certified mail, postage prepaid, addressed as follows:
7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but such counterparts together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the date
first above written.
FNB CORPORATION
By_____________________
Its____________________
SWVA BANCSHARES
By_____________________
Its____________________
2
FIRST NATIONAL BANK
By_____________________
Its____________________
3
EXHIBIT C
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT (the "Agreement") dated as of
_______________, 2000, between FNB CORPORATION, a Virginia corporation ("FNB")
and each of the individuals listed on Schedule A attached hereto (collectively,
the "Stockholders").
WHEREAS, FNB and SWVA BANCSHARES, INC. ("SWVA") have entered into an
Agreement and Plan of Merger, dated as of ______________, 2000, and a related
Plan of Merger (collectively, the "Affiliate Agreement") pursuant to which,
among other things, Southwest Virginia Savings Bank, FSB will become a wholly-
owned banking subsidiary of FNB (the "Affiliation");
WHEREAS, each of the Stockholders is the beneficial and registered
owner of, and has or shares the right to vote and dispose of, the number of
shares of common stock, par value $0.10 per share, of SWVA ("SWVA Common Stock")
set forth opposite such Stockholder's name on Schedule A hereto (the "Shares")
and has rights by option or otherwise to acquire additional shares of SWVA
Common Stock also set forth opposite such Stockholder's name on Schedule A
hereto;
WHEREAS, the Shares amount to an aggregate of ________________ shares
of SWVA Common Stock, which constitute as of this date approximately __________%
of the issued and outstanding shares of SWVA Common Stock; and
WHEREAS, as a condition and inducement to entering into the
Affiliation Agreement, FNB has requested that the Stockholders agree, and the
Stockholders have agreed, to support the Affiliation.
NOW, THEREFORE, to induce FNB to enter into the Affiliation Agreement
and in consideration of mutual covenants, representations, warranties, and
agreements set forth herein and in the Affiliation Agreement, and intending to
be legally bound hereby, the parties hereto agree as follows:
1. Agreement to Vote. At such time as SWVA conducts a meeting of its
stockholders, including any adjournments thereof, to approve the Affiliation
Agreement, each Stockholder agrees to vote or cause to be voted all of such
Stockholder's Shares in favor of the Affiliation Agreement, unless FNB is in
material default with respect to any covenant, representation, warranty or
agreement with respect to it contained in the Affiliation Agreement or the
Affiliation Agreement provides otherwise.
2. Agreement to Cooperative. In addition to the specific matters
provided for elsewhere herein, each Stockholder shall take all action reasonably
requested by FNB and SWVA to facilitate the consummation of the Affiliation and
the transactions contemplated by the Affiliation Agreement.
3. Securities Act of 1933. Each Stockholder agrees not to sell,
transfer or otherwise dispose of the shares of common stock, par value $5.00 per
share, of FNB ("FNB Common Stock") such Stockholder will receive in connection
with the Affiliation, unless such sale, transfer or disposition is in compliance
with Rule 145 promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
4. Covenants of Stockholders. Each of the Stockholders, severally
and not jointly, covenants as follows:
(a) Restrictions on Transfer. During the term of this Agreement and
except as agreed to by FNB, such Stockholder shall not pledge, hypothecate,
grant a security interest in, sell, transfer or otherwise dispose of or encumber
any of the Shares owned by him or her and will not enter into any agreement,
arrangement or understanding (other than a proxy for the purpose of voting his
or her shares in accordance with Section 1 hereof) which would during that term
(i) restrict, (ii) establish a right of first refusal to, or (iii) otherwise
relate to the transfer or voting of the Shares owned by such Stockholder.
(b) Other Acquisition Proposals. Such Stockholder agrees that until
the earlier of (i) the consummation of the Affiliation or (ii) the termination
of the Affiliation Agreement in accordance with its terms, the Stockholder will
not, directly or indirectly:
(x) vote any Shares, or cause or permit any of the Shares to be
voted, in favor of any other merger, consolidation, plan of liquidation,
sale of assets, reclassification or other transaction involving SWVA that
would have the effect of any person, other than FNB, acquiring control over
SWVA or any substantial portion of the assets of SWVA, except as otherwise
provided in the Affiliation Agreement. As used herein, the term "control"
means (1) the ability to direct the voting of 10% or more of the
outstanding voting securities of a person having ordinary voting power in
the election of directors or (2) the ability to direct the management and
policies of a person whether through ownership of securities, through any
contract, arrangement or understanding or otherwise.
(y) sell or otherwise transfer any of the Shares or cause or
permit any of the Shares to be sold or otherwise transferred (i) pursuant
to any tender offer, exchange offer or similar proposal made by any person
other than FNB or an affiliate of FNB, (ii) to any person known by such
Stockholder to be seeking to obtain control of SWVA or any substantial
portion of the assets of SWVA or to any other person (other than FNB or an
affiliate of FNB) under circumstances where such sale or transfer may
reasonably be expected to assist a person seeking to obtain such control or
(iii) for the principal purpose of avoiding the obligations of such
Stockholder under this Agreement.
(c) Additional Shares. The provisions of Section 1 and Subparagraph
(a) above shall apply to all Shares currently owned and hereafter acquired by
each of the Stockholders, except for shares held in a fiduciary capacity.
5. Capacity Only as a Stockholder. It is understood and agreed that
this Agreement relates solely to the capacity of such Stockholder as a
2
stockholder or other beneficial owner of the Shares and is not in any way
intended to affect the exercise by such Stockholder of his or her
responsibilities as a director or officer of SWVA. It is further understood and
agreed that the term "Shares" shall not include any securities beneficially
owned by the Stockholder as a trustee or fiduciary, and that this Agreement is
not in any way intended to affect the exercise by the Stockholder of his or her
fiduciary responsibility in respect of any such securities.
6. Termination. This Agreement shall terminate upon the termination
of the Affiliation Agreement. In the event of the termination of this
Agreement, this Agreement shall forthwith become null and void and there shall
be no liability or obligation on the part of each Stockholder, or SWVA, or FNB
or their respective officers or directors, except that nothing in this Section 6
shall relieve any party hereto from any liability for breach of this Agreement
prior to such termination.
7. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed by the applicable party hereto in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that each
of the parties hereto shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement by the other 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 it is
entitled at law or in equity and that each party waives the posting of any bond
or security in connection with any proceeding related thereto.
8. Amendments. This Agreement may not be modified, amended, altered
or supplemented except upon the execution and delivery of a written agreement
executed by all of the parties hereto.
9. Governing Law. This Agreement shall in all respects be governed
by and construed in accordance with the laws of the Commonwealth of Virginia
without regard to the conflict of law principles thereof.
10. Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of, and shall be enforceable by, the parties hereto and
their respective personal representatives, successors and assigns, except that
neither party may transfer or assign any of its respective rights or obligations
hereunder without the prior written consent of the other party or, if by FNB, in
accordance with the Affiliation Agreement.
11. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, all of which together
shall constitute one and the same instrument.
3
IN WITNESS WHEREOF, FNB and the Stockholders have caused this
Agreement to be duly executed as of the day and year first above written.
RP Financial, L.C.
Financial Services Industry Consultants
APPENDIX B
_____________ __, 2001
Board of Directors
SWVA Bancshares, Inc.
302 Second Street, S.W.
Roanoke, Virginia 24011
Members of the Board:
You have requested RP Financial, LC. ("RP Financial") to provide you with
its opinion as to the fairness from a financial point of view to the
stockholders of SWVA Bancshares, Inc., Roanoke, Virginia ("SWVA"), the holding
company for Southwest Virginia Savings Bank, FSB ("Southwest Virginia"), of the
Agreement and Plan of Merger (the "Agreement"), by and between FNB Corporation,
Christiansburg, Virginia ("FNB"), a Virginia banking corporation, and SWVA.
Unless otherwise defined, all capitalized terms incorporated herein have the
meanings ascribed to them in the Agreement, which is incorporated herein by
reference.
Summary Description of Consideration
At the Effective Time, SWVA shall be merged into FNB. Concurrently, each share
of the common stock, par value $0.10 per share, of SWVA ("SWVA Common Stock"),
issued and outstanding immediately prior to the Effective Date (except for
dissenters' shares) will be converted into either cash (the "Cash
Consideration") or shares of common stock, par value $5.00 per share, of FNB
("FNB Common Stock"), the "Stock Consideration". In the case that the Market
Value of FNB Common Stock is equal to or greater than $15.30 per share and equal
to or less than $18.70 per share, the Cash Consideration will be $20.25 per
share and the Stock Consideration will equal shares of FNB Common Stock with a
Market Value of $20.25. In the case that the Market Value of FNB Common Stock
is greater than $18.70 and less than or equal to $20.00, the Stock Consideration
will equal 1.083 shares of FNB Common Stock for each outstanding share of SWVA
Common Stock, and the Cash Consideration will be $20.25. In the case that the
Market Value of FNB Common Stock is less than $15.30 and equal to or greater
than $14.00, the Stock Consideration will equal 1.324 shares of FNB Common Stock
for each outstanding share of SWVA Common Stock, and the Cash Consideration will
be $20.25.
--------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center Telephone: (703) 528-1700
1700 Moore Street, Suite 2210 Fax No.: (703) 528-1788
Arlington, VA 22209 E-Mail: mail@fpfinancial.com
The Market Value of FNB Common Stock will be the average of the last reported
sales prices per share of FNB Common Stock as reported on the NASDAQ Exchange
Composite Transactions Tape (as reported in The Wall Street Journal, or, if not
reported thereby, another authoritative source as chosen by FNB) for the thirty
consecutive full trading days on such exchange (even if FNB Common Stock does
not trade in each such day) ending at the close of trading on the tenth calendar
day before the Effective Date. The ratio of shares of FNB's Common Stock that
will be exchanged for each outstanding share of SWVA Common Stock shall be
referred to herein as the "Exchange Ratio" and shall be rounded to the nearest
thousandth decimal point. As of the date hereof, SWVA had 423,612 shares of
common stock issued and outstanding, and 64,049 granted stock options
outstanding.
RP Financial Background and Experience
RP Financial, as part of its financial institution valuation and consulting
practice, is regularly engaged in the valuation of financial institution
securities in connection with mergers and acquisitions of commercial banks and
thrift institutions, initial and secondary offerings, mutual-to-stock
conversions of thrift institutions, and business valuations for other corporate
purposes for financial institutions. As specialists in the securities of
financial institutions, RP Financial has experience in, and knowledge of, the
Virginia and Southeast U.S. markets for thrift and bank securities and financial
institutions operating in Virginia.
Materials Reviewed
In rendering this fairness opinion, RP Financial reviewed the following
material: (1) the Agreement, dated August 7, 2000, including exhibits; (2)
financial and other information for SWVA, all with regard to balance and off-
balance sheet composition, profitability, interest rates, volumes, maturities,
trends, credit risk, interest rate risk, liquidity risk and operations: (a)
audited and unaudited financial statements for the fiscal years ended June 30,
1995 through 2000, (b) stockholder, regulatory and internal financial and other
reports through June 30, 2000, (c) the conversion prospectus, dated August 12,
1994, (d) the proxy statements for the last three years, and (e) SWVA's
management and Board comments regarding past and current business, operations,
financial condition, and future prospects; and (3) financial and other
information for FNB including: (a) unaudited and audited financial statements
for the fiscal years ended December 31, 1996 through 1999, (b) stockholder,
regulatory, internal financial and/or other reports through June 30, 2000, (c)
proxy statements for the last three years, (d) publicly-available information
pertaining to the pending acquisition of CNB Holdings, Inc., holding company for
Community National Bank, Pulaski, Virginia and (e) FNB's management comments
regarding past and current business, operations, financial condition, and future
prospects.
