-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ORwtJbU1jz0QT2z8LXsiyq3zBqx1KvKVkbJMSrhgDYszjg/k14w9Xh2jsQshYWRJ z6CJoPx8u3/VXxjm4kY8VQ== 0000898822-96-000054.txt : 19960410 0000898822-96-000054.hdr.sgml : 19960410 ACCESSION NUMBER: 0000898822-96-000054 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960202 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960209 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FNB CORP/PA CENTRAL INDEX KEY: 0000037808 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 251255406 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-08144 FILM NUMBER: 96514350 BUSINESS ADDRESS: STREET 1: HERMITAGE SQUARE CITY: HERMITAGE STATE: PA ZIP: 16148 BUSINESS PHONE: 4129816000 MAIL ADDRESS: STREET 1: HERMITAGE SQUARE CITY: HERMITAGE STATE: PA ZIP: 16148 FORMER COMPANY: FORMER CONFORMED NAME: CITIZENS BUDGET CO DATE OF NAME CHANGE: 19750909 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED Date of Report (Date of earliest event reported): February 2, 1996 F.N.B. CORPORATION (Exact name of registrant as specified in its charter) Pennsylvania 0-8144 25-1255406 (State of (Commission (IRS Employer Incorporation) File Number) Identification No.) Hermitage Square, Hermitage, Pennsylvania 16148 (Address of principal executive offices) Zip Code (412) 981-6000 (Registrant's telephone number, including area code) INFORMATION TO BE INCLUDED IN THE REPORT ITEM 5. OTHER EVENTS. On February 2, 1996, F.N.B. Corporation ("FNB"), a corporation organized and existing under the laws of the Com- monwealth of Pennsylvania and registered as a bank holding com- pany under the Bank Holding Company Act of 1956, as amended (the "BHCA"), Lambda Corporation ("Lambda"), a Florida corpora- tion and wholly-owned subsidiary of FNB, and Southwest Banks, Inc. ("Southwest"), a corporation organized and existing under the laws of the State of Florida and registered as a bank hold- ing company under the BHCA, entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which Lambda will be merged with and into Southwest, with Southwest as the surviving corporation (the "Merger"). The Board of Directors of both FNB and Southwest approved the Merger Agreement and the transactions contemplated thereby at their respective meetings held on February 2, 1996. In accordance with the terms of the Merger Agreement, each share of Southwest common stock, par value $.10 per share ("Southwest Common Stock"), outstanding immediately prior to the effective time of the Merger (the "Effective Time") will be converted into the right to receive 0.78 of a share (the "Ex- change Ratio") of FNB common stock, par value $2.00 per share ("FNB Common Stock"). The Merger is intended to constitute a tax-free reor- ganization under the Internal Revenue Code of 1986, as amended, and to be accounted for as a pooling of interests. The Merger Agreement contemplates that each stock option, warrant or other right to purchase shares of Southwest Common Stock under Southwest's stock option and other stock plans or agreements (each a "Southwest Plan"), will be con- verted into and become a right to purchase shares of FNB Common Stock in accordance with the terms of the Southwest Plan and Southwest option, warrant or other right agreement by which it is evidenced, except that from and after the Effective Time (i) the number of shares of FNB Common Stock subject to each South- west option, warrant or right shall be equal to the number of shares of Southwest Common Stock subject to such option, war- rant or right immediately prior to the Effective Time multi- plied by the Exchange Ratio, and (ii) the per share exercise price of FNB Common Stock purchasable thereunder or upon which the amount of a cash payment is determined shall be that speci- fied in the Southwest option, warrant or right divided by the Exchange Ratio. -1- Each holder of Southwest Common Stock or of a South- west option, warrant or right who would otherwise be entitled to receive a fractional share of FNB Common Stock (after taking into account all of a shareholder's certificates) will receive, in lieu thereof, the equivalent cash value of such fractional share, without interest. Consummation of the Merger is subject to various con- ditions, including: (i) receipt of approval by the sharehold- ers of Southwest of the Merger Agreement and the Merger, as required to be approved under Florida law; (ii) receipt of cer- tain regulatory approvals from the Board of Governors of the Federal Reserve System and the Department of Banking and Finance of the State of Florida; (iii) receipt of opinion of counsel as to the tax-free nature of certain aspects of the Merger; (iv) receipt of a letter from Ernst & Young, LLP, FNB's independent public accountants relating to the pooling of interests accounting treatment of the Merger; (v) Southwest's cumulative earnings (subject to certain adjustments) since December 31, 1995 through the close of the most recent calendar quarter must be greater than or equal to the amount equal to $500,000 multiplied by the number of calendar quarters which have passed since December 31, 1995; and (vi) satisfaction of certain other conditions. If the price of FNB Common Stock falls below $19 at any time during the ten day period commencing two days after the Board of Governors of the Federal Reserve Bank approves the merger, Southwest may, under certain circumstances, give notice of termination of the Agreement, unless FNB determines, in its discretion, to increase the Exchange Ratio pursuant to an adjustment formula specified in the Merger Agreement and Southwest permits such a revision of the Exchange Ratio. The Merger Agreement and the Merger will be submitted for approval at a meeting of the shareholders of Southwest. Prior to such meeting, FNB will file a registration statement with the Securities and Exchange Commission registering under the Securities Act of 1933, as amended, the FNB Common Stock to be issued in exchange for the outstanding shares of Southwest Common Stock in the Merger. The preceding description of the Merger Agreement is qualified in its entirety by reference to the copy of the Merger Agreement included as Exhibit 1 to this Current Report on Form 8-K dated February 2, 1996 and filed on February 9, 1996 (the "Current Report") and which is incorporated by refer- ence. -2- Immediately after executing the Merger Agreement, FNB and Southwest entered into a Stock Option Agreement, dated Feb- ruary 2, 1996 (the "Stock Option Agreement"), pursuant to which Southwest granted to FNB an option to purchase, under certain circumstances and subject to certain adjustments, up to 727,163 shares of Southwest Common Stock at a price, subject to certain adjustments, of $15 per share (the "FNB Option"). The FNB Op- tion, if exercised, would equal, before giving effect to the exercise of the FNB Option, 19.9% of the total number of shares of Southwest Common Stock outstanding as of its date of exer- cise. The FNB Option was granted by Southwest as a condition and inducement to FNB's willingness to enter into the Merger Agreement. Under certain circumstances, Southwest may be re- quired to repurchase the FNB Option or the shares acquired pur- suant to the exercise of the FNB Option. The preceding description of the Stock Option Agree- ment is qualified in its entirety by reference to the copy of the Stock Option Agreement included as Exhibit 2 to this Cur- rent Report and which is incorporated by reference. On February 5, 1996, FNB announced the anticipated Merger and the terms of the Merger Agreement with Southwest. A copy of the FNB press release is attached hereto as Exhibit 3. -3- ITEM 7. Financial Statements and Exhibits. (c) Exhibits Description 1 Agreement and Plan of Merger, dated as of February 2, 1996, by and between F.N.B. Corporation, Lambda Corporation, and Southwest Banks, Inc. 2 Stock Option Agreement, dated February 2, 1996, between Southwest Banks, Inc., as issuer and F.N.B. Corporation, as grantee. 3 Press release, dated February 5, 1996, issued by F.N.B. Corporation. -4- Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly autho- rized. F.N.B. CORPORATION (Registrant) By: /s/John D. Waters Name: John D. Waters Title: Vice President and Chief Financial Officer Dated: February 9, 1996 -5- EXHIBIT INDEX Exhibit No. Description of Exhibit 1 Agreement and Plan of Merger, dated as of February 2, 1996, by and between F.N.B. Corporation, Lambda Corporation, and Southwest Banks, Inc. 2 Stock Option Agreement, dated February 2, 1996, between Southwest Banks, Inc., as issuer and F.N.B. Corporation, as grantee. 3 Press release, dated September 5, 1996, issued by F.N.B. Corporation. -6- EX-1 2 EXHIBIT 1 EXHIBIT 1 AGREEMENT AND PLAN OF MERGER BY AND AMONG F.N.B. CORPORATION, LAMBDA CORPORATION AND SOUTHWEST BANKS, INC. Dated as of February 2, 1996 TABLE OF CONTENTS PAGE Parties................................................... 1 Preamble.................................................. 1 ARTICLE 1 - TRANSACTIONS AND TERMS OF MERGER.............. 2 1.1 Merger.......................................... 2 1.2 Time and Place of Closing....................... 2 1.3 Effective Time.................................. 2 1.4 Execution of Stock Option Agreement............. 3 ARTICLE 2 - TERMS OF MERGER............................... 3 2.1 Charter......................................... 3 2.2 Bylaws.......................................... 3 2.3 FNB Board of Directors.......................... 3 ARTICLE 3 - MANNER OF CONVERTING SHARES................... 3 3.1 Conversion of Shares............................ 3 3.2 Anti-Dilution Provisions........................ 4 3.3 Shares Held by Southwest or FNB................. 4 3.4 Fractional Shares............................... 4 3.5 Conversion of Stock Options..................... 4 ARTICLE 4 - EXCHANGE OF SHARES............................ 6 4.1 Exchange Procedures............................. 6 4.2 Rights of Former Southwest Shareholders......... 7 ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF SOUTHWEST... 8 5.1 Organization, Standing, and Power............... 8 5.2 Authority; No Breach By Agreement............... 8 5.3 Capital Stock................................... 9 5.4 Southwest Subsidiaries.......................... 10 5.5 SEC Filings; Financial Statements............... 11 5.6 Absence of Certain Changes or Events............ 12 5.7 Tax Matters..................................... 12 5.8 Assets.......................................... 14 5.9 Environmental Matters........................... 14 5.10 Compliance With Laws............................ 15 5.11 Labor Relations................................. 16 5.12 Employee Benefit Plans.......................... 16 5.13 Material Contracts.............................. 19 -i- PAGE 5.14 Legal Proceedings............................... 20 5.15 Reports......................................... 20 5.16 Statements True and Correct..................... 20 5.17 Accounting, Tax and Regulatory Matters.......... 21 5.18 State Takeover Laws............................. 21 5.19 Charter Provisions.............................. 21 5.20 Derivatives Contracts........................... 22 ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF FNB......... 22 6.1 Organization, Standing, and Power............... 22 6.2 Authority; No Breach By Agreement............... 22 6.3 Capital Stock................................... 23 6.4 SEC Filings; Financial Statements............... 24 6.5 Absence of Certain Changes or Events............ 24 6.6 Tax Matters..................................... 25 6.7 Compliance With Laws............................ 25 6.8 Legal Proceedings............................... 26 6.9 Reports......................................... 26 6.10 Statements True and Correct..................... 27 6.11 Accounting, Tax and Regulatory Matters.......... 27 6.12 Environmental Matters........................... 28 6.13 Derivatives Contracts........................... 28 ARTICLE 7 - CONDUCT OF BUSINESS PENDING CONSUMMATION...... 29 7.1 Affirmative Covenants of Southwest.............. 29 7.2 Negative Covenants of Southwest................. 29 7.3 Covenants of FNB................................ 32 7.4 Adverse Changes in Condition.................... 33 7.5 Reports......................................... 33 ARTICLE 8 - ADDITIONAL AGREEMENTS......................... 33 8.1 Registration Statement; Proxy Statement; Shareholder Approval.......................... 33 8.2 Exchange Listing................................ 34 8.3 Applications.................................... 34 8.4 Filings with State Offices...................... 34 8.5 Agreement as to Efforts to Consummate........... 34 8.6 Investigation and Confidentiality............... 35 8.7 Press Releases.................................. 35 8.8 Certain Actions................................. 36 8.9 Accounting and Tax Treatment.................... 36 8.10 State Takeover Laws............................. 36 8.11 Charter Provisions.............................. 36 8.12 Agreement of Affiliates......................... 37 8.13 Employee Benefits and Contracts................. 37 8.14 Indemnification................................. 38 -ii- PAGE ARTICLE 9 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE............................................. 39 9.1 Conditions to Obligations of Each Party......... 39 9.2 Conditions to Obligations of FNB................ 40 9.3 Conditions to Obligations of Southwest.......... 42 ARTICLE 10 - TERMINATION.................................. 43 10.1 Termination..................................... 43 10.2 Effect of Termination........................... 45 10.3 Non-Survival of Representations and Covenants... 46 ARTICLE 11 - MISCELLANEOUS................................ 46 11.1 Definitions..................................... 46 11.2 Expenses........................................ 57 11.3 Brokers and Finders............................. 57 11.4 Entire Agreement................................ 58 11.5 Amendments...................................... 58 11.6 Waivers......................................... 58 11.7 Assignment...................................... 59 11.8 Notices......................................... 59 11.9 Governing Law................................... 60 11.10 Counterparts.................................... 60 11.11 Captions........................................ 60 11.12 Interpretations................................. 60 11.13 Enforcement of Agreement........................ 60 11.14 Severability.................................... 61 Signatures................................................ 61 -iii- LIST OF EXHIBITS EXHIBIT NUMBER DESCRIPTION 1. Form of Stock Option Agreement. (Sec- tion 1.4). 2. Form of agreement of affiliates of South- west. (Section 8.12). -iv- AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into as of February 2, 1996, by and among F.N.B. CORPORATION ("FNB"), a Pennsylvania corporation having its principal office located in Hermitage, Pennsylvania; LAMBDA CORPORATION, a newly incorporated Florida corporation and a wholly-owned subsidiary of FNB ("Merger Sub"); and SOUTHWEST BANKS, INC. ("Southwest"), a Florida corporation having its principal office located in Naples, Florida. PREAMBLE The Boards of Directors of Southwest and FNB are of the opinion that the strategic affiliation described herein is in the best interests of the parties and their respective shareholders. This Agreement provides for the acquisition of Southwest by FNB pursuant to the merger of Merger Sub with and into Southwest. At the effective time of such merger, the out- standing shares of the capital stock of Southwest shall be con- verted into the right to receive shares of the common stock of FNB (except as provided herein). As a result, shareholders of Southwest shall become shareholders of FNB. Further, it is the current intention of FNB, subsequent to the effective time of this strategic affiliation, to retain the management team of Southwest with the authority and responsibility for operating Southwest and its subsidiaries in substantially same manner and fashion as historically operated by such management team. The transactions described in this Agreement are subject to the approvals of the shareholders of Southwest, the Board of Gover- nors of the Federal Reserve System, the Florida Department of Banking and Finance, and the satisfaction of certain other con- ditions described in this Agreement. It is the intention of the parties to this Agreement that the Merger (as hereinafter defined) for federal income tax purposes shall qualify as a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code, and for accounting purposes shall qualify for treatment as a pooling of interests. Immediately after the execution and delivery of this Agreement, as a condition and inducement to FNB's willingness to enter into this Agreement, Southwest and FNB are entering into a stock option agreement (the "Stock Option Agreement"), in substantially the form of Exhibit 1, pursuant to which Southwest is granting to FNB an option to purchase shares of Southwest Common Stock. Certain terms used in this Agreement are defined in Section 11.1 of this Agreement. NOW, THEREFORE, in consideration of the above and the mutual warranties, representations, covenants, and agreements set forth herein, the parties agree as follows: ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER 1.1 MERGER. Subject to the terms and conditions of this Agreement, at the Effective Time, Merger Sub shall be merged with and into Southwest in accordance with the provi- sions of the FBCA (the "Merger"). Southwest shall be the Sur- viving Corporation resulting from the Merger and shall continue to be governed by the Laws of the State of Florida. The Merger shall be consummated pursuant to the terms of this Agreement, which has been approved and adopted by the respective Boards of Directors of Southwest, Merger Sub and FNB. 1.2 TIME AND PLACE OF CLOSING. The closing will take place at 9:00 A.M. on the date that the Effective Time occurs (or the immediately preceding day if the Effective Time is earlier than 9:00 A.M.), or at such other time as the Par- ties, acting through their chief executive officers or chief financial officers, may mutually agree. The place of closing shall be at such location as may be mutually agreed upon by the Parties. 1.3 EFFECTIVE TIME. The Merger and other transac- tions contemplated by this Agreement shall become effective on the date and at the time the Florida Certificate of Merger re- flecting the Merger shall become effective with the Secretary of State of the State of Florida (the "Effective Time"). Sub- ject to the terms and conditions hereof, unless otherwise mutu- ally agreed upon in writing by each Party, the Parties shall use their reasonable efforts to cause the Effective Time to occur on or before the fifth business day (as designated by FNB) following the last to occur of (i) the effective date (in- cluding expiration of any applicable waiting period) of the last required Consent of any Regulatory Authority having au- thority over and approving or exempting the Merger, and (ii) the date on which the shareholders of Southwest approve this Agreement to the extent such approval is required by applicable Law; provided, however, that in no event shall the Effective Time occur prior to January 1, 1997, unless FNB determines in its sole discretion to permit the Effective Time to occur prior to January 1, 1997, but not earlier than December 16, 1996. -2- 1.4 EXECUTION OF STOCK OPTION AGREEMENT. Immedi- ately after the execution of this Agreement and as a condition thereto, Southwest is executing and delivering to FNB the Stock Option Agreement. ARTICLE 2 TERMS OF MERGER 2.1 CHARTER. The Articles of Incorporation of Southwest in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corpo- ration until otherwise amended or repealed. 2.2 BYLAWS. The Bylaws of Southwest in effect im- mediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation until otherwise amended or repealed. 2.3 FNB BOARD OF DIRECTORS. Following the Effective Time, the number of members of the FNB Board of Directors shall be increased by three, and three of the then current directors of Southwest shall be nominated by the FNB Board of Directors and elected to such Board. ARTICLE 3 MANNER OF CONVERTING SHARES 3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3, at the Effective Time, by virtue of the Merger and without any action on the part of FNB, Merger Sub or Southwest, or the shareholders of any of the foregoing, the shares of the constituent corporations shall be converted as follows: (a) Each share of FNB Capital Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding from and after the Effective Time. (b) Each share of common stock of the Merger Sub issued and outstanding immediately prior to the Effec- tive Time shall become and be converted into one share of Southwest Common Stock and shall remain issued and out- standing. (c) Each share of Southwest Common Stock (ex- cluding shares held by any Southwest Company or any FNB Company, in each case other than in a fiduciary capacity or as a result of debts previously contracted) issued and -3- outstanding at the Effective Time shall cease to be out- standing and shall be converted into and exchanged for 0.78 shares of FNB Common Stock (subject to possible ad- justment pursuant to Section 10.1(g) of this Agreement, the "Exchange Ratio"). 3.2 ANTI-DILUTION PROVISIONS. In the event FNB changes the number of shares of FNB Common Stock issued and outstanding prior to the Effective Time as a result of a stock split, stock dividend or similar recapitalization with respect to such stock and the record date therefor (in the case of a stock dividend) or the effective date thereof (in the case of a stock split or similar recapitalization for which a record date is not established) shall be prior to the Effective Time, the Exchange Ratio shall be proportionately adjusted. 3.3 SHARES HELD BY SOUTHWEST OR FNB. Each of the shares of Southwest Common Stock held by any Southwest Company or by any FNB Company, in each case other than in a fiduciary capacity or as a result of debts previously contracted, shall be canceled and retired at the Effective Time and no consider- ation shall be issued in exchange therefor. 3.4 FRACTIONAL SHARES. Notwithstanding any other provision of this Agreement, each holder of shares of Southwest Common Stock exchanged pursuant to the Merger who would other- wise have been entitled to receive a fraction of a share of FNB Common Stock (after taking into account all certificates deliv- ered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of FNB Common Stock multiplied by the market value of one share of FNB Common Stock at the Effective Time. The market value of one share of FNB Common Stock at the Effective Time shall be the average of the high bid and low asked prices of such common stock in the over-the-counter market, as re- ported by Nasdaq (or, if not reported thereby, any other au- thoritative source selected by FNB) on the last trading day preceding the Effective Time. No such holder will be entitled to dividends, voting rights, or any other rights as a share- holder in respect of any fractional shares. 