[FNB Corporation Letterhead]
March 29, 2000
Dear Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend the
Annual Meeting of Shareholders of FNB Corporation. The meeting will be held
at 2:00 p.m., on Tuesday, May 9, at Custom Catering, Inc., in Blacksburg,
Virginia. The bank will host a reception following the business meeting. I
encourage you to take this opportunity to visit with your friends and fellow
shareholders.
Information about the business meeting and the nominees for election as
Directors is in the enclosed meeting notice and proxy statement. This year,
you elect two Directors of Class I, ratify the appointment of independent
accountants, and approve the FNB Corporation 2000 Incentive Stock Plan and the
reservation of 400,000 shares of the Corporation's stock for issuance
thereunder. Please return your proxy by Friday, May 5, in the enclosed
postage-paid envelope.
We hope you will be able to attend. A map to the site is printed on the back
of this proxy statement for your convenience.
Sincerely,
J. Daniel Hardy, Jr.
President/CEO
Enclosures
<PAGE>
Notice of Annual Meeting of Shareholders
To Our Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
FNB Corporation (the "Corporation") will be held at Custom Catering, Inc.,
902 Patrick Henry Drive, Blacksburg, Virginia, on May 9, 2000, at 2:00 p.m.,
for the following purposes:
(1) To elect two (2) Directors of the Corporation to fill the vacancy
created by the expiration of terms of the Directors of Class I;
(2) To ratify the appointment of McLeod & Company, independent
certified public accountants, as auditors for 2000;
(3) To approve the FNB Corporation 2000 Incentive Stock Plan and the
reservation of 400,000 shares of the Corporation's stock for
issuance thereunder; and
(4) To transact any other business that may properly come before the
meeting or any adjournment thereof.
The record date for determining shareholders entitled to notice of, and to
vote at, the Annual Meeting has been fixed by the Board of Directors as of the
close of business at 2:00 p.m., on March 15, 2000. The number of shares
outstanding and entitled to vote is 4,093,996 shares.
This notice and the accompanying proxy materials enclosed herewith are sent to
you by order of the Board of Directors. The Board of Directors of FNB
Corporation recommends that shareholders elect the nominated Directors of
Class I; ratify the appointment of McLeod & Company, independent certified
public accountants, as auditors for the Corporation for 2000; and approve the
FNB Corporation 2000 Incentive Stock Plan and the reservation of 400,000
shares of the Corporation's stock for issuance thereunder.
Peter A. Seitz, Secretary
FNB Corporation
IMPORTANT: To assure that your shares will be voted at the meeting, you are
requested to complete and sign the enclosed proxy and return it in the
postage-paid envelope provided as soon as possible. The giving of a proxy will
not affect your right to vote in person in the event you attend the meeting
and elect that right.
<PAGE>
Proxy Statement
2000 Annual Meeting of Shareholders
To be Held on May 9, 2000
The accompanying proxy is solicited on behalf of the Board of Directors of FNB
Corporation (the "Corporation") for the 2000 Annual Meeting of Shareholders
("Annual Meeting") for the purposes set forth in the accompanying notice.
The Annual Meeting will be held at Custom Catering, Inc., 902 Patrick Henry
Drive, Blacksburg, Virginia, on May 9, 2000, at 2:00 p.m.
The Corporation will pay all costs for this proxy solicitation. All shares of
the common stock of the Corporation represented by properly executed and
delivered proxies will be voted according to their terms and conditions at the
Annual Meeting or any adjournments thereof. A proxy may be revoked at any
time before the stock to which it relates is voted, either by written notice
(which may be in the form of a substitute proxy delivered to the Secretary of
the Annual Meeting) or by attending the Annual Meeting and voting in person.
Voting Securities and Principal Holders Thereof. The number of shares
outstanding and entitled to vote is 4,093,996 shares of common stock. There
are no other outstanding classes of Corporation stock. The record date for
shareholders entitled to notice of, and to vote at, the Annual Meeting has
been fixed as of the close of business on March 15, 2000.
Cumulative Voting. Shareholders of the Corporation shall have no
cumulative voting rights.
Board of Directors and Committees of the Board. The Board of Directors of the
Corporation held 12 meetings during 1999. The Audit Committee of the
Corporation met on one occasion during the year. The Corporation has no other
standing committees. No director attended fewer than 75 percent of the
Corporation's Board meetings during the year. Non-management Directors of the
Corporation receive $1,500 compensation for their services each month.
The Corporation's Board reviews senior management's budget and compensation
projections for the ensuing year for the Corporation and the Bank. As part of
this process, the Board also recommends the annual compensation of the
President and Chief Executive Officer of the Corporation. In 1999, the Board
recommended an increase in Mr. Hardy's salary from $168,200 to $188,200.
Factors taken into consideration by the Board in their recommendation for such
executive compensation include:
a. Review of peer executive compensation as presented in a report prepared
by the Virginia Bankers Association;
b. Net earnings of the Corporation during the prior year;
c. Status of criticized loans and assets;
d. Overall performance of the Corporation during the prior year.
As further evaluation of performance, qualitative factors considered include
the quality of the strategic plan, organization and management development
progress, and civic involvement.
<PAGE>
Executive Officers of the Corporation. J. Daniel Hardy, Jr., President and
CEO, and Daniel A. Becker, Senior Vice President and Chief Financial Officer,
are Executive Officers of the Corporation. Both gentlemen serve at the
pleasure of the Corporation's Board. Mr. Hardy has served the Bank as
Executive Vice President/CAO, President, and President/CEO over the past five
years. Mr. Becker has served in his current capacity for the past year. Mr.
Becker served as Vice President/Financial Analyst for First National Bank
during 1998 and served for the three previous years as Manager of Financial
Analysis and Budgeting for First Union National Bank in Virginia/Maryland/DC.
Executive Compensation. The following table provides information concerning
those officers of the Corporation and Bank whose compensation exceeded
$100,000 for the year ended December 31, 1999.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
Name and Principal All Other
Position Year Salary($) Bonus($) Compensation($)(A)
<S> <C> <C> <C> <C>
J. Daniel Hardy, Jr. 1999 188,301 15,000 21,296
President and CEO, the 1998 165,801 10,000 28,130
Corporation, and President 1997 136,977 40,000 38,705
and CEO, the Bank
</TABLE>
(A) All other compensation for 1999 and 1998 consists of an estimated
contribution by the Bank to the ESOP and a matching of 3 percent of his
contribution to the Bank's 401(k) plan. Beginning in 1998, Mr. Hardy no
longer earned any director fees. In prior years, all other compensation
consisted of actual contributions to the ESOP, matching contribution to the
Bank's 401(k) plan, and director fees earned.
Transactions with Management. Directors and officers of the Bank and the
Corporation, and persons with whom they are associated, have had, and expect
to have in the future, banking transactions with the Bank and the Corporation
in the ordinary course of their businesses. In the opinion of management of
the Bank and the Corporation, all such loans and commitments for loans were
made on substantially the same terms, including interest rates, collateral,
and repayment terms, as those prevailing at the same time for comparable
transactions with other persons; were made in the ordinary course of business;
and do not involve more than a normal risk of collection or present
unfavorable features. As of December 31, 1999, there were outstanding loans
to Executive Officers and Directors of the Corporation of approximately
$1,212,000.
The Corporation entered into an employment agreement with Mr. Hardy during
1997. The agreement for Mr. Hardy provides for employment with the
Corporation for a period of three years. The term of the employment agreement
renews each year for an additional period of one year (for a maximum of three
years). Mr. Hardy's salary and benefits are established by the Board from
time to time in accordance with the agreement.
The agreement also provides for certain severance benefits in the event of a
"change in control" of the Corporation followed by termination of employment
within 36 months after the change in control. In such event, Mr. Hardy would
be entitled to receive the equivalent of 36 months of salary and benefits,
<PAGE>
calculated as of the time of change in control, whether or not his employment
is terminated by the new organization. In addition, Mr. Hardy is entitled to
an additional $100,000 immediate payment. Should Mr. Hardy accept employment
with a banking institution located within 50 miles of Christiansburg, however,
all salary and benefits under the employment agreement shall be reduced by the
value of those salary and benefits received from the new employer.
As part of Mr. Tollison's retirement from the organization, the Corporation
and Mr. Tollison mutually agreed to terminate his employment agreement and
replace it with a consulting, noncompetition, and put option agreement,
effective January 1, 1999. By the terms of the five-year agreement, Mr.
Tollison will provide consulting services to the organization, will refrain
from assisting any company in competition with the organization, and will
offer to the Corporation for sale each month blocks of 1000 shares of stock or
more and the Corporation may repurchase the shares at the current market
price. Should the Corporation subsequently complete an affiliation
transaction, the Corporation will reimburse Mr. Tollison for the excess in
price paid by the affiliating organizations to Corporation shareholders above
the price paid by the Corporation to Mr. Tollison for those shares repurchased
within one year before the affiliation announcement. The agreement may be
terminated by the Corporation if Mr. Tollison fails to abide by the agreement,
a bank regulator disqualifies him from service, or he is found guilty of a
crime of moral turpitude. Further, the agreement will terminate immediately
upon Mr. Tollison's death or should the Corporation and he mutually decide to
discontinue their contractual relationship. During the active term of the
agreement, Mr. Tollison will annually receive a total sum of $100,000 for his
consulting services and for his agreement not to compete.
Principal Security Holders. The Corporation knows of no person or group
acting in concert that beneficially owned more than five percent of the
outstanding shares of the Corporation's common stock as of February 18, 2000.
PROPOSALS TO BE VOTED ON
Proposal No. 1 Election of Directors
Election of Directors. Two Directors of Class I are to be elected at the
Annual Meeting to serve until the Annual Meeting in 2003 and until their
respective successors are duly elected and qualified. A majority of shares
cast is required to approve the election of a Director. Management proposes
that the nominees listed in this Proxy Statement as Directors of Class I be
elected. The nominees (Directors of Class I) for whom the persons named as
Proxy Holders intend to vote as Directors, unless otherwise indicated on the
form of proxy, and all Directors of Class II and III, and certain information
with regard to their ownership of the common stock of the Corporation is set
forth below. The dates of service include years serving on the Board of First
National Bank (the "Bank"), the Corporation's only subsidiary. Principal
occupations of the members of the Board include associations during the past
five years.
