<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
FNB FINANCIAL SERVICES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PRELIMINARY COPIES
FNB FINANCIAL SERVICES CORPORATION
202 South Main Street
Reidsville, North Carolina 27320
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 14, 1998
To Our Shareholders:
NOTICE IS HEREBY GIVEN that, pursuant to the call of the Board of
Directors, the 1998 Annual Meeting of Shareholders of FNB Financial Services
Corporation (the "Company") will be held at the Bryan Enrichment Center, 6275
Bryan Park Road, Brown Summit, North Carolina on Tuesday, April 14, 1998, at
1:00 p.m., for the following purposes:
1. To elect three nominees to serve as Class II Directors, each
to serve a three-year term until the Annual Meeting of
Shareholders in 2001;
2. To approve an amendment to the Company's Articles of
Incorporation which would (i) increase the amount of
authorized shares of Common Stock from 3,000,000 to 40,000,000
and (ii) authorize the issuance of up to 10,000,000 shares of
Preferred Stock which may be issued by the Company from time
to time in one or more classes or series; and
3. To consider and act upon such other business as may properly
come before the meeting or any adjournment or postponement
thereof.
All shareholders are invited to attend the Annual Meeting. Only those
shareholders of record as of the close of business on March 4, 1998, are
entitled to notice of, and to vote at, the Annual Meeting and all adjournments
and postponements of the meeting. If the Annual Meeting is adjourned or
postponed, the new date, time and place will be announced at the Annual Meeting
prior to adjournment or postponement. It is important that your stock be
represented at this meeting so that the presence of a quorum may be assured.
Information about the activities and operation of the Company during
the fiscal year ended December 31, 1997 is contained in the Company's 1997
Annual Report to Shareholders, a copy of which is enclosed.
IT IS IMPORTANT THAT YOUR SHARES OF STOCK BE REPRESENTED AT THE
MEETING, REGARDLESS OF THE NUMBER OF SHARES YOU MAY HOLD. EVEN THOUGH YOU MAY
PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE AND RETURN THE ENCLOSED
PROXY IN THE ENVELOPE PROVIDED SO THAT IT WILL BE RECEIVED NO LATER THAN FRIDAY,
APRIL 10, 1998. IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN
PERSON.
By Order of the Board of Directors.
Robert F. Albright
March 17, 1998 Senior Vice President
<PAGE> 3
PRELIMINARY COPIES
FNB FINANCIAL SERVICES CORPORATION
202 South Main Street
Reidsville, North Carolina 27320
PROXY STATEMENT
GENERAL INFORMATION
The accompanying proxy is solicited by and on behalf of the Board of
Directors of FNB Financial Services Corporation, a North Carolina corporation
(the "Company"), for use at the 1998 Annual Meeting of Shareholders to be held
on April 14, 1998, at 1:00 p.m. at the Bryan Enrichment Center, 6275 Bryan Park
Road, Brown Summit, North Carolina (the "Annual Meeting"), and at any
adjournment or postponement thereof. The Company's wholly-owned subsidiary is
First National Bank Southeast, formerly known as First National Bank of
Reidsville (the "Bank"). The purposes of the Annual Meeting are:
1. To elect three nominees to serve as Class II Directors, each
to serve a three-year term until the Annual Meeting of
Shareholders in 2001;
2. To approve an amendment to the Company's Articles of
Incorporation which would (i) increase the amount of
authorized shares of Common Stock from 3,000,000 to 40,000,000
and (ii) authorize the issuance of up to 10,000,000 shares of
Preferred Stock which may be issued from time to time by the
Company in one or more classes or series; and
3. To consider and act upon such other business as may properly
come before the meeting or any adjournment thereof.
The Board of Directors knows of no other matters other than those
stated above to be brought before the Annual Meeting or any adjournment or
postponement thereof. Nonetheless, the proxyholders named on the enclosed proxy
card may vote in accordance with the instructions of the Board of Directors or
in the absence thereof, in accordance with their discretion, on any matter
properly presented for action of which the Board of Directors is not now aware.
The shares represented by all properly executed proxies received by the Company
in time to be taken to the Annual Meeting will be voted; and, if a choice is
specified with respect to any matter to be acted upon, the shares will be voted
in accordance with such specifications. IF A SPECIFICATION IS NOT MADE, THE
PROXY WILL BE VOTED FOR THE PROPOSALS SET FORTH ABOVE AND IN THE NOTICE OF THE
ANNUAL MEETING OF SHAREHOLDERS.
This Proxy Statement is first being mailed to shareholders of record as
of March 4, 1998 on or about March 17, 1998.
By signing the proxy, a shareholder will be authorizing the proxyholder
to vote in his discretion regarding any procedural motions which may come before
the Annual Meeting. For example, this authority could be used to adjourn the
meeting if the Company believes it is desirable to do so. Adjournment or other
procedural matters could be used to obtain more time before a vote is taken in
<PAGE> 4
order to solicit additional proxies or to provide additional information to
shareholders. The Company has no current plans to adjourn the meeting, but would
attempt to do so if the Board of Directors believes adjournment would promote
shareholder interests.
Proxies may be revoked at any time before they are exercised by (i)
filing a written notice of revocation with the Secretary of the Company, (ii)
filing a duly executed proxy bearing a later date or (iii) personally appearing
at the Annual Meeting and electing to vote in person.
