<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
Commission File Number: 0-13086
FNB FINANCIAL SERVICES CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1382275
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
incorporation of organization) Identification Number)
202 South Main Street, Reidsville, N.C. 27320
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
336-342-3346
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
3,282,211 common shares were outstanding as of April 30, 1998, with a par value
of $1.00.
<PAGE> 2
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
INDEX
PAGE
PART I FINANCIAL INFORMATION NUMBER
Item 1 Financial Statements
Consolidated Balance Sheet
March 31, 1998 and December 31, 1997 1
Consolidated Statement of Income
Three months ended March 31, 1998 and 1997 2
Consolidated Statement of Changes in Shareholders Equity
March 31, 1998 and December 31, 1997 3
Consolidated Statement of Comprehensive Income
March 31, 1998 and December 31, 1997 4
Regulatory Capital Ratio Requirements 5
Consolidated Statement of Cash Flows
Three months ended March 31, 1998 and 1997 6 - 7
Notes to Consolidated Financial Statements 8 - 13
Item 2 Management's Discussion and Analysis of Financial Condition 14 - 15
and Results of Operations
Item 3 Quantative and Qualitative Disclosures About Market Risk 15
PART II OTHER INFORMATION
Item 1 Legal Proceedings 16
Item 2 Changes in Securities and Use of Proceeds 16
Item 3 Defaults Upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 17
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1
Financial Statements
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Consolidated Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Cash and due from banks 12,092 9,612
Federal funds sold 4,035 0
-------- --------
Total cash and cash equivalents 16,127 9,612
Securities available for sale 94,721 77,346
Other equity securities 1,088 1,392
Loans 247,470 228,715
Less: Allowance for loan losses (2,550) (2,331)
-------- --------
Net Loans 244,920 226,384
Property and equipment, net 6,413 6,490
Intangible assets 692 715
Accrued income and other assets 3,828 3,212
-------- --------
Total Assets 367,789 325,151
======== ========
LIABILITIES AND SHAREHOLDERS EQUITY
Deposits
Noninterest bearing 34,729 31,464
Interest bearing:
Savings accounts 17,770 16,889
NOW accounts 20,236 20,445
MMI accounts 19,623 15,439
Other time accounts 222,836 188,037
-------- --------
Total deposits 315,194 272,274
Federal funds purchased and securities
sold under repurchase agreements 10,447 13,720
Other borrowings 15,000 15,000
Accrued expenses and other liabilities 4,014 1,639
-------- --------
Total Liabilities 344,655 302,633
Shareholders Equity
Common stock, $1.00 par; authorized
3,000,000 shares; 2,498,782 shares
issued in 1998; 2,493,680 shares
issued in 1997 2,499 2,494
Paid in Capital 3,389 3,287
Accumulated other comprehensive income:
Net unrealized gain/(loss) on
securities available for sale 180 196
Retained earnings 17,066 16,541
-------- --------
Total Shareholders Equity 23,134 22,518
Total liabilities and
shareholders equity 367,789 325,151
======== ========
</TABLE>
1
<PAGE> 4
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Consolidated Income Statement
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
INTEREST INCOME 1998 1997
--------- ----------
<S> <C> <C>
Interest and fees on loans 5,547 3,394
Interest on federal funds sold 50 47
Interest and dividends on investments:
U.S. Treasury securities 45 172
Federal Agency securities 1,086 472
State, County and Municipal securities 75 103
Other securities 25 11
--------- ----------
Total Interest Income 6,828 4,199
INTEREST EXPENSE
Interest on savings, NOW and MMI deposits 287 248
Interest on other time deposits 2,917 1,617
Interest on federal funds purchased,
borrowed funds, and securities sold
under agreement to repurchase 358 101
--------- ----------
Total Interest Expense 3,562 1,966
Net Interest Income 3,266 2,233
Provision for loan losses 265 80
--------- ----------
Net interest income after loan
loss provision 3,001 2,153
NONINTEREST INCOME
Deposit service charge 244 195
Insurance commissions 19 16
Net securities gains/(losses) 10 0
Net gain/(loss) on sale of mortgages 49 (2)
Other operating income 113 45
--------- ----------
Total noninterest income 435 254
NONINTEREST EXPENSE
Salaries and employee benefits 1,436 994
Net occupancy expense 144 118
Furniture and equipment expense 175 125
Insurance 13 9
Printing and supplies 62 54
Net loss on disposition of asset 0 33
Other operating expense 427 342
--------- ----------
Total noninterest expense 2,257 1,675
Income Before Income Taxes 1,179 732
Applicable income taxes 404 226
--------- ----------
NET INCOME 775 506
========= ==========
PER SHARE DATA
Net income, basic $ 0.31 $ 0.21
Net income, diluted $ 0.29 $ 0.19
Cash dividends $ 0.10 $ 0.09
Weighted average shares outstanding, basic 2,498,034 2,460,448
Weighted average shares outstanding, diluted 2,708,695 2,671,109
</TABLE>
2
<PAGE> 5
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Consolidated Statement of Changes
in Shareholders Equity
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------- -------
<S> <C> <C>
Common Stock:
Balance at beginning of year 2,494 1,383
Stock dividend 0 1,082
Dividend reinvestment plan 3 6
Exercise of stock options 1 11
Employee stock awards 0 0
Employee 401(k) plan 1 12
------- -------
Balance at end of year 2,499 2,494
Paid in Capital:
Balance at beginning of year 3,287 2,728
Dividend reinvestment plan 61 156
Exercise of stock options 7 92
Employee stock awards 0 3
Employee 401(k) plan 34 308
------- -------
Balance at end of year 3,389 3,287
Retained Earnings:
Balance at beginning of year 16,541 16,119
Net income for years 775 2,477
Cash dividends (250) (959)
Stock dividend 0 (1,082)
Cash paid for fractional shares 0 (14)
------- -------
Balance at end of year 17,066 16,541
Accumulated other comprehensive income:
Net unrealized gains/(loss) on
securities held for sale 180 196
Total Shareholders Equity 23,134 22,518
======= =======
</TABLE>
3
<PAGE> 6
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Consolidated Statement of Comprehensive Income
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1998 1997
---- ----
<S> <C> <C>
Net income 775 506
Unrealized gains/(losses) on
available for sale securities (16) (96)
Less: reclassification adjustment for gains
included in net income (7) 0
---- ----
Other comprehensive income (23) (96)
---- ----
Comprehensive income 752 410
==== ====
</TABLE>
Disclosure of Taxes Allocated to Each Component of Comprehensive Income
<TABLE>
<CAPTION>
Tax Expense
Pretax or Benefit Net of Tax
------------ -------------------------------
<S> <C> <C> <C>
March 31, 1998
- --------------
Unrealized gains on securities:
Unrealized holding gains arising in period (26) 10 (16)
Less: reclassification adjustment for gains
included in net income (10) 3 (7)
------------ ------------- -------------
Net unrealized gains (36) 13 (23)
------------ ------------- -------------
Other comprehensive income (36) 13 (23)
============ ============= =============
<CAPTION>
Tax Expense
Pretax or Benefit Net of Tax
------------ -------------------------------
<S> <C> <C> <C>
March 31, 1997
- --------------
Unrealized gains on securities:
Unrealized holding gains arising in period (157) 61 (96)
Less: reclassification adjustment for gains
included in net income 0 0 0
------------ ------------- -------------
Net unrealized gains (157) 61 (96)
------------ ------------- -------------
Other comprehensive income (157) 61 (96)
============ ============= =============
</TABLE>
4
<PAGE> 7
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Regulatory Capital Ratio Requirements
Minimum Three Months Ended
Standard March 31, 1998
-------- --------------
Capital Adequacy - Risk Based
Tier 1 4.0 % 8.50 %
Total Capital 8.0 % 9.47 %
Leverage Ratio
Tier 1 4.0 % 6.57 %
5
<PAGE> 8
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Consolidated Statement of Cash Flows
(In thousands)
Increase/(Decrease) in Cash and Cash Equivalents:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Interest received 6,871 3,487
Fees and commissions 565 397
Interest paid (3,231) (1,775)
Noninterest expense paid (2,273) (1,717)
Income taxes paid 15 (70)
Proceeds from mortgage loans 6,849 517
------- -------
Net cash provided/(used) by operating activities: 8,796 839
Cash flows from investing activities:
Proceeds from sale of securities 25,266 5,215
Proceeds from maturity of securities 1,000 6,107
Purchase of securities (42,370) (15,997)
Capital expenditure (59) (1,213)
(Increase)/Decrease in other real estate (19) (27)
(Increase)/Decrease in net loans (25,603) (13,925)
------- -------
Net cash provided/(used) by investing activities: (41,785) (19,840)
Cash flows from financing activities:
Increase/(Decrease) in DDA, Savings, NOW, MMI 8,120 1,021
Increase/(Decrease) in time deposits 34,800 26,886
Increase/(Decrease) in repurchase agreements (3,273) (1,563)
Proceeds from stock issuance 107 31
Dividends paid (250) (225)
------- -------
Net cash provided/(used) by investing activities: 39,504 26,150
Net Increase/(Decrease) in cash equivalents 6,515 7,149
Cash and cash equivalents as of January 1 9,612 6,467
------- -------
Cash and cash equivalents as of March 31 16,127 13,616
======= =======
Supplemental Disclosures
Noncash transfers from loans to other real estate 18 27
Change in unrealized appreciation/(depreciation) of
securities available for sale (net of tax effect) (16) (96)
</TABLE>
6
<PAGE> 9
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Consolidated Statement of Cash Flows
(In thousands)
Reconciliation of net income to net cash provided by operating activities:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1997 March 31, 1997
-------------- --------------
<S> <C> <C>
Net Income 775 506
Adjustments to reconcile net income to cash:
Provision for loan loss 265 80
Depreciation 133 94
Accretion and amortization 79 51
(Gain)/Loss on sale of securities (10) 0
(Gain)/Loss on sale of assets (1) 32
(Gain)/Loss on sale mortgages (49) 2
Proceeds from mortgage loans 6,849 517
(Increase)/Decrease in interest receivable (290) (187)
(Increase)/Decrease in prepaid expense (106) (167)
(Increase)/Decrease in accrued income 1 (4)
(Increase)/Decrease in miscellaneous assets (234) 276
Increase/(Decrease) in taxes payable 419 (159)
Increase/(Decrease) in interest payable 332 91
Increase/(Decrease) in accrued expenses (69) (35)
Increase/(Decrease) in prepaid income 12 (4)
Increase/(Decrease) in miscellaneous liabilities 690 (254)
------ ----
Net cash provided by operations 8,796 839
====== ====
</TABLE>
7
<PAGE> 10
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month
period are not necessarily indicative of the results that may be expected
for the year ended December 31, 1998.
2. Stock Splits
On April 10, 1997 the Board of Directors declared a four-for-three split of
the common stock in the form of a 33 1/3% stock dividend to shareholders of
record on April 23, 1997 to be issued on April 30, 1997. As a result,
$461,790 ($1.00 for each share issued pursuant to the stock split) was
transferred from retained earnings to the common stock account. Cash was
paid in lieu of fractional shares from retained earnings of $6,098. All per
share data in the financial statements have been adjusted to reflect the
split.
On August 12, 1997 the Board of Directors declared another four-for-three
split of the common stock in the form of a 33 1/3% stock dividend to
shareholders of record on September 5, 1997 to be issued on September 12,
1997. As a result, $620,047 ($1.00 for each share issued pursuant to the
stock split) was transferred from retained earnings to the common stock
account. Cash was paid in lieu of fractional shares from retained earnings
of $8,599. All per share data in the financial statements have been adjusted
to reflect the split.