<PAGE>
<TABLE>
<CAPTION>
Directors of Class I to be elected for a term expiring in 2003
Name (Age) and Director Amount of Common Stock Percent
Principal Occupation Since Owned Beneficially and of Class
Nature of Ownership as
of February 18, 2000
(A) (B)
<S> <C> <C> <C>
Joan H. Munford (66) 1994 10,434 *
Owner, Advisor,
HCMF Corporation
Blacksburg, Virginia
Daniel D. Hamrick (53) 1992 7,306 *
Attorney, Daniel D. Hamrick, P.C.,
Christiansburg, Virginia;
formerly Stone, Hamrick,
Harrison and Turk, Radford, Virginia
</TABLE>
<TABLE>
<CAPTION>
Directors of Class II to continue in office until 2001
Name (Age) and Director Amount of Common Stock Percent
Principal Occupation Since Owned Beneficially and of Class
Nature of Ownership as
of February 18, 2000
(A) (B)
<S> <C> <C> <C>
Kendall O. Clay (57) 1988 21,303 *
Attorney,
Kendall O. Clay, P.C.,
Radford, Virginia
J. Daniel Hardy, Jr. (50) 1992 49,156 1.2
President/CEO,
FNB Corporation;
President/CEO, First
National Bank; formerly
EVP/CAO, the Bank
</TABLE>
<TABLE>
<CAPTION>
Director of Class III to continue in office until 2002
Name (Age) and Director Amount of Common Stock Percent
Principal Occupation Since Owned Beneficially and of Class
Nature of Ownership as
of February 18, 2000
(A) (B)
<S> <C> <C> <C>
Dr. Douglas Covington (65) 1999 748 *
President, Radford University;
formerly President,
Winston-Salem State University
Directors and Executive Officers 89,328 2.2
as a group (6 persons)
</TABLE>
* Less than one percent
(A) Includes shares that may be deemed beneficially owned due to joint
ownership, voting power, or investment power; including shares owned by
or held for the benefit of a Board member's spouse or another immediate
family member residing in the household of the Board member, which may
be deemed beneficially owned.
(B) Includes estimated 1999 Employee Stock Ownership Plan allocation.
<PAGE>
Vote Required
The affirmative vote of the holders of a majority of the Stock represented in
person or by proxy at the Annual Meeting, assuming a quorum is present, is
required to elect directors.
The Board of Directors recommends that the stockholders vote FOR the election of
Joan H. Munford and Daniel D. Hamrick to serve as Directors of Class I.
Proposal No. 2 Ratification of Independent Auditors
McLeod & Company has served as the Bank's auditors for 1995 and the
Corporation's auditors for 1996-1999 and has been appointed to serve as the
Corporation's auditors for 2000. The appointment of the auditors must be
ratified by a majority of the votes cast by the stockholders of the
Corporation at the Annual Meeting. A representative of McLeod & Company is
anticipated to be present at the Annual Meeting. This representative will be
prepared to answer any appropriate questions and, while not anticipated, will
have the opportunity to make a statement, if he or she so chooses.
Vote Required
The affirmative vote of the holders of a majority of the Stock represented in
person or by proxy at the Annual Meeting, assuming a quorum is present, is
required to ratify the appointment of McLeod & Company as the Corporation's
independent auditors for its 2000 fiscal year.
The Board of Directors recommends that the stockholders vote FOR ratification
of McLeod & Company as the Corporation's independent auditors for its 2000
fiscal year.
Proposal No. 3 Approval of 2000 Incentive Stock Plan and Reservation of
400,000 Shares
General
The Corporation's 2000 Incentive Stock Plan (the "Plan") was adopted by the
Board of Directors on February 15, 2000, subject to approval by the holders of
a majority of the Corporation's common stock ("Stock") represented at the
Annual Meeting. The Plan makes available up to 400,000 shares of Stock for
awards to key employees and non-employee directors of the Corporation and its
subsidiaries in the form of stock options, stock appreciation rights, and
stock awards, including the right to elect to receive non-employee directors'
retainer and meeting attendance fees in the form of Stock rather than in cash
(collectively, "Awards"), all as more fully described below.
No grants have been made to date under the Plan.
At the Annual Meeting, shareholders will be asked to approve the Plan and the
reservation of 400,000 shares of the Corporation's Stock for issuance
thereunder.
<PAGE>
The following description of the Plan summarizes the principal features of the
Plan and is qualified in its entirety by reference to the full text of the
Plan, a copy of which is attached hereto as Appendix A.
Plan Summary
Purpose. The purpose of the Plan is to promote the success of the Corporation
and its subsidiaries by providing incentives to key employees and non-employee
directors that will promote the identification of their personal interest with
the long-term financial success of the Corporation and with growth in
shareholder value.
The Plan is designed to provide flexibility to the Corporation in its ability
to motivate, attract, and retain the services of key employees, upon whose
judgment, interest, and effort the successful conduct of its operation is
largely dependent, through the grant of stock options, stock appreciation
rights, and restricted stock.
In addition, awards to non-employee directors are intended to increase the
non-employee directors' proprietary interest in the Corporation through the
automatic annual grant of non-qualified stock options and stock awards as part
of their compensation for service as directors. In addition, non-employee
directors of the Corporation and its subsidiaries are eligible under the Plan
annually to elect to receive all or part of their retainer and meeting
attendance fees in the form of Stock rather than in cash ("Stock Payment
Awards"). For information on automatic awards to non-employee directors, see
the description below under "Automatic Grants to Non-Employee Directors."
For information on Stock Payment Awards to non-employee directors, see the
description below under "Stock Payment Awards to Non-Employee Directors."
Administration. The Plan will be administered by the Incentive Stock
Committee (the "Committee"). All members of the Committee will be
disinterested persons as defined in Rule 16b-3 under the Securities Exchange
Act of 1934 (the "Exchange Act") and "outside directors" as defined by Section
162(m) under the Internal Revenue Code of 1986, as amended (the "Code").
The Committee will have the power to determine the key employees to whom
Awards are made. The Committee may also reduce the number of stock option and
stock awards to non-employee directors, or one or more classes of non-employee
directors, on an annual basis.
Each Award under the Plan (other than Stock Awards that are not restricted and
Stock Payment Awards) will be made pursuant to a written agreement between the
Corporation and the recipient of the Award (the "Agreement"). In
administering the Plan, the Committee will have the express power, subject to
the provisions of the Plan, to determine the terms and conditions upon which
Awards may be made and exercised; to determine terms and provisions of each
Agreement; to construe and interpret the Plan and the Agreements; to
establish, amend or waive rules or regulations for the Plan's administration;
to accelerate the exercisability of any Award or the end of any performance
period or period of restriction; and to make all other determinations and take
all other actions necessary or advisable for the administration of the Plan.
The members of the Committee will be indemnified by the Corporation against the
reasonable expenses incurred by them, including attorneys' fees, in the defense
<PAGE>
of any action, suit or proceeding, or any appeal therein to which they may be a
party by reasons of any action taken or failure to act under the Plan.
Subject to the terms, conditions, and limitations of the Plan, the Committee
may modify, extend, or renew outstanding Awards, or, if authorized by the Board
of Directors, accept the surrender of outstanding Awards and authorize new
Awards in substitution therefor. However, no modification, extension, renewal,
or surrender and substitution may provide for a lower exercise price than that
provided for prior to the modification, extension, renewal, or surrender and
substitution. The Committee may also modify any outstanding Agreement,
provided that no modification may adversely affect the rights or obligations
of the recipient without the consent of the recipient.
The Plan is intended to give the Committee the authority to grant Awards that
qualify as performance-based compensation under Section 162(m) of the Code and
will be interpreted and construed consistent with such intent. However, there
is no requirement in the Plan that Awards actually qualify as performance-based
compensation under Section 162(m) of the Code.
The Board may terminate, amend or modify the Plan from time to time in any
respect without stockholder approval, including amendments necessary to make
the Plan conform with Rule 16b-3 under the Exchange Act or regulations under
Section 162(m) of the Code, unless the particular amendment or modification
requires stockholder approval under the Code, the rules and regulations under
Section 16 of the Exchange Act, the rules and regulations of the exchange or
system on which the Stock is listed or reported, or any other applicable laws,
rules, or regulations. Currently, it is anticipated that stockholder approval
of any amendments will be required if an amendment would (i) materially
increase the number of securities which may be issued or (ii) materially
modify the requirements as to eligibility for participation.
The Plan will expire on February 14, 2010, unless sooner terminated
by the Board.
Eligibility. Employees of the Corporation and its subsidiaries who are deemed
to be key employees ("Key Employees") by the Committee are eligible for Awards
under the Plan. Key Employees include officers or other employees of the
Corporation and its subsidiaries who, in the opinion of the Committee, can
contribute significantly to the growth and profitability of, or perform
services of major importance to, the Corporation and its subsidiaries.
The number of employees who initially may be eligible for Awards under the Plan
is approximately 50 (including those persons named in the cash compensation
table), and the nature and extent of their participation, the benefits or
amounts to be received by each of them, and any consideration to be received
by the Corporation for granting or awarding such benefits will be determined
by the Committee.
Directors who are not also officers or employees of the Corporation or its
subsidiaries are not Key Employees, but are eligible for automatic awards
under the Plan as described under "Automatic Grants to Non-Employee Directors"
and, on an elective basis, to receive payment of retainer and meeting
attendance fees in Stock rather than in cash as described under "Elective
Stock Payment Awards to Non-Employee Directors."
<PAGE>
The number of non-employee directors who initially may be eligible for Awards
under the Plan is approximately 12 (consisting of the non-employee directors of
the Corporation and First National Bank).
Certain Terms of Awards. Awards granted under the Plan (other than Stock
Awards that are not restricted and Stock Payment Awards) generally may not be
assigned, transferred, pledged, or otherwise encumbered by a participant, other
than by will or the laws of descent and distribution. Awards of options and
stock appreciation rights may be exercised during the recipient's lifetime only
by the recipient or, in the case of disability, by the recipient's legal
representative. Stock Awards that are not restricted and Stock Payment Awards
are transferable immediately (subject to securities and other applicable
laws).