RP Financial reviewed financial, operational, market area and stock price
and trading characteristics for SWVA and FNB (on a historical and pro forma
basis) relative to publicly-traded savings institutions and commercial banking
institutions, respectively, with comparable resources, financial condition,
earnings, operations and markets. RP Financial also considered the economic and
demographic characteristics in the local market area, and the potential impact
of the regulatory, legislative and economic environments on operations for SWVA
and FNB and the public perception of the savings institution and commercial
2
banking industries. RP Financial also considered: (1) the financial terms,
financial and operating condition and market area of other recently completed
acquisitions of comparable savings institutions both regionally and nationally;
(2) discounted cash flow analyses for SWVA incorporating future prospects; (3)
expressions of interest by third parties seeking a business combination with
SWVA; (4) the pro forma impact on FNB of the acquisitions of CNB Holdings, Inc.
and SWVA, which are expected to be accounted for as purchases; and (5) the
market for FNB's common stock.
In rendering its opinion, RP Financial relied, without independent
verification, on the accuracy and completeness of the information concerning
SWVA and FNB furnished by the respective institutions to RP Financial for
review, as well as publicly-available information regarding other financial
institutions and economic and demographic data. SWVA and FNB did not restrict
RP Financial as to the material it was permitted to review. RP Financial did
not perform or obtain any independent appraisals or evaluations of the assets
and liabilities and potential and/or contingent liabilities of SWVA or FNB.
RP Financial expresses no opinion on matters of a legal, regulatory, tax or
accounting nature or the ability of the merger as set forth in the Agreement to
be consummated. In rendering its opinion, RP Financial assumed that, in the
course of obtaining the necessary regulatory and governmental approvals for the
proposed Merger, no restriction will be imposed on FNB that would have a
material adverse effect on the ability of the Merger to be consummated as set
forth in the Agreement.
Opinion
It is understood that this letter is directed to the Board of Directors of
SWVA in its consideration of the Agreement, and does not constitute a
recommendation to any stockholder of SWVA as to any action that such stockholder
should take in connection with the Agreement, or otherwise.
It is understood that this opinion is based on market conditions and other
circumstances existing on the date hereof.
It is understood that this opinion may be included in its entirety in any
communication by SWVA or its Board of Directors to the stockholders of SWVA and
that stockholders may rely on the opinion. It is also understood that this
opinion may be included in its entirety in any regulatory filing by SWVA or FNB,
and that RP Financial consents to the summary of the opinion in the proxy
materials of SWVA, and any amendments thereto. Except as described above, this
opinion may not be summarized, excerpted from or otherwise publicly referred to
without RP Financial's prior written consent.
Based upon and subject to the foregoing, and other such matters considered
relevant, it is RP Financial's opinion that, as of the date hereof, the Merger
Consideration to be received by SWVA's stockholders, as described in the
Agreement, is fair to such stockholders from a financial point of view.
Respectfully submitted,
RP FINANCIAL, LC.
3
Appendix C
ARTICLE 15 - CODE OF VIRGINIA
C-1
ARTICLE 15.
DISSENTERS' RIGHTS
ss.13.1-729. Definitions.--In this article:
"Corporation" means the issuer of the shares held by a dissenter before
the corporate action, except that (i) with respect to a merger, "corporation"
means the surviving domestic or foreign corporation or limited liability company
by merger of that issuer, and (ii) with respect to a share exchange,
"corporation" means the acquiring corporation by share exchange, rather than the
issuer, if the plan of share exchange places the responsibility for dissenters'
rights on the acquiring corporation.
"Dissenter" means a shareholder who is entitled to dissent from
corporate action under ss. 13.1-730 and who exercises that right when and in the
manner required by ss.13.1-732 through ss.13.1-739.
"Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
"Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
"Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
"Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
CODE OF VIRGINIA
ss 13.1-730
"Shareholder" means the record shareholder or the beneficial
shareholder. (1985, C. 522; 1992,C. 575.)
Law Review.--For article, "Dissenting Stockholders' Rights in Virginia:
Exclusivity of the Cash-Out Remedy and Determination of 'Fair Value,'" see 12 U.
Rich. L. Rev. 505 (1978). For article, "The New Virginia Stock Corporation Act:
A Primer," see 20 U. Rich. L. Rev. 67 (1985). For article, "Virginia's
Affiliated Transactions' Statute: Indulging Form Over Substance in Second
Generation Takeover Legislation," see 21 U. Rich. L. Rev. 489 (1987).
Editor's note.--The cases below were decided under prior law.
"Fair value" defined.--The term "fair value" of the stock of a
stockholder who dissents from a sale means the intrinsic worth of teh
dissenter's stock, which is to be arrived at after an appraisal of all the
elements of value. Lucas v. Pembroke Water Co., 205 Va. 84, 135 S.E.2d 147
(1964).
Elements of "fair value."--Among the elements to be considered in
arriving at the "fair value" or "fair cash value" of a dissenter's stock are its
market value, net asset value, investment value, and earning capacity. Lucas v.
Pembroke Water Co., 205 Va. 84, 135 S.E.2d 147 (1964).
The book value, or net asset value, of the stock is only one of the
factors to be considered. Mere book value alone is not determinative. Lucas v.
Pembroke Water Co., 205 Va. 84, 135 S.E.2d 147 (1964).
Excessive salary payments to officers and directors of a corporation
are assets of the corporation to be considered along with other assets in fixing
the value of the stock. Lucas v. Pembroke Water Co., 205 Va. 84, 135 S.E.2d 147
(1964).
"Fair cash value" means actual value.--Actual value of the shares of a
stockholder dissenting to a consolidation or merger of a corporation is
practically synonymous with "fair cash value" as those words were used in
repealed ss 13-47. Adams v. United States Distrib. Corp., 184 Va. 134, 34 S.E.2d
244 (1945), cert. denied, 327 U.S. 788, 66 S. Ct. 807, 90 L. Ed. 1014 (1946).
The term "fair cash value" means the intrinsic worth of the dissenter's
stock, which is to be arrived at after an appraisal of all the elements of
value. Adams v. United States Distrib. Corp., 184 Va. 134, 34 S.E.2d 244 (1945),
cert. denied, 327 U.S. 788, 66 S. Ct. 807, 90 L. Ed. 1014 (1946).
And not contractual value.--Dissenters may not recover the "contractual
value" of their shares, the par value plus accrued cumulative dividends, as
distinguished from the "fair cash value" or the "actual value." Adams v. United
States Distrib. Corp., 184 Va. 134, 34 S.E.2d 244 (1945), cert. denied, 327 U.S.
788, 66 S. Ct. 807, 90 L. Ed. 1014 (1946).
Determination of fair value of dissenters' stock upon conflicting
evidence is for the trial court. Lucas v. Pembroke Water Co., 205 Va. 84, 135
S.E.2d 147 (1964).
Amount of allowance of interest is left to discretion of trial court.
Lucas v. Pembroke Water Co., 205 Va. 84, 135 S.E.2d 147 (1964).
ss.13.1-730. Right to Dissent.--A. A shareholder is entitled to dissent
from, and obtain payment of the fair value of his shares in the event of, any of
the following corporate actions:
1. Consummation of a plan of merger to which the corporation is a party
(i) if shareholder approval is required for the merger by ss.13.1-718 or the
articles of incorporation and the shareholder is entitled to vote on the merger
or (ii) if the corporation is a subsidiary that is merged with its parent under
ss.13.1-719;
2. Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
3. Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation if the shareholder was entitled to vote on the
sale or exchange or if the sale or exchange was in furtherance of a dissolution
on which the shareholder was entitled to vote, provided that such dissenter's
rights shall not apply in the case of (i) a sale or exchange pursuant to court
order, or (ii) a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale;
4. Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors
ss.13.1-730 CORPORATIONS ss.13.1-730
provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
B. A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
C. Notwithstanding any other provision of this article, with respect to
a plan of merger or share exchange or a sale or exchange of property there shall
be no right of dissent in favor of holders of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at the meeting at which the plan of merger or
share exchange or the sale or exchange of property is to be acted on, were (i)
listed on a national securities exchange or on the National Association of
Securities Dealers Automated Securities System (NASDAQ) or (ii) held by at least
2,000 record shareholders, unless in either case:
1. The articles of incorporation of the corporation issuing such shares
provide otherwise;
2. In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange to
accept for such shares anything except:
a. Cash;
b. Shares or membership interests, or shares or membership
interests and cash in lieu of fractional shares (i) of the surviving or
acquiring corporation or limited liability company or (ii) of any other
corporation or limited liability company which, at the record date
fixed to determine the shareholders entitled to receive notice of and
to vote at the meeting at which the plan of merger or share exchange is
to be acted on, were either listed subject to notice of issuance on a
national securities exchange or held of record by at least 2,000 record
shareholders or members; or
c. A combination of cash and shares or membership interests as
set forth in subdivisions 2a and 2b of this subsection; or
3. The transaction to be voted on is an "affiliated transaction" and is
not approved by a majority of "disinterested directors" as such terms are
defined in ss.13.1-725.
D. The right of a dissenting shareholder to obtain payment of the fair
value of his shares shall terminate upon the occurrence of any one of the
following events:
1. The proposed corporate action is abandoned or rescinded;
2. A court having jurisdiction permanently enjoins or sets aside the
corporate action; or
3. His demand for payment is withdrawn with the written consent of the
corporation.
E. Notwithstanding any other provision of this article, no shareholder
of a corporation located in a county having a county manager form of government
and which is exempt from income taxation under ss.501 (c) or ss.528 of the
Internal Revenue Code and no part of whose income inures or may inure to the
benefit of any private shareholder or individual shall be entitled to dissent
and obtain payment for his shares under this article. (Code 1950, S.S. 13-85,
13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c. 425; 1975, c. 500; 1984,
c. 613; 1985, c. 522; 1986, c. 540; 1988, c. 442; 1990, c. 229; 1992, c. 575;
1996, c. 246; 1999, c. 288.)
The 1999 amendment added subsection E.
Law Review.--For article discussing shareholder approval of mergers,
see 56 Va. L. Rev. 755 (1970). For survey of Virginia law on business
associations for the year 1971-1972, see 58 Va. L. Rev. 1172 (1972). For survey
of Virginia administrative law for the year 1974-1975, see 61 Va. L. Rev. 1632
(1975). For survey of Virginia law on business associations for the year
1974-1975, see 61 Va. L. Rev. 1650 (1975).
ss.13.1-731 CODE OF VIRGINIA ss.13.1-732
For article, "Virginia's Affiliated Transactions' Statute: Indulging Form Over
Substance in Second Generation Takeover Legislation," see 21 U. Rich. L. Rev.
489 (1987).
Editor's note.--The cases below were decided under prior law.
Purpose of statutes.--The design of the statutes relating to the rights
of a dissenting stockholder is to assure him that he will be fully compensated
for the value of that of which he has been deprived by the merger, and no more.
Adams v. United States Distrib. Corp., 184 Va. 134, 34 S.E.2d 244 (1945), cert.
denied, 327 U.S. 788, 66 S. Ct. 807, 90 L. Ed. 1014 (1946).