The cost of the solicitation of proxies will be borne by the Company.
Solicitation of proxies will be made by mail except that, if necessary, proxies
may be solicited personally or by telephone by directors, officers and employees
of the Company or the Bank, none of whom will receive special compensation for
their efforts. Brokerage houses and nominees have been requested to forward
these proxy materials to the beneficial owners of shares held of record by such
persons, and upon request, the Company will reimburse such persons for the
reasonable out-of-pocket expenses thereby incurred.
VOTING SECURITIES OUTSTANDING
Only shareholders of record as of the close of business on March 4,
1998, will be entitled to notice of, and to vote at, the Annual Meeting. On such
date, the Company had ___________ shares of Common Stock, par value $1.00 per
share, issued and outstanding, each of which is entitled to one vote on each
matter calling for a vote of the shareholders. There are no other voting
securities.
Each shareholder entitled to vote has the right to vote, in person or
by proxy, the number of shares standing of record in his name for as many
persons as there are directors to be elected.
The holders of a majority of the outstanding shares of Common Stock
present in person or represented by proxy at the Annual Meeting will constitute
a quorum. Since many of the shareholders cannot attend the Annual Meeting, it is
necessary that a large number be represented by proxy. Accordingly, the Board of
Directors has designated proxies to represent those shareholders who cannot be
present in person and who desire to be so represented.
As of February 1, 1998, there were no individuals or entities known to
the Company who beneficially owned more than five percent of the Company's
outstanding Common Stock.
PROPOSAL 1: ELECTION OF DIRECTORS
It is intended that the persons named in the accompanying form of proxy
will vote FOR the three nominees listed under the caption "Class II" below for
directors, unless the authority to so vote is withheld. All three of the
nominees are presently members of the Board of Directors of the Company and of
the Board of Directors of the Bank.
The Board of Directors of the Company is divided into three classes:
Class I, Class II and Class III. If elected, the nominees will be designated
Class II, and will serve until the Annual Meeting of Shareholders in 2001. The
directors designated as Class III have been previously elected to serve until
2
<PAGE> 5
the 1999 Annual Meeting of Shareholders, and the directors designated as Class I
have been previously elected to serve until the 2000 Annual Meeting of
Shareholders.
The following table lists the directors of the Company and the classes
in which they serve as of the date of this Proxy Statement:
<TABLE>
<CAPTION>
Class I Class II (Nominees) Class III
------- ------------------- ---------
<S> <C> <C>
(Term Expiring 2000) (Term Expiring 1998) (Term Expiring 1999)
Ernest J. Sewell Willard B. Apple, Jr. Joseph H. Kinnarney
Charles A. Britt O. Eddie Green Elton H. Trent, Jr.
Barry Z. Dodson Clifton G. Payne Kenan C. Wright
</TABLE>
The total number of directors comprising the Company's Board of
Directors has been fixed at eleven. The Board currently has a vacancy of two
directors resulting from the prior retirement of two directors. The remaining
directors are permitted under the Company's Bylaws to fill the vacancies at any
time and to assign any director appointed to fill a vacancy to any class, as
long as the number of directors in each class are as close in number as
possible. Although the Company currently has no plans to fill any of the
existing vacancies on its Board of Directors, it may do so at any time with the
consent of a majority of the directors then in office. The term of office of any
such director appointed to fill the vacancy expires with the class in which such
director has been appointed.
The Board of Directors has no reason to believe that the persons named
as nominees for directors will be unable or will decline to serve if elected.
However, in the event of death or disqualification of any nominee or the refusal
or inability of any nominee to serve as a director, it is the intention of the
proxyholders named in the accompanying proxy card to vote for the election of
such other person or persons as the proxyholders determine in their discretion.
In no circumstance will the proxy be voted for more than three nominees.
Properly executed and returned proxies, unless revoked, will be voted as
directed by the shareholder or, in the absence of such direction, will be voted
in favor of the election of the recommended nominees.
In tallying shareholder votes, abstentions and broker non-votes will be
counted as present for purposes of determining the existence of a quorum at the
Annual Meeting. Under the North Carolina Business Corporation Act, to be elected
as a director, a nominee need only receive a plurality of the votes cast,
provided a quorum of shareholders is present. Accordingly, abstentions and
broker non-votes will not be counted against such nominees.
A broker non-vote occurs when a nominee holding shares for a beneficial
owner does not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that proposal and has not received
voting instructions from the beneficial owner (despite voting on at least one
other proposal for which it does have discretionary authority or for which it
has received instructions).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE NOMINEES FOR ELECTION
AS DIRECTORS.
3
<PAGE> 6
The following table sets forth certain information concerning each
person nominated for election as a director, and each person whose term of
office as a director will continue after the Annual Meeting.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned
as of February 1, 1998
---------------------------
Name; Age; Year First Elected Director; Shares Percent
Principal Occupation (Current and Last Five Years) Owned(1)(2) of Class(1)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Ernest J. Sewell; age 57; 1995; President and 41,789 1.7%
Chief Executive Officer of the Company and of the
Bank since January 1995; Senior Vice President,
Branch Banking and Trust Company, Winston-Salem N.C.,
1984 to 1995
Charles A. Britt; age 48; 1985; Owner, Carolina 16,850 *
Apothecary, Inc. and Belmont Pharmacy, Inc., Reidsville, N.C.