Unless specified below in the description of the particular Awards available
under the Plan or in the Plan itself, the prices, expiration dates,
consideration to be received by the Corporation, and other terms of each
Agreement will be determined by the Committee.
Option Awards to Key Employees. The Plan authorizes the grant of options to
purchase the Corporation's Stock to Key Employees and to non-employee
directors. An option may be either an incentive stock option within the
meaning of Section 422 of the Code ("ISOs") or a non-qualified stock option
("NQSOs") (collectively, "Options").
The Option terms applicable to such Options for Key Employees will be
determined by the Committee, but Options generally will not be exercisable in
any event after ten years from its grant (or 5 years if the Option is intended
to be an ISO and the optionee owns more then 10% of the Corporation's
outstanding stock), and the exercise price for an Option may not be less than
100% of the Stock's fair market value at the date the Option is awarded (or
110% if the Option is intended to be an ISO and the optionee owns more then
10% of the Corporation's outstanding stock). A Key Employee may not be
granted Options covering more than 40,000 shares in any one calendar year.
All Options granted as ISOs are intended to comply with all applicable
provisions of the Code and all other applicable rules and regulations
governing ISOs. All other Option terms will be determined by the
Committee in its sole discretion.
SAR Awards to Key Employees. The Plan authorizes the grant to Key Employees
(but not to non-employee directors) of stock appreciation rights ("SARs") in
tandem with the grant of Options ("Tandem SARs") or independent of the grant
of Options ("Freestanding SARs") and any combination of Tandem SARs and
Freestanding SARs. A Key Employee may not be granted Freestanding SARs
covering more than 40,000 shares in any one calendar year.
A SAR may be exercised in whole or part, and entitles the holder, upon
exercise, to receive, without any payment to the Corporation (other than
required withholding amounts), cash or Stock or a combination thereof
equivalent in value to the excess of the fair market value on the exercise
date of the shares of Stock represented by the SAR over either (i) the fair
market value of those shares on the date of the grant of a Freestanding SAR or
(ii) the option exercise price of the related Option in the case of a Tandem
SAR.
A SAR may be exercised only when the current value of the SAR exceeds its value
at the date of grant in the case of Freestanding SARs or the exercise price of
the related Option in the case of a Tandem SAR. A Tandem SAR will expire no
later than, and is exercisable and transferable subject to the conditions of,
the related Option. Freestanding SARs may be exercised upon such terms and
conditions as are specified by the Committee. However, in no event will the
term of any SAR exceed ten years from its grant date.
<PAGE>
If a Tandem SAR is exercised, it will reduce correspondingly the number of
shares of Stock represented by the related Option, and exercise of the related
Option will similarly reduce the number of shares represented by the Tandem
SAR. The Committee retains sole discretion to approve or disapprove an
optionee's election to receive cash to the extent required by Rule 16b-3 under
the Exchange Act or the terms of the particular Agreement.
Restricted Stock Awards to Key Employees. The Plan authorizes the grant to Key
Employees (but not to non-employee directors) of shares of the Corporation's
Stock which contains certain restrictions on the full enjoyment of those shares
("Restricted Stock"). No more than one-quarter of the shares authorized to be
issued under the Plan may be granted as Restricted Stock. A Key Employee may
not be granted Restricted Stock covering more than 10,000 shares in any one
calendar year.
Restricted Stock may not be disposed of by the recipient until certain
restrictions established by the Committee lapse. The restrictions may take the
form of a period of restriction during which the recipient must remain employed
or may require the achievement of one or more preestablished performance
criteria within a certain time period in order to be fully vested in the
shares. The performance criteria may be stated in terms of the value of the
Stock, return on equity, earnings per share, total earnings, earnings growth,
return on assets, or return on capital or other similar criteria or
combination thereof.
Recipients of Restricted Stock are not required to provide consideration other
than the rendering of services. Recipients generally will have, with respect
to the Restricted Stock, all the rights of a stockholder of the Corporation,
including the right to vote the shares, and, unless otherwise provided in the
Agreement, the right to receive any cash dividends on the shares. If a
distribution is paid in stock, unless otherwise provided in the Agreement, the
distributed stock will be Restricted Stock subject to the same restrictions as
are applicable to the Restricted Stock with respect to which the distribution
was made.
Upon termination of employment while Restricted Stock is subject to
restrictions for reasons other than death, disability, or retirement, shares
of Restricted Stock will be forfeited subject to such exceptions, if any, as
are authorized by the Committee and set forth in the Agreement. Similarly,
shares of Restricted Stock will also be forfeited if the performance criteria
established with respect to such Awards are not achieved within the required
time period.
Automatic Grants to Non-Employee Directors. Each non-employee director serving
on the Board of the Corporation or any subsidiary will receive (i) an automatic
non-qualified stock option (NQSO) grant covering 3,500 shares (if a member of
the Corporation's Board) or 3,000 (if a member of a subsidiary Board) and
(ii) an automatic award of 300 shares of stock ("Stock Awards") (collectively,
"Automatic Awards") on the first business day following the first meeting of
the Corporation's Board following each annual meeting of stockholders
("Automatic Grant Date") during the term of the Plan. The Committee may
reduce the number of shares in either or both the Option grant or the Stock
Award grant for any class or classes of non-employee directors as it
determines from time to time. The Corporation and its subsidiaries currently
have 12 non-employee directors.
<PAGE>
The exercise price of automatic Option grants will be 100% of fair market value
of the shares on the Automatic Grant Date. Unless otherwise provided in the
governing Agreement, one-quarter of each Award of Options will become
exercisable on the first, second, third, and fourth anniversary of the
applicable Automatic Grant Date. In addition, all outstanding Option will
automatically vest at a director's retirement from the Board in accordance
with Corporation policy, death or disability, or the occurrence of a "Change
in Control'' of the Corporation (as that term is defined in the Plan).
Options will be forfeited if they are not exercisable at the time of
termination of service as a director and such termination is for any reason
other than retirement from the Board in accordance with Corporation policy,
death or disability.
Stock Award shares will be immediately vested and will not be subject to any
restrictions on transfer.
Except as otherwise described in this subsection, Automatic Awards to non-
employee directors are subject to the same terms and conditions as other Awards
made under the Plan.
Elective Stock Payment Awards to Non-Employee Directors. Non-employee
directors may elect to receive payment of all or part of their retainer and
meeting attendance fees ("Fees") in the form of Stock Payment Awards in
accordance with the provisions of this Section. An election to receive Stock
Payment Awards must be made on an annual basis by delivering written notice to
the Secretary of the Company on the election form provided by the Company for
that purpose ("Election Form"). Once made, an election for a particular
calendar year may not be revoked and will be effective for all Fees owing to an
electing non-employee director for services to be rendered as a director
during that calendar year.
Stock Payment Awards will be made on a quarterly basis, beginning with the
second quarter of the calendar year 2000. Stock Payment Awards will be made
as soon as possible but in no event later than 30 days after the last day of
the quarter for which the non-employee director's Fees are earned.
The number of shares constituting a quarterly Stock Payment Award for each
electing non-employee director will be that number of shares, rounded to the
nearest whole number, which results from dividing the respective Fees earned
during that quarter by the "Fair Market Value" (as defined in the Plan for
this purpose) of the shares as of the Determination Date (as hereinafter
defined). The "Determination Date" means the earlier of (i) the last day of
the quarter for which the Fees are earned (March 31, June 30, September 30,
and December 31, respectively) or (ii) the effective date of an electing Non-
Employee Director's termination as a member of the Board prior to the end of a
calendar quarter. "Fair Market Value" with respect to Stock Payment Awards
means the average closing sale price of the Stock based upon the closing sales
price of the Stock, as reported by the NASDAQ National Market System, for all
trading dates from the beginning of the relevant calendar quarter up through
and including the Determination Date for that quarter.
A non-employee director will have no voting or dividend rights with respect
to, and no right to transfer any interest in, any Stock Payment Awards prior
to the Determination Date for such Award. Following a Determination Date, a
non-employee director will be entitled to vote Stock Payment Award shares and
to receive dividends thereafter declared and payable on such shares.
Following a Determination Date, the Stock Payment Award shares will be
immediately vested and will not be subject to any restrictions on transfer,
<PAGE>
and the Corporation will, in accordance with each non-employee director's
written request made on an Election Form, either cause a stock certificate to
be issued evidencing the Stock Payment Award shares or maintain a book-entry
record evidencing such shares. Stock Payment Award shares for which no such
written request is made will be evidenced by a book-entry record. Dividends
on Stock Payment Award shares evidenced by a stock certificate will be paid in
cash, and dividends on Stock Payment Award shares evidenced by a book entry
record will be reinvested in shares, in each case only as and when dividends
are declared and paid to shareholders of record of shares.
Notwithstanding the foregoing, at any time and from time to time, the
Committee may suspend the option for non-employee directors as a whole or for
any class of non-employee directors to elect to receive Stock Payment Awards
in lieu of Fees.
Shares Subject to the Plan. Up to 400,000 shares of Stock may be issued for
all purposes under the Plan. Except as set forth below, shares of Stock
issued in connection with the exercise of, or as other payment for, an Award
will be charged against the total number of shares issuable under the Plan.
If any Award granted (for which no material benefits of ownership have been
received, including dividends) terminates, expires, or lapses for any reason
other than as a result of being exercised (other than by exercise of a related
Option in the case of Tandem SARs), or if shares issued (for which no material
benefits of ownership have been received, including dividends) pursuant to an
Award are forfeited, Stock subject to such Award will be available for further
Awards to participants. Shares that are tendered as full or partial payment
of the exercise price of any Award or in payment of any applicable taxes
incurred in connection with the exercise of any Award will become available
for future grant or sale under the Plan; provided, however, that the total
number of shares so tendered from which ISOs may be granted will not exceed
400,000.
In order to reflect such events as stock dividends, stock splits,
recapitalizations, mergers, consolidations, or reorganizations by the
Corporation, the Committee may, in its sole discretion, adjust the number of
shares subject to each outstanding Award and Automatic Awards, the exercise
price, and the aggregate number of shares from which grants or awards may be
made.
The closing price per share of the Corporation's Stock on March 9, 2000 was
$ 16.75.