Stockholder has election as to dissent.--Every stockholder of a merging
corporation has an election either to dissent and secure in the prescribed
manner the fair cash value of his stock or, if he fails to dissent, to be bound
by the terms of the merger. Adams v. United States Distrib. Corp., 184 Va. 134,
34 S.E.2d 244 (1945), cert. denied, 327 U.S. 788, 66 S. Ct. 807, 90 L. Ed. 1014
(1946); Pittston Co. v. O'Hara, 191 Va. 886, 63 S.E.2d 34, appeal dismissed, 342
U.S. 803, 72 S. Ct. 38, 96 L. Ed. 608 (1951).
Exclusiveness of statutory remedy.--Unless a corporate merger be
tainted with fraud or illegality, the dissenting stockholder must pursue the
remedy prescribed by statute. Adams v. United States Distrib. Corp., 184 Va.
134, 34 S.E.2d 244 (1945), cert. denied, 327 U.S. 788, 66 S. Ct. 807, 90 L. Ed.
1014 (1946), wherein the court expressly refused to agree with Weiss v. Atkins,
52 F. Supp. 418 (S.D.N.Y. 1943), rev'd, 149 F.2d 193 (2nd Cir. 1945), and
pointed out that Winfree v. Riverside Cotton Mills, 113 Va. 717, 75 S.E. 309
(1912), holding contra, was no longer applicable. See McGhee v. General Fin.
Corp., 84 F. Supp. 24 (W.D. Va. 1949), holding that the remedy is available
only in state courts.
The provisions of former law in regard to the valuation of the interest
of dissatisfied members or stockholders in case of the merger of their
corporation with another, were held to apply only in those cases in which the
corporations seeking to merge had proceeded in all respects by authority of law.
The provisions, therefore, were not exclusive of the right of dissatisfied
members to contest the validity of an order of merger by the State Corporation
Commission claimed to be destructive of their rights and interests, and utterly
without warrant of law. Jones v. Rhea, 130 Va. 345, 107 S.E. 814 (1921).
It was held that the existence of a summary remedy of appraisal and
payment under former ss 13-85 did not make the remedy at law adequate in such a
manner as to defeat equity jurisdiction, and the existence of such remedy did
not otherwise foreclose the plenary jurisdiction of a court of equity to grant
an injunction in advance of action or to grant a money award on equitable
principles after action. Craddock-Terry Co. v. Powell, 181 Va. 417, 25 S.E.2d
363 (1943); Pittston Co. v. O'Hara, 191 Va. 886, 63 S.E.2d 34, appeal dismissed,
342 U.S. 803, 72 S. Ct. 38, 96 L. Ed. 608 (1951).
Purchaser of stock is legally put upon notice that in event of merger
his remedy will be provided by the statute. McGhee v. General Fin. Corp., 84 F.
Supp. 24 (W.D. Va. 1949).
ss.13.1-731. Dissent by Nominees and Beneficial Owners.--A. A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
B. A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
1. He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
2. He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote. (Code 1950, S.S.
13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c. 425; 1975, c. 500;
1984, c. 613; 1985, c. 522.)
ss.13.1-732. Notice of Dissenters' Rights.--A. If proposed corporate
action creating dissenters' rights under ss. 13.1-730 is submitted to a vote at
a shareholders' meeting, the meeting notice shall state that shareholders are or
ss.13.1-733 CORPORATIONS ss.13.1-735
may be entitled to assert dissenters' rights under this article and be
accompanied by a copy of this article.
B. If corporate action creating dissenters' rights under ss.13.1-730 is
taken without a vote of shareholders, the corporation, during the ten-day period
after the effectuation of such corporate action, shall notify in writing all
record shareholders entitled to assert dissenters' rights that the action was
taken and send them the dissenters' notice described in ss.13.1-734.(1985, c.
522.)
ss.13.1-733. Notice of Intent to Demand Payment.--A. If proposed
corporate action creating dissenters' rights under ss.13.1-730 is submitted to a
vote at a shareholders' meeting, a shareholder who wishes to assert dissenters'
rights (i) shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated and (ii) shall not vote such shares in favor of the proposed action.
B. A shareholder who does not satisfy the requirements of subsection A
of this section is not entitled to payment for his shares under this article.
(Code 1950, S.S. 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c.
425; 1975, c. 500; 1984, c. 613; 1985, c. 522.)
ss.13.1-734. Dissenters' Notice.--A. If proposed corporate action
creating dissenters' rights under ss.13.1-730 is authorized at a shareholders'
meeting, the corporation, during the ten-day period after the effectuation of
such corporate action, shall deliver a dissenters' notice in writing to all
shareholders who satisfied the requirements of ss.13.1-733.
B. The dissenters' notice shall:
1. State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited;
2. Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
3. Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before or
after that date;
4. Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty nor more than sixty days after the date
of delivery of the dissenters' notice; and
5. Be accompanied by a copy of this article. (Code 1950, S.S. 13-85,
13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c. 425; 1975, c. 500; 1984,
c. 613; 1985, c. 522.)
ss.13.1-735. Duty to Demand Payment.--A. A shareholder sent a
dissenters' notice described in ss.13.1-734 shall demand payment, certify that
he acquired beneficial-ownership of the shares before or after the date required
to be set forth in the dissenters' notice pursuant to paragraph 3 of subsection
B of ss. 13.1-734, and, in the case of certificated shares, deposit his
certificates in accordance with the terms of the notice.
B. The shareholder who deposits his shares pursuant to subsection A of
this section retains all other rights of a shareholder except to the extent that
these rights are canceled or modified by the taking of the proposed corporate
action.
C. A shareholder who does not demand payment and deposits his share
certificates where required each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article. (Code 1950, S.S.
13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c. 425; 1975, c. 500;
1984, c. 613; 1985, c. 522.)
ss.13.1-736 CODE OF VIRGINIA ss.13.1-739
ss.13.1-736. Share Restrictions.--A. The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received.
B. The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder except to the
extent that these rights are canceled or modified by the taking of the proposed
corporate action. (Code 1950, S.S. 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968,
c. 733; 1972, c. 425; 1975, c. 500; 1984, c. 613; 1985, c. 522.)
ss.13.1-737. Payment.--A. Except as provided in ss.13.1-738, within
thirty days after receipt of a payment demand made pursuant to ss.13.1-735, the
corporation shall pay the dissenter the amount the corporation estimates to be
the fair value of his shares, plus accrued interest. The obligation of the
corporation under this paragraph may be enforced (i) by the circuit court in the
city or county where the corporation's principal office is located, or, if none
in this Commonwealth, where its registered office is located or (ii) at the
election of any dissenter residing or having its principal office in the
Commonwealth, by the circuit court in the city or county where the dissenter
resides or has its principal office. The court shall dispose of the complaint on
an expedited basis.
B. The payment shall be accompanied by:
1. The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the effective date of the corporate
action creating dissenters' rights, an income statement for that year, a
statement of changes in shareholders' equity for that year, and the latest
available interim financial statements, if any;
2. An explanation of how the corporation estimated the fair value of
the shares and of how the interest was calculated;
3. A statement of the dissenters' right to demand payment under
ss.13.1-739; and
4. A copy of this article. (Code 1950, S.S. 13-85, 13.1-75, 13.1-78;
1956, c. 428; 1968, c. 733; 1972, c. 425; 1975, c. 500; 1984, c. 613; 1985, c.
522.)
ss.13.1-738. After-Acquired Shares.--A. A corporation may elect to
withhold payment required by ss. 13.1-737 from a dissenter unless he was the
beneficial owner of the shares on the date of the first publication by news
media or the first announcement to shareholders generally, whichever is earlier,
of the terms of the proposed corporate action, as set forth in the dissenters'
notice.
B. To the extent the corporation elects to withhold payment under
subsection A of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
offer to pay this amount of each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares and of how the
interest was calculated, and a statement of the dissenter's right to demand
payment under ss.13.1-739. (1985, c. 522.)
ss.13.1-739. Procedure if Shareholder Dissatisfied with Payment or
Offer.--A. A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and the amount of interest due, and demand
payment of his estimate (less any payment under ss. 13.1-737), or reject the
corporation's offer under ss. 13.1-738 and demand payment of the fair value of
his shares and interest due, if the dissenter believes that the amount paid
under ss.13.1-737 or offered under ss. 13.1-738 is less than the fair value of
his shares or that the interest due is incorrectly calculated.
ss.13.1-740 CORPORATIONS ss.13.1-741
B. A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection A
of this section within thirty days after the corporation made or offered payment
for his shares. (Code 1950, S.S. 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c.
733; 1972, c. 425; 1975, c. 500; 1984, c. 613; 1985, c. 522.)
ss.13.1-740. Court Action.--A. If a demand for payment under
ss.13.1-739 remains unsettled, the corporation shall commence a proceeding
within sixty days after receiving the payment demand and petition the circuit
court in the city or county described in subsection B of this section to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the sixty-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
B. The corporation shall commence the proceeding in the city or county
where its principal office is located, or, if none in this Commonwealth, where
its registered office is located. If the corporation is a foreign corporation
without a registered office in this Commonwealth, it shall commence the
proceeding in the city or county in this Commonwealth were the registered office
of the domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.
C. The corporation shall make all dissenters, whether or not residents
of this Commonwealth, whose demands remain unsettled parties to the proceeding
as in an action against their shares and all parties shall be served with a copy
of the petition. Nonresidents may be served by registered or certified mail or
by publication as provided by law.
D. The corporation may join as a party to the proceeding any
shareholder who claims to be a dissenter but who has not, in the opinion of the
corporation, complied with the provisions of this article. If the court
determines that such shareholder has not complied with the provisions of this
article, he shall be dismissed as a party.
E. The jurisdiction of the court in which the proceeding is commenced
under subsection B of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
F. Each dissenter made a party to the proceeding is entitled to
judgment (i) for the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation or (ii)
for the fair value, plus accrued interest, of his after-acquired shares for
which the corporation elected to withhold payment under ss.13.1-738. (Code 1950,
S.S. 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c. 425; 1975, c.
500; 1984, c. 613; 1985, c. 522.)
ss.13.1-741. Court Costs and Counsel Fees.--A. The court in an
appraisal proceeding commenced under ss.13.1-740 shall determine all costs of
the proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters did not act in good faith in demanding payment under ss.13.1-739.
B. The court may also assess the reasonable fees and expenses of
experts,
ss.13.1-742 CODE OF VIRGINIA ss.13.1-742
excluding those of counsel, for the respective parties, in amounts the
court finds equitable:
1. Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of ss. 13.1-732 through ss. 13.1-739; or
2. 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 did not act in good faith with respect to the rights provided by this
article.
C. If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, the court
may award to these counsel reasonable fees to be paid out of the amounts awarded
the dissenters who were benefited.
D. In a proceeding commenced under subsection A of ss. 13.1-737 the
court shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court finds
that such parties did not act in good faith in instituting the proceeding. (Code
1950, S.S. 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c. 425;
1975, c. 500; 1984, c. 613; 1985, c. 522.)