8
<PAGE> 11
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
3. Net Income Per Share
At December 31, 1997 the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128 "Earnings per Share". SFAS No. 128 requires
disclosure of two earnings per share amounts: basic earnings per share of
common stock and diluted earnings per share of common stock. Basic earnings
per share is computed by dividing net income available to common
shareholders by the weighted average number of common stock outstanding
during the period. Diluted earnings per share is computed by dividing net
income plus any adjustments to net income related to issuance of dilutive
potential common shares by the weighted average number of shares of common
stock outstanding during the period plus the number of potential dilutive
common shares. All earnings per share amounts have been restated to comply
with the new accounting standard.
Basic and diluted earnings per share amounts have been computed based upon
net income as presented in the accompanying income statements divided by
the weighted average number of common shares outstanding or assumed to be
outstanding as summarized below:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Weighted average number of shares 2,498,034 2,460,448
used in basic EPS
Effect of dilutive stock options 210,661 210,661
--------- ---------
Weighted average number of common
shares and dilutive potential common
shares used in dilutive EPS 2,708,695 2,671,109
========= =========
</TABLE>
9
<PAGE> 12
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
4. Investment Securities
Investment Securities
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
Amortized Fair Amortized Fair
Cost Value Cost Value
--------------------------- ---------------------------
Securities available for sale
<S> <C> <C> <C> <C>
U.S. Treasury Securities 3,065 3,088 3,074 3,092
U.S. Agency Securities 86,409 86,335 68,997 68,973
State and Municipal Obligations 4,952 5,298 4,953 5,281
------ ------ ------ ------
Total Available for Sale 94,426 94,721 77,024 77,346
====== ====== ====== ======
Other equity securities 1,076 1,076 1,392 1,392
====== ====== ====== ======
</TABLE>
5. Loans
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------- -------
<S> <C> <C>
Loan category
Real estate - residential 46,133 58,238
Real estate - commercial 68,322 51,022
Real estate - construction 26,543 19,083
Commercial, financial and agricultural 60,711 54,294
Consumer - direct 21,901 23,237
Consumer - home equity 20,551 19,740
Consumer - other 3,309 3,101
======= =======
Total Loans * 247,470 228,715
======= =======
</TABLE>
* The Bank has no foreign loan activity.
10
<PAGE> 13
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
6. Analysis of Allowance for Loan Loss
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1998 1997
----- -----
<S> <C> <C>
Balance at beginning of period 2,331 1,638
Charge-offs:
Commercial, financial, agricultural 0 0
Real estate - construction 0 0
Real estate - mortgage 3 0
Consumer 70 26
----- -----
73 26
Recoveries:
Commercial, financial, agricultural 12 0
Real estate - construction 0 0
Real estate - mortgage 0 0
Consumer 15 21
----- -----
27 21
----- -----
Net Charge-Offs 46 5
----- -----
Allowance charged to operations 265 80
----- -----
Balance at end of period 2,550 1,713
===== =====
Ratio of annualized net charge-offs during the
period to average loans outstanding
during the period 0.08 0.01
===== =====
Ratio of allowance for loan loss to
month end loans 1.03 1.08
===== =====
</TABLE>
11
<PAGE> 14
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
7. Allocation of Allowance for Loan Loss
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
-------------------------------- --------------------------------
% of Loans in % of Loans in
Balance at end of period Each Category Each Category
applicable to: Allowance to Total Loans Allowance to Total Loans
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Commercial 1,554 46% 1,020 53%
Real estate - construction 4 8% 12 2%
Real estate- mortgage 136 26% 157 25%
Consumer 324 20% 163 20%
General 491 0% 326 0%
-------------------------------- --------------------------------
Total balance sheet allocation 2,509 100% 1,678 100%
=========== ===========
Off balance sheet commitments 41 35
------------- -------------
Total allocation 2,550 1,713
============= =============
</TABLE>
12
<PAGE> 15
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
8. Nonperforming Assets
March 31, 1998 March 31, 1997
-------------- --------------
Nonaccrual (1) 1,479 555
Past due 90 days or more and
still accruing interest 2 0
Other real estate 50 75
Renegotiated trouble debt 0 0
(1) Other than amounts listed above, there are no other loans which: (a)
represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results,
liquidity, or capital resources, or (b) represent material credits
about which management is aware of any information which causes
management to have serious doubts as to the ability of such borrowers
to comply with the loan repayment terms.
13
<PAGE> 16
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
ITEM 2
Management's Discussion and Analysis of Financial Condition
and Results of Operation
Summary
Net income for the quarter ended March 31, 1998 of $775,000 was 53.2% more than
the $506,000 earned in the first quarter last year. The increase in 1998 is
primarily the result of a 46.3% increase in net interest income, caused by
balance sheet growth in connection with an aggressive expansion program carried
out during 1997. Office locations were increased by four in 1997, resulting in
average assets of $339.6 million during the first quarter, up 56.7% over the
comparable period in 1997.
Interest Income and Interest Expense
Total first quarter interest income increased 62.6% over the same quarter last
year, with a 59.1% gain in average earning assets for that period. Loans
outstanding averaged 61.9% more in the 1998 first quarter, with income from
loans climbing 63.4%, as loan yields were marginally higher this year.
Investment securities income was 62.4% higher this year, with average securities
climbing 55.0% over 1997 and yields slightly higher.
Total interest expense increased by 81.2% in the current quarter, as average
interest bearing liabilities were up 62.2% over 1997. Deposit growth continues
to be principally from relatively higher cost certificates of deposit, as the
weighted average rate paid on time deposits increased from 4.54% in 1997 to
5.06% this year. Borrowed funds have also been utilized to a greater extent this
year, with increased commercial sweep balances and Federal Home Loan Bank
borrowings.
Comparable net interest margins were as follows:
First Quarter, 1998 8.57 % - 4.59 % = 3.98 %
First Quarter, 1997 8.45 % - 4.09 % = 4.36 %
Noninterest Income and Expense
Noninterest income in the first quarter this year was up $181,000 or 71.3%,
including $58,000 more in credit card fees, $49,000 more in deposit service
charges and $61,000 more in gains from the sale of mortgages and securities.
Noninterest expense was $582,000 or 34.8% higher, which included approximately
$380,000 for the four new offices opened during 1997. For the total company,
personnel expense was up $442,000 or 44.5% as new personnel were hired to help
manage growth, occupancy/equipment up $76,000 or 31.3%, bank card expense up
$51,000 and telephone up $15,000.
14
<PAGE> 17
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
Year 2000
As the year 2000 approaches, an important business issue has emerged regarding
how existing application software programs and operating programs can
accommodate this date value. The Company primarily utilizes a third party vendor
for processing its primary banking applications. In addition, the Company also
utilizes third party vendor application software for all ancillary computer
applications. The third party vendor for the Company's banking applications is
in the process of modifying, upgrading or replacing its computer applications to
ensure Year 2000 compliance. The Company has been advised by the vendor that the
vendor has hired the services of a consultant to review the plan and assist such
vendor in achieving Year 2000 compliance by December 31, 1998. Also, the Company
has instituted an internal Year 2000 compliance program whereby the Company is
reviewing the Year 2000 issue on a comprehensive, company-wide basis. This
multi-phase program will assess all hardware and software to determine the need
for modification or replacement. The cost to be incurred in achieving full Year
2000 compliance has not been determined; however, management believes it will
not be material to the Company's results of operation, liquidity or capital
resources.
As a lending institution, the Bank is also exposed to potential risk if
borrowers suffer year 2000-related difficulties and are unable to repay their
loans. The Bank is discussing the year 2000 issue with borrowers as part of the
loan granting or renewal process. At this time, the Bank is unable to determine
what impact, if any, the year 2000 will have on the loan payment performance of
the Bank's borrowers. Thus far, however, none of the Bank's borrowers have
reported the expectation of material adverse impacts as a result of the year
2000.
Recent Events
On March 3, 1998, the Company announced it had filed a registration statement
with the Securities and Exchange Commission, relating to a previously announced
public offering of 650,000 shares of its common stock. On April 15, 1998,
announcement of the public offering of 780,000 shares at $22.50 per share was
made, up from the previously announced 650,000 shares. On May 1, 1998, the
Company announced the public offering of an additional 117,000 shares, as a
result of the exercise in full of an overallotment option by the underwriters.
The Company has received about $18.8 million in total net proceeds from
the offering, which will be used to support internal growth and for other
various corporate purposes.
Cautionary Statement for Forward-Looking Information
Information set forth in this Form 10-Q, including Management's Discussion and
Analysis of Financial Condition and Results of Operations, contains various
"forward looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Act of 1934, which
statements represent the Company's judgment concerning the future and are
subject to risks and uncertainties that could cause the Company's actual
operating results and financial position to differ materially. Such forward
looking statements can be identified by the use of forward looking terminology
such as "may," "will," "expect," "anticipate," "estimate," "believe," or
"continue," or the negative thereof or other variations thereof or comparable
terminology. The Company cautions that any such forward looking statements are
further qualified by important factors that could cause the Company's actual
operating results to differ materially from those in the forward looking
statements, including without limitation, the Company's management of its
growth, risks associated with government regulations and their impact, risks
relating to competition within the industry, dependence on personnel and the
other Risk Factors described in the Company's Annual Report on Form 10-K and
its Registration Statement on Form S-2 (No. 333-47203).
ITEM 3
Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
15
<PAGE> 18
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings.
None.
ITEM 2
Changes in Securities and Use of Proceeds.
(a) On April 14, 1998, the Company filed Amended and Restated Articles
of Incorporation with the North Carolina Secretary of State which increased from
3,000,000 to 40,000,000 the number of authorized shares of the Company's Common
Stock and authorized the Company's issuance of one or more series of up to
10,000,000 shares of Preferred Stock with such rights, preferences and
limitations as may be determined by the Board of Directors. On April 20, 1998
and May 5, 1998, the Company sold an aggregate of 897,000 shares of its common
stock to the public for aggregate proceeds to the Company of approximately $18.8
million, less expenses. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
ITEM 3
Defaults Upon Senior Securities.
Not applicable.
ITEM 4
Submission of Matters to a Vote of Security Holders.
Not applicable.
ITEM 5
Other Information.
None.
16
<PAGE> 19
FNB FINANCIAL SERVICES CORPORATION
AND SUBSIDIARY
ITEM 6
Exhibits and Reports on Form 8-K.
(a) Exhibits
1.01 Underwriting Agreement, dated April 15, 1998 by and
between the Company and Interstate/Johnson Lane
Corporation, as representative of the underwriters
named therein.
3.01 Amended and Restated Articles of Incorporation
3.02 Bylaws of the Company, as amended.
27.01 Financial Data Schedule
(b) Reports on Form 8-K.
On April 6, 1998, the Company filed a Current Report on Form 8-K, dated
April 6, 1998, which contained the text of a press release announcing the
Company's financial results for its fiscal quarter ended March 31, 1998.
17
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FNB FINANCIAL SERVICES CORPORATION
-------------------------------------------------
(Registrant)
Date 5/12/98
/s/ Robert F. Albright
-------------------------------------------------
(Senior Vice President & Chief Financial Officer)
18
<PAGE> 21
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
1.01 Underwriting Agreement, dated April 15, 1998, by and between
the Company and Interstate/Johnson Lane Corporation, as
representative of the underwriters named therein.