Change in Control. In order to maintain all the participants' rights in the
event of a Change in Control of the Corporation (as that term is defined in the
Plan), the Committee, as constituted before such Change in Control, in its sole
discretion, may, as to any outstanding Award and any Automatic Award either at
the time an Award is made or any time thereafter, take any one or more of the
following actions: (i) provide for the acceleration of any time periods
relating to the exercise or realization of any such Award so that such Award
may be exercised or realized in full on or before a date initially fixed by
the Committee; (ii) provide for the purchase or settlement of any such Award
by the Corporation, upon a participant's request, for an amount of cash equal
to the amount which could have been obtained upon the exercise of such Award
or realization of such participant's rights had such Award been currently
exercisable or payable; (iii) make such adjustment to any such Award then
outstanding as the Committee deems appropriate to reflect such Change in
Control; or (iv) cause any such Award then outstanding to be assumed, or new
rights substituted therefor, by the acquiring or surviving corporation in
such Change in Control.
<PAGE>
Certain Federal Income Tax Consequences
Incentive Stock Options. An optionee will not recognize income on the grant of
an ISO, and an optionee generally will not recognize income on the exercise
of an ISO, except as described in the following paragraph. Under these
circumstances, no deduction will be allowable to the Corporation or its
subsidiary employing such person (the "employer corporation") in connection
with either the grant of such Options or the issuance of shares upon
exercise thereof.
However, if the exercise of an ISO occurs more than three months after the
optionee ceased to be an employee for reasons other than death or disability
(or more than one year thereafter if the optionee ceased to be an employee by
reason of permanent and total disability), the exercise will not be treated
as the exercise of an ISO, and the optionee will be taxed in the same manner
as on the exercise of a NQSO, as described below. For the Option to qualify
as an ISO upon the optionee's death, the optionee must have been employed at
the Corporation for at least three months before his or her death.
To the extent the aggregate fair market value (determined at the time the
Options are granted) of shares subject to an ISO that become exercisable for
the first time by any optionee in a calendar year exceeds $100,000, the Options
will not be treated as ISOs, and the optionee will be taxed upon exercise of
those excess Options in the same manner as on the exercise of a NQSO, as
described below.
Gain or loss from the sale or exchange of shares acquired upon exercise of an
ISO generally will be treated as capital gain or loss. If, however, shares
acquired pursuant to the exercise of an ISO are disposed of within two years
after the Option was granted or within one year after the shares were
transferred pursuant to the exercise of the Option, the optionee generally
will recognize ordinary income at the time of the disposition equal to the
excess over the exercise price of the lesser of the amount realized or the
fair market value of the shares at the time of exercise (or, in certain
circumstances, at the time such shares became either transferable or not
subject to a substantial risk of forfeiture). If, however, such disposition
is not a sale or exchange with respect to which a loss (if sustained) would
be recognized, the ordinary income is the excess of the fair market value of
the shares at the time of exercise (or, in certain circumstances, at the time
they became either transferable or not subject to substantial risk of
forfeiture) over the exercise price. Gain recognized on the disposition in
excess of the ordinary income resulting therefrom will be capital gain and any
loss recognized on the disposition will be capital loss. If an optionee
recognizes ordinary income as a result of a disposition as described in this
paragraph, the employer corporation will be entitled to a deduction of the
same amount.
The exercise of an ISO may result in a tax to the optionee under the
alternative minimum tax because as a general rule the excess of the fair
market value of stock received on the exercise of an ISO over the exercise
price is defined as an item of "tax preference" for purposes of determining
alternative minimum taxable income.
Non-qualified Stock Options and SARs. A participant will not recognize income
on the grant of a NQSO or a SAR, but generally will recognize income upon the
exercise of a NQSO or a SAR. The amount of income recognized upon the exercise
of a NQSO will be measured by the excess, if any, of the fair market value of
the shares at the time of exercise over the exercise price, provided that the
shares issued are either transferable or not subject to a substantial risk of
forfeiture. The amount of income recognized upon the exercise of a SAR will be
equal to the amount of cash received and the fair market value of any shares
received at the time of exercise, provided the shares issued are either
transferable or not subject to a substantial risk of forfeiture, plus the
amount of any taxes withheld.
<PAGE>
If shares received on the exercise of a NQSO or a SAR are nontransferable and
subject to a substantial risk of forfeiture then, unless the optionee elects to
recognize income at the time of receipt of such shares, the optionee will not
recognize ordinary income until the shares become either transferable or not
subject to a substantial risk of forfeiture. For these purposes, shares will be
treated as nontransferable and subject to a substantial risk of forfeiture
for as long as the sale of the shares at a profit could subject the optionee
to suit under Section 16(b) of the Exchange Act. In the circumstances
described in this paragraph, the amount of income recognized is measured with
respect to the fair market value of the shares at the time the income is
recognized.
In the case of ordinary income recognized by an optionee as described above in
connection with the exercise of a NQSO or a SAR, the employer corporation will
be entitled to a deduction in the amount of ordinary income so recognized by
the optionee.
Use of Shares to Exercise Options. Special rules govern the tax treatment of
the use of stock to pay the exercise price of an ISO or NQSO.
Restricted Stock. A recipient of Restricted Stock is not required to include
the value of such shares in ordinary income until the first time his right in
the shares is transferable or is not subject to a substantial risk of
forfeiture, whichever occurs earlier, unless he elects to be taxed on receipt
of the shares.
With respect to Awards granted under the Plan that are settled either in cash
or in stock or other property that is either transferable or not subject to
substantial risk of forfeiture, the recipient will recognize ordinary income at
the time of receipt of the cash, stock, or other property. In the
circumstances described in this paragraph, the amount of such income will be
equal to the amount of cash received, or the excess of the fair market value
of the shares or other property received at the time the income is recognized
over the amount (if any) paid for the shares or other property.
The employer corporation will be entitled to a deduction in the amount of the
ordinary income recognized by the recipient for the employer's taxable year
which includes the last day of the recipient's taxable year in which he
recognizes such income.
Stock Awards. A recipient of a Stock Award (including a Stock Payment Award)
is required to include the value of such shares in ordinary income upon
receipt of the Stock issued in connection with the Award. The amount of such
income will be equal to the value of the shares received at the time the
income is recognized.
The employer corporation will be entitled to a deduction in the amount of the
ordinary income recognized by the recipient for the employer's taxable year
which includes the last day of the recipient's taxable year in which he
recognizes such income.
General. The rules governing the tax treatment of Awards that may be granted
under the Plan are quite technical, so that the above description of tax
consequences is necessarily general in nature and does not purport to be
complete. Moreover, statutory provisions are, of course, subject to change, as
are their interpretations, and their application may vary in individual
circumstances. Section 162(m) of the Code places certain limitations on the
Corporation's ability to deduct compensation paid to its executive officers
under certain circumstances, including compensation which may be payable
pursuant to the Plan.
<PAGE>
Finally, the tax consequences under applicable state laws may not be the same
as under the federal income tax laws.
Accounting Treatment
Under current accounting principles, neither the grant nor the exercise of a
stock option with an exercise price not less than the fair market value of the
Stock at the date of grant would require a charge against earnings.
SARs will require a charge to earnings of the Corporation in an amount equal to
the difference between the current market value of the Stock and the market
value on the date of grant in the case of Freestanding SARs or the exercise
price in the case of Tandem SARs.
Depending upon the specific provisions of any Restricted Stock granted, a
charge to earnings representing the value of the benefit conferred may be
required. Under certain circumstances, this charge may be spread over any
period of restriction applicable to such an Award.
The value of the shares in a Stock Award that is not restricted is considered
an expense for accounting purposes.
Effective Date
If approved by the stockholders, the Plan will be treated as effective as of
February 15, 2000.
Vote Required
The affirmative vote of the holders of a majority of the Stock represented in
person or by proxy at the Annual Meeting, assuming a quorum is present, is
required to ratify and approve the Plan including the options previously
granted thereunder.
The Board of Directors recommends that the stockholders vote FOR adoption of
the proposed Plan and the reservation of 400,000 shares of Stock for issuance
thereunder.
<PAGE>
Performance Graph. The following graph compares the cumulative total return
of the Corporation's common stock over a five-year period to the returns of
the Standard and Poor's 500 stock index and to the returns of an Independent
Peer Bank index. The Independent Bank Index is a compilation of the total
return to shareholders over the past five years of the following group of 23
independent community banks located in the southeastern states of Florida,
Georgia, North Carolina, South Carolina, Tennessee, Virginia and West
Virginia: United Security Bankshares, Inc., TIB Financial Corp., Seacoast
Banking Corp., Capital City Bank Group, Inc., Fidelity National Corp.,
Southwest Georgia Financial Corp., PAB Bankshares, Inc., Four Oaks Fincorp.,
Inc., Bank of Granite Corp., FNB Financial Services Corp., First Bancorp, CNB
Corporation, Palmetto Bancshares, Inc., Carolina Southern Bank, First Pulaski
National Corporation, National Bankshares, Inc., FNB Corporation, Virginia
Commonwealth Financial Corp., American National Bankshares, Inc., Central
Virginia Bankshares, Inc., Virginia Financial Corp., C&F Financial
Corporation, and First Century Bankshares, Inc. For periods prior to June
1996, the graph represents the performance of the Bank's common stock.
[Graph included in proxy sent to shareholders]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
FNB Corporation 100 104 112 115 144 134
Independent Bank Index 100 122 155 235 246 222
S & P 500 Index 100 138 169 225 290 351
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance. Based on a review of
the reports of changes in beneficial ownership of Common Stock and written
representations made to the Corporation, the Corporation believes that its
officers and directors have filed on a timely basis the reports required to be
filed under 16(a) of the Securities Exchange Act of 1934 during the fiscal
year ended December 31, 1999.
Shareholder Proposals. In order to be eligible for inclusion in the
Corporation's proxy materials for next year's Annual Meeting of Shareholders,
any shareholder proposal to take action at such meeting must be received at
the Corporation's main office, at 105 Arbor Drive, Christiansburg, Virginia,
no later than December 9, 2000. Any such proposal shall be subject to the
requirements of the proxy rules adopted under the Securities Exchange Act of
1934, as amended.