Barry Z. Dodson; age 49; 1997; self-employed 6,578 *
Certified Public Accountant
Willard B. Apple, Jr.; age 67; 1969; Chairman 29,313 1.2%
of the Company and of the Bank, Retired
O. Eddie Green; age 63; 1970; Division Manager, 31,209 1.2%
Chandler Concrete Co., Inc. since 1991; prior
thereto, President, G.B. Green & Son, Inc. (providers
of ready-mixed concrete)
Clifton G. Payne; age 66; 1976; Retired 61,328 2.5%
Joseph H. Kinnarney; age 44; 1988; President, 16,978 *
Reidsville Veterinary Hospital, Inc., Reidsville, N.C.
Elton H. Trent, Jr.; age 65; 1969; Vice 50,056 2.0%
Chairman of the Board of the Company and the Bank,
Retired
Kenan C. Wright; age 45; 1990; President, The 9,700 *
Wright Co. of N.C. Inc., Reidsville, N.C.
Directors and executive officers as a group, 335,638 13.4%
including those listed above (16 persons)(2)
</TABLE>
- ---------------------------
* Less than one percent.
(1) Based upon 2,497,681 shares of Common Stock outstanding on February 1,
1998. The securities "beneficially owned" by an individual are
determined in accordance with the definition of "beneficial ownership"
set forth in the regulations of the Securities and Exchange Commission.
Accordingly, they may include securities owned by or for, among others,
the spouse and/or minor children of the individual and any other
relative who has the same home as such individual, as well as other
securities as to which the individual has or shares voting or
investment power or has the right to acquire under outstanding stock
options within 60 days of February 1, 1998. Beneficial ownership may be
disclaimed as to certain of the securities. In addition, the shares set
forth above have been adjusted to reflect (i) a four-for-three stock
split effected as a 33% stock dividend on April 30, 1997 and (ii) a
four-for-three stock split effected as a 33% stock dividend on
September 12, 1997 (the "1997 Stock Splits").
Unless otherwise noted, the address of each director named in the table
above is c/o FNB Financial Services Corporation, 202 South Main Street,
Reidsville, North Carolina 27320.
4
<PAGE> 7
(2) Each director who is not an officer of the Company (other than Willard
B. Apple, Jr. and Barry Z. Dodson) has the right to acquire 5,726
shares of Common Stock under presently exercisable stock options. Mr.
Apple has the right to acquire 20,290 shares. Mr. Dodson has the right
to acquire 1,111 shares. All directors and executive officers as a
group have the right to acquire 140,224 shares of Common Stock under
stock options exercisable currently or within 60 days of February 1,
1998. These shares are shown as beneficially owned.
ATTENDANCE AT BOARD MEETINGS; COMMITTEES
During fiscal 1997, there were 12 regular meetings and no special
meetings of the Board of Directors of the Company. Each of the incumbent
directors attended 75% or more of the meetings held by the Company's Board of
Directors. The Company has an Audit Committee and a Compensation Committee, but
does not have a standing Nominating Committee. The members of the Audit
Committee, which reviews the reports and oversees the actions of the internal
audit department, are Messrs. Green, Britt, Dodson and Wright. The Audit
Committee met four times during 1997. The Compensation Committee, which met
three times during 1997, is comprised of Messrs. Britt, Kinnarney, Trent, Jr.
and Wright. The function of the Compensation Committee is to review and
recommend executive salary and benefit programs. The Board of Directors of the
Company performs the functions that would be performed by a nominating
committee. Presently, the Board of Directors does not have a policy or procedure
restricting or limiting shareholder recommendations for nominees to the Board.
During fiscal 1997, there were 12 regular meetings and no special
meetings of the Board of Directors of the Bank. Each of the incumbent directors
attended 75% or more of the aggregate of the total number of Bank Board meetings
and the total number of meetings held by all committees of the Bank's Board of
Directors on which he served.
The Board of Directors of the Bank also has an Audit Committee, a
Compensation Committee and a Trust Committee, but does not have a standing
Nominating Committee.
The Trust Committee of the Bank's Board of Directors met once during
the 1997 fiscal year. This Committee reviews the Trust Department's reports and
recommendations and is responsible for suitable audits of that department.
Committee members are Messrs. Kinnarney, Green, Payne and Dodson.
DIRECTOR COMPENSATION
In 1997, directors were paid $300 for each meeting attended of the
Board of Directors of the Bank, except for the Chairman of the Board, who
received $350 per meeting. Additionally, each director who is not an employee of
the Bank received an annual retainer of $4,000 during 1997.
5
<PAGE> 8
Directors are also paid $150 for each committee meeting of the Board of
Directors of the Bank attended, excluding those directors who are employees.
Payment is not made for meetings of the Bank's Board of Directors or Committees
where a director has failed to attend. The directors are also eligible for
awards under the Company's Stock Compensation Plan and under the Company's
Omnibus Equity Compensation Plan (the "Omnibus Plan"). During 1997, each
director who was not an employee of the Bank received non-qualified stock
options in December 1997 to purchase 1,000 shares of the Company's Common Stock,
at an exercise price of $25.25 per share, under the Omnibus Plan. Such options
vest in consecutive annual increments of 25% of the shares subject to the
option, with the first 25% vesting one year after the date of grant.