3.5 CONVERSION OF STOCK OPTIONS. (a) At the Effective Time, each option, warrant or other right to purchase shares of Southwest Common Stock pursuant to outstanding stock options, warrant agreements or stock appreciation rights ("Southwest Options") granted by Southwest under the Southwest Stock Plans identified in Section 3.5 of the Southwest Disclosure Memorandum, which are outstand- ing at the Effective Time, whether or not exercisable, shall be -4- converted into and become rights with respect to FNB Common Stock, and FNB shall assume each Southwest Option, in ac- cordance with the terms of the Southwest Stock Plan, stock op- tion agreement or warrant agreement by which it is evidenced, except that from and after the Effective Time, (i) FNB and its Compensation Committee shall be substituted for Southwest and the Compensation Committee of Southwest's Board of Directors (including, if applicable, the entire Board of Directors of Southwest) administering such Southwest Stock Plan, (ii) each Southwest Option assumed by FNB may be exercised solely for shares of FNB Common Stock (or cash in the case of stock ap- preciation rights), (iii) the number of shares of FNB Common Stock subject to such Southwest Option shall be equal to the number of shares of Southwest Common Stock subject to such Southwest Option immediately prior to the Effective Time multi- plied by the Exchange Ratio, and (iv) the per share exercise price under each such Southwest Option shall be adjusted by dividing the per share exercise price under each such Southwest Option by the Exchange Ratio and rounding down to the nearest cent. Notwithstanding the provisions of clause (iii) of the preceding sentence, FNB shall not be obligated to issue any fraction of a share of FNB Common Stock upon exercise of South- west Options and any fraction of a share of FNB Common Stock that otherwise would be subject to a converted Southwest Option shall represent the right to receive a cash payment equal to the product of such fraction and the difference between the market value of one share of FNB Common Stock and the per share exercise price of such Option. In addition, notwithstanding the provisions of clauses (iii) and (iv) of the first sentence of this Section 3.5, each Southwest Option which is an "incen- tive stock option" shall be adjusted as required by Section 424 of the Internal Revenue Code, and the regulations promulgated thereunder, so as not to constitute a modification, extension, or renewal of the option within the meaning of Section 424(h) of the Internal Revenue Code. Southwest agrees to take all necessary steps to effectuate the foregoing provisions of this Section 3.5. (b) As soon as practicable after the Effective Time, FNB shall deliver to the participants in each Southwest Stock Plan an appropriate notice setting forth such partici- pant's rights pursuant thereto and the grants pursuant to such Southwest Stock Plan shall continue in effect on the same terms and conditions (subject to the adjustments required by Section 3.5(a) after giving effect to the Merger), and FNB shall comply with the terms of each Southwest Stock Plan to ensure, to the extent required by, and subject to the provisions of, such Southwest Stock Plan, that Southwest Options which qualified as incentive stock options prior to the Effective Time continue to qualify as incentive stock options after the Effective Time. -5- At or prior to the Effective Time, FNB shall take all corporate action necessary to reserve for issuance sufficient shares of FNB Common Stock for delivery upon exercise of Southwest Op- tions assumed by it in accordance with this Section 3.5. As soon as practicable after the Effective Time, FNB shall file a registration statement on Form S-3 or Form S-8, as the case may be (or any successor or other appropriate forms), with respect to the shares of FNB Common Stock subject to such options and shall use its reasonable efforts to maintain the effectiveness of such registration statements (and maintain the current sta- tus of the prospectus or prospectuses contained therein) for so long as such options remain outstanding. With respect to those individuals who subsequent to the Merger will be subject to the reporting requirements under Section 16(a) of the 1934 Act, where applicable, FNB shall administer the Southwest Stock Plan assumed pursuant to this Section 3.5 in a manner that complies with Rule 16b-3 promulgated under the 1934 Act to the extent the Southwest Stock Plan complied with such rule prior to the Merger. (c) All restrictions or limitations on transfer with respect to Southwest Common Stock awarded under the South- west Stock Plans or any other plan, program, or arrangement of any Southwest Company, to the extent that such restrictions or limitations shall not have already lapsed, and except as other- wise expressly provided in such plan, program, or arrangement, shall remain in full force and effect with respect to shares of FNB Common Stock into which such restricted stock is converted pursuant to Section 3.1 of this Agreement. ARTICLE 4 EXCHANGE OF SHARES 4.1 EXCHANGE PROCEDURES. Promptly after the Effec- tive Time, FNB and Southwest shall cause the exchange agent se- lected by FNB (the "Exchange Agent") to mail to the former shareholders of Southwest appropriate transmittal materials (which shall specify that delivery shall be effected, and risk of loss and title to the certificates theretofore representing shares of Southwest Common Stock shall pass, only upon proper delivery of such certificates to the Exchange Agent). After the Effective Time, each holder of shares of Southwest Common Stock (other than shares to be canceled pursuant to Section 3.3 of this Agreement) issued and outstanding at the Effective Time shall surrender the certificate or certificates representing such shares to the Exchange Agent and shall upon surrender thereof promptly receive in exchange therefor the consideration provided in Section 3.1 of this Agreement, together with all undelivered dividends or distributions in respect of such -6- shares (without interest thereon) pursuant to Section 4.2 of this Agreement. To the extent required by Section 3.4 of this Agreement, each holder of shares of Southwest Common Stock is- sued and outstanding at the Effective Time also shall receive, upon surrender of the certificate or certificates representing such shares, cash in lieu of any fractional share of FNB Common Stock to which such holder may be otherwise entitled (without interest). FNB shall not be obligated to deliver the consider- ation to which any former holder of Southwest Common Stock is entitled as a result of the Merger until such holder surrenders such holder's certificate or certificates representing the shares of Southwest Common Stock for exchange as provided in this Section 4.1. The certificate or certificates of Southwest Common Stock so surrendered shall be duly endorsed as the Ex- change Agent may require. Any other provision of this Agree- ment notwithstanding, neither FNB nor the Exchange Agent shall be liable to a holder of Southwest Common Stock for any amounts paid or property delivered in good faith to a public official pursuant to any applicable abandoned property Law. 4.2 RIGHTS OF FORMER SOUTHWEST SHAREHOLDERS. At the Effective Time, the stock transfer books of Southwest shall be closed as to holders of Southwest Common Stock immediately prior to the Effective Time and no transfer of Southwest Common Stock by any such holder shall thereafter be made or recog- nized. Until surrendered for exchange in accordance with the provisions of Section 4.1 of this Agreement, each certificate theretofore representing shares of Southwest Common Stock (other than shares to be canceled pursuant to Section 3.3 of this Agreement) shall from and after the Effective Time repre- sent for all purposes only the right to receive the consider- ation provided in Sections 3.1 and 3.4 of this Agreement in exchange therefor, subject, however, to FNB's obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time which have been declared or made by Southwest in respect of such shares of Southwest Common Stock in accordance with the terms of this Agreement and which remain unpaid at the Effective Time. Whenever a dividend or other distribution is declared by FNB on the FNB Common Stock, the record date for which is at or after the Effective Time, the declaration shall include dividends or other distributions on all shares issuable pursuant to this Agreement, but begin- ning 30 days after the Effective Time no dividend or other dis- tribution payable to the holders of record of FNB Common Stock as of any time subsequent to the Effective Time shall be deliv- ered to the holder of any certificate representing shares of Southwest Common Stock issued and outstanding at the Effective Time until such holder surrenders such certificate for exchange as provided in Section 4.1 of this Agreement. However, upon surrender of such Southwest Common Stock certificate, both the -7- FNB Common Stock certificate (together with all such undeliv- ered dividends or other distributions without interest) and any undelivered dividends and cash payments to be paid for frac- tional share interests (without interest) shall be delivered and paid with respect to each share represented by such cer- tificate. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SOUTHWEST Southwest hereby represents and warrants to FNB as follows: 5.1 ORGANIZATION, STANDING, AND POWER. Southwest is a corporation duly organized, validly existing, and in good standing under the Laws of the State of Florida, and has the corporate power and authority to carry on its business as now conducted and to own, lease, and operate its material Assets. Southwest is duly qualified or licensed to transact business as a foreign corporation in good standing in the States of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not rea- sonably likely to have, individually or in the aggregate, a Material Adverse Effect on Southwest. 5.2 AUTHORITY; NO BREACH BY AGREEMENT. (a) Southwest has the corporate power and au- thority necessary to execute, deliver, and perform its obliga- tions under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery, and performance of this Agreement and the consummation of the transactions con- templated herein, including the Merger, have been duly and val- idly authorized by all necessary corporate action in respect thereof on the part of Southwest, subject to the approval of this Agreement by the holders of a majority of the outstanding shares of Southwest Common Stock other than those shares ben- eficially owned by FNB, which is the only shareholder vote re- quired for approval of this Agreement and consummation of the Merger by Southwest. Subject to such requisite shareholder approval, this Agreement represents a legal, valid, and binding obligation of Southwest, enforceable against Southwest in ac- cordance with its terms (except in all cases as such enforce- ability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the en- forcement of creditors' rights generally and except that the availability of the equitable remedy of specific performance or -8- injunctive relief is subject to the discretion of the court before which any proceeding may be brought). The Southwest Board of Directors has received from The Robinson-Humphrey Com- pany, Inc. a letter dated as of the date of this Agreement to the effect that, in the opinion of such firm, the Exchange Ra- tio is fair, from a financial point of view, to the holders of Southwest Common Stock. (b) Neither the execution and delivery of this Agreement by Southwest, nor the consummation by Southwest of the transactions contemplated hereby, nor compliance by South- west with any of the provisions hereof, will (i) conflict with or result in a breach of any provision of Southwest's Articles of Incorporation or Bylaws, or, (ii) except as disclosed in Section 5.2(b)(ii) of the Southwest Disclosure Memorandum, con- stitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any Southwest Company under, any Contract or Permit of any Southwest Company, where such Default or Lien, or any failure to obtain such Consent, is reasonably likely to have, individu- ally or in the aggregate, a Material Adverse Effect on South- west, or, (iii) subject to receipt of the requisite Consents referred to in Section 9.1(b) of this Agreement, violate any Law or Order applicable to any Southwest Company or any of their respective material Assets. (c) Other than in connection or compliance with the provisions of the Securities Laws, applicable state corpo- rate and securities Laws, and rules of the NASD, and other than Consents required from Regulatory Authorities, and other than notices to or filings with the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect to any em- ployee benefit plans, or under the HSR Act, and other than Con- sents, filings, or notifications which, if not obtained or made, are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Southwest, no notice to, filing with, or Consent of, any public body or authority is necessary for the consummation by Southwest of the Merger and the other transactions contemplated in this Agreement. 5.3 CAPITAL STOCK. (a) The authorized capital stock of Southwest consists of (i) 25,000,000 shares of Southwest Common Stock, of which 3,654,089 shares are issued and outstanding as of the date of this Agreement and not more than 4,000,855 shares will be issued and outstanding at the Effective Time, and (ii) 100,000 shares of preferred stock, par value $0.10 per share, none of which is issued and outstanding. All of the issued and outstanding shares of capital stock of Southwest are duly and -9- validly issued and outstanding and are fully paid and non- assessable under the FBCA. None of the outstanding shares of capital stock of Southwest has been issued in violation of any preemptive rights of the current or past shareholders of South- west. Southwest has reserved 651,194 shares of Southwest Com- mon Stock for issuance under the Southwest Stock Plans, pursu- ant to which options and warrants to purchase not more than 452,930 shares of Southwest Common Stock are outstanding. (b) Except as set forth in Section 5.3(a) of this Agreement, or as provided pursuant to the Stock Option Agreement, there are no shares of capital stock or other equity securities of Southwest outstanding and no outstanding Rights relating to the capital stock of Southwest. 5.4 SOUTHWEST SUBSIDIARIES. Southwest has disclosed in Section 5.4 of the Southwest Disclosure Memorandum all of the Southwest Subsidiaries as of the date of this Agreement. Except as disclosed in Section 5.4 of the Southwest Disclosure Memorandum, Southwest or one of its Subsidiaries owns all of the issued and outstanding shares of capital stock of each Southwest Subsidiary. No equity securities of any Southwest Subsidiary are or may become required to be issued (other than to another Southwest Company) by reason of any Rights, and there are no Contracts by which any Southwest Subsidiary is bound to issue (other than to another Southwest Company) ad- ditional shares of its capital stock or Rights or by which any Southwest Company is or may be bound to transfer any shares of the capital stock of any Southwest Subsidiary (other than to another Southwest Company). There are no Contracts relating to the rights of any Southwest Company to vote or to dispose of any shares of the capital stock of any Southwest Subsidiary. All of the shares of capital stock of each Southwest Subsidiary held by a Southwest Company are fully paid and nonassessable under the applicable corporation Law of the jurisdiction in which such Subsidiary is incorporated or organized and are owned by the Southwest Company free and clear of any Lien. Each Southwest Subsidiary is either a bank or a corporation, and is duly organized, validly existing, and (as to corpora- tions) in good standing under the Laws of the jurisdiction in which it is incorporated or organized, and has the corporate power and authority necessary for it to own, lease, and operate its Assets and to carry on its business as now conducted. Each Southwest Subsidiary is duly qualified or licensed to transact business as a foreign corporation in good standing in the States of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its busi- ness requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in -10- the aggregate, a Material Adverse Effect on Southwest. Each Southwest Subsidiary that is a depository institution is an "insured institution" as defined in the Federal Deposit Insur- ance Act and applicable regulations thereunder, and the depos- its in which are insured by the Bank Insurance Fund. 5.5 SEC FILINGS; FINANCIAL STATEMENTS. (a) Southwest has filed and made available to FNB all forms, reports, and documents required to be filed by Southwest with the SEC since December 31, 1992 (collectively, the "Southwest SEC Reports"). The Southwest SEC Reports (i) at the time filed, complied in all material respects with the ap- plicable requirements of the 1933 Act and the 1934 Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Southwest SEC Reports or neces- sary in order to make the statements in such Southwest SEC Re- ports, in light of the circumstances under which they were made, not misleading. Except for Southwest Subsidiaries that are registered as a broker, dealer or investment advisor, none of Southwest's Subsidiaries is required to file any forms, re- ports, or other documents with the SEC. Southwest has made available to FNB a copy of the balance sheets and the related consolidated statements of income, consolidated statement of changes in shareholders' equity (including related notes and schedules) of its subsidiary banks as of and for the period ended December 31, 1995 and any draft consolidated statements or earnings releases for Southwest and its consolidated subsid- iaries as of and for the period ended December 31, 1995 that have been prepared by Southwest as of the date of this Agree- ment. (b) Each of the Southwest Financial Statements (including, in each case, any related notes) contained in the Southwest SEC Reports, including any Southwest SEC Reports filed after the date of this Agreement until the Effective Time, complied as to form in all material respects with the applicable published rules and regulations of the SEC with re- spect thereto, was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements, or, in the case of unaudited statements, as permitted by Form 10-QSB of the SEC), and fairly presented the consolidated fi- nancial position of Southwest and its Subsidiaries as at the respective dates and the consolidated results of its operations -11- and cash flows for the periods indicated, except that the unau- dited interim financial statements were or are subject to nor- mal and recurring year-end adjustments which were not or are not expected to be material in amount. 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1995, except as disclosed in Section 5.6 of the Southwest Disclosure Memorandum, (i) there have been no events, changes, or occurrences which have had, or are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Southwest, and (ii) the Southwest Companies have not taken any action, or failed to take any action, prior to the date of this Agreement, which action or failure, if taken after the date of this Agreement, would represent or re- sult in a material breach or violation of any of the covenants and agreements of Southwest provided in Article 7 of this Agreement. 5.7 TAX MATTERS. (a) All Tax Returns required to be filed by or on behalf of any of the Southwest Companies have been timely filed or requests for extensions have been timely filed, granted, and have not expired for periods ended on or before December 31, 1995, and on or before the date of the most recent fiscal year end immediately preceding the Effective Time, ex- cept to the extent that all such failures to file, taken to- gether, are not reasonably likely to have a Material Adverse Effect on Southwest, and all Tax Returns filed are complete and accurate in all material respects to the Knowledge of South- west. All Taxes shown on filed Tax Returns have been paid. There is no audit examination, deficiency, or refund Litigation with respect to any Taxes that is reasonably likely to result in a determination that would have, individually or in the ag- gregate, a Material Adverse Effect on Southwest, except as re- served against in the Southwest Financial Statements delivered prior to the date of this Agreement or as disclosed in Section 5.7 of the Southwest Disclosure Memorandum. All Taxes and other Liabilities due with respect to completed and settled examinations or concluded Litigation have been paid. (b) Except as disclosed in Section 5.7 of the Southwest Disclosure Memorandum, none of the Southwest Compa- nies has executed an extension or waiver of any statute of limitations on the assessment or collection of any Tax due that is currently in effect. (c) Adequate provision for any Taxes due or to become due for any of the Southwest Companies for the period or -12- periods through and including the date of the respective South- west Financial Statements has been made and is reflected on such Southwest Financial Statements, except as disclosed in Section 5.7 of the Southwest Disclosure Memorandum. (d) Deferred Taxes of the Southwest Companies have been adequately provided for in the Southwest Financial Statements. (e) Each of the Southwest Companies is in com- pliance with, and its records contain all information and docu- ments (including properly completed Internal Revenue Service Forms W-9) necessary to comply with, all applicable information reporting and Tax withholding requirements under federal, state, and local Tax Laws, and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Internal Revenue Code, except for such in- stances of noncompliance and such omissions as are not reason- ably likely to have, individually or in the aggregate, a Mate- rial Adverse Effect on Southwest. (f) Except as disclosed in Section 5.7 of the Southwest Disclosure Memorandum, none of the Southwest Compa- nies has made any payments, is obligated to make any payments, or is a party to any contract, agreement, or other arrangement that could obligate it to make any payments that would be dis- allowed as a deduction under Section 280G or 162(m) of the In- ternal Revenue Code. (g) There are no Liens with respect to Taxes upon any of the assets of the Southwest Companies. (h) There has not been an ownership change, as defined in Internal Revenue Code Section 382(g), of the South- west Companies that occurred during or after any Taxable Period in which the Southwest Companies incurred a net operating loss that carries over to any Taxable Period ending after December 31, 1994. (i) No Southwest Company has filed any consent under Section 341(f) of the Internal Revenue Code concerning collapsible corporation. (j) All material elections with respect to Taxes affecting the Southwest Companies as of the date of this Agreement have been or will be timely made as set forth in Sec- tion 5.7 of the Southwest Disclosure Memorandum. After the date hereof, other than as set forth in Section 5.7 of the Southwest Disclosure Memorandum, no election with respect to -13- Taxes will be made without the prior written consent of FNB, which consent will not be unreasonably withheld. (k) No Southwest Company has or has had a per- manent establishment in any foreign country, as defined in any applicable tax treaty or convention between the United States and such foreign country. 5.8 ASSETS. Except as disclosed in Section 5.8 of the Southwest Disclosure Memorandum, the Southwest Companies have good and marketable title, free and clear of all Liens, to all of their respective Assets. All tangible properties used in the businesses of the Southwest Companies are in good condi- tion, reasonable wear and tear excepted, and are usable in the ordinary course of business consistent with Southwest's past practices. All Assets which are material to Southwest's busi- ness on a consolidated basis, held under leases or subleases by any of the Southwest Companies, are held under valid Contracts enforceable in accordance with their respective terms (except as enforceability may be limited by applicable bankruptcy, in- solvency, reorganization, moratorium, or other Laws affecting the enforcement of creditors' rights generally and except that the availability of the equitable remedy of specific perfor- mance or injunctive relief is subject to the discretion of the court before which any proceedings may be brought), and each such Contract is in full force and effect. The Southwest Com- panies currently maintain insurance in amounts, scope, and cov- erage as disclosed in Section 5.8 of the Southwest Disclosure Memorandum. None of the Southwest Companies has received writ- ten notice from any insurance carrier that (i) such insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be substantially increased. Except as dis- closed in Section 5.8 of the Southwest Disclosure Memorandum, there are presently no claims pending under such policies of insurance and no notices have been given by any Southwest Com- pany under such policies. The Assets of the Southwest Compa- nies include all Assets required to operate the business of the Southwest Companies as presently conducted. 5.9 ENVIRONMENTAL MATTERS. (a) To the Knowledge of Southwest, except as disclosed in Section 5.9 of the Southwest Disclosure Memoran- dum, each Southwest Company, its Participation Facilities, and its Loan Properties are, and have been, in compliance with all Environmental Laws, except for violations which are not reason- ably likely to have, individually or in the aggregate, a Mate- rial Adverse Effect on Southwest. -14- (b) Except as disclosed in Section 5.9 of the Southwest Disclosure Memorandum, to the Knowledge of Southwest, there is no Litigation pending or threatened before any court, governmental agency, or authority or other forum in which any Southwest Company or any of its Loan Properties or Participa- tion Facilities (or any Southwest Company in respect of any such Loan Property or Participation Facility) has been or, with respect to threatened Litigation, may be named as a defendant or potentially responsible party (i) for alleged noncompliance (including by any predecessor) with any Environmental Law or (ii) relating to the release into the environment of any Haz- ardous Material, whether or not occurring at, on, under, or involving any of its Loan Properties or Participation Facili- ties, except for such Litigation pending or threatened that is not reasonably likely to have, individually or in the ag- gregate, a Material Adverse Effect on Southwest. (c) To the Knowledge of Southwest, except as disclosed in Section 5.9 of the Southwest Disclosure Memoran- dum, there is no reasonable basis for any Litigation of a type described above in subsection (b), except such as is not rea- sonably likely to have, individually or in the aggregate, a Material Adverse Effect on Southwest. (d) To the Knowledge of Southwest, except as disclosed in Section 5.9 of the Southwest Disclosure Memoran- dum, there have been no releases of Hazardous Material in, on, under, or affecting any Participation Facility or Loan Property of a Southwest Company, except such as are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Southwest. 