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Article 10 of Chapter 9 of Title 13.1 of the Code of Virginia permits
a Virginia corporation to indemnify any director or officer for reasonable
expenses incurred in any legal proceeding in advance of final disposition of the
proceeding, if the director or officer furnishes the corporation a written
statement of his good faith belief that he has met the standard of conduct
prescribed by the Code, and a determination is made by the board of directors
that such standard has been met. In a proceeding by or in the right of the
corporation, no indemnification shall be made in respect of any matter as to
which an officer or director is adjudged to be liable to the corporation, unless
the court in which the proceeding took place determines that, despite such
liability, such person is reasonably entitled to indemnification in view of all
the relevant circumstances. In any other proceeding, no indemnification shall
be made if the director or officer is adjudged liable to the corporation on the
basis that he improperly received personal benefit. Corporations are given the
power to make any other or further indemnity, including advancement of expenses,
to any director or officer that may be authorized by the articles of
incorporation or any bylaw made by the shareholders, or any resolution adopted,
before or after the event, by the shareholders, except an indemnity against
willful misconduct or a knowing violation of the criminal law. Unless limited
by its articles of incorporation, indemnification of a director or officer is
mandatory when he entirely prevails in the defense of any proceeding to which he
is a party because he is or was a director or officer.
The Articles of Incorporation of the Registrant contain provisions
indemnifying the directors and officers of the Registrant to the full extent
permitted by Virginia law. In addition, the Articles of Incorporation eliminate
the personal liability of the Registrant's directors and officers to the
Registrant or its shareholders for monetary damages in excess of one dollar to
the full extent permitted by Virginia law.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
The following exhibits are filed on
behalf of the Registrant as part of this Registration Statement:
Exhibit No. Document
----------- --------
2.1 Agreement and Plan of Merger between CNB Holdings, Inc. and FNB
Corporation, dated as of July 10, 2000, filed as Appendix A
to the proxy statement/prospectus included in the
Registrant's Registration Statement on Form S-4, dated
September 13, 2000.
2.2 Agreement and Plan of Merger between SWVA Bancshares, Inc. and FNB
Corporation, dated as August 7, 2000, filed as Appendix A to
the proxy statement/prospectus included in this Registration
Statement.
3.1 Articles of Incorporation of FNB Corporation, incorporated herein by
reference to Exhibit 3.1 of the Registrant's Form 10-K,
dated as of December 31, 1996.
3.2 Bylaws of Virginia FNB Corporation, incorporated herein by reference
to Exhibit 3.2 of the Registrant's Form 10-K, dated as of
December 31, 1997.
II-1
3.3 Articles of Amendment to the Articles of Incorporation, incorporated
herein by reference to Exhibit 3.3 of Registrant's
Registration Statement on Form S-4, dated September 13,
2000.
5 Legal opinion of Troutman Sanders Mays & Valentine LLP
8 Tax opinion of Troutman Sanders Mays &Valentine LLP
10.A Consulting and Noncompetition Agreement With Put Option dated January
15, 1999, between Samuel H. Tollison and Registrant, filed
with the Commission as Exhibit (10) D on Form 10-K for the
year ended December 31, 1998, is incorporated herein by
reference.
10.B First Amendment to Consulting and Noncompetition Agreement dated
December 23, 1999, between Samuel H. Tollison and
Registrant, filed with the Commission as Exhibit (10) B on
Form 10-K for the year ended December 31, 1999, is
incorporated herein by reference.
10.C Employment Agreement dated September 11, 1997 between Julian D.
Hardy, Jr., First National Bank, and Registrant, filed with
the Commission as Exhibit (10)B on Form 10-Q for the quarter
ended September 30, 1997, is incorporated herein by
reference.
10.D Change in control agreements with seven senior officers of First
National Bank and one senior officer of Registrant. All
agreements have identical terms and, as such, only a sample
copy of the agreements was filed with the Commission as
Exhibit (10)C on Form 10-Q for the quarter ended September
30, 1997, and is incorporated herein by reference. The
officers covered by the agreements are as follows:
(1) Daniel A. Becker, Senior Vice President, Chief
Financial Officer, dated April 1, 1999
(2) Keith J. Houghton, Senior Vice President, Manager
Commercial Banking, dated April 1, 1999
(3) Darlene S. Lancaster, Senior Vice President, Manager,
Mortgage Loan Department, dated August 25, 1997
(4) R. Bruce Munro, Senior Vice President, Chief Credit
Administration Officer, dated August 25, 1997
(5) Woody B. Nester, Senior Vice President, Cashier, dated
August 25, 1997
(6) Peter A. Seitz, Executive Vice President, dated August
25, 1997
(7) Perry D. Taylor, Senior Vice President, Comptroller,
dated August 25, 1997
(8) Litz H. Van Dyke, Executive Vice President, dated
August 25, 1997
(9) Kay O. McCoy, Senior Vice President, manager of retail
banking, dated April 7, 2000
The agreements with Mr. Seitz and Mr. Van Dyke were
terminated under the terms of the Employment Agreement
referred to in Exhibit (10) E below.
II-2
10.E Employment agreement dated March 23, 1999 with two executive officers
of First National Bank. Both agreements have identical
terms and, as such, only a sample copy of the agreement was
filed with the Commission as Exhibit (10) E on Form 10-Q for
the quarter ended March 31, 1999, and is incorporated herein
by reference. The officers covered by this agreement are:
(1) Peter A. Seitz, Executive Vice President
(2) Litz H. Van Dyke, Executive Vice President
21 Subsidiaries of the Registrant.
23.1 Consent of Troutman Sanders Mays & Valentine LLP (included in
Exhibit 5).
23.2 Consent of McLeod & Company.
23.3 Consent of Cherry Bekaert & Holland L.L.P.
23.4 Consent of RP Financial, LC.
24 Powers of attorney (included on signature page).
99.1 Form of Proxy of SWVA Bancshares, Inc.
99.2 Election Form and Instructions
(b) Financial Statement Schedules
Not applicable.
(c) Reports, Opinions or Appraisals.
The opinion of RP Financial, LC. has been filed as Appendix B to the
proxy statement/prospectus included in this Registration Statement.
Item 22. Undertakings
(a) Undertakings Required by Item 512 of Regulation S-K.
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
II-3
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to 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.
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 which 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.
The Registrant undertakes that every prospectus (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 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.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of 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.
(b) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 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.
(c) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned; thereunto duly authorized, in Christiansburg,
Virginia, on January 25, 2001.
FNB CORPORATION
By:/s/ J. Daniel Hardy, Jr.
------------------------
J. Daniel Hardy, Jr.
President and Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned hereby appoints J. Daniel Hardy, Jr. and Peter
A. Seitz as attorneys and agents for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to sign
and file with the Securities and Exchange Commission under the Securities Act of
1933, as amended, any and all amendments and exhibits to this Registration
Statement and any and all applications, instruments and other documents to be
filed with the Securities and Exchange Commission pertaining to the registration
of securities covered hereby with full power and authority to do and perform any
and all acts and things whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ J. Daniel Hardy, Jr. President and Chief Executive Officer 1/25/01
------------------------ (Principal Executive Officer)
J. Daniel Hardy, Jr.
/s/ Daniel A. Becker Chief Financial Officer 1/25/01
-------------------- (Principal Accounting Officer and
Daniel A. Becker Principal Financial Officer)
/s/ Kendall O. Clay Director 1/25/01
-------------------
Kendall O. Clay
/s/ Daniel D. Hamrick Director 1/25/01
---------------------
Daniel D. Hamrick
/s/ Joan H. Munford Director 1/25/01
-------------------
Joan H. Munford
/s/ Douglas Covington Director 1/25/01
---------------------
Douglas Covington
/s/ James L. Hutton Director 1/25/01
-------------------
James L. Hutton
/s/ Steven D. Irvin Director 1/25/01
-------------------
Steven D. Irvin
/s/ Charles W. Steger Director 1/25/01
---------------------
Charles W. Steger
/s/ John T. Wyatt Director 1/25/01
-----------------
John T. Wyatt
EXHIBIT INDEX
Exhibit No. Document
---------- --------
2.1 Agreement and Plan of Merger between CNB Holdings, Inc. and FNB
Corporation, dated as of July 10, 2000, filed as Appendix A
to the proxy statement/prospectus included in the
Registrant's Registration Statement on Form S-4, dated
September 13, 2000.
2.2 Agreement and Plan of Merger between SWVA Bancshares, Inc. and FNB
Corporation, dated as August 7, 2000, filed as Appendix A to
the proxy statement/prospectus included in this Registration
Statement.
3.1 Articles of Incorporation of FNB Corporation, incorporated herein by
reference to Exhibit 3.1 of the Registrant's Form 10-K,
dated as of December 31, 1996.
3.2 Bylaws of Virginia FNB Corporation, incorporated herein by reference
to Exhibit 3.2 of the Registrant's Form 10-K, dated as of
December 31, 1997.
3.3 Articles of Amendment to the Articles of Incorporation, incorporated
herein by reference to Exhibit 3.3 of Registrant's
Registration Statement on Form S-4, dated September 13,
2000.
5 Legal opinion of Troutman Sanders Mays & Valentine LLP
8 Tax opinion of Troutman Sanders Mays &Valentine LLP
10.A Consulting and Noncompetition Agreement With Put Option dated January
15, 1999, between Samuel H. Tollison and Registrant, filed
with the Commission as Exhibit (10) D on Form 10-K for the
year ended December 31, 1998, is incorporated herein by
reference.
10.B First Amendment to Consulting and Noncompetition Agreement dated
December 23, 1999, between Samuel H. Tollison and
Registrant, filed with the Commission as Exhibit (10) B on
Form 10-K for the year ended December 31, 1999, is
incorporated herein by reference.
10.C Employment Agreement dated September 11, 1997 between Julian D.
Hardy, Jr., First National Bank, and Registrant, filed with
the Commission as Exhibit (10)B on Form 10-Q for the quarter
ended September 30, 1997, is incorporated herein by
reference.
10.D Change in control agreements with seven senior officers of First
National Bank and one senior officer of Registrant. All
agreements have identical terms and, as such, only a sample
copy of the agreements was filed with the Commission as
Exhibit (10)C on Form 10-Q for the quarter ended September
30, 1997, and is incorporated herein by reference. The
officers covered by the agreements are as follows:
II-7
(1) Daniel A. Becker, Senior Vice President, Chief
Financial Officer, dated April 1, 1999
(2) Keith J. Houghton, Senior Vice President, Manager
Commercial Banking, dated April 1, 1999
(3) Darlene S. Lancaster, Senior Vice President, Manager,
Mortgage Loan Department, dated August 25, 1997
(4) R. Bruce Munro, Senior Vice President, Chief Credit
Administration Officer, dated August 25, 1997
(5) Woody B. Nester, Senior Vice President, Cashier, dated
August 25, 1997
(6) Peter A. Seitz, Executive Vice President, dated August
25, 1997
(7) Perry D. Taylor, Senior Vice President, Comptroller,
dated August 25, 1997
(8) Litz H. Van Dyke, Executive Vice President, dated
August 25, 1997
(9) Kay O. McCoy, Senior Vice President, manager of retail
banking, dated April 7, 2000
The agreements with Mr. Seitz and Mr. Van Dyke were
terminated under the terms of the Employment Agreement
referred to in Exhibit (10) E below.
10.E Employment agreement dated March 23, 1999 with two executive officers
of First National Bank. Both agreements have identical
terms and, as such, only a sample copy of the agreement was
filed with the Commission as Exhibit (10) E on Form 10-Q for
the quarter ended March 31, 1999, and is incorporated herein
by reference. The officers covered by this agreement are:
(1) Peter A. Seitz, Executive Vice President
(2) Litz H. Van Dyke, Executive Vice President
21 Subsidiaries of the Registrant.
23.1 Consent of Troutman Sanders Mays & Valentine LLP (included in
Exhibit 5).