Additionally, Barry Z. Dodson received non-qualified stock options in March 1997
to purchase 2,500 shares at an exercise price of $23.00 (4,444 shares at
$12.9375 per share, as adjusted for the 1997 Stock Splits), concurrent with his
election to the Board of Directors, also under the Omnibus Plan. The directors
do not receive any additional compensation for attending meetings of the Board
of Directors of the Company.
All of the Company's directors and certain senior management employees
are eligible to participate in the Company's Deferred Compensation Plan, which
is intended to provide additional financial incentives and retirement security
for the Company's directors and executive officers, and to allow for deferral of
up to 100% of director's fees and a portion of eligible employees' compensation.
Eligible employees may elect to defer up to 25% of their base salary and up to
100% of any bonuses. Under the Plan, deferred compensation is invested in a
Guaranteed Interest Account (the return on which is tied to the rates on U.S.
Treasury Notes).
EXECUTIVE COMPENSATION
The following table sets forth for 1995, 1996 and 1997 the cash and
other compensation paid to, received or deferred by the Company's chief
executive officer ("CEO") in fiscal year 1997. No other executive officer earned
compensation in excess of $100,000 in salary and bonus during the 1997 fiscal
year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------- ----------------------
Awards
----------------------
Securities
Year Restricted Underlying All
Name and Principal Position Ended Other Annual Stock Options/ Other
---------------------------- 12/31 Salary Bonus Compensation Award(s) SARs Compensation
----- ------ ----- ------------ -------- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ernest J. Sewell, President and 1997 $176,666 $48,000(1) (2) -0- 20,000 $9,539(4)
Chief Executive Officer 1996 125,000 43,750(1) (2) -0- 44,443 9,539(4)(5)
1995 102,476 40,080(1) (2) $16,500(3) 18,888 9,539(4)
</TABLE>
- -----------------------
(1) Represents compensation earned by Mr. Sewell under the
Company's Annual Incentive Plan.
(2) Perquisites and other personal benefits received did not
exceed the lesser of $50,000 or 10% of salary and bonus
compensation for Mr. Sewell.
(3) Represents 1,000 fully-vested shares of the Company's Common
Stock awarded and issued pursuant to a Restricted-Stock Bonus
Award Agreement and the Company's Stock Compensation Plan.
Under the Agreement, Mr. Sewell is entitled to receive the
dividends on all 1,000 shares.
6
<PAGE> 9
(4) Represents benefits to Mr. Sewell under the Company's split-dollar
insurance plan.
(5) Excludes the gain received by Mr. Sewell on the sale of his personal
residence to the Company for $342,000, the value of such residence as
determined by three independent appraisals performed just prior to such
sale.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options
to purchase Common Stock granted to Mr. Sewell during the year ended December
31, 1997.
<TABLE>
<CAPTION>
Individual Grants
- -----------------------------------------------------------------------------------------------------------------
Number of Securities % of Total Options
Underlying Options Granted to Employees in Exercise or Base
Name Granted Fiscal Year Price (Per Share) Expiration Date
---- ------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C>
Ernest J. Sewell 20,000 24% $25.25 December 10, 2007
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
The following table sets forth certain information concerning options
to purchase Common Stock held by Mr. Sewell during the year ended December 31,
1997, the aggregate value of gains on the date of exercise, and the value of
unexercised options as of December 31, 1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Acquired Value Underlying Unexercised In-the-Money Options
Name on Exercise Realized Options at FY-End(#) at FY-End ($)(1)
---- ----------- -------- -------------------- ----------------
Exercisable/ Exercisable/
Unexercisable Unexercisable
------------- -------------
<S> <C> <C> <C> <C>
Ernest J. Sewell -0- -0- 18,665/64,666 $279,701/$636,765
</TABLE>
- ----------------------
(1) The value of the options is based upon the difference between the
exercise price and the closing price per share of the Company's Common
Stock on the Nasdaq National Market System on December 31, 1997 of
$25.50.
EMPLOYMENT CONTRACTS AND TERMINATION,
SEVERANCE AND CHANGE-OF-CONTROL ARRANGEMENTS
In May, 1995, Ernest J. Sewell, President and Chief Executive Officer
of the Company and the Bank, entered into an Employment Agreement with the
Company and the Bank, jointly. The Agreement has a rolling three-year term,
meaning that it is automatically renewed each month
7
<PAGE> 10
for a three-year period, unless either party terminates the Agreement in
accordance with its terms. The Agreement provides for an initial annual base
salary of $110,000 (increased to $225,000 as of January 1, 1998), plus a number
of benefits, including participation in various compensation plans offered to
the Company's employees and senior management. These plans include the Company's
Long Term Incentive Plan and its Annual Management Incentive Plans, and a
Benefit Equivalency (supplemental executive retirement) Plan. Mr. Sewell is also
a participant in the Company's Deferred Compensation Plan. Under the Employment
Agreement, if there is a change in control of the Company, Mr. Sewell may, under
certain circumstances, terminate his employment with the Company, and thereafter
continue to receive his base salary for a period of two years and eleven months,
in addition to any other benefits.
