FNB CORPORATION


Florida	0-8144	25-1255406

(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

One F.N.B. Boulevard, Hermitage, Pennsylvania		16148

(Address of principal executive offices)		(Zip Code)

On January 1, 2004, F.N.B. Corporation (the “Corporation”) completed the spin-off of its Florida operations through the distribution to its shareholders of all of the outstanding shares of stock of First National Bankshares of Florida, Inc. (“FNBF”). As a result of the spin-off, FNBF is currently an independent, separately traded, public company.

The spin-off was effected by way of a pro rata dividend of one share of FNBF common stock for every one share of the Corporation’s common stock held at the close of business on December 26, 2003. Shareholders who owned a fractional share of the Corporation’s common stock received a corresponding fractional share of FNBF common stock. Based on a letter ruling the Corporation received from the Internal Revenue Service, receipt of FNBF shares in the spin-off is tax-free for U.S. federal income tax purposes.

In connection with the distribution, FNBF and the Corporation entered into an Agreement and Plan of Distribution, a Tax Disaffiliation Agreement and an Employee Benefits Agreement, which are filed herewith as Exhibits 2.1, 2.2 and 2.3, respectively.

Further information concerning the distribution and related matters is contained in Amendment No. 2 to FNBF’s Registration Statement on Form 10 filed by FNBF with the SEC on December 22, 2003.

The Corporation’s unaudited pro forma consolidated financial statements are incorporated herein by reference to pages 14-18 of the Corporation’s Form 10-Q for its quarter ended September 30, 2003, filed with the SEC on November 14, 2003.


(c)	Exhibits

	2.1	Agreement and Plan of Distribution by and between F.N.B. Corporation and First National Bankshares of Florida, Inc., dated December 30, 2003.

	2.2	Tax Disaffiliation Agreement between F.N.B. Corporation and First National Bankshares of Florida, Inc., dated January 1, 2004.

	2.3	Employee Benefits Agreement between F.N.B. Corporation and First National Bankshares of Florida, Inc., dated January 1, 2004.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Corporation has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.


	F.N.B. CORPORATION



	By:	/s/Brian F. Lilly Brian F. Lilly Chief Financial Officer



Dated: January 8, 2004

Exhibit Index


2.1		Agreement and Plan of Distribution by and between F.N.B. Corporation and First National Bankshares of Florida, Inc., dated December 31, 2003 (Schedules and exhibits are omitted pursuant to Regulation S-K, Item 601(b)(2); F.N.B. Corporation agrees to furnish supplementally a copy of such schedules and/or exhibits to the Securities and Exchange Commission upon request)

2.2		Tax Disaffiliation Agreement between F.N.B. Corporation and First National Bankshares of Florida, Inc., dated January 1, 2004.

2.3		Employee Benefits Agreement between F.N.B. Corporation and First National Bankshares of Florida, Inc., dated January 1, 2004.

EX-2.1 3 g86619exv2w1.txt EX-2.1 AGREEMENT & PLAN OF DISTRIBUTION EXHIBIT 2.1 AGREEMENT AND PLAN OF DISTRIBUTION BY AND BETWEEN F.N.B. CORPORATION AND FIRST NATIONAL BANKSHARES OF FLORIDA, INC. DATED AS OF DECEMBER 30, 2003 TABLE OF CONTENTS