Other Matters. The Board of Directors is not aware of any business to come
before the Annual Meeting other than those matters described above. If any
other matters should properly come before the Annual Meeting, however, it is
intended that proxies in the accompanying form will be voted in respect
thereof, in accordance with the judgment of the person or persons voting the
proxies.
IMPORTANT: A copy of the Corporation's Annual Report on Form 10-K, including
the Financial Statements for the year ended 1999, required to be filed with
the Securities Exchange Commission in Washington, D.C., and related schedules
thereto, shall be provided by the Corporation without charge to each
shareholder upon his written request to Perry Taylor, Senior Vice
President/Comptroller, First National Bank, 105 Arbor Drive, P.O. Box 600,
Christiansburg, Virginia 24068-0600.
BY ORDER OF THE BOARD OF DIRECTORS
Peter A. Seitz
Secretary
Christiansburg, Virginia
March 29, 2000
<PAGE>
FNB CORPORATION
2000 INCENTIVE STOCK PLAN
ARTICLE 1
Establishment, Purpose, and Duration
1.1 Establishment of the Plan. FNB Corporation, a Virginia corporation (the
"Company") hereby establishes an incentive compensation plan to be known as
the "FNB Corporation 2000 Incentive Stock Plan", as set forth in this
document. Unless otherwise defined herein, all capitalized terms shall have
the meanings set forth in Section 2.1 herein. The Plan permits the grant of
Incentive Stock Options, Non-qualified Stock Options, Stock Appreciation
Rights and Stock Awards.
The Plan was adopted by the Board of Directors on, and shall become effective,
as of February 15, 2000 (the "Effective Date"), subject to the approval by
vote of shareholders of the Company in accordance with applicable laws.
Awards may be granted prior to shareholder approval of the Plan, but each such
Award shall be subject to the approval of the Plan by the shareholders.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the success
of the Company and its Subsidiaries by providing incentives to Key Employees
that will promote the identification of their personal interest with the
long-term financial success of the Company and with growth in shareholder
value. The Plan is designed to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Key Employees upon
whose judgment, interest, and special effort the successful conduct of its
operation is largely dependent. The Plan is also intended to promote a
greater identity of interest between Non-Employee Directors and the Company's
shareholders by increasing the Non-Employee Director's proprietary interest
in the Company through receipt of Awards as additional compensation or in
lieu of cash payments for a portion of each Non-Employee Director's fees.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date, as
described in Section 1.1 herein, and shall remain in effect, subject to the
right of the Board of Directors to terminate the Plan at any time pursuant to
Article 12 herein, until February 14, 2010 (the "Term"), at which time it
shall terminate except with respect to Awards made prior to, and outstanding
on, that date which shall remain valid in accordance with their terms.
ARTICLE 2
Definitions
2.1 Definitions. Except as otherwise defined in the Plan, the following
terms shall have the meanings set forth below:
(a) "Agreement" means a written agreement implementing the grant of each
Award signed by an authorized officer of the Company and by the
Participant.
(b) "Automatic Grant Date" means the first business day after the first
meeting of the Board of Directors of the Company following each
annual meeting of stockholders of the Company during the Term.
(c) "Award" means, individually or collectively, a grant under this
Plan of Automatic Options, Automatic Stock Awards, Incentive Stock
Options, Non-qualified Stock Options, Stock Appreciation Rights,
<PAGE>
Stock Awards, and Stock Payment Awards. Automatic Options and
Automatic Stock Awards are collectively referred to as "Automatic
Awards."
(d) "Award Date" or "Grant Date" means the date on which an Award is made
by the Committee under this Plan.
(e) "Board" or "Board of Directors" means the Board of Directors of the
Company, unless such term is used with respect to a Subsidiary
(such as in determining Non-Employee Directors eligible for
Automatic Awards), in which event it shall mean the present and any
succeeding Board of Directors of that Subsidiary.
(f) "Change in Control" means the occurrence, after the Effective Date,
of any of the following:
(i) the closing of a corporate reorganization in which First National
Bank becomes a subsidiary of a holding company, the majority of
the common stock of which is owned, in aggregate, by persons who
did not own the majority of the common stock of the Company
immediately prior to the reorganization;
(ii) individuals who constitute the Board of the Company on the
Effective Date (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof; provided that any person
becoming a director subsequent to the Effective Date whose
nomination for election was approved by a vote of at least
three-quarters (3/4) of the directors comprising the Incumbent
Board shall be considered as though such person were a member of
the Incumbent Board for purposes hereof;
(iii) the closing of the merger of First National Bank with or into
another person; or
(iv) the closing of the sale, conveyance or other transfer of
substantially all of the assets of First National Bank to
another person.
For purposes hereof, the term "person" shall include any individual,
corporation, partnership, group, association, or other "person", as
such term is used in Section 14(d) of the Exchange Act, other than
the Company, any entity in which the Company owns a majority of the
voting interest, or any employee benefit plan(s) sponsored by the
Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(h) "Committee" means the committee of the Board appointed to administer
the Plan pursuant to Article 3 herein, all of the members of which
shall be "non-employee directors" as defined in Rule 16b-3, as
amended, under the Exchange Act, or any similar or successor rule,
and "outside directors" within the meaning of Section 162(m)(4)(C)(i)
of the Code, as amended. Unless otherwise determined by the Board of
Directors, the Committee shall consist of all members of the Board
of Directors of the Company who are both non-employee directors and
outside directors (as hereinbefore defined).
<PAGE>
(i) "Company" means FNB Corporation, or any successor thereto as
provided in Article 14 herein.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(k) "Fair Market Value" of a Share means (i) with respect to Awards other
than Stock Payment Awards, the mean between the high and low sales
price of the Stock on the relevant date if it is a trading date, or
if not, on the most recent date on which the Stock was traded prior
to such date, as reported by NASDAQ National Market System; or if,
in the opinion of the Committee, this method is inapplicable or
inappropriate for any reason, the fair market value as determined
pursuant to a reasonable method adopted by the Committee in good
faith for such purpose and (ii) with respect to Stock Payment
Awards, the average closing sale price of the Stock based upon the
closing sales price of the Stock, as reported by the NASDAQ National
Market System, for all trading dates from the beginning of the
relevant calendar quarter up through and including the
Determination Date for that quarter (as defined in Section 9.3
herein); or if, in the opinion of the Committee, this method is
inapplicable or inappropriate for any reason, the fair market value
as determined pursuant to a reasonable method adopted by the
Committee in good faith for such purpose.
(l) "Incentive Stock Option" or "ISO" means an option to purchase Stock,
granted under Article 6 herein, which is designated as an incentive
stock option and is intended to meet the requirements of Section
422 of the Code.
(m) "Key Employee" means an officer or other key employee of the Company
or its Subsidiaries, who, in the opinion of the Committee, can
contribute significantly to the growth and profitability of, or
perform services of major importance to, the Company and its
Subsidiaries. "Key Employee" does not include Non-Employee Directors.
(n) "Non-Employee Director" means (i) with respect to Automatic Awards,
an individual who is a member of the Board of the Company or a
Subsidiary on the applicable Automatic Grant Date and who is not an
employee of the Company or a Subsidiary and (ii) with respect to
Stock Payment Awards, an individual who is a member of the Board of
the Company or a Subsidiary at any time during the calendar year and
who is not an employee of the Company or Subsidiary.
(o) "Non-qualified Stock Option" or "NQSO" means an option to purchase
Stock, granted under Article 6 or Article 9 herein, which is not
intended to be an Incentive Stock Option.
(p) "Option" means an Incentive Stock Option or a Non-qualified Stock
Option.
(q) "Participant" means a Key Employee or Non-Employee Director who is
granted or receives an Award under the Plan.
(r) "Performance Criteria" means one or more specified performance goals,
which may be stated in terms of the value of the Common Stock,
return on equity, earnings per share, total earnings, earnings
growth, return on assets, or return on capital, with respect to
awards of Restricted Stock pursuant to Article 8 herein.
(s) "Period of Restriction" means the period during which the transfer
of Shares of Restricted Stock is restricted, pursuant to Article 8
herein.
<PAGE>
(t) "Plan" means the FNB Corporation 2000 Incentive Stock Plan, as
described herein and as hereafter from time to time amended.
(u) "Related Option" means an Option with respect to which a Stock
Appreciation Right has been granted.
(v) "Restricted Stock" means a Stock Award which is subject to a Period
of Restriction and/or satisfaction of Performance Criteria granted
to a Participant pursuant to Article 8 herein.
(w) "Restrictions" means any applicable Period of Restriction and/or
Performance Criteria with respect to Shares of Restricted Stock.
(x) "Stock" or "Shares" means the Common Stock of the Company.
(y) "Stock Appreciation Right" or "SAR" means an Award, designated as a
stock appreciation right, granted to a Participant pursuant to
Article 7 herein.
(z) "Stock Awards" means an award of Stock granted to a Participant
pursuant to Article 8 or Article 9 herein.
(aa) "Stock Payment Awards" means an award of Stock made to a Non-Employee
Director in payment of director fees (retainer and meeting attendance
fees) in accordance with the formula and other provisions
established in Section 9.3 herein.
(bb) "Subsidiary" shall mean a corporation at least 50% of the total
combined voting power of all classes of stock of which is owned by
the Company, either directly or through one or more of its
Subsidiaries.
ARTICLE 3
Administration
3.1 The Committee. The Plan shall be administered by the Committee which
shall have all powers necessary or desirable for such administration. The
express grant in this Plan of any specific power to the Committee shall not be
construed as limiting any power or authority of the Committee. In addition to
any other powers and subject to the provisions of the Plan, the Committee
shall have the following specific powers: (i) to determine the terms and
conditions upon which the Awards may be made and exercised; (ii) to determine
all terms and provisions of each Agreement, which need not be identical;
(iii) to construe and interpret the Agreements and the Plan; (iv) to
establish, amend, or waive rules or regulations for the Plan's administration;
(v) to accelerate the exercisability of any Award or the termination of any
Period of Restriction; and (vi) to make all other determinations and take all
other actions necessary or advisable for the administration of the Plan.
3.2 Delegation of Certain Duties. The Committee may in its sole discretion
delegate all or part of its duties and obligations to designated officer(s) to
administer the Plan with respect to Awards to Key Employees who are not
subject to Section 16 of the Exchange Act.