5.10 COMPLIANCE WITH LAWS. Southwest is duly regis- tered as a bank holding company under the BHC Act. Each South- west Company has in effect all Permits necessary for it to own, lease, or operate its material Assets and to carry on its busi- ness as now conducted, except for those Permits the absence of which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Southwest, and there has occurred no Default under any such Permit, other than De- faults which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Southwest. None of the Southwest Companies: (a) is in violation of any Laws, Orders, or Permits applicable to its business or employees conducting its business, except for violations which are not reason- ably likely to have, individually or in the aggregate, a Material Adverse Effect on Southwest; and -15- (b) has received any notification or communica- tion from any agency or department of federal, state, or local government or any Regulatory Authority or the staff thereof (i) asserting that any Southwest Company is not in compliance with any of the Laws or Orders which such gov- ernmental authority or Regulatory Authority enforces, where such noncompliance is reasonably likely to have, individually or in the aggregate, a Material Adverse Ef- fect on Southwest, (ii) threatening to revoke any Permits, the revocation of which is reasonably likely to have, in- dividually or in the aggregate, a Material Adverse Effect on Southwest, or (iii) requiring any Southwest Company to enter into or consent to the issuance of a cease and de- sist order, formal agreement, directive, commitment, or memorandum of understanding, or to adopt any Board resolu- tion or similar undertaking, which restricts materially the conduct of its business, or in any manner relates to its capital adequacy, its credit or reserve policies, its management, or the payment of dividends. 5.11 LABOR RELATIONS. No Southwest Company is the subject of any Litigation asserting that it or any other South- west Company has committed an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state law) or seeking to compel it or any other Southwest Company to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving any Southwest Company, pending or threatened, or to the Knowledge of Southwest, is there any activity involving any Southwest Company's employees seeking to certify a collective bargaining unit or engaging in any other organization activity. 5.12 EMPLOYEE BENEFIT PLANS. (a) Southwest has disclosed in Section 5.12 of the Southwest Disclosure Memorandum, and has delivered or made available to FNB prior to the execution of this Agreement cop- ies in each case of, all pension, retirement, profit-sharing, deferred compensation, stock option, employee stock ownership, severance pay, vacation, bonus, or other incentive plan, all other written employee programs, arrangements, or agreements, all medical, vision, dental, or other health plans, all life insurance plans, and all other employee benefit plans or fringe benefit plans, including "employee benefit plans" (as that term is defined in Section 3(3) of ERISA), currently adopted, main- tained by, sponsored in whole or in part by, or contributed to by any Southwest Company or ERISA Affiliate (as defined below) thereof for the benefit of employees, retirees, dependents, spouses, directors, independent contractors, or other benefi- ciaries and under which employees, retirees, dependents, -16- spouses, directors, independent contractors, or other benefi- ciaries are eligible to participate (collectively, the "South- west Benefit Plans"). Any of the Southwest 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 "South- west ERISA Plan." Each Southwest ERISA Plan which is also a "defined benefit plan" (as defined in Section 4140) of the In- ternal Revenue Code) is referred to herein as a "Southwest Pen- sion Plan." No Southwest Pension Plan is or has been a multi- employer plan within the meaning of Section 3(37) of ERISA. (b) Except as disclosed in Section 5.12 of the Southwest Disclosure Memorandum, all Southwest Benefit Plans are in compliance with the applicable terms of ERISA, the In- ternal Revenue Code, and any other applicable Laws the breach or violation of which are reasonably likely to have, individu- ally or in the aggregate, a Material Adverse Effect on South- west, and each Southwest ERISA Plan which is intended to be qualified under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the Internal Revenue Service, and Southwest is not aware of any circum- stances likely to result in revocation of any such favorable determination letter. Except as disclosed in Section 5.12 of the Southwest Disclosure Memorandum, to the Knowledge of South- west, no Southwest Company has engaged in a transaction with respect to any Southwest Benefit Plan that, assuming the tax- able period of such transaction expired as of the date hereof, would subject any Southwest Company to a Tax imposed by either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA in amounts which are reasonably likely to have, individu- ally or in the aggregate, a Material Adverse Effect on South- west. (c) Except as disclosed in Section 5.12 of the Southwest Disclosure Memorandum, no Southwest Pension Plan has any "unfunded current liability" (as that term is defined in Section 302(d)(8)(A) of ERISA) and the fair market value of the assets of any such plan exceeds the plan's "benefit liabili- ties," as that term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial factors that would apply if the plan terminated in accordance with all applicable legal re- quirements. Except as disclosed in Section 5.12 of the South- west Disclosure Memorandum, since the date of the most recent actuarial valuation, there has been (i) no material change in the financial position of any Southwest Pension Plan, (ii) no change in the actuarial assumptions with respect to any South- west Pension Plan, and (iii) no increase in benefits under any Southwest Pension Plan as a result of plan amendments or changes in applicable Law which is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on -17- Southwest or materially adversely affect the funding status of any such plan. Neither any Southwest Pension Plan nor any "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any Southwest Company, or the single-employer plan of any entity which is considered one employer with Southwest under Section 4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of ERISA (whether or not waived) (an "ERISA Affili- ate") has an "accumulated funding deficiency" within the mean- ing of Section 412 of the Internal Revenue Code or Section 302 of ERISA, which is reasonably likely to have a Material Adverse Effect on Southwest. No Southwest Company has provided, or is required to provide, security to a Southwest Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to Sec- tion 401(a)(29) of the Internal Revenue Code. (d) Within the six-year period preceding the Effective Time, no Liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by any South- west Company with respect to any ongoing, frozen, or terminated single-employer plan or the single-employer plan of any ERISA Affiliate, which Liability is reasonably likely to have a Mate- rial Adverse Effect on Southwest. No Southwest Company has incurred any withdrawal Liability with respect to a multiem- ployer plan under Subtitle B of Title IV of ERISA (regardless of whether based on contributions of an ERISA Affiliate), which Liability is reasonably likely to have a Material Adverse Ef- fect on Southwest. No notice of a "reportable event," within the meaning of Section 4043 of ERISA for which the 30-day re- porting requirement has not been waived, has been required to be filed for any Southwest Pension Plan or by any ERISA Affili- ate within the 12-month period ending on the date hereof (e) Except as disclosed in Section 5.12 of the Southwest Disclosure Memorandum, no Southwest Company has any Liability for retiree health and life benefits under any of the Southwest Benefit Plans and there are no restrictions on the rights of such Southwest Company to amend or terminate any such plan without incurring any Liability thereunder, which Li- ability is reasonably likely to have a Material Adverse Effect on Southwest. (f) Except as disclosed in Section 5.12 of the Southwest Disclosure Memorandum, neither the execution and de- livery of this Agreement nor the consummation of the transac- tions contemplated hereby will (i) result in any payment (in- cluding severance, unemployment compensation, golden parachute, or otherwise) becoming due to any director or any employee of any Southwest Company from any Southwest Company under any Southwest Benefit Plan or otherwise, (ii) increase any benefits -18- otherwise payable under any Southwest Benefit Plan, or (iii) result in any acceleration of the time of payment or vesting of any such benefit, where such payment, increase, or acceleration is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Southwest. (g) The actuarial present values of all accrued deferred compensation entitlements (including entitlements un- der any executive compensation, supplemental retirement, or employment agreement) of employees and former employees of any Southwest Company and their respective beneficiaries, other than entitlements accrued pursuant to funded retirement plans subject to the provisions of Section 412 of the Internal Rev- enue Code or Section 302 of ERISA, have been fully reflected on the Southwest Financial Statements to the extent required by and in accordance with GAAP. 5.13 MATERIAL CONTRACTS. Except as disclosed in Section 5.13 of the Southwest Disclosure Memorandum, none of the Southwest Companies, nor any of their respective Assets, businesses, or operations, is a party to, or is bound or af- fected by, or receives benefits under, (i) any employment, sev- erance, termination, consulting, or retirement Contract provid- ing for aggregate payments to any Person in any calendar year in excess of $100,000, (ii) any Contract relating to the bor- rowing of money by any Southwest Company or the guarantee by any Southwest Company of any such obligation (other than Con- tracts evidencing deposit liabilities, purchases of federal funds, fully-secured repurchase agreements, and Federal Home Loan Bank advances of depository institution Subsidiaries, trade payables, and Contracts relating to borrowings or guaran- tees made in the ordinary course of business), and (iii) any other Contract or amendment thereto that would be required to be filed as an exhibit to a Form 10-KSB filed by Southwest with the SEC as of the date of this Agreement that has not been filed as an exhibit to Southwest's Form 10-KSB filed for the fiscal year ended December 31, 1994, or in another SEC Document and identified to FNB (together with all Contracts referred to in Sections 5.8 and 5.12(a) of this Agreement, the "Southwest Contracts"). With respect to each Southwest Contract and ex- cept as disclosed in Section 5.13 of the Southwest Disclosure Memorandum: (i) the Contract is in full force and effect; (ii) no Southwest Company is in Default thereunder, other than De- faults which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Southwest; (iii) no Southwest Company has repudiated or waived any material pro- vision of any such Contract; and (iv) no other party to any such Contract is, to the Knowledge of Southwest, in Default in any respect, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Material -19- Adverse Effect on Southwest, or has repudiated or waived any material provision thereunder. Except for Federal Home Loan Bank advances, all of the indebtedness of any Southwest Company for money borrowed is prepayable at any time by such Southwest Company without penalty or premium. 5.14 LEGAL PROCEEDINGS. Except as disclosed in Sec- tion 5.14 of the Southwest Disclosure Memorandum, there is no Litigation instituted or pending, or, to the Knowledge of Southwest, threatened (or unasserted but considered probable of assertion and which if asserted would have at least a reason- able probability of an unfavorable outcome) against any South- west Company, or against any Asset, employee benefit plan, in- terest, or right of any of them, that is reasonably likely to have, individually or in the aggregate, a Material Adverse Ef- fect on Southwest, nor are there any Orders of any Regulatory Authorities, other governmental authorities, or arbitrators outstanding against any Southwest Company, that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Southwest. Section 5.14 of the Southwest Disclosure Memorandum includes a summary report of all Litiga- tion as of the date of this Agreement to which any Southwest Company is a party and which names a Southwest Company as a defendant or cross-defendant and where the estimated maximum exposure to be $100,000 or more. 5.15 REPORTS. Since January 1, 1992, or the date of organization if later, each Southwest Company has timely filed all reports and statements, together with any amendments re- quired to be made with respect thereto, that it was required to file with any Regulatory Authorities (except, in the case of state securities authorities, failures to file which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Southwest). As of their respective dates, each of such reports and documents, including the finan- cial statements, exhibits, and schedules thereto, complied in all material respects with all applicable Laws. As of its re- spective date, each such report and document did not, in all material respects, 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 mis- leading. 5.16 STATEMENTS TRUE AND CORRECT. None of the in- formation supplied or to be supplied by any Southwest Company or any Affiliate thereof for inclusion in the Registration Statement to be filed by FNB with the SEC will, when the Regis- tration Statement becomes effective, be false or misleading -20- with respect to any material fact, or omit to state any mate- rial fact necessary to make the statements therein not mislead- ing. None of the information supplied or to be supplied by any Southwest Company or any Affiliate thereof for inclusion in the Proxy Statement to be mailed to Southwest's shareholders in connection with the Shareholders' Meeting, and any other docu- ments to be filed by a Southwest Company or any Affiliate thereof with the SEC or any other Regulatory Authority in con- nection with the transactions contemplated hereby, will, at the respective time such documents are filed, and with respect to the Proxy Statement, when first mailed to the shareholders of Southwest, be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or, in the case of the Proxy Statement or any amendment thereof or supplement thereto, at the time of the Shareholders' Meeting, be false or misleading with respect to any material fact, or omit to state any mate- rial fact necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the Shareholders' Meeting. All documents that any Southwest Company or any Affiliate thereof is responsible for filing with any Regulatory Authority in connection with the transactions contemplated hereby will comply as to form in all material re- spects with the provisions of applicable Law. 5.17 ACCOUNTING, TAX AND REGULATORY MATTERS. No Southwest Company or any Affiliate thereof has taken or agreed to take any action or has any Knowledge of any fact or circum- stance that is reasonably likely to (i) prevent the transac- tions contemplated hereby, including the Merger, from qualify- ing for pooling-of-interests accounting treatment or as a reor- ganization within the meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially impede or delay receipt of any Consents of Regulatory Authorities referred to in Section 9.1(b) of this Agreement or result in the imposition of a con- dition or restriction of the type referred to in the last sen- tence of such Section. 5.18 STATE TAKEOVER LAWS. Each Southwest Company has taken all necessary action to exempt the transactions con- templated by this Agreement from any applicable "moratorium," "control share," "fair price," "business combination," or other anti-takeover laws and regulations of the State of Florida (collectively, "Takeover Laws"). 5.19 CHARTER PROVISIONS. Each Southwest Company has taken all action so that the entering into of this Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement do not and will not result in -21- any super-majority voting requirement or the grant of any rights to any Person under the Articles of Incorporation, By- laws, or other governing instruments of any Southwest Company or restrict or impair the ability of FNB or any of its Subsid- iaries to vote, or otherwise to exercise the rights of a share- holder with respect to, shares of any Southwest Company that may be directly or indirectly acquired or controlled by it. 5.20 DERIVATIVES CONTRACTS. Except as disclosed in Section 5.20 of the Southwest Disclosure Memorandum, neither Southwest nor any of its Subsidiaries is a party to or has agreed to enter into an exchange-traded or over-the-counter swap, forward, future, option, cap, floor, or collar financial contract, or any other interest rate or foreign currency pro- tection contract not included on its balance sheet which is a financial derivative contract (including various combinations thereof) (each a "Derivatives Contract"), except for those De- rivatives Contracts set forth in Section 5.20 of the Southwest Disclosure Memorandum. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF FNB FNB hereby represents and warrants to Southwest as follows: 6.1 ORGANIZATION, STANDING, AND POWER. FNB is a corporation duly organized, validly existing, and in good standing under the Laws of the Commonwealth of Pennsylvania, and has the corporate power and authority to carry on its busi- ness as now conducted and to own, lease, and operate its mate- rial Assets. FNB is duly qualified or licensed to transact business as a foreign corporation in good standing in the States of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its busi- ness requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FNB. 6.2 AUTHORITY; NO BREACH BY AGREEMENT. (a) FNB has the corporate power and authority necessary to execute, deliver, and perform its obligations un- der this Agreement and to consummate the transactions contem- plated hereby. The execution, delivery, and performance of this Agreement and the consummation of the transactions con- templated herein, including the Merger, have been duly and val- idly authorized by all necessary corporate action in respect -22- thereof on the part of FNB. This Agreement represents a legal, valid, and binding obligation of FNB, enforceable against FNB in accordance with its terms (except in all cases as such en- forceability may be limited by applicable bankruptcy, insol- vency, reorganization, moratorium, or similar Laws affecting the enforcement of creditors' rights generally and except that the availability of the equitable remedy of specific perfor- mance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought). (b) Neither the execution and delivery of this Agreement by FNB, nor the consummation by FNB of the transac- tions contemplated hereby, nor compliance by FNB with any of the provisions hereof, will (i) conflict with or result in a breach of any provision of FNB's Articles of Incorporation or Bylaws, or (ii) constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any FNB Company under, any Contract or Permit of any FNB Company, where such Default or Lien, or any failure to obtain such Consent, is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FNB, or, (iii) subject to receipt of the requisite Consents referred to in Section 9.1(b) of this Agreement, violate any Law or Order applicable to any FNB Company or any of their re- spective material Assets. (c) Other than in connection or compliance with the provisions of the Securities Laws, applicable state corpo- rate and securities Laws, and rules of the Nasdaq, and other than Consents required from Regulatory Authorities, and other than notices to or filings with the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect to any employee benefit plans, or under the HSR Act, and other than Consents, filings, or notifications which, if not obtained or made, are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FNB, no notice to, fil- ing with, or Consent of, any public body or authority is neces- sary for the consummation by FNB of the Merger and the other transactions contemplated in this Agreement. 6.3 CAPITAL STOCK. The authorized capital stock of FNB consists of 20,000,000 shares of FNB Common Stock, of which 8,611,814 shares were issued and outstanding as of December 31, 1995 and (ii) 20,000,000 shares of FNB Preferred Stock, of which 451,638 shares were issued and outstanding as of December 31, 1995. All of the issued and outstanding shares of FNB Capital Stock are, and all of the shares of FNB Common Stock to be issued in exchange for shares of Southwest Common Stock upon consummation of the Merger, when issued in accordance with the terms of this Agreement, will be, duly and validly issued and -23- outstanding and fully paid and nonassessable under the PBCL. None of the outstanding shares of FNB Capital Stock has been, and none of the shares of FNB Common Stock to be issued in ex- change for shares of Southwest Common Stock upon consummation of the Merger will be, issued in violation of any preemptive rights of the current or past shareholders of FNB. 6.4 SEC FILINGS; FINANCIAL STATEMENTS. (a) FNB has filed and made available to South- west all forms, reports, and documents required to be filed by FNB with the SEC since December 31, 1992, other than registra- tion statements on Forms S-4 and S-8 (collectively, the "FNB SEC Reports"). The FNB SEC Reports (i) at the time filed, com- plied in all material respects with the applicable requirements of the 1933 Act and the 1934 Act, as the case may be, and (ii) did not at the time they were filed (or if amended or super- seded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a ma- terial fact or omit to state a material fact required to be stated in such FNB SEC Reports or necessary in order to make the statements in such FNB SEC Reports, in light of the cir- cumstances under which they were made, not misleading. (b) Each of the FNB Financial Statements (in- cluding, in each case, any related notes) contained in the FNB SEC Reports, including any FNB SEC Reports filed after the date of this Agreement until the Effective Time, complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared in accordance with GAAP applied on a consistent basis through- out the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC), and fairly presented the consolidated financial position of FNB and its Subsidiaries as at the respective dates and the consolidated results of its operations and cash flows for the periods indi- cated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjust- ments which were not or are not expected to be material in amount. 6.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1995, except as disclosed in the FNB Financial Statements delivered prior to the date of this Agreement, (i) there have been no events, changes or occurrences which have had, or are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FNB, and (ii) the FNB Companies have not taken any action, or failed to take any ac- tion, prior to the date of this Agreement, which action or -24- failure, if taken after the date of this Agreement, would rep- resent or result in a material breach or violation of any of the covenants and agreements of FNB provided in Article 7 of this Agreement. 6.6 TAX MATTERS. (a) All Tax Returns required to be filed by or on behalf of any of the FNB Companies have been timely filed or requests for extensions have been timely filed, granted, and have not expired for periods ended on or before December 31, 1995, and on or before the date of the most recent fiscal year end immediately preceding the Effective Time, except to the extent that all such failures to file, taken together, are not reasonably likely to have a Material Adverse Effect on FNB, and all Tax Returns filed are complete and accurate in all material respects. All Taxes shown on filed Tax Returns have been paid. There is no audit examination, deficiency, or refund Litigation with respect to any Taxes that is reasonably likely to result in a determination that would have, individually or in the ag- gregate, a Material Adverse Effect on FNB, except as reserved against in the FNB Financial Statements delivered prior to the date of this Agreement. All Taxes and other Liabilities due with respect to completed and settled examinations or concluded Litigation have been paid. (b) Adequate provision for any Taxes due or to become due for any of the FNB Companies for the period or pe- riods through and including the date of the respective FNB Fi- nancial Statements has been made and is reflected on such FNB Financial Statements. (c) Deferred Taxes of the FNB Companies have been adequately provided for in the FNB Financial Statements. 