2 EXHIBITS Exhibit Description of Exhibit - ------- ---------------------- Exhibit A Employee Benefits Agreement Exhibit B Tax Disaffiliation Agreement Exhibit C Trademark Assignment and Joint Ownership Agreement SCHEDULES Schedule Description of Schedule - -------- ----------------------- Schedule 1.1(q) Corporate Transactions Schedule 1.1(oo) Parent Business Schedule 1.1(ss) Specific Parent Liabilities Schedule 1.1(tt) Parent Policies Schedule 1.1(uu) Parent Shared Policies Schedule 1.1(ww) Parent Subsidiaries Schedule 1.1(eee) Shared Liabilities Schedule 1.1(iii) SpinCo Balance Sheet Schedule 1.1(jjj) SpinCo Business Schedule 1.1(nnn) Specific SpinCo Liabilities Schedule 1.1(ooo) SpinCo Policies Schedule 1.1(rrr) SpinCo Subsidiaries Schedule 2.1(d) Consents 3 AGREEMENT AND PLAN OF DISTRIBUTION This AGREEMENT AND PLAN OF DISTRIBUTION (this "Agreement"), dated as of December 30, 2003, by and between F.N.B. Corporation, a Florida corporation ("Parent"), and First National Bankshares of Florida, Inc., a Florida corporation ("SpinCo"); WHEREAS, the Board of Directors of Parent has determined that it is in the best interests of Parent and its stockholders to separate Parent's existing businesses into two independent businesses; WHEREAS, in furtherance of the foregoing, on August 12, 2003, SpinCo was formed and became a wholly owned subsidiary of Parent, and on or before the Effective Date Parent shall transfer or cause its Subsidiaries to transfer the SpinCo Assets to the SpinCo Group and shall cause the SpinCo Group to assume the SpinCo Liabilities, all as more fully described in this Agreement and the Ancillary Agreements; WHEREAS, the Board of Directors of Parent has further determined that it is appropriate and desirable, on the terms and conditions contemplated hereby, for Parent to distribute to holders of shares of Parent Common Stock all of the outstanding shares of SpinCo Common Stock (the "Distribution"); WHEREAS, the Distribution is intended to qualify as a tax-free spin-off under Sections 355 and 368 of the Code; and WHEREAS, the parties hereto have determined to set forth the principal corporate and other transactions required to effect the Distribution and to set forth other agreements that will govern certain other matters prior to and following the Distribution. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, the parties hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. General. Unless otherwise defined herein or unless the context otherwise requires, as used in this Agreement, the following terms shall have the following meanings: (a) "Action" shall mean any demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal. (b) "Affiliate" shall mean, when used with respect to any specified Person, a Person that directly or indirectly controls, is controlled by, or is under common control with such specified Person; provided, however, that for purposes of this Agreement, any Person who was a member of both Groups prior to the Distribution shall be deemed to be an Affiliate only of the Group of which such Person is a member following the Distribution. As used herein, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract or otherwise. Any contrary provision of this Agreement notwithstanding, neither Parent nor any Parent Subsidiary shall be deemed to be an Affiliate of SpinCo, and neither SpinCo nor any SpinCo Subsidiary shall be deemed to be an Affiliate of Parent. (c) "Agent" shall have the meaning set forth in Section 2.1(b) of this Agreement. (d) "Agreement" shall mean this Agreement. 4 (e) "Agreement Disputes" shall have the meaning set forth in Section 5.1 of this Agreement. (f) "Ancillary Agreements" shall mean all of the written agreements, instruments, understandings, assignments or other arrangements (other than this Agreement) entered into by the parties hereto or any other member of their respective Groups in connection with the transactions contemplated hereby, including the Conveyancing and Assumption Instruments, the Employee Benefits Agreement, the Tax Disaffiliation Agreement and the Trademark Agreement. (g) "Applicable Rate" shall mean the "prime rate" of interest per annum, as published from time to time in The Wall Street Journal, Eastern Edition, plus four percent (4%). (h) "Assets" shall mean assets, properties and rights, wherever located (including in the possession of vendors or other third parties or elsewhere), whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person, including, but not limited to, the following: (i) tangible personal property (such as equipment and furniture, including, but not limited to, office machinery, automated teller machines, shelving, office supplies and artwork, automobiles and trucks); (ii) real property, leaseholds and subleaseholds therein, improvements, fixtures, and fittings thereon, including, but not limited to, any banking houses, drive-in banking facilities, teller facilities and administrative offices together with appurtenant parking, storage and service facilities, and easements, rights-of-way, and other appurtenants thereto (such as appurtenant rights in and to public streets); (iii) intellectual property, goodwill associated therewith, licenses and sublicenses granted and obtained with respect thereto, and rights thereunder, remedies against infringements thereof, and rights to protection of interests therein under the laws of all jurisdictions; (iv) agreements, contracts, indentures, mortgages, instruments, guaranties, other similar arrangements, and rights thereunder (collectively, "Contracts"); (v) all rights under insurance policies and all rights in the nature of insurance, indemnification or contribution; (vi) accounts, notes, and other receivables; (vii) securities, (viii) claims, prepayments, refunds, loans, causes of action, choses in action, rights of recovery, rights of set off, and rights of recoupment; (ix) franchises, approvals, Permits, licenses, orders, registrations, certificates, variances, and similar rights obtained from any Governmental Authority; (x) books, records, ledgers, files, documents, correspondence, lists, plats, architectural plans, drawings, and specifications, creative materials, advertising and promotional materials, studies, reports, and other printed or written materials; and (xi) cash. 5 (i) "Book Value" shall mean, with respect to Parent or SpinCo, the Tier 1 Capital of such party as of the Distribution Date. For purposes of this definition, "Tier 1 Capital" shall mean the stockholders' equity of a party determined in accordance with generally accepted accounting principles in the United States, less unrealized gains on available for sale securities, less intangibles, plus trust preferred securities (limited to one-third of stockholders' equity less unrealized gains). (j) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which national banking associations are authorized or obligated by law or executive order to close. (k) "Claims Administration" shall mean the processing of claims made under the Parent Shared Policies, including the reporting of claims to the insurance carriers, management and defense of claims and providing for appropriate releases upon settlement of claims. (l) "Code" shall mean the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgated thereunder, including any successor legislation. (m) "Commission" shall mean the Securities and Exchange Commission. (n) "Consent" shall mean any consent, approval, authorization, clearance, exemption, waiver, or similar affirmation by any Person. (o) "Contracts" shall have the meaning set forth in the definition of Assets. (p) "Conveyancing and Assumption Instruments" shall mean, collectively, the various agreements, instruments and other documents to be or heretofore entered into to effect the Corporate Transactions or otherwise to effect the transfer of Assets and the assumption of Liabilities in the manner contemplated by this Agreement, the Ancillary Agreements and the Corporate Transactions. (q) "Corporate Transactions" shall mean, collectively, (a) each of the mergers, transfers, conveyances, contributions, assignments, dividends, dissolutions, assumptions, redemptions, purchases and other transactions described and set forth on Schedule 1.1(q) attached hereto, and (b) such other mergers, transfers, conveyances, contributions, assignments, dividends, dissolutions, assumptions, redemptions, purchases and other transactions that may be appropriate or required to be accomplished, effected or consummated by Parent or SpinCo or any of their respective Subsidiaries and Affiliates so that: (i) the SpinCo Assets, SpinCo Liabilities and SpinCo Business shall be owned, directly or indirectly, by SpinCo after giving effect to the Distribution; and (ii) the Parent Assets, Parent Liabilities and Parent Business shall be owned, directly or indirectly, by Parent after giving effect to the Distribution. (r) "Distribution" shall have the meaning set forth in the recitals to this Agreement. (s) "Distribution Date" shall mean January 1, 2004. (t) "Distribution Record Date" shall mean December 26, 2003. (u) "Effective Time" shall mean 12:01 a.m., Naples, Florida time, on the Distribution Date. (v) "Employee Benefits Agreement" shall mean the Employee Benefits Agreement by and between Parent and SpinCo, which agreement shall be entered into effective as of the Distribution Date in the form attached hereto as Exhibit A. (w) "Environmental Laws" shall mean any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, principles of common law, judgments, orders, decrees, Permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions (including the 6 Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq.), whether now or hereafter in existence, relating to the environment, natural resources, human health or safety, endangered or threatened species of fish, wildlife and plants, or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment (including indoor or outdoor air, surface water, groundwater and surface or subsurface soils), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the investigation, cleanup or other remediation thereof. (x) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder. (y) "Governmental Authority" shall mean any federal, state, local, foreign or international court, government, department, commission, board, bureau, agency, official, the NYSE, the Nasdaq Stock Market, or other regulatory, administrative or governmental authority. (z) "Group" shall mean with respect to Parent, the Parent Group and, with respect to SpinCo, the SpinCo Group. (aa) "Indemnifying Party" shall have the meaning set forth in Section 3.3(a) of this Agreement. (bb) "Indemnitee" shall have the meaning set forth in Section 3.3(a) of this Agreement. (cc) "Information Statement" shall mean the Information Statement filed with the Commission as part of the Registration Statement and mailed to the holders of shares of Parent Common Stock in connection with the Distribution, including any amendments or supplements thereto. (dd) "Insurance Administration" shall mean, with respect to each Parent Shared Policy, (i) the accounting for premiums, retrospectively rated premiums, defense costs, indemnity payments, deductibles and retentions, as appropriate, under the terms and conditions of each of the Parent Shared Policies; (ii) the reporting to excess insurance carriers of any losses or claims which may cause the applicable limits of any Parent Shared Policy to be exceeded; (iii) the distribution of Insurance Proceeds as contemplated by this Agreement; and (iv) any and all other actions reasonably necessary for the administration of the Parent Shared Policies. (ee) "Insurance Proceeds" shall mean those monies (i) received by an insured from an insurance carrier or (ii) paid by an insurance carrier on behalf of an insured. (ff) "Insured Claims" shall mean those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of any of the Parent Shared Policies, whether or not subject to deductibles, self-insured retentions, co-insurance, uncollectibility or retrospectively rated premium adjustments. (gg) "IRS" shall mean the Internal Revenue Service. (hh) "Law" shall mean any code, law, ordinance, regulation, reporting or licensing requirement, rule, or statute applicable to a Person or its Assets, liabilities, or business, including those promulgated, interpreted, or enforced by any Governmental Authority. (ii) "Liabilities" shall mean any and all debts, liabilities, obligations, responsibilities, response actions, losses, deposits as defined in Section 3(l) of the Federal Deposit Insurance Act, damages 7 (whether compensatory, punitive or treble), fines, penalties and sanctions, absolute or contingent, matured or unmatured, liquidated or unliquidated, foreseen or unforeseen, joint, several or individual, asserted or unasserted, accrued or unaccrued, known or unknown, whenever arising, including those arising under or in connection with any Law (including any Environmental Law), Action, threatened Action, order or consent decree of any Governmental Authority, or any award of any arbitration tribunal, and those arising under any contract, guarantee, commitment or undertaking, whether sought to be imposed by a Governmental Authority, private party, or party to this Agreement, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, or otherwise, and including any costs, expenses, interest, attorneys' fees, disbursements and expenses of counsel, expert and consulting fees and costs related thereto or to the investigation or defense thereof. (jj) "Loss" shall mean any loss, Liability, damages, claim, demand, judgment or settlement of any nature or kind, known or unknown, fixed, accrued, absolute or contingent, liquidated or unliquidated, including all reasonable costs and expenses (legal, accounting or otherwise as such costs are incurred) relating thereto. The amount of any indemnifiable Loss shall be reduced by the net amount of the Tax or insurance benefit actually realized by an indemnified party by reason of such Loss. (kk) "Notices" shall have the meaning set forth in Section 7.6 of this Agreement. (ll) "NYSE" shall mean the New York Stock Exchange, Inc. (mm) "Parent" shall have the meaning set forth in the preamble to this Agreement. (nn) "Parent Assets" shall mean, collectively, all the Assets owned or held by Parent or any Parent Subsidiary immediately after giving effect to the Corporate Transactions, except the SpinCo Assets. (oo) "Parent Business" shall mean each and every business conducted at any time by Parent Group prior to the Effective Time (including those businesses set forth on Schedule 1.1(oo)), including each and every business of the Parent Group which has been discontinued, sold or transferred, but excluding the SpinCo Business. (pp) "Parent Common Stock" shall mean the Common Stock, par value $0.01 per share, of Parent. (qq) "Parent Group" shall mean Parent and the Parent Subsidiaries. (rr) "Parent Indemnitee" shall mean: (i) Parent and each Affiliate thereof after giving effect to the Corporate Transactions and the Distribution; and (ii) each of the respective past, present and future Representatives of any of the entities described in the immediately preceding clause (i) and each of the heirs, executors, successors and assigns of any of such Representatives; provided, however, that in no event shall the term "Parent Indemnitee" include SpinCo or any Affiliate of SpinCo. (ss) "Parent Liabilities" shall mean: (i) any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be retained or assumed by Parent or any member of the Parent Group, and all agreements, obligations and Liabilities of any member of the Parent Group under this Agreement or any of the Ancillary Agreements; 8 (ii) all Liabilities set forth on Schedule 1.1(ss); (iii) all Liabilities (other than Taxes and any employee-related Liabilities which are specifically covered by the Tax Disaffiliation Agreement and the Employee Benefits Agreement, respectively) primarily relating to, arising out of or resulting from: (A) the operation of the Parent Business, as conducted at any time prior to, on or after the Distribution Date (including any Liability relating to, arising out of or resulting from any act or failure to act by any Representative (whether or not such act or failure to act is or was within such Person's authority)); (B) the operation of any business conducted by Parent or any Parent Subsidiary at any time after the Effective Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any Representative (whether or not such act or failure to act is or was within such Person's authority)); or (C) any Parent Assets, whether arising before, on or after the Distribution Date; and (iv) the Parent's Share of all Shared Liabilities. Notwithstanding the foregoing, the Parent Liabilities shall not include: (y) any Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be retained or assumed by SpinCo or any member of the SpinCo Group; or (z) all agreements and obligations of any member of the SpinCo Group under this Agreement or any of the Ancillary Agreements. Any contrary provision of this Agreement notwithstanding, any Liabilities or Losses in respect of any Action relating to the Parent Business, including those described on Schedule 1.1(ss), shall constitute Parent Liabilities. (tt) "Parent Policies" shall mean all Policies owned or maintained by or on behalf of Parent or any Parent Subsidiary that do not provide coverage to or with respect to the SpinCo Assets or the SpinCo Business, or any part thereof, including those Policies set forth on Schedule 1.1(tt). (uu) "Parent Shared Policies" shall mean all Policies owned or maintained by or on behalf of Parent or any Parent Subsidiary which provide coverage to or with respect to the SpinCo Group, the SpinCo Assets or the SpinCo Business, or any part thereof, other than SpinCo Policies, including those Policies set forth on Schedule 1.1(uu). (vv) "Parent's Share" shall mean the percentage obtained by dividing (x) the Book Value of Parent by (y) the sum of the Book Value of Parent and the Book Value of SpinCo. (ww) "Parent Subsidiaries" shall mean all of the Subsidiaries of Parent other than SpinCo and the SpinCo Subsidiaries. The Parent Subsidiaries shall consist of the entities set forth on Schedule 1.1(ww). (xx) "Permit" shall mean any federal, state, local, and foreign governmental approval, authorization, certificate, easement, filing, franchise, license, notice, permit, 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. (yy) "Person" shall mean any natural person, corporation, business trust, limited liability company, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. 9 (zz) "Policies" shall mean insurance policies and insurance contracts of any kind (other than life and benefits policies or contracts), including primary, excess and umbrella policies, master comprehensive general liability policies, director and officer liability, fiduciary liability, automobile, aircraft, property and casualty, workers' compensation and employee dishonesty insurance policies, bonds and self insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder. (aaa) "Records" shall have the meaning set forth in Section 4.1 of this Agreement. (bbb) "Registration Statement" shall mean the registration statement on Form 10 to effect the registration of the SpinCo Common Stock pursuant to the Exchange Act. (ccc) "Representative" shall mean, with respect to any Person, any of such Person's directors, officers, members, employees, agents, consultants, advisors, accountants, attorneys and representatives. (ddd) "Securities Act" shall mean the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder. (eee) "Shared Liabilities" shall mean all Liabilities that are neither Parent Liabilities (as defined without giving effect to clause (iv) of the definition of "Parent Liabilities") nor SpinCo Liabilities (as defined without giving effect to clause (v) of the definition of "SpinCo Liabilities"), including the Liabilities described on Schedule 1.1(eee). (fff) "Shared Marks" shall have the meaning given to the term "Marks" in the Trademark Agreement. (ggg) "SpinCo" shall have the meaning set forth in the preamble to this Agreement. (hhh) "SpinCo Assets" shall mean collectively, all the Assets that will be owned by the SpinCo Group as of the Effective Time and after giving effect to the Corporate Transactions, including: (i) the capital stock of the SpinCo Subsidiaries; (ii) all of the Assets reflected on the SpinCo Balance Sheet or the accounting records supporting such balance sheet; (iii) all of the Assets expressly allocated to SpinCo or any of the SpinCo Subsidiaries under this Agreement or any of the Ancillary Agreements; and (iv) any other Asset acquired by the Parent Group or the SpinCo Group from the date of the SpinCo Balance Sheet to the Effective Time that is owned by the Parent Group or the SpinCo Group as of the Effective Time and that is of a nature or type that would have resulted in such Asset being included as an Asset on the SpinCo Balance Sheet had it been acquired on or prior to the date of the SpinCo Balance Sheet, determined on a basis consistent with the determination of the Assets included on the SpinCo Balance Sheet. (iii) "SpinCo Balance Sheet" shall mean the combined balance sheet of the SpinCo Group, including the notes thereto, as of September 30, 2003, as set forth on Schedule 1.1(iii). (jjj) "SpinCo Business" shall mean each and every business to be conducted after the Effective Time by the SpinCo Group (including those businesses set forth on Schedule 1.1(jjj)). 10 (kkk) "SpinCo Common Stock" shall mean the Common Stock, par value $0.01 per share, of SpinCo. (lll) "SpinCo Group" shall mean SpinCo and the SpinCo Subsidiaries. (mmm) "SpinCo Indemnitees" shall mean: (i) SpinCo and each Affiliate thereof after giving effect to the Corporate Transactions and the Distribution; and (ii) each of the respective past, present and future Representatives of any of the entities described in the immediately preceding clause (i) and each of the heirs, executors, successors and assigns of any of such Representatives; provided, however, that in no event shall the term "SpinCo Indemnitee" include Parent or any Affiliate of Parent. (nnn) "SpinCo Liabilities" shall mean (i) any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be retained or assumed by SpinCo or any member of the SpinCo Group, and all agreements, obligations and Liabilities of any member of the SpinCo Group under this Agreement or any of the Ancillary Agreements; (ii) all Liabilities set forth on Schedule 1.1(nnn); (iii) all Liabilities (other than Taxes and any employee-related Liabilities which are specifically covered by the Tax Disaffiliation Agreement and the Employee Benefits Agreement, respectively), primarily relating to, arising out of or resulting from: (A) the operation of the SpinCo Business, as conducted at any time prior to, on or after the Distribution Date (including any Liability relating to, arising out of or resulting from any act or failure to act by any Representative with respect to the SpinCo Business (whether or not such act or failure to act is or was within such Person's authority)); (B) the operation of any business conducted by SpinCo or any SpinCo Subsidiary at any time after the Effective Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any Representative (whether or not such act or failure to act is or was within such Person's authority)); or (C) any SpinCo Assets, whether arising before, on or after the Distribution Date; (iv) all Liabilities reflected as liabilities or obligations on the SpinCo Balance Sheet or the accounting records supporting such balance sheet, and all Liabilities arising or assumed after the date of such balance sheet which, had they arisen or been assumed on or before such date and been retained as of such date, would have been reflected on such balance sheet, determined on a basis consistent with the determination of the Liabilities included on the SpinCo Balance Sheet, subject to any discharge of such Liabilities subsequent to the date of the SpinCo Balance Sheet, including those liabilities set forth on Schedule 1.1(nnn); and (v) SpinCo's Share of all Shared Liabilities. 11 Notwithstanding the foregoing, the SpinCo Liabilities shall not include: (y) any Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be retained or assumed by any member of the Parent Group; or (z) all agreements and obligations of any member of the Parent Group under this Agreement or any of the Ancillary Agreements. Any contrary provision of this Agreement notwithstanding, any Liabilities or Losses in respect of any Action relating to the SpinCo Business, including the matters set forth on Schedule 1.1(nnn), shall constitute SpinCo Liabilities. (ooo) "SpinCo Policies" shall mean all Policies owned or maintained by or on behalf of any member of the Parent Group or the SpinCo Group, which relate specifically to the SpinCo Assets or the SpinCo Business but do not relate to the Parent Business or the Parent Assets, including those Policies set forth on Schedule 1.1(ooo). (ppp) "SpinCo's Share" shall mean the percentage obtained by subtracting the Parent's Share from 100%. (qqq) "SpinCo Shares" shall mean all of the issued and outstanding shares of SpinCo Common Stock immediately prior to the Effective Time. (rrr) "SpinCo Subsidiaries" shall mean the Subsidiaries of SpinCo identified on Schedule 1.1(rrr). (sss) "Subsidiary" shall mean with respect to any specified Person, any corporation or other legal entity of which such Person or any of its Subsidiaries controls or owns, directly or indirectly, more than 50% of the stock or other equity interest entitled to vote on the election of members to the board of directors or similar governing body. (ttt) "Tax" shall have the meaning set forth in the Tax Disaffiliation Agreement. (uuu) "Tax Disaffiliation Agreement" shall mean the Tax Disaffiliation Agreement by and between Parent and SpinCo, which agreement shall be entered into effective as of the Distribution Date in the form attached hereto as Exhibit B. (vvv) "Third Party" shall mean a Person who is not a party hereto or a Subsidiary thereof. (www) "Third-Party Claim" shall have the meaning set forth in Section 3.3(a) of this Agreement. (xxx) "Trademark Agreement" shall mean the Trademark Assignment and Joint Ownership Agreement by and between Parent and SpinCo, which agreement shall be entered into effective as of the Distribution Date in the form attached hereto as Exhibit C. SECTION 1.2. Reference; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. The words "include", "includes" and "including" when used in this Agreement shall be deemed to be followed by the phrase "without limitation." Unless the context otherwise requires, references in this Agreement to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Unless the context otherwise requires, the words "hereof", "hereby" and "herein" and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement. Neither this Agreement nor any Ancillary Agreement shall be construed against either party as the principal draftsperson hereof or thereof. 12 ARTICLE II DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS SECTION 2.1. The Distribution And Other Transactions. (a) Certain Transactions. On the Distribution Date, or such earlier date as Parent deems necessary or appropriate to permit the Distribution to occur on the Distribution Date: (i) Pursuant to the Corporate Transactions, Parent Group shall contribute, assign, transfer, convey and deliver all of its right, title and interest in the SpinCo Assets to SpinCo Group, and SpinCo Group shall accept, assume and agree faithfully to perform and fulfill all the SpinCo Liabilities, in accordance with their respective terms. (ii) Pursuant to the Corporate Transactions, SpinCo Group shall contribute, assign, transfer, convey and deliver all of its right, title and interest in the Parent Assets to Parent Group, and Parent Group shall accept, assume and agree faithfully to perform and fulfill all the Parent Liabilities, in accordance with their respective terms. (b) Distribution of Shares by Parent. Prior to the Effective Time, Parent shall deliver to Parent's stock transfer agent (the "Agent") a certificate or certificates representing the SpinCo Shares, endorsed by Parent in blank, for the benefit of the holders of Parent Common Stock, and Parent shall authorize the Agent to distribute, as soon as practicable following the Effective Time, the SpinCo Shares to holders of record of shares of Parent Common Stock on the Distribution Record Date as further contemplated by the Information Statement and hereby either by crediting the holder's brokerage account or by delivering a certificate or certificates representing such shares. SpinCo shall provide any share certificates that the Agent shall require in order to effect the Distribution. (c) Applications. Parent shall use its reasonable best efforts to prepare and file applications with all Governmental Authorities having jurisdiction over the transactions contemplated by this Agreement seeking the requisite Consents necessary to consummate the transactions contemplated, and SpinCo shall cooperate in the preparation and, where appropriate, filing of such applications. (d) Consents. Parent and SpinCo shall each use, and shall cause each of its respective Subsidiaries to use, its reasonable best efforts to obtain all Permits and Consents of all third parties and Governmental Authorities necessary or desirable for the consummation of the transactions contemplated by this Agreement, including those Consents to transfer and/or assign Contracts from Third Parties set forth in Schedule 2.1(d). Whether or not each such Permit and Consent is obtained, nothing in this Section 2.1(d) shall in any way limit the obligations of the parties under Article III. (e) State Securities Laws. Prior to the Distribution Date, Parent and SpinCo shall take all such action as may be necessary or appropriate under the securities or blue sky laws of states or other political subdivisions of the United States in order to effect the Distribution. (f) Other Transactions. Prior to the Effective Time, the parties hereto shall have consummated those other transactions in connection with the Corporate Transactions and the Distribution that are contemplated by the Information Statement and not specifically referred to in this Section 2.1. 13 SECTION 2.2. Assumption and Satisfaction of Liabilities. Except as otherwise specifically set forth in any Ancillary Agreement, after the Effective Time, (i) Parent shall, or shall cause the applicable member of the Parent Group to, assume, pay, perform and discharge all Parent Liabilities in the ordinary course of business, consistent with past practice, and (ii) SpinCo shall, or shall cause the applicable member of the SpinCo Group to, assume, pay, perform and discharge all SpinCo Liabilities in the ordinary course of business, consistent with past practice. To the extent reasonably requested to do so by another party hereto, each party hereto agrees to execute and deliver such documents, in a form reasonably satisfactory to such party, as may be reasonably necessary to evidence the assumption of any Liabilities hereunder. SECTION 2.3. [Intentionally Removed]. SECTION 2.4. Limited Representations or Warranties. Each of the parties hereto agrees that no party hereto is, in this Agreement or in any other agreement or document contemplated by this Agreement or otherwise, making any representation or warranty whatsoever, as to title or value of Assets being transferred. It is also agreed that all Assets either transferred to or retained by the parties, as the case may be, shall be "as is, where is" and that (subject to Section 2.13) the party to which such Assets are to be transferred hereunder shall bear the economic and legal risk that such party's or any of the Subsidiaries' title to any such Assets shall be other than good and marketable and free from encumbrances. Similarly, each party hereto agrees that no party hereto is representing or warranting in any way that the obtaining of any Consents, the execution and delivery of any agreements and the making of any filings or applications contemplated by this Agreement will satisfy the provisions of any or all applicable Contracts or other agreements or the requirements of any or all applicable Laws or judgments, it being agreed that the party to which any Assets are transferred shall bear the economic and legal risk that any necessary consents or approvals are not obtained or that any requirements of Laws or judgments are not complied with. Notwithstanding the foregoing, however, except as otherwise provided in Section 2.5 or Section 2.6 hereof, after the Effective Time, the Parent Group shall be solely responsible for Parent Liabilities, and the SpinCo Group shall be solely responsible for SpinCo Liabilities. SECTION 2.5. Removal of Parent Group from Certain Guarantees; Releases of Parent Group from Liabilities. (a) Except as otherwise specified in any Ancillary Agreement, SpinCo shall use its commercially reasonable efforts to have, prior to the Effective Time, or as soon as practicable thereafter, any member of the Parent Group removed as guarantor of or obligor for any SpinCo Liability. (b) If SpinCo is unable to obtain, or to cause to be obtained, any such required removal as set forth in clause (a) of this Section 2.5, the applicable guarantor or obligor shall continue to be bound as such and, unless not permitted by law or the terms thereof, SpinCo shall or shall cause one of its Subsidiaries, as agent or subcontractor for such guarantor or obligor to pay, perform and discharge fully all the obligations or other liabilities of such guarantor or obligor thereunder from and after the date hereof. (c) If (i) SpinCo is unable to obtain, or to cause to be obtained, any such required removal as set forth in clause (a) of this Section 2.5, or (ii) SpinCo Liabilities arise after the Effective Time but before a member of the Parent Group which is a guarantor or obligor with reference to any such SpinCo Liability is removed pursuant to clause (a) of this Section 2.5, then such guarantor or obligor shall be indemnified by SpinCo for all Liabilities incurred by it in its capacity as guarantor or obligor in accordance with Article III hereof. Without limiting the foregoing, SpinCo shall, or shall cause a member of the SpinCo Group to, reimburse any such member of the Parent Group which is a guarantor or obligor as soon as practicable (but in no event later than thirty days) following delivery by Parent to SpinCo of notice of a payment made pursuant to this Section 2.5 in respect of SpinCo Liabilities. 14 (d) In the event that, at any time before or after the Effective Time, Parent identifies any letters of credit, interest rate or foreign exchange contracts, surety bonds or other Contracts (excluding guarantees) that relate primarily to the SpinCo Business but for which a member of the Parent Group has contingent, secondary, joint, several or other Liability of any nature whatsoever, SpinCo shall, at its expense, take such actions and enter into such agreements and arrangements as Parent may reasonably request to effect Parent's (or a member of the Parent Group's ) release or substitution. SECTION 2.6. Removal of SpinCo from Certain Guarantees; Releases of SpinCo from Liabilities. (a) Except as otherwise specified in any Ancillary Agreement, Parent shall use its commercially reasonable efforts to have, prior to the Effective Time, or as soon as practicable thereafter, any member of the SpinCo Group removed as guarantor of or obligor for any Parent Liability. (b) If Parent is unable to obtain, or to cause to be obtained, any such required removal as set forth in clause (a) of this Section 2.6, the applicable guarantor or obligor shall continue to be bound as such and, unless not permitted by law or the terms thereof, Parent shall or shall cause one of its Subsidiaries, as agent or subcontractor for such guarantor or obligor to pay, perform and discharge fully all the obligations or other liabilities of such guarantor or obligor thereunder from and after the date hereof. (c) If (i) Parent is unable to obtain, or to cause to be obtained, any such required removal as set forth in clause (a) of this Section 2.6, or (ii) Parent Liabilities arise after the Effective Time but before a member of the SpinCo Group which is a guarantor or obligor with reference to any such Parent Liability is removed pursuant to clause (a) of this Section 2.6, then such guarantor or obligor shall be indemnified by Parent for all Liabilities incurred by it in its capacity as guarantor or obligor in accordance with Article III hereof. Without limiting the foregoing, Parent shall, or shall cause a member of the Parent Group to, reimburse any such member of the SpinCo Group which is a guarantor or obligor as soon as practicable (but in no event later than thirty days) following delivery by SpinCo to Parent of notice of a payment made pursuant to this Section 2.6 in respect of Parent Liabilities. (d) In the event that, at any time before or after the Effective Time, SpinCo identifies any letters of credit, interest rate or foreign exchange contracts, surety bonds or other Contracts (excluding guarantees) that relate primarily to the Parent Business but for which a member of the SpinCo Group has contingent, secondary, joint, several or other Liability of any nature whatsoever, Parent shall, at its expense, take such actions and enter into such agreements and arrangements as SpinCo may reasonably request to effect SpinCo's (or a member of the SpinCo Group's ) release or substitution. SECTION 2.7. Witness Services. At all times after the Effective Time, each of Parent and SpinCo shall use its commercially reasonable efforts to make available to the other, upon reasonable request, its and its Subsidiaries' Representatives as witnesses to the extent that such Persons may reasonably be required in connection with the prosecution or defense of any Action in which the requesting party or any member of its Group from time to time is involved, provided that there is no conflict in the Action between the requesting party or any member of its Group, as applicable, and the other party or any member of its Group, as applicable. A party providing witness services to the other party under this Section shall be entitled to receive from the recipient of such services, upon the presentation of invoices therefor, reimbursement for payments made for any out-of-pocket expenses (which shall exclude the costs of salaries and benefits of employees who are witnesses) as may be reasonably incurred in providing such witness services. In addition, to the extent the provision of witness services requires an employee of a party to be away from his or her normal office location for more than four hours on any day, the party receiving the witness services shall pay the party providing the witness services at a per diem rate equal to such employee's then current base salary divided by 250. Witness 15 services in connection with indemnification claims under Article III shall be handled as provided in Article III. SECTION 2.8. Conveyancing and Assumption Instruments. In connection with the transfers of Assets and the assumptions of Liabilities contemplated by this Agreement, on the Distribution Date, or such earlier date as Parent deems necessary or appropriate to permit the Distribution to occur on the Distribution Date, the parties shall execute or cause to be executed by the appropriate entities the Conveyancing and Assumption Instruments contemplated hereby for transfers to be effected pursuant to Florida law or the Laws of one of the other states of the United States or the laws of the United States, in such other form as the parties shall reasonably agree. The transfer of capital stock shall be effected by means of delivery of stock certificates and executed stock powers and notation on the stock record books of the corporation or other legal entities involved, and, to the extent required by applicable Law, by notation on public registries. SECTION 2.9. Ancillary Agreements. On the Distribution Date, or such earlier date as Parent deems necessary or appropriate to permit the Distribution to occur on the Distribution Date, each of Parent and SpinCo shall enter into, and/or (where applicable) shall cause members of its respective Group to enter into, the Ancillary Agreements and any other agreements in respect of the Distribution reasonably necessary or appropriate in connection with the transactions contemplated hereby and thereby. SECTION 2.10. Corporate Names; Trademarks (a) As soon as reasonably practicable after the Effective Time, but in any event within six months thereafter, SpinCo will, and will cause the SpinCo Subsidiaries to, each at its own expense, remove (or, if necessary, on an interim basis, cover up) any and all exterior signs and other identifiers located on any of its real property or premises or on the real property or premises used by SpinCo or the SpinCo Subsidiaries which refer or pertain to Parent or which include the Parent or any Parent Subsidiary name, logo or other trademark or service mark or any similar mark or any derivative thereof or other intellectual property included in the Parent Assets, other than the Shared Marks. (b) As soon as is reasonably practicable after the Effective Time, but in any event within six months thereafter, SpinCo will, and will cause the SpinCo Subsidiaries to, remove from all letterhead, envelopes, invoices, products, product labels, product literature, brochures and other communications media of any kind, all references to Parent, and any other logo, trademark or service mark or other intellectual property included in the Parent Assets, other than the Shared Marks (except that SpinCo shall not be required to take any such action with respect to the SpinCo Group's corporate records or any materials in the possession of Third Parties). (c) As soon as reasonably practicable after the Effective Time, but in any event within six months thereafter, Parent will, and will cause the Parent Subsidiaries to, each at its own expense, remove (or, if necessary, on an interim basis, cover up) any and all exterior signs and other identifiers located on any of its real property or premises or on the real property or premises used by Parent or the Parent Subsidiaries which refer or pertain to SpinCo or which include the SpinCo or any SpinCo Subsidiary name, logo or other trademark or any similar mark or any derivative thereof or other intellectual property included in the SpinCo Assets, other than the Shared Marks. (d) As soon as is reasonably practicable after the Effective Time, but in any event within six months thereafter, Parent will, and will cause the Parent Subsidiaries to, remove from all letterhead, envelopes, invoices, products, product labels, product literature, brochures and other communications media of any kind, all references to SpinCo and its Subsidiaries, and any other logo, trademark or service mark or other intellectual property included in the SpinCo Assets, other than the Shared Marks (except that Parent shall not be required to take any such action with respect to the Parent Group's corporate records or any materials in the possession of Third Parties). 