SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FNB Corp.
(Name of Registrant as Specified in its Charter)
Jerry A. Little, Treasurer and Secretary, FNB Corp.
Post Office Box 1328, Asheboro, North Carolina 27204, (910) 626-8300
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
FNB CORP.
101 Sunset Avenue
Asheboro, North Carolina 27203
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the regular Annual Meeting of Shareholders
of FNB Corp. (the "Corporation") will be held at the AVS Banquet Centre, 2045
North Fayetteville Street, Asheboro, North Carolina, on Tuesday, the 13th day of
May, 1997, at one o'clock p.m., preceded by a buffet luncheon beginning at 12:15
p.m., for the following purposes:
1. To elect three Class II Directors to serve for three-year terms
expiring at the Annual Meeting in 2000.
2. To consider approval of the Corporation's Stock Compensation Plan,
including certain amendments.
3. To consider ratification of the selection of KPMG Peat Marwick LLP,
Certified Public Accountants, as independent auditors of the Corporation for the
1997 fiscal year.
4. To consider and act upon any other business as may come before the
meeting or any adjournment thereof.
All shareholders are invited to attend the meeting. Only those
shareholders of record at the close of business on March 27, 1997, shall be
entitled to notice of the meeting and to vote at the meeting.
Information relating to the activities and operations of FNB Corp.
during the fiscal year ended December 31, 1996, is contained in the
Corporation's Annual Report, which is enclosed.
By Order of the Board of Directors
/s/ Michael C. Miller
Michael C. Miller
President
APRIL 10, 1997
YOUR BOARD OF DIRECTORS URGES YOU TO MARK, DATE, SIGN AND RETURN THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON. THE PROXY MAY BE REVOKED AT ANY TIME BY NOTIFYING THE SECRETARY OF FNB
CORP. IN WRITING PRIOR TO THE VOTING OF THE PROXY.
PROXY STATEMENT
GENERAL INFORMATION
The following information is furnished in connection with the solicitation
of proxies by the Board of Directors of FNB Corp. (the "Corporation" or "FNB")
for use at the Annual Meeting of Shareholders to be held on May 13, 1997. The
principal executive offices of the Corporation are located at its wholly-owned
subsidiary, First National Bank and Trust Company (the "Bank"), 101 Sunset
Avenue, Asheboro, North Carolina 27203 (Telephone: 910-626-8300). This proxy
statement and the enclosed form of proxy were first sent to shareholders on or
about April 10, 1997.
A proxy may be revoked by the person giving it by delivering a written
notice to the Corporation prior to the meeting or by personally requesting that
it be returned. The shares represented by all properly executed proxies received
by the Corporation in time to be taken to the meeting will be voted; and, if a
choice is specified on the proxy, the shares represented thereby will be voted
in accordance with such specification. If a specification is not made, the proxy
will be voted for the proposals set forth in the Notice of Annual Meeting of
Shareholders.
Solicitation of proxies may be made in person or by mail or telephone by
directors, officers and regular employees of the Corporation or Bank without
additional compensation therefor. The Corporation may also request banking
institutions, brokerage firms, custodians, nominees and fiduciaries to forward
solicitation material to the beneficial owners of Corporation Common Stock held
of record by such person, and the Corporation will reimburse such forwarding
expenses. The Corporation will pay the costs of solicitation of proxies.
VOTING SECURITIES OUTSTANDING AND PRINCIPAL SHAREHOLDERS
Only holders of record of FNB Common Stock at the close of business on
March 27, 1997 (the "Record Date"), are entitled to a notice of and to vote on
matters to come before the Annual Meeting or any adjournment thereof. On the
Record Date, there were 1,811,104 shares of FNB Common Stock issued and
outstanding.
Each share is entitled to one vote on all matters. The presence, in person
or by proxy, of the holders of a majority of the outstanding shares of FNB
Common Stock entitled to vote is necessary to constitute a quorum.