The Board of Directors has adopted a Long Term Incentive Plan to
encourage eligible senior management employees to make long term decisions that
increase the Company's shareholder value, and enhance the Company's ability to
retain such employees. Under the Plan, certain senior management employees who
have significant policy-making roles, or the ability to affect policy, are
awarded incentive compensation if the Company reaches specified threshold,
target and maximum performance goals over a specified period, based on: (i) the
increase, if any, in the price per share of the Company's Common Stock; (ii) the
increase, if any, in the annual earnings per share of the Company; and (iii) the
growth in the Company's average earning assets. In the event of a change in
control of the Company, benefits under the Long Term Incentive Plan may vest
early. Assuming a five percent increase in his average base salary in 1999,
under the Long Term Incentive Plan Mr. Sewell will be entitled to receive a
payout in the following amount as of December 31, 1999: (i) $52,375, if the
Company meets the threshold performance goals; (ii) $261,875, if the Company
meets the target performance goals; or (iii) $392,813, if the Company meets the
maximum performance goals. There are seven senior officers of the Company
(including Mr. Sewell) who are participants in the Long Term Incentive Plan. The
aggregate potential payouts to such participants as of December 31, 1999 would
be: (i) $140,440, if the Company meets the threshold performance goals; (ii)
$702,200 if the Company meets the target performance goals; and (iii) $1,053,300
if the Company meets the maximum performance goals.
In addition to the Long Term Incentive Plan, the Board of Directors has
adopted an Annual Management Incentive Plan, pursuant to which certain of the
Company's officers and management employees, are awarded incentive compensation,
based in part on the Company's achievement of specified goals, such as a minimum
net income, over a specified period, generally one calendar year, and the
officer's achievement of certain goals relating to the functions of the
particular officer. If the Company does not meet the specified goals,
discretionary awards may be made to certain officers and management employees if
they meet planned individual goals during the specified period, as recommended
by the Chief Executive Officer of the Company.
Certain highly compensated employees of the Company, including Mr.
Sewell, are eligible for the Company's Benefit Equivalency Plan, which is a
supplemental executive retirement plan, intended to "make whole" those employees
whose compensation under the Company's Employees' Pension Plan is limited by
applicable governmental restrictions due to their compensation level. The Plan
includes certain early retirement benefits.
The Board of Directors has previously adopted a Stock Compensation Plan
in addition to the Omnibus Plan. The purpose of these Plans is to allow certain
officers, employees and directors of the Company and its subsidiaries to have an
opportunity to acquire or increase their ownership interest in the Company, as
an additional incentive to attract and retain employees and directors, and to
encourage them to promote the Company's business. The stock options awarded
under these Plans to the Company's officers and directors grant such persons the
right to acquire up to a specified number of the Company's shares at certain
times in the future at a fixed price, and thereby reward the recipients for
their contribution to increases in the price of the Company's shares. In the
event of a change in control of the Company, benefits under these Plans may vest
early.
8
<PAGE> 11
The Board of Directors has adopted two severance policies for the
senior officers of the Company and the Bank. Under the first severance policy,
any officer (other than an officer covered by a currently effective severance
agreement) who has been employed for five years or more, and who has attained
the office of Senior Vice President or above (a "Senior Officer"), is entitled
to receive salary continuation payments if his employment by the Company or the
Bank is terminated "without cause." Any officer covered by the policy would also
be entitled to payments in the event of a "change in control" of the Company or
Bank if the officer is not offered a position with the Company, the Bank, or the
successor of either, at the officer's current salary, that does not require the
officer to maintain an office more than 25 miles from his or her office before
the change in control. These payments would be made in the same installments and
amounts as the officer's salary immediately prior to the time of termination and
would continue for a period of time dependent on the officer's length of
employment. Any officer employed for less than ten years would receive payments
for one year, any officer employed for more than ten years but less than 15
years would receive payments for 18 months, and any officer employed for more
than 15 years would receive payments for two years.
The second severance policy was adopted by the Board of Directors at
its February 1997 meeting, and covers senior officers who have been employed by
the Bank for less than five years, and are recommended by the President and the
Board of Directors. Senior officers subject to this second policy receive
payments only if they are terminated as a result of a "change in control." Any
officer employed for less than three years would receive payments for six
months, and any officer employed for more than three years but less than five
years would receive payments for nine months.
Under either severance policy, payments to any officer would
immediately cease if the officer became an officer, director, employee,
consultant, or more than one percent owner of any bank or savings and loan
institution within 50 miles of the Company's home office and in connection with
such position is responsible for soliciting or servicing depositors, borrowers
or other customers. No amounts have ever been paid under either severance
policy.
CERTAIN TRANSACTIONS
Certain of the directors and executive officers of the Company are
customers of and borrowers from the Bank in the ordinary course of business.
From January 1, 1997 to December 31, 1997, loans outstanding to directors and
executive officers of the Company, and their associates as a group, amounted to
a maximum of approximately $3,314,342, or 15.2 % of the equity capital of the
Bank. The peak indebtedness occurred in September 1997. Total individual and
corporate obligations, direct and indirect, for any one director did not exceed
10% of the equity capital of the Bank at any time during the 1997 fiscal year.
All outstanding loans and commitments included in such transactions are made
substantially on the same terms, including rate and collateral, as those
prevailing at the time in comparable transactions with other customers. In the
opinion of management, these loans do not involve more than normal risk of
collectability, or contain other unfavorable features.