16 SECTION 2.11. Post-Distribution Remittances. (a) Following the Effective Time, Parent will promptly remit to SpinCo, or reimburse SpinCo for, all amounts, and endorse or remit to SpinCo the proceeds of all checks, drafts, notes or other documents, received by Parent or a Parent Subsidiary, that should have otherwise been paid to SpinCo or a SpinCo Subsidiary. (b) Following the Effective Time, SpinCo will promptly remit to Parent, or reimburse Parent for, all amounts, and endorse or remit to Parent the proceeds of all checks, drafts, notes or other documents, received by SpinCo or a SpinCo Subsidiary, that should have otherwise been paid to Parent or a Parent Subsidiary. SECTION 2.12. Non-Solicitation. (a) For the period beginning on the Distribution Date and ending on the second anniversary of the Distribution Date, SpinCo will not and will not permit any SpinCo Subsidiary to, directly or indirectly, solicit or recruit for its employment any employee of the Parent Group as of the Distribution Date without the prior written consent of Parent; provided, however, that nothing in this Section 2.12(a) shall (i) prohibit the hiring of any natural person who applied for employment with the SpinCo Group solely in response to any public medium advertising, (ii) prohibit the hiring of any natural person referred by any Person whose principal business is the recruiting of prospective employees, or (iii) prohibit the hiring of any natural person whose employment with a member of the Parent Group terminated at least three months prior to the date of such solicitation or recruitment for a bona fide reason not designed or intended to circumvent the provisions of this Section 2.12(a) and so long as such natural person was not solicited or recruited by SpinCo or any member of the SpinCo Group prior to the expiration of such three-month period. (b) For the period beginning on the Distribution Date and ending on the second anniversary of the Distribution Date, Parent will not and will not permit any Parent Subsidiary to, directly or indirectly, solicit or recruit for its employment any employee of the SpinCo Group as of the Distribution Date without the prior written consent of SpinCo; provided, however, that nothing in this Section 2.12(b) shall (i) prohibit the hiring of any natural person who applied for employment with the Parent Group solely in response to any public medium advertising, (ii) prohibit the hiring of any natural person referred by any Person whose principal business is the recruiting of prospective employees, or (iii) prohibit the hiring of any natural person whose employment with a member of the SpinCo Group terminated at least three months prior to the date of such solicitation or recruitment for a bona fide reason not designed or intended to circumvent the provisions of this Section 2.12(b) and so long as such natural person was not solicited or recruited by Parent or any member of the Parent Group prior to the expiration of such three-month period. SECTION 2.13. Further Assurances. (a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the parties hereto shall use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement. Without limiting the foregoing, each party hereto shall cooperate with the other party, and execute and deliver, or use commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all Consents and Permits of any Governmental Authority or any other Person, and take all such other actions as such party may reasonably be requested to take by the other party hereto from time to time, consistent with the terms of this Agreement, the Corporate Transactions, and the Ancillary 17 Agreements, in order to effectuate the provisions and purposes of this Agreement and the transfers of Assets and assumptions of Liabilities and the other transactions contemplated hereby. (b) If any such transfer of Assets or assumption of Liabilities is not consummated prior to or at the Effective Time, then the parties hereto shall continue to take the actions required by Section 2.13(a) to consummate and make effective such transfer or assumption as soon as practicable after the Effective Time and, in the case of Assets, shall use their commercially reasonable efforts to preserve the value of such Assets until the time of transfer. If and when any such Asset becomes transferable or Liability becomes assumable, such transfer or assumption shall be effected forthwith. The parties hereto agree that, no later than the Effective Time, each party hereto shall be deemed to have acquired complete and sole beneficial ownership to all of the Assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have assumed in accordance with the terms of this Agreement and the Ancillary Agreements all of the Liabilities, and all duties, obligations and responsibilities incident thereto, that such party is entitled or required to hold or assume pursuant to this Agreement. (c) Any disagreement regarding whether any Asset or Liability was or should have been transferred to, retained by or assumed by the Parent Group or the SpinCo Group shall be resolved in accordance with the provisions of Article V. ARTICLE III INDEMNIFICATION SECTION 3.1. Indemnification by Parent. Parent shall, and shall cause each member of the Parent Group to, indemnify, defend and hold harmless the SpinCo Indemnitees from and against any and all Losses of the SpinCo Indemnitees arising out of, by reason of or otherwise in connection with the Parent Liabilities or alleged Parent Liabilities, including any breach by Parent of any provision of this Section 3.1. Each member of the Parent Group shall be jointly and severally liable for the indemnification obligations imposed by this Section 3.1. Subject to the last sentence of Section 7.1, this Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Ancillary Agreements. SECTION 3.2. Indemnification by SpinCo. SpinCo shall, and shall cause each member of the SpinCo Group to, indemnify, defend and hold harmless the Parent Indemnitees from and against any and all Losses of the Parent Indemnitees arising out of, by reason of or otherwise in connection with the SpinCo Liabilities or alleged SpinCo Liabilities, including any breach by SpinCo of any provision of this Section 3.2. Each member of the SpinCo Group shall be jointly and severally liable for the indemnification obligations imposed by this Section 3.2. Subject to the last sentence of Section 7.1, this Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Ancillary Agreements. SECTION 3.3. Procedures for Indemnification. (a) If a claim or demand is made against a SpinCo Indemnitee or a Parent Indemnitee (each, an "Indemnitee") by any Third Party (a "Third-Party Claim") as to which such Indemnitee is entitled to indemnification pursuant to this Agreement, such Indemnitee shall notify the party which is or may be required pursuant to Section 3.1 or Section 3.2 hereof to make such indemnification (the "Indemnifying Party") in writing, and in reasonable detail, of the Third-Party Claim promptly (and in any event within seven Business Days) after receipt by such Indemnitee of written notice of the Third-Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure. Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event within five Business Days) after the Indemnitee's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim. 18 If a Third-Party Claim is made against an Indemnitee, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so elects in accordance with this Section 3.3(a), to assume the defense thereof with counsel selected by the Indemnifying Party; provided, however, that such counsel is not reasonably objected to by the Indemnitee. Should the Indemnifying Party so elect to assume the defense of a Third-Party Claim, the Indemnifying Party shall, within thirty days (or sooner if the nature of the Third-Party Claim so requires), notify the Indemnitee in writing of its intent to do so, and the Indemnifying Party shall thereafter not be liable to the Indemnitee for legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that such Indemnitee shall have the right to employ counsel to represent such Indemnitee if, in such Indemnitee's reasonable judgment, a conflict of interest between such Indemnitee and such Indemnifying Party exists in respect of such claim that would make representation of both such parties by one counsel inappropriate, and in such event the fees and expenses of such separate counsel shall be paid by the Indemnifying Party. If the Indemnifying Party elects to assume such defense, the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, subject to the proviso of the preceding sentence, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnifying Party has failed to assume the defense thereof (other than during the period prior to the time the Indemnitee shall have given notice of the Third-Party Claim as provided above). If the Indemnifying Party so elects to assume the defense of any Third-Party Claim, all of the Indemnitees shall cooperate with the Indemnifying Party in the defense or prosecution thereof, including by providing or causing to be provided, Records and witnesses as soon as reasonably practicable after receiving any request therefor from or on behalf of the Indemnifying Party. If an Indemnifying Party elects to assume the defense of a Third-Party Claim as provided above, in no event will the Indemnitee admit any liability with respect to, or settle, compromise or discharge, any Third-Party Claim without the Indemnifying Party's prior written consent; provided, however, that the Indemnitee shall have the right to settle, compromise or discharge such Third-Party Claim without the consent of the Indemnifying Party if the Indemnitee releases the Indemnifying Party from its indemnification obligation hereunder with respect to such Third-Party Claim and such settlement, compromise or discharge would not otherwise adversely affect the Indemnifying Party. If an Indemnifying Party elects to assume the defense of a Third-Party Claim as provided above, the Indemnitee will agree to any settlement, compromise or discharge of a Third-Party Claim that the Indemnifying Party may recommend and that by its terms obligates the Indemnifying Party to pay the full amount of the liability in connection with such Third-Party Claim and releases the Indemnitee completely in connection with such Third-Party Claim; provided, however, that, notwithstanding the foregoing, the Indemnitee shall not be required hereunder to agree to any such settlement, compromise or discharge involving the stipulation of facts or the adjudication of any question that the Indemnitee determines in its discretion would have an adverse effect on the Indemnitee in any other proceeding or otherwise would affect adversely the Indemnitee. If an Indemnifying Party elects not to assume the defense of a Third-Party Claim, or fails to notify an Indemnitee of its election to do so as provided herein, such Indemnitee may compromise, settle or defend such Third-Party Claim, and such Indemnitee may recover the Losses in connection with such compromise, settlement or defense from the Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third-Party Claim (and shall be liable for the fees and expenses of counsel incurred by the Indemnitee in defending such Third-Party Claim) if the Third-Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnitee which the Indemnitee reasonably determines, after conferring with its counsel, cannot be separated from any related claim for money damages. If such equitable relief or other relief portion of the Third-Party Claim can be so separated from that for money damages, the Indemnifying Party shall be entitled to assume the defense of the portion relating to money damages. 19 (b) In the event of payment by an Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right or claim. (c) The remedies provided in this Article III shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party. SECTION 3.4. Indemnification Payments. Unless otherwise agreed to in writing, indemnification required by this Article III shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Losses are incurred. If the Indemnifying Party fails to make an indemnification payment required by this Article III within thirty days after receipt of a bill therefor or notice that a Loss has been incurred, the Indemnifying Party shall also be required to pay interest on the amount of such indemnification payment, from the date of receipt of the bill or notice of the Loss to, but not including the date of payment, at the Applicable Rate. ARTICLE IV ACCESS TO INFORMATION SECTION 4.1. Provision of Corporate Records. (a) Except as otherwise provided in Article III, after the Effective Time, upon the prior written request by SpinCo for specific and identified agreements, documents, books, records or files (collectively, "Records") which relate to (x) SpinCo, the conduct of the SpinCo Business up to the Effective Time or the ownership of the SpinCo Assets up to the Effective Time, or (y) any Ancillary Agreement (other than the Tax Disaffiliation Agreement), Parent shall arrange, as soon as reasonably practicable following the receipt of such request, to provide such Records (or appropriate copies thereof if Parent has a reasonable need to retain the originals) in the possession or control of Parent or any of the Parent Subsidiaries, but only to the extent such items are not already in the possession or control of SpinCo. (b) Except as otherwise provided in Article III, after the Effective Time, upon the prior written request by Parent for specific and identified Records which relate to (x) Parent, the conduct of the Parent Business up to the Effective Time or the ownership of the Parent Assets up to the Effective Time, or (y) any Ancillary Agreement (other than the Tax Disaffiliation Agreement), SpinCo shall arrange, as soon as reasonably practicable following the receipt of such request, to provide such Records (or appropriate copies thereof if SpinCo has a reasonable need to retain the originals) in the possession or control of SpinCo or any of the SpinCo Subsidiaries, but only to the extent such items are not already in the possession or control of Parent. SECTION 4.2. Access to Information. Except as otherwise provided in Article III, after the Effective Time, each of Parent and SpinCo shall afford to the other and its authorized Representatives reasonable access during normal business hours, subject to appropriate restrictions for classified, privileged or confidential information, to the personnel, properties, and Records of such party and its Subsidiaries insofar as such access is reasonably required by the other party and relates to (x) such other party or the conduct of its business or ownership of its Assets prior to the Effective Time, (y) any Ancillary Agreement, or (z) litigation or threatened litigation against such party. 20 SECTION 4.3. Reimbursement; Other Matters. Except to the extent otherwise contemplated by any Ancillary Agreement, a party providing Records or access to personnel, properties or Records to the other party under this Article IV shall be entitled to receive from the recipient, upon the presentation of invoices therefor, reimbursement for payments made for supplies, disbursements and other out-of-pocket expenses (including attorneys' fees and disbursements), as may be reasonably incurred in providing such Records or access to personnel, properties or Records. SECTION 4.4. Confidentiality. Neither (i) Parent nor the Parent Subsidiaries nor (ii) SpinCo nor the SpinCo Subsidiaries shall use or permit the use of (without the prior written consent of the other) and each such entity shall keep, and shall cause its Representatives to keep, confidential all information concerning the other party in its possession, its custody or under its control (except to the extent that (A) such information has been in the public domain through no fault of such party or (B) such information has been later lawfully acquired from other sources by such party or (C) this Agreement or any other Ancillary Agreement or any other agreement entered into pursuant hereto permits the use or disclosure of such information) to the extent such information, (w) relates to or was acquired during the period up to the Effective Time, (x) relates to any Ancillary Agreement, (y) is obtained in the course of performing services for the other party pursuant to any Ancillary Agreement, or (z) is based upon or is derived from information described in the preceding clauses (w), (x) or (y), and each party shall not (without the prior written consent of the other) otherwise release or disclose such information to any other Person, except such party's Representatives, unless compelled to disclose such information by judicial or administrative process or unless such disclosure is required by Law and such party has provided the other party with prompt notice of such requirement in order to afford the other party the opportunity to seek an appropriate protective order or other remedy. In the event that such protective order or other remedy is not obtained or that the other party does not waive compliance with the provisions of this Section 4.4, the first party will furnish only that portion of such information that it is advised by opinion of counsel, which counsel shall be reasonably acceptable to the other party, is legally required and will endeavor to obtain assurance that confidential treatment will be accorded the information so furnished. Notwithstanding anything herein to the contrary, except as reasonably necessary to comply with applicable securities laws, Parent, SpinCo and their respective Representatives may (i) consult any tax advisor regarding U.S. federal income tax treatment or tax structure of the transactions contemplated by this Agreement, and (ii) disclose to any and all persons, without limitation of any kind, the U.S. federal income tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to either Parent or SpinCo relating to such tax treatment or tax structure. SECTION 4.5. Privileged Matters. The parties hereto recognize that legal and other professional services that have been and will be provided prior to the Effective Time have been and will be rendered for the benefit of each of the members of the Parent Group, and each of the members of the SpinCo Group, and that each of the members of the Parent Group, and each of the members of the SpinCo Group, should be deemed to be the client for the purposes of asserting all privileges which may be asserted under applicable Law. Except as otherwise specifically provided in the Tax Disaffiliation Agreement with respect to tax matters, to allocate the interests of each party in the information as to which any party is entitled to assert a privilege, the parties agree as follows: (a) Parent shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the Parent Business, whether or not the privileged information is in the possession of or under the control of Parent or SpinCo. Parent shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information that relates solely to the subject matter of any claims constituting Parent Liabilities, now pending or which may be asserted in the future, in any Action initiated against or by Parent, whether or not the privileged information is in the possession of or under the control of Parent or SpinCo. 21 (b) SpinCo shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the SpinCo Business, whether or not the privileged information is in the possession of or under the control of Parent or SpinCo. SpinCo shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the subject matter of any claims constituting SpinCo Liabilities, now pending or which may be asserted in the future, in any Action initiated against or by SpinCo, whether or not the privileged information is in the possession of SpinCo or under the control of Parent or SpinCo. (c) The parties hereto agree that they shall have a shared privilege, with equal right to assert or waive, subject to the restrictions in this Section 4.5, with respect to all privileges not allocated pursuant to the terms of Sections 4.5(a) and (b). All privileges relating to any Action, disputes or other matters which involve Parent and SpinCo in respect of which such parties retain any responsibility or liability under this Agreement, shall be subject to a shared privilege among them. (d) No party hereto may waive any privilege which could be asserted under any applicable Law, and in which any other party hereto has a shared privilege, without the consent of the other party, which consent shall not be unreasonably withheld or delayed, except to the extent reasonably required in connection with any Action with Third Parties or as provided in subsection (e) below. Consent shall be in writing, or shall be deemed to be granted unless written objection is made within twenty days after notice upon the other party requesting such consent. (e) In the event of any Action or dispute between any of the parties hereto, any party and a Subsidiary of another party hereto, or a Subsidiary of one party hereto and a Subsidiary of another party hereto, either such party, to the extent necessary in connection with such Action or dispute, may waive a privilege in which the other party has a shared privilege, without obtaining the consent of the other party, provided that such waiver of a shared privilege shall be effective only as to the use of information with respect to such Action or dispute between the relevant parties and/or their Subsidiaries, and shall not operate as a waiver of the shared privilege with respect to Third Parties. (f) If a dispute arises between or among the parties hereto or their respective Subsidiaries regarding whether a privilege should be waived to protect or advance the interest of any party, each party agrees that it shall negotiate in good faith, shall endeavor to minimize any prejudice to the rights of the other parties, and shall not unreasonably withhold consent to any request for waiver by another party. Each party hereto specifically agrees that it will not withhold consent to waiver for any purpose except to protect its own legitimate interests. (g) Upon receipt by any party hereto or by any Subsidiary thereof of any subpoena, discovery or other request which arguably calls for the production or disclosure of information subject to a shared privilege or as to which another party has the sole right hereunder to assert a privilege, or if any party obtains knowledge that any of its or any of its Subsidiaries' current or former Representatives has received any subpoena, discovery or other requests which arguably calls for the production or disclosure of such privileged information, such party shall promptly notify the other party of the existence of the request and shall provide the other party a reasonable opportunity to review the information (to the extent such information is available to such party) and to assert any rights it or they may have under this Section 4.5 or otherwise to prevent the production or disclosure of such privileged information. (h) The transfer of all Records and other information pursuant to this Agreement is made in reliance on the agreement of Parent and SpinCo, as set forth in Section 4.4 and this Section 4.5, to maintain the confidentiality of privileged information and to assert and maintain all applicable privileges. The access to information being granted pursuant to Sections 4.1 and 4.2 hereof, the agreement to provide witnesses and individuals pursuant to Sections 2.7 and 3.3 hereof, the furnishing of notices and documents and other cooperative efforts contemplated by Section 3.3 hereof, and the transfer of privileged information between and among the parties and their respective Subsidiaries pursuant to this 22 Agreement shall not be deemed a waiver of any privilege that has been or may be asserted under this Agreement or otherwise. SECTION 4.6. Ownership of Information. Any information owned by one party or any of its Subsidiaries that is provided to a requesting party pursuant to Article III or this Article IV shall be deemed to remain the property of the providing party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such information. SECTION 4.7. Retention of Records. (a) Parent shall deliver to SpinCo upon SpinCo's request all Records that are specifically identified by SpinCo and known by Parent, after reasonable inquiry, to be in its control or possession relating to SpinCo Assets, SpinCo Liabilities or the SpinCo Business. Except (a) as provided in the Tax Disaffiliation Agreement or (b) when a longer retention period is otherwise required by Law or agreed to in writing, the Parent Group and the SpinCo Group shall retain in a reasonably retrievable format, for a period of at least six years, all Records relating to the SpinCo Business as of the Effective Time. Notwithstanding the foregoing, in lieu of retaining any specific Records, Parent may offer in writing to deliver such Records to SpinCo and, if such offer is not accepted within ninety days, the offered Records may be destroyed or otherwise disposed of at any time. If SpinCo shall request in writing prior to the expiration of such ninety-day period that any of Records proposed to be destroyed or disposed of be delivered to SpinCo, Parent shall promptly arrange for delivery of such requested Records (at SpinCo's cost). (b) SpinCo shall deliver to Parent upon Parent's request all Records that are specifically identified by Parent and known by SpinCo, after reasonable inquiry, to be in its control or possession relating to Parent Assets, Parent Liabilities or the Parent Business. Except (i) as provided in the Tax Disaffiliation Agreement or (ii) when a longer retention period is otherwise required by Law or agreed to in writing, the Parent Group and the SpinCo Group shall retain in a reasonably retrievable format, for a period of at least six years, all Records relating to the Parent Business as of the Effective Time. Notwithstanding the foregoing, in lieu of retaining any specific Records, SpinCo may offer in writing to deliver such Records to Parent and, if such offer is not accepted within ninety days, the offered Records may be destroyed or otherwise disposed of at any time. If Parent shall request in writing prior to the expiration of such ninety-day period that any of Records proposed to be destroyed or disposed of be delivered to Parent, SpinCo shall promptly arrange for delivery of such requested Records (at Parent's cost). SECTION 4.8. Limitation of Liability; Release. (a) No party shall have any liability to any other party in the event that any information exchanged or provided pursuant to this Agreement which is an estimate or forecast, or which is based on an estimate or forecast, is found to be inaccurate. (b) Effective upon the Distribution and except as otherwise specifically set forth in this Agreement, each of Parent and SpinCo releases and forever discharges the other and its Representatives and Subsidiaries, of and from all Liabilities against such other party, its Representatives and Subsidiaries or any of its successors or assigns, which the releasing party has or ever had, which arise out of or relate to events, circumstances or actions taken by such other party prior to the Distribution; provided, however, that the foregoing general release shall not apply to this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby and shall not affect either party's right to enforce this Agreement or any of the Ancillary Agreements in accordance with their terms. 23 SECTION 4.9. Other Agreements Providing for Exchange of Information. The rights and obligations granted under this Article IV are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of information set forth in any Ancillary Agreement. ARTICLE V DISPUTE RESOLUTION SECTION 5.1. Negotiation. Subject to Section 5.6, in the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement or the transactions contemplated hereby, including any claim based on contract, tort, statute or constitution (but excluding any controversy, dispute or claim arising out of any agreement relating to the use or lease of real property if any Third Party is a party to such controversy, dispute or claim) (collectively, "Agreement Disputes"), the management of the parties shall negotiate in good faith for a reasonable period of time to settle such Agreement Dispute; provided, however, such reasonable period shall not, unless otherwise agreed by the parties in writing, exceed sixty days from the time a party has first given written notice of such Agreement Dispute to the other party. SECTION 5.2. Mediation. If after such reasonable period of negotiation the parties are unable to settle such Agreement Dispute (and in any event, unless otherwise agreed in writing by the parties, after ninety days have elapsed from the time the parties began such negotiations) and the Agreement Dispute involves a controversy, dispute or claim of less than $500,000, such Agreement Dispute shall be determined, at the request of any party, by mediation conducted in a location selected by the non-requesting party and acceptable to the requesting party, before a retired judge sitting on the panel of Judicial Arbitration & Mediation Services, Inc. The mediation process shall continue as the exclusive method of resolving the Agreement Dispute (other than negotiation between the parties) until the earlier of the Agreement Dispute being resolved or the mediator finding in good faith that all settlement possibilities have been exhausted and that the matter is not resolvable through mediation. SECTION 5.3. Continuity of Service and Performance. Unless otherwise agreed in writing, the parties will continue to provide services and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article V with respect to all matters not subject to such dispute, controversy or claim. SECTION 5.4. Other Remedies. Nothing in this Article V shall limit the right that any party may otherwise have to seek to obtain from any court of competent jurisdiction (i) preliminary injunctive relief in order to preserve the status quo pending the resolution of a dispute or (ii) temporary or permanent injunctive relief from any breach of any provisions of this Agreement. By seeking such relief, a party in no way waives its arbitration rights under this Agreement. SECTION 5.5. Tolling. The parties acknowledge and agree that any statute of limitations or any other defense that could be raised by a party based upon the passage or expiration of time with respect to any Agreement Dispute shall be suspended and tolled during the period in which the parties are negotiating in good faith pursuant to Section 5.1 hereof and during the period in which any mediation is pending or conducted pursuant to Section 5.2 hereof. The parties' time to commence any action in connection with any Agreement Dispute will not be extended by the number of days encompassed in the tolled period, and no party will be prejudiced in any way by the passage of time during the tolled period. SECTION 5.6. Determination of Book Value. As soon as practicable following the Distribution Date, each party (the "first party") shall submit to the other such first party's calculation of its Book Value. In the event either party disputes the other party's calculation of such other party's Book Value, the parties agree that either party may submit such disagreement at any time to Ernst & Young 24 LLP, and that each party shall be bound by the determination of such disputed Book Value made by Ernst & Young LLP. ARTICLE VI INSURANCE SECTION 6.1. Allocation of Policies. (a) Policies and Rights Included Within Assets. The SpinCo Assets shall include (i) the SpinCo Policies and (ii) any and all rights of an insured party under each of the Parent Shared Policies, subject to the terms of such Parent Shared Policies and any limitations or obligations of SpinCo contemplated by this Article VI, specifically including rights of indemnity and the right to be defended by or at the expense of the insurer, with respect to all claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses incurred or claimed to have been incurred prior to the Effective Time by any party in or in connection with the conduct of the SpinCo Business or the ownership of the SpinCo Assets or, to the extent any claim is made against SpinCo or any of the SpinCo Subsidiaries, the conduct of the Parent Business or the ownership of the Parent Assets, and which claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses may arise out of an insured or insurable occurrence under one or more of such Parent Shared Policies. (b) Continuation of Coverage. Parent shall, from and after the Effective Time, at no cost to any member of the SpinCo Group, maintain in effect at all times insurance coverage that is no less favorable to the SpinCo Group than the insurance coverage in effect under the Parent Shared Policies immediately prior to the Effective Time. SECTION 6.2. Post-Effective Time Claims. If, subsequent to the Effective Time, any Person shall assert a claim against SpinCo or any of the SpinCo Subsidiaries (including where SpinCo or the SpinCo Subsidiaries are joint defendants with other Persons) with respect to any claim, suit, action, proceeding, injury, loss, liability, damage or expense incurred or claimed to have been incurred prior to the Effective Time in or in connection with the conduct of the SpinCo Business or the ownership of the SpinCo Assets or, to the extent any claim is made against SpinCo or any of the SpinCo Subsidiaries (including where SpinCo or the SpinCo Subsidiaries are joint defendants with other Persons), the conduct of the Parent Business or the ownership of the Parent Assets, and which claim, suit, action, proceeding, injury, loss, liability, damage or expense may arise out of an insured or insurable occurrence under one or more of the Parent Shared Policies, Parent shall assert and collect any related Insurance Proceeds under such Parent Shared Policy on behalf of SpinCo and remit promptly to SpinCo any Insurance Proceeds so collected, and Parent shall further on behalf of SpinCo assert any and all rights of an insured party under such Parent Shared Policy with respect to such asserted claim, specifically including rights of indemnity and the right to be defended by or at the expense of the insurer and the right to any applicable Insurance Proceeds thereunder. The parties hereby acknowledge and agree that nothing herein shall limit SpinCo's right to assert directly and collect any related Insurance Proceeds under any Parent Shared Policy and that, should SpinCo become liable for any Parent Liabilities covered by any Parent Shared Policy or any Parent Policy, SpinCo shall have the right to assert directly and collect any related Insurance Proceeds under any such Parent Shared Policy or Parent Policy. SECTION 6.3. Administration; Other Matters. (a) Administration. Subject to Section 6.3(c) and Section 6.3(d), after the Effective Time, (i) Parent shall be responsible for (A) Insurance Administration of the Parent Shared Policies with respect to all Liabilities except SpinCo Liabilities and (B) Claims Administration (except as provided below) under such Parent Shared Policies with respect to all Liabilities except SpinCo Liabilities, and (ii) SpinCo shall be responsible for (A) Insurance Administration of the Parent Shared Policies with respect to all SpinCo 25 Liabilities and (B) Claims Administration (except as provided below) under such Parent Shared Policies with respect to all SpinCo Liabilities; provided, however, that the retention of such responsibilities by Parent or SpinCo, as the case may be, is in no way intended to limit, inhibit or preclude (i) any right to insurance coverage for any Insured Claim of a named insured under such Policies as contemplated by the terms of this Agreement or (ii) the sharing between Parent and SpinCo of information relating to the matters addressed in this Article VI; and provided further that Parent's retention or SpinCo's retention, as the case may be, of the administrative responsibilities for the Parent Shared Policies shall not relieve the party submitting any Insured Claim of the primary responsibility for reporting such Insured Claim accurately, completely and in a timely manner or of such party's authority to settle any such Insured Claim within any period permitted or required by the relevant Policy. Parent or SpinCo, as the case may be, may discharge its administrative responsibilities under this Section 6.3 by contracting for the provision of services by independent parties. Each of the parties hereto shall administer and pay any costs relating to defending its respective Insured Claims under Parent Shared Policies to the extent such defense costs are not covered under such Policies and shall be responsible for obtaining or reviewing the appropriateness of releases upon settlement of its respective Insured Claims under Parent Shared Policies. SpinCo shall reimburse Parent promptly for all disbursements, out-of-pocket expenses and direct and indirect costs of employees or agents of Parent relating to Claims Administration and Insurance Administration contemplated by this Section 6.3(a) on behalf of SpinCo. Likewise, Parent