6.7 COMPLIANCE WITH LAWS. FNB is duly registered as a bank holding company under the BHC Act. Each FNB Company has in effect all Permits necessary for it to own, lease, or oper- ate its material Assets and to carry on its business as now conducted, except for those Permits the absence of which are not reasonably likely to have, individually or in the ag- gregate, a Material Adverse Effect on FNB, and there has oc- curred no Default under any such Permit, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FNB. No FNB Company: (a) is in violation of any Laws, Orders, or Permits applicable to its business or employees conducting -25- its business, except for violations which are not reason- ably likely to have, individually or in the aggregate, a Material Adverse Effect on FNB; and (b) has received any notification or communica- tion from any agency or department of federal, state, or local government or any Regulatory Authority or the staff thereof (i) asserting that any FNB Company is not in com- pliance with any of the Laws or Orders which such govern- mental authority or Regulatory Authority enforces, where such noncompliance is reasonably likely to have, individu- ally or in the aggregate, a Material Adverse Effect on FNB, (ii) threatening to revoke any Permits, the revoca- tion of which is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FNB, or (iii) requiring any FNB Company to enter into or consent to the issuance of a cease and desist order, formal agree- ment, directive, commitment, or memorandum of understand- ing, or to adopt any board resolution or similar undertak- ing, which restricts materially the conduct of its busi- ness, or in any manner relates to its capital adequacy, its credit or reserve policies, its management or the pay- ment of dividends. 6.8 LEGAL PROCEEDINGS. There is no Litigation in- stituted or pending, or, to the Knowledge of FNB, threatened (or unasserted but considered probable of assertion and which if asserted would have at least a reasonable probability of an unfavorable outcome) against any FNB Company, or against any Asset, interest, or right of any of them, that is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FNB, nor are there any Orders of any Regula- tory Authorities, other governmental authorities, or arbitra- tors outstanding against any FNB Company, that are reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FNB. 6.9 REPORTS. Since January 1, 1992, or the date of organization if later, each FNB Company has filed all reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with Regulatory Authorities (except, in the case of state securities authorities, failures to file which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FNB). As of their respective dates, each of such reports and documents, including the financial statements, ex- hibits, and schedules thereto, complied in all material re- spects with all applicable Laws. As of its respective date, each such report and document did not, in all material re- spects, contain any untrue statement of a material fact or omit -26- to state a material fact required to be stated therein or nec- essary to make the statements made therein, in light of the circumstances under which they were made, not misleading. 6.10 STATEMENTS TRUE AND CORRECT. None of the in- formation supplied or to be supplied by any FNB Company or any Affiliate thereof for inclusion in the Registration Statement to be filed by FNB with the SEC, will, when the Registration Statement becomes effective, be false or misleading with re- spect to any material fact, or omit to state any material fact necessary to make the statements therein not misleading. None of the information supplied or to be supplied by any FNB Com- pany or any Affiliate thereof for inclusion in the Proxy State- ment to be mailed to Southwest's shareholders in connection with the Shareholders' Meeting, and any other documents to be filed by any FNB Company or any Affiliate thereof with the SEC or any other Regulatory Authority in connection with the trans- actions contemplated hereby, will, at the respective time such documents are filed, and with respect to the Proxy Statement, when first mailed to the shareholders of Southwest, be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not mis- leading, or, in the case of the Proxy Statement or any amend- ment thereof or supplement thereto, at the time of the Share- holders' 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 Shareholders' Meeting. All documents that any FNB Company or any Affiliate thereof is responsible for filing with any Regulatory Authority in connec- tion with the transactions contemplated hereby will comply as to form in all material respects with the provisions of ap- plicable Law. 6.11 ACCOUNTING, TAX AND REGULATORY MATTERS. No FNB Company or any Affiliate thereof has taken or agreed to take any action or has any Knowledge of any fact or circumstance that is reasonably likely to (i) prevent the transactions con- templated hereby, including the Merger, from qualifying as a reorganization within the meaning of Section 368(a) of the In- ternal Revenue Code, or (ii) materially impede or delay receipt of any Consents of Regulatory Authorities referred to in Sec- tion 9.1(b) of this Agreement or result in the imposition of a condition or restriction of the type referred to in the last sentence of such Section. -27- 6.12 ENVIRONMENTAL MATTERS. (a) To the Knowledge of FNB, except as dis- closed in Section 6.12 of the FNB Disclosure Memorandum, each FNB Company, its Participation Facilities, and its Loan Proper- ties are, and have been, in compliance with all Environmental Laws, except for violations which are not reasonably likely to have, individually or in the aggregate, a Material Adverse Ef- fect on FNB. (b) Except as disclosed in Section 6.12 of the FNB Disclosure Memorandum, there is no Litigation pending, or, to the Knowledge of FNB, threatened before any court, govern- mental agency, or authority or other forum in which any FNB Company or any of its Loan Properties or Participation Facili- ties (or any FNB Company in respect of any such Loan Property or Participation Facility) has been or, with respect to threat- ened Litigation, may be named as a defendant or potentially responsible party (i) for alleged noncompliance (including by any predecessor) with any Environmental Law or (ii) relating to the release into the environment of any Hazardous Material, whether or not occurring at, on, under, or involving any of its Loan Properties or Participation Facilities, except for such Litigation pending or threatened that is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FNB. (c) To the Knowledge of FNB, except as dis- closed in Section 6.12 of the FNB Disclosure Memorandum, there is no reasonable basis for any Litigation of a type described above in subsection (b), except such as is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on FNB. (d) To the Knowledge of FNB, except as dis- closed in Section 6.12 of the FNB Disclosure Memorandum, there have been no releases of Hazardous Material in, on, under, or affecting any Participation Facility or Loan Property of a FNB Company, except such as are not reasonably likely to have, in- dividually or in the aggregate, a Material Adverse Effect on FNB. 6.13 DERIVATIVES CONTRACTS. Neither FNB nor any of its Subsidiaries is a party to or has agreed to enter into a Derivatives Contract, except for those Derivatives Contracts set forth in Section 6.13 of the FNB Disclosure Memorandum. -28- ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION 7.1 AFFIRMATIVE COVENANTS OF SOUTHWEST. Unless the prior written consent of FNB shall have been obtained, and ex- cept as otherwise expressly contemplated herein, Southwest shall and shall cause each of its Subsidiaries to (i) operate its business only in the usual, regular, and ordinary course, (ii) preserve intact its business organization and Assets and maintain its rights and franchises, (iii) use its reasonable efforts to maintain its current employee relationships, and (iv) take no action which would (a) adversely affect the abil- ity of any Party to obtain any Consents required for the trans- actions contemplated hereby without imposition of a condition or restriction of the type referred to in the last sentence of Section 9.1(b) of this Agreement, or (b) adversely affect the ability of any Party to perform its covenants and agreements under this Agreement. 7.2 NEGATIVE COVENANTS OF SOUTHWEST. From the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement, Southwest covenants and agrees that it will not do or agree or commit to do, or permit any of its Subsidiaries to do or agree or commit to do, any of the following without the prior written consent of the chief executive officer, president, chief financial officer, or any executive vice president of FNB: (a) amend the Articles of Incorporation, By- laws, or other governing instruments of any Southwest Com- pany or, except as expressly contemplated by this Agree- ment; or (b) incur any additional debt obligation or other obligation for borrowed money (other than indebted- ness of a Southwest Company to another Southwest Company) in excess of an aggregate of $100,000 (for the Southwest Companies on a consolidated basis) except in the ordinary course of the business of Southwest Subsidiaries consis- tent with past practices (which shall include, for South- west Subsidiaries that are depository institutions, cre- ation of deposit liabilities, purchases of federal funds, advances from the Federal Reserve Bank or Federal Home Loan Bank, and entry into repurchase agreements fully se- cured by U.S. government or agency securities), or impose, or suffer the imposition, on any Asset of any Southwest Company of any Lien or permit any such Lien to exist (other than in connection with deposits, repurchase agree- ments, bankers acceptances, "treasury tax and loan" ac- counts established in the ordinary course of business, the -29- satisfaction of legal requirements in the exercise of trust powers, and Liens in effect as of the date hereof that are disclosed in the Southwest Disclosure Memoran- dum); or (c) repurchase, redeem, or otherwise acquire or exchange (other than exchanges in the ordinary course un- der employee benefit plans), directly or indirectly, any shares, or any securities convertible into any shares, of the capital stock of any Southwest Company, or declare or pay any dividend or make any other distribution in respect of Southwest's capital stock; or (d) except for this Agreement, or pursuant to the Stock Option Agreement or pursuant to the exercise of stock options outstanding as of the date hereof and pursu- ant to the terms thereof in existence on the date hereof, or as disclosed in Section 7.2(d) of the Southwest Disclo- sure Memorandum, issue, sell, pledge, encumber, authorize the issuance of, enter into any Contract to issue, sell, pledge, encumber, or authorize the issuance of, or other- wise permit to become outstanding, any additional shares of Southwest Common Stock or any other capital stock of any Southwest Company, or any stock appreciation rights, or any option, warrant, conversion, or other right to ac- quire any such stock, or any security convertible into any such stock; or (e) adjust, split, combine, or reclassify any capital stock of any Southwest Company or issue or autho- rize the issuance of any other securities in respect of or in substitution for shares of Southwest Common Stock, or sell, lease, mortgage, or otherwise dispose of or other- wise encumber (x) any shares of capital stock of any Southwest Subsidiary (unless any such shares of stock are sold or otherwise transferred to another Southwest Com- pany) or (y) any Asset other than in the ordinary course of business for reasonable and adequate consideration; or (f) except for purchases of United States Trea- sury securities or United States Government agency securi- ties, which in either case have maturities of five years or less, purchase any securities or make any material in- vestment, either by purchase of stock or securities, con- tributions to capital, Asset transfers, or purchase of any Assets, in any Person other than a wholly owned Southwest Subsidiary, or otherwise acquire direct or indirect con- trol over any Person, other than in connection with (i) -30- foreclosures in the ordinary course of business, (ii) ac- quisitions of control by a depository institution Subsid- iary in its fiduciary capacity, or (iii) the creation of new wholly-owned Subsidiaries organized to conduct or con- tinue activities otherwise permitted by this Agreement; or (g) grant any increase in compensation or ben- efits to the employees or officers of any Southwest Com- pany, except in accordance with past practice disclosed in Section 7.2(g) of the Southwest Disclosure Memorandum or as required by Law; pay any severance or termination pay or any bonus other than pursuant to written policies or written Contracts in effect on the date of this Agreement or as otherwise disclosed in Section 7.2(g) of the South- west Disclosure Memorandum; enter into or amend any sever- ance agreements with officers of any Southwest Company; grant any material increase in fees or other increases in compensation or other benefits to directors of any South- west Company except in accordance with past practice dis- closed in Section 7.2(g) of the Southwest Disclosure Memo- randum; or voluntarily accelerate the vesting of any stock options or other stock-based compensation or employee ben- efits; or (h) enter into or amend any employment Contract between any Southwest Company and any Person (unless such amendment is required by Law) that the Southwest Company does not have the unconditional right to terminate without Liability (other than Liability for services already ren- dered), at any time on or after the Effective Time; or (i) except as disclosed in Section 7.2(i) of the Southwest Disclosure Memorandum, adopt any new em- ployee benefit plan of any Southwest Company or make any material change in or to any existing employee benefit plans of any Southwest Company other than any such change that is required by Law or that, in the opinion of coun- sel, is necessary or advisable to maintain the tax quali- fied status of any such plan; or (j) make any significant change in any Tax or accounting methods or systems of internal accounting con- trols, except as may be appropriate to conform to changes in Tax Laws or regulatory accounting requirements or GAAP; or (k) except as disclosed in Section 7.2(k) of the Southwest Disclosure Memorandum, commence any Litiga- tion other than in accordance with past practice or settle any Litigation involving any Liability of any Southwest -31- Company for material money damages or restrictions upon the operations of any Southwest Company; or (l) except in the ordinary course of business, modify, amend, or terminate any material Contract or waive, release, compromise, or assign any material rights or claims; or (m) except for transactions in the ordinary course of business consistent with past practice, make any investment in excess of $100,000 either by purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or assets of any other individual, corporation or other entity other than a wholly-owned Subsidiary thereof; or (n) sell, transfer, mortgage, encumber or oth- erwise dispose of any of its properties or assets to any individual, corporation or other entity other than a di- rect or indirect wholly owned Subsidiary, or cancel, re- lease or assign any indebtedness to any such Person or any claims held by any such Person, except in the ordinary course of business consistent with past practice or pursu- ant to contracts or agreements in force at the date of this Agreement; or (o) agree to, or make any commitment to, take any of the actions prohibited by this Section 7.2. 7.3 COVENANTS OF FNB. From the date of this Agree- ment until the earlier of the Effective Time or the termination of this Agreement, FNB covenants and agrees that it shall (i) continue to conduct its business and the business of its Sub- sidiaries in a manner designed in its reasonable judgment, to enhance the long-term value of the FNB Common Stock and the business prospects of the FNB Companies, and (ii) take no ac- tion which would (a) materially adversely affect the ability of any Party to obtain any Consents required for the transactions contemplated hereby without imposition of a condition or re- striction of the type referred to in the last sentence of Sec- tion 9.1(b) of this Agreement, or (b) materially adversely af- fect the ability of any Party to perform its covenants and agreements under this Agreement; provided, that the foregoing shall not prevent any FNB Company from discontinuing or dis- posing of any of its Assets or business if such action is, in the judgment of FNB, desirable in the conduct of the business of FNB and its Subsidiaries. FNB further covenants and agrees that it will not, without the prior written consent of the Chairman and Chief Executive Officer of Southwest, which con- sent shall not be unreasonably withheld, amend the Articles of -32- Incorporation or Bylaws of FNB, in each case in any manner ad- verse to the holders of Southwest Common Stock. 7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written notice promptly to the other Party upon becom- ing aware of the occurrence or impending occurrence of any event or circumstance relating to it or any of its Subsidiaries which (i) is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a material breach of any of its representations, warranties, or covenants contained herein, and to use its rea- sonable efforts to prevent or promptly to remedy the same. 7.5 REPORTS. Each Party and its Subsidiaries shall file all reports required to be filed by it with Regulatory Authorities between the date of this Agreement and the Effec- tive Time and shall deliver to the other Party copies of all such reports promptly after the same are filed. If financial statements are contained in any such reports filed with the SEC, such financial statements will fairly present the consoli- dated financial position of the entity filing such statements as of the dates indicated and the consolidated results of op- erations, changes in shareholders' equity, and cash flows for the periods then ended in accordance with GAAP (subject in the case of interim financial statements to normal recurring year- end adjustments that are not material). As of their respective dates, such reports filed with the SEC will comply in all mate- rial respects with the Securities Laws 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 in order to make the statements therein, in light of the circumstances un- der which they were made, not misleading. Any financial state- ments contained in any other reports to another Regulatory Au- thority shall be prepared in accordance with Laws applicable to such reports. ARTICLE 8 ADDITIONAL AGREEMENTS 8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHARE- HOLDER APPROVAL. As soon as practicable after execution of this Agreement, FNB shall file the Registration Statement with the SEC, and shall use its reasonable efforts to cause the Reg- istration Statement to become effective under the 1933 Act and take any action required to be taken under the applicable state blue sky or securities Laws in connection with the issuance of the shares of FNB Common Stock upon consummation of the Merger. Southwest shall furnish all information concerning it and the holders of its capital stock as FNB may reasonably request in -33- connection with such action. Southwest shall call a Sharehold- ers' Meeting, to be held on a date that is determined by the Parties to be a mutually desirable date, which date shall be after the Registration Statement is declared effective by the SEC, for the purpose of voting upon approval of this Agreement and such other related matters as it deems appropriate. In connection with the Shareholders' Meeting, (i) Southwest shall prepare and file with the SEC a Proxy Statement and mail such Proxy Statement to its shareholders, (ii) the Parties shall furnish to each other all information concerning them that they may reasonably request in connection with such Proxy Statement, (iii) the Board of Directors of Southwest shall recommend (sub- ject to compliance with their fiduciary duties as advised by counsel) to its shareholders the approval of this Agreement, and (iv) the Board of Directors and officers of Southwest shall (subject to compliance with their fiduciary duties as advised by counsel) use their reasonable efforts to obtain such share- holders' approval. 8.2 EXCHANGE LISTING. Southwest shall use its rea- sonable best efforts to list, prior to the record date for de- termining shareholders entitled to vote at the Shareholders' Meeting, for trading on the Nasdaq as national market securi- ties, the shares of Southwest Common Stock. 8.3 APPLICATIONS. FNB shall promptly prepare and file, and Southwest shall cooperate in the preparation and, where appropriate, filing of, applications with all Regulatory Authorities having jurisdiction over the transactions contem- plated by this Agreement seeking the requisite Consents neces- sary to consummate the transactions contemplated by this Agree- ment. 8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the conditions of this Agreement, FNB shall execute and file the Florida Certificate of Merger with the Secretary of State of the State of Florida in connection with the Clos- ing. 8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and conditions of this Agreement, each Party agrees to use, and to cause its Subsidiaries to use, its rea- sonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper, or advisable under applicable Laws to consummate and make effec- tive, as soon as practicable after the date of this Agreement, the transactions contemplated by this Agreement, including us- ing its reasonable efforts to lift or rescind any Order ad- versely affecting its ability to consummate the transactions contemplated herein and to cause to be satisfied the conditions -34- referred to in Article 9 of this Agreement; provided, that nothing herein shall preclude either Party from exercising its rights under this Agreement. Each Party shall use, and shall cause each of its Subsidiaries to use, its reasonable efforts to obtain all Consents necessary or desirable for the consumma- tion of the transactions contemplated by this Agreement. 8.6 INVESTIGATION AND CONFIDENTIALITY. (a) Prior to the Effective Time, each Party shall keep the other Party advised of all material developments relevant to its business and to consummation of the Merger and shall permit the other Party to make or cause to be made such investigation of the business and properties of it and its Sub- sidiaries and of their respective financial and legal condi- tions as the other Party reasonably requests, provided that such investigation shall be reasonably related to the transac- tions contemplated hereby and shall not interfere unnecessarily with normal operations. No investigation by a Party shall af- fect the representations and warranties of the other Party. (b) In addition to the Parties' respective ob- ligations under the Confidentiality Agreements, each Party shall, and shall cause its advisers and agents to, maintain the confidentiality of all confidential information furnished to it by the other Party concerning its and its Subsidiaries' busi- nesses, operations, and financial positions and shall not use such information for any purpose except in furtherance of the transactions contemplated by this Agreement. If this Agreement is terminated prior to the Effective Time, each Party shall promptly return or certify the destruction of all documents and copies thereof, and all work papers containing confidential information received from the other Party. (c) Each Party agrees to give the other Party notice as soon as practicable after any determination by it of any fact or occurrence relating to the other Party which it has discovered through the course of its investigation and which represents, or is reasonably likely to represent, either a ma- terial breach of any representation, warranty, covenant, or agreement of the other Party or which has had or is reasonably likely to have a Material Adverse Effect on the other Party. 8.7 PRESS RELEASES. Prior to the Effective Time, Southwest and FNB shall consult with each other as to the form and substance of any press release or other public disclosure materially related to this Agreement or any other transaction contemplated hereby; provided, that nothing in this Section 8.7 -35- shall be deemed to prohibit any Party from making any disclo- sure which its counsel deems necessary or advisable in order to satisfy such Party's disclosure obligations imposed by Law. 8.8 CERTAIN ACTIONS. Except with respect to this Agreement and the transactions contemplated hereby, no South- west Company nor any Affiliate thereof nor any Representatives thereof retained by any Southwest Company shall directly or indirectly solicit any Acquisition Proposal by any Person. Ex- cept to the extent necessary to comply with the fiduciary du- ties of Southwest's Board of Directors as advised by Smith, Gambrell & Russell or other outside counsel reasonably accept- able to FNB, no Southwest Company or any Affiliate or Represen- tative thereof shall furnish any nonpublic information that it is not legally obligated to furnish or negotiate with respect to, any Acquisition Proposal, but Southwest may communicate information about such an Acquisition Proposal to its share- holders if and to the extent that it is required to do so in order to comply with its legal obligations as advised by coun- sel. Southwest shall promptly notify FNB orally and in writing in the event that it receives any inquiry or proposal relating to any such transaction. Southwest shall (i) immediately cease and cause to be terminated any existing activities, discus- sions, or negotiations with any Persons conducted heretofore with respect to any of the foregoing, and (ii) direct and use its reasonable efforts to cause of all its Representatives not to engage in any of the foregoing. 