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The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of its business with directors, officers and
principal shareholders of the Company, and their associates, on the same terms
including interest rates and collateral on loans, as those prevailing at the
same time for comparable transactions with others.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than ten
percent of the Company's Common Stock, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission ("SEC"). Executive
officers, directors and greater than ten percent beneficial owners are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that during the year ended December 31, 1997,
its executive officers and directors complied with all applicable Section 16(a)
filing requirements.
PROPOSAL 2: AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION
SUMMARY
On February 12, 1998 the Company's Board of Directors approved, and
voted to recommend to the shareholders for their approval, an amendment to the
Company's Articles of Incorporation, as amended (the "Articles of
Incorporation"). As described more fully below, the purposes of the proposed
amendment are (1) to increase the amount of authorized shares of Common Stock of
the Company and (2) to authorize shares of Preferred Stock of the Company (the
"Preferred Stock"). The text of the proposed amendment is attached to this Proxy
Statement as Appendix I and is incorporated herein by reference, and the
description set forth herein is qualified in its entirety by reference to the
text of proposed amendment. Approval of this proposal requires the affirmative
vote of a majority of the Company's shares of Common Stock present, or
represented, and entitled to vote at the Annual Meeting. Shares voted for the
proposal and shares represented by returned proxies that do not contain
instructions to vote against the proposal or to abstain from voting will be
counted as shares cast for the proposal. Shares will be counted as cast against
the proposal if the shares are voted either against the proposal or to abstain
from voting. Broker nonvotes will not change the number of votes cast for or
against the proposal, but will be treated as shares present or represented at
the meeting.
INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
The proposed amendment to the Articles of Incorporation would increase
the total number of shares of Common Stock which the Company is authorized to
issue from 3,000,000 to
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40,000,000 shares. One purpose of the proposed amendment is to provide a
sufficient number of shares to be issued by the Company pursuant to a proposed
public offering of shares of Common Stock to be filed with the SEC, subject to
market conditions and other considerations. The amendment to the Articles of
Incorporation is required to be approved prior to the offering being completed
since the amendment will allow the Company to have sufficient shares authorized
to consummate the offering. If consummated, the Company expects to receive gross
cash proceeds of approximately $12 million in the offering, without deducting
for underwriting commissions and offering expenses. The Company currently
expects to use the proceeds of the offering, assuming it is consummated, to
support internal growth, to finance de novo branch expansion, to finance
possible future acquisitions and for other general corporate purposes, including
upgrading internal policies, systems and equipment.
In addition, the increase in the number of authorized shares of Common
Stock has been recommended by the Board of Directors to ensure that an adequate
supply of authorized, but unissued shares of Common Stock is available for
general corporate purposes. In addition to the proposed offering, shares of
Common Stock could be used for issuance under stock-based compensation and
benefit plans, issuance as part or all of the consideration paid by the Company
for acquisitions of other businesses or properties, stock dividends, stock
splits or other general corporate needs. The proposed amendment would avoid in
each particular case an individual amendment to the Articles of Incorporation
and the delay and expense involved in obtaining shareholder approval for such an
amendment (except where approval is required by law), unless sufficient shares
of authorized but unissued Common Stock are otherwise available.
Other than with respect to the Company's stock option plans and
pursuant to the proposed offering described above, there currently are no plans,
agreements, undertakings or arrangements for the issuance of any additional
shares of Common Stock. The rights and terms of the Common Stock will not be
changed in any way by the proposed amendment, and the additional shares of
Common Stock will be identical to the presently authorized shares of Common
Stock.
If the proposed amendment is approved by the shareholders, all
additional shares authorized by the amendment would be available for issuance
without further action by the shareholders, unless otherwise required by
applicable law. On March 4, 1998, there were _______ shares of Common Stock
issued and outstanding. The adoption of the proposed amendment will make
available for issuance approximately _______ shares of Common Stock in excess of
the issued and outstanding shares and shares reserved for issuance as of such
date. Holders of Common Stock do not have preemptive rights to subscribe for
additional shares of Common Stock which may be issued by the Company.
AUTHORIZATION OF SHARES OF PREFERRED STOCK
The proposed amendment to the Articles of Incorporation also would
establish the right of the Company to issue up to 10,000,000 shares of Preferred
Stock. The authorization of Preferred Stock has been recommended by the Board of
Directors to ensure that an adequate supply of authorized, unissued shares of
Preferred Stock is available for general corporate purposes. The Board believes
that the complexity of modern business financing and other transactions requires
greater flexibility in the Company's capital structure than now exists. The
authorization of
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Preferred Stock, which does not currently exist in the Articles of
Incorporation, together with the increase in authorized shares of Common Stock
described above, will increase the Company's financial flexibility. There
currently are no plans, agreements, understandings or arrangements for the
issuance of any Preferred Stock. The Company currently has no outstanding shares
of Preferred Stock.
If approved, the shares of Preferred Stock could be issued by the
Company from time to time in one or more classes or series. Under the amendment,
the Board of Directors is authorized to determine and fix the characteristics or
features of the shares of each such class or series, including without
limitation: the designation of each class or series; the number of shares of
each class or series; the dividend rate or amount, if any; the dates at which
dividends, if declared, would be payable, and the dates from which dividends
would be cumulative, if at all; the redemption price or prices or the terms and
conditions of redemption, if any; the amounts payable and the priorities of
shares, if any, upon liquidation, dissolution, or winding up of the Company; the
rights and preferences, if any, over or otherwise in relation to other classes
or series of capital stock of the Company and among classes and series of
Preferred Stock as to dividends and amounts payable upon liquidation,
dissolution or winding up of the Company; the conversion and exchange rights, if
any; voting rights, if any, the number of votes per share, and the number of
votes, if any, in excess of a majority required for specified corporate action;
and any other preferences, relative rights, or limitations that may be
determined by the Board of Directors.