23.2 Consent of McLeod & Company.
23.3 Consent of Cherry Bekaert & Holland L.L.P.
23.4 Consent of RP Financial, LC.
24 Powers of attorney (included on signature page).
99.1 Form of Proxy of SWVA Bancshares, Inc.
99.2 Election Form and Instructions
Board of Directors
FNB Corporation
105 Arbor Drive
Christiansburg, Virginia 24068
Ladies and Gentlemen:
This letter is in reference to the amendment two to the Registration
Statement on Form S-4 dated January 26, 2001, filed by FNB Corporation (the
"Company") with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Registration Statement"). The
Registration Statement relates to 431,094 shares of Common Stock, $5.00 par
value per share (the "Shares"), which Shares are proposed to be offered to the
shareholders of SWVA Bancshares, Inc., a Virginia unitary thrift holding company
("SWVA"), pursuant to an Agreement and Plan of Merger, dated as of August 7,
2000, by and between SWVA and the Company (collectively, the "Agreement").
We have examined such corporate proceedings, records and documents as we
considered necessary for the purposes of this opinion. We have relied upon
certificates of officers of the Company where we have deemed it necessary in
connection with our opinion.
Based upon such examination, it is our opinion that the aforementioned
Shares, when issued will be validly issued, fully paid and nonassessable under
the laws of the Commonwealth of Virginia.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Opinion" in the Proxy Statement forming a part of the Registration Statement.
Very truly yours,
/s/ TROUTMAN SANDERS MAYS & VALENTINE, L.L.P.
Exhibit 8
[Letterhead of Troutman Sanders Mays & Valentine LLP]
January 26, 2001
FNB Corporation SWVA Bancshares, Inc.
105 Arbor Drive 302 Second Street, S.W.
Christiansburg, Virginia 24068 Roanoke, Virginia 24011
Ladies/Gentlemen:
We have acted as special counsel to FNB Corporation, a Virginia corporation
("FNB"), in connection with the proposed merger (the "Merger") of SWVA
Bancshares, Inc. ("SWVA") with and into FNB upon the terms and conditions set
forth in the Agreement and Plan of Merger dated as of August 7, 2000, by and
between FNB and SWVA (the "Agreement"). At your request, in connection with the
filing of the Registration Statement on Form S-4 filed with the Securities and
Exchange Commission in connection with the Merger (the "Registration
Statement"), we are rendering our opinion concerning certain federal income tax
consequences of the Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of FNB and the consent of SWVA, upon the accuracy and completeness of
the statements and representations of fact (which statements and representations
of fact we have neither investigated nor verified) contained, respectively, in
the certificates of the officers of FNB and SWVA, and have assumed that such
certificates will be complete and accurate as of the Effective Time. We have
also relied upon the accuracy of the Registration Statement and the Proxy
Statement/Prospectus included therein (together, the "Proxy Statement"). Any
capitalized term used and not defined herein has the meaning given to it in the
Proxy Statement or the appendices thereto (including the Agreement). We have
also assumed that the transactions contemplated by the Agreement will be
consummated in accordance therewith and as described in the Proxy Statement.
All section references below are to the Internal Revenue Code of 1986.
Based upon and subject to the foregoing, we are of the opinion that:
(1) The Merger will constitute a "reorganization" within the meaning
of Section 368(a)(1)(A).
(2) No gain or loss will be recognized by the shareholders of SWVA
upon the receipt of solely FNB common stock in exchange for their SWVA
stock (Section 354(a)(1)). However, a SWVA shareholder who receives FNB
stock and cash in exchange for his SWVA common stock will recognize gain,
if any, but not in excess of the amount of such cash (Section 356(a)(1)).
If the exchange has the effect of the distribution of a dividend
(determined with the application of Section 318(a)), the amount of gain
recognized that is not in excess of the SWVA shareholder's ratable share of
accumulated earnings in profits will be treated as a dividend (Section
356(a)(2)). The determination of whether the exchange has the effect of
the distribution of a dividend will be made in accordance with the
principles set forth in Commissioner v. Clark, 109 S. Ct. 1455 (1989). The
remainder, if any, of the gain recognized on such exchange will be treated
as gain from the exchange of property. No loss will be recognized on the
exchange (Section 356(c)).
(3) The basis of the FNB common stock received by a SWVA shareholder
will be the same as the basis of the FNB stock that was exchanged therefor,
decreased by the amount of any cash received and increased by the sum of
(i) the amount treated as a dividend and (ii) any gain recognized on the
exchange (not including any portion of the gain that was treated as a
dividend) (Section 358(a)(1)).
(4) The holding period of the FNB common stock received by a SWVA
shareholder will include the period during which the SWVA stock surrendered
in exchange therefor was held by the SWVA shareholder, provided that the
SWVA stock surrendered was a capital asset in the hands of the SWVA
shareholder on the Effective Date (Section 1223(1)).
(5) Where a SWVA shareholder receives solely cash in exchange for his
SWVA common stock, such cash should be treated as received by that
shareholder as a distribution in redemption of his SWVA common stock
subject to the conditions and limitations of Section 302. Where, as a
result of such distribution, a shareholder neither owns any stock of FNB
directly, nor is deemed to own any such stock under the constructive
ownership rules of Section 318(a), the redemption should be treated as a
complete termination of interest within the meaning of Section 302(b)(3),
and should be treated as a distribution full payment in exchange for the
stock redeemed as provided in Section 302(a). Gain or loss should be
realized and recognized to such shareholder measured by the difference
between the redemption price and the adjusted basis of the SWVA shares
surrendered as determined under Section 1011(Rev. Rul. 74-515, 1974-2 C.B.
118). Provided the SWVA stock is a capital asset in the hands of such
shareholder, the gain or loss, if any, should constitute capital gain or
loss subject to the provisions of subchapter P of Chapter 1 of the Internal
Revenue Code.
(6) The payment of cash to SWVA shareholders in lieu of fractional
share interests of FNB common stock will be treated as if the fractional
shares were distributed as part of the exchange and then were redeemed by
FNB. Such cash payments will be treated as distributions in full payment
in exchange for the stock redeemed as provided in Section 302(a) (Rev. Rul.
66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41-1977-2 C.B. 574).
(7) For purposes of (2) and (5) above, although there is no
controlling precedent, the Merger and the additional merger of CNB
Holdings, Inc. with and into FNB, when and if consummated, may be
aggregated and treated as a single integrated transaction. In such case,
the principles of Commissioner v. Clark, supra, and Section 302 would
likely be applied by taking into account a shareholder's actual and
constructive ownership of stock, if any, in SWVA, CNB and FNB both before
and after the mergers.
This opinion represents our best legal judgment, but it has no binding
effect or official status of any kind, and no assurance can be given that
contrary positions may not be taken by the Internal Revenue Service or a court
considering the issues. Also, future changes in federal income tax laws and the
interpretation thereof can have retroactive effect.
Further, this opinion does not address the tax consequences that may be
relevant to particular categories of shareholders subject to special treatment
under the federal income tax laws, such as shareholders who are dealers or
traders in securities or who mark securities to market, financial institutions,
insurance companies, tax-exempt organizations, persons who are not United States
citizens or resident aliens or domestic entities (partnerships or trusts), or
are subject to the alternative minimum tax (to the extent that tax affects the
tax consequences), or are subject to the golden parachute provisions of the Code
(to the extent that tax effects the tax consequences), or shareholders who
acquired SWVA common stock pursuant to employee stock options or otherwise as
compensation, who do not hold their shares as capital assets, or who hold their
shares as part of a "straddle" or "conversion transaction" or constructive sale
or other integrated transaction.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the caption "Material Federal Income Tax Consequences of
the Merger" and elsewhere in the Proxy Statement. In giving such consent, we do
not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Troutman Sanders Mays & Valentine LLP
Exhibit 21
Subsidiaries of FNB Corporation
State or Other
Jurisdiction of Incorporation
First National Bank National Banking Association
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 2 to the
registration statement on Form S-4 (Registration No. 333-46460) of our report
dated January 31, 2000 on our audits of the consolidated financial statements of
FNB Corporation and subsidiaries as of December 31, 1999 and 1998, and for the
years ended December 31, 1999, 1998, and 1997. We also consent to the reference
to our firm under the caption "Experts" in this Amendment No. 2 to the
registration statement on Form S-4.
/s/ MCLEOD & COMPANY
Roanoke, Virginia
January 26, 2001
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report incorporated by reference in
Registration Statement No. 333-46460 on Form S-4 of FBB Corporation of our
report dated August 14, 2000, relating to the consolidated statement of
financial condition of SWVA Bancshares, Inc. as of June 30, 2000 and 1999
and related consolidated statement of income, comprehensive income, changes in
stockholders' equity and cash flows for each year of the three-year period ended
June 30, 2000, which report is incorporated by reference in the Annual Report on
Form 10-KSB for the year ended June 30, 2000, of SWVA Bankshares, Inc., and the
reference to our Firm under the heading of "Experts" in this Registration
Statement as filed with the Securities and Exchange Commission.
CHERRY BEKAERT & HOLLAND, L.L.P.
Lynchburg, Virginia
January 26, 2001
RP Financial, L.C.
Financial Services Industry Consultants
Exhibit 23.4
CONSENT OF RP FINANCIAL, L.C.
January 26, 2001
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of SWVA Bancshares, Inc. (the "Company") as an Appendix to the proxy
statement/prospectus relating to the proposed merger of the Company with and
into FNB Corporation contained in the amendment two to the Registration
Statement on Form S-4 as filed with the Securities and Exchange Commission on
the date hereof, and to the reference to our firm and such opinion in such proxy
statement/prospectus.
Sincerely,
/s/ RP FINANCIAL, LC.
--------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center Telephone: (703) 528-1700
1700 Moore Street, Suite 2210 Fax No.: (703) 528-1788
Arlington, VA 22209 E-Mail: mail@fpfinancial.com
Exhibit 99.1
SWVA BANCSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS
__________ ____, 2001
The undersigned hereby appoints the Board of Directors of SWVA Bancshares,
Inc. ("SWVA"), or its designee, with full powers of substitution, to act as
attorneys and proxies for the undersigned, to vote all shares of common stock of
SWVA which the undersigned is entitled to vote at the 2000 Annual Meeting of
Stockholders, to be held at ____________________________________ Roanoke,
Virginia on ___________, 2001, at [10:30 a.m.] and at any and all adjournments
thereof, in the following manner:
FOR AGAINST ABSTAIN
--- ------- -------
1. The approval and adoption of the
Agreement and Plan of Merger between
SWVA Bancshares, Inc. and FNB Corporation |_| |_| |_|
The Board of Directors recommends a vote "FOR" Proposal 1.
FOR WITHHELD
2. The election as director of all nominees
listed below with terms expiring in 2003: |_| |_|
D.W. Shilling
B.L. Rakes
INSTRUCTIONS: To withhold your vote for any individual nominee or nominees, mark
the "WITHHELD" box and write the nominee's name or their names on the line
provided below.
The Board of Directors recommends a vote "FOR" Proposal 2.
FOR AGAINST ABSTAIN
--- ------- -------
3. The ratification of the appointment of Cherry
Bekaert & Holland L.L.P. as independent auditors
of SWVA for the fiscal year ending
June 30, 2001. |_| |_| |_|
The Board of Directors recommends a vote "FOR" Proposal 3.
FOR AGAINST ABSTAIN
--- ------- -------
4. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting, or any adjournment
thereof, including to vote in favor of an adjournment of the meeting,
if necessary, in order to solicit additional votes in favor of
approval of the Agreement and
Plan of Merger. |_| |_| |_|
The Board of Directors recommends a vote "FOR" Proposal 3.