8.9 ACCOUNTING AND TAX TREATMENT. Each of the Par- ties undertakes and agrees to use its reasonable efforts to cause the Merger, and to take no action which would cause the Merger not, to qualify for treatment as a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code for federal income tax purposes. Southwest undertakes and agrees to use its reasonable efforts to cause the Merger, and to take no action that would cause the Merger not, to qualify for pooling-of-interests accounting treatment. 8.10 STATE TAKEOVER LAWS. Each Southwest Company shall take all necessary steps to exempt the transactions con- templated by this Agreement from, or if necessary challenge the validity or applicability of, any applicable Takeover Laws. 8.11 CHARTER PROVISIONS. Each Southwest Company shall take all necessary action to ensure that the entering into of this Agreement and the consummation of the Merger and the other transactions contemplated hereby do not and will not result in any super-majority voting requirements or the grant of any rights to any Person under the Articles of Incorpora- tion, Bylaws, or other governing instruments of any Southwest -36- Company or restrict or impair the ability of FNB or any of its Subsidiaries to vote, or otherwise to exercise the rights of a shareholder with respect to, shares of any Southwest Company that may be directly or indirectly acquired or controlled by it. 8.12 AGREEMENT OF AFFILIATES. Southwest has dis- closed in Section 8.12 of the Southwest Disclosure Memorandum all Persons whom it reasonably believes are "affiliates" of Southwest for purposes of Rule 145 under the 1933 Act. South- west shall use its reasonable efforts to cause each such Person to deliver to FNB not later than 30 days prior to the Effective Time, a written agreement, substantially in the form of Exhibit 2, providing that such Person will not sell, pledge, transfer, or otherwise dispose of the shares of Southwest Common Stock held by such Person except as contemplated by such agreement or by this Agreement and will not sell, pledge, transfer, or oth- erwise dispose of the shares of FNB Common Stock to be received by such Person upon consummation of the Merger except in com- pliance with applicable provisions of the 1933 Act and the rules and regulations thereunder and until such time as finan- cial results covering at least 30 days of combined operations of FNB and Southwest have been published within the meaning of Section 201.01 of the SEC's Codification of Financial Reporting Policies. Shares of FNB Common Stock issued to such affiliates of Southwest in exchange for shares of Southwest Common Stock shall not be transferable until such time as financial results covering at least 30 days of combined operations of FNB and Southwest have been published within the meaning of Section 201.01 of the SEC's Codification of Financial Reporting Poli- cies, regardless of whether each such affiliate has provided the written agreement referred to in this Section 8.12 (and FNB shall be entitled to place restrictive legends upon certifi- cates for shares of FNB Common Stock issued to affiliates of Southwest pursuant to this Agreement to enforce the provisions of this Section 8.12). FNB shall not be required to maintain the effectiveness of the Registration Statement under the 1933 Act for the purposes of resale of FNB Common Stock by such af- filiates. 8.13 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Time, FNB shall provide generally to officers and employees of the Southwest Companies employee benefits under employee benefit plans (other than stock option or other plans involving the potential issuance of FNB Common Stock), on terms and conditions which when taken as a whole are no less favor- able than those currently provided by Southwest or those cur- rently provided by the FNB Companies to their similarly situ- ated officers and employees; provided, that, for a period of 12 months after the Effective Time, FNB shall provide generally to -37- officers and employees of Southwest Companies severance ben- efits in accordance with the policies of Southwest as disclosed in Section 8.13 of the Southwest Disclosure Memorandum. For purposes of participation and vesting (but not benefit accrual under any employee benefit plans of FNB and its subsidiaries other than the Southwest Benefit Plans) under such employee benefit plans, the service of the employees of the Southwest Companies prior to the Effective Time shall be treated as ser- vice with a FNB Company participating in such employee benefit plans. FNB shall, and shall cause its Subsidiaries to, honor in accordance with their terms all employment, severance, con- sulting, and other compensation Contracts disclosed in Section 8.13 of the Southwest Disclosure Memorandum between any South- west Company and any current or former director, officer, or employee thereof, and all provisions for vested benefits or other vested amounts earned or accrued through the Effective Time under the Southwest Benefit Plans; provided, however, that all such Contracts shall have been amended prior to the signing of this Agreement to provide that the Merger and the other transactions contemplated by the Agreement shall not constitute a "change of control" or otherwise give rise to any rights of acceleration, payment or other special rights under any such Contracts. 8.14 INDEMNIFICATION. (a) FNB shall indemnify, defend, and hold harm- less the present and former directors, officers, employees, and agents of the Southwest Companies (each, an "Indemnified Party") against all Liabilities arising out of actions or omis- sions occurring at or prior to the Effective Time (including the transactions contemplated by this Agreement) to the full extent permitted under Florida Law and by Southwest's Articles of Incorporation and Bylaws as in effect on the date hereof, including provisions relating to advances of expenses incurred in the defense of any Litigation. Without limiting the forego- ing, in any case in which approval by FNB is required to ef- fectuate any indemnification, FNB shall direct, at the election of the Indemnified Party, that the determination of any such approval shall be made by independent counsel mutually agreed upon between FNB and the Indemnified Party. (b) If FNB or any of its successors or assigns shall consolidate with or merge into any other Person and shall not be the continuing or surviving Person of such consolidation or merger or shall transfer all or substantially all of its assets to any Person, then and in each case, proper provision shall be made so that the successors and assigns of FNB shall assume the obligations set forth in this Section 8.14. -38- (c) The provisions of this Section 8.14 are intended to be for the benefit of and shall be enforceable by, each Indemnified Party, his or her heirs and representatives. ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE 9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of each Party to perform this Agreement and consummate the Merger and the other transactions contem- plated hereby are subject to the satisfaction of the following conditions, unless waived by both Parties pursuant to Section 11.6 of this Agreement: (a) SHAREHOLDER APPROVAL. The shareholders of Southwest shall have approved this Agreement, and the consumma- tion of the transactions contemplated hereby, including the Merger, as and to the extent required by Law. (b) REGULATORY APPROVALS. All Consents of, filings and registrations with, and notifications to, all Regu- latory Authorities required for consummation of the Merger shall have been obtained or made and shall be in full force and effect and all waiting periods required by Law shall have ex- pired. No Consent obtained from any Regulatory Authority which is necessary to consummate the transactions contemplated hereby shall be conditioned or restricted in a manner (including re- quirements relating to the raising of additional capital or the disposition of Assets) which in the reasonable judgment of the Board of Directors of either Party would so materially ad- versely impact the economic or business benefits of the trans- actions contemplated by this Agreement that, had such condition or requirement been known, such Party would not, in its reason- able judgment, have entered into this Agreement. (c) CONSENTS AND APPROVALS. Each Party shall have obtained any and all Consents required for consummation of the Merger (other than those referred to in Section 9.1(b) of this Agreement or listed in Section 9.1(c) of the Southwest Disclosure Memorandum) or for the preventing of any Default under any Contract or Permit of such Party which, if not ob- tained or made, is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on such Party. (d) LEGAL PROCEEDINGS. No court or governmen- tal or regulatory authority of competent jurisdiction shall have enacted, issued, promulgated, enforced, or entered any Law or Order (whether temporary, preliminary, or permanent) or taken any other action which prohibits, restricts, or makes -39- illegal consummation of the transactions contemplated by this Agreement. (e) REGISTRATION STATEMENT. The Registration Statement shall be effective under the 1933 Act, no stop orders suspending the effectiveness of the Registration Statement shall have been issued, no action, suit, proceeding, or inves- tigation by the SEC to suspend the effectiveness thereof shall have been initiated and be continuing, and all necessary ap- provals under state securities Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the shares of FNB Common Stock issuable pursuant to the Merger shall have been received. (f) POOLING OF INTERESTS. Ernst & Young LLP, FNB's independent public accountants, shall have issued a let- ter dated as of the Effective Time, to Southwest and FNB, re- spectively, to the effect that the Merger shall be accounted for as a pooling-of-interests under GAAP. (g) TAX MATTERS. Each Party shall have re- ceived a written opinion or opinions from counsel and in a form reasonably satisfactory to such Parties (the "Tax Opinion"), to the effect that (i) the Merger will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code and (ii) the exchange in the Merger of Southwest Common Stock for FNB Common Stock will not give rise to gain or loss to the shareholders of Southwest with respect to such exchange (except to the extent of any cash received). In rendering such Tax Opinion, such counsel shall be entitled to rely upon repre- sentations of officers of Southwest and FNB reasonably satis- factory in form and substance to such counsel. 9.2 CONDITIONS TO OBLIGATIONS OF FNB. The obliga- tions of FNB to perform this Agreement and consummate the Merger and the other transactions contemplated hereby are sub- ject to the satisfaction of the following conditions, unless waived by FNB pursuant to Section 11.6(a) of this Agreement: (a) REPRESENTATIONS AND WARRANTIES. For pur- poses of this Section 9.2(a), the accuracy of the repre- sentations and warranties of Southwest set forth in this Agreement shall be assessed as of the date of this Agree- ment and as of the Effective Time with the same effect as though all such representations and warranties had been made on and as of the Effective Time (provided that repre- sentations and warranties which are confined to a speci- fied date shall speak only as of such date). The repre- sentations and warranties of Southwest set forth in Sec- tion 5.3 of this Agreement shall be true and correct (ex- cept for inaccuracies which are de minimus in amount). -40- The representations and warranties of Southwest set forth in Sections 5.17, 5.18, 5.19, and 5.20 of this Agreement shall be true and correct in all material respects. There shall not exist inaccuracies in the representations and warranties of Southwest set forth in this Agreement (in- cluding the representations and warranties set forth in Sections 5.3, 5.17, 5.18, 5.19, and 5.20) such that the aggregate effect of such inaccuracies has, or is reason- ably likely to have, a Material Adverse Effect on South- west; provided that, for purposes of this sentence only, those representations and warranties which are qualified by references to Immaterial" or "Material Adverse Effect" shall be deemed not to include such qualifications. (b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the agreements and covenants of Southwest to be performed and complied with pursuant to this Agree- ment and the other agreements contemplated hereby prior to the Effective Time shall have been duly performed and com- plied with in all material respects. (c) CERTIFICATES. Southwest shall have deliv- ered to FNB (i) a certificate, dated as of the Effective Time and signed on its behalf by its chief executive of- ficer and its chief financial officer, to the effect that the conditions of its obligations set forth in Section 9.2(a) and 9.2(b) of this Agreement have been satisfied, and (ii) certified copies of resolutions duly adopted by Southwest's Board of Directors and shareholders evidencing the taking of all corporate action necessary to authorize the execution, delivery, and performance of this Agree- ment, and the consummation of the transactions contem- plated hereby, all in such reasonable detail as FNB and its counsel shall request. (d) AFFILIATES AGREEMENTS. FNB shall have re- ceived from each affiliate of Southwest the affiliates letter referred to in Section 8.12 of this Agreement, to the extent necessary to assure in the reasonable judgment of FNB that the transactions contemplated hereby will qualify for pooling-of-interests accounting treatment. (e) CUMULATIVE EARNINGS. As of the close of the most recent calendar quarter (or if the Effective Time shall occur within 20 days following the close of a calen- dar quarter, then as of the next preceding calendar quar- ter) cumulative earnings reported by Southwest since De- cember 31, 1995 shall be greater than or equal to the amount calculated by multiplying (a) $500,000 by (b) the number of full calendar quarters which have passed since -41- December 31, 1995 and for which earnings have been re- ported as of such date. As used in this Section "re- ported" means reported on Southwest's financial statements prepared in accordance with GAAP applied on a basis con- sistent with Southwest's financial statements for the years ended December 31, 1995 and 1994, as included in Southwest's reports to the Securities and Exchange Commis- sion on Forms 10-K-SB or Southwest's annual reports to shareholders subject to any subsequent adjustments re- quired to be reported whether or not such adjustments have, as yet, been reported with the following adjust- ments, if any, net of related income tax savings and costs, which were reflected in net income for the relevant period(s) added back into or deducted from net income for the applicable period: (i) investment banking expenses, outside legal and accounting fees, or other costs (includ- ing severance and extraordinary restructuring costs) and expenses associated with or resulting from the Merger, (ii) gains or losses on sales of assets outside of the ordinary course of business, (iii) any expense related to the exercise of options or the lapses of restrictions on restricted stock; and (iv) any other expenses which are incurred in connection with the transactions contemplated by this Agreement upon which FNB and Southwest shall mutu- ally agree. 9.3 CONDITIONS TO OBLIGATIONS OF SOUTHWEST. The obligations of Southwest to perform this Agreement and consum- mate the Merger and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by Southwest pursuant to Section 11.6(b) of this Agreement: (a) REPRESENTATIONS AND WARRANTIES. For pur- poses of this Section 9.3(a), the accuracy of the repre- sentations and warranties of FNB set forth in this Agree- ment shall be assessed as of the date of this Agreement and as of the Effective Time with the same effect as though all such representations and warranties had been made on and as of the Effective Time (provided that repre- sentations and warranties which are confined to a speci- fied date shall speak only as of such date). The repre- sentations and warranties of FNB set forth in Section 6.3 of this Agreement shall be true and correct (except for inaccuracies which are de minimus in amount). The repre- sentations and warranties of FNB set forth in Section 6.11 of this Agreement shall be true and correct in all mate- rial respects. There shall not exist inaccuracies in the representations and warranties of FNB set forth in this Agreement (including the representations and warranties -42- set forth in Sections 6.3 and 6.11) such that the ag- gregate effect of such inaccuracies has, or is reasonably likely to have, a Material Adverse Effect on FNB; provided that, for purposes of this sentence only, those represen- tations and warranties which are qualified by references to "material" or "Material Adverse Effect" shall be deemed not to include such qualifications. (b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the agreements and covenants of FNB to be performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Ef- fective Time shall have been duly performed and complied with in all material respects. (c) CERTIFICATES. FNB shall have delivered to Southwest (i) a certificate, dated as of the Effective Time and signed on its behalf by its chief executive of- ficer and its chief financial officer, to the effect that the conditions of its obligations set forth in Section 9.3(a) and 9.3(b) of this Agreement have been satisfied, and (ii) certified copies of resolutions duly adopted by FNB's Board of Directors evidencing the taking of all cor- porate action necessary to authorize the execution, deliv- ery, and performance of this Agreement, and the consumma- tion of the transactions contemplated hereby, all in such reasonable detail as Southwest and its counsel shall re- quest. (d) FAIRNESS OPINION. Southwest shall have re- ceived from The Robinson-Humphrey Company, Inc. a letter, dated not more than five business days prior to the date of the Proxy Statement, to the effect that, in the opinion of such firm, the Exchange Ratio is fair, from a financial point of view, to the holders of Southwest Common Stock. ARTICLE 10 TERMINATION 10.1 TERMINATION. Notwithstanding any other provi- sion of this Agreement, and notwithstanding the approval of this Agreement by the shareholders of Southwest, this Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time: (a) By mutual consent of the Board of Directors of FNB and the Board of Directors of Southwest; or (b) By the Board of Directors of either Party (provided that the terminating Party is not then in breach -43- of any representation or warranty contained in this Agree- ment under the applicable standard set forth in Section 9.2(a) of this Agreement in the case of Southwest and Sec- tion 9.3(a) in the case of FNB or in material breach of any covenant or other agreement contained in this Agree- ment) in the event of an inaccuracy of any representation or warranty of the other Party contained in this Agreement which cannot be or has not been cured within 30 days after the giving of written notice to the breaching Party of such inaccuracy and which inaccuracy would provide the terminating Party the ability to refuse to consummate the Merger under the applicable standard set forth in Section 9.2(a) of this Agreement in the case of Southwest and Sec- tion 9.3(a) of this Agreement in the case of FNB; or (c) By the Board of Directors of either Party in the event of a material breach by the other Party of any covenant or agreement contained in this Agreement which cannot be or has not been cured within 30 days after the giving of written notice to the breaching Party of such breach; or (d) By the Board of Directors of either Party in the event (i) any Consent of any Regulatory Authority required for consummation of the Merger and the other transactions contemplated hereby shall have been denied by final nonappealable action of such authority or if any action taken by such authority is not appealed within the time limit for appeal, or (ii) the shareholders of South- west fail to vote their approval of this Agreement and the transactions contemplated hereby as required by the FBCA at the Shareholders' Meeting where the transactions were presented to such shareholders for approval and voted upon; or (e) By the Board of Directors of either Party in the event that the Merger shall not have been consum- mated by July 31, 1997, if the failure to consummate the transactions contemplated hereby on or before such date is not caused by any breach of this Agreement by the Party electing to terminate pursuant to this Section 10.1(e); or (f) By the Board of Directors of either Party (provided that the terminating Party is not then in breach of any representation or warranty contained in this Agree- ment under the applicable standard set forth in Section 9.2(a) of this Agreement in the case of Southwest and Sec- tion 9.3(a) in the case of FNB or in material breach of any covenant or other agreement contained in this Agree- ment) in the event that any of the conditions precedent to -44- the obligations of such Party to consummate the Merger cannot be satisfied or fulfilled by the date specified in Section 10.1(e) of this Agreement; or (g) By Southwest, if its Board of Directors determines by a vote of a majority of the members of its entire Board of Directors, at any time during the ten-day period commencing two days after the Determination Date, if the Designated Price on the Determination Date of shares of FNB Common Stock shall be less than $19.00; sub- ject, however, to the following four sentences. If South- west refuses to consummate the Merger pursuant to this Section 10.1(g), it shall give prompt written notice thereof to FNB; provided, that such notice of election to terminate may be withdrawn at any time within the afore- mentioned ten-day period. During the five-day period com- mencing with its receipt of such notice, FNB shall have the option, subject to Southwest's written agreement, to elect to increase the Exchange Ratio to equal the quotient obtained by dividing (1) the product of $19.00 and the Exchange Ratio (as then in effect) by (2) the Designated Price. If FNB makes an election contemplated by the pre- ceding sentence, within such five-day period, it shall give prompt written notice to Southwest of such election and the revised Exchange Ratio, whereupon, provided that Southwest agrees to permit such an election by executing a written acceptance thereof, no termination shall occur pursuant to this Section 10.1(g) and this Agreement shall remain in effect in accordance with its terms (except as the Exchange Ratio shall have been so modified), and any references in this Agreement to "Exchange Ratio" shall thereafter be deemed to refer to the Exchange Ratio as adjusted pursuant to this Section 10.1(g). 10.1 EFFECT OF TERMINATION. In the event of the termination and abandonment of this Agreement pursuant to Sec- tion 10.1 of this Agreement, this Agreement shall become void and have no effect, except that (i) the provisions of this Sec- tion 10.2 and Article 11 and Section 8.6(b) of this Agreement shall survive any such termination and abandonment, and (ii) a termination pursuant to Sections 10.1(b), 10.1(c), or 10.1(f) of this Agreement shall not relieve the breaching Party from Liability for an uncured willful breach of a representation, warranty, covenant, or agreement giving rise to such termina- tion; provided, further, that in the event of any termination of this Agreement following the occurrence of an Initial Trig- gering Event (as defined in the Stock Option Agreement), FNB shall be entitled to a cash payment from Southwest in an amount equal to $1 million upon the occurrence of any Subsequent Trig- gering Event (as defined in the Stock Option Agreement) within -45- twelve months following the date of such termination (or such longer period as shall exist under the Stock Option Agreement until the occurrence of an Exercise Termination Date (as de- fined in the Stock Option Agreement)). In the event this Agreement is terminated as a result of FNB's failure to satisfy any of its representations, warranties or covenants set forth herein, FNB shall reimburse Southwest for its reasonable out- of-pocket expenses relating to the Merger in an amount not to exceed $250,000. 