The Corporation is not aware of any holders of more than 5% of the
outstanding shares of FNB Common Stock as of March 27, 1997.
1
EXECUTIVE OFFICERS
The current executive officers of the Corporation and of the Bank are as
follows:
NAME AGE POSITION IN CORPORATION POSITION IN BANK
Michael C. Miller 46 President and Chief President and Chief
Executive Officer Executive Officer
Jerry A. Little 53 Treasurer and Secretary Senior Vice President
and Secretary
The above officers have held executive positions with the Corporation or
the Bank for at least the past five years. Officers are elected annually by the
Board of Directors.
ELECTION OF DIRECTORS
The bylaws of the Corporation provide that the number of directors shall
consist of not less than nine nor more than twenty-five, with the exact number
of directors within such maximum and minimum limits to be fixed and determined
from time to time by resolution adopted by a majority of the full Board of
Directors or by resolution of the shareholders at any annual or special meeting
thereof. The Board of Directors has set the total number of directors at 10, all
of whom will be elected at the 1997 Annual Meeting or were previously elected
and will remain in office after that meeting.
The Board of Directors is divided into three classes: Class I, Class II and
Class III. In accordance with this classification, the members of Class II of
the Board of Directors are to be elected at this Annual Meeting. It is intended
that the persons named in the accompanying form of proxy will vote for the three
nominees listed below for directors of the Corporation in Class II, unless
authority so to vote is withheld. Each nominee is at present a member of the
Board of Directors. Class II directors will serve for three-year terms expiring
at the 2000 Annual Meeting or until their successors shall be elected and shall
qualify. Directors are elected by a plurality of the votes cast. Abstentions and
broker nonvotes will not affect the election results if a quorum is present.
The following information is furnished with respect to the nominees for
election as directors of the Corporation in Class II, and for the directors in
Classes I and III whose terms expire at the Annual Meetings occurring in 1999
and 1998, respectively. Each nominee for Class II director and each director
presently serving in Classes I and III also serves as a director of the Bank.
2
NOMINEES FOR CLASS II DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS FOR THREE-YEAR TERMS
EXPIRING AT THE ANNUAL MEETING IN 2000
OCCUPATION DIRECTOR
NAME LAST FIVE YEARS SINCE AGE
W. L. Hancock President and 1973 61
Treasurer,
Hancock Farms, Inc.
(Purebred Cattle)
(1987 - Present)
R. Reynolds Neely, Jr. Planning Director, 1980 43
City of Asheboro
Planning Department
(1989 - Present)
Richard K. Pugh Chairman of the Board, 1988 62
Pugh Oil Company, Inc.
(1990 - Present)
DIRECTORS IN CLASS I
DIRECTORS WITH TERMS
EXPIRING AT THE ANNUAL MEETING IN 1999
OCCUPATION DIRECTOR
NAME LAST FIVE YEARS SINCE AGE
James M. Culberson, Jr. Chairman of the Board 1974 68
of the Corporation
(1984 - Present); Chairman of the Board of
the Bank (1974 - Present); President of the
Corporation (1984 - 1993); Chief Executive
Officer of the Bank (1991 - 1993)
J. M. Ramsay III President, 1989 49
Elastic Therapy, Inc.
(1989 - Present)
3
OCCUPATION DIRECTOR
NAME LAST FIVE YEARS SINCE AGE
Charles W. Stout, M.D. Retired; 1989 64
Family Physician
(1962 - 1996)
Earlene V. Ward Secretary, 1976 65
Vestal Motor Co.
(1991 - Present);
Secretary and Treasurer,
Mid-State Motors, Inc.
(1991 - Present)
DIRECTORS IN CLASS III
DIRECTORS WITH TERMS
EXPIRING AT THE ANNUAL MEETING IN 1998
OCCUPATION DIRECTOR
NAME LAST FIVE YEARS SINCE AGE
James M. Campbell, Jr. President and 1984 58
Treasurer, Sew
Special, Inc.