<PAGE>
3.3 Selection of Key Employees. The Committee shall have the authority to
grant Awards under the Plan, from time to time, to such Key Employees as may
be selected by it. Each Award shall be evidenced by an Agreement.
3.4 Decisions Binding. All determinations and decisions made by the Board
or the Committee pursuant to the provisions of the Plan shall be final,
conclusive, and binding.
3.5 Requirements of Rule 16b-3 and Code Section 162(m). Notwithstanding any
other provision of the Plan, the Board or the Committee may impose such
conditions on any Award, and amend the Plan in any such respects, as may be
required to satisfy the requirements of Rule 16b-3, as amended (or any
successor or similar rule), under the Exchange Act.
Any provision of the Plan to the contrary notwithstanding, and except to the
extent that the Committee determines otherwise: (i) transactions by and with
respect to officers and directors of the Company who are subject to Section
16(b) of the Exchange Act (hereafter, "Section 16 Persons") shall comply
with any applicable conditions of SEC Rule 16b-3; (ii) transactions with
respect to persons whose remuneration is subject to the provisions of Section
162(m) of the Code shall conform to the requirements of Section 162(m)(4)(C)
of the Code; and (iii) every provision of the Plan shall be administered,
interpreted, and construed to carry out the foregoing provisions of this
sentence.
Notwithstanding any provision of the Plan to the contrary, the Plan is
intended to give the Committee the authority to grant Awards that qualify as
performance-based compensation under Code Section 162(m)(4)(C) as well as
Awards that do not so qualify. Every provision of the Plan shall be
administered, interpreted, and construed to carry out such intention, and any
provision that cannot be so administered, interpreted, and construed shall to
that extent be disregarded; and any provision of the Plan that would prevent
an Award that the Committee intends to qualify as performance-based
compensation under Code Section 162(m)(4)(C) from so qualifying shall be
administered, interpreted, and construed to carry out such intention, and any
provision that cannot be so administered, interpreted, and construed shall to
that extent be disregarded.
3.6 Indemnification. In addition to such other rights of indemnification as
they may have as directors or as members of the Committee, the members of the
Committee or their delegates shall be indemnified by the Company against
reasonable expenses, including attorneys' fees, actually and reasonably
incurred in connection with the defense of any action, suit, or proceeding, or
in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan or any Award granted or made hereunder, and against all amounts
reasonably paid by them in settlement thereof or paid by them in satisfaction
of a judgment in any such action, suit, or proceeding, if such members acted
in good faith and in a manner which they believed to be in, and not opposed
to, the best interests of the Company and its Subsidiaries.
ARTICLE 4
Stock Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3
herein, the maximum aggregate number of Shares that may be issued pursuant to
Awards made under the Plan shall not exceed 400,000. No more than one-quarter
of the aggregate number of such Shares shall be issued in connection with
Stock Awards. Except as provided in Section 4.2 herein, the issuance of
Shares in connection with the exercise of, or as other payment for Awards,
under the Plan shall reduce the number of Shares available for future Awards
under the Plan.
<PAGE>
4.2 Lapsed Awards, Forfeited Shares and Delivery of Shares as Payment . If
any Award granted under this Plan (for which no material benefits of ownership
have been received, including dividends) terminates, expires, or lapses for
any reason other than by virtue of exercise of the Award, or if Shares issued
pursuant to Awards (for which no material benefits of ownership have been
received, including dividends) are forfeited, any Stock subject to such Award
again shall be available for the grant of an Award under the Plan, subject to
Section 7.2 herein. Shares that are tendered, whether by physical delivery or
by attestation, to the Company by a Participant as full or partial payment of
the exercise price of any Award or in payment of any applicable withholding
for federal, state, city, local or other taxes incurred in connection with the
exercise of any Award shall become available for future grant or sale under
the Plan; provided, however, that the total number of Shares so tendered from
which ISOs may be granted shall not exceed 400,000.
4.3 Capital Adjustments. The number and class of Shares subject to each
outstanding Award and each Automatic Award, the Option Price (as defined in
Section 6.3 herein), and the aggregate number and class of Shares for which
Awards thereafter may be made shall be subject to such adjustment, if any, as
the Committee in its sole discretion deems appropriate to reflect such events
as stock dividends, stock splits, recapitalizations, mergers, consolidations,
or reorganizations of or by the Company.
ARTICLE 5
Eligibility
Persons eligible to participate in the Plan and receive Awards (other than
Automatic Awards) include all employees of the Company and its Subsidiaries
who, in the opinion of the Committee, are Key Employees.
Non-Employee Directors shall receive Automatic Awards, and may elect to
receive Stock Payment Awards, under the Plan pursuant to Article 9.
ARTICLE 6
Stock Options to Key Employees
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Key Employees at any time and from time to time as
shall be determined by the Committee. The Committee shall have complete
discretion in determining the number of Shares subject to Options granted to
each Key Employee; provided, however, (i) no Key Employee may be granted
Options in any calendar year for more than 40,000 shares of Common Stock and
(ii) that the aggregate Fair Market Value (determined at the time the Award
is made) of Shares with respect to which any Key Employee may first exercise
ISOs granted under the Plan during any calendar year may not exceed $100,000
or such amount as shall be specified in Section 422 of the Code and rules and
regulations thereunder.
6.2 Option Agreement. Each Option grant shall be evidenced by an Agreement
that shall specify the type of Option granted, the Option Price (as defined in
Section 6.3 herein), the duration of the Option, the number of Shares to which
the Option pertains, any conditions imposed upon the exercisability of Options
in the event of retirement, death, disability, or other termination of
employment, and such other provisions as the Committee shall determine. The
Agreement shall specify whether the Option is intended to be an Incentive
Stock Option within the meaning of Section 422 of the Code, or Nonqualified
Stock Option not intended to be within the provisions of Section 422 of the
Code.
<PAGE>
6.3 Option Price. The exercise price per share of Stock covered by an Option
("Option Price") shall be determined by the Committee subject to the
following limitations. The Option Price shall not be less than 100% of the
Fair Market Value of such Stock on the Grant Date. In addition, an ISO
granted to an employee who, at the time of grant, owns (within the meaning of
Section 425(d) of the Code) Stock possessing more than 10% of the total
combined voting power of all classes of Stock of the Company, shall have an
Option Price which is at least equal to 110% of the Fair Market Value of the
Stock.
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, no ISO
shall be exercisable later than the tenth (10th) anniversary date of its Award
Date. In addition, an ISO granted to an employee who, at the time of grant,
owns (within the meaning of Section 425(d) of the Code) Stock possessing more
than 10% of the total combined voting power of all classes of Stock of the
Company, shall not be exercisable later than the fifth (5th) anniversary date
of its Award Date.
6.5 Exercisability. Options granted under the Plan shall be exercisable at
such times and be subject to such restrictions and conditions as the Committee
shall determine, which need not be the same for all Key Employees.
6.6 Method of Exercise. Options shall be exercised by the delivery of a
written notice to the Company in the form prescribed by the Committee setting
forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares which shall be deemed to
include arrangements, if any, approved by the Committee for the delivery to
the Company of the proceeds of a sale or margin loan in the case of a
"cashless" exercise. The Option Price shall be payable to the Company in
full either in cash (including the proceeds of a cashless exercise in the
Committee's discretion), by delivery of Shares of Stock valued at Fair Market
Value at the time of exercise, by delivery of a promissory note (in the
Committee's discretion) or by a combination of the foregoing. As soon as
practicable after receipt of written notice and payment, the Company shall
deliver to the Participant stock certificates in an appropriate amount based
upon the number of Options exercised, issued in the Participant's name. No
Participant who is awarded Options shall have rights as a shareholder until
the date of exercise of the Options.
6.7 Restrictions on Stock Transferability. The Committee shall impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
under the Plan as it may deem advisable, including, without limitation,
restrictions under the applicable Federal securities law, under the
requirements of the National Association of Securities Dealers, Inc. or any
stock exchange upon which such Shares are then listed, and under any blue sky
or state securities laws applicable to such Shares.
6.8 Nontransferability of Options. No Option granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, all
Options granted to a Participant under the Plan shall be exercisable during
his lifetime only by such Participant or his guardian or legal representative.
<PAGE>
ARTICLE 7
Stock Appreciation Rights to Key Employees
7.1 Grant of Stock Appreciation Rights. Subject to the terms and conditions
of the Plan, Stock Appreciation Rights may be granted to Key Employees at the
discretion of the Committee (i) in connection with the grant, and exercisable
in lieu of Options ("Tandem SARs"), (ii) independent of the grant of the
Options ("Freestanding SARs"), or (iii) in any combination of the foregoing.
No Key Employee may be granted more than 40,000 SARs in any calendar year.
7.2 Exercise of Tandem SARs. Tandem SARs may be exercised with respect to
all or part of the Shares subject to the Related Option. The exercise of
Tandem SARs shall cause a reduction in the number of Shares subject to the
Related Option equal to the number of Shares with respect to which the Tandem
SAR is exercised. Conversely, the exercise, in whole or in part, of a Related
Option shall cause a reduction in the number of Shares subject to the Tandem
Option equal to the number of Shares with respect to which the Related Option
is exercised. Shares with respect to which the Tandem SAR shall have been
exercised may not be subject again to an Award under the Plan.
Notwithstanding any other provision of the Plan to the contrary, a Tandem SAR
shall expire no later than the expiration of the Related Option, shall be
transferable only when and under the same conditions as the Related Option and
shall be exercisable only when the Related Option is eligible to be exercised.
In addition, if the Related Option is an ISO, a Tandem SAR shall be exercised
for no more than 100% of the difference between the Option Price of the
Related Option and the Fair Market Value of Shares subject to the Related
Option at the time the Tandem SAR is exercised.
7.3 Exercise of Freestanding SARs. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in it sole discretion, imposes
upon such SARs.
7.4 Other Conditions Applicable to SARs. In no event shall the term of any
SAR granted under the Plan exceed ten years from the Grant Date. A SAR may be
exercised only when the Fair Market Value of a Share exceeds either (i) the
Option Price of the Related Option in the case of a Tandem SAR or (ii) the
Fair Market Value of a Share on the Grant Date in the case of a Freestanding
SAR. A SAR shall be exercised by delivery to the Committee of a notice of
exercise in the form prescribed by the Committee.