--------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4. IF ANY OTHER BUSINESS IS
PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the meeting, or
at any adjournments thereof, and after notification to the Secretary of SWVA at
the meeting of the stockholder's decision to terminate this proxy, the power of
said attorneys and proxies shall be deemed terminated and of no further force
and effect. The undersigned may also revoke this proxy by filing a subsequently
dated proxy or by written notification to the Secretary of SWVA of his or her
decision to terminate this proxy.
The undersigned acknowledges receipt from SWVA prior to the execution
of this proxy of a Notice of Annual Meeting of Stockholders and a proxy
statement/prospectus dated ________________, 2001.
Please check here if you
Dated: , 2001 |_| plan to attend the meeting.
------------------------- --------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
------------------------- --------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
Exhibit 99.2
Deadline for receipt of this Election Form is by 5 p.m. on ____________, 2001. 1-___-____-____
-----------------------------------------------------------------------------------------------------------------------
1 About You and Your Shares - Indicate Address Change as Necessary Below
-----------------------------------------------------------------------------------------------------------------------
ACCOUNT NUMBER: ________________
Description of Shares
Certificate Number
_________________
_________________
_________________ TOTAL CERTIFICATE SHARES: __________________
-----------------------------------------------------------------------------------------------------------------------
2 Election Options and Required Signatures - Check one option only *All certificates MUST accompany this form*
-----------------------------------------------------------------------------------------------------------------------
1. Exchange all shares 2. Exchange all shares 3. Exchange ___________ shares for cash and the
for cash for stock balance for stock. (Please write the number of
shares that you would like to exchange for cash
in the blank.
Required Signatures - All shareholders must sign below. Social Security Number: ___________________
The shareholders whose Social Security Number is printed
to the right must sign the W-9 Certification. W-9 Certification - I certify under penalties of perjury
that the Tax Identification Number (TIN) shown above is
X______________________________________________________ correct, or that I have entered the correct TIN and am not
Signature of Shareholder Date subject to withholding. If I fail to furnish my correct
TIN, I may be subject to a penalty by the IRS. Also, such
X______________________________________________________ a failure would result in backup withholding of 31% of any
Signature of Shareholder Date payment made to me.
(if joint account)
( ) - X_______________________________________________________
---------------------------------------------------------- Signature of Shareholder whose TIN or Date
Area Code and Daytime Phone Social Security Number is shown in this box
-----------------------------------------------------------------------------------------------------------------------
3 Lost, Stolen or Destroyed Certificate(s)
-----------------------------------------------------------------------------------------------------------------------
If certificates representing common shares of SWVA Bancshares, Inc. have been lost, stolen or destroyed, please check
this box and circle the missing certificate number(s) in Section 1 above. You will receive additional documents to
complete.
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
4 Special Transfer or Payment Instructions
-----------------------------------------------------------------------------------------------------------------------
Substitute Form W-9 - To be completed by the new
The check or shares from the exchange will be account holder.
issued in the name(s) printed in Section 1 unless
you indicate a different name below. Your Under Federal Income Tax law, you may be subject to
signature and a Signature Guarantee are required. certain penalties and backup withholding at a 31% rate
The Substitute Form W-9 to the right must be if you do not certify, under penalties of perjury,
completed by the new account holder. that the Social Security or Taxpayer Identification
Number provided below is correct, and that you are not
subject to backup withholding.
-----------------------------------------------------
Name 1. The number shown on this form is my correct
----------------------------------------------------- Taxpayer Identification Number (or I am waiting for a
Name number to be issued to me), and
-----------------------------------------------------
Address 2. I am not subject to backup withholding either
----------------------------------------------------- because I have not been notified by the Internal
City - State - Zip Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all
X___________________________________________________ interest or dividends, or the IRS has notified me that
Authorized Signature(s) I am no longer subject to backup withholding.
PLACE MEDALLION X____________________________________________
SIGNATURE GUARANTEE Signature
HERE
------------------------------------------------
5 Special Delivery Instructions __ __ __ __ __ __ __ __ __ __
------------------------------------------------ TIN or Social Security Number*
Certificate or check will be mailed to the address
shown in Section 1 unless you indicate a different *If you do not have a Social Security Number see How
address below: to Obtain a TIN, page 13 of the instructions.
NOTE: If the account is registered in more than one
______________________________________ name, see the chart on page 15 of the instructions for
Name guidelines on which number to use.
______________________________________
Address Return this signed form with your stock certificate(s)
______________________________________ in the enclosed envelope to FNB Corporation, Attn:
City - State - Zip Reorganization Department as indicated below:
By Mail:________________
By Hand:________________
By Overnight:___________
--------------------------------------------------------------------------------------------------------------
This booklet provides answers to frequently asked questions, describes your
options and provides information and instruction on how to make your election.
We urge you to carefully read the instructions and review the Frequently Asked
Questions. Then, promptly complete the enclosed Election Form and send it in
the envelope provided along with your stock certificates, to FNB Corporation, P.
O. Box 600, Christiansburg, Virginia 24068.
Table of Contents
Frequently Asked Questions 2
Instructions for Completing the Election Form 5
Instructions for Completing the Substitute Form W-9 12
[SWVA Letterhead]
Dear SWVA Bancshares, Inc. Shareholder,
This is an exciting time to be working and investing in the financial services
industry. Our merger with FNB Corporation, the company that owns First National
Bank in Christiansburg, is almost complete. The final step is yours - the
election process.
The election process is explained in full detail in the attached Election
Information and Instructions. It is extremely important that you read these
instructions carefully, then return your completed Election Form and stock
certificates by _______________, 2001.
As you make your election, it is important to note that you may not get all the
stock or cash that you elected. Because the total number of shares and the
amount of cash we can distribute to SWVA Bancshares' shareholders are limited by
the terms of the merger. We believe that the overall result of this requirement
will be to create greater value for you, our shareholders. Reducing the number
of shares outstanding provides your company more flexibility and reduces the
ultimate dilutive effect of the merger.
Again, I urge you to return your Election Form and certificates as soon as
possible. Thank you for your investment as well as your overwhelming support of
this merger.
Sincerely,
President and Chief Executive Officer
This letter contains forward-looking statements which are subject to risks and
uncertainties. Discussion of factors that can cause actual results to differ
materially from management's expectations, projections, forecasts and estimates
is contained in the Company's Securities and Exchange Commission filings.
Frequently Asked Questions
1
Why have I been sent an Election Form?
On ___________, the shareholders of SWVA Bancshares, Inc. approved the merger
agreement between SWVA and FNB Corporation, the company that owns First National
Bank in Christiansburg. The agreement provides that in exchange for each share
of SWVA Bancshares stock held by you, you will have to option to receive either
$_______ in cash or shares of FNB Corporation common stock or a combination of
cash and stock. What a shareholder receives is subject to certain limits. For
more information on these limits, please refer to page __ of the Proxy
Statement.
2
What is the Election Form?
The Election Form is the document provided to you to select your exchange
option. The form is divided into five sections. There are corresponding
instructions for completing each of these sections beginning on page 5.
The Election Form must accompany certificates for shares of SWVA Bancshares
common stock when you exchange them for shares of FNB Corporation common stock
or when you exchange them for cash.
Return your stock certificates along with the Election Form in the enclosed
envelope. Do not sign the certificates.
3
What happens if I do not send in my Election
Form?
If you do not respond, FNB Corporation will determine whether cash, stock or a
combination of cash and stock will be distributed to you. Shareholders who do
not respond will not receive FNB Corporation stock and associated dividends or
any cash payments as a result of the exchange until they have surrendered their
certificates. Refer to the Proxy Statement for more information.
4
What happens if I miss the Election Deadline?
Missing the Election Deadline is the same as not responding - FNB Corporation
will determine whether cash, stock or a combination of cash and stock will be
distributed to you. Also any shares or cash associated with the exchange will
be withheld along with any dividends on those shares. The Election Deadline is
_________.
5
Am I guaranteed to receive what I ask for on the Election Form?
No. If the combined elections received exceed the fixed cash or stock amounts
set aside for the merger, it may be necessary to allocate the cash or stock
consideration. In this case you may not receive the cash or the shares that you
elected. Refer to "What Shareholders Will Receive in the Merger" in the Proxy
Statement for more information.
Frequently Asked Questions
6
When can I expect to receive my new stock certificates or cash?
Please allow ______ weeks after the Effective Date of the merger to receive your
check and/or stock certificate. The Effective
Date will be approximately ____ (__) business days after the Election Deadline.
7
How do I know if I have stock certificates? How many shares do I own?
Section 1 (About You and Your Shares) of the Election Form gives you a break-
down of your holdings by certificates according to our records. Any shares that
you own that are held by your broker in street name do not appear on this form.
You should receive separate instructions from your broker regarding these
shares.
8
Do I have to send in my stock certificate(s)?
Yes. Whether you elect cash or stock your certificates must be returned with
your Election Form.
9
What if I cannot locate my stock certificate(s)
Complete Section 2 (Election Options and Required Signatures) and Section 3
(Lost, Stolen or Destroyed Certificate(s)) of the Election Form. Promptly mail
the Election Form along with any stock certificates you have to FNB Corporation
in the envelope provided. You will receive replacement instructions that must
be returned five (5) business days prior to the Election Deadline. If your
instructions are not received by the Election Deadline, FNB Corporation will
determine whether cash, stock or a combination of cash and stock will be
distributed to you for the shares represented
by the lost certificate(s). Please act promptly!
10
Will I have to pay taxes on the proceeds if my shares are exchanged for cash?
In most cases, an exchange for cash will be treated as a taxable sale of stock.
Because individual circumstances may differ, shareholders should consult their
tax advisors to determine the tax effect to them of the mergers, including the
application and effect of foreign, state, local or other tax laws.
11
Will I have to pay taxes on any FNB Corporation stock I receive in exchange for
my SWVA Bancshares shares?
In most cases, you should not have to pay taxes on the shares of FNB Corporation
stock you receive. Your tax basis on your SWVA Bancshares shares will continue
to be your tax basis on your FNB Corporation shares. However, because
individual circumstances may differ, shareholders should consult their tax
advisors to determine the tax effect to them of the mergers, including the
application and effect of foreign, state, local or other tax laws.
3
Frequently Asked Questions
12
How should I send in my signed documents and stock certificate(s)?
An envelope addressed to FNB Corporation is enclosed with this package. Please
use this envelope to return your Election Form, your stock certificates, if
applicable, and any additional documentation that may be required to make your
election complete. If you do not have the envelope, please return all requested
documentation to:
FNB Corporation as follows:
By Mail:
Post Office Box ____
By Hand:
By Overnight Delivery:
If you are mailing stock certificates with your Election Form, we recommend that
you use Registered and Insured Mail, Return Receipt Requested. Do not return
any exchange documents to SWVA Bancshares.
13
Are there any fees associated with the exchange?
There are no fees associated with the exchange unless you need to replace
missing stock certificates. If your certificate is lost see Section 3 (Lost,
Stolen or Destroyed Certificate(s)) of the instructions.
14
How do I change my address?
Mark through any incorrect address information that is printed in Section 1
(About You and Your Shares) of the Election Form. Write the correct address in
the space beside the printed information.
15
What do I do if:
o I want to change the name on my account?
o I want to have my check made payable to someone else?
o the owner or co-owner is deceased?