3.01 Amended and Restated Articles of Incorporation.
3.02 Bylaws of the Company, as amended.
27.01 Financial Data Schedule.
<PAGE> 1
EXHIBIT 1.01
FNB FINANCIAL SERVICES CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
April 15, 1998
INTERSTATE/JOHNSON LANE CORPORATION
As representative of the several
Underwriters named in Schedule I hereto,
c/o Interstate/Johnson Lane Corporation
Interstate Tower
121 West Trade Street
Charlotte, North Carolina 28202
Dear Sirs:
FNB Financial Services Corporation, a North Carolina corporation (the
"Company") proposes, subject to the terms and conditions stated herein, to issue
and sell to the underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 780,000 shares of common stock, par value $1.00 per share (the
"Common Stock"), of the Company (the "Firm Shares"), and, at the election of the
Underwriters, subject to the terms and conditions stated herein, to sell to the
Underwriters up to 117,000 additional shares of Common Stock (the "Optional
Shares") solely to cover overallotments, if any (the Firm Shares and the
Optional Shares that the Underwriters elect to purchase pursuant to Section 2
hereof are collectively called the "Shares").
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with each of the Underwriters that:
(a) A registration statement on Form S-2 (File No. 333-47203)
(the "Registration Statement") with respect to the Shares, has been
filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act");
the Registration Statement and any post-effective amendment thereto,
each in the form heretofore delivered to you, and, excluding exhibits
thereto but including all documents incorporated by reference in the
prospectus contained therein, delivered to you for each of the
Underwriters, have been declared effective by the Commission in such
form; other than a registration statement increasing the size of the
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offering, filed pursuant to Rule 462(b) under the Act which became
effective upon filing (the "Rule 462(b) Registration Statement"); no
other document with respect to the Registration Statement, any post
effective amendment thereto or the Rule 462(b) Registration Statement
has heretofore been filed with the Commission; and no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been instituted or
threatened by the Commission (any preliminary prospectus included in
the Registration Statement or filed with the Commission pursuant to
Rule 424 of the Rules and Regulations of the Commission under the Act,
being hereinafter called a "Preliminary Prospectus", the various parts
of such Registration Statement and the Rule 462(b) Registration
Statement, including all exhibits thereto, and including (i) the
information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) of this Agreement and deemed by virtue of Rule 430(A)
under the Act to be part of the Registration Statement at the time it
was declared effective, and (ii) the documents incorporated by
reference in the Prospectus contained in the Registration Statement at
the time such part of the Registration Statement became effective or
such part of the Rule 462(b) Registration Statement became or
hereinafter becomes effective, each as amended at the time such part
became effective, being herein called collectively the "Registration
Statement", and the final prospectus, in the form first filed pursuant
to Rule 424(b), being hereinafter called the "Prospectus"; and any
reference herein to any Preliminary Prospectus or the Prospectus shall
be deemed to refer to and include the documents incorporated by
reference herein pursuant to Item 12 of Form S-2 under the Act.)
(b) No order preventing or suspending the use of any
Prospectus has been issued and no proceeding for that purpose has been
instituted or threatened by the Commission or the securities authority
of any state or other jurisdiction. No stop order suspending the
effectiveness of the Registration Statement or any part thereof has
been issued and no proceeding for that purpose has been instituted or
threatened or, to the best knowledge of the Company, contemplated by
the Commission or the securities authority of any state or other
jurisdiction.
(c) Each Prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto
complied when so filed in all material respects with the requirements
applicable to it under the Act and the rules and regulations
promulgated thereunder and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and any further documents so filed and
incorporated by reference in the Prospectus or any further amendment or
supplement thereto, when such documents become effective or are filed
with the Commission, as the case may be, will conform in all material
respects to the requirements of the Act or the Securities Exchange Act
of 1934, as applicable, and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
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information furnished in writing to the Company by an Underwriter
through Interstate/Johnson Lane Corporation expressly for use therein.
When the Registration Statement or any amendment thereto was declared
effective, and at each Time of Delivery (as hereinafter defined), it
(i) contained all statements required to be stated therein in
accordance with, and complied or will comply in all material respects
with the requirements of the Act and the rules and regulations of the
Commission thereunder and (ii) did not include any untrue statement of
a material fact or omit to state any material fact necessary to make
the statements therein not misleading. When the Prospectus or any
amendment or supplement thereto is filed with the Commission pursuant
to Rule 424(b) (or, if the Prospectus or such amendment or supplement
is not required to be so filed, when the Registration Statement or the
amendment thereto containing such amendment or supplement to the
Prospectus was or is declared effective) and at each Time of Delivery,
the Prospectus, as amended or supplemented at any such time (i)
contained or will contain all statements required to be stated therein
in accordance with, and complied or will comply in all material
respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (ii) did not or will not
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
The foregoing provisions of this paragraph (c) do not apply to
statements or omissions made in any Preliminary Prospectus, the
Registration Statement or any amendment thereto or the Prospectus or
any amendment or supplement thereto in reliance upon and in conformity
with written information furnished to the Company by any Underwriter.
(d) The descriptions in the Registration Statement and the
Prospectus of statutes, legal and governmental proceedings or contracts
and other documents that are required to be so described are accurate
and fairly present the information required to be shown; and there are
no statutes or legal or governmental proceedings required to be
described in the Registration Statement or the Prospectus that are not
described as required and no contracts or documents of a character that
are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described and filed as required.
(e) Each of the Company and its subsidiary has been duly
incorporated, is validly existing as a corporation under the laws of
its jurisdiction of incorporation and has full power and authority to
own or lease its properties and conduct its business as described in
the Prospectus. The Company has full power and authority to enter into
this Agreement and to perform its obligations hereunder. Each of the
Company and its subsidiary is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or conducts
any business, so as to require such qualification, except where the
failure to so qualify would not have a material adverse effect on the
financial position, results of operations or business of the Company
and its subsidiary.
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(f) The Company's authorized, issued and outstanding capital
stock is as disclosed in the Prospectus. All of the issued shares of
capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and conform to the description
of the Common Stock contained in the Prospectus. None of the issued
shares of capital stock of the Company or its subsidiary has been
issued or is owned or held in violation of any preemptive rights of
shareholders, and no person or entity (including any holder of
outstanding shares of capital stock of the Company or its subsidiary)
has any preemptive or other rights to subscribe for any of the Shares.
(g) All of the issued shares of capital stock of the Company's
subsidiary have been duly authorized and validly issued, are fully
paid, and, except as may be applicable under the National Bank Act,
nonassessable and are owned beneficially by the Company free and clear
of all liens, security interests, pledges, charges, encumbrances,
defects, shareholders' agreements, voting trusts, equities or claims of
any nature whatsoever. Other than First National Bank Southeast, the
Company does not own, directly or indirectly, any capital stock or
other equity securities of any other corporation or any ownership
interest in any partnership, joint venture or other association.
(h) Except as disclosed in the Prospectus, there are no
outstanding (i) securities or obligations of the Company or its
subsidiary convertible into or exchangeable for any capital stock of
the Company or its subsidiary, (ii) warrants, rights or options to
subscribe for or purchase from the Company or its subsidiary any such
capital stock or any such convertible or exchangeable securities or
obligations, or (iii) obligations of the Company or its subsidiary to
issue any shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or options.
(i) Since the date of the most recent audited financial
statements included in the Prospectus, neither the Company nor its
subsidiary has sustained any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as disclosed in or
contemplated by the Prospectus.
(j) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) neither the
Company nor its subsidiary has incurred any liabilities or obligations,
direct or contingent, or entered into any transactions, not in the
ordinary course of business, that are material to the Company and its
subsidiary, (ii) the Company has not purchased any of its outstanding
capital stock or declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock, (iii) there has not been
any change in the capital stock, long-term debt or short-term debt of
the Company or its subsidiary, and (iv) there has not been any material
adverse change, or any development involving a prospective material
adverse change, in or affecting the financial position, results of
operations or business of the Company and its subsidiary, in each case
other than as disclosed in or contemplated by the Prospectus.
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(k) The Shares have been duly authorized and, when issued and
delivered against payment therefor as provided therein, will be validly
issued and fully paid and nonassessable and will conform to the
description of the Common Stock contained in the Prospectus; and the
certificates evidencing the Shares will comply with all applicable
requirements of North Carolina law.
(l) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement (or any
such right has been effectively waived) or any securities being
registered pursuant to any other registration statement filed by the
Company under the Act.
(m) Neither the Company nor its subsidiary is, or (with or
without the giving of notice or passage of time or both), would be in
violation of its Articles of Incorporation or Bylaws or in default
under any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which the Company or its subsidiary is
a party or to which any of their respective properties or assets are
subject that is material to the Company and its subsidiary, when taken
as a whole.
(n) The issue and sale of the Shares and the performance of
this Agreement and the consummation of the transactions herein
contemplated will not conflict with, or (with or without the giving of
notice or the passage of time or both) result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which the Company or its subsidiary is a
party or to which any of their respective properties or assets is
subject, nor will such action conflict with or violate any provision of
the Articles of Incorporation or Bylaws of the Company or its
subsidiary or any statute, rule or regulation or any order, judgment or
decree of any court or governmental agency or body having jurisdiction
over the Company or its subsidiary or any of their respective
properties or assets.
(o) The Company and its subsidiary have good and marketable
title in fee simple to all real property, if any, and good title to all
personal property owned by them, in each case free and clear of all
liens, security interests, pledges, charges, encumbrances, mortgages
and defects, except such as are disclosed in the Prospectus or such as
do not materially and adversely interfere with the operations of the
Company and its subsidiary; and any real property and buildings held
under lease by the Company or its subsidiary are held under valid,
subsisting and enforceable leases, with such exceptions as are
disclosed in the Prospectus or are not material and do not interfere
with the operations of the Company or its subsidiary.
(p) No consent, approval, authorization, order or declaration
of or from, or registration, qualification or filing with, any court or
governmental agency or body is
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required for the issue and sale of the Shares or the consummation of
the transactions contemplated by this Agreement, except the
registration of the Shares under the Act and such as may be required
under state securities or blue sky laws in connection with the offer,
sale and distribution of the Shares by the Underwriters.
(q) Other than as disclosed in the Prospectus, there is no
litigation, arbitration, claim, proceeding (formal or informal) or
investigation pending or threatened (or any basis therefor) in which
the Company or its subsidiary is a party or of which any of their
respective properties or assets are the subject which, if determined
adversely to the Company or its subsidiary, would individually or in
the aggregate have a material adverse effect on the financial position,
results of operations or business of the Company and its subsidiary.
(r) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding
agreement of the Company enforceable against the Company in accordance
with its terms subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws relating
to or affecting the enforcement of creditors' rights generally and to
general equitable principles, and except as the enforceability of
rights to indemnity and contribution under this Agreement may be
limited under applicable securities laws or the public policy
underlying such laws.
(s) Neither the Company nor any of its officers, directors or
affiliates has (i) taken, directly or indirectly, any action designed
to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
Shares or (ii) since the filing of the Registration Statement (A) sold,
bid for, purchased or paid anyone any compensation for soliciting
purchases of, the Shares or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of
the Company.
(t) The Company has obtained for the benefit of the Company
and the Underwriters from each of its directors and officers a written
agreement that for a period of 120 days from the date of the Prospectus
such director or officer will not, without your prior written consent,
offer, pledge, sell, contract to sell, grant any option for the sale
of, or otherwise dispose of (or announce any offer, pledge, sale, grant
of an option to purchase or other disposition), directly or indirectly,
any shares of Common Stock or securities convertible into, or
exercisable or exchangeable for, shares of Common Stock.
(u) The Company's subsidiary is not currently prohibited,
directly or indirectly, from paying any dividends to the Company, from
making any other distributions on its subsidiary's capital stock, from
repaying to the Company any loans or advances to its subsidiary or from
transferring its subsidiary's property or assets to the Company, except
as disclosed in the Prospectus.