(1979 - Present)
Thomas A. Jordan President, Michael 1984 57
Thomas Furniture
Company
(1983 - Present)
Michael C. Miller President and Chief 1992 46
Executive Officer of
the Corporation
(1994 - Present);
Chief Executive Officer
of the Bank
(1994 - Present);
President of the Bank
(1991 - Present);
Vice President, Treasurer
and Secretary of the
Corporation
(1986 - 1993);
Director,
B. B. Walker Company
4
In the event that any nominee should not be available to serve for any
reason (which is not anticipated), it is intended that the persons acting under
the proxy will vote for the election, in his stead, of such other persons as the
Board of Directors of the Corporation may recommend.
COMMITTEES OF THE BOARD
The Board of Directors holds regular monthly meetings to conduct the normal
business of the Corporation and meets on other occasions when required for
special circumstances. In addition, certain board members serve on standing
committees. Among these committees are the Audit and Compliance, Compensation
and Nominating Committees, whose members and principal functions are as follows:
AUDIT AND COMPLIANCE COMMITTEE. The Audit and Compliance Committee reviews
significant audit and accounting principles, policies and practices and meets
with the audit manager relative to internal audit functions and with the
Independent Auditors to review the performance of the audit manager and internal
controls and accounting procedures. The committee also reviews significant
regulatory compliance matters and meets with the compliance officer relative to
the compliance management function. Additionally, the committee reviews
regulatory reports filed with the Federal Reserve Board and Comptroller of the
Currency. Members of this committee are Directors Neely, Hancock and Ramsay. The
Audit and Compliance Committee met six times during the 1996 fiscal year.
COMPENSATION COMMITTEE. The Compensation Committee deals in broad terms
with personnel matters and reviews the compensation of the senior officers of
the Corporation and Bank. Members of this committee are Directors Campbell,
Neely, Pugh and Ward. The Compensation Committee met twice during the 1996
fiscal year.
NOMINATING COMMITTEE. The Board of Directors, as a group, serves as the
Nominating Committee and in that capacity recommends nominees for election to
the Board. Qualified candidates recommended by shareholders will be considered
by the Board. In order for a candidate recommended by a shareholder to be
considered as a nominee at the next annual meeting, the name of such candidate,
together with a written description of the candidate's qualifications must be
received by the Secretary of FNB Corp., 101 Sunset Avenue, Asheboro, North
Carolina 27203, no later than December 11, 1997.
During the fiscal year ended December 31, 1996, the Board of Directors held
a total of 13 meetings. Each Director attended 75% or more of the total number
of meetings of the Board and of the committees of the Board on which he or she
served except for James M. Culberson, Jr., who attended 69% of such meetings.
5
EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ended December 31, 1996,
1995 and 1994, the cash and certain other compensation paid to or received or
deferred by persons who were at December 31, 1996 the chief executive officer of
the Corporation and the other officers of the Corporation whose total salary and
bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION STOCK OPTIONS ALL OTHER
ON DECEMBER 31, 1996 YEAR SALARY BONUS (#) COMPENSATION
- ------------------------------------ ---- ------ ----- ------------- ------------
Michael C. Miller, President and 1996 $162,504 $35,848 7,500 $6,430 (1)
Chief Executive Officer of the 1995 137,496 36,750 5,000 8,042
Corporation and Bank 1994 125,000 35,000 7,500 4,768
(1) Amount shown consists of $1,680 paid by the Bank pursuant to a Split
Dollar Insurance Program for executives and $4,750 contributed by the
Corporation to a 401(k) plan.
STOCK OPTIONS
The following table provides details regarding stock options granted to the
Named Executive Officers in the 1996 fiscal year. Information concerning stock
options to directors is set forth under the heading "Director Compensation". The
stock options were granted pursuant to the Corporation's Stock Compensation
Plan.