Under the amendment, the Board of Directors would be authorized to
issue Preferred Stock and to determine and fix the designations, preferences,
relative rights, and limitations of each class or series of Preferred Stock
prior to issuance, without additional shareholder approval. Thus, the proposed
amendment would provide new authority to the Board with regard to the issuance
of Preferred Stock which does not currently exist.
ANTI-TAKEOVER CONSIDERATIONS
The increase in the authorized shares of Common Stock and the
authorization of Preferred Stock, as set forth in the proposed amendment to the
Articles of Incorporation, may have certain anti-takeover effects. For example,
although the Company has no present intent to take such action, the issuance of
additional shares by the Company could be used to dilute the stock ownership of
a person or entity seeking to obtain control of the Company or could make it
more difficult to obtain shareholder approval of various actions, such as a
merger or removal of management. The existence of the additional authorized
shares of Common Stock and the authorization of Preferred Stock could have the
effect of discouraging unsolicited takeover attempts. Such shares could be
issued to a purchaser who might cooperate with the Board of Directors in
opposing an attempt by a third party to gain control of the Company. The Board
of Directors could issue shares of Preferred Stock that may, depending on the
terms of the class or series as determined by the Board, make more difficult or
discourage an attempt to obtain control of the Company through a merger, tender
offer, proxy contest or other means. Because the proposed amendment may have
anti-takeover effects, such a provision may have an adverse impact on a
shareholder who may want to participate in certain transactions which are
opposed by the Board of Directors and may benefit management.
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<PAGE> 15
The Board of Directors believes that the proposed amendment is
beneficial to the Company and its shareholders. The increase in the authorized
shares of Common Stock provide the Company with the ability to consummate the
proposed offering which management believes will improve the Company's financial
condition and allow it to position itself for future growth. The amendment would
also provide the Company with flexibility to consider additional possible
financing transactions and for other corporate purposes. To the extent that the
proposed amendment may have anti-takeover effects, the amendment may encourage
persons seeking to acquire the Company to negotiate directly with the Board,
enabling the Board to consider the transaction in a nondisruptive environment
and to act on a proposed transaction in a manner that is in the best interests
of the shareholders.
The Company is not aware of any present effort by any person to obtain
control of the Company. There currently are no plans, agreements, understandings
or arrangements for the issuance of additional shares of Common Stock, except as
described herein, or to issue any Preferred Stock. The Board does not intend to
issue any Common Stock or Preferred Stock to be authorized under the proposed
amendment except upon terms that the Board deems to be in the best interests of
the Company and its shareholders. The Company has no present plans to adopt any
additional provisions which may have anti-takeover effects and the proposed
amendment is not part of a plan to adopt a series of such provisions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT.
INDEPENDENT ACCOUNTANTS
The accounting firm of Cherry, Bekaert & Holland, L.L.P. was the
Company's independent accountants for 1997. Cherry, Bekaert & Holland's services
to the Company for 1997 included the audit of the Company's annual consolidated
financial statements, reviews of certain of the Company's income tax returns and
consultation on various accounting, tax, securities and other matters. The
Company has not yet selected its independent accountants for 1998 since it
intends, as soon as practicable as an ordinary business practice, to solicit
competitive bids from independent accountants, including Cherry, Bekaert &
Holland, L.L.P., to serve as the Company's independent accountants in 1998. A
representative of Cherry, Bekaert & Holland, L.L.P. is expected to be present at
the 1998 Annual Meeting, to have the opportunity to make a statement if he
desires to do so and to be available to respond to appropriate questions.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR
1999 ANNUAL MEETING
Any proposals which shareholders intend to present for a vote of
shareholders at the 1999 Annual Meeting of Shareholders and which such
shareholders desire to have included in the Company's proxy statement and form
of proxy relating to that meeting must be sent to the Company's principal
executive office, marked to the attention of the Secretary of the Company and
received by the Company at such offices on or before December 7, 1998. The
determination by the Company of whether it will oppose inclusion of any proposal
in its proxy statement and
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<PAGE> 16
form of proxy will be made on a case-by-case basis in accordance with its
judgment and the rules and regulations promulgated by the Securities and
Exchange Commission. Proposals received after December 7, 1998 will not be
considered for inclusion in the Company's proxy materials for its 1999 Annual
Meeting.
MISCELLANEOUS
The Annual Report of the Company for the year ended December 31, 1997,
which includes financial statements audited and reported upon by the Company's
independent auditor, is being mailed along with this Proxy Statement; however,
it is not intended that the Annual Report be a part of this Proxy Statement or a
solicitation of proxies.
THE FORM 10-KSB FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, WILL BE
PROVIDED FREE OF CHARGE UPON WRITTEN REQUEST DIRECTED TO: FNB FINANCIAL SERVICES
CORPORATION, POST OFFICE BOX 2037, REIDSVILLE, NORTH CAROLINA 27320-2037,
ATTENTION: ROBERT F. ALBRIGHT (336-342-3346).
By Order of the Board of Directors.