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(v) The Company and its subsidiary have filed all material
foreign, federal, state and local tax returns that are required to be
filed by them and have paid all taxes shown as due on such returns as
well as all other taxes, assessments and governmental charges that are
due and payable; and no deficiency with respect to any such return has
been assessed or proposed in any material respects.
(w) The Company is not, nor will it become as a result of
transactions contemplated hereby, and does not intend to conduct its
business in a manner that would cause it to become, an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940.
2. PURCHASE AND SALE OF SHARES. Subject to the terms and conditions
herein set forth, (a) the Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agree, severally and not jointly, to
purchase from the Company, at a purchase price of $20.93 per share, the number
of Firm Shares set opposite the name of such Underwriter in Schedule I hereto,
and (b) in the event and to the extent that the Underwriters shall exercise the
election to purchase Optional Shares as provided below, the Company agrees to
issue and to sell to each of the Underwriters, and each of the Underwriters
agree, severally and not jointly, to purchase from the Company, at the purchase
price per share set forth in clause (a) of this Section 2, that portion of the
number of Optional Shares as to which such election shall have been exercised
(to be adjusted by you so as to eliminate fractional shares) determined by
multiplying such number of Optional Shares by a fraction, the numerator of which
is the maximum number of Optional Shares that such Underwriter is entitled to
purchase as set forth opposite the name of such Underwriter in Schedule I hereto
and the denominator of which is the maximum number of the Optional Shares that
all of the Underwriters are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
its election in whole or in part from time to time up to 117,000 Optional
Shares, at the purchase price per share set forth in clause (a) in the paragraph
above for the sole purpose of covering over-allotments in the sale of Firm
Shares. Any such election to purchase Optional Shares may be exercised by
written notice from you to the Company, given from time to time within a period
of 30 calendar days after the date of this Agreement and setting forth the
aggregate number of Optional Shares to be purchased and the date on which such
Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as hereinafter defined) or, unless you
and the Company otherwise agree in writing, earlier than two or later than ten
business days after the date of such notice. In the event you elect to purchase
all or a portion of the Optional Shares, the Company agrees to furnish or cause
to be furnished to you the certificates, letters and opinions, and to satisfy
all conditions set forth in Section 7 hereof at each Subsequent Time of Delivery
(as hereinafter defined).
3. OFFERING BY THE UNDERWRITERS. Upon the authorization by you of the
release of the Shares, the several Underwriters propose to offer the Shares for
sale upon the terms and conditions disclosed in the Prospectus.
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4. DELIVERY OF SHARES; CLOSING. Certificates in definitive form for the
Shares to be purchased by each Underwriter hereunder, and in such denominations
and registered in such names as Interstate/Johnson Lane Corporation may request
upon at least 48 hours prior notice to the Company shall be delivered by or on
behalf of the Company to you for your account against payment by you of the
purchase price therefor by official bank check or checks (payable in next day
funds unless closing is on a Friday in which case it shall be payable in same
day funds) drawn on a Charlotte, North Carolina bank, payable to the order of
the Company. The closing of the sale and purchase of the Shares shall be held at
the offices of Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, Raleigh,
North Carolina. The time and date of such delivery and payment shall be, with
respect to the Firm Shares, at 10:00 a.m., Charlotte time, on the fourth full
business day after the execution of this Agreement or at such other time and
date as you and the Company may agree upon in writing, and, with respect to the
Optional Shares, at 10:00 a.m., Charlotte time, on the date specified by you in
the written notice given by you of the Underwriters' election to purchase all or
part of such Optional Shares, or at such other time and date as you and the
Company may agree upon in writing. Such time and date for delivery of the Firm
Shares is herein called the "First Time of Delivery," such time and date for
delivery of the Optional Shares, if not the First Time of Delivery, is herein
called a "Subsequent Time of Delivery," and each such time and date for delivery
is herein called a "Time of Delivery." The Company will make such certificates
available for checking and packaging at least 24 hours prior to each Time of
Delivery at your office at the address set forth above or such other location
designated by you to the Company.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriter:
(a) The Company will file the Prospectus with the Commission
pursuant to and in accordance with subparagraph (1) (or, if applicable
and if consented to by you, subparagraph (4)) of Rule 424(b) not later
than the earlier of (i) the second business day following the execution
and delivery of this Agreement or (ii) the 15th business day after the
date on which the Registration Statement is declared effective. The
Company will advise you promptly of any such filing pursuant to Rule
424(b).
(b) The Company will not file with the Commission the
Prospectus or the amendment referred to in the second sentence of
Section l(a) hereof, any amendment or supplement to the Prospectus or
any amendment to the Registration Statement unless you have received a
reasonable period of time to review any such proposed amendment or
supplement and consented to the filing thereof and will use its best
efforts to cause any such amendment to the Registration Statement to be
declared effective as promptly as possible. Upon the request of the
Representative or counsel for the Representative, the Company will
promptly prepare and file with the Commission, in accordance with the
rules and regulations of the Commission, any amendments to the
Registration Statement or amendments or supplements to the Prospectus
that may be necessary or advisable in connection with the distribution
of the Shares by the Underwriters and will use its best efforts to
cause any such amendment to the Registration Statement to be declared
effective as promptly as possible. If required, the Company will file
any amendment or
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supplement to the Prospectus with the Commission in the manner and
within the time period required by Rule 424(b) under the Act. The
Company will advise the Representative, promptly after receiving notice
thereof, of the time when the Registration Statement or any amendment
thereto has been filed or declared effective or the Prospectus or any
amendment or supplement thereto has been filed and will provide
evidence to the Representative of each such filing or effectiveness.
(c) The Company will advise you promptly after receiving
notice or obtaining knowledge of (i) the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or any part thereof or any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, (ii) the suspension of the qualification of the
Shares for offer or sale in any jurisdiction or of the initiation or
threatening of any proceeding for any such purpose, or (iii) any
request made by the Commission or any securities authority of any other
jurisdiction for amending the Registration Statement, for amending or
supplementing the Prospectus or for additional information. The Company
will use its best efforts to prevent the issuance of any such stop
order and, if any such stop order is issued, to obtain the withdrawal
thereof as promptly as possible.
(d) If the delivery of a Prospectus relating to the Shares is
required under the Act at any time prior to the expiration of nine
months after the date of the Prospectus, and if at such time any events
have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading, or if for any reason it is necessary during such
same period to amend or supplement the Prospectus to comply with the
Act or the rules and regulations thereunder, the Company will promptly
notify you and upon your request (but at the Company's expense) prepare
and file with the Commission an amendment or supplement to the
Prospectus that corrects such statement or omission or effects such
compliance and will furnish without charge to each Underwriter and to
any dealer in securities, as many copies of such amended or
supplemented Prospectus as you may from time to time reasonably
request. If the delivery of a Prospectus relating to the Shares is
required under the Act at any time nine months or more after the date
of the Prospectus, upon your request but at the expense of such
Underwriter, the Company will prepare and deliver to such Underwriter
as many copies as you may request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act. Neither your
consent to nor the Underwriter's delivery of, any such amendment or
supplement shall constitute a waiver of any of the conditions set forth
in Section 7.
(e) The Company promptly from time to time will take such
action as you may reasonably request to qualify the Shares for offering
and sale under the securities or blue sky laws of such jurisdictions as
you may request and will continue such qualifications in effect for as
long as may be necessary to complete the distribution of the Shares,
provided that in connection therewith the Company shall not be required
to
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qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction.
(f) The Company will promptly provide you, without charge, (i)
one manually executed copy of the Registration Statement as originally
filed with the Commission and of each amendment thereto, (ii) for each
other Underwriter a conformed copy of the Registration Statement as
originally filed and of each amendment thereto, without Exhibits, and
(iii) so long as a prospectus relating to the Shares is required to be
delivered under the Act, as many copies of each Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto as you may
reasonably request.
(g) As soon as practicable, but in any event not later than
the last day of the thirteenth month after the effective date of the
Registration Statement, the Company will make generally available to
its security holders an earnings statement of the Company and its
subsidiary, if any, covering a period of at least 12 months beginning
after the effective date of the Registration Statement (which need not
be audited) complying with Section 11(a) of the Act and the rules and
regulations thereunder.
(h) During the period beginning from the date hereof and
continuing to and including the date 120 days after the date of the
Prospectus, the Company will not, without your prior written consent,
offer, pledge, issue, sell, contract to sell, grant any option for the
sale of, or otherwise dispose of (or announce any offer, pledge, sale,
grant of an option to purchase or other disposition), directly or
indirectly, any shares of Common Stock or securities convertible into,
exercisable or exchangeable for, shares of Common Stock, except as
provided in Section 2 and except for the issuance of Common Stock upon
the exercise of stock options or warrants outstanding on the date of
this Agreement.
(i) Neither the Company nor any of its officers, directors or
affiliates will (i) take, directly or indirectly, prior to the closing
of the purchase and sale of the Shares, any action designed to cause or
to result in, or that might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Shares, (ii)
sell, bid for, purchase or pay anyone any compensation for soliciting
purchases of, the Shares or (iii) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of
the Company.
(j) The Company will apply the net proceeds from the offering
in the manner set forth under "Use of Proceeds" in the Prospectus.
(k) The Company will cause the Shares to be listed on the
NASDAQ National Market of the NASDAQ Stock Market at each Time of
Delivery and for at least one year from the date hereof.
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6. EXPENSES. The Company will pay all costs and expenses incident to
the performance of its obligations under this Agreement, whether or not the
transactions contemplated hereby are consummated or this Agreement is terminated
pursuant to Section 10 hereof, including without limitation all costs and
expenses incident to (i) the fees, disbursements and expenses of the Company's
counsel and accountants in connection with the registration of the Shares under
the Act and all other expenses in connection with the preparation, printing and
filing of the Registration Statement (including all amendments thereto), any
Preliminary Prospectus, the Prospectus and any amendments and supplements
thereto, this Agreement and any blue sky memoranda; (ii) the delivery of copies
of the foregoing documents to the Underwriters; (iii) the filing fees of the
Commission and the National Association of Securities Dealers, Inc. relating to
the Shares; (iv) the preparation, issuance and delivery to the Underwriters of
any certificates evidencing the Shares, including transfer agent's and
registrar's fees; (v) the qualification of the Shares for offering and sale
under state securities and blue sky laws, including filing fees and fees and
disbursements of counsel for the Underwriters relating thereto not to exceed
$15,000; (vi) any NASDAQ National Market of the NASDAQ Stock Market fees or
expenses; and (vii) any expenses for travel, lodging and meals incurred by the
Company and any of its officers, directors and employees in connection with any
meetings with prospective investors in the Shares. It is understood, however,
that, except as provided in this Section, Section 8 and Section 10 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Shares by them, and
any advertising expenses relating to the offer and sale of the Shares.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder to purchase and pay for the Shares to be delivered at
each Time of Delivery shall be subject, in their discretion, to the accuracy of
the representations and warranties of the Company contained herein as of the
date hereof and as of such Time of Delivery, to the accuracy of the statements
of Company officers made pursuant to the provisions hereof, to the performance
by the Company of its covenants and agreements hereunder, and to the following
additional conditions precedent:
(a) If the Registration Statement as amended to date has not
become effective prior to the execution of this Agreement, such
registration statement shall have been declared effective not later
than 11:00 a.m., Charlotte time, on the date of this Agreement or such
later date and/or time as shall have been consented to by you in
writing. The Prospectus and any amendment or supplement thereto shall
have been filed with the Commission pursuant to Rule 424(b) within the
applicable time period prescribed for such filing and in accordance
with Section 5(a) of this Agreement; no stop order suspending the
effectiveness of the Registration Statement or in part thereof shall
have been issued and no proceedings for that purpose shall have been
instituted, threatened or, to the knowledge of the Company and the
Representatives, contemplated by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction.