OPTION GRANTS IN 1996
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED EXERCISE
OPTIONS TO OR BASE
GRANTED EMPLOYEES PRICE EXPIRATION
(#) (1) IN 1996 ($/SH) DATE
------------- ----------- --------- ----------
Michael C. Miller 7,500 19.9% $28.00 12/11/06
(1) Incentive Stock Options exercisable one year after the grant date
(December 12, 1997), with 20% of the shares covered thereby becoming exercisable
at that time and an additional 20% of the option shares becoming exercisable on
each successive anniversary date. The price for shares that may be purchased
pursuant to the options is equal to the fair market value of the Corporation's
Common Stock on the date of grant.
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The following table shows the number of shares covered by exercisable and
unexercisable options held by Named Executive Officers as of December 31, 1996.
No options were exercised by Named Executive Officers in 1996.
OPTION VALUES AT DECEMBER 31, 1996
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996 (#) DECEMBER 31, 1996 (1)
------------------------------ -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Michael C. Miller 4,000 16,000 $47,190 $100,785
(1) The closing price of the Corporation's Common Stock on December 30,
1996, the last day the stock was traded in fiscal 1996, was $30.00.
PENSION PLAN
The Bank maintains a Pension Plan for its employees. The aggregate amount
set aside or accrued during the year ended December 31, 1996, for all benefits
to be paid under the Plan in the event of retirement with respect to all
employees, as a group, was $185,368. The contributions to the Plan are based on
actuarial assumptions covering all employees, as a group, and the contributions
attributable to officers as a group are not determinable. No outside director is
included in the Pension Plan. As of January 1, 1997, the individual named in the
Summary Compensation Table, Mr. Miller, had 11 credited years of service under
such plan. The approximate annual retirement benefits beginning at the normal
retirement age of 65 to plan participants with salaries in the classifications
indicated are listed in the table below. The benefit amounts listed in the
following table reflect a straight life annuity. The benefit amounts listed in
the table are subject to certain adjustments for participants who accrued
benefits under the Plan prior to January 1, 1989.
APPROXIMATE ANNUAL BENEFIT UPON RETIREMENT
FOR YEARS OF SERVICE INDICATED (1)
ASSUMED AVERAGE ----------------------------------------------
COMPENSATION FOR
FINAL TEN YEARS 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
- --------------- -------- -------- -------- -------- -------- --------
$100,000 22,061 29,415 36,769 44,123 51,476 56,476
125,000 28,249 37,665 47,081 56,498 65,914 72,164
150,000 34,436 45,915 57,394 68,873 80,351 87,851
175,000 40,624 54,165 67,706 81,248 94,789 103,539
200,000 46,811 62,415 78,019 93,623 109,226 119,226
225,000 52,999 70,665 88,331 105,998 123,664 134,914
(1) Annual retirement benefits over $125,000 exceed the current maximum
plan benefits under the Internal Revenue Code.
7
DIRECTOR COMPENSATION
Directors, other than the Chairman of the Board, who are not also employees
of the Corporation or Bank are paid $400 for each Board meeting they attend and
receive an additional $200 for each committee meeting attended. In addition,
each nonemployee director, other than the Chairman of the Board, is paid a
monthly retainer of $400. The Chairman of the Board receives an annual fee of
$50,000. Directors may elect to defer receipt of their fees and monthly
retainers until their retirement from the Board. Any deferred fees and retainers
become a general obligation of the Corporation to be credited with interest at
the Bank's deposit rate applied to individual retirement accounts with a
two-year term and priced on a monthly variable-rate basis, subject to a minimum
rate of 5.5% per annum.
On December 12, 1996, the Corporation granted to each nonemployee director
a nonqualified stock option to purchase 1,000 shares of Common Stock at the
price of $28.00 per share. The price for shares that may be purchased pursuant
to the options is equal to the fair market value of the Corporation's Common
Stock on date of grant. The stock options first become exercisable on December
12, 1997, with 20% of the shares covered thereby becoming exercisable at that
time and an additional 20% of the option shares becoming exercisable on each
successive anniversary date. The options expire on December 11, 2006.