10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective representations and warranties of the Parties shall not survive the Effective Time. All agreements of the Parties to this Agreement which by their terms are to be per- formed following the Effective Time shall survive the Effective Time until performed in accordance with their terms. ARTICLE 11 MISCELLANEOUS 11.1 DEFINITIONS. (a) Except as otherwise provided herein, the capitalized terms set forth below shall have the following meanings: "1933 ACT" shall mean the Securities Act of 1933, as amended. "1934 ACT" shall mean the Securities Exchange Act of 1934, as amended. "ACQUISITION PROPOSAL" with respect to a Party shall mean any tender offer or exchange offer or any pro- posal for a merger, acquisition of all of the stock or assets of, or other business combination involving such Party or any of its Subsidiaries or the acquisition of a substantial equity interest in, or a substantial portion of the assets of, such Party or any of its Subsidiaries. "AFFILIATE" of a Person shall mean: (i) any other Person directly, or indirectly through one or more intermediaries, controlling, controlled by or under common control with such Person; (ii) any officer, director, partner, employer, or direct or indirect beneficial owner of any 10% or greater equity or voting interest of such Person; or (iii) any other Person for which a Person de- scribed in clause (ii) acts in any such capacity. -46- "AGREEMENT" shall mean this Agreement and Plan of Merger, including the Exhibits delivered pursuant hereto and incorporated herein by reference. "ASSETS" of a Person shall mean all of the as- sets, properties, businesses, and rights of such Person of every kind, nature, character, and description, whether real, personal, or mixed, tangible or intangible, accrued or contingent, or otherwise relating to or utilized in such Person's business, directly or indirectly, in whole or in part, whether or not carried on the books and records of such Person, and whether or not owned in the name of such Person or any Affiliate of such Person and wherever located. "BHC ACT" shall mean the Federal Bank Holding Company Act of 1956, as amended. "CONFIDENTIALITY AGREEMENTS" shall mean those certain Confidentiality Agreements, between Southwest and FNB entered into in connection with the discussions relat- ing to the Merger. "CONSENT" shall mean any consent, approval, au- thorization, clearance, exemption, waiver, or similar af- firmation by any Person pursuant to any Contract, Law, Order, or Permit. "CONTRACT" shall mean any written or oral agree- ment, arrangement, authorization, commitment, contract, indenture, instrument, lease, obligation, plan, practice, restriction, understanding, or undertaking of any kind or character, or other document to which any Person is a party or that is binding on any Person or its capital stock, Assets, or business. "DEFAULT" shall mean (i) any breach or violation of or default under any Contract, Order, or Permit, (ii) any occurrence of any event that with the passage of time or the giving of notice or both would constitute a breach or violation of or default under any Contract, Order, or Permit, or (iii) any occurrence of any event that with or without the passage of time or the giving of notice would give rise to a right to terminate or revoke, change the current terms of, or renegotiate, or to accelerate, in- crease, or impose any Liability under, any Contract, Or- der, or Permit, where, in any such event, such Default is reasonably likely to have, individually or in the ag- gregate, a Material Adverse Effect on a Party. -47- "DERIVATIVES CONTRACT" shall have the meaning set forth in Section 5.20 hereof. "DESIGNATED PRICE" shall mean the average of the mid-point of the closing high bid and low asked prices of FNB Common Stock in the over-the-counter market, as re- ported by Nasdaq or such other trading system or exchange upon which the FNB Common Stock shall then be traded for the twenty consecutive full trading days in which such shares are traded ending at the close of trading on the Determination Date. "DETERMINATION DATE" shall mean the day prior to the date on which the Consent of the Board of Governors of the Federal Reserve System is received. "EFFECTIVE TIME" shall have the meaning set forth in Section 1.3 hereof. "ENVIRONMENTAL LAWS" shall mean all Laws relat- ing to pollution or protection of human health or the en- vironment (including ambient air, surface water, ground water, land surface, or subsurface strata) and which are administered, interpreted, or enforced by the United States Environmental Protection Agency and state and local agencies with jurisdiction over, and including common law in respect of, pollution or protection of the environment, including the Comprehensive Environmental Response Compen- sation and Liability Act, as amended, 42 U.S.C. 9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq., and other Laws relating to emissions, discharges, releases, or threatened releases of any Hazardous Material, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of any Hazardous Material. "ERISA" shall mean the Employee Retirement In- come Security Act of 1974, as amended. "ERISA AFFILIATE" shall have the meaning set forth in Section 5.12(c) hereof. "EXCHANGE AGENT" shall have the meaning set forth in Section 4.1 hereof. "EXCHANGE RATIO" shall have the meaning set forth in Section 3.1(c) hereof. -48- "EXHIBITS" 1 and 2 shall mean the Exhibits so marked, copies of which are attached to this Agreement. Such Exhibits are hereby incorporated by reference herein and made a part hereof, and may be referred to in this Agreement and any other related instrument or document without being attached hereto. "FNB" shall have the meaning set forth in the first paragraph hereof. "FNB CAPITAL STOCK" shall mean, collectively, the FNB Common Stock, the FNB Preferred Stock, and any other class or series of capital stock of FNB. "FNB COMMON STOCK" shall mean the $2 par value common stock of FNB. "FNB COMPANIES" shall mean, collectively, FNB and all FNB Subsidiaries. "FNB DISCLOSURE MEMORANDUM" shall mean the writ- ten information entitled "FNB Corporation Disclosure Memo- randum" delivered prior to the date of this Agreement to Southwest describing in reasonable detail the matters con- tained therein and, with respect to each disclosure made therein, specifically referencing each Section of this Agreement under which such disclosure is being made. "FNB FINANCIAL STATEMENTS" shall mean (i) the consolidated statements of condition (including related notes and schedules, if any) of FNB as of September 30, 1995, and as of December 31, 1994 and 1993, and the re- lated statements of income, changes in shareholders' eq- uity, and cash flows (including related notes and sched- ules, if any) for the six months ended September 30, 1995, and for each of the three years ended December 31, 1994, 1993, and 1992, as filed by FNB in SEC Documents, and (ii) the consolidated statements of condition of FNB (including related notes and schedules, if any) and related state- ments of income, changes in shareholders' equity, and cash flows (including related notes and schedules, if any) in- cluded in SEC Documents filed with respect to periods ended subsequent to September 30, 1995. "FNB PREFERRED STOCK" shall mean the $10 par value preferred stock of FNB. "FNB SEC REPORTS" shall have the meaning set forth in Section 6.4(a) hereof. -49- "FNB SUBSIDIARIES" shall mean the Subsidiaries of FNB, which shall include any corporation, bank, savings association, or other organization acquired as a Subsid- iary of FNB in the future and owned by FNB at the Effec- tive Time. "FBCA" shall mean the Florida Business Corpora- tion Act. "FLORIDA CERTIFICATE OF MERGER" shall mean the Certificate of Merger to be executed by FNB and filed with the Secretary of State of the State of Florida relating to the Merger as contemplated by Section 1.1 of this Agree- ment. "GAAP" shall mean generally accepted accounting principles, consistently applied during the periods in- volved. "HAZARDOUS MATERIAL" shall mean (i) any hazard- ous substance, hazardous material, hazardous waste, regu- lated substance, or toxic substance (as those terms are defined by any applicable Environmental Laws) and (ii) any chemicals, pollutants, contaminants, petroleum, petroleum products, or oil (and specifically shall include asbestos requiring abatement, removal, or encapsulation pursuant to the requirements of governmental authorities and any poly- chlorinated biphenyls). "INDEMNIFIED PARTY" shall have the meaning set forth in Section 8.14 hereof. "HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title II of the Hart-Scott-Rodino Anti- trust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regu- lations promulgated thereunder. "KNOWLEDGE" as used with respect to a Person (including references to such Person being aware of a par- ticular matter) shall mean the personal knowledge of the chairman, president, chief financial officer, chief ac- counting officer, chief credit officer, general counsel, any assistant or deputy general counsel, or any senior or executive vice president of such Person and the knowledge of any such persons obtained or which would have been ob- tained from a reasonable investigation. -50- "LAW" shall mean any code, law, ordinance, regu- lation, reporting or licensing requirement, rule, or stat- ute applicable to a Person or its Assets, Liabilities, or business, including those promulgated, interpreted, or enforced by any Regulatory Authority. "LIABILITY" shall mean any direct or indirect, primary or secondary, liability, indebtedness, obligation, penalty, cost, or expense (including costs of investiga- tion, collection, and defense), claim, deficiency, guar- anty, or endorsement of or by any Person (other than en- dorsements of notes, bills, checks, and drafts presented for collection or deposit in the ordinary course of busi- ness) of any type, whether accrued, absolute or contin- gent, liquidated or unliquidated, matured or unmatured, or otherwise. "LIEN" shall mean any conditional sale agree- ment, default of title, easement, encroachment, encum- brance, hypothecation, infringement, lien, mortgage, pledge, reservation, restriction, security interest, title retention, or other security arrangement, or any adverse right or interest, charge, or claim of any nature whatso- ever of, on, or with respect to any property or property interest, other than (i) Liens for current property Taxes not yet due and payable, and (ii) for depository institu- tion Subsidiaries of a Party, pledges to secure deposits, and other Liens incurred in the ordinary course of the banking business. "LITIGATION" shall mean any action, arbitration, cause of action, claim, complaint, criminal prosecution, demand letter, governmental or other examination or inves- tigation, hearing, inquiry, administrative or other pro- ceeding, or notice (written or oral) by any Person alleg- ing potential Liability or requesting information relating to or affecting a Party, its business, its Assets (includ- ing Contracts related to it), or the transactions contem- plated by this Agreement, but shall not include regular, periodic examinations of depository institutions and their Affiliates by Regulatory Authorities. "LOAN PROPERTY" shall mean any property owned, leased, or operated by the Party in question or by any of its Subsidiaries or in which such Party or Subsidiary holds a security or other interest (including an interest in a fiduciary capacity), and, where required by the con- text, includes the owner or operator of such property, but only with respect to such property. -51- "MATERIAL" for purposes of this Agreement shall be determined in light of the facts and circumstances of the matter in question; provided that any specific mone- tary amount stated in this Agreement shall determine mate- riality in that instance. "MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change, or occurrence which, individually or together with any other event, change, or occurrence, has a material adverse impact on (i) the financial position, business, or results of operations of such Party and its Subsidiaries, taken as a whole, or (ii) the ability of such Party to perform its obligations under this Agreement or to consummate the Merger or the other transactions con- templated by this Agreement, provided that "Material Ad- verse Effect" shall not be deemed to include the impact of (a) changes in banking and similar Laws of general ap- plicability or interpretations thereof by courts or gov- ernmental authorities, (b) changes in GAAP or regulatory accounting principles generally applicable to banks and their holding companies, (c) actions and omissions of a Party (or any of its Subsidiaries) taken with the prior informed consent of the other Party in contemplation of the transactions contemplated hereby, (d) circumstances affecting regional bank holding companies generally, and (e) the Merger and compliance with the provisions of this Agreement on the operating performance of the Parties. "MERGER" shall have the meaning set forth in Section 1.1 hereof. "MERGER SUB" shall have the meaning set forth in the first paragraph hereof. "NASDAQ" shall mean the Nasdaq Stock Market. "NASD" shall mean the National Association of Securities Dealers, Inc. "NYSE" shall mean the New York Stock Exchange, Inc. "ORDER" shall mean any administrative decision or award, decree, injunction, judgment, order, quasi- judicial decision or award, ruling, or writ of any fed- eral, state, local, or foreign or other court, arbitrator, mediator, tribunal, administrative agency, or Regulatory Authority. -52- "PARTICIPATION FACILITY" shall mean any facility or property in which the Party in question or any of its Subsidiaries participates in the management and, where required by the context, said term means the owner or op- erator of such facility or property, but only with respect to such facility or property. "PARTY" shall mean either Southwest or FNB, and "Parties" shall mean both Southwest and FNB. "PBCL" shall mean the Pennsylvania Business Cor- poration Law. "PERMIT" shall mean any federal, state, local, and foreign governmental approval, authorization, certifi- cate, easement, filing, franchise, license, notice, per- mit, or right to which any Person is a party or that is or may be binding upon or inure to the benefit of any Person or its securities, Assets, or business. "PERSON" shall mean a natural person or any le- gal, commercial, or governmental entity, such as, but not limited to, a corporation, general partnership, joint ven- ture, limited partnership, limited liability company, trust, business association, group acting in concert, or any person acting in a representative capacity. "PROXY STATEMENT" shall mean the proxy statement used by Southwest to solicit the approval of its share- holders of the transactions contemplated by this Agree- ment, which shall include the prospectus of FNB relating to the issuance of the FNB Common Stock to holders of Southwest Common Stock. "REGISTRATION STATEMENT" shall mean the Regis- tration Statement on Form S-4, or other appropriate form, including any pre-effective or post-effective amendments or supplements thereto, filed with the SEC by FNB under the 1933 Act with respect to the shares of FNB Common Stock to be issued to the shareholders of Southwest in connection with the transactions contemplated by this Agreement. "REGULATORY AUTHORITIES" shall mean, collec- tively, the Federal Trade Commission, the United States Department of Justice, the Board of the Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, all state regulatory agencies having jurisdiction over the -53- Parties and their respective Subsidiaries, the NASD, and the SEC. "REPRESENTATIVE" shall mean any investment banker, financial advisor, attorney, accountant, consult- ant or other representative of a Person. "RIGHTS" shall mean all arrangements, calls, commitments, Contracts, options, rights to subscribe to, scrip, understandings, warrants, or other binding obliga- tions of any character whatsoever relating to, or securi- ties or rights convertible into or exchangeable for, shares of the capital stock of a Person or by which a Per- son is or may be bound to issue additional shares of its capital stock or other Rights. "SEC" shall mean the Securities and Exchange Commission. "SEC DOCUMENTS" shall mean all forms, proxy statements, registration statements, reports, schedules, and other documents filed, or required to be filed, by a Party or any of its Subsidiaries with any Regulatory Au- thority pursuant to the Securities Laws. "SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules and regu- lations of any Regulatory Authority promulgated there- under. "SHAREHOLDERS' MEETING" shall mean the meeting of the shareholders of Southwest to be held pursuant to Section 8.1 of this Agreement, including any adjournment or adjournments thereof. "SOUTHWEST" shall have the meaning set forth in the first paragraph hereof. "SOUTHWEST BENEFITS PLANS" shall have the mean- ing set forth in Section 5.12(a) hereof. "SOUTHWEST COMMON STOCK" shall mean the $0.10 par value common stock of Southwest. "SOUTHWEST COMPANIES" shall mean, collectively, Southwest and all Southwest Subsidiaries. -54- "SOUTHWEST CONTRACT" shall have the meaning set forth in Section 5.13. "SOUTHWEST DISCLOSURE MEMORANDUM" shall mean the written information entitled "Southwest Corporation Dis- closure Memorandum" delivered prior to the date of this Agreement to FNB describing in reasonable detail the mat- ters contained therein and, with respect to each disclo- sure made therein, specifically referencing each Section of this Agreement under which such disclosure is being made. Information disclosed with respect to one Section shall not be deemed to be disclosed for purposes of any other Section not specifically referenced with respect thereto. "SOUTHWEST ERISA PLAN" shall have the meaning set forth in Section 5.12(a) hereof. "SOUTHWEST FINANCIAL STATEMENTS" shall mean (i) the consolidated balance sheets (including related notes and schedules, if any) of Southwest as of September 30, 1995, and as of December 31, 1994 and 1993, and the re- lated statements of income, changes in shareholders' eq- uity, and cash flows (including related notes and sched- ules, if any) for the six months ended September 30, 1995, and for each of the three fiscal years ended December 31, 1994, 1993, and 1992, as filed by Southwest in SEC Docu- ments, and (ii) the consolidated balance sheets of South- west (including related notes and schedules, if any) and related statements of income, changes in shareholders' equity, and cash flows (including related notes and sched- ules, if any) included in SEC Documents filed with respect to periods ended subsequent to September 30, 1995. "SOUTHWEST PENSION PLAN" shall have the meaning set forth in Section 5.12(a) hereof. "SOUTHWEST STOCK PLANS" shall mean the existing stock option and other stock-based compensation plans and warrant instruments of Southwest set forth in Section 3.5 of the Southwest Disclosure Memorandum. "SOUTHWEST OPTIONS" shall have the meaning set forth in Section 3.5(a) hereof. "SOUTHWEST SEC REPORTS" shall have the meaning set forth in Section 5.5(a) hereof. "SOUTHWEST SUBSIDIARIES" shall mean the Subsid- iaries of Southwest, which shall include the Southwest -55- Subsidiaries described in Section 5.4 of this Agreement and any corporation, bank, savings association, or other organization acquired as a Subsidiary of Southwest in the future and owned by Southwest at the Effective Time. "STOCK OPTION AGREEMENT" shall have the meaning set forth in the Preamble hereof. "SUBSIDIARIES" shall mean all those corpora- tions, banks, associations, or other entities of which the entity in question owns or controls 50% or more of the outstanding equity securities either directly or through an unbroken chain of entities as to each of which 50% or more of the outstanding equity securities is owned di- rectly or indirectly by its parent; provided, there shall not be included any such entity acquired through foreclo- sure or any such entity the equity securities of which are owned or controlled in a fiduciary capacity. "SURVIVING CORPORATION" shall mean Southwest as the surviving corporation resulting from the Merger. "TAKEOVER LAWS" shall have the meaning set forth in Section 5.18 hereof. "TAX" OR "TAXES" shall mean all federal, state, local, and foreign taxes, charges, fees, levies, imposts, duties, or other assessments, including income, gross re- ceipts, excise, employment, sales, use, transfer, license, payroll, franchise, severance, stamp, occupation, windfall profits, environmental, federal highway use, commercial rent, customs duties, capital stock, paid-up capital, profits, withholding, Social Security, single business and unemployment, disability, real property, personal prop- erty, registration, ad valorem, value added, alternative or add-on minimum, estimated, or other tax or governmental fee of any kind whatsoever, imposed or required to be withheld by the United States or any state, local, foreign government or subdivision or agency thereof, including any interest, penalties or additions thereto. "TAX OPINION" shall have the meaning set forth in Section 9.1(g) hereof. "TAXABLE PERIOD" shall mean any period pre- scribed by any governmental authority, including the United States or any state, local, foreign government or subdivision or agency thereof for which a Tax Return is required to be filed or Tax is required to be paid. -56- "TAX RETURN" shall mean any report, return, in- formation return, or other information required to be sup- plied to a taxing authority in connection with Taxes, in- cluding any return of an affiliated or combined or unitary group that includes a Party or its Subsidiaries. (b) Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singu- lar. Whenever the words "include," "includes," or "including" are used in this Agreement, they shall be deemed followed by the words "without limitation." 11.2 EXPENSES. (a) Except as otherwise provided in this Sec- tion 11.2, each of FNB and Southwest shall bear and pay all direct costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, in- cluding filing, registration, and application fees, printing fees, and fees and expenses of its own financial or other con- sultants, investment bankers, accountants, and counsel, except that each of FNB and Southwest shall bear and pay one-half of the printing costs incurred in connection with the printing of the Registration Statement and the Proxy Statement. (b) Nothing contained in this Section 11.2 shall constitute or shall be deemed to constitute liquidated damages for the willful breach by a Party of the terms of this Agreement or otherwise limit the rights of the nonbreaching Party. 11.3 BROKERS AND FINDERS. Except for The Robinson- Humphrey Company, Inc. as to Southwest and except for McCon- nell, Budd & Downes, Inc. as to FNB, each of the Parties repre- sents and warrants that neither it nor any of its officers, directors, employees, or Affiliates has employed any broker or finder or incurred any Liability for any financial advisory fees, investment bankers' fees, brokerage fees, commissions, or finders' fees in connection with this Agreement or the transac- tions contemplated hereby. In the event of a claim by any bro- ker or finder based upon his or its representing or being re- tained by or allegedly representing or being retained by South- west or FNB, each of Southwest and FNB, as the case may be, agrees to indemnify and hold the other Party harmless of and from any Liability in respect of any such claim. -57- 11.4 ENTIRE AGREEMENT. Except as otherwise ex- pressly provided herein, this Agreement (including the docu- ments and instruments referred to herein) constitutes the en- tire agreement between the Parties with respect to the trans- actions contemplated hereunder and supersedes all prior ar- rangements or understandings with respect thereto, written or oral (except for the Confidentiality Agreements). Nothing in this Agreement expressed or implied, is intended to confer upon any Person, other than the Parties or their respective succes- sors, any rights, remedies, obligations, or liabilities under or by reason of this Agreement, other than as provided in Sec- tions 8.14 of this Agreement. 11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be amended by a subsequent writing signed by each of the Parties upon the approval of the Boards of Direc- tors of each of the Parties, whether before or after share- holder approval of this Agreement has been obtained; provided, that after any such approval by the holders of Southwest Common Stock, there shall be made no amendment that reduces or modi- fies in any material respect the consideration to be received by holders of Southwest Common Stock without the further ap- proval of such shareholders. 11.6 WAIVERS. (a) Prior to or at the Effective Time, FNB, acting through its Board of Directors, chief executive officer, president or other authorized officer, shall have the right to waive any Default in the performance of any term of this Agree- ment by Southwest, to waive or extend the time for the compli- ance or fulfillment by Southwest of any and all of its obliga- tions under this Agreement, and to waive any or all of the con- ditions precedent to the obligations of FNB under this Agree- ment, except any condition which, if not satisfied, would re- sult in the violation of any Law. No such waiver shall be ef- fective unless in writing signed by a duly authorized officer of FNB. (b) Prior to or at the Effective Time, South- west, acting through its Board of Directors, chief executive officer, president or other authorized officer, shall have the right to waive any Default in the performance of any term of this Agreement by FNB, to waive or extend the time for the com- pliance or fulfillment by FNB of any and all of its obligations under this Agreement, and to waive any or all of the conditions precedent to the obligations of Southwest under this Agreement, except any condition which, if not satisfied, would result in the violation of any Law. No such waiver shall be effective -58- unless in writing signed by a duly authorized officer of South- west. (c) The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect the right of such Party at a later time to enforce the same or any other provision of this Agreement. No waiver of any condition or of the breach of any term contained in this Agreement in one or more instances shall be deemed to be or construed as a further or continuing waiver of such con- dition or breach or a waiver of any other condition or of the breach of any other term of this Agreement. 