Complete Section 4 (Special Transfer or Payment Instructions) of the Election
Form in order to transfer the shares or cash to someone else. For more
information, refer to the instructions for completing that section.
16
Who do I call if I have additional questions or need more information?
You may contact ____________________ at _______________.
4
Instructions for Completing
the Election Form
These instructions are for the accompanying Election Form for registered
shareholders of SWVA Bancshares, Inc. All elections are subject to the merger
agreement that was furnished to shareholders as part of the Proxy Statement
dated __________. Copies of the Proxy Statement are available upon request tot
he address or phone number on the back cover of this booklet.
The terms of the merger agreement may make it impossible for all elections to be
honored in full. FNB Corporation intends to honor effective elections to the
maximum extent possible. It is VERY IMPORTANT that you correctly complete, sign
and return the Election Form before the Election Deadline of _____________,
unless the Election Deadline is extended. Please use the enclosed envelope,
addressed to ___________________________, to return the Election Form, together
with all of your stock certificates. ALL STOCK CERTIFICATES MUST BE SUBMITTED
NO MATTER WHAT ELECTION YOU MAKE. If some of your stock is held by a broker,
bank or other nominee, please wait for instructions on what to do with those
shares.
1 About You and Your Shares
This section shows the registration on
your account and the number of shares
owned as of the election record date.
Mark through any incorrect address
information that is printed in this
section. Write the correct address in
the space beside the printed
information. If your certificate(s)
is lost, circle the certificate
number(s) printed in this section,
complete Sections 2 and 3 of the
Election Form and return the completed
form to FNB Corporation. Refer to the
bottom of the Election Form or the
back cover of this booklet for mailing
and other delivery instructions.
2 Election Options and Required Signatures
YOU MUST COMPLETE THIS SECTION FOR YOUR ELECTION TO BE VALID.
Making Your Election
The terms of the merger agreement allow you to specify the type of consideration
you would like to receive for your shares, subject to limitations. For more in-
depth information, please refer to the Proxy Statement. You may select only one
option. Regardless of the option you choose, you must return all of your stock
certificates with the Election Form for your election to be valid. If you are
unable to find all of your certificates, please complete Section 3.
Your options are:
1. Exchange all shares for cash. Choose this option if you would like to
receive $_______ for each SWVA Bancshares share.
5
Instructions for Completing
the Election Form
2. Exchange all shares for stock. Choose this option if you would like to
receive FNB Corporation stock in exchange for your SWVA Bancshares shares.
3. Exchange shares for cash and stock. Choose this option if you would like to
exchange some of your SWVA Bancshares shares for cash (at $_____ per share) and
some for FNB Corporation stock. Fill in the blank with the number of SWVA
Bancshares shares you would like to exchange for cash.
IMPORTANT
If no option is marked, FNB Corporation will assume the shareholder has no
preference and will determine the type of consideration to be given.
HOW THE MERGER AGREEMENT AND YOUR ELECTION OPTION WILL WORK TOGETHER.
The merger agreement limits the amount of cash and the amount of stock that can
be issued in exchange for SWVA Bancshares shares. To find out more about these
limits, and the allocation method we will use, please see "What Shareholders
Will Receive in the Merger" in the Proxy Statement.
Signing the Election Form
Signing the form authorizes FNB Corporation to do whatever is necessary to
accomplish the exchange. All individuals listed on the share certificate(s) and
the account must sign this section of the Election Form. Please be sure to
include your daytime phone number. If you are a trustee, executor,
shareholder and your name is not printed in Section 1 of the Election Form, you
must include your full title and send us proper evidence of your authority to
exchange the shares. See Item 4 for more details.
W-9 Certification
Certify that the Social Security Number that we have printed in this section is
correct. Even if you have previously furnished a Taxpayer Identification Number
(TIN), Social Security Number or the certification on Form W-9, you must again
certify this number on the W-9 included in this section.
Returning the Election Form
Regardless of the election option you choose please do not return any exchange
documents to SWVA Bancshares or Southwest Virginia Savings Bank, F.S.B. Return
your stock certificates with the Election Form to FNB Corporation using one of
the methods indicated at the bottom of the Election Form. Before you mail your
Election Form, make sure that you:
a) verify the election you have chosen,
b) sign and date the Election Form and include your daytime phone number,
c) verify the TIN or Social Security Number printed on the Election Form and
sign the W-9 certification, and
d) include your stock certificates along with the Election Form in the enclosed
envelope. (If you are sending certificates, we recommend using Registered
and Insured Mail, Return Receipt Requested.)
6
Instructions for Completing
the Election Form
The completed Election Form and stock certificate(s), if applicable, must be
received by 5 p.m. on ___________, 2001.
Notice of Defects; Resolutions of Disputes
FNB Corporation and SWVA Bancshares, Inc. have no obligation to notify you or
anyone else that FNB Corporation has not received your Election Form or that the
Election Form you submitted has not been properly completed and will not incur
any liability for failure to give such notification.
Any disputes regarding your election or the elections made by other SWVA
Bancshares shareholders (for instance, disputes about whether an Election Form
was submitted by the Election Deadline, whether any other time limits involved
in the election process have been satisfied, whether stock certificates have
been correctly submitted, whether allocations and prorations for the merger have
been correctly calculated) will be resolved by FNB Corporation and its decision
will be final for all parties concerned. FNB Corporation has the absolute right
to reject any and all Election Forms and surrenders of stock certificates which
it determines are not in proper form or to waive minor irregularities in any
Election Form or in the surrender of any certificate. Surrenders of
certificates will not be effective until all defects or irregularities that have
not been waived by FNB Corporation have been corrected. Please return your
Election Form promptly after receipt to allow sufficient time to correct any
possible deficiencies before the Election Deadline.
Changing or Revoking Your Election
Shareholders may revoke their elections by filing a written revocation with the
Exchange Agent before the Election Deadline.
3 Lost, Stolen or Destroyed Certificates
Refer to Section 1 (About You and Your Shares) of the Election Form to see a
listing of your certificates. If any of your SWVA Bancshares stock certificates
have been LOST, STOLEN, or DESTROYED, circle the missing certificate number on
the certificate list and check the box in Section 3 (Lost, Stolen or Destroyed
Certificate(s)). Promptly return the certificates that you do have along with
the Election Form in the enclosed envelope. If you are sending certificates, we
recommend using Registered and Insured Mail, Return Receipt Requested. You will
receive replacement instructions that must be returned five (5) business days
prior to the Election Deadline. If your instructions are not received in time,
FNB Corporation will determine whether cash, stock or a combination of cash and
stock will be distributed to you.
IMPORTANT
The shares represented by the missing stock certificate(s) will not be
considered part of your election until the lost certificate affidavits are
returned and the replacement certificate is issued. If your instructions are
not received in time, FNB Corporation will determine whether cash, stock or a
combination of cash and stock will be distributed to you for the shares
represented by the lost certificate(s).
7
Instructions for Completing
the Election Form
You will be billed for any replacement fees in accordance with the following fee
schedules.
Fee Schedule for Certificate Replacement (General)
Certificate Value Fee(s)
-------------------------------------------
$500 - $1000 $50 service charge
Greater than $1000 $50 service charge
+ 2% of market value
Fee Schedule for Certificate Replacement
(Where Named Shareholder is Deceased)
Certificate Value Fee(s)
-------------------------------------------
less than $500 2% of market value
greater than $500 $50 service charge
+ 2% of market value
4 Special Transfer or Payment Instructions
If you want your FNB Corporation certificate registered or your check made
payable in a name different from the name(s) printed in Section 1 of the
Election Form, you must complete this section.
First, print the name(s) and address of the person(s) receiving the shares in
the space provided in Section 4. Then, refer to the procedures printed below
for the requirements needed to make some of the most frequently requested types
of registration changes. The documents described below must accompany your
certificate(s), if applicable, and your Election Form in order for us to honor
your instructions.
Transfer of ownership to another individual:
1. The shareholder whose name is printed in Section 1 must obtain a signature
guarantee. If the account is in joint names, both owners must sign and have
their signatures guaranteed. [Signature(s) must be guaranteed by an officer
of a commercial bank, trust company, credit union or savings & loan who is a
member of the Securities Transfer Agents Medallion Program (STAMP), or by a
stockbroker who is a member of STAMP.] The signature of a Notary Public is
not acceptable for this purpose.
2. Complete the Substitute Form W-9 in Section 4 by listing the Taxpayer
Identification Number (TIN) or Social Security Number (SSN) that is to be
used for tax reporting on the new account. The individual whose TIN or SSN
is being used must sign the Substitute Form W-9. Please refer to the
Instructions for Completing Substitute Form W-9 for more detailed
information.
Name change due to marriage:
1. The shareholder whose name is printed in Section 1 must obtain a signature
guarantee. If the account is in joint names, both owners must sign and have
their signatures guaranteed. [Signature(s) must be guaranteed by an officer
of a commercial bank, trust company, credit union or savings & loan who is a
member of the Securities Transfer Agents Medallion Program (STAMP), or by a
stockbroker who is a member of STAMP.] The signature of a Notary Public is
not acceptable for this purpose.
8
Instructions for Completing
the Election Form
2. Complete the Substitute Form W-9 in Section 4 by listing the Taxpayer
Identification Number (TIN) or Social Security Number (SSN) that is to be
used for tax reporting on the new account. The individual whose TIN or SSN
is being used must sign the Substitute Form W-9. Please refer to the
Instructions for Completing Substitute Form W-9 for more detailed
information.
Only one person's name is printed in Section 1 and that person is deceased. You
are the executor or administrator of the estate:
1. Provide a certified (under raised seal) copy of the Court Qualification
appointing the legal representative (dated within 60 days).
2. You, as legal representative, must obtain a signature guarantee.
[Signature(s) must be guaranteed by an officer of a commercial bank, trust
company, credit union or savings & loan who is a member of the Securities
Transfer Agents Medallion Program (STAMP), or by a stockbroker who is a
member of STAMP.] The signature of a Notary Public is not acceptable for
this purpose.
3. Complete the Substitute Form W-9 in Section 4 by listing the Taxpayer
Identification Number (TIN) or Social Security Number (SSN) that is to be
used for tax reporting on the new account. The individual whose TIN or SSN
is being used must sign the Substitute Form W-9. Please refer to the
Instructions for Completing Substitute Form W-9 for more detailed
information.
Note: Some states require application for an Inheritance Tax Waiver. This
is dependent upon the state in which the deceased person resided. Please
contact that state's Tax Department for the tax waiver.
The account is a joint account and one person is deceased. Transferring shares
to the survivor only:
1. Provide a certified (under raised seal) copy of death certificate.
2. Survivor's signature (no signature guarantee is necessary in this case).
3. Complete the Substitute Form W-9 in Section 4 by listing the Taxpayer
Identification Number (TIN) or Social Security Number (SSN) that is to be
used for tax reporting on the new account. The individual whose TIN or SSN
is being used must sign the Substitute Form W-9. Please refer to the
Instructions for Completing Substitute Form W-9 for more detailed
information.
Note: Some states require application for an Inheritance Tax Waiver. This
is dependent upon the state in which the deceased person resided. Please
contact that state's Tax Department for the tax waiver.
The account is a joint account and one person is deceased. Transferring to the
survivor and adding a name:
1. Provide a certified (under raised seal) copy of death certificate.
9
Instructions for Completing
the Election Form
2. Survivor must obtain a signature guarantee. [Signature(s) must be guaranteed
by an officer of a commercial bank, trust company, credit union or savings &
loan who is a member of the Securities Transfer Agents Medallion Program
(STAMP), or by a stockbroker who is a member of STAMP.] The signature of a
Notary Public is not acceptable for this purpose.