INDEBTEDNESS OF OFFICERS AND DIRECTORS
Certain of the directors and officers of the Corporation and Bank and
companies with which they are affiliated were customers of and borrowers from
the Bank in the ordinary course of business in 1996. Similar banking
transactions are expected to take place in the future. In the opinion of
management, all outstanding loans and commitments included in such transactions
were made substantially on the same terms, including rate and collateral, as
those prevailing at the time in comparable transactions with other customers and
did not involve more than normal risk of collectibility or contain other
unfavorable features.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 27, 1997, certain information
with respect to the beneficial ownership of FNB Common Stock by directors and by
directors and executive officers as a group.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT
NAME AND ADDRESS MARCH 27, 1997 (1) (2) OF CLASS
- ---------------- ----------------------- --------
James M. Campbell, Jr. 22,061 1.22
Randleman, NC
James M. Culberson, Jr. 19,968 1.10
Asheboro, NC
W. L. Hancock 32,608 1.80
Franklinville, NC
Thomas A. Jordan 77,291 4.27
Liberty, NC
Michael C. Miller 7,912 0.44
Asheboro, NC
8
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT
NAME AND ADDRESS MARCH 27, 1997 (1) (2) OF CLASS
- ---------------- ----------------------- --------
R. Reynolds Neely, Jr. 82,077 (3) 4.53
Asheboro, NC
Richard K. Pugh 2,300 0.13
Asheboro, NC
J. M. Ramsay III 9,791 0.54
Asheboro, NC
Charles W. Stout, M.D. 12,170 0.67
Asheboro, NC
Earlene V. Ward 11,606 0.64
Asheboro, NC
Directors and executive officers 279,610 (3) 15.34
as a group (11 persons)
(1) Includes shares held by directors' and executive officers' immediate
families, including spouse and/or children residing in same household. Does not
include 2,310 shares owned by the Ferree Educational and Welfare Fund, of which
Mr. Miller is a trustee and treasurer.
(2) Includes shares subject to stock options exercisable as of March 27,
1997 or within 60 days thereafter for Mr. Campbell (800 shares), Mr. Culberson
(800 shares), Mr. Hancock (500 shares), Mr. Jordan (800 shares), Mr. Miller
(4,000 shares), Mr. Neely (800 shares), Mr. Pugh (800 shares), Mr. Ramsay (800
shares), Mrs. Ward (500 shares) and all directors and executive officers as a
group (11,300 shares).
(3) Includes 51,096 shares held of record by Mr. Neely's mother and over
which Mr. Neely and his sister have joint voting and dispository control
pursuant to a revocable power of attorney.
Under the securities laws of the United States, the Corporation's
directors, its executive officers, and any persons holding more than 10 percent
of the Corporation's stock are required to report their ownership of the
Corporation's stock and any changes in that ownership to the Securities and
Exchange Commission. Specific due dates for these reports have been established
and the Corporation is required to report in this proxy statement any failure to
file by these dates during 1996. All of these filing requirements were satisfied
by its directors, executive officers and 10 percent holders, except that each of
the directors and executive officers of the Corporation inadvertently failed to
file on a timely basis one report relating to one transaction involving the
grant of stock options during 1996. In making these statements, the Corporation
has relied on the written representations of its directors, executive officers
and 10 percent holders and copies of the reports that they have filed with the
Commission.