shall reimburse SpinCo promptly for all disbursements, out-of-pocket expenses and direct and indirect costs of employees or agents of SpinCo relating to Claims Administration and Insurance Administration contemplated by this Section 6.3(a) on behalf of Parent. (b) Claims. SpinCo may, subject to Section 6.3(c) and Section 6.3(d), claim coverage for Insured Claims under a Parent Shared Policy in accordance with the terms of Section 6.1 as and to the extent that such insurance is available up to the full extent of the applicable limits of liability of such Parent Shared Policy (and may receive any Insurance Proceeds with respect thereto as contemplated by Section 6.2 or Section 6.3(c) hereof), subject to the terms of this Section 6.3. (c) Allocation of Insurance Proceeds. Insurance Proceeds received with respect to claims, costs and expenses under the Parent Shared Policies shall be paid directly to the appropriate Person or to Parent, which shall thereafter administer the Parent Shared Policies by paying the Insurance Proceeds, as appropriate, to Parent with respect to Parent Liabilities and to SpinCo with respect to the SpinCo Liabilities. Payment of the allocable portions of indemnity costs of Insurance Proceeds resulting from such Policies will be made by Parent to the appropriate Person upon receipt from the insurance carrier. In the event that the applicable limits on any particular Parent Shared Policy are exceeded by the amount of outstanding Insured Claims by the relevant parties hereto, such parties agree to allocate the Insurance Proceeds received thereunder based upon their respective percentage of the total of their bona fide claims (measured as of the date costs related to such bona fide claims were incurred, such incurrence to be measured, (i) in the case of fees and expenses incurred for services performed that are attributable to the defense or disposition of Insured Claims, as of the date such fees and expenses are billed to an insurance carrier, and (ii) in the case of sums payable in settlement or satisfaction of a judgment attributable to Insured Claims, as of the date of any such judgment) which were covered under such Parent Shared Policy (their "allocable portion of Insurance Proceeds"), and any party who has received Insurance Proceeds in excess of such party's allocable portion of Insurance Proceeds shall pay to the other party the appropriate amount so that each party will have received its allocable portion of Insurance Proceeds pursuant hereto. Each of the parties agrees to use commercially reasonable efforts to maximize available coverage under those Parent Shared Policies applicable to it, and to take all commercially reasonable steps to recover from all other responsible parties in respect of an Insured Claim to the extent coverage limits under a particular Parent Shared Policy have been exceeded or would be exceeded as a result of such Insured Claim. (d) Allocation of Deductibles, Etc. In the event that the parties have bona fide claims under any Parent Shared Policy for which a deductible or a retrospectively rated premium adjustment is payable 26 or for which a self-insurance retention amount has been applied, the parties agree that the aggregate amount of the deductible or retrospectively rated premium adjustment paid or retention amount applied shall be borne by the parties in the same proportion which the Insurance Proceeds received by each such party bears to the total Insurance Proceeds received under the applicable Parent Shared Policy (their "allocable share of the deductible, premium adjustment or retention amount"), and any party who has paid more than its allocable share of the deductible, premium adjustment or retention amount shall be entitled to receive from the other party an appropriate amount so that each party has borne its allocable share of the deductible, premium adjustment or retention amount pursuant hereto. Further, if a party receives no Insurance Proceeds under that applicable Parent Shared Policy, that party shall have no allocable share of the deductible, premium adjustment or retention amount under that applicable Parent Shared Policy, and the other party shall bear all of the allocable share of the deductible, premium adjustment or retention amount under that applicable Parent Shared Policy. (e) Continued Responsibility. Notwithstanding anything in this Article VI to the contrary, the Parent Group shall remain liable to the SpinCo Indemnitees for the indemnification obligations contemplated by Section 3.1, and the SpinCo Group shall remain liable to the Parent Indemnitees for the indemnification obligations contemplated by Section 3.2, in each case, to the extent any Loss or Liability is not fully paid to or on behalf of the applicable party by Insurance Proceeds. SECTION 6.4. Agreement for Waiver of Conflict and Shared Defense. In the event that Insured Claims of more than one of the parties hereto exist relating to the same occurrence, the parties shall jointly defend and waive any conflict of interest necessary to the conduct of the joint defense. Nothing in this Article VI shall be construed to limit or otherwise alter in any way the obligations of the parties to this Agreement, including those created by this Agreement, by operation of Law or otherwise. SECTION 6.5. Cooperation. The parties agree to use their commercially reasonable efforts to cooperate with respect to the various insurance matters contemplated by this Agreement. ARTICLE VII MISCELLANEOUS SECTION 7.1. Complete Agreement; Construction. This Agreement, including the Exhibits and Schedules, and the Ancillary Agreements shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. In the event of any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail. Other than Section 2.4, Section 4.5 and Article V, which shall prevail over any inconsistent or conflicting provisions in any Ancillary Agreement, notwithstanding any other provisions in this Agreement to the contrary, in the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of any Ancillary Agreement, such Ancillary Agreement shall control. SECTION 7.2. Ancillary Agreements. Subject to the last sentence of Section 7.1, this Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Ancillary Agreements. SECTION 7.3. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. SECTION 7.4. Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement shall survive the Effective Time. 27 SECTION 7.5. Distribution Expenses. Except as otherwise set forth in this Agreement or any Ancillary Agreement, all costs and expenses incurred prior to the Effective Time which are outstanding as of the Effective Time or arise after the Effective Time in connection with the preparation, execution, delivery, printing and implementation of this Agreement and any Ancillary Agreement, the Registration Statement (including the Information Statement) and the Distribution and the consummation of the transactions contemplated thereby (including any transfer taxes imposed on the transfer of real or personal property in the Corporate Transactions) shall be charged to and paid by Parent, and such costs and expenses shall be deemed to be Parent Liabilities. Further, except as otherwise set forth in this Agreement or any Ancillary Agreement (including the retention and assumption by the Parent Group of the Parent Liabilities and the retention and assumption by the SpinCo Group of the SpinCo Liabilities in accordance with Section 2.2 hereof), all other Liabilities (to the extent not otherwise satisfied prior to the Effective Time) directly resulting from actions taken prior to the Effective Time in connection with the preparation, execution, delivery, printing and implementation of this Agreement and any Ancillary Agreement, the Information Statement (including the Registration Statement) and the Distribution and the consummation of the transactions contemplated thereby shall be deemed to be Parent Liabilities. Except as otherwise set forth in this Agreement or any Ancillary Agreement, each party shall bear its own costs and expenses incurred after the Effective Time, and any amount or expense to be paid or reimbursed by any party hereto to any other party hereto shall be so paid or reimbursed promptly after the existence and amount of such obligation is determined and written demand therefor is made. SECTION 7.6. Notices. All notices and other communications hereunder shall be in writing, shall reference this Agreement and shall be hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received ("Notices"): To Parent: F.N.B. Corporation One F.N.B. Boulevard Hermitage, Pennsylvania 16148 Attention: Stephen J. Gurgovits Telephone: (724) 981-6000 Facsimile: (724) 983-3515 To SpinCo: First National Bankshares of Florida, Inc. 2150 Goodlette Road North Naples, Florida 34102 Attention: Gary L. Tice Telephone: (239) 262-7600 Facsimile: (239) 435-7658 SECTION 7.7. Waivers. The failure of any party to require strict performance by any other party of any provision in this Agreement will not waive or diminish that party's right to demand strict performance thereafter of that or any other provision hereof. SECTION 7.8. Amendments. Subject to the terms of Section 7.10 hereof, this Agreement may not be modified or amended except by an agreement in writing signed by each of the parties hereto. 28 SECTION 7.9. Successors and Assigns. The provisions to this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. SECTION 7.10. Termination. This Agreement (including Article III hereof) may be terminated and the Distribution may be amended, modified or abandoned at any time prior to the Effective Time by and in the sole discretion of Parent without the approval of SpinCo or the stockholders of Parent. In the event of such termination, no party shall have any liability of any kind to any other party or any other Person. After the Distribution, this Agreement may not be terminated except by an agreement in writing signed by the parties; provided, however, that Article III shall not be terminated or amended after the Distribution in respect of any Indemnitees not a party to this Agreement without the consent of such Persons. SECTION 7.11. Subsidiaries. Parent shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Parent Subsidiary. SpinCo shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any SpinCo Subsidiary. SECTION 7.12. Third-Party Beneficiaries. Except for the right of Indemnitees to enforce the provisions of Article III hereof, this Agreement is solely for the benefit of the parties hereto and their respective Subsidiaries and Affiliates and should not be deemed to confer upon Third Parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement. SECTION 7.13. Title and Headings. Titles and headings to Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. SECTION 7.14. Exhibits and Schedules. The Exhibits and Schedules shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. SECTION 7.15. Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Florida, without regard to any conflicts of Laws principles. SECTION 7.16. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic or operational effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7.17. Consolidation, Merger, Etc. (a) Involving SpinCo. SpinCo shall not consolidate with or merge into any other Person or convey, transfer or lease all or any substantial portion of its properties and assets to any Person, unless, in each case such Person is a corporation, partnership, limited liability company or trust and expressly assumes, by a written agreement, executed and delivered to Parent, in form reasonably satisfactory to Parent, all of the liabilities, obligations and expenses to be assumed by SpinCo under this Agreement and the due and punctual performance or observance of every agreement and covenant of this Agreement and the Ancillary Agreements on the part of SpinCo to be performed or observed. (b) Involving Parent. Parent shall not consolidate with or merge into any other Person or convey, transfer or lease all or any substantial portion of its properties and assets to any Person, unless, in 29 each case such Person is a corporation, partnership, limited liability company or trust and expressly assumes, by a written agreement, executed and delivered to SpinCo, in form reasonably satisfactory to SpinCo, all of the liabilities, obligations and expenses to be assumed by Parent under this Agreement and the due and punctual performance or observance of every agreement and covenant of this Agreement and the Ancillary Agreements on the part of Parent to be performed or observed. 30 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. F.N.B. CORPORATION By: /s/ Stephen J. Gurgovits ------------------------------------------ Stephen J. Gurgovits, Vice Chairman FIRST NATIONAL BANKSHARES OF FLORIDA, INC. By: /s/ Gary L. Tice ------------------------------------------ Gary L. Tice, Chairman and Chief Executive Officer 31 EX-2.2 4 g86619exv2w2.txt EX-2.2 TAX DISAFFILIATION AGREEMENT EXHIBIT 2.2 TAX DISAFFILIATION AGREEMENT TAX DISAFFILIATION AGREEMENT dated as of January 1, 2004, by and between F.N.B. CORPORATION ("Parent"), a Florida corporation, and FIRST NATIONAL BANKSHARES OF FLORIDA, INC. ("SpinCo"), a Florida corporation. RECITALS WHEREAS, Parent is the common parent of an affiliated group of corporations within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and currently files consolidated federal income tax returns; WHEREAS, as reflected in the Agreement and Plan of Distribution (the "Distribution Agreement") dated as of December 30, 2003 by and between Parent and SpinCo, Parent has formed SpinCo as a direct subsidiary; WHEREAS, Parent will contribute to SpinCo certain assets held by Parent and SpinCo will assume certain liabilities of Parent; WHEREAS, following such contributions and assumptions and pursuant to the Distribution Agreement, Parent shall distribute to its shareholders all of the outstanding shares of stock of SpinCo on a pro rata basis (the "Distribution"); WHEREAS, Parent and SpinCo intend that the Distribution will qualify as a reorganization described in Sections 355 and 368 of the Code and will not result in the recognition of any taxable gain or income to Parent, SpinCo or any of their respective shareholders; WHEREAS, from the day after the date of the Distribution forward, SpinCo and its subsidiaries shall cease to be members of the Parent affiliated group for all applicable tax purposes; and WHEREAS, following the Distribution, the affiliated group of which SpinCo is the common parent will file consolidated Tax Returns; WHEREAS Parent and SpinCo desire on behalf of themselves, their affiliates and their successors to set forth their rights and obligations with respect to taxes due for periods before and after the Distribution. NOW, THEREFORE, in consideration of the transactions recited above and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS For the purposes of this Agreement: 1.01 "45 Percent Interest" shall have the meaning ascribed to the term "50-percent or greater interest" in Section 355(d)(4) of the Code, substituting therein "45" each place "50" appears. 1.02 "45 Percent Threshold" shall have the meaning set forth in Section 2.04(e)(iv). 1.03 "Affiliate" shall mean, when used with respect to any specified Person, a Person that directly or indirectly controls, is controlled by, or is under common control with such specified Person; provided, however, that for purposes of this Agreement, a Person shall be deemed to be an Affiliate only of the Group of which such Person is a member following the Distribution. As used herein, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract or otherwise. Each of the Affiliates listed on Exhibit A, attached hereto, shall be considered an Affiliate of Parent. Each of the Affiliates listed on Exhibit B, attached hereto, shall be considered an Affiliate of SpinCo. Any contrary provision of this Agreement notwithstanding, neither Parent nor any Parent Affiliate shall be deemed to be an Affiliate of SpinCo, and neither SpinCo nor any SpinCo Affiliate shall be deemed to be an Affiliate of Parent. 1.04 "After Tax Basis" shall mean, with respect to any payment to be received, that the amount of such payment is increased to the extent necessary so that, after deduction of all taxes (assuming for this purpose that the recipient of such payment is subject to taxation at the highest federal and applicable state and local marginal rates applicable to widely held corporations for the year in which such income is taxable) required to be paid by the recipient (less any tax savings to be realized, utilizing the same tax rate assumptions as set forth in the immediately preceding parenthetical phrase, by the recipient as a result of the payment of such amounts) with respect to the receipt of such amounts, such increased payment (as so reduced) is equal to the payment otherwise required to be made. 1.05 "Agreement" shall mean this Tax Disaffiliation Agreement, as the same may be amended from time to time. 1.06 "Applicable Federal Rate" shall have the meaning set forth in Section 1274(d) of the Code for a short term rate, compounded quarterly. 1.07 "Assets" shall mean the assets of Parent, SpinCo, their respective Affiliates, or a "predecessor or successor" (within the meaning Section 355(e)(4)(D) of the Code) of such corporations or their Affiliates; it being understood that any transfer, sale or assignment of the assets of Parent, SpinCo, their Affiliates, or a predecessor or a successor in the ordinary course of business shall not be taken into account for purposes of Section 2.04(e) of this Agreement. 2 1.08 "Book Value" shall have the meaning set forth in the Distribution Agreement. 1.09 "Claim" shall have the meaning set forth in Section 5.03(a) of this Agreement. 1.10 "Code" shall have the meaning set forth in the recitals. 1.11 "Common Consolidated Tax Return" shall mean any consolidated, combined or unitary Tax Return that includes at least one member of the Parent Group and at least one member of the SpinCo Group. 1.12 "Controlling Party" shall have the meaning set forth in Section 5.01 of this Agreement. 1.13 "Corporate Transactions" shall have the meaning set forth in the Distribution Agreement. 1.14 "Distribution" shall have the meaning set forth in the recitals. 1.15 "Distribution Agreement" shall have the meaning set forth in the recitals. 1.16 "Distribution Date" shall mean the Distribution Date specified in the Distribution Agreement. 1.17 "Distribution Related Gain" shall mean any gain recognized by Parent, or Parent's or SpinCo's shareholders, by virtue of (i) either the Distribution or the Internal Distribution failing to qualify as a distribution described in Section 355(a)(1) of the Code, (ii) any stock or securities of SpinCo failing to qualify as "qualified property" within the meaning of Section 355(c)(2)(B) and 361(c)(2)(B) of the Code, or (iii) the application of Section 355(d), (e) or (f) of the Code to the Distribution or the Internal Distribution. 1.18 "Final Determination" shall mean with respect to any issue (a) a decision, judgment, decree or other order by any court of competent jurisdiction, which decision, judgment, decree or other order has become final and not subject to further appeal, (b) a binding closing agreement whether or not entered into under Section 7121 of the Code or any other binding settlement agreement (whether or not with the Internal Revenue Service), or (c) the completion of the highest level of administrative proceedings if a judicial contest is not or is no longer available. 1.19 "First SpinCo Notification Letter" shall have the meaning set forth in Section 2.03(c)(ii) of this Agreement. 1.20 "Indemnitor" shall have the meaning set forth in Section 5.02 of this Agreement. 3 1.21 "Internal Distribution" shall mean the Corporate Transaction consisting of the distribution by First National Bank of Pennsylvania ("FNB-PA") to Parent of all of the capital stock of the national banking association to be formed by FNB-PA for the purpose of transferring to such association all of the Florida operations of the businesses presently conducted by First National Trust Company and its Affiliates. 1.22 "IRS" shall have the meaning set forth in Section 2.04(d)(v) of this Agreement. 1.23 "Parent" shall have the meaning set forth in the preamble to this Agreement. 1.24 "Parent Affiliate" or "Affiliate of Parent" shall include all of the Affiliates listed on Exhibit A attached hereto. Neither SpinCo nor any SpinCo Affiliate shall be considered an Affiliate of Parent. 1.25 "Parent Group" shall mean, for any period, Parent and its then Affiliates. Under no circumstances shall the Parent Group include any member of the SpinCo Group. 1.26 "Parent Notification Letter" shall have the meaning set forth in Section 2.03(c)(ii) of this Agreement. 1.27 "Parent Tainting Act" means any act or acts first occurring after the Distribution Date of or involving any Person (other than SpinCo or any Person that is an Affiliate of SpinCo immediately before or immediately after such act or acts), or any omission or omissions of any Person (other than SpinCo or any Person that is an Affiliate of SpinCo immediately before or immediately after such omission or omissions), of a commercially reasonable act or acts first available to it after the Distribution Date, if such act or omission contributes to a Final Determination that the Distribution or the Internal Distribution results in any Distribution Related Gain. 1.28 "Period After Distribution" shall mean (i) any taxable year or other taxable period beginning after the Distribution Date and, (ii) that part of the taxable year or other taxable period that includes the Distribution Date that begins on the day immediately after the Distribution Date. 1.29 "Period Before Distribution" shall mean (i) any taxable year or other taxable period that ends on, at the close of, or before the Distribution Date and, (ii) that part of the taxable year or other taxable period that includes the Distribution Date that ends on and includes the Distribution Date. 1.30 "Person" shall mean any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization, government or department or agency of a government. 1.31 "Restructuring Taxes" means any taxes resulting from the Corporate Transactions, the Internal Distribution or the Distribution, including, but not limited to, any taxes imposed pursuant to or as a result of Sections 311 or 1001 of the Code or the Treasury Regulations under Section 1502 of the Code (and any applicable similar federal, state, local or 4 foreign taxes, together with related interest, penalties and additions to tax), but excluding any taxes imposed as a result of a Final Determination that the Distribution or the Internal Distribution results in any Distribution Related Gain. 1.32 "SpinCo" shall have the meaning set forth in the preamble to this Agreement. 1.33 "SpinCo Affiliate" or "Affiliate of SpinCo" shall include all of the Affiliates listed on Exhibit B attached hereto. Neither Parent nor any Parent Affiliate shall be considered an Affiliate of SpinCo. 1.34 "SpinCo Group" shall mean, for any period, SpinCo and its then Affiliates. Under no circumstances shall the SpinCo Group include any member of the Parent Group. 1.35 "SpinCo Tainting Act" means any act or acts first occurring after the Distribution Date of or involving any Person (other than Parent or any Person that is an Affiliate of Parent immediately before or immediately after such act or acts), or any omission or omissions of any Person (other than Parent or any Person that is an Affiliate of Parent immediately before or immediately after such omission or omissions) of a commercially reasonable act or acts first available to it after the Distribution Date, if such act or omission contributes to a Final Determination that the Distribution or the Internal Distribution results in any Distribution Related Gain. 1.36 "SpinCo Tax Adjustment Amount" shall have the meaning set forth in Section 2.03(c)(ii) of this Agreement. 1.37 "Stock" shall mean common or preferred stock or any instrument that might reasonably be treated as common or preferred stock for federal income tax purposes. However, for purposes of Section 2.04(d) only, the term Stock shall not include stock acquired by a person in connection with such person's performance of services as an employee, director, or independent contractor for Parent or SpinCo, or a Person related to such corporation under Section 355(d)(7)(A) of the Code (and that is not excessive by reference to the services performed) in a transaction in which Section 83 or Section 421(a) of the Code applies. The preceding sentence shall not apply if the acquiring person or a coordinated group (within the meaning of Treas. Reg.ss. 1.355-7T(h)(4)) of which such person is a member is a controlling shareholder (within the meaning of Treas. Reg.ss. 1.355-7T(h)(3)) or a 10-percent shareholder (within the meaning of Treas. Reg.ss. 1.355-7T(h)(9)) of the acquired company (i.e., Parent or SpinCo) immediately after the acquisition. 1.38 "Stock Options" shall mean call options, warrants, convertible obligations, the conversion feature of convertible stock, put options, redemption agreements (including rights to cause the redemption of stock), any other instruments that provide for the right or possibility to issue, redeem, or transfer stock (including an option on an option), or any other similar interest treated as an option; provided, however, for purposes of Section 2.04(d)(i) only, the term "Stock Options" only includes instruments that provide for the right or possibility to issue, redeem or transfer stock (including an option on an option), or any similar interest and does not include: (i) an option that is part of a security arrangement in a typical lending transaction (including a purchase money loan), if the arrangement is subject to customary commercial conditions; (ii) an 5 option to acquire stock in Parent or SpinCo with customary terms and conditions provided to a person in connection with such person's performance of services as an employee, director, or independent contractor for Parent or SpinCo or a person related to it under Section 355(d)(7)(A) of the Code (and is not excessive by reference to the services performed), provided that (a) the transfer of stock pursuant to such option is described in Section 421(a) of the Code or (b) the option is nontransferable within the meaning of Treas. Reg. ss. 1.83-3(d) and does not have a readily ascertainable fair market value as defined in Treas. Reg. ss. 1.83-7(b); (iii) an option entered into between shareholders of a corporation (or a shareholder and the corporation) that is exercisable only upon death, disability or mental incompetency of the shareholder, or, in the case of stock acquired in connection with the performance of services for a corporation, or a person related to the corporation under Section 355(d)(7)(A) (and that is not excessive by reference to the services performed), the shareholder's separation from service; and (iv) a bona fide right of first refusal regarding the corporation's stock with customary terms, entered into between shareholders of a corporation (or between the corporation and a shareholder). 1.39 "tax" or "taxes" whether used in the form of a noun or adjective, shall mean all forms of taxation, whenever created or imposed, including, but not limited to, taxes on or measured by income, franchise, gross receipts, sales, use, excise, payroll, personal property (tangible or intangible), real property, ad-valorem, value-added, leasing, leasing use or other taxes, levies, imposts, duties, charges or withholdings of any nature whether imposed by a nation, locality, municipality, government, state, federation, or other governmental body (a "Taxing Authority"). Whenever the term "tax" or "taxes" is used (including, without limitation, in the context of any duty to pay, or to reimburse another party or indemnify for taxes or refunds or credits of taxes) it shall include penalties, fines, additions to tax and interest thereon. The term "tax" or "taxes" does not include any unclaimed or abandoned property remitted or required to be remitted to any Taxing Authority under applicable law. 1.40 "Tax Attribute" shall mean any net operating loss, capital loss, credit or other tax attribute (other than the basis of property) relevant to the calculation of a tax liability. 1.41 "Taxing Authority" shall have the meaning set forth in Section 1.39 of this Agreement. 1.42 "Tax Item" shall mean any item of income, capital gain, net operating loss, capital loss, deduction, credit or other tax attribute relevant to the calculation of a tax liability. 1.43 "Tax Return" shall mean any report, return, information statement, questionnaire, evidence of tax payments, invoice or other document received from, or required to be filed or that may be filed for any period with, any Taxing Authority (whether domestic or foreign) in connection with any tax or taxes (whether domestic or foreign). All capitalized terms used but not defined herein shall have the meaning given to such terms in the Distribution Agreement. 6 ARTICLE II TAX RETURNS, TAX PAYMENTS AND TAX SHARING OBLIGATIONS 2.01 Obligations to File Tax Returns. (a) Parent shall prepare and shall timely file or cause to be filed (i) all Tax Returns filed on a separate company basis for any member of the Parent Group, (ii) all Tax Returns filed on a consolidated, combined or unitary basis that include members of the Parent Group other than any Common Consolidated Tax Return, and (ii) all Common Consolidated Tax Returns. SpinCo shall reimburse Parent for SpinCo's proportionate share of the expenses incurred by Parent in the preparation and filing of a Common Consolidated Tax Return. For purposes of this Section 2.01(a), SpinCo's proportionate share of the expenses with respect to a Common Consolidated Tax Return shall be determined by multiplying the total expenses by a fraction, the numerator of which equals the number of SpinCo Affiliates included in the return and the denominator of which equals the total number of SpinCo Affiliates and Parent Affiliates included in the return. Subject to Section 2.03(c) hereof, Parent shall make full and timely payment of all taxes shown due on all Tax Returns described in this Section 2.01(a). (b) SpinCo shall prepare, at its own expense, and shall timely file or cause to be filed (i) all Tax Returns with respect to the SpinCo Group for any taxable year or other taxable period beginning after the Distribution Date, (ii) all Tax Returns filed on a separate company basis, for any member of the SpinCo Group, and (iii) all Tax Returns filed on a consolidated, combined or unitary basis that include members of the SpinCo Group other than any Common Consolidated Tax Return. SpinCo shall make full and timely payment of all taxes shown due on all Tax Returns described in this Section 2.01(b). (c) To the extent required or permitted by law or administrative practice, in the case of any Common Consolidated Tax Return that includes the Distribution Date, the taxable year of the SpinCo Group member shall be treated as closing at the close of the Distribution Date. 2.02 Obligation to Remit Taxes. SpinCo and Parent shall each timely remit or cause to be remitted any taxes due in respect of any tax for which it is required to file a Tax Return hereunder and shall be entitled to reimbursement for such payments only to the extent provided in Section 2.03. 2.03 Tax Sharing Obligations and Prior Agreements. (a) SpinCo's Obligations. Other than liabilities dealt with elsewhere in this Agreement, SpinCo shall be liable for and shall indemnify and hold Parent and its Affiliates harmless on an After Tax Basis against any tax liability for any member of the SpinCo Group, including the portion of any tax liability resulting from the inclusion of any member of the SpinCo Group in a Common Consolidated Tax Return as determined under Section 2.03(c). Except as provided in Section 3.01 for refunds attributable to carrybacks, SpinCo shall be entitled to any refund of or credit for taxes for which SpinCo 7 is responsible under this Section 2.03(a) or with respect to which SpinCo is required to file a Tax Return under Section 2.01 hereof. (b) Parent's Obligations. Other than liabilities dealt with elsewhere in this Agreement, Parent shall be liable for, and shall hold SpinCo and its Affiliates harmless on an After Tax Basis against any tax liability of any member of the Parent Group. Except as provided in Section 3.01 for refunds attributable to carrybacks, Parent shall be entitled to any refund of or credit for taxes for any periods for which Parent is responsible under this Section 2.03(b) or with respect to which Parent is required to file a Tax Return under Section 2.01 hereof. (c) SpinCo's Share of the Common Consolidated Tax Return Liability. SpinCo's proportionate share of the tax liability with respect to a Common Consolidated Tax Return, or with respect to any estimated tax payment relating to any such Tax Return, shall be determined by multiplying the Common Consolidated Tax Return tax liability by a fraction, the numerator of which equals the separate return tax liability of the SpinCo Group and the denominator of which equals the sum of the separate return tax liabilities of the Parent Group and the SpinCo Group. For purposes of this determination, the separate return tax liabilities of the Parent Group and the SpinCo Group are, in each case, determined as if the Common Consolidated Tax Return included only the Tax Items of the respective group, applying the principles of Section 1552(a)(2) of the Code and Treas. Reg.ss. 1.1552-1(a)(2). For purposes of this Section 2.03(c) and Section 2.03(d), the tax liability of the Common Consolidated Tax Return and the separate return tax liability of the SpinCo Group and the Parent Group shall not include Restructuring Taxes or any tax liability resulting from Distribution Related Gain. (d) Payment for use of Tax Attributes. With respect to any Common Consolidated Tax Return, (i) SpinCo shall reimburse Parent on an After Tax Basis for the tax benefit attributable to the use of Tax Attributes of the Parent Group to reduce SpinCo's proportionate share of the Common Consolidated Tax Return tax liability to an amount that is less than the separate return tax liability of the SpinCo Group, and (ii) Parent shall reimburse SpinCo on an After Tax Basis for the tax benefit attributable to the use of Tax Attributes of the SpinCo Group to reduce Parent's proportionate share of the Common Consolidated Tax Return tax liability to an amount that is less than the separate return tax liability of the Parent Group. For purposes of this Section 2.03(d), (i) the separate return tax liabilities of the Parent Group and the SpinCo Group are, in each case, determined as if the Common Consolidated Tax Return included only the Tax Items of the respective group, applying the principles of Section 1552(a)(2) of the Code and Treas. Reg.ss. 1.1552-1(a)(2), and (ii) Parent's proportionate share of the tax liability with respect to a Common Consolidated Tax Return shall be determined by multiplying the Common Consolidated Tax Return tax liability by a fraction, the numerator of which equals the separate return tax liability of the Parent Group and the denominator of which equals the sum of the separate return tax liabilities of the Parent Group and the SpinCo Group. (e) Notification and contest procedures. (i) Parent shall, in good faith, calculate SpinCo's tax liability, if any, under Section 2.03(c), and the amount of any 8 payment obligation of Parent or SpinCo under Section 2.03(d), and notify SpinCo of the amount of its liability, if any, under Section 2.03(a) and the amount of any Parent or SpinCo payment obligation under Section 2.03(d) (the "Parent Notification Letter"). Notification of a SpinCo tax liability and payment obligation under this clause (i) of this Section 2.03(e) shall constitute a request for payment, and, subject to clause (ii) of this Section 2.03(e), SpinCo shall pay such amount, in immediately available funds, to Parent within five days after receipt of such notice from Parent, provided that SpinCo shall not be obligated to make such payment to Parent earlier than ten days prior to the due date for the filing or making of the relevant Tax Return or estimated tax payment. Subject to clause (ii) of this Section 2.03(e), Parent shall pay the amount of its obligation under Section 2.03(d), in immediately available funds, to SpinCo within ten days of the date of mailing (or other type of delivery) by Parent of the Parent Notification Letter, provided that Parent shall not be obligated to make such payment to SpinCo earlier than the due date for the filing or making of the relevant Tax Return or estimated tax payment. (ii) If SpinCo determines in good faith that the amount of its tax liability under Section 2.03(a) or the amount of any payment obligation under section 2.03(d) differs from the corresponding amount in the Parent Notification Letter, SpinCo shall notify Parent of such difference (the "SpinCo Tax Adjustment Amount") (such determination, with calculations in reasonable detail, being referred to as the "First SpinCo Notification Letter," which SpinCo shall deliver to Parent no later than 30 days after the date of receipt of the Parent Notification Letter). If Parent determines in good faith that SpinCo's determination of the SpinCo Tax Adjustment Amount is incorrect, Parent shall notify SpinCo of such determination (the "Second Parent Notification Letter") within thirty days of receipt of the First SpinCo Notification Letter. If the dispute is not resolved by mutual accord within thirty days of SpinCo's receipt of the Second Parent Notification Letter, the dispute shall be resolved under the provisions of Article VIII. Until Parent and SpinCo reach agreement, or any dispute between them is resolved pursuant to Article VIII, as to the SpinCo Tax Adjustment Amount, the provisions of this Section 2.03(a) and 2.03(d) shall continue to apply and payments shall be made by the parties in the amounts set forth in the Parent Notification Letter in accordance with clause (i) of this Section 2.03(e). Within ten days of reaching an agreement or resolution, Parent shall pay to SpinCo the agreed amount after taking into account any payments made under clause (i) of this Section 2.03(e), together with interest at a rate equal to the Applicable Federal Rate from the date of SpinCo's payment pursuant to this Section 2.03(e). (f) Prior Agreements. Except as set forth in this Agreement and in consideration of the mutual indemnities and other obligations of this Agreement, any and all prior tax sharing agreements or practices between any member of the Parent Group and any member of the SpinCo Group shall be terminated as of the beginning of the day after the Distribution Date. 9 2.04 Restructuring Taxes and Expenses; Other Taxes Relating to the Distribution. (a) Restructuring Taxes and Expenses. Notwithstanding any other provision of this Agreement to the contrary, Taxes and expenses attributable to the transactions set forth in Exhibit C shall be borne in the manner set forth in such Exhibit. Any remaining Restructuring Taxes (together with any reasonable expenses, including, but not limited to, attorney's fees, incurred in defending any audit or examination with respect to Restructuring Taxes) and expenses incurred to effect the Distribution and the Internal Distribution shall be borne by Parent and SpinCo pro rata based on their relative Book Value. (b) Distribution Related Gain. (i) In the event of a Final Determination that the Distribution or the Internal Distribution results in any Distribution Related Gain (other than a Final Determination that the Distribution or the Internal Distribution results in any Distribution Related Gain which determination would not have been made but for a Parent Tainting Act or a SpinCo Tainting Act), the liability of Parent and SpinCo for any taxes or liability arising from such Final Determination, including any liability to shareholders arising from such Final Determination (together with any reasonable expenses, including, but not limited to, attorney's fees incurred in defending against any liability) shall be borne by Parent