(b) Moore & Van Allen, PLLC, counsel for the Underwriters,
shall have furnished to you such opinion or opinions, dated such Time
of Delivery, with respect to
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<PAGE> 12
the incorporation of the Company, the validity of the Shares being
delivered at such Time of Delivery, the Registration Statement, the
Prospectus, and other related matters as you may reasonably request and
which are customary, and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling them
to pass upon such matters.
(c) You shall have received an opinion, dated such Time of
Delivery, of Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan,
L.L.P., counsel for the Company in form and substance satisfactory to
you and your counsel, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation under the laws of North
Carolina and has the corporate power and authority to own or
lease its properties and conduct its business as described in
the Registration Statement and the Prospectus and to enter
into this Agreement and perform its obligations hereunder.
(ii) The subsidiary of the Company has been duly
incorporated, is validly existing as a national banking
association under the laws of the United States of America and
has the corporate power and authority to own or lease its
properties and conduct its business as described in the
Registration Statement and the Prospectus. The subsidiary is
duly qualified to transact business as a foreign corporation
and is in good standing under the laws of each other
jurisdiction in which it owns or leases property, or conducts
any business, so as to require such qualification, except
where the failure to so qualify would not have a material
adverse effect on the financial position, results of
operations or business of the Company and its subsidiary.
(iii) The Company's authorized, issued and
outstanding capital stock is as disclosed in the Prospectus.
All of the issued shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and
nonassessable and conform to the description of the Common
Stock contained in the Prospectus.
(iv) All of the issued shares of capital stock of the
Company's subsidiary has been duly authorized and validly
issued, are fully paid and, except as provided under the
National Bank Act, nonassessable, and are owned beneficially
by the Company.
(v) The Shares have been duly authorized and, when
issued and delivered against payment therefor as provided
herein, will be validly issued and fully paid and
nonassessable and will conform to the description of the
Common Stock contained in the Prospectus.
(vi) The issue and sale of the Shares being issued at
such Time of Delivery and the performance of this Agreement
and the consummation of the
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<PAGE> 13
transactions herein contemplated will not conflict with, or
(with or without the giving of notice or the passage of time
or both) result in a breach or violation of any of the terms
or provisions of, or constitute a default under any of the
following which is filed as an exhibit to the Registration
Statement: any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which the
Company or its subsidiary is a party or to which any of their
respective properties or assets is subject, nor will such
action conflict with or violate any provision of the Articles
of Incorporation or Bylaws of the Company or its subsidiary or
any statute, rule or regulation which in such counsel's
experience is normally applicable to transactions of the type
contemplated by this Agreement or to the best of counsel's
knowledge any order, judgment or decree of any court or
governmental agency or body having jurisdiction over the
Company or its subsidiary.
(vii) No consent, approval, authorization or order
from, or registration, qualification or filing with, any
governmental agency or body is required for the issue and sale
of the Shares or the consummation of the transactions
contemplated by this Agreement, except the registration of the
Shares under the Act and such as may be required under state
securities or blue sky laws in connection with the offer, sale
and distribution of the Shares by the Underwriters.
(viii) This Agreement has been duly authorized,
executed and delivered by the Company.
(ix) The Registration Statement and the Prospectus
and each amendment or supplement thereto (other than the
financial statements and schedules and other financial
information included therein, as to which such counsel need
express no opinion), as of their respective effective or issue
dates, complied as to form in all material respects with the
requirements of the Act and the rules and regulations
thereunder. The descriptions in the Registration Statement and
the Prospectus of statutes are accurate and fairly present the
information required to be shown; and such counsel does not
know of any statutes or legal or governmental proceedings
required to be described in the Registration Statement or
Prospectus that are not described as required or of any
contracts or documents of a character required to be described
in the Registration Statement or Prospectus or to be filed as
exhibits to the Registration Statement which are not described
and filed as required.
(x) The Registration Statement is effective under the
Act; any required filing of the Prospectus pursuant to Rule
424(b) has been (or will be) made in the manner and within the
time period required by Rule 424(b); and to such counsel's
knowledge no stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued
and, to such counsel's knowledge, no proceedings for that
purpose have been instituted or threatened or are contemplated
by the Commission.
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<PAGE> 14
(xi) The Company is not, and will not be as a result
of the consummation of the transactions contemplated by this
Agreement, an "investment company," or a company "controlled"
by an "investment company", within the meaning of the
Investment Company Act of 1940.
Such counsel shall also state that no facts have come to their
attention which lead them to believe that as of its effective date, the
Registration Statement or any further amendment thereto made by the
Company prior to the date hereof (other than the financial statements
and related schedules therein or other financial data derived from
accounting records, as to which they need express no opinion) contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company prior to
the date hereof (other than the financial statements and related
schedules therein or other financial data derived from accounting
records, as to which they need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that, as of
the date hereof, either the Registration Statement or the Prospectus or
any further amendment or supplement thereto made by the Company prior
to the date hereof (other than the financial statements and related
schedules therein or other financial data derived from accounting
records, as to which they need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deem proper, on
certificates of responsible officers of the Company and public
officials.
(d) You shall have received from Cherry, Bekaert & Holland,
L.L.P. letters dated, respectively, the date of this Agreement and the
effective date of the most recently filed post-effective amendment to
the Registration Statement and also at each Time of Delivery, in form
and substance satisfactory to you, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in or incorporated by reference
in the Registration Statement and the Prospectus.
(e) Since the date of the latest audited financial statements
included in the Prospectus, neither the Company nor its subsidiary
shall have sustained (i) any loss or interference with their respective
businesses from fire, explosion, flood, hurricane or other calamity,
whether or not covered by insurance, or from any labor dispute or court
or governmental action, order or decree, otherwise than as disclosed in
or contemplated by the Prospectus, or (ii) any change, or any
development involving a prospective change (including without
limitation a change in management or control of the Company), in or
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<PAGE> 15
affecting the position (financial or otherwise), results of operations,
net worth or business prospects of the Company and its subsidiary,
otherwise than as disclosed in or contemplated by the Prospectus
(including any amendment), the effect of which, in either such case, is
in your judgment so material and adverse as to make it unpracticable or
inadvisable to proceed with the purchase, sale and delivery of the
Shares being delivered at such Delivery as contemplated by the
Registration Statement, as amended as of the date hereof.
(f) Subsequent to the date hereof there shall not have
occurred any of the following: (i) any suspension or limitation in
trading in securities generally on the New York Stock Exchange (other
than normal market breaks or cooling periods), or any setting of
minimum prices for trading on such exchange, or in the Common Stock by
the Commission or the NASDAQ National Market of the NASDAQ Stock
Market; (ii) a moratorium on commercial banking activities in New York
declared by either federal or state authorities; (iii) any major
outbreak or major escalation of hostilities involving the United
States, declaration by the United States of a national emergency (other
than with respect to natural disasters) or war or any other national or
international calamity or emergency if the effect of any such event
specified in this clause (iii) in your judgment makes it impracticable
or inadvisable to proceed with the purchase, sale and delivery of the
Shares being delivered at such Time of Delivery as contemplated by the
Registration Statement, as amended as of the date hereof.
(g) The Company shall have furnished to you at such Time of
Delivery certificates of officers of the Company, satisfactory to you
as to the accuracy of the representations and warranties of the Company
herein at and as of such Time of Delivery, as to the performance by the
Company of all of its obligations hereunder to be performed at or prior
to such Time of Delivery, and as to such other matters as you may
reasonably request, and the Company shall have furnished or caused to
be furnished certificates as to the matters set forth in subsections
(a) and (e) of this Section 7, and as to such other matters as you may
reasonably request.
(h) The Shares shall be included for listing on the NASDAQ
National Market of The NASDAQ Stock Market.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement made by the Company in Section
1 of this Agreement; (ii) any untrue statement or alleged untrue statement of
any material fact contained in (A) the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or (B) any application or other document, or any amendment
or supplement thereto, executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify the Shares under the securities or blue sky laws thereof or filed with
the
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<PAGE> 16
Commission or any securities association or securities exchange (each an
"Application"); or (iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or any Application, material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse each Underwriter for any legal or other
expenses reasonably incurred by such Underwriter in connection with
investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement or any amendment thereto, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto or
any Application in reliance upon and in conformity with written information
furnished to the Company by any Underwriter. The Company will not, without the
prior written consent of each Underwriter, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action, suit or
proceeding (or related cause of action or portion thereof) in respect of which
indemnification may be sought hereunder (whether or not such Underwriter is a
party to such claim, action, suit or proceeding), unless: such settlement,
compromise or consent includes an unconditional release of such Underwriter from
all liability arising out of such claim, action, suit or proceeding or related
cause of action or portion thereof.
(b) Each Underwriter agrees to indemnify and hold harmless the Company
and its officers, directors, agents, representatives and affiliates against any
losses, claims, damages or liabilities to which the Company or its officers,
directors, agents, representatives and affiliates may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement or any amendment thereto, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto or any Application or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by the Underwriter through you expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by
such Company in connection with investigating or defending any such loss, claim,
damage, liability or action.
(c) Promptly after receipt by an indemnified party under subsection (a)
and (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish,
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<PAGE> 17
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party, be counsel to the
indemnifying party); provided, however, that if the defendants in any such
action included the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to it or other indemnified parties which are different
from or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party and such indemnified party shall have the
right to select separate counsel to defend such action on behalf of such
indemnified party. After such notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, which separate counsel shall be
designated by the Representatives in the case of indemnity arising under
paragraph (a) of this Section 8) or (ii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party. Nothing in this Section 8(c) shall preclude an indemnified
party from participating at its own expense in the defense of any such action so
assumed by the indemnifying party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriter on
the other from the offering of the Shares. If, however, the allocation provided
by the immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under subsection (c)
above, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriter on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts, and
commissions received by the Underwriters. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand
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<PAGE> 18
or the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
pro rata allocation (even if the Underwriters were treated as one for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (d),
the Underwriter shall not be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.
9. DEFAULT OF UNDERWRITERS. (a) If any Underwriter defaults in its
obligation to purchase Shares at a Time of Delivery, you may in your discretion
arrange for you or another party, or other parties to purchase such shares on
the terms contained herein. If within 36 hours after such default by any
Underwriter you do not arrange for the purchase of such Shares, the Company
shall be entitled to a further period of 36 hours within which to procure
another party or other parties satisfactory to you to purchase such Shares on
such terms. In the event that, within the respective prescribed periods, you
notify the Company that you have so arranged for the purchase of such Shares, or
the Company notifies you that it has so arranged for the purchase of such
Shares, you or the Company shall have the right to postpone a Time of Delivery
for a period of not more than 7 days in order to effect whatever change is made
thereby be made necessary in the Registration Statement or the Prospectus, or in
any other documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus that in your opinion
may thereby be made necessary. The cost of preparing, printing and filing any
such amendments shall be paid for by the Underwriters. The term "Underwriter" as
used in this Agreement shall include any person substituted under this Section
with effect as if such person had originally been a party to this Agreement with
respect to such Shares.