9
PROPOSAL TO APPROVE STOCK COMPENSATION PLAN,
INCLUDING CERTAIN AMENDMENTS
On March 11, 1993, the Board of Directors adopted the Corporation's
Stock Compensation Plan (the "Plan"), which was approved by the shareholders of
the Corporation at their 1993 Annual Meeting held on May 11, 1993. On December
12, 1996, the Board of Directors amended the Plan in a manner intended to permit
certain awards granted under the Plan to be treated as "performance-based
compensation" under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), so that the Corporation may receive the full benefit of
any deductions resulting from the grant or exercise of such awards. The changes
made to the Plan include the following: (i) the Plan will be administered by a
committee (the "Committee") comprised of at least two "outside directors," as
defined in Section 162(m), (ii) the number of shares of the Corporation's Common
Stock, par value $2.50 per share (the "Common Stock"), eligible for awards to
any one individual under the Plan is 50,000 shares, (iii) advisory board members
are now eligible for grants of nonqualified stock options under the Plan, and
(iv) language relating to compliance with Section 16 of the Securities Exchange
Act of 1934 was amended to conform to recent changes in the rules and
regulations promulgated thereunder.
The Corporation is seeking shareholder approval of the Plan as
originally adopted and as now amended in order to comply with the requirements
of Section 162(m) of the Code and to allow incentive stock options granted under
the Plan to receive favorable tax treatment as provided in Section 422 of the
Code and described below. The following summary of the Plan is qualified in its
entirety by express reference to the text of the Plan.
DESCRIPTION OF THE PLAN
The Plan permits the Committee to grant (i) incentive stock options and
restricted and unrestricted stock bonuses to key employees and (ii) nonqualified
stock options to key employees, officers, directors (whether or not employees)
and advisory board members. The Board of Directors is authorized under the Plan
to grant nonqualified options to nonemployee directors and advisory board
members. The Corporation has approximately 100 employees, nonemployee directors
and advisory board members whom it considers eligible to receive awards under
the Plan. The Plan is intended to allow certain key employees, officers,
directors and advisory board members of the Corporation and its subsidiaries to
have an opportunity to acquire an ownership interest in the Corporation and to
encourage them to continue to promote the Corporation's best interests. The Plan
authorizes grants to acquire up to 180,000 shares of the Corporation's Common
Stock.
The number and class of shares available under the Plan will be
adjusted in the event of stock splits and combinations, stock dividends and
similar changes in the capitalization of the Corporation.
The Plan allows the Committee and the Board of Directors broad
discretion in determining the number of shares and the particular terms of any
stock option or stock bonus. The exercise price of stock options may not be less
than the fair market value of the Common Stock as of the date the option is
granted. The closing market price of the Common Stock as reported on NASDAQ on
March 25, 1997, was $29.50 per share. Unless otherwise provided in the Plan or
in an option agreement evidencing such option, one-fifth of each option becomes
exercisable on and after each of the first, second, third, fourth and fifth
anniversary dates of the grant.
The terms of each option are as provided in the applicable option
agreement, but no stock option granted may have a term in excess of ten years
from the grant date. In addition, any incentive stock option which is granted to
a key employee who holds more than 10% of the total combined voting power of all
classes of stock of the Corporation or its affiliates is exercisable only at a
price which is at least 110% of the fair market value of the Common Stock on the
date of grant and such option may not be exercisable more than five years after
the date on which it is granted. Unless otherwise provided in the applicable
option agreement, all unexercised options
10
terminate three months after an optionee's termination of employment for any
reason other than death. If a termination of employment is due to death, the
option must be exercised, if at all, within one year of termination.
The Plan may be amended, modified, suspended or terminated by the Board
of Directors of the Corporation provided, however, that no such amendment may
(i) increase the maximum aggregate number of shares available under the Plan,
(ii) change the minimum option exercise price provided in the Plan, (iii) extend
the period during which options and stock bonuses may be exercised or granted or
(iv) expand the class of persons eligible to receive options or stock bonuses.