and SpinCo pro rata based on their relative Book Value. (ii) In the event of a Final Determination that the Distribution or the Internal Distribution results in any Distribution Related Gain which determination would not have been made but for the occurrence of both a Parent Tainting Act and a SpinCo Tainting Act, any taxes or liability resulting from such Final Determination (together with any reasonable expenses, including, but not limited to, attorney's fees incurred in defending against any liability) shall be borne by Parent and SpinCo pro rata based on their relative Book Value. (iii) In the event of a Final Determination that the Distribution or the Internal Distribution results in any Distribution Related Gain which determination would not have been made but for the occurrence of either a Parent Tainting Act and a SpinCo Tainting Act, and both such Acts occurred, any taxes or liability resulting from such Final Determination (together with any reasonable expenses, including, but not limited to, attorney's fees incurred in defending against any liability) shall be borne by the party whose Act occurred first. (c) Covenant and Indemnification for SpinCo Tainting Acts. SpinCo covenants that neither SpinCo nor any member of the SpinCo Group shall commit or be party to or the subject of any SpinCo Tainting Act. In the event of a Final Determination that the Distribution or the Internal Distribution results in any Distribution Related Gain which Final Determination would not have been made but for a SpinCo Tainting Act, SpinCo shall pay, and shall indemnify and hold harmless Parent and its Affiliates on an After Tax Basis, from and against, any liability of Parent or its Affiliates, or of SpinCo or its Affiliates, to any Taxing Authority, Parent shareholders or SpinCo shareholders (together with any reasonable expenses, including, but not limited to, attorney's fees 10 incurred in defending against any such liability) resulting from a Final Determination that the Distribution or the Internal Distribution results in any Distribution Related Gain. (d) Covenant and Indemnification for Parent Tainting Acts. Parent covenants that neither Parent nor any member of the Parent Group shall commit or be party to or the subject of any Parent Tainting Act. In the event of a Final Determination that the Distribution or the Internal Distribution results in any Distribution Related Gain which Final Determination would not have been made but for a Parent Tainting Act, Parent shall pay, and shall indemnify and hold harmless SpinCo and its Affiliates on an After Tax Basis, from and against, any liability of SpinCo or its Affiliates, or of Parent or its Affiliates, to any Taxing Authority, Parent shareholders or SpinCo shareholders (together with any reasonable expenses, including, but not limited to, attorney's fees incurred in defending against any such liability) resulting from a Final Determination that the Distribution or the Internal Distribution results in any Distribution Related Gain. (e) Reporting and Restrictions. (i) During the two-year period commencing immediately after the Distribution Date, at quarterly intervals and at any other time reasonably requested by the party to receive such report, Parent will provide to SpinCo and SpinCo will provide to Parent a report ("Report") listing for the period commencing immediately after the Distribution Date and ending on the date of the Report any issuance, sale, transfer, assignment or redemption (or any agreement concerning the issuance, sale, transfer, assignment or redemption) of the reporting corporation's or any of its Affiliates': (x) Stock (excluding any sale, transfer, or assignment of Stock that meets the requirements of the safe harbor in Treas. Reg.ss. 1.355-7T(d)(5)); (y) Stock Options; or (z) Assets (excluding: (A) any sale, transfer, or assignment of Assets that is fully taxable to the selling, transferring, or assigning corporation; and (B) any other sale, transfer, or assignment of Assets that in the aggregate does not exceed 5 percent of the gross assets of the selling, transferring, or assigning corporation as reflected on such corporation's balance sheet during any 90 day period). (ii) At any time during the two-year period commencing immediately after the Distribution Date that the issuance, sale, transfer, assignment or redemption (or any agreement concerning the issuance, sale, arrangement, assignment or redemption) of the reporting corporation's (or its Affiliates) Stock or Stock Options would exceed 10 percent by vote or value of the reporting corporation's (or its Affiliates) outstanding Stock (treating Stock Options as exercised) when aggregated with all prior such issuances, sales, transfer, assignments or redemptions occurring after the Distribution Date, or the issuance, sale, transfer, or assignment (or any agreement concerning the issuance, sale, transfer, or assignment) of the reporting corporation's (or its Affiliates) Assets, when aggregated with all prior such issuances, sales, transfers of assignments occurring after the Distribution Date, exceeds 10 percent of the gross assets of the selling, transferring, or assigning corporation as reflected on such corporation's balance sheet, a notice ("Notice") of such transaction must be given to the other party within 10 days of entering into any agreement concerning the issuance, sale, arrangement, assignment or redemption of the reporting corporation's (or its Affiliate's) stock (but in no event less than 30 days prior to 11 such issuance, transfer, assignment or redemption). For purposes of this clause (ii) of Section 2.04(e), the exclusions from Parent's and SpinCo's Asset reporting obligations contained in clause (i) of Section 2.04(e) shall not apply, but the exclusions to Parent's and SpinCo's Stock reporting obligations contained in clause (i) of Section 2.04(e) shall apply. (iii) Parent's and SpinCo's obligations to issue Reports and Notices will be extended beyond the two-year reporting period (not to exceed five years after the Distribution Date) until the consummation of any agreement resulting in the issuance, sale, transfer or assignment of the reporting corporation's Stock, Stock Options or Assets that is reported or required to be reported during the two-year period after the Distribution Date. (iv) If, before the two-year anniversary of the Distribution, the issuances, sales, transfers, assignments, or redemptions (or agreements concerning the issuance, sale, transfer, assignment or redemption) of the reporting corporation's Stock, Stock Options or Assets that are required to be reported pursuant to clause (ii) of this Section 2.04(e), in the aggregate, would equal or exceed (as calculated using a method provided by a nationally recognized tax advisor acceptable to both Parent and SpinCo) a 45 Percent Interest in such reporting company (the "45 Percent Threshold"), such company (or companies, if both have reached the 45 Percent Threshold) shall not act or fail to take any commercially reasonable act that would cause the 45 Percent Threshold to be exceeded without obtaining an opinion from a nationally recognized tax advisor (acceptable to both Parent and SpinCo) that such issuance, sale, transfer, assignment, or redemption (or agreement concerning the issuance, sale, transfer, assignment or redemption) will not cause Section 355(e) or (f) of the Code to apply to the Distribution or the Internal Distribution. The expense of obtaining any opinion under this clause (iv) of Section 2.04(e) will be borne by the party whose issuance, sale, transfer, assignment or redemption is the subject of such opinion. The party that receives such ruling or opinion shall forward a copy of such ruling or opinion to the other party at least thirty days prior to the consummation of the transaction contemplated to occur and with respect to which the ruling or opinion relates. (v) For purposes of this Section 2.04(e), Parent and SpinCo will not be required to report any issuance, sale, transfer, assignment, or redemption of Stock, Stock Options or Assets with respect to which (y) the Internal Revenue Service ("IRS") has issued a private letter ruling to Parent or SpinCo, or (z) a nationally recognized tax advisor acceptable to both Parent and SpinCo has issued an opinion that such issuance, sale, transfer, assignment, or redemption should not be required to be taken into account in applying Sections 355(e) or 355(f) of the Code by reason of any authority upon which taxpayers are authorized to rely. The expense of obtaining any opinion under this clause (v) of Section 2.04(e) from a nationally recognized tax advisor or an IRS private letter ruling will be borne by the party whose issuance, sale, transfer, assignment or redemption is the subject of such opinion or private letter ruling. The party that 12 receives such ruling or opinion shall forward a copy of such ruling or opinion to the other party at least thirty days prior to the consummation of the transaction contemplated to occur and with respect to which the ruling or opinion relates. ARTICLE III CARRYBACKS, DISTRIBUTIONS AND ELECTIONS 3.01 Carrybacks. (a) To the extent permitted by law, any member of the SpinCo Group shall be entitled, but not required, to carry back any Tax Attribute from a taxable period ending after the Distribution Date to a taxable period ending before or including the Distribution Date. At the direction of SpinCo, Parent shall file (or cause to be filed) any claim for refund relating to such carryback. Any refund of taxes resulting from any such carryback by a member of the SpinCo Group shall be payable to SpinCo as provided in Section 4.01. In addition, if the SpinCo Tax Attribute is carried to a Common Consolidated Tax Return and reduces the separate return tax liability of the SpinCo Group (within the meaning of Section 2.03(c)), SpinCo's share of the Common Consolidated Tax Return liability for the carryback year shall be recomputed ("SpinCo's Recomputed Share"), and Parent shall pay to SpinCo an amount equal to the sum of (i) the excess of SpinCo's share of the Common Consolidated Tax Return liability as originally computed (but not in excess of SpinCo's payment of such liability) over SpinCo's Recomputed Share, and (ii) the payments made by SpinCo for the use of a Tax Attribute of the Parent Group to the extent the Tax Attribute of the Parent Group is replaced by the Tax Attribute of the SpinCo Group as a result of the carryback. SpinCo shall indemnify and hold the Parent Group harmless on an After Tax Basis for any tax liability that results from any refund claim relating to a carryback under this Section 3.01(a). Notwithstanding any other provision of this Agreement to the contrary, Parent shall be considered the Controlling Party for purposes of Article V for any tax audit or proceeding involving a Common Consolidated Tax Return for any period ending before or including the Distribution Date to which the net operating loss or other item is carried and Parent shall have sole right to contest such audit or proceeding and to employ advisors of its choice under Section 5.01 provided, however, that Parent shall (i) permit SpinCo to participate at its own expense in any proceedings relating to any claim for refund pursuant to this Section 3.01(a); (ii) at SpinCo's request, contest any denial (in whole or in part) of any such claim for refund, provided that SpinCo shall agree to pay to Parent on demand all out-of-pocket costs, losses and expenses (including, but not limited to, legal and accounting fees) paid or incurred by Parent in connection with contesting such claim; (iii) not settle any such claim for refund without SpinCo's consent (which consent shall not be unreasonably delayed or withheld); provided that if Parent wishes to settle such claim and SpinCo does not consent, SpinCo will pay to Parent on demand all out-of-pocket costs, losses and expenses (including, but not limited to, legal and accounting fees) paid or incurred by Parent in connection with contesting such claim, regardless of whether SpinCo requested such claim to be contested; and (iv) to the extent SpinCo is not participating, shall keep SpinCo informed as to all significant developments relating to any such claim for refund or the contest of any denial thereof. 13 (b) To the extent permitted by law, any member of the Parent Group shall be entitled, but not required, to carry back any net operating loss or other item from a taxable period ending after the Distribution Date to a taxable period ending before or including the Distribution Date. Any refund of taxes resulting from any such carryback by a member of the Parent Group shall be payable to Parent as provided in Section 4.01. Parent shall indemnify and hold the SpinCo Group harmless for any tax liability that results from any refund claim relating to a carryback under this Section 3.01(b). Notwithstanding any other provision of this Agreement to the contrary, Parent shall be considered the Controlling Party for purposes of Article V for any tax audit or proceeding involving any period ending before or including the Distribution Date to which the net operating loss or other item is carried back and Parent shall have sole right to contest such audit or proceeding and to employ advisors of its choice under Section 5.01. 3.02 Distributions and Elections. (a) Except as contemplated by the Corporate Transactions, no member of the SpinCo Group shall make any tax election, pay or cause to be paid any distribution from an Affiliate or take any other action that would cause an actual increase in the taxes for which the Parent Group is responsible or would cause an actual reduction in the amount of any refund of taxes payable to the Parent Group unless Parent and its Affiliates are indemnified and held harmless, on an After Tax Basis, for the detriment resulting from such act. (b) Except as contemplated by the Corporate Transactions, no member of the Parent Group shall make any tax election, pay or cause to be paid any distribution from an Affiliate or take any other action that would cause an actual increase in the taxes for which the SpinCo Group is responsible or would cause an actual reduction in the amount of any refund of taxes payable to the SpinCo Group unless SpinCo and its Affiliates are indemnified and held harmless, on an After Tax Basis, for the detriment resulting from such act. (c) Neither SpinCo nor Parent shall be liable to the other under Section 3.02(a) or Section 3.02(b) for any tax position on a Tax Return that independent tax counsel selected by SpinCo (in the case of a Tax Return position desired to be taken by any member of the SpinCo Group) or Parent (in the case of a Tax Return position desired to be taken by any member of the Parent Group), the identity of which is reasonably acceptable to the other party, opines is necessary and required to comply with the Code, the regulations or other applicable law. (d) In the absence of a controlling change in law or circumstances, and unless deviation from past practice would have no adverse effect on any of the parties, to the extent permitted by law, SpinCo and Parent will file any Tax Return which such party is responsible to file for any Period Before Distribution or for the period that includes the Distribution Date consistent with the tax principles and methods reflected in the most recent Tax Returns involving similar Tax Items filed prior to the Distribution Date. 14 ARTICLE IV PAYMENTS 4.01 Payments. Subject to the provisions of Section 2.03 and Section 5.03, and except as otherwise explicitly provided herein, all payments due hereunder to a party shall be paid not later than twenty days after the receipt or crediting of a refund or the receipt of notice of a Final Determination by reason of which a party is liable for an indemnified cost pursuant to this Agreement. In the event that such payment is not made within ten days after such receipt, credit or notice, interest shall be charged to the indemnifying party at a rate equal to the Applicable Federal Rate from the date on which the indemnifying party receives such receipt, credit or notice to the date the payment is made. 4.02 Notice. SpinCo and Parent shall give each other prompt written notice of any payment that may be due under this Agreement. 4.03 Reimbursement. Any party hereto that is entitled to indemnification, payment or reimbursement pursuant to the terms of this Agreement shall be reimbursed on an After Tax Basis for all reasonable expenses (including, but not limited to, attorney's fees) incurred in connection with the enforcement of its rights hereunder. The preceding sentence shall not be construed to limit a party's entitlement to reimbursements or payments to which it otherwise is entitled pursuant to the terms of this Agreement. ARTICLE V TAX AUDITS 5.01 General. Except as provided in Sections 3.01, 5.02 and 6.02 hereof, each of SpinCo and Parent shall have sole responsibility for all audits or other proceedings with respect to Tax Returns that it is required to file under Section 2.01 (the "Controlling Party"). Except as provided in Section 5.03 hereof, the Controlling Party shall have the sole right to contest the audit or proceeding and to employ advisors of its choice.. 5.02 Indemnified Claims in General. SpinCo and Parent shall promptly notify the other in writing prior to the issuance of an actual notice of assessment by the relevant Taxing Authority (for example, if by the IRS, prior to the issuance of a Form 5701 Notice of Proposed Adjustment) of any proposed adjustment to a Tax Return that may result in liability of the other party (the "Indemnitor") under this Agreement. If there is no Indemnitor other than the Controlling Party, Sections 5.02 and 5.03 are inapplicable and Section 5.01 shall govern the rights of the parties with respect to the audit or proceeding. If the Indemnitor is not also the Controlling Party, the Controlling Party shall provide the Indemnitor with information about the nature and amounts of the proposed adjustments and shall permit the other party to participate in the proceeding at its own expense, provided, however, that the failure of the Controlling Party to notify or provide such information to the Indemnitor shall not affect the Indemnitor's indemnity obligations hereunder unless and to the extent the Indemnitor is materially prejudiced thereby. Upon a Final Determination of the assessment or proposed adjustment, the Indemnitor shall pay its pro rata share (based on its share of liability resulting from the Final Determination) of all reasonable expenses (including, but not limited to, legal and accounting fees) incurred by the 15 Controlling Party in connection with the assessment or proposed adjustment within seven days after a written request by the Controlling Party. 5.03 Certain Tax Claims. (a) Any issue raised by any Taxing Authority in any tax inquiry, audit, examination, investigation, dispute, litigation or other proceeding relating to a Common Consolidated Tax Return that would result in tax liability to the Indemnitor is defined as a "Claim." Except as provided in Sections 3.01(b), 5.03(d) and the second sentence of Section 5.02 hereof, and notwithstanding any other provision of this Agreement that may be construed to the contrary, the Controlling Party agrees to contest any Claim and not to settle any Claim without the prior written consent of the Indemnitor, provided that (i) the Controlling Party shall provide notice to Indemnitor pursuant to Section 5.02 hereof of any Claim, (ii) within thirty days after notice by the Controlling Party to the Indemnitor of a Claim is received by the Indemnitor, the Indemnitor shall (1) request in writing that such Claim be contested, and (2) provide an opinion of independent tax counsel, selected by the Indemnitor and reasonably acceptable to the Controlling Party, to the effect that it is more likely than not that a Final Determination shall be substantially consistent with the Indemnitor's position relating to such Claim, (iii) the Indemnitor agrees to pay on demand all out-of-pocket costs, losses and expenses (including, but not limited to, legal and accounting fees) paid or incurred by the Controlling Party in connection with contesting such Claim, except for a Claim where the expenses are shared pursuant to Section 2.04(a) hereof, and (iv) the Controlling Party, after reasonable consultation with the Indemnitor, shall determine in its sole discretion the nature of all actions to be taken to contest such Claim, including (1) whether any action to contest such Claim shall initially be by way of judicial or administrative proceeding, or both, (2) whether any such Claim shall be contested by resisting payment thereof or by paying the same and seeking a refund thereof, and (3) the court or other judicial body before which judicial action, if any, shall be commenced. To the extent the Indemnitor is not participating, the Controlling Party shall keep the Indemnitor and, upon request by the Indemnitor, its counsel, informed as to the progress of the contest. (b) If the Indemnitor requests that the Controlling Party accept a settlement of a Claim offered by any Taxing Authority and if such Claim may, in the reasonable discretion of the Controlling Party, be settled without prejudicing any claims such Taxing Authority may have with respect to matters other than the transactions contemplated by the Distribution Agreement, the Controlling Party shall either accept such settlement offer or agree with the Indemnitor that the Indemnitor's liability with respect to such Claim shall be limited to the lesser of (i) an amount calculated on the basis of such settlement offer or (ii) the amount calculated on the basis of a Final Determination. After a settlement or a Final Determination, the Controlling Party shall reimburse the Indemnitor in an amount equal to the excess, if any, of the amount of expenses paid by the Indemnitor pursuant to clause (iv) of Section 5.03(a) over the Indemnitor's pro rata portion of such expenses based on the Indemnitor's share of the liability with respect to such Claim as determined under the first sentence of this Section 5.03(b). 16 (c) If the Controlling Party shall elect to pay the Claim and seek a refund, the Indemnitor shall lend sufficient funds on an interest-free basis to the Controlling Party, and with no net after-tax cost to the Controlling Party, to cover any applicable indemnity obligations of the Indemnitor. To the extent such refund claim is ultimately disallowed, the loan or portion thereof equal to the amount of the refund claim so disallowed shall be applied against the Indemnitor's obligation to make indemnity payments pursuant to this Agreement. In addition, if the refund is ultimately disallowed, the Controlling Party shall reimburse the Indemnitor for the Controlling Party's pro rata portion of the expenses paid by the Indemnitor under clause (iv) of Section 5.03(a) based on the Controlling Party's share of the tax previously paid. To the extent such refund claim is allowed, the Controlling Party shall pay to the Indemnitor (i) the amounts loaned or advanced to the Controlling Party with respect to the indemnity obligation (not to exceed the Indemnitor's share of any refund), and (ii) the Controlling Party's pro rata portion of the expenses paid by the Indemnitor under clause (iv) of Section 5.03(a) based on the Controlling Party's share of any refund, within ten days of the receipt of such refund (or if the Controlling Party would have received such refund but for the existence of a counterclaim or other claim not indemnified by the Indemnitor under this Agreement, within ten days of the final resolution of the contest), plus an amount equal to any interest received (or that would have been received) from the Taxing Authority that is properly attributable to such amount. (d) Except as provided below, the Controlling Party shall not settle a Claim that Indemnitor is entitled to require the Controlling Party to contest under Section 5.03(a) without the prior written consent of the Indemnitor (which consent shall not be unreasonably withheld). At any time, whether before or after commencing to take any action pursuant to this Section 5.03 with respect to any Claim, the Controlling Party may decline to take action with respect to such Claim and may settle such Claim without the prior written consent of the Indemnitor by notifying the Indemnitor in writing that the Indemnitor is released from its obligations to indemnify the Controlling Party with respect to such Claim (which notification shall release the Indemnitor from such obligations except to the extent the Indemnitor has agreed in writing that it would be willing to have its liability calculated on the basis of a settlement offer, as provided in Section 5.03(b), at that point in the contest) and with respect to any Claim the resolution of which is based on the outcome of such Claim. If the Controlling Party settles any Claim without the consent of the Indemnitor or otherwise takes or declines to take any action pursuant to this paragraph, the Controlling Party shall (i) reimburse the Indemnitor for all the expenses paid by the Indemnitor pursuant to clause (iv) of Section 5.03(a), and (ii) pay to the Indemnitor any other amounts paid or advanced by the Indemnitor with respect to such Claim (other than amounts payable by the Indemnitor in connection with a settlement offer pursuant to Section 5.03(b)), plus interest at a rate equal to the Applicable Federal Rate from the date on which the amounts were advanced. 17 ARTICLE VI COOPERATION 6.01 General. Parent and SpinCo shall cooperate with each other in the filing of any Tax Return and the conduct of any audit or other proceeding and each shall execute and deliver such powers of attorney and make available such other documents as are reasonably necessary to carry out the intent of this Agreement. Each party agrees to notify the other party in writing of any audit adjustments that do not result in tax liability but can be reasonably expected to affect Tax Returns of the other party, or any of its Affiliates, for any period that includes or is subsequent to the Distribution Date. Each party agrees to treat the Distribution and the Internal Distribution for all income tax purposes as not causing the recognition of any gain or loss. 6.02 Cooperation With Respect to Tax Return Filings, Examinations and Tax Related Controversies. (a) SpinCo's Obligations. In addition to any obligations imposed pursuant to the Distribution Agreement, SpinCo and each other member of the SpinCo Group shall fully cooperate with Parent and its representatives, in a prompt and timely manner, in connection with (i) the preparation and filing of and (ii) any inquiry, audit, examination, investigation, dispute, or litigation involving, any Tax Return filed or required to be filed by or for any member of the Parent Group for any taxable period ending before or including the Distribution Date. Such cooperation shall include, but not be limited to, (x) the execution and delivery to Parent by the appropriate SpinCo Group member of any power of attorney required to allow Parent and its counsel to participate on behalf of SpinCo or such other SpinCo Group member in any inquiry, audit or other administrative proceeding and to assume the defense or prosecution, as the case may be, of any suit, action or proceeding for which Parent is the Controlling Party, (y) making available to Parent, during normal business hours, and within thirty days of any written request therefor, all books, records and information, and the assistance of all appropriate officers and employees, reasonably necessary or useful in connection with any tax inquiry, audit, examination, investigation, dispute, litigation or any other matter, and (z) use of its commercially reasonable best efforts in defending Parent's interests in any tax inquiry, audit, examination, investigation, dispute, litigation or any other matter for which SpinCo is the Controlling Party. (b) Parent's Obligations. In addition to any obligations imposed pursuant to the Distribution Agreement, Parent shall fully cooperate with SpinCo and its representatives, in a prompt and timely manner, in connection with (i) the preparation and filing of and (ii) any inquiry, audit, examination, investigation, dispute, or litigation involving, any Tax Return filed or required to be filed by or for any member of the SpinCo Group which includes Parent or any other member of the Parent Group. Such cooperation shall include, but not be limited to, (x) the execution and delivery to SpinCo by the appropriate Parent Group member of any power of attorney required to allow SpinCo and its counsel to participate on behalf of Parent or such other Parent Group member in any inquiry, audit or other administrative proceeding and to assume the defense or prosecution, as the case may be, of any suit, action or proceeding for which SpinCo is the Controlling Party, (y) making available to SpinCo, during normal business 18 hours, and within thirty days of any written request therefor, all books, records and information, and the assistance of all appropriate officers and employees, reasonably necessary or useful in connection with any tax inquiry, audit, examination, investigation, dispute, litigation or any other matter, and (z) the use of its commercially reasonable best efforts in defending SpinCo's interests in any tax inquiry, audit, examination, investigation, dispute, litigation or other matter for which Parent is the Controlling Party. (c) Remedy for Failure to Comply. If Parent reasonably determines that SpinCo is not for any reason fulfilling its obligations under Section 6.02(a) hereof, or if SpinCo reasonably determines that Parent is not for any reason fulfilling its obligations under Section 6.02(b) hereof, then Parent or SpinCo, as the case may be, shall have the right to appoint an independent nationally recognized public accounting or law firm to assist the other in meeting its obligations under this Section 6.02. Such entity shall have complete access, during normal business hours to all books, records and information, and the reasonable cooperation of all appropriate officers and employees, of Parent or SpinCo, as the case may be. In addition, the non-fulfilling party shall be responsible for any additional tax liability caused by the non-fulfillment of its obligations under Section 6.02(a) or (b). Anything in the preceding provisions of this Section 6.02(c) to the contrary notwithstanding, if the party alleged not to have fulfilled or be fulfilling its obligations under Section 6.02(a) or 6.02(b), as applicable, shall maintain that it fulfilled its obligations under Section 6.02(a) or Section 6.02(b), as applicable, and/or that no additional liability resulted from any non-fulfillment with respect to Section 6.02(a) or Section 6.02(b), as applicable, such matter or matters shall be determined by independent counsel agreed to by both the allegedly non-fulfilling party and the party alleging non-fulfillment (which determination shall be final and binding). If such independent counsel shall determine that the allegedly non-fulfilling party in fact fulfilled its obligations under Section 6.02(a) or Section 6.02(b), as applicable: (i) the fees and expenses of the accounting or law firm appointed pursuant to the first sentence of this Section 6.02(c) as well as the fees and expenses of the independent counsel making such determination shall be paid by the party alleging non-fulfillment, and (ii) liability for taxes alleged to have resulted from such non-fulfillment shall be borne by SpinCo or Parent without regard to this Section 6.02(c). If such independent tax counsel shall determine that the alleged non-fulfilling party did not fulfill its obligations under Section 6.02(a) or 6.02(b), as applicable: (i) the fees and expenses referred to in clause (i) of the preceding sentence shall be borne by the party determined not to have fulfilled such obligations, and (ii) the additional tax liability alleged to have been caused by such non-fulfillment shall be borne by the non-fulfilling party, unless and to the extent that such independent counsel determines that such taxes were not caused by such non-fulfillment, in which case and to which extent liability for taxes alleged to have resulted from such non-fulfillment shall be borne by SpinCo or Parent without regard to this Section 6.02(c). ARTICLE VII RETENTION OF RECORDS; ACCESS The Parent Group and the SpinCo Group shall (a) in accordance with their then current record retention policy, retain records, documents, accounting data and other information 19 (including computer data) necessary for the preparation and filing of all Tax Returns in respect of taxes of the Parent Group or the SpinCo Group for any taxable period ending before or including the Distribution Date for the audit of such Tax Returns; and (b) give to the other reasonable access to such records, documents, accounting data and other information (including computer data) and to its personnel (insuring their cooperation) and premises, for the purpose of the review or audit of such Tax Returns to the extent relevant to an obligation or liability of a party under this Agreement. At any time after the Distribution Date that either the Parent Group or the SpinCo Group proposes to destroy such material or information, it shall first notify the other Group in writing, and the other Group shall be entitled to receive such materials or information proposed to be destroyed. ARTICLE VIII DISPUTES 8.01 Negotiation. Subject to Section 8.05, in the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement, including any claim based on contract, tort, statute or constitution (collectively, "Agreement Disputes"), the management of the parties shall negotiate in good faith for a reasonable period of time to settle such Agreement Dispute; provided, however, such reasonable period shall not, unless otherwise agreed by the parties in writing, exceed sixty days from the time a party has first given written notice of such Agreement Dispute to the other party. 8.02 Mediation. If after such reasonable period of negotiation the parties are unable to settle such Agreement Dispute (and in any event, unless otherwise agreed in writing by the parties, after ninety days have elapsed from the time the parties began such negotiations), such Agreement Dispute shall be determined, at the request of any party, by mediation conducted in a location selected by the non-requesting party and acceptable to the requesting party, before a tax expert mutually agreeable to both parties. The mediation process shall continue as the exclusive method of resolving the Agreement Dispute (other than negotiation between the parties) until the earlier of the Agreement Dispute being resolved or the mediator finding in good faith that all settlement possibilities have been exhausted and that the matter is not resolvable through mediation. 8.03 Continuing Performance. Unless otherwise agreed in writing, the parties will continue to honor all other commitments under this Agreement during the course of dispute resolution pursuant to the provisions of this Article VIII with respect to all matters not subject to such dispute, controversy or claim. 8.04 Other Remedies. Nothing in this Article VIII shall limit the right that any party may otherwise have to seek to obtain from any court of competent jurisdiction (i) preliminary injunctive relief in order to preserve the status quo pending the resolution of the a dispute or (ii) temporary or permanent injunctive relief from any breach of any provisions of this Agreement. By seeking such relief, a party in no way waives its arbitration rights under this Agreement. 20 8.05 Tolling. The parties acknowledge and agree that any statute of limitations or any other defense that could be raised by a party based on the passage or expiration of time with respect to any Agreement Dispute shall be suspended and tolled during the period in which the parties are negotiating in good faith pursuant to Section 8.01 hereof and during the period in which any mediation is pending or conducted pursuant to Section 8.02 hereof. ARTICLE IX TERMINATION OF LIABILITIES Notwithstanding any other provision in this Agreement, any liabilities determined under this Agreement shall not terminate any earlier than the expiration of the applicable statute of limitation for such liability. All other covenants under this Agreement shall survive indefinitely. ARTICLE X MISCELLANEOUS PROVISIONS 10.01 Complete Agreement; Construction. This Agreement shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. 10.02 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. 10.03 Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement shall survive the Distribution Date. 10.04 Notices. All notices and other communications hereunder shall be in writing, shall reference this Agreement and shall be hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received: To Parent: F.N.B. Corporation One F.N.B. Boulevard Hermitage, Pennsylvania 16148 Attention: Stephen J. Gurgovits Telephone: (724) 981-6000 Facsimile: (724) 983-3515 21 To SpinCo: First National Bankshares of Florida, Inc. 2150 Goodlette Road North Naples, Florida 34102 Attention: Gary L. Tice Telephone: (239) 262-7600 Facsimile: (239) 435-7658 10.05 Waivers. The failure of any party to require strict' performance by any other party of any provision in this Agreement shall not waive or diminish that party's right to demand strict performance thereafter of that or any other provision hereof. 10.06 Amendments. This Agreement may not be modified or amended except by an agreement in writing signed by each of the parties hereto. 10.07 Successors and Assigns. The provisions to this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 10.08 Affiliates. Each of the parties hereto shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Affiliate of such party or by any entity that is contemplated to be an Affiliate of such party on and after the Distribution Date. 10.09 Third-Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and their respective Affiliates and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. 10.10 Title and Headings. Titles and headings to Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 10.11 Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Florida, without regard to conflicts of Laws principles. 10.12 Dispute Resolution. Any dispute arising out of or relating to the performance, breach or interpretation of this Agreement shall be handled in accordance with Article VIII of this Agreement (solely with respect to matters of computation) and Article V of the Distribution Agreement. 10.13 Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic or 22 operational effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. [Signature Page Follows] 23 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. F.N.B. CORPORATION By:/s/ Stephen J. Gurgovits ------------------------------------- Stephen J. Gurgovits, Vice Chairman FIRST NATIONAL BANKSHARES OF FLORIDA, INC. By:/s/ Gary L. Tice ------------------------------------- Gary L. Tice, Chairman and Chief Executive Officer 24 EXHIBIT A Affiliates of F.N.B. CORPORATION First National Corporation Firs National community Development Corporation First National Bank of Pennsylvania F.N.B. PA Investments Corporation Infitech, Inc. First National Building Corporation First National Corporation, Hermitage, PA First National Financial Management Corporation Metropolitan National Realty Holdings, Inc. Pennsylvania First National Trust F.N.B. Advisors, Inc. F.N.B. Building Corporation Penn-Ohio Life Insurance Company Regency Finance Company Regency Investment Company, Inc. Citizens Financial Services, Inc. Gelvin, Jackson & Starr, Inc. EXHIBIT B Affiliates of FIRST NATIONAL BANKSHARES OF FLORIDA, INC. First National Wealth Management Company First National Bank of Florida First National Realty Services Co. FNB Corporation Florida Holdings Company FNB Corporation Florida Real Estate Holding company FNB Corporation Florida Real Estate Investment Trust Co. West Coast Guaranty Title Insurance Co. First National Corporation (formerly Citizens Financial Corporation) Roger Bouchard Insurance, Inc. Allocation of Tax Liability and Expenses of Certain Transactions