Willard B. Apple, Jr.
Chairman of the Board
March 17, 1998
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<PAGE> 17
APPENDIX I
RESOLVED, that Paragraph 4 of the Articles of Incorporation of the
Corporation should be amended and restated to read in full as follows:
"4. A. Classes of Stock. The corporation is
authorized to issue two classes of shares to be designated,
respectively, "Common Stock" and "Preferred Stock". The total
number of shares of capital stock that the corporation shall
have authority to issue is fifty million (50,000,000). The
total number of shares of Common Stock the corporation shall
have authority to issue is forty million (40,000,000) shares,
par value $1.00 per share. The total number of shares of
Preferred Stock the corporation shall have authority to issue
is ten million (10,000,000) shares, no par value.
B. Rights, Preferences and Restrictions of Preferred
Stock. The Preferred Stock authorized by these Articles of
Incorporation may be issued from time to time in one or more
classes or series, the shares of each such class or series to
have such designations, preferences, relative rights, powers,
including voting powers, and par value, if any (or
qualifications, limitations or restrictions thereof) as are
stated in the resolution or resolutions providing for the
issuance of such class or series adopted by the Board of
Directors of the corporation. Authority is expressly granted
to the Board of Directors, subject to the provisions hereof
and to any limitations provided under the North Carolina
Business Corporation Act, to authorize the issuance of one or
more classes, or one or more series within a class, of
Preferred Stock, and with respect to each such class or series
to determine and fix by resolution or resolutions the
designations, preferences, relative rights, powers, including
voting powers, full or limited, or no voting power, and the
par value, if any, of such shares, or the qualifications,
limitations or restrictions of such shares. This paragraph is
intended to afford to the Board of Directors the maximum
authority under Section 55-6-02 of the North Carolina General
Statutes."
; and further
RESOLVED, that the proper officers of the Corporation are hereby
authorized and directed, after shareholder approval of the proposed amendment to
the Corporation's Articles of Incorporation, to execute, under its corporate
seal, Articles of Amendment and Restatement and to file such Articles of
Amendment and Restatement with the North Carolina Secretary of State; and
further
RESOLVED, that the Board of Directors of the Corporation may,
notwithstanding approval by the shareholders of the Corporation, at any time
prior to the filing of the Articles of Amendment and Restatement with the North
Carolina Secretary of State, terminate the proposed amendment and all
transactions contemplated by or incident thereto.
<PAGE> 18
APPENDIX A
PRELIMINARY COPIES
REVOCABLE PROXY
FNB FINANCIAL SERVICES CORPORATION
202 South Main Street
Reidsville, North Carolina 27320
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - APRIL 14, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Ernest J. Sewell and Robert F.
Albright, or either of them, as attorney and proxy of the undersigned, each with
full power of substitution to represent the undersigned and to vote all shares
of FNB Financial Services Corporation which the undersigned is entitled to vote
at the above Annual Meeting of Shareholders, and any adjournment or postponement
thereof.
WHEN PROPERLY EXECUTED AND RETURNED, THIS PROXY AND THE SHARES REPRESENTED
HEREBY WILL BE VOTED IN THE MANNER DESCRIBED HEREIN BY THE UNDERSIGNED. IF NO
DIRECTION IS MADE, THIS PROXY AND SUCH SHARES WILL BE VOTED FOR PROPOSALS 1 AND
2 SET FORTH BELOW AND DESCRIBED IN THE PROXY STATEMENT. THE UNDERSIGNED FURTHER
GIVES THE ABOVE-NAMED ATTORNEYS AND PROXIES THE AUTHORITY TO VOTE IN THEIR
DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING AND ANY ADJOURNMENT OR POSTPONEMENT OF THE MEETING. THIS PROXY MAY BE
REVOKED PRIOR TO ITS EXERCISE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSALS LISTED BELOW.
1. Election of Board of Directors:
[ ] FOR all nominees listed below (except as marked to the contrary
below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
Willard B. Apple, Jr., O. Eddie Green, Clifton G. Payne
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THE
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
- ------------------------------------------------------
2. To approve the Amendment to FNB Financial Services Corporation's
Articles of Incorporation, as amended, to (i) increase the number of
shares of authorized Common Stock from 3,000,000 to 40,000,000 and (ii)
authorize the issuance of up to 10,000,000 shares of Preferred Stock
which may be issued from time to time in one or more classes or series.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
<PAGE> 19
By signing the proxy, a shareholder will also be authorizing the proxy
holder to vote in his discretion regarding any procedural motions which may come
before the Annual Meeting. For example, this authority could be used to adjourn
the meeting if the Company believes it is desirable to do so. Adjournment or
other procedural matters could be used to obtain more time before a vote is
taken in order to solicit additional proxies or to provide additional
information to shareholders. The Company has no current plans to adjourn the
meeting, but would attempt to do so if the Company believes that adjournment
would promote shareholder interests.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders, the Proxy Statement for such meeting, and the 1997
Annual Report to Shareholders.
Dated: , 1998
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SIGNATURE OF SHAREHOLDER
When signing as Attorney-in-Fact, Executor,
Administrator, Trustee or Guardian, please
give full title. If more than one Trustee,
all should sign. All joint owners must sign.
If a corporation, please sign in full
corporate name by any authorized officer.
-----------------------------------
SIGNATURE OF SHAREHOLDER
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