Unless sooner terminated as provided in the Plan, the Plan will terminate on
March 10, 2003. No options or stock bonuses may be granted after the Plan has
terminated.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Any incentive stock options granted under the Plan are intended to
qualify as "incentive stock options" under Section 422 of the Code. The grant of
an incentive stock option generally does not result in taxable income to the
optionee at the time of grant or at the time of exercise. However, for any year
in which Common Stock is purchased upon exercise of the option, the difference
between the fair market value of the Common Stock at the time of exercise and
its cost to the employee is an item of adjustment for purposes of computation of
an employee's alternative minimum tax under Section 55 of the Code. If the
optionee exercises the option and then sells the Common Stock purchased under
the option at a gain, the excess of the sales price of the Common Stock over its
cost to the optionee is taxable as a long-term capital gain if the sale is made
more than two years from the granting of the option and more than one year from
the transfer of the Common Stock to the optionee. If the sale is made within two
years after the granting of the option or within one year after the Common Stock
is transferred to the optionee, the optionee will generally recognize ordinary
income, equal to the fair market value of the Common Stock on the date of
exercise less the option price, and capital gain (long-term or short-term as the
case may be), equal to the amount realized in excess of the fair market value of
the Common Stock on the date of exercise. No tax deduction is generally
available to the Corporation as a result of the granting of incentive stock
options, the exercise of such options, or the sale by optionees of the Common
Stock purchased. However, the Corporation is entitled to a deduction in an
amount equal to the ordinary income, if any, realized by an optionee on the sale
of Common Stock purchased pursuant to the exercise of an incentive stock option.
Nonqualified options granted under the Plan are not intended to qualify
as "incentive stock options" under Section 422 of the Code. An optionee does not
receive taxable income, and the Corporation receives no deduction, by reason of
the grant of a nonqualified option. On the date any such option is exercised, an
optionee is deemed to receive ordinary income equal to the amount by which the
fair market value of the Common Stock on the exercise date exceeds the option
price. At that time, the Corporation receives a deduction in the same amount.
Stock bonuses granted under the Plan result in the recipient
recognizing ordinary income equal to the fair market value of the Common Stock
when the Common Stock is no longer subject to substantial risk of forfeiture or
may be transferred free of such risk. For unrestricted stock bonuses, the
recipient recognizes this income on the date of grant. In addition, the
recipient of a restricted stock bonus may elect to report this income in the
year the Common Stock is transferred to him even though the income would
otherwise be deferred. At the time the recipient includes the restricted stock
bonus as income, the Corporation would receive a deduction in the same amount.
The Plan provides that the Committee may, in its discretion, grant tax
reimbursement payments to stock bonus and nonqualified stock option recipients
for use in paying income taxes resulting from such bonuses or options.
11
Any discussion herein pertaining to a deduction for the Corporation is
qualified by application of Section 162(m) of the Code and the regulations
thereunder. Section 162(m) limits to $1,000,000 per year the allowable deduction
for compensation paid to or accrued by the chief executive officer and the four
most highly compensated officers (other than the chief executive officer),
except that such limit does not include "performance-based compensation," as
that term is defined therein. If the Plan, as amended, is approved by
shareholders in the manner described below, compensation realized upon the
exercise of options will be "performance-based" if the exercise price is at
least equal to the fair market value of the underlying stock on the date of
grant. The Plan is intended to meet the provisions of Section 162(m) such that
any deductions realized from stock option transactions thereunder will not be
limited. Compensation derived from stock bonus awards granted under the Plan is
not intended to qualify as "performance-based" under the Section 162(m)
regulations. Since stock bonus awards are granted in minimal numbers, the
Corporation believes it is unlikely that granting such awards will result in
nondeductible compensation through the application of Section 162(m).
PURPOSE OF AMENDMENTS
Although the Corporation considers it unlikely that any employee will
receive total compensation in excess of $1,000,000 in any year, including the
value realized from grants under the Plan, the Board of Directors felt it
prudent to amend the Plan to assure that options granted under the Plan will
comply with Section 162(m) of the Code. Compliance with Section 162(m) should
allow the Corporation to take full advantage of any deductions resulting from
stock option transactions in the event a dramatic increase in the price of the
Corporation's Common Stock or a similar event causes one or more employees to
receive or accrue total compensation in excess of $1,000,000 in a given year.