7.5 Payment Upon Exercise of SARs. Subject to the provisions of the
Agreement, upon the exercise of a SAR, the Participant is entitled to receive,
without any payment to the Company (other than required tax withholding
amounts), an amount equal to the product of multiplying (i) the number of
Shares with respect to which the SAR is exercised by (ii) an amount equal to
the excess of (A) the Fair Market Value per Share on the date of exercise of
the SAR over (B) either (x) the Option Price of the Related Option in the case
of a Tandem SAR or (y) the Fair Market Value per Share on the Award Date in
the case of a Freestanding SAR.
Payment to the Key Employee shall be made in Shares, valued at the Fair Market
Value on the date of exercise, in cash if the Key Employee has so elected in
his written notice of exercise and the Committee has consented thereto, or a
combination thereof. To the extent required to satisfy the conditions of Rule
16b-3(e) under the Exchange Act, or any successor or similar rule, or as
otherwise provided in the Agreement, the Committee shall have the sole
discretion to consent to or disapprove the election of any Key Employee to
receive cash in full or partial settlement of a SAR. In cases where an
election of settlement in cash must be consented to by the Committee, the
Committee may consent to or disapprove such election at any time after such
election, or within such period for taking action as is specified in the
election, and failure to give consent shall be disapproval. Consent may be
<PAGE>
given in whole or as to a portion of the SAR surrendered by the Key Employee.
If the election to receive cash is disapproved in whole or in part, the SAR
shall be deemed to have been exercised for Shares, or, if so specified in the
notice of exercise and election, not to have been exercised to the extent the
election to receive cash is disapproved.
7.6 Nontransferability of SARs. No SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, all SARs
granted to a Key Employee under the Plan shall be exercisable during his
lifetime only by such Key Employee or his guardian or legal representative.
ARTICLE 8
Stock Awards to Key Employees
8.1 Grant of Stock Awards. Subject to the terms and provisions of the Plan,
the Committee, at any time and from time to time, may grant Stock Awards under
the Plan to such Key Employees, which may but need not be Restricted Stock,
and in such amounts as it shall determine; provided, however, that no Key
Employee may be granted Stock Awards in any calendar year for more than 10,000
shares of Common Stock. Key Employees receiving Stock Awards are not required
to pay the Company therefor (except for applicable tax withholding) other than
by the rendering of services.
8.2 Stock Award Agreement. Each Stock Award shall be evidenced by an
Agreement that shall specify the number of shares of Stock covered by the
Stock Award, any applicable Restrictions and such other provisions as the
Committee shall determine. The Committee may impose such other restrictions
to be set forth in the Agreement as it may deem advisable, including without
limitation, restrictions under applicable Federal or state securities laws,
and may legend the certificates representing Stock Awards to give appropriate
notice of such restrictions.
8.3 Transferability. Except as otherwise provided in the Agreement pursuant
to which Stock Awards are made and subject to the limitation in the next
sentence, the Shares of Stock granted as Stock Awards may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until
the termination of any applicable Restrictions or upon earlier satisfaction of
other conditions as specified by the Committee in its sole discretion and set
forth in the Agreement. All rights with respect to the Stock Awards granted
to a Participant under the Plan shall be exercisable during his lifetime only
by such Participant or his guardian or legal representative.
8.4 Restrictions on Restricted Stock. With respect to Shares of Restricted
Stock granted pursuant to the Plan, the Committee shall either (i) impose a
Period of Restriction which requires continuation of employment for a
prescribed period, or (ii) require the satisfaction of one or more specified
Performance Criteria to be achieved within a stated time period, in order for
the Participant to be fully vested in the Shares of Restricted Stock. Unless
otherwise determined by the Committee, custody of Shares of Restricted Stock
shall be retained by the Company until the termination of the Restrictions
pertaining thereto.
8.5 Certificate Legend. In addition to any legends placed on certificates
pursuant to Section 8.2 herein, each certificate representing shares of
Restricted Stock granted pursuant to the Plan shall bear the following legend:
The sale or other transfer of the Shares of Stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer set forth in the FNB
<PAGE>
Corporation 2000 Incentive Stock Plan, in the rules and administrative
procedures adopted pursuant to such Plan, and in an Agreement dated
February 15, 2000. A copy of the Plan, such rules and procedures, and
such Restricted Stock Agreement may be obtained from the Secretary of
FNB Corporation.
8.6 Removal of Restrictions. Except as otherwise provided in this Article,
Shares of Restricted Stock covered by each Restricted Stock Award made under
the Plan shall become freely transferable by the Participant after the last
day of the Period of Restriction or on the day immediately following the date
on which the Performance Criteria have been timely satisfied. Once the Shares
are released from the restrictions, the Company shall deliver the certificate
representing the Restricted Stock to the Participant and the Participant shall
be entitled to have the legend required by Section 8.5 herein removed from his
Stock certificate.
8.7 Voting Rights. Participants entitled to Shares of Restricted Stock
still subject to Restrictions may exercise full voting rights with respect to
those Shares.
8.8 Dividends and Other Distributions. Unless otherwise provided in the
Agreement, Participants entitled to Shares of Restricted Stock still subject
to Restrictions shall be entitled to receive all dividends and other
distributions paid with respect to those shares while they are so held. If
any such dividends or distributions are paid in Shares, the Shares shall be
subject to the same restrictions on transferability and subject to the same
rules for custody as the Shares of Restricted Stock with respect to which they
were distributed.
8.9 Termination of Employment Due to Retirement. Unless otherwise provided
in the Agreement, in the event that a Key Employee terminates his employment
with the Company or one of its Subsidiaries because of normal retirement (as
defined in the plans and/or policies of the Company in effect at the time),
any remaining Restrictions applicable to the Restricted Stock Shares pursuant
to Section 8.4 herein shall automatically terminate and, except as otherwise
provided in Section 8.2 herein, the Shares of Restricted Stock shall thereby
be free of restrictions and freely transferable. Unless otherwise provided in
the Agreement, in the event that a Key Employee terminates his employment with
the Company because of early retirement (as defined in the policies and/or
plans of the Company in effect at the time), the Committee, in its sole
discretion, may waive the restrictions remaining on any or all Shares of
Restricted Stock pursuant to Section 8.2 herein and add such new restrictions
to those Shares of Restricted Stock as it deems appropriate.
8.10 Termination of Employment Due to Death or Disability. Unless otherwise
provided in the Agreement, in the event a Key Employee's employment is
terminated because of death or disability, any remaining Restriction
applicable to the Restricted Stock pursuant to Section 8.4 herein shall
automatically terminate and, except as otherwise provided in Section 8.2
herein, the shares of Restricted Stock shall thereby be free of restrictions
and fully transferable.
8.11 Termination of Employment for Other Reasons. Unless otherwise provided
in the Agreement, in the event that a Key Employee terminates his employment
with the Company for any reason other than for death, disability, or
retirement, as set forth in Sections 8.9 and 8.10 herein, then any shares of
Restricted Stock still subject to Restrictions as of the date of such
termination shall automatically be forfeited and returned to the Company.
8.12 Failure to Satisfy Performance Criteria. In the event that the specified
Performance Criteria are not satisfied within the time period established by
the Committee, the Shares of Restricted Stock which were awarded subject to
the satisfaction of such Performance Goals shall be automatically forfeited
and returned to the Company.
<PAGE>
ARTICLE 9
Automatic Awards to Non-Employee Directors
9.1. Automatic Options. On each Automatic Grant Date, each Non-Employee
Director will automatically receive a Non-Qualified Stock Option ("Automatic
Option") covering 3,500 Shares for Non-Employee Directors of the Company and
3,000 Shares for Non-Employee Directors of any Subsidiary, or such lesser
number as the Committee may determine from time to time for Non-Employee
Directors as a whole or for any class of Non-Employees Directors, on each
Automatic Grant Date after the Effective Date to be evidenced by an Agreement.
Notwithstanding the foregoing, a person serving as a Non-Employee Director on
more than one Board shall only receive one Automatic Option Award per year.
The Option Price of Automatic Options shall be 100% of the Fair Market Value
on the Automatic Grant Date.
Unless otherwise provided in the Agreement pursuant to which they are
received, one-quarter of each Automatic Option Award shall become exercise on
the first, second, third, and fourth anniversary of its Automatic Grant Date;
provided, however, that an Automatic Option Award shall be immediately
exercisable if the Non-Employee Director's membership on the Board terminates
as a result of the Non-Employee Director's retirement from Board service in
accordance with the Company's policy, death, or permanent and total disability
(as such term is defined in Section 22(e)(3) of the Code) or if a Change of
Control occurs.
An Automatic Option shall be forfeited if, as of the termination of the Non-
Employee Director's membership on the Board, the Automatic Option is not then
exercisable and such termination occurs for any reason other than as a result
of the Non-Employee Director's retirement from Board service in accordance
with the Company's policy, death or permanent and total disability (as such
term is defined in Section 22(e)(3) of the Code).
Unless otherwise provided in the Agreement pursuant to which they are
received, Automatic Options that are exercisable or that become exercisable
upon the Non-Employee Director's termination of membership on the Board will
remain exercisable until the tenth anniversary of the Automatic Option's
Automatic Grant Date.
An Automatic Option may be exercised with respect to any number of whole
shares less than the full number for which the Option could be exercised. A
partial exercise of an Automatic Option shall not affect the right to exercise
the Automatic Option from time to time in accordance with this Plan and the
applicable Agreement with respect to the shares remaining subject to the
Automatic Option.
The provisions of Sections 6.6, 6.7, and 6.8 herein shall be applicable to
Automatic Options.
9.2 Automatic Stock Awards. On each Automatic Grant Date, each Non-Employee
Director shall automatically receive a Stock Award ("Automatic Stock Award")
for 300 Shares, or such lesser number as the Committee may determine from time
to time for Non-Employee Directors as a whole or for any class of
Non-Employees Directors, to be evidenced by an Agreement. Notwithstanding the
foregoing, a person serving as a Non-Employee Director on more than one Board
shall only receive one Automatic Stock Award per year.