11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this Agreement nor any of the rights, inter- ests, or obligations hereunder shall be assigned by any Party hereto (whether by operation of Law or otherwise) without the prior written consent of the other Party. Subject to the pre- ceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by the Parties and their respective successors and assigns. 11.8 NOTICES. All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, or by cou- rier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided here- under), and shall be deemed to have been delivered as of the date so delivered: Southwest: 900 Goodlette Road North Naples, Florida 33940 Telecopy Number: 813-435-7658 Attention: Chairman and Chief Executive Officer Copy to Counsel: Smith, Gambrell & Russell 3343 Peachtree Road, NE Suite 1800 Atlanta, Georgia 30326 Telecopy Number: 404-264-2658 Attention: Robert Schwartz FNB: Hermitage Square -59- Hermitage, PA 16148 Telecopy Number: 412-983-3515 Attention: Chairman and Chief Executive Officer Copy to Counsel: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Telecopy Number: (212) 403-2000 Attention: Craig M. Wasserman 11.9 GOVERNING LAW. This Agreement shall be gov- erned by and construed in accordance with the Laws of the Com- monwealth of Pennsylvania, without regard to any applicable conflicts of Laws, except to the extent that the Laws of the State of Florida relate to the consummation of the Merger. 11.10 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 11.11 CAPTIONS. The captions contained in this Agreement are for reference purposes only and are not part of this Agreement. 11.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or re- solved against any party, whether under any rule of construc- tion or otherwise. No Party to this Agreement shall be consid- ered the draftsman. The parties acknowledge and agree that this Agreement has been reviewed, negotiated, and accepted by all Parties and their attorneys and shall be construed and in- terpreted according to the ordinary meaning of the words used so as fairly to accomplish the purposes and intentions of all parties hereto. 11.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement was not performed in ac- cordance with its specific terms or was otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdic- tion, this being in addition to any other remedy to which they are entitled at law or in equity. -60- 11.14 SEVERABILITY. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other juris- diction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed on its behalf and its corporate seal to be hereunto affixed and attested by officers thereunto as of the day and year first above written. F.N.B. CORPORATION By: /s/ Peter Mortensen Name: Peter Mortensen Title: Chairman of the Board and President SOUTHWEST BANKS, INC. By: /s/ Gary L. Tice Name: Gary L. Tice Title: Chairman of the Board, President, and Chief Executive Officer LAMBDA CORPORATION By: /s/ Peter Mortensen Name: Peter Mortensen Title: President -61- EX-2 3 EXHIBIT 2 EXHIBIT 2 STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT, dated February 2, 1996, be- tween F.N.B. Corporation, a Pennsylvania corporation ("Grantee"), and Southwest Banks, Inc., a Florida corporation ("Issuer"). W I T N E S S E T H: WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement"), which agreement has been executed by the parties hereto prior to this Agreement; and WHEREAS, as a condition and inducement to Grantee's pursuit of the transactions contemplated by the Merger Agree- ment and in consideration therefor, Issuer has agreed to grant Grantee the Option (as hereinafter defined): NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein and in the Merger Agreement, the parties hereto agree as follows: 1. (a) Issuer hereby grants to Grantee an uncondi- tional, irrevocable option (the "Option") to purchase, subject to the terms hereof, up to 727,163 fully paid and nonassessable shares of the common stock, $0.10 par value, of Issuer ("Common Stock"), at a price per share equal to $15 (as adjusted as set forth herein, the "Option Price"); provided, that in no event shall the number of shares for which this Option is exercisable exceed 19.9% of the issued and outstanding shares of Common Stock. The number of shares of Common Stock that may be received upon the exercise of the Option and the Option Price are subject to adjustment as herein set forth. (b) In the event that any additional shares of Com- mon Stock are issued or otherwise become outstanding after the date of this Agreement (other than pursuant to this Agreement), the number of shares of Common Stock subject to the Option shall be increased so that, after such issuance, it equals 19.9% of the number of shares of Common Stock then issued and outstanding without giving effect to any shares subject or is- sued pursuant to the Option. Nothing contained in this Section l(b) or elsewhere in this Agreement shall be deemed to autho- rize Issuer or Grantee to breach any provision of the Merger Agreement. 2. (a) The Holder (as hereinafter defined) may ex- ercise the Option, notwithstanding the provisions of the Confi- dentiality Agreements (as defined in the Merger Agreement) in A-1 whole or part, if, but only if, both an Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined) shall have occurred prior to the occurrence of an Exercise Termination Event (as hereinafter de- fined). Each of the following shall be an Exercise Termination Event: (i) the Effective Time (as defined in the Merger Agree- ment) of the Merger; (ii) termination of the Merger Agreement in accordance with the provisions thereof if such termination occurs prior to the occurrence of an Initial Triggering Event; or (iii) the passage of 12 months (or such longer period as provided in Section 10) after termination of the Merger Agree- ment if such termination follows the occurrence of an Initial Triggering Event. The term "Holder" shall mean the holder or holders of the Option. The rights set forth in Sections 7 and 9 shall terminate when the right to exercise the Option termi- nates (other than as a result of a complete exercise of the Option) as set forth herein. (b) The term "Initial Triggering Event" shall mean any of the following events or transactions occurring after the date hereof: (i) Issuer or any of its Subsidiaries (as herein- after defined) (each an "Issuer Subsidiary"), without hav- ing received Grantee's prior written consent, shall have entered into an agreement to engage in an Acquisition Transaction (as hereinafter defined) with any person (the term "person" for purposes of this Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (the "1934 Act"), and the rules and regulations thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee Sub- sidiary") or the Board of Directors of Issuer shall have recommended that the shareholders of Issuer approve or accept any Acquisition Transaction other than as contem- plated by the Merger Agreement or this Agreement. For purposes of this Agreement, (a) "Acquisition Transaction" shall mean (x) a merger or consolidation, or any similar transaction, involving Issuer or any Significant Subsid- iary (as defined in Rule 1-02 of Regulation S-X promul- gated by the Securities and Exchange Commission (the "SEC")) of Issuer, (y) a purchase, lease or other acquisi- tion of all or substantially all of the assets or deposits of Issuer or any Significant Subsidiary of Issuer, or (z) a purchase or other acquisition (including by way of merg- er, consolidation, share exchange or otherwise) of securi- ties representing 15% or more of the voting power of Is- suer or any Significant Subsidiary of Issuer, and (b) "Subsidiary" shall have the meaning set forth in Rule 12b-2 under the 1934 Act; A-2 (ii) Any person other than Grantee, any Grantee Sub- sidiary or any Issuer Subsidiary acting in a fiduciary capacity shall have acquired beneficial ownership or the right to acquire beneficial ownership of 15% or more of the outstanding shares of Common Stock (the term "benefi- cial ownership" for purposes of this Agreement having the meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and regulations thereunder); (iii) The shareholders of the Issuer shall not have approved the transactions contemplated by the Merger Agreement at the meeting held for that purpose or any ad- justment thereof, or such meeting shall not have been held or shall have been canceled prior to termination of the Merger Agreement, in either case, after Issuer's Board of Directors shall have withdrawn or modified (or publicly announced its intention to withdraw or modify or interest in withdrawing or modifying) its recommendation that the shareholders of Issuer approve the transactions contem- plated by the Merger Agreement, or Issuer or any Issuer Subsidiary, without having received Grantee's prior writ- ten consent, shall have authorized, recommended, proposed (or publicly announced its intention to authorize, recom- mend or propose or interest in authorizing, recommending or proposing) an agreement to engage in an Acquisition Transaction, with any person other than Grantee or a Grantee Subsidiary; (iv) Any person other than Grantee or any Grantee Subsidiary shall have made a bona fide proposal to Issuer or its shareholders to engage in an Acquisition Transac- tion; (v) Issuer shall have willfully breached any cov- enant or obligation contained in the Merger Agreement in anticipation of engaging in an Acquisition Transaction, and such breach would entitle Grantee to terminate the Merger Agreement; or (vi) Any person other than Grantee or any Grantee Subsidiary, other than in connection with a transaction to which Grantee has given its prior written consent, shall have filed an application or notice with the Federal Re- serve Board or other federal or state bank regulatory au- thority, which application or notice has been accepted for processing, for approval to engage in an Acquisition Transaction. A-3 (c) The term "Subsequent Triggering Event" shall mean any of the following events or transactions occurring af- ter the date hereof: (i) The acquisition by any person of beneficial own- ership of 25% or more of the then outstanding Common Stock; or (ii) The occurrence of the Initial Triggering Event described in clause (i) of subsection (b) of this Section 2, except that the percentage referred to in clause (z) shall be 25%. (d) Issuer shall notify Grantee promptly in writing of the occurrence of any Initial Triggering Event or Subsequent Triggering Event (together, a "Triggering Event"), it being understood that the giving of such notice by Issuer shall not be a condition to the right of the Holder to exercise the Op- tion. (e) In the event the Holder is entitled to and wishes to exercise the Option, it shall send to Issuer a writ- ten notice prior to an Exercise Termination Event (the date of which being herein referred to as the "Notice Date") specifying (i) the total number of shares it will purchase pursuant to such exercise and (ii) a place and date not earlier than three business days nor later than 10 business days from the Notice Date for the closing of such purchase (the "Closing Date"); provided that if prior notification to or approval of the Fed- eral Reserve Board or any other regulatory agency is required in connection with such purchase, the Holder shall promptly file the required notice or application for approval, shall promptly notify the Issuer of such filing, and shall expedi- tiously process the same and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which any required notification periods have expired or been terminated or such approvals have been obtained and any requisite waiting period or periods shall have passed. Any exercise of the Option shall be deemed to occur on the Notice Date relating thereto. (f) At the closing referred to in subsection (e) of this Section 2, the Holder shall pay to Issuer the aggregate purchase price for the shares of Common Stock purchased pursu- ant to the exercise of the Option in immediately available funds by wire transfer to a bank account designated by Issuer, provided that failure or refusal of Issuer to designate such a bank account shall not preclude the Holder from exercising the Option. A-4 (g) At such closing, simultaneously with the deliv- ery of immediately available funds as provided in subsection (f) of this Section 2, Issuer shall deliver to the Holder a certificate or certificates representing the number of shares of Common Stock purchased by the Holder and, if the Option should be exercised in part only, a new Option evidencing the rights of the Holder thereof to purchase the balance of the shares purchasable thereunder. (h) Certificates for Common Stock delivered at a closing hereunder may be endorsed with a restrictive legend that shall read substantially as follows: "The transfer of the shares represented by this certificate is subject to certain pro- visions of an agreement between the reg- istered holder hereof and Issuer and to resale restrictions arising under the Secu- rities Act of 1933, as amended. A copy of such agreement is on file at the principal office of Issuer and will be provided to the holder hereof without charge upon re- ceipt by Issuer of a written request there- for." It is understood and agreed that: (1) the reference to the re- sale restrictions of the Securities Act of 1933 (the "1933 Act") in the above legend shall be removed by delivery of sub- stitute certificate(s) without such reference if the Holder shall have delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel, in form and sub- stance satisfactory to Issuer, to the effect that such legend is not required for purposes of the 1933 Act; (ii) the refer- ence to the provisions of this Agreement in the above legend shall be removed by delivery of substitute certificate(s) with- out such reference if the shares have been sold or transferred in compliance with the provisions of this Agreement and under circumstances that do not require the retention of such refer- ence; and (iii) the legend shall be removed in its entirety if the conditions in the proceeding clauses (i) and (ii) are both satisfied. In addition, such certificates shall bear any other legend as may be required by law. (i) Upon the giving by the Holder to Issuer of the written notice of exercise of the Option provided for under subsection (e) of this Section 2 and the tender of the appli- cable purchase price in immediately available funds the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of Issuer shall then be closed or that A-5 certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. Issuer shall pay all expenses, and any and all United States federal, state and lo- cal taxes and other charges that may be payable in connection with the preparation, issue and delivery of stock certificates under this Section 2 in the name of the Holder or its assignee, transferee or designee. 3. Issuer agrees: (i) that it shall at all times main- tain, free from preemptive rights, sufficient authorized but unissued or treasury shares of Common Stock so that the Option may be exercised without additional authorization of Common Stock after giving effect to all other options, warrants, con- vertible securities and other rights to purchase Common Stock; (ii) that it will not, by charter amendment or through reorga- nization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the ob- servance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by Issuer; (iii) promptly to take all action as may from time to time be required (including (x) complying with all premerger notifica- tion, reporting and waiting period requirements specified in 15 U.S.C. Section 18a and regulations promulgated thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as amended, or any state or other federal banking law, prior ap- proval of or notice to the Federal Reserve Board or to any state or other federal regulatory authority is necessary before the Option may be exercised, cooperating fully with the Holder in preparing such applications or notices and providing such information to the Federal Reserve Board or such state or other federal regulatory authority as they may require) in order to permit the Holder to exercise the Option and Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all action provided herein to protect the rights of the Holder against dilution. 4. This Agreement (and the Option granted hereby) are exchangeable, without expense, at the option of the Holder, upon presentation and surrender of this Agreement at the prin- cipal office of Issuer, for other Agreements providing for Op- tions of different denominations entitling the holder thereof to purchase, on the same terms and subject to the same condi- tions as are set forth herein, in the aggregate the same number of shares of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein include any Agreements and related Options for which this Agreement (and the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, de- struction or mutilation of this Agreement, and (in the case of A-6 loss, theft or destruction) of reasonably satisfactory indemni- fication, and upon surrender and cancellation of this Agree- ment, if mutilated, Issuer will execute and deliver a new Agreement of like tenor and date. 5. The number of shares of Common Stock purchasable upon the exercise of the Option shall be subject to adjustment from time to time as provided in this Section 5. (a) In the event of any change in Common Stock by reason of stock dividends, splitups, mergers, recapital- izations, combinations, subdivisions, conversions, ex- changes of shares or the like, the type and number of shares of Common Stock purchasable upon exercise hereof shall be appropriately adjusted and proper provision shall be made so that, in the event that any additional shares of Common Stock are to be issued or otherwise become out- standing as a result of any such change (other than pur- suant to an exercise of the Option), the number of shares of Common Stock that remain subject to the Option shall be increased so that, after such issuance and together with shares of Common Stock previously issued pursuant to the exercise of the Option (as adjusted on account of any of the foregoing changes in the Common Stock), it equals 19.9% of the number of shares of Common Stock then issued and outstanding. (b) Whenever the number of shares of Common Stock purchasable upon exercise hereof is adjusted as provided in this Section 5, the Option Price shall be adjusted by multiplying the Option Price by a fraction, the numerator of which shall be equal to the number of shares of Common Stock purchasable prior to the adjustment and the denomi- nator of which shall be equal to the number of shares of Common Stock purchasable after the adjustment. 6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to an Exercise Termination Event, Issuer shall, at the request of Grantee delivered prior to an Exercise Termination Event (or such later period as provided in Section 10) (whether on its own behalf or on behalf of any subsequent holder of this Option (or part thereof) or any of the shares of Common Stock issued pursuant hereto), promptly prepare, file and keep current a registration statement under the 1933 Act covering any shares issued and issuable pursuant to this Option and shall use its best efforts to cause such registration statement to become effective and remain current in order to permit the sale or other disposition of any shares of Common Stock issued upon total or partial exercise of this Option ("Option Shares") in accordance with any plan of disposition A-7 requested by Grantee. Issuer will use its best efforts to cause such registration statement first to become effective and then to remain effective for such period not in excess of 120 days from the day such registration statement first becomes effective or such shorter time as may be reasonably necessary to effect such sales or other dispositions. Grantee shall have the right to demand two such registrations. The Issuer shall bear the costs of such registrations (including, but not lim- ited to, attorneys' fees, printing costs and filing fees). The foregoing notwithstanding, if, at the time of any request by Grantee for registration of Option Shares as provided above, Issuer is in registration with respect to an underwritten pub- lic offering of shares of Common Stock, and if in the good faith judgment of the managing underwriter or managing under- writers, or, if none, the sole underwriter or underwriters, of such offering the inclusion of the Option Shares would inter- fere with the successful marketing of the shares of Common Stock offered by Issuer, the number of Option Shares otherwise to be covered in the registration statement contemplated hereby may be reduced; provided, however, that after any such required reduction the number of Option Shares to be included in such offering for the account of the Holder shall constitute at least 25% of the total number of shares to be sold by the Hold- er and Issuer in the aggregate; and provided further, however, that if such reduction occurs, then the Issuer shall file a registration statement for the balance as promptly as practical thereafter as to which no reduction pursuant to this Section 6 shall be permitted or occur and the Holder shall thereafter be entitled to one additional registration. Each such Holder shall provide all information reasonably requested by Issuer for inclusion in any registration statement to be filed here- under. If requested by any such Holder in connection with such registration, Issuer shall become a party to any underwriting agreement relating to the sale of such shares, but only to the extent of obligating itself in respect of representations, war- ranties, indemnities and other agreements customarily included in such underwriting agreements for Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer agrees to send a copy thereof to any other person known to Issuer to be entitled to registration rights under this Section 6, in each case by promptly mailing the same, postage prepaid, to the ad- dress of record of the persons entitled to receive such copies. 