3. Sale of Gelvin Jackson & Starr stock by Roger Bouchard Insurance, Inc. with respect to expenses Roger Bouchard Insurance, Inc. to F.N.B. incurred, and any gain or loss realized, in connection Corporation with such sale 4. Sale of municipal bonds by First National First National Bank of Pennsylvania with respect to Bank of Pennsylvania expenses incurred, and any gain or loss realized, in connection with such sale 5. Division of the corporate owned life Any tax liability resulting from such division (as well insurance as the expenses incurred to effect the division) shall be borne by F.N.B. Corporation and First National Bankshares of Florida, Inc. in proportion to their percentage ownership of the insurance contracts

EX-2.3 5 g86619exv2w3.txt EX-2.3 EMPLOYEE BENEFITS AGREEMENT EXHIBIT 2.3 EXECUTION COPY EMPLOYEE BENEFITS AGREEMENT BETWEEN F.N.B. CORPORATION AND FIRST NATIONAL BANKSHARES OF FLORIDA, INC. DATED AS OF JANUARY 1, 2004 EMPLOYEE BENEFITS AGREEMENT TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS AND REFERENCES....................................................................1 SECTION 1.1 Definitions..........................................................................1 SECTION 1.2 References...........................................................................5 ARTICLE II GENERAL PRINCIPLES...........................................................................5 SECTION 2.1 Assumption of Liabilities............................................................5 SECTION 2.2 Termination of Participating Company Status..........................................6 SECTION 2.3 Establishment or Assumption of the SpinCo Plans......................................6 SECTION 2.4 Terms of Participation by Transferred Individuals....................................6 ARTICLE III DEFINED BENEFIT PLANS.......................................................................7 SECTION 3.1 F.N.B. Corporation Retirement Income Plan............................................7 ARTICLE IV DEFINED CONTRIBUTION PLANS...................................................................7 SECTION 4.1 Savings Plans........................................................................7 ARTICLE V HEALTH AND WELFARE PLANS......................................................................7 SECTION 5.1 Assumption of Health and Welfare Plan Liabilities....................................7 SECTION 5.2 Parent Short-Term Disability Arrangements............................................8 SECTION 5.3 COBRA and HIPAA......................................................................8 SECTION 5.4 Leave of Absence Programs............................................................9 SECTION 5.5 Post-Distribution Transitional Arrangements..........................................9 SECTION 5.6 Application of Article V to the SpinCo Group........................................10 ARTICLE VI EXECUTIVE COMPENSATION MATTERS..............................................................11 SECTION 6.1 F.N.B. Restricted Stock and Incentive Bonus Plan....................................11 SECTION 6.2 Stock Options.......................................................................12 SECTION 6.3 Deferred Compensation Plans.........................................................12 SECTION 6.4 Rabbi Trust.........................................................................13 SECTION 6.5 Employment Agreements...............................................................13 SECTION 6.6 Automobile Program..................................................................13 SECTION 6.7 Director Benefits...................................................................13 SECTION 6.8 Vacation Pay/Paid Time-Off..........................................................14 SECTION 6.9 Split Dollar Life Insurance.........................................................14 ARTICLE VII GENERAL....................................................................................14 SECTION 7.1 Sharing of Participant Information..................................................14 SECTION 7.2 Restrictions on Extension of Option Exercise Periods, Amendment or Modification of Option Terms and Conditions.........................................14 SECTION 7.3 Reporting and Disclosure and Communications to Participants.........................15 SECTION 7.4 Plan Audits.........................................................................15 SECTION 7.5 Beneficiary Designations/Release of Information/Right of Reimbursement..............16 SECTION 7.6 Requests for Internal Revenue Service Rulings and United States Department of Labor Opinions........................................................16 SECTION 7.7 Fiduciary and Related Matters.......................................................16 SECTION 7.8 No Third-Party Beneficiaries; Non-Termination of Employment.........................16 SECTION 7.9 Consent of Third Parties............................................................16 SECTION 7.10 Effect if Distribution Does Not Occur...............................................17 SECTION 7.11 Relationship of Parties.............................................................17 SECTION 7.12 Affiliates..........................................................................17 SECTION 7.13 Dispute Resolution..................................................................17