<PAGE>
9.3 Stock Payment Awards. Non-Employee Directors may elect to receive
payment of their retainer and meeting attendance fees ("Fees") in the form of
Stock Payment Awards in accordance with the provisions of this Section. An
election to receive Stock Payment Awards must be made on an annual basis by
delivering written notice to the Secretary of the Company on the election
form provided by the Company for that purpose ("Election Form").
With respect to elections for the balance of the calendar year containing the
Effective Date, the election form must be delivered on or before May 31, 2000,
and is effective only with respect to fees earned after the effective date of
the election, and, with respect to elections for subsequent calendar years, on
or before the date of the last Board meeting in the calendar year preceding
the year to which the election relates. In the event an individual becomes a
Non-Employee Director after the deadline for delivery of the election notice
for a particular calendar year, the Company may, but shall not be required to,
permit such Non-Employee Director to make an election to receive Stock Payment
Awards for such calendar year. Once made, an election for a particular
calendar year may not be revoked and will be effective for all Fees owing to
an electing Non-Employee Director for services to be rendered as a director
during that calendar year.
Stock Payment Awards shall be made on a quarterly basis, beginning with the
second quarter of the calendar year 2000. Stock Payment Awards shall be made
as soon as possible but in no event later than 30 days after the last day of
the quarter for which the Non-Employee Director's Fees are earned.
The number of Shares constituting a quarterly Stock Payment Award for each
electing Non-Employee Director shall be that number of Shares, rounded to the
nearest whole number, which results from dividing the respective Non-Employee
Director's Fees earned during that quarter by the Fair Market Value of the
Shares as of the Determination Date (as hereinafter defined). The Company
shall send each electing Non-Employee Director a letter agreement setting
forth the number of Shares constituting each Stock Payment Award and such
other terms and conditions of the Award as are consistent with this Section
9.3. The "Determination Date" shall mean the earlier of (i) the last day of
the quarter for which the Non-Employee Director's Fees are earned (March 31,
June 30, September 30 and December 31, respectively) or (ii) the effective
date of an electing Non-Employee Director's termination as a member of the
Board prior to the end of a calendar quarter.
A Non-Employee Director shall have no voting or dividend rights with respect
to, and no right to transfer any interest in, any Stock Payment Awards prior
to the Determination Date for such Award. Following a Determination Date, a
Non-Employee Director shall be entitled to vote Stock Payment Award Shares and
to receive dividends thereafter declared and payable on such Shares.
Following a Determination Date, the Stock Payment Award Shares shall not be
subject to any restrictions on transfer and the Company shall, in accordance
with each Non-Employee Director's written request made on an Election Form,
either cause a stock certificate to be issued evidencing the Stock Payment
Award Shares or maintain a book-entry record evidencing such Shares. Stock
Payment Award Shares for which no such written request is made shall be
evidenced by a book-entry record. Dividends on Stock Payment Award Shares
evidenced by a stock certificate shall be paid in cash, and dividends on Stock
Payment Award Shares evidenced by a book entry record shall be reinvested in
Shares, in each case only as and when dividends are declared and paid to
shareholders of record of Shares.
Notwithstanding the foregoing, at any time and from time to time, the
Committee may suspend the option for Non-Employee Directors as a whole or for
any class of Non-Employees Directors to elect to receive Stock Payment Awards
in lieu of Fees.
<PAGE>
ARTICLE 10
Change in Control
The Committee, as constituted before a Change in Control, in its sole
discretion may, as to any outstanding Award, either at the time the Award is
made or any time thereafter, take any one or more of the following actions
with respect to a Change in Control: (i) provide for the acceleration of any
time periods relating to the exercise or realization of any such Award so that
such Award may be exercised or realized in full on or before a date initially
fixed by the Committee; (ii) provide for the purchase or settlement of any
such Award by the Company, upon a Participant's request, for an amount of cash
equal to the amount which could have been obtained upon the exercise of such
Award or realization of such Participant's rights had such Award been
currently exercisable or payable; (iii) make such adjustment to any such Award
then outstanding as the Committee deems appropriate to reflect such Change in
Control; or (iv) cause any such Award then outstanding to be assumed, or new
rights substituted therefor, by the acquiring or surviving corporation in such
Change in Control.
ARTICLE 11
Modification, Extension, and Renewals of Awards
Subject to the terms and conditions and within the limitations of the Plan,
the Committee may modify, extend or renew outstanding Awards, or, if
authorized by the Board, accept the surrender of outstanding Awards (to the
extent not yet exercised) granted under the Plan and authorize the granting of
new Awards pursuant to the Plan in substitution therefor, and the substituted
Awards may specify a longer term than the surrendered Awards or may contain
any other provisions that are authorized by the Plan. Notwithstanding the
foregoing, no modification, extension, renewal, or surrender and substitution
may provide for a lower exercise price than that provided for prior to the
modification, extension, renewal, or surrender and substitution. Subject to
the foregoing limitation, the Committee may also modify the terms of any
outstanding Agreement. Notwithstanding the foregoing, however, no
modification of an Award, shall, without the consent of the Participant,
adversely affect the rights or obligations of the Participant.
ARTICLE 12
Amendment, Modification, and Termination of the Plan
12.1 Amendment, Modification, and Termination. At any time and from time to
time, the Board may terminate, amend, or modify the Plan. Such amendment or
modification may be without shareholder approval except to the extent that
such approval is required by the Code, pursuant to the rules under Section 16
of the Exchange Act, by any national securities exchange or system on which
the Stock is then listed or reported, by any regulatory body having
jurisdiction with respect thereto, or under any other applicable laws, rules,
or regulations.
12.2 Awards Previously Granted. No termination, amendment, or modification of
the Plan other than pursuant to Section 4.3 herein shall in any manner
adversely affect any Award theretofore granted under the Plan, without the
written consent of the Participant.
<PAGE>
ARTICLE 13
Withholding
13.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, State, and local taxes (including a
Participant's FICA obligation, if any) required by law to be withheld with
respect to any grant, exercise, or payment made under or as a result of this
Plan.
13.2 Stock Withholding. With respect to withholding required upon the
exercise of Nonqualified Stock Options, or upon the lapse of restrictions on
Restricted Stock, or upon the occurrence of any other similar taxable event,
Participants may elect, subject to the approval of the Committee, to satisfy
the withholding requirement, in whole or in part, by having the Company
withhold Shares of Stock having a Fair Market Value equal to the amount
required to be withheld. The value of the Shares to be withheld shall be
based on Fair Market Value of the Shares on the date that the amount of tax to
be withheld is to be determined. All elections shall be irrevocable and be
made in writing, signed by the Participant on forms approved by the Committee
in advance of the day that the transaction becomes taxable.
ARTICLE 14
Successors
All obligations of the Company under the Plan, with respect to Awards granted
hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the
business and/or assets of the Company.
ARTICLE 15
General
15.1 Requirements of Law. The granting of Awards and the issuance of Shares
of Stock under this Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies as may be
required.
15.2 Effect of Plan. The establishment of the Plan shall not confer upon any
Key Employee or any Non-Employee Director any legal or equitable right against
the Company, a Subsidiary, the Board, or the Committee, except as expressly
provided in the Plan. The Plan does not constitute an inducement or
consideration for the employment of any Key Employee, nor is it a contract
between the Company or any of its Subsidiaries and any Key Employee or any
Non-Employee Director. Participation in the Plan shall not give any Key
Employee any right to be retained in the service of the Company or any of its
Subsidiaries. Participation in the Plan shall not give any Non-Employee
Director any right to be retained as a member of the Board of the Company or
any of its Subsidiaries.
15.3 Creditors. The interests of any Participant under the Plan or any
Agreement are not subject to the claims of creditors and may not, in any way,
be assigned, alienated, or encumbered.
15.4 Governing Law. The Plan, and all Agreements hereunder, shall be
governed, construed ,and administered in accordance with the laws of the
Commonwealth of Virginia and the intention of the Company is that ISOs
granted under the Plan qualify as such under Section 422 of the Code.
<PAGE>
15.5 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
Approved by the Board of Directors
on February 15, 2000
REVOCABLE PROXY
FNB CORPORATION
___X___ PLEASE MARK VOTES AS IN THIS EXAMPLE
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
JAMES L. HUTTON, DANIEL D. HAMRICK, and ________________________ or any
of them (the "Proxy Holders"), with power of substitution to each, are hereby
authorized to represent the undersigned and vote all shares of FNB Corporation
(the "Corporation") standing in the name of the undersigned at the Annual
Meeting of Shareholders of the Corporation to be held at Custom Catering,
Inc., 902 Patrick Henry Dr., Blacksburg, Virginia, on Tuesday, May 9, 2000, at
2:00 p.m., or any adjournment thereof, on each of the following matters. With
respect to any adjournment recommended by management for the purpose of
soliciting additional votes on a matter, only proxies indicating a vote in
favor of that matter will be considered a vote in favor of such adjournment.
Please be sure to sign and date this Proxy in the box below.
Date ___________________________
___________________________ ________________________________
Stockholder sign above Co-holder (if any) sign above
1. For __________, Withhold __________, Except __________
The election of the nominees listed for Class I Directors (except as
marked to the contrary below):
Joan H. Munford
Danied D. Hamrick
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"Except" and write that nominee's name in the space provided below.
____________________________________________________________________________
2. For __________, Against __________, Abstain __________
The appointment of McLeod & Company, independent certified public
accountants, as auditors for the year 2000.
3. For __________, Against __________, Abstain __________
To approve the FNB Corporation 2000 Incentive Stock Plan and the
reservation of 400,000 shares of the Corporation's stock for issuance
thereunder.
4. The transaction of any other business which may properly come before
the Meeting. Management at present knows of no other business to be
presented at the Meeting.
This proxy when properly executed, will be voted in the manner directed
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR the election of directors identified in item 1, FOR the appointment
of accountants in item 2, FOR the approval of the FNB Corporation 2000
Incentive Stock Plan and the reservation of 400,000 shares of the
Corporation's stock for issuance thereunder in item 3, and as the Proxy
Holders see fit in any matters that may come up in item 4.
When signing as attorney, executor, trustee or guardian, please give
full title. If more than one fiduciary, all should sign. All joint owners
MUST sign.