Shareholder approval is also necessary under Section 422 of the Code because all
material changes in a plan must be so approved in order for incentive stock
options to be so treated under that section.
VOTE REQUIRED; EFFECT OF NONAPPROVAL
In order for incentive stock options granted under the Plan to receive
the favorable tax treatment described above and to comply with Section 162(m) of
the Code and the Regulations thereunder, it is necessary that the Plan, as
amended, be approved by the shareholders of the Corporation. The Plan, as
amended, will not become effective unless the Plan is approved by a majority of
the votes cast at a shareholders' meeting at which a quorum is present, either
in person or by proxy. Abstentions and broker nonvotes will have no effect. If
such approval is not obtained, the Plan as currently in effect will remain
effective until it expires on March 10, 2003; provided, however, that any
compensation realized upon the exercise of options or awards under the Plan will
not be deemed performance-based compensation under Code Section 162(m).
PLAN BENEFITS
Because the Plan is discretionary, it is not possible to determine what
options the Committee or the Board of Directors will grant thereunder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE STOCK COMPENSATION
PLAN, AS AMENDED.
12
INDEPENDENT AUDITORS
The firm of KPMG Peat Marwick LLP, independent certified public
accountants, has been selected by the Board of Directors as independent auditors
for the 1997 fiscal year. This selection is being presented to the shareholders
for ratification at the Annual Meeting.
A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting of Shareholders and will be given an opportunity to make a
statement if he desires to do so. Such representative will be available to
respond to questions relating to the 1996 audit of the Corporation's financial
statements.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders must be received by the Secretary of FNB Corp., 101
Sunset Avenue, Asheboro, North Carolina 27203, no later than December 11, 1997.
OTHER MATTERS
There is no business other than as set forth, so far as now known, to be
presented for action by the shareholders at the meeting. It is intended that the
proxies will be exercised by the persons named therein upon matters that may
properly come before the meeting or any adjournment thereof, in accordance with
the recommendations of management.
By Order of the Board of Directors:
/s/ Michael C. Miller
Michael C. Miller
President
Date: April 10, 1997
13
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APPENDIX
FNB CORP.
101 Sunset Avenue
Asheboro, North Carolina 27203
Proxy for Annual Meeting of Shareholders - May 13, 1997
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas A. Jordan and Charles W. Stout,
M.D., or either of them, proxies with full power of substitution to vote all
shares of FNB Corp. standing in the name of the undersigned at the above Annual
Meeting of Shareholders, and all adjournments thereof:
1. ELECTION OF CLASS II DIRECTORS TO SERVE FOR THREE-YEAR TERMS EXPIRING
AT THE ANNUAL MEETING IN 2000: W. L. Hancock, R. Reynolds Neely, Jr.,
Richard K. Pugh
_____ With authority to vote for all nominees listed above, except as
designated below.
_____ Without authority to vote for all nominees listed above.
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To withhold authority to vote for any individual nominee, write the
nominee's name in the space above.
2. PROPOSAL TO APPROVE STOCK COMPENSATION PLAN, INCLUDING CERTAIN
AMENDMENTS.
_____ FOR _____ AGAINST _____ ABSTAIN
3. PROPOSAL TO RATIFY SELECTION OF KPMG PEAT MARWICK LLP as independent
auditors.
_____ FOR _____ AGAINST _____ ABSTAIN
4. With discretionary authority upon such other matters as may come before
the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AUTHORIZATION TO VOTE FOR THE
NOMINEES, APPROVAL OF THE STOCK COMPENSATION PLAN AND THE RATIFICATION OF THE
SELECTION OF AUDITORS. THE PROXY WILL BE VOTED ACCORDINGLY UNLESS OTHERWISE
SPECIFIED.
Dated: _____________________, 1997 __________________________________
Signature of Shareholder
__________________________________
Signature of Shareholder
When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title. If more than one trustee,
all should sign. All joint owners
must sign.