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<PAGE> 19
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of
Shares to be purchased at such Time of Delivery, then the Company shall have the
right to require each non-defaulting Underwriter to purchase the number of
Shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made, but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
10. TERMINATION. (a) This Agreement may be terminated with respect to
the Shares or any Optional Shares in the sole discretion of the Representatives
by notice to the Company given prior to the First Time of Delivery or any
Subsequent Time of Delivery, respectively, in the event that (i) any condition
to the obligations of the Underwriters set forth in Section 7 hereof has not
been satisfied, or (ii) the Company shall have failed, refused or been unable to
deliver the Shares or to perform all obligations and satisfy all conditions on
its part to be performed or satisfied hereunder at or prior to such Time of
Delivery, in either case other than by reason of a default by any of the
Underwriters. If this Agreement is terminated pursuant to this Section 10(a),
the Company will reimburse the Underwriters upon demand for all out-of-pocket
expenses (including counsel fees and disbursements) that shall have been
incurred by it in connection with the proposed purchase and sale of the Shares.
The Company shall not in any event be liable to any of the Underwriters for the
loss of anticipated profits from the transactions covered by this Agreement.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in Section 10(a), the aggregate number of such Shares which remain
unpurchased exceeds one-eleventh of the aggregate number of Shares to be
purchased at such Time of Delivery, or if the Company shall not exercise the
right described in Section 9(b) to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to a Subsequent Time of Delivery, the obligations of the
Underwriters to purchase and of the Company to sell the Optional Shares)
thereupon will terminate, without liability on the part of any nonfaulting
Underwriter or the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
11. SURVIVAL. The respective indemnities, agreements, representations,
warranties and other statements of the Company, its officers and the
Underwriter, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of the Underwriter or any controlling person referred to in
Section 8(e) or the Company, or any officer or director or controlling person of
the Company referred to in Section 8(e), and shall survive delivery of and
payment for the Shares. The respective agreements,
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<PAGE> 20
covenants, indemnities and other statements set forth in Sections 6 and 8 hereof
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
12. NOTICES. All communications hereunder shall be in writing and, if
sent to the Underwriter, shall be mailed, delivered or telegraphed and confirmed
in writing to Interstate/Johnson Lane Corporation, 121 West Trade Street,
Charlotte, North Carolina 28202, Attention: Corporate Finance Department (with a
copy to Moore & Van Allen, PLLC, One Hannover Square, Suite 1700, Raleigh, North
Carolina 27601, and if sent to the Company, shall be mailed, delivered or
telegraphed and confirmed in writing to the Company at 202 South Main Street,
Reidsville, North Carolina 27302, Attention: President and Chief Executive
Officer (with a copy to Gerald F. Roach of Smith, Anderson, Blount, Dorsett,
Mitchell & Jernigan, Suite 2500, First Union Capital Center, Raleigh, North
Carolina 27601).
13. REPRESENTATIVES. You will act for the several Underwriters in
connection with the transactions contemplated by this Agreement, and any action
under this Agreement taken by you will be binding upon all the Underwriters.
14. BINDING EFFECT. This Agreement shall be binding upon, and inure
solely to the benefit of, each Underwriter and the Company and to the extent
provided in Sections 8 and 10 hereof, the officers and directors and controlling
persons referred to therein and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from the Underwriters shall be deemed a successor or assign by reason
merely of such purchase.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina without giving effect to
any provisions regarding conflicts of laws.
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<PAGE> 21
16. COUNTERPARTS. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us one of the counterparts hereof, and upon
the acceptance hereof by Interstate/Johnson Lane Corporation, this letter will
constitute a binding agreement among the Underwriters and the Company.
Very truly yours,
FNB FINANCIAL SERVICES CORPORATION
By: /s/ Ernest J. Sewell
----------------------------------------
Name: Ernest J. Sewell
Title: President & Chief Executive Officer
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<PAGE> 22
The foregoing Agreement is hereby confirmed
and accepted as of the date first written
above at Charlotte, North Carolina.
INTERSTATE/JOHNSON LANE CORPORATION
By: /s/ James H. Glen, Jr.
-------------------------------
James H. Glen, Jr.
Managing Director
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<PAGE> 23
SCHEDULE I
FNB FINANCIAL SERVICES CORPORATION
780,000 SHARES
COMMON STOCK
NUMBER OF
OPTIONAL SHARES
TOTAL NUMBER OF TO BE PURCHASED
FIRM SHARES TO IF MAXIMUM
UNDERWRITER BE PURCHASED OPTION EXERCISED
- ----------- ------------ ----------------
Interstate/Johnson Lane Corporation 540,000 81,000
J. C. Bradford & Co. 60,000 9,000
The Robinson-Humphrey Company, LLC 60,000 9,000
Scott & Stringfellow, Inc. 60,000 9,000
Wheat First Securities, Inc. 60,000 9,000
------- -------
Total 780,000 117,000
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<PAGE> 1
EXHIBIT 3.01
AMENDMENT AND RESTATEMENT OF
THE ARTICLES OF INCORPORATION OF
FNB FINANCIAL SERVICES CORPORATION
Pursuant to Section 55-10-07 of the North Carolina Business Corporation
Act, the undersigned corporation hereby submits these Amended and Restated
Articles of Incorporation for the purpose of integrating into one document its
original Articles of Incorporation and all amendments thereto and also for the
purpose of amending its Articles of Incorporation:
1. The name of the corporation is FNB Financial Services Corporation.
2. Attached hereto as Exhibit A are the Amended and Restated Articles
of Incorporation of FNB Financial Services Corporation which contain an
amendment to the Articles of Incorporation requiring shareholder approval.
3. The Amended and Restated Articles of Incorporation were adopted by
the shareholders of FNB Financial Services Corporation on the date hereof, in
the manner prescribed by law.
4. These articles will become effective upon filing.
IN WITNESS WHEREOF, I have hereunto set my hand, as of the 14th day of
April, 1998.
FNB FINANCIAL SERVICES CORPORATION
By: /s/ Ernest J. Sewell
-------------------------------------
Ernest J. Sewell
President and Chief Executive Officer
<PAGE> 2
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
1. The name of the corporation is FNB Financial Services
Corporation.
2. The period of duration of the corporation shall be perpetual.
3. The purposes for which the corporation is organized are:
(a) to purchase, own, and hold the stock of other corporations, and to
do every act and thing covered generally by the denomination "bank holding
corporation" or "holding corporation," and especially to direct the operations
of banks, banking associations or other corporations through the ownership of
stock therein;
(b) to purchase, subscribe for, acquire, own, hold, sell, exchange,
assign, transfer, create security interests in, pledge, or otherwise dispose of
shares of the capital stock, or any bonds, notes, securities, or evidences of
indebtedness created by any other corporation or corporations organized under
the laws of this state or any other state and also bonds or evidences of
indebtedness of the United States or of any state, district, territory or
subdivision or municipality thereof and to issue in exchange therefor shares of
the capital stock, bonds, notes, or other obligations of the corporation and
while the owner thereof to exercise all the rights, powers and privileges of
ownership including the right to vote on any shares of stock so owned;
(c) to promote, lend money to, and guarantee the dividends, stocks,
bonds, notes, evidences of indebtedness, contracts, or other obligations of, and
otherwise aid in any manner which shall be lawful, any corporation or
association of which any bonds, stocks or other securities or evidences of
indebtedness shall be held by or for this corporation, or in which, or in the
welfare of which, this corporation shall have any interest, and to do any acts
and things permitted by law and designed to protect, preserve, improve, or
enhance the value of any such bonds, stocks, or other securities or evidences of
indebtedness or the property of this corporation;
(d) To engage in any other lawful act or activity for which
corporations may be organized under Chapter 55 of the General Statutes of North
Carolina, entitled "Business Corporation Act", including, but not limited to,
manufacturing, purchasing or otherwise acquiring, owning, mortgaging, pledging,
selling, assigning and transferring, or otherwise disposing of, investing,
trading, dealing in and with, goods, wares and merchandise and property of every
class and description, whether real, personal, mixed, tangible, or intangible;
entering into or serving in any kind of management, investigative, advisory,
promotional, protective, insurance, guarantyship, suretyship, fiduciary or
representative relationship or capacity for any persons or corporations
whatsoever; and
(e) To engage in, conduct and operate any other business which may be
deemed adopted, directly or indirectly, to add to the profits of its business or
to increase the value of its property.
In furtherance and not in limitation of the power conferred by the laws
of the State of North Carolina upon corporations organized for the foregoing
purposes, the corporation shall have power to borrow money, to lend money, to
guarantee obligations, to purchase, construct, lease or otherwise acquire, own,
hold, use, maintain, operate or otherwise manage or control, sell, exchange,
lease, mortgage, pledge or
<PAGE> 3
otherwise dispose of, property of any kind or character, real, personal or
mixed, tangible or intangible, necessary, useful or convenient therefor, and to
acquire, hold, mortgage, pledge or dispose of shares, bonds and other evidences
of indebtedness and securities of the United States of America or any state or
municipality therein or of any domestic or foreign corporation.
The foregoing clauses shall be construed as enumerating specific
purposes and powers, but no recitation, expression or declaration of specific
purposes or powers herein enumerated shall be deemed to be exclusive, but it is
hereby expressly declared that all other lawful purposes and powers not
inconsistent therewith are hereby included.
The Board of Directors of the corporation shall have the authority to
adopt resolutions approving the indemnification, to the fullest extent permitted
by Chapter 55 of the North Carolina General Statutes, of any person made a party
to any action or proceeding, whether civil, criminal or administrative, by
reason of the fact that such person was serving as director, officer, employee
or agent of the corporation.
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.
5. The minimum amount of consideration to be received by the
corporation for its shares before it shall commence business is Five Hundred
Dollars ($500.00) in cash or property of equivalent value.
6. No holder of any stock or other securities of the corporation shall
be entitled to any preemptive right to purchase any stock or other securities of
the corporation.
7. The address of the initial registered office of the corporation is
202 South Main Street, Reidsville, Rockingham County, North Carolina, 27320 and
the name of the initial registered agent at such address is W.B. Apple, Jr.
8. The board of directors of the corporation shall be and is divided
into three classes, Class I, Class II and Class III, which shall be as nearly
equal in number as possible. Each director shall serve for a
<PAGE> 4
term ending on the date of the third annual meeting of stockholders following
the annual meeting at which the director was elected; provided, however, that
each initial director named herein shall hold office until the annual meeting of
shareholders shown as follows:
<TABLE>
<CAPTION>
Term of Office Expires
Directors In: With Annual Meeting In:
------------ ----------------------
<S> <C>
Class I 1985
Class II 1986
Class III 1987
</TABLE>
A director elected to fill a vacancy shall serve for the remainder of
their present term of office of the class to which he was elected.
9. The name and address of the sole incorporator are:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
W. B. Apple, Jr 2307 Pine Lane
Reidsville, N. C. 27320
</TABLE>
10. The corporation shall not consolidate with, or merge with or into,
any other corporation or convey to any corporation or other person or otherwise
dispose of all or substantially all of the assets or dispose of by any means all
or substantially all of the stock or assets of any major subsidiary of the
corporation unless such consolidation, merger, conveyance or disposition is
approved (a) by the affirmative vote of not less than seventy-five percent (75%)
of the aggregate voting power of the outstanding stock entitled to vote thereon,
and (b) by the affirmative vote of not less than seventy-five percent (75%) of
the aggregate voting power of the outstanding stock entitled to vote thereon,
which shall include the affirmative vote of at least fifty percent (50%) of the
voting power of the outstanding stock of shareholders entitled to vote thereon
other than controlling shareholders, (i) if the shareholder entitled to vote
thereon is a person who, including affiliates of such person, is the beneficial
owner (as the terms are defined in the Securities and Exchange Act of 1934 and
in the rules thereunder) of more than twenty percent (20%) of the voting power
of the corporation (a "controlling shareholder") provided that shares held,
voted or otherwise controlled by a person as a trustee, plan administrator,
officer of the corporation or otherwise pursuant to an employee benefit plan of
the corporation or of an affiliate of the corporation shall not be deemed to be
beneficially owned by any person for the purpose of determining whether a person
is a controlling shareholder, and (ii) if, prior to the acquisition of twenty
percent (20%) of the voting power of the corporation by a shareholder, the Board
of Directors of the corporation had not unanimously approved such consolidation,
merger, conveyance or disposition. If there is a controlling shareholder, this
article can be amended only by the affirmative vote of the voting power of the
corporation then required to approve a consolidation, merger, conveyance or
disposition under this article.