3. Complete the Substitute Form W-9 in Section 4 by listing the Taxpayer
Identification Number (TIN) or Social Security Number (SSN) that is to be
used for tax reporting on the new account. The individual whose TIN or SSN
is being used must sign the Substitute Form W-9. Please refer to the
Instructions for Completing Substitute Form W-9 for more detailed
information.
Note: Some states require application for an Inheritance Tax Waiver. This
is dependent upon the state in which the deceased person resided. Please
contact that state's Tax Department for the tax waiver.
The account is a custodial account and the minor has reached the legal age of
majority:
If the request is being made by the custodian:
1. The custodian must obtain a signature guarantee. [Signature(s) must be
guaranteed by an officer of a commercial bank, trust company, credit union or
savings & loan who is a member of the Securities Transfer Agents Medallion
Program (STAMP), or by a stockbroker who is a member of STAMP.] The
signature of a Notary Public is not acceptable for this purpose.
2. Provide a certified (under raised seal) copy of the birth certificate for the
former minor.
3. Complete the Substitute Form W-9 in Section 4 by listing the Taxpayer
Identification Number (TIN) or Social Security Number (SSN) that is to be
used for tax reporting on the new account. The individual whose TIN or SSN
is being used must sign the Substitute Form W-9. Please refer to the
Instructions for Completing Substitute Form W-9 for more detailed
information.
If the request is being made by the minor who has now reached the age of
majority:
1. The former minor must obtain a signature guarantee. [Signature(s) must be
guaranteed by an officer of a commercial bank, trust company, credit union or
savings & loan who is a member of the Securities Transfer Agents Medallion
Program (STAMP), or by a stockbroker who is a member of STAMP.] The
signature of a Notary Public is not acceptable for this purpose.
2. Complete the Substitute Form W-9 in Section 4 by listing the Taxpayer
Identification Number (TIN) or Social Security Number (SSN) that is to be
used for tax reporting on the new account. The individual whose TIN or SSN
is being used must sign the Substitute Form W-9. Please refer to the
Instructions for Completing Substitute Form W-9 for more detailed
information.
10
Instructions for Completing
the Election Form
You want to have the account registered in the name of a trust:
1. Obtain a signature guarantee for the shareholder whose name is printed in
Section 1. If the account is in joint names both owners must sign and have
their signatures guaranteed. [Signature(s) must be guaranteed by an officer
of a commercial bank, trust company, credit union or savings & loan who is a
member of the Securities Transfer Agents Medallion Program (STAMP), or by a
stockbroker who is a member of STAMP.] The signature of a Notary Public is
not acceptable for this purpose.
2. Provide a copy of the first and last pages of the trust agreement.
3. Complete the Substitute Form W-9 in Section 4 by listing the Taxpayer
Identification Number (TIN) or Social Security Number (SSN) that is to be
used for tax reporting on the new account. The individual whose TIN or SSN
is being used must sign the Substitute Form W-9. Please refer to the
Instructions for Completing Substitute Form W-9 for more detailed
information.
5 Special Delivery Instructions
Complete this section only if you want
the certificate or check resulting
from your election to be registered to
you but delivered to an address other
than the one that is printed in
Section 1 (About You and Your Shares)
of the Election Form.
Note: Your address of record will not
be affected by completing this
section. If you have had a permanent
address change, please note it in
Section 1 of the Election Form.
RETURN INSTRUCTIONS
Return the completed Election Form with
your stock certificate(s), if
applicable, using the enclosed
envelope addressed to FNB Corporation.
The method of delivery of the Election
Form and accompanying stock
certificate(s) is at your option and
risk. If you are mailing stock
certificates, we recommend Registered
and Insured Mail, Return Receipt
Requested. Do not sign
your stock certificates. Refer to the
bottom of the Election Form for the
return deadline and delivery options.
11
IRS Instructions for Completing
Substitute Form W-9
Certification Instructions
You must cross out item (2) on the Substitute Form W-9 if you have been notified
by the IRS that you are currently subject to backup withholding because of
underreporting interest or dividends on your tax return. (Also see Signing The
Certification under Specific Instructions).
(Section References are to the Internal Revenue Code.)
Purpose of Form
A person who is required to file an information return with IRS must obtain your
correct taxpayer identification number (TIN) to report income paid to you. Use
this Substitute Form W-9 to furnish your correct TIN to the requester (FNB
Corporation), and when applicable, (1) to certify that the TIN you are
furnishing is correct (or that you are waiting for a number to be issued), (2)
to certify that you are not subject to backup withholding, and (3) to claim
exemption from backup withholding if you are an exempt payee. Furnishing your
correct TIN and making the appropriate certifications will prevent certain
payments from being subject to the 31% backup withholding.
What is Backup Withholding
Persons making certain payments to you are required to withhold and pay to IRS
31% of such payments under certain conditions. This is called "backup
withholding." Payments that could be subject to backup withholding include
interest, dividends, broker and barter exchange transactions, rents, royalties,
nonemployee compensation, and certain payments from fishing boat operators, but
do not include real estate transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
(1) You do not furnish your TIN to the requester, or
(2) IRS notifies the requester that you furnished an incorrect TIN, or
(3) You are notified by IRS that you are subject to backup withholding
because you failed to report all your interest and dividends on your tax return
(for reportable interest and dividends only), or
(4) You fail to certify to the requester that you are not subject to backup
withholding under (3) above (for reportable interest and dividend accounts
opened after 1983 only), or
(5) You fail to certify your TIN. This applies only to reportable interest,
dividend, broker, or barter exchange accounts opened after 1983, or broker
accounts considered inactive in 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and
information reporting. See Payees and Payments Exempt from Backup Withholding
and Exempt Payees and Payments under Specific Instructions, on page 14, if you
are an exempt payee.
12
Instructions for Completing
the Election Form
How to Obtain a TIN
If you do not have a TIN, you should apply for one immediately. To apply get
Form SS-5, Application for a Social Security Number Card (for individuals) from
your local office of the Social Security Administration, or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), from your local Internal Revenue Service office.
To complete Form W-9 if you do not have a TIN, write "Applied For" in the
space for the TIN in Part 1, sign and date the form and give it to the
requester. Generally, you will then have 60 days to obtain a TIN and furnish it
to the requester. If the requester does not receive your TIN within 60 days,
backup withholding, if applicable, will begin and continue until you furnish
your TIN to the requester. For reportable interest or dividend payments, the
payer must exercise one of the following options concerning backup withholding
during this 60-day period. Under option (1), a payer must backup withhold on
any withdrawals you make from your account after 7 business days after the
requester receives this form back from you. Under option (2), the payer must
backup withhold on any reportable interest or dividend payments made to your
account, regardless of whether you make any withdrawals. The backup withholding
under option (2) must begin no later than 7 business days after the requester
receives this form back. Under option (2), the payer is required to refund the
amounts withheld if your certified TIN is received within the 60-day period and
you were not subject to backup withholding during that period.
Note: Writing "Applied For" on the form means that you have already applied for
a TIN OR that you intend to apply for one in the near future.
As soon as you receive your TIN, complete another Form W-9, include your TIN,
sign and date the form, and give it to the requester.
Payees and Payments Exempt from Backup Withholding
The following is a list of payees exempt from backup withholding. For interest
and dividends, all listed payees are exempt except item (2). For broker
transactions, payees listed in (1) through (13) and a person registered under
the Investment Advisors Act of 1940 who regularly acts as a broker are exempt.
(1) A corporation.
(2) An organization exempt from tax under Section 501(a), or an individual
retirement plan (IRA), or a custodial account under 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or
a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under Section 584(a).
(13) A financial institution.
13
Instructions for Completing
the Election Form
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under Section 664 or described in Section 4947.
Payments of dividends and patronage dividends generally not subject to backup
withholding also include the following:
o Payments to nonresident aliens subject to withholding under Section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S.
and that have at least one resident partner.
o Payments of patronage dividends not paid in money.
o Payments made by certain foreign organizations.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see the regulations under Sections 6041,
6041A(a), 6042, 6044, 6045, 6049 and 6050A.
Penalties
If you fail to furnish your correct TIN to a requester, you are subject to a
penalty of $50 for such failure unless your failure is due to a reasonable cause
and not to willful neglect.
Civil Penalty for False Information with Respect to Withholding - If you make
a false statement with no reasonable basis that results in no imposition of
backup withholding, you are subject to a penalty of $500.
Criminal Penalty for Falsifying Information - Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
Specific Instructions
Name - Be sure to enter your correct name.
If you are an individual, you must generally provide the name shown on your
social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of your name change, please enter your first name and both the last name shown
on your social security card and your new last name.
Signing the Certification
(1) Interest, Dividend, Broker and Barter Exchange Accounts Opened After 1983 -
You must sign the certification or backup withholding will apply. If you are
subject to backup withholding and you are merely providing your correct TIN to
the requester, you must cross out item (2) in the certification before signing
the form.
(2) Exempt Payees and Payments - If you are exempt from backup withholding, you
should complete this form to avoid possible erroneous backup withholding. Enter
your correct TIN in Section 4, write "EXEMPT" in the block in Section 4, sign
and date the form. If you are a nonresident alien or foreign entity not subject
to backup withholding, give the requester a completed
Form W-8, Certificate of Foreign Status.
(3) TIN "Applied For" - Follow the instructions under How to Obtain a TIN, on
page 13, sign and date the form.
Signature - For a joint account, only the person whose TIN is shown in Section 2
should sign the form.
Privacy Act Notice - Section 6109 requires you to furnish your correct taxpayer
14
Instructions for Completing
the Election Form
identification number (TIN) to persons who must file information returns with
IRS to report interest, dividends, and certain other income paid to you,
mortgage interest you paid the acquisition or abandonment of secured property,
or contributions you made to an individual retirement arrangement (IRA). IRS
uses the numbers for identification purposes and to help verify the accuracy of
your tax returns. You must provide you TIN whether or not you are required to
file a tax return. Payers must generally withhold 31% of taxable interest,
dividend, and certain other payments to a payee who does not furnish a TIN to a
payer. Certain penalties may also apply.
What Number to Give FNB Corporation
------------------------------------------------------
For this type of account: Give the Social Security
Number of:
1. Individual The individual
------------------------------------------------------
2. Two or more The actual owner of the
individuals (joint account OR, if combined
account) funds the first individual
on the account (1)
------------------------------------------------------
3. Custodian account The minor (2)
of a minor (Uniform
Transfers to Minors Act)
------------------------------------------------------
4. a. The usual The grantor-trustee (1)
revocable savings trust
(grantor is also trustee)
------------------------------------------------------
b. So-called trust The actual owner (1)
account that is not a
legal or valid trust under
state law
------------------------------------------------------
5. Sole proprietorship The owner (3)
------------------------------------------------------
6. A valid trust, Legal entity (do not
estate, furnish the identification
or pension trust number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title) (4)
------------------------------------------------------
7. Corporate The corporation
8. Association, club, The organization
religious, charitable,
educational, or other
tax-
exempt organization
------------------------------------------------------
9. Partnership The partnership
------------------------------------------------------
10. A broker or The broker or nominee
registered nominee
------------------------------------------------------
11. Account with the The public entity
Department of
Agriculture in the name
of a public entity (such
as a state or local
government, school
district, or prison) that
receives agricultural
program payments
------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
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