Page ---- SECTION 7.14 Indemnification.....................................................................17 SECTION 7.15 W-2 Matters.........................................................................17 SECTION 7.16 Confidentiality.....................................................................18 SECTION 7.17 Notices.............................................................................18 SECTION 7.18 Interpretation......................................................................18 SECTION 7.19 Severability........................................................................18 SECTION 7.20 Governing Law/Execution.............................................................18 SECTION 7.21 Amendments to Plans.................................................................18
ii EMPLOYEE BENEFITS AGREEMENT THIS EMPLOYEE BENEFITS AGREEMENT, dated as of the 1st day of January, 2004, is by and between F.N.B. Corporation, a Florida corporation ("Parent"), and First National Bankshares of Florida, Inc., a Florida corporation ("SpinCo"). WHEREAS, Parent's Board of Directors has determined that it is in the best interests of Parent and its shareholders to separate Parent's existing businesses into two independent businesses; and WHEREAS, in furtherance of the foregoing, on August 12, 2003, SpinCo was formed and became a wholly owned subsidiary of Parent; and WHEREAS, Parent intends to accomplish the separation of SpinCo through a distribution of the stock of SpinCo to the shareholders of Parent that is intended to be tax free pursuant to section 355 of the Internal Revenue Code of 1986, as amended (the "Distribution"); and WHEREAS, Parent and SpinCo have entered into an Agreement and Plan of Distribution, dated as of December 30, 2003 (the "Distribution Agreement"), and several other agreements that will govern certain matters relating to the Distribution and the relationship of Parent and SpinCo and their respective Subsidiaries following the Distribution; and WHEREAS, pursuant to the Distribution Agreement, Parent and SpinCo have agreed to enter into this Agreement for the purpose of allocating assets, liabilities, and responsibilities with respect to certain employee compensation and benefit plans and programs between them. NOW, THEREFORE, in consideration of the mutual promises contained herein and in the Distribution Agreement, the parties agree as follows: ARTICLE I DEFINITIONS AND REFERENCES SECTION 1.1 Definitions. For purposes of this Agreement, capitalized terms used (other than the formal names of Parent Plans (as defined below)) and not otherwise defined shall have the respective meanings assigned to them below or as assigned to them in the Distribution Agreement (as defined above): (a) "Action" has meaning given that term in the Distribution Agreement. (b) "Agreement" means this Employee Benefits Agreement, including all the attached Appendices. (c) "ASO Contract" means an administrative services contract, related prior practice, or related understanding with a third-party administrator that pertains to any Parent Health and Welfare Plan or any SpinCo Health and Welfare Plan. (d) "Award" means a long-term or short-term award under an Incentive Plan or, as the context or facts may require, any other award under another incentive or special bonus, incentive, or award program or arrangement. (e) "Code" means the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgated thereunder, including any successor legislation. (f) "Conversion Formula" means the appropriate formula which shall be applied in adjusting the exercise price and award size of Options under the Parent Stock Incentive Plans and in determining the exercise price and number of SpinCo Options under the SpinCo Incentive Plans. The Conversion Formula shall be based on the closing per share prices of Parent Common Stock (with a due bill) and SpinCo Common Stock (on a when-issued basis) as reported on the New York Stock Exchange on the last trading day immediately preceding the Distribution Date or such other prices as jointly agreed upon by SpinCo and Parent, and shall be determined and applied in such a manner as to maintain (1) the aggregate spread of such Options, which is the difference between the exercise price per share of Parent Common Stock covered by the Option and the closing price per share of Parent Common Stock (with a due bill) immediately preceding the Distribution, multiplied by the total number of shares covered by the Option; and (2) the ratio of the exercise price per share covered by the Option to the closing price per share of Parent Common Stock (with a due bill) immediately preceding the Distribution. (g) "Deferred Compensation Plans," when immediately preceded by "Parent" means the F.N.B. Deferred Compensation Plan, the F.N.B. Corporation Basic Retirement Plan, the F.N.B. Corporation ERISA Excess Profit Sharing and Lost Match Plan, and the F.N.B. Corporation Directors' Compensation Plan. When immediately preceded by "SpinCo," "Deferred Compensation Plans" means the deferred compensation plans to be assumed, established or maintained by SpinCo pursuant to Section 2.3. (h) "Director" means any director of Parent immediately prior to the Distribution other than Gary L. Tice or Stephen J. Gurgovits. (i) "Distribution" has the meaning given that term under the Distribution Agreement. (j) "Distribution Agreement" is defined in the preamble of this Agreement. (k) "Distribution Date" has the meaning given that term under the Distribution Agreement. (l) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific provision of ERISA also includes any proposed, temporary, or final regulation in force under that provision. (m) "Governmental Authority" means any federal, state, local, foreign, or international court, government, department, commission, board, bureau, agency, official, or other regulatory, administrative, or governmental authority, including the Department of Labor, the Securities and Exchange Commission, the Internal Revenue Service, and the Pension Benefit Guaranty Corporation. (n) "Group Insurance Policy" means a group insurance policy issued in connection with any Parent Health and Welfare Plan or any SpinCo Health and Welfare Plan, as applicable. (o) "Health and Welfare Plans," when immediately preceded by "Parent" means the health and welfare benefit plans, programs, and policies (including the Reimbursement Plans) which are sponsored by Parent. When immediately preceded by "SpinCo," "Health and Welfare Plans" means the benefit plans, programs, and policies (including the Reimbursement Plans) corresponding to those plans, programs, and policies which will be sponsored by a member of the SpinCo Group immediately after the Distribution Date. (p) "HMO" means a health maintenance organization that provides benefits under the Parent Health and Welfare Plans or the SpinCo Health and Welfare Plans, as applicable. 2 (q) "HMO Agreements" means contracts, letter agreements, practices, and understandings with HMOs that provide medical, dental, prescription drug, or vision services under the Parent Health and Welfare Plans or the SpinCo Health and Welfare Plans, as applicable. (r) "Incentive Plan," when immediately preceded by "Parent" means any short-term or long-term compensation, bonus, stock-based or other incentive compensation programs established or maintained by the Parent Group. When immediately preceded by "SpinCo," "Incentive Plan" means any short-term or long-term compensation, stock-based bonus, or incentive compensation programs to be established or maintained by SpinCo pursuant to Section 2.3. (s) "Individual Agreement" means an individual contract or agreement (whether written or unwritten) entered into between a member of the Parent Group or a member of the SpinCo Group and any employee or individual who will be an employee of, or otherwise assigned to, the SpinCo Group immediately after the Distribution Date that establishes the right of such individual to special compensation or benefits, special bonuses, supplemental pension benefits, hiring bonuses, loans, guaranteed payments, special allowances, tax equalization payments, special expatriate compensation payments, disability benefits, or other forms of compensation and benefits. (t) "Liabilities" means any and all losses, claims, charges, debts, premiums, demands, actions, costs, and expenses (including any current or future benefit payments or other entitlements, and administrative and related costs and expenses of any Plan, program, service or consulting agreement, or arrangement), of any nature whatsoever, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whether or not imposed or determined by a court, whenever arising. (u) "Material Feature" means any feature of a Plan that could reasonably be expected to be of material importance to the sponsoring employer or the participants and beneficiaries of the Plan, which could include, depending on the type and purpose of the particular Plan, the class or classes of employees eligible to participate in such Plan, the nature, type, form, source, and level of benefits provided by the employer under such Plan and the amount or level of contributions, if any, required or permitted to be made by participants (or their dependents or beneficiaries) to such Plan. (v) "Option" shall mean any stock option granted pursuant to a Parent Incentive Plan prior to the Distribution. (w) "Parent Common Stock" has the meaning given that term under the Distribution Agreement. (x) "Parent Group" has the meaning given that term under the Distribution Agreement. (y) "Participating Company" means any Person (other than an individual) that is participating in a Plan sponsored by a member of the Parent Group or a member of the SpinCo Group, as the context requires. (z) "Person" means an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity, or any Governmental Authority. (aa) "Plan," when immediately preceded by "Parent" or "SpinCo," means any plan, policy, program, payroll practice, on-going arrangement, contract, trust, insurance policy, or other agreement or funding vehicle, whether written or unwritten, providing benefits to employees or former employees of the Parent Group or the SpinCo Group, as applicable. 3 ================================================================================ (bb) "Rabbi Trust," when immediately preceded by "Parent" means the Trust Agreement for the F.N.B. Corporation Directors' Compensation Plan. When immediately preceded by "SpinCo", "Rabbi Trust" means the grantor trust to be established by SpinCo pursuant to Section 6.4(a). (cc) "Reimbursement Plans," when immediately preceded by "Parent," means the health care flexible spending account plans and the dependent care flexible spending account plans, as applicable. When immediately preceded by "SpinCo," "Reimbursement Plans" means the health care flexible spending account plan and the dependent care flexible spending account plan to be established or maintained by SpinCo pursuant to Section 2.3 that corresponds to the corresponding Parent Reimbursement Plans. (dd) "Retiree" means any person who prior to the Distribution Date retires under a retirement plan or policy of Parent or its Subsidiaries. (ee) "Savings Plan," when immediately preceded by "Parent," means the F.N.B. Corporation Progress Savings 401(k) Plan that is sponsored by Parent and will continue to be sponsored by Parent following the Distribution Date. When immediately preceded by "SpinCo," "Savings Plan" means the F.N.B. Corporation Salary Savings Plan that will be sponsored by SpinCo for periods immediately after the Distribution Date. (ff) "SpinCo Business" has the meaning given that term under the Distribution Agreement. (gg) "SpinCo Common Stock" has the meaning given that term under the Distribution Agreement. (hh) "SpinCo Group" has the meaning given that term under the Distribution Agreement. (ii) "SpinCo Mirror Plan" means any SpinCo Plans to be established that will be substantially similar to a Parent Plan, as set forth on Appendix A hereto. (jj) "SpinCo Option" shall mean any stock option granted pursuant to a SpinCo Incentive Plan. (kk) "SpinCo Stand-Alone Plan" means any Plan maintained by Parent or an affiliate of Parent, that, no later than the Distribution Date, will be assumed, sponsored and maintained by SpinCo or a member of the SpinCo Group for the exclusive benefit of Transferred Individuals, including but not limited to the SpinCo Savings Plan, and those SpinCo Plans set forth and designated as Stand-Alone Plans on Appendix A hereto. (ll) "Subsidiary" has the meaning given that term under the Distribution Agreement. (mm) "Transferred Individual" means any individual who, as of the Distribution Date: (i) is actively employed by, or on a leave of absence (including those individuals receiving short-term disability benefits and those taking leave pursuant to the Family and Medical Leave Act of 1993, as amended) from, a member of the SpinCo Group (or is deemed to be so employed or on leave in accordance with an agreement between Parent and SpinCo); or (ii) is not actively employed by, nor on a leave of absence (including those individuals receiving short-term disability benefits and those taking leave pursuant to the Family and Medical Leave Act of 1993, as amended) from, Parent or a member of the Parent Group, or SpinCo or a member of the SpinCo Group, and: 4 a) whose most recent (through the Distribution Date) active employment with Parent or a past or present affiliate of Parent was with a member of the SpinCo Group or the SpinCo Business, or the predecessors of such business; or b) who otherwise is identified pursuant to a methodology approved by Parent and SpinCo, which methodology shall be consistent with the intent of the parties that former employees of Parent or a past or present affiliate of Parent and such other individuals who performed services for Parent (including non-employees) will only be aligned with SpinCo if they provided services to the SpinCo Group or SpinCo Business; (iii) is employed by Parent as of the Distribution Date and is designated as a Transferred Individual on Appendix C; or (iv) is a Director of Parent prior to the Distribution Date but will become a director of SpinCo immediately after the Distribution Date. An alternate payee under a qualified domestic relations order (within the meaning of Code ss. 414(p) and ERISA ss. 206(d)), alternate recipient under a qualified medical child support order (within the meaning of ERISA ss. 609(a)), beneficiary, or covered dependent, in each case, of an employee or former employee described in (i), (ii) or (iii) above shall also be a Transferred Individual with respect to the interest of such alternate payee, alternate recipient, beneficiary, or covered dependent in that employee's or former employee's benefit under the applicable Plans. Such an alternate payee, alternate recipient, beneficiary, or covered dependent shall not otherwise be considered a Transferred Individual with respect to his or her own benefits under any applicable Plans, unless he or she is a Transferred Individual by virtue of either of subparagraphs (i), (ii) or (iii) above. In addition, Parent and SpinCo may agree to designate any other individuals, or group of individuals, as Transferred Individuals. Subject to the other provisions of this definition, an individual may be a Transferred Individual pursuant to this definition regardless of whether such individual is, as of the Distribution Date, alive, actively employed, on a temporary leave of absence from active employment, on layoff, terminated from employment, retired or on any other type of employment, post-employment, or independent contractor status relative to Parent or SpinCo or to a Parent or SpinCo Plan. Nothing contained in this Agreement shall permit, or be construed or interpreted to permit, any non-employee of Parent or SpinCo to participate, at any time, in any Plan of Parent or SpinCo. SECTION 1.2 References. Unless the context clearly indicates otherwise, reference to a particular Article, Section, subsection or paragraph means the Article, Section, subsection or paragraph so delineated in this Agreement. ARTICLE II GENERAL PRINCIPLES SECTION 2.1 Assumption of Liabilities. Except for each Liability that is expressly retained in writing by Parent or excluded in writing by Parent from those being assumed by SpinCo and unless otherwise provided for elsewhere in this Agreement, SpinCo hereby assumes and agrees to pay, perform, fulfill, and discharge, in accordance with their respective terms and conditions, all of the following (regardless of when or where such Liabilities arose or arise or were or are incurred): (i) all Liabilities to or relating to Transferred Individuals, and their dependents and beneficiaries, under or with respect to employee compensation programs, Plans or policies to the extent relating to, arising out of or 5 resulting from future, present, or former employment with SpinCo, a member of the SpinCo Group, Parent or a member of the Parent Group, (including Liabilities under Parent Plans and SpinCo Plans), (ii) all Liabilities under any Individual Agreements relating to Transferred Individuals, and (iii) all other Liabilities relating to, arising out of, or resulting from obligations, liabilities, and responsibilities expressly assumed or retained by a member of the SpinCo Group or a SpinCo Plan pursuant to this Agreement. SECTION 2.2 Termination of Participating Company Status. Unless otherwise provided in this Agreement, to the extent applicable, effective as of the Distribution Date, SpinCo and each member of the SpinCo Group shall cease to be a Participating Company in any of the Parent Plans remaining with Parent, and Parent and each member of the Parent Group shall cease to be a Participating Company in any Plan assumed by SpinCo or a member of the SpinCo Group. SECTION 2.3 Establishment or Assumption of the SpinCo Plans. (a) Assumption of SpinCo Stand-Alone Plans. Unless otherwise provided in this Agreement, effective no later than the Distribution Date, SpinCo or a member of the SpinCo Group shall assume or cause to be assumed, the SpinCo Stand-Alone Plans set forth on Appendix A to this Agreement for the benefit of Transferred Individuals and other current, future and former employees of the SpinCo Group. SpinCo and Parent shall take all action necessary to provide for such assumption of the SpinCo Stand-Alone Plans, including any necessary amendments, and the name of the Plans shall be changed as and where appropriate. (b) Establishment of SpinCo Mirror Plans. Unless otherwise provided in this Agreement, effective no later than the Distribution Date, SpinCo or a member of the SpinCo Group shall adopt or cause to be adopted, the SpinCo Mirror Plans for the benefit of Transferred Individuals and other current, future, and former employees of the SpinCo Group, all as set forth in Appendix A to this Agreement. The foregoing SpinCo Mirror Plans as in effect immediately after the Distribution Date shall be substantially identical in all Material Features to the corresponding Parent Plans as in effect as of the Distribution Date. Nothing in this Agreement shall prohibit SpinCo from choosing to enter into ASO Contracts, Group Insurance Policies, HMO Agreements, letters of understanding or other arrangements with new or different vendors with respect to the SpinCo Mirror Plans to be established pursuant to this Section 2.3. SECTION 2.4 Terms of Participation by Transferred Individuals. The SpinCo Plans shall be, with respect to Transferred Individuals, in all respects the successors in interest to, shall recognize all rights and entitlements as of the Distribution Date under, and shall not provide benefits that duplicate benefits provided by, the corresponding Parent Plans for such Transferred Individuals. Parent and SpinCo shall agree on methods and procedures, including amending the respective Plan documents, to prevent Transferred Individuals from receiving duplicative benefits from the Parent Plans and the SpinCo Plans. SpinCo shall not permit any SpinCo Plan to commence benefit payments to Transferred Individuals until it receives written notice from Parent regarding the date on which payments under the corresponding Parent Plan shall cease. To the extent permitted by applicable law, with respect to Transferred Individuals, each SpinCo Plan shall provide that all benefit or other elections, all designations of beneficiaries, all service, all compensation, and all other benefit-affecting determinations that, as of the Distribution Date, were recognized under the corresponding Parent Plan (for periods immediately before the Distribution Date) shall, as of immediately after the Distribution Date, receive full recognition, credit, and validity and be taken into account under such SpinCo Plan to the same extent as if such items originally occurred under such SpinCo Plan, except to the extent that duplication of benefits would result. The provisions of this Agreement for the transfer of assets, if any, from certain trusts relating to Parent Plans to the corresponding trusts relating to SpinCo Plans are based upon the understanding and agreement of the parties that each such SpinCo Plan will assume all Liabilities under the corresponding Parent Plan to or relating to Transferred Individuals, as provided for herein. If there are any legal or other 6 authoritative reasons that any such Liabilities are not effectively assumed by the appropriate SpinCo Plan, then the amount of assets transferred to the trust relating to such SpinCo Plan from the trust relating to the corresponding Parent Plan shall be recomputed, ab initio, as set forth in this Agreement but taking into account the retention of any such Liabilities by such Parent Plan, and assets shall be transferred by the trust relating to such SpinCo Plan to the trust relating to such Parent Plan so as to place each such trust in the position it would have been in, had the initial asset transfer been made in accordance with such recomputed amount of transferred Liabilities and assets. ARTICLE III DEFINED BENEFIT PLANS SECTION 3.1 F.N.B. Corporation Retirement Income Plan. All Transferred Individuals who are participants in the F.N.B. Corporation Retirement Income Plan shall be deemed "terminated vested participants" for purposes of this plan and shall be treated in accordance with the terms of the plan. No SpinCo Mirror Plan will be established for the F.N.B. Corporation Retirement Income Plan in connection with the Distribution. ARTICLE IV DEFINED CONTRIBUTION PLANS SECTION 4.1 Savings Plans. Effective no later than the Distribution Date, SpinCo or a member of the SpinCo Group shall take all action necessary to assume and become the plan sponsor of the SpinCo Savings Plan and shall be responsible for all Liabilities relating to the SpinCo Savings Plan. The SpinCo Savings Plan shall recognize and maintain all contribution and investment elections made by Transferred Individuals under the SpinCo Savings Plan as such elections were last in effect during the period immediately prior to the Distribution Date and shall apply such elections under the SpinCo Savings Plan for the remainder of the period or periods for which such elections are by their terms applicable (subject in all cases to applicable election change rights of the Transferred Individuals). The Roger Bouchard Insurance, Inc. 401(k) Profit Sharing and Trust Plan, which is presently sponsored by Roger Bouchard Insurance, Inc. ("Bouchard"), shall continue to be sponsored by Bouchard for periods immediately after the Distribution Date. Bouchard, as a member of the SpinCo Group, shall be responsible for all Liabilities relating to the Roger Bouchard Insurance, Inc. 401(k) Profit Sharing and Trust Plan. Any employees of the Parent Group who are participants in the Roger Bouchard Insurance, Inc. 401(k) Profit Sharing and Trust Plan and are not Transferred Individuals shall be deemed terminated for purposes of this plan and shall be treated in accordance with the terms of such plan. ARTICLE V HEALTH AND WELFARE PLANS SECTION 5.1 Assumption of Health and Welfare Plan Liabilities. (a) Assumption by SpinCo. Effective no later than the Distribution Date, SpinCo shall establish, or cause to be established, the SpinCo Health and Welfare Plans. Immediately after the Distribution Date, all Liabilities for or relating to Transferred Individuals under the Parent Health and Welfare Plans, shall cease to be Liabilities of Parent or the Parent Health and Welfare Plans and shall be assumed by SpinCo and the corresponding SpinCo Health and Welfare Plans. Thus, SpinCo and the SpinCo Health and Welfare Plans shall be responsible for all Liabilities that pertain to Transferred Individuals regardless of when incurred, including all reported claims that are unpaid, all incurred but not reported claims as of the Distribution Date, and all claims incurred after the Distribution Date that pertain to Transferred Individuals under the Parent Health and Welfare Plans and the SpinCo Health and Welfare Plans. SpinCo shall be required to make all payments due or payable to Transferred Individuals under the appropriate SpinCo Health and Welfare Plans for the period beginning immediately after the Distribution 7 Date, including all reported claims that are unpaid and all incurred but not reported claims as of the Distribution Date. To the extent permitted by the applicable Plans, all treatments which have been pre-certified for or are being provided on an on-going basis to a Transferred Individual under the Parent Health and Welfare Plans as of the Distribution Date shall continue to be provided without interruption under the appropriate SpinCo Health and Welfare Plan until such treatment is concluded or discontinued pursuant to applicable plan rules and limitations, and SpinCo and the SpinCo Health and Welfare Plans shall be responsible for all Liabilities relating to, arising out of, or resulting from such pre-certified or on-going treatments as of the Distribution Date. Notwithstanding the preceding provisions of this Section 5.1, neither SpinCo nor a SpinCo Health and Welfare Plan shall assume any Liability with respect to: (i) a claim incurred on or prior to the Distribution Date for which Parent or a Parent Health and Welfare Plan has insurance coverage, or (ii) any benefit claim for which Parent is responsible under Section 5.3. (b) Certain Audit Procedures with Respect to Health and Welfare Plans. At periodic intervals beginning immediately after the Distribution Date, Parent and SpinCo shall examine their respective payments and receipts for health and welfare coverages to ascertain whether Parent has mistakenly made or received payments for coverages with respect to Transferred Individuals and whether SpinCo has mistakenly made or received payments for coverages with respect to participants and beneficiaries in the Parent Health and Welfare Plans (other than Transferred Individuals). If any such mistaken payments have been made or received by Parent or SpinCo, such mistaken payments and receipts shall first be netted against each other by Parent and SpinCo and thereafter such net payments or net receipts shall be further netted against the other party's net payments or net receipts. The party with the remaining amount of mistaken payments shall transfer such amount in cash to the other party at such time or times as agreed upon by Parent and SpinCo, but not less than semi-annually. Furthermore, at periodic intervals beginning immediately after the Distribution Date, Parent and SpinCo shall examine the payment of benefits and claims, and reimbursements for expenses, by their respective Health and Welfare Plans to ascertain whether any Parent Health and Welfare Plan has mistakenly paid claims or benefits, or reimbursed expenses, with respect to Transferred Individuals and whether any SpinCo Health and Welfare Plan has mistakenly paid claims or benefits, or reimbursed expenses, with respect to participants and beneficiaries in the Parent Health and Welfare Plans (other than Transferred Individuals). If any such mistaken payments or reimbursements have been made by any Parent or SpinCo Health and Welfare Plan, such mistaken payments and reimbursements shall be netted against the other corresponding Health and Welfare Plan's mistaken payments and reimbursements. The Health and Welfare Plan with the remaining amount of mistaken payments and reimbursements shall transfer such amount in cash to the other party's corresponding Health and Welfare Plan at such time or times as agreed upon by Parent and SpinCo, but not less than semi-annually. SECTION 5.2 Parent Short-Term Disability Arrangements. Any final determinations made by Parent with respect to short-term disability claims by Transferred Individuals prior to the Distribution Date shall be final and binding. Parent shall transfer to SpinCo, effective immediately after the Distribution Date, and SpinCo shall assume responsibility for (i) administering all short-term disability claims incurred by Transferred Individuals before the Distribution Date that are administered by Parent as of the Distribution Date, and (ii) all Liabilities under any Parent short-term disability arrangements to Transferred Individuals as of the Distribution Date, in the same manner, and using the same methods and procedures, as Parent used in determining and paying such claims. Effective immediately after the Distribution Date, SpinCo shall have sole discretionary authority to make any necessary determinations with respect to such claims, including entering into settlements with respect to such claims, and shall be solely responsible for any costs, Liabilities or related expenses of any nature whatsoever related to such claims, payments or obligations. SECTION 5.3 COBRA and HIPAA. Effectively immediately after the Distribution Date, SpinCo or a member of the SpinCo Group shall be responsible for administering compliance and providing coverage in accordance with the health care continuation coverage requirements for "group 8 health plans" under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), and the portability requirements (including the requirements for issuance of certificates of creditable coverage) under the Health Insurance Portability and Accountability Act of 1996 with respect to all Transferred Individuals and other employees and former employees of SpinCo or a member of the SpinCo Group and any beneficiaries and dependents thereof who experience a COBRA qualifying event or loss of coverage under the SpinCo Health and Welfare Plans after the Distribution Date. Effective immediately after the Distribution Date, SpinCo or a member of the SpinCo Group shall be responsible for filing all necessary employee change notices with respect to these persons identified in the previous sentence in accordance with applicable law. SECTION 5.4 Leave of Absence Programs. Effective immediately after the Distribution Date, SpinCo shall, or shall cause a member of the SpinCo Group to, assume sole responsibility for the administration and compliance of all leaves of absences and related programs (including compliance with the Family and Medical Leave Act of 1993, as amended) affecting Transferred Individuals. SECTION 5.5 Post-Distribution Transitional Arrangements. (a) Continuance of Elections, Co-Payments, and Maximum Benefits. To the extent permitted by the applicable Health and Welfare Plan and applicable law: (i) SpinCo shall cause the SpinCo Health and Welfare Plans to recognize and maintain all coverage and contribution elections made by Transferred Individuals under the Parent Health and Welfare Plans, as such elections were last in effect during the period immediately prior to the Distribution Date, and shall apply such elections under the SpinCo Health and Welfare Plans for the remainder of the period or periods for which such elections are by their terms applicable (subject to applicable election change rights). Parent shall cause the claims administrator for the Parent Health and Welfare Plans to transfer to the claims administrator for the SpinCo Health and Welfare Plans all data necessary to maintain such coverage and elections. (ii) SpinCo shall cause the SpinCo Health and Welfare Plans to recognize and give credit for (A) all amounts applied to deductibles, out-of-pocket maximums, and other applicable benefit coverage limits with respect to such expenses which have been incurred by Transferred Individuals under the Parent Health and Welfare Plans for the remainder of the benefit limit year in which the Distribution occurs, and (B) all benefits paid to Transferred Individuals under the Parent Health and Welfare Plans, during and prior to the benefit limit year in which the Distribution occurs, for purposes of determining when such persons have reached their maximum benefits under the SpinCo Health and Welfare Plans. (iii) SpinCo shall recognize and cover under the SpinCo Health and Welfare Plans all eligible employee groups covered by the Parent Health and Welfare Plans (pertaining to Transferred Individuals) as of the Distribution Date (determined under the applicable Plan documents). (iv) SpinCo shall (A) provide coverage to Transferred Individuals under the SpinCo Health and Welfare Plans without the need to undergo a physical examination or otherwise provide evidence of insurability, and (B) recognize and maintain all irrevocable assignments, elections and beneficiary designations made by Transferred Individuals in connection with their life insurance coverage under the Parent Health and Welfare Plans and any predecessor plans. 9 (b) Parent Reimbursement Plans. To the extent any Transferred Individual contributed to an account under the Parent Reimbursement Plans during the calendar year that includes the Distribution Date, effective immediately after the Distribution Date, SpinCo shall recognize any such Transferred Individual's account balance, determined as of the Distribution Date, and SpinCo shall thereafter be solely responsible for making any and all payments relative to such account balance of the Transferred Individual for all claims during such calendar year under the applicable SpinCo Reimbursement Plan. All elections by Transferred Individuals in effect immediately prior to the Distribution Date shall continue and be recognized by SpinCo, and the Distribution alone shall not be considered an event that gives any participant the right to change any prior election. As soon as practicable after the Distribution Date, Parent shall calculate as of the Distribution Date the aggregate net balance in the accounts of Transferred Individuals under the Parent Reimbursement Plans, expressed relative to the contributions received from such Transferred Individuals. If the contributions received from a Transferred Individual exceed the reimbursements made to or on behalf of such Transferred Individual, the Transferred Individual shall be deemed to have a positive account balance. In turn, if the contributions received from a Transferred Individual are less than the reimbursements made to or on behalf of such Transferred Individual, the Transferred Individual shall be deemed to have a negative account balance. If the aggregate net balance in the accounts of all such Transferred Participants is a positive number, then Parent shall pay this amount in cash to SpinCo as soon as practicable after the Distribution Date, and if the aggregate net balance in the accounts of all such Transferred Participants is a negative number, then SpinCo shall pay this amount in cash to Parent as soon as practicable after the Distribution Date. SECTION 5.6 Application of Article V to the SpinCo Group. Any reference in this Article V to "SpinCo" shall include a reference to another member of the SpinCo Group when and to the extent SpinCo has caused the other member of the SpinCo Group to (a) become a party to an ASO Contract, Group Insurance Policy, HMO Agreement, letter of understanding or arrangement associated with a SpinCo Health and Welfare Plan, (b) become a self-insured entity for the purposes of one or more SpinCo Health and Welfare Plans, (c) assume all or a portion of the Liabilities or the administrative responsibilities with respect to benefits which arose before the Distribution Date under any Parent Health and Welfare Plan and which were expressly assumed by SpinCo pursuant to this Agreement, or (d) take any other action, extend any coverage, assume any other Liability or fulfill any other responsibility that SpinCo would otherwise be required to take under the terms of this Article V, unless it is clear from the context that the particular reference is not intended to include another member of the SpinCo Group. In all such instances in which a reference in this Article V to "SpinCo" includes a reference to another member of the SpinCo Group, SpinCo shall be responsible to Parent for ensuring that the other member of the SpinCo Group complies with the applicable terms of this Agreement and that the Transferred Individuals employed by such member of the SpinCo Group shall have the same rights and entitlements to benefits under the applicable SpinCo Health and Welfare Plans that the Transferred Individual would have had, if he or she had instead been employed by SpinCo. 