11. No director of this corporation shall be liable for monetary
damages for breach of his duty as a director arising out of any legal action
whether by or in the right of the corporation or otherwise, except (i) acts or
omissions not made in good faith that the director at the time of such breach
knew or believed were in conflict with the best interests of the corporation,
(ii) any liability under Section 55-32 of the General Statutes of North
Carolina, (iii) any transaction from which the director derived an improper
personal benefit, or (iv) acts or omissions occurring prior to June 13, 1988.
<PAGE> 1
EXHIBIT 3.02
BY-LAWS
OF
FNB FINANCIAL SERVICES CORPORATION
ARTICLE I.
Offices
-------
1. Principal Office. The principal office of the corporation shall be
----------------
located at such place as the Board of Directors may determine.
2. Other Offices. The corporation may have offices at such other
-------------
places, either within or without the State of North Carolina, as the Board of
Directors may from time to time determine, or as the affairs of the corporation
may require.
ARTICLE II.
1. Place of Meetings. All meetings of shareholders shall be held at the
-----------------
principal office of the corporation, or at such other place, either within or
without the State of North Carolina, as shall be designated in the notice of the
meeting or agreed upon by a majority of the shareholders entitled to vote
thereat.
2. Annual Meetings. The annual meeting of shareholders shall be held on
---------------
the second Tuesday in May, if not a legal holiday, but if a legal holiday, then
on the next day following not a legal holiday, for the purpose of electing
directors of the corporation and for the transaction of such other business as
may be properly brought before the meeting.
3. Substitute Annual Meeting. If the annual meeting shall not be held
-------------------------
on the day designated by these by-laws, a substitute annual meeting may be
called in accordance with the provisions of Section 4 of this Article. A meeting
so called shall be designated and treated for all purposes as the annual
meeting.
4. Special Meetings. Special Meetings of the shareholders may be called
----------------
at any time by the President, Secretary or Board of Directors of the
corporation, or by any shareholder pursuant to the written request of the
holders of not less than 10% of all the shares entitled to vote at the meeting.
<PAGE> 2
5. Notice of Meetings. Written or printed notice stating the time and
------------------
place of the meeting shall be delivered not less than ten nor more than fifty
days before the date thereof, either personally or by mail, by or at the
direction of the President, the Secretary, or other person calling the meeting,
to each shareholder of record entitled to vote at such meeting. Such notice must
be given not less than twenty days before any meeting at which a merger or
consolidation is to be considered. If mailed, such notice shall be deemed to be
delivered when deposited in the United states mail, addressed to the shareholder
at his address as it appears on the record of shareholders of the corporation,
with postage thereon prepaid.
In the case of annual or substitute annual meeting, the notice of
meeting need not specifically state the business to be transacted thereat unless
it is a matter, other than election of directors, on which the vote of
shareholders is expressly required by the provisions of the North Carolina
Business Corporation Act. In the case of a special meeting the notice of meeting
shall specifically state the purpose or purposes for which the meeting is
called.
When a meeting is adjourned for thirty days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting. When a
meeting is adjourned for less than thirty days in any one adjournment, it is not
necessary to give notice of the adjourned meeting other than by announcement at
the meeting at which the adjournment is taken.
6. Waiver of Notice. The transactions of any shareholders' meeting,
----------------
however called and with whatever notice, if any, are as valid as though at a
meeting duly held after regular call and notice, if a quorum of the shareholders
is present at the meeting in person or by proxy and no objection to hold the
meeting is made by any shareholder present, or his proxy, and if either before
or after the meeting each of the persons entitled to vote, not present in person
or by proxy, signs a written waiver of notice, or a consent to the holding of
the meeting, or an approval of the action taken as shown by the minutes thereof.
All such waivers, consents, or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
7. Quorum. The holders of a majority of the shares entitled to vote,
------
represented in person or by proxy, shall constitute a quorum at meetings of
shareholders. If there is no quorum at the opening of a meeting of shareholders,
such meeting may be adjourned from time to time by a vote of a majority of the
shares voting on the motion to adjourn; at any adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the original meeting.
The shareholders at a meeting at which a quorum is present may continue
to do business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
8. Voting of Shares. Each outstanding share having voting rights shall
----------------
be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. Except in the election of directors the vote of a majority of the
shares voted on any matter at a meeting of shareholders at which a quorum is
present shall be the act of the shareholders on that matter, unless the vote of
a greater number is required by law or by the charter or by a bylaw adopted by
the shareholders of this corporation.
2
<PAGE> 3
9. Informal Action by Shareholders. Any action which is required or
-------------------------------
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the persons who would be entitled to vote upon such action at a
meeting, and filed with the Secretary of the corporation to be kept in the
corporate minute book, whether done before or after the action so taken.
ARTICLE III.
Directors
---------
1. General Powers. The business and affairs of the corporation shall be
--------------
managed by the Board of Directors or, to the extent provided by the Board of
Directors, by such Executive Committee as the Board may establish pursuant to
these bylaws.
2. Number, Term and Qualifications. The number of directors of the
-------------------------------
corporation shall be not less than five nor more than twenty-five, which number
shall be fixed at any annual or special meeting of shareholders at which
directors are to be elected by a vote of a majority of the shares represented at
the meeting. Each director shall hold office until his death, resignation,
retirement, removal, disqualification, or until his successor is elected and
qualified. Directors need not be residents of the State of North Carolina or
shareholders of the corporation, except insofar as such requirements are imposed
by national banking laws or by regulations of the Federal Reserve and/or the
U.S. Comptroller of the Currency.
3. Election of Directors. Except as provided in Section 5 of this
---------------------
Article, the directors shall be elected at the annual meeting of shareholders by
a plurality of the votes cast.
4. Removal. The shareholders may remove one or more of the directors
-------
with or without cause. A director may be removed only if the number of votes
cast for the removal exceeds the number of votes cast against the removal. A
director may not be removed by the shareholders at a meeting unless the notice
of the meeting states that the purpose, or one of the purposes, of the meeting
is removal of the director.
5. Vacancies. A vacancy occurring in the Board of Directors may be
---------
filled by a majority of the remaining directors, even though less than a quorum,
or by the sole remaining director; but a vacancy created by an increase in the
authorized number of directors shall be filled only by election at an annual
meeting or at a special meeting of the shareholders called for that purpose. The
shareholders may elect a director at any time to fill any vacancy not filled by
the directors. A director elected to fill a vacancy shall serve for the
unexpired term of his predecessor in office and until his successor is elected
and qualified.
6. Chairman. There may be a Chairman of the Board of Directors elected
--------
by the directors from their number at any meeting of the Board. The Chairman
shall preside at all
3
<PAGE> 4
meetings of the Board of Directors and perform such other duties as may be
directed by the Board.
7. Compensation. The Board of Directors may compensate directors for
------------
their services as such and may provide for the payment of any or all expenses
incurred by directors in attending regular and special meetings of the Board.
8. Executive and other Committees. Unless otherwise provided in the
------------------------------
charter or a bylaw adopted by the shareholders, the Board of Directors, by
resolution adopted by a majority of the number of directors then in office, may
designate from among it members an executive committee and one or more other
committees, each consisting of two or more directors, and each of which, to the
extent provided in the resolution or in the charter or the bylaws of the
corporation, shall have and may exercise all of the authority of the Board of
Directors in the management of the business and affairs of the corporation,
except as to the matters which are by law specifically excepted from the
authority of such committees. Any such committee or any member thereof may be
discharged by a majority of the directors present at a meeting at which a quorum
is present, or by informal action by the Board of Directors as provided by law,
or in the charter or bylaws of the corporation.
ARTICLE IV.
Meetings of Directors
---------------------
1. Regular Meetings. A regular meeting of the Board of Directors shall
----------------
be held immediately after, and at the same place as, the annual meeting of the
shareholders. In addition, the Board of Directors may provide, by resolution,
the time and place, either within or without the State of North Carolina, for
the holding of additional regular meetings.
2. Special Meetings. Special meetings of the Board of Directors may be
----------------
called by or at the request of the President or any two directors. Such meetings
may be held within or without the State of North Carolina.
3. Notice of Meetings. Regular meetings of the Board of Directors may
------------------
be held without notice.
The person or persons calling a special meeting of the Board of
Directors shall, at least two days before the meeting, give notice thereof by
any usual means of communication. Such notice need not specify the purpose for
which the meeting is called.
4. Waiver of Notice. Any director may waive notice of any directors'
----------------
meeting held without proper call or notice, either before or after the meeting
is held.
4
<PAGE> 5
Attendance by a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
purpose of objecting to the transaction of any business because the meeting is
not lawfully called.
Failure of a director who did not attend a meeting held without proper
call or notice to file with the secretary or Assistant Secretary of the
corporation his written objection to the holding of the meeting or to any
specific action so taken promptly after having knowledge of the action taken and
of the insufficiency of notice shall constitute ratification of the action taken
at the meeting.
5. Quorum. A majority of the directors fixed by these bylaws shall
------
constitute a quorum for the transaction of business at any meeting of the Board
of Directors.
6. Manner of Acting. Except as otherwise provided by law or in this
----------------
section, an act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
The vote of the majority of the number of directors then in office
shall be required to adopt a resolution constituting an Executive or other
committee of the Board of Directors. The vote of a majority of the directors
then holding office shall be required to adopt, amend or repeal a bylaw, if
otherwise permissible, or to adopt a resolution dissolving the corporation
without action by the shareholders. Approval of a transaction in which one or
more directors have an adverse interest shall require a majority, not less than
two, of the disinterested directors present, even though less than a quorum.
Vacancies in the Board of Directors may be filled as provided in Article III,
Section 6 of these bylaws.
7. Informal Action by Directors and Attendance by Telephone. Action
--------------------------------------------------------
taken by a majority of the directors without a meeting is nevertheless Board
action if written consent to the action in question is signed by all the
directors and filed with the minutes of the proceedings of the Board, whether
done before or after the action so taken.
Any one or more directors may participate in a meeting of the board by
means of a conference telephone or similar device which allows all persons
participating in the meeting to hear each other, and such participation in a
meeting shall be deemed presence in person at such meeting.
ARTICLE V.
Officers
--------
1. Number. The officers of the corporation shall consist of a
------
President, a Secretary, a Treasurer and such Vice-Presidents, Assistant
Secretaries, Assistant Treasurers, and other officers as the Board of Directors
may from time to time elect. Any two or more offices may be held by the same
person, except the offices of President and Secretary, but no officer may act in
5
<PAGE> 6
more than one capacity where action of two or more officers is required. It
shall not be necessary for any officer to be a shareholder of the corporation.
2. Election and Term. The officers of the corporation shall be elected
-----------------
by the Board of Directors. Such election may be held at any regular or special
meeting of the Board. Each officer shall hold office until his death,
resignation, retirement, removal, disqualification or until his successor is
elected and qualified.
3. Removal. Any officer or agent elected or appointed by the Board of
-------
Directors may be removed by the Board with or without cause; but said removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
4. Compensation. The compensation of all officers of the corporation
------------
shall be fixed by the Board of Directors.