7. (a) Upon the occurrence of a Repurchase Event (as hereinafter defined) that occurs prior to an Exercise Ter- mination Event, (i) at the request of the Holder, delivered prior to an Exercise Termination Event (or such later period as provided in Section 10), Issuer shall repurchase the Option from the Holder at a price (the "Option Repurchase Price") equal to the amount by which (A) the Market/Offer Price (as A-8 defined below) exceeds (B) the Option Price, multiplied by the number of shares for which this Option may then be exercised and (ii) at the request of the owner of Option Shares from time to time (the "Owner"), delivered prior to the occurrence of an Exercise Termination Event (or such later period as provided in Section 10), Issuer shall repurchase such number of the Option Shares from the Owner as the Owner shall designate at a price (the "Option Share Repurchase Price") equal to the market/offer price multiplied by the number of Option Shares so designated. The term "Repurchase Event" shall occur if (i) any person (the term "person" for purposes of this Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the 1934 Act, and the rules and regulations thereunder) other than Grantee or any of its Subsidiaries shall have acquired benefi- cial ownership, or the right to acquire beneficial ownership, or any "group" (as such term is defined under the 1934 Act) shall have been formed which beneficially owns or has the right to acquire beneficial ownership of 50% or more of the then- outstanding shares of Common Stock (the term "beneficial owner- ship" for purposes of this Agreement having the meaning as- signed thereto in Section 13(d) of the 1934 Act, and the rules and regulations thereunder), or (ii) any of the transactions described in Section 8(a)(i), 8(a)(ii), or 8(a)(iii) shall be consummated. The term "Market/Offer Price" shall mean the highest of (i) the price per share of Common Stock at which a tender or exchange offer therefor has been made, (ii) the price per share of Common Stock to be paid by any third party pursu- ant to an agreement with Issuer, (iii) the highest closing price for shares of Common Stock within the three-month period immediately preceding the date the Holder gives notice of the required repurchase of this Option or the Owner gives notice of the required repurchase of Option Shares, as the case may be, or (iv) in the event of a sale of all or substantially all of Issuer's assets or deposits, the sum of the net price paid in such sale for such assets or deposits, the sum of the net price paid in such sale for such assets or deposits and the current market value of the remaining net assets of Issuer as deter- mined by a nationally recognized investment banking firm se- lected by the Holder or the Owner, as the case may be, divided by the number of shares of Common Stock of Issuer outstanding at the time of such sale. In determining the market/offer price, the value of consideration other than cash shall be de- termined by a nationally recognized investment banking firm selected by the Holder or Owner, as the case may be, (b) The Holder and the Owner, as the case may be, may exercise its right to require Issuer to repurchase the Op- tion and any Option Shares pursuant to this Section 7 by sur- rendering for such purpose to Issuer, at its principal office, a copy of this Agreement or certificates for Option Shares, as A-9 applicable, accompanied by a written notice or notices stating that the Holder or the Owner, as the case may be, elects to require Issuer to repurchase this Option and/or the Option Shares in accordance with the provisions of this Section 7. As promptly as practicable, and in any event within ten business days after the surrender of the Option and/or certificates rep- resenting Option Shares and the receipt of such notice or no- tices relating thereto, Issuer shall deliver or cause to be delivered to the Holder the Option Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor or the portion thereof that Issuer is not then prohibited under ap- plicable law and regulation from so delivering. (c) To the extent that Issuer is prohibited under applicable law or regulation, or as a consequence of adminis- trative policy, from repurchasing the Option and/or the Option Shares in full, Issuer shall immediately so notify the Holder and/or the Owner and thereafter deliver or cause to be deliv- ered, from time to time, to the Holder and/or the Owner, as appropriate, the portion of the Option Repurchase Price and the Option Share Repurchase Price, respectively, that it is no longer prohibited from delivering, within ten business days after the date on which Issuer is no longer so prohibited; pro- vided, however, that if Issuer at any time after delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited under applicable law or regulation, or as a consequence of administrative policy, from delivery to the Holder and/or the Owner, as appropriate, the Option Repurchase Price and the Option Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its best efforts to obtain all required regulatory and legal approvals and to file any required notices as promptly as practicable in order to accomplish such repurchase), the Holder or Owner may revoke its notice of repurchase of the Option or the Option Shares whether in whole or to the extent of the prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that portion of the Option Purchase Price or the Option Share Repurchase Price that Issuer is not prohibited from delivering, and (ii) deliver, as appro- priate, either (A) to the Holder, a new Agreement evidencing the right of the Holder to purchase that number of shares of Common Stock obtained by multiplying the number of shares of Common Stock for which the surrendered Agreement was exercis- able at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Option Repurchase Price less the portion thereof theretofore delivered to the Holder and the denominator of which is the Option Repurchase Price, or (B) to the Owner, a certificate for the Option Shares it is then so prohibited from repurchasing. A-10 8. (a) In the event that, prior to an Exercise Ter- mination Event, Issuer shall enter into an agreement (i) to consolidate with or merge into any person, other than Grantee or a Grantee Subsidiary, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Grantee or a Grantee Subsidiary, to merge into Issuer and Issuer shall be the continuing or sur- viving corporation, but, in connection with such merger, the then outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property or the then outstanding shares of Common Stock shall after such merger represent less than 50% of the outstanding shares and share equivalents of the merged com- pany, or (iii) to sell or otherwise transfer all or substan- tially all of its or any Significant Subsidiary's assets or deposits to any person, other than Grantee or a Grantee Subsid- iary, then, and in each such case, the agreement governing such transaction shall make proper provision so that the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option (the "Substitute Option"), at the election of the Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or (y) any person that controls the Acquiring Corporation. (b) The following terms have the meanings indicated: (i) "Acquiring Corporation" shall mean (i) the con- tinuing or surviving corporation of a consolidation or merger with Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving person, and (iii) the transferee of all or substantially all of Issuer's assets or deposits (or the assets or de- posits of a Significant Subsidiary of Issuer). (ii) "Substitute Common Stock" shall mean the common stock issued by the issuer of the Substitute Option upon exercise of the Substitute Option. (iii) "Assigned Value" shall mean the market/offer price, as defined in Section 7. (iv) "Average Price" shall mean the average closing price of a share of the Substitute Common Stock for the one year immediately preceding the consolidation, merger or sale in question, but in no event higher than the clos- ing price of the shares of substitute Common Stock on the day preceding such consolidation, merger or sale; provided that if Issuer is the issuer of the Substitute Option, the Average Price shall be computed with respect to a share of A-11 common stock issued by the person merging into Issuer or by any company which controls or is controlled by such person, as the Holder may elect. (c) The Substitute Option shall have the same terms as the Option, provided, that if the terms of the Substitute Option cannot, for legal reasons, be the same as the Option, such terms shall be as similar as possible and in no event less advantageous to the Holder. The issuer of the Substitute Op- tion shall also enter into an agreement with the then Holder or Holders of the Substitute Option in substantially the same form as this Agreement (after giving effect for such purpose to the provisions of Section 9), which agreement shall be applicable to the Substitute Option. (d) The Substitute Option shall be exercisable for such number of shares of Substitute Common Stock as is equal to the Assigned Value multiplied by the number of shares of Common Stock for which the Option is then exercisable, divided by the Average Price. The exercise price of the Substitute Option per share of Substitute Common Stock shall then be equal to the Option Price multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock for which the Option is then exercisable and the denominator of which shall be the number of shares of Substitute Common Stock for which the Substitute Option is exercisable. (e) In no event, pursuant to any of the foregoing paragraphs, shall the Substitute Option be exercisable for more than 19.9% of the shares of Substitute Common Stock outstanding prior to exercise of the Substitute Option. (f) Issuer shall not enter into any transaction de- scribed in subsection (a) of this Section 8 unless the Acquir- ing Corporation and any person that controls the Acquiring Cor- poration assume in writing all the obligations of Issuer here- under. 9. (a) At the request of the holder of the Substi- tute Option (the "Substitute Option Holder"), the issuer of the Substitute Option (the "Substitute Option Issuer") shall repur- chase the Substitute Option from the Substitute Option Holder at a price (the "Substitute Option Repurchase Price") equal to the amount by which (i) the Highest Closing Price (as herein- after defined) exceeds (ii) the exercise price of the Substi- tute Option, multiplied by the number of shares of Substitute Common Stock for which the Substitute Option may then be exer- cised, and at the request of the owner (the "Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall repurchase the A-12 Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to the Highest Closing Price multiplied by the number of Substitute Shares so designated. The term "Highest Closing Price" shall mean the highest closing price for shares of Substitute Common Stock within the three-month period imme- diately preceding the date the Substitute Option Holder gives notice of the required repurchase of the Substitute Option or the Substitute Share Owner gives notice of the required repur- chase of the Substitute Shares, as applicable. (b) The Substitute Option Holder and the Substitute Share Owner, as the case may be, may exercise its respective right to require the Substitute Option Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to this Section 9 by surrendering for such purpose to the Substitute Option Issuer, at its principal office, the agreement for such Substitute Option (or, in the absence of such an agreement, a copy of this Agreement) and certificates for Substitute Shares accompanied by a written notice or notices stating that the Substitute Option Holder or the Substitute Share Owner, as the case may be, elects to require the Substitute Option Issuer to repurchase the Substitute Option and/or the Substitute Shares in accordance with the provisions of this Section 9. As promptly as practicable, and in any event within ten business days after the surrender of the Substitute Option and/or cer- tificates representing Substitute Shares and the receipt of such notice or notices relating thereto, the Substitute Option Issuer shall deliver or cause to be delivered to the Substitute Option Holder the Substitute Option Repurchase Price and/or to the Substitute Share Owner the Substitute Share Repurchase Price therefor or the portion thereof which the Substitute Op- tion Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that the Substitute Option Issuer is prohibited under applicable law or regulation, or as a con- sequence of administrative policy, from repurchasing the Sub- stitute Option and/or the Substitute Shares in part or in full, the Substitute Option Issuer shall immediately so notify the Substitute Option Holder and/or the Substitute Share Owner and thereafter deliver or cause to be delivered, from time to time, to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the portion of the Substitute Share Re- purchase Price, respectively, which it is no longer prohibited from delivering, within ten business days after the date on which the Substitute Option Issuer is no longer so prohibited; provided, however, that if the Substitute Option Issuer is at any time after delivery of a notice of repurchase pursuant to subsection (b) of this Section 9 prohibited under applicable A-13 law or regulation, or as a consequence of administrative pol- icy, from delivering to the substitute Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option Repurchase Price and the Substitute Share Repurchase Price, respectively, in full (and the Substitute Option Issuer shall use its best efforts to receive all required regulatory and legal approvals as promptly as practicable in order to accom- plish such repurchase), the Substitute Option Holder or Sub- stitute Share Owner may revoke its notice of repurchase of the Substitute Option or the Substitute Shares either in whole or to the extent of the prohibition, whereupon, in the latter case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner, as appropriate, that portion of the Substitute Option Repurchase Price or the Substitute Share Repurchase Price that the Substi- tute Option Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new Substitute Option evidencing the right of the Substitute Option Holder to purchase that number of shares of the Substitute Common Stock obtained by multiplying the number of shares of the Substitute Common Stock for which the surren- dered Substitute Option was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Substitute Option Repurchase Price less the por- tion thereof theretofore delivered to the Substitute Option Holder and the denominator of which is the Substitute Option Repurchase Price, or (B) to the Substitute Share Owner, a cer- tificate for the Substitute Option Shares it is then so prohib- ited from repurchasing. 10. The periods for exercise of certain rights under Sec- tions 2, 6, 7, 9 and 12 shall be extended: (i) to the extent necessary to obtain all regulatory approvals for the exercise of such rights (for so long as the Holder is using commercially reasonable efforts to obtain such regulatory approvals), and for the expiration of all statutory waiting periods; and (ii) to the extent necessary to avoid liability under Section 16(b) of the 1934 Act by reason or such exercise. 11. Issuer hereby represents and warrants to Grantee as follows: (a) Issuer has full corporate power and authority to execute and deliver this Agreement and to consummate the trans- actions contemplated hereby. The execution and delivery this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Issuer and no other corporate proceedings on the part of Issuer are necessary to authorize this Agreement or to A-14 consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by Issuer. (b) Issuer has taken all necessary corporate action to authorize and reserve and to permit it to issue, and at all times from the date hereof through the termination of this Agreement in accordance with its terms will have reserved for issuance upon the exercise of the Option, that number of shares of Common Stock equal to the maximum number of shares of Common Stock at any time and from time to time issuable hereunder, and all such shares, upon issuance pursuant thereto, will be duly authorized, validly issued, fully paid, nonassessable, and will be delivered free and dear of all claims, liens, encumbrance and security interests and not subject to any preemptive rights. 12. Neither of the parties hereto may assign any of its rights or obligations under this Agreement or the Option cre- ated hereunder to any other person, without the express written consent of the other party, except that in the event a Subse- quent Triggering Event shall have occurred prior to an Exercise Termination Event, Grantee, subject to the express provisions hereof, may assign in whole or in part its rights and obliga- tions hereunder following such Subsequent Triggering Event; provided, however that until the date 30 days following the date on which the Federal Reserve Board has approved applica- tions by Grantee to acquire the shares of Common Stock subject to the Option, Grantee may not assign its rights under the Op- tion except in (i) a widely dispersed public distribution, (ii) a private placement in which no one party acquires the right to purchase in excess of 2% of the voting shares of issuer, (iii) an assignment to a single party (i.e., a broker or investment banker) for the purpose of conducting a widely disbursed public distribution on Grantee's behalf, or (iv) any other manner ap- proved by the Federal Reserve Board. 13. Each of Grantee and Issuer will use its best efforts to make all filings with, and to obtain consents of, all third parties and governmental authorities necessary to the consumma- tion of the transactions contemplated by this Agreement, in- cluding without limitation applying to the Federal Reserve Board under the Bank Holding Company Act for approval to ac- quire the shares issuable hereunder, but Grantee shall not be obligated to apply to state banking authorities for approval to acquire the shares of Common Stock issuable hereunder until such time, if ever, as it deems appropriate to do so. 14. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement by either party hereto and that the obligations of the parties hereto A-15 shall be enforceable by either party hereto through injunctive or other equitable relief. 15. If any term, provision, covenant or restriction con- tained in this Agreement is held by a court or a federal or state regulatory agency of competent jurisdiction to be in- valid, void or unenforceable, the remainder of the terms, pro- visions and covenants and restrictions contained in this Agree- ment shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. If for any reason such court or regulatory agency determines that the Holder is not permitted to acquire, or Issuer is not permitted to repurchase pursuant to Section 7, the full number of shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 5 hereof), it is the express intention of Issuer to allow the Holder to acquire or to require Issuer to repurchase such lesser number of shares as may be permissible, without any amendment or modification hereof. 16. All notices, requests, claims, demands and other com- munications hereunder shall be deemed to have been duly given when delivered in person, by fax, telecopy, or by registered or certified mail (postage prepaid, return receipt requested) at the respective addresses of the parties set forth in the Merger Agreement. 17. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, regardless of the laws that might otherwise govern under ap- plicable principles of conflicts of laws thereof. 18. This Agreement may be executed in two or more coun- terparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 19. Except as otherwise expressly provided herein, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transac- tions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. 20. Except as otherwise expressly provided herein or in the Merger Agreement, this Agreement contains the entire agree- ment between the parties with respect to the transactions con- templated hereunder and supersedes all prior arrangements or understandings with respect thereof, written or oral. The terms and conditions of this Agreement shall inure to the ben- efit of and be binding upon the parties hereto and their re- spective successors and permitted assignees. Nothing in this A-16 Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, and their respective suc- cessors except as assignees, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. 21. Capitalized terms used in this Agreement and not de- fined herein shall have the meanings assigned thereto in the Merger Agreement. IN WITNESS WHEREOF, each of the parties had caused this Agreement to be executed on its behalf by their officers there- unto duly authorized, all as the date first above written. F.N.B. CORPORATION By: /s/ Peter Mortensen Name: Peter Mortensen Title: Chairman of the Board and President SOUTHWEST BANKS, INC. By: /s/ Gary L. Tice Name: Gary L. Tice Title: Chairman of the Board President and Chief Executive Officer A-17 EX-3 4 EXHIBIT 3 [F.N.B. CORPORATION LETTERHEAD] F.N.B. CORPORATION (NASDAQ: FBAN) HERMITAGE, PA 16148 DATE: February 5, 1996 FOR RELEASE: Immediately CONTACT: John D. Waters V.P. and Chief Financial Officer (412) 983-3440 --------------------------------------------------------------- F.N.B. CORPORATION AND SOUTHWEST BANKS, INC. ANNOUNCE MERGER HERMITAGE, PA -- F.N.B. Corporation and Southwest Banks, Inc. today jointly announced the signing of a definitive agreement to merge the two bank holding companies. Under terms of the agreement, each share of Southwest Banks will be exchanged for .78 share of F.N.B. Corporation common stock and the transac- tion will be accounted for as a pooling of interests. The exchange ratio currently represents a multiple of 2 times its year-end book value. The actual per share value will depend upon the price of F.N.B. stock at the closing of the transac- tion. F.N.B. Corporation will issue 2.9 million shares in the tax free exchange, making the total value of the transaction approximately $61 million. - MORE - [F.N.B. CORPORATION LETTERHEAD CON'T] F.N.B. CORPORATION February 5, 1996 Page 2 F.N.B. Corporation is a bank holding company head- quartered in Hermitage, Pennsylvania, with $1.7 billion in assets. It operates six banks and a consumer finance subsidiary through 93 offices in Pennsylvania, eastern Ohio and southwest New York. The company recently announced record earnings for 1995 of $18.1 million, $2.00 per share primary and $1.90 fully diluted, which represents a 34% increase over 1994. Southwest Banks, Inc., a holding company headquar- tered in Naples, Florida, operates two banking subsidiaries, First National Bank of Naples with five locations in Collier County and Cape Coral National Bank in Lee County with two locations. At December 31, 1995, its assets totaled $386 mil- lion which represents a 46% growth rate for the year. Addi- tionally, Southwest recently reported record earnings of $1.7 million or $.44 per share for the year 1995, an increase of 162% over last year. Gary L. Tice, Chairman, President and Chief Executive Officer of Southwest Banks, Inc., enthusiastically remarked, "The transaction represents a substantial premium over current market and book values and an exciting business opportunity, especially considering the historical operating philosophy of F.N.B. Corporation. F.N.B. provides its affiliates an operat- ing environment which will allow us to continue our commitment to superior customer service. This situation is unlike recent mergers which have resulted in sign changes, product changes, layoffs, branch closings and reduced customer service. Addi- tionally, F.N.B. Corporation provides a strong source of capi- tal which will permit our company to continue pursuing a prof- itable growth strategy. In my opinion, there has never been a more natural, compatible and complimentary affiliation with two companies relative to common values, operating philosophy, strategic needs and management personalities." Tice is a native of Sharpsville, Pennsylvania, and was once an officer of First National Bank of Pennsylvania, the lead bank of F.N.B. Corporation. Tice added, "In addition to realizing a premium on their stock ownership, shareholders will benefit from divi- dends paid by F.N.B. Corporation." - MORE - F.N.B. CORPORATION February 5, 1996 Page 3 Southwest Banks has not paid cash dividends. F.N.B. Corporation recently increased its regular dividend on common stock to $.64 on an annual basis, which represents a 3% yield. Commenting on the proposed merger, Peter Mortensen, Chairman and President of F.N.B. Corporation, said, "The affiliation with Southwest Banks provides a unique opportunity to employ our growing capital and greatly increases the fran- chise value of the Company. Further, we are fortunate to have an in-depth knowledge of Southwest Banks and its strong manage- ment team. Finally, in contrast to our traditional stable mar- ket areas, southwest Florida is one of the fastest growing mar- kets in the U.S." Mortensen is one of the founders of Southwest Banks, Inc. as well as its lead bank, First National Bank of Naples and has served as a director of both entities since their formation in 1988. F.N.B. Corporation has owned approximately 5% of Southwest Banks' stock for several years. The management of both companies have a similar credit philoso- phy having jointly financed numerous projects over the years both in Florida and Pennsylvania. As a result of the merger, Southwest Banks, Inc. will be an affiliate of F.N.B. Corporation. Its banks will retain their individual identity and high customer service standards. Gary L. Tice will remain Chief Executive Officer of Southwest Banks and will become an Executive Vice President and Director of F.N.B. Corporation. Two other directors of Southwest Banks will be invited to join the F.N.B. Corporation's Board. On a proforma consolidated basis, measured at December 31, 1995, F.N.B. Corporation would have total assets of $2.1 billion, total deposits of $1.8 billion and total Shareholders' Equity of $174 million. F.N.B. Corporation and Southwest Banks would each continue to be characterized as "well capitalized" by all regulatory standards. Mortensen added, "The transaction will create an acceptable level of earnings dilution, about 6% in the first year. Based on our advisors' analyses considering certain assumptions and expectations, it is anticipated that the impact will become accretive approximately - MORE - F.N.B. CORPORATION February 5, 1996 Page 4 eighteen months after closing. This accretion should increase rapidly considering the favorable growth in Southwest Banks' market compared to our more mature market area." In connection with the merger, Southwest Banks, Inc., is granting an option to F.N.B. Corporation to acquire up to 19.9% of its stock exercisable at a price of $15.00 per share only if certain conditions are met. The merger requires approval by Southwest Banks, Inc. shareholders as well as vari- ous regulatory authorities. Closing is expected in early 1997. The investment banking firm of McConnell, Budd & Downes, Inc. is advising F.N.B. Corporation and Robinson-Humphrey Company, Inc. is advising Southwest Banks, Inc. in this transaction. F.N.B. Corporation's common stock trades on NASDAQ under the symbol FBAN. The average of its bid and asked price last Friday was $21.125. Southwest Banks, Inc. trades in the over-the-counter market using the symbol SWBA and was quoted on Friday at $14.75 per share. JDW\skb -----END PRIVACY-ENHANCED MESSAGE-----