10 ARTICLE VI EXECUTIVE COMPENSATION MATTERS SECTION 6.1 F.N.B. Restricted Stock and Incentive Bonus Plan. (a) Annual Incentive Awards. For the performance period ended December 31, 2003, Parent shall pay to participants (excluding Transferred Individuals) any amounts earned under the Parent Restricted Stock and Incentive Bonus Plan at the time and in the manner provided under the terms of such plan and SpinCo shall pay to participants who are also Transferred Individuals any amounts earned under the Parent Restricted Stock and Incentive Bonus Plan at the time and in the manner provided under the terms of such plan. (b) Restricted Stock Awards. (i) Each Award that consists of unvested restricted shares of Parent Common Stock that is outstanding as of the Distribution Date and is held by a Transferred Individual shall be converted, effective immediately after the Distribution Date, into a new Award under a SpinCo Incentive Plan consisting of such number of unvested restricted shares of SpinCo Common Stock with a value equal to the economic value of the unvested restricted shares of Parent Common Stock constituting such Award as of the last trading day immediately preceding the Distribution Date. The number of unvested restricted shares of SpinCo Common Stock shall be determined by dividing the "economic value" of the Parent Common Stock subject to such Award by the closing price per share of SpinCo Common Stock as reported on the New York Stock Exchange (on a when-issued basis) on the last trading day immediately preceding the Distribution Date, rounded down to the nearest whole share. Each such converted Award shall otherwise have the same terms and conditions as were applicable to the corresponding Parent Award as of the Distribution Date, except that references to Parent shall be amended to refer to SpinCo and dividend equivalent payments, if any, shall be payable after the Distribution Date with reference to dividends on SpinCo Common Stock. (ii) Each Award that consists of unvested restricted shares of Parent Common Stock that is outstanding as of the Distribution Date and is held by a Person other than a Transferred Individual shall be adjusted, effective immediately after the Distribution Date, such that the number of unvested shares of Parent Common Stock subject to such Award immediately after the Distribution Date shall have a value equal to the economic value of the unvested restricted shares of Parent Common Stock constituting such Award as of the last trading day immediately preceding the Distribution Date. The number of unvested restricted shares of Parent Common Stock subject to the adjusted Award shall be determined by dividing (x) the economic value of the Parent Common Stock subject to such Award immediately preceding the Distribution Date by (y) the difference between the closing price per share of Parent Common Stock (with a due bill) and the closing price per share of SpinCo Common Stock (on a when-issued basis) as reported on the New York Stock Exchange on the last trading day immediately preceding the Distribution Date, rounded down to the nearest whole share. For purposes of this Section 6.1(b), the "economic value" of the Parent Common Stock subject to such Award shall be determined by multiplying the number of unvested restricted shares of Parent Common Stock subject to such Award by the closing price per share of Parent Common Stock (with a due bill) on the last trading day immediately preceding the Distribution Date as reported by the New York Stock Exchange. (iii) Each vested share of Parent Common Stock subject to an Award shall be entitled to receive a share of SpinCo Common Stock in the same manner as every other outstanding share of Parent Common Stock on the Distribution Date. 11 SECTION 6.2 Stock Options. (a) Options Held by Transferred Individuals. Each Option that is outstanding as of the Distribution Date and is held by a Transferred Individual, other than a Director or Retiree (which shall be treated as provided in Section 6.2(c) below), shall be replaced immediately after the Distribution Date, with a SpinCo Option under a SpinCo Incentive Plan. The number of Shares of SpinCo Common Stock subject to each SpinCo Option and the exercise price of each such SpinCo Option shall be determined by application of the Conversion Formula to the corresponding Option held by a Transferred Individual, other than a Director or Retiree (except as provided in Section 6.2(c) below). Each such SpinCo Option shall otherwise have the same terms and conditions as were applicable to the corresponding Option as of the Distribution Date, except that references to Parent and the Parent Group shall be amended to refer to SpinCo and the SpinCo Group. SpinCo shall be the obligor with respect to such SpinCo Options and shall be solely responsible for all stock option grants and payments under the SpinCo Incentive Plans, with respect to, but not limited to, recordkeeping, administrative costs and fees, payroll taxes, plan maintenance, option exercise and related tax filings. SpinCo shall, as soon as practicable after the Distribution Date, provide Transferred Individuals, and Directors and Retirees who receive SpinCo Options pursuant to Section 6.2(c), an agreement or notice relating to such Person's options under the SpinCo Incentive Plans. (b) Options Held by Persons other than Transferred Individuals. Each Option that is outstanding as of the Distribution Date and is held by a Person other than (i) a Transferred Individual or (ii) a Director or Retiree (which shall be treated as provided in Section 6.2(c) below), shall be adjusted by application of the Conversion Formula to such Option. Each such Option shall otherwise have the same terms and conditions as were applicable to the such Option as of the Distribution Date. Parent shall, as soon as practicable after the Distribution Date, provide to such Persons whose Options are adjusted pursuant to this Section 6.2(b), an agreement or notice relating to the adjustment to such Person's Options. (c) Options held by Directors or Retirees. Each Option that is outstanding as of the Distribution Date and is held by a Director or Retiree shall be treated as follows: (i) fifty percent (50%) of the number of shares of Parent Common Stock subject to each such Option, rounded down to the nearest whole share, shall be converted to SpinCo Options in accordance with Section 6.2(a) as if such Director or Retiree was a Transferred Individual with respect to that portion of such Director's or Retiree's Option; and (ii) fifty percent (50%) of the number of shares of Parent Common Stock subject to each such Option, rounded down to the nearest whole share, shall be adjusted in accordance with Section 6.2(b) as if such Director or Retiree was not a Transferred Individual with respect to that portion of such Director's or Retiree's Option. SECTION 6.3 Deferred Compensation Plans. (a) Establishment of SpinCo Deferred Compensation Plans. Effective no later than the Distribution Date, SpinCo shall take all action necessary to establish the SpinCo Deferred Compensation Plans that are SpinCo Mirror Plans. Parent and SpinCo shall take all action necessary, including any necessary amendments to such plans, to cause the amounts credited to the accounts of Transferred Individuals under the Parent Deferred Compensation Plans to be transferred to the applicable SpinCo Deferred Compensation Plans. The Transferred Individuals' termination of employment with the Parent Group as a result of the Distribution shall not constitute a termination of employment for purposes of the Parent or SpinCo Deferred Compensation Plans. All elections by the Transferred Individuals that were controlling under the 12 terms of the applicable Parent Deferred Compensation Plan prior to the Distribution shall continue under the applicable SpinCo Deferred Compensation Plan until changed under the terms of such Plan. All investment choices of Transferred Individuals under the Parent or SpinCo Deferred Compensation Plans shall also be continued in effect; provided, however, that any portion of a Transferred Individual's account balance that is deemed to be invested in phantom shares of Parent Common Stock shall be converted into deemed investments in phantom shares of SpinCo Common Stock in a manner similar to the conversion of unvested shares of restricted stock as provided in Section 6.1(b)(i) hereof. With respect to participants in the Parent Deferred Compensation Plans who are not Transferred Individuals, any portion of such participant's account balance that is deemed to be invested in phantom shares of Parent Common Stock shall continue to be deemed invested in phantom shares of Parent Common Stock and shall be adjusted in a manner similar to the adjustment of shares of unvested restricted stock as provided in Section 6.1(b)(ii) hereof. Nothing herein shall restrict Parent's or SpinCo's rights to amend or terminate their respective Plans in the future. (b) Transfer of Corporate-Owned Life Insurance. The corporate-owned life insurance policies which are jointly owned by Parent and a member of the SpinCo Group on the Distribution Date that have been held by Parent or its affiliates to help fund its obligations under Parent's various employee benefit Plans will continue after the Distribution Date to be governed by the management plan (the "Management Plan") by and among Parent, First National Bank of Pennsylvania and First National Bank of Florida. Any changes to the Management Plan after the Distribution Date, including, but not limited to, changes regarding policy contracts, distribution of reports, selection and allocation of investment divisions, policy surrender, policy value withdrawals, policy loans, or the transfer to SpinCo or its affiliates of any such corporate-owned life insurance policies, shall require the written consent of all parties to the Management Plan, which consent shall not be unreasonably withheld. SECTION 6.4 Rabbi Trust. Effective no later than the Distribution Date, SpinCo shall establish, or cause to be established, the SpinCo Rabbi Trust as a grantor trust subject to Code Sections 671 et seq., which shall be substantially similar in all Material Features to the Parent Rabbi Trust and shall hold those shares of SpinCo Common Stock to be issued in the Distribution with respect to shares of Parent Common Stock held in the Parent Rabbi Trust. SpinCo shall appoint First National Wealth Management Company as trustee under the SpinCo Rabbi Trust. SECTION 6.5 Employment Agreements. On or before the Distribution Date, Parent shall assign and SpinCo shall assume the employment agreements with the Transferred Individuals listed in Appendix B. Except as set forth in the assignment agreements with respect to each individual employment agreement, SpinCo shall be solely responsibly for all Liabilities related to the SpinCo employment agreements with the Transferred Individuals. SECTION 6.6 Automobile Program. As of the Distribution Date, SpinCo shall assume all of Parent's Liabilities and obligations with respect to the motor vehicles leased by Parent for Transferred Individuals pursuant to lease agreements under any Parent executive automobile program. SECTION 6.7 Director Benefits. (a) F.N.B. Corporation Directors' Compensation Plan. Effective not later than the Distribution Date, SpinCo shall establish a SpinCo Directors' Compensation Plan that, except as necessary to give effect to the provisions of this Section 6.7(a), is substantially identical in all Material Features to the F.N.B. Corporation Directors' Compensation Plan. In connection with the Distribution, Parent shall either (i) cause the trustee of the Parent Rabbi Trust to transfer the shares of SpinCo Common Stock which relate to shares of Parent Common Stock previously deferred by participants in the F.N.B. Directors' Compensation Plan to the SpinCo Rabbi Trust as set forth in Section 6.4, or (ii) cause such shares of SpinCo Common Stock to be distributed directly to such SpinCo Rabbi Trust in the 13 Distribution. SpinCo shall assume and be solely responsible for (x) all Liabilities under the F.N.B. Corporation Directors' Compensation Plan relating to the deferred payment of cash compensation to individuals who are Transferred Individuals and (y) all Liabilities under the F.N.B. Corporation Directors' Compensation Plan relating to the deferred payment of shares of SpinCo Common Stock to participants in the F.N.B. Corporation Directors' Compensation Plan (including those individuals who are not Transferred Individuals), but in the case of clause (y), only to the extent attributable to the SpinCo Common Stock distributed by Parent in the Distribution with respect to the Parent Common Stock held in the Parent Rabbi Trust. Parent shall retain all Liabilities under the F.N.B. Corporation Directors' Compensation Plan relating to the deferred payment of shares of Parent Common Stock to participants in the F.N.B. Corporation Directors' Compensation Plan (including those individuals who are Transferred Individuals). (b) Directors' Stock Option Plan. Effective not later than the Distribution Date, SpinCo shall establish the SpinCo Directors' Stock Option Plan that is substantially identical in all Material Features to the F.N.B. Corporation 1998 Directors' Stock Option Plan. All outstanding options held by Directors of Parent, including those Directors who will become directors of SpinCo, shall be treated as provided in Section 6.2(c). SECTION 6.8 Vacation Pay/Paid Time-Off. As of the Distribution Date, the SpinCo Group shall recognize all of the Transferred Individuals' accrued and unused vacation benefits consistent with the terms of the vacation policies of Parent applicable to the Transferred Individuals as is in effect on the Distribution Date and shall assume or retain liability for all unpaid vacation pay, sick pay, and personal leave accrued by Transferred Individuals as of the Distribution Date. SECTION 6.9 Split Dollar Life Insurance. On or before the Distribution Date, Parent shall take all action necessary to implement the proposals approved by Parent's Compensation Committee at a meeting of such committee held on December 15, 2003 with respect to all split-dollar life insurance arrangements or policies entered into between employees of Parent and SpinCo, on the one hand, and Parent, on the other hand. ARTICLE VII GENERAL SECTION 7.1 Sharing of Participant Information. Subject to applicable laws on confidentiality, Parent and SpinCo shall share, Parent shall cause each applicable member of the Parent Group to share, and SpinCo shall cause each applicable member of the SpinCo Group to share, with each other and their respective agents and vendors (without obtaining releases) all participant information necessary for the efficient and accurate administration of each of the Parent Plans and the SpinCo Plans with respect to periods ending on or before the Distribution Date. Parent and SpinCo and their respective authorized agents shall, subject to applicable laws on confidentiality, be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the other party, to the extent necessary for such administration. Until the Distribution Date, all participant information shall be provided in the manner and medium applicable to Participating Companies in the Parent Plans generally, and thereafter until December 31, 2004, all participant information shall be provided in a manner and medium that is compatible with the data processing systems of Parent as in effect on the Distribution Date, unless otherwise agreed to by Parent and SpinCo. SECTION 7.2 Restrictions on Extension of Option Exercise Periods, Amendment or Modification of Option Terms and Conditions. SpinCo agrees that, without the prior written consent of Parent, neither SpinCo nor any of its affiliates or Subsidiaries shall take any action to extend the exercise period of or to provide for additional vesting with respect to any SpinCo options which were issued 14 pursuant to Section 6.2 in replacement of Parent options for Transferred Individuals, including providing such Transferred Individuals with leaves of absences or special termination or severance arrangements. SECTION 7.3 Reporting and Disclosure and Communications to Participants. SpinCo shall assist, and SpinCo shall cause each other applicable member of the SpinCo Group to assist, Parent in complying with all reporting and disclosure requirements of ERISA for plan years ending on or before December 31, 2003, including the preparation of Form 5500 annual reports for the Parent Plans, where applicable. SECTION 7.4 Plan Audits. (a) Audit Rights with Respect to Information Provided. (i) Subject to Section 7.4(a)(ii), each of Parent and SpinCo, and their duly authorized representatives, shall have the right to conduct audits at any time upon reasonable prior notice, at their own expense, with respect to all information provided to it or to any Plan recordkeeper or third-party administrator by the other party with respect to all periods ending on or before the Distribution Date. Subject to Section 7.4(a)(ii), the party conducting the audit shall have the sole discretion to determine the procedures and guidelines for conducting audits and the selection of audit representatives. The auditing party shall have the right to make copies of any records at its expense, subject to the confidentiality provisions set forth in the Distribution Agreement, which are incorporated by reference herein. The party being audited shall provide the auditing party's representatives with reasonable access during normal business hours to its operations, computer systems and paper and electronic files, and provide workspace to its representatives. After any audit is completed, the party being audited shall have the right to review a draft of the audit findings and to comment on those findings in writing within five business days after receiving such draft. (ii) The auditing party's audit rights under this Section 7.4(a) shall include the right to audit, or participate in an audit facilitated by the party being audited, of any Subsidiaries and affiliates of the party being audited and of any benefit providers and third parties with whom the party being audited has a relationship, or agents of such party, to the extent any such persons are affected by or addressed in this Agreement (collectively, the "Non-parties"). The party being audited shall, upon written request from the auditing party, provide an individual (at the auditing party's expense) to supervise any audit of any Non-party. The auditing party shall be responsible for supplying, at its expense, additional personnel sufficient to complete the audit in a reasonably timely manner. (b) Audits Regarding Vendor Contracts. From immediately after the Distribution Date through December 31, 2004, Parent and SpinCo and their duly authorized representatives shall have the right to conduct joint audits with respect to any vendor contracts that relate to both the Parent Health and Welfare Plans and the SpinCo Health and Welfare Plans. The scope of such audits shall encompass the review of all correspondence, account records, claim forms, canceled drafts (unless retained by the bank), provider bills, medical records submitted with claims, billing corrections, vendor's internal corrections of previous errors and any other documents or instruments relating to the services performed by the vendor under the applicable vendor contracts. Parent and SpinCo shall agree on the performance standards, audit methodology, auditing policy and quality measures and reporting requirements relating to the audits described in this Section 7.4(b) and the manner in which costs incurred in connection with such audits will be shared. In the event that the parties cannot agree on the matters described in this Section 7.4(b), such matters shall be subject to the dispute resolution process set forth in Section 7.13 of this Agreement. (c) Audit Assistance. To the extent that either Parent or SpinCo is required to respond to any Governmental Authority, vendor or recordkeeper audit, or otherwise conducts an audit with respect to any 15 provision or obligation of the other party under this Agreement, Parent or SpinCo, whichever is applicable, shall be required to fully cooperate with the audit, including providing such records and data as may be necessary to respond to any document or data request that may arise by reason of such audit. The party being audited shall provide the auditing party's representatives with reasonable access during normal business hours to its operations, computer systems and paper and electronic files, and provide workspace to its representatives. To the extent the results of an audit result in any correction to the Liabilities involving any Transferred Individuals, Parent shall be solely responsible for all such costs and expenses associated with such Liabilities and any related corrections. SECTION 7.5 Beneficiary Designations/Release of Information/Right of Reimbursement. All beneficiary designations, authorizations for the release of information and rights to reimbursement made by or relating to Transferred Individuals under Parent Plans shall be transferred to and be in full force and effect under the corresponding SpinCo Plans until such beneficiary designations, authorizations or rights are replaced or revoked by, or no longer apply, to the relevant Transferred Individual. SECTION 7.6 Requests for Internal Revenue Service Rulings and United States Department of Labor Opinions. SpinCo shall cooperate fully with Parent on any issue relating to the transactions contemplated by this Agreement for which Parent elects to seek a determination letter or private letter ruling from the Internal Revenue Service or an advisory opinion from the United States Department of Labor. Parent shall cooperate fully with SpinCo with respect to any request for a determination letter or private letter ruling from the Internal Revenue Service or advisory opinion from the United States Department of Labor with respect to any of the SpinCo Plans relating to the transactions contemplated by this Agreement. Any reasonable expenses incurred by the cooperating party shall be borne by the party which is seeking cooperation. SECTION 7.7 Fiduciary and Related Matters. The parties acknowledge that Parent will not be a fiduciary with respect to the SpinCo Plans and that SpinCo will not be a fiduciary with respect to the Parent Plans. The parties also acknowledge that neither party shall be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good faith determination that to do so would violate any applicable fiduciary duties or standards of conduct under ERISA or other applicable law. Notwithstanding any other provision in this Agreement, the parties may take such actions as necessary or appropriate to effectuate the terms and provisions of this Agreement. SECTION 7.8 No Third-Party Beneficiaries; Non-Termination of Employment. This Agreement is not intended and shall not be construed as to confer upon any Person other than the parties hereto any rights or remedies hereunder. No provision of this Agreement or the Distribution Agreement shall be construed to create any right, or accelerate entitlement, to any compensation or benefit whatsoever on the part of any Transferred Individual or other future, present, or former employee of the Parent Group or the SpinCo Group under any Parent Plan or SpinCo Plan or otherwise. Without limiting the generality of the foregoing, except as expressly provided in this Agreement: (i) neither the Distribution nor the termination of the Participating Company status of a member of the SpinCo Group shall cause any employee to be deemed to have incurred a termination of employment which entitles such individual to the commencement of benefits under any of the Parent Plans, any of the SpinCo Plans, or any of the Individual Agreements; and (ii) nothing in this Agreement other than those provisions specifically set forth herein to the contrary shall preclude Parent or SpinCo, at any time after the Distribution Date, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any SpinCo Plan, any benefit under any Plan or any trust, insurance policy or funding vehicle related to any SpinCo Plan. SECTION 7.9 Consent of Third Parties. If any provision of this Agreement is dependent on the consent of any third party (such as a vendor) and such consent is withheld, Parent and 16 SpinCo shall use their reasonable best efforts to implement the applicable provisions of this Agreement to the full extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, Parent and SpinCo shall negotiate in good faith to implement the provision in a mutually satisfactory manner. The phrase "reasonable best efforts" as used in this Agreement shall not be construed to require the incurrence of any non-routine or unreasonable expense or liability or the waiver of any right. SECTION 7.10 Effect if Distribution Does Not Occur. If the Distribution does not occur, then all actions and events that are, under this Agreement, to be taken or occur before or effective as of the Distribution Date, immediately after the Distribution Date, or otherwise in connection with the Distribution, shall not be taken or occur except to the extent specifically agreed by SpinCo and Parent. SECTION 7.11 Relationship of Parties. Nothing in this Agreement shall be deemed or construed by the parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the parties, it being understood and agreed that no provision contained herein, and no act of the parties, shall be deemed to create any relationship between the parties other than the relationship set forth herein. SECTION 7.12 Affiliates. Each of Parent and SpinCo shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by members of the Parent Group or members of the SpinCo Group, respectively, where relevant. SECTION 7.13 Dispute Resolution. Any controversy or claim arising out of or relating to this Agreement, or the breach hereof, shall be settled pursuant to the dispute resolution provisions described in the Distribution Agreement. SECTION 7.14 Indemnification. All Liabilities retained or assumed or allocated to Parent or any member of the Parent Group pursuant to this Agreement will be deemed to be Parent Liabilities (as defined in the Distribution Agreement) and all Liabilities retained or assumed by or allocated to SpinCo or any member of the SpinCo Group pursuant to this Agreement will be deemed to be SpinCo Liabilities (as defined in the Distribution Agreement), and, in each case, will be subject to the indemnification provisions set forth in the Distribution Agreement. SECTION 7.15 W-2 Matters. Pursuant to the alternative procedure set forth in Internal Revenue Service Rev. Proc. 96-60, SpinCo will assume Parent's obligations to furnish Forms W-2 to all Transferred Individuals for the year in which the Distribution Date occurs. Parent will provide to SpinCo the information not available to SpinCo relating to periods ending on the Distribution Date necessary for SpinCo to prepare and distribute Forms W-2 to Transferred Individuals for the year in which the Distribution Date occurs, which will include all remuneration earned by Transferred Individuals before the Distribution Date and Forms W-4 provided to Parent by Transferred Individuals to the extent that SpinCo is not already in possession of such information. SpinCo shall prepare and distribute such forms. To the extent permitted by applicable law, in particular Code Sections 3121(a)(1) and 3306(b)(1), SpinCo shall be deemed a successor employer to Parent with respect to Transferred Individuals for purposes of calculating the annual wage limitation to which state and federal payroll taxes apply. 17 SECTION 7.16 Confidentiality. Except as required by applicable law, for the purpose of satisfying any obligation under this Agreement or with the consent of the other party, neither Parent nor SpinCo shall disclose to any Person (other than members of the Parent Group or the SpinCo Group) any information (including, but not limited to, information regarding fees, expenses, assets, Liabilities and Plan terms) relating to the Parent Plans, SpinCo Plans or Transferred Individuals. Each of Parent and SpinCo shall be permitted to disclose such information within the Parent Group and SpinCo Group only to the extent reasonably necessary in the ordinary course of business. SECTION 7.17 Notices. Any notice, demand, claim, or other communication under this Agreement shall be in writing and shall be given in accordance with the provisions for giving notice under the Distribution Agreement. SECTION 7.18 Interpretation. Words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other genders as the context requires. The terms "hereof," "herein," and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all Appendices hereto) and not to any particular provision of this Agreement. The word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless the context otherwise requires or unless otherwise specified. The word "or" shall not be exclusive. SECTION 7.19 Severability. The provisions of this Agreement are severable and should any provision hereof be void, voidable or unenforceable under any applicable law, such provision shall not affect or invalidate any other provision of this Agreement, which shall continue to govern the relative rights and duties of the parties as though such void, voidable or unenforceable provision were not a part hereof. SECTION 7.20 Governing Law/Execution. This Agreement shall be construed in accordance with, and governed by, the laws of the State of Florida without regard to the conflicts of law rules of such state, may not be assigned by either party without the prior written consent of the other, and shall bind and inure to the benefit of the parties hereto and their respective successors and permitted assignees. This Agreement may not be amended or supplemented except by an agreement in writing signed by Parent and SpinCo. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute one and the same Agreement. SECTION 7.21 Amendments to Plans. To the extent not otherwise described in this Agreement, each of Parent and SpinCo shall have the authority to take all action necessary to cause any Plans to be amended in order to effect the provisions of this Agreement, and until such time as formal amendments are adopted to do so, such Plans shall be deemed amended as of the Distribution Date in order to effect the provisions contained in this Agreement. [SIGNATURE PAGE FOLLOWS] 18 IN WITNESS WHEREOF, the parties have caused this Employee Benefits Agreement to be duly executed as of the day and year first above written. F.N.B. CORPORATION By: /s/ Stephen J. Gurgovits ------------------------------------------------- Name: Stephen J. Gurgovits Title: Vice Chairman FIRST NATIONAL BANKSHARES OF FLORIDA, INC. By: /s/ Gary L. Tice ------------------------------------------------- Name: Gary L. Tice Title: Chairman and Chief Executive Officer 19 APPENDIX A SPINCO STAND-ALONE PLANS AND MIRROR PLANS STAND-ALONE PLANS/AGREEMENTS TO BE ASSUMED BY SPINCO (WITH APPROPRIATE NAME CHANGES) F.N.B. Corporation Salary Savings Plan Roger Bouchard Insurance, Inc. 401(k) Profit Sharing and Trust Plan F.N.B. Corporation Section 125 Flexible Benefits Plan F.N.B. Corporation Employee Dental Plan PARENT PLANS FOR WHICH SPINCO MIRROR PLANS WILL BE ESTABLISHED Deferred Compensation Plans F.N.B. Corporation Basic Retirement Plan F.N.B. Corporation Deferred Compensation Plan F.N.B. Corporation Excess Profit Sharing and Lost Match Plan F.N.B. Corporation Directors' Compensation Plan Health and Welfare Plans F.N.B. Corporation Employee Assistance Program F.N.B. Corporation Long-Term Disability, Life and AD&D Insurance Plan F.N.B. Corporation Termination Pay Plan Incentive Plans F.N.B. Corporation 2001 Incentive Plan F.N.B. Corporation 1998 Directors' Stock Option Plan A-1 APPENDIX B Employment Agreements Martha Bibby C.C. Coghill Tracy Coghill James L. Goehler George D. Hagi Kevin C. Hale Carmen M. Odle (Danner) Donald C. Rogers Gary L. Tice Terry R. Walston Thomas B. Hebble Garrett Richter David Straz Charles C. Grau Kathleen E. Meli Michael H. Morris Jack R. Kuhn B-1 APPENDIX C Transferred Individuals who are employed by Parent as of the Distribution Date and will be employed by SpinCo following the Distribution Date. Carmen Danner Colleen M. Craft Mary Ann Crabtree Karen Toro C.C. Coghill Gary L. Tice Lura Holtkamp Suzanne L. Orschell Thomas B. Hebble Kevin C. Hale Kathleen Elaine Fleming Susan Grose George Franklin Hannah Jr. Martha Bibby Kenneth C. Mitchell Joseph M. Sustersic Dana Pinnix Linda M. Becker Kim Lasanta Laurence M. Rouse George D. Hagi Clay W. Cone Nancy Moss Tracy L. Coghill David J. Sweeney Matthew Elsey Flor Higa Sara Busch Ellen Vanderburg Terry R. Walston Joyce A. Kimble David A. Casado Susan Pogany Kevin Chapman Tara Mclaughlin Tangela R. Burns Philip Nemni Laura A. Witty Robert T. Reichert Lisa Frechette Brenda S. Eberline Jana L. Geiger Barbara Pollak Maralee A. Murphy Martha L. Mcfadden Sherry Gleason Erin B. Anderson Kathleen M Schmidt Julia L. Achille Douglas Tice Veronica Viamonte Frances L. Siebert Loriann Beall William Focht The following persons who were employed by Parent prior to the Distribution Date and will not be employed by either Parent or SpinCo following the Distribution Date shall not be deemed to be Transferred Individuals for purposes of this Agreement; provided, however, that any Liabilities arising as a result of any Action or threatened Action by any of the following persons relating to the termination of such person's employment with Parent prior to the Distribution Date shall be deemed "Shared Liabilities" as set forth on Schedule 1.1(eee) to the Distribution Agreement and shall be treated in accordance with the terms of that agreement. Cass Bettinger Alice Jean Case Thomas E. Fahey Myron Harvey Donna Senica William Rundorff John Waters Jean Morocco Carol Koch Sandra Barone Dorothy Whitney Scott Hartle C-1 -----END PRIVACY-ENHANCED MESSAGE-----

Table of Contents

Table of Contents

Table of Contents

Table of Contents


SIGNATURES
Exhibit Index
EX-2.1 AGREEMENT & PLAN OF DISTRIBUTION
EX-2.2 TAX DISAFFILIATION AGREEMENT
EX-2.3 EMPLOYEE BENEFITS AGREEMENT