5. President. The President shall be the principal executive officer of
---------
the corporation and, subject to the control of the Board of Directors, shall
supervise and control the management of the corporation according to these
bylaws.
He shall, when present, preside at all meetings of the shareholders. He
shall sign, with any other proper officer, certificates for shares of the
corporation, and any deeds, mortgages, bonds, contracts, or other instruments
which may lawfully be executed on behalf of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be delegated by the Board of
Directors to some other officer or agent; and, in general, he shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
6. Vice-Presidents. The Vice Presidents in the order of their election,
---------------
unless otherwise determined by the Board of Directors, shall in the absence or
disability of the President perform the duties and exercise the powers of that
office. In addition, they shall perform such other duties and shall have such
other powers as the Board of Directors shall prescribe.
7. Secretary. The Secretary shall keep accurate records of acts and
---------
proceedings of all meetings of shareholders and directors. He shall give all
notices required by law and by these bylaws. He shall have general charge of the
corporate records and books and of the corporate seal, and he shall affix the
corporate seal to any lawfully executed instruments requiring it. He shall have
general charge of the stock transfer books of the corporation and shall keep, at
the registered or principal office of the corporation, a record of shareholders
showing the name and address of each shareholder and the number and class of the
shares held by each. He shall sign such instruments as may require his
signature, and, in general, shall perform all duties incident to the office of
Secretary and such other duties as may be assigned to him from time to time by
the President or by the Board of Directors.
8. Treasurer. The Treasurer shall have custody of all funds and
---------
securities belonging to the corporation and shall receive, deposit or disburse
the same under the direction of the Board
6
<PAGE> 7
of Directors. He shall keep full and accurate records of the finances of the
corporation in books especially provided for the purpose; and he shall cause a
true statement of the assets and liabilities as of the close of each fiscal year
and of the results of its operations and of changes in surplus for such fiscal
year, all in reasonable detail, including particulars as to convertible
securities then outstanding, to be made and filed at the registered or principal
office of the corporation within four months after the end of such fiscal year.
The statement so filed shall be kept available for inspection by any shareholder
for a period of ten years and the Treasurer shall mail or otherwise deliver a
copy of the latest such statement to any shareholder upon his written request
therefor. The Treasurer shall, in general, perform all duties incident to his
office and such other duties as may be assigned to him from time to time by the
President or by the Board of Directors.
9. Assistant Secretaries and Treasurers. The Assistant Secretaries and
------------------------------------
Assistant Treasurers shall, in the absence or disability of the Secretary or the
Treasurer, respectively, perform the duties and exercise the powers of those
offices and shall, in general, perform such other duties as shall be assigned to
them by the Secretary or the Treasurer, respectively, or by the President or the
Board of Directors.
10. Bonds. The Board of Directors may by resolution require any or all
-----
officers, agents and employees of the corporation to give bond to the
corporation, with sufficient sureties, conditioned on the faithful performance
of the duties of their respective offices or positions, and to comply with such
other conditions as may from time to time be required by the Board of Directors.
ARTICLE VI
Contracts, Checks and Deposits
------------------------------
1. Contracts. The Board of Directors may authorize any officer or
---------
officers, agent or agents, to enter into any contract or execute and deliver any
instrument on behalf of the corporation, and such authority may be general or
confined to specific instances.
2. Checks and Drafts. All checks, drafts or orders for the payment of
-----------------
money issued in the name of the corporation shall be signed by such officer or
officers, agent or agents of the corporation and in such manner as shall from
time to time be determined by resolution of the Board of Directors.
3. Deposits. All funds of the corporation not otherwise employed shall
--------
be deposited from time to time to the credit of the corporation in such
depositories as the Board of Directors shall direct.
7
<PAGE> 8
ARTICLE VII
Certificates for Shares and Transfer Thereof
--------------------------------------------
1. Certificate for Shares. Certificates representing shares of the
----------------------
corporation shall be issued, in such form as the Board of Directors shall
determine, to every shareholder for the fully paid shares owned by him. Each
certificate shall be signed by the President or any Vice President and the
Secretary, Assistant Secretary, Treasurer or Assistant Treasurer. The signatures
of any such officers upon a certificate may be facsimiles or may be engraved or
printed or omitted if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the corporation itself or an employee of
the corporation. The Certificates shall be consecutively numbered or otherwise
identified; and the names and address of the persons to whom they are issued,
with the number of shares and date of issue shall be entered on the stock
transfer books of the corporation.
2. Transfer of Shares. Transfer of shares shall be made on the stock
------------------
transfer books of the corporation only upon surrender of the certificates for
the shares sought to be transferred by the record holder thereof or by his duly
authorized agent, transferree or legal representative. All certificates
surrendered for transfer shall be cancelled before new certificates for the
transferred shares shall be issued.
3. Fixing Record Date. For the purpose of determining shareholders
------------------
entitled to receive notice of a meeting of shareholders, to demand a special
meeting, to vote, to take any other action, or to receive payment, or for any
other purpose, the board of directors may fix in advance a date as the record
date for any such determination of shareholders, such record date in any case to
be not more than 70 days, and, in case of a meeting of shareholders, not less
than ten days, before the date on which the particular action requiring such
determination of shareholders is to be taken.
4. Lost Certificates. The Board of Directors may authorize the issuance
-----------------
or a new certificate in place of a certificate claimed to have been lost or
destroyed, upon receipt of an affidavit of such fact from the persons claiming
the loss or destruction. When authorizing such issuance of a new certificate,
the Board may require the claimant to give the corporation a bond in such sum as
it may direct to indemnify the corporation against such loss from any claim with
respect to the certificate claimed to have been lost or destroyed; or the Board
may, be [sic] resolution reciting that the circumstances justify such action,
authorize the issuance of a new certificate without requiring such a bond.
ARTICLE VIII
General Provisions
------------------
1. Dividends. The Board of Directors may from time to time declare, and
---------
the corporation may pay, dividends on its outstanding shares in such manner and
upon such terms and conditions as are permitted by law and by its charter.
2. Waiver of Notice. Whenever any notice is required to be given to any
----------------
shareholder or director under the provisions of the North Carolina Business
Corporation Act or under the
8
<PAGE> 9
provisions of the charter or bylaws of this corporation, a waiver thereof in
writing signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be equivalent to such notice.
3. Fiscal Year. Unless otherwise ordered by the Board of Directors, the
-----------
fiscal year of the corporation shall be from January 1 to December 31.
4. Amendments. Except as otherwise provided therein, these bylaws may
----------
be amended or repealed and new bylaws may be adopted by the affirmative vote of
a majority of the directors then holding office at any regular or special
meeting of the Board of Directors.
The Board of Directors shall have no power to adopt a bylaw: (1)
requiring more than a majority of the voting shares for a quorum at a meeting of
shareholders or more than a majority of the votes cast to constitute action by
the shareholders, except where higher percentages are required by law; (2)
providing for the management of the corporation otherwise than by the Board of
Directors or its Executive or other committees; (3) increasing or decreasing the
number of directors authorized by these bylaws; (4) classifying and staggering
the election of directors.
No bylaws adopted or amended by the shareholders shall be altered or
repealed by the Board of Directors.
5. Inapplicability of the North Carolina Control Share Acquisition Act.
-------------------------------------------------------------------
Article 7A of Chapter 55 of the General Statutes of North Carolina, entitled,
"Control Share Acquisitions," shall not apply to this corporation.
6. Indemnification. Any person who at any time serves or has served as
---------------
a director or officer of the Corporation, or at the request of the Corporation
is or was serving as an officer, director, agent, partner, trustee,
administrator, or employee for any other foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
shall be indemnified by the Corporation to the fullest extent from time to time
permitted by law in the event he is made, or is threatened to be made, a party
to any threatened, pending or completed civil, criminal, administrative,
investigative or arbitrative action, suit or proceeding and any appeal therein
(and any inquiry or investigation that could lead to such action, suit or
proceeding), whether or not brought by or on behalf of the Corporation, seeking
to hold him liable by reason of the fact that he is or was acting in such
capacity. In addition, the board may provide such indemnification for the
employees and agents of the Corporation as it deems appropriate.
The rights of those receiving indemnification hereunder shall, to the
fullest extent from time to time permitted by law, cover (i) reasonable
expenses, including without limitation all attorneys' fees actually and
necessarily incurred by him in connection with any such action, suit or
proceeding, (ii) all reasonable payments made by him in satisfaction of any
judgment, money decree, fine (including an excise tax assessed with respect to
an employee benefit plan), penalty, or settlement for which he may have become
liable in such action, suit or proceeding; and (iii) all reasonable expenses
incurred in enforcing the indemnification rights provided herein.
Expenses incurred by anyone entitled to receive indemnification under
this section in defending a proceeding may be paid by the Corporation in advance
of the final disposition of such proceeding as authorized by the board of
directors in the specific case or as authorized or required under any provisions
in the bylaws or by any applicable resolution or contract upon receipt of an
undertaking by or on behalf of the director to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation against such expenses.
The board of directors of the Corporation shall take all such action as
may be necessary and appropriate to authorize the Corporation to pay the
indemnification required by this bylaw,
9
<PAGE> 10
including without limitation, to the extent needed, making a good faith
evaluation of the manner in which the claimant for indemnity acted and of the
reasonable amount of indemnity due him.
Any person who at any time serves or has served in any of the aforesaid
capacities for or on behalf of the Corporation shall be deemed to be doing or to
have done so in reliance upon, and as consideration for, the right of
indemnification provided herein. Any repeal or modification of these
indemnification provisions shall not affect any rights or obligations existing
at the time of such repeal or modification. The rights provided for herein shall
inure to the benefit of the legal representatives of any such person and shall
not be exclusive of any other rights to which such person may be entitled apart
from the provisions of this bylaw.
The rights granted herein shall not be limited by the provisions
contained in N.C. Gen. Stat. Section 55-8-51 (or its successor), provided,
however, that the Corporation shall not indemnify or agree to indemnify a
potential indemnitee against liability or expenses he may incur on account of
his activities which were at the time taken known or believed by the potential
indemnitee to be clearly in conflict with the best interests of the Corporation.
10
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FNB FINANCIAL SERVICES CORPORATION FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 12,092
<INT-BEARING-DEPOSITS> 280,465
<FED-FUNDS-SOLD> 4,035
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 94,721
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 247,470
<ALLOWANCE> (2,550)
<TOTAL-ASSETS> 367,789
<DEPOSITS> 315,194
<SHORT-TERM> 10,447
<LIABILITIES-OTHER> 4,014
<LONG-TERM> 15,000
0
0
<COMMON> 2,499
<OTHER-SE> 20,635
<TOTAL-LIABILITIES-AND-EQUITY> 367,789
<INTEREST-LOAN> 5,547
<INTEREST-INVEST> 1,231
<INTEREST-OTHER> 50
<INTEREST-TOTAL> 3,562
<INTEREST-DEPOSIT> 3,204
<INTEREST-EXPENSE> 2,257
<INTEREST-INCOME-NET> 3,266
<LOAN-LOSSES> 265
<SECURITIES-GAINS> 10
<EXPENSE-OTHER> 2,257
<INCOME-PRETAX> 1,179
<INCOME-PRE-EXTRAORDINARY> 1,179
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 775
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.29
<YIELD-ACTUAL> 8.57
<LOANS-NON> 1,479
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,331
<CHARGE-OFFS> 73
<RECOVERIES> 27
<ALLOWANCE-CLOSE> 2,550
<ALLOWANCE-DOMESTIC> 2,059
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 491
</TABLE>
